Coach 2012 Annual Report Download - page 42

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
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