Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to Starbucks Coffee Company’s Third Quarter Fiscal Year 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. DeGrande, you may begin your conference call.

Thank you, Mike. Good afternoon. This is JoAnn DeGrande, Vice President of Investor Relations for Starbucks Coffee Company. Joining me on the call today are Howard Schultz, Chairman, President and CEO; Adam Brotman, Chief Digital Officer; and Troy Alstead, Chief Financial Officer. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and the risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K. Starbucks assumes no obligation to update any of these forward-looking statements or information. This call is being webcast and an archive of the webcast will be available on our website at investor.starbucks.com later today. With that, let me turn the call over to Howard Schultz. Howard?

Thank you, JoAnn, and welcome to everyone on today’s call. I’m very pleased to share with you the extraordinary third quarter result that Starbucks reported today. Starbucks global comparable store sales grew 8% in Q3, 9% in each of our Americas and China Asia-Pacific segments, driven by 7% increase in traffic and representing Starbucks 14th consecutive quarter of comp growth in excess of 5%. Our revenue in Q3 increased the full 13% over last year to a record $3.7 billion. Operating leverage and our continuing emphasis on increasing efficiency and controlling costs drove operating margin up 150 basis points to a record, Q3 record of 16.4% and an operating income of up 25% to a Q3 record of $615 million. Together, these factors contribute to a record Q3 EPS of $0.55 per share, 28% over last years’ third quarter and the second highest EPS of any quarter in Starbucks 42 year history. Particularly noteworthy, these results were delivered in the phase of challenging economic and consumer environments in many of the 62 countries around the world in which we operate. At our December 2010 Investor Day conference, I laid out a strategic vision that completed Starbucks leveraging all of our unique assets, our robust and growing pipeline of innovation, would grown into over 19,000 store global footprint, our fast growing CPG presence and our best-in-class digital card loyalty and mobile capabilities to create a flywheel effect whereby each asset would leverage and enhance our brands and customer experience elevating the relevancy of all things Starbucks and driving increase profitability. I left the conference recognizing that this would have to be executed in a way that would be fully appreciated after the conference. The results we announced today, demonstrate the success of both our vision and our strategy for achieving it.…

Thanks Howard. As Howard said, there are number of factors that contributed to the strength of our U.S. business in Q3. From a digital perspective, these kind of past several years building an engine of digital touch points with our customers that not only allows us a deeper relationship with our customers but also pays off with incrementality for our business. Let me talk for a moment about the growth we're seeing in a variety of key digital card loyalty and mobile programs. In our third quarter, we saw 3% year-over-year growth in total dollars loaded on Starbucks card in retail North America and nearly 100% year-over-year growth in dollars loaded on our cards via Starbucks mobile apps and web properties. And the Starbucks card continues to represent nearly one-third of U.S. in-store transaction. We also saw over 30% year-over-year growth in total dollars spent in our stores from My Starbucks Rewards or MSR loyalty members in the U.S. And this momentum in loyalty is not just in volume. We’ve also expanded integration between MSR and our CPG channel as well as with our Teavana source. Regarding mobile, our momentum as the leading retailer in the mobile payment space also continued its rapid growth in Q3. I’m pleased to report that now when 10% of all transactions in our U.S. stores are made with a phone mobile devices have become increasingly important part of the customer experience at Starbucks as the fastest and easiest way to pay in our stores. And we will continue to bring more innovation to this space. As we’ve been building capabilities and customer enrollment in our card, loyalty and mobile initiatives we haven't taken our foot off of the pedal at all when it comes to Starbucks presence on the web and social media. We…

