UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 28,~~December 27, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 0-20322

Starbucks Corporation

(Exact Name of Registrant as Specified in its Charter)


Washington			91-1325671
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)

2401 Utah Avenue South, Seattle, Washington 98134

(Address of principal executive offices)

(206) 447-1575

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SBUX	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Shares Outstanding as of ~~July 22, 2020~~January 20, 2021
~~1,169.0~~1,177.3 million

Table of Contents

STARBUCKS CORPORATION

FORM 10-Q

For the Quarterly Period Ended ~~June 28,~~December 27, 2020

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share data)

(unaudited)


		Quarter Ended						Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
Net revenues:	Net revenues:									Net revenues:
Company-operated stores	Company-operated stores	$	3,444.4	$	5,535.0	$	13,991.0	$	16,064.3	Company-operated stores	$	5,726.5	$	5,780.7
Licensed stores	Licensed stores	300.5		725.0		1,782.4		2,140.3		Licensed stores	613.8		792.0
Other	Other	477.2		563.0		1,541.5		1,557.0		Other	409.1		524.4
Total net revenues	Total net revenues	4,222.1		6,823.0		17,314.9		19,761.6		Total net revenues	6,749.4		7,097.1
Product and distribution costs	Product and distribution costs	1,484.0		2,199.6		5,718.2		6,387.4		Product and distribution costs	2,049.1		2,236.4
Store operating expenses	Store operating expenses	2,537.8		2,643.2		8,080.7		7,784.2		Store operating expenses	2,867.3		2,821.5
Other operating expenses	Other operating expenses	133.6		94.4		330.3		279.4		Other operating expenses	91.8		101.8
Depreciation and amortization expenses	Depreciation and amortization expenses	361.0		343.1		1,068.3		1,032.5		Depreciation and amortization expenses	366.1		351.0
General and administrative expenses	General and administrative expenses	399.9		459.7		1,240.6		1,365.7		General and administrative expenses	472.1		434.2
Restructuring and impairments	Restructuring and impairments	78.1		37.7		83.7		123.9		Restructuring and impairments	72.2		6.3
Total operating expenses	Total operating expenses	4,994.4		5,777.7		16,521.8		16,973.1		Total operating expenses	5,918.6		5,951.2
Income from equity investees	Income from equity investees	68.4		76.0		210.3		206.1		Income from equity investees	82.7		73.9
Operating income/(loss)		(703.9)		1,121.3		1,003.4		2,994.6
Operating income										Operating income	913.5		1,219.8

Net gain resulting from divestiture of certain operations		—		601.8		—		622.8

Interest income and other, net	Interest income and other, net	12.7		40.2		30.7		80.2		Interest income and other, net	15.5		15.9
Interest expense	Interest expense	(120.8)		(86.4)		(312.1)		(235.3)		Interest expense	(120.7)		(91.9)
Earnings/(loss) before income taxes		(812.0)		1,676.9		722.0		3,462.3
Income tax expense/(benefit)		(133.9)		303.7		190.0		670.1
Net earnings/(loss) including noncontrolling interests		(678.1)		1,373.2		532.0		2,792.2
Net earnings/(loss) attributable to noncontrolling interests		0.3		0.4		(3.7)		(4.2)
Net earnings/(loss) attributable to Starbucks		$	(678.4)	$	1,372.8	$	535.7	$	2,796.4
Earnings/(loss) per share - basic		$	(0.58)	$	1.13	$	0.46	$	2.27
Earnings/(loss) per share - diluted		$	(0.58)	$	1.12	$	0.45	$	2.25
Earnings before income taxes										Earnings before income taxes	808.3		1,143.8
Income tax expense										Income tax expense	186.1		258.5
Net earnings including noncontrolling interests										Net earnings including noncontrolling interests	622.2		885.3
Net loss attributable to noncontrolling interests										Net loss attributable to noncontrolling interests	0		(0.4)
Net earnings attributable to Starbucks										Net earnings attributable to Starbucks	$	622.2	$	885.7
Earnings per share - basic										Earnings per share - basic	$	0.53	$	0.75
Earnings per share - diluted										Earnings per share - diluted	$	0.53	$	0.74
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	1,168.5		1,211.0		1,173.6		1,230.8		Basic	1,175.0		1,180.4
Diluted	Diluted	1,168.5		1,223.0		1,182.7		1,242.4		Diluted	1,183.0		1,191.0

See Notes to Consolidated Financial Statements.

Table of Contents

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)


		Quarter Ended						Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
Net earnings/(loss) including noncontrolling interests		$	(678.1)	$	1,373.2	$	532.0	$	2,792.2
Net earnings including noncontrolling interests										Net earnings including noncontrolling interests	$	622.2	$	885.3
Other comprehensive income/(loss), net of tax:	Other comprehensive income/(loss), net of tax:									Other comprehensive income/(loss), net of tax:
Unrealized holding gains/(losses) on available-for-sale debt securities	Unrealized holding gains/(losses) on available-for-sale debt securities	5.1		3.7		8.2		9.6		Unrealized holding gains/(losses) on available-for-sale debt securities	(0.5)		(0.1)
Tax (expense)/benefit	Tax (expense)/benefit	(1.1)		(0.8)		(1.8)		(2.1)		Tax (expense)/benefit	0.1		0
Unrealized gains/(losses) on cash flow hedging instruments	Unrealized gains/(losses) on cash flow hedging instruments	(28.6)		(3.2)		(124.1)		(24.7)		Unrealized gains/(losses) on cash flow hedging instruments	7.7		32.4
Tax (expense)/benefit	Tax (expense)/benefit	6.3		0.6		30.9		5.9		Tax (expense)/benefit	(2.9)		(6.6)
Unrealized gains/(losses) on net investment hedging instruments	Unrealized gains/(losses) on net investment hedging instruments	(24.6)		(21.1)		56.7		(40.1)		Unrealized gains/(losses) on net investment hedging instruments	(30.2)		23.7
Tax (expense)/benefit	Tax (expense)/benefit	6.2		5.3		(14.4)		10.2		Tax (expense)/benefit	7.6		(6.0)
Translation adjustment and other	Translation adjustment and other	29.0		(64.9)		25.2		15.0		Translation adjustment and other	238.7		76.1
Tax (expense)/benefit	Tax (expense)/benefit	—		—		1.5		1.4		Tax (expense)/benefit	0		0
Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale debt securities, hedging instruments, and translation adjustment	Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale debt securities, hedging instruments, and translation adjustment	(0.9)		3.2		(18.0)		5.5		Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale debt securities, hedging instruments, and translation adjustment	(3.6)		(10.7)
Tax expense/(benefit)	Tax expense/(benefit)	0.5		(0.3)		4.4		0.6		Tax expense/(benefit)	1.8		2.3
Other comprehensive income/(loss)	Other comprehensive income/(loss)	(8.1)		(77.5)		(31.4)		(18.7)		Other comprehensive income/(loss)	218.7		111.1
Comprehensive income/(loss) including noncontrolling interests		(686.2)		1,295.7		500.6		2,773.5
Comprehensive income including noncontrolling interests										Comprehensive income including noncontrolling interests	840.9		996.4
Comprehensive income/(loss) attributable to noncontrolling interests	Comprehensive income/(loss) attributable to noncontrolling interests	0.3		0.4		(3.7)		(4.2)		Comprehensive income/(loss) attributable to noncontrolling interests	0		(0.4)
Comprehensive income/(loss) attributable to Starbucks		$	(686.5)	$	1,295.3	$	504.3	$	2,777.7
Comprehensive income attributable to Starbucks										Comprehensive income attributable to Starbucks	$	840.9	$	996.8

See Notes to Consolidated Financial Statements.

Table of Contents

STARBUCKS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

(unaudited)


		Jun 28, 2020		Sep 29, 2019			Dec 27, 2020		Sep 27, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	3,965.9	$	2,686.6	Cash and cash equivalents	$	5,028.1	$	4,350.9
Short-term investments	Short-term investments	229.9		70.5		Short-term investments	235.5		281.2
Accounts receivable, net	Accounts receivable, net	881.1		879.2		Accounts receivable, net	888.0		883.4
Inventories	Inventories	1,583.8		1,529.4		Inventories	1,471.5		1,551.4
Prepaid expenses and other current assets	Prepaid expenses and other current assets	920.3		488.2		Prepaid expenses and other current assets	734.4		739.5
Total current assets	Total current assets	7,581.0		5,653.9		Total current assets	8,357.5		7,806.4
Long-term investments	Long-term investments	223.4		220.0		Long-term investments	190.9		206.1
Equity investments	Equity investments	426.1		396.0		Equity investments	496.0		478.7
Property, plant and equipment, net	Property, plant and equipment, net	6,295.6		6,431.7		Property, plant and equipment, net	6,177.9		6,241.4
Operating lease, right-of-use asset	Operating lease, right-of-use asset	8,214.0		—		Operating lease, right-of-use asset	8,199.4		8,134.1
Deferred income taxes, net	Deferred income taxes, net	1,740.0		1,765.8		Deferred income taxes, net	1,792.4		1,789.9
Other long-term assets	Other long-term assets	550.8		479.6		Other long-term assets	541.1		568.6
Other intangible assets	Other intangible assets	599.6		781.8		Other intangible assets	506.4		552.1
Goodwill	Goodwill	3,510.1		3,490.8		Goodwill	3,706.8		3,597.2
TOTAL ASSETS	TOTAL ASSETS	$	29,140.6	$	19,219.6	TOTAL ASSETS	$	29,968.4	$	29,374.5
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)	LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)					LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	860.8	$	1,189.7	Accounts payable	$	1,050.6	$	997.9
Accrued liabilities	Accrued liabilities	1,511.7		1,753.7		Accrued liabilities	1,616.9		1,160.7
Accrued payroll and benefits	Accrued payroll and benefits	652.1		664.6		Accrued payroll and benefits	685.3		696.0
Income taxes payable	Income taxes payable	90.9		1,291.7		Income taxes payable	149.7		98.2
Current portion of operating lease liability	Current portion of operating lease liability	1,237.1		—		Current portion of operating lease liability	1,267.6		1,248.8
Stored value card liability and current portion of deferred revenue	Stored value card liability and current portion of deferred revenue	1,463.3		1,269.0		Stored value card liability and current portion of deferred revenue	1,871.2		1,456.5
Short-term debt	Short-term debt	936.5		—		Short-term debt	492.6		438.8
Current portion of long-term debt	Current portion of long-term debt	1,249.6		—		Current portion of long-term debt	750.0		1,249.9
Total current liabilities	Total current liabilities	8,002.0		6,168.7		Total current liabilities	7,883.9		7,346.8
Long-term debt	Long-term debt	14,645.6		11,167.0		Long-term debt	14,673.5		14,659.6
Operating lease liability	Operating lease liability	7,653.6		—		Operating lease liability	7,754.5		7,661.7
Deferred revenue	Deferred revenue	6,642.6		6,744.4		Deferred revenue	6,597.7		6,598.5
Other long-term liabilities	Other long-term liabilities	821.1		1,370.5		Other long-term liabilities	962.8		907.3
Total liabilities	Total liabilities	37,764.9		25,450.6		Total liabilities	37,872.4		37,173.9
Shareholders’ equity/(deficit):
Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,168.9 and 1,184.6 shares, respectively		1.2		1.2
Shareholders' deficit:						Shareholders' deficit:
Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,177.2 and 1,173.3 shares, respectively						Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,177.2 and 1,173.3 shares, respectively	1.2		1.2
Additional paid-in capital	Additional paid-in capital	115.4		41.1		Additional paid-in capital	488.6		373.9
Retained earnings/(deficit)		(8,208.3)		(5,771.2)
Retained deficit						Retained deficit	(8,253.6)		(7,815.6)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(529.9)		(503.3)		Accumulated other comprehensive loss	(145.9)		(364.6)
Total shareholders’ equity/(deficit)		(8,621.6)		(6,232.2)
Total shareholders’ deficit						Total shareholders’ deficit	(7,909.7)		(7,805.1)
Noncontrolling interests	Noncontrolling interests	(2.7)		1.2		Noncontrolling interests	5.7		5.7
Total equity/(deficit)		(8,624.3)		(6,231.0)
Total deficit						Total deficit	(7,904.0)		(7,799.4)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)	$	29,140.6	$	19,219.6	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)	$	29,968.4	$	29,374.5

See Notes to Consolidated Financial Statements.

Table of Contents

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)


		Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net earnings including noncontrolling interests	Net earnings including noncontrolling interests	$	532.0	$	2,792.2	Net earnings including noncontrolling interests	$	622.2	$	885.3
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	1,124.0		1,083.6		Depreciation and amortization	388.4		369.2
Deferred income taxes, net	Deferred income taxes, net	20.0		(1,243.5)		Deferred income taxes, net	(6.1)		10.4
Income earned from equity method investees	Income earned from equity method investees	(182.3)		(174.1)		Income earned from equity method investees	(69.0)		(62.9)
Distributions received from equity method investees	Distributions received from equity method investees	165.6		163.7		Distributions received from equity method investees	77.2		64.3

Net gain resulting from divestiture of certain retail operations		—		(622.8)

Stock-based compensation	Stock-based compensation	188.0		255.4		Stock-based compensation	99.3		90.3
Goodwill impairments		—		10.5

Non-cash lease costs	Non-cash lease costs	902.4		—		Non-cash lease costs	308.3		294.9
Loss on retirement and impairment of assets	Loss on retirement and impairment of assets	124.6		50.5		Loss on retirement and impairment of assets	132.6		12.7
Other	Other	63.7		71.8		Other	(10.2)		(7.6)
Cash provided by/(used in) changes in operating assets and liabilities:
Cash provided by changes in operating assets and liabilities:						Cash provided by changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	13.4		(70.1)		Accounts receivable	19.6		(22.9)
Inventories	Inventories	(51.7)		(140.5)		Inventories	90.1		122.8
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(492.1)		831.6		Prepaid expenses and other current assets	5.2		(28.5)
Income taxes payable	Income taxes payable	(1,224.5)		1,045.4		Income taxes payable	56.9		125.1
Accounts payable	Accounts payable	(320.3)		(15.1)		Accounts payable	24.8		(110.3)
Deferred revenue	Deferred revenue	92.0		(32.4)		Deferred revenue	398.9		426.7
Operating lease liability	Operating lease liability	(918.2)		—		Operating lease liability	(314.8)		(301.6)
Other operating assets and liabilities	Other operating assets and liabilities	70.5		(67.4)		Other operating assets and liabilities	12.3		(31.8)
Net cash provided by operating activities	Net cash provided by operating activities	107.1		3,938.8		Net cash provided by operating activities	1,835.7		1,836.1
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchases of investments	Purchases of investments	(297.4)		(176.3)		Purchases of investments	(135.5)		(38.0)
Sales of investments	Sales of investments	133.5		281.7		Sales of investments	91.2		64.6
Maturities and calls of investments	Maturities and calls of investments	10.0		57.5		Maturities and calls of investments	113.7		1.3

Additions to property, plant and equipment	Additions to property, plant and equipment	(1,138.4)		(1,280.7)		Additions to property, plant and equipment	(324.2)		(394.3)

Net proceeds from the divestiture of certain operations		—		684.2

Other	Other	(39.4)		(72.9)		Other	(17.7)		(19.9)
Net cash used in investing activities	Net cash used in investing activities	(1,331.7)		(506.5)		Net cash used in investing activities	(272.5)		(386.3)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Net proceeds from issuance of commercial paper						Net proceeds from issuance of commercial paper	0		398.9
Net proceeds from issuance of short-term debt						Net proceeds from issuance of short-term debt	192.9		99.0
Repayments of short-term debt						Repayments of short-term debt	(144.7)		0

Proceeds from issuance of short-term debt		1,157.2		—
Repayments of short-term debt		(220.7)		—
Proceeds from issuance of long-term debt		4,727.6		1,996.0
Repayments of long-term debt	Repayments of long-term debt	—		(350.0)		Repayments of long-term debt	(500.0)		0

Proceeds from issuance of common stock	Proceeds from issuance of common stock	98.9		358.5		Proceeds from issuance of common stock	102.8		33.1
Cash dividends paid	Cash dividends paid	(1,444.2)		(1,330.7)		Cash dividends paid	(528.2)		(484.2)
Repurchase of common stock	Repurchase of common stock	(1,698.9)		(7,972.9)		Repurchase of common stock	0		(1,091.4)
Minimum tax withholdings on share-based awards	Minimum tax withholdings on share-based awards	(89.1)		(106.1)		Minimum tax withholdings on share-based awards	(88.6)		(78.4)
Other		(37.8)		(17.6)
Net cash provided by/(used in) financing activities		2,493.0		(7,422.8)

Net cash used in financing activities						Net cash used in financing activities	(965.8)		(1,123.0)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	10.9		(2.5)		Effect of exchange rate changes on cash and cash equivalents	79.8		27.1
Net increase/(decrease) in cash and cash equivalents		1,279.3		(3,993.0)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	677.2		353.9
CASH AND CASH EQUIVALENTS:	CASH AND CASH EQUIVALENTS:					CASH AND CASH EQUIVALENTS:
Beginning of period	Beginning of period	2,686.6		8,756.3		Beginning of period	4,350.9		2,686.6
End of period	End of period	$	3,965.9	$	4,763.3	End of period	$	5,028.1	$	3,040.5
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest, net of capitalized interest	Interest, net of capitalized interest	$	274.3	$	219.9	Interest, net of capitalized interest	$	130.0	$	87.2
Income taxes	Income taxes	$	1,691.1	$	126.2	Income taxes	$	109.4	$	92.1

See Notes to Consolidated Financial Statements.

Table of Contents

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

For the ~~Quarter~~Quarters Ended ~~June 28,~~December 27, 2020 and ~~June 30,~~December 29, 2019

(in millions, except per share data, unaudited)


		Common Stock					Additional Paid-in Capital		Retained Earnings/(Deficit)		Accumulated Other Comprehensive Income/(Loss)		Shareholders’ Equity/(Deficit)		Noncontrolling Interests				Total	Common Stock				Additional Paid-in Capital		Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Loss)		Shareholders’ Equity/(Deficit)			Noncontrolling Interests		Total
		Shares	Amount																															Noncontrolling Interests					Total
Balance, March 29, 2020		1,168.1	$	1.2	$	41.1	$	(7,050.6)	$	(521.8)	$	(7,530.1)	$	(2.8)	$	(7,532.9)
Balance, September 27, 2020																	Balance, September 27, 2020	1,173.3		$	1.2	$	373.9	$	(7,815.6)			$	(364.6)						$	(7,805.1)	$	5.7		$	(7,799.4)
Cumulative effect of adoption of new accounting guidance																	Cumulative effect of adoption of new accounting guidance	—		0		0		(2.2)		0				(2.2)		0			(2.2)
Net earnings																	Net earnings	—		0		0		622.2		0				622.2		0			622.2
Other comprehensive income/(loss)																	Other comprehensive income/(loss)	—		0		0		0		218.7				218.7		0			218.7
Stock-based compensation expense																	Stock-based compensation expense	—		0		100.5		0		0				100.5		0			100.5
Exercise of stock options/vesting of RSUs																	Exercise of stock options/vesting of RSUs	3.8		0		4.0		0		0				4.0		0			4.0
Sale of common stock																	Sale of common stock	0.1		0		10.2		0		0				10.2		0			10.2

Cash dividends declared, $0.90 per share																	Cash dividends declared, $0.90 per share	—		0		0		(1,058.0)		0				(1,058.0)		0			(1,058.0)

Balance, December 27, 2020																	Balance, December 27, 2020	1,177.2		$	1.2	$	488.6	$	(8,253.6)	$	(145.9)			$	(7,909.7)	$	5.7		$	(7,904.0)

Balance, September 29, 2019																	Balance, September 29, 2019	1,184.6		$	1.2	$	41.1	$	(5,771.2)	$	(503.3)			$	(6,232.2)	$	1.2		$	(6,231.0)
Cumulative effect of adoption of new accounting guidance																	Cumulative effect of adoption of new accounting guidance	—		0		0		12.5		4.8				17.3		0			17.3
Net earnings/(loss)	Net earnings/(loss)	—	—		—		(678.4)		—		(678.4)		0.3		(678.1)		Net earnings/(loss)	—		0		0		885.7		0				885.7		(0.4)			885.3
Other comprehensive income/(loss)	Other comprehensive income/(loss)	—	—		—		—		(8.1)		(8.1)		—		(8.1)		Other comprehensive income/(loss)	—		0		0		0		111.1				111.1		0			111.1
Stock-based compensation expense	Stock-based compensation expense	—	—		42.3		—		—		42.3		—		42.3		Stock-based compensation expense	—		0		91.3		0		0				91.3		0			91.3
Exercise of stock options/vesting of RSUs	Exercise of stock options/vesting of RSUs	0.6	—		22.2		—		—		22.2		—		22.2		Exercise of stock options/vesting of RSUs	2.8		0		(54.1)		0		0				(54.1)		0			(54.1)
Sale of common stock	Sale of common stock	0.2	—		9.8		—		—		9.8		—		9.8		Sale of common stock	0.1		0		8.9		0		0				8.9		0			8.9
Repurchase of common stock	Repurchase of common stock	—	—		—		—		—		—		—		—		Repurchase of common stock	(13.0)		0		(46.1)		(1,061.8)		0				(1,107.9)		0			(1,107.9)
Cash dividends declared, $0.41 per share		—	—		—		(479.3)		—		(479.3)		(0.2)		(479.5)
Cash dividends declared, $0.41 per share																	Cash dividends declared, $0.41 per share	—		0		0		(480.0)		0				(480.0)		0			(480.0)

Balance, June 28, 2020		1,168.9	$	1.2	$	115.4	$	(8,208.3)	$	(529.9)	$	(8,621.6)	$	(2.7)	$	(8,624.3)

Balance, March 31, 2019		1,210.0	$	1.2	$	41.1	$	(4,807.7)	$	(271.5)	$	(5,036.9)	$	1.7	$	(5,035.2)

Net earnings/(loss)		—	—		—		1,372.8		—		1,372.8		0.4		1,373.2
Other comprehensive income/(loss)		—	—		—		—		(77.5)		(77.5)		—		(77.5)
Stock-based compensation expense		—	—		64.0		—		—		64.0		—		64.0
Exercise of stock options/vesting of RSUs		3.2	—		24.4		—		—		24.4		—		24.4
Sale of common stock		0.1	—		8.6		—		—		8.6		—		8.6
Repurchase of common stock		(6.8)	—		(97.0)		(144.1)		—		(241.1)		—		(241.1)
Cash dividends declared, $0.36 per share		—	—		—		(434.9)		—		(434.9)		—		(434.9)
Net distributions to noncontrolling interests		—	—		—		—		—		—		(0.5)		(0.5)
Balance, June 30, 2019		1,206.5	$	1.2	$	41.1	$	(4,013.9)	$	(349.0)	$	(4,320.6)	$	1.6	$	(4,319.0)
Balance, December 29, 2019																	Balance, December 29, 2019	1,174.5		$	1.2	$	41.1	$	(6,414.8)	$	(387.4)			$	(6,759.9)	$	0.8		$	(6,759.1)

See Notes to Consolidated Financial Statements.

