Document And Entity Information

In Millions, unless otherwise specified

3 Months Ended

Jan. 1, 2017

Jan. 25, 2017

Document And Entity Information [Abstract]

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Jan. 01, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q1

Trading Symbol

SBUX

Entity Registrant Name

STARBUCKS CORP

Entity Central Index Key

0000829224

Current Fiscal Year End Date

--10-01

Entity Filer Category

Large Accelerated Filer

Entity Common Stock, Shares Outstanding

1,457.4

Condensed Consolidated Statements of Earnings (USD $)

In Millions, except Per Share data, unless otherwise specified

3 Months Ended

Jan. 1, 2017

Dec. 27, 2015

Net revenues:

Total net revenues

$ 5,732.9

$ 5,373.5

Cost of sales including occupancy costs

2,295.0

2,186.2

Store operating expenses

1,638.2

1,506.2

Other operating expenses

145.4

146.2

Depreciation and amortization expenses

249.7

235.5

General and administrative expenses

356.4

305.5

Total operating expenses

4,684.7

4,379.6

Income from equity investees

84.4

64.1

Operating income

1,132.6

1,058.0

Interest income and other, net

24.1

8.1

Interest expense

(23.8)

(16.5)

Earnings before income taxes

1,132.9

1,049.6

Income tax expense

381.4

361.9

Net earnings including noncontrolling interests

751.5

687.7

Net earnings/(loss) attributable to noncontrolling interests

(0.3)

0.1

Net earnings attributable to Starbucks

751.8

687.6

Earnings per share - basic

$ 0.52

$ 0.46

Earnings per share - diluted

$ 0.51

$ 0.46

Weighted average shares outstanding:

Basic

1,457.5

1,485.9

Diluted

1,470.5

1,503.3

Cash dividends declared per share

$ 0.25

$ 0.20

Company-operated stores [Member]

Net revenues:

Total net revenues

4,469.3

4,210.6

Licensed stores [Member]

Net revenues:

Total net revenues

602.4

540.6

CPG, foodservice and other [Member]

Net revenues:

Total net revenues

$ 661.2

$ 622.3

Condensed Consolidated Statements of Comprehensive Income (USD $)

In Millions, unless otherwise specified

3 Months Ended

Jan. 1, 2017

Dec. 27, 2015

Net earnings including noncontrolling interests

$ 751.5

$ 687.7

Other comprehensive loss, net of tax:

Other comprehensive loss

(133.9)

(25.7)

Comprehensive income including noncontrolling interests

617.6

662.0

Comprehensive income/(loss) attributable to noncontrolling interests

(0.3)

0.1

Comprehensive income attributable to Starbucks

617.9

661.9

Available-for-sale Securities [Member]

Other comprehensive loss, net of tax:

Unrealized holding gains/(losses) on available-for-sale securities, before tax

(13.4)

1.0

Unrealized holding gains/(losses) on available-for-sale securities, tax (expense)/benefit

4.1

(0.4)

Cash Flow Hedging [Member]

Other comprehensive loss, net of tax:

Unrealized gains/(losses) on hedging instruments, before tax

113.5

5.8

Unrealized gains/(losses) on hedging instruments, tax (expense)/benefit

(26.5)

(2.7)

Net Investment Hedging [Member]

Other comprehensive loss, net of tax:

Unrealized gains/(losses) on hedging instruments, before tax

41.1

0

Unrealized gains/(losses) on hedging instruments, tax (expense)/benefit

(15.2)

0

Available-for-sale Securities [Member]

Other comprehensive loss, net of tax:

Other comprehensive loss

(8.7)

0.9

Cash Flow Hedging [Member]

Other comprehensive loss, net of tax:

Other comprehensive loss

20.7

(2.2)

Net Investment Hedging [Member]

Other comprehensive loss, net of tax:

Other comprehensive loss

25.9

0

Translation Adjustment [Member]

Other comprehensive loss, net of tax:

Translation adjustment and other, before tax

(171.8)

(26.1)

Translation adjustment and other, tax (expense)/benefit

0

1.7

Other comprehensive loss

(171.8)

(24.4)

Reclassification out of Accumulated Other Comprehensive Income [Member]

Other comprehensive loss, net of tax:

Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale securities, hedging instruments, and translation adjustment, before tax

(81.7)

(7.7)

Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale securities, hedging instruments, and translation adjustment, tax expense/(benefit)

$ 16.0

$ 2.7

Condensed Consolidated Balance Sheets (USD $)

In Millions, unless otherwise specified

Jan. 1, 2017

Oct. 2, 2016

Current assets:

Cash and cash equivalents

$ 2,034.6

$ 2,128.8

Short-term investments

140.8

134.4

Accounts receivable, net

865.1

768.8

Inventories

1,218.7

1,378.5

Prepaid expenses and other current assets

357.0

347.4

Total current assets

4,616.2

4,757.9

Long-term investments

1,278.3

1,141.7

Equity and cost investments

373.7

354.5

Property, plant and equipment, net

4,478.5

4,533.8

Deferred income taxes, net

806.1

885.4

Other long-term assets

394.9

403.3

Other intangible assets

470.6

516.3

Goodwill

1,599.0

1,719.6

TOTAL ASSETS

14,017.3

14,312.5

Current liabilities:

Accounts payable

662.5

730.6

Accrued liabilities

1,944.9

1,999.1

Insurance reserves

211.6

246.0

Stored value card liability

1,578.3

1,171.2

Current portion of long-term debt

0

399.9

Total current liabilities

4,397.3

4,546.8

Long-term debt

3,185.7

3,185.3

Other long-term liabilities

631.2

689.7

Total liabilities

8,214.2

8,421.8

Shareholders' equity:

Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,457.2 shares and 1,460.5 shares, respectively

1.5

Additional paid-in capital

41.1

Retained earnings

5,996.3

5,949.8

Accumulated other comprehensive loss

(242.3)

(108.4)

Total shareholders' equity

5,796.6

5,884.0

Noncontrolling interests

6.5

6.7

Total equity

5,803.1

5,890.7

TOTAL LIABILITIES AND EQUITY

$ 14,017.3

$ 14,312.5

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)

Jan. 1, 2017

Oct. 2, 2016

Statement of Financial Position [Abstract]

Common stock, par value

$ 0.001

Common stock, shares authorized

2,400,000,000

Common stock, shares issued

1,457,200,000

1,460,500,000

Common stock, shares outstanding

1,457,200,000

1,460,500,000

Condensed Consolidated Statements of Cash Flows (USD $)

In Millions, unless otherwise specified

3 Months Ended

Jan. 1, 2017

Dec. 27, 2015

OPERATING ACTIVITIES:

Net earnings including noncontrolling interests

$ 751.5

$ 687.7

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

263.2

247.3

Deferred income taxes, net

56.4

225.2

Income earned from equity method investees

(65.3)

(47.0)

Distributions received from equity method investees

39.1

69.3

Gain resulting from sale of equity in joint venture

0

0.6

Stock-based compensation

55.0

57.3

Excess tax benefit on share-based awards

(34.1)

(67.2)

Other

9.3

18.0

Cash provided by changes in operating assets and liabilities:

Accounts receivable

(128.7)

(65.1)

Inventories

146.4

60.6

Accounts payable

(34.7)

(28.2)

Stored value card liability

425.0

468.9

Other operating assets and liabilities

(12.6)

(9.8)

Net cash provided by operating activities

1,495.7

1,636.0

INVESTING ACTIVITIES:

Purchases of investments

(323.4)

(145.6)

Sales of investments

149.6

85.3

Maturities and calls of investments

18.1

0.8

Additions to property, plant and equipment

(307.4)

(331.8)

Proceeds from sale of equity in joint venture

0

30.2

Other

61.6

1.0

Net cash used by investing activities

(401.5)

(360.1)

FINANCING ACTIVITIES:

Principal payments on long-term debt

400.0

0

Proceeds from issuance of common stock

51.2

48.4

Excess tax benefit on share-based awards

34.1

67.2

Cash dividends paid

(364.0)

(297.0)

Repurchase of common stock

(408.1)

(245.8)

Minimum tax withholdings on share-based awards

(68.3)

(101.3)

Other

0.1

(0.2)

Net cash used by financing activities

(1,155.0)

(528.7)

Effect of exchange rate changes on cash and cash equivalents

(33.4)

(13.8)

Net (decrease)/increase in cash and cash equivalents

(94.2)

733.4

CASH AND CASH EQUIVALENTS:

