View:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 3, 2004
Coach, Inc.
---------------
(Exact name of registrant as specified in its charter)
Maryland 1-16153 52-2242751
-------- ------- ----------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
516 West 34th Street, New York, NY 10001
----------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 594-1850
----------------
(Registrant's telephone number, including area code)
Item 7: Exhibits.
(c) The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated August 3, 2004
Item 9: Regulation FD Disclosure; Item 12: Results of Operations and Financial
Condition.
On August 3, 2004, Coach, Inc. (the "Company") issued a press release (the
"Press Release") in which the Company announced its financial results for its
fiscal quarter and fiscal year ended July 3, 2004. All information in the press
release is being furnished to the Securities and Exchange Commission and shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934.
This Form 8-K and the Press Release attached hereto as Exhibit 99.1 are
being furnished to the Securities and Exchange Commission under Item 9 of Form
8-K in satisfaction of the public disclosure requirements of Regulation FD. This
Form 8-K and the Press Release, insofar as they disclose historical information
regarding the Company's results of operations or financial condition for the
fiscal quarter and fiscal year ended July 3, 2004, are also being furnished to
the Securities and Exchange Commission under Item 12 of Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 3, 2004
COACH, INC.
By: /s/ Carole P. Sadler
--------------------------------------
Carole P. Sadler
Senior Vice President, General Counsel
and Secretary
EXHIBIT INDEX
99.1 Text of Press Release, dated August 3, 2004
Exhibit 99.1
Coach Reports Fourth Quarter Earnings Per Share of $0.34;
Up 113% and Ahead of Expectations; Raises Guidance for FY05;
Increases FY05 Guidance to at Least $1.68; Up 23% from FY04
NEW YORK--(BUSINESS WIRE)--Aug. 3, 2004--Coach, Inc. (NYSE: COH),
a leading marketer of modern classic American accessories, today
announced a 113% increase in earnings per diluted share for its fourth
fiscal quarter ended July 3, 2004. This substantial increase in
earnings from the prior year's fourth quarter reflected 46% growth in
net sales combined with significant operating margin improvement. For
the fiscal year, net sales rose 39% and net income increased 79%
versus the prior fiscal year.
In the fourth quarter, net sales were $338 million, 46% higher
than generated in the prior year's fourth quarter. Net income rose
120% to $66 million, or $0.34 per diluted share, compared with $30
million, or $0.16 per share in the prior year. This was ahead of the
analysts' consensus estimate of $0.31 for the quarter. For the fiscal
year 2004, net sales were $1.3 billion, up 39% from the $953 million
recorded in fiscal year 2003. Net income rose to $262 million, up 79%
from the $147 million earned in the prior year. Diluted earnings per
share rose 72% to $1.36, versus $0.79 a year ago.
The company noted that results for the fourth quarter and fiscal
year ending July 3, 2004 included 14 and 53 weeks, respectively, while
the same periods in fiscal 2003 included 13 and 52 weeks,
respectively. The 53rd week contributed approximately $20 million to
2004 fourth quarter and fiscal year sales. Therefore, excluding the
extra week sales would have risen 38% for the quarter, while sales for
the year would have been up 37%.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "I'm delighted with our fiscal fourth quarter and full
year results. This quarter's performance demonstrated a continuation
of the momentum we have seen throughout the year, as our market share
expanded across all channels and geographies. Similarly, fiscal 2004
was another remarkable year for our company, as we generated
outstanding financial results in all dimensions of our business. Our
performance reflected the growing strength of the Coach brand, and
consumers' continued enthusiasm for our fresh and relevant product
offering."
In the fourth quarter, gross margin increased by 350 basis points
on a year-over-year basis from 73.2% to 76.7%, while gross margin for
the year expanded from 71.1% to 74.9%, a 380 basis point increase.
This improvement was driven by channel mix, sourcing cost initiatives
and product mix.
SG&A expenses as a percentage of net sales improved in the fourth
quarter to 43.8% from the 51.3% generated in the year-ago period. For
the full year, SG&A expenses as a percentage of net sales declined to
41.3% from 45.5% a year ago. As a result, the operating margin in the
quarter reached 32.9%, compared with 21.9% in the year-ago fourth
quarter. For the full year the company's operating margin rose to
33.6% from the 25.6% margin achieved in fiscal year 2003.
