Coach 2010 Annual Report Download - page 32

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TABLE OF CONTENTS
Coach Japan operating expenses was driven primarily by the impact of foreign currency exchange rates which increased reported expenses
by approximately $22.0 million.
Advertising, marketing, and design costs were $179.4 million, or 5.0% of net sales, in fiscal 2010, compared to $163.6 million, or
5.1% of net sales, during fiscal 2009. The increase was primarily due to new design expenditures for the Reed Krakoff brand, with
expected introductions in fiscal year 2011, partly offset by controlled sample making expenses.
Distribution and consumer service expenses were $48.0 million, or 1.3% of net sales, in fiscal 2010, compared to $52.2 million, or
1.6%, in fiscal 2009. The decrease in expenses was primarily the result of fiscal 2009 cost savings initiatives and process improvements.
Administrative expenses were $204.0 million, or 5.7% of net sales, in fiscal 2010 compared to $153.4 million, or 4.7% of net sales,
during fiscal 2009. Excluding items affecting comparability of $23.4 in fiscal 2009, expenses were $130.0 million, representing 4.0% of net
sales. The increase in administrative expenses was primarily due to higher performance-based and share-based compensation. Also during
fiscal 2009, the Company reversed straight-line rent accruals resulting from the purchase of our corporate headquarters building during the
lease period.
Interest Income, Net
Net interest income was $8.0 million in fiscal 2010 compared to $10.8 million in fiscal 2009. The decrease is attributable to lower
returns on our investments due to lower interest rates.
Provision for Income Taxes
The effective tax rate was 36.5% in fiscal 2010 compared to 36.6% in fiscal 2009. In the fourth quarter of fiscal 2009, the Company
recorded a benefit of $18.8 million primarily related to favorable settlements of tax return examinations and certain other tax accounting
adjustments. Excluding these benefits, the effective tax rate was 38.5% in fiscal 2009.
Net Income
Net income was $734.9 million in fiscal 2010 compared to $623.4 million in fiscal 2009. Excluding items affecting comparability of
$1.2 million in fiscal 2009, net income was $622.1 million in fiscal 2009. The increase was primarily due to operating income
improvement partially offset by a higher provision for income taxes.
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