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~~STARBUCKS CORPORATION~~

~~CONSOLIDATED STATEMENTS OF EQUITY~~

~~For the Three Quarters Ended June 28, 2020 and June 30, 2019~~

~~(in millions, except per share data, unaudited)~~

Common Stock Additional Paid-in Capital Retained
Earnings/(Deficit) Accumulated
Other
Comprehensive
Income/(Loss) Shareholders’
Equity/(Deficit) Noncontrolling
Interests Total
Shares Amount
Balance, September 29, 2019 1,184.6 $ 1.2 $ 41.1 $ (5,771.2) $ (503.3) $ (6,232.2) $ 1.2 $ (6,231.0)
Cumulative effect of adoption of new accounting guidance — — — 12.5 4.8 17.3 — 17.3
Net earnings/(loss) — — — 535.7 — 535.7 (3.7) 532.0
Other comprehensive income/(loss) — — — — (31.4) (31.4) — (31.4)
Stock-based compensation expense — — 190.7 — — 190.7 — 190.7
Exercise of stock options/vesting of RSUs 4.2 — (18.3) — — (18.3) — (18.3)
Sale of common stock 0.4 — 28.3 — — 28.3 — 28.3
Repurchase of common stock (20.3) — (126.4) (1,548.6) — (1,675.0) — (1,675.0)
Cash dividends declared, $1.23 per share — — — (1,436.7) — (1,436.7) (0.2) (1,436.9)
Balance, June 28, 2020 1,168.9 $ 1.2 $ 115.4 $ (8,208.3) $ (529.9) $ (8,621.6) $ (2.7) $ (8,624.3)
Balance, September 30, 2018 1,309.1 $ 1.3 $ 41.1 $ 1,457.4 $ (330.3) $ 1,169.5 $ 6.3 $ 1,175.8
Cumulative effect of adoption of new accounting guidance — — — 495.6 — 495.6 — 495.6
Net earnings/(loss) — — — 2,796.4 — 2,796.4 (4.2) 2,792.2
Other comprehensive income/(loss) — — — — (18.7) (18.7) — (18.7)
Stock-based compensation expense — — 258.0 — — 258.0 — 258.0
Exercise of stock options/vesting of RSUs 13.2 — 227.4 — — 227.4 — 227.4
Sale of common stock 0.3 — 25.0 — — 25.0 — 25.0
Repurchase of common stock (116.1) (0.1) (510.4) (7,443.8) — (7,954.3) — (7,954.3)
Cash dividends declared, $1.08 per share — — — (1,319.5) — (1,319.5) — (1,319.5)
Net distributions to noncontrolling interests — — — — — — (0.5) (0.5)
Balance, June 30, 2019 1,206.5 $ 1.2 $ 41.1 $ (4,013.9) $ (349.0) $ (4,320.6) $ 1.6 $ (4,319.0)

~~See Notes to Consolidated Financial Statements.~~

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STARBUCKS CORPORATION

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1	Summary of Significant Accounting Policies	109

Note 2	~~Acquisitions, Divestitures and Strategic Alliance~~	13
~~Note 3~~	Derivative Financial Instruments	1310
Note 43	Fair Value Measurements	1814
Note 54	Inventories	2016
Note 65	Supplemental Balance Sheet and Statement of Earnings Information	2016
Note 76	Other Intangible Assets and Goodwill	2117
Note 7	Debt	18
Note 8	~~Debt~~Leases	20
Note 9	Deferred Revenue	21
Note 10	Equity	22
Note 9	~~Leases~~	24
~~Note 10~~	~~Deferred Revenue~~	26
~~Note~~ 11	~~Equity~~	27
~~Note 12~~	Employee Stock Plans	2923

Note 12	Earnings per Share	23
Note 13	~~Income Taxes~~	29
~~Note 14~~	~~Earnings~~/~~(Loss)~~ ~~per Share~~	29
~~Note 15~~	Commitments and Contingencies	3023
Note 1614	Segment Reporting	3024

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STARBUCKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Summary of Significant Accounting Policies

Financial Statement Preparation

The unaudited consolidated financial statements as of ~~June 28,~~December 27, 2020, and for the ~~quarter and three~~ quarters ended ~~June 28,~~December 27, 2020 and ~~June 30,~~December 29, 2019, 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 ~~quarter and three~~ quarters ended ~~June 28,~~December 27, 2020 and ~~June 30,~~December 29, 2019 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.”

Beginning with the Form 10-Q for the quarter and three quarters ended June 28, 2020, we renamed the "cost of sales" caption on our consolidated statement of earnings to "product and distribution costs," which more accurately reflects the substance of costs classified within this line item. There were no classification or other changes made in conjunction with the new caption. Descriptions of material operating expenses presented on our consolidated statements of earnings are described below.

~~Product and distribution costs~~

Product and distribution costs primarily consist of raw materials, purchased goods and packaging costs as well as operational costs of our supply chain organization, such as wages and benefits, occupancy costs and depreciation expenses, in support of sourcing, procuring, manufacturing, warehousing and transportation activities of products sold at our company-operated and licensed stores as well as through Channel Development and our other businesses. Also included are inventory and supply chain asset impairment costs.

~~Store operating expenses~~

Store operating expenses consist of costs incurred in our company-operated stores, primarily wages and benefits related to store partners (employees), occupancy costs and other costs that directly support the operation and sales-related activities of those stores.

~~General and administrative expenses~~

General and administrative expenses primarily consist of wages and benefits, professional service fees and occupancy costs for corporate headquarter and regional offices that support our corporate functions, including technology, finance, legal and partner (employee) resources.

~~Expense reclassification in fiscal 2019~~

In the fourth quarter of fiscal 2019, we changed the classification of certain costs on our consolidated statements of earnings and revised prior period information to be consistent with the current period presentation. The most significant impact for the quarter and three quarters ended June 30, 2019, was the reclassification of our company-operated store occupancy costs from product and distribution costs to store operating expenses of $611.6 million and $1.8 billion, respectively. We also made certain other immaterial changes. There was no impact on consolidated revenues, consolidated operating income or net earnings per share as a result of these changes. Additionally, certain prior period information on the consolidated statements of cash flows was reclassified to conform to the current year presentation.

The financial information as of September ~~29, 2019~~27, 2020 is derived from our audited consolidated financial statements and notes for the fiscal year ended September ~~29, 2019~~27, 2020 (“fiscal ~~2019”~~2020”) included in Item 8 in the Fiscal ~~2019~~2020 Annual Report on Form 10-K (“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 ~~and three quarters~~ ended ~~June 28,~~December 27, 2020 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending ~~September 27, 2020~~October 3, 2021 (“fiscal ~~2020”~~2021”).

~~COVID-19~~ Additionally, our 2021 fiscal year will include 53 weeks, with the 53rd week falling in the fourth fiscal quarter.

The novel coronavirus, known as the global pandemic COVID-19, was first identified in December ~~2019. The outbreak of the virus initially impacted our China market~~2019 before spreading to ~~other~~ markets where we have company-operated ~~stores~~ or licensed ~~stores, including~~stores. We have since established the ~~U.S.,~~necessary protocols to operate safely, and our ~~largest market. The temporary store closures, reduced customer traffic and changes made~~businesses continue to our operations, which began in the second quarter of fiscal 2020, have had a material negative impact on our financial results to date. The most adverse impact occurred in our fiscal third quarter when the total number of company-operated and licensed store closures had reached its peak in early May. Since that time, nearly all our company-operated stores in major markets such as the U.S., China, Japan and Canada re-opened during the fiscal quarter, most with modified hours and operations.

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Given the magnitude of the effects of COVID-19 on our operations and financial results, key assumptions and estimates were updated during the fiscal third quarter, particularly with respect to business recovery trends and their impacts on future revenue growth and profitability for assessing impairment of our company-operated retail store and related operating lease right-of-use assets. For the lower-performing stores identified in the analysis, we compared the carrying value of the assets to the estimated undiscounted cash flows. For stores with estimated undiscounted future cash flows less than their asset carrying values, we determined the related impairment losses by comparing asset carrying values to their estimated fair values.recover. As ~~a result, we recorded $20.0 million of impairment losses within store operating expenses on our consolidated statement of earnings during the quarter ended June 28, 2020.~~

In June 2020, we announced a plan to optimize our U.S. store portfolio in urban markets by blending store formats to better cater to changing customer tastes and preferences. As a result, we expect the closure of up to 400 incremental stores over the next 18 months. Additionally, we will restructure our company-operated business in Canada with an expected closure of up to 200 incremental stores over the next two years. As of June 28, 2020, we had identified 78 stores for closure under our restructuring plans, and as a result we recorded approximately $56.0 million to restructuring and impairments on our consolidated statement of earnings. Of this total, $41.5 million related to the impairment of store assets for which either a triggering event occurred and the assets were determined not to be recoverable or the store was permanently closed. The remaining $14.5 million was primarily associated with lease termination activities for identified stores. For impaired store asset groups, we estimated the fair values using an income approach incorporating internal projections of revenue growth and operating expenses that are considered Level 3 fair value measurements, as well as applicable discount rates and market lease rates. For stores yet to be identified for closure in both markets, future restructuring costs are estimated to be approximately $300 million to $400 million. Estimated future restructuring costs are based on actual costs incurred for recently closed stores of similar profile under the restructuring plans. As store closure decisions are still in process and the actual number of store closures may vary, the final costs to close the stores may be different from the initial estimates depending on the associated asset values and remaining lease terms. Future restructuring costs are expected to be primarily comprised of lease exit costs, accelerated depreciation costs, fixed asset impairment and disposal costs not previously recorded as part of our ongoing store impairment process, and severance. Future restructuring costs are expected to be incurred over the next 18 to 24 months as stores are specifically identified for closure or, in the case of lease exit costs, when the stores cease operations.

~~The assessment of our other assets, mainly accounts receivable and inventory, did not indicate significant impairment risks as~~ of the end of the ~~third~~first quarter of fiscal ~~2020. Our accounts receivable are mainly comprised of unpaid invoices for product sales to~~2021, nearly all our company-operated and royalties from our licensees. Our allowance for doubtful accounts is calculated based on historical experience, licensee credit risk and application of the specific identification method. We also assessed incremental risks due to COVID-19 on our licensees' financial viability. During the quarter ended June 28, 2020, we did not observe a significant deterioration of our receivable portfolio that required a significant increase in bad debt expense. To assist our international licensed partners during the outbreak, we provided a short-term payment extension for their outstanding receivables as of the end of the fiscal second quarter. We may also offer longer-term payment extensions to help certain licensees dedicate their capital to further develop stores ~~and build the brand as the business recovers. We expect to charge a market interest rate on receivables when payment terms~~ have been extended beyond twelve months. During the fiscal third quarter, we waived royalty payments from our international licensees and did not recognize royalty revenues associated with these accounts. We do not believe the terms and forms of these financial relief actions changed our revenue recognition policy or had a significant impact on future collectability.re-opened; however, many were operating at less than full capacity.

In the second quarter of fiscal 2020, we recorded significant inventory write-offs due to expired or expected expiration of perishable ingredients and products relating to the temporary store closures. Since the majority of our stores were re-opened during the fiscal third quarter, there were no significant inventory write-offs during the period. See ~~Note 5, Inventories, for additional details.~~Government Subsidies

During the second quarter of fiscal 2020, we received an immaterial amount of COVID-19-related rent concessions for certain stores in China, generally correlating with the temporary store closure period. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in April 2020, we have elected to treat COVID-19-related rent concessions as variable rent. During the third quarter of fiscal 2020, we received $21.7 million of additional concessions for stores in our International segment that were recognized as an offset to our rent expense within store operating expenses. See ~~Note 9, Leases, for additional details.~~

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak and options to defer payroll tax payments for a limited period. Based on our evaluation of the CARES Act, we ~~qualify~~qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments in the future. Additionally, the Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) to help employers offset a portion of their employee ~~salaries and~~ wages for a limited period. We elected to treat qualified government subsidies from the U.S., Canada and other governments as offsets to the related operating expenses. During the first quarter ~~and three quarters ended~~

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~~June 28, 2020, the~~fiscal 2021, qualified payroll credits reduced our store operating expenses by ~~$266.0 million and $301.0~~$19.8 million on our consolidated statement of ~~earnings, respectively.~~earnings. After netting the qualified U.S. payroll tax credits against our payroll tax payable, ~~we recorded approximately $214.0~~a receivable of $149.3 million ~~within~~was included in prepaid expenses and other current assets as of December 27, 2020. During the first fiscal quarter of fiscal 2021, we deferred $76.5 million of qualified payroll tax payments, and as of December 27, 2020, deferred payroll tax payments of $227.5 million were included in other long-term liabilities on our consolidated balance sheets.

Restructuring

In fiscal 2020, we announced a plan to optimize our North America store portfolio, primarily in dense metropolitan markets by blending store formats to better cater to changing customer tastes and preferences. As of December 27, 2020, we expect the total number of closures to be approximately 800 stores in the U.S. and Canada. As of December 27, 2020, we have identified 713 stores for closure under our restructuring plans, and as a result we recorded approximately $72.2 million to restructuring and impairments on our consolidated statement of earnings. Of this total, $42.6 million related to the impairment of store assets for which either a triggering event occurred and the assets were determined not to be recoverable or the store was permanently closed. An additional $29.6 million was associated with accelerated amortization of right-of-use (“ROU”) lease assets due to planned store closures prior to the end of contractual lease terms. For impaired store asset groups, we estimated the ~~quarter ending June 28, 2020.~~fair values using an income approach incorporating internal projections of revenue growth and operating expenses that are considered Level 3 fair value measurements, as well as applicable discount rates and market lease rates. The application of these projections and fair value measurements did not have a significant impact on our final impairment decisions given that we plan to fully exit the majority of these identified stores over the next 9 to 12 months.

We expect total future restructuring costs, which are attributable to our Americas segment, to be approximately $100 million to $120 million. These restructuring costs include accelerated amortization or impairments of ROU assets due to planned store closures prior to the end of contractual lease terms ($90 million to $100 million), store impairment and disposal costs not previously recorded ~~our income tax expense, deferred tax assets and related liabilities based on management’s best estimates. Additionally, we assessed the likelihood of realizing the benefits~~as part of our ~~deferred tax assets. During~~ongoing store impairment process ($10 million to $15 million), with the ~~third~~remaining amount related to employee termination costs. As we have previously recorded impairment charges for stores that may be identified for

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closure under our plans, and because store closure decisions are still subject to change, the final costs associated with these store closures may vary from these estimates. These costs will depend on the asset carrying value and remaining lease term of the specific stores identified. Future restructuring costs are expected to be incurred primarily over the next 9 to 12 months as stores are specifically identified for closure or, in the case of lease exit costs, either when a store ceases operations or when a reduced lease term is reasonably certain due to expected, early lease termination.

As of December 27, 2020, restructuring liabilities totaling $24.4 million were included in current and non-current operating lease liability for the remaining outstanding rent liabilities due to landlords. The associated expense was recognized in fiscal 2020 or during the first quarter of fiscal ~~2020, we recorded valuation allowances~~2021 for stores that were either closed or reasonably certain to close in fiscal 2021. Additionally, $14.9 million of ~~$55.0 million against deferred tax assets as of~~accrued employee termination costs is included in accrued payroll and benefits. Cash payments were immaterial for the ~~beginning~~first quarter of fiscal 2020 relating to certain foreign jurisdictions that are not expected to be recovered due to estimated operating losses. We will continue to record valuation allowances against deferred tax assets established during fiscal 2020 for these jurisdictions through the current annual effective tax rate. Based on our current business forecast, we expect to realize the benefits from deferred tax assets recognized relating to other foreign jurisdictions. See ~~Note 13, Income Taxes for additional details.~~

~~Recent Accounting Pronouncements~~2021.

Recently Adopted Accounting Pronouncements

In ~~the second quarter of fiscal 2020, we adopted the new guidance from~~June 2016, the FASB issued guidance replacing the incurred loss impairment methodology with a new methodology that reflects current expected credit losses on ~~simplifying the accounting for income taxes by removing certain exceptions~~financial assets, including receivables and available-for-sale securities. The new methodology requires entities to ~~the general principles.~~estimate and recognize expected credit losses each reporting period. The guidance was adopted ~~on a prospective basis and had no material impact on the consolidated financial statements.~~

On September 30, 2019, we adopted the new guidance from the FASB on the recognition and measurement of leases utilizing the modified retrospective approach. As a result, the prior period information reported under the previous lease guidance has not been restated.

As permitted under the new FASB lease guidance, we elected the package of practical expedients, which allowed us to retain our prior conclusions regarding lease identification, classification and initial direct costs. For our lease agreements with lease and non-lease components, we elected the practical expedient to account for these as a single lease component for all underlying classes of assets. For our adoption, we did not elect to use hindsight for our existing leases. Additionally, for short-term leases with an initial lease term of 12 months or less and with purchase options we are reasonably certain will not be exercised, we elected to not record right-of-use assets or corresponding lease obligations on our consolidated balance sheet. We will continue to record rent expense for each short-term lease on a straight-line basis over the lease term.

The new FASB lease guidance had a material impact on our consolidated balance sheet; however, it did not have a material impact on our consolidated statement of earnings. The most material impact was the recognition of right-of-use assets of $8.4 billion upon adoption, with corresponding lease liabilities of $9.0 billion relating to our operating leases. Existing deferred rent and tenant improvement allowances of approximately $568.0 million, previously recorded within other long-term liabilities, were recorded as an offset to our gross operating lease right-of-use assets. Additionally, pursuant to the transition guidance, we derecognized build-to-suit lease assets, previously recorded in property, plant and equipment, net, along with the corresponding liabilities on the consolidated balance sheet as of September 30, 2019. Accordingly, these leases have been recorded as operating leases as of the adoption date and are now included in operating lease, right-of-use assets and operating lease liabilities on the consolidated balance sheet. As of the adoption date, accumulated deficit within shareholder's equity on our consolidated balance sheet decreased by $17.3 million, primarily related to the derecognition of build-to-suit leasing arrangements.

~~See~~ ~~Note 9, Leases, for further discussion regarding the adoption of the new guidance.~~

Induring the first quarter of fiscal ~~2020, we adopted~~2021 under the ~~new guidance from the FASB~~modified retrospective approach which included a $2.2 million transition adjustment to opening shareholders' retained deficit on ~~the reclassification~~our consolidated statements of certain tax effects from accumulated other comprehensive income (loss) (“AOCI”) which permits entities to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from AOCI to retained earnings. The guidance was adopted prospectively with no material impact on the consolidated financial statements as of June 28, 2020.equity upon adoption.

Recent Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued guidance related to reference rate reform. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the impact of the transition from LIBOR to alternative reference rates but do not expect a significant impact to our consolidated financial statements.

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~~Note 2:~~ ~~Acquisitions, Divestitures and Strategic Alliance~~

~~Fiscal 2019~~

In the third quarter of fiscal 2019, we sold our company-operated retail business in Thailand to Coffee Concepts Thailand, a joint venture between Maxim's Caterers Limited and F&N Retail Connection Co. Ltd, converting this operation to a fully licensed market. This transaction resulted in a pre-tax gain of $601.9 million, which was included in net gains resulting from divestiture of certain operations on our consolidated statements of earnings.

In the second quarter of fiscal 2019, we sold our company-operated retail businesses in France and the Netherlands to Alsea, S.A.B. de C.V. converting these operations to fully licensed markets. These transactions did not have a material impact to our consolidated financial statements.

Note 3: 2: Derivative Financial Instruments

Interest Rates

From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates. We enter into interest rate swap agreements and treasury locks, which are synthetic forward sales of U.S. treasury securities settled in cash based upon the difference between an agreed-upon treasury rate and the prevailing treasury rate at settlement. These agreements are cash settled at the time of the pricing of the related debt. Each derivative agreement's gain or loss is recorded in AOCI and is subsequently reclassified to interest expense over the life of the related debt.

To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges. The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevant benchmark interest rates are recorded in interest expense. Refer to Note 87, Debt, for additional information on our long-term 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 resulting gains and losses from these derivatives are recorded in AOCI and subsequently reclassified to revenue, product and distribution costs, or interest income and other, net, respectively, when the hedged exposures affect net earnings.

From time to time, we may enter into financial instruments, including, but not limited to, forward and swap contracts or foreign currency-denominated debt, to hedge the currency exposure of our net investments in certain international operations. The resulting gains and losses from these derivatives are ~~generally~~ recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.

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

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Commodities

Depending on market conditions, we may enter into coffee forward contracts, futures contracts and collars to hedge anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5,4 , Inventories, or our longer-dated forecasted coffee demand where underlying fixed price and price-to-be-fixed contracts are not yet available. The resulting gains and losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Depending on market conditions, we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under our dairy purchase contracts and our forecasted dairy demand. The resulting gains or losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

To mitigate the price uncertainty of a portion of our future purchases, including diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments. The resulting gains and losses are recorded in interest income and other, net to help offset price fluctuations on our beverage, food, packaging and transportation costs, which are included in product and distribution costs on our consolidated statements of earnings.

~~Table of Contents~~

Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge. Cash flows from hedging transactions are classified in the same categories as the cash flows from the respective hedged items. For de-designated cash flow hedges in which the underlying transactions are no longer likely to occur, the related accumulated derivative gains or losses are recognized in interest income and other, net on our consolidated statements of earnings. During the quarters ended March 29, 2020 and June 28, 2020, we de-designated certain cash flow hedges due to the global COVID-19 impacts, resulting in the release of an insignificant net gain from AOCI to our consolidated statement of earnings. We continue to believe transactions relating to our other designated cash flow hedges are probable to occur as of the end of the fiscal quarter.