At the end of the fiscal year the company had cash and marketable
securities of $564 million, up from $229 million in cash a year ago.
Fourth fiscal quarter and full year sales grew in each of Coach's
primary channels of distribution as follows:
-- Direct to consumer sales, which consist primarily of sales at
Coach stores, rose 39% to $195 million during the fourth
quarter from $140 million posted for the fourth quarter of the
prior year. These exceptional results were driven by both same
store sales growth and distribution. Comparable store sales
rose 17.7%, with retail stores up 20.1%, and factory stores up
14.5%. For the full year, direct to consumer sales rose 30% to
$726 million from $560 million generated in fiscal 2003.
Overall, comparable store sales for the fiscal year increased
16.9%, with retail stores up 21.9% and factory stores up
10.3%.
-- Indirect sales increased 57% to $144 million in the fourth
quarter from the $92 million reported for the prior year. For
the year, indirect sales rose 51% to $595 million, up from
$394 million recorded for fiscal 2003. Results for both the
quarter and fiscal year reflected strong gains in all indirect
businesses, including Coach Japan, International wholesale,
U.S. department stores and business-to-business. Comparable
location sales in Japan rose at a mid-single-digit rate for
the quarter and a double-digit rate for the year. During the
quarter, sales to Japanese consumers outside Japan grew much
faster than expected due to an estimated doubling in Japanese
international travel from the prior year.
Mr. Frankfort added, "The strength of our fourth quarter results
was reflected in all of our businesses. Clearly our colorful and
stylish spring and summer offerings, and consistent monthly product
flow, drove full-priced sales in our U.S. retail stores, in U.S.
department stores, and among Japanese consumers worldwide.
Introductions this spring included Optic Signature, an expanded Beach
collection and Signature Stripe and Patchwork. Hamptons Weekend, in
its second successful year in new colors and sizes, was also a
significant contributor to quarterly sales, while our popular straw
group remained a Mother's Day favorite. Importantly, we were excited
to see an unprecedented high level of growth in the U.S. accessory
category, as evidenced by sales increases in department and specialty
stores. This trend bodes well for a sustainable higher level of
consumer spending on handbags and women's accessories."
"We were particularly pleased with the outstanding sales and
market share growth in Japan in FY04, where we attained the number two
position amid imported handbag and accessory brands. Our rapidly
expanding sales in Japan, and to Japanese consumers worldwide, truly
speaks to the success of our distribution strategy - notably the
acceleration of flagship openings, along with the expansion of highly
productive shop-in-shops as we continue to focus on driving improved
productivity through consistent product flow and distinctive newness."
During the fourth quarter of fiscal 2004, the company opened seven
Coach retail stores and closed one factory store, bringing the total
to 174 retail stores and 76 factory stores at July 3, 2004. This was a
net increase of 18 Coach retail stores from the 156 in operation a
year ago. Also during the quarter, we relocated and expanded two
retail stores bringing the total number of retail store expansions
this year to 9. Coach Japan opened two new locations, including the
Marunouchi flagship, bringing the total to 102 at fiscal year end.
This was a net increase of 7 locations from the 95 at year-end 2003.
In addition, we expanded five locations during the fourth quarter,
bringing the year end total to 16 expansions in Japan.
"We continue to operate Coach as a small business with large
sales, which we manage very actively. Based on the increasing vibrancy
and strength of the Coach brand and the growing U.S. premium
accessories category, we've never felt more positive than we do today
about our prospects for future organic growth. We're confident that
our proven strategies will allow us to continue to deliver superior
results over the planning horizon," Mr. Frankfort concluded.
The company also reported that July results remained strong,
auguring well for first quarter performance. First fiscal quarter
sales are projected to be at least $330 million, an increase of at
least 27% with earnings per share projected to be at least $0.30.
In addition, Coach raised guidance for fiscal 2005 and now
estimates sales of at least $1.6 billion for the year, an increase of
at least 20%. Operating margin is expected to expand by at least 100
basis points, driven primarily by a lower SG&A expense ratio.
Operating income is expected to rise at least 23% while earnings per
share are forecasted to rise to at least $1.68, ahead of the analysts'
consensus of $1.64 for the year.
