Coach 2008 Annual Report Download - page 30

TABLE OF CONTENTS
Provision for Income Taxes
The effective tax rate was 34.5% in fiscal 2008 compared to 38.5% in fiscal 2007. During the fourth quarter of fiscal 2008, the
Company recorded a benefit of $50.0 million, primarily related to a favorable settlement of a tax return examination. Excluding this benefit,
the effective tax rate in fiscal 2008 was essentially flat as compared to the fiscal 2007 effective rate.
Income from Continuing Operations
Income from continuing operations increased 23.0% to $783.0 million in fiscal 2008 compared to $636.5 million in fiscal 2007.
Excluding items affecting comparability of $41.0 million discussed above, income from continuing operations was $742.0 million, a
16.6% increase over prior year. The increase is primarily attributable to increased net sales as discussed above.
Income from Discontinued Operations
In March 2007, the Company exited its corporate accounts business in order to better control the location and image of the brand where
Coach product is sold. Through the corporate accounts business, Coach sold products primarily to distributors for gift-giving and incentive
programs. The results of the corporate accounts business, previously included in the Indirect segment, have been segregated from continuing
operations and reported as discontinued operations in the Consolidated Statements of Income for all periods presented.
In fiscal 2007, net sales and net income from discontinued operations were $66.5 million and $27.1 million, respectively. In fiscal
2008, net sales and net income from discontinued operations were not significant.
Financial Condition
Cash Flow
Net cash provided by operating activities was $809.2 million in fiscal 2009 compared to $923.4 million in fiscal 2008. The $114.2
million decrease was primarily due to decreased earnings of $159.7 million. The changes in operating assets and liabilities were attributable
to normal operating fluctuations.
Net cash used by investing activities was $264.7 million in fiscal 2009 compared to $445.4 million net cash provided by investing
activities in fiscal 2008. The $710.2 million change is primarily attributable to a $620.2 million decrease in the net proceeds from
maturities of investments, a $103.3 million use of cash related to the purchase of Coach’s corporate headquarters building and a $24.4
million use of cash related to the acquisition of our retail businesses in Hong Kong, Macau and mainland China. These items were partially
offset by a $37.7 million decrease in expenditures on property and equipment.
Net cash used in financing activities was $440.1 million in fiscal 2009 compared to $1.23 billion in fiscal 2008. The decrease of
$790.2 million in net cash used was attributable to an $882.8 million decrease in funds expended to repurchase common stock in fiscal
2009 as compared to fiscal 2008. This decrease in cash used was partially offset by a $76.0 million decrease in proceeds from the exercise
of share-based awards and a $24.1 million decrease in the excess tax benefit from share-based compensation.
Revolving Credit Facilities
On July 26, 2007, the Company renewed its $100 million revolving credit facility with certain lenders and Bank of America, N.A. as
the primary lender and administrative agent (the “Bank of America facility”), extending the facility expiration to July 26, 2012. At Coach’s
request, the Bank of America facility can be expanded to $200 million. The facility can also be extended for two additional one-year periods,
at Coach’s request.
Coach’s Bank of America facility is available for seasonal working capital requirements or general corporate purposes and may be
prepaid without penalty or premium. During fiscal 2009 and fiscal 2008 there were no borrowings under the Bank of America facility.
Accordingly, as of June 27, 2009 and June 28, 2008, there were no outstanding borrowings under the Bank of America facility. The
Company’s borrowing capacity as of June 27, 2009 was $87.0 million, due to outstanding letters of credit.
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