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Maryland
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52-2242751
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Emerging growth company
¨
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Page Number
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PART I – FINANCIAL INFORMATION (unaudited)
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||
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ITEM 1.
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Financial Statements:
|
|
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||
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||
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ITEM 2.
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||
ITEM 3.
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||
ITEM 4.
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||
PART II – OTHER INFORMATION
|
||
ITEM 1.
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||
ITEM 1A.
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||
ITEM 2.
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||
ITEM 4.
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||
ITEM 6.
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||
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Three Months Ended
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|
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Nine Months Ended
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||||||||||||
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April 1,
2017 |
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March 26,
2016 |
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April 1,
2017 |
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March 26,
2016 |
||||||||
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(millions, except per share data)
|
|||||||||||||||
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(unaudited)
|
|||||||||||||||
Net sales
|
$
|
995.2
|
|
|
$
|
1,033.1
|
|
|
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$
|
3,354.5
|
|
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$
|
3,337.2
|
|
Cost of sales
|
289.5
|
|
|
320.1
|
|
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1,027.9
|
|
|
1,068.6
|
|
||||
Gross profit
|
705.7
|
|
|
713.0
|
|
|
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2,326.6
|
|
|
2,268.6
|
|
||||
Selling, general and administrative expenses
|
554.6
|
|
|
578.7
|
|
|
|
1,732.2
|
|
|
1,731.9
|
|
||||
Operating income
|
151.1
|
|
|
134.3
|
|
|
|
594.4
|
|
|
536.7
|
|
||||
Interest expense, net
|
4.0
|
|
|
6.5
|
|
|
|
14.8
|
|
|
19.5
|
|
||||
Income before provision for income taxes
|
147.1
|
|
|
127.8
|
|
|
|
579.6
|
|
|
517.2
|
|
||||
Provision for income taxes
|
24.9
|
|
|
15.3
|
|
|
|
140.3
|
|
|
138.2
|
|
||||
Net income
|
$
|
122.2
|
|
|
$
|
112.5
|
|
|
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$
|
439.3
|
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$
|
379.0
|
|
Net income per share:
|
|
|
|
|
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|
|
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||||
Basic
|
$
|
0.44
|
|
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$
|
0.40
|
|
|
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$
|
1.57
|
|
|
$
|
1.37
|
|
Diluted
|
$
|
0.43
|
|
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$
|
0.40
|
|
|
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$
|
1.56
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|
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$
|
1.36
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
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||||
Basic
|
280.8
|
|
|
277.8
|
|
|
|
280.2
|
|
|
277.4
|
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||||
Diluted
|
282.9
|
|
|
279.5
|
|
|
|
282.2
|
|
|
278.7
|
|
||||
Cash dividends declared per common share
|
$
|
0.3375
|
|
|
$
|
0.3375
|
|
|
|
$
|
1.0125
|
|
|
$
|
1.0125
|
|
|
Three Months Ended
|
|
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Nine Months Ended
|
||||||||||||
|
April 1,
2017 |
|
March 26,
2016 |
|
|
April 1,
2017 |
|
March 26, 2016
|
||||||||
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(millions)
|
|||||||||||||||
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(unaudited)
|
|||||||||||||||
Net income
|
$
|
122.2
|
|
|
$
|
112.5
|
|
|
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$
|
439.3
|
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|
$
|
379.0
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized (losses) gains on cash flow hedging derivatives, net
|
(0.7
|
)
|
|
(4.5
|
)
|
|
|
11.5
|
|
|
(8.2
|
)
|
||||
Unrealized gains (losses) on available-for-sale investments, net
|
0.2
|
|
|
0.4
|
|
|
|
(0.8
|
)
|
|
(1.5
|
)
|
||||
Foreign currency translation adjustments
|
22.4
|
|
|
20.3
|
|
|
|
(31.6
|
)
|
|
(4.7
|
)
|
||||
Other comprehensive income (loss), net of tax
|
21.9
|
|
|
16.2
|
|
|
|
(20.9
|
)
|
|
(14.4
|
)
|
||||
Comprehensive income
|
$
|
144.1
|
|
|
$
|
128.7
|
|
|
|
$
|
418.4
|
|
|
$
|
364.6
|
|
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Nine Months Ended
|
||||||
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April 1,
2017 |
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March 26,
2016 |
||||
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(millions)
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||||||
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(unaudited)
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||||||
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
|
|
|
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|
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Net income
|
$
|
439.3
|
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$
|
379.0
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
148.7
|
|
|
156.6
|
|
||
Provision for bad debt
|
0.5
|
|
|
2.2
|
|
||
Share-based compensation
|
55.1
|
|
|
65.7
|
|
||
Excess tax effect from share-based compensation
|
1.0
|
|
|
10.3
|
|
||
Restructuring activities
|
6.9
|
|
|
9.5
|
|
||
Deferred income taxes
|
63.0
|
|
|
17.4
|
|
||
Other non-cash charges, net
|
16.1
|
|
|
(5.9
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Trade accounts receivable
|
35.9
|
|
|
(47.2
|
)
|
||
Inventories
|
(31.1
|
)
|
|
21.1
|
|
||
Accounts payable
|
(51.9
|
)
|
|
(49.0
|
)
|
||
Accrued liabilities
|
(101.7
|
)
|
|
(38.3
|
)
|
||
Other liabilities
|
(26.9
|
)
|
|
(24.6
|
)
|
||
Other assets
|
(24.9
|
)
|
|
12.4
|
|
||
Net cash provided by operating activities
|
530.0
|
|
|
509.2
|
|
||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
||
Hudson Yards sale of investments
|
680.6
|
|
|
—
|
|
||
Sale of former headquarters
|
126.0
|
|
|
—
|
|
||
Purchases of investments
|
(498.3
|
)
|
|
(545.0
|
)
|
||
Proceeds from maturities and sales of investments
|
450.8
|
|
|
272.9
|
|
||
Purchases of property and equipment
|
(192.1
|
)
|
|
(276.4
|
)
|
||
Acquisition of lease rights, net
|
(4.5
|
)
|
|
(8.3
|
)
|
||
Acquisition of interest in equity method investment
|
—
|
|
|
(118.1
|
)
|
||
Net cash provided by (used in) investing activities
|
562.5
|
|
|
(674.9
|
)
|
||
CASH FLOWS USED IN FINANCING ACTIVITIES
|
|
|
|
|
|
||
Dividend payments
|
(283.2
|
)
|
|
(280.7
|
)
|
||
Repayment of debt
|
(285.0
|
)
|
|
(7.5
|
)
|
||
Proceeds from share-based awards
|
40.7
|
|
|
8.8
|
|
||
Taxes paid to net settle share-based awards
|
(21.7
|
)
|
|
(14.9
|
)
|
||
Excess tax effect from share-based compensation
|
(1.0
|
)
|
|
(10.3
|
)
|
||
Net cash used in financing activities
|
(550.2
|
)
|
|
(304.6
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(6.8
|
)
|
|
0.1
|
|
||
Increase (decrease) in cash and cash equivalents
|
535.5
|
|
|
(470.2
|
)
|
||
Cash and cash equivalents at beginning of period
|
859.0
|
|
|
1,291.8
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,394.5
|
|
|
$
|
821.6
|
|
Supplemental information:
|
|
|
|
||||
Cash paid for income taxes, net
|
$
|
155.2
|
|
|
$
|
124.7
|
|
Cash paid for interest
|
$
|
26.0
|
|
|
$
|
19.5
|
|
Noncash investing activity - property and equipment obligations
|
$
|
40.4
|
|
|
$
|
32.2
|
|
|
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
|
11.7
|
|
|
4.8
|
|
|
0.7
|
|
|
17.2
|
|
||||
Cash payments
|
(20.2
|
)
|
|
(3.6
|
)
|
|
(3.2
|
)
|
|
(27.0
|
)
|
||||
Non-cash charges
|
(6.2
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
(6.9
|
)
|
||||
Liability as of April 1, 2017
|
$
|
7.5
|
|
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
8.7
|
|
|
(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
|
(20.5
|
)
|
|
(0.8
|
)
|
|
(21.3
|
)
|
|||
Balance at April 1, 2017
|
$
|
326.4
|
|
|
$
|
154.7
|
|
|
$
|
481.1
|
|
|
April 1, 2017
|
|
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
