Note 1: Summary of Significant Accounting Policies

Financial Statement Preparation

The unaudited condensed consolidated financial statements as of June 28, 2009, and for the 13-week and 39-week periods ended June 28, 2009 and June 29, 2008, have been prepared by Starbucks Corporation (“Starbucks” or the “Company”) under the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial information for the 13-week and 39-week periods ended June 28, 2009 and June 29, 2008 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The Company evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through August 4, 2009, the day the financial statements were issued.

The financial information as of September 28, 2008 is derived from the Company’s audited consolidated financial statements and notes for the fiscal year ended September 28, 2008 (“fiscal 2008”), included in Item 8 in the Fiscal 2008 Annual Report on Form 10-K (the “10-K”). The information included in this Quarterly Report on Form 10-Q (the “10-Q”) should be read in conjunction with management’s discussion and analysis and notes to the financial statements in the 10-K.

The results of operations for the 13-week and 39-week periods ended June 28, 2009 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 27, 2009 (“fiscal 2009”).

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments. Details on the fair value of the Company’s trading securities, available-for-sale securities and derivatives are included in Note 5, Fair Value Measurements. For equity securities of companies that are privately held, or where an observable quoted market price does not exist, the Company estimates fair value using a variety of valuation methodologies. Such methodologies include comparing the security with securities of publicly traded companies in similar lines of business, applying revenue multiples to estimated future operating results for the private company and estimating discounted cash flows for that company. Declines in fair value below the Company’s carrying value deemed to be other than temporary are charged against net earnings. The fair value of the Company’s debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying value of short-term debt approximates fair value. The estimated fair value of Starbucks $550 million of 6.25% Senior Notes was approximately $564 million as of June 28, 2009.

Goodwill

The Company tests its goodwill for impairment on an annual basis, or more frequently if circumstances indicate goodwill carrying values exceed reporting unit fair values. Fair value is estimated by projecting discounted cash flows from the reporting unit in addition to other quantitative and qualitative analyses. If the carrying amount of goodwill exceeds the estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value.

Starbucks conducted its annual test for its consolidated entities in the fiscal third quarter, resulting in $7 million of goodwill impairment related to its US operating segment’s Hawaii reporting unit, which is comprised of retail store operations. The current and future projected operating results for the Hawaii operations, which were acquired in fiscal 2006, are lower than originally anticipated due to the overall economic slowdown and its impact on the travel industry in particular, resulting in a partial impairment of the goodwill recorded at acquisition.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Starbucks adopted SFAS 157 for its financial assets and liabilities effective September 29, 2008 (see Note 5 for additional disclosures). As permitted by FSP FAS 157-2, SFAS 157 is effective for nonfinancial assets and liabilities for Starbucks first fiscal quarter of 2010. The Company continues to evaluate the potential impact of the adoption of SFAS 157 related to its nonfinancial assets and liabilities.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill, and any noncontrolling interest in the acquiree. SFAS 141R also provides for disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will be effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively to business combinations completed in fiscal 2010 and beyond.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51,” which establishes accounting and reporting standards for noncontrolling interests (“minority interests”) in subsidiaries. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be accounted for as a component of equity separate from the parent’s equity. SFAS 160 will be effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company continues to evaluate the impact that adoption will have on its consolidated financial statements.

In early April 2009, three FASB Staff Positions were issued. FSP FAS 157-4 addresses the determination of fair values in inactive markets. FSP FAS 115-2 addresses other-than-temporary impairments for debt securities. FSP FAS 107-1 requires interim disclosures about fair value of financial instruments. Starbucks adopted the three FSPs in the third quarter of fiscal 2009, with no significant impact on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” SFAS No. 167 requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. The standard will be effective for Starbucks first fiscal quarter of 2011. The Company is currently evaluating the impact that adoption may have on its consolidated financial statements.

Note 2: Restructuring Charges

In the third quarter of fiscal 2009, Starbucks continued to execute its restructuring efforts to position the Company for long-term profitable growth. These efforts are focused on both the global Company-operated store base and the non-retail support organization. Starbucks actions to rationalize its store portfolio have included the announcements (in July 2008 and January 2009) of plans to close a total of approximately 800 Company-operated stores in the US, restructure its Australia market, and close approximately 100 additional Company-operated stores internationally. Since those announcements, 676 US stores, 61 stores in Australia and 28 other International stores have been closed.

