COACH INC (COH) SEC Filing 10-K Annual report for the fiscal year ending Saturday, July 1, 2017

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Exhibit 99.1

Coach, Inc. Reports Fiscal 2017 Fourth Quarter and Full Year Results

Board Declares Quarterly Dividend

NEW YORK--(BUSINESS WIRE)--August 15, 2017--Coach, Inc. (NYSE:COH) (SEHK:6388), a leading New York-based house of modern luxury accessories and lifestyle brands, today reported fourth quarter and full year results for the period ended July 1, 2017.

Victor Luis, Chief Executive Officer of Coach, Inc., said, “Our strong fourth quarter results – in which we achieved mid-single-digit North America comparable store sales for the Coach brand and drove solid growth at Stuart Weitzman - capped an excellent FY17 performance for the company. For the year, we posted a double-digit increase in net income as we continued to make progress on our brand and company transformation plan. We generated positive Coach brand North American comps in each quarter, while driving solid international Coach brand sales gains, notably in Europe and Mainland China. Importantly, the Coach brand evolved across the key consumer pillars of product, stores and marketing, with strategic actions including a broader 1941 collection, dual gender runway shows, the execution of a differentiated store concept and new collaborations and campaigns further elevating brand perception.”

“We were also very pleased with the overall contribution of the Stuart Weitzman brand as we invested in the brand, both in stores and most significantly in people, bringing in the key leadership and design talent to drive performance in both growing the global footwear category and in their nascent accessories business.”

“We also took a major step in our corporate transformation with the acquisition of Kate Spade & Company, which closed in July, becoming the first New York-based house of modern luxury lifestyle brands. Kate Spade brings a new, unique brand attitude and an additional consumer segment to the Coach, Inc. portfolio and we expect that this acquisition will enhance our position in the attractive and growing $80 billion global premium handbag and accessories, footwear and outerwear market.”

53rd Week Discussion - Fiscal 2016:

The results for the fiscal fourth quarter and year ending July 1, 2017 included 13 and 52 weeks, while the fiscal year ending July 2, 2016 included 14 and 53 weeks, respectively. As previously reported, the 53rd week contributed about $84 million to 2016 fiscal fourth quarter and year sales, including $77 million in Coach brand revenue and $7 million associated with Stuart Weitzman. The additional week added $0.07 to earnings per diluted share in fiscal 2016.

Non-Cash Charges and Non-GAAP Reconciliation Items - Fiscal 2017:

Non-Cash Charges:

During the fourth fiscal quarter of 2017, the Company recorded non-cash impairment charges related to stores and a negotiated reduction in a purchase commitment which increased SG&A expenses by $20 million on both a reported and non-GAAP basis.

Non-GAAP Reconciliation Items:

In addition, the Company also recorded the following on a reported basis:

  • Operational Efficiency Plan: Fourth fiscal quarter charges of approximately $7 million, primarily related to organizational efficiency and technology infrastructure costs. Full fiscal year charges of approximately $24 million, primarily related to organizational efficiency, technology infrastructure costs and to a lesser extent, network optimization costs.
  • Stuart Weitzman Acquisition-Related Costs: Fourth fiscal quarter income of approximately $28 million, consisting of $35 million in income associated with a reduction in estimated contingent purchase price payments, included in Coach brand results, partially offset by $7 million of integration-related costs included in Stuart Weitzman results. Full year income of approximately $6 million, consisting of a net of $27 million in income primarily associated with a reduction in estimated contingent purchase price payments, included in Coach brand results, partially offset by $21 million of integration-related costs included in Stuart Weitzman results.
  • Kate Spade Acquisition-Related Costs: Fourth fiscal quarter and full year charges of approximately $17 million, which relate to fees for bridge financing and acquisition-related costs.

During the fiscal fourth quarter of 2017, these three items decreased the Company’s consolidated reported gross profit by approximately $2 million, decreased SG&A expenses by about $16 million and increased interest expense by approximately $10 million. Including the net positive impact on the provision for income taxes, reported net income was favorably impacted by $10 million or about $0.03 per diluted share in the fourth quarter.

During the full fiscal year of 2017, these three items decreased the Company’s consolidated reported gross profit by approximately $3 million, increased SG&A expenses by about $22 million and increased interest expense by approximately $10 million. Including the net positive impact on the provision for income taxes, reported net income was negatively impacted by $18 million or about $0.06 per diluted share in fiscal 2017.

Overview of Fourth Quarter 2017 Consolidated, Coach, Inc. Results:

  • Net sales totaled $1.13 billion for the fourth fiscal quarter as compared to $1.15 billion in the prior year. Excluding the additional week included in fiscal 2016 results, net sales increased 6% on a reported basis and 7% on a constant currency basis. As planned, the Company’s strategic decision to elevate the Coach brand’s positioning in the North American wholesale channel through a reduction in promotional events and door closures negatively impacted sales growth by approximately 60 basis points in the quarter.
  • Gross profit totaled $755 million on a reported basis, while gross margin for the quarter was 66.5% on a reported basis compared to 67.8% in the prior year. On a non-GAAP basis, gross profit totaled $757 million, while gross margin was 66.8% as compared to 67.8% in the prior year.
  • SG&A expenses totaled $562 million on a reported basis and represented 49.5% of sales compared to 57.7% in the year-ago quarter. On a non-GAAP basis, SG&A expenses were $577 million and represented 50.9% of sales, including $20 million or approximately 180 basis points in non-cash charges as noted above, as compared to 52.7% in the year-ago period.
  • Operating income for the quarter on a reported basis totaled $193 million, while operating margin was 17.0% versus 10.1% in the prior year. On a non-GAAP basis, operating income was $180 million, while operating margin was 15.8%, including approximately 180 basis points of non-cash charges as noted, versus 15.1% in last year’s fourth quarter.
  • Net interest expense was $14 million in the quarter on a reported basis, including $10 million in expense associated with bridge financing in connection with the acquisition of Kate Spade & Company as compared to $7 million in the year ago period. On a non-GAAP basis, net interest expense was $4 million.
  • Net income for the quarter on a reported basis totaled $152 million, with earnings per diluted share of $0.53. This compared to reported net income in the fourth quarter of FY16 of $82 million with earnings per diluted share of $0.29. On a non-GAAP basis, net income for the quarter totaled $142 million, with earnings per diluted share of $0.50. This compared to non-GAAP net income in the fourth quarter of FY16 of $126 million with earnings per diluted share of $0.45, including $0.07 associated with the additional week.

Coach Brand Fourth Quarter of 2017 Results:

  • Net sales for the Coach brand totaled $1.05 billion for the fourth fiscal quarter as compared to $1.07 billion in the prior year. Excluding the additional week included in fiscal 2016 results, net sales increased 5% on a reported basis and 7% on a constant currency basis.

Fourth fiscal quarter sales results in each of Coach’s primary segments were as follows:

  • Total North American Coach brand sales were $586 million versus $606 million last year, including $44 million associated with additional week of sales in the prior fiscal year. On a 13-week versus 13-week basis, total North American Coach brand sales increased 4% over prior year, while North American direct sales rose 5% on a dollar basis and 6% on a constant currency basis for the quarter. Both North American aggregate and bricks and mortar comparable store sales rose approximately 4%. As planned, sales at North American department stores declined approximately 40% at a POS and approximately 20% on a net sales basis as the company has now started to anniversary the pullback in shipments into the channel.
  • International Coach brand sales were $442 million as compared to $450 million last year, including approximately $32 million associated with additional week of sales in the prior fiscal year. On a 13-week versus 13-week basis, total sales increased 6% in dollars and 9% on a constant currency basis. Greater China sales increased 3% versus prior year in dollars and 7% in constant currency on a 13-week basis, driven by double-digit growth and positive comparable store sales on the Mainland, offset, in part, by softness in Hong Kong and Macau. In Japan, on a 13-week basis, sales declined 3% in dollars and approximately 1% in constant currency. Sales for the remaining directly operated businesses in Asia decreased mid-single digits in dollars and declined similarly in constant currency on a 13-week basis, due primarily to weakness in Korea where macroeconomic and geopolitical headwinds continued to pressure spending from domestic consumers and tourists. Europe was very strong on a 13-week versus 13-week basis, driven by double-digit growth in the directly operated channels and benefiting from the planned shift in wholesale shipment timing as previously announced. As expected, international wholesale increased on a net sales basis due to shipment timing, while POS sales declined as weaker tourist location results offset domestic growth.
  • Gross profit for the Coach brand totaled $705 million on both a reported and non-GAAP basis. Gross margin for the quarter was 67.4%, including approximately 20 basis points of pressure from currency, as compared to 68.8% in the prior year period on both a reported and non-GAAP basis reflecting, in part, the anticipated negative impact of channel mix.
  • SG&A expenses totaled $511 million for the Coach brand on a reported basis and represented 48.8% of sales compared to 58.1% in the year-ago quarter. On a non-GAAP basis, SG&A expenses were $531 million and represented 50.8% of sales as compared to 52.8% in the year-ago period.
  • Operating income for the Coach brand on a reported basis was $195 million, while operating margin was 18.6% versus 10.7% in the prior year. On a non-GAAP basis, operating income was $174 million, while operating margin was 16.6% versus 16.0% in last year’s fourth quarter.

