What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-18 compared with 2021-11-19 · 207 added, 247 removed, 1147 unchanged (28% of the section changed)

39 unchanged sentences

Unrealized holding gains/(losses) on available-for-sale securities ( 22.8 ) ( 3.4 ) 8.3

Tax (expense)/benefit 0.7 ( 1.8 ) ( 2.3 )

Tax benefit/(expense) 5.6 0.7 ( 1.8 )

Unrealized gains/(losses) on cash flow hedging instruments 259.5 283.8 ( 126.3 )

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Unrealized gains/(losses) on net investment hedging instruments 229.0 63.1 38.7

Tax (expense)/benefit ( 16.0 ) ( 9.8 ) 10.1

Tax (expense) ( 57.9 ) ( 16.0 ) ( 9.8 )

Translation adjustment and other ( 794.7 ) 188.2 206.9

Tax (expense)/benefit 2.2 1.5 2.5

Tax benefit — 2.2 1.5

Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale securities, hedging instruments, translation adjustment and other ( 210.5 ) 41.8 ( 20.1 )

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Accrued payroll and benefits 761.7 772.3

Income taxes payable 348.0 98.2

Current portion of operating lease liability 1,245.7 1,251.3

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Stock-based compensation 271.5 319.1 248.6

Goodwill impairments — — 10.5

Non-cash lease cost 1,497.7 1,248.6 1,197.6

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Inventories ( 641.0 ) ( 49.8 ) ( 10.9 )

Prepaid expenses and other current assets 251.1 ( 317.5 ) 922.0

Income taxes payable ( 149.6 ) 286.1 ( 1,214.6 )

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Net earnings/(loss) — — — 928.3 — 928.3 ( 3.6 ) 924.7

Other comprehensive income/(loss) — — — — ( 173.0 ) ( 173.0 ) — ( 173.0 )

Other comprehensive income — — — — 133.9 133.9 — 133.9

Stock-based compensation expense — — 252.1 — — 252.1 — 252.1

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Cumulative effect of adoption of new accounting guidance — — — ( 2.2 ) — ( 2.2 ) — ( 2.2 )

Net earnings/(loss) — — — 928.3 — 928.3 ( 3.6 ) 924.7

Other comprehensive income/(loss) — — — — 133.9 133.9 — 133.9

Net earnings — — — 4,199.3 — 4,199.3 1.0 4,200.3

Other comprehensive income — — — — 511.8 511.8 — 511.8

Stock-based compensation expense — — 322.8 — — 322.8 — 322.8

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Sale of common stock 0.4 — 42.4 — — 42.4 — 42.4

Repurchase of common stock ( 20.3 ) — ( 126.4 ) ( 1,548.6 ) — ( 1,675.0 ) — ( 1,675.0 )

Cash dividends declared, $ 2.29 per share

— — — ( 2,697.2 ) — ( 2,697.2 ) — ( 2,697.2 )

Noncontrolling interest resulting from divestiture — — — — — — 8.3 8.3

Balance, September 27, 2020 1,173.3 $ 1.2 $ 373.9 $ ( 7,815.6 ) $ ( 364.6 ) $ ( 7,805.1 ) $ 5.7 $ ( 7,799.4 )

Cumulative effect of adoption of new accounting guidance — — — ( 2.2 ) — ( 2.2 ) — ( 2.2 )

Net earnings/(loss) — — — 4,199.3 — 4,199.3 1.0 4,200.3

Other comprehensive income/(loss) — — — — 511.8 511.8 — 511.8

Balance, October 3, 2021 1,180.0 $ 1.2 $ 846.1 $ ( 6,315.7 ) $ 147.2 $ ( 5,321.2 ) $ 6.7 $ ( 5,314.5 )

Net earnings — — — 3,281.6 — 3,281.6 1.8 3,283.4

Other comprehensive loss — — — — ( 610.4 ) ( 610.4 ) — ( 610.4 )

Stock-based compensation expense — — 275.5 — — 275.5 — 275.5

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Sale of common stock 0.6 — 46.9 — — 46.9 — 46.9

Repurchase of common stock ( 36.3 ) — ( 890.8 ) ( 3,122.2 ) — ( 4,013.0 ) — ( 4,013.0 )

Cash dividends declared, $ 2.00 per share

— — — ( 2,293.5 ) — ( 2,293.5 ) — ( 2,293.5 )

Net distributions to noncontrolling interests — — — — — — ( 0.6 ) ( 0.6 )

Balance, October 2, 2022 1,147.9 $ 1.1 $ 205.3 $ ( 8,449.8 ) $ ( 463.2 ) $ ( 8,706.6 ) $ 7.9 $ ( 8,698.7 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years ended October 3, 2021, September 27, 2020 and September 29, 2019

Fiscal Years ended October 2, 2022, October 3, 2021 and September 27, 2020

Summary of Significant Accounting Policies and Estimates

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and 3) Channel Development.

Non-reportable operating segments such as Evolution Fresh and unallocated corporate expenses are reported within Corporate and Other.

Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

Additional details on the nature of our business and our reportable operating segments are included in Note 17 , Segment Reporting.

Certain prior period information on the consolidated balance sheets and consolidated statements of cash flows have been reclassified to conform to the current presentation.

Principles of Consolidation

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Our fiscal year ends on the Sunday closest to September 30.

Fiscal year 2021 included 53 weeks, with the 53rd week falling in the fourth fiscal quarter.

Fiscal years 2020 and 2019 included 52 weeks.

Fiscal years 2022, 2021 and 2020 included 52, 53 and 52 weeks, respectively.

The 53rd week in fiscal 2021 fell in the fourth fiscal quarter.

Estimates and Assumptions

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Restructuring

In fiscal 2020, we announced a restructuring 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 October 3, 2021, 807 stores in the U.S.

and Canada had been identified for closure, and substantially all were closed under the plan.

In fiscal 2022, we announced our plan in the U.S.

market to increase efficiency while elevating the partner and customer experience (the “Reinvention Plan”).

We believe the investments in partner wages and trainings will increase retention and productivity while the acceleration of purpose-built store concepts and innovations in technologies will provide additional convenience and connection with our customers.

As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded $ 46.0 million to restructuring and impairments on our consolidated statements of earnings.

Future restructuring and impairment costs attributable to our Reinvention Plan are not expected to be material.

In fiscal 2021, we substantially completed our plan to reposition our North America store portfolio, primarily in dense metropolitan markets by pursuing strategic store closures and focusing on new store formats that better cater to changing customer tastes and preferences.

During fiscal years 2021 and 2020, we recorded approximately $ 155.4 million and $ 254.7 million, respectively, to restructuring and impairments on our consolidated statements of earnings.

These totals included $ 53.1 million and $ 151.0 million, respectively, related to disposal and impairment of company-operated store assets and $ 89.5 million and $ 87.7 million, respectively, primarily associated with accelerated amortization of ROU lease assets and other lease costs due to store closures prior to the end of contractual lease terms.

Company-operated store asset impairments were the result of either a triggering event that occurred where the assets were determined not to be recoverable or the store was permanently closed.

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.

The application of these projections and fair value measurements did not have a significant impact on our final impairment charges given that we have closed substantially all of these identified stores.

As of October 3, 2021, we expect total future restructuring costs under this plan, which are attributable to our North America segment, to be immaterial.

Restructuring-related accrued employee termination costs included in accrued payroll and benefits on the consolidated balance sheets were immaterial as of October 3, 2021 and September 27, 2020.

Additionally on the consolidated balance sheets, other accrued restructuring costs included in accrued liabilities were immaterial as of October 3, 2021 and there were no other accrued restructuring costs outstanding as of September 27, 2020.

