Coach 2014 Annual Report Download - page 45

TABLE OF CONTENTS
will retain a condominium interest serving as its new corporate headquarters. During fiscal 2014, the Company invested $87.2 million in the joint venture.
The Company expects to invest approximately $350 million over the next two years, of which and depending on construction progress, the Company’s latest
estimate contemplates an investment of approximately $240 million in fiscal 2015. Outside of the joint venture, Coach is directly investing in aspects of the
new corporate headquarters. In fiscal 2014, $2.1 million was included in capital expenditures and we expect an additional $188 million over the period of
construction. The joint venture investments and capital expenditures will be financed by the Company with cash on hand, debt and approximately $130
million of proceeds from the sale of its current headquarters buildings expected in fiscal 2016.
Management believes that cash flow from operations, access to the credit and capital markets and our credit lines, on hand cash and cash equivalents and
our investments will provide adequate funds for the foreseeable working capital needs, planned capital expenditures and dividend payments. Any future
acquisitions or joint ventures, and other similar transactions may require additional 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.
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Firm Commitments
As of June 28, 2014, Coach’s contractual obligations are as follows:
(dollars in millions)
Total
Fiscal
2015
Fiscal
2016 – 2017
Fiscal
2018 – 2019
Fiscal 2020
and Beyond
Capital expenditure commitments
$ 15.9
$ 15.9
$ —
$ —
$ —
Inventory purchase obligations
533.5
533.5
—
—
—
New corporate headquarters joint venture(1)
350.0
240.0
110.0
—
—
Operating leases
1,210.9
208.5
353.1
243.4
405.9
Other
9.1
1.1
6.2
1.8
—
Total
$ 2,119.4
$ 999.0
$ 469.3
$ 245.2
$ 405.9
(1) Payments are estimated and may vary based on construction progress.
Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $188.7 million as of June 28, 2014, as
we cannot make a reliable estimate of the period in which the liability will be settled, if ever. The above table also excludes amounts included in current
liabilities in the Consolidated Balance Sheet at June 28, 2014 as these items will be paid within one year, certain long-term liabilities not requiring cash
payments and cash contributions for the Company’s pension plans.
Off-Balance Sheet Arrangements
In addition to the commitments included in the table above, we have outstanding letters of credit $5.6 million as of June 28, 2014, primarily serving to
collateralize our obligation to third parties for insurance claims and value-added tax refunds. These letters of credit expire at various dates through 2015.
As discussed earlier, the Company entered into a joint venture agreement with the Related Companies, L.P. to develop a new office tower in Manhattan
in the Hudson Yards district, in April 2013. The formation of the Hudson Yards joint venture serves as a financing vehicle for the project. Construction of the
new building has commenced and upon completion of the office tower in fiscal 2016, Coach will retain a condominium interest serving as its new corporate
headquarters. The Hudson Yards joint venture is determined to be a variable interest entity primarily due to the fact that it has insufficient equity to finance
its activities without additional subordinated financial support from its two joint venture partners. Coach is not considered the primary beneficiary of the
entity primarily because we do not have the power to direct the activities that most significantly impact the entity’s economic performance. The Company’s
maximum loss exposure is limited to the committed capital.
We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be
expected to have a material current or future effect on our consolidated financial statements. Refer to Note 12, "Commitments and Contingencies," to the
accompanying audited consolidated financial statements for further information.
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