Beginning of period

2,128.8

1,530.1

End of period

2,034.6

2,263.5

Cash paid during the period for:

Interest, net of capitalized interest

41.1

34.4

Income taxes, net of refunds

$ 270.8

$ 86.7

Summary of Significant Accounting Policies

Summary Of Significant Accounting Policies

Summary of Significant Accounting Policies

Financial Statement Preparation

The unaudited condensed consolidated financial statements as of January 1, 2017, and for the quarters ended January 1, 2017 and December 27, 2015, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial information for the quarters ended January 1, 2017 and December 27, 2015 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. In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”

The financial information as of October 2, 2016 is derived from our audited consolidated financial statements and notes for the fiscal year ended October 2, 2016 (“fiscal 2016”) included in Item 8 in the Fiscal 2016 Annual Report on Form 10-K (the “10-K”). The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.

The results of operations for the quarter ended January 1, 2017 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 1, 2017 ("fiscal 2017").

Recent Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings at the beginning of our first quarter of fiscal 2019 but permits adoption in an earlier period. We are currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.

In June 2016, the FASB issued guidance on the measurement and recognition of credit losses on most financial assets. For trade receivables, loans, and held-to-maturity debt securities, the current probable loss recognition methodology is being replaced by an expected credit loss model. For available-for-sale debt securities, the recognition model on credit losses is generally unchanged, except the losses will be presented as an adjustable allowance. The guidance will be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance will become effective at the beginning of our first quarter of fiscal 2021 but can be adopted as early as the beginning of our first quarter of fiscal 2020. We are currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.

In March 2016, the FASB issued guidance related to stock-based compensation, which changes the accounting and classification of excess tax benefits and minimum tax withholdings on share-based awards. The guidance becomes effective at the beginning of our first quarter of fiscal 2018 but permits adoption in an earlier period. With this adoption, excess tax benefits and tax deficiencies related to stock-based compensation will be prospectively reflected as income tax expense in our consolidated statement of earnings instead of additional paid-in capital on our consolidated balance sheet. Additionally, within our consolidated statement of cash flows, this guidance will require excess tax benefits to be presented as an operating activity, rather than a financing activity, in the same manner as other cash flows related to income taxes. We are currently evaluating the timing and impact of adopting this guidance; however, as a result of the presentation requirements associated with the standard, we expect this adoption to have a significant impact on our consolidated statements of earnings, earnings per share and consolidated statement of cash flows.

In March 2016, the FASB issued guidance for financial liabilities resulting from selling prepaid stored value products that are redeemable at third-party merchants. Under the new guidance, expected breakage amounts associated with these products must be recognized proportionately in earnings as redemption occurs. Our current accounting policy of applying the remote method to all of our stored value cards, including cards redeemable at the third-party licensed locations, will no longer be allowed. The guidance will become effective at the beginning of our first quarter of fiscal 2019, with the option to adopt in an earlier period. As the guidance and timing of transition are consistent with the new revenue recognition standard issued by the FASB in May 2014 and discussed below, we expect to implement the provisions of both standards in the same period.

In February 2016, the FASB issued guidance on the recognition and measurement of leases. Under the new guidance, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance will require modified retrospective application at the beginning of our first quarter of fiscal 2020, with optional practical expedients, but permits adoption in an earlier period. We are currently evaluating the impact this guidance will have on our consolidated financial statements. We expect this adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets and will likely have an insignificant impact on our consolidated statements of earnings.

In January 2016, the FASB issued guidance on the recognition and measurement of financial instruments. This guidance retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. The new guidance will result in a cumulative effect adjustment recognized in our balance sheet and will become effective for us at the beginning of our first quarter of fiscal 2019. We are currently evaluating the impact of this guidance.

In April 2015, the FASB issued guidance on the financial statement presentation of debt issuance costs. This guidance requires these costs to be presented in the balance sheet as a reduction of the related debt liability rather than as an asset. We retrospectively adopted this guidance in the first quarter of fiscal 2017, which resulted in the reclassification of $17.0 million of debt issuance costs previously presented in prepaid expenses and other current assets and other long-term assets to long-term debt in our consolidated balance sheet as of October 2, 2016. Components of our long-term debt and aggregate debt issuance costs and unamortized premium are disclosed in Note 7, Debt.

