x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
|
|
ACT
OF 1934
|
||
For
the Quarterly Period Ended March 28, 2009
|
||
or
|
||
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
|
|
ACT
OF 1934
|
Maryland
|
52-2242751
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Large
Accelerated Filer þ
|
Accelerated
Filer ¨
|
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Small
Reporting Company ¨
|
Page Number
|
||
PART
I – FINANCIAL INFORMATION
|
||
ITEM
1.
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets –
At
March 28, 2009 and June 28, 2008
|
4
|
|
Condensed
Consolidated Statements of Income –
For
the Quarters and Nine Months Ended
March
28, 2009 and March 29, 2008
|
5
|
|
Condensed
Consolidated Statements of Cash Flows –
For
the Nine Months Ended
March
28, 2009 and March 29, 2008
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations
|
23
|
ITEM
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
36
|
ITEM
4.
|
Controls
and Procedures
|
37
|
PART
II – OTHER INFORMATION
|
||
ITEM
1.
|
Legal
Proceedings
|
38
|
ITEM
1A.
|
Risk
Factors
|
38
|
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
39
|
|
||
ITEM
6.
|
Exhibits
|
39
|
SIGNATURE
|
40
|
March 28,
|
June 28,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash and cash
equivalents
|
$ | 551,267 | $ | 698,905 | ||||
Trade accounts receivable, less
allowances of $6,568 and $7,717, respectively
|
127,148 | 106,738 | ||||||
Inventories
|
357,670 | 318,490 | ||||||
Other current
assets
|
195,230 | 235,085 | ||||||
Total current
assets
|
1,231,315 | 1,359,218 | ||||||
Long-term investments
|
6,000 | 8,000 | ||||||
Property and equipment,
net
|
587,108 | 464,226 | ||||||
Goodwill and other intangible
assets
|
282,729 | 258,906 | ||||||
Deferred income
taxes
|
110,257 | 81,346 | ||||||
Other
assets
|
98,592 | 75,657 | ||||||
Total
assets
|
$ | 2,316,001 | $ | 2,247,353 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 67,623 | $ | 134,726 | ||||
Accrued
liabilities
|
348,160 | 315,930 | ||||||
Revolving credit
facilities
|
1,896 | - | ||||||
Current portion of long-term
debt
|
594 | 285 | ||||||
Total current
liabilities
|
418,273 | 450,941 | ||||||
Long-term
debt
|
24,986 | 2,580 | ||||||
Other
liabilities
|
300,219 | 278,086 | ||||||
Deferred income
taxes
|
30,609 | 25,371 | ||||||
Total
liabilities
|
774,087 | 756,978 | ||||||
Commitments and contingencies (Note
9)
|
||||||||
Stockholders'
Equity:
|
||||||||
Preferred stock: (authorized
25,000,000 shares; $0.01 par value) none issued
|
- | - | ||||||
Common stock: (authorized
1,000,000,000 shares; $0.01 par value) issued
|
||||||||
and outstanding -
317,533,772 and
336,728,851 shares, respectively
|
3,175 | 3,367 | ||||||
Additional
paid-in-capital
|
1,167,547 | 1,115,041 | ||||||
Retained
earnings
|
376,931 | 353,122 | ||||||
Accumulated other comprehensive
(loss) income
|
(5,739 | ) | 18,845 | |||||
Total stockholders'
equity
|
1,541,914 | 1,490,375 | ||||||
Total liabilities and
stockholders' equity
|
$ | 2,316,001 | $ | 2,247,353 |
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
March 28,
|
March 29,
|
March 28,
|
March 29,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net sales
|
$ | 739,939 | $ | 744,522 | $ | 2,452,724 | $ | 2,399,257 | ||||||||
Cost of sales
|
214,876 | 186,204 | 677,432 | 585,446 | ||||||||||||
Gross
profit
|
525,063 | 558,318 | 1,775,292 | 1,813,811 | ||||||||||||
Selling, general and
administrative expenses
|
339,686 | 301,626 | 1,008,066 | 915,298 | ||||||||||||
Operating
income
|
185,377 | 256,692 | 767,226 | 898,513 | ||||||||||||
Interest (expense) income,
net
|
(121 | ) | 9,547 | 3,057 | 35,111 | |||||||||||
Income before provision for income
taxes
|
185,256 | 266,239 | 770,283 | 933,624 | ||||||||||||