2009 Restructuring Charges

US store closures — In the third quarter of fiscal 2009, the Company closed 60 of the approximately 600 stores announced in July 2008, bringing the total number of US closures under this restructuring action to 563 stores as of the end of the third quarter. The Company also closed 109 of the approximately 200 stores announced for closure in January 2009, bringing the total number of closures under this restructuring action to 113 stores as of the end of the third quarter. The Company expects to complete the remaining US store closures by the end of fiscal 2009, and recognize the associated lease exit costs concurrently with the actual closures.

International store closures - During the third quarter of fiscal 2009, the Company closed 25 of the approximately 100 stores announced for closure in January 2009, bringing the total number of International closures under this action to 28 stores. The Company expects to complete the remaining closures in fiscal 2010, and will recognize the associated lease exit costs concurrently with the actual closures.

Restructuring charges by type and a reconciliation of the associated accrued liability were as follows (in millions):

		Lease Exit								Employee
		and Other				Asset				Termination
		Related Costs				Impairments				Costs				Total
Total expected costs		$	296.8			$	327.4			$	39.1			$	663.3
Expenses recognized during the 13 weeks ended June 28, 2009 (1)			44.1				5.6				1.9				51.6
Expenses recognized during the 39 weeks ended June 28, 2009 (1)			135.1				125.8				18.3				279.2
Costs incurred during the 13 weeks ended June 28, 2009 (1)			44.0				5.6				1.9				51.5
Costs incurred during the 39 weeks ended June 28, 2009 (1)			120.4				125.8				18.3				264.5
Costs incurred cumulative to date			183.0				327.4				35.8				546.2
Accrued liability as of September 28, 2008		$	48.0			$	—			$	5.4			$	53.4
Costs incurred, excluding non-cash charges and credits (2)			139.2				—				18.2				157.4
Cash payments			(109.6	)			—				(22.2	)			(131.8	)
Accrued liability as of June 28, 2009		$	77.6			$	—			$	1.4			$	79.0

Restructuring charges by reportable segment were as follows (in millions):

										Unallocated
		US				International				Corporate (3)				Total
Total expected costs		$	467.8			$	100.8			$	94.7			$	663.3
Expenses recognized during the 13 weeks ended June 28, 2009 (1)			39.2				4.5				7.9				51.6
Expenses recognized during the 39 weeks ended June 28, 2009 (1)			200.4				21.4				57.4				279.2
Costs incurred during the 13 weeks ended June 28, 2009 (1)			39.0				4.6				7.9				51.5
Costs incurred during the 39 weeks ended June 28, 2009 (1)			185.5				21.5				57.5				264.5
Costs incurred cumulative to date			411.2				40.7				94.3				546.2

2008 Restructuring Charges

The Company recognized $167.7 million of restructuring charges in the 13 weeks and 39 weeks ended June 29, 2008, comprised of store asset impairments related to Starbucks July 2008 announcement that it would close approximately 600 stores in its US market.

Note 3: Investments

Available-for-sale securities

The Company’s available-for-sale securities as of June 28, 2009 were as follows (in millions):

						Gross				Gross
						Unrealized				Unrealized
		Amortized				Holding				Holding				Fair
		Cost				Losses				Gains				Value
Short-term investments
Corporate debt securities		$	5.5			$	—			$	0.1			$	5.6
Long-term investments
State and local government obligations		$	58.4			$	(2.5	)		$	—			$	55.9
Corporate debt securities			11.5				—				0.7				12.2
Total long-term investments		$	69.9			$	(2.5	)		$	0.7			$	68.1
Total available-for-sale securities		$	75.4			$	(2.5	)		$	0.8			$	73.7

For available-for-sale securities, proceeds from sales were $5.0 million for both the 13 weeks and 39 weeks ended June 28, 2009. Additionally, in the third quarter of fiscal 2009, one of the Company’s auction rate securities (“ARS”) was called at par value of $7.4 million. There were immaterial amounts of realized gains and realized losses during the 13-week and 39-week periods.

As of June 28, 2009, the Company’s long-term available-for-sale securities of $68.1 million included $55.9 million invested in ARS. ARS have long-dated maturities but provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals. Due to the auction failures that began in mid-February 2008, these securities became illiquid and were classified as long-term investments. The investment principal associated with the failed auctions will not be accessible until:

	•		successful auctions resume;
	•		an active secondary market for these securities develops;
	•		the issuers replace these securities with another form of financing; or
	•		final payments are made according to the contractual maturities of the debt issues which range from 21 to 36 years.

The Company intends to hold the ARS until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities.

The Company has $2.5 million of accumulated unrealized losses on ARS, determined to be temporary, which is included in accumulated other comprehensive income as a reduction in shareholders’ equity. The Company’s ARS are collateralized by portfolios of student loans, substantially all of which are guaranteed by the United States Department of Education. As of June 28, 2009, approximately $41.6 million in ARS was rated triple-A by two or more of the following major rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings. All of the remaining securities were rated investment grade.

