Coach 2014 Annual Report Download - page 68
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TABLE OF CONTENTS
Certain prior year amounts, specifically related to disclosures of short-term investments in Note 10, "Fair Value Measurements" and amounts in
connection with the acquisition of the retail business in Europe, have been reclassified to conform to the current year presentation in the consolidated
financial statements.
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). ASU 2013-02 requires disclosure of significant amounts
reclassified out of AOCI by component. If the amounts are required to be reclassified from AOCI to net income in their entirety in the same reporting period,
the effect of such reclassifications on the relevant line items of net income must be presented either on the face of the financial statements or in the notes. For
amounts that are not required to be reclassified to net income in their entirety in the same reporting period, cross-references to other disclosures that provide
additional details about such reclassifications are required. ASU 2013-02 did not change the requirements for determining or reporting net income or OCI.
The Company adopted the provisions of ASU 2013-02 as of the beginning of the first quarter of fiscal 2014, which resulted in expanded OCI-related
disclosures (see Note 4), but did not have an impact on the Company’s Consolidated Financial Statements.
In May 2014, the FASB issued Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” which provides a single,
comprehensive revenue recognition model for all contracts with customers, and contains principles to determine the measurement of revenue and timing of
when it is recognized. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2016, and interim
periods within those annual periods, which for the Company is the first quarter of fiscal 2018. The Company is currently evaluating this guidance, but does
not expect its adoption to have a material effect on its Consolidated Financial Statements.
Transformation-Related Charges
During the fourth quarter of fiscal 2014, Coach announced a multi-year strategic plan to transform the brand and reinvigorate growth. This multi-faceted,
multi-year transformation plan (the "Transformation Plan") includes key operational and cost measures needed in order to fund and execute this plan,
including: (i) the investment in capital improvements in stores and wholesale locations in fiscal 2015 and fiscal 2016; (ii) the optimization of the North
American store fleet including the closure of underperforming locations in fiscal 2015; (iii) the realignment of inventory levels to reflect the Company's
elevated product strategy in fiscal 2014; (iv) the investment in incremental advertising costs to further promote this new strategy starting in fiscal 2015; and
(v) the significant scale-back of the Company's promotional cadence, particularly within the outlet Internet sales site starting in fiscal 2014.
In fiscal 2014, the Company incurred restructuring and transformation related charges of $131,507 ($88,281 after-tax, or $0.31 per diluted share). The
charges recorded in cost of sales and SG&A expenses were $82,192 and $49,315, respectively, and primarily relate to the Company's North America business.
A summary of charges and related liabilities under the Company's Transformation Plan are as follows:
(1) Includes store closure costs, related severance and accelerated depreciation charges as a result of store updates.
Inventory-related charges, recorded within cost of sales, primarily relate to reserves for the donation and destruction of certain on-hand inventory and
future non-cancelable inventory purchase commitments. Impairment charges, recorded within SG&A expenses, were based on discounted expected cash flows
within certain impacted retail stores, and resulted in the reduction of the
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