Cash payments relating to these liabilities were immaterial for the fiscal years ended October 3, 2021 and September 27, 2020.

As this restructuring plan was substantially completed in fiscal 2021, we did not recognize any material restructuring and impairment amounts related to this plan during the fiscal year ended October 2, 2022.

As of October 2, 2022 and October 3, 2021, there were no material restructuring-related accrued liabilities on our consolidated balance sheets.

Cash and Cash Equivalents

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Available-for-sale Debt Securities

Our short-term and long-term investments consist primarily of investment-grade debt securities, all of which are classified as available-for-sale.

Our short-term and long-term investments include investment-grade debt securities, all of which are classified as available-for-sale.

Available-for-sale debt securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income.

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Purchases and sales are recorded on a trade date basis.

Structured Deposits

We hold short-term, principal-protected structured deposits that provide returns in the form of both fixed and variable yields;

such variable yields are indexed to foreign exchange rates, equity-linked instruments or interest rate indices.

The Company has elected to account for these using the fair value option with gains and losses recorded in our consolidated statements of earnings.

For fiscal 2022, 2021 and 2020, resulting gains and losses were immaterial to our consolidated statements of earnings.

Marketable Equity Securities

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We account for equity investments for which we do not have significant influence and without readily determinable fair values at cost with adjustments for observable changes in price or impairments as permitted by the measurement alternative.

Investments for which the measurement alternative has been elected are assessed for impairment quarterly, or if a triggering event indicates impairment may be present.

Investments for which the measurement alternative has been elected are assessed for impairment quarterly, or if a triggering

event indicates impairment may be present.

Any adjustments as a result of price changes or impairments are recorded in interest income and other, net on our consolidated statements of earnings.

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government treasury securities and commodity futures contracts, we use quoted prices in active markets for identical assets to determine fair value.

When quoted prices in active markets for identical assets are not available, we determine the fair value of our available-for-sale securities and our over-the-counter forward contracts, collars and swaps based upon factors such as the quoted market price of similar assets or a discounted cash flow model using readily observable market data, which may include interest rate curves and forward and spot prices for currencies and commodities, depending on the nature of the investment.

When quoted prices in active markets for identical assets are not available, we determine the fair value of certain assets based upon factors such as the quoted market price of similar assets or a discounted cash flow model using readily observable market data, which may include interest rate curves and forward and spot prices for currencies and commodities, depending on the nature of the investment.

The fair value of our long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities.

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We also enter into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds.

As of October 3, 2021 and September 27, 2020, cash collateral held under collateral security arrangements was $ 44.7 million and $ 34.9 million, respectively, and is included in other long-term liabilities on our consolidated balance sheets.

As of October 2, 2022 and October 3, 2021, cash collateral held under collateral security arrangements was $ 74.3 million and $ 44.7 million, respectively, and is included in other long-term liabilities on our consolidated balance sheets.

As of October 2, 2022, cash collateral pledged as part of our commodity derivative margin requirements was $ 75.6 million and is included in prepaid expenses and other current assets on our consolidated balance sheets.

As of October 3, 2021, cash collateral pledged as part of our commodity derivative margin requirements was $ 72.5 million and is included in cash and cash equivalents on our consolidated balance sheets.

The potential effects of netting arrangements with our derivative contracts, excluding the effects of collateral, would not have had a material impact on our consolidated balance sheets.

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Normal Purchase Normal Sale

We enter into fixed-price and price-to-be-fixed green coffee purchase commitments, which are described further in Note 5 , Inventories.

For both fixed-price and price-to-be-fixed purchase commitments, we expect to take delivery of green coffee and to utilize the coffee in a reasonable period of time in the ordinary course of business.

We enter into fixed-price and price-to-be-fixed green coffee purchase commitments, which we expect to take delivery and to utilize in a reasonable period of time in the ordinary course of business.

Since these types of purchase commitments qualify for the normal purchase normal sale exemption, they are not recorded as derivative instruments on our consolidated balance sheets.

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We also assessed incremental risks due to COVID-19 on our licensees’ financial viability.

For the year ended October 3, 2021, we did not observe a significant deterioration of our receivable portfolio that required a significant increase in our allowance for credit losses.

As of October 3, 2021, our allowance for credit losses was $ 25.6 million.

As of September 27, 2020, prior to adoption of the new estimated credit losses methodology, our allowance for doubtful accounts was $ 27.1 million.

To assist certain international licensed partners with their business recovery from the impact of the COVID-19 pandemic, we provided payment extensions for their outstanding receivables to help them dedicate their capital to further develop stores and build the brand.

During the third quarter of fiscal 2020, we also temporarily waived royalty payments from our international licensees and did not recognize royalty revenues associated with these accounts.

Normal royalty billings and collections resumed during the fourth quarter of fiscal 2020.

We do not believe the terms and forms of these financial relief actions changed our revenue recognition policy or had a significant impact on future collectability.

For the fiscal year ended October 2, 2022, we did not observe a significant deterioration of our receivable portfolio that required a significant increase in our allowance for credit losses.

As of October 2, 2022 and October 3, 2021, our allowance for credit losses was $ 27.2 million and $ 25.6 million, respectively.

Inventories are stated at the lower of cost (primarily moving average cost) or net realizable value.

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Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method.

As of October 3, 2021 and September 27, 2020, inventory reserves were $ 36.6 million and $ 48.4 million , respectively.

As of October 2, 2022 and October 3, 2021, inventory reserves were $ 43.1 million and $ 36.6 million, respectively.

Property, Plant and Equipment

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We recognized net disposition and impairment charges of $ 66.6 million, $ 153.1 million and $ 294.9 million in fiscal 2022, 2021 and 2020, respectively.

Of the total net impairment and disposition charges, $ 53.1 million, $ 151.0 million and $ 7.3 million in fiscal 2021, 2020 and 2019, respectively, were restructuring related and recorded in restructuring and impairment expenses.

Of the total net disposition and impairment charges, $ 9.6 million, $ 53.1 million and $ 151.0 million in fiscal 2022, 2021 and 2020, respectively, were restructuring related and recorded in restructuring and impairment expenses.

For fiscal 2022, 2021 and 2020, we evaluated COVID-19 business recovery trends and their estimated impacts on future revenue growth and profitability for assessing impairment of our company-operated retail store and related operating lease ROU assets.

As a result, we recorded $ 44.4 million and $ 59.6 million of impairment losses within store operating expenses on our consolidated statements of earnings during the years ended October 3, 2021 and September 27, 2020, respectively.

As a result, we recorded $ 14.3 million, $ 44.4 million and $ 59.6 million of impairment losses within store operating expenses on our consolidated statements of earnings during the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020, respectively.

Unless it is restructuring related, the nature of the underlying asset that is impaired or disposed of will determine the operating expense line on which the related impact is recorded on our consolidated statements of earnings.

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We do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term.

We review contracts for identified assets where we have the right to direct the use of the asset and record those agreements as embedded leases on our consolidated balance sheet.

Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised.

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The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs and any tenant improvement allowances received.

For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method.

For finance leases, ROU assets are amortized on a straight-line basis over the

shorter of the useful life of the leased asset or the lease term.

For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability

determined using the effective interest method.

For finance leases, ROU assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term.

Interest expense on each finance lease liability is recognized utilizing the effective interest method.

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Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required.

During fiscal 2021, the COVID-19-related rent concessions we received for stores, primarily in our International segment, were immaterial.

During fiscal 2022 and fiscal 2021, the COVID-19-related rent concessions we received for stores, primarily in our International segment, were immaterial.

During fiscal 2020, we received $ 27.6 million of COVID-19-related rent concessions for stores in our International segment generally correlating with the temporary period our stores were closed.