Provision for income
taxes
|
70,397 | 103,827 | 292,707 | 364,109 | ||||||||||||
Income from continuing
operations
|
114,859 | 162,412 | 477,576 | 569,515 | ||||||||||||
(Loss) income from discontinued
operations,
|
||||||||||||||||
net of income
taxes
|
- | (4 | ) | - | 16 | |||||||||||
Net income
|
$ | 114,859 | $ | 162,408 | $ | 477,576 | $ | 569,531 | ||||||||
Net income per
share
|
||||||||||||||||
Basic
|
||||||||||||||||
Continuing
operations
|
$ | 0.36 | $ | 0.47 | $ | 1.47 | $ | 1.58 | ||||||||
Discontinued
operations
|
- | (0.00 | ) | - | 0.00 | |||||||||||
Net income
|
$ | 0.36 | $ | 0.47 | $ | 1.47 | $ | 1.58 | ||||||||
Diluted
|
||||||||||||||||
Continuing
operations
|
$ | 0.36 | $ | 0.46 | $ | 1.46 | $ | 1.56 | ||||||||
Discontinued
operations
|
- | (0.00 | ) | - | 0.00 | |||||||||||
Net income
|
$ | 0.36 | $ | 0.46 | $ | 1.46 | $ | 1.56 | ||||||||
Shares used in computing net
income per share
|
||||||||||||||||
Basic
|
320,163 | 348,125 | 325,481 | 360,507 | ||||||||||||
Diluted
|
321,355 | 351,593 | 327,102 | 365,497 |
Nine Months
Ended
|
||||||||
March 28,
|
March 29,
|
|||||||
2009
|
2008
|
|||||||
CASH FLOWS FROM OPERATING
ACTIVITIES
|
||||||||
Net income
|
$ | 477,576 | $ | 569,531 | ||||
Adjustments to reconcile net
income to net cash from operating activities:
|
||||||||
Depreciation and
amortization
|
91,823 | 74,948 | ||||||
Provision for bad
debt
|
1,987 | 1,034 | ||||||
Share-based
compensation
|
49,656 | 50,473 | ||||||
Excess tax benefit from
share-based compensation
|
(1,157 | ) | (21,537 | ) | ||||
Deferred income
taxes
|
658 | (36,875 | ) | |||||
Other, net
|
7,195 | (4,981 | ) | |||||
Changes in operating assets and
liabilities:
|
||||||||
Increase in trade accounts
receivable
|
(17,809 | ) | (29,458 | ) | ||||
(Increase) decrease in
inventories
|
(33,615 | ) | 6,230 | |||||
Decrease (increase) in other
assets
|
12,529 | (27,132 | ) | |||||
(Decrease) increase in other
liabilities
|
(3,066 | ) | 11,571 | |||||
Decrease in accounts
payable
|
(70,580 | ) | (53,778 | ) | ||||
Increase in accrued
liabilities
|
23,759 | 60,295 | ||||||
Net cash provided by operating
activities
|
538,956 | 600,321 | ||||||
CASH FLOWS FROM INVESTING
ACTIVITIES
|
||||||||
Acquisition of
distributor
|
(14,507 | ) | - | |||||
Purchases of property and
equipment
|
(111,460 | ) | (119,777 | ) | ||||
Purchase of corporate headquarters
building
|
(103,300 | ) | - | |||||
Purchases of
investments
|
- | (162,300 | ) | |||||
Proceeds from maturities and sales
of investments
|
- | 782,460 | ||||||
Net cash (used in) provided by
investing activities
|
(229,267 | ) | 500,383 | |||||
CASH FLOWS FROM FINANCING
ACTIVITIES
|
||||||||
Repurchase of common
stock
|
(453,786 | ) | (1,166,600 | ) | ||||
Repayment of long-term
debt
|
(285 | ) | (235 | ) | ||||
Borrowings on revolving credit
facilities, net
|
1,896 | 9,563 | ||||||
Proceeds from share-based awards,
net
|
1,703 | 80,984 | ||||||
Excess tax benefit from
share-based compensation
|
1,157 | 21,537 | ||||||
Net cash used in financing
activities
|
(449,315 | ) | (1,054,751 | ) | ||||
Effect of changes in foreign
exchange rates on cash and cash equivalents
|
(8,012 | ) | 5,291 | |||||
(Decrease) increase in cash and
cash equivalents
|
(147,638 | ) | 51,244 | |||||
Cash and cash equivalents at
beginning of period
|
698,905 | 556,956 | ||||||
Cash and cash equivalents at end
of period
|
$ | 551,267 | $ | 608,200 | ||||
Supplemental
information:
|
||||||||
Cash paid for income
taxes
|
$ | 216,868 | $ | 373,783 | ||||
Cash paid for interest
|
$ | 652 | $ | 590 | ||||
Non-cash investing activity -
property and equipment obligations incurred
|
$ | 14,366 | $ | 24,395 | ||||
Non-cash financing activity -
mortgage debt assumed
|
$ | 23,000 | $ | - |
1.