Gains and losses on derivative contracts and foreign currency-denominated debt 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/Debt Remaining Maturity (Months)	Net Gains/(Losses) Included in AOCI				Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months	Outstanding Contract/Debt Remaining Maturity (Months)
		Jun 28, 2020		Sep 29, 2019								Dec 27, 2020		Sep 27, 2020
Cash Flow Hedges:	Cash Flow Hedges:								Cash Flow Hedges:
Coffee									Coffee	$	7.4	$	(2.5)	$	1.0	12
Cross-currency swaps									Cross-currency swaps	5.6		5.2		0		47
Dairy									Dairy	0.4		0.5		0.4		8
Foreign currency - other									Foreign currency - other	(15.4)		5.3		(6.4)		33
Interest rates	Interest rates	$	(93.7)	$	0.5	$	8.7	148	Interest rates	(73.5)		(90.6)		(1.2)		142
Net Investment Hedges:									Net Investment Hedges:
Cross-currency swaps	Cross-currency swaps	5.3		(1.4)		—		53	Cross-currency swaps	17.9		32.6		0		105
Foreign currency - other		17.9		12.9		10.1		36
Coffee		(13.6)		(1.0)		(10.4)		18
Dairy		0.4		—		0.4		8
Net Investment Hedges:
Foreign currency	Foreign currency	16.0		16.0		—		0	Foreign currency	16.0		16.0		0		0
Cross-currency swaps		38.4		—		—		111
Foreign currency debt	Foreign currency debt	(27.1)		(26.1)		—		45	Foreign currency debt	(47.4)		(37.1)		0		39

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Pre-tax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in 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
Location of gain/(loss)
Jun 28,
2020 Jun 30,
2019 Jun 28,
2020 Jun 30,
2019
Cash Flow Hedges:
Interest rates $ (8.5) $ 5.3 $ (0.7) $ 1.1 Interest expense
Cross-currency swaps (1.0) (5.8) 1.5 0.1 Interest expense
(6.9) (9.9) Interest income and other, net
Foreign currency - other (14.5) (2.7) — 2.2 Licensed stores revenues
(5.0) 1.4 Product and distribution costs
3.9 —
Interest income and other, net⁽¹⁾
Coffee (13.2) — — — Product and distribution costs
Dairy 8.6 — 4.1 — Product and distribution costs
(1.1) —
Interest income and other, net⁽¹⁾
Net Investment Hedges:
Cross-currency swaps (7.3) — 2.9 — Interest expense
Foreign currency debt (17.3) (21.1) — —
⁽¹⁾As a result of the global COVID-19 impacts, Starbucks discontinued cash flow hedges during the quarter ended June 28, 2020.
Three Quarters Ended
Gains/(Losses)
Recognized in
OCI Before Reclassifications Gains/(Losses) Reclassified from
AOCI to Earnings Location of gain/(loss)
Jun 28,
2020 Jun 30,
2019 Jun 28,
2020 Jun 30,
2019
Cash Flow Hedges:
Interest rates $ (129.1) $ (25.3) $ 0.6 $ 3.9 Interest expense
Cross-currency swaps 8.1 (8.4) 0.9 (0.5) Interest expense
(1.1) (19.7) Interest income and other, net
Foreign currency - other 7.6 9.0 4.0 4.9 Licensed stores revenues
(7.7) 3.6 Product and distribution costs
6.1 —
Interest income and other, net⁽¹⁾
Coffee (14.3) — — (0.3) Product and distribution costs
Dairy 3.6 — 4.8 — Product and distribution costs
(1.7) —
Interest income and other, net⁽¹⁾
Net Investment Hedges:
Cross-currency swaps 61.4 — 10.1 — Interest expense
Foreign currency debt (4.7) (40.1) — —
⁽¹⁾As a result of the global COVID-19 impacts, Starbucks discontinued cash flow hedges during the quarters ended March 29, 2020 and June 28, 2020.

~~Table of Contents~~


	Quarter Ended
	Gains/(Losses) Recognized in OCI Before Reclassifications			Gains/(Losses) Reclassified from AOCI to Earnings				Location of gain/(loss)
		Dec 27, 2020		Dec 29, 2019		Dec 27, 2020				Dec 29, 2019
Cash Flow Hedges:
Coffee		$	12.0	$	11.0	$	0.7	$	0		Product and distribution costs
Cross-currency swaps		(3.4)		6.2		1.0		(0.2)			Interest expense
						(4.8)		5.6			Interest income and other, net
Dairy		2.5		(0.1)		2.6		0			Product and distribution costs
Foreign currency - other		(25.9)		(4.7)		0		1.7			Licensed stores revenues
						0		(0.3)			Product and distribution costs

Interest rates		22.5		20.0		(0.6)		0.8			Interest expense
Net Investment Hedges:
Cross-currency swaps		(16.5)		10.7		3.2		3.3			Interest expense

Foreign currency debt		(13.7)		13.0		0		0

Pre-tax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related fair value hedged item recognized in earnings (in millions):


			Gains/(Losses) Recognized in Earnings																					Gains/(Losses) Recognized in Earnings
		Location of gain/(loss) recognized in earnings	Quarter Ended									Three Quarters Ended								Location of gain/(loss) recognized in earnings			Quarter Ended
					Jun 28, 2020			Jun 30, 2019			Jun 28, 2020			Jun 30, 2019		Location of gain/(loss) recognized in earnings		Dec 27, 2020			Dec 29, 2019
Non-Designated Derivatives:	Non-Designated Derivatives:													Non-Designated Derivatives:
Diesel fuel and other commodities														Diesel fuel and other commodities	Interest income and other, net			$	1.2		$	0.9
Foreign currency - other	Foreign currency - other	Interest income and other, net	$	(5.0)		$	(2.3)		$	3.3		$	(9.7)	Foreign currency - other	Interest income and other, net		(0.8)			3.4

Dairy		Interest income and other, net	(1.7)			0.3			(1.6)			(1.9)
Diesel fuel and other commodities		Interest income and other, net	(0.8)			(0.8)			(8.7)			(5.5)
Fair Value Hedges:	Fair Value Hedges:													Fair Value Hedges:
Interest rate swap	Interest rate swap	Interest expense	3.9			15.0			28.3			41.2		Interest rate swap	Interest expense		0.4			(10.9)
Long-term debt (hedged item)	Long-term debt (hedged item)	Interest expense	(3.1)			(16.3)			(26.4)			(44.8)		Long-term debt (hedged item)	Interest expense		2.9			4.2

Notional amounts of outstanding derivative contracts (in millions):


		Jun 28, 2020		Sep 29, 2019			Dec 27, 2020		Sep 27, 2020
Interest rate swap		$	1,750	$	1,500
Coffee						Coffee	$	109	$	63
Cross-currency swaps	Cross-currency swaps	887		341		Cross-currency swaps	854		870
Foreign currency - other		1,206		1,125
Coffee		84		52
Dairy	Dairy	21		1		Dairy	44		61
Diesel fuel and other commodities	Diesel fuel and other commodities	12		17		Diesel fuel and other commodities	11		5
Foreign currency - other						Foreign currency - other	1,000		1,140
Interest rate swap						Interest rate swap	1,750		1,750

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Fair value of outstanding derivative contracts (in millions) including the location of the asset and/or liability on the consolidated balance sheets:


				Derivative Assets															Derivative Assets
		Balance Sheet Location		Jun 28, 2020			Sep 29, 2019			Balance Sheet Location				Dec 27, 2020					Sep 27, 2020
Designated Derivative Instruments:	Designated Derivative Instruments:								Designated Derivative Instruments:
Interest rates		Other long-term assets		$	—		$	0.1
Coffee									Coffee	Prepaid expenses and other current assets				$	13.6				$	2.6

Cross-currency swaps	Cross-currency swaps	Other long-term assets		49.2			0.2		Cross-currency swaps	Other long-term assets				17.3					37.7
Dairy									Dairy	Prepaid expenses and other current assets				1.7					2.1

Foreign currency - other	Foreign currency - other	Prepaid expenses and other current assets		15.1			11.4		Foreign currency - other	Prepaid expenses and other current assets				1.8					8.6
			Other long-term assets			9.6					Foreign currency - other	Other long-term assets					0.3					3.8
Coffee		Prepaid expenses and other current assets		0.2			—

Dairy		Prepaid expenses and other current assets		1.9			—

Interest rate swap	Interest rate swap	Other long-term assets		39.1			18.2		Interest rate swap	Other long-term assets				35.9					45.8
Non-designated Derivative Instruments:	Non-designated Derivative Instruments:								Non-designated Derivative Instruments:
Diesel fuel and other commodities									Diesel fuel and other commodities	Prepaid expenses and other current assets				0.9					0
Foreign currency	Foreign currency	Prepaid expenses and other current assets		3.5			1.0		Foreign currency	Prepaid expenses and other current assets				6.7					2.3

Diesel fuel and other commodities		Prepaid expenses and other current assets		—			0.2

				Derivative Liabilities															Derivative Liabilities
		Balance Sheet Location		Jun 28, 2020			Sep 29, 2019			Balance Sheet Location				Dec 27, 2020					Sep 27, 2020
Designated Derivative Instruments:	Designated Derivative Instruments:								Designated Derivative Instruments:
Interest rates		Other long-term liabilities		$	72.3		$	2.6
Coffee									Coffee	Accrued liabilities				$	0				$	1.4
										Other long-term liabilities				0					0.1
Cross-currency swaps	Cross-currency swaps	Other long-term liabilities		6.6			9.7		Cross-currency swaps	Other long-term liabilities				9.9					7.3
Dairy									Dairy	Accrued liabilities				1.3					1.4
Foreign currency - other	Foreign currency - other	Accrued liabilities		0.1			0.6		Foreign currency - other	Accrued liabilities				10.3					1.6
			Other long-term liabilities			1.0						Foreign currency - other	Other long-term liabilities					10.7					2.6
Coffee		Accrued liabilities		13.9			1.0
			Other long-term liabilities			0.1			0.1
Dairy		Accrued liabilities		1.3			—
Interest rates									Interest rates	Other long-term liabilities						46.8					69.3

Non-designated Derivative Instruments:	Non-designated Derivative Instruments:								Non-designated Derivative Instruments:
Diesel fuel and other commodities									Diesel fuel and other commodities	Accrued liabilities				0.2					1.7
Foreign currency	Foreign currency	Accrued liabilities		2.1			3.0		Foreign currency	Accrued liabilities				1.4					1.2
										Foreign currency

Diesel fuel and other commodities		Accrued liabilities		3.9			1.1

The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships:


		Carrying amount of hedged item						Cumulative amount of fair value hedging adjustment included in the carrying amount							Carrying amount of hedged item				Cumulative amount of fair value hedging adjustment included in the carrying amount
		Jun 28, 2020		Sep 29, 2019		Jun 28, 2020		Sep 29, 2019			Dec 27, 2020		Sep 27, 2020		Dec 27, 2020		Sep 27, 2020
Location on the balance sheet	Location on the balance sheet									Location on the balance sheet
Long-term debt	Long-term debt	$	788.1	$	761.8	$	38.1	$	11.8	Long-term debt	$	782.7	$	785.6	$	32.7	$	35.6

Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 1110, Equity.

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Note 4: 3: Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis (in millions):


				Fair Value Measurements at Reporting Date Using													Fair Value Measurements at Reporting Date Using
		Balance at June 28, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Balance at December 27, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	3,965.9	$	3,965.9	$	—	$	—	Cash and cash equivalents	$	5,028.1	$	5,028.1	$	0	$	0
Short-term investments:	Short-term investments:									Short-term investments:
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities

Certificates of deposit										Certificates of deposit	1.6		0		1.6		0
Commercial paper	Commercial paper	37.6		—		37.6		—		Commercial paper	71.8		0		71.8		0
Corporate debt securities	Corporate debt securities	106.0		—		106.0		—		Corporate debt securities	78.5		0		78.5		0
Foreign government obligations		8.5		—		8.5		—

Mortgage and other asset-backed securities	Mortgage and other asset-backed securities	11.8		—		11.8		—		Mortgage and other asset-backed securities	16.7		0		16.7		0
State and local government obligations										State and local government obligations	1.0		0		1.0		0

Certificates of deposit		6.2		—		6.2		—
Total available-for-sale debt securities	Total available-for-sale debt securities	170.1		—		170.1		—		Total available-for-sale debt securities	169.6		0		169.6		0
Marketable equity securities	Marketable equity securities	59.8		59.8		—		—		Marketable equity securities	65.9		65.9		0		0
Total short-term investments	Total short-term investments	229.9		59.8		170.1		—		Total short-term investments	235.5		65.9		169.6		0
Prepaid expenses and other current assets:	Prepaid expenses and other current assets:									Prepaid expenses and other current assets:
Derivative assets	Derivative assets	20.7		0.3		20.4		—		Derivative assets	24.7		14.6		10.1		0
Long-term investments:	Long-term investments:									Long-term investments:
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities

Corporate debt securities		90.6		—		90.6		—
Auction rate securities	Auction rate securities	5.7		—		—		5.7		Auction rate securities	5.7		0		0		5.7

Corporate debt securities										Corporate debt securities	82.6		0		82.6		0

Mortgage and other asset-backed securities										Mortgage and other asset-backed securities	9.8		0		9.8		0
State and local government obligations										State and local government obligations	2.6		0		2.6		0
U.S. government treasury securities	U.S. government treasury securities	98.9		98.9		—		—		U.S. government treasury securities	90.2		90.2		0		0
State and local government obligations		3.6		—		3.6		—
Mortgage and other asset-backed securities		24.6		—		24.6		—

Total long-term investments	Total long-term investments	223.4		98.9		118.8		5.7		Total long-term investments	190.9		90.2		95.0		5.7
Other long-term assets:	Other long-term assets:									Other long-term assets:
Derivative assets	Derivative assets	97.9		—		97.9		—		Derivative assets	53.5		0		53.5		0
Total assets	Total assets	$	4,537.8	$	4,124.9	$	407.2	$	5.7	Total assets	$	5,532.7	$	5,198.8	$	328.2	$	5.7
Liabilities:	Liabilities:									Liabilities:
Accrued liabilities:	Accrued liabilities:									Accrued liabilities:
Derivative liabilities	Derivative liabilities	$	21.3	$	14.1	$	7.2	$	—	Derivative liabilities	$	13.2	$	0.8	$	12.4	$	0
Other long-term liabilities:	Other long-term liabilities:									Other long-term liabilities:
Derivative liabilities	Derivative liabilities	80.0		0.1		79.9		—		Derivative liabilities	67.4		0		67.4		0
Total liabilities	Total liabilities	$	101.3	$	14.2	$	87.1	$	—	Total liabilities	$	80.6	$	0.8	$	79.8	$	0

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				Fair Value Measurements at Reporting Date Using													Fair Value Measurements at Reporting Date Using
		Balance at September 29, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Balance at September 27, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,686.6	$	2,686.6	$	—	$	—	Cash and cash equivalents	$	4,350.9	$	4,350.9	$	0	$	0
Short-term investments:	Short-term investments:									Short-term investments:
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
Certificates of deposit										Certificates of deposit	1.6		0		1.6		0
Commercial paper	Commercial paper	0.5		—		0.5		—		Commercial paper	66.8		0		66.8		0
Corporate debt securities	Corporate debt securities	3.5		—		3.5		—		Corporate debt securities	123.6		0		123.6		0

Foreign government obligations										Foreign government obligations	8.5		0		8.5		0
Mortgage and other asset-backed securities										Mortgage and other asset-backed securities	15.8		0		15.8		0
Total available-for-sale debt securities	Total available-for-sale debt securities	4.0		—		4.0		—		Total available-for-sale debt securities	216.3		0		216.3		0
Marketable equity securities	Marketable equity securities	66.5		66.5		—		—		Marketable equity securities	64.9		64.9		0		0
Total short-term investments	Total short-term investments	70.5		66.5		4.0		—		Total short-term investments	281.2		64.9		216.3		0
Prepaid expenses and other current assets:	Prepaid expenses and other current assets:									Prepaid expenses and other current assets:
Derivative assets	Derivative assets	12.6		—		12.6		—		Derivative assets	15.6		3.6		12.0		0
Long-term investments:	Long-term investments:									Long-term investments:
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities

Corporate debt securities		101.2		—		101.2		—
Auction rate securities	Auction rate securities	5.8		—		—		5.8		Auction rate securities	5.7		0		0		5.7

Corporate debt securities										Corporate debt securities	82.6		0		82.6		0

Mortgage and other asset-backed securities										Mortgage and other asset-backed securities	19.3		0		19.3		0
State and local government obligations										State and local government obligations	3.6		0		3.6		0
U.S. government treasury securities	U.S. government treasury securities	106.5		106.5		—		—		U.S. government treasury securities	94.9		94.9		0		0
State and local government obligations		4.9		—		4.9		—
Mortgage and other asset-backed		1.6		—		1.6		—

Total long-term investments	Total long-term investments	220.0		106.5		107.7		5.8		Total long-term investments	206.1		94.9		105.5		5.7
Other long-term assets:	Other long-term assets:									Other long-term assets:
Derivative assets	Derivative assets	26.3		—		26.3		—		Derivative assets	87.3		0		87.3		0
Total assets	Total assets	$	3,016.0	$	2,859.6	$	150.6	$	5.8	Total assets	$	4,941.1	$	4,514.3	$	421.1	$	5.7
Liabilities:	Liabilities:									Liabilities:
Accrued liabilities:	Accrued liabilities:									Accrued liabilities:
Derivative liabilities	Derivative liabilities	$	5.7	$	1.1	$	4.6	$	—	Derivative liabilities	$	7.3	$	1.9	$	5.4	$	0
Other long-term liabilities:	Other long-term liabilities:									Other long-term liabilities:
Derivative liabilities	Derivative liabilities	12.5		—		12.5		—		Derivative liabilities	79.3		0.1		79.2		0
Total liabilities	Total liabilities	$	18.2	$	1.1	$	17.1	$	—	Total liabilities	$	86.6	$	2.0	$	84.6	$	0

There were no material 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 available-for-sale debt securities and marketable equity securities were not material as of ~~June 28,~~December 27, 2020 and September ~~29, 2019.~~27, 2020.

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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, ROU assets, goodwill and other intangible assets and other assets. These assets are measured at fair value if determined to be impaired. During our first quarter of fiscal ~~third quarter,~~2021, we recorded asset impairment charges, primarily related to restructuring efforts for our North America store ~~assets as discussed in~~portfolio. See Note 1, Summary of Significant Accounting ~~Policies. Also see~~ Policies, for further discussion.~~Note 7, Other Intangible Assets and Goodwill.~~

~~Table of Contents~~

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 87, Debt. There were no material fair value adjustments during the ~~three~~ quarters ended ~~June 28,~~December 27, 2020 and ~~June 30,~~December 29, 2019.

Note 5: 4: Inventories (in millions):


		Jun 28, 2020		Sep 29, 2019			Dec 27, 2020		Sep 27, 2020
Coffee:	Coffee:					Coffee:
Unroasted	Unroasted	$	757.5	$	656.5	Unroasted	$	625.8	$	664.7
Roasted	Roasted	214.3		276.5		Roasted	226.9		223.5
Other merchandise held for sale	Other merchandise held for sale	268.8		288.0		Other merchandise held for sale	282.0		293.9
Packaging and other supplies	Packaging and other supplies	343.2		308.4		Packaging and other supplies	336.8		369.3
Total	Total	$	1,583.8	$	1,529.4	Total	$	1,471.5	$	1,551.4

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

As of ~~June 28,~~December 27, 2020, we had committed to purchasing green coffee totaling ~~$725~~$809 million under fixed-price contracts and an estimated ~~$384~~$554 million under price-to-be-fixed contracts. We expect to take physical delivery for these contracts. A portion of our price-to-be-fixed contracts are effectively fixed through the use of futures. ~~See~~ ~~Note 3, Derivative Financial Instruments, for further discussion.~~ 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 and continuous monitoring, the risk of non-delivery on these purchase commitments is remote.

During our fiscal second quarter, we wrote off approximately $50 million of inventory that was expiring or expected to expire due to COVID-19 related store closures, primarily perishable food and beverage ingredients located at our stores, distribution centers and suppliers. We did not record significant write-offs related to COVID-19 during the third fiscal quarter.

Note 6: 5: Supplemental Balance Sheet and Statement of Earnings Information ~~(in~~(in millions):

Prepaid Expenses and Other Current Assets

Jun 28, 2020 Sep 29, 2019
Income tax receivable $ 429.8 $ 141.1
Government subsidies receivable 214.0 —
Other prepaid expenses and current assets 276.5 347.1
Total prepaid expenses and current assets $ 920.3 $ 488.2

~~Property, Plant and Equipment, net~~

Jun 28, 2020 Sep 29, 2019
Land $ 46.8 $ 46.8
Buildings 582.9 691.5
Leasehold improvements 8,210.3 7,948.6
Store equipment 2,765.9 2,659.5
Roasting equipment 789.1 769.6
Furniture, fixtures and other 1,771.0 1,799.0
Work in progress 398.9 358.5
Property, plant and equipment, gross 14,564.9 14,273.5
Accumulated depreciation (8,269.3) (7,841.8)
Property, plant and equipment, net $ 6,295.6 $ 6,431.7


	Dec 27, 2020		Sep 27, 2020
Income tax receivable	$	332.6	$	356.9
Government subsidies receivable	149.3		155.1
Other prepaid expenses and current assets	252.5		227.5
Total prepaid expenses and current assets	$	734.4	$	739.5

2016

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Property, Plant and Equipment, net


	Dec 27, 2020		Sep 27, 2020
Land	$	46.2	$	46.0
Buildings	597.4		586.8
Leasehold improvements	8,231.7		8,262.6
Store equipment	2,817.0		2,800.3
Roasting equipment	805.6		796.6
Furniture, fixtures and other	1,274.7		1,285.7
Work in progress	335.8		377.3
Property, plant and equipment, gross	14,108.4		14,155.3
Accumulated depreciation	(7,930.5)		(7,913.9)
Property, plant and equipment, net	$	6,177.9	$	6,241.4

Accrued Liabilities


		Jun 28, 2020		Sep 29, 2019			Dec 27, 2020		Sep 27, 2020
Accrued occupancy costs	Accrued occupancy costs	$	68.2	$	176.9	Accrued occupancy costs	$	79.9	$	76.9
Accrued dividends payable	Accrued dividends payable	479.2		485.7		Accrued dividends payable	529.7		0
Accrued capital and other operating expenditures	Accrued capital and other operating expenditures	610.1		703.9		Accrued capital and other operating expenditures	629.2		677.2
Self-insurance reserves	Self-insurance reserves	238.2		210.5		Self-insurance reserves	221.2		243.9
Accrued business taxes	Accrued business taxes	116.0		176.7		Accrued business taxes	156.9		162.7
Total accrued liabilities	Total accrued liabilities	$	1,511.7	$	1,753.7	Total accrued liabilities	$	1,616.9	$	1,160.7

Store Operating Expenses


		Quarter Ended						Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
Wages and benefits	Wages and benefits	$	1,477.7	$	1,500.3	$	4,683.7	$	4,395.8	Wages and benefits	$	1,606.2	$	1,598.0
Occupancy costs	Occupancy costs	555.5		611.6		1,768.1		1,791.0		Occupancy costs	628.1		618.7
Other expenses	Other expenses	504.6		531.3		1,628.9		1,597.4		Other expenses	633.0		604.8
Total store operating expenses	Total store operating expenses	$	2,537.8	$	2,643.2	$	8,080.7	$	7,784.2	Total store operating expenses	$	2,867.3	$	2,821.5

Note 7: 6: Other Intangible Assets and Goodwill

During the third quarter of fiscal 2020, we completed our annual goodwill impairment analysis. The results of our analysis indicated significant excess fair values over carrying values across the different reporting units, and therefore no goodwill impairment was recorded. Due to changes in branding and marketing strategy, certain indefinite-lived intangible assets became definite-lived. As a result, approximately $105.5 million was reclassified primarily into Trade names, trademarks and patents within the Finite-lived intangible assets table below. We estimated the fair values of these assets under an income approach with an average remaining useful life of approximately five years. The analysis indicated that the fair value of one of the assets exceeded its carrying value. As a result, we recorded a charge of $22.1 million to restructuring and impairments on our consolidated statement of earnings during the third quarter of fiscal 2020. For our remaining intangible assets, our analysis did not indicate further impairment.Indefinite-Lived Intangible Assets

~~Indefinite-lived intangible assets~~


(in millions)	Dec 27, 2020		Sep 27, 2020
Trade names, trademarks and patents	$	95.4	$	95.0

(in millions) Jun 28, 2020 Sep 29, 2019
Trade names, trademarks and patents $ 96.6 $ 203.4

~~Finite-lived intangible assets~~

Jun 28, 2020 Sep 29, 2019
(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Acquired and reacquired rights $ 1,083.4 $ (693.5) $ 389.9 $ 1,075.0 $ (537.2) $ 537.8
Acquired trade secrets and processes 27.6 (21.3) 6.3 27.6 (19.2) 8.4
Trade names, trademarks and patents 124.7 (27.2) 97.5 40.6 (22.9) 17.7
Licensing agreements 16.3 (14.1) 2.2 16.2 (12.2) 4.0
Other finite-lived intangible assets 22.2 (15.1) 7.1 22.0 (11.5) 10.5
Total finite-lived intangible assets $ 1,274.2 $ (771.2) $ 503.0 $ 1,181.4 $ (603.0) $ 578.4

Amortization expense for finite-lived intangible assets was $55.9 million and $164.5 million for the quarter and three quarters ended June 28, 2020 and $55.2 million and $178.4 million for the quarter and three quarters ended June 30, 2019, respectively.