The following table presents the length of time available-for-sale securities were in continuous unrealized loss positions but were not deemed to be other-than-temporarily impaired, as of June 28, 2009 (in millions):

Consecutive Monthly Unrealized Losses

Greater Than

Less Than

or Equal to

12 Months

12 months

Gross

Gross

Unrealized

Unrealized

Holding

Fair

Holding

Fair

Losses

Value

Losses

Value

State and local government obligations

$

—

$

—

$

(2.5

)

$

55.9

Gross unrealized holding losses on the state and local obligations consist of unrealized losses on the Company’s eleven ARS. As Starbucks has the ability and intent to hold its available-for-sale securities until a recovery of fair value, which may be at maturity, the Company does not consider these securities to be other-than-temporarily impaired. Long-term corporate debt securities generally mature in less than five years.

There were no realized losses recorded for other-than-temporary impairments during the 13-week and 39-week periods ended June 28, 2009.

Trading securities

Changes in net unrealized holding gains/losses in the trading portfolio included in earnings were a net gain of $5.4 million for the 13-week period ended June 28, 2009 and a net loss of $10.6 million for the 39-week period ended June 28, 2009.

Cost Method Investments

The Company has equity interests in entities that develop and operate Starbucks licensed retail stores in several global markets. The value of these investments was $35.2 million as of June 28, 2009. Additionally, Starbucks has investments in privately held equity securities unrelated to Starbucks licensed retail stores. The value of these investments was $2.5 million as of June 28, 2009. Management compared the estimated fair value of each cost method investment to its related carrying value as of June 28, 2009, and recognized a loss of $0.3 million on one of the investments that is unrelated to Starbucks licensed retail stores.

Note 4: Derivative Financial Instruments

The Company manages its exposure to certain market-based risks through an umbrella risk management policy. Under this policy, market-based risks are quantified and evaluated for potential mitigation strategies, such as entering into hedging transactions. Hedging instruments may include derivatives used to hedge interest rates, commodity prices, and foreign currency denominated revenues, purchases, assets and liabilities.

The Company records all derivatives on the consolidated balance sheets at fair value. For a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (“OCI”) and subsequently reclassified into net earnings when the hedged exposure affects net earnings. For a net investment hedge, the effective portion of the derivative’s gain or loss is reported as a component of OCI.

See Note 5 for additional information on the Company’s fair value measurements related to derivative instruments.

Cash Flow Hedges

The Company and certain subsidiaries enter into cash flow derivative instruments to hedge portions of anticipated revenue streams and inventory purchases in currencies other than the entity’s functional currency. Outstanding forward contracts, which comprise the majority of the Company’s derivative instruments, hedge monthly forecasted revenue transactions denominated in Japanese yen and Canadian dollars, as well as forecasted inventory purchases denominated in US dollars for foreign operations. From time to time, the Company also uses futures contracts to hedge the variable price component for a small portion of its price-to-be-fixed green coffee purchase contracts.

The Company had net derivative gains of $5.0 million, net of taxes, in accumulated OCI as of June 28, 2009, related to cash flow hedges. Of this amount, $0.6 million of net derivative gains pertains to hedging instruments that will be dedesignated within 12 months and will also continue to experience fair value changes before affecting earnings. No cash flow hedges were discontinued during the 13-week and 39-week periods ended June 28, 2009 and June 29, 2008. Outstanding contracts will expire within 39 months.

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 $15.4 million, net of taxes, in accumulated OCI as of June 28, 2009, related to net investment derivative hedges. Outstanding contracts will expire within 20 months.

Other Derivatives

The Company enters into certain foreign currency forward contracts that are not designated as hedging instruments under SFAS 133 to mitigate the translation risk of certain balance sheet items. These contracts are recorded at fair value, with the changes in fair value recognized in “Interest income and other, net” on the consolidated statements of earnings. The impact of the fair value adjustments on earnings is largely offset by the financial impact of translating foreign currency denominated payables and receivables, which is also recognized in “Interest income and other, net.”

In the third quarter of fiscal 2009, the Company entered into certain swap and futures contracts that are not designated as hedging instruments under SFAS 133 to mitigate the price uncertainty of a portion of its future purchases of dairy products and diesel fuel. These contracts are recorded at fair value, with the changes in fair value recognized in “Interest income and other, net” on the consolidated statement of earnings.