|
Basis
of Presentation and Organization
|
2.
|
Change
in Accounting Principle
|
At June 28,
2008
|
As Previously
Reported
|
Effect of
Accounting
Principle Change
|
Adjusted
|
|||||||||
Inventories
|
$ | 345,493 | $ | (27,003 | ) | $ | 318,490 | |||||
Other current
assets
|
234,573 | 512 | 235,085 | |||||||||
Deferred income taxes -
liability
|
26,417 | (1,046 | ) | 25,371 | ||||||||
Retained
earnings
|
375,949 | (22,827 | ) | 353,122 | ||||||||
Accumulated other comprehensive
income
|
21,463 | (2,618 | ) | 18,845 | ||||||||
At March 29,
2008
|
||||||||||||
Inventories
|
$ | 319,655 | $ | (29,015 | ) | $ | 290,640 | |||||
Other current
assets
|
137,722 | 512 | 138,234 | |||||||||
Other liabilities -
non-current
|
168,635 | (1,046 | ) | 167,589 | ||||||||
Retained
earnings
|
332,376 | (22,827 | ) | 309,549 | ||||||||
Accumulated other comprehensive
income
|
33,941 | (4,630 | ) | 29,311 | ||||||||
Period Ended March 29,
2008
|
||||||||||||
Translation
adjustments
|
$ | 50,015 | $ | (5,602 | ) | $ | 44,413 |
At March 28,
2009
|
Prior to Effect
of
Accounting
Principle
Change
|
Effect of
Accounting
Principle
Change
|
As Reported
|
|||||||||
Inventories
|
$ | 387,078 | $ | (29,408 | ) | $ | 357,670 | |||||
Other current
assets
|
194,718 | 512 | 195,230 | |||||||||
Deferred income taxes -
liability
|
31,655 | (1,046 | ) | 30,609 | ||||||||
Retained
earnings
|
399,758 | (22,827 | ) | 376,931 | ||||||||
Accumulated other comprehensive
loss
|
(716 | ) | (5,023 | ) | (5,739 | ) |
3.
|
Acquisition
|
Assets
Acquired
|
Fair Value at
September 1,
2008
|
||
Current
assets
|
$ | 5,099 | |
Fixed
assets
|
3,555 | ||
Other
assets
|
2,299 | ||
Goodwill
|
3,554 | ||
Total assets
acquired
|
$ | 14,507 |
4.
|
Purchase
of Corporate Headquarters Building
|
5.
