|
|
|
|
|
Maryland
|
52-2242751
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large Accelerated Filer
þ
|
|
Accelerated Filer
¨
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
|
Smaller Reporting Company
¨
|
|
|
|
Page Number
|
PART I – FINANCIAL INFORMATION (unaudited)
|
||
|
|
|
ITEM 1.
|
Financial Statements:
|
|
|
||
|
||
|
||
|
||
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
PART II – OTHER INFORMATION
|
||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 4.
|
||
ITEM 6.
|
||
|
|
Three Months Ended
|
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2016 |
|
December 26,
2015 |
|
|
December 31,
2016 |
|
December 26,
2015 |
||||||||
|
(millions, except per share data)
|
|||||||||||||||
|
(unaudited)
|
|||||||||||||||
Net sales
|
$
|
1,321.7
|
|
|
$
|
1,273.8
|
|
|
|
$
|
2,359.3
|
|
|
$
|
2,304.1
|
|
Cost of sales
|
415.5
|
|
|
414.7
|
|
|
|
738.4
|
|
|
748.5
|
|
||||
Gross profit
|
906.2
|
|
|
859.1
|
|
|
|
1,620.9
|
|
|
1,555.6
|
|
||||
Selling, general and administrative expenses
|
628.8
|
|
|
598.1
|
|
|
|
1,177.6
|
|
|
1,153.2
|
|
||||
Operating income
|
277.4
|
|
|
261.0
|
|
|
|
443.3
|
|
|
402.4
|
|
||||
Interest expense, net
|
5.1
|
|
|
6.3
|
|
|
|
10.8
|
|
|
13.0
|
|
||||
Income before provision for income taxes
|
272.3
|
|
|
254.7
|
|
|
|
432.5
|
|
|
389.4
|
|
||||
Provision for income taxes
|
72.6
|
|
|
84.6
|
|
|
|
115.4
|
|
|
122.9
|
|
||||
Net income
|
$
|
199.7
|
|
|
$
|
170.1
|
|
|
|
$
|
317.1
|
|
|
$
|
266.5
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.71
|
|
|
$
|
0.61
|
|
|
|
$
|
1.13
|
|
|
$
|
0.96
|
|
Diluted
|
$
|
0.71
|
|
|
$
|
0.61
|
|
|
|
$
|
1.13
|
|
|
$
|
0.96
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
280.5
|
|
|
277.6
|
|
|
|
279.9
|
|
|
277.3
|
|
||||
Diluted
|
281.8
|
|
|
278.4
|
|
|
|
281.8
|
|
|
278.3
|
|
||||
Cash dividends declared per common share
|
$
|
0.3375
|
|
|
$
|
0.3375
|
|
|
|
$
|
0.6750
|
|
|
$
|
0.6750
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2016 |
|
December 26,
2015 |
|
|
December 31,
2016 |
|
December 26, 2015
|
||||||||
|
(millions)
|
|||||||||||||||
|
(unaudited)
|
|||||||||||||||
Net income
|
$
|
199.7
|
|
|
$
|
170.1
|
|
|
|
$
|
317.1
|
|
|
$
|
266.5
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gains (losses) on cash flow hedging derivatives, net
|
9.3
|
|
|
(0.4
|
)
|
|
|
12.2
|
|
|
(3.7
|
)
|
||||
Unrealized losses on available-for-sale investments, net
|
(0.5
|
)
|
|
(1.4
|
)
|
|
|
(1.0
|
)
|
|
(1.9
|
)
|
||||
Foreign currency translation adjustments
|
(56.9
|
)
|
|
(3.4
|
)
|
|
|
(54.0
|
)
|
|
(25.0
|
)
|
||||
Other comprehensive loss, net of tax
|
(48.1
|
)
|
|
(5.2
|
)
|
|
|
(42.8
|
)
|
|
(30.6
|
)
|
||||
Comprehensive income
|
$
|
151.6
|
|
|
$
|
164.9
|
|
|
|
$
|
274.3
|
|
|
$
|
235.9
|
|
|
Six Months Ended
|
||||||
|
December 31,
2016 |
|
December 26,
2015 |
||||
|
(millions)
|
||||||
|
(unaudited)
|
||||||
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
|
|
|
|
|
|
||
Net income
|
$
|
317.1
|
|
|
$
|
266.5
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
100.2
|
|
|
107.1
|
|
||
Provision for bad debt
|
0.1
|
|
|
0.1
|
|
||
Share-based compensation
|
36.2
|
|
|
44.5
|
|
||
Excess tax effect from share-based compensation
|
0.3
|
|
|
9.6
|
|
||
Restructuring activities
|
4.6
|
|
|
8.1
|
|
||
Deferred income taxes
|
12.7
|
|
|
8.7
|
|
||
Other non-cash charges, net
|
13.4
|
|
|
(4.1
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Trade accounts receivable
|
(35.1
|
)
|
|
(87.9
|
)
|
||
Inventories
|
(26.9
|
)
|
|
38.9
|
|
||
Accounts payable
|
(27.6
|
)
|
|
(75.6
|
)
|
||
Accrued liabilities
|
(49.3
|
)
|
|
(49.4
|
)
|
||
Other liabilities
|
3.0
|
|
|
(8.6
|
)
|
||
Other assets
|
(20.6
|
)
|
|
52.1
|
|
||
Net cash provided by operating activities
|
328.1
|
|
|
310.0
|
|
||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
||
Hudson Yards sale of investments
|
680.6
|
|
|
—
|
|
||
Sale of former headquarters
|
126.0
|
|
|
—
|
|
||
Purchases of investments
|
(388.1
|
)
|
|
(450.5
|
)
|
||
Proceeds from maturities and sales of investments
|
307.2
|
|
|
166.9
|
|
||
Purchases of property and equipment
|
(121.7
|
)
|
|
(175.5
|
)
|
||
Acquisition of lease rights, net
|
(4.2
|
)
|
|
—
|
|
||
Acquisition of interest in equity method investment
|
—
|
|
|
(86.6
|
)
|
||
Net cash provided by (used in) investing activities
|
599.8
|
|
|
(545.7
|
)
|
||
CASH FLOWS USED IN FINANCING ACTIVITIES
|
|
|
|
|
|
||
Dividend payments
|
(188.5
|
)
|
|
(187.0
|
)
|
||
Repayment of debt
|
(285.0
|
)
|
|
(3.7
|
)
|
||
Proceeds from share-based awards
|
26.7
|
|
|
4.7
|
|
||
Taxes paid to net settle share-based awards
|
(19.9
|
)
|
|
(13.3
|
)
|
||
Excess tax effect from share-based compensation
|
(0.3
|
)
|
|
(9.6
|
)
|
||
Net cash used in financing activities
|
(467.0
|
)
|
|
(208.9
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(10.2
|
)
|
|
(3.4
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
450.7
|
|
|
(448.0
|
)
|
||
Cash and cash equivalents at beginning of period
|
859.0
|
|
|
1,291.8
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,309.7
|
|
|
$
|
843.8
|
|
Supplemental information:
|
|
|
|
||||
Cash paid for income taxes, net
|
$
|
139.4
|
|
|
$
|
60.8
|
|
Cash paid for interest
|
$
|
13.2
|
|
|
$
|
18.3
|
|
Noncash investing activity - property and equipment obligations
|
$
|
48.8
|
|
|
$
|
50.1
|
|
|
Organizational Efficiency
(1)
|
|
Technology Infrastructure
(2)
|
|
Network Optimization
(3)
|
|
Total
|
||||||||
|
(millions)
|
||||||||||||||
Liability as of July 2, 2016
|
$
|
22.2
|
|
|
$
|
—
|
|
|
$
|
3.2
|
|
|
$
|
25.4
|
|
Fiscal 2017 charges
|
7.6
|
|
|
2.5
|
|
|
0.7
|
|
|
10.8
|
|
||||
Cash payments
|
(13.5
|
)
|
|
(1.5
|
)
|
|
(3.2
|
)
|
|
(18.2
|
)
|
||||
Non-cash charges
|
(3.9
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
(4.6
|
)
|
||||
Liability as of December 31, 2016
|
$
|
12.4
|
|
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
13.4
|
|
|
(1)
|
Organizational efficiency charges, recorded within SG&A expenses, primarily related to accelerated depreciation associated with the retirement of information technology systems, severance and related costs of corporate employees as well as consulting fees related to process and organizational optimization.