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See Note 10 , Leases, for additional details.

Additionally, for the years ended October 3, 2021 and September 27, 2020, we recognized accelerated amortization of ROU lease assets and other lease costs of $ 89.5 million and $ 87.7 million, respectively, due to planned store closures prior to the end of contractual lease terms, which were recorded in restructuring and impairments on the consolidated statement of earnings.

Additionally, for the fiscal years ended October 3, 2021 and September 27, 2020, we recognized accelerated amortization of ROU lease assets and other lease costs of $ 89.5 million and $ 87.7 million, respectively, due to planned store closures prior to the end of contractual lease terms, which were recorded in restructuring and impairments on the consolidated statement of earnings.

In fiscal 2021, we substantially completed our plan to optimize our North America store portfolio and we did not recognize any material restructuring and impairment amounts related to this plan during the fiscal year ended October 2, 2022.

We evaluate goodwill for impairment annually during our third fiscal quarter, or more frequently if an event occurs or circumstances change, such as material deterioration in performance or a significant number of store closures, that would indicate that impairment may exist.

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As a result, when closing individual stores, we do not include goodwill in the calculation of any loss on disposal of the related assets.

We recorded no goodwill impairment during fiscal 2021 and fiscal 2020.

In fiscal 2019, we recorded goodwill impairment of $ 10.5 million.

We recorded no goodwill impairment during fiscal 2022, fiscal 2021 and fiscal 2020.

See Note 8 , Other Intangible Assets and Goodwill, for further information.

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In addition, we continuously monitor and may revise our intangible asset useful lives if and when facts and circumstances change.

There were no significant other intangible asset impairment charges recorded during fiscal 2021.

There were no significant other intangible asset impairment charges recorded during fiscal 2022 and fiscal 2021.

We recorded other intangible asset impairment charges of $ 22.1 million during fiscal 2020.

There were no significant other intangible asset impairments charges recorded during fiscal 2019.

See Note 8 , Other Intangible Assets and Goodwill, for further information.

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Company-operated store revenues are recognized when payment is tendered at the point-of-sale as the performance obligation has been satisfied.

For products sold via delivery platforms, revenues are also recognized when control of products are transferred to the customers.

Delivery service fees are immaterial in the periods presented.

Company-operated store revenues are reported excluding sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities.

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Breakage is recognized as company-operated stores and licensed stores revenue within the consolidated statement of earnings.

For the fiscal years ended October 3, 2021, September 27, 2020 and September 29, 2019, we recognized breakage revenue of $ 164.5 million, $ 130.3 million and $ 125.1 million in company-operated store revenues, respectively, and $ 16.6 million, $ 14.3 million and $ 15.7 million in licensed store revenues, respectively.

For the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020, we recognized breakage revenue of $ 196.0 million, $ 164.5 million and $ 130.3 million in company-operated store revenues, respectively, and $ 16.7 million, $ 16.6 million and $ 14.3 million in licensed store revenues, respectively.

Loyalty Program

Customers in the U.S., Canada and certain other countries who register their Starbucks Card are automatically enrolled in the Starbucks Rewards program, which is primarily a spend-based loyalty program.

They earn loyalty points (“Stars”) in a variety of ways, including with each purchase at participating Starbucks ® stores and when making purchases with the Starbucks-branded credit and debit cards.

They earn loyalty points (“Stars”) in a variety of ways, including with each purchase at participating Starbucks stores and when making purchases with the Starbucks-branded credit cards.

Starbucks Rewards members can earn Stars by paying with cash, credit or debit cards, or selected mobile wallets at company-operated stores in the U.S.

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General and Administrative Expenses

General and administrative expenses primarily consist of wages and benefits, professional service fees and occupancy costs for corporate headquarter and regional offices that support our corporate functions, including technology, finance, legal and partner resources .

General and administrative expenses primarily consist of wages and benefits, professional service fees and occupancy costs for corporate headquarters and regional offices that support our corporate functions, including technology, finance, legal and partner resources .

We expense most advertising costs as they are incurred, except for certain production costs that are expensed the first time the advertising takes place.

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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.

The CARES Act and CEWS were no longer applicable to us in late fiscal 2021.

The qualified payroll credits reduced our store operating expenses by $ 210.0 million and $ 349.6 million on our consolidated statement of earnings during fiscal 2021 and 2020, respectively.

After netting the qualified credits against our payable, a receivable balance of $ 172.4 million and $ 155.1 million was included in prepaid expenses and other current assets as of October 3, 2021 and September 27, 2020, respectively.

During the year ended October 3, 2021, we deferred $ 81.7 million of qualified payroll tax payments.

After netting the qualified credits against our payable, a receivable balance of $ 69.4 million and $ 172.4 million was included in prepaid expenses and other current assets as of October 2, 2022 and October 3, 2021, respectively.

As of October 2, 2022, deferred payroll tax payments of $ 116.5 million were included in accrued liabilities on our consolidated balance sheets.

As of October 3, 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.

As of September 27, 2020, deferred payroll tax payments of $ 151.0 million were included in other long-term liabilities on our consolidated balance sheets.

Store Preopening Expenses

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Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as a gain or loss in store operating expense on our consolidated statements of earnings.

As of October 3, 2021 and September 27, 2020, our net ARO assets included in property, plant and equipment were $ 30.9 million and $ 30.7 million, respectively, and our net ARO liabilities included in other long-term liabilities were $ 116.5 million and $ 111.0 million, respectively.

As of October 2, 2022 and October 3, 2021, our net ARO assets included in property, plant and equipment were $ 26.1 million and $ 30.9 million, respectively, and our net ARO liabilities included in other long-term liabilities were $ 104.7 million and $ 116.5 million, respectively.

Stock-based Compensation

We maintain several equity incentive plans under which we may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”) or stock appreciation rights to employees, non-employee directors and consultants;

stock options have not been broadly used as part of our compensation strategy in recent years.

We also have an employee stock purchase plan (“ESPP”).

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Expense for performance-based RSUs is recognized when it is probable the performance goal will be achieved.

Performance goals are determined by the Board of Directors and may include measures such as earnings per share, operating income and return on invested capital.

Performance goals are determined by the Board and may include measures such as earnings per share, operating income, return on invested capital, total shareholder return and metrics focused on building inclusive and diverse teams.

The fair value of each stock option granted is estimated on the grant date using the Black-Scholes-Merton option valuation model.

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Common Stock Share Repurchases

We may repurchase shares of Starbucks common stock under a program authorized by our Board of Directors, including pursuant to a contract, instruction or written plan meeting the requirements of Rule 10b5-1(c)(1) of the Exchange Act.

We may repurchase shares of Starbucks common stock under a program authorized by our Board, including pursuant to a contract, instruction or written plan meeting the requirements of Rule 10b5-1(c)(1) of the Exchange Act.

Under applicable Washington State law, shares repurchased are retired and not displayed separately as treasury stock on the financial statements.

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Recently Adopted Accounting Pronouncements

In the first quarter of fiscal 2022, we adopted the Financial Accounting Standards Board (“FASB”) issued guidance related to reference rate reform.

The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

The adoption of the new guidance did not have a material impact to our financial statements.

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.

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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

In March 2020, the FASB issued guidance related to reference rate reform.

The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

We expect to adopt the guidance and begin transitioning from

LIBOR to alternative reference rates in the first quarter of fiscal 2022.

We do not expect adoption and transition to alternative reference rates to have a material impact on our consolidated financial statements.

Acquisitions, Divestitures and Strategic Alliance

In the fourth quarter of fiscal 2022, we sold our Evolution Fresh brand and business to Bolthouse Farms.

This transaction did not have a material impact on our consolidated financial statements.