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Finite-Lived Intangible Assets


	Dec 27, 2020						Sep 27, 2020
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Acquired and reacquired rights	$	1,157.3	$	(845.3)	$	312.0	$	1,116.1	$	(765.0)	$	351.1
Acquired trade secrets and processes	27.6		(22.7)		4.9		27.6		(22.0)		5.6
Trade names, trademarks and patents	125.1		(37.1)		88.0		124.8		(32.1)		92.7
Licensing agreements	16.9		(15.9)		1.0		16.6		(15.0)		1.6
Other finite-lived intangible assets	23.7		(18.6)		5.1		22.8		(16.7)		6.1
Total finite-lived intangible assets	$	1,350.6	$	(939.6)	$	411.0	$	1,307.9	$	(850.8)	$	457.1

Amortization expense for finite-lived intangible assets was $61.2 million for the quarter ended December 27, 2020 and $54.1 million for the quarter ended December 29, 2019, respectively.

Estimated future amortization expense as of ~~June 28,~~December 27, 2020 (in millions):


Fiscal Year	Fiscal Year	Total		Fiscal Year	Total
2020 (excluding the three quarters ended June 28, 2020)		$	58.2
2021		213.3
2021 (excluding the quarter ended December 27, 2020)				2021 (excluding the quarter ended December 27, 2020)	$	165.4
2022	2022	177.8		2022	190.8
2023	2023	19.5		2023	19.7
2024	2024	18.9		2024	19.1
2025				2025	13.2
Thereafter	Thereafter	15.3		Thereafter	2.8
Total estimated future amortization expense	Total estimated future amortization expense	$	503.0	Total estimated future amortization expense	$	411.0

Goodwill

Changes in the carrying amount of goodwill by reportable operating segment (in millions):

Americas International Channel
Development Corporate and Other Total
Goodwill balance at September 29, 2019 $ 496.7 $ 2,958.4 $ 34.7 $ 1.0 $ 3,490.8
Other⁽¹⁾
(0.8) 20.1 — — 19.3
Goodwill balance at June 28, 2020 $ 495.9 $ 2,978.5 $ 34.7 $ 1.0 $ 3,510.1


	Americas		International		Channel Development		Corporate and Other		Total
Goodwill balance at September 27, 2020	$	496.5	$	3,065.0	$	34.7	$	1.0	$	3,597.2


Other(1)	1.0		108.6		0		0		109.6
Goodwill balance at December 27, 2020	$	497.5	$	3,173.6	$	34.7	$	1.0	$	3,706.8

⁽¹⁾“Other” consists of changes in the goodwill balance resulting from foreign currency translation.

Note 8: 7: Debt

Short-term Debt

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases. As of ~~June 28,~~December 27, 2020, we had ~~$296.5~~$299.7 million of borrowings outstanding under the program, net of unamortized discount, of which athe majority matures in the second quarter of fiscal 2021.

~~During~~Additionally, we hold the ~~second quarter of fiscal 2020, we entered into a new $500 million unsecured 364-day term-loan facility (“the 2020 term-loan facility”), which is~~following Japanese yen-denominated credit facilities that are available for ~~general corporate purposes.~~working capital needs and capital expenditures within our Japanese market:

The 2020 term-loan facility is currently set to mature on March 19, 2021. Borrowings under the term-loan facility are subject to terms defined within the 2020 term-loan facility and will bear interest depending on if the loan is a Eurocurrency Rate Loan or a Base Loan. Eurocurrency Rate Loans will bear interest on the outstanding principal amount equal to the Eurocurrency Rate for such Interest Period plus the applicable margin. Each Base Rate Loan will bear interest on the outstanding principal amount equal to the Base Rate plus the applicable margin. The applicable margin is based on the Company's long-term credit ratings assigned by Moody's and Standard & Poor's rating agencies. The current applicable margin is 1.000% for Eurocurrency Rate Loans and 0.000% (nil) for Base Rate Loans. As of June 28, 2020, we had $500.0 million of borrowings outstanding under this term-loan facility program.

During the third quarter of fiscal 2020, we expanded our ¥1 billion unsecured credit facility to ¥5 billion, or $46.6 million. This facility is currently set to mature on December 31, 2020. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300% or 0.400%, depending on the tranche borrowed. Additionally during the third quarter, we expanded our ¥2 billion unsecured credit facility to•A ¥10 billion, or ~~$93.4 million. This~~$96.5 million, facility is currently set to mature on March 26, 2021. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.

Table of Contents

•A ¥10 billion, or $96.5 million, facility is currently set to mature on October 29, 2021. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.350%.

•A ¥5 billion, or $48.2 million, facility is currently set to mature on December 30, 2021. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400%.

As of ~~June 28,~~December 27, 2020, we had ~~¥15~~¥20 billion , or ~~$140.0~~$192.9 million, of borrowings outstanding under these credit facilities.

~~Table of Contents~~

Long-term Debt

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


		Jun 28, 2020						Sep 29, 2019						Stated Interest Rate		Effective Interest Rate⁽¹⁾			Dec 27, 2020					Sep 27, 2020					Stated Interest Rate	Effective Interest Rate(1)
Issuance	Issuance	Amount		Estimated Fair Value		Amount		Estimated Fair Value										Issuance	Amount	Estimated Fair Value				Amount	Estimated Fair Value
November 2020 notes(2)	November 2020 notes(2)	$	500.0	$	503	$	500.0	$	501	2.200	%	2.228	%	November 2020 notes(2)	$	0	$	0		$	500.0	$	501.5		2.200	%	2.228	%
February 2021 notes	February 2021 notes	500.0		504		500.0		500		2.100	%	2.293	%	February 2021 notes	500.0		500.6			500.0		502.3			2.100	%	2.293	%
February 2021 notes	February 2021 notes	250.0		252		250.0		250		2.100	%	1.600	%	February 2021 notes	250.0		250.3			250.0		251.1			2.100	%	1.600	%
May 2022 notes⁽⁵⁾	May 2022 notes⁽⁵⁾	500.0		506		—		—		1.300	%	1.334	%	May 2022 notes⁽⁵⁾	500.0		506.3			500.0		506.5			1.300	%	1.334	%
June 2022 notes	June 2022 notes	500.0		520		500.0		509		2.700	%	2.819	%	June 2022 notes	500.0		515.0			500.0		517.5			2.700	%	2.819	%
March 2023 notes	March 2023 notes	1,000.0		1,064		1,000.0		1,033		3.100	%	3.107	%	March 2023 notes	1,000.0		1,056.5			1,000.0		1,058.8			3.100	%	3.107	%
October 2023 notes⁽²⁾⁽³⁾	October 2023 notes⁽²⁾⁽³⁾	750.0		819		750.0		798		3.850	%	2.859	%	October 2023 notes⁽²⁾⁽³⁾	750.0		814.0			750.0		817.5			3.850	%	2.859	%
March 2024 notes⁽³⁾⁽⁴⁾	March 2024 notes⁽³⁾⁽⁴⁾	793.0		781		788.3		795		0.372	%	0.462	%	March 2024 notes⁽³⁾⁽⁴⁾	820.1		828.7			806.4		794.4			0.372	%	0.462	%
August 2025 notes	August 2025 notes	1,250.0		1,409		1,250.0		1,351		3.800	%	3.721	%	August 2025 notes	1,250.0		1,416.7			1,250.0		1,414.5			3.800	%	3.721	%
June 2026 notes	June 2026 notes	500.0		533		500.0		502		2.450	%	2.511	%	June 2026 notes	500.0		540.7			500.0		542.6			2.450	%	2.511	%
March 2027 notes⁽⁴⁾	March 2027 notes⁽⁴⁾	500.0		525		—		—		2.000	%	2.058	%	March 2027 notes⁽⁴⁾	500.0		529.0			500.0		528.9			2.000	%	2.058	%
March 2028 notes	March 2028 notes	600.0		677		600.0		644		3.500	%	3.529	%	March 2028 notes	600.0		688.0			600.0		679.5			3.500	%	3.529	%
November 2028 notes	November 2028 notes	750.0		879		750.0		837		4.000	%	3.958	%	November 2028 notes	750.0		888.4			750.0		886.0			4.000	%	3.958	%
August 2029 notes	August 2029 notes	1,000.0		1,136		1,000.0		1,080		3.550	%	3.840	%	August 2029 notes	1,000.0		1,161.1			1,000.0		1,147.1			3.550	%	3.840	%
March 2030 notes⁽⁴⁾	March 2030 notes⁽⁴⁾	750.0		778		—		—		2.250	%	3.084	%	March 2030 notes⁽⁴⁾	750.0		791.6			750.0		778.0			2.250	%	3.084	%
November 2030 notes⁽⁵⁾	November 2030 notes⁽⁵⁾	1,250.0		1,309		—		—		2.550	%	2.582	%	November 2030 notes⁽⁵⁾	1,250.0		1,344.1			1,250.0		1,325.9			2.550	%	2.582	%
June 2045 notes	June 2045 notes	350.0		405		350.0		390		4.300	%	4.348	%	June 2045 notes	350.0		428.9			350.0		412.4			4.300	%	4.348	%
December 2047 notes	December 2047 notes	500.0		543		500.0		518		3.750	%	3.765	%	December 2047 notes	500.0		582.7			500.0		546.6			3.750	%	3.765	%
November 2048 notes	November 2048 notes	1,000.0		1,178		1,000.0		1,160		4.500	%	4.504	%	November 2048 notes	1,000.0		1,287.7			1,000.0		1,222.8			4.500	%	4.504	%
August 2049 notes	August 2049 notes	1,000.0		1,219		1,000.0		1,165		4.450	%	4.447	%	August 2049 notes	1,000.0		1,288.6			1,000.0		1,215.5			4.450	%	4.447	%
March 2050 notes⁽⁴⁾	March 2050 notes⁽⁴⁾	500.0		511		—		—		3.350	%	3.362	%	March 2050 notes⁽⁴⁾	500.0		553.3			500.0		517.1			3.350	%	3.362	%
November 2050 notes⁽⁵⁾	November 2050 notes⁽⁵⁾	1,250.0		1,321		—		—		3.500	%	3.528	%	November 2050 notes⁽⁵⁾	1,250.0		1,436.5			1,250.0		1,332.2			3.500	%	3.528	%
Total	Total	15,993.0		17,372		11,238.3		12,033						Total	15,520.1		17,408.7			16,006.4		17,498.7
Aggregate debt issuance costs and unamortized premium/(discount), net	Aggregate debt issuance costs and unamortized premium/(discount), net	(135.9)				(83.1)								Aggregate debt issuance costs and unamortized premium/(discount), net	(129.3)					(132.5)
Hedge accounting fair value adjustment⁽²⁾⁽³⁾	Hedge accounting fair value adjustment⁽²⁾⁽³⁾	38.1				11.8								Hedge accounting fair value adjustment⁽²⁾⁽³⁾	32.7					35.6
Total	Total	$	15,895.2			$	11,167.0							Total	$	15,423.5				$	15,909.5

⁽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.

⁽²⁾November 2020 notes were repaid in the first quarter of fiscal 2021.

(3)Amount includes the change in fair value due to changes in benchmark interest rates related to our October 2023 notes. Refer to Note 32, Derivative Financial Instruments, for additional information on our interest rate swap designated as a fair value hedge.

⁽³⁾~~Japanese yen-denominated long-term debt.~~

⁽⁴⁾~~Issued in March 2020.~~

⁽⁵⁾~~Issued in May 2020.~~

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(4)Japanese yen-denominated long-term debt.

The following table summarizes our long-term debt maturities as of ~~June 28,~~December 27, 2020 by fiscal year (in millions):


Fiscal Year	Fiscal Year	Total		Fiscal Year	Total

2020		$	—
2021	2021	1,250.0		2021	$	750.0
2022	2022	1,000.0		2022	1,000.0
2023	2023	1,000.0		2023	1,000.0
2024	2024	1,543.0		2024	1,570.1
2025				2025	1,250.0
Thereafter	Thereafter	11,200.0		Thereafter	9,950.0
Total	Total	$	15,993.0	Total	$	15,520.1

Note 9: 8: Leases

~~The following significant~~For the quarter ended December 27, 2020, we recognized accelerated lease ~~accounting policies from our most recent Annual Report on Form 10-K have been updated to reflect the adoption of FASB's new guidance on the recognition and measurement of leases.~~

The majority of our leases are operating leases for our company-operated retail store locations. We also lease, among other things, roasting, distribution and warehouse facilities and office space for corporate administrative purposes. We do not enter into lease transactions with related parties.

We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for all underlying classes of assets.

~~We recognize a~~ right-of-use ~~(“ROU”~~("ROU") asset and lease liability for each operating and finance lease with a contractual term greater than 12 months at the time of lease inception. We do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised.

Our lease liability represents the present value of future lease payments over the lease term. Given our policy election to combine lease and non-lease components, we also consider fixed common area maintenance (“CAM”) part of our fixed future lease payments; therefore, fixed CAM is also included in our lease liability.

We cannot determine the interest rate implicit in each of our leases. Therefore, we use market and term-specific incremental borrowing rates. Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because we do not borrow on a collateralized basis, we consider a combination of factors, including our credit-adjusted risk-free interest rate, the risk profile and funding cost of the specific geographic market of the lease, the lease term and the effect of adjusting the rate to reflect consideration of collateral. Our credit-adjusted risk-free rate takes into consideration interest rates we pay on our unsecured long-term bonds as well as quoted interest rates obtained from financial institutions.

Total lease costs recorded as rent and other occupancy costs include fixed operating lease costs, variable lease costs and short-term lease costs. Most of our real estate leases require we pay certain expenses, such as CAM costs, real estate taxes and other executoryamortization costs of which the fixed portion is included in operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. In addition to the above costs, variable lease costs also include amounts based on a percentage of gross sales in excess of specified levels and are recognized when probable and are not included in determining the present value of our lease liability. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. A significant majority of our leases are related to our company-operated stores, and their related costs are recorded within store operating expenses.

The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs, and any tenant improvement allowances received. For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method. For finance leases, ROU assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term. Interest expense on each finance lease liability is recognized utilizing the effective interest method. ROU assets are tested for impairment in the same manner as long-lived assets. Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required. We received $21.7$29.6 million, ~~in rent concessions for the quarter and three quarters~~

~~Table of Contents~~

~~ended June 28, 2020,~~ which was recorded as a reduction to store operating expenses on our consolidated statement of earnings. Additionally, for the quarter and three quarters ended June 28, 2020, we recorded total lease exit costs of $13.4 million and $17.0 million, respectively, and an immaterial ROU asset impairment charge, which were recordedrecognized within restructuring and impairments on the consolidated statements of earnings.

The components of lease costs (in millions):


		Quarter Ended		Three Quarters Ended			Quarter Ended
		Jun 28, 2020		Jun 28, 2020			Dec 27, 2020		Dec 29, 2019
Operating lease costs⁽¹⁾	Operating lease costs⁽¹⁾	$	363.3	$	1,113.9	Operating lease costs(1)	$	409.4	$	373.1
Variable lease costs	Variable lease costs	184.3		610.2		Variable lease costs	222.4		228.8
Short-term lease costs	Short-term lease costs	8.1		24.7		Short-term lease costs	8.7		8.3
Total lease costs	Total lease costs	$	555.7	$	1,748.8	Total lease costs	$	640.5	$	610.2

⁽¹⁾Operating lease costs ~~includes an~~were net of immaterial ~~amount~~amounts of sublease ~~income.~~income and rent concessions.

The following table includes supplemental information (in millions):


	~~Three Quarters Ended~~
	~~Jun 28, 2020~~
~~Cash paid related to operating lease liabilities~~	$	~~1,089.4~~
~~Operating lease liabilities arising from obtaining ROU assets~~⁽¹⁾	~~770.4~~

	~~Jun 28, 2020~~
~~Weighted-average remaining operating lease term~~	~~8.9 years~~
~~Weighted-average operating lease discount rate~~	~~2.5~~		%

⁽¹⁾~~Excludes the initial impact of adoption. See~~ ~~Note 1, Summary of Significant Accounting Policies for additional information.~~


	Quarter Ended
	Dec 27, 2020			Dec 29, 2019
Cash paid related to operating lease liabilities	$	385.6		$	368.9
Operating lease liabilities arising from obtaining ROU assets	353.8			226.4

	Dec 27, 2020			Dec 29, 2019
Weighted-average remaining operating lease term	8.8 years			9.0 years
Weighted-average operating lease discount rate	2.5		%	2.5		%

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet. ~~Finance~~There were no material finance leases ~~were immaterial~~ as of ~~June 28,~~December 27, 2020.

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Minimum future maturities of operating lease liabilities (in millions):


Fiscal Year	Fiscal Year	Total		Fiscal Year	Total
2020 (excluding the three quarters ended June 28, 2020)		$	374.4
2021		1,468.7
2021 (excluding the quarter ended December 27, 2020)				2021 (excluding the quarter ended December 27, 2020)	$	1,173.9
2022	2022	1,350.1		2022	1,463.3
2023	2023	1,222.0		2023	1,321.2
2024	2024	1,085.8		2024	1,180.3
2025				2025	1,030.6
Thereafter	Thereafter	4,523.1		Thereafter	3,992.3
Total lease payments	Total lease payments	10,024.1		Total lease payments	10,161.6
Less imputed interest	Less imputed interest	(1,133.4)		Less imputed interest	(1,139.5)
Total	Total	$	8,890.7	Total	$	9,022.1

As of ~~June 28,~~December 27, 2020, we have entered into operating leases that have not yet commenced of ~~$681.2~~$723.4 million, primarily related to real estate leases. These leases will commence between fiscal year ~~2020~~2021 and fiscal year ~~2026~~2027 with lease terms ofranging from 3 years to 20 years.

~~Previous Lease Guidance Disclosures~~

~~Rent expense under operating lease agreements under the previous lease guidance, which excludes certain amounts required under the new guidance, for the quarter and three quarters ended June 30, 2019~~ ~~(in millions)~~:

~~Table of Contents~~

Quarter Ended Three Quarters Ended
Jun 30, 2019 Jun 30, 2019
Minimum rent $ 367.6 $ 1,084.6
Contingent rent 57.7 169.7
Total $ 425.3 $ 1,254.3

As previously reported in our 10-K, the minimum future rental payments under non-cancelable operating leases and lease financing arrangements under the previous lease guidance as of September 29, 2019 ~~(in millions)~~:

Fiscal Year Operating Leases Lease Financing Arrangements
2020 $ 1,432.9 $ 5.2
2021 1,342.2 5.2
2022 1,247.4 5.0
2023 1,124.3 5.0
2024 996.4 4.9
Thereafter 4,087.7 42.6
Total minimum lease payments $ 10,230.9 $ 67.9

Note ~~10:~~ 9: Deferred Revenue

Our deferred revenue primarily consists of the ~~up-front~~ prepaid royalty from Nestlé, for which we have continuing performance obligations to support the Global Coffee Alliance, ~~and~~ our unredeemed stored value card liability and unredeemed loyalty points (“Stars”) associated with our loyalty program.

At ~~June 28,~~December 27, 2020, the current and long-term deferred revenue related to the Nestlé ~~up-front payment~~ was ~~$176.5~~$180.3 million and ~~$6.6~~$6.5 billion, respectively. During ~~the quarter and three~~both quarters ended ~~June 28,~~December 27, 2020 and December 29, 2019, we recognized $44.2 million ~~and $132.6 million in current deferred~~of prepaid royalty revenue ~~respectively,~~ related to amortization of the up-front payment. For the quarter and three quarters ended June 30, 2019, we recognized $43.7 million and $131.5 million in current deferred revenue, respectively, related to amortization of the up-front payment.Nestlé.

