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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): April 22, 2003
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 7: Exhibits.
(c) The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated April 22, 2003
Item 9: Regulation FD Disclosure; Item 12: Results of Operations and Financial
Condition.
On April 22, 2003, Coach, Inc. (the "Company") issued a press release (the
"Press Release") in which the Company announced its preliminary financial
results for its fiscal quarter ended March 29, 2003. 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 ended March 29, 2003, are also being furnished to the Securities
and Exchange Commission under Item 12 of Form 8-K.
The attached press release includes the following Non-GAAP financial
information:
- - During the prior fiscal year, the Company announced a plan to cease
production at the Lares, Puerto Rico manufacturing plant; please refer to
footnote #8 in the Form 10-K filed for the year ended June 29, 2002, for a
description of this restructuring plan.
- - As required by Regulation G, net income is calculated and presented in
accordance with GAAP.
- - Under the heading of "Supplemental Information", the Company has presented
"Net income excluding reorganization costs". As part of this presentation,
the reconciliation from the GAAP results to this alternative measure is
included.
- - This alternative performance measure does not impact the number of
outstanding shares of Common Stock, hence the same number of diluted shares
is used to calculate the "Supplemental diluted net income, excluding
reorganization cost, per share".
The Company believes that it is appropriate to present this supplemental
information, for the following reasons:
- - Over the past several years, the Company has shifted its manufacturing
processes from owned domestic factories to independent manufacturers in
lower cost markets. The closure of the Company's Lares, Puerto Rico
manufacturing plant completed this transition from ownership of
manufacturing facilities to a sourced goods business model. The successful
implementation of this strategy has resulted in significant changes to our
cost structure, resulting in increased flexibility, improved quality and
lower costs. Management feels that it is important for investors to
understand this change in our business in order to understand our cost
structure and the potential impact on future results.
- - The restructuring charge is not part of the Company's normal cost
structure.
- - Presenting the amount of the charge, the impact on net income and the
impact on earnings per share will allow investors to better understand the
Company's financial results and the underlying business trends.
- - As the restructuring charge was incurred in the prior fiscal year, this
presentation will allow investors to better understand the change in the
Company's financial results from last year to the current year.
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 22, 2003
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 22, 2003
Coach Reports Third Quarter Earnings Per Share of $0.34;
Up 113% and Ahead of Expectations; Raises Guidance for FY03;
Results Driven by a 36% Sales Gain and Continued Margin Expansion
NEW YORK--(BUSINESS WIRE)--April 22, 2003--Coach, Inc. (NYSE:
COH), a leading marketer of modern classic American accessories, today
announced a 113% increase in earnings per diluted share to $0.34 for
its third fiscal quarter ended March 29, 2003.
This substantial increase in earnings from the prior year's third
quarter reflected a 36% gain in net sales combined with operating
margin improvement.
In the third quarter, net sales were $220.4 million, 36% higher
than the $161.6 million reported in the same period of the prior year.
Net income rose 117% to $31.9 million, or $0.34 per share, compared
with $14.7 million, or $0.16 per share the prior year. These results
were ahead of the analysts' recently revised consensus estimate of
$0.29 per share. Net income in the year-ago period excludes a
restructuring charge for the closure of a manufacturing facility in
Lares, Puerto Rico in March 2002. Including this charge and related
adjustments, net income in last year's third quarter was $11.8 million
or $0.13 per diluted share.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "Our strong third quarter sales reflect sustained momentum
and market share gains in all channels of our business. These results
again demonstrate the vitality of Coach and speak to our unique
proposition, as America's leading accessible luxury accessories brand.
Our distinctive and stylish products are extremely well made from
superior materials and offer exceptional value, which resonates well
with consumers. Further, our growth in profitability evidences our
ability to drive continued margin improvement and leverage our expense
base."
During the quarter, gross profit rose 44% to $159.8 million from
$111.1 million a year ago. Gross margin expanded by 370 basis points
from 68.8% to 72.5%, driven by product mix, channel mix and sourcing
cost initiatives. SG&A expenses as a percentage of net sales declined
to 48.6%, a 550 basis point decrease from the 54.1% reported in the
year-ago quarter, primarily due to leveraging the higher sales.
For the nine months ended March 29, 2003, net sales were $721.7
million, up 32% from the $548.0 million reported in the first nine
months of fiscal 2002. Net income rose to $116.8 million, up 64% from
the $71.4 million reported a year ago, before the impact of the
restructuring charge noted above. Including this charge and related
adjustments, net income in last year's comparable nine month period
was $68.5 million.
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 $121.6 million from $93.9
million last year. Comparable store sales for the quarter rose
14.1%, with retail stores up 25.5% and factory store sales up
2.4%.
-- Indirect sales rose 46% to $98.8 million from $67.7 million in
the same period last year. All indirect businesses, including
Coach Japan, international wholesale, US department stores and
special markets, contributed to this significant increase.
Mr. Frankfort added, "Our robust business this quarter was driven
by well-received spring offerings, continuing the very strong trend we
have seen over the last several periods. In US retail, our assortment
drew an enthusiastic response from consumers, resulting in higher
conversion; while increased traffic in our stores reflected the
brand's strength. We're particularly pleased with the performance of
mini-Signature, which has broadened our logo offering. In addition,
we're also pleased with last month's successful introduction of
Hamptons Weekend - a lightweight and functional group of sporty totes,
which gives consumers a colorful new option from Coach for active
everyday usage. In our indirect segment, we saw momentum continuing in
US department stores also driven by fashion innovation.