The following table presents the fair values of derivative instruments on the consolidated balance sheet as of June 28, 2009 (in millions):

		Assets								Liabilities
Contract Type		Balance Sheet location				Fair Value				Balance Sheet location				Fair Value
Derivatives designated as hedging instruments under SFAS 133:
Cash Flow Hedges:
Foreign Exchange		Prepaid expenses and other current assets				$	9.2			Other accrued expenses				$	4.5
Foreign Exchange		Other assets					13.7			Other long-term liabilities					2.7
Commodity		Prepaid expenses and other current assets					—			Other accrued expenses					—
							22.9								7.2
Net Investment Hedges:
Foreign Exchange		Prepaid expenses and other current assets					1.2			Other accrued expenses					3.0
Foreign Exchange		Other assets					—			Other long-term liabilities					2.5
							1.2								5.5
Total Derivatives under SFAS 133						$	24.1							$	12.7
Derivatives not designated as hedging instruments under SFAS 133:
Foreign Exchange		Prepaid expenses and other current assets				$	0.4			Other accrued expenses				$	15.0
Commodity		Prepaid expenses and other current assets					0.8			Other accrued expenses					0.4
Total Derivatives not under SFAS 133							1.2								15.4
Total Derivatives						$	25.3							$	28.1

The following table presents the effect of derivative instruments on the consolidated statements of earnings for the 13-week and 39-week periods ended June 28, 2009 (in millions):

										Location of Gain/(Loss)				Gain/(Loss) reclassed from
										reclassified from Accumulated				Accumulated OCI to Net
		Gain/(Loss) recognized in OCI								OCI into Net Earnings -				Earnings
Contract Type		13 Weeks				39 Weeks				Effective Portion				13 Weeks				39 Weeks
Derivatives designated as hedging instruments under SFAS 133:
Cash Flow Hedges:
Foreign Exchange(1)		$	(13.5	)		$	25.7			Total net revenue				$	(0.6	)		$	(2.8	)
										Cost of sales including occupancy costs					2.0				5.0
Commodity			(3.9	)			(1.5	)		Cost of sales including occupancy costs					(0.2	)			(0.3	)
Interest rate (2)			—				—			Interest expense					(0.2	)			(0.5	)
			(17.4	)			24.2								1.0				1.4
Net Investment Hedges:
Foreign Exchange (3)			(8.2	)			(3.8	)							—				—
Total		$	(25.6	)		$	20.4							$	1.0			$	1.4

		Location of Gain/(Loss) recognized in				Gain/(Loss) recognized in Net Earnings
		Net Earnings				13 Weeks				39 Weeks
Derivatives not designated as hedging instruments under SFAS 133
Foreign Exchange		Interest Income and Other, net				$	(24.7	)		$	20.8
Commodity		Interest Income and Other, net				$	(0.3	)		$	(0.3	)

The Company had the following outstanding derivative contracts as of June 28, 2009, based on notional amounts:

•		$695 million in foreign exchange contracts
•		$20 million in dairy contracts
•		$11 million in diesel contracts
•		$0.3 million in green coffee contracts

Note 5: Fair Value Measurements

The Company adopted SFAS 157 for its financial assets and liabilities effective September 29, 2008, and will adopt SFAS 157 for nonfinancial assets and liabilities in the first fiscal quarter of 2010. The two-step adoption is in accordance with FSP FAS 157-2, which allows for the delay of the effective date of SFAS 157 for nonfinancial assets and liabilities. The Company continues to evaluate the potential impact of the adoption of SFAS 157 fair value measurements related to its property, plant and equipment, goodwill and other intangible assets.

SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

•		Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
•		Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
•		Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the financial assets and liabilities measured at fair value on a recurring basis as of June 28, 2009 (in millions):

		Jun 28,
		2009				Level 1				Level 2				Level 3
Assets:
Trading securities		$	39.2			$	39.2			$	—			$	—
Available-for-sale securities			73.7				—				17.8				55.9
Derivatives			25.3				—				25.3				—
Total		$	138.2			$	39.2			$	43.1			$	55.9
Liabilities:
Derivatives		$	28.1			$	—			$	28.1			$	—

Trading securities include mutual funds and exchange-traded-funds, which the Company holds as an economic hedge against its liability under the Management Deferred Compensation Plan (“MDCP”). For these securities, the Company uses quoted prices in active markets for identical assets to determine their fair value, thus they are considered to be Level 1 instruments.

Available-for-sale securities include corporate bonds and auction-rate securities (“ARS”) collateralized by student loans, substantially all of which are guaranteed by the United States Department of Education. The Company uses observable direct and indirect inputs for corporate bonds, which are considered Level 2 instruments. Level 3 instruments are comprised solely of ARS, all of which are considered to be illiquid due to the auction failures that began in mid-February 2008. The Company values ARS using an internally developed valuation model, whose inputs include interest rate curves, credit and liquidity spreads, and effective maturity.

