SBUX » Topics » Note 10: Long-term Debt and Short-term Borrowings

This excerpt taken from the SBUX 10-K filed Dec 14, 2006.
Note 10: Long-term Debt and Short-term Borrowings
 
In August 2005, the Company entered into a $500 million unsecured five-year revolving credit facility (the “facility”) with various banks, of which $100 million may be used for issuances of letters of credit. The facility is available for working capital, capital expenditures and other corporate purposes, which may include acquisitions and share repurchases. In August 2006, the Company increased its borrowing capacity under the facility to $1 billion, as provided in the original credit facility. The interest rate for borrowings under the facility ranges from 0.150% to 0.275% over LIBOR or an alternate base rate, which is the greater of the bank prime rate or the Federal Funds Rate plus 0.50%. The specific spread over LIBOR will depend upon the Company’s performance under specified financial criteria.
 
As of October 1, 2006, the Company had $700 million outstanding, as well as a letter of credit of $11.9 million which reduces the borrowing capacity under the credit facility. For the fiscal year ended October 1, 2006, the Company had additional borrowings of $1.4 billion under the facility and made principal repayments of $993 million. As of October 2, 2005, the Company had $277 million outstanding, with no letters of credit. The weighted average contractual interest rates at October 1, 2006 and October 2, 2005 were 5.5% and 4.0% respectively. The facility contains provisions that require the Company to maintain compliance with certain covenants, including the maintenance of certain financial ratios. As of October 1, 2006 and October 2, 2005, the Company was in compliance with each of these covenants.
 
In September 1999, Starbucks purchased the land and building comprising its York County, Pennsylvania roasting plant and distribution facility for a total purchase price of $12.9 million. At the time of purchase, the Company assumed related loans totaling $7.7 million from the York County Industrial Development Corporation. As of October 1, 2006, the Company had $2.7 million outstanding. The remaining maturities of these loans range from four to five years, with interest rates from 0.0% to 2.0%.
 
Interest expense, net of interest capitalized, was $8.4 million, $1.3 million and $0.4 million in fiscal 2006, 2005 and 2004, respectively. In fiscal 2006, $2.7 million of interest expense was capitalized for new store construction and included in “Property, plant and equipment, net,” on the consolidated balance sheet. No interest was capitalized in fiscal 2005 or 2004.
 
56 STARBUCKS CORPORATION, FORM 10-K


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Scheduled principal payments on long-term debt are as follows (in thousands):
 
         
FISCAL YEAR ENDING      
 
 
2007
  $ 762  
2008
    776  
2009
    789  
2010
    337  
2011
    56  
 
 
Total principal payments
  $ 2,720  
 
 
 
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