Annual Report Project

1
Annual Report Project

• Lindsey Berkowitz
• Susan Crosson
• ACG2021
• 10 October 2006

2
Executive Summary

• Starbucks Corporation, since its start, has been
  steadily growing every year. Each fiscal year,
  the company expands its enterprise to more
  locations around the world and produces new and
  unique products for consumers. The companys
  paramount goal is to become the most respected
  coffee distributor in the world. In order to
  fulfill this goal, Starbucks plans to continue to
  expand, to develop new products, and to discover
  new and innovative means of distribution.
  Starbucks is not only concerned with making the
  most profits but they are also concerned about
  the wellbeing of their stakeholders, which is
  what I believe makes the company such a success.
• Annual Report Fiscal Year 2005

3
Introduction

• Chief Executive Officer James L. Donald
• Location of Home Office Seattle, Washington
• Ending Date of Last Fiscal Year 2 October 2005
• Starbucks Corporation is the largest chain of
  specialty coffee roasters and retailers that has
  over 10,000 locations world-wide. In addition to
  coffee, Starbucks also offers a multitude of
  products that include Tazo? Teas, Ethos? bottled
  water, Hear Music? CDs, brewing equipment and a
  variety of Starbucks brand liqueurs. Starbucks
  also owns and distributes Seattles Best Coffee.
  In addition to specialty coffee and other
  beverages, Starbucks serves food items such as
  pastries and sandwiches. Because of licensing
  agreements, Starbucks is able to distribute their
  products in a wide variety of locations within
  grocery stores, airports, hotels, and university
  campuses
• Starbucks has over 10,000 licensed locations in
  North America, Latin America, Europe, the Middle
  East, and the Pacific Rim

4
Audit Report

• Name of the companys independent auditors
  Deloitte and Touche
• According to Deloitte and Touche, the
  corporations consolidated financial statements
  were compiled and presented accurately by using
  the universally accepted accounting process. It
  was concluded that, from observing the companys
  stock market activity that dividends have never
  been paid on its common stock and that the
  company has the intention of keeping the use of
  its retained earnings within the business. In
  reference to Starbucks Corporate Social
  Responsibility, the auditors reflect the same
  ideas that are the basis of the companys 2005
  Fiscal Year CSR Annual Report. These ideas convey
  that Starbucks, while spearheading the coffee
  industry, stays committed to building the company
  while ensuring that benefits reach their
  stakeholders. Starbucks is not only concerned
  with generating revenue but their paramount goal
  is to positively impact the people and places
  surrounding the company socially, economically,
  and environmentally.

5
Stock Market Information

• Most recent price of the companys stock 34.05
  per share
• Twelve month trading range of the companys stock
  of past two fiscal years

According to the experts, the price per share is
projected to increase steadily. This stock is a
good investment if the investor is looking for
long term activity, but at the moment it looks
like selling is the best option for short term
activity.
6
Industry Situation and Company Plans

• Starbucks coffee is a part of the special
  eateries industry. This particular industry is
  relatively small in reference to the companies it
  includes. Companies such as Panera Bread, Caribou
  Coffee Company and Tim Hortons Inc., examples of
  other names seen in this industry
  (www.bizyahoo.com). This industry is one that is
  relatively elastic being that peoples incomes,
  tastes and preferences affect the demand of the
  good. The prosperity of this industry depends
  somewhat on consumer goods and how badly they
  want the product. On the flip-sde, the industry,
  particularly coffee, depends on many other
  factors that include climate and its affect on
  the supplies needed to produce coffee.
• The outlook on the prosperity of Starbucks for
  the future is a very positive one. The company
  has many plans for the next fiscal year and
  because of the companys ongoing success, those
  plans will most likely become a reality. In
  fiscal 2005, Starbucks expanded their
  international activity in countries including
  Jordan, the Bahamas and Ireland. In the upcoming
  year the company plans for future growth in
  countries including Brazil, India and Russia that
  will contribute to the projected opening of 1800
  new stores. Starbucks expects a 20 increase in
  annual net revenue growth for the next 3-5 years.
  Starbucks, however, does not just focus on
  financial success. The company strives to build
  positive partnerships with its suppliers, coffee
  farmers, customers and surrounding environment.

7
Income Statement

• The format of the income statement is multi-step

There have only been increases in these amounts.
If Starbucks uses its retained earnings to build
their company and the industry remains the
same, the company should continue to prosper.
8
Balance Sheet
The asset account for 2005 more than doubled
compared to the previous fiscal year. This just
confirms that Starbucks is a growing corporation
and it has done so significantly in the past year.
9
Statement of Cash Flows

• The cash flows from operations are more than net
  income for the past two years
• The company is growing through investing
  activities, I.e. buying property, plant and
  equipment and other long lived assets
• Starbucks primary source of financing is
  borrowing. The biggest decrease in the companys
  financing activity is the issuance of its stock.
• Over the past two years, the Starbucks cash has
  increased steadily. In 2003, the companys net
  cash was 99.46 million where in 2005 the company
  brought in 173.81.

10
Accounting Policies

• Starbucks Corporation has quite simple accounting
  policies. These include renting their office
  space, leasing their many leasing locations, and
  leasing distribution offices. The companys
  paramount goal is to become the most respected
  coffee distributor in the world. In order to
  fulfill this goal, Starbucks plans to continue to
  expand, to develop new products, and to discover
  new and innovative means of distribution.
• Topics of notes to financial statements
• Description of business
• Principles of consolidation
• Fiscal year end
• Reclassifications
• Estimates and Assumptions
• Cash and Cash Equivalents
• Etc

11
Liquidity Ratios
12
Profitability Ratio

13
Solvency Ratios
14
Market Strength Ratios