Coach 2009 Annual Report Download - page 16

TABLE OF CONTENTS
•product quality issues,
•political unrest, and
•natural disasters, acts of war or terrorism and other external factors over which we have no control.
While we have business continuity and contingency plans for our sourcing sites, significant disruption of manufacturing for any of the
above reasons could interrupt product supply and, if not remedied in a timely manner, could have an adverse impact on our business.
Our business is subject to increased costs due to excess inventories if we misjudge the demand for our products.
If Coach misjudges the market for its products it may be faced with significant excess inventories for some products and missed
opportunities for other products. In addition, because Coach places orders for products with its manufacturers before it receives wholesale
customers’ orders, it could experience higher excess inventories if wholesale customers order fewer products than anticipated.
Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of Coach
common stock.
Because Coach products are frequently given as gifts, Coach has historically realized, and expects to continue to realize, higher sales
and operating income in the second quarter of its fiscal year, which includes the holiday months of November and December. In addition,
fluctuations in sales and operating income in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events
affecting retail sales.
If we are unable to pay quarterly dividends at intended levels, our reputation and stock price may be harmed.
Our quarterly cash dividend is currently $0.15 per common share. The dividend program requires the use of a modest portion of our
cash flow. Our ability to pay dividends will depend on our ability to generate sufficient cash flows from operations in the future. This
ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our Board of Directors
(“Board”) may, at its discretion, decrease the intended level of dividends or entirely discontinue the payment of dividends at any time. Any
failure to pay dividends after we have announced our intention to do so may negatively impact our reputation and investor confidence in us
and negatively impact our stock price.
Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results and stock price.
We are subject to income taxes in many U.S. and certain foreign jurisdictions. We record tax expense based on our estimates of future
payments, which include reserves for uncertain tax positions in multiple tax jurisdictions. At any one time, many tax years are subject to
audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of
these issues. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and
exposures are evaluated. In addition, our effective tax rate in a given financial statement period may be materially impacted by changes in the
mix and level of earnings or by changes to existing accounting rules or regulations. Further, there is proposed tax legislation that may be
enacted in the future, which could negatively impact our current or future tax structure and effective tax rates.
Provisions in Coach’s charter and bylaws, Maryland law or its “poison pill” may delay or prevent an acquisition of Coach by a
third party.
Coach’s charter and bylaws and Maryland law contain provisions that could make it more difficult for a third party to acquire Coach
without the consent of Coach’s Board. Coach’s charter permits its Board, without stockholder approval, to amend the charter to increase or
decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that Coach has the authority to
issue. In addition, Coach’s Board may classify or reclassify any unissued shares of common stock or preferred stock and may set the
preferences, rights and other terms of the classified or reclassified shares. Although Coach’s Board has no intention to do so at the present
time, it could establish a series of preferred stock that could have the effect of delaying, deferring or preventing a transaction or a change in
control that might involve a premium price for Coach’s common stock or otherwise be in the best interest of Coach’s stockholders.
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