|
Stockholders’
Equity
|
Common
Stockholders'
Equity
|
Additional
Paid-in-
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
Stockholders'
Equity
|
||||||||||||||||
Balances at June 30,
2007
|
$ | 3,725 | $ | 978,664 | $ | 940,757 | $ | (12,792 | ) | $ | 1,910,354 | |||||||||
Net income
|
- | - | 569,531 | - | 569,531 | |||||||||||||||
Unrealized losses on cash flow
hedging derivatives, net of tax
|
- | - | - | (3,282 | ) | (3,282 | ) | |||||||||||||
Translation
adjustments
|
- | - | - | 44,413 | 44,413 | |||||||||||||||
Comprehensive
income
|
610,662 | |||||||||||||||||||
Cumulative effect of change in
accounting principle (Note 2)
|
- | - | (22,827 | ) | 972 | (21,855 | ) | |||||||||||||
Shares issued for stock options
and employee
|
||||||||||||||||||||
benefit
plans
|
36 | 75,186 | - | - | 75,222 | |||||||||||||||
Share-based
compensation
|
- | 50,473 | - | - | 50,473 | |||||||||||||||
Excess tax benefit from share-based
compensation
|
- | 21,537 | - | - | 21,537 | |||||||||||||||
Repurchase of common
stock
|
(349 | ) | (37,136 | ) | (1,129,115 | ) | - | (1,166,600 | ) | |||||||||||
Adjustment to adopt FIN
48
|
- | - | (48,797 | ) | - | (48,797 | ) | |||||||||||||
Balances at March 29,
2008
|
$ | 3,412 | $ | 1,088,724 | $ | 309,549 | $ | 29,311 | $ | 1,430,996 | ||||||||||
Balances at June 28,
2008
|
$ | 3,367 | $ | 1,115,041 | $ | 353,122 | $ | 18,845 | $ | 1,490,375 | ||||||||||
Net income
|
- | - | 477,576 | - | 477,576 | |||||||||||||||
Unrealized losses on cash flow
hedging derivatives, net of tax
|
- | - | - | (9,109 | ) | (9,109 | ) | |||||||||||||
Translation
adjustments
|
- | - | - | (15,497 | ) | (15,497 | ) | |||||||||||||
Comprehensive
income
|
452,970 | |||||||||||||||||||
Shares issued for stock options
and employee
|
||||||||||||||||||||
benefit
plans
|
10 | 1,693 | - | - | 1,703 | |||||||||||||||
Share-based
compensation
|
- | 49,656 | - | - | 49,656 | |||||||||||||||
Excess tax benefit from
share-based compensation
|
- | 1,157 | - | - | 1,157 | |||||||||||||||
Repurchase of common
stock
|
(202 | ) | - | (453,584 | ) | - | (453,786 | ) | ||||||||||||
Adjustment to adopt SFAS 158
measurement date
|
||||||||||||||||||||
provision, net of
tax
|
- | - | (183 | ) | 22 | (161 | ) | |||||||||||||
Balances at March 28,
2009
|
$ | 3,175 | $ | 1,167,547 | $ | 376,931 | $ | (5,739 | ) | $ | 1,541,914 |
Period
Ended
|
||||||||
March 28,
2009
|
June 28,
2008
|
|||||||
Cumulative translation
adjustments
|
$ | (2,602 | ) | $ | 12,895 | |||
Unrealized (losses)/gains on cash
flow hedging derivatives, net of taxes of $(1,491) and
$4,762
|
(2,166 | ) | 6,943 | |||||
Pension liability
adjustments, net of taxes of
$672 and $657
|
(971 | ) | (993 | ) | ||||
Accumulated other comprehensive
(loss) income
|
$ | (5,739 | ) | $ | 18,845 |
6.
|
Earnings
Per Share
|
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
March 28,
2009
|
March 29,
2008
|
March 28,
2009
|
March 29,
2008
|
|||||||||||||
Net income from continuing
operations
|
$ | 114,859 | $ | 162,412 | $ | 477,576 | $ | 569,515 | ||||||||
Total weighted-average basic
shares
|
320,163 | 348,125 | 325,481 | 360,507 | ||||||||||||
Dilutive
securities:
|
||||||||||||||||
Employee benefit and share award
plans
|
60 | 468 | 187 | 604 | ||||||||||||
Stock option
programs
|
1,132 | 3,000 | 1,434 | 4,386 | ||||||||||||
Total weighted-average diluted
shares
|
321,355 | 351,593 | 327,102 | 365,497 | ||||||||||||
Income from continuing operations
per share:
|
||||||||||||||||
Basic
|
$ | 0.36 | $ | 0.47 | $ | 1.47 | $ | 1.58 | ||||||||
Diluted
|
$ | 0.36 | $ | 0.46 | $ | 1.46 | $ | 1.56 |
7.