In the fourth quarter of fiscal 2021, we sold our 50 % ownership interest in Starbucks Coffee Korea Co., Ltd.

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This transaction resulted in a pre-tax gain of $ 864.5 million, which is included in net gain resulting from divestiture of certain operations on our consolidated statements of earnings.

In the third quarter of fiscal 2019, we sold our company-operated retail business in Thailand to Coffee Concepts Thailand, a joint-venture between Maxim's Caterers Limited and F&N Retail Connection Co.

Ltd, converting this operation to a fully licensed market.

This transaction resulted in a pre-tax gain of $ 601.9 million, which was included in net gains resulting from divestiture of certain operations on our consolidated statements of earnings.

In the second quarter of fiscal 2019, we sold our company-operated retail businesses in France and the Netherlands to Alsea, S.A.B.

converting these operations to fully licensed markets.

These transactions did not have a material impact on our consolidated financial statements.

Derivative Financial Instruments

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From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates.

We enter into interest rate swap agreements and treasury locks, which are synthetic forward sales of U.S.

treasury securities settled in cash based upon the difference between an agreed-upon treasury rate and the prevailing treasury rate at settlement.

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

We enter into interest rate swap agreements, including forward-starting interest rate swaps and treasury locks, settled in cash based upon the difference between an agreed-upon benchmark rate and the prevailing benchmark rate at settlement.

These agreements are generally settled around 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.

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Depending on market conditions, we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under our dairy purchase contracts and our forecasted dairy demand.

The resulting gains or losses are

recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

The resulting gains or losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge.

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

During the second and third quarters of fiscal 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.

Due to ongoing global supply chain disruptions, certain coffee cash flow hedges have been de-designated early which resulted in insignificant amounts recognized in earnings during the fiscal year ended October 2, 2022 and October 3, 2021.

These derivatives may be accounted for prospectively as non-designated derivatives until maturity, re-designated to new hedging relationships or terminated early.

We continue to believe transactions related to our other designated cash flow hedges are probable to occur.

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.

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Foreign currency debt 175.5 42.6 ( 18.1 ) — — —

(1) As a result of the global COVID-19 impacts, we discontinued cash flow hedges during the year ended September 27, 2020.

(1) As a result of the global COVID-19 impacts, we discontinued certain cash flow hedges during the fiscal year ended September 27, 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 ):

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

Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Non-Designated Derivatives:

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Diesel fuel and other commodities Interest income and other, net 3.7 2.6 ( 8.8 )

Coffee Interest income and other, net 9.2 — —

Foreign currency - other Interest income and other, net 46.8 7.5 0.3

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Notional amounts of outstanding derivative contracts (in millions) :

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Coffee $ 649 $ 481

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Derivative Assets

Balance Sheet Location Oct 3, 2021 Sep 27, 2020

Balance Sheet Location Oct 2, 2022 Oct 3, 2021

Designated Derivative Instruments:

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Foreign currency Prepaid expenses and other current assets 34.3 7.3

Other long-term assets 7.3 —

Derivative Liabilities

Balance Sheet Location Oct 3, 2021 Sep 27, 2020

Balance Sheet Location Oct 2, 2022 Oct 3, 2021

Designated Derivative Instruments:

Coffee Accrued liabilities $ — $ 1.4

Other long-term liabilities — 0.1

Cross-currency swaps Other long-term liabilities $ — $ 3.3

2 unchanged sentences

Other long-term liabilities — 3.6

Interest rates Other long-term liabilities 1.3 69.3

Interest rates Accrued liabilities 12.0 —

Other long-term liabilities — 1.3

Interest rate swap Other long-term liabilities 34.0 —

Non-designated Derivative Instruments:

Dairy Accrued liabilities — 0.2

Diesel fuel and other commodities Accrued liabilities — 1.7

Foreign currency Accrued liabilities 5.8 0.1

1 unchanged sentence

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

Oct 3, 2021 Sep 27, 2020 Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021

Location on the balance sheet

11 unchanged sentences

Available-for-sale debt securities

Commercial paper 63.0 — 63.0 —

Corporate debt securities 22.4 — 22.4 —

Mortgage and other asset-backed securities 0.1 — 0.1 —

government treasury securities 9.3 9.3 — —

Total available-for-sale debt securities 31.7 9.3 22.4 —

Structured deposits 275.1 — 275.1 —

Marketable equity securities 57.7 57.7 — —

4 unchanged sentences

Available-for-sale debt securities

Auction rate securities 6.0 — — 6.0

Corporate debt securities 134.7 — 134.7 —

13 unchanged sentences

Fair Value Measurements at Reporting Date Using

September 27, 2020 Quoted Prices

October 3, 2021 Quoted Prices

Identical Assets

6 unchanged sentences

Available-for-sale debt securities

Certificates of deposit 1.6 — 1.6 —

Commercial paper 63.0 — 63.0 —

Corporate debt securities 24.7 — 24.7 —

Foreign government obligations 8.5 — 8.5 —

Mortgage and other asset-backed securities 0.1 — 0.1 —

8 unchanged sentences

Corporate debt securities 162.0 — 162.0 —

Foreign government obligations 4.0 — 4.0 —

Mortgage and other asset-backed securities 31.9 — 31.9 —

9 unchanged sentences

Derivative liabilities 8.2 — 8.2 —

Total $ 86.6 $ 2.0 $ 84.6 $ —

Total liabilities $ 16.8 $ 0.3 $ 16.5 $ —

There were no material transfers between levels and there was no significant activity within Level 3 instruments during the periods presented.

3 unchanged sentences

Proceeds from sales of securities were $ 72.6 million , $ 134.1 million and $ 177.4 million for fiscal 2022, 2021 and 2020, respectively.

Realized gains and losses were not material for fiscal 2021, 2020 and 2019.

Gross unrealized holding gains and losses were not material as of October 3, 2021 and September 27, 2020.

Realized gains and losses were not material f or fiscal 2022, 2021 and 2020.

Gross unrealized holding gains and losses were not material as of October 2, 2022 and October 3, 2021.

Marketable Equity Securities

1 unchanged sentence

Our marketable equity securities portfolio approximates a portion of our liability under our MDCP, a defined contribution plan.

Our MDCP liability was $ 105.2 million and $ 91.4 million as of October 3, 2021 and September 27, 2020, respectively.

Our MDCP liability was $ 85.9 million and $ 105.2 million as of October 2, 2022 and October 3, 2021, respectively.

The changes in net unrealized holding gains and losses in the marketable equity securities portfolio included in earnings for fiscal 2022, 2021 and 2020 were not material.

Gross unrealized holding gains and losses on marketable equity securities were not material as of October 3, 2021 and September 27, 2020.

Gross unrealized holding gains and losses on marketable equity securities were not material a s of October 2, 2022 and October 3, 2021.

Derivative Assets and Liabilities

3 unchanged sentences

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

Impairment of property, plant and equipment and ROU assets is included in Note 1 , Summary of Significant Accounting Policies.

We have recognized impairments during fiscal 2021 and 2020 primarily related to our North America restructuring plan.

See Note 1 , Summary of Significant Accounting Policies, Note 10 , Leases and Note 8 , Other Intangible Assets and Goodwill for additional discussion of these impairments.

Impairment of property, plant and equipment and ROU assets is included in Note 1 , Summary of Significant Accounting Policies and Estimates.

We recognized impairments during fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020.

Impairments recognized in fiscal years ended October 3, 2021 and September 27, 2020 were primarily related to our restructuring plan.

See Note 1 , Summary of Significant Accounting Policies and Estimates, Note 8 , Other Intangible Assets and Goodwill and Note 10 , Leases for additional discussion of these impairments.

