Coach 2006 Annual Report Download - page 33

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Proceeds from exercise of stock options 112,119 86,550 46,835
Excess tax benefit from share-based compensation 65,100 99,337 68,667
Adjustment to excess tax benefit from share-based
compensation
(16,658) — —
Net cash provided by (used in) financing activities 10,392 (426,826) (211,918)
Increase (decrease) in cash and cash equivalents 413,568 (11,178) (108,154)
Cash and cash equivalents at beginning of year 143,388 154,566 262,720
Cash and cash equivalents at end of year $556,956 $ 143,388 $ 154,566
Cash paid for income taxes $ 370,189 $ 205,451 $ 162,702
Cash paid for interest $ 1,099 $ 1,155 $ 238
Noncash investing activity — property and equipment
obligations
$ 31,537 $ 22,349 $ —
42





Coach, Inc. (the “Company”) designs and markets high-quality, modern American classic accessories. The Company’s primary
product offerings, manufactured by third-party suppliers, include handbags, women’s and men’s accessories, footwear, outerwear,
business cases, sunwear, watches, travel bags, jewelry and fragrance. Coach’s products are sold through its Direct-to-Consumer segment,
which includes Company-operated stores in North America and Japan, its online store and its catalogs, as well as through its Indirect
segment, which includes department store locations in the United States, international department stores, freestanding retail locations and
specialty retailers.


The Company’s fiscal year ends on the Saturday closest to June 30. Unless otherwise stated, references to years in the financial
statements relate to fiscal years. The fiscal years ended June 30, 2007 (“fiscal 2007”), July 1, 2006 (“fiscal 2006”) and July 2, 2005
(“fiscal 2005”) were each 52-week periods.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the
reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are
completed. Actual results could differ from estimates in amounts that may be material to the financial statements.

The consolidated financial statements include the accounts of the Company and all subsidiaries under the control of the Company,
including Coach Japan, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

Cash and cash equivalents consist of cash balances and highly liquid investments with a maturity of less than 90 days at the date of
purchase.

Investments consist of U.S. government and agency debt securities as well as municipal government and corporate debt securities.
These securities are classified as held-to-maturity, as the Company has both the ability and the intent to hold these securities until maturity,
except for auction rate securities, which are classified as available-for-sale. Investments classified as held-to-maturity are recorded at
amortized cost. Premiums are amortized and discounts are accreted over the lives of the related securities as adjustments to interest income.
Investments classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded in other comprehensive
income. Dividend and interest income are recognized when earned.

Financial instruments that potentially expose Coach to concentration of credit risk consist primarily of cash investments and accounts
receivable. The Company places its cash investments with high-credit quality financial institutions and currently invests primarily in U.S.
government and agency debt securities, municipal government and corporate debt securities, and bank money market funds placed with