|
Share-Based
Compensation
|
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
March 28,
2009
|
March 29,
2008
|
March 28,
2009
|
March 29,
2008
|
|||||||||||||
Share-based compensation
expense
|
$ | 17,684 | $ | 16,320 | $ | 49,656 | $ | 50,473 | ||||||||
Income tax
benefit related to share-based compensation
expense
|
6,282 | 6,000 | 17,641 | 18,840 |
Number of
Options
Outstanding
|
Weighted-
Average
Exercise
Price
|
|||||||
Outstanding at June 28,
2008
|
28,655 | $ | 29.44 | |||||
Granted
|
4,949 | 26.02 | ||||||
Exercised
|
(459 | ) | 12.70 | |||||
Forfeited or
expired
|
(1,340 | ) | 33.50 | |||||
Outstanding at March 28,
2009
|
31,805 | $ | 28.97 | |||||
Vested and expected to vest at
March 28,
2009
|
31,445 | $ | 28.98 | |||||
Exercisable at March 28,
2009
|
20,320 | 27.50 |
Number of
Non-vested
Share Units
|
Weighted-
Average Grant-
Date Fair
Value
|
|||||||
Non-vested at June 28,
2008
|
1,588 | $ | 33.98 | |||||
Granted
|
1,670 | 24.67 | ||||||
Vested
|
(592 | ) | 27.15 | |||||
Forfeited
|
(58 | ) | 33.89 | |||||
Non-vested at March 28,
2009
|
2,608 | $ | 29.57 |
8.
|
Fair
Value Measurements
|
Level 2
|
Level 3
|
|||||||
Assets:
|
||||||||
Long-term investment - auction
rate security
(a)
|
$ | - | $ | 6,000 | ||||
Derivative assets - zero-cost
collar options
(b)
|
5 | - | ||||||
Total
|
$ | 5 | $ | 6,000 | ||||
Liabilities:
|
||||||||
Derivative liabilities - zero-cost
collar options
(b)
|
$ | 2,353 | $ | - | ||||
Derivative liabilities - cross-currency
swap
(c)
|
- | 28,252 | ||||||
Total
|
$ | 2,353 | $ | 28,252 |
Auction Rate
Security
|
||||
Balance at June 28,
2008
|
$ | 8,000 | ||
Unrealized other-than-temporary
loss,
|
||||
recognized in selling, general and
administrative expenses
|
(2,000 | ) | ||
Balance at March 28,
2009
|
$ | 6,000 |
Cross-Currency
Swap
|
||||
Balance at June 28,
2008
|
$ | 5,540 | ||
Unrealized loss, recorded in
accumulated other comprehensive income
|
22,712 | |||
Balance at March 28,
2009
|
$ | 28,252 |
9.
|
Commitments and
Contingencies
|
10.
|
Derivative Instruments and
Hedging
Activities
|
Derivatives designated as
hedging
|
Balance
Sheet
|
Fair Value
|
||||||||
instruments under Statement
133
|
Classification
|
At March 28,
2009
|
At June 28,
2009
|
|||||||
Foreign exchange
contracts
|
Other Current
Assets
|
$ | 5 | $ | 7,906 | |||||
Total derivative
assets
|
$ | 5 | $ | 7,906 | ||||||
Foreign exchange
contracts
|
Accrued
Liabilities
|
$ | 30,605 | $ | 5,540 | |||||
Total derivative
liabilities
|
$ | 30,605 | $ | 5,540 |
Amount of Gain or (Loss)
Recognized in OCI on Derivatives
(Effective
Portion)
|
||||||||||||||||
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
Derivatives in Statement 133 Cash
Flow Hedging
Relationships
|
March 28,
2009
|
March 29,
2008
|
March 28,
2009
|
March 29,
2008
|
||||||||||||
Foreign exchange
contracts
|
$ | 2,868 | $ | (4,630 | ) | $ | (9,664 | ) | $ | (3,298 | ) | |||||
Total
|
$ | 2,868 | $ | (4,630 | ) | $ | (9,664 | ) | $ | (3,298 | ) |
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Income
(Effective Portion)
|
||||||||||||||||
Location of Gain or (Loss)
|
Quarter
Ended
|
Nine Months
Ended
|
||||||||||||||
Reclassified from Accumulated OCI
into Income (Effective
Portion)
|
March 28,
2009
|
March 29,
2008
|
March 28,
2009
|
March 29,
2008
|
||||||||||||
Cost of
Sales
|
$ | (1,915 | ) | $ | (1,481 | ) | $ | (936 | ) | $ | (27 | ) | ||||
Total
|
$ | (1,915 | ) | $ | (1,481 | ) | $ | (936 | ) | $ | (27 | ) |
Period
Ended
|
||||||||
March 28,
2009
|
June 28,
2008
|
|||||||
Balance at beginning of
period
|
$ | 6,943 | $ | 1,161 | ||||
Net losses transferred to
earnings
|
555 | 2,411 | ||||||
Change in fair value, net of
tax expense
|
(9,664 | ) | 3,371 | |||||