Fair Value of Other Financial Instruments

1 unchanged sentence

Inventories (in millions)

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Unroasted $ 1,018.6 $ 670.3

13 unchanged sentences

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

During 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.

During the fiscal years ended October 2, 2022 and October 3, 2021, we did not record significant write-offs related to the COVID-19 pandemic.

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

This was included in product and distribution costs on our consolidated statement of earnings.

We did not record significant write-offs related to COVID-19 during the fiscal year ended October 3, 2021.

Equity Investments (in millions)

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Equity method investments $ 283.1 $ 216.0

10 unchanged sentences

Related product and distribution costs were $ 76.5 million, $ 92.1 million and $ 79.8 million in fiscal 2022, 2021 and 2020, respectively.

As of October 3, 2021 and September 27, 2020, there were $ 7.9 million and $ 28.7 million of accounts receivable from equity investees, respectively, on our consolidated balance sheets, primarily related to product sales and royalty revenues.

As of October 2, 2022 and October 3, 2021, there were $ 14.8 million and $ 7.9 million of accounts receivable from equity investees, respectively, on our consolidated balance sheets, primarily related to product sales and royalty revenues.

Additionally, we hold equity interests in other entities to support our corporate and investment strategies.

6 unchanged sentences

Prepaid Expenses and Other Current Assets

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Income tax receivable $ 27.7 $ 20.7

3 unchanged sentences

Property, Plant and Equipment, net

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Land $ 46.1 $ 46.2

9 unchanged sentences

Accrued Liabilities

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Accrued occupancy costs $ 84.6 $ 107.1

2 unchanged sentences

Self-insurance reserves 232.3 229.3

Income taxes payable 139.2 348.0

Accrued business taxes 194.6 218.0

1 unchanged sentence

Store Operating Expenses

Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Wages and benefits $ 8,157.7 $ 6,989.3 $ 6,131.9

4 unchanged sentences

Indefinite-Lived Intangible Assets

(in millions) Oct 3, 2021 Sep 27, 2020

(in millions) Oct 2, 2022 Oct 3, 2021

Trade names, trademarks and patents $ 97.5 $ 96.4

Finite-Lived Intangible Assets

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

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

6 unchanged sentences

Amortization expense for finite-lived intangible assets was $ 192.7 million, $ 223.4 million and $ 223.7 million during fiscal 2022, 2021 and 2020, respectively.

Our fiscal 2022 and 2021 analyses indicated excess fair values over carrying values for these assets, and therefore no impairment charge was recorded during these years.

During the fiscal year ended September 27, 2020, we recorded a charge of $ 22.1 million to restructuring and impairments on our consolidated statement of earnings as the analysis indicated the carrying value of one of the assets exceeded its fair value.

Our fiscal 2021 analysis indicated excess fair values over carrying values for these assets, and therefore no impairment charge was recorded.

Estimated future amortization expense as of October 2, 2022 ( in millions ):

3 unchanged sentences

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

North America (1)

International (1)

North America International Channel

Development Corporate and Other Total

1 unchanged sentence

1.4 78.6 — 0.1 80.1

Goodwill balance at September 27, 2020 $ 491.8 $ 3,069.7 $ 34.7 $ 1.0 $ 3,597.2

Goodwill balance at October 3, 2021 $ 493.2 $ 3,148.3 $ 34.7 $ 1.1 $ 3,677.3

( 2.1 ) ( 391.6 ) — ( 0.1 ) ( 393.8 )

Goodwill balance at October 2, 2022 $ 491.1 $ 2,756.7 $ 34.7 $ 1.0 $ 3,283.5

(1) North America and International goodwill as of September 27, 2020 and September 29, 2019, was restated to conform with current period presentation.

(1) “Other” consists of changes in the goodwill balance resulting from foreign currency translation.

During the third quarter of fiscal 2021, we completed our annual goodwill impairment analysis.

During the fiscal year ended October 2, 2022, we completed our annual goodwill impairment analysis.

The results of our analysis indicated significant excess fair values over carrying values across the different reporting units, and therefore no goodwill impairment was recorded.

Revolving Credit Facility

During the fourth quarter of fiscal 2021, we replaced our $ 2.0 billion unsecured 5-year revolving credit facility (the "2018 credit facility") and our $ 1.0 billion unsecured 364-Day credit facility (the "364-day credit facility") with a new $ 3.0 billion unsecured 5-year revolving credit facility (the "2021 credit facility").

Our $ 3.0 billion unsecured 5-year revolving credit facility (the “2021 credit facility”), of which $ 150 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026 .

The 2021 credit facility is available for working capital, capital expenditures and other corporate purposes, including acquisitions and share repurchases.

The 2021 credit facility, of which $ 150 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026 .

We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $ 1.0 billion.

We have the option,

subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $ 1.0 billion.

Borrowings under the credit facility will bear interest at a variable rate based on LIBOR, and, for U.S.

10 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 October 3, 2021, we had no borrowings outstanding under the program.

As of October 2, 2022, we had $ 175.0 million in borrowings outstanding under the program.

As of October 3, 2021, we had no borrowings outstanding under this 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:

3 unchanged sentences

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 0.350 %.

As of October 3, 2021, we had no borrowings outstanding under these credit facilities.

For the year ended September 27, 2020, we had ¥ 15 billion, or $ 142.3 million, outstanding under these Japanese yen-denominated credit facilities.

As of October 2, 2022 and October 3, 2021, we had no borrowings outstanding under these Japanese yen-denominated credit facilities.

Long-term Debt

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

Oct 3, 2021 Sep 27, 2020 Stated Interest Rate Effective Interest Rate (1)

Oct 2, 2022 Oct 3, 2021 Stated Interest Rate Effective Interest Rate (1)

Issuance Face Value Estimated Fair Value Face Value Estimated Fair Value

November 2020 notes (2)

$ — — $ 500.0 501.5 2.200 % 2.228 %

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 — — 500.0 503.1 1.300 % 1.334 %

3 unchanged sentences

750.0 744.8 750.0 794.8 3.850 % 2.859 %

February 2024 notes (3)

500.0 497.3 — — 2.912 % 3.143 %

March 2024 notes (4)

6 unchanged sentences

August 2029 notes (2)

1,000.0 900.3 1,000.0 1,109.9 3.550 % 3.840 %

March 2030 notes 750.0 607.7 750.0 758.6 2.250 % 3.084 %

November 2030 notes 1,250.0 1,017.9 1,250.0 1,286.9 2.550 % 2.582 %

February 2032 notes 1,000.0 827.1 — — 3.000 % 3.155 %

June 2045 notes 350.0 281.5 350.0 414.1 4.300 % 4.348 %

7 unchanged sentences

Hedge accounting fair value adjustment (2)

( 52.3 ) 21.7

Total $ 14,868.9 $ 14,615.8

(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 the interest rate risk prior to the debt issuance.

(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.

(2) Amount includes the change in fair value due to changes in benchmark interest rates related to hedging our October 2023 notes and $ 350 million of our August 2029 notes.

Refer to Note 3 , Derivative Financial Instruments, for additional information on our interest rate swap designated as a fair value hedge.

(3) Floating rate notes which bear interest at a rate equal to Compounded SOFR (as defined in the February 2024 notes) plus 0.420 %, resulting in a stated interest rate of 2.912% at October 2, 2022.

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

4 unchanged sentences

Total $ 15,038.4

During the years ended October 3, 2021 and September 27, 2020, we recognized accelerated amortization of ROU lease assets and other lease costs of $ 89.5 million and $ 87.7 million, respectively, which were recognized within restructuring and impairments on the consolidated statements of earnings.