Derivative assets and liabilities include foreign currency forward contracts, commodity swaps and futures contracts. Where applicable, the Company uses quoted prices in an active market for identical derivative assets and liabilities that are traded in exchanges. These derivative assets and liabilities are coffee and dairy futures contracts and are included in Level 1. Derivative assets and liabilities included in Level 2 are over-the-counter currency forward contracts and commodity swaps whose fair values are estimated using industry-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves and forward and spot prices for currencies and commodities.

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table presents the changes in Level 3 instruments measured on a recurring basis for the 39 weeks ended June 28, 2009 (in millions):

		ARS
Beginning balance, September 28, 2008		$	59.8
Total reduction in unrealized losses included in other comprehensive income			3.5
Purchases, sales, issuances, and settlements			(7.4	)
Transfers in (out) of Level 3			—
Ending balance, June 28, 2009		$	55.9

Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company measures certain financial assets, including its cost and equity method investments, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the 13 weeks and 39 weeks ended June 28, 2009, the Company recorded $0.3 million of other-than-temporary impairment for one of its cost method investments in privately held equity securities that is unrelated to Starbucks licensed retail stores.

Note 6: Inventories

Inventories consisted of the following (in millions):

		Jun 28,				Sep 28,				Jun 29,
		2009				2008				2008
Coffee:
Unroasted		$	451.4			$	377.7			$	374.7
Roasted			56.5				89.6				84.8
Other merchandise held for sale			92.2				120.6				103.9
Packaging and other supplies			103.5				104.9				99.3
Total		$	703.6			$	692.8			$	662.7

As of June 28, 2009, the Company had committed to purchasing green coffee totaling $205 million under fixed-price contracts and an estimated $95 million under price-to-be-fixed contracts. The Company believes, based on relationships established with its suppliers in the past, the risk of non-delivery on such purchase commitments is remote.

Note 7: Property, Plant and Equipment

Property, plant and equipment consisted of the following (in millions):

		Jun 28,				Sep 28,
		2009				2008
Land		$	57.6			$	59.1
Buildings			235.3				217.7
Leasehold improvements			3,308.6				3,363.1
Store equipment			1,076.7				1,045.3
Roasting equipment			272.3				220.7
Furniture, fixtures and other			588.2				517.8
Work in progress			124.1				293.6
			5,662.8				5,717.3
Less accumulated depreciation and amortization			(3,068.7	)			(2,760.9	)
Property, plant and equipment, net		$	2,594.1			$	2,956.4

Note 8: Debt

The Company’s debt consisted of the following (in millions):

		Jun 28,				Sep 28,
		2009				2008
Commercial paper program (weighted average interest rate 3.4%)		$	—			$	413.0
Revolving credit facility (weighted average interest rate of 3.5%)			—				300.0
Current portion of long-term debt			0.4				0.7
Short-term debt			0.4				713.7
6.25% Senior Notes (due Aug 2017)			549.3				549.2
Other long-term debt			0.1				0.4
Long-term debt			549.4				549.6
Total debt		$	549.8			$	1,263.3

Note 9: Other Long-term Liabilities

The Company’s other long-term liabilities consisted of the following (in millions):

		Jun 28,				Sep 28,
		2009				2008
Deferred rent		$	275.4			$	303.9
Unrecognized tax benefits			54.6				60.4
Asset retirement obligations			43.4				44.6
Minority interest			15.5				18.3
Other			18.9				15.2
Total		$	407.8			$	442.4

Note 10: Shareholders’ Equity

In addition to 1.2 billion shares of authorized common stock with $0.001 par value per share, the Company has authorized 7.5 million shares of preferred stock, none of which was outstanding as of June 28, 2009.

Share repurchase activity under the Company’s publicly announced plans was as follows (in millions, except for average price data):

		39 Weeks Ended
		Jun 28, 2009				Jun 29, 2008
Number of shares acquired			—				12.2
Average price per share of acquired shares			—			$	24.12
Total accrual-based cost of acquired shares			—			$	295.3
Total cash-based cost of acquired shares			—			$	311.4

Comprehensive Income

Comprehensive income, net of related tax effects, was as follows (in millions):