|
(2)
|
Technology infrastructure costs, recorded within SG&A expenses, related to the initial costs of replacing and updating the Company’s core technology platforms.
|
(3)
|
Network optimization costs, recorded within SG&A expenses, related to lease termination costs.
|
|
International
|
|
Stuart Weitzman
|
|
Total
|
||||||
|
(millions)
|
||||||||||
Balance at July 2, 2016
|
$
|
346.9
|
|
|
$
|
155.5
|
|
|
$
|
502.4
|
|
Foreign exchange impact
|
(33.9
|
)
|
|
(1.2
|
)
|
|
(35.1
|
)
|
|||
Balance at December 31, 2016
|
$
|
313.0
|
|
|
$
|
154.3
|
|
|
$
|
467.3
|
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||||||||||||||||
|
Gross
Carrying Amount |
|
Accum.
Amort. |
|
Net
|
|
Gross
Carrying Amount |
|
Accum.
Amort. |
|
Net
|
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
$
|
54.7
|
|
|
$
|
(7.9
|
)
|
|
$
|
46.8
|
|
|
$
|
54.7
|
|
|
$
|
(5.8
|
)
|
|
$
|
48.9
|
|
Favorable lease rights, net
|
26.1
|
|
|
(5.1
|
)
|
|
21.0
|
|
|
24.7
|
|
|
(3.6
|
)
|
|
21.1
|
|
||||||
Total intangible assets subject to amortization
|
80.8
|
|
|
(13.0
|
)
|
|
67.8
|
|
|
79.4
|
|
|
(9.4
|
)
|
|
70.0
|
|
||||||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks and trade names
|
276.8
|
|
|
—
|
|
|
276.8
|
|
|
276.8
|
|
|
—
|
|
|
276.8
|
|
||||||
Total intangible assets
|
$
|
357.6
|
|
|
$
|
(13.0
|
)
|
|
$
|
344.6
|
|
|
$
|
356.2
|
|
|
$
|
(9.4
|
)
|
|
$
|
346.8
|
|
|
Amortization Expense
|
||
|
(millions)
|
||
Remainder of Fiscal 2017
|
$
|
3.6
|
|
Fiscal 2018
|
6.8
|
|
|
Fiscal 2019
|
6.7
|
|
|
Fiscal 2020
|
6.5
|
|
|
Fiscal 2021
|
6.1
|
|
|
Fiscal 2022
|
5.5
|
|
|
Fiscal 2023 and thereafter
|
32.6
|
|
|
Total
|
$
|
67.8
|
|
|
Shares of
Common
Stock
|
|
Common Stock
|
|
Additional
Paid-in-
Capital
|
|
(Accumulated
Deficit) / Retained Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|||||||||||
|
(millions, except per share data)
|
|||||||||||||||||||||
Balance at June 27, 2015
|
276.6
|
|
|
$
|
2.8
|
|
|
$
|
2,754.4
|
|
|
$
|
(189.6
|
)
|
|
$
|
(77.7
|
)
|
|
$
|
2,489.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
266.5
|
|
|
—
|
|
|
266.5
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.6
|
)
|
|
(30.6
|
)
|
|||||
Shares issued for stock options and employee benefit plans
|
1.1
|
|
|
—
|
|
|
(6.1
|
)
|
|
—
|
|
|
—
|
|
|
(6.1
|
)
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
44.5
|
|
|
—
|
|
|
—
|
|
|
44.5
|
|
|||||
Excess tax effect from share-based compensation
|
—
|
|
|
—
|
|
|
(9.6
|
)
|
|
—
|
|
|
—
|
|
|
(9.6
|
)
|
|||||
Dividends declared ($0.6750 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(187.3
|
)
|
|
—
|
|
|
(187.3
|
)
|
|||||
Balance at December 26, 2015
|
277.7
|
|
|
$
|
2.8
|
|
|
$
|
2,783.2
|
|
|
$
|
(110.4
|
)
|
|
$
|
(108.3
|
)
|
|
$
|
2,567.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at July 2, 2016
|
278.5
|
|
|
$
|
2.8
|
|
|
$
|
2,857.1
|
|
|
$
|
(104.1
|
)
|
|
$
|
(72.9
|
)
|
|
$
|
2,682.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
317.1
|
|
|
—
|
|
|
317.1
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.8
|
)
|
|
(42.8
|
)
|
|||||
Shares issued for stock options and employee benefit plans
|
2.1
|
|
|
—
|
|
|
6.8
|
|
|
—
|
|
|
—
|
|
|
6.8
|
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
36.7
|
|
|
—
|
|
|
—
|
|
|
36.7
|
|
|||||
Excess tax effect from share-based compensation
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|||||
Dividends declared ($0.6750 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(189.3
|
)
|
|
—
|
|
|
(189.3
|
)
|
|||||
Balance at December 31, 2016
|
280.6
|
|
|
$
|
2.8
|
|
|
$
|
2,900.3
|
|
|
$
|
23.7
|
|
|
$
|
(115.7
|
)
|
|
$
|
2,811.1
|
|
|
Unrealized
Gains (Losses)
on Cash
Flow
Hedges
(1)
|
|
Unrealized Gains
(Losses)
on Available-
for-Sale Debt
Securities
|
|
Cumulative
Translation
Adjustment
|
|
Other
(2)
|
|
Total
|
||||||||||
|
(millions)
|
||||||||||||||||||
Balances at June 27, 2015
|
$
|
4.4
|
|
|
$
|
0.5
|
|
|
$
|
(81.7
|
)
|
|
$
|
(0.9
|
)
|
|
$
|
(77.7
|
)
|
Other comprehensive loss before reclassifications
|
(0.3
|
)
|
|
(1.9
|
)
|
|
(25.0
|
)
|
|
—
|
|
|
(27.2
|
)
|
|||||
Less: gains reclassified from accumulated other comprehensive income to earnings
|
3.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.4
|
|
|||||
Net current-period other comprehensive loss
|
(3.7
|
)
|
|
(1.9
|
)
|
|
(25.0
|
)
|
|
—
|
|
|
(30.6
|
)
|
|||||
Balances at December 26, 2015
|
$
|
0.7
|
|
|
$
|
(1.4
|
)
|
|
$
|
(106.7
|
)
|
|
$
|
(0.9
|
)
|
|
$
|
(108.3
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balances at July 2, 2016
|
$
|
(8.8
|
)
|
|
$
|
0.3
|
|
|
$
|
(62.9
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
(72.9
|
)
|
Other comprehensive income (loss) before reclassifications
|
6.5
|
|
|
(1.0
|
)
|
|
(54.0
|
)
|
|
—
|
|
|
(48.5
|
)
|
|||||
Less: losses reclassified from accumulated other comprehensive income to earnings
|
(5.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.7
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
12.2
|
|
|
(1.0
|
)
|
|
(54.0
|
)
|
|
—
|
|
|
(42.8
|
)
|
|||||
Balances at December 31, 2016
|
$
|
3.4
|
|
|
$
|
(0.7
|
)
|
|
$
|
(116.9
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
(115.7
|
)
|
|
(1)
|
The ending balances of AOCI related to cash flow hedges are net of tax of
($2.3)
million and
($0.4)
million as of
December 31, 2016
and
December 26, 2015
, respectively. The amounts reclassified from AOCI are net of tax of
$2.9
million and
($1.8)
million as of
December 31, 2016
and
December 26, 2015
, respectively.
