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To complete this template, you need to refer to the Starbucks financial statements for fiscal year. You will need to access the information in two different locations: 1. Starbucks’s web site 2. The SEC’s web site (www.sec.gov)
In answering the questions below, provide all dollar amounts in thousands to be consistent with the financial statements. When computing percentages, carry all answers out to two decimal places (i.e., 12.34%).
The following information can be obtained from the Annual Report at the company’s web site.
I. Refer to the Starbucks Chairman’s Letter 1. People around the world share a common desire to be treated how?
2. What unique place does Starbucks want to establish?
3. How many new stores did Starbucks open in fiscal 2008? (That’s an average of how many stores per day?)
4. Starbucks is in how many countries? Which countries are recent additions?
5. How many locations are in Mainland China and Hong Kong?
6. Which beverage came to North America from “cross market learning”?
7. How does music fit in?
8. What is C.A.F.E. and what is its purpose? 9. How many stores does Starbucks plan to open in 2009?
2 10. What is the expected annual net revenue growth for 2009?
II.
Refer to the Starbucks Financial Highlights 11. Fill in the following chart:
Year
Net Revenue
Stores Open at Fiscal Year End
Calculate the Average Net Revenue per Store
2002 2003 2004 2005 a. Is Net Revenue increasing or decreasing on a per store basis?
b. Comment on whether or not you think this is sustainable growth; why?
c. Do you think average sales per store will increase or decrease as the number of stores increases? Why?
III. Refer to the 10K at Starbucks website or the SEC’s website to answer the following questions: 12. What are the first 8 “Items” titled in the 10K? Item 1. and 1A Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 8.
3 IV. Refer to the Item 1 in the 10K 13. What is the company’s objective?
14. What are the company’s two broad general categories of income? What are the two operating segments?
15. What is included in “Specialty Operations”?
16. What percentage of revenue is from company operated retail stores?
17. What is the Starbucks Experience?
18. What criteria does Starbucks use to select locations for its stores?
19. How many Company-operated retail stores did Starbucks have as of Oct 2, 2008: In the U.S.? International stores? Total? 19a. How many licensed retail stores did Starbucks have as of Oct 2, 2008: In Asia Pacific? In Europe/Middle East/Africa? In Americas? 20. Do you think there is growth potential? Primarily in which countries?
4 V. Refer to the Item 1A in the 10K 21. List the 3 risk factors that you think present the largest threat to Starbucks, and state why. 1.
2.
3. VI. Refer to the Item 2 in the 10K 22. Are the company-operated retail stores mostly owned or leased by Starbucks? Why?
VII. Refer to the Item 4 in the 10K 23. Who is the founder of Starbucks and what is his current position?
VIII. Refer to the Balance Sheet in Item 8 in the 10K 24. Fill in the following blanks. Total Assets = As of 10/2/2005: As of 10/3/2004: Shareholders’ Equity
Total Liabilities +
25. What is Starbucks’s total contributed capital? Common Stock Additional Paid in Capital As of 10/2/2005: As of 10/3/2004:
Total
26. Why did common stock decrease from 10/3/07 to 10/2/08? (See Note 13)
5 27. What is the total dollar amount of earnings that Starbucks has retained in the company since its inception? As of 10/2/2008: As of 10/3/2007:
28. Compute the difference in the retained earnings amount that you recorded above. Compare this to the net income reported in fiscal 2008. What is the difference? a. Difference in retained earnings b. Net Income in fiscal 2008 (from the Income Statement) c. Difference (a – b)
29. Why (or why not) is there a difference?
30. Refer to the Retained Earnings Column of the Consolidated Statements of Shareholder’s Equity. Does Starbucks pay dividends? Why or why not?
31. What is Starbucks’s net Property and Equipment at 10/2/2008?
32. What is included in net Property and Equipment (see Note 8 to Consolidated Financial Statements)?
33. Do you think that Property and Equipment is higher or lower than you would expect? What do you think is the reason?
6 IX. Refer to the Starbucks Income Statement. (Note: Net earnings and net income refer to the same thing.) 34. Fill in the following blanks. For the year For the year ended 10/2/08 ended 10/3/07 Net Revenue Operating Expenses Net Operating Income (Ignore income from equity investees)
For the year ended 9/28/06
35. Compute the Revenue growth and growth in net income, filling in the blanks below. Fiscal 2008 vs. Fiscal 2007 Fiscal 2007 vs. Fiscal 2006 Revenue growth (as a %) Growth in net income (as a %) 36. In your own words, explain the meaning of “profit margin.”
Compute Starbucks’s profit margin: For the year ending: Profit margin
10/2/08
10/3/07
9/28/06
(Hint: The profit margin, or return on sales (ROS) is computed as Net Income/Net Sales.
X. Refer to Starbucks’s Cash Flow Statement. 37. Fill in the following blanks. (a) (b)
(c)
Net change in cash (SUM of columns a,b,c)
For the year ending: 10/2/08 10/3/07
Operating Activities
Investing Activities
Financing Activities
7 38. Compute the change in the Cash and Cash Equivalents account (on the Balance Sheet), filling in the blanks below. 10/2/08 10/3/07 Difference Cash and cash equivalents
How does the last column in your response to question 22 correspond to the difference that you just computed?
39. What must the balance of the Cash and Cash Equivalents account have been at 9/28/03?
40. How much cash did Starbucks use for additions to property, plant and equipment? In fiscal year 2008 (ending 10/2/07) In fiscal year 2007 (ending 10/3/07)
Where does the cash that Starbucks is using for capital expenditures (term used for purchase of fixed assets, usually, property, plant and equipment) come from?
41. What was the primary use of cash during the fiscal year ended 10/2/08?
XI. Notes to the Consolidated Financial Statements 42. Refer to Note 1 Summary of Significant Accounting Policies and Note 6 Inventory. How is inventory valued? What is the primary item in inventory?
43. Refer to Note #1 regarding Summary of Significant Accounting Policies. When is “Retail Revenue” recognized?
8 44. How is revenue recognized for the sale of “value cards”? Why?
45. Refer to Note #18. What is the nature of the two lawsuits in which Starbucks is currently involved?
46. Who are the auditors of Starbucks?
47. What was their opinion of the financial statements for 2007?
48. On which stock exchange is Starbucks traded?
49. What is their trading symbol?
9 50. Information on Starbucks’s recent stock price can be found at www.investor.msn.com. (On the right-hand side of the page, in the blank that says “Get Quote,” type Starbucks’s ticker. Record Starbucks’s latest stock price as of (date): What is the percentage of institutional ownership in Starbucks’s stock? How many shares of stock does Starbucks have outstanding? What is the Starbucks market cap. ?
(Market cap. refers to the “market capitalization” or the total market value of the company.)
$
_____million shares $______ billion
Show how the market cap. was computed.
Using your answer to (1) on the first page, what is Starbucks’s M/B ratio? (Market = market capitalization, book = book value or another name for Shareholders’ Equity) Note: Book Value is a company's shareholder’s equity as it appears on a balance sheet which is equal to total assets minus liabilities (in it’s simplest form). This is how much the company would have left over in assets if it sold its assets and paid its liabilities. Since companies are usually expected to grow and generate more profits in the future, market capitalization is higher than book value for most companies. Since book value is a more accurate measure of valuation for companies which aren't growing quickly, book value is of more interest to value investors than growth investors.
51. What is the listed P/E ratio? _____ What is the meaning of the P/E ratio?
52. Based on this assignment and your analysis, would you recommend purchasing Starbucks stock? Why or Why not?