Coach 2010 Annual Report Download - page 35

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TABLE OF CONTENTS
Charitable Contribution and Tax Adjustments
During the fourth quarter of fiscal 2009, the Company decreased the provision for income taxes by $18.8 million, primarily as a result
of a favorable settlement of a multi-year tax return examination and other tax accounting adjustments. The underlying events and
circumstances for the tax settlement and adjustments were not related to the fiscal 2008 settlement. The Company used the net income
favorability to contribute $15.0 million to the Coach Foundation. The Company believed that in order to reflect the direct results of the
normal, ongoing business operations, both the tax adjustments and the resulting foundation funding needed to be adjusted. This exclusion is
consistent with the way management views its results and is the basis on which incentive compensation was calculated and paid for fiscal
2009.
Fiscal 2008 Items
Charitable Contribution and Tax Adjustments
During the fourth quarter of fiscal 2008, the Company decreased the provision for income taxes by $60.6 million, primarily as a result
of a favorable settlement of a tax return examination. The underlying events and circumstances for the tax settlement were not related to the
fiscal 2009 settlement. The Company used the net income favorability to create the Coach Foundation. The Company recorded an initial
contribution to the Coach Foundation in the amount of $20.0 million. The Company believed that in order to reflect the direct results of the
business operations as was done for executive management incentive compensation, both the tax adjustments and the resulting foundation
funding needed to be adjusted.
Variable Expenses
As a result of the lower income tax provision, the Company incurred additional incentive compensation expense of $12.1 million, as a
portion of the Company’s incentive compensation plan is based on net income and earnings per share. Incremental incentive compensation
driven by tax settlements of this magnitude is unlikely to recur in the near future as the Company has modified its incentive compensation
plans during fiscal 2009 to be measured exclusive of any unusual accounting adjustments. The Company believes excluding these variable
expenses, which were directly linked to the tax settlements, assists investors in evaluating the Company’s direct, ongoing business
operations.
Currency Fluctuation Effects
Percentage increases and decreases in sales in fiscal 2011 and fiscal 2010 for Coach Japan have been presented both including and
excluding currency fluctuation effects from translating foreign-denominated sales into U.S. dollars and comparing these figures to the same
period in the prior fiscal year.
We believe that presenting Coach Japan sales increases and decreases, including and excluding currency fluctuation effects, will help
investors and analysts to understand the effect on this valuable performance measure of significant year-over-year currency fluctuations.
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