Starbucks Responds to Moody's Downgrade

Starbucks Coffee company (NASDAQ:SBUX - News) issued a response to the decision by Moody’s Investors Service to downgrade the company’s credit ratings.

Troy Alstead, executive vice president, chief financial officer and chief administrative officer, issued the following statement:

“As we noted on our April 29, 2009 earnings call, Starbucks remains in a very solid financial position. The company continues to generate strong operating cash flow and maintain strong liquidity. For the first six months of FY 2009, Starbucks generated $715 million in cash from operations and approximately $479 million in free cash flow. Starbucks defines free cash flow as cash flow from operations less capital expenditures with capital expenditures for the first half of fiscal 2009 of approximately $237 million the period. Also during that period, the company reduced its short-term borrowings by $487 million to $226 million and we expect to substantially reduce the outstanding balance during the remainder of the calendar year.

We expect to deliver operating cash flow in excess of $1 billion in fiscal 2009, as we have for each of the past three years. At the same time, we continue to focus on cost savings throughout our organization and we delivered $120 million of permanent cost savings in Q2, following the $75 million produced in Q1. We expect to deliver approximately $150 million of such savings in Q3 and $175 million in Q4, for a total cost reduction exceeding $500 million in fiscal 2009.

We are ahead of target with our initiatives to position the company for sustainable, profitable growth, and the results of those efforts are reflected in Starbucks second-quarter financial performance. Finally, despite the difficult consumer environment, Starbucks second quarter non-GAAP earnings exceeded the First Call consensus estimate.”