Changes in our deferred revenue balance related to our stored value cards and loyalty program (in millions):


Quarter Ended ~~June 28,~~December 27, 2020	Total
Stored value cards and loyalty program at ~~March 29,~~September 27, 2020	$	~~1,273.1~~1,280.5
Revenue deferred - card activations, card reloads and Stars earned	~~1,875.4~~3,437.4
Revenue recognized - card and Stars redemptions and breakage	~~(1,842.4)~~(2,980.2)
Other⁽¹⁾	~~3.1~~12.3
Stored value cards and loyalty program at ~~June 28,~~December 27, 2020⁽²⁾	$	~~1,309.2~~1,750.0

~~Three Quarters~~Quarter Ended ~~June 28, 2020~~December 29, 2019	Total
Stored value cards and loyalty program at September 29, 2019	$	1,113.7
Revenue deferred - card activations, card reloads and Stars earned	~~7,836.5~~3,507.5
Revenue recognized - card and Stars redemptions and breakage	~~(7,640.7)~~(3,061.9)
Other⁽¹⁾	~~(0.3)~~1.7
Stored value cards and loyalty program at ~~June 28, 2020~~December 29, 2019⁽²⁾	$	~~1,309.2~~1,561.0

⁽¹⁾“Other” primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.

⁽²⁾~~Approximately $1,226.4~~As of December 27, 2020 and December 29, 2019, approximately $1,623.7 million and $1,460.9 million of ~~this amount is current.~~these amounts were current, respectively.

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Note ~~11:~~ 10: Equity~~Equity~~

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

Quarter Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total
June 28, 2020
Net gains/(losses) in AOCI, beginning of period $ 5.6 $ (64.8) $ 47.8 $ (510.4) $ (521.8)
Net gains/(losses) recognized in OCI before reclassifications 4.0 (22.3) (18.4) 29.0 (7.7)
Net (gains)/losses reclassified from AOCI to earnings (1.7) 3.4 (2.1) — (0.4)
Other comprehensive income/(loss) attributable to Starbucks 2.3 (18.9) (20.5) 29.0 (8.1)
Net gains/(losses) in AOCI, end of period $ 7.9 $ (83.7) $ 27.3 $ (481.4) $ (529.9)
June 30, 2019
Net gains/(losses) in AOCI, beginning of period $ 0.1 $ 4.3 $ 5.5 $ (281.4) $ (271.5)
Net gains/(losses) recognized in OCI before reclassifications 2.9 (2.6) (15.8) (64.9) (80.4)
Net (gains)/losses reclassified from AOCI to earnings 0.2 4.4 — (1.7) 2.9
Other comprehensive income/(loss) attributable to Starbucks 3.1 1.8 (15.8) (66.6) (77.5)
Net gains/(losses) in AOCI, end of period $ 3.2 $ 6.1 $ (10.3) $ (348.0) $ (349.0)
Three Quarters Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total
June 28, 2020
Net gains/(losses) in AOCI, beginning of period $ 3.9 $ 11.0 $ (10.1) $ (508.1) $ (503.3)
Net gains/(losses) recognized in OCI before reclassifications 6.4 (93.2) 42.3 26.7 (17.8)
Net (gains)/losses reclassified from AOCI to earnings (1.7) (4.5) (7.4) — (13.6)
Other comprehensive income/(loss) attributable to Starbucks 4.7 (97.7) 34.9 26.7 (31.4)
Cumulative effect of accounting adoption (0.7) 3.0 2.5 — 4.8
Net gains/(losses) in AOCI, end of period $ 7.9 $ (83.7) $ 27.3 $ (481.4) $ (529.9)
June 30, 2019
Net gains/(losses) in AOCI, beginning of period $ (4.9) $ 17.7 $ 19.6 $ (362.7) $ (330.3)
Net gains/(losses) recognized in OCI before reclassifications 7.5 (18.8) (29.9) 16.4 (24.8)
Net (gains)/losses reclassified from AOCI to earnings 0.6 7.2 — (1.7) 6.1
Other comprehensive income/(loss) attributable to Starbucks 8.1 (11.6) (29.9) 14.7 (18.7)
Net gains/(losses) in AOCI, end of period $ 3.2 $ 6.1 $ (10.3) $ (348.0) $ (349.0)

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Quarter Ended	Available-for-Sale Debt Securities		Cash Flow Hedges		Net Investment Hedges		Translation Adjustment and Other		Total
December 27, 2020
Net gains/(losses) in AOCI, beginning of period	$	5.7	$	(82.1)	$	11.5	$	(299.7)	$	(364.6)
Net gains/(losses) recognized in OCI before reclassifications	(0.4)		4.8		(22.6)		238.7		220.5
Net (gains)/losses reclassified from AOCI to earnings	(1.2)		1.8		(2.4)		0		(1.8)
Other comprehensive income/(loss) attributable to Starbucks	(1.6)		6.6		(25.0)		238.7		218.7


Net gains/(losses) in AOCI, end of period	$	4.1	$	(75.5)	$	(13.5)	$	(61.0)	$	(145.9)

December 29, 2019
Net gains/(losses) in AOCI, beginning of period	$	3.9	$	11.0	$	(10.1)	$	(508.1)	$	(503.3)
Net gains/(losses) recognized in OCI before reclassifications	(0.1)		25.8		17.7		76.1		119.5
Net (gains)/losses reclassified from AOCI to earnings	0.1		(6.1)		(2.4)		0		(8.4)
Other comprehensive income/(loss) attributable to Starbucks	0		19.7		15.3		76.1		111.1

Cumulative effect of accounting adoption	(0.7)		3.0		2.5		0		4.8
Net gains/(losses) in AOCI, end of period	$	3.2	$	33.7	$	7.7	$	(432.0)	$	(387.4)

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


Quarter Ended	Quarter Ended								Quarter Ended
AOCI Components	AOCI Components	Amounts Reclassified from AOCI								Affected Line Item in the Statements of Earnings		AOCI Components	Amounts Reclassified from AOCI			Affected Line Item in the Statements of Earnings
				Jun 28, 2020			Jun 30, 2019						Dec 27, 2020		Dec 29, 2019
Gains/(losses) on available-for-sale debt securities	Gains/(losses) on available-for-sale debt securities	$	2.2		$	0.2		Interest income and other, net	Gains/(losses) on available-for-sale debt securities		$	1.5	$	(0.2)	Interest income and other, net
Gains/(losses) on cash flow hedges	Gains/(losses) on cash flow hedges	(4.2)			(5.1)			Please refer to Note 3, Derivative Financial Instruments for additional information.	Gains/(losses) on cash flow hedges		(1.1)		7.6		Please refer to Note 2, Derivative Financial Instruments for additional information.
Gains/(losses) on net investment hedges									Gains/(losses) on net investment hedges		3.2		3.3		Interest expense

											3.6		10.7		Total before tax
											(1.8)		(2.3)		Tax (expense)/benefit
Gains/(losses) on net investment hedges		2.9			—			Interest expense
Translation adjustment⁽¹⁾

Thailand		—			1.7			Net gain resulting from divestiture of certain operations
											$	1.8	$	8.4	Net of tax
		0.9			(3.2)			Total before tax
		(0.5)			0.3			Tax (expense)/benefit
		$	0.4		$	(2.9)		Net of tax
⁽¹⁾Release of cumulative translation adjustments to earnings upon sale or liquidation of foreign businesses.

Three Quarters Ended
AOCI Components		Amounts Reclassified from AOCI								Affected Line Item in the Statements of Earnings
				Jun 28, 2020			Jun 30, 2019
Gains/(losses) on available-for-sale debt securities		$	2.0		$	0.9		Interest income and other, net
Gains/(losses) on cash flow hedges		5.9			(8.1)			Please refer to Note 3, Derivative Financial Instruments for additional information.

Gains/(losses) on net investment hedges		10.1			—			Interest expense
Translation adjustment⁽¹⁾

Thailand		—			1.7			Net gain resulting from divestiture of certain operations

		18.0			(5.5)			Total before tax
		(4.4)			(0.6)			Tax (expense)/benefit
		$	13.6		$	(6.1)		Net of tax
⁽¹⁾Release of cumulative translation adjustments to earnings upon sale or liquidation of foreign businesses.

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, NaN of which was outstanding as of ~~June 28,~~December 27, 2020.

During the three quarters ended June 28, 2020, we repurchased 20.3 million shares of common stock for $1.7 billion. On March 18, 2020, we announced that our Board of Directors authorized the repurchase of up to an additional 40 million shares under our ongoing share repurchase program. On April 8, 2020, we announced a temporary suspension of our share repurchase program. Repurchases pursuant to this program were last made in mid-March. As of ~~June 28,~~December 27, 2020, 48.9 million shares remained available for repurchase under current authorizations.

~~In September 2018, we entered into accelerated~~ We have suspended our share repurchase ~~agreements (“ASR agreements”) with third-party~~program until we restore certain financial ~~institutions totaling $5.0 billion, effective October 1, 2018. We made a $5.0 billion up-front payment~~leverage targets, which we currently expect to occur in late fiscal 2021.

On September 30, 2020, which was early in the financial institutions and received an initial delivery of 72.0 million shares. In March 2019, we received an additional 4.9 million shares upon the completion of the program based on a volume-weighted average share price (less discount) of $65.03.

In March 2019, we entered into ASR agreements with third-party financial institutions totaling $2.0 billion, effective March 22, 2019. We made a $2.0 billion up-front payment to the financial institutions and received an initial delivery of 22.2 million shares. In June 2019, we received an additional 3.9 million shares upon the completion of the program based on a volume-weighted average share price (less discount) of $76.50.

~~During the third~~first quarter of fiscal ~~2020,~~2021, our Board of Directors ~~declared~~approved a quarterly cash dividend to shareholders of ~~$0.41~~$0.45 per share to be paid on ~~August 21,~~November 27, 2020 to shareholders of record as of the close of business on ~~August 7,~~November 12, 2020. In November 2020, our Board of Directors approved a quarterly cash dividend to shareholders of $0.45 per share to be paid on March 5, 2021 to shareholders of record as of the close of business on February 18, 2021.

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Note ~~12:~~ 11: Employee Stock Plans

As of ~~June 28,~~December 27, 2020, there were ~~46.5~~39.4 million shares of common stock available for issuance pursuant to future equity-based compensation awards and ~~12.0~~11.8 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						Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
Options	Options	$	1.4	$	2.4	$	3.8	$	17.9	Options	$	0.9	$	1.7
Restricted Stock Units (“RSUs”)	Restricted Stock Units (“RSUs”)	40.0		60.9		184.2		237.5		Restricted Stock Units (“RSUs”)	98.4		88.6
Total stock-based compensation expense	Total stock-based compensation expense	$	41.4	$	63.3	$	188.0	$	255.4	Total stock-based compensation expense	$	99.3	$	90.3

Stock option and RSU transactions from September ~~29, 2019~~27, 2020 through ~~June 28,~~December 27, 2020 (in millions):


		Stock Options		RSUs			Stock Options		RSUs
Options outstanding/Nonvested RSUs, September 29, 2019		15.2		8.9
Options outstanding/Nonvested RSUs, September 27, 2020						Options outstanding/Nonvested RSUs, September 27, 2020	9.2		8.3
Granted	Granted	0.1		3.8		Granted	0		3.8
Options exercised/RSUs vested	Options exercised/RSUs vested	(1.8)		(3.4)		Options exercised/RSUs vested	(1.8)		(2.9)
Forfeited/expired	Forfeited/expired	(0.1)		(0.9)		Forfeited/expired	(0.1)		(0.4)
Options outstanding/Nonvested RSUs, June 28, 2020		13.4		8.4
Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of June 28, 2020		$	1.7	$	177.0
Options outstanding/Nonvested RSUs, December 27, 2020						Options outstanding/Nonvested RSUs, December 27, 2020	7.3		8.8
Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 27, 2020						Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 27, 2020	$	0.4	$	309.7

Note ~~13:~~ ~~Income Taxes~~

The effective tax rate for the first three quarters ended June 28, 2020 was 26.3% compared to 19.4% for the same period in fiscal 2019. The increase was primarily due to the valuation allowances recorded against deferred tax assets of certain international jurisdictions (approximately 1,390 basis points). This unfavorable impact was partially offset by the impact of changes in indefinite reinvestment assertions for certain foreign subsidiaries in the first quarter of fiscal 2019 (approximately 220 basis points), release of income tax reserves (approximately 210 basis points) and lower pre-tax earnings including the foreign rate differential on our jurisdictional mix of earnings.

~~Note 14:~~ ~~Earnings/(Loss)~~12: Earnings per Share

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


		Quarter Ended						Three Quarters Ended							Quarter Ended
		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019
Net earnings/(loss) attributable to Starbucks		$	(678.4)	$	1,372.8	$	535.7	$	2,796.4
Net earnings attributable to Starbucks										Net earnings attributable to Starbucks	$	622.2	$	885.7
Weighted average common shares outstanding (for basic calculation)	Weighted average common shares outstanding (for basic calculation)	1,168.5		1,211.0		1,173.6		1,230.8		Weighted average common shares outstanding (for basic calculation)	1,175.0		1,180.4
Dilutive effect of outstanding common stock options and RSUs	Dilutive effect of outstanding common stock options and RSUs	—		12.0		9.1		11.6		Dilutive effect of outstanding common stock options and RSUs	8.0		10.6
Weighted average common and common equivalent shares outstanding (for diluted calculation)	Weighted average common and common equivalent shares outstanding (for diluted calculation)	1,168.5		1,223.0		1,182.7		1,242.4		Weighted average common and common equivalent shares outstanding (for diluted calculation)	1,183.0		1,191.0
Earnings/(loss) per share — basic		$	(0.58)	$	1.13	$	0.46	$	2.27
Earnings/(loss) per share — diluted		$	(0.58)	$	1.12	$	0.45	$	2.25
EPS — basic										EPS — basic	$	0.53	$	0.75
EPS — diluted										EPS — diluted	$	0.53	$	0.74

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, calculated using the treasury stock method. For the three months ended June 28, 2020, the Company had 8.1 million of outstanding stock options and unvested RSUs that could potentially dilute earnings per share in future periods that were excluded from the computation of diluted earnings per share because the effect would have been antidilutive given the net loss during the period. The calculation of dilutive shares outstanding ~~also excludes~~would exclude 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~~be antidilutive. As of ~~June 28,~~December 27, 2020 and ~~June 30,~~December 29, 2019, we had 0 out-of-the-money stock options.

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Note ~~15:~~ 13: Commitments and Contingencies

Legal Proceedings

On April 13, 2010, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and certain other defendants who manufacture, package, distribute or sell brewed coffee. The lawsuit is Council for Education and Research on Toxics v. Starbucks Corporation, et al. On May 9, 2011, the Plaintiff filed an additional lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and additional defendants who manufacture, package, distribute or sell packaged coffee. The lawsuit is Council for Education and Research on Toxics v. Brad Barry LLC, et al.. Both cases have since been consolidated and now include nearly eighty defendants, which constitute the great majority of the coffee industry in California. Plaintiff alleges that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. Plaintiff seeks equitable relief, including

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providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per violation of Proposition 65. The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

The Company, as part of a joint defense group organized to defend against the lawsuit, disputes the claims of the Plaintiff. Acrylamide is not added to coffee but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process. The Company has asserted multiple affirmative defenses. Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants. On September 1, 2015, the trial court issued a final ruling adverse to defendants on all Phase 1 defenses. Trial of the second phase of the case commenced in the fall of 2017. On May 7, 2018, the trial court issued a ruling adverse to defendants on the Phase 2 defense, the Company's last remaining defense to liability. On June 22, 2018, the California Office of Environmental Health Hazard Assessment (OEHHA) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65. The case was set to proceed to a third phase trial on damages, remedies and attorneys' fees on October 15, 2018. However, on October 12, 2018, the California Court of Appeal granted the defendants request for a stay of the Phase 3 trial.

On June 3, 2019, the Office of Administrative Law (OAL) approved the coffee exemption regulation. The regulation became effective on October 1, 2019. On June 24, 2019, the Court of Appeal lifted the stay of the litigation. AAt the status conference ~~before~~on August 25, 2020, the trial judge granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to ~~discuss~~ the ~~motions that each party has~~Plaintiff’s complaint. The Notice of Entry of Judgment from the court was served on October 6, 2020 and the Plaintiff filed ~~has been scheduled for August 10,~~a Notice of Appeal on November 20, 2020. ~~At this stage of the proceedings,~~ Starbucks believes that the likelihood that the Company will ultimately incur a material loss in connection with this litigation is ~~remote.~~less than reasonably possible. Accordingly, no loss contingency was recorded for this matter.

Starbucks is party to various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Note ~~16:~~ 14: Segment Reporting

Segment information is prepared on the same basis that our ceo, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results and makes key operating decisions.

Consolidated revenue mix by product type⁽¹⁾ (in millions):


		Quarter Ended														Three Quarters Ended													Quarter Ended
		Jun 28, 2020						Jun 30, 2019						Jun 28, 2020								Jun 30, 2019						Dec 27, 2020	Dec 29, 2019
Beverage⁽²⁾	Beverage⁽²⁾	$	2,628.8	62	%	$	4,122.1	60	%	$	10,429.1	60	%	$	11,814.2	60	%	Beverage(2)	$	4,251.9	63		%	$	4,260.9	60	%
Food⁽³⁾	Food⁽³⁾	629.2		15	%	1,106.9		16	%	2,760.6		16	%	3,228.0		16	%	Food(3)	1,140.8		17		%	1,162.1		16	%
Other⁽⁴⁾	Other⁽⁴⁾	964.1		23	%	1,594.0		24	%	4,125.2		24	%	4,719.4		24	%	Other(4)	1,356.7		20		%	1,674.1		24	%
Total	Total	$	4,222.1	100	%	$	6,823.0	100	%	$	17,314.9	100	%	$	19,761.6	100	%	Total	$	6,749.4	100		%	$	7,097.1	100	%

⁽¹⁾Certain prior period amounts have been reclassified to conform to current ~~year~~period presentation.

⁽²⁾Beverage represents sales within our company-operated stores.

⁽³⁾Food includes sales within our company-operated stores.

⁽⁴⁾“Other” primarily consists of packaged and single-serve coffees and teas, serveware, royalty and licensing revenues, ~~serveware,~~ beverage-related ingredients and ready-to-drink beverages, among other items.

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

Quarter Ended


		Americas		International		Channel Development		Corporate and Other		Total			Americas		International		Channel Development		Corporate and Other		Total
June 28, 2020
December 27, 2020												December 27, 2020
Total net revenues	Total net revenues	$	2,805.5	$	949.6	$	447.3	$	19.7	$	4,222.1	Total net revenues	$	4,703.2	$	1,654.3	$	371.4	$	20.5	$	6,749.4
Depreciation and amortization expenses	Depreciation and amortization expenses	191.3		128.5		0.3		40.9		361.0		Depreciation and amortization expenses	188.9		140.0		0.2		37.0		366.1
Income from equity investees	Income from equity investees	—		17.4		51.0		—		68.4		Income from equity investees	0		26.3		56.4		0		82.7
Operating income/(loss)	Operating income/(loss)	$	(404.9)	$	(86.0)	$	124.2	$	(337.2)	$	(703.9)	Operating income/(loss)	813.5		274.8		180.8		(355.6)		913.5

June 30, 2019
Total net revenues⁽¹⁾		$	4,681.1	$	1,585.3	$	533.3	$	23.3	$	6,823.0
Depreciation and amortization expenses		175.6		127.7		0.2		39.6		343.1
Income from equity investees		—		27.2		48.8		—		76.0
Operating income/(loss)		$	1,018.7	$	270.2	$	181.9	$	(349.5)	$	1,121.3

Three Quarters Ended
		Americas		International		Channel Development		Corporate and Other		Total
June 28, 2020
December 29, 2019												December 29, 2019
Total net revenues	Total net revenues	$	12,146.3	$	3,655.3	$	1,461.0	$	52.3	$	17,314.9	Total net revenues	$	5,010.9	$	1,571.1	$	494.6	$	20.5	$	7,097.1
Depreciation and amortization expenses	Depreciation and amortization expenses	571.9		385.2		0.9		110.3		1,068.3		Depreciation and amortization expenses	189.2		126.6		0.3		34.9		351.0
Income from equity investees	Income from equity investees	—		73.1		137.2		—		210.3		Income from equity investees	0		30.9		43.0		0		73.9
Operating income/(loss)	Operating income/(loss)	$	1,315.1	$	174.5	$	489.3	$	(975.5)	$	1,003.4	Operating income/(loss)	1,098.8		275.9		175.5		(330.4)		1,219.8

June 30, 2019
Total net revenues⁽¹⁾		$	13,607.6	$	4,618.6	$	1,484.5	$	50.9	$	19,761.6
Depreciation and amortization expenses		515.5		385.0		12.6		119.4		1,032.5
Income from equity investees		—		75.7		130.4		—		206.1
Operating income/(loss)		$	2,843.8	$	701.8	$	506.6	$	(1,057.6)	$	2,994.6
⁽¹⁾Prior period amounts have been restated to reflect the fourth quarter fiscal 2019 realigned Starbucks operating segment reporting structure.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements herein are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, these statements can be identified by the use of words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “outlook,” “plan,” “potential,” “project,” “seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements include statements relating to trends in or expectations relating to the expected effects of our initiatives, strategies and plans, as well as trends in or expectations regarding our financial results and long-term growth model and drivers, the anticipated timing and effects of recovery of our business, the conversion of several market operations to fully licensed models, our plans for streamlining our operations, including store openings, closures, and changes in store formats and models, expanding our licensing to Nestlé of our consumer packaged goods and Foodservice businesses and its effects on our Channel Development segment results, tax rates, business opportunities and expansion, strategic acquisitions, expenses, dividends, share repurchases, commodity costs and our mitigation strategies, liquidity, cash flow from operations, use of cash and cash requirements, investments, borrowing capacity and use of proceeds, repatriation of cash to the U.S., the likelihood of the issuance of additional debt and the applicable interest rate, the impact of the COVID-19 outbreak on our financial results, credits available to us under the CARES Act and other government credits, the expected effects of new accounting pronouncements and the estimated impact of changes in U.S. tax law, including on tax rates, investments funded by these changes, and potential outcomes and effects of legal proceedings. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to: further spread of COVID-19 and related disruptions to our business; regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements, and the duration and efficacy of such restrictions; the potential for a resurgence of COVID-19 infections in a given geographic region after it has hit its “peak”; fluctuations in U.S. and international economies and currencies; our ability to preserve, grow and leverage our brands; the ability of our business partners and third-party providers to fulfill their responsibilities and commitments; potential negative effects of incidents involving food or beverage-borne illnesses, tampering, adulteration, contamination or mislabeling; potential negative effects of material breaches of our information technology systems to the extent we experience a material breach; material failures of our information technology systems; costs associated with, and the successful execution of, the Company’s initiatives and plans, including the ~~integration of the East China business and the~~ successful expansion of our Global Coffee Alliance with Nestlé; our ability to obtain financing on acceptable terms; the acceptance of the Company’s products by our customers, evolving consumer preferences and tastes and changes in consumer spending behavior; changes in the availability and cost of labor; the impact of competition; inherent risks of operating a global business; the prices and availability of coffee, dairy and other raw materials; the effect of legal proceedings; the effects of changes in tax laws and related guidance and regulations that may be implemented and other risks detailed in our filings with the SEC, including in Part I Item IA “Risk Factors” in the ~~10-K and in the 10-Q filed April 28, 2020.~~10-K.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the 10-K.