		13 Weeks Ended								39 Weeks Ended
		Jun 28, 2009				Jun 29, 2008				Jun 28, 2009				Jun 29, 2008
Net earnings/(loss)		$	151.5			$	(6.7	)		$	240.8			$	310.1
Unrealized holding gains/(losses) on available-for-sale securities			0.7				(0.6	)			3.0				(0.6	)
Unrealized holding gains/(losses) on cash flow hedging instruments			(10.7	)			0.7				14.9				1.1
Unrealized holding gains/(losses) on net investment hedging instruments			(5.1	)			2.8				(2.4	)			(2.6	)
Reclassification adjustment for net (gains)/losses realized in net earnings for cash flow hedges			(1.1	)			1.2				(0.6	)			3.6
Net unrealized gain/(loss)			(16.2	)			4.1				14.9				1.5
Translation adjustment			26.6				(9.6	)			(15.5	)			23.5
Total comprehensive income/(loss)		$	161.9			$	(12.2	)		$	240.2			$	335.1

The components of accumulated other comprehensive income, net of tax, were as follows (in millions):

		Jun 28, 2009				Sep 28, 2008
Net unrealized gains/(losses) on available-for-sale securities		$	(1.1	)		$	(4.1	)
Net unrealized gains/(losses) on hedging instruments			(10.3	)			(22.2	)
Translation adjustment			59.2				74.7
Accumulated other comprehensive income		$	47.8			$	48.4

Note 11: Employee Stock Plans

The Company maintains several equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), or stock appreciation rights to employees, non-employee directors and consultants. As of June 28, 2009, there were 36.5 million shares of common stock available for issuance pursuant to future equity-based compensation awards.

Stock Option Exchange Program

On March 18, 2009, Starbucks shareholders approved a proposal to allow for a one-time stock option exchange program, designed to provide eligible employees an opportunity to exchange certain outstanding underwater stock options for a lesser amount of new options to be granted with lower exercise prices. Stock options eligible for exchange were those with an exercise price per share greater than $19.00 that were granted prior to December 1, 2007 under the Company’s Amended and Restated 2005 Long-Term Equity Incentive Plan (the “2005 Plan”), the Amended and Restated Key Employee Stock Option Plan-1994 or the 1991 Company-Wide Stock Option Plan. On May 1, 2009 Starbucks commenced the option exchange program, which expired on May 29, 2009. A total of 14.3 million eligible stock options were tendered by employees, representing 65% of the total stock options eligible for exchange. On June 1, 2009, the Company granted an aggregate of 4.7 million new stock options in exchange for the eligible stock options surrendered. The exercise price of the new stock options is $14.92, which was the closing price of Starbucks common stock on June 1, 2009. The new stock options were granted under the 2005 Plan. No incremental stock option expense was recognized for the exchange, which was determined to be fair value neutral under SFAS 123(R), because the fair value of the surrendered options, as determined based on the Black-Scholes option pricing model, was equal to the fair value, in the aggregate, of the eligible options being exchanged.

The Company also has employee stock purchase plans (“ESPP”). The ESPP for US employees was amended in March 2009 to change the employees’ purchase price to 95% of the fair market value of the stock on the last business day of the quarterly offering period. Prior to the amendment, the employees’ purchase price was 85% of the lesser of the fair market value of the stock on the first business day or the last business day of the quarterly offering period.

The following table presents total stock-based compensation expense recognized in the consolidated statements of earnings (in millions):

		13 Weeks Ended								39 Weeks Ended
		Jun 28, 2009				Jun 29, 2008				Jun 28, 2009				Jun 29, 2008
Stock option expense		$	16.6			$	15.4			$	47.7			$	47.3
RSU expense			3.9				2.1				10.4				3.1
ESPP expense			0.1				2.9				5.0				9.3
Total stock-based compensation expense		$	20.6			$	20.4			$	63.1			$	59.7

Options

The following table presents the weighted average assumptions used to value stock options granted outside of the stock option exchange program described above, along with the related weighted average grant price for the 13-week and 39-week periods ended June 28, 2009 and June 29, 2008:

		13 Weeks Ended								39 Weeks Ended
		Jun 28, 2009				Jun 29, 2008				Jun 28, 2009				Jun 29, 2008
Expected term (in years)			4.5				4.5				4.9				4.7
Expected stock price volatility			43.8	%			30.9	%			44.4	%			29.1	%
Risk-free interest rate			2.0	%			3.2	%			2.2	%			3.5	%
Expected dividend yield			0.0	%			0.0	%			0.0	%			0.0	%
Weighted average grant price		$	12.90			$	17.44			$	8.78			$	22.39
Estimated fair value per option granted		$	4.93			$	5.40			$	3.54			$	6.93

The assumptions used to calculate the fair value of stock options granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

The following table summarizes all stock option transactions from September 29, 2008 through June 28, 2009 (in millions, except per share and contractual life amounts):

						Weighted				Weighted
						Average				Average
		Shares				Exercise				Remaining				Aggregate
		Subject to				Price				Contractual				Intrinsic
		Options				per Share				Life (Years)				Value
Outstanding, September 28, 2008			63.0			$	20.96				5.7			$	114.9
Granted			34.9				9.60
Exercised			(4.6	)			6.17
Forfeited/Cancelled/Exchanged			(25.6	)			24.94
Outstanding, June 28, 2009			67.7				14.59				6.7				216.3
Exercisable, June 28, 2009			30.1				17.19				4.0				67.5
Vested and expected to vest, June 28, 2009			60.9				15.00				6.4				183.1

The closing market value of the Company’s stock on June 26, 2009 was $14.53. As of June 28, 2009, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $79 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.9 years.

