Coach 2012 Annual Report Download - page 34

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$25.7 million in fiscal 2011, expenses were $243.0 million and $226.7 million, respectively, representing 5.1%
and 5.5% of net sales, respectively. The dollar increase in administrative expenses was primarily due to
increased headcount and systems investment, largely due to our international expansion.
Provision for Income Taxes
The effective tax rate was 31.0% in fiscal 2012 compared to 32.3% in fiscal 2011. During the second
quarter of fiscal 2012, the Company recorded the effect of a revaluation of certain deferred tax asset balances
due to a change in Japan’s corporate tax laws and the favorable completion of a multi-year transfer pricing
agreement with Japan. Also, during the fourth quarter of fiscal 2012, the Company recognized a favorable tax
settlement. As a result, it made charitable contributions which precisely offset the benefit of the tax settlement
to net income and earnings per share. During the third quarter of fiscal 2011, the Company decreased the
provision for income taxes primarily as a result of a favorable settlement of a multi-year tax return
examination. Excluding the benefit from these items affecting comparability, the effective tax rate was 32.8%
in fiscal 2012 and 33.6% in fiscal 2011. The decrease in the effective tax rate is also attributable to higher
profitability in lower tax rate jurisdictions in which income is earned, due to the increased globalization of the
Company, and a lower effective state tax rate.
Net Income
Net income was $1.04 billion in fiscal 2012 compared to $880.8 million in fiscal 2011. The increase was
due to the higher operating income and a reduction of the effective tax rate.
31