week 2 assignment

ACCT 540 Week 2 Assignment

The management’s discussion and analysis section of a company’s annual report is known to be the main source of comments from the U.S. Securities and Exchange Commission staff. The Securities and Exchange Commission is required by the Sarbanes Oxley Act to evaluate companies at a minimum of once every three years. In the management’s discussion and analysis section, management is encouraged to tell the company’s story so that investors can get an idea of what the company is like from the viewpoint of management. The focus of the management’s discussion and analysis section is typically on heightening the executive overview in order to give the investor a well-composed summary of the challenges and risks that impact the company’s cash flows and results of operations. With regards to these results of operations, the Securities and Exchange Commission encourages management to disclose any uncertainties, trends, changes to the financial statements, and analysis of the causes of such changes.

Overall, the management’s discussion and analysis section of Starbucks Corporation’s annual 10k report complies with the expectations of the Securities and Exchange Commission. In this section, the management of Starbucks Corporation communicates the significant details of the 2014 fiscal year as well as how the 2014 statistics relate to the prior years. The difference of the statistics between the 2014 fiscal year and the prior years are then disclosed with analysis of the causes of such differences. Towards the end of the management’s discussion and analysis section, the management of Starbucks Corporation discusses the challenges risks associated with their company, noting that the company’s financial standing was not significantly harmed by any risks that were posed in the fiscal year of 2014.

Investors will find from reading the management’s discussion and analysis section of Starbucks Corporation’s annual 10k report that the company experienced a net increase in revenue in 2014 by 11%. This is mainly due to a 6% growth in store sales, and increases in consolidated operating income and earnings per share. The company’s increase in total revenue for 2015 was also due to the acquisition of 555 new Starbucks-operated stores and their successes in adding more premiem single-serve items to their product line. Capital expenditures stayed about the same from 2013 to 2014, and the company was able to return $1.6 billion to its shareholders in 2014 by way of share repurchases and dividends.

The financial state of Starbucks Corporation for the fiscal year of 2014 was greatly impacted by the $2.8 billion Kraft litigation charge that took place in the prior year. The dispute involved an agreement that Starbucks had started with Kraft in 1998 to allocate and sell Starbucks brand coffee in grocery stores. The ruling concludes a dispute that was started in 2010, when Starbucks offered Kraft $750 million to end the agreement. When Kraft refused to accept the offer, Starbucks dropped the agreement anyway and tried to gain control of its packaged coffee business as revenue in that segment flourished and outshined gains in the company’s other segments. At the time, Starbucks was thriving off of the new Starbucks products introduced in grocery stores such as K cups, and this source of revenue would not have been possible if it weren’t for Kraft.

Starbucks expects their revenue to grow 16% to 18% in the 2015 fiscal year. This includes the expected growth in revenue resulting from gaining Starbucks Japan. Starbucks Corporation notes that about half of the new stores that are expected to open will be in their Chinese or Asia Pacific segment. Also in 2015, Starbucks plans to alter the business model from a joint venture to a company-operated market.

As a whole, the management’s discussion and analysis section of Starbucks Corporation’s annual 10k report is written in a clear, concise manner that complies with the expectations of the Securities and Exchange Commission. By reviewing the management’s discussion and analysis section of Starbucks Corporation’s annual 10k report, investors can gather a clear understanding of the financial standing of Starbucks Corporation from the perspective of the company’s management.

References

Heller, M. (2014, November 25). SEC Encouraging Firms to 'Tell Their Story' in

MD&A. Retrieved July 18, 2015.

Jargon, J. (2013, November 13). Starbucks Fined $2.8 Billion in Grocery Dispute.

Retrieved July 18, 2015.

Starbucks Corporation (2014). Form 10-K 2014. Retrieved from SEC EDGAR

website http://www.sec.gov/edgar.shtml