Stuart Weitzman Fourth Quarter of 2017 Results:

  • Net sales for the Stuart Weitzman brand totaled $88 million for the fourth fiscal quarter compared to $84 million reported in the same period of the prior year. Excluding the additional week included in fiscal 2016 results, net sales increased 15% on a reported basis and 16% on a constant currency basis.
  • Gross profit for the Stuart Weitzman brand totaled $49 million on a reported basis, while gross margin for the quarter was 56.2% as compared to 54.8% in the prior year. On a non-GAAP basis, gross profit totaled $52 million, while gross margin was 58.9% as compared to 55.2% in the prior year period.
  • SG&A expenses for the Stuart Weitzman brand were $51 million on a reported basis and represented 58.1% of sales as compared to 52.6% of sales in the prior year’s fourth quarter on a reported basis. On a non-GAAP basis, SG&A expenses were $46 million or 52.5% of sales as compared to 50.8% of sales in the prior year reflecting in part the increase in store occupancy costs, as well as the company’s strategic investments in team and infrastructure.
  • Operating income for the Stuart Weitzman brand was a loss of $2 million on a reported basis, while operating margin was (1.8%) versus 2.2% in the prior year. On a non-GAAP basis, operating income was $6 million or 6.4% of sales versus 4.4% in the prior year.

Overview of Full Year 2017 Consolidated, Coach, Inc. Results:

  • Net sales totaled $4.49 billion for fiscal year 2017 as compared to $4.49 billion in the prior year. Excluding the additional week included in fiscal 2016 results, net sales increased 2% on both a reported and constant currency basis. As planned, the company’s strategic decision to elevate the Coach brand’s positioning in the North American wholesale channel through a reduction in promotional events and door closures negatively impacted sales growth by approximately 150 basis points in fiscal 2017.
  • Gross profit totaled $3.08 billion on a reported basis, while gross margin for the year was 68.6% as compared to 67.9% in the prior year. On a non-GAAP basis, gross profit also totaled $3.08 billion, while gross margin was 68.7% compared to 68.0% in the prior year.
  • SG&A expenses totaled $2.29 billion on a reported basis and represented 51.1% of sales compared to 53.4% a year ago. On a non-GAAP basis, SG&A expenses were $2.27 billion and represented 50.6% of sales, including $20 million or 50 basis points in non-cash charges as noted above, as compared to 50.7% a year ago, reflecting in part the company’s continued investment in Stuart Weitzman.
  • Operating income for the year totaled $787 million on a reported basis, while operating margin was 17.5% versus 14.5% a year ago. On a non-GAAP basis, operating income was $813 million, while operating margin was 18.1%, including 50 basis points in non-cash charges as noted above, versus 17.3% a year ago.
  • Net interest expense was $28 million on a reported basis including $10 million in expense associated with bridge financing in connection with the acquisition of Kate Spade & Company as compared to $27 million in fiscal 2016. On a non-GAAP basis, net interest expense was approximately $19 million.
  • Net income totaled $591 million on a reported basis, with earnings per diluted share of $2.09. This compared to reported net income in the prior year of $461 million with earnings per diluted share of $1.65. On a non-GAAP basis, net income was $609 million with earnings per diluted share of $2.15. This compared to $552 million a year ago with earnings per diluted share of $1.98, including $0.07 associated with the additional week.

The company also announced that its Board of Directors declared a quarterly cash dividend of $0.3375 per common share, maintaining an annual rate of $1.35. The dividend is payable on October 2, 2017 to shareholders of record as of the close of business on September 8, 2017.

Mr. Luis added, “Three years ago we laid out an ambitious plan to transform the Coach brand, with a goal of increasing relevancy and improving consumer perceptions. During this time, we’ve done just that, by making the necessary and significant investments across all aspects of the Coach brand and business. We are extremely pleased with the progress we’ve made, having largely attained our strategic goals, in spite of the impact of the volatile retail and macroeconomic environment on our core category. Today, after the successful integration of Stuart Weitzman and the acquisition of Kate Spade, we are at an exciting and pivotal moment in our journey. In an unpredictable environment, we are evolving to drive our long-term success by reinventing ourselves, moving from a single-brand, specialty retailer, to a true house of emotional, desirable brands built on our unique values. We are transforming into an entirely different, truly multi-brand company, creating a more agile organization and infrastructure to support a new corporate structure, while making certain each brand has the resources in place to innovate and drive its distinct personality.”

“Naturally, we are focused on driving top and bottom-line growth for Coach, Inc., but we are also committed to taking the right steps to achieve sustainable long-term profitability through the health of our brands, by making the appropriate investments and carefully managing our distribution channels. This balance is critical to informing our strategic plan as we move forward into the next chapter as the first New York-based house of modern luxury lifestyle brands,” Mr. Luis concluded.

Fiscal Year 2018 Outlook

The following fiscal 2018 guidance is provided on a non-GAAP basis and includes projected Kate Spade results subsequent to the closing of the transaction on July 11, 2017.

The company expects revenues for fiscal 2018 to increase about 30% versus fiscal 2017, to $5.8 to $5.9 billion, with low-single digit organic growth and the acquisition of Kate Spade adding over $1.2 billion in revenue.

In addition, the company is projecting operating income growth of 22% to 25% versus fiscal 2017 driven by mid-single digit organic growth, the acquisition of Kate Spade, and estimated synergies of $30-$35 million. These synergies are expected to offset in part the reduction in profitability from the strategic and deliberate pullback of Kate Spade wholesale disposition and online flash sales channels. Taken together, the Kate Spade business and resulting synergies are expected to contribute approximately $130-$140 million to operating income.

Interest expense is expected to be approximately $90 million for the year while the full year fiscal 2018 tax rate is projected at about 25% to 26%.

Overall, the company is projecting earnings per diluted share in the range of $2.35-$2.40, an increase of about 10% to 12% for the year, including low-to-mid- single digit accretion from the acquisition of Kate Spade, consistent with the previously communicated forecast.

Fiscal Year 2018 Outlook - Non-GAAP Disclosure:

The company is not able to provide a full reconciliation of the non-GAAP financial measures to GAAP because certain material items that impact these measures, such as the timing and exact amount of charges related to our acquisition and integration related charges, have not yet occurred or are out of the company’s control. Accordingly, a reconciliation of our non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. Where possible, the company has identified the estimated impact of the items excluded from its fiscal 2018 guidance.

This fiscal 2018 non-GAAP guidance excludes (1) expected pre-tax charges of around $10 million attributable to the company’s Operational Efficiency Plan and (2) currently estimated Kate Spade acquisition and integration costs and short-term purchase accounting impacts. The company expects to pay $40-$45 million related to acquisition transaction fees and currently estimates that it will incur approximately $150-$200 million in pre-tax charges in fiscal 2018, which are attributable to Kate Spade integration-related costs. The company continues to fully develop its integration plan.

In fiscal 2018, the company is adopting Accounting Standard Update (ASU) 2016-09 for the accounting of employee share-based payments, which was issued by the Financial Accounting Standards Board. This will affect the company’s effective tax rate because certain tax impacts that were previously recorded to equity will now be included in income tax expense. Further, because the tax impacts are defined by the company’s stock price when Restricted Stock Units (RSUs) and Performance Restricted Stock Units (PRSUs) vest and when employees exercise their stock options, the timing and the amount of the impact cannot be estimated. The majority of RSUs and PRSUs vest in the first quarter of the fiscal year, and accordingly, it is likely that the first fiscal quarter could be most impacted.

Change in Reportable Segments:

Given the acquisition of Kate Spade & Company in July 2017, the company intends to change its reportable segments beginning in fiscal 2018. The company’s new reportable segments will be as follows: Coach, Kate Spade, and Stuart Weitzman.

This change in reporting is consistent with how the company now runs the business, establishes the overall business strategy, allocates resources, and assesses performance. Segment information under these new reportable segments will be provided in an 8-K filed with the SEC in conjunction with the company’s fiscal 2018 first quarter earnings announcement.

Conference Call Details:

Coach will host a conference call to review these results at 8:30 a.m. (ET) today, August 15, 2017. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet or dialing into 1-877-510-8087 or 1-862-298-9015 and providing the Conference ID 44861138. A telephone replay will be available starting at 12:00 p.m. (ET) today, for a period of five business days. To access the telephone replay, call 1-800-585-8367 or 1-404-537-3406 and enter the Conference ID above. A webcast replay of the earnings conference call will also be available for five business days on the Coach website.

The company expects to report fiscal 2018 first quarter financial results on Tuesday, November 7, 2017. To receive notification of future announcements, please register at www.coach.com/investors ("Subscribe to E-Mail Alerts").