In May 2014, the FASB issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The original effective date of the guidance would have required us to adopt at the beginning of our first quarter of fiscal 2018; however, the FASB approved an optional one-year deferral of the effective date. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. We are currently evaluating the overall impact this guidance will have on our consolidated financial statements, as well as the expected timing and method of adoption. Based on our preliminary assessment, we determined the adoption will change the timing of recognition and classification of our stored value card breakage income, which is currently recognized using the remote method and recorded in net interest income and other. The new guidance will require application of the proportional method and classification within total net revenues on our consolidated statements of earnings. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. We are continuing our assessment, which may identify other impacts.

Acquisitions and Divestitures


Note 2:	Acquisitions and Divestitures

Fiscal 2016

During the third quarter of fiscal 2016, we sold our ownership interest in our Germany retail business to AmRest Holdings SE for a total of $47.3 million. This transaction converted these company-operated stores to a fully licensed market and resulted in an insignificant pre-tax gain, which was included in interest income and other, net on our condensed consolidated statements of earnings.

In the first quarter of fiscal 2016, we sold our 49% ownership interest in our Spanish joint venture, Starbucks Coffee España, S.L. ("Starbucks Spain"), to our joint venture partner, Sigla S.A. (Grupo Vips), for a total purchase price of $30.2 million. This transaction resulted in an insignificant pre-tax gain, which was included in interest income and other, net on our consolidated statements of earnings.

Derivative Financial Instruments

Interest Rates

Depending on market conditions, we enter into interest rate swap agreements to hedge the variability in cash flows due to changes in benchmark interest rates related to anticipated debt issuances. These agreements are cash settled at the time of the pricing of the related debt. The effective portion of the derivative's gain or loss is recorded in accumulated other comprehensive income ("AOCI") and is subsequently reclassified to interest expense over the life of the related debt.

Foreign Currency

To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, and intercompany borrowing and lending activities. The effective portion of the derivative's gain or loss is recorded in AOCI and is subsequently reclassified to revenue, cost of sales including occupancy costs, or interest income and other, net, respectively, when the hedged exposure affects net earnings.

We also enter into forward contracts to hedge the foreign currency exposure of our net investment in certain foreign operations. The effective portion of the derivative's gain or loss is recorded in AOCI and is subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.

To mitigate the foreign exchange risk of certain balance sheet items, we enter into foreign currency forward and swap contracts that are not designated as hedging instruments. Gains and losses from these derivatives are largely offset by the financial impact of translating foreign currency denominated payables and receivables; both are recorded in interest income and other, net.

Commodities

Depending on market conditions, we may enter into coffee futures contracts and collars (the combination of a purchased call option and a sold put option) to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5, Inventories. The effective portion of each derivative's gain or loss is recorded in AOCI and is subsequently reclassified to cost of sales including occupancy costs when the hedged exposure affects net earnings.

To mitigate the price uncertainty of a portion of our future purchases, primarily of dairy products, diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments. Gains and losses from these derivatives are recorded in interest income and other, net and help to offset price fluctuations on our beverage, food, packaging and transportation costs, which are included in cost of sales including occupancy costs on our consolidated statements of earnings.

Gains and losses on derivative contracts designated as hedging instruments included in AOCI and expected to be reclassified into earnings within 12 months, net of tax (in millions):



	Net Gains/(Losses) Included in AOCI						Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months			Outstanding Contract Remaining Maturity (Months)
	Jan 1, 2017			Oct 2, 2016						Outstanding Contract Remaining Maturity (Months)
Cash Flow Hedges:
Interest rates	$	19.8		$	20.5		$	3.0		0
Cross-currency swaps	(9.6		)	(7.7		)	—			95
Foreign currency - other	21.5			(0.4		)	15.9			36
Coffee	(0.1		)	(1.6		)	(0.1		)	10
Net Investment Hedges:
Foreign currency	27.2			1.3			—			1

Pretax gains and losses on derivative contracts designated as hedging instruments recognized in other comprehensive income ("OCI") and reclassifications from AOCI to earnings (in millions):



	Quarter Ended
	Gains/(Losses) Recognized in OCI Before Reclassifications					Gains/(Losses) Reclassified from AOCI to Earnings
	Jan 1, 2017		Dec 27, 2015			Jan 1, 2017			Dec 27, 2015
Cash Flow Hedges:
Interest rates	$	—	$	3.1		$	1.2		$	1.5
Cross-currency swaps	75.3		(5.3		)	77.6			(1.8		)
Foreign currency - other	37.2		9.3			4.4			8.5
Coffee	1.0		(1.3		)	(0.7		)	(0.1		)
Net Investment Hedges:
Foreign currency	41.1		—			—			—