Balance at end of
period
|
$ | (2,166 | ) | $ | 6,943 |
Direct-to-
Consumer
|
Indirect
|
Total
|
||||||||||
Goodwill balance at June 28,
2008
|
$ | 247,602 | $ | 1,516 | $ | 249,118 | ||||||
Acquisition of Hong Kong & Macau retail
businesses
|
3,554 | - | 3,554 | |||||||||
Foreign exchange
impact
|
20,269 | - | 20,269 | |||||||||
Goodwill balance at March 28,
2009
|
$ | 271,425 | $ | 1,516 | $ | 272,941 |
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
March 28,
|
March 29,
|
March 28,
|
March 29,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Service
cost
|
$ | 290 | $ | 202 | $ | 823 | $ | 574 | ||||||||
Interest
cost
|
106 | 96 | 316 | 287 | ||||||||||||
Expected return on plan
assets
|
(89 | ) | (79 | ) | (267 | ) | (237 | ) | ||||||||
Recognized actuarial
loss
|
37 | 67 | 111 | 197 | ||||||||||||
Net periodic pension
cost
|
$ | 344 | $ | 286 | $ | 983 | $ | 821 |
Direct-to-
Consumer
|
Indirect
|
Corporate
Unallocated
|
Total
|
|||||||||||||
Quarter Ended March 28,
2009
|
||||||||||||||||
Net sales
|
$ | 634,033 | $ | 105,906 | $ | - | $ | 739,939 | ||||||||
Operating income
(loss)
|
211,153 | 56,381 | (82,157 | ) | 185,377 | |||||||||||
Income (loss) before provision
for
|
||||||||||||||||
income taxes and discontinued
operations
|
211,153 | 56,381 | (82,278 | ) | 185,256 | |||||||||||
Depreciation and amortization
expense
|
19,694 | 2,483 | 8,554 | 30,731 | ||||||||||||
Additions to long-lived
assets
|
18,487 | 783 | 3,784 | 23,054 | ||||||||||||
Quarter Ended March 29,
2008
|
||||||||||||||||
Net sales
|
$ | 582,274 | $ | 162,248 | $ | - | $ | 744,522 | ||||||||
Operating income
(loss)
|
229,197 | 103,089 | (75,594 | ) | 256,692 | |||||||||||
Income (loss) before provision
for
|
||||||||||||||||
income taxes and discontinued
operations
|
229,197 | 103,089 | (66,047 | ) | 266,239 | |||||||||||
Depreciation and amortization
expense
|
18,340 | 2,478 | 4,991 | 25,809 | ||||||||||||
Additions to long-lived assets
|
22,710 | 2,571 | 7,229 | 32,510 | ||||||||||||
Nine Months Ended March 28,
2009
|
||||||||||||||||
Net sales
|
$ | 2,043,790 | $ | 408,934 | $ | - | $ | 2,452,724 | ||||||||
Operating income
(loss)
|
762,206 | 239,022 | (234,002 | ) | 767,226 | |||||||||||
Income (loss) before provision
for
|
||||||||||||||||
income taxes and discontinued
operations
|
762,206 | 239,022 | (230,945 | ) | 770,283 | |||||||||||
Depreciation and amortization
expense
|
62,095 | 7,490 | 22,238 | 91,823 | ||||||||||||
Additions to long-lived
assets
|
53,711 | 5,061 | 151,464 | 210,236 | ||||||||||||
Nine Months Ended March 29,
2008
|
||||||||||||||||
Net sales
|
$ | 1,895,568 | $ | 503,689 | $ | - | $ | 2,399,257 | ||||||||
Operating income
(loss)
|
818,407 | 325,261 | (245,155 | ) | 898,513 | |||||||||||
Income (loss) before provision
for
|
||||||||||||||||
income taxes and discontinued
operations
|
818,407 | 325,261 | (210,044 | ) | 933,624 | |||||||||||
Depreciation and amortization
expense
|
51,098 | 7,166 | 16,684 | 74,948 | ||||||||||||
Additions to long-lived
assets
|
80,864 | 12,686 | 21,549 | 115,099 |
Quarter
Ended
|
Nine Months
Ended
|
|||||||||||||||
March 28,
|
March 29,
|
March 28,
|
March 29,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Production
variances
|
$ | 8,509 | $ | 12,354 | $ | 17,627 | $ | 19,330 | ||||||||
Advertising, marketing
and
design
|
(37,390 | ) | (32,818 | ) | (114,186 | ) | (96,101 | ) | ||||||||
Administration and information
systems
|
(40,870 | ) | (44,081 | ) | (99,266 | ) | (134,187 | ) | ||||||||
Distribution and customer
service
|
(12,406 | ) | (11,049 | ) | (38,177 | ) | (34,197 | ) | ||||||||
Total corporate
unallocated
|
$ | (82,157 | ) | $ | (75,594 | ) | $ | (234,002 | ) | $ | (245,155 | ) |
ITEM 2.