|
(2)
|
Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balances at
December 31, 2016
and
December 26, 2015
are net of tax of
$0.8 million
and
$0.5
million, respectively.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2016 |
|
December 26,
2015 |
|
December 31,
2016 |
|
December 26,
2015 |
||||||||
|
(millions, except per share data)
|
||||||||||||||
Net income
|
$
|
199.7
|
|
|
$
|
170.1
|
|
|
$
|
317.1
|
|
|
$
|
266.5
|
|
|
|
|
|
|
|
|
|
||||||||
Total weighted-average basic shares outstanding
|
280.5
|
|
|
277.6
|
|
|
279.9
|
|
|
277.3
|
|
||||
Dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities
|
1.3
|
|
|
0.8
|
|
|
1.9
|
|
|
1.0
|
|
||||
Total weighted-average diluted shares
|
281.8
|
|
|
278.4
|
|
|
281.8
|
|
|
278.3
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.71
|
|
|
$
|
0.61
|
|
|
$
|
1.13
|
|
|
$
|
0.96
|
|
Diluted
|
$
|
0.71
|
|
|
$
|
0.61
|
|
|
$
|
1.13
|
|
|
$
|
0.96
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31, 2016
(1)
|
|
December 26,
2015
|
|
December 31, 2016
(1)
|
|
December 26, 2015
|
||||||||
|
(millions)
|
||||||||||||||
Share-based compensation expense
|
$
|
20.7
|
|
|
$
|
21.6
|
|
|
$
|
36.7
|
|
|
$
|
44.5
|
|
Income tax benefit related to share-based compensation expense
|
6.4
|
|
|
7.3
|
|
|
11.1
|
|
|
14.2
|
|
|
(1)
|
During the three and six months ended
December 31, 2016
, the Company incurred
$0.5 million
of share-based compensation expense under the Company's Operational Efficiency Plan.
|
|
Number of
Options
Outstanding
|
|
Weighted-Average
Exercise Price per Option
|
|||
|
(millions)
|
|
|
|||
Outstanding at July 2, 2016
|
15.1
|
|
|
$
|
40.18
|
|
Granted
|
3.5
|
|
|
39.66
|
|
|
Exercised
|
(0.8
|
)
|
|
40.11
|
|
|
Forfeited or expired
|
(1.0
|
)
|
|
40.55
|
|
|
Outstanding at December 31, 2016
|
16.8
|
|
|
40.05
|
|
|
Vested and expected to vest at December 31, 2016
|
16.2
|
|
|
41.94
|
|
|
Exercisable at December 31, 2016
|
9.9
|
|
|
43.64
|
|
|
Number of
Non-vested
RSUs
|
|
Weighted-
Average Grant-
Date Fair Value
per RSU
|
|||
|
(millions)
|
|
|
|||
Non-vested at July 2, 2016
|
3.7
|
|
|
$
|
49.06
|
|
Granted
|
1.8
|
|
|
39.60
|
|
|
Vested
|
(1.6
|
)
|
|
39.16
|
|
|
Forfeited
|
(0.3
|
)
|
|
34.82
|
|
|
Non-vested at December 31, 2016
|
3.6
|
|
|
50.01
|
|
|
Number of
Non-vested
PRSUs
|
|
Weighted-
Average Grant-
Date Fair Value
per PRSU
|
|||
|
(millions)
|
|
|
|||
Non-vested at July 2, 2016
|
1.4
|
|
|
$
|
38.67
|
|
Granted
|
0.3
|
|
|
39.34
|
|
|
Change due to performance condition achievement
|
(0.1
|
)
|
|
53.19
|
|
|
Vested
(1)
|
—
|
|
|
39.72
|
|
|
Forfeited
|
(0.1
|
)
|
|
40.39
|
|
|
Non-vested at December 31, 2016
|
1.5
|
|
|
37.74
|
|
|
(1)
|
During the first
six months ended
December 31, 2016
, less than
0.1 million
PRSU shares vested.
|
|
December 31,
2016
|
|
July 2,
2016
|
||||
|
(millions)
|
||||||
Current Debt:
|
|
|
|
||||
Term Loan
|
$
|
—
|
|
|
$
|
15.0
|
|
Total Current Debt
|
$
|
—
|
|
|
$
|
15.0
|
|
|
|
|
|
||||
Long-Term Debt:
|
|
|
|
||||
Term Loan
|
$
|
—
|
|
|
$
|
270.0
|
|
4.250% Senior Notes
|
600.0
|
|
|
600.0
|
|
||
Total Long-Term Debt
|
600.0
|
|
|
870.0
|
|
||
Less: Unamortized Discount and Debt Issuance Costs on 4.250% Senior Notes
|
(8.4
|
)
|
|
(8.8
|
)
|
||
Total Long-Term Debt, net
|
$
|
591.6
|
|
|
$
|
861.2
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||||
|
December 31,
2016 |
|
July 2,
2016 |
|
December 31,
2016 |
|
July 2,
2016 |
|
December 31,
2016 |
|
July 2,
2016 |
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash equivalents
(1)
|
$
|
371.1
|
|
|
$
|
197.9
|
|
|
$
|
100.5
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term investments
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Time deposits
(2)
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
||||||
Commercial paper
(2)
|
—
|
|
|
—
|
|
|
85.8
|
|
|
54.8
|
|
|
—
|
|
|
—
|
|
||||||
Government securities - U.S.