|
|
|
$
|
(8.8
|
)
|
|
$
|
45.9
|
|
|
$
|
54.7
|
|
|
$
|
(5.8
|
)
|
|
$
|
48.9
|
|
Favorable lease rights, net
|
26.1
|
|
|
(5.9
|
)
|
|
20.2
|
|
|
24.7
|
|
|
(3.6
|
)
|
|
21.1
|
|
||||||
Total intangible assets subject to amortization
|
80.8
|
|
|
(14.7
|
)
|
|
66.1
|
|
|
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
|
|
|
$
|
(14.7
|
)
|
|
$
|
342.9
|
|
|
$
|
356.2
|
|
|
$
|
(9.4
|
)
|
|
$
|
346.8
|
|
|
Amortization Expense
|
||
|
(millions)
|
||
Remainder of Fiscal 2017
|
$
|
1.9
|
|
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
|
$
|
66.1
|
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
379.0
|
|
|
—
|
|
|
379.0
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.4
|
)
|
|
(14.4
|
)
|
|||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
|
1.3
|
|
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
65.7
|
|
|
—
|
|
|
—
|
|
|
65.7
|
|
|||||
Excess tax effect from share-based compensation
|
—
|
|
|
—
|
|
|
(10.3
|
)
|
|
—
|
|
|
—
|
|
|
(10.3
|
)
|
|||||
Dividends declared ($1.0125 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(281.1
|
)
|
|
—
|
|
|
(281.1
|
)
|
|||||
Balance at March 26, 2016
|
277.9
|
|
|
$
|
2.8
|
|
|
$
|
2,806.4
|
|
|
$
|
(91.7
|
)
|
|
$
|
(92.1
|
)
|
|
$
|
2,625.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at July 2, 2016
|
278.5
|
|
|
$
|
2.8
|
|
|
$
|
2,857.1
|
|
|
$
|
(104.1
|
)
|
|
$
|
(72.9
|
)
|
|
$
|
2,682.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
439.3
|
|
|
—
|
|
|
439.3
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20.9
|
)
|
|
(20.9
|
)
|
|||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
|
2.6
|
|
|
—
|
|
|
18.9
|
|
|
—
|
|
|
—
|
|
|
18.9
|
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
56.8
|
|
|
—
|
|
|
—
|
|
|
56.8
|
|
|||||
Excess tax effect from share-based compensation
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|||||
Dividends declared ($1.0125 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(284.1
|
)
|
|
—
|
|
|
(284.1
|
)
|
|||||
Balance at April 1, 2017
|
281.1
|
|
|
$
|
2.8
|
|
|
$
|
2,931.8
|
|
|
$
|
51.1
|
|
|
$
|
(93.8
|
)
|
|
$
|
2,891.9
|
|
|
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
|
(4.4
|
)
|
|
(1.5
|
)
|
|
(4.7
|
)
|
|
—
|
|
|
(10.6
|
)
|
|||||
Less: gains reclassified from accumulated other comprehensive income to earnings
|
3.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|||||
Net current-period other comprehensive loss
|
(8.2
|
)
|
|
(1.5
|
)
|
|
(4.7
|
)
|
|
—
|
|
|
(14.4
|
)
|
|||||
Balances at March 26, 2016
|
$
|
(3.8
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
(86.4
|
)
|
|
$
|
(0.9
|
)
|
|
$
|
(92.1
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balances at July 2, 2016
|
$
|
(8.8
|
)
|
|
$
|
0.3
|
|
|
$
|
(62.9
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
(72.9
|
)
|
Other comprehensive income (loss) before reclassifications
|
5.6
|
|
|
(0.8
|
)
|
|
(31.6
|
)
|
|
—
|
|
|
(26.8
|
)
|
|||||
Less: losses reclassified from accumulated other comprehensive income to earnings
|
(5.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.9
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
11.5
|
|
|
(0.8
|
)
|
|
(31.6
|
)
|
|
—
|
|
|
(20.9
|
)
|
|||||
Balances at April 1, 2017
|
$
|
2.7
|
|
|
$
|
(0.5
|
)
|
|
$
|
(94.5
|
)
|
|
$
|
(1.5
|
)
|
|
$
|
(93.8
|
)
|
|
(1)
|
The ending balances of AOCI related to cash flow hedges are net of tax of
($1.4)
million and
$1.6
million as of
April 1, 2017
and
March 26, 2016
, respectively. The amounts reclassified from AOCI are net of tax of
$3.1
million and
($1.9)
million as of
April 1, 2017
and
March 26, 2016
, respectively.
|
(2)
|
Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balances at
April 1, 2017
and
March 26, 2016
are net of tax of
$0.8 million
and
$0.5
million, respectively.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
April 1,
2017 |
|
March 26,
2016 |
|
April 1,
2017 |
|
March 26,
2016 |
||||||||
|
(millions, except per share data)
|
||||||||||||||
Net income
|
$
|
122.2
|
|
|
$
|
112.5
|
|
|
$
|
439.3
|
|
|
$
|
379.0
|
|
|
|
|
|
|
|
|
|
||||||||
Total weighted-average basic shares outstanding
|
280.8
|
|
|
277.8
|
|
|
280.2
|
|
|
277.4
|
|
||||
Effect of dilutive securities
|
2.1
|
|
|
1.7
|
|
|
2.0
|
|
|
1.3
|
|
||||
Total weighted-average diluted shares
|
282.9
|
|
|
279.5
|
|
|
282.2
|
|
|
278.7
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.44
|
|
|
$
|
0.40
|
|
|
$
|
1.57
|
|
|
$
|
1.37
|
|
Diluted
|
$
|
0.43
|
|
|
$
|
0.40
|
|
|
$
|
1.56
|
|
|
$
|
1.36
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
April 1,
2017
(1)
|
|
March 26,
2016 |
|
April 1,
2017
(1)
|
|
March 26,
2016
|
||||||||
|
(millions)
|
||||||||||||||
Share-based compensation expense
|
$
|
20.1
|
|
|
$
|
21.2
|
|
|
$
|
56.8
|
|
|
$
|
65.7
|
|
Income tax benefit related to share-based compensation expense
|
6.4
|
|
|
5.6
|
|
|
17.5
|
|
|
19.8
|
|
|
(1)
|
During the three and nine months ended
April 1, 2017
, the Company incurred
$1.2 million
and
$1.7 million
, respectively, 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
|
|
|
39.65
|
|
|
Exercised
|
(1.3
|
)
|
|
39.54
|
|
|
Forfeited or expired
|
(1.3
|
)
|
|
40.62
|
|
|
Outstanding at April 1, 2017
|
16.0
|
|
|
40.08
|
|
|
Vested and expected to vest at April 1, 2017
|
15.6
|
|
|
42.04
|
|
|
Exercisable at April 1, 2017
|
9.5
|
|
|
44.00
|
|
|
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
|
2.0
|
|
|
39.43
|
|
|
Vested
|
(1.7
|
)
|
|
39.14
|
|
|
Forfeited
|
(0.4
|
)
|
|
35.14
|
|
|
Non-vested at April 1, 2017
|
3.6
|
|
|
50.03
|
|
|
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
|
|
|
39.53
|
|
|
Change due to performance condition achievement
|
(0.1
|
)
|
|
53.19
|
|
|
Vested
(1)
|
—
|
|
|
39.72
|
|
|
Forfeited
|
(0.1
|
)
|
|
40.28
|
|
|
Non-vested at April 1, 2017
|
1.5
|
|
|
37.78
|
|
|
(1)
|
During the
nine months ended
April 1, 2017
, fewer than
0.1 million
PRSU shares vested.
|
|
April 1,
2017
|
|
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
|
(8.2
|
)
|
|
(8.8
|
)
|
||
Total Long-Term Debt, net
|
$
|
591.8
|
|
|
$
|
861.2
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||||
|
April 1,
2017 |
|
July 2,
2016 |
|
April 1,
2017 |
|
July 2,
2016 |
|
April 1,
2017 |
|
July 2,
2016 |
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash equivalents
(1)
|
$
|
464.3
|
|
|
$
|
197.9
|
|
|
$
|
125.7
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term investments
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Time deposits
(2)
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
||||||
Commercial paper
(2)
|
—
|
|
|
—
|
|
|
73.1
|
|
|
54.8
|
|
|
—
|
|
|
—
|
|
||||||
Government securities - U.S.
(2)
|
172.7
|
|
|
119.9
|
|
|
—
|
|
|
11.8
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - U.S.
(2)
|
—
|
|
|
—
|
|
|
137.3
|
|
|
161.4
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - non U.S.
(2)
|
—
|
|
|
—
|
|
|
111.8
|
|
|
111.5
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
1.9
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||||||
Long-term investments
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate debt securities - U.S.
(3)
|
—
|
|
|
—
|
|
|
65.5
|
|
|
64.2
|
|
|
—
|
|
|
—
|
|
||||||
Corporate debt securities - non U.S.
(3)
|
—
|
|
|
—
|
|
|
38.9
|
|
|
33.9
|
|
|
—
|
|
|
—
|
|
||||||
Derivative Assets
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Inventory-related hedges
(4)
|
—
|
|
|
—
|
|
|
3.3
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
||||||
Intercompany loan hedges
(4)
|
—
|
|
|
—
|
|
|
0.4
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Contingent earnout obligation
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35.2
|
|
|
$
|
28.4
|
|
Derivative liabilities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inventory-related hedges
(4)
|
—
|
|
|
—
|
|
|
1.7
|
|
|
11.0
|
|
|
—
|
|
|
—
|
|
||||||
Intercompany loan hedges
(4)
|
—
|
|
|
—
|
|
|
0.3
|
|
|
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 contingent 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. As previously disclosed, the revenue target for calendar 2017 is
$425 million
. The total amount payable under the earnout will not exceed
$44.0 million
, and will be paid out in fiscal 2018 if targets are achieved.
|
|
April 1, 2017
|
|
July 2, 2016
|
||||
|
(millions)
|
||||||
Beginning of fiscal year
|
$
|
28.4
|
|
|
$
|
19.4
|
|
Increase to contingent earnout obligation
|
6.8
|
|
|
9.0
|
|
||
End of period
|
$
|
35.2
|
|
|
$
|
28.4
|
|
|
April 1, 2017
|
|
July 2, 2016
|
||||||||||||||||||||
|
Short-term
|
|
Long-term
|
|
Total
|
|
Short-term
|
|
Long-term
|
|
Total
|
||||||||||||
|
(millions)
|
||||||||||||||||||||||
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper
(1)
|
$
|
73.1
|
|
|
$
|
—
|
|
|
$
|
73.1
|
|
|
$
|
54.8
|
|
|
$
|
—
|
|
|
$
|
54.8
|
|
Government securities - U.S.
(2)
|
172.7
|
|
|
—
|
|
|
172.7
|
|
|
131.7
|
|
|
—
|
|
|
131.7
|
|
||||||
Corporate debt securities - U.S.
(2)
|
137.3
|
|
|
65.5
|
|
|
202.8
|
|
|
161.4
|
|
|
64.2
|
|
|
225.6
|
|
||||||
Corporate debt securities - non-U.S.
(2)
|
111.8
|
|
|
38.9
|
|
|
150.7
|
|
|
111.5
|
|
|
33.9
|
|
|
145.4
|
|
||||||
Available-for-sale investments, total
|
$
|
494.9
|
|
|
$
|
104.4
|
|
|
$
|
599.3
|
|
|
$
|
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
|
$
|
497.4
|
|
|
$
|
104.4
|
|
|
$
|
601.8
|
|
|
$
|
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
April 1, 2017
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 sales to consumers through the Internet in Japan, mainland China, South Korea, the United Kingdom, France, Spain, Germany and Italy, 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 April 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
474.2
|
|
|
$
|
429.5
|
|
|
$
|
11.6
|
|
|
$
|
—
|
|
|
$
|
79.9
|
|
|
$
|
995.2
|
|
Gross profit
|
294.8
|
|
|
333.2
|
|
|
11.6
|
|
|
16.5
|
|
|
49.6
|
|
|
705.7
|
|
||||||
Operating income (loss)
|
115.5
|
|
|
152.2
|
|
|
9.0
|
|
|
(129.4
|
)
|
|
3.8
|
|
|
151.1
|
|
||||||
Income (loss) before provision for income taxes
|
115.5
|
|
|
152.2
|
|
|
9.0
|
|
|
(133.4
|
)
|
|
3.8
|
|
|
147.1
|
|
||||||
Depreciation and amortization expense
(3)
|
17.5
|
|
|
17.6
|
|
|
—
|
|
|
11.1
|
|
|
4.0
|
|
|
50.2
|
|
||||||
Additions to long-lived assets
|
12.2
|
|
|
15.7
|
|
|
—
|
|
|
40.0
|
|
|
2.5
|
|
|
70.4
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three Months Ended March 26, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
498.9
|
|
|
$
|
448.2
|
|
|
$
|
6.8
|
|
|
$
|
—
|
|
|
$
|
79.2
|
|
|
$
|
1,033.1
|
|
Gross profit
|
309.1
|
|
|
338.0
|
|
|
5.8
|
|
|
14.0
|
|
|
46.1
|
|
|
713.0
|
|
||||||
Operating income (loss)
|
135.5
|
|
|
151.7
|
|
|
4.0
|
|
|
(161.6
|
)
|
|
4.7
|
|
|
134.3
|
|
||||||
Income (loss) before provision for income taxes
|
135.5
|
|
|
151.7
|
|
|
4.0
|
|
|
(168.1
|
)
|
|
4.7
|
|
|
127.8
|
|
||||||
Depreciation and amortization expense
(3)
|
14.5
|
|
|
16.7
|
|
|
—
|
|
|
17.1
|
|
|
3.1
|
|
|
51.4
|
|
||||||
Additions to long-lived assets
|
26.9
|
|
|
25.7
|
|
|
—
|
|
|
44.6
|
|
|
3.7
|
|
|
100.9
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Nine Months Ended April 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
1,763.6
|
|
|
$
|
1,273.3
|
|
|
$
|
31.9
|
|
|
$
|
—
|
|
|
$
|
285.7
|
|
|
$
|
3,354.5
|
|
Gross profit
|
1,099.0
|
|
|
973.6
|
|
|
29.1
|
|
|
48.2
|
|
|
176.7
|
|
|
2,326.6
|
|
||||||
Operating income (loss)
|
537.9
|
|
|
401.7
|
|
|
24.5
|
|
|
(391.9
|
)
|
|
22.2
|
|
|
594.4
|
|
||||||
Income (loss) before provision for income taxes
|
537.9
|
|
|
401.7
|
|
|
24.5
|
|
|
(406.7
|
)
|
|
22.2
|
|
|
579.6
|
|
||||||
Depreciation and amortization expense
(3)
|
52.6
|
|
|
51.7
|
|
|
—
|
|
|
37.9
|
|
|
11.7
|
|
|
153.9
|
|
||||||
Additions to long-lived assets
|
42.1
|
|
|
58.9
|
|
|
—
|
|
|
73.7
|
|
|
17.4
|
|
|
192.1
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Nine Months Ended March 26, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
1,790.9
|
|
|
$
|
1,254.5
|
|
|
$
|
31.1
|
|
|
$
|
—
|
|
|
$
|
260.7
|
|
|
$
|
3,337.2
|
|
Gross profit
|
1,105.3
|
|
|
947.6
|
|
|
23.8
|
|
|
35.6
|
|
|
156.3
|
|
|
2,268.6
|
|
||||||
Operating income (loss)
|
555.4
|
|
|
389.5
|
|
|
16.5
|
|
|
(455.4
|
)
|
|
30.7
|
|
|
536.7
|
|
||||||
Income (loss) before provision for income taxes
|
555.4
|
|
|
389.5
|
|
|
16.5
|
|
|
(474.9
|
)
|
|
30.7
|
|
|
517.2
|
|
||||||
Depreciation and amortization expense
(3)
|
46.6
|
|
|
50.4
|
|
|
—
|
|
|
51.9
|
|
|
15.9
|
|
|
164.8
|
|
||||||
Additions to long-lived assets
|
63.6
|
|
|
79.3
|
|
|
—
|
|
|
126.2
|
|
|
7.3
|
|
|
276.4
|
|
|
(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
$1.7 million
and
$5.2 million
of Operational Efficiency Plan charges for the three and
nine months ended
April 1, 2017
, respectively, and
$1.9 million
and
$8.2 million
of transformation-related charges for the three and
nine months ended
March 26, 2016
, respectively. These charges are recorded as corporate unallocated expenses.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
April 1,
2017 |
|
March 26, 2016
|
|
April 1,
2017 |
|
March 26,
2016 |
||||||||
|
(millions)
|
||||||||||||||
Inventory-related
(1)
|
$
|
16.5
|
|
|
$
|
14.0
|
|
|
$
|
48.2
|
|
|
$
|
35.7
|
|
Advertising, marketing and design
(2)
|
(57.7
|
)
|
|
(63.7
|
)
|
|
(179.9
|
)
|
|
(190.0
|
)
|
||||
Administration and information systems
(2)(3)
|
(75.4
|
)
|
|
(97.2
|
)
|
|
(219.4
|
)
|
|
(254.4
|
)
|
||||
Distribution and customer service
(2)
|
(12.8
|
)
|
|
(14.7
|
)
|
|
(40.8
|
)
|
|
(46.7
|
)
|
||||
Total corporate unallocated
|
$
|
(129.4
|
)
|
|
$
|
(161.6
|
)
|
|
$
|
(391.9
|
)
|
|
$
|
(455.4
|
)
|
|
(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
nine months ended
April 1, 2017
, Operational Efficiency Plan charges recorded within SG&A expenses were
($6.4) million
and
$(17.2) million
, respectively. Furthermore, during the three and
nine months ended
April 1, 2017
,
($2.8) million
and
$(8.2) million
of charges related to the Stuart Weitzman contingent earn out payments and other integration-related activities was recorded within corporate unallocated costs, respectively. During the three and
nine months ended
March 26, 2016
, Transformation Plan costs recorded within SG&A expenses were
($9.4) million
and
($35.9) million
, respectively. During the three and
nine months ended
March 26, 2016
,
($5.4) million
and
($15.2) 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
|
|||||||||||||||||||
|
April 1, 2017
|
|
March 26, 2016
|
|
Variance
|
|||||||||||||||
|
(millions, except per share data)
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
995.2
|
|
|
100.0
|
%
|
|
$
|
1,033.1
|
|
|
100.0
|
%
|
|
$
|
(37.9
|
)
|
|
(3.7
|
)%
|
Gross profit
|
705.7
|
|
|
70.9
|
|
|
713.0
|
|
|
69.0
|
|
|
(7.3
|
)
|
|
(1.0
|
)
|
|||
SG&A expenses
|
554.6
|
|
|
55.7
|
|
|
578.7
|
|
|
56.0
|
|
|
(24.1
|
)
|
|
4.2
|
|
|||
Operating income
|
151.1
|
|
|
15.2
|
|
|
134.3
|
|
|
13.0
|
|
|
16.8
|
|
|
12.5
|
|
|||
Interest expense, net
|
4.0
|
|
|
0.4
|
|
|
6.5
|
|
|
0.6
|
|
|
(2.5
|
)
|
|
(38.2
|
)
|
|||
Provision for income taxes
|
24.9
|
|
|
2.5
|
|
|
15.3
|
|
|
1.5
|
|
|
9.6
|
|
|
(61.9
|
)
|
|||
Net income
|
122.2
|
|
|
12.3
|
|
|
112.5
|
|
|
10.9
|
|
|
9.7
|
|
|
8.7
|
|
|||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.44
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|
|
$
|
0.04
|
|
|
7.5
|
%
|
Diluted
|
$
|
0.43
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|
|
$
|
0.03
|
|
|
7.4
|
%
|
|
|
Three Months Ended April 1, 2017
|
||||||||||||||||||
|
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
|
$
|
705.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
705.7
|
|
SG&A expenses
|
554.6
|
|
|
—
|
|
|
6.4
|
|
|
4.5
|
|
|
543.7
|
|
|||||
Operating income
|
151.1
|
|
|
—
|
|
|
(6.4
|
)
|
|
(4.5
|
)
|
|
162.0
|
|
|||||
Provision for income taxes
|
24.9
|
|
|
—
|
|
|
(1.6
|
)
|
|
(1.2
|
)
|
|
27.7
|
|
|||||
Net income
|
122.2
|
|
|
—
|
|
|
(4.8
|
)
|
|
(3.3
|
)
|
|
130.3
|
|
|||||
Diluted net income per share
|
0.43
|
|
|
—
|
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
0.46
|
|
•
|
Operational Efficiency Plan
-
$6.4 million
primarily related to organizational efficiency costs and technology infrastructure; and
|
•
|
Acquisition-Related Costs
-
$4.5 million
total charges related to the acquisition of Stuart Weitzman Holdings LLC related to charges attributable to integration-related activities and contingent payments (of which $2.8 million of charges are recorded within unallocated corporate expenses within the Coach brand and $1.7 million of charges are recorded within the Stuart Weitzman segment).
