Coach 2014 Annual Report Download - page 44

TABLE OF CONTENTS
Coach Japan maintains credit facilities with several Japanese financial institutions to provide funding for working capital and general corporate
purposes, with maximum borrowing capacity of 5.3 billion yen, or approximately $52 million at June 28, 2014. Interest is based on the Tokyo Interbank rate
plus a margin of 25 to 30 basis points. At June 28, 2014 and during fiscal 2014, there were no outstanding borrowings under these facilities.
Coach Shanghai Limited maintains a credit facility to provide funding for working capital and general corporate purposes, with a maximum borrowing
capacity of 63.0 million Chinese renminbi, or approximately $10 million at June 28, 2014. Interest is based on the People's Bank of China rate. At June 28,
2014 and during fiscal 2014, there were no outstanding borrowings under this facility.
Both the Coach Japan and Coach Shanghai Limited credit facilities can be terminated at any time by either party, and there is no guarantee that they will
be available to the Company in future periods.
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In October 2012, the Company’s Board of Directors approved a common stock repurchase program to acquire up to $1.5 billion of Coach’s outstanding
common stock through June 2015.
Purchases of Coach common stock are made subject to market conditions and at prevailing market prices, through open market purchases. Under
Maryland law, Coach’s state of incorporation, treasury shares are not allowed. As a result, all repurchased shares are retired when acquired. The Company may
terminate or limit the stock repurchase program at any time.
During fiscal 2014 and fiscal 2013, the Company repurchased and retired 10.2 million and 7.1 million shares, respectively, or $524.9 million and $400.0
million of common stock, respectively, at an average cost of $51.27 and $56.61, respectively. As of June 28, 2014, Coach had $836.7 million remaining in
the stock repurchase program.
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Our sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term investments, our non-
current investments, the $700 million available under our JP Morgan facility, the availability under our Japan and Shanghai credit facilities, and other
potential fixed-financing options available to us in the credit and capital markets. Substantially all of our cash and short-term investments are held outside
the U.S. in jurisdictions where we intend to permanently reinvest our undistributed earnings to support our continued growth. We are not dependent on
foreign cash to fund our domestic operations. We believe that our existing sources of liquidity, including our ability to access credit and capital markets
when needed, will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, our plans for further business
expansion and transformation-related initiatives.
We had $140 million in revolving credit borrowings outstanding under our credit facilities as of June 28, 2014. We will continue to draw on our credit
facilities or access other sources of financing for, among other things, funding our investment in the Hudson Yards joint venture, our transformation-related
initiatives, a material acquisition, settlement of a material contingency (including uncertain tax positions), or a material adverse business or macroeconomic
development, as well as for other general corporate business purposes. This is expected to lead to increased outstanding debt during fiscal 2015.
We believe that our JP Morgan facility is adequately diversified with no undue concentrations in any one financial institution. As of June 28, 2014, there
were nine financial institutions participating in the facility, with no one participant maintaining a maximum commitment percentage in excess of 16%. We
have no reason at this time to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the
terms of the facility in the event we elect to draw funds in the foreseeable future.
For the fiscal year ending June 27, 2015, excluding expected capital expenditures related to the Hudson Yards joint venture of approximately $90 to
$125 million, which are in addition to our joint venture contributions, the Company expects total capital expenditures to be approximately $300 to $350
million. Capital expenditures will be primarily for capital investments in stores in North America and new stores in Asia and Europe to support our
transformation-related initiatives. We will also continue to invest in department store and distributor locations and corporate infrastructure, primarily
technology.
Because Coach products are frequently given as gifts, Coach experiences seasonal variations in its net sales, operating cash flows and working capital
requirements, primarily related to seasonal holiday shopping. During the first fiscal quarter, Coach builds inventory for the holiday selling season. In the
second fiscal quarter, its working capital requirements are reduced substantially as Coach generates higher net sales and operating income, especially during
the holiday months of November and December. Fluctuations in net sales, operating income and operating cash flows in any fiscal quarter may be affected by
other events affecting retail sales, such as adverse weather conditions.
In April 2013, the Company entered into a joint venture agreement with the Related Companies, L.P. to develop a new office tower in Manhattan in the
Hudson Yards district. The formation of the joint venture serves as a financing vehicle for the project, with the Company owning less than 43% of the joint
venture. Upon completion of the office tower in fiscal 2016, the Company
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