Coach, Inc. is a New York-based house of modern luxury lifestyle brands. The company’s portfolio includes the Coach, kate spade new york, and Stuart Weitzman brands. Our company and our brands are founded upon a consumer-led view of luxury that stands for inclusivity and approachability. Each of our brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. Coach, Inc.’s common stock is traded on the New York Stock Exchange under the symbol COH and Coach’s Hong Kong Depositary Receipts are traded on The Stock Exchange of Hong Kong Limited under the symbol 6388.

Neither the Hong Kong Depositary Receipts nor the Hong Kong Depositary Shares evidenced thereby have been or will be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to, or for the account of, a U.S. Person (within the meaning of Regulation S under the Securities Act), absent registration or an applicable exemption from the registration requirements. Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act.

This information to be made available in this press release may contain forward-looking statements based on management's current expectations. Forward-looking statements include, but are not limited to, the statements under “Fiscal Year 2018 Outlook,” as well as statements that can be identified by the use of forward-looking terminology such as "may," "will," “can,” "should," "expect," "intend," "estimate," "continue," "project," "guidance," "forecast," "anticipate," “moving,” “leveraging,” “developing,” “driving,” “targeting,” “assume,” “plan,” “pursue,” “look forward to,” “achieve” or comparable terms. Future results may differ materially from management's current expectations, based upon a number of important factors, including risks and uncertainties such as expected economic trends, the ability to anticipate consumer preferences, the ability to control costs and successfully execute our transformation and operational efficiency initiatives and growth strategies and our ability to achieve intended benefits, cost savings and synergies from acquisitions, etc. Please refer to Coach Inc.’s latest Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission for a complete list of risks and important factors.

                 

COACH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Quarters and Years Ended July 1, 2017 and July 2, 2016

(in millions, except per share data)

 
(unaudited) (unaudited) (audited)
QUARTER ENDED     YEAR ENDED    
July 1, July 2, July 1, July 2,
2017 2016 2017 2016
 
Net sales $ 1,133.8 $ 1,154.6 $ 4,488.3 $ 4,491.8
 
Cost of sales   379.3   371.9   1,407.2   1,440.5
 
Gross profit 754.5 782.7 3,081.1 3,051.3
 
Selling, general and administrative expenses   561.5   665.9   2,293.7   2,397.8
 

Operating income

193.0 116.8 787.4 653.5
 
Interest expense, net   13.6   7.4   28.4   26.9
 
Income before provision for income taxes 179.4 109.4 759.0 626.6
 
Provision for income taxes   27.7   27.9   168.0   166.1
 
Net Income $ 151.7 $ 81.5 $ 591.0 $ 460.5
 
 
Net income per share:
 
Basic $ 0.54 $ 0.29 $ 2.11 $ 1.66
 
Diluted $ 0.53 $ 0.29 $ 2.09 $ 1.65
 
 
Shares used in computing
net income per share:
 
Basic   281.5   278.2   280.6   277.6
 
Diluted   284.7   281.1   282.8   279.3
 
                   

COACH, INC.

GAAP TO NON-GAAP RECONCILIATION

For the Quarters Ended July 1, 2017 and July 2, 2016

(in millions, except per share data)

(unaudited)

                         
July 1, 2017
Stuart Weitzman Kate Spade
GAAP Basis Operational Acquisition-Related Acquisition-Related Non-GAAP Basis
(As Reported) Efficiency Plan (1) Costs (2) Costs (3) (Excluding Items)
 
Gross profit $ 754.5 $ - $ (2.3 ) $ - $ 756.8
 
Selling, general and administrative expenses $ 561.5 $ 6.8 $ (30.0 ) $ 7.4 $ 577.3
 
Operating income $ 193.0 $ (6.8 ) $ 27.7 $ (7.4 ) $ 179.5
 
Income before provision for income taxes $ 179.4 $ (6.8 ) $ 27.7 $ (16.9 ) $ 175.4
 
Provision for income taxes $ 27.7 $ (4.0 ) $ 4.7 $ (6.7 ) $ 33.7
 
Net income $ 151.7 $ (2.8 ) $ 23.0 $ (10.2 ) $ 141.7
 
Diluted net income per share $ 0.53 $ (0.01 ) $ 0.08 $ (0.04 ) $ 0.50
 
                         
July 2, 2016
Stuart Weitzman
GAAP Basis Transformation and Operational Acquisition-Related Non-GAAP Basis
(As Reported) Other Actions (4) Efficiency Plan (1) Costs (2) (Excluding Items)
 
Gross profit $ 782.7 $ - $ - $ (0.2 ) $ 782.9
 
Selling, general and administrative expenses $ 665.9 $ 8.2 $ 43.9 $ 5.7 $ 608.1
 
Operating income $ 116.8 $ (8.2 ) $ (43.9 ) $ (5.9 ) $ 174.8
 
Income before provision for income taxes $ 109.4 $ (8.2 ) $ (43.9 ) $ (5.9 ) $ 167.4
 
Provision for income taxes $ 27.9 $ (1.7 ) $ (10.3 ) $ (1.4 ) $ 41.3
 
Net income $ 81.5 $ (6.5 ) $ (33.6 ) $ (4.5 ) $ 126.1
 
Diluted net income per share $ 0.29 $ (0.02 ) $ (0.12 ) $ (0.02 ) $ 0.45
 
(1) Amounts as of July 1, 2017 reflect Coach brand charges primarily related to organizational efficiency and technology infrastructure costs. Amounts as of July 2, 2016 reflect Coach brand charges primarily related to organizational efficiency costs and to a lesser extent, network optimization costs.
   

(2) Amounts as of July 1, 2017 and July 2, 2016 represent charges attributable to acquisition-related costs and limited life purchase accounting impacts, related to the acquisition of Stuart Weitzman Holdings LLC.

    The Company recorded the following during the quarter ended July 1, 2017:

    - Acquisition-related income of $27.7 million, primarily related to a reduction in projected contingent payments, partially offset by integration-related costs.

Coach brand: $35.0 million of this income was recorded within the Coach brand.

Stuart Weitzman brand: $5.0 million of SG&A expenses and $2.3 million of cost of sales were recorded within the Stuart Weitzman brand.

 
The Company recorded the following during the quarter ended July 2, 2016:
 
- Acquisition-related costs of $5.4 million, primarily related to contingent payments and integration-related activities.

Coach brand: $4.2 million of these SG&A expenses were recorded within the Coach brand.

Stuart Weitzman brand: $1.2 million of these SG&A expenses were recorded within the Stuart Weitzman brand.

 

- Limited life purchase accounting impacts of $0.5 million, recorded within the Stuart Weitzman brand, primarily due to the amortization of the fair value of the limited life distributor relationships.

 
(3) Amounts as of July 1, 2017 represent charges attributable to the acquisition of Kate Spade & Company, recorded within the Coach brand. The Company recorded $9.5 million to interest expense and $7.4 million to SG&A expenses.
 
(4) The Transformation Plan was completed in fiscal 2016. Amounts as of July 2, 2016 related to Coach brand lease termination charges and organizational efficiency costs.
 
                   

COACH, INC.

GAAP TO NON-GAAP RECONCILIATION

For the Years Ended July 1, 2017 and July 2, 2016

(in millions, except per share data)

(unaudited)

 
July 1, 2017
Stuart Weitzman Kate Spade
GAAP Basis Operational Acquisition-Related Acquisition-Related Non-GAAP Basis
(As Reported) Efficiency Plan (1) Costs (2) Costs (3) (Excluding Items)
 
Gross profit $ 3,081.1 $ - $ (2.9 ) $ - $ 3,084.0
 
Selling, general and administrative expenses $ 2,293.7 $ 24.0 $ (9.1 ) $ 7.4 $ 2,271.4
 
Operating income $ 787.4 $ (24.0 ) $ 6.2 $ (7.4 ) $ 812.6
 
Income before provision for income taxes $ 759.0 $ (24.0 ) $ 6.2 $ (16.9 ) $ 793.7
 
Provision for income taxes $ 168.0 $ (8.3 ) $ (1.5 ) $ (6.6 ) $ 184.4
 
Net income $ 591.0 $ (15.7 ) $ 7.7 $ (10.3 ) $ 609.3
 
Diluted net income per share $ 2.09 $ (0.05 ) $ 0.03 $ (0.04 ) $ 2.15
 
 
July 2, 2016
Stuart Weitzman
GAAP Basis Transformation and Operational Acquisition-Related Non-GAAP Basis
(As Reported) Other Actions (4) Efficiency Plan (1) Costs (2) (Excluding Items)
 
Gross profit $ 3,051.3 $ - $ - $ (1.1 ) $ 3,052.4
 
Selling, general and administrative expenses $ 2,397.8 $ 44.1 $ 43.9 $ 34.0 $ 2,275.8
 
Operating income $ 653.5 $ (44.1 ) $ (43.9 ) $ (35.1 ) $ 776.6
 
Income before provision for income taxes $ 626.6 $ (44.1 ) $ (43.9 ) $ (35.1 ) $ 749.7
 
Provision for income taxes $ 166.1 $ (10.7 ) $ (10.3 ) $ (10.9 ) $ 198.0
 
Net income $ 460.5 $ (33.4 ) $ (33.6 ) $ (24.2 ) $ 551.7
 
Diluted net income per share $ 1.65 $ (0.12 ) $ (0.12 ) $ (0.09 ) $ 1.98
 

(1) Amounts as of July 1, 2017 reflect Coach brand charges primarily related to organizational efficiency costs, technology infrastructure costs and to a lesser extent, network optimization costs. Amounts as of July 2, 2016 reflect Coach brand charges primarily related to organizational efficiency costs and to a lesser extent, network optimization costs.