|
|
Three Months Ended March 26, 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
|
$
|
713.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
713.0
|
|
SG&A expenses
|
578.7
|
|
|
9.4
|
|
|
—
|
|
|
8.1
|
|
|
561.2
|
|
|||||
Operating income
|
134.3
|
|
|
(9.4
|
)
|
|
—
|
|
|
(8.1
|
)
|
|
151.8
|
|
|||||
Provision for income taxes
|
15.3
|
|
|
(3.0
|
)
|
|
—
|
|
|
(2.9
|
)
|
|
21.2
|
|
|||||
Net income
|
112.5
|
|
|
(6.4
|
)
|
|
—
|
|
|
(5.2
|
)
|
|
124.1
|
|
|||||
Diluted net income per share
|
0.40
|
|
|
(0.02
|
)
|
|
—
|
|
|
(0.02
|
)
|
|
0.44
|
|
|
Three Months Ended
|
|||||||||||||||
|
Total Net Sales
|
|
Rate of
Change
|
|
Percentage of
Total Net Sales
|
|||||||||||
|
April 1,
2017 |
|
March 26,
2016 |
|
|
April 1,
2017 |
|
March 26,
2016 |
||||||||
|
(dollars in millions)
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
North America
|
$
|
474.2
|
|
|
$
|
498.9
|
|
|
(5.0
|
)%
|
|
47.6
|
%
|
|
48.3
|
%
|
International
|
429.5
|
|
|
448.2
|
|
|
(4.2
|
)
|
|
43.2
|
|
|
43.4
|
|
||
Other
(1)
|
11.6
|
|
|
6.8
|
|
|
70.6
|
|
|
1.2
|
|
|
0.6
|
|
||
Coach brand
|
$
|
915.3
|
|
|
$
|
953.9
|
|
|
(4.1
|
)
|
|
92.0
|
%
|
|
92.3
|
%
|
Stuart Weitzman
|
79.9
|
|
|
79.2
|
|
|
1.1
|
|
|
8.0
|
|
|
7.7
|
|
||
Total net sales
|
$
|
995.2
|
|
|
$
|
1,033.1
|
|
|
(3.7
|
)
|
|
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
|
|||||||||||
|
|
April 1,
2017 |
|
March 26,
2016 |
|
Amount
|
|
%
|
|||||||
|
|
(millions)
|
|
|
|||||||||||
|
|
|
|
|
|||||||||||
North America
|
|
$
|
115.5
|
|
|
$
|
135.5
|
|
|
$
|
(20.0
|
)
|
|
(14.7
|
)%
|
International
|
|
152.2
|
|
|
151.7
|
|
|
0.5
|
|
|
0.2
|
|
|||
Other
(1)
|
|
9.0
|
|
|
4.0
|
|
|
5.0
|
|
|
125.0
|
|
|||
Corporate unallocated
|
|
(129.4
|
)
|
|
(161.6
|
)
|
|
32.2
|
|
|
(19.9
|
)
|
|||
Coach brand
|
|
$
|
147.3
|
|
|
$
|
129.6
|
|
|
$
|
17.7
|
|
|
13.7
|
%
|
Stuart Weitzman
|
|
3.8
|
|
|
4.7
|
|
|
(0.9
|
)
|
|
(19.5
|
)
|
|||
Total operating income
|
|
$
|
151.1
|
|
|
$
|
134.3
|
|
|
$
|
16.8
|
|
|
12.5
|
%
|
|
(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.
|
|
Nine Months Ended
|
|||||||||||||||||||
|
April 1, 2017
|
|
March 26, 2016
|
|
Variance
|
|||||||||||||||
|
(millions, except per share data)
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
% of
net sales
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
3,354.5
|
|
|
100.0
|
%
|
|
$
|
3,337.2
|
|
|
100.0
|
%
|
|
$
|
17.3
|
|
|
0.5
|
%
|
Gross profit
|
2,326.6
|
|
|
69.4
|
|
|
2,268.6
|
|
|
68.0
|
|
|
58.0
|
|
|
2.6
|
|
|||
SG&A expenses
|
1,732.2
|
|
|
51.6
|
|
|
1,731.9
|
|
|
51.9
|
|
|
0.3
|
|
|
—
|
|
|||
Operating income
|
594.4
|
|
|
17.7
|
|
|
536.7
|
|
|
16.1
|
|
|
57.7
|
|
|
10.8
|
|
|||
Interest expense, net
|
14.8
|
|
|
0.4
|
|
|
19.5
|
|
|
0.6
|
|
|
(4.7
|
)
|
|
(24.0
|
)
|
|||
Provision for income taxes
|
140.3
|
|
|
4.2
|
|
|
138.2
|
|
|
4.1
|
|
|
2.1
|
|
|
1.5
|
|
|||
Net income
|
439.3
|
|
|
13.1
|
|
|
379.0
|
|
|
11.4
|
|
|
60.3
|
|
|
15.9
|
|
|||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
1.57
|
|
|
|
|
|
$
|
1.37
|
|
|
|
|
|
$
|
0.20
|
|
|
14.8
|
%
|
Diluted
|
$
|
1.56
|
|
|
|
|
|
$
|
1.36
|
|
|
|
|
|
$
|
0.20
|
|
|
14.5
|
%
|
|
|
Nine Months Ended April 1, 2017
|
||||||||||||||||||
|
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
|
$
|
2,326.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
2,327.2
|
|
SG&A expenses
|
1,732.2
|
|
|
—
|
|
|
17.2
|
|
|
20.9
|
|
|
1,694.1
|
|
|||||
Operating income
|
594.4
|
|
|
—
|
|
|
(17.2
|
)
|
|
(21.5
|
)
|
|
633.1
|
|
|||||
Provision for income taxes
|
140.3
|
|
|
—
|
|
|
(4.3
|
)
|
|
(6.2
|
)
|
|
150.8
|
|
|||||
Net income
|
439.3
|
|
|
—
|
|
|
(12.9
|
)
|
|
(15.3
|
)
|
|
467.5
|
|
|||||
Diluted net income per share
|
1.56
|
|
|
—
|
|
|
(0.05
|
)
|
|
(0.05
|
)
|
|
1.66
|
|
•
|
Operational Efficiency Plan
-
$17.2 million
primarily related to organizational efficiency costs, technology infrastructure costs and, to a lesser extent, network optimization costs; and
|
•
|
Acquisition-Related Costs
-
$21.5 million
total charges related to the acquisition of Stuart Weitzman Holdings LLC, of which
$20.7 million
is primarily related to charges attributable to integration-related activities and contingent payments(of which $8.2 million of income is recorded within unallocated corporate expenses within the Coach brand and $12.5 million of charges 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.
