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): October 24, 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 October 24, 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 September 30, 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 and
compared to the same quarter 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 October 24, 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: October 25, 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 October 24, 2006
Exhibit 99.1
Coach Reports First Quarter Earnings Growth of 40%
Ahead of Analysts' Expectations
Increases FY07 Guidance to At Least $1.63; Up 28% from FY06
NEW YORK--(BUSINESS WIRE)--Oct. 24, 2006--Coach, Inc. (NYSE: COH), a
leading marketer of modern classic American accessories, today announced an
increase of 40% in earnings per diluted share to $0.34 for its first fiscal
quarter ended September 30, 2006, up from $0.24 per diluted share a year ago.
This substantial increase in earnings from the prior year's first quarter
reflected a 23% gain in net sales combined with operating margin improvement.
In the first quarter, net sales were $554 million compared with the $449
million reported in the same period of the prior year. Net income rose 34% to
$126 million, or $0.34 per diluted share, compared with $94 million, or $0.24
per diluted share in the prior year. These results were ahead of the analysts'
consensus estimate of $0.31 per share and the company's guidance of $0.30.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said,
"Our exceptional results this quarter reflect the strength of our franchise and
the enthusiastic reception to our product offerings. Further fueling our results
has been the continued rapid growth in the U.S. premium handbag market, as
consumers continue to trade up within the category. Given the strength of our
product pipeline, breadth of our assortment and shoppers' strong interest in
accessories for gifts and self-purchase, Coach is clearly well positioned for
another excellent holiday season."
Quarterly operating income totaled $198 million, up 36% from the $145
million reported in the comparable year ago period, while operating margin rose
to 35.7%, a 340 basis point improvement from the 32.3% reported for the prior
year. During the quarter, gross profit rose 24% to $425 million from $341
million a year ago. Gross margin expanded by 70 basis points from 76.0% to
76.7%, driven by gains from product mix shifts and supply chain initiatives.
SG&A expenses as a percentage of net sales declined 270 basis points to 41.0%,
compared to the 43.7% reported in the year-ago quarter.
First fiscal quarter sales results in each of Coach's primary channels of
distribution grew as follows:
-- Direct-to-consumer sales increased 29% to $404 million from $315
million last year. U.S. comparable store sales for the quarter rose
21.4%, with retail stores up 16.0% and factory store sales up 27.1%.
In Japan, sales rose 21% on a constant-currency basis, while dollar
sales rose 16% due to a weaker yen. Comparable location sales in Japan
rose at a mid-single-digit rate for the quarter.
-- Indirect sales increased 11% to $150 million in the first quarter from
the $134 million reported for the prior year. Coach enjoyed excellent
gains at POS for all U.S. indirect businesses, including department
stores and business-to-business, which were not fully reflected in
reported sales due to timing of shipments.
During the first quarter of fiscal 2007, the company opened 12 retail
stores and one net factory store in North America, bringing the total to 230
retail stores and 87 factory stores as of September 30, 2006. In addition, two
factory stores were expanded. In Japan, Coach opened eight and expanded two
retail locations.
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 Signature Stripe, our first new
major lifestyle collection of the year. This was followed by Chelsea in August,
and by a fresh group of Hamptons silhouettes in September. Our excellent
performance has continued into October with the successful introduction of
Legacy, our second new major lifestyle collection. This collection, which was
inspired by Coach's heritage, to celebrate our 65th anniversary, has become an
instant success."
"For Holiday, our Legacy collection will remain a key focus. In
addition, a range of Patchwork handbags, in best-selling Coach
silhouettes, will be interpreted in neutral shades with contrasting
accents and trimmed in vintage leather. Our Soho collection will be
updated with the launch of Soho Stitched in both leather and
Signature, while a fresh group of Duffles will be presented in vintage
leather and Signature. Also, the always popular Gallery Totes will be
available in a range of fabrications and embellishments. Finally, a
broad assortment of gifts under $100, geared to the more
price-sensitive consumer, will round out the holiday offering."
"During this quarter, as planned, we will add seven more retail stores in
the U.S. before holiday, bringing the fiscal year-to-date total to 19 new retail
stores. At the same time in Japan, Coach will open two new retail locations."
The company estimates second fiscal quarter sales of about $785 million,
representing a year-over-year increase of about 21% and earnings per diluted
share of $0.56, up over 25%, and ahead of the analysts' consensus of $0.55. For
the fiscal year 2007 the company expects to generate sales of about $2.55
billion, an increase of 21% from prior year, and earnings per diluted share of
at least $1.63, ahead of the analysts' consensus of $1.58, and representing an
increase of at least 28%.
The company also announced that during the first fiscal quarter, it
repurchased and retired five million shares of its common stock at an average
cost of $29.99, completing its existing stock buyback program. Accordingly, the
Board of Directors has authorized a new repurchase program, allowing the company
to buy back up to an aggregate of $500 million of its common stock through June
2008.
Coach will host a conference call to review first fiscal quarter results at
8:30 a.m. (ET) today, October 24, 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 & 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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For the Quarters Ended September 30, 2006 and October 1, 2005
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED
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September 30, October 1,
2006 2005
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Net sales $553,851 $448,951
Cost of sales 129,171 107,590
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Gross profit 424,680 341,361
Selling, general and administrative
expense 227,014 196,252
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Operating income 197,666 145,109
Interest income, net 6,589 5,887
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Income before provision for income taxes 204,255 150,996
Provision for income taxes 78,639 57,381
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Net income $125,616 $93,615
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Net income per share
Basic $0.34 $0.25
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Diluted $0.34 $0.24
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Shares used in computing net income per
share
Basic 368,171 379,551
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Diluted 373,672 389,972
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At September 30, 2006, July 1, 2006 and October 1, 2005
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(in thousands)
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September 30, July 1, October 1,
2006 2006 2005
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(unaudited) (unaudited)
ASSETS
Cash, cash equivalents and
short-term investments $456,333 $537,565 $447,630
Receivables 118,082 84,361 104,906
Inventories 300,855 233,494 215,251
Other current assets 148,137 119,062 95,761
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Total current assets 1,023,407 974,482 863,548
Property and equipment, net 320,996 298,531 214,170
Long-term investments - - 90,890
Other noncurrent assets 332,097 353,507 333,164
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Total assets $1,676,500 $1,626,520 $1,501,772
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $86,173 $79,819 $70,250
Accrued liabilities 301,155 261,835 210,274
Subsidiary credit
facilities 7,380 - 4,867
Current portion of long-
term debt 235 170 170
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Total current liabilities 394,943 341,824 285,561
Long-term debt 2,865 3,100 3,100
Other liabilities 86,580 92,862 46,359
Stockholders' equity 1,192,112 1,188,734 1,166,752
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Total liabilities and
stockholders' equity $1,676,500 $1,626,520 $1,501,772
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CONTACT: Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
VP Investor Relations & Corporate Communications