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TABLE OF CONTENTS
The following table presents operating income by reportable segment for fiscal 2014 compared to fiscal 2013:
(dollars in millions)

June 29, 2013(1)
Variance
Amount
%
North America
 
$ 1,460.0
$ (295.9)
(20.3)%
International

582.2
(26.5)
(4.6)
Other(2)

30.0
4.2
14.0
Corporate unallocated

(547.7)
(86.2)
15.7
Total operating income
 
$ 1,524.5
$ (404.4)
(26.5)%
(1) In connection with the acquisition of the retail business in Europe, the Company evaluated the composition of its reportable segments and concluded
that the operating income associated with this region should be included in the International segment. Accordingly, prior year comparable amounts have
been reclassified to conform to the current year presentation. See Note 7, "Acquisitions" and Note 16, "Segment Information" for more information.
(2) Operating income in the Other category, which is not a reportable segment, consists of sales and expenses generated in ancillary channels, including
licensing and disposition.
North America Operating Incomedecreased 20.3% or $295.9 million to $1.16 billion in fiscal 2014 reflecting the decrease in gross profit of $353.1
million which was partially offset by lower SG&A expenses of $57.2 million. The decrease in SG&A expenses was related to the absence of costs in fiscal
2014 related to the divestiture of the Reed Krakoff business and lower variable selling costs as a result of lower sales. Operating margin decreased 450 basis
points to 37.5% in fiscal 2014 from 42.0% during the same period in the prior year due to lower gross margin of 310 basis points and higher SG&A expense
as a percentage of net sales of 140 basis points.
International Operating Incomedecreased 4.6% or $26.5 million to $555.7 million primarily reflecting higher SG&A expenses of $66.5 million partially
offset by higher gross profit of $40.0 million. The increase in SG&A expenses is related to a $53.7 million increase in China and Asia, excluding Japan,
related to higher occupancy and employee costs associated with new store openings and a $45.8 million increase as a result of the recently acquired Europe
business. The increase in SG&A costs was offset by foreign currency effects in Japan of $42.6 million. Operating margin decreased 360 basis points to 33.8%
in fiscal 2014 from 37.4% during the same period in the prior year primarily due to lower gross margin of 180 basis points and higher overall selling expenses
as a percentage of net sales which increased by 180 basis points.
Corporate Unallocated Operating Expense increased $86.2 million to $633.9 million, an increase of 15.7%. This increase was primarily attributable
higher charges incurred by the Company in fiscal 2014 as part its Transformation Plan. Excluding items affecting comparability, unallocated operating
expenses increased by 1.6% or $7.9 million to $502.4 million from $494.5 million.

The effective tax rate was 30.4% in fiscal 2014, as compared to 32.0% in fiscal 2013. Excluding the items affecting comparability, the effective tax rate
was 30.6% and 32.2% in fiscal 2014 and fiscal 2013, respectively. Both fiscal 2014 and fiscal 2013 benefited from one-time discrete items. In fiscal 2014, the
Company recognized a net benefit related to refinements of its various tax accounts which were partially offset by the loss of deductions related to changes in
key executives. During fiscal 2013, the Company recognized a favorable tax settlement and the benefit of certain permanent adjustments related to executive
compensation. These one-time discrete items favorably impacted our effective tax rate by approximately 220 basis points and 40 basis points in fiscal 2014
and fiscal 2013, respectively.

Net income decreased 24.5% or $253.1 million to $781.3 million in fiscal 2014 as compared to $1.03 billion in fiscal 2013. Excluding items of
comparability, net income decreased 18.5% or $197.4 million to $869.6 million in fiscal 2014 from $1.07 billion in fiscal 2013. This decrease was primarily
due to lower operating income partially offset by lower provision for income taxes.

Net income per diluted share decreased 22.7% to $2.79 in fiscal 2014 as compared to $3.61 in fiscal 2013. Excluding items of comparability, net income
per diluted share decreased 16.9% or $0.63 to $3.10 in fiscal 2014 from $3.73 in fiscal 2013, due to lower net income.
33