Coach 2014 Annual Report Download - page 62

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TABLE OF CONTENTS




Coach, Inc. (the “Company”) is a leading New York design house of modern luxury accessories and lifestyle collections. The Company’s primary
product offerings, manufactured by third-party suppliers, include women’s and men’s bags, women’s and men’s small leather goods, business cases, footwear,
wearables including outerwear, watches, weekend and travel accessories, scarves, sunwear, fragrance, jewelry, travel bags and other lifestyle products.
Coach’s products are sold through the North America and International reportable segments. The North America segment includes sales to North American
consumers through Coach-operated stores (including the Internet), and sales to wholesale customers and distributors. The International segment includes
sales to consumers through Coach-operated stores (including the Internet) and concession shop-in-shops in Japan and mainland China, Coach-operated stores
and concession shop-in-shops in Hong Kong, Macau, Singapore, Taiwan, Malaysia, South Korea, the United Kingdom, France, Ireland, Spain, Portugal,
Germany and Italy, as well as sales to wholesale customers and distributors in approximately 35 countries. The Company also records sales generated in
ancillary channels including licensing and disposition.


The Company’s fiscal year ends on the Saturday closest to June 30. Unless otherwise stated, references to years in the financial statements relate to fiscal
years. The fiscal years ended June 28, 2014 (“fiscal 2014”), June 29, 2013 (“fiscal 2013”) and June 30, 2012 (“fiscal 2012”) were each 52-week periods. The
fiscal year ending June 27, 2015 (“fiscal 2015”) will be also be a 52-week period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
estimates in amounts that may be material to the financial statements.
Significant estimates inherent in the preparation of the consolidated financial statements include customer returns, discounts, end-of-season markdowns,
and operational chargebacks; the realizability of inventory; reserves for contingencies; useful lives and impairments of long-lived tangible and intangible
assets; accounting for income taxes and related uncertain tax positions; the valuation of stock-based compensation and related expected forfeiture rates;
reserves for restructuring; and accounting for business combinations, amongst others.

The consolidated financial statements include the accounts of the Company and all 100% owned subsidiaries. All intercompany transactions and
balances are eliminated in consolidation.

Cash and cash equivalents consist of cash balances and highly liquid investments with a maturity of three months or less at the date of purchase.

Long-term investments primarily consist of high-credit quality U.S. and non-U.S. issued corporate debt securities, U.S. Treasuries and government
agency securities, classified as available-for-sale, and recorded at fair value, with unrealized gains and losses recorded in other comprehensive income. Long-
term investments also include the equity method investment related to the Hudson Yards joint venture and the Reed Krakoff cost method investment. Short-
term investments consist primarily of time deposits, U.S. Treasuries and government agency securities, and high-credit quality U.S. and non-U.S. issued
corporate debt securities with original maturities greater than three months and with maturities within one year of balance sheet date, classified as available-
for-sale and held-to-maturity. Held-to-maturity investments are recorded at amortized cost, which approximates fair value. Dividend and interest income are
recognized when earned.
Investments in companies in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the
equity method. Significant influence is generally presumed to exist when the Company owns between
60