Introduction and Overview

Starbucks is the premier coffee roaster and retailer of specialty coffee with operations in 83 markets around the world. As of ~~June 28,~~December 27, 2020, Starbucks had over ~~32,000~~32,900 company-operated and licensed stores, an increase of 5%4% from the prior year. Additionally, we sell a variety of consumer-packaged goods, or CPG, primarily through the Global Coffee Alliance established with Nestlé and other partnerships and joint ventures. Our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales and margin management. Comparable store sales represent company-operated stores open for 13 months or longer, and exclude the impact of foreign currency translation. Stores that are temporarily closed or operating at reduced hours due to the COVID-19 outbreak remain in comparable store sales while stores identified for permanent closure have been removed. During the quarter ended ~~June 28,~~December 27, 2020, our global comparable store sales declined ~~40%~~5%, including the negative impacts of COVID-19.

We have three reportable operating segments: Americas, International and Channel Development. Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

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Our fiscal year ends on the Sunday closest to September 30. Our 2021 fiscal year includes 53 weeks, with the 53rd week falling in the fourth fiscal quarter, while fiscal year 2020 included 52 weeks. All references to store counts, including data for new store openings, are reported net of store closures, unless otherwise noted.

COVID-19 Update

Starbucks results for the first quarter of fiscal 2021 reflect continued recovery from the effects of the COVID-19 pandemic. The ~~novel coronavirus, known as~~sequential improvements in our quarterly results demonstrate the ~~global pandemic COVID-19, was~~resilience of our business model and the strength of our brand. Consolidated net revenues declined 5% to $6.7 billion in first ~~identified~~quarter of fiscal 2021 compared to $7.1 billion in ~~December 2019.~~ ~~In response to~~ the ~~outbreak, we temporarily closed a significant number~~first quarter of fiscal 2020, driven primarily by reduced customer traffic, modified business operations, reduced store operating hours and temporary closures of our company-operated and licensed stores. As of December 27, 2020, nearly all of our company-operated and licensed stores ~~and modified~~were re-opened; however, many were operating at less than full capacity.

For the ~~operation and business hours~~Americas segment, comparable store sales declined by 6% for ~~stores that remained open in~~ the ~~second~~first quarter of fiscal ~~2020. By prioritizing the health~~2021, primarily due to reduced customer traffic, temporary store closures and ~~safety~~modified store operations. As of December 27, 2020, approximately 40% of our ~~partners and customers, we gradually re-opened~~U.S. company-operated stores offered limited seating. Our business in ~~China~~the U.S. continued its steady recovery, with a 5% decline in ~~late second fiscal quarter and in other markets during the third fiscal quarter under modified operations to meet public health guidelines and evolving customer behaviors and expectations.~~

~~Comparable~~comparable store sales for the ~~Americas segment declined by 41% during the third~~first quarter of fiscal 2021 compared to declines of 9% and 40% for the fourth and third fiscal quarters of 2020, ~~due~~respectively. We continued to ~~temporary store closures, reduced customer traffic and limitations of modified operations. Most stores were re-opened beginning in early May~~incur incremental costs attributable to COVID-19, including catastrophe pay programs for this segment, with approximately 96% of the company-operated stores and over 80% of licensed stores open as of June 28, 2020. We achieved notable improvements in comparable store sales as the quarter progressed.

~~To help protect our partners’ health and welfare, we paid all of our U.S. and Canada~~ company-operated store partners who were either unable or uncomfortable working in a retail environment through early May. Partners who were able to work during this period received a temporary wage increase as a recognition of their service. The incremental salaries and wages incurred(employees). These were partially offset by qualified tax credits provided by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and the Canada Emergency Wage Subsidy (“CEWS”). AsIn fiscal year 2020, we ~~began re-opening stores, we realigned labor schedules and hours due to reduced customer traffic and demand, which required~~announced a portion of our retail store partners to be furloughed or separated from the Company and resulted in additional benefit payments to impacted partners. Due to the extended store closures and changing customer behaviors, the Company accelerated plansplan to optimize our Americas store portfolio, primarily in ~~U.S. urban~~dense, metropolitan markets, by blending store formats to better cater to changing customer tastes and ~~restructure our company-operated business in Canada, announcing~~preferences. During the ~~expected closure~~first quarter of ~~up to 400 incremental~~fiscal 2021, we closed approximately 170 stores in the U.S. and Canada, and we expect to close an additional 500 stores in those markets primarily over the next 189 to 12 months ~~and up~~ to ~~200 incremental stores in Canada over the next two years.~~complete our restructuring efforts. Costs incurred related to the restructuring efforts are recorded as restructuring and impairments on our consolidated statement of earnings ~~which~~and will continue ~~in future quarters in accordance with the anticipated timeline of store closures. Our licensed business in the Americas segment was also impacted by the outbreak during the fiscal quarter with many~~to be recorded as stores ~~closed temporarily during the quarter, although most licensed stores have since been re-opened.~~are identified for closure and are eventually closed.

For the International segment, comparable store sales declined ~~37% during~~3% for the ~~third~~first quarter of fiscal ~~2020, reflecting the temporary closures and~~2021, primarily due to modifications of store operations atin our our company-operated international markets. ~~Due to the early onset of the virus and subsequent control of the outbreak~~Our business in China ~~we began re-opening stores during~~has substantially recovered. Comparable store sales increased 5%, inclusive of a nearly 5% benefit from the ~~latter part of fiscal second quarter while our company-operated markets~~temporary VAT exemption ending in ~~Japan~~December 2020. The China market continued to demonstrate upward momentum in sales and ~~EMEA began re-opening stores during the middle of fiscal third quarter.~~profitability. As of ~~June 28,~~December 27, 2020, nearly all company-operated stores within the International segment were ~~open in these markets.~~open. Most of our International licensed stores ~~have~~were also ~~re-opened. To support~~open at the end of the first quarter of fiscal 2021.

Net revenues for our ~~international licensees, we extended more flexible development and financial terms, including waiving royalty payments during the fiscal third quarter.~~

~~The~~ Channel Development segment ~~was not materially impacted by COVID-19 during the fiscal third quarter as a result of at-home coffee offerings offsetting softness in the Foodservice channel. The revenue decline~~declined $123 million, or 25%, when compared with the ~~same~~first quarter ~~in the prior year~~of fiscal 2020. This was largely due to the transition of certain single-serve product activities to Nestlé beginning in the fourth quarter of fiscal 2020 and lapping Global Coffee Alliance transition-related ~~activities, including higher inventory sales~~activities. Also contributing were lower Global Coffee Alliance revenues, primarily driven by the Foodservice business, which experienced softening due to COVID-19. Our Channel Development segment continues to grow category share as customers adjust to their at-home routines.

We continue to invest in technologies and innovations to elevate the ~~prior year as Nestlé prepared~~customer and partner experience and to ~~fulfill customer orders.~~

~~Based~~drive long-term growth. Absent significant COVID-19 relapses or global economic disruptions, and based on the current trend of our retail business recovery and our focused efforts to expand contactless customer experiences, enhance digital capabilities and drive beverage innovation, we ~~expect continued improvement in comparable store sales and operating margin in our fiscal fourth quarter. Absent significant COVID-19 relapses,~~believe we ~~expect~~are well positioned to ~~return~~regain the positive business momentum we had demonstrated prior to ~~profitability in~~ the ~~fourth quarter.~~pandemic.

Comparable Store Sales

Starbucks comparable store sales for the ~~third~~first quarter of fiscal ~~2020:~~2021:


		Quarter Ended Jun 28, 2020					Three Quarters Ended Jun 28, 2020					Quarter Ended Dec 27, 2020
		Sales Growth	Change in Transactions	Change in Ticket	Sales Growth	Change in Transactions	Change in Ticket		Change in Comparable Store Sales	Change in Transactions	Change in Ticket
Consolidated	Consolidated	(40)%	(51)%	23%	(15)%	(21)%	8%	Consolidated	(5)%	(19)%	17%
Americas	Americas	(41)%	(53)%	27%	(13)%	(20)%	9%	Americas	(6)%	(21)%	20%
International	International	(37)%	(44)%	13%	(23)%	(26)%	4%	International	(3)%	(10)%	8%

The above comparable store sales for the quarter ~~and three quarters~~ ended ~~June 28,~~December 27, 2020 decreased primarily due to reduced customer traffic, temporary store closures and stores with modified operations and business hours as a result of COVID-19.

Refer to our Quarterly Store Data, also included in Item 2 of Part I of this 10-Q, for additional information on our company operated and licensed store portfolio.

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Results of Operations (in millions)

Revenues


		Quarter Ended														Three Quarters Ended											Quarter Ended
		Jun 28, 2020		Jun 30, 2019		$ Change		% Change		Jun 28, 2020		Jun 30, 2019		$ Change		% Change			Dec 27, 2020		Dec 29, 2019		$ Change		% Change
Company-operated stores	Company-operated stores	$	3,444.4	$	5,535.0	$	(2,090.6)	(37.8)	%	$	13,991.0	$	16,064.3	$	(2,073.3)	(12.9)	%	Company-operated stores	$	5,726.5	$	5,780.7	$	(54.2)	(0.9)	%
Licensed stores	Licensed stores	300.5		725.0		(424.5)		(58.6)		1,782.4		2,140.3		(357.9)		(16.7)		Licensed stores	613.8		792.0		(178.2)		(22.5)
Other	Other	477.2		563.0		(85.8)		(15.2)		1,541.5		1,557.0		(15.5)		(1.0)		Other	409.1		524.4		(115.3)		(22.0)
Total net revenues	Total net revenues	$	4,222.1	$	6,823.0	$	(2,600.9)	(38.1)	%	$	17,314.9	$	19,761.6	$	(2,446.7)	(12.4)	%	Total net revenues	$	6,749.4	$	7,097.1	$	(347.7)	(4.9)	%

~~Quarter~~For the quarter ended ~~June 28,~~December 27, 2020 compared with the quarter ended ~~June 30,~~December 29, 2019

Total net revenues for the ~~third~~first quarter of fiscal ~~2020~~2021 decreased ~~$2,601~~$348 million. Company-operated stores revenue declined $54 million, ~~primarily due to decreased revenues from company-operated stores ($2,091 million). The decline in company-operated stores revenues was due to~~reflecting a ~~40%~~5% decrease in comparable store sales ($~~2,122~~279 million)~~, primarily driven~~ attributed to a 19% decrease in transactions partially offset by a ~~51% decrease~~17% increase in ~~transactions. Also contributing to the~~average ticket. This decrease was ~~the conversion of our retail business in Thailand to a fully licensed market during fiscal 2019 ($37 million). Partially offsetting these decreases were the incremental revenues from 770~~partially offset by 667 net new Starbucks^®company-operated ~~store openings,~~stores, or a 5%4% increase, over the past 12 months ($~~128~~170 million) and favorable foreign currency translation ($69 million).

Licensed stores revenue decreased ~~$425~~$178 million, primarily driven by lower product and equipment sales to and royalty revenues from our ~~licensees ($420 million).~~licensees.

Other revenues decreased ~~$86~~$115 million, primarily due to ~~lapping of higher product sales to Nestlé in prior year related to transitioning activities of~~ the ~~Global Coffee Alliance.~~

~~Three quarters ended June 28, 2020 compared with three quarters ended June 30, 2019~~

Total net revenues for the first three quarters of fiscal 2020 decreased $2,447 million, primarily due to decreased revenues from company-operated stores ($2,073 million). The decline in company-operated store revenues was due to a 15% decrease in comparable store sales ($2,350 million), primarily driven by a 21% decrease in transactions. Also contributing to the decrease were the conversions of our retail businesses in Thailand, France and the Netherlands to fully licensed markets during fiscal 2019 ($204 million). Partially offsetting these decreases were the incremental revenues from 770 net new Starbucks^® ~~company-operated store openings, or a 5% increase, over the past 12 months ($526 million).~~

Licensed stores revenue decline also contributed to the decrease in total net revenues ($358 million), driven by lower product and royalty revenues from our licensees ($351 million). The decrease was partially offset by the conversions of our retail businesses in Thailand, France and the Netherlands to fully licensed markets ($25 million).

~~Other revenues decreased $16 million, primarily due to lapping prior year product sales related to transitioning activities of the Global Coffee Alliance and the Tazo brand~~ transition ~~agreement, partially offset by the expansion of the Global Coffee Alliance, including the benefit related to the transfer~~ of certain single-serve product activities to Nestlé ~~beginning~~and lapping of transition activities related to the Global Coffee Alliance in the ~~second quarter of fiscal 2020.~~

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prior year. Also contributing were lower Global Coffee Alliance revenues, mainly driven by the Foodservice business, which experienced softening due to COVID-19.

Operating Expenses


		Quarter Ended																								Three Quarters Ended																		Quarter Ended
		Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020				Jun 30, 2019				Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020				Jun 30, 2019			Dec 27, 2020		Dec 29, 2019		$ Change		Dec 27, 2020				Dec 29, 2019
								As a % of Total Net Revenues																		As a % of Total Net Revenues																	As a % of Total Net Revenues
Product and distribution costs	Product and distribution costs	$	1,484.0	$	2,199.6	$	(715.6)	35.1	%			32.2	%			$	5,718.2	$	6,387.4	$	(669.2)	33.0	%			32.3	%	Product and distribution costs	$	2,049.1	$	2,236.4	$	(187.3)	30.4	%			31.5	%
Store operating expenses	Store operating expenses	2,537.8		2,643.2		(105.4)		60.1				38.7				8,080.7		7,784.2		296.5		46.7				39.4		Store operating expenses	2,867.3		2,821.5		45.8		42.5				39.8
Other operating expenses	Other operating expenses	133.6		94.4		39.2		3.2				1.4				330.3		279.4		50.9		1.9				1.4		Other operating expenses	91.8		101.8		(10.0)		1.4				1.4
Depreciation and amortization expenses	Depreciation and amortization expenses	361.0		343.1		17.9		8.6				5.0				1,068.3		1,032.5		35.8		6.2				5.2		Depreciation and amortization expenses	366.1		351.0		15.1		5.4				4.9
General and administrative expenses	General and administrative expenses	399.9		459.7		(59.8)		9.5				6.7				1,240.6		1,365.7		(125.1)		7.2				6.9		General and administrative expenses	472.1		434.2		37.9		7.0				6.1
Restructuring and impairments	Restructuring and impairments	78.1		37.7		40.4		1.8				0.6				83.7		123.9		(40.2)		0.5				0.6		Restructuring and impairments	72.2		6.3		65.9		1.1				0.1

Total operating expenses	Total operating expenses	4,994.4		5,777.7		(783.3)		118.3				84.7				16,521.8		16,973.1		(451.3)		95.4				85.9		Total operating expenses	5,918.6		5,951.2		(32.6)		87.7				83.9
Income from equity investees	Income from equity investees	68.4		76.0		(7.6)		1.6				1.1				210.3		206.1		4.2		1.2				1.0		Income from equity investees	82.7		73.9		8.8		1.2				1.0
Operating income/(loss)		$	(703.9)	$	1,121.3	$	(1,825.2)	(16.7)	%			16.4	%			$	1,003.4	$	2,994.6	$	(1,991.2)	5.8	%			15.2	%
Operating income																												Operating income	$	913.5	$	1,219.8	$	(306.3)	13.5	%			17.2	%
Store operating expenses as a % of company-operated store revenues	Store operating expenses as a % of company-operated store revenues									73.7	%			47.8	%									57.8	%			48.5	%	Store operating expenses as a % of company-operated store revenues							50.1	%			48.8	%

~~Quarter~~For the quarter ended ~~June 28,~~December 27, 2020 compared with the quarter ended ~~June 30,~~December 29, 2019

Product and distribution costs as a percentage of total net revenues ~~increased 290~~decreased 110 basis points for the ~~third~~first quarter of fiscal 2021, primarily due to the transfer of certain single-serve products to Nestlé beginning in the fourth quarter of fiscal 2020 ~~primarily due to sales deleverage attributable to COVID-19 impacts, which included manufacturing deleverage due to lower production volume~~ (approximately ~~390~~90 basis points)~~. The sales deleverage was partially offset by supply chain efficiencies (approximately 30 basis points).~~ and pricing in Americas.

Store operating expenses as a percentage of total net revenues increased ~~2,140~~270 basis points for the ~~third~~first quarter of fiscal ~~2020.~~2021. Store operating expenses as a percentage of company-operated store revenues increased ~~2,590~~130 basis points, primarily due to sales deleverage attributable to COVID-19 impacts, ~~which included~~as well as catastrophe ~~pay and enhanced~~ pay programs for retail partners, net of benefits provided by temporary subsidies from the U.S. and certain foreign governments (approximately ~~470~~50 basis points), and growth in wages and benefits (approximately 180 basis points). These were partially offset by labor efficiencies (approximately 250 basis points).

Other operating expenses ~~increased $39~~decreased $10 million for the ~~third~~first quarter of fiscal ~~2020,~~2021, primarily due to lapping prior year incremental costs to develop and grow the Global Coffee ~~Alliance ($35 million).~~Alliance.

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Depreciation and amortization expenses as a percentage of total net revenues increased 50 basis points, primarily due to sales deleverage.

General and administrative expenses ~~decreased $60~~increased $38 million, primarily due to lower performance-based compensation ($45 million), and lapping the 2018 U.S stock award granted in the third quarter of fiscal 2018 ($14 million), which was funded by savings from the Tax Act and vested in the third quarter of fiscal 2019, partially offset by incremental strategic investments in ~~technology.~~technology ($28 million) and higher performance-based compensation, recognizing the strength of the company's overall recovery from pandemic-related business impacts ($18 million).

Restructuring and impairment expenses increased ~~$40~~$66 million, primarily due to higher asset impairment related to store portfolio optimization ($3542 million) and ~~intangible asset impairment related to changes in our branding and marketing strategies~~accelerated amortization of right-of-use lease assets associated with the closure of certain company-operated stores ($~~22 million), partially offset by lower severance costs ($8~~26 million).

Income from equity investees ~~decreased $8~~increased $9 million, primarily due to ~~lower royalty~~higher income from our North American Coffee Partnership joint venture, partially offset by temporary store closures and reduced operating hours in our South Korea and India joint ventures.

The combination of these changes resulted in an overall decrease in operating margin of ~~3,310 basis points for the third quarter of fiscal 2020.~~

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~~Three quarters ended June 28, 2020 compared with three quarters ended June 30, 2019~~

~~Product and distribution costs as a percentage of total net revenues increased 70~~370 basis points for the first three quarters of fiscal 2020, primarily due to sales deleverage attributable to COVID-19 impacts, which included inventory write-offs and product waste (approximately 10 basis points), partially offset by supply chain efficiencies (approximately 70 basis points).

Store operating expenses as a percentage of total net revenues increased 730 basis points for the first three quarters of fiscal 2020. Store operating expenses as a percentage of company-operated store revenues increased 930 basis points, primarily due to sales deleverage attributable to COVID-19 impacts, which included catastrophe pay and enhanced pay programs for retail partners, net of benefits provided by temporary subsidies from the U.S. and certain foreign governments (approximately 210 basis points).

~~Other operating expenses increased $51 million for the first three quarters of fiscal 2020, primarily due to incremental costs to develop and grow the Global Coffee Alliance.~~

~~General and administrative expenses decreased $125 million, primarily due to lower performance-based compensation ($64 million) and the lapping of the 2018 U.S stock award granted in the third~~ quarter of fiscal ~~2018, which was funded by savings from the Tax Act and vested in the third quarter of fiscal 2019 ($61 million), partially offset by incremental strategic investments in technology.~~

Restructuring and impairment expenses decreased $40 million, primarily due to lower severance costs ($41 million), lower exit costs associated with the closure of certain company-operated stores ($29 million) and lapping the impairment related to our Switzerland retail market ($10 million). Partially offsetting these decreases were higher asset impairment related to store portfolio optimization ($27 million) and intangible asset impairment related to changes in our branding and marketing strategies ($22 million).

~~Income from equity investees increased $4 million, primarily due to growth in our South Korea joint venture and higher income from our North American Coffee Partnership joint venture.~~

~~The combination of these changes resulted in an overall decrease in operating margin of 940 basis points for the first three quarters of fiscal 2020.~~

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2021.

Other Income and Expenses

Quarter Ended Three Quarters Ended
Jun 28,
2020 Jun 30,
2019
$
Change
Jun 28,
2020 Jun 30,
2019 Jun 28,
2020 Jun 30,
2019 $
Change Jun 28,
2020 Jun 30,
2019
As a % of Total
Net Revenues
As a % of Total
Net Revenues
Operating income/(loss) $ (703.9) $ 1,121.3 $ (1,825.2) (16.7) % 16.4 % $ 1,003.4 $ 2,994.6 $ (1,991.2) 5.8 % 15.2 %
Net gain resulting from divestiture of certain operations — 601.8 (601.8) — 8.8 — 622.8 (622.8) — 3.2
Interest income and other, net 12.7 40.2 (27.5) 0.3 0.6 30.7 80.2 (49.5) 0.2 0.4
Interest expense (120.8) (86.4) (34.4) (2.9) (1.3) (312.1) (235.3) (76.8) (1.8) (1.2)
Earnings/(loss) before income taxes (812.0) 1,676.9 (2,488.9) (19.2) 24.6 722.0 3,462.3 (2,740.3) 4.2 17.5
Income tax expense/(benefit) (133.9) 303.7 (437.6) (3.2) 4.5 190.0 670.1 (480.1) 1.1 3.4
Net earnings/(loss) including noncontrolling interests (678.1) 1,373.2 (2,051.3) (16.1) 20.1 532.0 2,792.2 (2,260.2) 3.1 14.1
Net earnings/(loss) attributable to noncontrolling interests 0.3 0.4 (0.1) — — (3.7) (4.2) 0.5 — —
Net earnings/(loss) attributable to Starbucks $ (678.4) $ 1,372.8 $ (2,051.2) (16.1) % 20.1 % $ 535.7 $ 2,796.4 $ (2,260.7) 3.1 % 14.2 %
Effective tax rate including noncontrolling interests 16.5 % 18.1 % 26.3 % 19.4 %


	Quarter Ended
	Dec 27, 2020		Dec 29, 2019		$ Change		Dec 27, 2020		Dec 29, 2019
							As a % of Total Net Revenues
Operating income	$	913.5	$	1,219.8	$	(306.3)	13.5	%	17.2	%


Interest income and other, net	15.5		15.9		(0.4)		0.2		0.2
Interest expense	(120.7)		(91.9)		(28.8)		(1.8)		(1.3)
Earnings before income taxes	808.3		1,143.8		(335.5)		12.0		16.1
Income tax expense	186.1		258.5		(72.4)		2.8		3.6
Net earnings including noncontrolling interests	622.2		885.3		(263.1)		9.2		12.5
Net loss attributable to noncontrolling interests	—		(0.4)		0.4		—		—
Net earnings attributable to Starbucks	$	622.2	$	885.7	$	(263.5)	9.2	%	12.5	%
Effective tax rate including noncontrolling interests							23.0	%	22.6	%

~~Quarter~~For the quarter ended ~~June 28,~~December 27, 2020 compared with the quarter ended ~~June 30,~~December 29, 2019

~~Net gain resulting from divestiture of certain operations decreased $602 million due to lapping the sale of our retail operation in Thailand in fiscal 2019.~~

Interest income and other, net decreased $28 million, primarily due to lapping the gain on the sale of a non-operating asset and lapping interest income earned last year on excess cash related to our Nestlé transaction.