Pretax gains and losses on derivative contracts not designated as hedging instruments recognized in earnings (in millions):



	Gains/(Losses) Recognized in Earnings
	Quarter Ended
	Jan 1, 2017		Dec 27, 2015
Foreign currency - other	$	8.3	$	2.1
Dairy	5.1		(5.6		)
Diesel fuel and other commodities	0.2		(4.7		)

Notional amounts of outstanding derivative contracts (in millions):



	Jan 1, 2017		Oct 2, 2016
Cross-currency swaps	$	552	$	660
Foreign currency - other	1,407		688
Coffee	—		7
Dairy	47		76
Diesel fuel and other commodities	51		46

Fair value of outstanding derivative contracts (in millions):



	Derivative Assets				Derivative Liabilities
	Jan 1, 2017		Oct 2, 2016		Jan 1, 2017		Oct 2, 2016
Designated Derivative Hedging Instruments:
Cross-currency swaps	$	26.2	$	—	$	7.9	$	57.0
Foreign currency - other	75.3		20.8		2.7		24.0
Coffee	—		1.8		—		—
Non-designated Derivative Hedging Instruments:
Foreign currency - other	22.3		6.2		10.1		6.5
Dairy	3.9		1.5		—		1.6
Diesel fuel and other commodities	4.6		3.8		2.0		0.5

Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 8, Equity.

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis (in millions):



			Fair Value Measurements at Reporting Date Using
	Balance at Jan 1, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	2,034.6	$	2,034.6	$	—	$	—
Short-term investments:
Available-for-sale securities
Agency obligations	1.3		—		1.3		—
Commercial paper	5.6		—		5.6		—
Corporate debt securities	20.5		—		20.5		—
Foreign government obligations	4.6		—		4.6
U.S. government treasury securities	28.8		28.8		—		—
State and local government obligations	0.5		—		0.5		—
Certificates of deposit	9.4		—		9.4		—
Total available-for-sale securities	70.7		28.8		41.9		—
Trading securities	70.1		70.1		—		—
Total short-term investments	140.8		98.9		41.9		—
Prepaid expenses and other current assets:
Derivative assets	85.8		3.3		82.5		—
Long-term investments:
Available-for-sale securities
Agency obligations	54.5		—		54.5		—
Corporate debt securities	515.9		—		515.9		—
Auction rate securities	5.7		—		—		5.7
Foreign government obligations	59.5		—		59.5		—
U.S. government treasury securities	355.3		355.3		—		—
State and local government obligations	83.6		—		83.6		—
Mortgage and other asset-backed securities	203.8		—		203.8		—
Total long-term investments	1,278.3		355.3		917.3		5.7
Other long-term assets:
Derivative assets	46.5		—		46.5		—
Total assets	$	3,586.0	$	2,492.1	$	1,088.2	$	5.7
Liabilities:
Accrued liabilities:
Derivative liabilities	$	13.5	$	—	$	13.5	$	—
Other long-term liabilities:
Derivative liabilities	9.2		—		9.2		—
Total liabilities	$	22.7	$	—	$	22.7	$	—



			Fair Value Measurements at Reporting Date Using
	Balance at Oct 2, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	2,128.8	$	2,128.8	$	—	$	—
Short-term investments:
Available-for-sale securities
Agency obligations	1.3		—		1.3		—
Commercial paper	2.6		—		2.6		—
Corporate debt securities	34.2		—		34.2		—
Foreign government obligations	5.5		—		5.5		—
U.S. government treasury securities	15.8		15.8		—		—
State and local government obligations	0.5		—		0.5		—
Certificates of deposit	5.8		—		5.8		—
Total available-for-sale securities	65.7		15.8		49.9		—
Trading securities	68.7		68.7		—		—
Total short-term investments	134.4		84.5		49.9		—
Prepaid expenses and other current assets:
Derivative assets	27.7		3.1		24.6		—
Long-term investments:
Available-for-sale securities
Agency obligations	44.4		—		44.4		—
Corporate debt securities	459.3		—		459.3		—
Auction rate securities	5.7		—		—		5.7
Foreign government obligations	46.7		—		46.7		—
U.S. government treasury securities	358.2		358.2		—		—
State and local government obligations	57.5		—		57.5		—
Mortgage and other asset-backed securities	169.9		—		169.9		—
Total long-term investments	1,141.7		358.2		777.8		5.7
Other long-term assets:
Derivative assets	6.4		—		6.4		—
Total assets	$	3,439.0	$	2,574.6	$	858.7	$	5.7
Liabilities:
Accrued liabilities:
Derivative liabilities	$	18.0	$	1.7	$	16.3	$	—
Other long-term liabilities:
Derivative liabilities	71.6		—		71.6		—
Total	$	89.6	$	1.7	$	87.9	$	—