In fiscal 2021, we substantially completed our 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.

During the fiscal years ended October 3, 2021 and September 27, 2020, we recognized accelerated amortization of ROU lease assets and other lease costs of $ 89.5 million and $ 87.7 million, respectively, which were recognized within restructuring and impairments on the consolidated statements of earnings.

We did not recognize any material restructuring and impairment amounts related to this plan during the fiscal year ended October 2, 2022.

The components of lease costs (in millions) :

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Operating lease costs (1)

5 unchanged sentences

The following table includes supplemental information (in millions) :

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Cash paid related to operating lease liabilities $ 1,647.3 $ 1,707.1 $ 1,463.3

1 unchanged sentence

1,639.4 1,590.3 1,093.0

(1) Excludes the initial impact of adoption during the year ended September 27, 2020.

Oct 3, 2021 Sep 27, 2020

Weighted-average remaining operating lease term 8.7 years 8.8 years

(1) Excludes the initial impact of adoption during the fiscal year ended September 27, 2020.

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Weighted-average remaining operating lease term 8.5 years 8.7 years 8.8 years

Weighted-average operating lease discount rate 2.6 % 2.5 % 2.5 %

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

Finance leases were immaterial as of October 3, 2021 and September 27, 2020.

Finance leases were immaterial as of October 2, 2022, October 3, 2021 and September 27, 2020.

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

5 unchanged sentences

Total $ 8,760.9

As of October 3, 2021, we have entered into operating leases that have not yet commenced of $ 830.9 million, primarily related to real estate leases.

As of October 2, 2022, we have entered into operating leases that have not yet commenced of $ 1.1 billion, primarily related to real estate leases.

These leases will commence between fiscal year 2023 and fiscal year 2028 with lease terms of 10 years to 20 years.

Previous Lease Guidance Disclosures

Rent expense under operating lease agreements under the previous lease guidance, which excludes certain amounts required under the new guidance (in millions) :

Minimum rent $ 1,441.7

Contingent rent 224.3

Total 1,666.0

We have subleases related to certain of our operating leases.

We recognized $ 10.9 million of sublease income during the fiscal year ended September 29, 2019.

Additionally, as of September 29, 2019, the gross carrying value of assets related to build-to-suit lease arrangements accounted for as financing leases was $ 122.3 million, with associated accumulated depreciation of $ 17.2 million.

Lease exit costs associated with our restructuring efforts primarily relate to the closure of Teavana retail stores and certain Starbucks company-operated stores, and are recognized concurrently with actual store closures.

Total lease exit costs of $ 55.3 million was recorded in restructuring and impairments on the consolidated statement of earnings in fiscal 2019.

Deferred Revenue

5 unchanged sentences

At October 2, 2022, the current and long-term deferred revenue related to the Nestlé up-front payment was $ 177.0 million and $ 6.2 billion, respectively.

At September 27, 2020, the current and long-term deferred revenue related to the Nestlé up-front payment was $ 179.3 million and $ 6.5 billion, respectively.

During the fiscal years ended October 3, 2021, September 27, 2020 and September 29, 2019, we recognized $ 176.6 million, $ 176.8 million and $ 175.2 million of current deferred revenue, respectively, related to amortization of the up-front payment.

At October 3, 2021, the current and long-term deferred revenue related to the Nestlé up-front payment was $ 177.0 million and $ 6.4 billion, respectively.

During the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020, we recognized $ 176.5 million, $ 176.6 million and $ 176.8 million of current deferred revenue, respectively, related to amortization of the up-front payment.

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

Fiscal Year Ended October 2, 2022

Stored value cards and loyalty program at September 27, 2020

Stored value cards and loyalty program at October 3, 2021

Revenue deferred - card activations, card reloads and Stars earned 13,464.7

1 unchanged sentence

Stored value cards and loyalty program at October 2, 2022 (2)

Fiscal Year Ended September 27, 2020

Fiscal Year Ended October 3, 2021

Stored value cards and loyalty program at September 27, 2020

1 unchanged sentence

Revenue recognized - card and Stars redemptions and breakage ( 12,401.7 )

Stored value cards and loyalty program at September 27, 2020 (2)

Stored value cards and loyalty program at October 3, 2021 (2)

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

(2) As of October 2, 2022, approximately $ 1.4 billion of this amount was current.

As of September 27, 2020, approximately $ 1.2 billion of this amount was current .

As of October 3, 2021, approximately $ 1.3 billion of this amount was current .

In addition to 2.4 billion shares of authorized common stock with $ 0.001 par value per share, we have authorized 7.5 million shares of preferred stock, none of which was outstanding at October 2, 2022.

In March 2019, we entered into ASR agreements with third-party financial institutions totaling $ 2.0 billion, effective March 22, 2019.

We made a $ 2.0 billion up-front payment to the financial institutions and received an initial delivery of 22.2 million shares.

In June 2019 , we received an additional 3.9 million shares upon the completion of the program based on a volume-weighted average share price (less discount) of $ 76.50 .

Outside of the ASR agreements noted above, we repurchased 36.6 million shares of common stock for $ 3.1 billion on the open market during the year ended September 29, 2019.

In total, we repurchased 139.6 million shares at a total cost of $ 10.1 billion for the year ended September 29, 2019.

Our Board of Directors authorized the repurchase of up to an additional 120 million and 40 million shares under our ongoing share repurchase program during the fiscal first quarter of 2019 and fiscal second quarter of 2020, respectively.

In March 2020, we announced a temporary suspension of our share repurchase program until we restored certain financial leverage targets.

We repurchased 20.3 million shares of common stock for $ 1.7 billion on the open market during the year ended September 27, 2020.

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

Due to our business recovery and restoration of certain leverage metrics, we have resumed our share repurchase program in the first quarter of fiscal 2022.

During the fourth quarter of fiscal 2021, our Board of Directors declared a quarterly cash dividend to shareholders of $ 0.49 per share to be paid on November 26, 2021 to shareholders of record as of the close of business on November 12, 2021.

Through open market transactions under our share repurchase program, we repurchased 20.3 million shares of common stock for $ 1.7 billion during the fiscal year ended September 27, 2020.

During the second fiscal quarter of 2020, our Board authorized the repurchase of up to an additional 40 million shares under our ongoing share repurchase program.

We temporarily suspended our share repurchase program in March 2020 upon the onset of the COVID-19 pandemic, and did not make any share repurchases in fiscal 2021.

Due to our business recovery and restoration of certain leverage metrics, we resumed our share repurchase program in the first quarter of fiscal 2022 and repurchased 36.3 million shares of common stock for $ 4.0 billion on the open market during the fiscal year ended October 2, 2022.

On March 15, 2022, we announced that our Board authorized the repurchase of up to an additional 40 million shares under our ongoing share repurchase program.

On April 4, 2022, we announced a temporary suspension of our share repurchase program to allow us to augment investments in our stores and partners.

As of October 2, 2022, 52.6 million shares remained available for repurchase under current authorizations.

We have resumed our share repurchase program in the first quarter of fiscal 2023.

During the fourth quarter of fiscal 2022, our Board declared a quarterly cash dividend to shareholders of $ 0.53 per share to be paid on November 25, 2022 to shareholders of record as of the close of business on November 11, 2022.

Comprehensive Income

2 unchanged sentences

Accumulated other comprehensive income reported on our consolidated balance sheets consists of foreign currency translation adjustments and other items and the unrealized gains and losses, net of applicable taxes, on available-for-sale debt securities and on derivative instruments designated and qualifying as cash flow and net investment hedges.