|
|
Nine Months Ended March 26, 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
|
$
|
2,268.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.9
|
)
|
|
$
|
2,269.5
|
|
SG&A expenses
|
1,731.9
|
|
|
35.9
|
|
|
—
|
|
|
28.3
|
|
|
1,667.7
|
|
|||||
Operating income
|
536.7
|
|
|
(35.9
|
)
|
|
—
|
|
|
(29.2
|
)
|
|
601.8
|
|
|||||
Provision for income taxes
|
138.2
|
|
|
(9.0
|
)
|
|
—
|
|
|
(9.5
|
)
|
|
156.7
|
|
|||||
Net income
|
379.0
|
|
|
(26.9
|
)
|
|
—
|
|
|
(19.7
|
)
|
|
425.6
|
|
|||||
Diluted net income per share
|
1.36
|
|
|
(0.10
|
)
|
|
—
|
|
|
(0.07
|
)
|
|
1.53
|
|
|
Nine Months Ended
|
|||||||||||||||
|
Total Net Sales
|
|
Rate of
Change
|
|
Percentage of
Total Net Sales
|
|||||||||||
|
April 1,
2017 |
|
March 26,
2016 |
|
|
April 1,
2017 |
|
March 26,
2016 |
||||||||
|
(dollars in millions)
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
North America
|
$
|
1,763.6
|
|
|
$
|
1,790.9
|
|
|
(1.5
|
)%
|
|
52.6
|
%
|
|
53.7
|
%
|
International
|
1,273.3
|
|
|
1,254.5
|
|
|
1.5
|
|
|
38.0
|
|
|
37.6
|
|
||
Other
(1)
|
31.9
|
|
|
31.1
|
|
|
2.6
|
|
|
0.9
|
|
|
0.9
|
|
||
Coach brand
|
$
|
3,068.8
|
|
|
$
|
3,076.5
|
|
|
(0.3
|
)
|
|
91.5
|
%
|
|
92.2
|
%
|
Stuart Weitzman
|
285.7
|
|
|
260.7
|
|
|
9.6
|
|
|
8.5
|
|
|
7.8
|
|
||
Total net sales
|
$
|
3,354.5
|
|
|
$
|
3,337.2
|
|
|
0.5
|
|
|
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.
|
|
|
Nine Months Ended
|
|||||||||||||
|
|
Operating Income
|
|
Variance
|
|||||||||||
|
|
April 1,
2017 |
|
March 26,
2016 |
|
Amount
|
|
%
|
|||||||
|
|
(millions)
|
|
|
|||||||||||
|
|
|
|
|
|||||||||||
North America
|
|
$
|
537.9
|
|
|
$
|
555.4
|
|
|
$
|
(17.5
|
)
|
|
(3.1
|
)%
|
International
|
|
401.7
|
|
|
389.5
|
|
|
12.2
|
|
|
3.3
|
|
|||
Other
(1)
|
|
24.5
|
|
|
16.5
|
|
|
8.0
|
|
|
48.5
|
|
|||
Corporate unallocated
|
|
(391.9
|
)
|
|
(455.4
|
)
|
|
63.5
|
|
|
(13.9
|
)
|
|||
Coach brand
|
|
$
|
572.2
|
|
|
$
|
506.0
|
|
|
$
|
66.2
|
|
|
13.1
|
%
|
Stuart Weitzman
|
|
22.2
|
|
|
30.7
|
|
|
(8.5
|
)
|
|
(27.8
|
)
|
|||
Total operating income
|
|
$
|
594.4
|
|
|
$
|
536.7
|
|
|
$
|
57.7
|
|
|
10.8
|
%
|
|
(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.
|
|
|
Nine Months Ended
|
||||||||||
|
|
April 1,
2017 |
|
March 26,
2016 |
|
Change
|
||||||
|
|
(millions)
|
||||||||||
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
530.0
|
|
|
$
|
509.2
|
|
|
$
|
20.8
|
|
Net cash provided by (used in) investing activities
|
|
562.5
|
|
|
(674.9
|
)
|
|
1,237.4
|
|
|||
Net cash used in financing activities
|
|
(550.2
|
)
|
|
(304.6
|
)
|
|
(245.6
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
(6.8
|
)
|
|
0.1
|
|
|
(6.9
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
535.5
|
|
|
$
|
(470.2
|
)
|
|
$
|
1,005.7
|
|
|
Sources of Liquidity
|
|
Outstanding Indebtedness
|
|
Total Available Liquidity
|
||||||
|
(millions)
|
||||||||||
Cash and cash equivalents
(1)
|
$
|
1,394.5
|
|
|
$
|
—
|
|
|
$
|
1,394.5
|
|
Short-term investments
(1)
|
497.4
|
|
|
—
|
|
|
497.4
|
|
|||
Non-current investments
|
104.4
|
|
|
—
|
|
|
104.4
|
|
|||
Amended and Restated Credit Agreement
(2)
|
700.0
|
|
|
—
|
|
|
700.0
|
|
|||
4.250% Senior Notes
(3)
|
600.0
|
|
|
600.0
|
|
|
—
|
|
|||
International credit facilities
|
47.0
|
|
|
—
|
|
|
47.0
|
|
|||
Total
|
$
|
3,343.3
|
|
|
$
|
600.0
|
|
|
$
|
2,743.3
|
|
|
|
|
|
|
(1)
|
As of
April 1, 2017
, approximately 56% 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
nine 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
April 1, 2017
, 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
|
•
|
failure of the business to perform as planned following the acquisition or achieve anticipated revenue or profitability targets;
|
•
|
delays, unexpected costs or difficulties in completing the integration of acquired companies or assets;
|
•
|
higher than expected costs, lower than expected cost savings or synergies and/or a need to allocate resources to manage unexpected operating difficulties;
|
•
|
difficulties assimilating the operations and personnel of acquired companies into our operations;
|
•
|
diversion of the attention and resources of management or other disruptions to current operations;
|
•
|
the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002;
|
•
|
unanticipated issues in integrating manufacturing, logistics, information, communications and other systems;
|
•
|
unanticipated changes in applicable laws and regulations;
|
•
|
unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators;
|
•
|
retaining key customers, suppliers and employees;
|
•
|
retaining and obtaining required regulatory approvals, licenses and permits;
|
•
|
operating risks inherent in the acquired business and our business;
|
•
|
consumers’ failure to accept product offerings by us or our licensees;
|
•
|
assumption of liabilities not identified in due diligence; and
|
•
|
other unanticipated issues, expenses and liabilities.
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 6.
|
Exhibits
|
2.1*
|
Agreement and Plan of Merger, dated as of May 7, 2017, by and among Coach, Inc., Kate Spade & Company and Chelsea Merger Sub, Inc.
|
10.1*
|
Employment Offer Letter, dated March 27, 2017, between Coach and Joshua Schulman
|
10.2*
|
Commitment Letter, dated May 7, 2017, among Coach, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bank of America, N.A.
|
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)
|
ARTICLE I THE OFFER
|
2
|
|
||
Section 1.1
|
|
The Offer
|
2
|
|
Section 1.2
|
|
Company Actions
|
5
|
|
|
|
|
|
|
ARTICLE II THE MERGER
|
7
|
|
||
Section 2.1
|
|
The Merger
|
7
|
|
Section 2.2
|
|
Closing
|
7
|
|
Section 2.3
|
|
Effective Time
|
8
|
|
Section 2.4
|
|
Effects of the Merger
|
8
|
|
Section 2.5
|
|
Certificate of Incorporation
|
8
|
|
Section 2.6
|
|
Bylaws
|
8
|
|
Section 2.7
|
|
Directors
|
8
|
|
Section 2.8
|
|
Officers
|
8
|
|
|
|
|
|
|
ARTICLE III EFFECT OF THE MERGER ON CAPITAL STOCK
|
9
|
|
||
Section 3.1
|
|
Conversion of Capital Stock
|
9
|
|
Section 3.2
|
|
Surrender of Certificates and Book-Entry Shares
|
10
|
|
Section 3.3
|
|
Company Equity Awards
|
12
|
|
Section 3.4
|
|
Dissenting Shares
|
14
|
|
|
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
15
|
|
||
Section 4.1
|
|
Organization and Power
|
15
|
|
Section 4.2
|
|
Organization and Power of Subsidiaries; Foreign Qualifications
|
15
|
|
Section 4.3
|
|
Corporate Authorization
|
15
|
|
Section 4.4
|
|
Enforceability
|
16
|
|
Section 4.5
|
|
Subsidiaries
|
16
|
|
Section 4.6
|
|
Governmental Authorizations
|
16
|
|
Section 4.7
|
|
Non-Contravention
|
17
|
|
Section 4.8
|
|
Capitalization
|
17
|
|
Section 4.9
|
|
SEC Reports
|
19
|
|
Section 4.10
|
|
Financial Statements; Internal Controls
|
19
|
|
Section 4.11
|
|
Liabilities
|
21
|
|
Section 4.12
|
|
Absence of Certain Changes
|
21
|
|
Section 4.13
|
|
Litigation
|
22
|
|
Section 4.14
|
|
Material Contracts
|
22
|
|
Section 4.15
|
|
Benefit Plans
|
24
|
|
Section 4.16
|
|
Labor Relations
|
27
|
|
Section 4.17
|
|
Taxes
|
28
|
|
Section 4.18
|
|
Environmental Matters
|
29
|
|
Section 4.19
|
|
Intellectual Property
|
29
|
|
Section 4.20
|
|
Real Property
|
30
|
|
Section 4.21
|
|
Insurance
|
31
|
|
Section 4.22
|
|
Permits; Compliance with Law
|
31
|
|
Section 4.23
|
|
Affiliated Transactions
|
32
|
|
Section 4.24
|
|
Opinion of Financial Advisor
|
32
|
|
Section 4.25
|
|
Customers and Suppliers
|
32
|
|
Section 4.26
|
|
Brokers
|
32
|
|
Section 4.27
|
|
State Takeover Laws
