Correspondence Document
April 27, 2005
VIA EDGAR
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Securities and Exchange Commission
Attention: Filing Desk
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Report on Form 8-K of Coach, Inc.
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Ladies/Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, we are filing by EDGAR a Current Report on Form 8-K of Coach, Inc. (the
"Company") including exhibits.
Thank you for your assistance in this matter. If you should have any
questions on the foregoing, please call the undersigned at (212) 615-2002.
Very truly yours,
/s/ Daniel J. Ross
Attachments
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): April 25, 2005
Coach, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-16153 52-2242751
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
516 West 34th Street, New York, NY 10001
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(Address of principal executive offices) (Zip Code)
(212) 594-1850
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(Registrant's telephone number, including area code)
Item 1.01: Entry into a Material Definitive Agreement.
On April 25, 2005, Coach, Inc. (the "Company") and Sumitomo Corporation
("Sumitomo") entered into an agreement under which the Company will purchase
Sumitomo's 50% ownership interest in Coach Japan, Inc. (a joint venture between
the Company and Sumitomo). Two of the Company's wholly-owned subsidiaries (Coach
Japan Holdings, Inc. and Coach Japan Investments, Inc.), as well as Coach Japan,
Inc., were also parties to the agreement. The purchase price for this
transaction will be approximately $225 million, plus approximately $75 million
representing Sumitomo's undistributed profits and paid-in capital, for a total
cash payment of $300 million. The purchase is expected to close at the end of
the Company's current fiscal year and be accretive to earnings in its next
fiscal year.
Item 2.02: Results of Operations and Financial Condition.
On April 26, 2005, Coach, Inc. (the "Company") issued a press release (the
"Press Release") in which the Company announced its financial results for its
fiscal quarter ended April 2, 2005. 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
(the "Exchange Act") or otherwise subject to liability under that section, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except as expressly set forth by
specific reference in such a filing.
Item 9.01: Financial Statements and Exhibits.
(c) Exhibits. The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated April 26, 2005.
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: April 28, 2005
COACH, INC.
By: /s/ Carole P. Sadler
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Carole P. Sadler
Senior Vice President, General
Counsel and Secretary
EXHIBIT INDEX
99.1 Text of Press Release, dated April 26, 2005.
Exhibit 99.1
Coach Reports Third Quarter Earnings Per Share of $0.23;
Up 51% and Ahead of Expectations; Raises Guidance for FY05;
Announces Buyout of Coach Japan Joint Venture Partner
NEW YORK--(BUSINESS WIRE)--April 26, 2005--Coach, Inc. (NYSE:COH),
a leading marketer of modern classic American accessories, today
announced a 51% increase in earnings per diluted share to $0.23 for
its third fiscal quarter ended April 2, 2005. This substantial
increase in earnings from the prior year's third quarter reflected a
33% gain in net sales combined with operating margin improvement. In
addition, the company announced the purchase of Sumitomo's 50%
interest in Coach Japan, Inc. for approximately $225 million plus
undistributed profits and paid-in capital of about $75 million. The
purchase is expected to close at the end of the current fiscal year
and be accretive to earnings in FY06.
In the third quarter, net sales were $416 million, 33% higher than
the $313 million reported in the same period of the prior year. Net
income rose 53% to $89 million from $58 million a year ago, and
earnings per share increased 51% to $0.23 compared with $0.15 the
prior year. These results were ahead of the analysts' recently revised
consensus estimate of $0.22 per share. Earnings per share numbers have
been adjusted for the two-for-one split, which was effected on April
4, 2005.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "Our excellent third quarter sales reflect the
sustainability of our growth and the strength of our business model.
These results again demonstrate the vitality of the Coach brand.
Clearly, our accessible luxury proposition of product innovation,
relevance and exceptional value resonates with consumers across
multiple channels and geographies. Further, our bottom-line
performance evidences our ability to drive continued gains in
profitability."
During the quarter, gross profit rose 37% to $325 million from
$238 million a year ago. Gross margin expanded by 220 basis points
from 75.9% to 78.1%, driven by channel mix, product mix and sourcing
cost initiatives. SG&A expenses as a percentage of net sales declined
to 43.0%, a 60 basis point decrease from the 43.6% reported in the
year-ago quarter, primarily due to leveraging the higher sales.
For the nine months ended April 2, 2005, net sales were $1.29
billion, up 31% from the $983 million reported in the first nine
months of fiscal 2004. Net income rose to $291 million, up 49% from
the $196 million reported a year ago.
Third fiscal quarter sales results in each of Coach's primary
channels of distribution grew as follows:
-- Direct to consumer sales, which consist primarily of sales at
U.S. Coach stores, increased 30% to $209 million from $160
million last year. Comparable store sales for the quarter rose
19.3%, with retail stores up 12.9% and factory store sales up
28.5%.
-- Indirect sales rose 36% to $207 million from $153 million in
the same period last year. All indirect businesses, including
Coach Japan, U.S. department stores, international wholesale
and special markets, contributed to this significant increase.
Sales at Coach Japan increased by 35% in constant currency,
driven by new store openings, expansions and high-single-digit
sales gains in comparable retail locations.
Mr. Frankfort added, "Our exceptionally strong results this
quarter are a continuation of the trend we have seen over the last
several years. Our business has been fueled by product innovation -
punctuated by monthly flow. In fact, while consumers have always seen
Coach as a leading handbag and accessory resource, increasingly many
of our customers come to Coach as a resource for the newest styles,
similar to the way they seek out the latest innovations in technology.