"Our results in Japan were also extremely strong, as comparable
locations again posted double-digit sales gains, and our new shops,
led by the Ginza flagship, performed very well. In addition, just last
week, we opened our second Japanese flagship store, located in the
Shibuya section of Tokyo, to an enthusiastic response. This 7,300
square foot store is our largest location in the world. We expect this
flagship to raise Coach's appeal with the younger and more stylish
Japanese consumer."
During the third quarter of fiscal 2003, the company opened one
and closed one Coach retail store and closed one factory store,
resulting in a total of 150 retail stores and 75 factory stores at
March 29, 2003. Through Coach Japan, three net locations were added,
bringing the total in Japan to 92.
"This month our momentum is continuing in Coach US retail stores,
US department stores and locations in Japan, despite the events around
us. Clearly, the fact that we derive nearly 90% of our business from
the local consumer, whether in the US or Japan, helps to insulate us
from the volatility in international travel. We're well positioned to
sustain accelerated growth through the rest of this quarter, fueled by
new product introductions and a growing customer base pre-disposed to
purchase Coach.
"This quarter, as planned, we will add six more retail stores in
the U.S., bringing the total to 20 new retail stores in fiscal 2003.
In Japan, besides the Shibuya flagship, we have just opened
Shinsaibashi, a retail store in Osaka; and, we'll be opening another
retail store in the Roppongi section of Toyko this week, further
leveraging our opportunity in this under-penetrated market," Mr.
Frankfort concluded.
The company now estimates full fiscal year 2003 sales of over $935
million, an increase of 30% from prior year, and earnings per share of
at least $1.54, compared with analysts' current consensus estimate of
$1.47. This reflects sales of at least $215 million and earnings per
share of at least $0.28 for the fourth quarter, up 55% from the $0.18
reported for the same period in fiscal 2002 and above the analysts'
consensus estimate of $0.25. For fiscal 2004 we expect sales growth of
at least 15% to at least $1.075 billion, operating income increasing
by at least 20% and earnings per share of at least $1.80.
Coach will host a conference call to review these results at 8:30
a.m. (EDT) today, April 22, 2003. Interested parties may listen to the
webcast by accessing www.coach.com/investors on the Internet or
dialing into 1-888-455-0032 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 1-800-947-4869. 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, jewelry,
sunwear, furniture and related accessories. Coach is sold worldwide
through Coach stores, select department stores and specialty stores,
through the Coach catalogue 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 Thirteen and Thirty-Nine Weeks
Ended March 29, 2003 and March 30, 2002
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(in Thousands, Except Per
Share Data)
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(Unaudited)
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THIRTEEN WEEKS THIRTY-NINE WEEKS
ENDED ENDED
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March 29, March 30, March 29, March 30,
2003 2002 2003 2002
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Net sales $220,396 $161,571 $721,710 $548,023
Cost of sales 60,589 50,465 213,837 178,728
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Gross profit 159,807 111,106 507,873 369,295
Selling, general and
administrative expenses 107,060 87,379 314,918 256,157
Reorganization costs - 4,467 - 4,467
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Operating income 52,747 19,260 192,955 108,671
Interest expense, net (344) (129) (619) 539
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Income before income taxes and
minority interest 53,091 19,389 193,574 108,132
Provision for income taxes 19,644 6,883 71,624 38,388
Minority Interest, net of tax 1,594 689 5,186 1,223
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Net income $31,853 $11,817 $116,764 $68,521
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Basic net income per share $0.35 $0.13 $1.31 $0.78
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Shares used in computing
basic net income per share 90,231 88,424 89,387 87,706
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Diluted net income per share $0.34 $0.13 $1.26 $0.76
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Shares used in computing
diluted net income per share 93,246 91,646 92,464 90,420
========= ========= ========= =========
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Supplemental information
Net income, as reported $31,853 $11,817 $116,764 $68,521
Add back reorganization costs
(net of tax) - 2,881 - 2,881
Net income, excluding
reorganization costs $31,853 $14,698 $116,764 $71,402
Supplemental diluted net
income, excluding
reorganization cost, per
share $0.34 $0.16 $1.26 $0.79
Shares used in computing
supplemental diluted
net income, excluding
reorganization costs, per
share 93,246 91,646 92,464 90,420
Coach, Inc.
Condensed Consolidated Balance Sheets
at March 29, 2003, June 29, 2002 and March 30, 2002
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(in Thousands)
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March 29, June 29, March 30,
2003 2002 2002
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(unaudited) (unaudited)
ASSETS
Cash $192,263 $93,962 $76,278
Receivables 46,703 30,925 25,563
Inventories 135,996 136,404 131,783
Other current assets 29,670 26,297 27,244
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Total current assets 404,632 287,588 260,868
Property, net 109,370 90,589 84,295
Trademarks and other assets 65,374 62,394 53,457
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Total assets $579,376 $440,571 $398,620
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $29,660 $25,819 $26,162
Accrued liabilities 112,345 99,365 86,184
U.S. revolving credit facility - - -
Subsidiary credit facilities 32,945 34,169 35,386
Long-term debt due within 1 year 80 75 75
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Total current liabilities 175,030 159,428 147,807
Long-term debt 3,535 3,615 3,615
Other liabilities 3,448 2,625 2,262
Minority interest 19,733 14,547 15,586
Common stockholders' equity 377,630 260,356 229,350
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Total liabilities and stockholders'
equity $579,376 $440,571 $398,620
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CONTACT: Coach, Inc., New York
Analysts & Media
Andrea Shaw Resnick, 212/629-2618
or
Burson-Marsteller, New York
Media
Jennifer Stalzer, cell 646/824-9508 or 212/614-4619