   

(2) Amounts as of July 1, 2017 and July 2, 2016 represent charges attributable to acquisition-related costs and limited life purchase accounting impacts, related to the acquisition of Stuart Weitzman Holdings LLC.

    The Company recorded the following during the year ended July 1, 2017:

    - Acquisition-related income of $6.2 million, primarily related to a reduction in projected contingent payments, partially offset by integration-related costs.

Coach brand: $26.8 million of this income was recorded within the Coach brand.

Stuart Weitzman brand: $17.7 million of SG&A expenses and $2.9 million of cost of sales were recorded within the Stuart Weitzman brand.

 
The Company recorded the following during the year ended July 2, 2016:
 
- Acquisition-related costs of $27.6 million, primarily related to contingent payments and integration-related activities.

Coach brand: $19.4 million of these SG&A expenses were recorded within the Coach brand.

Stuart Weitzman brand: $8.2 million of these SG&A expenses were recorded within the Stuart Weitzman brand.

 

- Limited life purchase accounting impacts of $7.5 million, recorded within the Stuart Weitzman brand, primarily due to the amortization of the fair value of the order backlog asset, limited life distributor relationships and inventory step-up.

 
(3) Amounts as of July 1, 2017 represent charges attributable to the acquisition of Kate Spade & Company, recorded within the Coach brand. The Company recorded $9.5 million to interest expense and $7.4 million to SG&A expenses.
 
(4) The transformation plan was completed in fiscal 2016. Amounts as of July 2, 2016 related to Coach brand organizational efficiency costs, lease termination charges and accelerated depreciation as a result of store renovations.
 

The Company reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). The Company's management does not, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Further, the non-GAAP measures utilized by the Company may be unique to the Company, as they may be different from non-GAAP measures used by other companies. The financial information presented above, as well as gross margin, SG&A expense ratio, and operating margin, have been presented both including and excluding the effect of certain items related to our Transformation Plan, our Operational Efficiency Plan and Acquisition-Related Costs for Coach, Inc., as well as the Coach brand, which includes the Company’s North America and International segment, as well as Other and Corporate Unallocated results, and the Stuart Weitzman brand, which includes the Company’s Stuart Weitzman segment. The Company’s North America comparable store sales are presented for the 13-weeks ending July 1, 2017 versus the analogous 13-week period ended July 2, 2016 for comparability. The Company’s sales and earnings per diluted share results are presented both including and excluding the impact of the 53rd week in fiscal year 2016.

The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP. Percentage increases/decreases in net sales and direct sales for the Company’s North America segment and net sales for the Company, the Coach brand, the Company’s International segment, Greater China, Coach Japan and the Company’s remaining directly operated businesses in Asia have been presented both including and excluding currency fluctuation effects from translating foreign-denominated sales into U.S. dollars and compared to the same periods in the prior quarter and fiscal year. The Company calculates constant currency revenue results by translating current period revenue in local currency using the prior period’s monthly average currency conversion rate.

Guidance for certain financial information for the fiscal year ending June 30, 2018 has also been presented on a non-GAAP basis.

Management utilizes these non-GAAP and constant currency measures to conduct and evaluate its business during its regular review of operating results for the periods affected and to make decisions about Company resources and performance. The Company believes presenting these non-GAAP measures, which exclude items that are not comparable from period to period, is useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management’s evaluation of business performance and understanding how such results compare with the Company’s historical performance. Additionally, the Company believes presenting these metrics on a constant currency basis will help investors and analysts to understand the effect of significant year-over-year foreign currency exchange rate fluctuations on these performance measures and provide a framework to assess how business is performing and expected to perform excluding these effects.

       

COACH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

At July 1, 2017 and July 2, 2016

(in millions)

 
(unaudited) (audited)
July 1, July 2,
2017 2016
ASSETS
 
Cash, cash equivalents and short-term investments $ 3,083.6 $ 1,319.4
Receivables 268.0 245.2
Inventories 469.7 459.2
Other current assets   132.0   149.1
 
Total current assets 3,953.3 2,172.9
 
Property and equipment, net 691.4 919.5
Other noncurrent assets   1,186.9   1,800.3
 
Total assets $ 5,831.6 $ 4,892.7
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Accounts payable $ 194.6 $ 186.7
Accrued liabilities 559.2 625.0
Current debt   -   15.0
 
Total current liabilities 753.8 826.7
 
Long-term debt 1,579.5 861.2
Other liabilities 496.4 521.9
 
Stockholders' equity   3,001.9   2,682.9
 
Total liabilities and stockholders' equity $ 5,831.6 $ 4,892.7
 
               

COACH, INC.

Store Count

At April 1, 2017 and July 1, 2017

(unaudited)

 
As of As of

Directly-Operated Store Count:

April 1, 2017 Openings (Closures) July 1, 2017
 

Coach

North America 424 1 (6) 419
 
Japan 184 0 0 184
 
Greater China (PRC, Hong Kong & Macau) 197 4 (2) 199
 
Asia - Other 103 3 (1) 105
 
Europe 47 9 (1) 55
 

Stuart Weitzman

 
Global 82 0 (1) 81
 
               

COACH, INC.

Store Count

At July 2, 2016 and July 1, 2017

(unaudited)

 
 
 
As of As of

Directly-Operated Store Count:

July 2, 2016 Openings (Closures) July 1, 2017
 

Coach

 
North America 432 4 (17) 419
 
Japan 195 0 (11) 184
 
Greater China (PRC, Hong Kong & Macau) 185 24 (10) 199
 
Asia - Other 103 6 (4) 105
 
Europe 39 19 (3) 55
 

Stuart Weitzman

 
Global 75 9 (3) 81

CONTACT:
Coach, Inc.
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
Global Head of Investor Relations and Corporate Communications
or
Christina Colone, 212-946-7252
Senior Director, Investor Relations