|
Management’s Discussion and
Analysis of Financial Condition and Results of Operations
|
|
·
|
Build
market share in the North American women’s accessories
market. As part of our culture of innovation and continuous
improvement we are implementing a number of initiatives to accelerate the
level of newness, elevate our product offering and enhance the in-store
experience. These initiatives will enable us to continue to
leverage our leadership position in the
market.
|
|
·
|
Continue
to grow our North American retail store base primarily by opening stores
in new markets and adding stores in existing markets. We
believe that North America can support about 500 retail stores in total,
including up to 30 in Canada. During fiscal 2009, we plan to
open 39 retail stores, of which 13 will be in new markets. We
currently plan to open approximately 20 new retail stores in fiscal 2010,
of which 13 will be in new markets. The pace of our future
retail store openings will depend upon the economic environment and
reflect opportunities in the
marketplace.
|
|
·
|
Continue
to expand market share with the Japanese consumer, driving growth in Japan
primarily by opening new retail locations. We believe that
Japan can support about 180 locations in
total.
|
|
·
|
Raise
brand awareness in emerging markets, notably in China, where our brand is
taking hold and the category is developing rapidly. In
September 2008, Coach successfully completed the first phase of our
acquisition of our retail businesses in China, transitioning eight stores
in Hong Kong and two stores in Macau. The acquisition of our
retail business in mainland China was completed in April 2009,
transitioning 15 stores.
|
|
·
|
Earnings
per diluted share fell 22.6% to $0.36. Excluding one-time
charges of $0.03 per diluted share, earnings per diluted share decreased
17.0% to $0.38 per diluted share.
|
|
·
|
Net
sales decreased 0.6% to $739.9
million.
|
|
·
|
Direct-to-consumer
sales rose 8.9% to $634.0 million.
|
|
·
|
Comparable
store sales in North America declined 4.2%, primarily due to the
challenging retail environment which resulted in decreased traffic in our
full-priced stores.
|
|
·
|
Coach
Japan sales, when translated into U.S. dollars, rose 14.2% to $177.0
million. This increase includes a 13.4% positive impact from
currency translation.
|
|
·
|
In
North America, Coach opened two new retail stores, opened three new
factory stores and closed two retail stores, bringing the total number of
retail and factory stores to 324 and 109, respectively, at the end of the
third quarter of fiscal 2009. We also expanded one retail store
and one factory store in North
America.
|
|
·
|
In
Japan, Coach opened one new location, bringing the total number of Coach
Japan-operated locations at the end of the third quarter of fiscal 2009 to
156.