There were no transfers between levels, and there was no significant activity within Level 3 instruments during the periods presented. The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on investments were not material as of January 1, 2017 and October 2, 2016.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, goodwill and other intangible assets, equity and cost method investments, and other assets. These assets are measured at fair value if determined to be impaired. During the quarters ended January 1, 2017 and December 27, 2015, there were no material fair value adjustments.

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 7, Debt.

Inventories


	Inventories (in millions)



	Jan 1, 2017		Oct 2, 2016		Dec 27, 2015
Coffee:
Unroasted	$	550.5	$	561.6	$	559.2
Roasted	255.7		300.4		256.6
Other merchandise held for sale	256.2		308.6		270.8
Packaging and other supplies	156.3		207.9		156.0
Total	$	1,218.7	$	1,378.5	$	1,242.6

Other merchandise held for sale includes, among other items, serveware and tea. Inventory levels vary due to seasonality, commodity market supply and price fluctuations.

As of January 1, 2017, we had committed to purchasing green coffee totaling $586 million under fixed-price contracts and an estimated $540 million under price-to-be-fixed contracts. Price-to-be-fixed contracts are purchase commitments whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and therefore the price, at which the base “C” coffee commodity price component will be fixed has not yet been established. For most contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the delivery date. For other contracts, Starbucks and the seller may agree upon pricing parameters determined by the base "C" coffee commodity price. Until prices are fixed, we estimate the total cost of these purchase commitments. We believe, based on relationships established with our suppliers in the past, the risk of non-delivery on these purchase commitments is remote.

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information (in millions)

Property, Plant and Equipment, net



	Jan 1, 2017			Oct 2, 2016
Land	$	46.5		$	46.6
Buildings	454.3			458.4
Leasehold improvements	5,924.8			5,892.9
Store equipment	1,927.6			1,931.7
Roasting equipment	603.2			605.4
Furniture, fixtures and other	1,388.6			1,366.9
Work in progress	266.7			271.4
Property, plant and equipment, gross	10,611.7			10,573.3
Accumulated depreciation	(6,133.2		)	(6,039.5		)
Property, plant and equipment, net	$	4,478.5		$	4,533.8

Accrued Liabilities



	Jan 1, 2017		Oct 2, 2016
Accrued compensation and related costs	$	457.5	$	510.8
Accrued occupancy costs	138.8		137.5
Accrued taxes	355.1		368.4
Accrued dividends payable	364.2		365.1
Accrued capital and other operating expenditures	629.3		617.3
Total accrued liabilities	$	1,944.9	$	1,999.1

Debt

In December 2016, we repaid the $400 million of 0.875% Senior Notes (the "2016 notes") at maturity.

Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity (in millions, except interest rates):



	Jan 1, 2017					Oct 2, 2016					Stated Interest Rate		Effective Interest Rate ⁽¹⁾
Issuance	Face Value			Estimated Fair Value		Face Value			Estimated Fair Value		Stated Interest Rate		Effective Interest Rate ⁽¹⁾
2016 notes	$	—		$	—	$	400.0		$	400	0.875	%	0.941	%
2018 notes	350.0			353		350.0			357		2.000	%	2.012	%
2021 notes	500.0			499		500.0			511		2.100	%	2.293	%
2021 notes	250.0			249		250.0			255		2.100	%	1.600	%
2022 notes	500.0			502		500.0			526		2.700	%	2.819	%
2023 notes	750.0			799		750.0			839		3.850	%	2.860	%
2026 notes	500.0			475		500.0			509		2.450	%	2.511	%
2045 notes	350.0			366		350.0			417		4.300	%	4.348	%
Total	3,200.0			3,243		3,600.0			3,814
Aggregate debt issuance costs and unamortized premium, net	(14.3		)			(14.8		)
Total	$	3,185.7				$	3,585.2


⁽¹⁾	Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-starting interest rate swaps utilized to hedge the interest rate risk prior to the debt issuance.

