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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 1, 2006
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 2.02: Results of Operations and Financial Condition.
On August 1, 2006, Coach, Inc. (the "Company") issued a press release
(the "Press Release") in which the Company announced its financial results for
its fiscal quarter ended July 1, 2006. 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 sales have been presented both including and
excluding the effect of currency fluctuation effects from
translating foreign-denominated sales into U.S. dollars for the
quarter/12-month period and compared to the same quarter/12-month
period in the prior fiscal year.
The Company believes that it is appropriate to present this
supplemental information, for the following reasons:
o Presenting the Company's net sales in the attached release
without the impact of currency fluctuations will allow investors
to better understand the Company's operating and 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 increase in net sales over the
prior-year periods on a constant-currency basis, a valuable
measure of relative sales performance in the Company's markets.
Item 9.01: Financial Statements and Exhibits.
(c) Exhibits. The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated August 1, 2006
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, 2006
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 August 1, 2006
Exhibit 99.1
Coach Reports Fourth Quarter Earnings Per Share of $0.31; Up 33% and $0.02 Ahead
of Expectations; Raises Guidance for FY07; Increases FY07 Guidance to at Least
$1.55; Up 22% from FY06
NEW YORK--(BUSINESS WIRE)--Aug. 1, 2006--Coach, Inc. (NYSE: COH),
a leading marketer of modern classic American accessories, today
announced a 33% increase in earnings per diluted share for its fourth
fiscal quarter ended July 1, 2006. This substantial increase in
earnings from the prior year's fourth quarter reflected a 23% growth
in net sales, combined with significant operating margin improvement.
For the full fiscal year, net sales rose 23% and net income increased
38% versus the prior fiscal year.
During the fourth quarter, net sales were $514 million, 23% higher
than generated in the prior year's fourth quarter. On a
constant-exchange-rate basis, net sales increased 25% in the fourth
quarter, excluding the negative currency effects from translating
foreign-denominated sales into U.S. dollars. Net income rose 31% to
$118 million, or $0.31 per diluted share, compared with $90 million,
or $0.23 per share, in the prior year. This was ahead of the analysts'
consensus estimate of $0.29 for the quarter. For the fiscal year 2006,
net sales were $2.1 billion, up 23% from the $1.7 billion recorded in
fiscal year 2005. On a constant-exchange-rate basis, net sales
increased 26% for the fiscal year, excluding the negative currency
effects from translating foreign-denominated sales into U.S. dollars.
Net income rose to $494 million, up 38% from the $359 million earned
in the prior year. Diluted earnings per share rose 38% to $1.27,
versus $0.92 a year ago, and ahead of analysts' estimates of $1.25.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "I'm extremely pleased with our fiscal fourth quarter and
full year results. This quarter's performance demonstrated a
continuation of the strength we have seen throughout the year, as our
market share continued to grow across all channels and geographies.
Our performance also reflects the vibrancy of the premium accessory
category, notably in the U.S., where we continue to see double-digit
growth."
Quarterly operating income totaled $180 million, up 41% from the
$128 million reported in the comparable year ago period, while
operating margin rose to 35.0%, a 440 basis point improvement from the
30.6% reported for the prior year. During the quarter, gross profit
rose 24% to $403 million from $325 million a year ago. Gross margin
expanded by 80 basis points from 77.6% to 78.4%, driven by gains from
supply chain initiatives and product mix shifts. SG&A expenses as a
percentage of net sales declined 370 basis points to 43.3%, compared
to the 47.0% reported in the year-ago quarter. For the full year,
operating income rose 34% to $765 million, while operating margin rose
to 36.2%, a 270 basis point increase from the 33.5% reported for FY05.
During the year, gross profit rose 25.0% to $1.6 billion, as compared
to $1.3 billion a year ago. Gross margin expanded by 100 basis points
from 76.6% to 77.6% while SG&A expenses as a percentage of net sales
declined 180 basis points from 43.2% to 41.4%.
At the end of the fiscal year, the company had cash and marketable
securities of $538 million, as compared with $505 million a year ago.
It should be noted that the 2006 fiscal year end cash balance reflects
the repurchase of over $600 million of Coach common stock during the
fiscal year.
Fourth fiscal quarter and full year sales grew in each of Coach's
primary channels of distribution as follows:
-- Direct-to-consumer sales increased 23% to $419 million from
$341 million last year. U.S. comparable store sales for the
quarter rose 18.5%, with retail stores up 10.9% and factory
store sales up 29.0%. In Japan, sales rose 20% on a
constant-currency basis, while dollar sales rose 12% due to a
weaker yen. Coach achieved mid-single-digit increases in
comparable location sales in Japan for the quarter.
For the full year, direct to consumer sales rose 23% to $1.6
billion from $1.3 billion generated in fiscal 2005. Overall, North
American comparable store sales for the fiscal year increased 20.7%,
with retail stores up 12.3% and factory stores up 31.9%, while
comparable locations sales in Japan rose mid-single-digit. For the
year, sales in Japan rose 22% on a constant-currency basis, while
dollar sales rose 12%, impacted by the exchange rate.
-- Indirect sales increased 23% to $96 million in the fourth
quarter from the $78 million reported for the prior year. For
the year, indirect sales rose 24% to $501 million, up from
$403 million recorded for fiscal 2005. Results for both the
quarter and fiscal year reflected strong gains in all indirect
businesses, including U.S. department stores and International
wholesale.
Mr. Frankfort added, "The strength of our fourth quarter results
was reflected in all of our businesses. Our successful spring and
summer offerings drove our performance, as we continued to improve
productivity through our well-received product offerings. In April,
our Soho Optic Signature fabrication was introduced in a seasonal
palette in several strong-selling handbag, accessory and footwear
styles. For May, we launched a new summer program, which included soft
totes in classic Signature and Optic Signature shoulder totes. And in
June we brought in new Signature Patchwork and Tie Dye offerings -
both perennial favorites."