Thanks, Adam and good afternoon everyone. The third quarter results we announced today are a testament to the continue efficiency, diversity and overall strength of our business. We grew revenues by 13% with every segment contributing to that growth. We grew global comparable store sales by 8% with each region accelerating compared to last quarter. We expanded operating margin by 150 basis points with margin expansion in every segment. Starbucks cards loads grew by 30% with 24 countries now contributing. Our investment income grew 23% with both store and CBG partnership contributing. All of that together produced earnings per share of 55 cents. Our best third quarter ever, growing 28% over last Q3. For the next few minutes I will provide more context on our outstanding third quarter performance as well as update you on our fourth quarter projections. Then I will provide our initial outlook for fiscal 2014. Consolidated net revenues in the third quarter grew to $3.7 billion, 13% higher than a year ago. The growth was largely driven by global comparable store sales growth of 8%, including 7% traffic growth and a 1% increase in average ticket, also contributing revenues from 1,558 net new stores in the past 12 months, including 355 Teavana stores. Operating income grew 25% in the third quarter to $615 million. Operating margin expanded 150 basis points to 16.4%. Although coffee cost continue to be a benefit to us, contributing 60 basis points this quarter. Leverage on our strong sales was the biggest driver of the margin improvement. As an illustration of strong operationally effectiveness of our teams across the globe, our store operating expenses as a percentage of related revenues continue to dip near all time lows. As evidence of the deep cost discipline our partners have embraced, the continuous improvements we’ve…

(Operator Instructions) Your first question comes from Sharon Zackfia of William Blair. Your line is open.

Hi, good afternoon. I guess Troy I’m going to take the easy question. I guess the comment on the comp trend you know not continuing that you saw in the third quarter. Is there anything you're seeing specifically or anything you would like to comment on?

Thanks Sharon. No, that is not a message whatsoever about early trends in the portfolio at all. We’re not making any comments about current trends as usual. That is simply a message that 9% comp growth in the U.S. and the Americas in the third quarter was really a break through quarter. It’s phenomenonal as you know on a system the size of ours. A number of fantastic names all come together in that quarter to contribute to that kind of level of comp growth. So as we look at Q4, as we look at fiscal ’14 we expect very strong, very healthy, very consistent same store sales growth more in line with what we saw in the first half of the year. And that’s just recognition of product innovation, the loyalty program, the great experience for providing for our customers in the stores.

Perfect. Thank you.

Your next question comes from the line John Ivankoe of JPMorgan. Your line is open.

Hi, great, thank you. I mean you mentioned your foods impact you know to this quarter and you're cheating that without La Boulange. So I was just hoping you know to take this opportunity to talk about how significant you know La Boulange has been of you know in your early tests and you know what should we really expect to see you know from a customer (inaudible) point of view you know as far as the breakfast and the lunch products you know as we go forward in ’14 and ’15. And of course you know I asked this you know but in terms of your comp guidance into 2014 which is obviously lowered than what you just achieved, it seems like you know food at least is one thing that could be significantly more accretive you know for 2014 than it was for 2013.

Let me have Cliff speak to in particular what we're seeing in La Boulange now and I’ll come back and talk with you about the comp side for next year.

Thanks John. You know a strategy on this John is that we were going to acquire La Boulange to enhance the customer experience and leverage food as part of our future growth strategy. And I’m delighted to say in every market we’ve introduced La Boulange so far it’s been extremely well received. The product is fantastic and we're seeing really, really encouraging results. So the strategy is being justified and we are now through 1000 stores by the end of Q3 and every market we open we see a great reception, particularly around the pastries, the croissant which is the core product in this line of La Boulange. And it gives us every confidence that we're on the road to fantastic growth platform. We’ll start with breakfast. We’ll then enhance lunch. And the opportunity to enhance the current experience to the customers and gross sales is really strong. I’m looking forward to ’14 and ’15 that I’m extremely optimistic that this will be a platform to growth and as we realize the results in the coming months we’ll share more in the coming quarters.

And, John, specifically the guidance on ‘14, what I will tell you is we have very good confidence in our ability to very sustainable continue to drive healthy comp growth for our stores through innovation in our stores, productivity enhancements through loyalty program and yet through new things, such as the La Boulange which, as Cliff mentioned in our experience so far in our stores has just been nothing short of phenomenal and we are quiet confidence that as La Boulange rolls throughout the system, it will be a layer of comp growth for us in the system. Now with that said, as you will know, comp growth doesn’t trend as a percentage. You've got to recreate it every single quarter and every single year with new innovation, with great experiences, with new frequency among our customers and so we firmly believe that innovation such as Evolution Fresh, such as Teavana coming into the stores, such as La Boulange and enhanced food program, all those things and any others are what allow us to stick with confidence about our ability to drive consistent healthy comp growth into the year ahead.