The indentures under which the above notes were issued require us to maintain compliance with certain covenants, including limits on future liens and sale and leaseback transactions on certain material properties. As of January 1, 2017, we were in compliance with all applicable covenants.

The following table summarizes our long-term debt maturities as of January 1, 2017 by fiscal year (in millions):



Fiscal Year	Total
2018	$	—
2019	350.0
2020	—
2021	750.0
2022	500.0
Thereafter	1,600.0
Total	$	3,200.0

Equity

Changes in total equity (in millions):



	Quarter Ended
	Jan 1, 2017									Dec 27, 2015
	Attributable to Starbucks			Noncontrolling interests			Total Equity			Attributable to Starbucks			Noncontrolling interest		Total Equity
Beginning balance of total equity	$	5,884.0		$	6.7		$	5,890.7		$	5,818.0		$	1.8	$	5,819.8
Net earnings including noncontrolling interests	751.8			(0.3		)	751.5			687.6			0.1		687.7
Translation adjustment and other, net of reclassifications and tax	(171.8		)	—			(171.8		)	(24.4		)	—		(24.4		)
Unrealized gains/(losses), net of reclassifications and tax	37.9			—			37.9			(1.3		)	—		(1.3		)
Other comprehensive loss	(133.9		)	—			(133.9		)	(25.7		)	—		(25.7		)
Stock-based compensation expense	55.7			—			55.7			57.9			—		57.9
Exercise of stock options/vesting of RSUs	8.8			—			8.8			7.8			—		7.8
Sale of common stock	7.0			—			7.0			0.1			—		0.1
Repurchase of common stock	(413.7		)	—			(413.7		)	(267.1		)	—		(267.1		)
Cash dividends declared	(363.1		)	—			(363.1		)	(297.1		)	—		(297.1		)
Ending balance of total equity	$	5,796.6		$	6.5		$	5,803.1		$	5,981.5		$	1.9	$	5,983.4

Changes in AOCI by component, net of tax (in millions):

Quarter Ended



	Available-for-Sale Securities			Cash Flow Hedges			Net Investment Hedges		Translation Adjustment and Other			Total
January 1, 2017
Net gains/(losses) in AOCI, beginning of period	$	1.1		$	10.9		$	1.3	$	(121.7	)	$	(108.4	)
Net gains/(losses) recognized in OCI before reclassifications	(9.3		)	87.0			25.9		(171.8		)	(68.2		)
Net (gains)/losses reclassified from AOCI to earnings	0.6			(66.3		)	—		—			(65.7		)
Other comprehensive income/(loss) attributable to Starbucks	(8.7		)	20.7			25.9		(171.8		)	(133.9		)
Net gains/(losses) in AOCI, end of period	$	(7.6	)	$	31.6		$	27.2	$	(293.5	)	$	(242.3	)

December 27, 2015
Net gains/(losses) in AOCI, beginning of period	$	(0.1	)	$	25.6		$	1.3	$	(226.2	)	$	(199.4	)
Net gains/(losses) recognized in OCI before reclassifications	0.6			3.1			—		(24.4		)	(20.7		)
Net (gains)/losses reclassified from AOCI to earnings	0.3			(5.3		)	—		—			(5.0		)
Other comprehensive income/(loss) attributable to Starbucks	0.9			(2.2		)	—		(24.4		)	(25.7		)
Net gains/(losses) in AOCI, end of period	$	0.8		$	23.4		$	1.3	$	(250.6	)	$	(225.1	)

Impact of reclassifications from AOCI on the consolidated statements of earnings (in millions):

Quarter Ended



AOCI Components	Amounts Reclassified from AOCI						Affected Line Item in the Statements of Earnings
AOCI Components	Jan 1, 2017			Dec 27, 2015			Affected Line Item in the Statements of Earnings
Gains/(losses) on available-for-sale securities	$	(0.8	)	$	(0.3	)	Interest income and other, net
Gains/(losses) on cash flow hedges
Interest rate hedges	1.2			1.5			Interest expense
Cross-currency swaps	77.6			(1.8		)	Interest income and other, net
Foreign currency hedges	1.3			3.0			Revenues
Foreign currency/coffee hedges	2.4			5.3			Cost of sales including occupancy costs
	81.7			7.7			Total before tax
	(16.0		)	(2.7		)	Tax expense
	$	65.7		$	5.0		Net of tax

In addition to 2.4 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 January 1, 2017.