Coach will host a conference call to review these results at 8:30
a.m. (EDT) today, August 3, 2004. Interested parties may listen to the
webcast by accessing www.coach.com/investors on the Internet or
dialing into 1-888-405-2080 and asking for the Coach earnings call led
by Andrea Shaw Resnick, VP of Investor Relations. A telephone replay
will be available starting at 12:00 noon today, for a period of five
business days. The number to call is 1-888-282-0028. A webcast replay
of this call will be available for five business days on the Coach
website.
Coach, with headquarters in New York, is a leading American
marketer of fine accessories and gifts for women and men, including
handbags, women's and men's small leathergoods, business cases,
weekend and travel accessories, footwear, watches, outerwear, jewelry,
sunwear, and related accessories. Coach is sold worldwide through
Coach stores, select department stores and specialty stores, through
the Coach catalog in the U.S. by calling 1-800-223-8647 and through
Coach's website at www.coach.com. Coach's shares are traded on The New
York Stock Exchange under the symbol COH.
This press release contains forward-looking statements based on
management's current expectations. These statements can be identified
by the use of forward-looking terminology such as "may," "will,"
"should," "expect," "intend," "estimate," "are positioned to,"
"continue," "project," "guidance," "forecast," "anticipated," or
comparable terms. Future results may differ materially from
management's current expectations, based upon risks and uncertainties
such as expected economic trends, the ability to anticipate consumer
preferences, the ability to control costs, etc. Please refer to
Coach's latest Annual Report on Form 10-K for a complete list of risk
factors.
COACH, INC.
-----------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
For the Quarters and Twelve Months
Ended July 3, 2004 and June 28, 2003
------------------------------------
(in thousands, except per share data)
-------------------------------------
QUARTER ENDED (1) TWELVE MONTHS ENDED (1)
-------------------------------------------
July 3, June 28, July 3, June 28,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales $ 338,145 $ 231,516 $1,321,106 $ 953,226
Cost of sales 78,632 61,960 331,024 275,797
---------- ---------- ---------- ----------
Gross profit 259,513 169,556 990,082 677,429
Selling, general and
administrative expenses 148,246 118,749 545,617 433,667
---------- ---------- ---------- ----------
Operating income 111,267 50,807 444,465 243,762
Interest income, net (1,553) (440) (3,192) (1,059)
---------- ---------- ---------- ----------
Income before income taxes
and minority interest 112,820 51,247 447,657 244,821
Income taxes 42,299 18,961 167,866 90,585
Minority interest, net of
tax 4,851 2,422 18,043 7,608
---------- ---------- ---------- ----------
Net income $ 65,670 $ 29,864 $ 261,748 $ 146,628
========== ========== ========== ==========
Basic net income per share $ 0.35 $ 0.16 $ 1.41 $ 0.82
========== ========== ========== ==========
Shares used in computing
basic net income per share 188,518 181,872 186,060 179,558
========== ========== ========== ==========
Diluted net income per
share $ 0.34 $ 0.16 $ 1.36 $ 0.79
========== ========== ========== ==========
Shares used in computing
diluted net income per
share 194,706 188,548 192,779 185,842
========== ========== ========== ==========
(1)Includes 53rd week in fiscal year 2004
COACH, INC.
-----------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
At July 3, 2004 and June 28, 2003
---------------------------------
(in thousands)
--------------
July 3, June 28,
2004 2003
--------- ---------
ASSETS
Cash, cash equivalents and short term $ 434,443 $ 229,176
investments
Receivables 55,724 35,470
Inventories 161,913 143,807
Other current assets 53,536 40,085
--------- ---------
Total current assets 705,616 448,538
Property and equipment, net 148,524 118,547
Long term investments 130,000 -
Other noncurrent assets 44,518 50,567
--------- ---------
Total assets $1,028,658 $ 617,652
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 44,771 $ 26,637
Accrued liabilities 135,353 108,273
Subsidiary credit facilities 1,699 26,471
Current portion of long-term debt 115 80
--------- ---------
Total current liabilities 181,938 161,461
Deferred tax liabilities 15,791 -
Long-term debt 3,420 3,535
Other liabilities 5,025 3,572
Minority interest, net of tax 40,198 22,155
Stockholders' equity 782,286 426,929
--------- ---------
Total liabilities and stockholders' equity $1,028,658 $ 617,652
========= =========
CONTACT: Coach
Andrea Shaw Resnick, 212-629-2618