RSUs

The Company has both time-vested and performance-based RSUs. Time-vested RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period, subject solely to the employee’s continuing employment. The Company’s performance-based RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock if the Company achieves target earnings per share for the full fiscal year in the year of award, and the grantee remains employed during the subsequent vesting period. The fair value of RSUs is based on the closing price of Starbucks common stock on the award date. Expense for performance-based RSUs is recognized when it is probable the performance goal will be achieved.

The following table summarizes all RSU transactions from September 29, 2008 through June 28, 2009 (in millions, except per share and contractual life amounts):

						Weighted				Weighted
						Average				Average
		Number				Grant Date				Remaining				Aggregate
		of				Fair Value				Contractual				Intrinsic
		Shares				per Share				Life (Years)				Value
Nonvested, September 28, 2008			2.0			$	17.36				2.5			$	30.5
Granted			3.3				8.71
Vested			—				—
Forfeited/Cancelled			(0.8	)			14.21
Nonvested, June 28, 2009			4.5				11.63				1.9				66.0

As of June 28, 2009, total unrecognized stock-based compensation expense related to nonvested RSUs was approximately $37 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.6 years.

Note 12: Earnings/(Loss) Per Share

The following table presents the calculation of net earnings/(loss) per common share (“EPS”) — basic and diluted (in millions, except EPS):

		13 Weeks Ended								39 Weeks Ended
		Jun 28,				Jun 29,				Jun 28,				Jun 29,
		2009				2008				2009				2008
Net earnings/(loss)		$	151.5			$	(6.7	)		$	240.8			$	310.1
Weighted average common shares and common stock units outstanding (for basic calculation)			739.4				731.7				737.9				730.7
Dilutive effect of outstanding common stock options and RSUs			7.3				—				4.0				11.0
Weighted average common and common equivalent shares outstanding (for diluted calculation)			746.7				731.7				741.9				741.7
EPS — basic		$	0.20			$	(0.01	)		$	0.33			$	0.42
EPS — diluted		$	0.20			$	(0.01	)		$	0.32			$	0.42

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) and unvested RSUs, using the treasury stock method. Potential dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive.

The number of antidilutive options and RSUs totaled 37.3 million for the 13-week period ended June 28, 2009. Potential dilutive options and RSUs of 69.8 million for the 13-week period ended June 29, 2008 were not included in the computation of diluted net loss per common share, because to do so would have decreased the loss per share for the period. The number of antidilutive options and RSUs totaled 62.6 million and 40.7 million for the 39-week periods ended June 28, 2009 and June 29, 2008, respectively.

Note 13: Commitments and Contingencies

Guarantees

The following table presents information on unconditional guarantees as of June 28, 2009 (in millions):

										Fair value estimate
		Maximum				Year Guarantee				recorded on
		Exposure				Expires in				Balance Sheet
Japanese yen-denominated bank loans (Starbucks Japan — an unconsolidated equity investee)		$	3.5				2014			$	—	(1)
Borrowings of other unconsolidated equity investees		$	17.1				2012			$	3.7

Legal Proceedings

On October 8, 2004, a former hourly employee of the Company filed a lawsuit in San Diego County Superior Court entitled Jou Chau v. Starbucks Coffee Company. The lawsuit alleges that the Company violated the California Labor Code by allowing shift supervisors to receive tips. More specifically, the lawsuit alleges that since shift supervisors direct the work of baristas, they qualify as “agents” of the Company and are therefore excluded from receiving tips under California Labor Code Section 351, which prohibits employers and their agents from collecting or receiving tips left by patrons for other employees. The lawsuit further alleges that because the tipping practices violate the Labor Code, they also are unfair practices under the California Unfair Competition Law. In addition to recovery of an unspecified amount of tips distributed to shift supervisors, the lawsuit seeks penalties under California Labor Code Section 203 for willful failure to pay wages due. Plaintiff also seeks attorneys’ fees and costs. On February 28, 2008, the trial court ruled against the Company in the liability phase of the trial and on March 20, 2008 the court ordered the Company to pay approximately $87 million in restitution, plus interest. The Company appealed the decision of the trial court and on June 2, 2009 the California Court of Appeal reversed the trial court’s judgment in its entirety and ruled in favor of Starbucks. The Court of Appeal denied plaintiffs’ petition for rehearing and reaffirmed its ruling on July 2, 2009. The plaintiffs have filed a petition with the California Supreme Court on July 13, 2009 seeking review of the decision of the Court of Appeal. Starbucks believes that the likelihood that the Company will ultimately incur a loss in connection with this litigation is reasonably possible rather than probable. The Company has not accrued any loss related to this litigation.