This season's colorful offerings, driven by handbags and women's
accessories, have drawn an enthusiastic response from consumers. We're
particularly pleased with the ongoing strength of the Soho and
Hamptons handbag collections across multiple fabrications and new
silhouettes. Last month, we also introduced a significantly expanded
and updated Hamptons Weekend collection, including new handbag styles
and the whimsical Scribble print, which was instantly successful."
"Our results in Japan were also excellent, as our market share
continues to grow rapidly. Of special note, earlier this month, we
received a terrific reception at the opening of our newest Japanese
flagship, located in Nagoya. This 7,800 square foot store is our
seventh flagship in Japan and our first in Nagoya. We also enjoyed an
amazing response to our charity concert in Tokyo earlier this month,
broadening our consumer appeal."
During the third quarter of fiscal 2005, the company opened one
Coach retail store and closed one factory store, resulting in a total
of 186 retail stores and 80 factory stores at April 2, 2005. Through
Coach Japan, one location was added, while as expected, three small
shop-in-shops were closed.
"We're well positioned to sustain accelerated growth through the
rest of this quarter, as our business this month has continued strong
throughout all channels. As always, we have a strong pipeline of fresh
and relevant products planned. This month we launched a new line of
straw totes which were very well received by consumers. In addition,
our Optic Signature fabrication was introduced in yellow, pink and
green in several strong-selling Soho handbag styles, as well as in
footwear, scarves and hats. Already a success, Optic Signature will
also be our feature for Mother's Day. In May, we will be launching a
new summer program including fresh interpretations of the Shoulder
Tote, a very successful shape from last year's spring collection.
Coming in June will be a new Vintage Signature Tie Dye and Patchwork
group, the latter a perennial favorite. Also in the fourth quarter, we
will be adding seven more retail stores in the U.S., bringing the
total to 19 new retail stores in fiscal 2005."
Mr. Frankfort concluded, "Looking ahead, we've never felt more
positive about our prospects for growth, which rest on our distinctive
proposition, strong brand equities, and expanding market share."
The company now estimates 2005 sales of over $1.7 billion for the
full fiscal year ending July 2, 2005, an increase of about 29% from
prior year, and earnings per share of at least $0.97 or up 43% from
last year, compared with analysts' current consensus estimate of
$0.95. This reflects sales of at least $415 million and earnings per
share of at least $0.23 for the fourth quarter, up 35% from the $0.17
reported for the 14-week quarter in fiscal 2004 and above the
analysts' consensus estimate of $0.22. For fiscal 2006, we expect
sales growth of at least 19% to at least $2.0 billion, and earnings
per share growth of at least 22% to least $1.18, compared with
analysts' current consensus estimate of $1.13.
It should be noted that this guidance excludes the earnings impact
from the implementation of accounting for share-based payments
(Statement of Financial Accounting Standards No. 123R), which is
currently expected to be required in the first quarter of fiscal year
2006.
Coach will host a conference call to review these results at 8:30
a.m. (EDT) today, April 26, 2005. 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 1-866-352-7723. A webcast replay
of the earnings conference call will also 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, 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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For the Quarters and Nine Months Ended
April 2, 2005 and March 27, 2004
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED NINE MONTHS ENDED
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April 2, March 27, April 2, March 27,
2005 2004 2005 2004
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Net sales $415,939 $313,073 $1,291,763 $982,961
Cost of sales 91,266 75,556 305,948 252,392
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Gross profit 324,673 237,517 985,815 730,569
Selling, general and
administrative expenses 178,842 136,648 505,414 397,371
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Operating income 145,831 100,869 480,401 333,198
Interest income, net 4,945 768 10,924 1,639
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Income before income taxes
and minority interest 150,776 101,637 491,325 334,837
Income taxes 57,296 38,114 186,704 125,567
Minority interest, net of
tax 4,241 5,212 13,534 13,192
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Net income $89,239 $58,311 $291,087 $196,078
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Net income per share
Basic $0.24 $0.16 $0.77 $0.53
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Diluted $0.23 $0.15 $0.75 $0.51
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Shares used in computing
net income per share
Basic 379,695 374,012 378,885 370,502
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Diluted 391,609 387,139 390,413 384,294
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At April 2, 2005, July 3, 2004 and March 27, 2004
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(in thousands)
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April 2, July 3, March 27,
2005 2004 2004
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(unaudited) (unaudited)
ASSETS
Cash, cash equivalents and short
term investments $495,691 $434,443 $445,343
Receivables 83,630 55,724 78,657
Inventories 180,814 161,913 153,834
Other current assets 78,315 53,536 46,978
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Total current assets 838,450 705,616 724,812
Property and equipment, net 189,775 164,291 150,687
Long term investments 198,591 130,000 -
Other noncurrent assets 49,956 44,518 52,341
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Total assets $1,276,772 $1,044,425 $927,840
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $49,964 $44,771 $39,670
Accrued liabilities 169,759 123,647 129,987
Subsidiary credit facilities 21,315 1,699 13,264
Current portion of long-term debt 150 115 115
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Total current liabilities 241,188 170,232 183,036
Long-term debt 3,270 3,420 3,420
Other liabilities 65,080 48,289 32,409
Minority interest, net of tax 53,732 40,198 35,347
Stockholders' equity 913,502 782,286 673,628
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Total liabilities and stockholders'
equity $1,276,772 $1,044,425 $927,840
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CONTACT: Coach
Andrea Shaw Resnick, 212-629-2618