Thank you.

Your next question comes from Joe Buckley of Bank of America Merrill Lynch.

Thank you. I’ll try to speak to because I like to ask Adam a question. Just whether it is possible to have a global Starbucks card and perhaps you well on the path to that it wasn’t clear from your comments?

Thanks, Joe. It’s a great question. And we are looking at ways that we can improve the ability for the cards to travel across regions. It’s not always possible in every case where it is, we are looking to do that and we already have some regions where the, the card can travel and where its not we’re continuing to look into ways so we can improve that.

Okay. And then, Troy, can I ask the question on the China, Asia-Pacific region. Just talk about the variables in the performance in the second quarter which look toward a little light on the operating income growth to this quarter which look terrific?

Joe, I'll address that specifically, and really so we did two or three things, but in particular in any one quarter in Chinese specific as we are experiencing the kind of returns and growth we are in that part of world and in China particular. We continue to make investments into the infrastructure, into supply chain, into our stores and in some quarters those investments will just be a little bit higher and what is proportionate that they are another quarters. So for example in the second quarter we had a higher growth rate in new store openings in that quarter over the previous year then we did in the third quarter, and that just a timing of the pipeline and when it comes to bear, in the fourth quarter ahead of us as I mentioned in my comments, we will once again have an acceleration in the number of new stores in the quarter. Those new stores in any one particular quarter put meaningful pressure on the margins just in the quarter, it become very profitable, very quickly and begin contributing, but there is margin pressure when you open that many stores in that particular quarter and we experienced that in the second quarter, and we experienced bit less of that in the third quarter, and that explains much of that differentiation that you are seeing. I’d also remind you and we pointed this out on our second quarter call a quarter ago and that is the second quarter of the previous year, fiscal ’12 had some unusual entries in it that made the year-over-year comparison difficult. So I have to go all the way back to back to really get the comparison.

Thank you.

Your next question is from Brian Bittner of Oppenheimer Company.

Troy you said in your comments that in 2014 you expect a nice acceleration in the CPG segment sales, I’m just wondering what would be the main driver of that? And also when are you going to possibly pull the lever on innings entering some international markets?

Brian, let me have John Culver speak to the first part of your question and then we’ll come back to the second part.

Hi, Brian. This is John. Thanks to your question. Now really what we’ve done over the last quarters really laid the groundwork for sustainable growth going forward in packaged goods and I want you to be clear that we are very confident and committed to delivering aggressive revenue growth, double-digit growth in FY ‘14. We believe that for a couple of reasons, first, obviously we’ve taken a less price reduction, Troy spoke about and with that we are seeing that show up in the stores down the isle. We’ve also introduced My Starbucks rewards, which better position us to continue to build customer acceptance and customer loyalty. And really we see tremendous opportunity to accelerate the premium single cup agreement that we have with Green Mountain and what we’ve seen in the past quarters is that that Starbucks share has grown faster than the overall, I’m sorry. Starbucks growth has grown faster than the overall premium single cup category. And with the recent announcement with Green Mountain, we're going to be able to increase the number of SKUs that we offer going into next year by three fold. So tremendous opportunity relating to premium single cup. As it relates to international, we're just laying the foundation around international. In the quarter that just ended we opened four new markets. We now do business in 25 markets out of the 62 markets around the world. So tremendous opportunity to continue to expand there. We have many new products and innovations that we have planned yet to come and we continue to invest in building our capabilities from a people and from a infrastructure standpoint. And a great example of that is Jeff Hansberry who over the last three years has built the channel business for us here in the U.S., is now positioned in Hong Kong and squarely focused on the China/Asia Pacific region and the opportunities that exist in that part of the world for the channels outside our stores. So a great opportunity for us in the future.

