If you look at new balance sheet (10Q), SBUX has only $635 million of current assets after subtracting liabilities. They also paid out over $150 million in dividends after that balance sheet was issued. That means they have around $485 million net current assets. (cash, investments and receivables minus all debt). They have set up no reserves for lawsuit. I'm not even including the money they used to buy back stock. Therefore they will be short $2.420 Billion when they lose Kraft lawsuit.
At this time, Starbucks believes an unfavorable outcome with respect to the arbitration is not probable, but as noted above is reasonably possible. As also noted above, Starbucks believes we have valid claims of material breach by Kraft under the Agreement that allowed us to terminate the Agreement without compensation to Kraft. In addition, Starbucks believes Kraft's damage estimates are highly inflated and based upon faulty analysis. As a result, we cannot reasonably estimate the possible loss. Accordingly, no loss contingency has been recorded for this matter.
Kraft Foods Global Inc. vs. Starbucks Corp. U.S. District Court Southern No.10 cv 09085 and 11-389-cv in the U.S. Court of Appeals for the 2nd circuit in New York. This is actual trial number for this suit.
On April 2, 2012, Starbucks and Kraft exchanged expert reports regarding alleged damages on their affirmative claims. Starbucks claimed damages of up to $62.9 million from the loss of sales resulting from Kraft's failure to use commercially reasonable efforts to market Starbucks ® coffee, plus attorney fees. Kraft's expert opined that the fair market value of the Agreement was $1.9 billion . After applying a 35% premium and 9% interest, Kraft claimed damages of up to $2.9 billion , plus attorney fees. The arbitration hearing commenced on July 11, 2012 and was completed on August 3. Starbucks presented evidence of material breaches on Kraft's part and sought nominal damages from Kraft for those breaches. Kraft presented evidence denying it had breached the parties' Agreement and sought damages of $2.9 billion plus attorney fees. We were expecting a decision from the Arbitrator in the first half of fiscal 2013 but now expect a decision in the second half of fiscal 2013.