Microsoft Excel LibreOffice Calc

Starbucks Corp. (SBUX)

Economic Value Added (EVA)

High level of difficulty

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit

Starbucks Corp., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Net operating profit after taxes (NOPAT)1 2,231,571  12,689,054  3,292,441  3,452,299  3,108,422  2,352,496 
Cost of capital2 6.28% 6.23% 6.33% 6.43% 6.63% 6.55%
Invested capital3 20,389,137  27,242,440  17,066,282  15,161,964  12,932,291  10,788,694 
 
Economic profit4 951,797  10,992,065  2,211,668  2,477,275  2,250,618  1,645,480 

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,231,571 – 6.28% × 20,389,137 = 951,797

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Starbucks Corp.’s economic profit increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Starbucks Corp., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Net earnings attributable to Starbucks 3,599,200  4,518,300  2,884,700  2,817,700  2,757,400  2,068,100 
Deferred income tax expense (benefit)1 (1,448,800) 726,800  114,200  290,600  20,400  7,600 
Increase (decrease) in allowance for doubtful accounts2 (1,300) (1,800) 400  (1,400) 4,100  1,000 
Increase (decrease) in stored value card liability and deferred revenue3 (405,200) 7,125,700  121,700  187,400  189,300  140,800 
Increase (decrease) in equity equivalents4 (1,855,300) 7,850,700  236,300  476,600  213,800  149,400 
Interest expense 331,000  170,300  92,500  81,300  70,500  64,100 
Interest expense, operating lease liability5 293,028  250,410  177,347  165,130  134,188  146,301 
Adjusted interest expense 624,028  420,710  269,847  246,430  204,688  210,401 
Tax benefit of interest expense6 (131,046) (103,074) (94,446) (86,250) (71,641) (73,640)
Adjusted interest expense, after taxes7 492,982  317,636  175,401  160,179  133,047  136,761 
(Gain) loss on marketable securities (900) 3,600  (6,400) (5,200) 3,500  (2,100)
Investment income, before taxes (900) 3,600  (6,400) (5,200) 3,500  (2,100)
Tax expense (benefit) of investment income8 189  (882) 2,240  1,820  (1,225) 735 
Investment income, after taxes9 (711) 2,718  (4,160) (3,380) 2,275  (1,365)
Net income (loss) attributable to noncontrolling interest (4,600) (300) 200  1,200  1,900  (400)
Net operating profit after taxes (NOPAT) 2,231,571  12,689,054  3,292,441  3,452,299  3,108,422  2,352,496 

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in stored value card liability and deferred revenue.

4 Addition of increase (decrease) in equity equivalents to net earnings attributable to Starbucks.

5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 8,799,637 × 3.33% = 293,028

6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 624,028 × 21.00% = 131,046

7 Addition of after taxes interest expense to net earnings attributable to Starbucks.

8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 900 × 21.00% = 189

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Starbucks Corp.’s NOPAT increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Cash Operating Taxes

Starbucks Corp., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Income tax expense 871,600  1,262,000  1,432,600  1,379,700  1,143,700  1,092,000 
Less: Deferred income tax expense (benefit) (1,448,800) 726,800  114,200  290,600  20,400  7,600 
Add: Tax savings from interest expense 131,046  103,074  94,446  86,250  71,641  73,640 
Less: Tax imposed on investment income 189  (882) 2,240  1,820  (1,225) 735 
Cash operating taxes 2,451,257  639,156  1,410,606  1,173,530  1,196,166  1,157,305 

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Starbucks Corp.’s cash operating taxes declined from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Invested Capital

Starbucks Corp., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Current portion of long-term debt —  349,900  —  400,000  —  — 
Long-term debt, excluding current portion 11,167,000  9,090,200  3,932,600  3,202,200  2,347,500  2,048,300 
Operating lease liability1 8,799,637  8,183,340  7,778,382  6,526,864  5,102,191  4,354,194 
Total reported debt & leases 19,966,637  17,623,440  11,710,982  10,129,064  7,449,691  6,402,494 
Shareholders’ equity (deficit) (6,232,200) 1,169,500  5,450,100  5,884,000  5,818,000  5,272,000 
Net deferred tax (assets) liabilities2 (1,579,400) 135,500  (789,100) (870,700) (1,137,400) (1,209,600)
Allowance for doubtful accounts3 6,700  8,000  9,800  9,400  10,800  6,700 
Stored value card liability and deferred revenue4 8,013,400  8,418,600  1,292,900  1,171,200  983,800  794,500 
Equity equivalents5 6,440,700  8,562,100  513,600  309,900  (142,800) (408,400)
Accumulated other comprehensive (income) loss, net of tax6 503,300  330,300  155,600  108,400  199,400  (25,300)
Noncontrolling interests 1,200  6,300  6,900  6,700  1,800  1,700 
Adjusted shareholders’ equity (deficit) 713,000  10,068,200  6,126,200  6,309,000  5,876,400  4,840,000 
Marketable securities7 (290,500) (449,200) (770,900) (1,276,100) (393,800) (453,800)
Invested capital 20,389,137  27,242,440  17,066,282  15,161,964  12,932,291  10,788,694 

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of stored value card liability and deferred revenue.

