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): October 25, 2005
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 2.02: Results of Operations and Financial Condition.
On October 25, 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 October 1, 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.
The attached press release includes the following Non-GAAP financial
information:
o The Company's net income and net income per share have been presented
both including and excluding the effect of stock option expense for
the quarter and compared to the same quarter in the prior fiscal year.
Selling, general & administrative expense has also been presented both
with and without the impact of option expense.
o The Company has also presented its projected earnings per diluted
share for the second fiscal quarter and full fiscal year both
including and excluding the effect of stock option expense.
The Company believes that it is appropriate to present this supplemental
information, for the following reasons:
o Effective July 3, 2005, the Company adopted Statement of Financial
Accounting Standards No. 123(R), which requires companies to measure
all employee stock-based compensation awards using a fair value method
and recognize compensation costs in its financial statements. The
attached earnings report is the first report issued by the Company
that includes the impact of expenses from such compensation.
o Prior to the attached report, all written earnings and
earnings-per-share guidance issued by the Company has not included the
impact of expenses from such compensation; historically, this has been
the way in which management has analyzed and managed the Company's
business.
o Presenting the Company's earnings and earnings per share in the
attached release both with and without the impact of such expenses
will allow investors to better understand the Company's financial
results and how such results compare with the Company's prior
guidance. In addition, this presentation will help investors and
analysts to understand the relationship of the Company's results to
analysts' coverage and projected earnings forecasts, which have not
included the impact of stock option expense.
o This presentation will also allow investors to better understand the
change in the Company's financial results from last year to the
current year and the impact from fiscal 2005 to fiscal 2006 of
expenses from such compensation on the Company's earnings and earnings
per share.
Item 9.01: Financial Statements and Exhibits.
(c) Exhibits. The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated October 25, 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: October 27, 2005
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 October 25, 2005
Exhibit 99.1
Coach Reports First Quarter Earnings Growth of
about 50%; Ahead of Analysts' Expectations; Increases Guidance for
Balance of FY06
NEW YORK--(BUSINESS WIRE)--Oct. 25, 2005--Coach, Inc. (NYSE: COH),
a leading marketer of modern classic American accessories, today
announced an increase of 48% in earnings per diluted share before
option expense to $0.26 for its first fiscal quarter ended October 1,
2005, up from $0.17 per diluted share a year ago. Net of option
expense of approximately $0.02 in both periods, earnings per share
rose 53% to $0.24 from $0.16. This substantial increase in earnings
from the prior year's first quarter reflected a 30% gain in net sales
combined with operating margin improvement.
In the first quarter, net sales were $449 million, 30% higher than
the $344 million reported in the same period of the prior year. Net
income before option expense rose 48% to $100 million, or $0.26 per
diluted share, compared with $68 million, or $0.17 per diluted share
in the prior year. These results were ahead of the analysts' consensus
estimate of $0.25 per share and the company's guidance. Including the
impact of stock option expense net income rose 53% to $94 million, or
$0.24 per diluted share, compared with $61 million or $0.16 per share
in the prior year.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "Our exceptional results again this quarter speak to the
vibrancy of the Coach proposition. This consistency demonstrates the
strength of the Coach brand, the sustainability of our business model,
the clarity of our strategies and our ability to execute efficiently.
Coach is clearly well positioned for another excellent holiday
season."
During the quarter, gross profit rose 32% to $341 million from
$258 million a year ago. Gross margin expanded by 100 basis points
from 75.0% to 76.0% driven by product mix and sourcing cost
initiatives. SG&A expenses as a percentage of net sales before option
expense declined 130 basis points to 41.3%, compared to the 42.6%
reported in the year-ago quarter. Including option expense in both
periods, SG&A expenses declined 210 basis points to 43.7% of sales
from 45.8% in the prior year's first quarter.
First fiscal quarter sales results in each of Coach's primary
channels of distribution grew as follows:
-- Direct to consumer sales, which now also include sales by
Coach Japan, rose 29% to $315 million from $244 million in the
comparable period of the prior year. U.S. comparable store
sales for the quarter rose 25.1%, with retail stores up 14.4%
and factory stores up 35.8%. Sales in Japan increased by 24%
in constant currency, fueled by new store openings, expansions
and mid-single-digit sales gains in comparable retail
locations.
-- Indirect sales, which now exclude sales generated by Coach
Japan, increased 34% to $134 million from $100 million in the
same period last year. Results were primarily driven by strong
gains in US department store and international wholesale
sales.
During the first quarter of fiscal 2006, the company opened six
retail stores and three factory stores in North America, bringing the
total to 199 retail stores and 85 factory stores as of October 1,
2005. In addition, four retail stores were expanded. In Japan, Coach
opened four and expanded one retail location.