(2)
|
180.5
|
|
|
119.9
|
|
|
—
|
|
|
11.8
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - U.S.
(2)
|
—
|
|
|
—
|
|
|
142.8
|
|
|
161.4
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - non U.S.
(2)
|
—
|
|
|
—
|
|
|
114.6
|
|
|
111.5
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
1.9
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||||||
Long-term investments
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate debt securities - U.S.
(3)
|
—
|
|
|
—
|
|
|
68.4
|
|
|
64.2
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - non U.S.
(3)
|
—
|
|
|
—
|
|
|
41.7
|
|
|
33.9
|
|
|
—
|
|
|
—
|
|
||||||
Derivative Assets
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Inventory-related hedges
(4)
|
—
|
|
|
—
|
|
|
9.3
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
||||||
Intercompany loan hedges
(4)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Contingent earnout obligation
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32.9
|
|
|
$
|
28.4
|
|
Derivative liabilities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inventory-related hedges
(4)
|
—
|
|
|
—
|
|
|
1.4
|
|
|
11.0
|
|
|
—
|
|
|
—
|
|
||||||
Intercompany loan hedges
(4)
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Cash equivalents consist of money market funds and time deposits with maturities of three months or less at the date of purchase. Due to their short term maturity, management believes that their carrying value approximates fair value.
|
(2)
|
Short-term available-for-sale investments are recorded at fair value, which approximates their carrying value, and are primarily based upon quoted vendor or broker priced securities in active markets.
|
(3)
|
Fair value is primarily determined using vendor or broker priced securities in active markets. These securities have maturity dates in calendar years 2018 and 2019.
|
(4)
|
The fair value of these hedges is primarily based on the forward curves of the specific indices upon which settlement is based and includes an adjustment for the counterparty’s or Company’s credit risk.
|
(5)
|
As part of the purchase agreement for the Stuart Weitzman acquisition, the Company is obligated to pay a potential earnout of
$14.7 million
annually if the Stuart Weitzman brand achieves certain revenue targets in calendar years 2015 through 2017. The agreement also contains a catch-up provision that provides that if the revenue targets are missed in any one year but are surpassed in succeeding years then amounts for past years become due upon surpassing targets in succeeding years. The revenue targets were not achieved in calendar year 2015 or 2016.
|
|
December 31, 2016
|
|
July 2, 2016
|
||||
|
(millions)
|
||||||
Beginning of fiscal year
|
$
|
28.4
|
|
|
$
|
19.4
|
|
Increase to contingent earnout obligation
|
4.5
|
|
|
9.0
|
|
||
End of period
|
$
|
32.9
|
|
|
$
|
28.4
|
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||||||||||||||||
|
Short-term
|
|
Long-term
|
|
Total
|
|
Short-term
|
|
Long-term
|
|
Total
|
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper
(1)
|
$
|
85.8
|
|
|
$
|
—
|
|
|
$
|
85.8
|
|
|
$
|
54.8
|
|
|
$
|
—
|
|
|
$
|
54.8
|
|
Government securities - U.S.
(2)
|
180.5
|
|
|
—
|
|
|
180.5
|
|
|
131.7
|
|
|
—
|
|
|
131.7
|
|
||||||
Corporate debt securities - U.S.
(2)
|
142.8
|
|
|
68.4
|
|
|
211.2
|
|
|
161.4
|
|
|
64.2
|
|
|
225.6
|
|
||||||
Corporate debt securities - non-U.S.
(2)
|
114.6
|
|
|
41.7
|
|
|
156.3
|
|
|
111.5
|
|
|
33.9
|
|
|
145.4
|
|
||||||
Available-for-sale investments, total
|
$
|
523.7
|
|
|
$
|
110.1
|
|
|
$
|
633.8
|
|
|
$
|
459.4
|
|
|
$
|
98.1
|
|
|
$
|
557.5
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Time deposits
(1)
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
||||||
Other
(3)
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
0.4
|
|
|
460.5
|
|
|
460.9
|
|
||||||
Total Investments
|
$
|
526.2
|
|
|
$
|
110.1
|
|
|
$
|
636.3
|
|
|
$
|
460.4
|
|
|
$
|
558.6
|
|
|
$
|
1,019.0
|
|
|
(1)
|
These securities have original maturities greater than
three months
and are recorded at fair value.
|
(2)
|
The securities as of
December 31, 2016
have maturity dates between calendar years
2017
and
2019
and are recorded at fair value.
|
(3)
|
Long-term Other as of
July 2, 2016
relates to the equity method investment in an entity formed during fiscal 2013 for the purpose of developing a new office tower in Manhattan (the "Hudson Yards joint venture"), with the Company owning less than
43%
of the joint venture. Refer to Note 14, "Headquarters Transactions," for further information.
|
•
|
North America, which is composed of Coach brand sales to North American consumers through stores, including the Internet, and sales to wholesale customers.
|
•
|
International, which is composed of Coach brand sales to consumers through stores and concession shop-in-shops in Japan, mainland China, Hong Kong, Macau, Singapore, Taiwan, Malaysia, South Korea, the United Kingdom, France, Ireland, Spain, Portugal, Germany, Italy, Austria, Belgium, the Netherlands and Switzerland. Additionally, International includes Coach brand sales to consumers through the Internet in Japan, mainland China, the United Kingdom and South Korea, as well as sales to wholesale customers and distributors in approximately
55
countries.
|
•
|
Stuart Weitzman, which includes worldwide sales generated by the Stuart Weitzman brand, primarily
through department stores in North America and international locations, within numerous independent third party distributors and within Stuart Weitzman operated stores (including the Internet) in the United States, Canada and Europe.