Interest expense increased ~~$34~~$29 million, primarily due to additional interest incurred on long-term debt issued in March 2020 and May 2020.

The effective tax rate for the quarter ended ~~June 28,~~December 27, 2020 was ~~16.5%~~23.0% compared to ~~18.1%~~22.6% for the same quarter in fiscal ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~a change in~~ the ~~absolute~~effect of lower pre-tax ~~operating results when compared to the same period of the prior year~~earnings and ~~thereby changing~~ the proportionate ~~impact of~~impacts from certain permanent differences and discrete items, as well as the foreign rate differential on our jurisdictional mix of earnings. This was partially offset by ~~valuation allowances recorded against deferred~~an increase in stock-based compensation excess tax ~~assets of certain international jurisdictions.~~

~~Three quarters ended June 28, 2020 compared with three quarters ended June 30, 2019~~

~~Net gain resulting from divestiture of certain operations decreased $623 million due to lapping the sale of retail operations in Thailand, France, and the Netherlands in fiscal 2019.~~

Interest income and other, net decreased $50 million, primarily due to lapping interest income earned last year on excess cash related to our Nestlé transaction and lapping the gain on the sale of a non-operating asset.

~~Interest expense increased $77 million, primarily due to additional interest incurred on long-term debt issued in March 2020 and May 2020.~~benefits (approximately 190 basis points).

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Segment Information

Results of operations by segment (in millions):

Americas


		Quarter Ended																								Three Quarters Ended																		Quarter Ended
		Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020				Jun 30, 2019				Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020				Jun 30, 2019			Dec 27, 2020		Dec 29, 2019		$ Change		Dec 27, 2020				Dec 29, 2019
								As a % of Americas Total Net Revenues																		As a % of Americas Total Net Revenues																	As a % of Americas Total Net Revenues
Net revenues:	Net revenues:																											Net revenues:
Company-operated stores	Company-operated stores	$	2,568.9	$	4,182.2	$	(1,613.3)	91.6	%			89.3	%			$	10,903.5	$	12,124.0	$	(1,220.5)	89.8	%			89.1	%	Company-operated stores	$	4,284.8	$	4,471.0	$	(186.2)	91.1	%			89.2	%
Licensed stores	Licensed stores	235.5		496.3		(260.8)		8.4				10.6				1,237.0		1,474.0		(237.0)		10.2				10.8		Licensed stores	416.2		537.3		(121.1)		8.8				10.7
Other	Other	1.1		2.6		(1.5)		—				0.1				5.8		9.6		(3.8)		—				0.1		Other	2.2		2.6		(0.4)		—				0.1
Total net revenues	Total net revenues	2,805.5		4,681.1		(1,875.6)		100.0				100.0				12,146.3		13,607.6		(1,461.3)		100.0				100.0		Total net revenues	4,703.2		5,010.9		(307.7)		100.0				100.0
Product and distribution costs	Product and distribution costs	805.6		1,324.0		(518.4)		28.7				28.3				3,442.2		3,895.8		(453.6)		28.3				28.6		Product and distribution costs	1,276.2		1,388.4		(112.2)		27.1				27.7
Store operating expenses	Store operating expenses	2,054.4		2,034.0		20.4		73.2				43.5				6,427.3		5,952.8		474.5		52.9				43.7		Store operating expenses	2,238.8		2,214.4		24.4		47.6				44.2
Other operating expenses	Other operating expenses	40.7		41.7		(1.0)		1.5				0.9				125.1		125.6		(0.5)		1.0				0.9		Other operating expenses	42.8		42.5		0.3		0.9				0.8
Depreciation and amortization expenses	Depreciation and amortization expenses	191.3		175.6		15.7		6.8				3.8				571.9		515.5		56.4		4.7				3.8		Depreciation and amortization expenses	188.9		189.2		(0.3)		4.0				3.8
General and administrative expenses	General and administrative expenses	62.2		72.0		(9.8)		2.2				1.5				202.8		217.9		(15.1)		1.7				1.6		General and administrative expenses	70.8		72.4		(1.6)		1.5				1.4
Restructuring and impairments	Restructuring and impairments	56.2		15.1		41.1		2.0				0.3				61.9		56.2		5.7		0.5				0.4		Restructuring and impairments	72.2		5.2		67.0		1.5				0.1
Total operating expenses	Total operating expenses	3,210.4		3,662.4		(452.0)		114.4				78.2				10,831.2		10,763.8		67.4		89.2				79.1		Total operating expenses	3,889.7		3,912.1		(22.4)		82.7				78.1

Operating income/(loss)		$	(404.9)	$	1,018.7	$	(1,423.6)	(14.4)	%			21.8	%			$	1,315.1	$	2,843.8	$	(1,528.7)	10.8	%			20.9	%
Operating income																												Operating income	$	813.5	$	1,098.8	$	(285.3)	17.3	%			21.9	%
Store operating expenses as a % of company-operated store revenues	Store operating expenses as a % of company-operated store revenues									80.0	%			48.6	%									58.9	%			49.1	%	Store operating expenses as a % of company-operated store revenues							52.2	%			49.5	%

~~Quarter~~For the quarter ended ~~June 28,~~December 27, 2020 compared with the quarter ended ~~June 30,~~December 29, 2019

Revenues

Americas total net revenues for the ~~third~~first quarter of fiscal ~~2020~~2021 decreased ~~$1,876~~$308 million, or ~~40%~~6%, primarily due to a ~~41%~~6% decrease in comparable store sales ($~~1,661~~242 million), driven by a ~~53%~~21% decrease in ~~transactions. Also contributing~~transactions, partially offset by a 20% increase in average ticket. These declines were slightly offset by the opening of new company-operated stores ($62 million).

Licensed stores revenues declined by $121.1 million, primarily due to lower product and equipment sales to and royalty revenues from our ~~licensees ($244 million). These decreases were partially offset by 159 net new Starbucks~~^®~~company-operated store openings, or a 2% increase, over the past 12 months ($75 million).~~

~~Table of Contents~~

licensees.

Operating Margin

Americas operating income for the ~~third~~first quarter of fiscal ~~2020~~2021 decreased ~~140%~~26% to ~~a loss of $405~~$814 million, compared to ~~an operating income of $1,019 million~~$1.1 billion in the ~~third~~first quarter of fiscal ~~2019.~~2020. Operating margin decreased ~~3,620~~460 basis points to ~~(14.4)%~~17.3%, primarily due to sales deleverage ~~primarily attributable~~attributed to ~~reduced labor productivity and fixed occupancy costs, as well as~~COVID-19 impacts. In addition, we also incurred additional costs, ~~incurred attributable to COVID-19, mainly~~primarily catastrophe ~~pay and enhanced~~ pay programs for retail store partners incurred, net of benefits provided by the CARES Act and CEWS (approximately ~~530~~40 basis points), and growth in wages and benefits (approximately 200 basis points). Higher restructuring expenses relating to our ~~U.S.~~Americas portfolio optimization (approximately ~~170~~140 basis points) also contributed to the decrease.

~~Three quarters ended June 28, 2020 compared with three quarters ended June 30, 2019~~

~~Revenues~~

Americas total net revenues for the first three quarters of fiscal 2020 decreased $1,461 million, or 11%, primarily due to a 13% decrease in comparable store sales ($1,541 million), driven by a 20% decrease in transactions. Also contributing were lower product sales to and royalty revenues from our licensees ($218 million). These decreases were partially offset by 159 net new Starbucks^®~~company-operated store openings, or a 2% increase, over the past 12 months ($335 million).~~

~~Operating Margin~~

Americas operating income for the first three quarters of fiscal 2020 decreased 54% to $1.3 billion, compared to $2.8 billion for the same period in fiscal 2019. Operating margin decreased 1,010 basis points to 10.8%, primarily due to sales deleverage attributed to reduced labor productivity and additional costs incurred attributable to COVID-19, mainly catastrophe pay and enhanced pay programs for retail store partners, net of benefits provided by the CARES Act and CEWS (approximately 210 basis points). Partially offsetting these decreases ~~was sales leverage realized during the first fiscal quarter, prior to the onset of COVID-19.~~

~~International~~

Quarter Ended Three Quarters Ended
Jun 28,
2020 Jun 30,
2019
$
Change
Jun 28,
2020 Jun 30,
2019 Jun 28,
2020 Jun 30,
2019
$
Change
Jun 28,
2020 Jun 30,
2019
As a % of International
Total Net Revenues As a % of International
Total Net Revenues
Net revenues:
Company-operated stores $ 875.5 $ 1,352.8 $ (477.3) 92.2 % 85.3 % $ 3,087.5 $ 3,940.3 $ (852.8) 84.5 % 85.3 %
Licensed stores 65.0 228.7 (163.7) 6.8 14.4 545.4 666.3 (120.9) 14.9 14.4
Other 9.1 3.8 5.3 1.0 0.2 22.4 12.0 10.4 0.6 0.3
Total net revenues 949.6 1,585.3 (635.7) 100.0 100.0 3,655.3 4,618.6 (963.3) 100.0 100.0
Product and distribution costs 337.7 476.1 (138.4) 35.6 30.0 1,213.9 1,408.9 (195.0) 33.2 30.5
Store operating expenses 483.4 609.2 (125.8) 50.9 38.4 1,653.4 1,831.4 (178.0) 45.2 39.7
Other operating expenses 37.5 26.7 10.8 3.9 1.7 105.1 84.5 20.6 2.9 1.8
Depreciation and amortization expenses 128.5 127.7 0.8 13.5 8.1 385.2 385.0 0.2 10.5 8.3
General and administrative expenses 66.1 86.0 (19.9) 7.0 5.4 196.9 235.5 (38.6) 5.4 5.1
Restructuring and impairments (0.2) 16.6 (16.8) — 1.0 (0.6) 47.2 (47.8) — 1.0
Total operating expenses 1,053.0 1,342.3 (289.3) 110.9 84.7 3,553.9 3,992.5 (438.6) 97.2 86.4
Income from equity investees 17.4 27.2 (9.8) 1.8 1.7 73.1 75.7 (2.6) 2.0 1.6
Operating income/(loss) $ (86.0) $ 270.2 $ (356.2) (9.1) % 17.0 % $ 174.5 $ 701.8 $ (527.3) 4.8 % 15.2 %
Store operating expenses as a % of company-operated store revenues 55.2 % 45.0 % 53.6 % 46.5 %

were improved labor efficiencies (approximately 260 basis points) and pricing (approximately 110 basis points).

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~~Quarter~~International


	Quarter Ended
	Dec 27, 2020		Dec 29, 2019		$ Change		Dec 27, 2020		Dec 29, 2019
							As a % of International Total Net Revenues
Net revenues:
Company-operated stores	$	1,441.7	$	1,309.7	$	132.0	87.1	%	83.4	%
Licensed stores	197.6		254.7		(57.1)		11.9		16.2
Other	15.0		6.7		8.3		0.9		0.4
Total net revenues	1,654.3		1,571.1		83.2		100.0		100.0
Product and distribution costs	520.4		488.5		31.9		31.5		31.1
Store operating expenses	628.5		607.1		21.4		38.0		38.6
Other operating expenses	34.3		35.9		(1.6)		2.1		2.3
Depreciation and amortization expenses	140.0		126.6		13.4		8.5		8.1
General and administrative expenses	82.6		67.2		15.4		5.0		4.3
Restructuring and impairments	—		0.8		(0.8)		—		0.1
Total operating expenses	1,405.8		1,326.1		79.7		85.0		84.4
Income from equity investees	26.3		30.9		(4.6)		1.6		2.0
Operating income	$	274.8	$	275.9	$	(1.1)	16.6	%	17.6	%
Store operating expenses as a % of company-operated store revenues							43.6	%	46.4	%

For the quarter ended ~~June 28,~~December 27, 2020 compared with the quarter ended ~~June 30, 2019~~

~~Revenues~~

International total net revenues for the third quarter of fiscal 2020 decreased $636 million, or 40%, primarily due to a 37% decrease in comparable company-operated store sales ($461 million), driven by a 44% decrease in transactions. Also contributing were lower product sales to and royalty revenues from our licensees ($158 million) and the conversion of our retail business in Thailand to a fully licensed market during 2019 ($37 million). These decreases were partially offset by 611 net new Starbucks^®~~company-operated store openings, or an 11% increase, over the past 12 months ($53 million).~~

~~Operating Margin~~

International operating loss for the third quarter of fiscal 2020 was $86 million, compared to $270 million of operating income in the third quarter of fiscal 2019. Operating margin decreased 2,610 basis points to (9.1)%, primarily due to sales deleverage attributable to COVID-19, including continued partner wages and benefits and occupancy costs. Royalty relief provided to licensees (approximately 480 basis points) and catastrophe pay (approximately 170 basis points) also contributed to the decrease. These were partially offset by temporary government subsidies (approximately 220 basis points) and rent concessions (approximately 140 basis points).

~~Three quarters ended June 28, 2020 compared with three quarters ended June 30,~~December 29, 2019

Revenues

International total net revenues for the first ~~three quarters~~quarter of fiscal ~~2020 decreased $963~~2021 increased $83 million, or ~~21%, due to a 23% decrease in comparable company-operated~~5%. Company-operated store ~~sales ($809 million),~~revenues increased $132 million, primarily driven by a 26% decrease in transactions. Also contributing were the conversions of our retail businesses in Thailand, France and the Netherlands to fully licensed markets during 2019 ($179 million) and lower product sales to and royalty revenues from licensees ($133 million). These decreases were partially offset by 611658 net new Starbucks^®company-operated ~~store openings,~~stores, or an 11% increase, over the past 12 months ($~~191~~108 million) and favorable foreign currency translation ($71 million). These were partially offset by a 3% decline in comparable store sales ($37 million), driven by a 10% decrease in transactions, partially offset by an 8% increase in average ticket.

Licensed stores revenues declined by $57.1 million, primarily due to lower product and equipment sales to and royalty revenues from our licensees.

Operating Margin

International operating income for the first ~~three quarters~~quarter of fiscal ~~2020 decreased 75% to $175~~2021 was $275 million, compared to ~~$702~~$276 million ~~for~~in the ~~same period in~~first quarter of fiscal ~~2019.~~2020. Operating margin decreased ~~1,040~~100 basis points to ~~4.8%~~16.6%, primarily due to sales deleverage attributable to COVID-19, ~~including continued~~as well as additional costs incurred to invest in partner wages and benefits ~~and occupancy costs. Royalty relief granted to licensees during the fiscal third quarter also contributed to the decrease~~ (approximately ~~120~~70 basis points). These were partially offset by labor efficiencies (approximately 80 basis points).

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Channel Development


		Quarter Ended																		Three Quarters Ended														Quarter Ended
		Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020		Jun 30, 2019		Jun 28, 2020		Jun 30, 2019		$ Change		Jun 28, 2020		Jun 30, 2019			Dec 27, 2020		Dec 29, 2019		$ Change		Dec 27, 2020		Dec 29, 2019
								As a % of Channel Development Total Net Revenues												As a % of Channel Development Total Net Revenues													As a % of Channel Development Total Net Revenues
Net revenues	Net revenues	$	447.3	$	533.3	$	(86.0)					$	1,461.0	$	1,484.5	$	(23.5)					Net revenues	$	371.4	$	494.6	$	(123.2)
Product and distribution costs	Product and distribution costs	319.9		377.1		(57.2)		71.5	%	70.7	%	1,010.3		1,030.9		(20.6)		69.2	%	69.4	%	Product and distribution costs	233.5		338.8		(105.3)		62.9	%	68.5	%
Other operating expenses	Other operating expenses	51.4		20.2		31.2		11.5		3.8		89.7		55.9		33.8		6.1		3.8		Other operating expenses	11.1		20.6		(9.5)		3.0		4.2
Depreciation and amortization expenses	Depreciation and amortization expenses	0.3		0.2		0.1		0.1		—		0.9		12.6		(11.7)		0.1		0.8		Depreciation and amortization expenses	0.2		0.3		(0.1)		0.1		0.1
General and administrative expenses	General and administrative expenses	2.5		2.7		(0.2)		0.6		0.5		8.0		8.9		(0.9)		0.5		0.6		General and administrative expenses	2.2		2.4		(0.2)		0.6		0.5
Total operating expenses	Total operating expenses	374.1		400.2		(26.1)		83.6		75.0		1,108.9		1,108.3		0.6		75.9		74.7		Total operating expenses	247.0		362.1		(115.1)		66.5		73.2
Income from equity investees	Income from equity investees	51.0		48.8		2.2		11.4		9.2		137.2		130.4		6.8		9.4		8.8		Income from equity investees	56.4		43.0		13.4		15.2		8.7
Operating income	Operating income	$	124.2	$	181.9	$	(57.7)	27.8	%	34.1	%	$	489.3	$	506.6	$	(17.3)	33.5	%	34.1	%	Operating income	$	180.8	$	175.5	$	5.3	48.7	%	35.5	%

~~Quarter ended June 28, 2020 compared with~~For the quarter ended ~~June 30, 2019~~

~~Revenues~~

Channel Development total net revenues for the third quarter of fiscal 2020 decreased $86 million, or 16%, primarily due to lapping of higher product sales to Nestlé in prior year related to transitioning activities of the Global Coffee Alliance ($85 million).

~~Operating Margin~~

Channel Development operating income for the third quarter of fiscal 2020 decreased 32% to $124 million, compared to $182 million for the same period in fiscal 2019. Operating margin decreased 630 basis points to 27.8%, primarily driven by certain transition items related to the Global Coffee Alliance (approximately 750 basis points), partially offset by lapping the transfer of certain products to Nestlé as part of the Global Coffee Alliance in the prior year.

~~Three quarters ended June 28,~~December 27, 2020 compared with the ~~three quarters~~quarter ended ~~June 30,~~December 29, 2019

Revenues

Channel Development total net revenues for the first ~~three quarters~~quarter of fiscal ~~2020~~2021 decreased ~~$24~~$123 million, or 2%25%, primarily due to the lapping of higher product sales in prior year related to transitioning order fulfillment of the Global Coffee Alliance ($40 million). Also contributing was lapping prior year product sales to Unilever as a result of the sale and transition ~~of the Tazo brand ($33 million). These decreases were partially offset by the expansion of the Global Coffee Alliance, including the benefit related to the transfer~~ of certain single-serve product activities to Nestlé ~~beginning~~($91 million) and lapping of transition activities related to the Global Coffee Alliance ($21 million). Also contributing were lower Global Coffee Alliance revenues ($18 million), mainly driven by the Foodservice business, which experienced softening due to COVID-19. These were partially offset by growth in ~~the second quarter of fiscal 2020 ($50 million).~~at-home coffee and our ready-to-drink business.

Operating Margin

Channel Development operating income for the first ~~three quarters~~quarter of fiscal ~~2020 decreased~~2021 increased 3% to ~~$489~~$181 million, compared to ~~$507~~$176 million ~~for~~in the ~~same period in~~first quarter of fiscal ~~2019.~~2020. Operating margin ~~decreased 60~~increased 1,320 basis points to ~~33.5%~~48.7%, primarily ~~driven by certain transition items related~~due to ~~the Global Coffee Alliance (approximately 250 basis points), partially offset by lapping the correction of amortization expense (approximately 80 basis points) in the prior year and~~ the transfer of certain single-serve products to Nestlé as part of the Global Coffee ~~Alliance.~~Alliance (approximately 820 basis points). Strong performance from our North American Coffee Partnership joint venture also contributed.

~~Table of Contents~~

Corporate and Other


		Quarter Ended														Three Quarters Ended											Quarter Ended
		Jun 28, 2020		Jun 30, 2019		$ Change		% Change		Jun 28, 2020		Jun 30, 2019		$ Change		% Change			Dec 27, 2020		Dec 29, 2019		$ Change		% Change
Net revenues:	Net revenues:																	Net revenues:

Other	Other	$	19.7	$	23.3	$	(3.6)	(15.5)	%	$	52.3	$	50.9	$	1.4	2.8	%	Other	$	20.5	$	20.5	$	—	—	%
Total net revenues	Total net revenues	19.7		23.3		(3.6)		(15.5)		52.3		50.9		1.4		2.8		Total net revenues	20.5		20.5		—		—
Product and distribution costs	Product and distribution costs	20.8		22.4		(1.6)		(7.1)		51.8		51.8		—		—		Product and distribution costs	19.0		20.7		(1.7)		(8.2)

Other operating expenses	Other operating expenses	4.0		5.8		(1.8)		(31.0)		10.4		13.4		(3.0)		(22.4)		Other operating expenses	3.6		2.8		0.8		28.6
Depreciation and amortization expenses	Depreciation and amortization expenses	40.9		39.6		1.3		3.3		110.3		119.4		(9.1)		(7.6)		Depreciation and amortization expenses	37.0		34.9		2.1		6.0
General and administrative expenses	General and administrative expenses	269.1		299.0		(29.9)		(10.0)		832.9		903.4		(70.5)		(7.8)		General and administrative expenses	316.5		292.2		24.3		8.3
Restructuring and impairments	Restructuring and impairments	22.1		6.0		16.1		268.3		22.4		20.5		1.9		9.3		Restructuring and impairments	—		0.3		(0.3)		nm
Total operating expenses	Total operating expenses	356.9		372.8		(15.9)		(4.3)		1,027.8		1,108.5		(80.7)		(7.3)		Total operating expenses	376.1		350.9		25.2		7.2

Operating loss	Operating loss	$	(337.2)	$	(349.5)	$	12.3	(3.5)	%	$	(975.5)	$	(1,057.6)	$	82.1	(7.8)	%	Operating loss	$	(355.6)	$	(330.4)	$	(25.2)	7.6	%

Corporate and Other primarily consists of our unallocated corporate expenses, as well as Evolution Fresh. Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. ~~The decreases~~

Corporate and Other operating loss increased to $356 million for the first fiscal quarter ~~and three quarters ending June 28, 2020 were~~of 2021, or 8%, compared to $330 million for the first fiscal quarter of 2020. This increase was primarily driven ~~by lower performance-based compensation and lapping of the 2018 stock award granted in the third quarter of fiscal 2018, partially offset~~ by incremental strategic investments in ~~technology.~~technology and higher performance-based compensation recognizing the strength of the company's overall recovery from pandemic-related business impacts.