Changes in AOCI by component for the years ended October 3, 2021, September 27, 2020 and September 29, 2019, net of tax, are as follows:

Changes in AOCI by component for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020, net of tax, are as follows:

(in millions) Available-for-Sale Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

6 unchanged sentences

(in millions) Available-for-Sale Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

September 27, 2020

October 3, 2021

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

2 unchanged sentences

Other comprehensive income/(loss) attributable to Starbucks ( 4.2 ) 240.4 37.1 238.5 511.8

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

Net gains/(losses) in AOCI, end of period $ 1.5 $ 158.3 $ 48.6 $ ( 61.2 ) $ 147.2

5 unchanged sentences

Other comprehensive income/(loss) attributable to Starbucks 2.5 ( 96.1 ) 19.1 208.4 133.9

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

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

2 unchanged sentences

the Statements of Earnings

Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Gains/(losses) on available-for-sale securities $ ( 0.4 ) $ 1.8 $ 4.9 Interest income and other, net

3 unchanged sentences

Korea — ( 58.9 ) — Net gain resulting from divestiture of certain operations

Thailand — — 1.7 Net gain resulting from divestiture of certain operations

210.5 ( 41.8 ) 20.1 Total before tax

8 unchanged sentences

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

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

RSUs $ 271.8 $ 316.9 $ 241.0

4 unchanged sentences

We have both time-vested and performance-based RSUs.

Time-vested RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period, subject solely to the employee’s continuing employment.

The time-vested RSUs either vest in two or four equal annual installments beginning a year from the grant date.

Our performance-based RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock if we achieve specified performance goals during the performance period and the grantee remains employed through the vesting period.

RSU transactions for the year ended October 3, 2021 (in millions, except per share and contractual life amounts) :

Time-vested RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period, subject to the employee’s continuing employment.

The time-vested RSUs generally either vest in two or four equal annual installments beginning a year from the grant date.

performance-based RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock if we achieve specified performance goals during the performance period and the grantee remains employed through the vesting period.

RSU transactions for the fiscal year ended October 2, 2022 (in millions, except per share and contractual life amounts) :

Shares Weighted

1 unchanged sentence

Life (Years) Aggregate

Nonvested, September 27, 2020 8.3 $ 74.23 1.1 $ 699

Nonvested, October 3, 2021 7.7 $ 86.23 0.9 $ 869

Granted 4.2 107.71

5 unchanged sentences

For fiscal 2021 and 2020, the weighted average fair value per RSU granted was $ 96.05 and $ 81.96 , respectively.

Stock Option Plans

Stock Options

We may provide stock options as a form of employee compensation, which are primarily time-vested.

2 unchanged sentences

All outstanding stock options are non-qualified stock options.

No stock options were granted during the fiscal year ended October 2, 2022.

The fair value of stock option awards was estimated at the grant date with the following weighted average assumptions for fiscal 2022, 2021 and 2020:

14 unchanged sentences

The amounts shown above for the estimated fair value per option granted are before the estimated effect of forfeitures, which reduce the amount of expense recorded in the consolidated statements of earnings.

Stock option transactions for the year ended October 3, 2021 (in millions, except per share and contractual life amounts) :

Stock option transactions for the fiscal year ended October 2, 2022 (in millions, except per share and contractual life amounts) :

Options Weighted

1 unchanged sentence

Life (Years) Aggregate

Outstanding, September 27, 2020 9.2 $ 53.06 5.4 $ 286

Granted 0.0 110.46

Outstanding, October 3, 2021 5.2 $ 54.58 4.5 $ 303

Exercised ( 1.1 ) 49.82

4 unchanged sentences

The aggregate intrinsic value in the table above, which is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options, is before applicable income taxes and represents the amount optionees would have realized if all in-the-money options had been exercised on the last business day of the period indicated.

As of October 3, 2021, total unrecognized stock-based compensation expense, net of estimated forfeitures, related to nonvested options was approximately $ 0.1 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 0.5 years.

As of October 2, 2022, there was immaterial unrecognized stock-based compensation expense, net of estimated forfeitures, related to nonvested options.

The total intrinsic value of options exercised was $ 57 million, $ 219 million and $ 236 million during fiscal 2022, 2021 and 2020, respectively.

12 unchanged sentences

Components of earnings before income taxes (in millions):

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

United States $ 3,484.9 $ 4,138.5 $ 904.6

2 unchanged sentences

Provision/(benefit) for income taxes (in millions):

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Current taxes:

11 unchanged sentences

federal income tax rate with our effective income tax rate:

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Statutory rate 21.0 % 21.0 % 21.0 %

1 unchanged sentence

Foreign rate differential 0.3 0.5 ( 3.2 )

Change in tax rates ( 1.3 ) ( 2.2 ) —

Excess tax benefits of stock-based compensation ( 0.9 ) ( 4.2 ) ( 2.1 )

Foreign derived intangible income ( 0.8 ) ( 0.5 ) ( 1.4 )

Charitable contributions ( 0.4 ) ( 1.7 ) —

Valuation allowances ( 0.7 ) 0.2 10.0

Residual tax on foreign earnings — — 1.7

Tax impacts related to sale of certain operations — — ( 1.3 )

Excess tax benefits of stock-based compensation ( 0.5 ) ( 0.9 ) ( 4.2 )

Charitable contributions ( 0.3 ) ( 0.4 ) ( 1.7 )

Change in tax rates 0.0 ( 1.3 ) ( 2.2 )

Other, net 0.1 0.3 0.1

Effective tax rate 22.4 % 21.6 % 20.6 %

As of October 3, 2021, in certain foreign subsidiaries in which we are partially indefinitely reinvested, the gross taxable temporary difference between the accounting basis and tax basis was approximately $ 1.8 billion f or which there could be up to approximately $ 290 million o f unrecognized tax liability.

As of October 2, 2022, in certain foreign subsidiaries in which we are partially indefinitely reinvested, the gross taxable temporary difference between the accounting basis and tax basis was approximately $ 1.5 billion for which there could be up to approximately $ 230 million of unrecognized tax liability.

Tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities (in millions):

Oct 3, 2021 Sep 27, 2020

Oct 2, 2022 Oct 3, 2021

Deferred tax assets:

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Net deferred tax asset (liability) $ 1,681.1 $ 1,726.3

The valuation allowances as of October 3, 2021 and September 27, 2020 were primarily related to net operating losses and other deferred tax assets of consolidated foreign subsidiaries.

The valuation allowances as of October 2, 2022 and October 3, 2021 were primarily related to net operating losses and other deferred tax assets of consolidated foreign subsidiaries.

As of October 2, 2022, we had federal net operating loss carryforwards of $ 70.8 million which have an indefinite carryforward period, state net operating loss carryforwards of $ 78.6 million which will begin to expire in fiscal 2024, federal tax credit carryforwards of $ 31.8 million which will begin to expire in fiscal 2030, state tax credit carryforwards of $ 1.4 million which will begin to expire in fiscal 2024 and foreign net operating loss carryforwards of $ 369.1 million, of which $ 102.0 million have an indefinite carryforward period and the remainder expire at various dates starting from fiscal 2023.

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As of October 2, 2022, we had $ 89.7 million of gross unrecognized tax benefits of which $ 65.1 million , if recognized, would affect our effective tax rate.

We recognized a benefit of $ 4.6 million, an expense of $ 3.0 million and a benefit of $ 2.8 million of interest and penalties in income tax expense, prior to the benefit of the federal tax deduction, for fiscal 2021, 2020 and 2019, respectively.

As of October 3, 2021 and September 27, 2020, we had accrued interest and penalties of $ 7.1 million and $ 13.0 million, respectively, within our consolidated balance sheets.

We recognized an expense of $ 2.3 million , a benefit of $ 4.6 million and an expense of $ 3.0 million of interest and penalties in income tax expense, prior to the benefit of the federal tax deduction, for fiscal 2022, 2021 and 2020, respectively.

