Coach Reports 156% Increase in Third Quarter Net Income; Earnings Per Share Rise to $0.17; Results Driven by 13% Sales Gain and Significant Margin Expansion.Business Editors NEW YORK--(BUSINESS WIRE)--April 23, 2001 Coach, Inc. (NYSE NYSE See: New York Stock Exchange : COH CoH City of Heroes (gaming) CoH Company of Heroes (game) COH City of Hope COH Court of Honor (Boy Scouts of America) COH Controlled Ovarian Hyperstimulation ), a leading marketer of modern classic American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of accessories, today announced a 156% increase in net income for its third fiscal quarter ended March 31, 2001. This substantial increase in net income from the prior year's third quarter reflected 13% growth in net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight combined with significant operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improvement. For the nine months ended March 31, 2001, net sales rose 12% and net income increased 73% versus the comparable year-ago period, before the impact of a reorganization charge. This charge was taken in the first quarter and related to the closing of a manufacturing facility in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and . Including these costs, net income rose 64%. In the third quarter, net sales were $130.6 million, 13% higher than reported in the same period of the prior year. Net income rose 163% to $8.0 million, including the impact of a $0.2 million, net after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , positive adjustment related to the reorganization charge taken in the first fiscal quarter. Net income before the impact of this adjustment rose 156% to $7.8 million, or $0.17 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $3.0 million, or $0.07 per share, the prior year based upon the current number of shares outstanding. Actual shares outstanding prior to the initial public offering were 35.0 million and earnings per share in the prior-year equaled $0.09 using this number of shares. Gross margin in the quarter increased by 430 basis points from 61.0% to 65.3%. This improvement was driven by a shift in product mix, reflecting the continued diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. into non-leather fabrications with new and successful mixed-materials collections. In addition, gross margin benefited from the continuing impact of sourcing cost reductions. SG&A expenses as a percentage of net sales declined to 55.9%, a 130 basis point improvement from the 57.2% reported in the year-ago quarter due to operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. as the sales base expanded. For the first nine months of fiscal year 2001, ended March 31, 2001, net sales were $479.3 million, up 12% from the $427.2 million reported in the first nine months of fiscal 2000. Net income rose to $57.8 million before the impact of the reorganization charge, up 73% from the $33.3 million reported a year ago. Including the impact of this charge, net income was $54.8 million, up 64% from prior-year levels. Third fiscal quarter sales grew in each of Coach's primary channels of distribution as follows: - Direct to consumer sales, which consist primarily of sales at Coach stores, rose 16% to $77.0 million during the third quarter from $66.4 million in the comparable period of the prior year. These results were generated by new and expanded stores as well as comparable store sales, which rose 3.7%, with retail stores up 2.7%, and factory stores up 4.6%. - Wholesale sales increased 10% to $53.6 million in the third quarter from $48.7 million in the comparable period of the prior year. Results were driven by strong gains in the international division, highlighted by continued double-digit increases in comparable location sales to Japanese consumers worldwide. During the third quarter of fiscal 2001, the company opened one Coach factory store, bringing the total to 114 retail stores and 66 factory stores at March 31, 2001. In addition, four retail stores were renovated and one store was relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. . The company remains on target to open an additional 7 Coach retail stores in the fourth quarter, bringing the total number of retail stores opened in fiscal 2001 to 15. At the end of the third fiscal quarter, through new store openings and renovations, 65 stores, representing over 70% of retail sales volume, reflected the new retail format. Lew a. 1. Lukewarm; tepid. Frankfort Frankfort, city (1990 pop. 25,968), state capital and seat of Franklin co., N central Ky., on both sides of the Kentucky River, in the heart of the bluegrass country; inc. 1796. , Chairman and Chief Executive Officer of Coach, Inc., said, "Our strong third quarter results demonstrate the continued enthusiasm Coach consumers have shown toward our modern American styling and use of new materials. During the period, we successfully introduced new styles and colors in our Hamptons and Mercer mer·cer n. Chiefly British A dealer in textiles, especially silks. [Middle English, from Old French mercier, trader, from merz, merchandise, from Latin merx twill twill One of the three basic textile weaves (see weaving), distinguished by diagonal lines. In the simplest twill, the weft crosses over two warp yarns, then under one, the sequence being repeated in each succeeding shot (row), but stepped over, one warp either to the collections, both in their second year. In addition, we launched an important new Signature lifestyle collection, in fabric and leather, with a graphic logo design inspired by materials from our archives." Mr. Frankfort added, "The Signature collection, which was immediately well received, is particularly significant as it advances the Coach brand, attracting loyal users and bringing new consumers into the Coach franchise. This occurred both in the U.S. and, most notably, in Japan where Coach's market share continues to grow. Building on this success, Signature, which now consists of handbags, women's accessories and shoes, will be extended into new materials and additional categories in seasons to come." "Looking ahead, we're we're Contraction