SBUX » Topics » Net Investment Hedges

This excerpt taken from the SBUX 10-K filed Nov 20, 2009.
Net Investment Hedges
 
Net investment derivative instruments are used to hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. (“Starbucks Japan”) as well as the Company’s net investments in its Canada, UK and China subsidiaries, to minimize foreign currency exposure.
 
The Company had net derivative losses of $19.8 million and $13.0 million, net of taxes, in Accumulated OCI as of September 27, 2009 and September 28, 2008, respectively, related to net investment derivative hedges. Outstanding contracts will expire within 18 months.
 
These excerpts taken from the SBUX 10-K filed Nov 24, 2008.
Net Investment Hedges
 
Net investment derivative instruments are used to hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. (“Starbucks Japan”) as well as the Company’s net investments in its Canada, UK and China subsidiaries, to minimize foreign currency exposure. The Company had accumulated net derivative losses of $13.0 million, net of taxes, in other comprehensive income as of September 28, 2008, related to net investment derivative hedges. Outstanding contracts expire within 29 months.
 
The following table presents the net gains and losses reclassified from other comprehensive income into the consolidated statements of earnings during the fiscal years indicated for cash flow and net investment hedges (in millions):
 
                         
    Sep 28,
    Sep 30,
    Oct 1,
 
    2008     2007     2006  
 
Cash flow hedges:
                       
Reclassified (losses)/gains into total net revenues
  $ (2.5 )   $ 1.5     $ 1.5  
Reclassified losses into cost of sales
    (7.7 )     (2.2 )     (7.7 )
Reclassified losses into interest expense
    (0.6 )     (0.1 )      
                         
Net reclassified losses — cash flow hedges
    (10.8 )     (0.8 )     (6.2 )
Net investment hedges:
                       
Reclassified gains into interest income and other, net
    3.5       6.1       3.7  
                         
Total
  $ (7.3 )   $ 5.3     $ (2.5 )
                         
 
Net
Investment Hedges



 



Net investment derivative instruments are used to hedge the
Company’s equity method investment in Starbucks Coffee
Japan, Ltd. (“Starbucks Japan”) as well as the
Company’s net investments in its Canada, UK and China
subsidiaries, to minimize foreign currency exposure. The Company
had accumulated net derivative losses of $13.0 million, net
of taxes, in other comprehensive income as of September 28,
2008, related to net investment derivative hedges. Outstanding
contracts expire within 29 months.


 



The following table presents the net gains and losses
reclassified from other comprehensive income into the
consolidated statements of earnings during the fiscal years
indicated for cash flow and net investment hedges (in
millions
):


 




















































































































































































































                         

 

 

Sep 28,



 

 

Sep 30,



 

 

Oct 1,



 

 

 

2008

 

 

2007

 

 

2006

 
 


Cash flow hedges:


 

 

 

 

 

 

 

 

 

 

 

 


Reclassified (losses)/gains into total net revenues


 

$

(2.5

)

 

$

1.5

 

 

$

1.5

 


Reclassified losses into cost of sales


 

 

(7.7

)

 

 

(2.2

)

 

 

(7.7

)


Reclassified losses into interest expense


 

 

(0.6

)

 

 

(0.1

)

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 


Net reclassified losses — cash flow hedges


 

 

(10.8

)

 

 

(0.8

)

 

 

(6.2

)


Net investment hedges:


 

 

 

 

 

 

 

 

 

 

 

 


Reclassified gains into interest income and other, net


 

 

3.5

 

 

 

6.1

 

 

 

3.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Total


 

$

(7.3

)

 

$

5.3

 

 

$

(2.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 






 




This excerpt taken from the SBUX 10-K filed Nov 29, 2007.
Net Investment Hedges
 
Net investment derivative instruments are used to hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. (“Starbucks Japan”) as well as the Company’s net investments in its Canadian, UK, and Chinese subsidiaries, to minimize foreign currency exposure. The Company had accumulated net derivative losses of $12.0 million, net of taxes, in other comprehensive income as of September 30, 2007, related to net investment derivative hedges. Outstanding contracts expire within 30 months.
 
The following table presents the net gains and losses reclassified from other comprehensive income into the consolidated statements of earnings during the periods indicated for cash flow and net investment hedges (in thousands):
 
                         
    Sept 30,
    Oct 1,
    Oct 2,
 
    2007     2006     2005  
 
Cash flow hedges:
                       
Reclassified gains/(losses) into net revenues
  $ 1,494     $ 1,489     $ (843 )
Reclassified losses into cost of sales
    (2,201 )     (7,698 )     (4,535 )
Reclassified losses into other income
    (56 )            
                         
Net reclassified losses — cash flow hedges
    (763 )     (6,209 )     (5,378 )
Net reclassified gains — net investment hedges
    6,031       3,754       1,058  
                         
Total
  $ 5,268     $ (2,455 )   $ (4,320 )
                         
 
This excerpt taken from the SBUX 10-K filed Dec 14, 2006.
Net Investment Hedges
 
Net investment derivative instruments are used to hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. as well as the Company’s net investments in its Canadian and United Kingdom subsidiaries, to minimize foreign currency exposure. The Company applies the spot-to-spot method for these forward foreign exchange contracts, and under this method the change in fair value of the forward contracts attributable to the changes in spot exchange rates (the effective portion) is reported in other comprehensive income. The remaining change in fair value of the forward contract (the ineffective portion) is reclassified into earnings in “Interest and other income, net.” The Company had
 
52 STARBUCKS CORPORATION, FORM 10-K


Table of Contents

accumulated net derivative losses of $3.2 million, net of taxes, in other comprehensive income as of October 1, 2006, related to net investment derivative hedges. Current contracts expire within 33 months.
 
The following table presents the net gains and losses reclassified from other comprehensive income into the consolidated statements of earnings during the periods indicated for cash flow and net investment hedges (in thousands):
 
                         
    Oct 1, 2006     Oct 2, 2005     Oct 3, 2004  
 
 
Cash flow hedges:
                       
Reclassified gains/(losses) into total net revenues
  $ 1,489     $ (843 )   $ (1,488 )
Reclassified losses into cost of sales
    (7,698 )     (4,535 )     (761 )
     
     
Net reclassified losses — cash flow hedges
    (6,209 )     (5,378 )     (2,249 )
Net reclassified gains — net investment hedges
    3,754       1,058       673  
 
 
Total
  $ (2,455 )   $ (4,320 )   $ (1,576 )
 
 
 
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