On June 30, 2005, three individuals, Erik Lords, Hon Yeung, and Donald Brown, filed a lawsuit in Orange County Superior Court, California. The lawsuit alleges that the Company violated the California Labor Code section 432.8 by asking job applicants to disclose at the time of application convictions for marijuana-related offenses more than two years old. The California Court of Appeals issued a ruling on December 10, 2008 instructing the trial judge to enter summary judgment against plaintiffs and the California Supreme Court has rejected the plaintiffs’ appeal. The matter is now back before the trial court awaiting final dismissal.

The Company is party to various other legal proceedings arising in the ordinary course of its business, but it is not currently a party to any legal proceeding that management believes would have a material adverse effect on the consolidated financial position or results of operations of the Company.

Note 14: Segment Reporting

Segment information is prepared on the same basis that the Company’s management reviews financial information for operational decision making purposes. The tables below present information by operating segment (in millions):

		United												Unallocated
		States				International				Global CPG				Corporate(1)				Total
13 Weeks Ended
June 28, 2009
Company-operated retail revenues		$	1,613.2			$	400.6			$	—			$	—			$	2,013.8
Licensing revenues			129.4				65.3				106.3				—				301.0
Foodservice and other revenues			77.6				11.5				—				—				89.1
Total net revenues			1,820.2				477.4				106.3				—				2,403.9
Depreciation and amortization expenses			95.6				26.3				—				11.8				133.7
Income from equity investees			—				15.5				14.2				—				29.7
Operating income/(loss)			204.6				34.4				49.2				(84.2	)			204.0
Earnings/(loss) before income taxes			212.0				47.7				49.2				(91.6	)			217.3
Net impairment and disposition losses			32.9				6.8				—				13.6				53.3
June 29, 2008
Company-operated retail revenues		$	1,730.4			$	449.8			$	—			$	—			$	2,180.2
Licensing revenues			119.2				71.4				90.7				—				281.3
Foodservice and other revenues			98.1				14.4				—				—				112.5
Total net revenues			1,947.7				535.6				90.7				—				2,574.0
Depreciation and amortization expenses			101.9				27.9				—				10.0				139.8
Income/(loss) from equity investees			(0.6	)			14.8				14.8				—				29.0
Operating income/(loss)			(27.8	)			35.5				48.7				(78.0	)			(21.6	)
Earnings/(loss) before income taxes			(25.9	)			35.5				48.7				(91.5	)			(33.2	)
Net impairment and disposition losses			194.2				1.2				—				(0.3	)			195.1
39 Weeks Ended
June 28, 2009
Company-operated retail revenues		$	4,977.2			$	1,174.6			$	—			$	—			$	6,151.8
Licensing revenues			404.2				198.5				315.4				—				918.1
Foodservice and other revenues			248.8				33.7				—				—				282.5
Total net revenues			5,630.2				1,406.8				315.4				—				7,352.4
Depreciation and amortization expenses			290.2				75.6				—				36.3				402.1
Income from equity investees			0.5				38.5				39.4				—				78.4
Operating income/(loss)			429.2				53.3				146.0				(265.9	)			362.6
Earnings/(loss) before income taxes			447.0				60.5				146.0				(303.0	)			350.5
Net impairment and disposition losses			106.2				38.2				—				54.6				199.0
June 29, 2008
Company-operated retail revenues		$	5,346.2			$	1,328.4			$	—			$	—			$	6,674.6
Licensing revenues			372.2				200.7				287.6				—				860.5
Foodservice and other revenues			291.8				40.7				—				—				332.5
Total net revenues			6,010.2				1,569.8				287.6				—				7,867.6
Depreciation and amortization expenses			302.5				80.1				—				28.5				411.1
Income/(loss) from equity investees			(0.9	)			42.1				35.9				—				77.1
Operating income/(loss)			477.0				107.4				142.0				(236.7	)			489.7
Earnings/(loss) before income taxes			486.3				116.3				142.0				(283.9	)			460.7
Net impairment and disposition losses			225.7				12.0				—				(0.2	)			237.5