Coach 2011 Annual Report Download - page 42

TABLE OF CONTENTS
capital. There can be no assurance that any such capital will be available to Coach on acceptable terms or at all. Coach’s ability to fund its
working capital needs, planned capital expenditures, dividend payments and scheduled debt payments, as well as to comply with all of the
financial covenants under its debt agreements, depends on its future operating performance and cash flow, which in turn are subject to
prevailing economic conditions and to financial, business and other factors, some of which are beyond Coach’s control.
Commitments
At June 30, 2012, the Company had letters of credit available of $600 million, of which $215.4 million were outstanding. These letters
of credit, which expire at various dates through 2014, primarily collateralize the Company’s obligation to third parties for the purchase of
inventory.
Contractual Obligations
As of June 30, 2012, Coach’s long-term contractual obligations are as follows:
Payments Due by Period
Less than
1 Year
1 – 3
Years
3 – 5
Years
More than
5 Years
Total Fiscal
2013
Fiscal
2014 — 2015
Fiscal
2016 – 2017
Fiscal 2018
and beyond
(amounts in millions)
Capital expenditure commitments(1) $ 1.3 $ 1.3 $ — $ — $ —
Inventory purchase obligations(2) 212.1 212.1 — — —
Long-term debt, including the current portion (3) 24.4 23.4 1.0 — —
Operating leases 1,075.5 179.3 324.2 233.4 338.5
Total $ 1,313.3 $ 416.1 $ 325.2 $ 233.4 $ 338.5
(1) Represents the Company’s legally binding agreements related to capital expenditures.
(2) Represents the Company’s legally binding agreements to purchase finished goods.
(3) Amounts presented include interest payment obligations.
The table above excludes the following: amounts included in current liabilities, other than the current portion of long-term debt, in the
Consolidated Balance Sheet at June 30, 2012 as these items will be paid within one year; long-term liabilities not requiring cash payments
and cash contributions for the Company’s pension plans. The Company intends to contribute approximately $0.4 million to its pension
plans during the next year. The above table also excludes reserves recorded in accordance with the Financial Accounting Standards Board’s
(“FASB”) guidance for accounting for uncertainty in income taxes which has been codified within Accounting Standards Codification
(“ASC”) 740, as we are unable to reasonably estimate the timing of future cash flows related to these reserves.
Coach does not have any off-balance-sheet financing or unconsolidated special purpose entities. Coach’s risk management policies
prohibit the use of derivatives for trading or speculative purposes. The valuation of financial instruments that are marked-to-market are
based upon independent third-party sources.
Long-Term Debt
Coach is party to an Industrial Revenue Bond related to its Jacksonville, Florida distribution and consumer service facility. This loan
has a remaining balance of $1.4 million and bears interest at 4.5%. Principal and interest payments are made semiannually, with the final
payment due in 2014.
During fiscal 2009, Coach assumed a mortgage in connection with the purchase of its corporate headquarters building in New York
City. This mortgage bears interest at 4.68%. Interest payments are made monthly and principal payments began in July 2009, with the final
payment of $21.6 million due in June 2013. As of June 30, 2012, the remaining balance on the mortgage was $21.9 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions. Predicting future events is
39