|
|
North
America
|
|
International
|
|
Other
(1)
|
|
Corporate
Unallocated
(2)
|
|
Stuart Weitzman
|
|
Total
|
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Three Months Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
744.1
|
|
|
$
|
448.3
|
|
|
$
|
11.0
|
|
|
$
|
—
|
|
|
$
|
118.3
|
|
|
$
|
1,321.7
|
|
Gross profit
|
463.0
|
|
|
342.3
|
|
|
9.4
|
|
|
15.5
|
|
|
76.0
|
|
|
906.2
|
|
||||||
Operating income (loss)
|
258.2
|
|
|
136.2
|
|
|
9.4
|
|
|
(139.7
|
)
|
|
13.3
|
|
|
277.4
|
|
||||||
Income (loss) before provision for income taxes
|
258.2
|
|
|
136.2
|
|
|
9.4
|
|
|
(144.8
|
)
|
|
13.3
|
|
|
272.3
|
|
||||||
Depreciation and amortization expense
(3)
|
17.5
|
|
|
15.6
|
|
|
—
|
|
|
11.4
|
|
|
3.9
|
|
|
48.4
|
|
||||||
Additions to long-lived assets
|
12.8
|
|
|
17.9
|
|
|
—
|
|
|
17.6
|
|
|
5.8
|
|
|
54.1
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three Months Ended December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
731.0
|
|
|
$
|
437.3
|
|
|
$
|
11.5
|
|
|
$
|
—
|
|
|
$
|
94.0
|
|
|
$
|
1,273.8
|
|
Gross profit
|
447.3
|
|
|
327.4
|
|
|
9.6
|
|
|
14.3
|
|
|
60.5
|
|
|
859.1
|
|
||||||
Operating income (loss)
|
248.2
|
|
|
130.6
|
|
|
6.4
|
|
|
(142.5
|
)
|
|
18.3
|
|
|
261.0
|
|
||||||
Income (loss) before provision for income taxes
|
248.2
|
|
|
130.6
|
|
|
6.4
|
|
|
(148.8
|
)
|
|
18.3
|
|
|
254.7
|
|
||||||
Depreciation and amortization expense
(3)
|
16.3
|
|
|
16.9
|
|
|
—
|
|
|
17.7
|
|
|
5.3
|
|
|
56.2
|
|
||||||
Additions to long-lived assets
|
14.9
|
|
|
22.2
|
|
|
—
|
|
|
67.0
|
|
|
1.9
|
|
|
106.0
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six Months Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
1,289.4
|
|
|
$
|
843.8
|
|
|
$
|
20.3
|
|
|
$
|
—
|
|
|
$
|
205.8
|
|
|
$
|
2,359.3
|
|
Gross profit
|
804.2
|
|
|
640.4
|
|
|
17.5
|
|
|
31.7
|
|
|
127.1
|
|
|
1,620.9
|
|
||||||
Operating income (loss)
|
422.4
|
|
|
249.5
|
|
|
15.5
|
|
|
(262.5
|
)
|
|
18.4
|
|
|
443.3
|
|
||||||
Income (loss) before provision for income taxes
|
422.4
|
|
|
249.5
|
|
|
15.5
|
|
|
(273.3
|
)
|
|
18.4
|
|
|
432.5
|
|
||||||
Depreciation and amortization expense
(3)
|
35.1
|
|
|
34.1
|
|
|
—
|
|
|
26.8
|
|
|
7.7
|
|
|
103.7
|
|
||||||
Additions to long-lived assets
|
29.9
|
|
|
43.2
|
|
|
—
|
|
|
33.7
|
|
|
14.9
|
|
|
121.7
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six Months Ended December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
1,292.0
|
|
|
$
|
806.3
|
|
|
$
|
24.3
|
|
|
$
|
—
|
|
|
$
|
181.5
|
|
|
$
|
2,304.1
|
|
Gross profit
|
796.2
|
|
|
609.6
|
|
|
18.0
|
|
|
21.6
|
|
|
110.2
|
|
|
1,555.6
|
|
||||||
Operating income (loss)
|
419.9
|
|
|
237.8
|
|
|
12.5
|
|
|
(293.8
|
)
|
|
26.0
|
|
|
402.4
|
|
||||||
Income (loss) before provision for income taxes
|
419.9
|
|
|
237.8
|
|
|
12.5
|
|
|
(306.8
|
)
|
|
26.0
|
|
|
389.4
|
|
||||||
Depreciation and amortization expense
(3)
|
32.1
|
|
|
33.7
|
|
|
—
|
|
|
34.8
|
|
|
12.8
|
|
|
113.4
|
|
||||||
Additions to long-lived assets
|
36.7
|
|
|
53.6
|
|
|
—
|
|
|
81.6
|
|
|
3.6
|
|
|
175.5
|
|
|
(1)
|
Other, which is not a reportable segment, consists of Coach brand sales and expenses generated in licensing and disposition channels.
|
(2)
|
Corporate unallocated includes certain centrally managed Coach brand inventory-related amounts, advertising, marketing, design, administration and information systems, as well as distribution and consumer service expenses. Furthermore, Operational Efficiency Plan and Transformation Plan charges incurred by the Company as described in Note 4, "Restructuring Activities" and charges associated with contingent earn out payments of the Stuart Weitzman acquisition and other integration-related activities, are also included as unallocated corporate expenses.
|
(3)
|
Depreciation and amortization expense includes
$0.5 million
and
$3.5 million
of Operational Efficiency Plan charges for the three and
six months ended
December 31, 2016
, respectively, and
$3.5 million
and
$6.3 million
of transformation-related charges for the three and
six months ended
December 26, 2015
, respectively. These charges are recorded as corporate unallocated expenses.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2016 |
|
December 26, 2015
|
|
December 31,
2016 |
|
December 26,
2015 |
||||||||
|
(millions)
|
||||||||||||||
Inventory-related
(1)
|
$
|
15.5
|
|
|
$
|
14.4
|
|
|
$
|
31.7
|
|
|
$
|
21.7
|
|
Advertising, marketing and design
(2)
|
(66.3
|
)
|
|
(63.2
|
)
|
|
(122.2
|
)
|
|
(126.3
|
)
|
||||
Administration and information systems
(2)(3)
|
(74.8
|
)
|
|
(76.9
|
)
|
|
(144.0
|
)
|
|
(157.2
|
)
|
||||
Distribution and customer service
(2)
|
(14.1
|
)
|
|
(16.8
|
)
|
|
(28.0
|
)
|
|
(32.0
|
)
|
||||
Total corporate unallocated
|
$
|
(139.7
|
)
|
|
$
|
(142.5
|
)
|
|
$
|
(262.5
|
)
|
|
$
|
(293.8
|
)
|
|
(1)
|
Inventory-related amounts consist primarily of production variances, which represents the difference between the expected standard cost and actual cost of inventory, and inventory-related reserves which are recorded within cost of sales.
|
(2)
|
Costs recorded within SG&A expenses.
|
(3)
|
During the three and
six months ended
December 31, 2016
, Operational Efficiency Plan charges recorded within SG&A expenses were
($3.7) million
and
$(10.8) million
, respectively. Furthermore, during the three and
six months ended
December 31, 2016
,
($3.0) million
and
$(5.4) million
of charges related to the Stuart Weitzman contingent earn out payments and other integration-related activities were recorded within corporate unallocated costs, respectively. During the three and
six months ended
December 26, 2015
, Transformation Plan costs recorded within SG&A expenses were
($13.9) million
and
($26.5) million
, respectively. During the three and
six months ended
December 26, 2015
,
($6.2) million
and
($9.8) million
of charges related to the Stuart Weitzman contingent earn out payments and other integration-related activities were recorded within corporate unallocated costs, respectively.
|
ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Transform the Coach brand into a modern luxury brand by continuing to evolve across the key consumer touchpoints of product, stores and marketing.
|
•
|
Reinvigorate growth and brand relevance through our differentiated positioning, which combines our history of heritage and craftsmanship with Stuart Vevers's modern creative vision.
|
•
|
Raise brand awareness and increase market share for the Stuart Weitzman brand globally, building upon the company's strong momentum and core brand equities of fusing fashion with fit.
|
•
|
Continue to increase the Coach brand's penetration internationally, most notably in mainland China and Europe.
|
•
|
Support the development of the Stuart Weitzman brand, particularly in Asia.
|
•
|
Continue to accelerate the development of our digital programs and capabilities world-wide, reflecting the change in consumer shopping behavior globally.
|
•
|
Create an agile and scalable business model to support sustainable/future growth for Coach, Inc.