The following information was filed by COACH INC on Tuesday, August 15, 2017 as an 8K 2.02 statement, which is a press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • coh_10k_2017-08-18_29_22
    Financial - Cash Flow
    Declines in traffic could result in store impairment charges if expected future cash flows of the related asset group do not exceed the carrying value.
  • coh_10k_2017-08-18_182_513
    Other - Other
    balance sheet changes, net, were a use of cash of $6.3 million in fiscal 2016 as compared to a source of cash of $17.8 million in fiscal 2015, primarily due to increased store-related related receivables during fiscal 2016 as compared to fiscal 2015 as a result of select new store openings, including our Fifth Avenue and Regent Street stores, described above.
  • coh_10k_2017-08-18_169_267
    Revenue - Product
    The $1.40 billion increase in net cash was primarily due to proceeds from the sale of the Companys equity method investment in Hudson Yards of $680.6 million in fiscal 2017, the impact of net cash proceeds from maturities and sales of investments of $67.7 million in fiscal 2017, compared to net purchases of investments of $238.8 million in fiscal 2016.
  • coh_10k_2017-08-18_181_278
    Revenue - Product
    Accounts receivable was a use of cash of $28.3 million in fiscal 2016 compared to a source of cash of $0.3 million in fiscal 2015, primarily driven by increased wholesale shipments for Coach brand and an increase in credit card receivables in fiscal 2016 as compared to fiscal 2015 driven by the timing of sales in the last week of fiscal 2016.
  • coh_10k_2017-08-18_128_184
    Financial - Earnings
    The gross margin decline of 150 basis points or 160 basis points excluding non-GAAP items was primarily due to the unfavorable effects of foreign currency on the Coach brand, and the inclusion of the Stuart Weitzman business in our full year fiscal 2016 results which contains lower gross margins compared to the Coach brand.
  • coh_10k_2017-08-18_131_192
    Revenue - Geography
    Foreign currency negatively impacted gross margin by 210 basis points, primarily due to the Japanese Yen.
  • coh_10k_2017-08-18_193_288
    Financial - Earnings
    As of July 1, 2017, approximately 39% of our cash and short-term investments were held outside the U.S. in jurisdictions where we intend to permanently reinvest our undistributed earnings to support our continued growth.
  • coh_10k_2017-08-18_27_18
    Financial - Expense
    Key operational and cost measures of the Transformation Plan included: i the investment in capital improvements in our stores and wholesale locations to drive comparable sales improvement ii the optimization and streamlining of our organizational model as well as the closure of underperforming stores in North America, and select International stores iii the realignment of inventory levels and mix to reflect our elevated product strategy and consumer preferences iv the investment in incremental advertising costs to elevate consumer perception of the Coach brand, drive sales growth and promote our new strategy, which started in fiscal 2015 and v the significant scale-back of our promotional cadence in an increased global promotional environment, particularly within our outlet Internet sales site, which began in fiscal 2014.
  • coh_10k_2017-08-18_52_43
    Financial - Expense
    Operational Efficiency Plan - Total charges of $24.0 million primarily related to organizational efficiency costs, technology infrastructure costs and, to a lesser extent, network optimization costs.
  • coh_10k_2017-08-18_124_163
    Revenue - Geography
    Excluding the unfavorable impact of foreign currency due to the Canadian dollar, net sales decreased $50.7 million or 2.1%.
  • coh_10k_2017-08-18_167_263
    Other - Other
    Inventories were a use of cash of $20.0 million in fiscal 2017 as compared to a source of cash of $40.7 million in fiscal 2016, primarily driven by increased inventory purchases.
  • coh_10k_2017-08-18_127_179
    Revenue - Product
    Stuart Weitzman Net Sales increased $301.7 million to $344.7 million in fiscal 2016, including the favorable impact of the 53rd week in fiscal 2016, which resulted in incremental net revenues of $7.4 million.
  • coh_10k_2017-08-18_40_41
    MA - Other
    The reported results during fiscal 2017 and 2016 reflect the impact of the Operational Efficiency Plan, Stuart Weitzman and Kate Spade Acquisition-Related Costs and the Transformation Plan, as noted in the following tables.
  • coh_10k_2017-08-18_60_453
    Financial - Expense
    Operational Efficiency Plan - $43.9 million primarily related to organizational efficiency costs and, to a lesser extent, network optimization costs.
  • coh_10k_2017-08-18_112_476
    Financial - Expense
    Operational Efficiency Plan - $43.9 million primarily related to organizational efficiency costs and, to a lesser extent, network optimization costs and
  • coh_10k_2017-08-18_145_217
    Financial - Expense
    The decrease in SG&A expenses was due to lower store-related costs, largely driven by net store closures, as well as decreased variable selling costs as a result of lower sales in North America stores, the Internet business and the wholesale channel.
  • coh_10k_2017-08-18_136_488
    Financial - Expense
    to Non-GAAP Reconciliation herein, SG&A expenses increased 6.9% or $146.0 million from fiscal 2015 and SG&A expenses as a percentage of net sales remained relatively flat at 50.7% in fiscal 2016 compared to 50.8% in fiscal 2015.
  • coh_10k_2017-08-18_124_166
    Revenue - Product
    Excluding the negative impact of the Internet business on comparable store sales, which was primarily attributable to the impact of reduced outlet Internet events, comparable store sales decreased 3.0%.
  • coh_10k_2017-08-18_129_186
    Financial - Earnings
    Furthermore, gross margin for the Coach brand decreased 90 basis points from 69.6% in fiscal 2015 to 68.7% in the fiscal 2016, inclusive of an unfavorable 100 basis point foreign currency impact, as described below.
  • coh_10k_2017-08-18_87_125
    Financial - Income
    Excluding non-GAAP adjustments of $25.2 million in fiscal 2017 and $123.1 million in fiscal 2016, as discussed in the GAAP to Non-GAAP Reconciliation herein, operating income increased 4.6% or $36.0 million to $812.6 million from $776.6 million in fiscal 2016 and operating margin was 18.1% in fiscal 2017 as compared to 17.3% in fiscal 2016.
  • coh_10k_2017-08-18_63_48
    Revenue - Product
    Net sales in fiscal 2017 decreased slightly by 0.1% to $4.49 billion, with no material impact from foreign currency.
  • coh_10k_2017-08-18_92_130
    Financial - Expense
    The increase in SG&A expenses was due to higher occupancy costs, primarily due to the 5th Avenue store, as well as higher depreciation expense.
  • coh_10k_2017-08-18_120_156
    Revenue - Product
    Net sales increased 7.2% or $300.2 million to $4.49 billion in fiscal 2016, inclusive of the favorable impact of the 53rd week in fiscal 2016, which resulted in incremental net revenues of $84.4 million.
  • coh_10k_2017-08-18_104_154
    MA - Other
    The reported results during fiscal 2016 and 2015 reflect certain items, including the impact of the Transformation Plan, the Operational Efficiency Plan and Acquisition-Related Costs, as noted in the following tables.
  • coh_10k_2017-08-18_63_53
    Financial - Expense
    Excluding non-GAAP charges, SG&A expenses decreased by 0.2% to $2.27 billion.
  • coh_10k_2017-08-18_131_194
    Revenue - Product
    Furthermore, an improved mix of elevated product sales, particularly in Greater China and Japan, positively impacted gross margin by 50 basis points.
  • coh_10k_2017-08-18_27_17
    Other - Other
    During the fourth quarter of fiscal 2014, Coach, Inc. announced a multi-year strategic plan with the objective of transforming the Coach brand and reinvigorating growth the Transformation Plan.
  • coh_10k_2017-08-18_73_86
    Financial - Earnings
    Excluding Non-GAAP charges of $2.9 million in fiscal 2017 and $1.1 million in fiscal 2016, as discussed in the GAAP to Non-GAAP Reconciliation herein, gross profit increased 1.0% or $31.6 million to $3.08 billion from $3.05 billion in fiscal 2016, and gross margin was 68.7% in fiscal 2017 as compared to 68.0% in fiscal 2016, an increase of 70 basis points.
  • coh_10k_2017-08-18_128_183
    Financial - Earnings
    Excluding Non-GAAP charges of $1.1 million in fiscal 2016 and $9.7 million in fiscal 2015, as discussed in the GAAP to Non-GAAP Reconciliation herein, gross profit increased 4.6% or $134.1 million to $3.05 billion from $2.92 billion in fiscal 2015, and gross margin was 68.0% in fiscal 2016 as compared to 69.6% in fiscal 2015.
  • coh_10k_2017-08-18_220_357
    Other - Other
    A decrease in product demand due to changing customer tastes, buying patterns or increased competition could impact the Companys evaluation of its inventory and additional reserves might be required.
  • coh_10k_2017-08-18_86_122
    Financial - Expense
    The decrease was primarily due to lower employee related costs and litigation costs.
  • coh_10k_2017-08-18_201_315
    MA - Other
    On May 4, 2015, pursuant to the terms of the purchase agreement dated January 5, 2015, the Company acquired all of the equity interests of Stuart Weitzman Intermediate LLC, a luxury footwear company and the parent of Stuart Weitzman Holdings, LLC, from Topco for an aggregate payment of approximately $531.1 million in cash, subject to a potential earnout of up to $44.1 million of cash based on achievement of certain revenue targets.
  • coh_10k_2017-08-18_125_173
    Revenue - Geography
    North America sales were also negatively impacted by lower wholesale sales of approximately $10.1 million, due to lower volume of shipments.
  • coh_10k_2017-08-18_63_52
    Financial - Expense
    SG&A expenses decreased by 4.3% to $2.29 billion in fiscal 2017.
  • coh_10k_2017-08-18_237_532
    Other - Other