|
32
|
|
Section 4.28
|
|
Foreign Operations and Export Matters
|
33
|
|
Section 4.29
|
|
Information Supplied
|
33
|
|
Section 4.30
|
|
No Other Representations or Warranties
|
34
|
|
|
|
|
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
|
34
|
|
||
Section 5.1
|
|
Organization and Power
|
34
|
|
Section 5.2
|
|
Corporate Authorization
|
34
|
|
Section 5.3
|
|
Governmental Authorizations
|
34
|
|
Section 5.4
|
|
Non-Contravention
|
35
|
|
Section 5.5
|
|
Capitalization; Interim Operations of Purchaser; Ownership of Common Stock
|
35
|
|
Section 5.6
|
|
Financing
|
36
|
|
Section 5.7
|
|
Litigation
|
37
|
|
Section 5.8
|
|
Absence of Arrangements with Management
|
37
|
|
Section 5.9
|
|
Brokers
|
37
|
|
Section 5.10
|
|
Information Supplied
|
38
|
|
Section 5.11
|
|
Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans
|
38
|
|
Section 5.12
|
|
Independent Investigation
|
38
|
|
Section 5.13
|
|
No Other Company Representations and Warranties
|
39
|
|
|
|
|
|
|
ARTICLE VI COVENANTS
|
39
|
|
||
Section 6.1
|
|
Conduct of Business of the Company
|
39
|
|
Section 6.2
|
|
Conduct of Business of Parent
|
43
|
|
Section 6.3
|
|
Access to Information; Confidentiality
|
43
|
|
Section 6.4
|
|
No Solicitation
|
44
|
|
Section 6.5
|
|
Employees; Benefit Plans
|
48
|
|
Section 6.6
|
|
Directors' and Officers' Indemnification and Insurance
|
51
|
|
Section 6.7
|
|
Reasonable Best Efforts
|
53
|
|
Section 6.8
|
|
Consents; Filings; Further Action
|
53
|
|
Section 6.9
|
|
Public Announcements
|
55
|
|
Section 6.10
|
|
Fees, Expenses and Conveyance Taxes
|
56
|
|
Section 6.11
|
|
Rule 16b-3
|
56
|
|
Section 6.12
|
|
Parent Vote
|
56
|
|
Section 6.13
|
|
Transaction Litigation
|
56
|
|
Section 6.14
|
|
Rule 14d-10
|
57
|
|
Section 6.15
|
|
Stock Exchange Delisting
|
57
|
|
Section 6.16
|
|
Financing
|
57
|
|
ARTICLE VII CONDITIONS TO THE MERGER
|
64
|
|
||
Section 7.1
|
|
Conditions to Each Party's Obligation to Effect the Merger
|
64
|
|
|
|
|
|
|
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
|
65
|
|
||
Section 8.1
|
|
Termination by Mutual Consent
|
65
|
|
Section 8.2
|
|
Termination by Either Parent or the Company
|
65
|
|
Section 8.3
|
|
Termination by Parent
|
65
|
|
Section 8.4
|
|
Termination by the Company
|
65
|
|
Section 8.5
|
|
Notice of Termination
|
66
|
|
Section 8.6
|
|
Effect of Termination
|
66
|
|
Section 8.7
|
|
Fees and Expenses Following Termination
|
67
|
|
|
|
|
|
|
ARTICLE IX MISCELLANEOUS
|
68
|
|
||
Section 9.1
|
|
Certain Definitions
|
68
|
|
Section 9.2
|
|
Interpretation
|
76
|
|
Section 9.3
|
|
No Survival
|
77
|
|
Section 9.4
|
|
Governing Law
|
77
|
|
Section 9.5
|
|
Submission to Jurisdiction; Service
|
78
|
|
Section 9.6
|
|
WAIVER OF JURY TRIAL
|
78
|
|
Section 9.7
|
|
Notices
|
79
|
|
Section 9.8
|
|
Amendment
|
80
|
|
Section 9.9
|
|
Extension; Waiver
|
80
|
|
Section 9.10
|
|
Entire Agreement
|
80
|
|
Section 9.11
|
|
No Third-Party Beneficiaries
|
80
|
|
Section 9.12
|
|
Severability
|
81
|
|
Section 9.13
|
|
Rules of Construction
|
81
|
|
Section 9.14
|
|
Assignment
|
81
|
|
Section 9.15
|
|
Specific Performance
|
82
|
|
Section 9.16
|
|
Non-Recourse
|
82
|
|
Section 9.17
|
|
Obligations of Parent
|
82
|
|
Section 9.18
|
|
Counterparts; Effectiveness
|
82
|
|
Term
|
Section
|
2017 Bonuses
|
6.5(c)
|
Acceptable Confidentiality Agreement
|
9.1(a)
|
Acceptance Time
|
1.1(g)
|
Adverse Recommendation Change
|
6.4(c)
|
Affiliate
|
9.1(b)
|
Agreement
|
Preamble
|
Alternative Acquisition Agreement
|
6.4(c)
|
Alternative Interests
|
4.8(a)
|
Antitrust Laws
|
9.1(c)
|
Applicable Antitrust Laws
|
4.6
|
Applicable Exchange
|
9.1(d)
|
Assumed MSU Award
|
3.3(d)
|
Assumed PSU Award
|
3.3(c)
|
Assumed RSU Award
|
3.3(b)
|
Available Transaction Financing
|
6.20(a)(ii)
|
Balance Sheet Date
|
4.11(a)
|
Book-Entry Shares
|
3.1(c)(ii)
|
Business Day
|
9.1(e)
|
Certificate of Merger
|
2.3
|
Certificates
|
3.1(c)(ii)
|
Chosen Courts
|
9.5
|
Closing
|
2.2
|
Closing Date
|
2.2
|
Code
|
3.2(f)
|
Commitment Letter
|
5.6(a)
|
Common Stock
|
9.1(f)
|
Company
|
Preamble
|
Company 401(k) Plan
|
6.5(h)
|
Company Assets
|
4.7
|
Company Benefit Plan
|
4.15(a)
|
Company Board
|
Recitals
|
Company Board Recommendation
|
Recitals
|
Company Disclosure Letter
|
IV
|
Company Equity Awards
|
9.1(g)
|
Company Equity Plans
|
9.1(h)
|
Company Financial Advisor
|
4.24
|
Company Material Adverse Effect
|
9.1(i)
|
Company MSU Award
|
9.1(j)
|
Company Option
|
9.1(k)
|
Company Organizational Documents
|
9.1(l)
|
Company Permits
|
4.22(a)
|
Company PSU Award
|
9.1(m)
|
Company Related Parties
|
9.1(n)
|
Term
|
Section
|
Company RSU Award
|
9.1(o)
|
Company SEC Reports
|
4.9
|
Company Severance Plan
|
6.5(e)
|
Company Termination Fee
|
8.7(b)
|
Confidentiality Agreement
|
6.3(c)
|
Continuation Period
|
6.5(a)
|
Continuing Employee
|
6.5(a)
|
Contract
|
9.1(q)
|
Contracting Party
|
9.16
|
Conveyance Taxes
|
6.10
|
D&O Insurance
|
6.6(c)
|
Damages
|
6.6(b)
|
DGCL
|
Recitals
|
Dissenting Shares
|
3.4(a)
|
Effect
|
9.1(i)
|
Effective Time
|
2.3
|
Enforceability Exceptions
|
9.1(r)
|
Engagement Letters
|
5.6(c)
|
Environmental Law
|
4.18
|
ERISA
|
4.15(a)
|
ERISA Affiliate
|
9.1(t)
|
Exchange Act
|
1.1(a)
|
Excluded Shares
|
3.1(b)
|
Expenses
|
6.10
|
Expiration Date
|
1.1(c)
|
Extension Deadline
|
1.1(d)
|
Equity Award Exchange Ratio
|
91(r)
|
Financing Sources
|
5.6(a)
|
Foreign Competition Law
|
4.6
|
FTC
|
6.8(c)
|
GAAP
|
4.10(a)(ii)
|
Governmental Authority
|
9.1(u)
|
Governmental Authorizations
|
4.6
|
Hazardous Substances
|
9.1(v)
|
House Mark
|
9.1(w)
|
HSR Act
|
4.6
|
Indemnified Parties
|
6.6(a)
|
Individual Severance Agreement
|
6.5(e)
|
Initial Expiration Date
|
1.1(c)
|
Intellectual Property
|
9.1(x)
|
Intervening Event
|
9.1(y)
|
IRS
|
4.15(b)
|
Term
|
Section
|
IT Systems
|
9.1(z)
|
Key Employees
|
9.1(aa)
|
Knowledge
|
9.1(bb)
|
Law
|
9.1(cc)
|
Legal Actions
|
4.13
|
Liabilities
|
4.11
|
License Agreement
|
4.14(o)
|
Licensed Intellectual Property
|
9.1(dd)
|
Liens
|
9.1(ee)
|
Material Contracts
|
4.14
|
Material Customer
|
4.25
|
Material Supplier
|
4.25
|
Maximum Premium
|
6.6(c)
|
Merger
|
2.1
|
Merger Consideration
|
3.1(c)(i)
|
Minimum Tender Condition
|
Annex I
|
New Plans
|
6.5(f)
|
Non-Party Affiliates
|
9.16
|
Non-U.S. Benefit Plan
|
4.15(a)
|
OFAC Sanctions Regulations
|
4.28(a)
|
Offer
|
Recitals
|
Offer Commencement Date
|
1.1(a)
|
Offer Conditions
|
1.1(b)
|
Offer Documents
|
1.1(f)
|
Offer Price
|
Recitals
|
Offer to Purchase
|
1.1(b)
|
Old Plans
|
6.5(f)
|
Option Consideration
|
3.3(a)
|
Option Payment Amount
|
3.3(a)
|
Option Payment Date
|
3.3(a)
|
Option Payment Right
|
3.3(a)
|
Orders
|
9.1(ff)
|
Owned Intellectual Property
|
9.1(gg)
|
Parent
|
Preamble
|
Parent Assets
|
5.4
|
Parent Common Stock
|
9.1(gg)
|
Parent Contracts
|
5.4
|
Parent Material Adverse Effect
|
9.1(ii)
|
Paying Agent
|
3.2(a)
|
Paying Agent Agreement
Payment Fund
|
3.2(a)
3.2(b)
|
Permits
|
4.22(a)
|
Permitted Lien
|
9.1(jj)
|
Person
|
9.1(kk)
|
Preferred Stock
|
4.8(a)
|
Term
|
Section
|
Products
|
4.22(c)
|
Purchaser
|
Preamble
|
Real Property Leases
|
4.20(b)
|
Representatives
|
9.1(ll)
|
Required Financial Information
|
6.20(b)(iii)
|
Required Payment Amount
|
5.6(a)
|
Restraint Authority
|
7.1(a)
|
Retention Program
|
6.5(d)
|
Retired Debt
|
5.6(a)
|
Revolving Credit Facility
|
9.1(mm)
|
Schedule 14D-9
|
1.2(a)
|
Schedule TO
|
1.1(f)
|
SEC
|
1.1(f)
|
Securities Act
|
4.9
|
Share
|
Recitals
|
Software