Terrific. And just a quick capital structure follow up, what would the leverage range be to keep a triple or a A minus rating?

Your next question is from Matthew DeFrisco of Lazard.

Thank you. I just had one clarification and then a question. I think you said Troy you compared China/Asia Pacific segment margins to sequential, on a sequential basis. Can you just I guess confirm that in 4Q you expect similar year-over-year margin expansion for that region?

Now what I was actually saying was not that. That we expect the fourth quarter to not expand quite like the third quarter did. And that’s simply due to the timing of new store openings. We’ll open significantly more new stores in the fourth quarter in CAP than we did in the third quarter. So again to my response earlier I think to Joe, you know in regions like China is to say that we're making significant investments to accelerate growth. That includes infrastructure and people investment. It also includes the short term, very short-term margin pressure that comes from acceleration of new stores in any particular quarter. in Q3 the impact was quite low, a little bit higher in Q4 so my comment was simply to make you aware that our expectation for margins in the fourth quarter are a bit lower than they were in the third quarter.

Okay I just wanted to, I didn’t hear if you said you were implying expansion though but just less expansion on a year-over-year basis in the fourth quarter.

Yes, less expansions and the very strong 250 basis points expansions we experienced in Q3.

Thank you for walking me through that and then Adam I had a question with respect to digital. I was wondering where do we see or when do we think you’ll have the opportunity to potentially maybe even go across channels. It’s been a tremendous success obviously in making your traffic very stable and superior than your peers in the store, in your Starbucks stores. How about maybe even using that to try and drive trial traffic and new product trail traffic in the channel development or in the CPG channel specifically ranging as you have obviously a whole cupboard full of new products coming out Evolution Fresh, et cetera through the CPG channel. When do you think, how do you stage that? Do you put the products out there first or do you use that as sort of a launch pad as well using the digital?

Thanks, Matt. It’s a good question because we're actually have good news to deliver there. And we have already started doing that. For example, we have begun to roll out of integrating our digital loyalty program MSR with channel in the United States with the ability to earn stars when you buy packaged coffee down the grocery aisle. We just started that and you can, and we do plan on expanding on that in the future. Secondly, we have fully integrated My Service Reward, our mobile app and our card program with Teavana. And you can actually go in to Teavana stores and use your Starbucks card and earn loyalty points in that, those branded stores as well. So those are two examples of where we’ve already started and those are good examples of what we plan more of in the future.

Adam, once again I would add one thing. This is Howard. Your question isn’t only about digital, it’s about leveraging the capability of our CPG business off of the tailwind of our core retail business once we build the brand and loyalty. So a great example is the acquisition of Evolution Fresh. We placed Naked Juice in Starbucks retail store. We’ve seen a significant lift in terms of sales there and as a result of the [approved stores] of that brand inside our stores. We are now shipping Evolution juice to across hundreds of Supermarkets across the country, including as we sit here today, we are shipping national Evolution Fresh juice to whole foods. And I don’t think we would get that opportunity if we didn’t have [approved stores] fruit source everyday validating Evolution Fresh brand inside Starbucks. So when I spoke in my remarks, the flywheel effect is not only on the digital opportunity to leverage it across channels and concepts, as Adam mentioned with Teavana, but also product categories then we will be able to validate inside our stores and Evolution Fresh is the perfect example of that and we are really proud that whole foods is going to be listing Evolution Fresh nationally.

Excellent. Thank you very much for all that detail.

The next question comes from Jeffrey Bernstein with Barclays.

Great. Thank you. Also just one clarification and then a separate question. In terms of the clarification, Troy, I think you, when you talked about the fourth quarter the comping more in the 5% to 7% range. Just wondering specific to the fiscal third quarter, you had brought up that, I guess, trends had slowed last June and into July, I think you will recall. Just wondering if you can size up the sequential maybe trend through this quarter just ended on, with on two basis to kind of flush out the noise from last year was it stable through the quarter, because we definitely hearing from other peers the things have slowed down June and into July, I’m just wondering how you read the two-year trend through your fiscal third quarter and I had a question on China?

