Non-operating income: gains or losses from sources not related to the typical activities
of the business or organization. Non-operating income can include gains or losses from
investments, property or asset sales, currency exchange, and other atypical gains or
losses.
Interest income: revenue from investments that pay interest, such as a savings account
or certificate of deposit.
Interest expense: the interest that the company must pay after borrowing money.
--------------------------------------------------------------------------------------------------------------------The part of Dunkin’s Non-Operating Income that I want to highlight is the Loss on Debt
Extinguishment and Refinancing Transactions. This basically just means when Dunkin’
feels that has too much debt and they want to refinance some of their loans, the
expenses that come with refinancing those loans. When Dunkin’ got a loan from a bank,
but then decides they can get a better loan at a different bank with a lower interest rate
or longer repayment terms, the original bank will make Dunkin’ completely pay off that
loan resulting in those negative numbers in 2019 and 2017 that we see.
In Dunkin’s Annual Report in both 2019 and 2017, they stated how their company was
in “substantial indebtedness” which was limiting their ability to obtain additional funding,
increasing their costs of borrowing, and placing them at a disadvantage compared to
their competitors. Refinancing their loans and trying to extinguish this debt was a high
priority for them in these years.
--------------------------------------------------------------------------------------------------------------------The first thing that I want to call your attention to is the gain resulting from an acquisition
of the East China joint venture in 2018. Starbucks was in a joint venture with a
company: Uni-President Group, and in 2018 Starbucks bought out Uni-President
Group’s 50% stake in the East China joint venture for approximately $1.4 billion.
Then in 2019, we can see Starbucks’ net gain resulting from divestiture of certain retail
operations made a gain of $622 million. A huge part of this $622 million is because they
sold a retail business in Thailand to Thai joint venture for $601.9 million. This is most
likely because Starbuck’s felt that this business didn’t align with the market or the
direction that Starbucks’ officers wanted the company to go.
Finally, in 2018 Starbucks sold a retail business in Brazil to SouthRock, an acquisitions
and developments investment group. Also, in 2018, after Starbucks bought out UPG
from their East China joint venture, they sold their 50% ownership position in President
Starbucks Coffee Taiwan Limited to UPG for $181 million. Both of these transactions in
both Brazil and Taiwan make up basically all of the $499 million that we see.