Mr. Frankfort continued, "Our first quarter results were fueled by
innovative transitional and new fall product. Each of our monthly
introductions was very well received, starting in July with Soho and
Hamptons Weekend, followed by Chelsea in August, and by a fresh group
of Hamptons silhouettes in September. Throughout the quarter,
consumers appreciated our more sophisticated silhouettes and luxurious
materials as limited edition styles sold extremely well at higher
price points. Our strong performance has continued into October with
the introduction of beaded Gallery totes and duffles earlier this
month, which have also been well received. For holiday, building upon
the success of our fall color palette, Coach will offer a wide
assortment of neutrals accented by a variety of reds, as well as a
strong patchwork statement. In addition, many of our items will
feature stylish embellishments such as metallics, fur and beading,
which are particularly suitable for holiday gift giving."
"During this quarter, as planned, we will add four more retail
stores in the U.S. before holiday, bringing the year-to-date total to
10 new retail stores, as well as completing six expansions. At the
same time in Japan, Coach will open two new retail locations."
The company provided initial guidance for the second fiscal
quarter, projecting sales of at least $645 million, representing a
year-over-year increase of at least 21%, and earnings per diluted
share before option expense of at least $0.45, up at least 32%, and
ahead of the analysts' consensus of $0.44. Including about $0.02 of
option expense, earnings per share are estimated at at least $0.43, up
34% from the comparable year-ago results of $0.32 For the fiscal year
2006 the company expects to generate sales of about $2.1 billion, an
increase of 23% from prior year, and earnings per diluted share before
option expense of at least $1.28, ahead of the analysts' consensus of
$1.26, and representing an increase of at least 28%. After about $0.10
of option expense, the company is projecting earnings per share of at
least $1.18, up 28% from the $0.92 reported on the same basis for
FY05.
The company also announced that it repurchased and retired 921,000
shares of common stock at an average cost of $32.54 during the first
fiscal quarter. At this time, approximately $220 million remains
available for future repurchases under the existing program, which
expires in May, 2007.
Coach will host a conference call to review these results at 8:30
a.m. (ET) today, October 25, 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 & Corporate
Communications. 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 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, scarves,
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
-------------------------------------------
(Includes Stock Option Expense in Both Periods)
-----------------------------------------------
For the Quarters Ended October 1, 2005
and October 2, 2004
---------------------------------------
(in thousands, except per share data)
-------------------------------------
(unaudited)
-----------
QUARTER ENDED
------------------
Oct. 1, Oct. 2,
2005 2004
-------- --------
Net sales $448,951 $344,065
Cost of sales 107,590 85,891
-------- --------
Gross profit 341,361 258,174
Selling, general and administrative expense 196,252 157,617
-------- --------
Operating income 145,109 100,557
Interest income, net 5,887 2,510
-------- --------
Income before income taxes and minority interest 150,996 103,067
Income taxes 57,381 39,165
Minority interest, net of tax - 2,921
-------- --------
Net income $ 93,615 $ 60,981
======== ========
Net income per share
Basic $ 0.25 $ 0.16
======== ========
Diluted $ 0.24 $ 0.16
======== ========
Shares used in computing net income per share
Basic 379,551 377,981
======== ========
Diluted 389,972 389,492
======== ========
- ---------------------------------------------------------------------
Supplemental Information to Remove Impact of Stock
Option Expense
Net income, as reported $ 93,615 $ 60,981
Add back Stock Option Expense (after tax) 6,591 6,744
Pro forma net income, ex Stock Option Expense $100,206 $ 67,725
Pro forma as adjusted basic net income, excluding
stock option expense, per share $ 0.26 $ 0.18
Pro forma as adjusted diluted net income,
excluding stock option expense, per share $ 0.26 $ 0.17
- ---------------------------------------------------------------------
COACH, INC.
-----------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
At October 1, 2005, July 2, 2005
and October 2, 2004
--------------------------------
(in thousands)
--------------
(unaudited)
-----------
Oct. 1, July 2, Oct. 2,
2005 2005 2004
---------- ---------- ----------
ASSETS
Cash, cash equivalents and
short-term investments $ 447,630 $ 383,051 $ 441,888
Receivables 104,906 65,399 85,607
Inventories 215,251 184,419 204,479
Other current assets 95,761 76,491 63,890
---------- ---------- ----------
Total current assets 863,548 709,360 795,864
Property and equipment, net 214,170 203,862 168,109
Long-term investments 90,890 122,065 107,547
Other noncurrent assets 333,163 334,869 62,118
---------- ---------- ----------
Total assets $1,501,771 $1,370,156 $1,133,638
========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $ 70,250 $ 64,985 $ 60,469
Accrued liabilities 210,690 188,247 147,085
Subsidiary credit facilities 4,867 12,292 23,099
Current portion of long-term
debt 170 150 150
---------- ---------- ----------
Total current liabilities 285,977 265,674 230,803
Long-term debt 3,100 3,270 3,270
Other liabilities 46,359 45,306 50,913
.
Minority interest, net of tax - - 43,119
Stockholders' equity 1,166,335 1,055,906 805,533
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,501,771 $1,370,156 $1,133,638
========== ========== ==========
CONTACT: Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618