Yeah. I’ll, to your first question, Jeff, I’ll -- I’m not going to make any comments about in quarter trends. I would remind you that despite what was slowing that did impact this last June that we spoken about previously. Q3 of last year was still was a very strong 7%. That’s a challenging comp growth that lasted any point in time. And so all the better reflection of the 9% we delivered in the third quarter. Now as we are moving into fourth quarter, given what we expect in the market and our ability to continue drive innovation to the stores. We once again expecting there will be comp growth. But, again, I won’t speak any current quarter trends and I won’t speak any trends about the third quarter or the monthly results within that.

Troy, can I speak up on that. I’d say instead, perhaps some of you are taking away any concern we may have about comp growth. So let me just hit that straight on. We had 14 consecutive quarters in a row of 5% or greater. Our peer group or those people who reported before us you saw that they -- comp growth they reported was low single digits. For us to have a 9% comp growth in United States of America given what’s going on in this country. It is unparallel and unprecedented. It would be irresponsible for anyone at Starbucks to share with you that we intend to express you today that we can repeat that at 9%. So the better part of our, is for all of us to say to you we are extraordinarily proud and stunt that we are able to achieve a 9% comp and would be irresponsible to share with you that we can do that again in Q4. Now having said that, our expectations of ourselves that we are going to deliver a healthy comp growth in Q4 that our investors will be proud of. Let’s get off the comp number, because it’s not the issue, issue is we are building a great extraordinary endeavoring company and the comps are going to follow that.

Understood. And then just simply on China, we are hearing from peers and just broader macro data kind of slowing whatever GDP growth and retail sales growth? Obviously you put up a strong 9% comp. I’m just wondering at least two-year basis if a modest slowdown? I don’t know if there is any whether you’d attribute that just lower large numbers were sustaining that kind of double-digit run rate would be somewhat impossible or whether you think there is some macro impact or whether maybe avian flu had any impact on your trends this quarter or just the system getting much larger and if were the double-digit pace difficult to sustain?

Yeah. We’ll have John Culver take that.

Hi Jeff. This is John. First off, our Q3 results were very strong and on top of the numbers that we were able to deliver, as Troy mentioned, we were able to make investments in the business as we’ve been doing over the last several years to take a very long-term view on China and how we want to grow our business in a very focused and very disciplined way. The 9% comp for the quarter was driven mostly by traffic, 8% of that was traffic. So we continue to see new customers and existing customers coming into our stores and continuing to experience Starbucks in unique ways. We also see that a lot of the innovation that we are bringing in to the stores, whether it's what Adam spoke about around My Starbucks Rewards and the Starbucks Card or whether it’s the local products that we're offering are resonating with the customers. For instance in the quarter, we ran a promotion around this dragon and -- around Dragon Dumplings for Dragon Boat festival. That was something that was new that we haven't done in previous years. And it drove the mentality into the business. So very pleased with what we're seeing in China. We continue to remain very focused and disciplined on how we want to grow this business. And again we are optimistic that we can continue to do it the right way and in a way that continues to elevate our brand.

And perhaps just to add a little bit to that, we're now approaching 1,000 stores in China. That market for us is progressing to a size and scale where we believe we have the opportunity just as we've done for many, many quarters now in the U.S. to deliver stable, consistent, healthy comp growth through great experiences in stores through product innovation as John mentioned. So, China is now becoming a large market for us, significantly more opportunity ahead. And we believe we can continue to drive averaging the volumes and comp growth within that market.

Your next question comes from Keith Siegner of Credit Suisse.

A question for Cliff actually, Troy gave us the details on the third quarter of Americas and U.S. comp, including the beverage innovation and especially as it relates to those (inaudible) and refreshers, can you give us a little detail, is this driving new customers? Is this bringing new folks in for different occasions? Or is this increased frequency of morning folks coming back in the afternoon? And then a subsector or a subpart question to this, are you also finding -- are you able to drive more packaged coffee whether that's kicked up you another packaged coffee sales in the store, it seemed like there were good promotions for that in-store purchases this quarter, did that also help contribute to the comp? Thanks.

