Coach 2010 Annual Report Download - page 59

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TABLE OF CONTENTS
COACH, INC.
Notes to Consolidated Financial Statements
(dollars and shares in thousands, except per share data)
4. LEASES
Coach leases certain office, distribution and retail facilities. The lease agreements, which expire at various dates through 2028, are
subject, in some cases, to renewal options and provide for the payment of taxes, insurance and maintenance. Certain leases contain
escalation clauses resulting from the pass-through of increases in operating costs, property taxes and the effect on costs from changes in
consumer price indices. Certain rentals are also contingent upon factors such as sales.
Rent-free periods and scheduled rent increases are recorded as components of rent expense on a straight-line basis over the related terms
of such leases. Contingent rentals are recognized when the achievement of the target (i.e., sales levels), which triggers the related payment, is
considered probable. Rent expense for the Company’s operating leases consisted of the following:
Fiscal Year Ended
July 2,
2011
July 3,
2010
June 27,
2009
Minimum rentals $ 129,110 $ 121,563 $ 107,272
Contingent rentals 77,795 59,806 43,995
Total rent expense $ 206,905 $ 181,369 $ 151,267
Future minimum rental payments under noncancelable operating leases are as follows:
Fiscal Year Amount
2012 $ 152,871
2013 148,348
2014 140,032
2015 133,556
2016 93,785
Subsequent to 2016 350,671
Total minimum future rental payments $ 1,019,263
Certain operating leases provide for renewal for periods of five to ten years at their fair rental value at the time of renewal. In the normal
course of business, operating leases are generally renewed or replaced by new leases.
5. FAIR VALUE MEASUREMENTS
In accordance with ASC 820-10, “ Fair Value Measurements and Disclosures,” the Company categorized its assets and liabilities
based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy as set forth below. The three levels of the
hierarchy are defined as follows:
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Coach currently does not have any Level 1
financial assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets
or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices
that are observable for substantially the full term of the asset or liability.
Level 3 — Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability.
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