    See Note 2, Significant Accounting Policies, to the accompanying audited consolidated financial statements for a description of certain recently adopted, issued or proposed accounting standards which may impact our consolidated financial statements in future reporting periods.
  • coh_10k_2017-08-18_152_235
    Financial - Earnings
    Net income per diluted share increased 13.6% to $1.65 in fiscal 2016 as compared to $1.45 in fiscal 2015.
  • coh_10k_2017-08-18_99_148
    Financial - Earnings
    Net income per diluted share increased 26.7% to $2.09 in fiscal 2017 as compared to $1.65 in fiscal 2016.
  • coh_10k_2017-08-18_87_124
    Financial - Earnings
    Operating margin increased to 17.5% as compared to 14.5% in fiscal 2016.
  • coh_10k_2017-08-18_117_481
    MA - Other
    Acquisition-Related Costs - $24.6 million total acquisition-related costs, of which $17.1 million primarily related to consulting and legal costs related to the acquisition of Stuart Weitzman Holdings LLC, as well as costs attributable to contingent payments related to the acquisition of which $15.8 million was recorded within unallocated corporate expenses within the Coach brand and $1.3 million was recorded within the Stuart Weitzman segment, resulting in a decrease in operating income of $15.8 million and $1.3 million, respectively, and $7.5 million was related to the limited life impact of purchase accounting, primarily due to the amortization of the fair value of the inventory step-up and order backlog asset, all recorded within the Stuart Weitzman segment resulting in a $7.5 million decrease in operating income.
  • coh_10k_2017-08-18_64_55
    Financial - Earnings
    Net income per diluted share increased 26.7% to $2.09, primarily due to higher net income.
  • coh_10k_2017-08-18_215_343
    Other - Other
    The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements.
  • coh_10k_2017-08-18_96_139
    Financial - Income
    Stuart Weitzman Operating Income decreased $11.9 million to $20.6 million in fiscal 2017, resulting in an operating margin of 5.5%, compared to an operating income of $32.5 million in fiscal 2016.
  • coh_10k_2017-08-18_91_127
    Financial - Earnings
    Furthermore, operating margin for the Coach brand increased 360 basis points to 18.6% in fiscal 2017 when compared to fiscal 2016.
  • coh_10k_2017-08-18_141_211
    Financial - Income
    Excluding non-GAAP adjustments of $123.1 million in fiscal 2016 and $170.5 million in fiscal 2015, as discussed in the GAAP to Non-GAAP Reconciliation herein, operating income decreased 1.5% or $11.9 million to $776.6 million from $788.5 million in fiscal 2015 and operating margin was 17.3%, in fiscal 2016 as compared to 18.8% in fiscal 2015.
  • coh_10k_2017-08-18_150_231
    Revenue - Geography
    The decrease in our effective tax rate was primarily attributable to the expiration of certain statutes partially offset by the impact of certain ongoing audits, the benefit of available foreign tax credits, and the geographic mix of earnings.
  • coh_10k_2017-08-18_166_501
    Financial - Earnings
    Net cash provided by operating activities increased $95.2 million primarily due to higher net income of $130.5 million and higher non-cash charges of $98.5 million, partially offset by changes in operating assets and liabilities of $133.8 million.
  • coh_10k_2017-08-18_153_239
    Financial - Earnings
    The reported gross profit, SG&A expenses, operating income, provision for income taxes, net income and earnings per diluted share in fiscal 2017, fiscal 2016 and fiscal 2015 reflect certain items, including the impact of the Transformation Plan, the Operational Efficiency Plan and Acquisition-Related Charges.
  • coh_10k_2017-08-18_93_134
    Financial - Earnings
    Operating margin increased 110 basis points to 31.2% in fiscal 2017 from 30.1% during the same
  • coh_10k_2017-08-18_76_96
    Financial - Earnings
    Gross margin increased 50 basis points to 76.0% in fiscal 2017 from 75.5% in fiscal 2016.
  • coh_10k_2017-08-18_78_102
    Financial - Earnings
    Gross margin increased 180 basis points to 60.5% in fiscal 2017 from 58.7% in fiscal 2016.
  • coh_10k_2017-08-18_75_91
    Financial - Earnings
    Gross margin increased 20 basis points to 61.9% in fiscal 2017 from 61.7% in fiscal 2016.
  • coh_10k_2017-08-18_25_13
    Other - Other
    During the fourth quarter of fiscal 2016, the Company announced a series of operational efficiency initiatives focused on creating an agile and scalable business model the Operational Efficiency Plan.
  • coh_10k_2017-08-18_82_113
    Financial - Expense
    SG&A expenses decreased 4.3% or $104.1 million to $2.29 billion in fiscal 2017 as compared to $2.40 billion in fiscal 2016.
  • coh_10k_2017-08-18_194_292
    Other - Other
    Borrowings under the Facility bear interest at a rate per annum equal to, at the Borrowers option, either a an alternate base rate which is a rate equal to the greatest of i the Prime Rate in effect on such day, ii the Federal Funds Effective Rate in effect on such day plus 1 2 of 1% or iii the Adjusted LIBO Rate for a one month Interest Period on such day plus 1% or b a rate based on the rates applicable for deposits in the interbank
  • coh_10k_2017-08-18_135_198
    Financial - Expense
    SG&A expenses increased 4.7% or $107.2 million to $2.40 billion in fiscal 2016 as compared to $2.29 billion in fiscal 2015.
  • coh_10k_2017-08-18_11_416
    Financial - Earnings
    We are focused on driving long-term growth and profitability through the following key initiatives:
  • coh_10k_2017-08-18_202_320
    Revenue - Product
    In the second fiscal quarter, working capital requirements are reduced substantially as we generate higher net sales and operating income, especially during the holiday months of November and December.
  • coh_10k_2017-08-18_63_49
    Revenue - Product
    Net sales in fiscal 2016 includes the favorable impact of the 53rd week in fiscal 2016, which resulted in incremental net sales of $84.4 million.
  • coh_10k_2017-08-18_148_224
    Financial - Expense
    Excluding non-GAAP adjustments, unallocated operating expenses decreased by $2.5 million to $544.5 million.
  • coh_10k_2017-08-18_95_137
    Financial - Expense
    Excluding non-GAAP adjustments, unallocated operating expenses decreased by $51.7 million to $492.8 million.
  • coh_10k_2017-08-18_77_459
    Financial - Earnings
    Corporate Unallocated Gross Profit increased $7.8 million to $59.8 million in fiscal 2017 from $52.0 million in fiscal 2016, primarily due to the impact of favorable inventory production variances partially offset by higher inventory reserves and royalty payments.
  • coh_10k_2017-08-18_226_380
    Financial - Earnings
    Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2018 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.
  • coh_10k_2017-08-18_149_226
    Financial - Income
    Stuart Weitzman Operating Income increased $37.1 million to $32.5 million in fiscal 2016, resulting in an operating margin of 9.4%, compared to an operating loss of $4.6 million in fiscal 2015, including the impact of non-GAAP charges as discussed in the GAAP to Non-GAAP Reconciliation herein.
  • coh_10k_2017-08-18_152_236
    Financial - Earnings
    Excluding non-GAAP charges as discussed in the GAAP to Non-GAAP Reconciliation herein, net income per diluted share increased 3.1% or $0.06 to $1.98 in fiscal 2016 from $1.92 in fiscal 2015, due to higher net income.
  • coh_10k_2017-08-18_99_149
    Financial - Earnings
    Excluding non-GAAP charges as discussed in the GAAP to Non-GAAP Reconciliation herein, net income per diluted share increased 9.1% or $0.17 to $2.15 in fiscal 2017 from $1.98 in fiscal 2016, due to higher net income.
  • coh_10k_2017-08-18_70_74
    Revenue - Product
    This $5.7 million increase is primarily due to an increase in net sales in Europe of $23.3 million due to positive comparable store sales as well as an expanded store distribution network and an increase in Greater China of $20.8 million due to the impact of net new stores and positive comparable store sales in mainland China.
  • coh_10k_2017-08-18_72_80
    MA - Other
    This increase was primarily due to $35.2 million in the retail channel due to the acquisition of the Stuart Weitzman Canadian distributor in the fourth quarter of fiscal 2016, positive comparable store sales and net store openings.
  • coh_10k_2017-08-18_184_281
    MA - Other
    The increase in net cash used of $197.1 million was primarily due to the impact of net cash used for purchase of investments of $238.8 million in fiscal 2016, compared to net proceeds from investments of $255.6 million in fiscal 2015, as well as increased capital expenditures in fiscal 2016, partially offset by a $494.0 million decrease in cash used for acquisitions, primarily related to the Stuart Weitzman acquisition that occurred in the fourth quarter of fiscal 2015.
  • coh_10k_2017-08-18_69_61
    Revenue - Geography
    North America Net Sales decreased 2.0% or $47.6 million to $2.35 billion in fiscal 2017, which was not materially impacted by changes in foreign currency.
  • coh_10k_2017-08-18_64_56
    Financial - Earnings
    Excluding non-GAAP charges, net income and net income per diluted share increased 10.4% and 9.1%, respectively.
  • coh_10k_2017-08-18_116_480
    Revenue - Geography
    Transformation and Other Actions - $145.9 million under our Coach brand Transformation Plan due to accelerated depreciation and lease termination charges as a result of store updates and closures within North America and select International stores, organizational efficiency charges, and charges related to the destruction of inventory
  • coh_10k_2017-08-18_157_250
    Other - Other
    We believe these non-GAAP measures are useful to investors and others in evaluating the Companys ongoing operating and financial results in a manner that is consistent with managements evaluation of business performance and understanding how such results compare with the Companys historical performance.
  • coh_10k_2017-08-18_118_482
