8-KEarnings & ResultsExhibits & Filings

STARBUCKS CORP 8-K Report, Financial Results (Nov 13, 2013)

Filed November 13, 2013For Securities:SBUX

Summary

Starbucks Corporation (SBUX) filed an 8-K on November 12, 2013, to report significant developments related to a concluded arbitration with Kraft Foods Global, Inc. concerning packaged coffee. The arbitrator ordered Starbucks to pay Kraft approximately $2.23 billion in damages, plus an estimated $557 million in prejudgment interest and attorneys' fees, totaling roughly $2.79 billion. This substantial award has been recognized as a charge to operating expense in the fourth quarter and full fiscal year 2013 results. The impact of this award significantly skewed Starbucks' reported financial results. For Q4 fiscal 2013, the company reported an operating loss of $2,115.2 million and a net loss of $1,232.0 million ($1.64 per share). For the full fiscal year 2013, Starbucks reported an operating loss of $325.4 million and net earnings of $8.3 million ($0.01 per share). Investors should note that these GAAP figures are heavily impacted by the Kraft arbitration settlement.

Key Highlights

  • 1Starbucks ordered to pay Kraft Foods Global, Inc. $2.23 billion in damages, plus estimated $557 million in interest and fees, totaling approximately $2.79 billion.
  • 2The award will be treated as a charge to operating expense for the fourth quarter and full fiscal year 2013.
  • 3Q4 fiscal 2013 reported operating loss of $2,115.2 million and net loss of $1,232.0 million ($1.64 per share) due to the arbitration award.
  • 4Full fiscal year 2013 reported operating loss of $325.4 million and net earnings of $8.3 million ($0.01 per share) impacted by the award.
  • 5Excluding the award, non-GAAP Q4 fiscal 2013 operating income was $668.9 million ($0.63 per share), and non-GAAP full-year fiscal 2013 operating income was $2,458.7 million ($2.26 per share).
  • 6Updated financial statements reflecting the award are attached as Exhibit 99.1, with GAAP to non-GAAP reconciliations as Exhibit 99.2.

Frequently Asked Questions

This 8-K filing is primarily to report the conclusion of Starbucks' arbitration with Kraft Foods Global, Inc. regarding packaged coffee, and to disclose the resulting substantial award that Starbucks must pay.

Starbucks has been ordered to pay Kraft $2.23 billion in damages, plus an estimated $557 million in prejudgment interest and attorneys' fees. The total estimated cost is approximately $2.79 billion.

The award will be recognized as a significant charge to operating expense in the fourth quarter and full fiscal year 2013. This has resulted in reported operating losses and net losses for Q4 fiscal 2013, and a significantly reduced net earning for the full fiscal year 2013 on a GAAP basis.

Yes, Starbucks provided non-GAAP figures that exclude the impact of the award. These non-GAAP results show a much stronger operational performance, with non-GAAP net earnings per share of $0.63 for Q4 fiscal 2013 and $2.26 for the full fiscal year 2013. A reconciliation of GAAP to non-GAAP measures is provided in the filing.