Coach 2012 Annual Report Download - page 40

occurred in inventories, accrued liabilities and other liabilities. Increases in inventory balances in fiscal 2012
resulted in the use of cash of $71.7 million as compared to $64.7 million in fiscal 2011, primarily due to the
Company’s international expansion. Changes during the year in accrued liabilities balances provided cash of
$84.2 million in fiscal 2012, compared to $53.7 million in fiscal 2011, driven primarily by the timing of
certain expenses and tax payments. Changes in other liabilities balances resulted in a use of cash of $17.6
million in fiscal 2012 compared to a cash source of $13.4 million in fiscal 2011, primarily due to the timing
of certain cash payments.
Net cash used in investing activities was $259.4 million in fiscal 2012 compared to $59.6 million in fiscal
2011, with the increase of $199.8 million largely driven by acquisitions, higher planned capital investment,
and the timing of cash investments. During fiscal 2012, the Company acquired 100% of its domestic retail
businesses in Singapore and Taiwan from the former distributors for an aggregate $53.2 million, net of cash
acquired. Purchases of property and equipment were $184.3 million in fiscal 2012, which was $36.6 million
higher than fiscal 2011, reflecting planned increased capital investment. In addition, during fiscal 2012, the
Company provided $24.1 million of loan advances in connection with its European joint venture operations, to
fund expansion plans in the region.
Net cash used in financing activities was $741.9 million in fiscal 2012 as compared to $875.1 million in
fiscal 2011. The decrease of $133.2 million was primarily attributable to $398.0 million less expended for
common stock repurchases, partially offset by $192.4 million lower net proceeds from exercises of share
based awards and $82.2 million higher dividend payments in fiscal 2012, due to the higher dividend payment
rate.
Revolving Credit Facilities
Through June 18, 2012, the Company maintained a $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’’). At Coach’s request and lenders’ consent, the Bank of America facility was able to be expanded to
$200 million and also extended for two additional one-year periods.
Coach paid a commitment fee of 6 to 12.5 basis points on the Bank of America facility 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 were based on the Company’s fixed charge coverage ratio.
Coach’s Bank of America facility was available for seasonal working capital requirements or general
corporate purposes and could be prepaid without penalty or premium. During fiscal 2012 and fiscal 2011 there
were no borrowings under the Bank of America facility. Accordingly, as of July 2, 2011, there were no
outstanding borrowings under the Bank of America facility.
The Bank of America facility contained various covenants and customary events of default. Coach was in
compliance with all covenants of the Bank of America facility since its inception through its termination.
On June 18, 2012, the Company terminated the Bank of America facility and replaced it with a new,
$400 million revolving credit facility with certain lenders and JP Morgan Chase Bank, N.A. as the primary
lender and administrative agent (the ‘‘JP Morgan facility’’). The JP Morgan facility may also be used to
finance the working capital needs, capital expenditures, certain investments, share repurchases, dividends, and
other general corporate purposes of the Company and its subsidiaries (which may include commercial paper
back-up), and expires in June 2017. At Coach’s request and lenders’ consent, revolving commitments of the
JP Morgan facility may be expanded to $650 million. As of June 30, 2012, there were no outstanding
borrowings on the JP Morgan facility, and the borrowing capacity was $393 million, due to outstanding letters
of credit.
Borrowings under the JP Morgan Facility bear interest at a rate per annum equal to, at Coach’s option,
either (a) an alternate base rate or (b) a rate based on the rates applicable for deposits in the interbank market
for U.S. dollars or the applicable currency in which the loans are made (the ‘‘Adjusted LIBO Rate’’) plus an
applicable margin. The applicable margin for Adjusted LIBO Rate loans will be adjusted by reference to a
grid (the ‘‘Pricing Grid’’) based on the ratio of (a) consolidated debt plus 800% of consolidated lease expense
to (b) consolidated EBITDAR (‘‘Leverage Ratio’’). Additionally, Coach will pay a commitment fee, calculated
37