    Financial - Expense
    These fiscal 2015 actions taken together increased the Companys SG&A expenses by $160.8 million and cost of sales by $9.7 million, negatively impacting net income by $128.8 million, or $0.47 per diluted share.
  • coh_10k_2017-08-18_57_450
    Financial - Expense
    These actions taken together increased the Companys SG&A expenses by $22.3 million and cost of sales by $2.9 million, negatively impacting net income by $18.3 million, or $0.06 per diluted share.
  • coh_10k_2017-08-18_226_379
    Financial - Cash Flow
    Several factors could impact the Stuart Weitzman brands ability to achieve future cash flows, including the optimization of the store fleet productivity, the impact of promotional activity in department stores, the consolidation or take-back of certain distributor relationships, the simplification of certain corporate overhead structures and other initiatives aimed at expanding higher performing categories of the business.
  • coh_10k_2017-08-18_93_133
    Financial - Expense
    The decrease in SG&A expenses is primarily related to reduced marketing and occupancy costs in Greater China, as well as lower employee related costs in international wholesale, partially offset by unfavorable foreign currency effects in Japan and increased occupancy costs in Europe to support the growth of the business.
  • coh_10k_2017-08-18_17_422
    Financial - Shares / Equity
    Raise brand awareness and increase market share for the Stuart Weitzman brand globally, building upon the companys strong momentum and core brand equities of fusing fashion with fit.
  • coh_10k_2017-08-18_157_255
    Other - Other
    Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies.
  • coh_10k_2017-08-18_70_72
    Revenue - Geography
    Excluding the favorable impact of foreign currency, primarily within Japan, net sales increased $5.7 million or 0.3%.
  • coh_10k_2017-08-18_167_260
    Other - Other
    The $133.8 million decline in changes in our operating asset and liability balances was primarily driven by changes in other liabilities, accrued liabilities and inventories, partially offset by changes in accounts payable and other assets.
  • coh_10k_2017-08-18_199_307
    Financial - Cash Flow
    Management believes that cash flows from operations, access to the credit and capital markets and our credit lines, on-hand cash and cash equivalents and our investments will provide adequate funds to support our operating, capital, and debt service requirements for the foreseeable future, our plans for acquisitions, further business expansion and restructuring-related initiatives.
  • coh_10k_2017-08-18_148_222
    Financial - Expense
    Corporate Unallocated Operating Expense decreased $56.7 million to $651.9 million in fiscal 2016, a decrease of 8.0% from $708.6 million in fiscal 2015.
  • coh_10k_2017-08-18_95_135
    Financial - Expense
    Corporate Unallocated Operating Expense decreased $154.4 million to $497.5 million in fiscal 2017, a decrease of 23.7% from $651.9 million in fiscal 2016.
  • coh_10k_2017-08-18_76_98
    Revenue - Geography
    Excluding the impact of foreign currency, International gross margin increased 40 basis points.
  • coh_10k_2017-08-18_78_103
    Financial - Earnings
    The increase in gross margin is primarily attributable to a shift in channel mix.
  • coh_10k_2017-08-18_207_329
    Financial - Expense
    The Company currently estimates that it will incur costs in the range of $150 - $200 million related to Kate Spade integration in fiscal 2018, which include severance, store closure costs and inventory realignment.
  • coh_10k_2017-08-18_181_273
    Other - Other
    The overall decline in changes in our operating asset and liability balances were primarily driven by changes in accounts payable, other liabilities, accrued liabilities, accounts receivable and other balance sheet changes.
  • coh_10k_2017-08-18_113_477
    MA - Other
    Acquisition-Related Costs - $35.1 million total charges related to the acquisition of Stuart Weitzman Holdings LLC, of which $27.6 million is primarily related to charges attributable to contingent payments and integration-related activities of which $19.4 million is recorded within unallocated corporate expenses within the Coach brand and $8.2 million is recorded within the Stuart Weitzman segment, resulting in a decrease in operating income of $19.4 million and $8.2 million, respectively, and $7.5 million is related to the limited life impact of purchase accounting, primarily due to the amortization of the fair value of the order backlog asset, distributor relationships and inventory step-up, all recorded within the Stuart Weitzman segment resulting in a $7.5 million decrease in operating income.
  • coh_10k_2017-08-18_61_454
    MA - Other
    Acquisition-Related Costs - $35.1 million total charges related to the acquisition of Stuart Weitzman Holdings LLC, of which $27.6 million is primarily related to charges attributable to contingent payments and integration-related activities of which $19.4 million is recorded within unallocated corporate expenses within the Coach brand and $8.2 million is recorded within the Stuart Weitzman segment, resulting in a decrease in operating income of $19.4 million and $8.2 million, respectively, and $7.5 million is related to the limited life impact of purchase accounting, primarily due to the amortization of the fair value of the order backlog asset, distributor relationships and inventory step-up, all recorded within the Stuart Weitzman segment resulting in a $7.5 million decrease in operating income.
  • coh_10k_2017-08-18_25_16
    Other - Other
    The remaining charges under this plan approximate $10-15 million which will be incurred in fiscal 2018.
  • coh_10k_2017-08-18_52_44
    Other - Other
    The Company expects that the remaining charges under this plan will approximate $10-15 million and will be incurred in fiscal 2018.
  • coh_10k_2017-08-18_206_323
    MA - Other
    On May 7, 2017, the Company entered into an Agreement and Plan of Merger the Merger Agreement with Kate Spade & Company and Chelsea Merger Sub Inc., a Delaware corporation and direct wholly owned subsidiary of Coach the Merger Sub .
  • coh_10k_2017-08-18_69_63
    Revenue - Product
    This decrease was primarily driven by lower sales to wholesale customers of $56.3 million due to the Companys strategic decision to elevate the Coachs brand positioning in the channel by limiting participation in promotional events and closing approximately 25% of its wholesale doors by the end of fiscal 2017 and a decrease in non-comparable store sales of $9.1 million primarily due to the impact of net store closures.
  • coh_10k_2017-08-18_130_188
    Financial - Earnings
    Gross margin decreased 210 basis points from 63.8% in fiscal 2015 to 61.7% in fiscal 2016.
  • coh_10k_2017-08-18_131_191
    Financial - Earnings
    Gross margin decreased 150 basis points from 77.0% in fiscal 2015 to 75.5% in fiscal 2016.
  • coh_10k_2017-08-18_140_208
    Financial - Expense
    The increase is primarily due to the impact of Stuart Weitzman, contributing to $55.5 million of this increase, as well as increased Coach brand information system costs and litigation costs, partially offset by lower Coach brand occupancy costs.
  • coh_10k_2017-08-18_223_367
    Financial - Cash Flow
    This approach uses significant estimates and assumptions, including projected future cash flows, discount rates, royalty rates and growth rates.
  • coh_10k_2017-08-18_82_115
    Financial - Expense
    Excluding non-GAAP adjustments of $22.3 million in fiscal 2017 and $122.0 million in fiscal 2016, as discussed in the GAAP to Non-GAAP Reconciliation herein, SG&A expenses decreased 0.2% or $4.4 million from fiscal 2016 and SG&A expenses as a percentage of net sales remained relatively consistent at 50.6% in fiscal 2017 compared to 50.7% in fiscal 2016.
  • coh_10k_2017-08-18_76_99
    Financial - Expense
    This increase was due to favorable effects of decreased duty costs.
  • coh_10k_2017-08-18_167_262
    Revenue - Geography
    Accrued liabilities were a use of cash of $50.1 million in fiscal 2017 as compared to a source of cash of $30.1 million in fiscal 2016, primarily driven by changes in derivative positions due to foreign currency fluctuations and timing of other operating payments.
  • coh_10k_2017-08-18_32_31
    Revenue - Geography
    Our results have been impacted by foreign exchange rate fluctuations, and will continue to fluctuate with future volatility.
  • coh_10k_2017-08-18_217_346
    Revenue - Product
    Internet revenue from sales of products ordered through the Companys e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers.
  • coh_10k_2017-08-18_63_51
    Financial - Earnings
    Gross profit increased by 1.0% to $3.08 billion during fiscal 2017 as compared to $3.05 billion in fiscal 2016.
  • coh_10k_2017-08-18_157_253
    Other - Other
    By providing the non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors understanding of our business and our results of operations.
  • coh_10k_2017-08-18_145_218
    Financial - Earnings
    Operating margin decreased 250
  • coh_10k_2017-08-18_126_174
    Revenue - Product
    International Net Sales increased 5.1% or $82.0 million to $1.70 billion in fiscal 2016.
  • coh_10k_2017-08-18_69_65
    Revenue - Product
    Our bricks and mortar comparable store sales increased 3.8%.
  • coh_10k_2017-08-18_70_71
    Revenue - Product
    International Net Sales increased 0.7% or $11.2 million to $1.72 billion in fiscal 2017.
  • coh_10k_2017-08-18_75_93
    Financial - Earnings
    The increase in gross margin is due to favorable channel mix as a result of wholesale door closures and to a lesser extent, improved costing and product mix which was offset by promotional activity.
  • coh_10k_2017-08-18_68_60
    Revenue - Product
    Excluding the impact of the 53rd week in fiscal 2016, net sales increased 1.1%.
  • coh_10k_2017-08-18_63_50
    Revenue - Product
