Coach 2008 Annual Report Download - page 65

TABLE OF CONTENTS
COACH, INC.
Notes to Consolidated Financial Statements
(dollars and shares in thousands, except per share data)
12. Income Taxes – (continued)
taken or expected to be taken in a tax return. As a result, the Company recorded a non-cash cumulative transition charge of $48,797 as a
reduction to the opening retained earnings balance.
Significant judgment is required in determining the worldwide provision for income taxes, and there are many transactions for which the
ultimate tax outcome is uncertain. It is the Company’s policy to establish provisions for taxes that may become payable in future years as a
result of an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure
associated with uncertain tax positions. The provisions are analyzed periodically and adjustments are made as events occur that warrant
adjustments to those provisions. All of these determinations are subject to the requirements of FIN 48.
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:
Fiscal 2009 Fiscal 2008
Balance at beginning of fiscal year $ 131,185 $ 120,367
Gross increase due to tax positions related to prior periods 13,690 8,606
Gross decrease due to tax positions related to prior periods (48,602) (44,719)
Gross increase due to tax positions related to current period 42,367 72,983
Gross decrease due to tax positions related to current period — (24,369)
Decrease due to lapse of statutes of limitations (833) (1,683)
Balance at end of fiscal year $ 137,807 $ 131,185
Of the $137,807 ending gross unrecognized tax benefit balance, $67,058 relates to items which, if recognized, would impact the
effective tax rate. As of June 27, 2009 and June 28, 2008, gross interest and penalties payable was $25,960 and $18,640, which are
included in other liabilities. During fiscal 2009 and fiscal 2008, the Company recognized interest and penalty expense of $5,611 and
$(3,180), respectively, in the Consolidated Statements of Income.
The Company files income tax returns in the U.S. federal jurisdiction as well as various state and foreign jurisdictions. Fiscal years
2007 to present are open to examination in the federal jurisdiction, fiscal 2003 to present in significant state jurisdictions, and from fiscal
2003 to present in foreign jurisdictions.
Based on the number of tax years currently under audit by the relevant tax authorities, the Company anticipates that one or more of these
audits may be finalized in the foreseeable future. However, based on the status of these examinations, and the protocol of finalizing audits
by the relevant tax authorities, we can not reasonably estimate the impact of any amount of such changes in the next 12 months, if any, to
previously recorded uncertain tax positions.
At June 27, 2009, the Company had net operating loss carryforwards in foreign tax jurisdictions of $62,854, which will expire
beginning in fiscal years 2012 through fiscal year 2016.
The total amount of undistributed earnings of foreign subsidiaries as of June 27, 2009 was $363,725. It is the Company’s intention to
permanently reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no
provision has been made for foreign withholding taxes or United States income taxes which may become payable if undistributed earnings
of foreign subsidiaries are paid as dividends.
13. Retirement Plans
Defined Contribution Plan
Coach maintains the Coach, Inc. Savings and Profit Sharing Plan, which is a defined contribution plan. Employees who meet certain
eligibility requirements and are not part of a collective bargaining agreement
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