Thanks Keith. And really, really pleased with the way the beverage growth is contributing to overall comps. The good news is we are seeing increased comps on all day parts, and I think our innovation around beverages, particularly around refreshers gives us that opportunity to serve morning customers and the afternoon refresher really does complement an afternoon day parts. Our ice tea is complementing our lunch platform, so there is great innovation there. And I also think it makes us very relevant when you get the seasonal changes, the experience in the summer and the refreshment platform has shown really, really well. So it's not only providing additional occasions for existing customers but is making relevance to new customers in different day parts, and that is, as Troy said it's all parts of the country, it's all day parts. So it's extremely healthy. With packaged coffee, that has not been a significant driver of our comp. It really has been beverage. It has been food and that has been the main drivers this year which for us is the healthy part of our business. It is a -- as with the CPG channel, we are seeing the customers really adopt single serve in a big way. And whether that's (inaudible) platform, whether that's our K-Cups, whether that's -- we are really well positioned to accommodate and serve our customers as they change their habits to adopt a much more single serve in that sector. So it is playing its part, but it's the beverage innovation and really our ability to increase the number of customers, we are serving at peak with our operational discipline and on customer service that is driving the -- the healthy comps in this quarter and going forward.

Thanks and very, very impressive performance folks.

Thanks, Keith.

Thanks Keith.

The next question comes from Michael Kelter with Goldman Sachs.

Can you guys talk more broadly about your food plans in the coming years beyond, just upgrading the bakery case with La Boulange. What else should we expect from you on food at breakfast, lunch and dinner. And where is the limit with respect to what you can versus can’t do in food given your store operating model?

Michael, thanks for that. And thanks for the opportunity to talk about food. The acquisition of La Boulange was, there is opportunity to really enhance the experience and really get good quality food, which we needed to be relevant in the market price and also to develop food that matches our account and really plays with where we started La Boulange. We are really growing our capability and we are showing that we can deliver world-class products in Starbucks stores. This is really early days for us because as you can imagine we are having to learn the way to operate food within our store environment and obviously it’s got to compliment the coffee but we make sure we do not slow down the speed of service. And the first 1000 stores has been an amazing learning opportunity. We have also with La Boulange capability able to respond quickly to adapt recipes and to evolve our product offering. I just think we’re at the beginning we’ve got the capability but only around breakfast and we are able to start testing some lunch ideas. We have an evenings and innovation we’re testing in our stores and all of these just build well in the future. And we over the last five years, we’ve developed a testing capability to make sure when we bring things into the stores, that is operationally a good feeling and good experience for our partners behind the bar. They are proud to deliver the products to the customers that it enhances his overall customer experience. So we just see that we are in the early days but only here in the U.S. but I can imagine the recipes and ideas, we’ve started in license rules and it will go into other parts of the world. And this a global capability that we’re going to develop and it will be matching all beverage capabilities we’ve had for the last 30 years.

And I have some really quick, the deck you are tacking on. You mentioned for general corporate purposes, are there any specific calls on cash which we think about other than repurchases?

No. Not at this point in time. There is still is the arbitration results yet to be announced. We have as I mentioned no new news on that whatsoever but that certainly is in our mind just the platform regardless of any answers. And then beyond that, no specific messages on use of capital at this point.

Thank you.

Your next question comes from John Glass with Morgan Stanley.

Thanks. So historically you’ve made a bunch of investments every year that run through P&L. Can you or are there any numbers you can provide for preliminary in 2014 investments and what they relate to. You also didn’t, I think, address capital in the release which are capital spending budget for ‘14 and then finally, you said the net effect of green coffee left these things was $0.09 to $0.10. So what’s the gross benefit of coffee for 2014, Howard?

