STARBUCKS 10-K FILING MD&A
Starbucks 10-K Filing-MD&A
Management's Discussion and Analysis of Financial Condition and Results of Operations Patricia Horton
Go to the SEC's website (www.sec.gov) and click on "search for company filings" under "filings and forms."
On the next page, click "Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification)" to search for a company.
On the next page, search for Starbucks by using their ticker symbol "SBUX."
Scroll down on the next page until you see their 10-K filing and click on "Documents."
Click on the first document's link: "d10k.htm."
Retrieve Item 7– their "Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A).
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In a 2–3 page paper (12-point, double-spaced), summarize their MD&A and critique it based on the SEC.
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
The MD&A provides the company’s overview of the previous year of operations and how the company performed during that period. Management uses this section of the 10-K report to give information from their point of view. The report also outlines goals and new projects for the upcoming year. Item 7, the MD&A, is a very important section of an annual report because it provides a look at management and how they operating style. This section of the 10-K report contains useful information for investors but it is important to remember that this section is unaudited. The following papers look at the MD&A of Starbucks year ending 2013 in comparison to SEC filing requirements.
Financial Conditions, Liquidity and Capital Resources
This section focuses on company operations and financial results. Company information about liquidity, capital resources, trends, or uncertainties that could affect the company are disclosed in this report section. Starbucks begins with Investment Overview provides information on their cash and short-term investments for period ending September 29, 2013. They focused on their holdings and investment in the U.S. and abroad to internally fund operations. The company’s borrowing capacity has been updated. The $500 million dollar unsecured credit facility was replaced by a $750 million dollar unsecured revolving credit facility because the previous was set to mature in 2014. Under the section Use of Cash, it lists their dispute with Kraft and arbitration outcome. Starbucks must pay Kraft over $557 million dollars and plans to use cash from their U.S. companies along with procuring of debt to pay the judgment. They approximate capital expenditures for 2014 to be $1.2 billion. They planned to pay out $196 million in dividends through the end of November. Cash Flow has increased from $1.8 billion in 2012 to $2.9 billion in 2013 due to increased earnings. Contractual Obligations for leases, debt, purchases and other obligations are expected to be paid through normal operating income. Off Balance Sheet Arrangement have been listed in the footnotes
Commodity Prices, Availability, and General Risk Conditions
The SEC offers examples as to how companies can present operational risk they face. Companies may discuss how they plan to meet taste changes in consumers. Commodity risks, resource management are topics for companies that rely on natural resources for their manufacture red products. Companies operating on an international basis can discuss exchange rate fluctuations. Handling of economic downturn, competition and building their brand may be discussed. Other risks include regulation and law compliance at present and future new or anticipated regulations and laws. Starbucks states that commodity pricing is their primary risk factor due to their large purchases of green coffee beans and dairy products. The majority of Starbucks business transactions are in US currency but they do operate internationally so foreign currency exchange rates are a risk. Interest rate risks are associated with their debt securities (short and long-term) and available-for-sale securities.
Financial Risk Management
Starbucks manages commodity risks by using commodity hedges and price-fixed or to-be-fixed contracts for coffee purchases. The impact of future commodity price fluctuations is illustrated in a table for transactions occurring after September 29, 2013. Foreign currency exchange rates risks are managed through foreign exchange contracts and other hedging instruments. A table is provided to capture possible foreign currency hedges. The company feels that their equity security price risk is low due to sensitivity analysis they conducted with a 10% fluctuation rate. They use sensitivity analysis to determine their interest rate risks using a 100-point basis and they see no significant impact to operations. .
Always on Time
Marked to Standard
Application of Critical Accounting Policies
Accounting judgments affect the financial statements past, future and present. Changes made from previous years Critical accounting judgments, such as estimates and assumptions. These accounting judgments – and any changes from previous years – can have a significant impact on the numbers in the financial statements, such as assets, costs, and net income. Starbucks states that Applying Critical Accounting Policies is a matter of making judgments based on uncertainties and these decisions can materially affect the financial condition of the company. The subsection is Property, Plant, Equipment and Definite Lived Assets explaining their policy on conducting periodic impairment testing and has not any significant asset impairment for the last three fiscal years. The next subsection is Goodwill, Indefinite-Lived Intangible Assets and Starbucks list they do impairment testing on an annual basis and predict no significant impairment changes in the near future. Income Taxes are listed next stating they are periodically audited by foreign and domestic tax entities and adjust their tax benefits and losses when they occur. Litigation Accruals is the last area of this section address their legal dealing with lawsuits and other legal matters as a normal part of business. They review and adjust legal expenditures regularly.
The purpose of the MD&A, governed by SEC, is to provide investors with the financial condition of a company from management’s point of view. These documents provide disclosures, trends, assessments and judgments that can have a material impact on and a company. Investors look at management’s style of operating which allows them to make financial decisions based on the information provided in the 10-K.
SEC, 2013. SEC Filing from Subscription Database. Starbucks Corporation (2013, September 29). Form 10-K Annual Report. Retrieved January 15, 2013 from
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