1. Annual Report Project Starbucks Blake Hersch ACG2021 Sec. 080

2. Executive Summary Starbucks main business is to purchase, roast and sell premium coffees in its company-run retail outlets Starbucks continues to grow earnings per share in the short term, and still has long- term growth opportunities. However, the company is likely to face increasing store operating costs as a result of increasing labor costs. Additionally, domestic store openings and same store sales are likely to level off. As the domestic retail business is starting to mature, the company is focusing more on international expansion and domestic specialty sales. ANNUAL REPORT

3. Introduction Chief Executive Officer: Orin C. Smith Location of Home Office: Seattle, Washington Ending Date of Latest Fiscal Year: Oct. 2, 2005 Products and Services Company Provides: Starbucks Corporation engages in purchasing, roasting, and selling whole bean coffees worldwide. The company also sells brewed coffees, espresso beverages, cold blended beverages, food items, teas, branded coffee drinks, ice cream, and a line of compact discs through its retail stores. Main Geographic Activity: United States, Canada, United Kingdom, Australia, Singapore, and Thailand.

4. Audit Report Deloitte & Touche LLP I have been looking for Starbucks’ audit report ever since I started this project; but I couldn’t find anything. I guess I was looking in all the wrong places because I'm sure it’s out there.

5. Stock Market Information Most Recent Price of Company’s Stock: $50.40 Twelve Month Trading Range: $44.58 to $64.26 Dividend Per Share: 0 Date of Above Information: Oct. 3, 2005 Opinion to Buy/Sell/Hold: BuyBuy

6. Industry Situation and Company Plans Starbucks is a corporation which sells high quality whole bean coffee, along with a variety of pastries and confections, and coffee-related accessories and equipment. StarbucksStarbucks is attempting to broaden their Entertainment division and Starbuck Hear Music. They have also in the last year they have also introduced their new signature coffee line, Starbucks Black Apron Exclusive. StarbucksStarbucks also made a $5 million, 5-year commitment to long-term relief & recovery efforts for victims of hurricane Katrina. In addition to its financial commitment, Starbucks is working closely with the American Red Cross relief effort, as well as Emergency Operations Centers and Federal Emergency Management Agency in the impacted areas.

7. Income Statement Everything seems to be at a steady increase, which means that the more money Starbucks is making, the more money they are putting back into the retained earnings. Period Ending3-Oct-0428-Sep-0329-Sep-02 Gross Profit3,102,8072,389,5941,938,897 Income From Operations 608,173424,713318,725 Net Income390,559268,346215,073

8. Balance Sheet The smallest interval increase is shown in the total liabilities section of the graph. The liabilities are what the company will have to eventually pay off from the assets. The largest interval increase is through the total assets. The total assets are what the company owns, whether it is money or equipment. Total Liabilities + Total S.H.E. = Total Assets 3-Oct-0428-Sep-0329-Sep-02 Total Liabilities 916,330 647,319 566,098 Total Stockholder Equity 2,474,2182,082,4271,726,638 Total Assets3,390,548 2,729,746 2,292,736

9. Statement of Cash Flows Total cash flow for Starbucks over the past two years has been more that its net income. Their spending in investments, such as buildings and inventory, is helping Starbucks reach their goal of expanding their franchise to numerous locations all over the world. Starbucks activity in selling stock and overall financing has been decreasing over the past three years; but their main source of financing would have to be borrowing. While investing activities are decreasing and operating activities are increasing, the overall cash flow for Starbucks is increasing.

10. Accounting Policies The accounting process for this business is fairly uncomplicated. The company leases its retail locations, distribution facilities and office space. Minimum future payments under these contracts are not that different than the company has paid in the past. The company is currently debt free, and inventory levels have traditionally been well managed by the company since its coffee bean products are perishable. As of June, 2002, Starbucks had not made any material changes in financial accounting methods, estimates or timing. Notes of Financial Statements Income Statement Balance Sheet Cash Flow

11. Financial Analysis Liquidity Ratios (IN MILLIONS) 9/30/04 9/30/03 Working Capital 315,326 604,636 Current Ratio 1.748 1.810 times Receivable Turnover 37.757 11.884 times Average Days Sales Uncollected 9.667 30.714 days Inventory Turnover 5.202 4.916 times Average Days Inventory on Hand 70.165 74.247 days

12. Financial Analysis Profitability Ratios (IN MILLIONS) 9/30/04 9/30/03 Profit Margin 7.4 % 6.6 % Asset Turnover 1.591 1.493 times Return on Assets 11.8 % 13.5 % Return on Equity 15.8 % 13.5 %

13. Financial Analysis Solvency Ratio (IN MILLIONS)9/30/049/30/03 Debt to Equity.338.135 times

14. Financial Analysis Market Strength Ratios 9/30/049/30/03 Price/Earnings 45.57934.179 times Dividend Yield 0 0