Coach 2008 Annual Report Download - page 59

TABLE OF CONTENTS
COACH, INC.
Notes to Consolidated Financial Statements
(dollars and shares in thousands, except per share data)
7. Fair Value Measurements – (continued)
Level 3 of the fair value hierarchy as the inputs are based on unobservable estimates. The table below presents the changes in the fair value
of the auction rate security during fiscal 2009:
Auction Rate
Security
Balance at June 28, 2008 $ 8,000
Unrealized other-than-temporary loss, recognized in selling, general and administrative
expenses
(2,000)
Balance at June 27, 2009 $ 6,000
On April 9, 2009, the FASB issued FSP No. SFAS 115-2 and SFAS 124-2, “Recognition and Presentation of Other-Than-
Temporary Impairments” which amends the other-than-temporary impairment indicators to (a) management has no intent to sell the
security and (b) it is more likely than not management will not have to sell the security before recovery. The Company adopted FSP 115-2
and 124-2 for the annual period ending June 27, 2009 and as of the interim period beginning March 29, 2009. As a result of the adoption,
the Company recorded a cumulative effect adjustment of $1,072 to retained earnings with a corresponding adjustment to accumulated other
comprehensive income. This adjustment represents the non-credit portion of the impairment as of the date of adoption.
As of June 27, 2009 and June 28, 2008, the fair value of the Company’s cross-currency swap derivative was included within accrued
liabilities. The Company uses a management model which includes a combination of observable inputs, such as tenure of the agreement and
notional amount and unobservable inputs, such as the Company’s credit rating. The table below presents the changes in the fair value of the
cross-currency swap during fiscal 2009:
Cross-Currency
Swap
Balance at beginning of period $ 5,540
Unrealized loss, recorded in accumulated other comprehensive income 30,578
Balance at end of period $ 36,118
8. Debt
Revolving Credit Facilities
The Company maintains a $100,000 revolving credit facility with certain lenders and Bank of America, N.A. as the primary lender and
administrative agent (the “Bank of America facility”). The facility expires on July 26, 2012. At Coach’s request, the Bank of America
facility can be expanded to $200,000 and can also be extended for two additional one-year periods. Under the Bank of America facility,
Coach pays a commitment fee of 6 to 12.5 basis points on any unused amounts and interest of LIBOR plus 20 to 55 basis points on any
outstanding borrowings. At June 27, 2009, the commitment fee was 7 basis points and the LIBOR margin was 30 basis points.
The 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 $87,045, due to outstanding letters of credit.
The Bank of America facility contains various covenants and customary events of default. Coach has been in compliance with all
covenants since its inception.
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