Coach 2006 Annual Report Download - page 39

The total fair value of shares vested during fiscal 2007, 2006 and 2005 was $11,558, $28,932 and $5,829, respectively. At June 30,
2007, $15,387 of total unrecognized compensation cost related to nonvested share awards is expected to be recognized over a weighted-
average period of 1.5 years.
The Company recorded an adjustment in the first quarter of fiscal 2007 to reduce additional paid-in-capital by $16,658, with a
corresponding increase to current liabilities, due to an excess tax benefit from share-based compensation overstatement in the fourth quarter
of fiscal 2006. This immaterial adjustment is reflected within the cash flows from financing activities of the Consolidated Statement of
Cash Flows.

Under the Employee Stock Purchase Plan, full-time Coach employees are permitted to purchase a limited number of Coach common
shares at 85% of market value. Under this plan, Coach sold 159, 162 and 159 shares to employees in fiscal 2007, 2006 and 2005,
respectively. Compensation expense is calculated for the fair value of employees’ purchase rights using the Black-Scholes model and the
following weighted-average assumptions:

 





Expected term (years) 0.5 0.5 0.5
Expected volatility 30.1% 25.7% 27.6%
Risk-free interest rate 5.1% 3.7% 2.8%
Dividend yield —% —% —%
The weighted-average fair value of the purchase rights granted during fiscal 2007, 2006 and 2005 was $8.72, $6.64 and $6.24,
respectively.

Under the Coach, Inc. Executive Deferred Compensation Plan, executive officers and certain employees at or above the senior director
level may elect to defer all or a portion of their annual bonus or annual base salary into the plan. Under the Coach, Inc. Deferred
Compensation Plan for Non-Employee Directors, Coach’s outside directors may similarly defer their director’s fees. Amounts deferred under
these plans may, at the participants’ election, be either represented by deferred stock units, which represent the right to receive shares of
Coach common stock on the distribution date elected by the participant, or placed in an interest-bearing
50





account to be paid on such distribution date. The amounts accrued under these plans at June 30, 2007 and July 1, 2006 were $1,922 and
$3,622, respectively, and are included within total liabilities in the consolidated balance sheets.
The following table summarizes share and exercise price information about Coach’s equity compensation plans as of June 30, 2007:



















Equity compensation plans approved by
security holders
30,702 $ 26.18 25,242
Equity compensation plans not approved by security
holders
46 6.84 250
Total 30,748 25,492

Coach leases certain office, distribution and retail facilities. The lease agreements, which expire at various dates through 2020, are
subject, in some cases, to renewal options and provide for the payment of taxes, insurance and maintenance. Certain leases contain
escalation clauses resulting from the pass-through of increases in operating costs, property taxes and the effect on costs from changes in
consumer price indices. Certain rentals are also contingent upon factors such as sales.
Rent-free periods and scheduled rent increases are recorded as components of rent expense on a straight-line basis over the related terms
of such leases. Contingent rentals are recognized when the achievement of the target (i.e., sales levels), which triggers the related payment, is
considered probable. Rent expense for the Company’s operating leases consisted of the following: