Projected Income statement for Starbucks - WITHOUT additional investment 2002 Revenue Co - Owned North American Co - Owned International

Total Company - Operated Retail Speciality Operations Net Revenues COGS Gross Profit Joint - Venture Income Expenses: Store Operating Expense Other Operating Expense Depreciation & Amortization Expense GAS Additional expense Operating Expense Operating Profit Net Income 1121.1 127.2 205.6 202.1 0 1656 1394.027 158.1663 255.6524 251.3004 40 pg-12 para 3 2099.146 2003 Data Source Assumption/Reasoning

*for Number of stores refer additional ca 2583.8 3199.003 pg-12, para 2 assuming revenue increases at the same 209.1 305.286 pg-12, para 2 assuming revenue increases at the same 2792.9 3504.289 496 585.28

assuming revenue increases at the same

3288.9 4089.569 1350 1678.652 1938.9 2410.917 35.8 44.75

assuming COGS to be a fixed percentage

assuming JV income growing at previous

assuming this expense to be a fixed perc assuming this expense tobe a fixed perce assuming this expense tobe a fixed perce assuming this expense tobe a fixed perce

318.7 356.5208 215.1 240.6264

fixed percentage ( 2002 )of Operating pro

*Data for 2002 from pg-13,Exhibit-1

n/Reasoning

er of stores refer additional calculation evenue increases at the same rate as previous year; rate for last year = 2583.3/2086.4 = 1.2381 evenue increases at the same rate as previous year; rate for last year = 209.1/143.2 = 1.46

evenue increases at the same rate as previous year; rate for last year = 496/419.4 = 1.18

OGS to be a fixed percentage (2002) of revenue(E13) for 2003

JV income growing at previous year's growth rate = 35.8/28.6=1.25

his expense to be a fixed percentage ( 2002 )of revenue(E13) of 2003 his expense tobe a fixed percentage ( 2002 )of revenue(E13) of 2003 his expense tobe a fixed percentage ( 2002 )of revenue(E13) of 2003 his expense tobe a fixed percentage ( 2002 )of revenue(E13) of 2003

ntage ( 2002 )of Operating profit of 2003; this implies a fixed tax rate

Projected Income statement for Starbucks - With additional $40million investment 2002 Revenue Co - Owned North American Co - Owned International Total Company - Operated Retail Speciality Operations Net Revenues COGS Gross Profit Joint - Venture Income Expenses: Store Operating Expense Other Operating Expense Depreciation & Amortization Expense GAS Additional expense Operating Expense Operating Profit Net Income 1121.1 127.2 205.6 202.1 0 1656 1826.779 207.2664 335.0155 329.3124 40 2738.374 2583.8 209.1 2792.9 496 4181.84 520 4701.84 657.267 2003

3288.9 5359.107 1350 2199.761 1938.9 3159.346 35.8 44.75

318.7 465.7222 215.1 314.3296

* Data for 2002 from pg-13,Exhibit-1

Summary Without additional investment Invest $40 mn Operating Income Net Income Operating Income Net Income Difference in NI 356.5208 240.6264 465.7222 314.3296 73.7 million $

(in favor of investment)

Data Source

Assumption/Reasoning

*for Number of stores refer additional calculation pg-12, para 2 assuming a best case estimate of weekly sales of $20,000 for all company operated stores in North America pg-12, para 2 assuming a best case estimate of weekly sales of $20,000 for all company operated stores in international ma

Assuming specialty operations income is directly proportional to no.of licensed stores; assuming ratio of sales

assuming COGS tobe a fixed percentage ( 2002 )of revenue of 2003

assuming JV income growing at previous year's growth rate = 35.8/28.6=1.25

assuming this expense tobe a fixed percentage ( 2002 )of revenue of 2003 assuming this expense tobe a fixed percentage ( 2002 )of revenue of 2003 assuming this expense tobe a fixed percentage ( 2002 )of revenue of 2003 assuming this expense tobe a fixed percentage ( 2002 )of revenue of 2003 pg-12 para 3

fixed percentage ( 2002 )of Operating profit of 2003

investment)

ted stores in North America ted stores in international markets

stores; assuming ratio of sales to licensed stores remains constant

Additional calculations Total no. of company -operated stores in North America in 2003 = 525+3496 = 4021 Total no. of licensed stores in North America in 2003 = 225+1078 = 1303 Total no. of International Company operated stores in 2003 = 1.301*384 = 500 where growth rate is previous years growth rate = 384/295=1.301 Similarly ,Total no. of International licensed stores in 2003 = 1.46*928 = 1358 avg sales per store for 2002 = net revenue /total no. of stores total no. of licensed stores = 1078 + 928 = 2006 Hence, avg sales per store for 2002 = 496/2006 = 0.247

Data Source page 7 ; para 5 and Exhibit 2 page 7 ; para 5 and Exhibit 2 pg-13, Exhibit 2 pg-13, Exhibit 2 pg-13, Exhibit 2

Assumption

Rate of increase in number of stores is same as last year

pg-13, Exhibit 2

4021

500