Coach 2012 Annual Report Download - page 37

the second half of fiscal 2010 we established an Asia distribution center in Shanghai, owned and operated by
a third-party, allowing us to better manage the logistics in this region. During fiscal 2011, the Asia distribution
center contributed to the increase in distribution and consumer service expenses; however in the long run, the
Company expects the Asia distribution center to reduce costs as a percentage of net sales.
Administrative expenses were $252.4 million, or 6.1% of net sales, compared to $204.0 million, or 5.7%
of net sales, during fiscal 2010. Excluding items affecting comparability of $25.7 million in fiscal 2011,
expenses were $226.7 million, representing 5.5% of net sales. The increase in administrative expenses was
primarily due to higher share-based and performance-based compensation.
Provision for Income Taxes
The effective tax rate was 32.3% in fiscal 2011 compared to 36.5% in fiscal 2010. Excluding the benefit
from the items affecting comparability, the effective tax rate was 33.6% in fiscal 2011. The decrease in the
effective tax rate is primarily attributable to a favorable settlement of a multi-year tax return examination and
higher profitability in lower tax rate jurisdictions in which income is earned, due to the increased globalization
of the Company, and a lower effective state tax rate.
Net Income
Net income was $880.8 million in fiscal 2011 compared to $734.9 million in fiscal 2010. The increase
was due to the higher operating income and a reduction of the effective tax rate.
FISCAL 2012, FISCAL 2011, FISCAL 2009 AND FISCAL 2008 ITEMS AFFECTING
COMPARABILITY OF OUR FINANCIAL RESULTS
Non-GAAP Measures
The Company’s reported results are presented in accordance with U.S. Generally Accepted Accounting
Principles (‘‘GAAP’’). The reported SG&A expenses, operating income, and provision for income taxes in
fiscal 2012 and 2011 reflect certain items which affect the comparability of our results. Similarly, the reported
SG&A expenses, operating income, provision for income taxes, income from continuing operations, net
income and earnings per diluted share from continuing operations in both fiscal 2009 and fiscal 2008 reflect
certain items which affect the comparability of our results. These metrics are also reported on a non-GAAP
basis for these fiscal years to exclude the impact of these items.
These non-GAAP performance measures were used by management to conduct and evaluate its business
during its regular review of operating results for the periods affected. Management and the Company’s Board
utilized these non-GAAP measures to make decisions about the uses of Company resources, analyze
performance between periods, develop internal projections and measure management performance. The
Company’s primary internal financial reporting excluded these items affecting comparability. In addition, the
compensation committee of the Company’s Board used these non-GAAP measures when setting and assessing
achievement of incentive compensation goals.
We believe these non-GAAP measures are useful to investors in evaluating the Company’s ongoing
operating and financial results and understanding how such results compare with the Company’s historical
performance. In addition, we believe excluding the items affecting comparability assists investors in
developing expectations of future performance. These items affecting comparability do not represent the
Company’s direct, ongoing business operations. By providing the non-GAAP measures, as a supplement to
GAAP information, we believe we are enhancing investors’ understanding of our business and our results of
operations. The non-GAAP financial measures are limited in their usefulness and should be considered in
addition to, and not in lieu of, U.S. GAAP financial measures. Further, these non-GAAP measures may be
unique to the Company, as they may be different from non-GAAP measures used by other companies.
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