of we are. we're we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the prospects for the fourth fiscal quarter. Mother's Day, Father's Day and graduation Graduation is the action of receiving or conferring an academic degree or the associated ceremony. The date of event is often called degree day. The event itself is also called commencement, convocation or invocation. each represent strong sales occasions for Coach. While a significant portion of our consumers' purchases today are for gifts, we are further strengthening Coach's position as a gift resource with new product, a stronger focal presentation for key seasonal items and a more shoppable environment. We are well positioned to achieve strong results for the remainder of this fiscal year and into fiscal 2002," Mr. Frankfort concluded. Coach, with headquarters in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , is a leading American marketer of fine accessories and gifts for women and men, including handbags, business cases, furniture, luggage LUGGAGE. Such things as are carried by a traveller, generally for his personal accommodation; baggage. In England this word is generally used in the same sense that baggage is used in the United States. See Baggage. and travel accessories, wallets, footwear Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). , watches and related accessories. Coach is sold worldwide through Coach stores, select department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. and specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" , through the Coach catalogue in the U.S. by calling 800-262-2411 and through Coach's website at www.Coach.com. Coach's shares are traded on The New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol COH. Coach will host a conference call to review these results at 8:30 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) on April 24, 2001. Interested parties may listen to the Webcast by accessing www.coach.com/investors or www.vcall.com on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the or dialing in to 1-888-455-0040 and asking for the Coach earnings call led by Andrea Shaw Resnick. A telephone replay will be available starting at 12:00 noon on April 24, 2001, for a period of five business days. The number to call is 1-800-810-4034. A webcast replay of this call will be available for five business days on the Coach website. Information on Coach products can be found on the Web at: http://www.coach.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , based on current expectations, that involve risks and uncertainties that could cause results of Coach, Inc. to differ materially from management's current expectations. These forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "intend," "estimate," "are positioned to," "continue," or the negative thereof or comparable terminology, including predictions of future results. Future results will vary from historical results and historical growth is not indicative of future trends, which will depend upon expected economic trends, our ability to anticipate consumer preferences for accessories and fashion trends, our ability to control costs, our store expansion and renovation program, and are subject to risks, including currency fluctuations, and other factors. Please refer to the company's most recent Prospectus for a complete list of risk factors.
COACH, INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
For the Thirteen and Thirty-Nine Weeks Ended
March 31, 2001 and April 1, 2000
(in thousands, except per share data)
(unaudited)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
March 31, April 1, March 31, April 1,
2001 2000 2001 2000
Net sales $130,598 $115,072 $479,308 $427,232
Cost of sales 45,272 44,835 168,982 173,203
Gross profit 85,326 70,237 310,326 254,029
Selling, general and
administrative expenses 72,963 65,768 219,509 205,690
Reorganization costs (363) - 4,587 -
Operating income 12,726 4,469 86,230 48,339
Interest expense, net 430 97 1,942 291
Income before income taxes 12,296 4,372 84,288 48,048
Provision for income taxes 4,303 1,338 29,500 14,703
Net income $ 7,993 $ 3,034 $ 54,788 $ 33,345
Net income per share $ 0.18 $ 0.09 $ 1.35 $ 0.95
Shares used in computing
basic net income per share 43,513 35,026(1) 40,684(2) 35,026(1)
Diluted net income per share $ 0.18 $ 0.09 $ 1.32 $ 0.95
Shares used in computing
diluted net income per share 45,385 35,026(1) 41,641(2) 35,026(1)
(1) - Represents number of shares owned by Sara Lee that were
outstanding prior to the public offering in October 2000.
(2) - Represents weighted average of outstanding shares before and
after the public offering.
Supplemental information
Net income, as reported $ 7,993 $ 3,034 $ 54,788 $ 33,345
Add back reorganization
costs (net of tax) (236) - 2,982 -
Net income, excluding
reorganization costs $ 7,757 $ 3,034 $ 57,770 $ 33,345
Supplemental diluted
net income, excluding
reorganization cost,
per share $ 0.17 $ 0.07 $ 1.30 $ 0.77
Shares used in computing
supplemental diluted
net income, excluding
reorganization costs,
per share 45,385 43,513(3) 44,470(3) 43,513(3)
(3) - Common shares issued in the October 2000 public offering are
assumed to be outstanding for all periods presented.
COACH, INC.
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
At March 31, 2001 and July 1, 2000
(in thousands)
March 31, July 1,
2001 2000
(unaudited)
ASSETS
Cash $ 7,241 $ 162
Receivables 20,642 15,567
Inventories 104,183 102,097
Other current assets 20,701 15,862
Total current assets 152,767 133,688
Receivable from Sara Lee - 63,783
Property, net 70,609 65,184
Trademarks and other assets 28,333 33,998
Total assets $ 251,709 $ 296,653
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank overdrafts $ 7,774 $ 4,940
Accounts payable 4,564 2,926
Accrued liabilities 78,330 71,693
Revolving credit facility 19,000 -
Long-term debt, classified as current 45 40
Total current liabilities 109,713 79,599
Long-term debt 3,690 3,735
Other liabilities 2,303 511
Stockholders' equity 136,003 212,808
Total liabilities and
stockholders' equity $ 251,709 $ 296,653
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