Coach 2014 Annual Report Download - page 82

TABLE OF CONTENTS
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recognized gross interest and penalty expense of $767 in fiscal 2014, and gross interest and penalty income of $7,037 and $10,920 in fiscal 2013 and fiscal
2012, respectively.
The Company files income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Tax examinations are currently in
progress in select foreign and state jurisdictions that are extending the years open under the statutes of limitation. Fiscal years 2011 to present are open to
examination in the U.S. federal jurisdiction, fiscal 2007 to present in select state jurisdictions and fiscal 2005 to present in select foreign jurisdictions. The
Company anticipates that one or more of these audits may be finalized in the foreseeable future. However, based on the status of these examinations, and the
average time typically incurred in finalizing audits with the relevant tax authorities, we cannot reasonably estimate the impact these audits may have in the
next 12 months, if any, to previously recorded uncertain tax positions. We accrue for certain known and reasonably anticipated income tax obligations after
assessing the likely outcome based on the weight of available evidence. Although we believe that the estimates and assumptions we have used are reasonable
and legally supportable, the final determination of tax audits could be different than that which is reflected in historical income tax provisions and recorded
assets and liabilities. With respect to all jurisdictions, we believe we have made adequate provision for all income tax uncertainties.
For the years ended June 28, 2014 and June 29, 2013, the Company had net operating loss carryforwards in foreign tax jurisdictions of $526,681 and
$340,893, the majority of which can be carried forward indefinitely. The deferred tax assets related to the carryforwards have been reflected net of $131,788
and $79,599 valuation allowances at June 28, 2014 and June 29, 2013, respectively. The Company’s valuation allowance increased by $52,189 in fiscal
2014 and $26,096 in fiscal 2013, primarily as the result of actual or anticipated results in the foreign jurisdictions.
The total amount of undistributed earnings of foreign subsidiaries as of June 28, 2014 and June 29, 2013, was $2,033,869 and $1,601,637, respectively.
It is the Company’s intention to permanently reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for foreign withholding taxes or United States income taxes which may become payable if undistributed earnings
of foreign subsidiaries are paid as dividends. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable
because such liability, if any, is subject to many variables and is dependent on circumstances existing if and when remittance occurs.
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Coach maintains the Coach, Inc. Savings and Profit Sharing Plan, which is a defined contribution plan. Employees who meet certain eligibility
requirements and are not part of a collective bargaining agreement may participate in this program. The annual expense incurred by Coach for this defined
contribution plan was $7,541, $16,274, and $18,641 in fiscal 2014, fiscal 2013 and fiscal 2012, respectively.
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In fiscal 2014, the Company’s operations reflect five operating segments aggregated into two reportable segments:
• North America, which includes sales to North American consumers through Company-operated stores, including the Internet, and sales to wholesale
customers.
• International, which 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.
In deciding how to allocate resources and assess performance, Coach's chief operating decision maker regularly evaluates the sales and operating income
of these segments. Operating income is the gross margin of the segment less direct expenses of the segment. Unallocated corporate expenses include
inventory-related costs (such as production variances), advertising, marketing, design, administration and information systems, as well as distribution and
consumer service expenses. Additionally, costs incurred by the Company as described in Note 3, "Transformation, Restructuring and Other Related Actions,"
are also included as unallocated corporate expenses.
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