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Pastimes : Starbucks SBUX

SBUX 88.88

+0.8%

Jan 9 9:30 AM EST

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To: Jean-Pierre Abe who wrote (14)	8/6/1996 11:30:00 PM
From: Sturgeon	of 148

They issued $80 million 4 1/2% convertible debentures due 2003 on August 3, 1993, convertible at $15 per share. They sold 12 million shares November 1994 in a secondary offering to raise $164 million. They issued $165 million 4 1/4% convertible debentures due 2002 in late 1995, convertible at $23.25. The company recently forced conversion of the $80 million convertible. The use of convertible debentures accounts for the debt level you mentioned. Because SBUX is only paying 4.x percent for all this money their profitabiltiy is acctually worse than it looks. ROE is about 10, but ROA is much lower. ROE would be much lower without these favourably low interest rate convertibles. SBUX issues Convertibles instead of shares sometimes. The net effect is the same as issuing shares once the conversion occurs. Maybe they use convertibles to pump up their anemic profitability with the low interest rates. I don't know.

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