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Quarterly Store Data

Our store data for the periods presented is as follows:


		Net stores opened/(closed) and transferred during the period										Net stores opened/(closed) and transferred during the period
		Quarter Ended			Three Quarters Ended					Stores open as of		Quarter Ended			Stores open as of
		Jun 28, 2020	Jun 30, 2019	Jun 28, 2020	Jun 30, 2019	Jun 28, 2020	Jun 30, 2019		Dec 27, 2020		Dec 29, 2019		Dec 27, 2020	Dec 29, 2019
Americas	Americas							Americas
Company-operated stores	Company-operated stores	(34)	81	43	167	10,017	9,857	Company-operated stores	(80)		46		10,029	10,020
Licensed stores	Licensed stores	(2)	53	125	226	8,218	7,996	Licensed stores	34		90		8,279	8,183
Total Americas	Total Americas	(36)	134	168	393	18,235	17,853	Total Americas	(46)		136		18,308	18,203
International	International							International
Company-operated stores	Company-operated stores	117	(233)	394	(5)	6,254	5,646	Company-operated stores	185		199		6,713	6,059
Licensed stores	Licensed stores	49	541	362	926	7,691	7,127	Licensed stores	139		204		7,917	7,533
Total International	Total International	166	308	756	921	13,945	12,773	Total International	324		403		14,630	13,592
Corporate and Other

Licensed stores		—	—	—	(12)	—	—
Total Corporate and Other		—	—	—	(12)	—	—

Total Company	Total Company	130	442	924	1,302	32,180	30,626	Total Company	278		539		32,938	31,795

Financial Condition, Liquidity and Capital Resources

Investment Overview

Our cash and investments totaled ~~$4.4~~$5.5 billion as of ~~June 28,~~December 27, 2020 and ~~$3.0~~$4.8 billion as of September ~~29, 2019.~~27, 2020. We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, make acquisitions and return cash to shareholders through common stock cash dividend payments and share repurchases. Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (foreign and domestic) and commercial paper. As of ~~June 28,~~December 27, 2020, approximately ~~$1.7~~$2.3 billion of cash was held in foreign subsidiaries.

Borrowing Capacity

The 2018 credit facility

Our $2.0 billion unsecured 5-year revolving credit facility ("the 2018 credit facility"), of which $150 million may be used for issuances of letters of credit, is currently set to mature on October 25, 2022. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million. Borrowings under the credit facility are subject to terms defined within the 2018 credit facility and will bear interest at a variable rate based on LIBOR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate, in each case plus an applicable margin. The applicable margin is based on the better of (i) the Company's long-term credit ratings assigned by Moody's and Standard & Poor's rating agencies and (ii) the Company's fixed charge coverage ratio, pursuant to a pricing grid set forth in the five-year credit agreement. The current applicable margin is ~~0.910%~~1.100% for Eurocurrency Rate Loans and ~~0.000% (nil)~~0.100% for Base Rate Loans. The 2018 credit facility is available for general corporate purposes. As of ~~June 28,~~December 27, 2020, we had no borrowings under the 2018 credit facility.

The 364-day credit facility

Our $1.0 billion unsecured 364-day credit facility (the "364-day credit facility"), of which no amount may be used for issuances of letters of credit, is currently set to mature on ~~October 21, 2020.~~September 22, 2021. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million. Borrowings under the credit facility are subject to terms defined within the 364-day credit facility and will bear interest at a variable rate based on LIBOR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate, in each case plus an applicable margin. The applicable margin is ~~0.920%~~based on the better of (i) the Company's long-term credit ratings assigned by Moody's and Standard & Poor's rating agencies and (ii) the Company's fixed charge coverage ratio, pursuant to a pricing grid set forth in the 364-day credit agreement. The applicable margin is 1.150% for Eurocurrency Rate Loans and ~~0.000% (nil)~~0.150% for Base Rate Loans. The 364-day credit facility is available for general purposes. As of ~~June 28,~~December 27, 2020, we had no borrowings under the 364-day credit facility.

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Due to the financial impacts from COVID-19, we ~~have~~ reached an agreement with our lenders to amend the fixed charge coverage ratio covenant for our combined $3 billion revolving lines of credit, through the fourth quarter of fiscal 2021.

~~The 2020 term-loan facility~~

Our $500 million unsecured 364-day term-loan facility ("the 2020 term-loan facility") is currently set to mature on March 19, 2021. Borrowings under the term-loan facility are subject to terms defined within the 2020 term-loan facility and will bear interest depending on if the loan is a Eurocurrency Rate Loan or a Base Loan. Eurocurrency Rate Loans will bear interest on the outstanding principal amount equal to the Eurocurrency Rate for such Interest Period plus the applicable margin. Each Base Rate Loan will bear interest on the outstanding principal amount equal to the Base Rate plus the applicable margin. The applicable margin is based on the Company's long-term credit ratings assigned by Moody's and Standard & Poor's rating agencies. The current applicable margin is 1.000% for Eurocurrency Rate Loans and 0.00% (nil) for Base Rate Loans. The 2020 term-loan facility is available for general corporate purposes. As

Table of ~~June 28, 2020, we had $500.0 million borrowings outstanding under the 2020 term-loan facility and were in compliance with all applicable covenants related to our credit facilities.~~Contents

Commercial Paper

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under the 2018 and 364-day credit facilities discussed above. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases. As of ~~June 28,~~December 27, 2020, we had borrowings of ~~$296.5~~$299.7 million outstanding, net of unamortized discount, under our commercial paper program, of which a majority will mature during the second quarter of fiscal 2021. As such, our total contractual borrowing capacity for general corporate purposes as of the end of our ~~third~~first quarter of fiscal ~~2020~~2021 was $2.7 billion when combining the unused commercial paper program and credit facilities, less outstanding borrowing.

Credit facilities in Japan

Additionally, we hold Japanese yen-denominated credit facilities for the use of our Japan subsidiary. These are available for working capital needs and capital expenditures within our Japanese market.

During the third quarter of fiscal 2020, we expanded our ¥1 billion unsecured credit facility to ¥5 billion, or $46.6 million, as of June 28, 2020. This facility is currently set to mature on December 31, 2020. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300% or 0.400%, depending on the tranche borrowed. Additionally during the third quarter, we expanded our ¥2 billion unsecured credit facility to•A ¥10 billion, or ~~$93.4~~$96.5 million, ~~as of June 28, 2020. This~~ facility is currently set to mature on March 26, 2021. Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus ~~0.30%~~an applicable margin of 0.300%.

As of ~~June 28,~~December 27, 2020, we had ~~$140.0~~$192.9 million of borrowings outstanding under these credit facilities.

On May 7, 2020, we issued long-term debt in an underwritten registered public offering, which consisted of $500 million of 1.300% Senior Notes (the“2022 notes”) due May 2022, $1.25 billion of 2.550% Senior Notes (the “2030 notes”) due November 2030, and $1.25 billion of 3.500% Senior Notes (the “2050 notes”) due November 2050. We are using the net proceeds from the offering for general corporate purposes, including the repayment of outstanding indebtedness. Interest on the 2022 notes is payable semi-annually on May 7 and November 7, commencing on November 7, 2020. Interest on the 2030 notes and the 2050 notes is payable semi-annually on May 15 and November 15, commencing on November 15, 2020.

See Note 8 ,7, Debt, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for details of the components of our long-term debt.

Our ability to incur new liens and conduct sale and leaseback transactions on certain material properties is subject to compliance with terms of the indentures under which the Senior Notes were issued. As of ~~June 28,~~December 27, 2020, we were in compliance with all applicable covenants.

We returned to positive cash flow during the latter part of the third quarter of fiscal 2020 and expect a return to profitability in the fiscal fourth quarter. To further strengthen our liquidity, we expect to continue to curtail discretionary spending and suspend share repurchases. If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances.

Use of Cash

We expect to use our available cash and investments, including, but not limited to, additional potential future borrowings under the credit facilities, commercial paper program and the issuance of debt to support and invest in our core businesses, including investing in new ways to serve our customers and supporting our store partners, repaying maturing debts, as well as returning

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cash to shareholders through common stock cash dividend payments and discretionary share repurchases and investing in new business opportunities related to our core and developing businesses. Further, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business in support of our “Growth at Scale” agenda. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy.

We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally combined with our ability to leverage our balance sheet through the issuance of debt will be sufficient to finance capital requirements for our core businesses as well as shareholder distributions for the foreseeable future. Significant new joint ventures, acquisitions and/or other new business opportunities may require additional outside funding. We have borrowed funds and continue to believe we have the ability to do so at reasonable interest rates; however, additional borrowings would result in increased interest expense in the future. In this regard, we may incur additional debt, within targeted levels, as part of our plans to fund our capital programs, including cash returns to shareholders through future dividends and discretionary share repurchases. To further strengthen our liquidity in the near term, we currently expect the suspension of share repurchases to continue into late fiscal 2021. If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances.

We regularly review our cash positions and our determination of indefinite reinvestment of foreign earnings. In the event we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional

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foreign withholding taxes and U.S. state income taxes, which could be material. We do not anticipate the need for repatriated funds to the U.S. to satisfy domestic liquidity needs.

~~During the third quarter of fiscal~~In November 2020, our Board of Directors ~~declared~~approved a quarterly cash dividend to shareholders of ~~$0.41~~$0.45 per share to be paid on ~~August 21, 2020~~March 5, 2021 to shareholders of record as of the close of business on ~~August 7, 2020.~~February 18, 2021. As of the date of this report, we do not expect to reduce our quarterly dividend as a result of the COVID-19 pandemic.

~~We repurchased 20.3 million shares of common stock, or $1.7 billion, during the first three quarters of fiscal 2020 under our ongoing share repurchase program.~~ On April 8, 2020, we announced a temporary suspension of our share repurchase program. Repurchases pursuant to this program were last made in ~~mid-March.~~mid-March 2020. As of ~~June 28,~~December 27, 2020, 48.9 million shares remained available for repurchase under current authorizations. In addition to the suspension of our share repurchase program, to further enhance our financial flexibility, we have taken and may continue to take steps to defer capital expenditures and reduce discretionary spending. The existing share repurchase program remains authorized by the Board of Directors, ~~and~~however, we ~~may resume~~have temporarily suspended our share ~~repurchases~~repurchase program until we restore certain financial leverage targets, which we currently expect to occur in ~~the future at any time, depending upon market conditions, our capital needs and other factors.~~late fiscal 2021.

Other than normal operating expenses, cash requirements for the remainder of fiscal ~~2020~~2021 are expected to consist primarily of capital expenditures for investments in our new and existing stores and our supply chain and corporate facilities. Total capital expenditures for fiscal ~~2020~~2021 are expected to be approximately ~~$1.5~~$1.9 billion.

Cash Flows

Cash provided by operating activities was ~~$107.1 million~~$1.8 billion for the first ~~three quarters~~quarter of fiscal ~~2020,~~2021, compared to ~~$3.9~~$1.8 billion for the same period in fiscal ~~2019. The change was primarily due to material retail store closures resulting from~~2020. Although our net earnings were negatively impacted by the COVID-19 ~~crisis, the U.S. federal tax payment related~~pandemic, our cash flows from operations were flat when compared to the ~~Nestlé transaction~~same period in fiscal 2020. This is largely attributable to the non-cash loss on retirement and ~~the timing~~impairment of ~~other tax payments~~assets and ~~refunds.~~improvements to our working capital.

Cash used in investing activities for the first ~~three quarters~~quarter of fiscal ~~2020~~2021 totaled ~~$1.3~~$0.3 billion, compared to cash used in investing activities of ~~$506.5 million~~$0.4 billion for the same period in fiscal 2019. The change was primarily driven by lapping proceeds from the divestiture of certain operations related to the conversions of our retail businesses in Thailand, France and the Netherlands to fully licensed markets during 2019 and lower sales of investments in fiscal 2020.

Cash provided by financing activities for the first three quarters of fiscal 2020 totaled $2.5 billion compared to cash used by financing activities of $7.4 billion for the first three quarters of fiscal 2019. The change was primarily due to lower existing and new store investments, partially offset by higher ~~repurchases~~maturities and calls of investments.

Cash used in financing activities for the first quarter of fiscal 2021 totaled $1.0 billion compared to cash used in financing activities of $1.1 billion for the same period in fiscal 2020. The change was primarily due to temporary suspension of our ~~common stock under accelerated~~ share repurchase ~~agreements in fiscal 2019~~program, partially offset by increased debt repayments and ~~higher~~lower net proceeds from ~~issuance of long-term~~new debt ~~in fiscal 2020.~~issuances.

Contractual Obligations

In Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K, we disclosed that we had ~~$28.2~~$35.4 billion in total contractual obligations as of September 29, 2019. Other than our commercial paper and credit facilities borrowings, the issuance of our 2027 notes, our 2030 notes and our 2050 notes in the second quarter of fiscal 2020 and the issuance of our 2022 notes, our 2030 notes and our 2050 notes in the third quarter of fiscal 2020 as described in ~~Note 8, Debt, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, there~~27, 2020. There have been no material changes to our total obligations during the period covered by this 10-Q outside of the normal course of our business.

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Off-Balance Sheet Arrangements

~~Other than the addition of operating leases to the balance sheet in the first quarter of fiscal 2020 as described in~~ ~~Note 9, Leases, there~~There has been no material change in our off-balance sheet arrangements discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K.

Commodity Prices, Availability and General Risk Conditions

Commodity price risk represents our primary market risk, generated by our purchases of green coffee and dairy products, among other items. We purchase, roast and sell high-quality arabica coffee and related products and risk arises from the price volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of our company-operated stores. The price and availability of these commodities directly impact our results of operations, and we expect commodity prices, particularly coffee, to impact future results of operations. For additional details, see Product Supply in Item 1 of the 10-K, as well as Risk Factors in Item 1A of the 10-K.

Seasonality and Quarterly Results

Our business is subject to moderate seasonal fluctuations, of which our fiscal second quarter typically experiences lower revenues and operating income. However, the COVID-19 outbreak may have an impact on consumer behaviors and customer traffic that result in changes in the seasonal fluctuations of our business. Additionally, as our stored value cards are issued to and loaded by customers during the holiday season, we tend to have higher cash flows from operations during the first quarter of the fiscal year. However, since revenues from our stored value cards are recognized upon redemption and not when cash is loaded, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced. As a result of moderate seasonal fluctuations, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

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RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for a detailed description of recent accounting pronouncements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the commodity price risk, foreign currency exchange risk, equity security price risk or interest rate risk discussed in Item 7A of the 10-K.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

During the ~~third~~first quarter of fiscal ~~2020,~~2021, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report ~~(June 28,~~(December 27, 2020).

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2 to this 10-Q.

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PART II — OTHER INFORMATION

Item 1.Legal Proceedings

See Note 1513, Commitments and Contingencies, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for information regarding certain legal proceedings in which we are involved.

Item 1A.Risk Factors

There have been no material changes to the risk factors previously disclosed in the ~~10-K and in the 10-Q filed on April 28, 2020, other than the addition of the text below.~~10-K.

~~Our financial condition and results of operations for fiscal 2020 have been and are expected to continue to be adversely affected by the recent coronavirus outbreak.~~

In December 2019, a novel strain of coronavirus, known as COVID-19, was first reported and was subsequently declared a pandemic by the World Health Organization in March 2020. To date, this outbreak has surfaced in nearly all regions around the world, and as the pandemic continues to spread, particularly in the United States, businesses as well as federal, state and local governments have implemented significant actions to attempt to mitigate this public health crisis. Our operations have been and may continue to be disrupted to varying degrees in many markets (from limited operations including only drive-thru and delivery to full store closures in some markets). While we cannot predict the duration or scope of the COVID-19 pandemic, it has negatively impacted our business and such impact has been and could continue to be material to our financial results, condition and outlook. The COVID-19 pandemic may also have the effect of heightening other risks disclosed in the Risk Factors section included in our 10-K filed on November 15, 2019, such as, but not limited to, those related to:

•reduction or volatility in demand for our products, which may be caused by, among other things: store closures or modified operating hours and business model, reduced customer traffic due to illness, quarantine or government or self-imposed restrictions placed on our stores' operations and changes in consumer spending behaviors (e.g. continued practice of social distancing, consumer confidence in general macroeconomic conditions and a decrease in consumer discretionary spending);

•disruption to our operations or the operations of our business partners, including licensee and joint venture relationships, third-party manufacturers, distributors and retailers, through the effects of business and facilities closures, reductions in operating hours, social, economic, political or labor instability in affected areas, transportation delays, travel restrictions and changes in operating procedures, including for additional cleaning and safety protocols;

•impacts to our business partners' ability to operate or manage increases in their operating costs and other supply chain effects that may have an adverse effect on our ability to meet consumer demand and achieve cost targets; and

•increased volatility or significant disruption of global financial markets due in part to the COVID-19 pandemic, which could have a negative impact on our ability to access capital markets and other funding sources, on acceptable terms or at all and impede our ability to comply with debt covenants.

The further spread of COVID-19, and the requirements to take action to mitigate the spread of the pandemic, will impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition. Even in regions where we are reopening stores, our stores are subject to modified hours and conditions. Moreover, certain of those regions including parts of China and the United States, have suffered a COVID-19 relapse after reopening. If those regions fail to fully contain COVID-19, or if additional regions suffer a COVID-19 relapse, any of those markets may not recover quickly or at all, which could have a material adverse effect on our business and results of operations. As a result, we may incur additional impairment charges to our inventory, store and corporate assets— and our ability to realize the benefits from deferred tax assets may become limited— any of which may have a significant or material impact on our financial results. We are participating in, or have applied to participate in, certain relief programs and financial assistance from the U.S. and other foreign governments and are assessing whether we will take advantage of any other programs or assistance. There is no guarantee that we will continue to meet the eligibility requirements to participate in any current or future government relief programs or that the benefits will meaningfully offset the lost revenues and incremental costs incurred. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the efficacy, scope and duration of actions to contain COVID-19 or treat its impact, among others. While such actions have been relaxed or rolled back in certain markets,the actions have been reinstated as certain regions have suffered relapse, and may be reinstated in additional regions as the pandemic continues to evolve. The scope and timing of any such reinstatements are difficult to predict and may materially affect our future operations.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Shares under our ongoing share repurchase program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or through privately negotiated transactions. The timing, manner, price and amount of repurchases will be determined at our discretion and the share repurchase program may be suspended, terminated or modified at any time for any reason. On April 8, 2020, we announced a temporary suspension of our share repurchase program. During the ~~third~~first fiscal quarter ended ~~June 28,~~December 27, 2020, there was no share repurchase activity.

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Item 6.Exhibits

Incorporated by Reference
Exhibit
No.
Exhibit Description Form File No.
Date of
Filing
Exhibit Number
Filed
Herewith
3.1
Restated Articles of Incorporation of Starbucks Corporation
10-Q 0-20322 04/28/2015 3.1
3.2
Amended and Restated Bylaws of Starbucks Corporation (As amended and restated through June 1, 2018)
8-K 0-20322 06/05/2018 3.1
4 .1
Seventh Supplemental Indenture, dated as of May 7, 2020, by and between Starbucks Corporation and U.S. Bank National Association, as trustee
8-K 0-20322 05/07/2020 4.2
4 .2
Form of 1.300% Senior Notes due May 7, 2022 (included in Exhibit 4.1)
8-K 0-20322 05/07/2020 4.3
4 .3
Form of 2.550% Senior Notes due November 15, 2030 (included in Exhibit 4.1)
8-K 0-20322 05/07/2020 4.4
4 .4
Form of 3.500% Senior Notes due November 15, 2050 (included in Exhibit 4.1)
8-K 0-20322 05/07/2020 4.5
10 .1 *
Fifth Amendment to Starbucks Corporation Management Deferred Compensation Plan
— — — — X
10 .2
First Amendment to Credit Agreement, dated May 27, 2020, among Starbucks Corporation, each Lender under the Credit Agreement that is a party thereto, and the Bank of America, N.A., in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer
— — — — X
10.3
First Amendment to Amended and Restated 364-Day Credit Agreement, dated May 27, 2020, among Starbucks Corporation, each Lender under the Credit Agreement that is a party thereto, and the Bank of America, N.A., as Administrative Agent and Swing Line Lender
— — — — X
31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
— — — — X
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
— — — — X
32**
Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
— — — — —
101 The following financial statements from the Company's 10-Q for the fiscal quarter ended June 28, 2020, formatted in iXBRL: (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity and (vi) Notes to Consolidated Financial Statements — — — — X
104 Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) — — — — X


		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Date of Filing	Exhibit Number	Filed Herewith
3.1	Restated Articles of Incorporation of Starbucks Corporation	10-Q	0-20322	04/28/2015	3.1
3.2	Amended and Restated Bylaws of Starbucks Corporation (As amended and restated through June 1, 2018)	8-K	0-20322	06/05/2018	3.1
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	—	—	—	X
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	—	—	—	X
32*	Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	—	—	—	—
101	The following financial statements from the Company's 10-Q for the fiscal quarter ended December 27, 2020, formatted in iXBRL: (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity and (vi) Notes to Consolidated Financial Statements	—	—	—	—	X
104	Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)	—	—	—	—	X

* Denotes a management contract or compensatory plan or arrangement.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~July 28, 2020~~January 26, 2021

STARBUCKS CORPORATION

By:

/s/ Patrick J. Grismer

Patrick J. Grismer

executive vice president, chief financial officer

Signing on behalf of the registrant and as

principal financial officer

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Fiscal Year	Operating Leases		Lease Financing Arrangements
2020	$	1,432.9	$	5.2
2021	1,342.2		5.2
2022	1,247.4		5.0
2023	1,124.3		5.0
2024	996.4		4.9
Thereafter	4,087.7		42.6
Total minimum lease payments	$	10,230.9	$	67.9