Coach 2010 Annual Report Download - page 36

TABLE OF CONTENTS
FINANCIAL CONDITION
Cash Flow
Net cash provided by operating activities was $1.03 billion in fiscal 2011 compared to $990.9 million in fiscal 2010. The increase of
$42.4 million was primarily due to the $145.9 million increase in net income as well as changes in deferred income taxes year-over-year,
partially offset by working capital changes between the two periods, the most significant of which occurred in other assets and trade
accounts receivable. Deferred income taxes were a source of cash of $39.7 million in fiscal 2011 compared to a use of cash of $17.1 million
in fiscal 2010, due to the timing of deferred tax items. Other assets were a use of cash of $42.2 million in fiscal 2011 compared to a cash
source of $35.6 million in fiscal 2010, primarily due to the timing of certain cash receipts. Trade accounts receivable were a use of cash of
$31.8 million in fiscal 2011, compared to a cash source of $4.3 million in fiscal 2010, due to the timing of shipments to, and payments
from, customers.
Net cash used in investing activities was $59.6 million in fiscal 2011 compared to $182.2 million in fiscal 2010. Purchases of
investments and proceeds from their maturities and sales resulted in a net cash inflow in fiscal 2011 of $97.7 million, compared to a net
cash outflow of $99.9 million in fiscal 2010. Additionally, purchases of property and equipment were $66.6 million higher in the current
fiscal year, driven by the timing of certain projects and the Company’s international expansion.
Net cash used in financing activities was $875.1 million in fiscal 2011 as compared to $1.02 billion in fiscal 2010. The decrease of
$144.8 million was primarily attributable to $138.6 million of higher cash proceeds from share-based compensation awards during the
current fiscal year. The Company spent approximately $1.10 billion on repurchases of common stock in both fiscal 2011and fiscal 2010.
Revolving Credit Facilities
On July 26, 2007, the Company renewed its $100 million revolving credit facility with certain lenders and Bank of America, N.A. as
the primary lender and administrative agent (the “Bank of America facility”), extending the facility expiration to July 26, 2012. At Coach’s
request and lenders’ consent, the Bank of America facility can be expanded to $200 million. The facility can also be extended for two
additional one-year periods, at Coach’s request and the lenders’ consent.
Coach’s 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 2011 and fiscal 2010 there were no borrowings under the Bank of America facility.
Accordingly, as of July 2, 2011 and July 3, 2010, there were no outstanding borrowings under the Bank of America facility. The
Company’s borrowing capacity as of July 2, 2011 was $90.0 million, due to outstanding letters of credit.
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. Both the commitment fee and the LIBOR margin are based on the Company’s fixed charge coverage ratio. At
July 2, 2011, the commitment fee was 7 basis points and the LIBOR margin was 30 basis points.
The Bank of America facility contains various covenants and customary events of default. Coach has been in compliance with all
covenants since its inception.
To provide funding for working capital and general corporate purposes, Coach Japan has available credit facilities with several Japanese
financial institutions. These facilities allow a maximum borrowing of 4.1 billion yen, or approximately $50.7 million, at July 2, 2011.
Interest is based on the Tokyo Interbank rate plus a margin of 30 basis points. During fiscal 2011, the peak borrowings under the Japanese
credit facilities were $27.1 million. There were no borrowings in fiscal 2010. As of July 2, 2011 and July 3, 2010, there were no outstanding
borrowings under the Japanese credit facilities.
To provide funding for working capital and general corporate purposes, Coach Shanghai Limited has a credit facility that allows a
maximum borrowing of 63 million Chinese renminbi, or approximately $10 million at July 2, 2011. Interest is based on the People’s Bank
of China rate. During fiscal 2011 and fiscal 2010, the peak borrowings under this credit facility were $0 and $7.5 million. At July 2, 2011
and July 3, 2010, there were no outstanding borrowings under this facility.
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