|
9.1(oo)
|
Stockholder List Date
|
1.2(b)
|
Subsidiary
|
9.1(pp)
|
Superior Proposal
|
9.1(qq)
|
Suppliers
|
4.22(c)
|
Surviving Bylaws
|
2.6
|
Surviving Charter
|
2.5
|
Surviving Corporation
|
2.1
|
Takeover Proposal
|
9.1(rr)
|
Tax
|
9.1(ss)
|
Tax Returns
|
9.1(tt)
|
Taxes
|
9.1(ss)
|
Termination Date
|
8.2(a)
|
Transaction Financing
|
5.6(b)
|
Transaction Litigation
|
6.13
|
Transactions
|
Recitals
|
Term Credit Facility
|
9.1(uu)
|
WARN Act
|
4.16(b)
|
Willful and Material Breach
|
9.1(vv)
|
By:
|
/s/ Victor Luis
|
By:
|
/s/ Todd Kahn
|
By:
|
/s/ Craig A. Leavitt
|
1.
|
Base Salary
|
2.
|
Incentive Compensation
|
3.
|
Special Joining 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;
|
•
|
You returning a signed copy of this offer letter by
March 10, 2017.
|
•
|
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 Code of Conduct and our Confidentiality, Information Security and Privacy Agreement; and
|
•
|
The terms and conditions of individual equity award agreements.
|
By:
|
/s/ Wajeeh Fahem
|
By:
|
/s/ Victor Luis
|
Borrower:
|
Coach, Inc., a Maryland corporation (the “
Borrower
”).
|
Guarantors:
|
The Bridge Facility (as defined below) shall be guaranteed (the “
Guarantees
”) by (i) all of the Borrower’s domestic “significant subsidiaries” on terms, and subject to exceptions, substantially similar to the Existing Revolving Facility (as defined below) and (ii) any other person that is a borrower or issuer with respect to, or that guarantees or is required to guarantee, the Existing Revolving Facility (or any credit facility that replaces or refinances the Existing Revolving Facility) or any senior notes of the Borrower (collectively, the “
Guarantors
”);
provided
that each such person’s Guarantee shall be released if such person’s guarantee of the Existing Revolving Facility is released.
|
Transactions:
|
The Borrower intends to acquire (the “
Acquisition
”) a company previously identified to the Lead Arranger and code named “
Kansas
” (the “
Acquired Business
”), pursuant to an Agreement and Plan of Merger (together with the schedules and exhibits thereto, the “
Acquisition Agreement
”), dated as of May 7, 2017, between the Borrower, Merger Sub (as defined below) and the Acquired Business for an aggregate cash consideration to be paid in connection with the Offer as set forth in the Acquisition Agreement (“
Offer Consideration
”). Such Acquisition will be effected through (i) the purchase of shares of the common stock of the Acquired Business by a direct or indirect wholly-owned domestic subsidiary of the Borrower (the “
Merger Sub
”) in the “
Offer
” (as defined in the Acquisition Agreement) and (ii) on the Closing Date (as defined below), promptly following the closing of the Offer, the merger (the “
Merger
”) of Merger Sub with and into the Acquired Business pursuant to Section 251(h) of the Delaware General Corporation Law, with the Target surviving such Merger as a direct or indirect wholly-owned subsidiary of the Borrower. The date of consummation of the Acquisition, Offer and Merger (and the date on which the Bridge Facility shall be available) is referred to herein as the “
Closing Date
.” In connection with the Acquisition, the Borrower intends to (a) obtain a 364-day senior unsecured bridge term loan credit facility described below under the caption “Bridge Facility” and (b) pay the fees and expenses incurred in connection with the foregoing (the “
Transaction Costs
”). It is anticipated that some or all of the Bridge Facility will be replaced or refinanced by the issuance of senior unsecured notes by the Borrower through a public offering or in a private placement (the “
Senior Notes
”). The transactions described in this paragraph are collectively referred to herein as the “
Transactions
.”
|
Agent
:
|
Bank of America, N.A. (“
Bank of America
”) will act as sole and exclusive administrative agent for the Lenders (the “
Administrative Agent
”).
|
and Sole Bookrunner:
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any of its designated affiliates, “
MLPFS
”) will act as sole and exclusive lead arranger and sole and exclusive bookrunner for the Bridge Facility (the “
Lead Arranger
”).
|
Lenders:
|
Bank of America and other banks, financial institutions and institutional lenders selected by the Lead Arranger, subject to approval by the Borrower to the extent expressly contemplated hereby (such approval not to be unreasonably withheld or delayed).
|
Bridge Facility:
|
A 364-day senior unsecured bridge term loan credit facility in an aggregate principal amount in U.S. dollars of up to $2,100,000,000 (the “
Bridge Facility
”).
|
Purpose:
|
The proceeds shall be used by the Borrower (i) to pay the Offer Consideration and (ii) to pay the Transaction Costs.
|
Availability:
|
The Bridge Facility shall be available in a single draw on the Closing Date.
|
Interest Rates and Fees:
|
As set forth in
Annex I
hereto.
|
and Fees:
|
Other than calculations in respect of interest at the Base Rate (which shall be made on the basis of actual number of days elapsed in a 365/366 day year), all calculations of interest and fees shall be made on the basis of actual number of days elapsed in a 360-day year.
|
Cost and Yield Protection:
|
Customary for transactions and facilities of this type, including, without limitation, in respect of breakage or redeployment costs, changes in capital adequacy, liquidity and capital requirements or their interpretation (including pursuant to Dodd-Frank or Basel III), illegality, unavailability and clear of withholding or other taxes (with customary limitations and exclusions for transactions of this type).
|
Maturity:
|
The Bridge Facility will mature on the date that is 364 days after the Closing Date
(the “
Maturity Date
”)
.
|
Scheduled Amortization:
|
None.
|
Reductions:
|
On or prior to the Closing Date, the aggregate commitments in respect of the Bridge Facility under the Commitment Letter or under the Credit Documentation (as applicable) shall be permanently reduced, and after the Closing Date, the aggregate loans under the Bridge Facility shall be
|
Commitment Reductions:
|
The Bridge Facility may be prepaid at any time in whole or in part without premium or penalty, upon written notice, at the option of the Borrower, except that any prepayment of LIBOR advances other than at the end of the applicable interest periods therefor shall be made with reimbursement for any funding losses and redeployment costs of the Lenders resulting therefrom. The commitment under the Bridge Facility may be reduced permanently or terminated by the Borrower at any time without penalty.
|
Closing Date:
|
The borrowing under the Bridge Facility on the Closing Date will be subject solely to the conditions precedent set forth in Section 5 of the Commitment Letter and
Exhibit B
to the Commitment Letter.
|
Documentation:
|
The definitive documentation for the Bridge Facility (the “
Credit Documentation
”), including the representations and warranties, covenants, and events of default in the Credit Documentation, will be based on the Existing Revolving Facility, with changes mutually agreed between the Borrower and the Administrative Agent. In addition,
the Credit Documentation will reflect the terms set forth in the Commitment Letter (including this Term Sheet) and the Fee Letter, and will give due regard to the size of the Borrower and its subsidiaries
pro forma
for the Transactions.