|
|
Three Months Ended
|
|||||||||||||||||||
|
December 31, 2016
|
|
December 26, 2015
|
|
Variance
|
|||||||||||||||
|
(millions, except per share data)
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
1,321.7
|
|
|
100.0
|
%
|
|
$
|
1,273.8
|
|
|
100.0
|
%
|
|
$
|
47.9
|
|
|
3.8
|
%
|
Gross profit
|
906.2
|
|
|
68.6
|
|
|
859.1
|
|
|
67.4
|
|
|
47.1
|
|
|
5.5
|
|
|||
SG&A expenses
|
628.8
|
|
|
47.6
|
|
|
598.1
|
|
|
47.0
|
|
|
30.7
|
|
|
5.1
|
|
|||
Operating income
|
277.4
|
|
|
21.0
|
|
|
261.0
|
|
|
20.5
|
|
|
16.4
|
|
|
6.3
|
|
|||
Interest expense, net
|
5.1
|
|
|
0.4
|
|
|
6.3
|
|
|
0.5
|
|
|
(1.2
|
)
|
|
(18.7
|
)
|
|||
Provision for income taxes
|
72.6
|
|
|
5.5
|
|
|
84.6
|
|
|
6.6
|
|
|
(12.0
|
)
|
|
(14.2
|
)
|
|||
Net income
|
199.7
|
|
|
15.1
|
|
|
170.1
|
|
|
13.4
|
|
|
29.6
|
|
|
17.4
|
|
|||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.71
|
|
|
|
|
|
$
|
0.61
|
|
|
|
|
|
$
|
0.10
|
|
|
16.0
|
%
|
Diluted
|
$
|
0.71
|
|
|
|
|
|
$
|
0.61
|
|
|
|
|
|
$
|
0.10
|
|
|
16.0
|
%
|
|
|
Three Months Ended December 31, 2016
|
||||||||||||||||||
|
GAAP Basis
(As Reported)
|
|
Transformation and Other Actions
|
|
Operational Efficiency Plan
|
|
Acquisition-Related Costs
|
|
Non-GAAP Basis
(Excluding Items)
|
||||||||||
|
(millions, except per share data)
|
||||||||||||||||||
Gross profit
|
$
|
906.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
$
|
906.4
|
|
SG&A expenses
|
628.8
|
|
|
—
|
|
|
3.7
|
|
|
13.0
|
|
|
612.1
|
|
|||||
Operating income
|
277.4
|
|
|
—
|
|
|
(3.7
|
)
|
|
(13.2
|
)
|
|
294.3
|
|
|||||
Provision for income taxes
|
72.6
|
|
|
—
|
|
|
(1.2
|
)
|
|
(4.2
|
)
|
|
78.0
|
|
|||||
Net income
|
199.7
|
|
|
—
|
|
|
(2.5
|
)
|
|
(9.0
|
)
|
|
211.2
|
|
|||||
Diluted net income per share
|
0.71
|
|
|
—
|
|
|
(0.01
|
)
|
|
(0.03
|
)
|
|
0.75
|
|
•
|
Operational Efficiency Plan
-
$3.7 million
primarily related to technology infrastructure and organizational efficiency costs; and
|
•
|
Acquisition-Related Costs
-
$13.2 million
total charges related to the acquisition of Stuart Weitzman Holdings LLC, of which
$13.0 million
is primarily related to charges attributable to integration-related activities and contingent payments (of which $3.0 million is recorded within unallocated corporate expenses within the Coach brand and $10.0 million is recorded within the Stuart Weitzman segment), and
$0.2 million
is related to the limited life impact of purchase accounting, primarily due to the amortization of the inventory step-up, all recorded within the Stuart Weitzman segment.
|
|
Three Months Ended December 26, 2015
|
||||||||||||||||||
|
GAAP Basis
(As Reported)
|
|
Transformation and Other Actions
|
|
Operational Efficiency Plan
|
|
Acquisition-Related Costs
|
|
Non-GAAP Basis
(Excluding Items)
|
||||||||||
|
(millions, except per share data)
|
||||||||||||||||||
Gross profit
|
$
|
859.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
859.1
|
|
SG&A expenses
|
598.1
|
|
|
13.9
|
|
|
—
|
|
|
10.1
|
|
|
574.1
|
|
|||||
Operating income
|
261.0
|
|
|
(13.9
|
)
|
|
—
|
|
|
(10.1
|
)
|
|
285.0
|
|
|||||
Provision for income taxes
|
84.6
|
|
|
(1.9
|
)
|
|
—
|
|
|
(3.8
|
)
|
|
90.3
|
|
|||||
Net income
|
170.1
|
|
|
(12.0
|
)
|
|
—
|
|
|
(6.3
|
)
|
|
188.4
|
|
|||||
Diluted net income per share
|
0.61
|
|
|
(0.04
|
)
|
|
—
|
|
|
(0.03
|
)
|
|
0.68
|
|
|
Three Months Ended
|
|||||||||||||||
|
Total Net Sales
|
|
Rate of
Change
|
|
Percentage of
Total Net Sales
|
|||||||||||
|
December 31,
2016 |
|
December 26,
2015 |
|
|
December 31,
2016 |
|
December 26,
2015 |
||||||||
|
(dollars in millions)
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
North America
|
$
|
744.1
|
|
|
$
|
731.0
|
|
|
1.8
|
%
|
|
56.3
|
%
|
|
57.4
|
%
|
International
|
448.3
|
|
|
437.3
|
|
|
2.5
|
|
|
33.9
|
|
|
34.3
|
|
||
Other
(1)
|
11.0
|
|
|
11.5
|
|
|
(4.3
|
)
|
|
0.9
|
|
|
0.9
|
|
||
Coach brand
|
$
|
1,203.4
|
|
|
$
|
1,179.8
|
|
|
2.0
|
|
|
91.1
|
%
|
|
92.6
|
%
|
Stuart Weitzman
|
118.3
|
|
|
94.0
|
|
|
25.7
|
|
|
8.9
|
|
|
7.4
|
|
||
Total net sales
|
$
|
1,321.7
|
|
|
$
|
1,273.8
|
|
|
3.8
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
(1)
|
Net sales in the Other category, which is not a reportable segment, consists of sales generated by the Coach brand other ancillary channels, licensing and disposition.
|
|
|
Three Months Ended
|
|||||||||||||
|
|
Operating Income
|
|
Variance
|
|||||||||||
|
|
December 31,
2016 |
|
December 26,
2015 |
|
Amount
|
|
%
|
|||||||
|
|
(millions)
|
|
|
|||||||||||
|
|
|
|
|
|||||||||||
North America
|
|
$
|
258.2
|
|
|
$
|
248.2
|
|
|
$
|
10.0
|
|
|
4.0
|
%
|
International
|
|
136.2
|
|
|
130.6
|
|
|
5.6
|
|
|
4.3
|
|
|||
Other
(1)
|
|
9.4
|
|
|
6.4
|
|
|
3.0
|
|
|
46.9
|
|
|||
Corporate unallocated
|
|
(139.7
|
)
|
|
(142.5
|
)
|
|
2.8
|
|
|
2.0
|
|
|||
Coach brand
|
|
$
|
264.1
|
|
|
$
|
242.7
|
|
|
$
|
21.4
|
|
|
8.8
|
%
|
Stuart Weitzman
|
|
13.3
|
|
|
18.3
|
|
|
(5.0
|
)
|
|
(27.3
|
)
|
|||
Total operating income
|
|
$
|
277.4
|
|
|
$
|
261.0
|
|
|
$
|
16.4
|
|
|
6.3
|
%
|
|
(1)
|
Operating income in the Other category, which is not a reportable segment, consists of sales generated by the Coach brand other ancillary channels, licensing and disposition.