John, our planning cycle in our company is really beginning now and some of that work is done but much of it is in a couple of months ahead of yet. As we finish up this fiscal year, and just remember we’re not even in the new fiscal year yet. So our final capital spending plans, off course, learned away but they are going through the normal scrutiny and planning a discussion that we would always put them through as all of our investment plans for the year. So no messages for you. At this point in time on any of those things, those are all things that I will detail for you in our call mid-October every year. But suffice to say the broad based targets I provided today in terms of margin expansion and in terms of earnings per share, our numbers that we feel quite confident in being able to deliver even with those investments that we have. Now, when it comes to coffee, yeah, I spoke about the $0.09 to $0.10 as the net benefit. So you would all have clarity as to what we expect to deliver of that benefit to the bottom line. That’s primarily net of the CPG price actions we’ve taken recently. And then another normal course investments and again what that -- the size of those are influx to stage, I won’t provide detail on the gross coffee benefit particularly because we still have part of the fiscal '14 year as they open in terms of price locking at this stage. But the gross benefit is somewhat higher than that $0.09 to $0.10 net benefit that I spoke of.

Your next question comes from Nicole Miller with Piper Jaffray.

Howard, I was wondering if you would talk to us about your vision of -- as these stores come together with the digital experience and food, beverage innovation on tea and innovation and evolution of the platform you have today, what does that translate to in terms of domestic growth opportunities and global growth opportunities? And then Adam, if I can do a follow up with you as well, I think it's been great color around technology and it is very disruptive in the fact that it’s channel agnostic. I looked into how you used it and it is a little bit manual. I am wondering if you ever envision that becoming more automatic?

Sure. Nicole, it's a good question, because one of the things that's allowed us to get such a big lead in mobile payments is that we did not try to, for example, go right to the cloud, go right to some sort of cap to pay although we do plan in the future on implementing whatever is state-of-the-art and most convenient to our customers. But where we have done a barcode, where we have done other things has given us an ability to be nimble, be fast and it's given us the lead in the space.

In terms of your question about the multiple formats and growth opportunities, let me begin with saying that the lens that we have used to decide whether or not to acquire these companies was first and foremost to try and check the box and answer the question in the affirmative, does this acquisition enhance the experience inside our retail stores? So obviously in listening to Cliff talk about La Boulange , we certainly have been able to do that in terms of what food is representing in the 1000 stores and what's going to come nationally. Secondarily, the acquisition of Evolution has given us a health and wellness brand and a platform to build well beyond juice and take that into the CPG category. And thirdly, Teavana, a little bit different, we bought 300 plus stores in malls that we thought we could bring our creativity and our confidence into that category and do for tea what we did for coffee in a number of ways. Beginning as I said in my remarks it will open up a reimagined flagship store in every site of Manhattan in the fall and that will be the beginning of demonstrating the integration and our capability of theatre and romance and handcrafted tea beverages hot and cold inside at the Teavana store. And that will be the template to get mingle back into Teavana stores and do that in near stores and then over time, you'll begin to see Teavana handcrafted beverages inside Starbucks as well as a very high quality super premium loose teas. So the integration of Teavana into Starbucks, the integration of La Boulange into Starbucks, the integration of juice in our stores. But the Teavana opportunity I think is at least 1000 stores in North America and the opportunity that we saw during the acquisition due diligence for Teavana was much greater outside the North America given the propensity of people consuming tea in parts of the world where we are very strong specifically Asia Pacific. So I think this is the early days of these growth channels for us but as I said in previous calls no one should lose sight of the fact that in the last two years, the Starbucks stores that we opened have been some of the best performing stores in almost a decade in terms of average unit volumes and sales to investment ratio. And we have no plans whatsoever to slow down on the U.S. opportunity, including the success that Cliff and his team have had in drive-throughs which has added a significant incrementality. So I think we're in a very unique position to offset any slowdown in the economic environment and continue with the pace we've had in both our core business and take advantage of the acquisitions we've made to leverage inside and outside of our stores.

Your next question comes from David Tarantino with Robert W. Baird.

Troy I just or maybe Howard, I just wanted to come back to the question on the debt placement. And the thought that you need additional liquidity given how much cash is already on the balance sheet and how much free cash flow you're generating. I’m just wondering is the big acquisition part of the near-term strategy or is that a possibility. I think you mentioned at the Analyst Day back in December that that you’re going to absorb but you already have. I’m just wondering if the thinking there might have changed over the last six months or so.