The principles described in this paragraph are referred to herein as the “
Documentation Principles
.”
|
Warranties:
|
Limited to the following (subject to the Documentation Principles): (i) organization, powers, subsidiaries; (ii) authorization, enforceability; (iii) governmental approvals, no conflicts; (iv) financial condition, no material adverse change; (v) properties; (vi) litigation; (vii) investment company status; (viii) taxes; (ix) ERISA; (x) disclosures; (xi) Federal Reserve regulations; (xii) no default; (xiii) anti-corruption laws and sanctions (including the U.S.A. Patriot Act, Foreign Corrupt Practices Act and laws with respect to sanctioned persons); (xiv) solvency and (xv) Borrower not an EEA Financial Institution.
|
Covenants:
|
Affirmative, negative and financial covenants limited to the following (subject to the Documentation Principles):
|
(a)
|
Affirmative Covenants:
(i) Financial statements and other information; (ii) notices of material events; (iii) existence, conduct of business; (iv) payment of obligations; (v) maintenance of properties and insurance; (vi) books and records, inspection rights; (vii) compliance with laws and material contractual obligations; (viii) use of proceeds and (ix) subsidiary guarantees (if applicable).
|
(b)
|
Negative Covenants:
Restrictions with respect to (i) indebtedness; (ii) liens; (iii) fundamental changes and asset sales; (iv) investments, loans, advances, guarantees and acquisitions; (v) transactions with affiliates and (vi) restricted payments; in each of the foregoing cases, with such exceptions and thresholds consistent with the Documentation Principles.
|
(c)
|
Financial Covenant:
|
•
|
Maximum ratio of (x) Consolidated Total Indebtedness
plus
600% of Consolidated Lease Expense to (y) Consolidated EBITDAR of 4.00 to 1.00, calculated in a manner substantially similar to the Existing Revolving Facility.
|
Events of Default:
|
Limited to the following (subject to the Documentation Principles): (i) nonpayment of principal, interest, fees or other amounts; (ii) any representation or warranty proving to have been inaccurate when made or deemed made; (iii) failure to perform or observe or comply with covenants, conditions and agreements set forth in the Credit Documentation; (iv) cross payment default to material indebtedness; (v) cross default to material indebtedness; (vi) voluntary and involuntary bankruptcy and insolvency defaults; (vii) material unpaid judgments; (viii) customary ERISA defaults; (ix) change of control; and (x) actual or asserted invalidity or impairment of material provision of Credit Documentation (including, without limitation, any Guarantee).
|
Participations:
|
Prior to the Closing Date, the Lenders will be permitted to assign commitments under the Bridge Facility with the consent of the Borrower (not to be unreasonably withheld); provided that such consent of the Borrower shall not be required (i) if such assignment is made to another Lender under the Bridge Facility or an affiliate or approved fund of any such Lender (any such person, a “Lender or Affiliate Assignee”) or (ii)
|
Waivers and Amendments:
|
Amendments and waivers of the provisions of the Credit Documentation will require the approval of Lenders holding advances and commitments representing more than 50% of the aggregate advances and commitments under the Bridge Facility (the “
Required Lenders
”), except that the consent of each Lender will be required with respect to, among other things, (i) increases in commitment amount of such Lender, (ii) reductions of principal, interest, or fees payable to such Lender, (iii) extensions of scheduled maturities or times for payment of the loans or commitments of such Lender, (iv) alterations of certain provisions relating to the
pro rata
sharing of payments and (v) release of all or substantially all of the value of the Guarantees.
|
Indemnification:
|
The Borrower will indemnify and hold harmless the Administrative Agent, the Lead Arranger, each Lender and each of their affiliates and their officers, directors, employees, agents and advisors (each, an “
Indemnified Party
”) from and against all losses, liabilities, claims, damages or expenses arising out of or relating to the Transactions, the Bridge Facility, the Borrower’s use of loan proceeds or the commitments, including, but not limited to, settlement costs and reasonable fees of one primary counsel and, if necessary, one special counsel in each applicable specialty and one local counsel in each applicable jurisdiction, in each case to the Indemnified Parties, taken as a whole (and, in each case, conflicts counsel of the foregoing types for each relevant group of similarly-situated persons subject to a conflict of interest), except, in each case, to the extent such losses, liabilities, claims, damages or expenses resulted from (i) such Indemnified Party’s gross negligence or willful misconduct, (ii) such Indemnified Party’s material breach of its obligations under the Credit Documentation or (iii) any investigation, litigation, claim, proceeding or defense not involving an act or omission by the Borrower or any of its affiliates and that is brought by an Indemnified Party against another Indemnified Party (other than in
|
European Union Bail-in:
|
The Credit Documentation will contain a standard European Union bail-in acknowledgement.
|
Governing Law:
|
New York.
|
Expenses:
|
If the Closing Date occurs, the Borrower will pay all reasonable costs and expenses associated with the preparation, due diligence, administration, syndication and enforcement of all Credit Documentation and regardless of whether the Closing Date occurs, the Borrower shall reimburse the Commitment Parties for all Legal Fees. The Borrower will also pay the expenses of each Lender in connection with the enforcement of any of the Credit Documentation related to the Bridge Facility.
|
Miscellaneous:
|
Each of the parties shall (i) waive its right to a trial by jury and (ii) submit to exclusive New York jurisdiction. The Credit Documentation will also contain customary defaulting lender language.
|
Interest Rates:
|
The interest rates per annum applicable to the Bridge Facility will be, at the option of the Borrower (i) LIBOR (calculated on a 360-day basis)
plus
the Applicable LIBOR Margin (as hereinafter defined) or (ii) the Base Rate (calculated on a 365/366-day basis)
plus
the Applicable Base Rate Margin (as hereinafter defined).
|
Default Interest:
|
During the continuance of an event of default, overdue portions (including amounts overdue in connection with an acceleration of loans’ maturity, whether or not in connection with a bankruptcy or insolvency proceeding) of loans shall automatically bear interest at the rate otherwise applicable to such loan
plus
2%.
|
Applicable LIBOR Margin:
|
To be based on public ratings from S&P, Moody’s and/or Fitch for senior unsecured, long-term debt of the Borrower without third-party credit enhancement (the “
Public Debt Rating
”), as follows:
|
|
Pricing
Level I
|
Pricing
Level II
|
Pricing
Level III
|
Pricing
Level IV
|
Public Debt Rating
|
≥ BBB / Baa2 / BBB
|
BBB- / Baa3 / BBB-
|
BB+ / Ba1 / BB+
|
≤ BB / Ba2 / BB
|
Applicable Margin Rate
|
||||
Closing Date through 89 days following the Closing Date
|
125.0 bps
|
150.0 bps
|
200.0 bps
|
225.0 bps
|
90th day following the Closing Date through 179th day following the Closing Date
|
150.0 bps
|
175.0 bps
|
225.0 bps
|
250.0 bps
|
180th day following the Closing Date through 269th day following the Closing Date
|
175.0 bps
|
200.0 bps
|
250.0 bps
|
275.0 bps
|
From the 270th day following the Closing Date
|
200.0 bps
|
225.0 bps
|
275.0 bps
|
300.0 bps
|
Applicable Base Rate Margin
:
|
The greater of (i) 0% and (ii) the Applicable LIBOR Margin
minus
1.0%.
|
Duration Fees:
|
The Borrower will pay a fee (the “
Duration Fee
”), for the ratable benefit of the Lenders, in an amount equal to (i) 0.50% of the aggregate principal amount of the loans under the Bridge Facility outstanding on the date which is 90 days after the Closing Date, due and payable in cash on such 90
th
day (or if such day is not a business day, the next business day); (ii) 0.75% of the aggregate principal amount of the loans under the Bridge Facility outstanding on the date which is 180 days after the Closing Date, due and payable in cash on such 180
th
day (or if such day is not a business day, the next business day); and (iii) 1.00% of the aggregate principal amount of the loans under the Bridge Facility outstanding on the date which is 270 days after the Closing Date, due and payable in cash on such 270
th
day (or if such day is not a business day, the next business day).
|
Undrawn Commitment Fees:
|
The Borrower will pay a fee (the “
Undrawn Commitment Fee
”), for the ratable benefit of the Lenders, at a rate per annum equal to 0.175% (the applicable rate, the “
Undrawn Fee Rate
”), on the undrawn portion of the commitments in respect of the Bridge Facility, which fee shall accrue from and including the later of (x) 45 days after the date of the Commitment Letter and (y) the date of execution of the Credit Documentation (such later date, the “
Fee Start Date
”), to but excluding the earlier of (i) termination or expiration of the commitments under the Bridge Facility and (ii) the Closing Date (such earlier date, the “
Fee Payment Date
”), such Undrawn Commitment Fee shall by be due and payable on the Fee Payment Date and shall be calculated based on the number of days (if any) elapsed in a 360-day year.
|
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/ Kevin Wills
|
|
|
Name:
|
Kevin Wills
|
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Victor Luis
|
|
|
Name:
|
Victor Luis
|
|
Title:
|
Chief Executive Officer
|
By:
|
/s/ Kevin Wills
|
|
|
Name:
|
Kevin Wills
|
|
Title:
|
Chief Financial Officer
|