As of October 2, 2022 and October 3, 2021, we had accrued interest and penalties of $ 9.4 million and $ 7.1 million, respectively, within our consolidated balance sheets.

The following table summarizes the activity related to our unrecognized tax benefits (in millions) :

Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Beginning balance $ 82.6 $ 123.7 $ 132.1

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federal examination for years prior to fiscal 2018, U.S.

state and local examinations for years prior to fiscal 2014 or examination in any material international markets prior to 2015.

state and local examinations for years prior to fiscal 2016 or examination in any material international markets prior to fiscal 2017.

We do not expect a significant amount of Company's gross unrecognized tax benefits to be recognized by the end of fiscal 2023 for reasons such as a lapse of the statute of limitations or resolution of examinations with tax authorities .

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

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Net earnings attributable to Starbucks $ 3,281.6 $ 4,199.3 $ 928.3

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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 October 3, 2021, September 27, 2020 and September 29, 2019, we had no out-of-the-money stock options.

As of October 2, 2022, we had an immaterial amount of out-of-the-money stock options and antidilutive RSUs.

As of October 3, 2021 and September 27, 2020, we had an immaterial amount of antidilutive RSUs and no out-of-the-money stock options.

Commitments and Contingencies

Legal Proceedings

On April 13, 2010, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and certain other defendants who manufacture, package, distribute or sell brewed coffee.

The lawsuit is Council for Education and Research on Toxics v.

Starbucks Corporation, et al.

On May 9, 2011, the Plaintiff filed an additional lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and additional defendants who manufacture, package, distribute or sell packaged coffee.

The lawsuit is Council for Education and Research on Toxics v.

Brad Barry LLC, et al.

Both cases have since been consolidated and now include nearly eighty defendants, which constitute the great majority of the coffee industry in California.

Plaintiff alleges that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65.

Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per violation of Proposition 65.

The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

The Company, as part of a joint defense group organized to defend against the lawsuit, disputes the claims of the Plaintiff.

Acrylamide is not added to coffee but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process.

The Company has asserted multiple affirmative defenses.

Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants.

On September 1, 2015, the trial court issued a final ruling adverse to defendants on all Phase 1 defenses.

Trial of the second phase of the case commenced in the fall of 2017.

On May 7, 2018, the trial court issued a ruling adverse to defendants on the Phase 2 defense, the Company's last remaining defense to liability.

On June 22, 2018, the California Office of Environmental Health Hazard Assessment (“OEHHA”) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

The case was set to proceed to a third phase trial on damages, remedies and attorneys’ fees on October 15, 2018.

However, on October 12, 2018, the California Court of Appeal granted the defendants request for a stay of the Phase 3 trial.

On June 3, 2019, the Office of Administrative Law approved the coffee exemption regulation.

The regulation became effective on October 1, 2019.

On June 24, 2019, the Court of Appeal lifted the stay of the litigation.

At the status conference on August 25, 2020, the trial judge granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to the Plaintiff’s complaint.

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, and its opening brief in the appeals process on April 9, 2021.

Defendants filed their response brief on August 9, 2021, and Plaintiff filed a reply on November 15, 2021.

In 2010 and 2011, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed lawsuits in the Superior Court of the State of California, County of Los Angeles, against the Company and other companies who manufacture, package, distribute or sell brewed coffee.

The suits were later consolidated into a single action.

Plaintiff alleged that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65.

Plaintiff sought equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per alleged violation of Proposition 65, which the Plaintiff claimed was every day coffee is sold without a compliant warning.

The Company denied the claims.

During the pendency of the litigation, the California Office of Environmental Health Hazard Assessment (“OEHHA”) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

The regulation was approved by the Office of Administrative Law and became effective on October 1, 2019.

In 2020, the trial court granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to the Plaintiff’s complaint.

On October 26, 2022, the California Court of Appeal affirmed the trial court's dismissal of the case.

The Plaintiff’s subsequent request for a rehearing before the Court of Appeals was denied.

The Plaintiff has until December 5, 2022 to file a petition for review in the California Supreme Court.

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

Accordingly, no loss contingency was recorded for this matter.

Starbucks is party to various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Starbucks is involved in various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Segment Reporting

Segment information is prepared on the same basis that our ceo, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results and makes key operating decisions.

Segment information is prepared on the same basis that our interim ceo, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results and makes key operating decisions.

We have three reportable operating segments:

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Consolidated revenue mix by product type (in millions):

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

$ 19,555.3 61 % $ 18,317.0 63 % $ 14,337.5 61 %

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Information by geographic area ( in millions ):

Fiscal Year Ended Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020

Net revenues:

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Management evaluates the performance of its operating segments based on net revenues and operating income.

The accounting policies of the operating segments are the same as those described in Note 1 , Summary of Significant Accounting Policies.

The accounting policies of the operating segments are the same as those described in Note 1 , Summary of Significant Accounting Policies and Estimates.

Operating income represents earnings before other income and expenses and income taxes.

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Assets not attributed to reportable operating segments are corporate assets and are primarily comprised of cash and cash equivalents available for general corporate purposes, investments, assets of the corporate headquarters and roasting facilities and inventory.

The table below presents financial information for our reportable operating segments and Corporate and Other segment for the years ended October 3, 2021, September 27, 2020 and September 29, 2019.

The table below presents financial information for our reportable operating segments and Corporate and Other segment for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020.

( in millions )

7 unchanged sentences

Total net revenues $ 20,447.9 $ 6,921.6 $ 1,593.6 $ 97.5 $ 29,060.6

$ 16,296.2 $ 5,230.6 $ 1,925.0 $ 66.2 $ 23,518.0

Depreciation and amortization expenses 753.9 544.7 1.2 141.9 1,441.7

1 unchanged sentence

Operating income/(loss) 4,259.3 1,245.7 789.1 ( 1,422.0 ) 4,872.1

1,801.7 370.6 687.2 ( 1,297.8 ) 1,561.7

Total assets $ 10,571.8 $ 10,083.3 $ 125.4 $ 10,612.1 $ 31,392.6

6 unchanged sentences

Total assets $ 10,717.4 $ 9,449.7 $ 165.0 $ 9,042.4 $ 29,374.5

(1) North America, International and Corporate and Other total net revenues and operating income/(loss) for fiscal years ended September 27, 2020 and September 29, 2019, have been restated to conform with current period presentation .

(1) North America, International and Corporate and Other total net revenues and operating income/(loss) for fiscal year ended September 27, 2020 have been restated to conform with current period presentation .

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Starbucks Corporation and subsidiaries (the “Company”) as of October 3, 2021 and September 27, 2020, the related consolidated statements of earnings, comprehensive income, equity, and cash flows, for each of the three years in the period ended October 3, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 3, 2021 and September 27, 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 3, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 19, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheets of Starbucks Corporation and subsidiaries (the “Company”) as of October 2, 2022 and October 3, 2021, the related consolidated statements of earnings, comprehensive income, equity, and cash flows, for each of the three years in the period en ded October 2, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 2, 2022 and October 3, 2021, and the results of its operations and its cash flows for each of the three years in the period ended October 2, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 2, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 18, 2022, expresse d an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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federal and state income taxes upon sale or a partial or complete distribution of earnings, incremental to local income taxes already paid.

As of October 3, 2021, the Company is partially indefinitely reinvested in certain foreign subsidiaries.

As o f October 2, 2022, th e Company is partially indefinitely reinvested in certain foreign subsidiaries.

The Company has recorded a deferred tax liability of $75 million related to the taxable temporary difference for which it is not indefinitely reinvested.

24 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data