"In Japan, we were particularly pleased with the outstanding sales
and market share growth in FY06, which we achieved despite an absence
of growth in the category. Our rapidly expanding sales in Japan
reflect the success of our distribution strategy - notably the
acceleration of new openings, along with the expansion of highly
productive shop-in-shops."
During the fourth quarter of fiscal 2006, the company opened 12
U.S. Coach retail stores - including three in new markets for Coach -
and three factory stores, while closing one factory location, bringing
the total to 218 retail stores and 86 factory stores at July 1, 2006.
This was a net increase of 25 Coach retail stores from the 193 in
operation a year ago. Also during the quarter, one retail store
location was expanded, bringing the total number of completed retail
store expansions this year to seven. In Japan, seven new locations
were opened in the fourth quarter and one was closed, bringing the
total to 122 at fiscal year end. This was a net increase of 16
locations from the 106 at year-end 2005. In addition, Coach expanded
four locations during the fourth quarter, bringing the year end total
to nine expansions in Japan.
The company also announced that it repurchased and retired 15.6
million shares of common stock at an average cost of $31.20 during the
fourth fiscal quarter, bringing the year-to-date total to 19.1 million
shares of common stock repurchased at an average cost of $31.50. At
this time, approximately $150 million remains available for future
repurchases under the company's repurchase program, which expires in
June 2007.
Mr. Frankfort noted, "During fiscal 2007, Coach will be
introducing three new major lifestyle platforms, which we are
especially excited about, after a year spent successfully evolving
established collections. The first, Signature Stripe, is a new weekend
collection centered around a group of reversible totes. This
collection was just launched last month and became an instant success.
Additional platforms debuting this year will be Legacy this fall,
featuring a return to our heritage in rich leathers and iconic
hardware, and Ergo, a lightweight, sophisticated group for spring."
"While fiscal 2007 has just begun, our strong start bodes well for
the year. We're confident that our proven growth strategies, built
upon our leadership position, will continue to deliver excellent
returns in the seasons ahead and over our planning horizon," Mr.
Frankfort concluded.
Coach updated guidance for fiscal 2007 and now estimates sales of
about $2.5 billion for the year, an increase of about 19%. Operating
income is expected to rise over 20% with an operating margin of nearly
37%. Earnings per share are forecasted to rise to at least $1.55, up
22% from last year and ahead of the analysts' consensus of $1.53 for
the year.
In addition, the company introduced its first fiscal quarter
outlook, with sales targeted to be at about $535 million, an increase
of at least 19%, and earnings per share projected to be about $0.30, a
gain of about 25%. This compares to the consensus earnings estimate of
$0.29 for the first quarter.
Coach will host a conference call to review these results at 8:30
a.m. (EDT) today, August 1, 2006. 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 Years Ended July 1, 2006 and July 2, 2005
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED YEAR ENDED
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July 1, July 2, July 1, July 2,
2006 2005 2006 2005
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Net sales $ 514,355 $ 418,660 $2,111,501 $1,710,423
Cost of sales 111,282 93,704 472,622 399,652
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Gross profit 403,073 324,956 1,638,879 1,310,771
Selling, general and
administrative
expenses 222,956 196,776 874,275 738,208
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Operating income 180,117 128,180 764,604 572,563
Interest income, net 9,628 4,836 32,623 15,760
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Income before income
taxes and minority
interest 189,745 133,016 797,227 588,323
Income taxes 72,103 43,053 302,950 216,070
Minority interest, net
of tax - 107 - 13,641
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Net income $ 117,642 $ 89,856 $ 494,277 $ 358,612
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Net income per share
Basic $ 0.31 $ 0.24 $ 1.30 $ 0.95
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Diluted $ 0.31 $ 0.23 $ 1.27 $ 0.92
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Shares used in
computing net
income per share
Basic 376,706 377,632 379,635 378,670
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Diluted 384,227 389,130 388,495 390,191
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Supplemental
information
Net income, as
reported $ 117,642 $ 89,856 $ 494,277 $ 358,612
Add back Stock Option
Expense
(after tax) 9,443 7,709 36,262 30,040
Net income, ex Stock
Option Expense $ 127,085 $ 97,565 $ 530,539 $ 388,652
Pro forma as adjusted
basic net income, ex
stock option expense,
per share $ 0.34 $ 0.26 $ 1.40 $ 1.03
Pro forma as adjusted
diluted net income,
ex stock option
expense, per share $ 0.33 $ 0.25 $ 1.37 $ 1.00
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At July 1, 2006 and July 2, 2005
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(in thousands)
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(unaudited)
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July 1, July 2,
2006 2005
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ASSETS
Cash, cash equivalents and short term
investments $ 537,565 $ 383,051
Receivables 84,361 65,399
Inventories 233,494 184,419
Other current assets 119,062 76,491
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Total current assets 974,482 709,360
Property and equipment, net 298,531 203,862
Long term investments - 122,065
Other noncurrent assets 353,507 334,870
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Total assets $1,626,520 $1,370,157
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 79,819 $ 64,985
Accrued liabilities 261,835 188,234
Subsidiary credit facilities - 12,292
Current portion of long-term debt 170 150
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Total current liabilities 341,824 265,661
Long-term debt 3,100 3,270
Other liabilities 92,862 45,306
Stockholders' equity 1,188,734 1,055,920
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Total liabilities and stockholders' equity $1,626,520 $1,370,157
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CONTACT: Coach, Inc.
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618