|
|
Six Months Ended
|
|||||||||||||||||||
|
December 31, 2016
|
|
December 26, 2015
|
|
Variance
|
|||||||||||||||
|
(millions, except per share data)
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
2,359.3
|
|
|
100.0
|
%
|
|
$
|
2,304.1
|
|
|
100.0
|
%
|
|
$
|
55.2
|
|
|
2.4
|
%
|
Gross profit
|
1,620.9
|
|
|
68.7
|
|
|
1,555.6
|
|
|
67.5
|
|
|
65.3
|
|
|
4.2
|
|
|||
SG&A expenses
|
1,177.6
|
|
|
49.9
|
|
|
1,153.2
|
|
|
50.1
|
|
|
24.4
|
|
|
2.1
|
|
|||
Operating income
|
443.3
|
|
|
18.8
|
|
|
402.4
|
|
|
17.5
|
|
|
40.9
|
|
|
10.2
|
|
|||
Interest expense, net
|
10.8
|
|
|
0.5
|
|
|
13.0
|
|
|
0.6
|
|
|
(2.2
|
)
|
|
(16.9
|
)
|
|||
Provision for income taxes
|
115.4
|
|
|
4.9
|
|
|
122.9
|
|
|
5.3
|
|
|
(7.5
|
)
|
|
(6.1
|
)
|
|||
Net income
|
317.1
|
|
|
13.4
|
|
|
266.5
|
|
|
11.6
|
|
|
50.6
|
|
|
19.0
|
|
|||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
1.13
|
|
|
|
|
|
$
|
0.96
|
|
|
|
|
|
$
|
0.17
|
|
|
17.5
|
%
|
Diluted
|
$
|
1.13
|
|
|
|
|
|
$
|
0.96
|
|
|
|
|
|
$
|
0.17
|
|
|
17.5
|
%
|
|
|
Six Months Ended December 31, 2016
|
||||||||||||||||||
|
GAAP Basis
(As Reported)
|
|
Transformation and Other Actions
|
|
Operational Efficiency Plan
|
|
Acquisition-Related Costs
|
|
Non-GAAP Basis
(Excluding Items)
|
||||||||||
|
(millions, except per share data)
|
||||||||||||||||||
Gross profit
|
$
|
1,620.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
1,621.5
|
|
SG&A expenses
|
1,177.6
|
|
|
—
|
|
|
10.8
|
|
|
16.4
|
|
|
1,150.4
|
|
|||||
Operating income
|
443.3
|
|
|
—
|
|
|
(10.8
|
)
|
|
(17.0
|
)
|
|
471.1
|
|
|||||
Provision for income taxes
|
115.4
|
|
|
—
|
|
|
(2.7
|
)
|
|
(5.0
|
)
|
|
123.1
|
|
|||||
Net income
|
317.1
|
|
|
—
|
|
|
(8.1
|
)
|
|
(12.0
|
)
|
|
337.2
|
|
|||||
Diluted net income per share
|
1.13
|
|
|
—
|
|
|
(0.03
|
)
|
|
(0.04
|
)
|
|
1.20
|
|
•
|
Operational Efficiency Plan
-
$10.8 million
primarily related to organizational efficiency costs, technology infrastructure costs and, to a lesser extent, network optimization costs; and
|
•
|
Acquisition-Related Costs
-
$17.0 million
total charges related to the acquisition of Stuart Weitzman Holdings LLC, of which
$16.2 million
is primarily related to charges attributable to integration-related activities and contingent payments (of which $5.4 million is recorded within unallocated corporate expenses within the Coach brand and $10.8 million is recorded within the Stuart Weitzman segment), and
$0.8 million
is related to the limited life impact of purchase accounting, primarily due to the amortization of the inventory step-up and distributor relationships, all recorded within the Stuart Weitzman segment.
|
|
Six Months Ended December 26, 2015
|
||||||||||||||||||
|
GAAP Basis
(As Reported)
|
|
Transformation and Other Actions
|
|
Operational Efficiency Plan
|
|
Acquisition-Related Costs
|
|
Non-GAAP Basis
(Excluding Items)
|
||||||||||
|
(millions, except per share data)
|
||||||||||||||||||
Gross profit
|
$
|
1,555.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.9
|
)
|
|
$
|
1,556.5
|
|
SG&A expenses
|
1,153.2
|
|
|
26.5
|
|
|
—
|
|
|
20.2
|
|
|
1,106.5
|
|
|||||
Operating income
|
402.4
|
|
|
(26.5
|
)
|
|
—
|
|
|
(21.1
|
)
|
|
450.0
|
|
|||||
Provision for income taxes
|
122.9
|
|
|
(6.0
|
)
|
|
—
|
|
|
(6.6
|
)
|
|
135.5
|
|
|||||
Net income
|
266.5
|
|
|
(20.5
|
)
|
|
—
|
|
|
(14.5
|
)
|
|
301.5
|
|
|||||
Diluted net income per share
|
0.96
|
|
|
(0.07
|
)
|
|
—
|
|
|
(0.05
|
)
|
|
1.08
|
|
|
Six Months Ended
|
|||||||||||||||
|
Total Net Sales
|
|
Rate of
Change
|
|
Percentage of
Total Net Sales
|
|||||||||||
|
December 31,
2016 |
|
December 26,
2015 |
|
|
December 31,
2016 |
|
December 26,
2015 |
||||||||
|
(dollars in millions)
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
North America
|
$
|
1,289.4
|
|
|
$
|
1,292.0
|
|
|
(0.2
|
)%
|
|
54.7
|
%
|
|
56.1
|
%
|
International
|
843.8
|
|
|
806.3
|
|
|
4.6
|
|
|
35.8
|
|
|
35.0
|
|
||
Other
(1)
|
20.3
|
|
|
24.3
|
|
|
(16.5
|
)
|
|
0.8
|
|
|
1.0
|
|
||
Coach brand
|
$
|
2,153.5
|
|
|
$
|
2,122.6
|
|
|
1.5
|
|
|
91.3
|
%
|
|
92.1
|
%
|
Stuart Weitzman
|
205.8
|
|
|
181.5
|
|
|
13.3
|
|
|
8.7
|
|
|
7.9
|
|
||
Total net sales
|
$
|
2,359.3
|
|
|
$
|
2,304.1
|
|
|
2.4
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
(1)
|
Net sales in the Other category, which is not a reportable segment, consists of sales generated by the Coach brand other ancillary channels, licensing and disposition.