We repurchased 7.6 million shares of common stock at a total cost of $413.7 million, and 4.5 million shares at a total cost of $267.1 million for the quarters ended January 1, 2017 and December 27, 2015, respectively. As of January 1, 2017, 110.2 million shares remained available for repurchase under current authorizations.

During the first quarter of fiscal 2017, our Board of Directors declared a quarterly cash dividend to shareholders of $0.25 per share to be paid on February 24, 2017 to shareholders of record as of the close of business on February 9, 2017.

Employee Stock Plans

As of January 1, 2017, there were 71.3 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 13.7 million shares available for issuance under our employee stock purchase plan.

Stock-based compensation expense recognized in the consolidated statements of earnings (in millions):



	Quarter Ended
	Jan 1, 2017		Dec 27, 2015
Options	$	14.9	$	15.5
Restricted Stock Units (“RSUs”)	40.1		41.8
Total stock-based compensation expense	$	55.0	$	57.3

Stock option and RSU transactions from October 2, 2016 through January 1, 2017 (in millions):



	Stock Options			RSUs
Options outstanding/Nonvested RSUs, October 2, 2016	31.3			8.3
Granted	6.7			4.7
Options exercised/RSUs vested	(1.8		)	(3.6		)
Forfeited/expired	(0.5		)	(0.4		)
Options outstanding/Nonvested RSUs, January 1, 2017	35.7			9.0
Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of January 1, 2017	$	66.5		$	235.0

Earnings Per Share

Earnings per Share

Calculation of net earnings per common share (“EPS”) — basic and diluted (in millions, except EPS):



	Quarter Ended
	Jan 1, 2017		Dec 27, 2015
Net earnings attributable to Starbucks	$	751.8	$	687.6
Weighted average common shares outstanding (for basic calculation)	1,457.5		1,485.9
Dilutive effect of outstanding common stock options and RSUs	13.0		17.4
Weighted average common and common equivalent shares outstanding (for diluted calculation)	1,470.5		1,503.3
EPS — basic	$	0.52	$	0.46
EPS — diluted	$	0.51	$	0.46

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and nonvested) and unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled approximately 8.6 million and 2.4 million as of January 1, 2017 and December 27, 2015, respectively.

Segment Reporting

Our chief executive officer and chief operating officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that our CODM manages the segments, evaluates financial results and makes key operating decisions.

The table below presents financial information for our reportable operating segments and All Other Segments (in millions):

Quarter Ended



	Americas		China/ Asia Pacific		EMEA		Channel Development		All Other Segments		Segment Total
January 1, 2017
Total net revenues	$	3,991.4	$	770.8	$	262.4	$	553.7	$	154.6	$	5,732.9
Depreciation and amortization expenses	152.4		48.6		7.6		0.6		2.9		212.1
Income from equity investees	—		42.5		—		41.9		—		84.4
Operating income	958.5		163.4		44.1		242.9		9.6		1,418.5

December 27, 2015
Total net revenues	$	3,726.2	$	653.6	$	313.0	$	512.1	$	168.6	$	5,373.5
Depreciation and amortization expenses	140.8		42.1		11.5		0.7		3.6		198.7
Income from equity investees	—		31.2		1.2		31.7		—		64.1
Operating income	934.6		127.1		48.1		193.3		5.9		1,309.0

Reconciliation of total segment operating income to consolidated earnings before income taxes (in millions):



	Quarter Ended
	Jan 1, 2017			Dec 27, 2015
Total segment operating income	$	1,418.5		$	1,309.0
Unallocated corporate operating expenses	(285.9		)	(251.0		)
Consolidated operating income	1,132.6			1,058.0
Interest income and other, net	24.1			8.1
Interest expense	(23.8		)	(16.5		)
Earnings before income taxes	$	1,132.9		$	1,049.6

Summary of Significant Accounting Policies (Policies)