5 Addition of equity equivalents to shareholders’ equity (deficit).

6 Removal of accumulated other comprehensive income.

7 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Starbucks Corp.’s invested capital increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.

Cost of Capital

Starbucks Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 99,452,010  99,452,010  ÷ 120,284,647  = 0.83 0.83 × 7.04% = 5.82%
Long-term debt, including current portion3 12,033,000  12,033,000  ÷ 120,284,647  = 0.10 0.10 × 3.33% × (1 – 21.00%) = 0.26%
Operating lease liability4 8,799,637  8,799,637  ÷ 120,284,647  = 0.07 0.07 × 3.33% × (1 – 21.00%) = 0.19%
Total: 120,284,647  1.00 6.28%

Based on: 10-K (filing date: 2019-11-15).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 84,559,296  84,559,296  ÷ 102,064,636  = 0.83 0.83 × 7.04% = 5.83%
Long-term debt, including current portion3 9,322,000  9,322,000  ÷ 102,064,636  = 0.09 0.09 × 3.06% × (1 – 24.50%) = 0.21%
Operating lease liability4 8,183,340  8,183,340  ÷ 102,064,636  = 0.08 0.08 × 3.06% × (1 – 24.50%) = 0.19%
Total: 102,064,636  1.00 6.23%

Based on: 10-K (filing date: 2018-11-16).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 81,000,004  81,000,004  ÷ 92,817,386  = 0.87 0.87 × 7.04% = 6.14%
Long-term debt, including current portion3 4,039,000  4,039,000  ÷ 92,817,386  = 0.04 0.04 × 2.28% × (1 – 35.00%) = 0.06%
Operating lease liability4 7,778,382  7,778,382  ÷ 92,817,386  = 0.08 0.08 × 2.28% × (1 – 35.00%) = 0.12%
Total: 92,817,386  1.00 6.33%

Based on: 10-K (filing date: 2017-11-17).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 81,167,658  81,167,658  ÷ 91,508,522  = 0.89 0.89 × 7.04% = 6.24%
Long-term debt, including current portion3 3,814,000  3,814,000  ÷ 91,508,522  = 0.04 0.04 × 2.53% × (1 – 35.00%) = 0.07%
Operating lease liability4 6,526,864  6,526,864  ÷ 91,508,522  = 0.07 0.07 × 2.53% × (1 – 35.00%) = 0.12%
Total: 91,508,522  1.00 6.43%

Based on: 10-K (filing date: 2016-11-18).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 90,676,736  90,676,736  ÷ 98,180,927  = 0.92 0.92 × 7.04% = 6.50%
Long-term debt, including current portion3 2,402,000  2,402,000  ÷ 98,180,927  = 0.02 0.02 × 2.63% × (1 – 35.00%) = 0.04%
Operating lease liability4 5,102,191  5,102,191  ÷ 98,180,927  = 0.05 0.05 × 2.63% × (1 – 35.00%) = 0.09%
Total: 98,180,927  1.00 6.63%

Based on: 10-K (filing date: 2015-11-12).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 58,457,196  58,457,196  ÷ 64,975,390  = 0.90 0.90 × 7.04% = 6.33%
Long-term debt, including current portion3 2,164,000  2,164,000  ÷ 64,975,390  = 0.03 0.03 × 3.36% × (1 – 35.00%) = 0.07%
Operating lease liability4 4,354,194  4,354,194  ÷ 64,975,390  = 0.07 0.07 × 3.36% × (1 – 35.00%) = 0.15%
Total: 64,975,390  1.00 6.55%

Based on: 10-K (filing date: 2014-11-14).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt, including current portion. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Starbucks Corp., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 951,797  10,992,065  2,211,668  2,477,275  2,250,618  1,645,480 
Invested capital2 20,389,137  27,242,440  17,066,282  15,161,964  12,932,291  10,788,694 
Performance Ratio
Economic spread ratio3 4.67% 40.35% 12.96% 16.34% 17.40% 15.25%

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 951,797 ÷ 20,389,137 = 4.67%

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Starbucks Corp.’s economic spread ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Economic Profit Margin

Starbucks Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 951,797  10,992,065  2,211,668  2,477,275  2,250,618  1,645,480 
Net revenues 26,508,600  24,719,500  22,386,800  21,315,900  19,162,700  16,447,800 
Add: Increase (decrease) in stored value card liability and deferred revenue (405,200) 7,125,700  121,700  187,400  189,300  140,800 
Adjusted net revenues 26,103,400  31,845,200  22,508,500  21,503,300  19,352,000  16,588,600 
Performance Ratio
Economic profit margin2 3.65% 34.52% 9.83% 11.52% 11.63% 9.92%

Based on: 10-K (filing date: 2019-11-15), 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × 951,797 ÷ 26,103,400 = 3.65%

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Starbucks Corp.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.