I would say -- it’s Howard. Just I would say candidly with the three acquisitions we’ve made over the last year and a half or so, and the opportunities we have to integrate those acquisitions inside our stores take advantage of globally. I would say that we have enough to digest in the near-term and just nothing candidly in our guideline that would suggest that we’re involved and engaged in anything that we’re going to acquire. And Troy do you want to add?

David, I would just say really for my comments with respect to debt we have loan recognize that there is opportunity with extremely conservative balance sheet to bring a bit of debt on to the balance sheet and frankly, the market conditions have been very good for that in the last several months as you know. So that combined with just as we look to the future and think about our cash around the world and how that continues to grow, we’ve made a determination this is the right time to get into the markets that would bring a little of debt on and that’s really what’s behind.

I would say also we work with our board and I think we’ve reached the consensus for the fairly opportunistic given the pricing of this kind of money.

Great and then maybe just a quick follow up, once you pass the [crest] I don’t know it would just be a signal then that you could become more aggressive with the dividend or buybacks, is that the idea?

David, that’s always a possibility. I’m not consciously signaling that today, but I’ll tell you as you know every year we go through an evaluation of our cash flow, of our capability, of our plans ahead and of our dividends and the pay of ratio and how active we are on repurchases. So that’s an ongoing evaluation, certainly something we’ll look at as we end this fiscal year and move into the next fiscal year. And then we’ll come back and I expect we’ll have more to tell you about that when we get into the October call.

JoAnn, we take one more call.

Yeah. Thank you, Howard. We’ll take one more call and we’ll call those of you who left hanging on the line.

But, we’re looking for a good question in the last call.

You don’t worry.

The last question comes from Andy Barish with Jefferies.

Lot of pressure, Andy. Andrew Barish - Jefferies & Company: Howard, how about we can [hawking] back to another company in the industry this week that talks about some throughput issues as a bottleneck, love to hear your perspective as the operating side of the business has come such a long way, just in terms of kind of where do you stand in terms of labor investment or some examples of how you’re handling the increase volumes and comps and complexities in the U.S. store footprint?

I think Cliff and his team of operators deserve all the credit and I give it to Cliff to answer the question in specificity. But let me frame it for you. We’re serving more customers today in our U.S. stores than any other times in our history and that is happening for a number of reasons. The peak periods will become much more effective and efficient being able to move our customers through in a satisfactory way. But the clear difference is the day part in these states that we are satisfying that really was not in existence five years ago. That’s a credit to the operators, the product innovation. And specifically what’s happening on mobile because the mobile platform that Adam talked about earlier which is growing at rates that are just unbelievable and put us in a position where we’ve more transactions on mobile than any other retail in the world is also creating speed of service and efficiency and also satisfying our customers in ways that they have not been satisfied before. But the real credit in all this goes to Cliff and his operators. Cliff?

Thanks, Howard. I thank you for giving me space to answer a question. Andy thank you. The work that we’re doing everyday in our stores is the work of serving our customers and we’re really focused on the product we develop and the way we bring them into store, the testing capability that we’ve never had before and we have an incredible team of people. The team work that is out there today is far better everything we’re doing around the environment to set our partners for success is critical and I really just want to thank our partners for their hard work each and every day. They’re doing incredible job. They are more productive than they’ve ever been. And that said, we still see opportunity to grow capacity and at the innovations around day parts whether it’s beverage, whether it’s food, whether it’s juice, whether it’s combinations in the future, all of those give us the real potential to continue growing and we will continue to do that work. Technology will support it whether it’s the digital (inaudible) and we have some exciting things in the pipeline. So thanks very much, Andy.

That concludes our call and our fantastic third quarter results. Thank you for joining us. We will talk to you again in November. Thank you.

This concludes Starbucks Coffee Company’s third quarter fiscal year 2013 earnings conference call. You may now disconnect.