|
|
|
Six Months Ended
|
|||||||||||||
|
|
Operating Income
|
|
Variance
|
|||||||||||
|
|
December 31,
2016 |
|
December 26,
2015 |
|
Amount
|
|
%
|
|||||||
|
|
(millions)
|
|
|
|||||||||||
|
|
|
|
|
|||||||||||
North America
|
|
$
|
422.4
|
|
|
$
|
419.9
|
|
|
$
|
2.5
|
|
|
0.6
|
%
|
International
|
|
249.5
|
|
|
237.8
|
|
|
11.7
|
|
|
4.9
|
|
|||
Other
(1)
|
|
15.5
|
|
|
12.5
|
|
|
3.0
|
|
|
24.0
|
|
|||
Corporate unallocated
|
|
(262.5
|
)
|
|
(293.8
|
)
|
|
31.3
|
|
|
10.6
|
|
|||
Coach brand
|
|
$
|
424.9
|
|
|
$
|
376.4
|
|
|
$
|
48.5
|
|
|
12.9
|
%
|
Stuart Weitzman
|
|
18.4
|
|
|
26.0
|
|
|
(7.6
|
)
|
|
(29.3
|
)
|
|||
Total operating income
|
|
$
|
443.3
|
|
|
$
|
402.4
|
|
|
$
|
40.9
|
|
|
10.2
|
%
|
|
(1)
|
Operating income in the Other category, which is not a reportable segment, consists of sales generated by the Coach brand other ancillary channels, licensing and disposition.
|
|
|
Six Months Ended
|
||||||||||
|
|
December 31,
2016 |
|
December 26,
2015 |
|
Change
|
||||||
|
|
(millions)
|
||||||||||
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
328.1
|
|
|
$
|
310.0
|
|
|
$
|
18.1
|
|
Net cash provided by (used in) investing activities
|
|
599.8
|
|
|
(545.7
|
)
|
|
1,145.5
|
|
|||
Net cash used in financing activities
|
|
(467.0
|
)
|
|
(208.9
|
)
|
|
(258.1
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
(10.2
|
)
|
|
(3.4
|
)
|
|
(6.8
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
450.7
|
|
|
$
|
(448.0
|
)
|
|
$
|
898.7
|
|
|
Sources of Liquidity
|
|
Outstanding Indebtedness
|
|
Total Available Liquidity
|
||||||
|
(millions)
|
||||||||||
Cash and cash equivalents
(1)
|
$
|
1,309.7
|
|
|
$
|
—
|
|
|
$
|
1,309.7
|
|
Short-term investments
(1)
|
526.2
|
|
|
—
|
|
|
526.2
|
|
|||
Non-current investments
|
110.1
|
|
|
—
|
|
|
110.1
|
|
|||
Amended and Restated Credit Agreement
(2)
|
700.0
|
|
|
—
|
|
|
700.0
|
|
|||
4.250% Senior Notes
(3)
|
600.0
|
|
|
600.0
|
|
|
—
|
|
|||
International credit facilities
|
46.0
|
|
|
—
|
|
|
46.0
|
|
|||
Total
|
$
|
3,292.0
|
|
|
$
|
600.0
|
|
|
$
|
2,692.0
|
|
|
|
|
|
|
(1)
|
As of
December 31, 2016
, approximately 54% of our cash and short-term investments were held outside the U.S. in jurisdictions where we intend to permanently reinvest our undistributed earnings to support our continued growth. We are not dependent on foreign cash to fund our domestic operations. If we choose to repatriate any funds to the U.S., we would be subject to applicable U.S. and foreign taxes.
|
(2)
|
In March 2015, the Company amended and restated its existing
$700.0 million
revolving credit facility (the "Revolving Facility") with certain lenders and JP Morgan Chase Bank, N.A. as the administrative agent, to provide for a
five
-year senior unsecured
$300.0 million
term loan (the “Term Loan”) and to extend the maturity date to
March 18, 2020
(the "Amended and Restated Credit Agreement"). On August 3, 2016, the Company prepaid its outstanding borrowings under the Term Loan facility. There were no debt borrowings under the Revolving Facility for the first
six months
of fiscal 2017 and fiscal 2016. The Amended and Restated Credit Agreement contains various covenants and customary events of default, including the requirement to maintain a maximum ratio of adjusted debt to consolidated EBITDAR, as defined in the agreement, of no greater than 4.0 as of the date of measurement. As of
December 31, 2016
, no known events of default have occurred. Refer to Note 9, "Debt," for further information on our existing debt instruments.
|
ITEM 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 6.
|
Exhibits
|
10.1*
|
Employment Offer Letter, dated December 12, 2016, between Coach and Kevin Wills
|
31.1*
|
Rule 13(a) – 14(a)/15(d) – 14(a) Certifications
|
32.1*
|
Section 1350 Certifications
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
*
|
Filed Herewith
|
|
COACH, INC.
|
|
|
(Registrant)
|
|
|
|
|
|
By:
|
/s/ Melinda Brown
|
|
Name:
|
Melinda Brown
|
|
Title:
|
Corporate Controller
|
|
|
(Principal Accounting Officer)
|
1.
|
Base Salary
|
2.
|
Incentive Compensation
|
3.
|
Special New Hire Compensation
|
4.
|
Equity Compensation
|
5.
|
Severance
|
6.
|
Section 409A of the Internal Revenue Code
|
7.
|
Benefits
|
8.
|
Confidentiality
|
•
|
Incentive Repayment Policy;
|
•
|
Executive Stock Ownership Policy;
|
•
|
Notice of Intent to Terminate Employment;
|
•
|
Post-Employment Restrictions; and
|
•
|
Other Terms and Conditions of Employment.
|
1.
|
Incentive Repayment Policy
|
2.
|
Executive Stock Ownership Policy
|
3.
|
Notice of Intent to Terminate Employment
|
4.
|
Post-Employment Restrictions
|
5.
|
Other Terms and Conditions of Employment
|
•
|
Formal ratification of this agreement by the Human Resources Committee;
|
•
|
You passing a credit/background check and verification of your identity and authorization to be employed in the United States;
|
•
|
Your returning a signed copy of this offer letter by
December 14
th
2016,
;
|
•
|
Your agreement to be bound by, and adhere to, all of Coach’s policies in effect during your employment with Coach, including the Executive
Stock Ownership Policy and Incentive Repayment Policy, and our Confidentiality, Information Security and Privacy Agreement; and
|
•
|
The terms and conditions of individual equity award agreements.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Coach, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
/s/ Victor Luis
|
|
|
Name:
|
Victor Luis
|
|
Title:
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Coach, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
/s/ Andrea Resnick
|
|
|
Name:
|
Andrea Resnick
|
|
Title:
|
Interim Chief Financial Officer
|
By:
|
/s/ Victor Luis
|
|
|
Name:
|
Victor Luis
|
|
Title:
|
Chief Executive Officer
|
By:
|
/s/ Andrea Resnick
|
|
|
Name:
|
Andrea Resnick
|
|
Title:
|
Interim Chief Financial Officer
|