    Excluding the impact of the 53rd week in fiscal 2016, net sales increased by $80.9 million or 1.8%.
  • coh_10k_2017-08-18_74_89
    Financial - Earnings
    Gross margin for the Coach brand increased 70 basis points to 69.4% in fiscal 2017 from 68.7% in fiscal 2016, which was not materially impacted by the year over year change in foreign currency rates.
  • coh_10k_2017-08-18_78_100
    Financial - Earnings
    Stuart Weitzman Gross Profit increased 11.7% or $23.7 million to $226.1 million in fiscal 2017.
  • coh_10k_2017-08-18_73_84
    Financial - Earnings
    Gross profit increased 1.0% or $29.8 million to $3.08 billion in fiscal 2017 from $3.05 billion in fiscal 2016.
  • coh_10k_2017-08-18_76_94
    Financial - Earnings
    International Gross Profit increased 1.4% or $17.7 million to $1.30 billion in fiscal 2017.
  • coh_10k_2017-08-18_74_88
    Financial - Earnings
    Excluding the 53rd week in fiscal 2016, gross profit increased by $55.1 million.
  • coh_10k_2017-08-18_131_190
    Financial - Earnings
    International Gross Profit increased 3.0% or $37.4 million to $1.29 billion in fiscal 2016.
  • coh_10k_2017-08-18_128_181
    Financial - Earnings
    Gross profit increased 4.9% or $142.7 million to $3.05 billion in fiscal 2016 from $2.91 billion in fiscal 2015.
  • coh_10k_2017-08-18_216_527
    Revenue - Product
    Revenue is recognized by the Company when there is persuasive evidence of an arrangement, delivery has occurred and risks and rewards of ownership have been transferred to the buyer, price has been fixed or is determinable, and collectability is reasonably assured.
  • coh_10k_2017-08-18_147_219
    Financial - Earnings
    increased 6.7% or $32.1 million to $512.7 million in fiscal 2016, primarily reflecting an increase in gross profit of $37.4 million partially offset by higher SG&A expenses of $5.3 million.
  • coh_10k_2017-08-18_141_210
    Financial - Earnings
    Operating margin decreased to 14.5% as compared to 14.7% in fiscal 2015.
  • coh_10k_2017-08-18_195_297
    Other - Other
    The Company had no outstanding borrowings under the Revolving Credit Facility at fiscal year end.
  • coh_10k_2017-08-18_98_147
    Financial - Income
    This increase was primarily due to higher operating income.
  • coh_10k_2017-08-18_97_142
    Other - Other
    The effective tax rate was 22.1% in fiscal 2017, as compared to 26.5% in fiscal 2016.
  • coh_10k_2017-08-18_150_229
    Other - Other
    The effective tax rate was 26.5% in fiscal 2016, as compared to 34.2% in fiscal 2015.
  • coh_10k_2017-08-18_151_234
    Financial - Income
    This increase was primarily due to lower provision for income taxes, partially offset by the impact of increased interest expense attributable to our debt as well as lower operating income.
  • coh_10k_2017-08-18_64_54
    Financial - Earnings
    Net income increased 28.3% in fiscal 2017 as compared to fiscal 2016, primarily due to an increase in operating income of $133.9 million.
  • coh_10k_2017-08-18_76_95
    Financial - Earnings
    Excluding the impact of the 53rd week in fiscal 2016, gross profit increased $40.8 million.
  • coh_10k_2017-08-18_33_35
    Other - Other
    Several organizations that monitor the worlds economy, including the International Monetary Fund, are projecting slightly accelerated economic strengthening with modest overall global growth for the remainder of calendar 2017 but caution that there is considerable uncertainty surrounding the underlying assumptions of the forecast.
  • coh_10k_2017-08-18_35_37
    Other - Other
    For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A - Risk Factors included in this Annual Report on Form 10-K.
  • coh_10k_2017-08-18_87_123
    Financial - Income
    Operating income increased 20.5% or $133.9 million to $787.4 million during fiscal 2017 as compared to $653.5 million in fiscal 2016.
  • coh_10k_2017-08-18_141_209
    Financial - Income
    Operating income increased 5.7% or $35.5 million to $653.5 million during fiscal 2016 as compared to $618.0 million in fiscal 2015.
  • coh_10k_2017-08-18_213_338
    Other - Other
    Actual results could differ from estimates in amounts that may be material to the financial statements.
  • coh_10k_2017-08-18_82_114
    Revenue - Product
    As a percentage of net sales, SG&A expenses decreased to 51.1% during fiscal 2017 as compared to 53.4% during fiscal 2016.
  • coh_10k_2017-08-18_135_199
    Revenue - Product
    As a percentage of net sales, SG&A expenses decreased to 53.4% during fiscal 2016 as compared to 54.6% during fiscal 2015.
  • coh_10k_2017-08-18_151_232
    Financial - Earnings
    Net income increased 14.4% or $58.1 million to $460.5 million in fiscal 2016 as compared to $402.4 million in fiscal 2015.
  • coh_10k_2017-08-18_98_145
    Financial - Earnings
    Net income increased 28.3% or $130.5 to $591.0 million in fiscal 2017 as compared to $460.5 million in fiscal 2016.
  • coh_10k_2017-08-18_181_274
    Other - Other
    Accounts payable were a use of cash of $48.4 million in fiscal 2016 as compared to a source of cash in fiscal 2015 of $64.4 million, driven by an overall decrease in inventory purchases as well as timing of inventory payments, the timing of transformation-related payments and a decrease in payables due to timing of payments.
  • coh_10k_2017-08-18_156_247
    Revenue - Geography
    Accordingly, certain increases and decreases in operating results for the Company, the Coach brand and the Companys North America and International segment have been presented both including and excluding currency fluctuation effects from translating foreign-denominated amounts into U.S. dollars and compared to the same period in the prior fiscal year.
  • coh_10k_2017-08-18_222_529
    Other - Other
    Goodwill and Other Intangible Assets
  • coh_10k_2017-08-18_223_366
    Financial - Cash Flow
    Estimates of fair value for finite-lived and indefinite-lived intangible assets are primarily determined using discounted cash flows and the relief from royalty method, respectively, with consideration of market comparisons and recent transactions.
  • coh_10k_2017-08-18_167_264
    Financial - Expense
    Accounts payable were a source of cash of $8.4 million in fiscal 2017 as compared to a use of cash in fiscal 2016 of $48.4 million, primarily driven by timing of inventory payments and other expenses.
  • coh_10k_2017-08-18_224_368
    Other - Other
    The Company generally performs its annual goodwill and indefinite-lived intangible assets impairment analysis using a quantitative approach.
  • coh_10k_2017-08-18_92_129
    Financial - Earnings
    decreased 5.5% or $40.3 million to $697.0 million in fiscal 2017, reflecting the decrease in gross profit of $25.0 million and higher SG&A expenses of $15.3 million.
  • coh_10k_2017-08-18_208_524
    Financial - Expense
    The Company also expects to incur costs of approximately $45 million of acquisition-related expenses, which is excluded from the above table, as these contractual obligations were created subsequent to July 1, 2017.
  • coh_10k_2017-08-18_74_87
    Financial - Earnings
    Gross profit for the Coach brand increased slightly by 0.2% or $6.1 million to $2.86 billion in fiscal 2017.
  • coh_10k_2017-08-18_232_397
    Financial - Shares / Equity
    Actual distributed shares are calculated upon conclusion of the service and performance periods, and include dividend equivalent shares.
  • coh_10k_2017-08-18_90_464
    Financial - Income
    Operating income for the Coach brand increased
  • coh_10k_2017-08-18_221_360
    MA - Other
    In connection with an acquisition, the Company records all assets acquired and liabilities assumed of the acquired business at their acquisition date fair value, including the recognition of contingent consideration at fair value on the acquisition date.
  • coh_10k_2017-08-18_167_261
    Other - Other
    Other liabilities were a use of cash of $53.4 million in fiscal 2017 compared to a source of cash of $49.5 million in fiscal 2016, primarily driven by changes in tax liabilities including the expiration of statutes during the quarter, partially offset by higher store-related liabilities in fiscal 2016.
  • coh_10k_2017-08-18_180_512
    Financial - Earnings
    Net cash provided by operating activities decreased $178.8 million primarily due to the year-over-year declines in cash sources from operating assets and liabilities decrease of $131.7 million and noncash charges decrease of $105.2 million, partially offset by higher net income of $58.1 million.
  • coh_10k_2017-08-18_218_351
    Other - Other
    Returns and allowances require pre-approval from management and discounts are based on trade terms.
  • coh_10k_2017-08-18_225_373
    Other - Other
    Determination of the fair value of a reporting unit and intangible asset is based on managements assessment, considering independent third-party appraisals when necessary.

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Exhibit 12 - STATEMENT REGARDING CALCULATION OF RATIOS

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Exhibit 21.1 - SUBSIDARIES OF THE REGISTRANT

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Exhibit 23.1 - CONSENTS OF EXPERTS AND COUNSEL

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Exhibit 31.1 - RULE 13A-14A/15D-14A CERTIFICATION

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Exhibit 32.1 - SECTION 1350 CERTIFICATION

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  • Form Type: Annual
  • Number of times amended: 0
  • Accession Number: 0001116132-17-000011
  • Submitted to the SEC: Friday, August 18, 2017
  • Accepted by the SEC: Friday, August 18, 2017
  • Period Ending: July 2017
Companies
 

COH Morningstar

COACH INC

$40.35 +0.88 (+2.23%)

Day's Range:
$39.70 to $40.43

52-Week Range:
$34.16 to $48.85

Volume:
4,479,769

Volume (Avg):
3,636,400

Earnings per Share:
$2.09

PEG / Short / PE Ratios:
1.55 / 2.68 / 19.31

Market Cap:
$11.40B

Book Value:
10.65

EBITDA:
$1.00B

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