|
Quarter
Ended
|
||||||||||||||||||||||||
March 28,
2009
|
March 29,
2008
|
Variance
|
||||||||||||||||||||||
(dollars in millions, except per share
data)
|
||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||
Amount
|
% of
net sales
|
Amount
|
% of
net sales
|
Amount
|
%
|
|||||||||||||||||||
Net sales
|
$ | 739.9 | 100.0 | % | $ | 744.5 | 100.0 | % | $ | (4.6 | ) | (0.6 | )% | |||||||||||
Gross
profit
|
525.1 | 71.0 | 558.3 | 75.0 | (33.3 | ) | (6.0 | ) | ||||||||||||||||
Selling, general and administrative
expenses
|
339.7 | 45.9 | 301.6 | 40.5 | 38.1 | 12.6 | ||||||||||||||||||
Operating
income
|
185.4 | 25.1 | 256.7 | 34.5 | (71.3 | ) | (27.8 | ) | ||||||||||||||||
Interest (expense) income,
net
|
(0.1 | ) | (0.0 | ) | 9.5 | 1.3 | (9.7 | ) | (101.3 | ) | ||||||||||||||
Provision for income
taxes
|
70.4 | 9.5 | 103.8 | 13.9 | (33.4 | ) | (32.2 | ) | ||||||||||||||||
Income from continuing
operations
|
114.9 | 15.5 | 162.4 | 21.8 | (47.6 | ) | (29.3 | ) | ||||||||||||||||
Income from continuing operations
per share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.36 | $ | 0.47 | $ | (0.11 | ) | (23.1 | )% | |||||||||||||||
Diluted
|
$ | 0.36 | $ | 0.46 | $ | (0.10 | ) | (22.6 | )% |
Quarter
Ended
|
||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||
Percentage
of
|
||||||||||||||||||||
Net Sales
|
Total Net
Sales
|
|||||||||||||||||||
March 28,
|
March 29,
|
Rate of
|
March 28,
|
March 29,
|
||||||||||||||||
2009
|
2008
|
Increase
|
2009
|
2008
|
||||||||||||||||
(dollars in
millions)
|
||||||||||||||||||||
Direct-to-consumer
|
$ | 634.0 | $ | 582.3 | 8.9 | % | 85.7 | % | 78.2 | % | ||||||||||
Indirect
|
105.9 | 162.2 | (34.7 | ) | 14.3 | 21.8 | ||||||||||||||
Total net
sales
|
$ | 739.9 | $ | 744.5 | (0.6 | ) | 100.0 | % | 100.0 | % |
Nine Months
Ended
|
||||||||||||||||||||||||
March 28,
2009
|
March 29,
2008
|
Variance
|
||||||||||||||||||||||
(dollars in millions, except per
share data)
|
||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||
Amount
|
% of
net sales
|
Amount
|
% of
net sales
|
Amount
|
%
|
|||||||||||||||||||
Net sales
|
$ | 2,452.7 | 100.0 | % | $ | 2,399.3 | 100.0 | % | $ | 53.5 | 2.2 | % | ||||||||||||
Gross
profit
|
1,775.3 | 72.4 | 1,813.8 | 75.6 | (38.5 | ) | (2.1 | ) | ||||||||||||||||
Selling, general and
administrative expenses
|
1,008.1 | 41.1 | 915.3 | 38.1 | 92.8 | 10.1 | ||||||||||||||||||
Operating
income
|
767.2 | 31.3 | 898.5 | 37.4 | (131.3 | ) | (14.6 | ) | ||||||||||||||||
Interest income,
net
|
3.1 | 0.1 | 35.1 | 1.5 | (32.1 | ) | (91.3 | ) | ||||||||||||||||
Provision for income
taxes
|
292.7 | 11.9 | 364.1 | 15.2 | (71.4 | ) | (19.6 | ) | ||||||||||||||||
Income from continuing
operations
|
477.6 | 19.5 | 569.5 | 23.7 | (91.9 | ) | (16.1 | ) | ||||||||||||||||
Income from continuing operations
per share:
|
||||||||||||||||||||||||
Basic
|
$ | 1.47 | $ | 1.58 | $ | (0.11 | ) | (7.1 | )% | |||||||||||||||
Diluted
|
$ | 1.46 | $ | 1.56 | $ | (0.10 | ) | (6.3 | )% |
Nine Months
Ended
|
||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||
Net Sales
|
Percentage of
Total Net
Sales
|
|||||||||||||||||||
March 28,
2009
|
March 29,
2008
|
Rate of
Increase
|
March 28,
2009
|
March 29,
2008
|
||||||||||||||||
(dollars in
millions)
|
||||||||||||||||||||
Direct-to-consumer
|
$ | 2,043.8 | $ | 1,895.6 | 7.8 | % | 83.3 | % | 79.0 | % | ||||||||||
Indirect
|
408.9 | 503.7 | (18.8 | ) | 16.7 | 21.0 | ||||||||||||||
Total net
sales
|
$ | 2,452.7 | $ | 2,399.3 | 2.2 | 100.0 | % | 100.0 | % |
ITEM 3.
|
Quantitative and Qualitative
Disclosures about Market
Risk
|
ITEM 4.
|
Controls and
Procedures
|
ITEM 1.
|
Legal
Proceedings
|
ITEM 1A.
|
Risk
Factors
|
ITEM 2.
|
Unregistered Sales of Equity
Securities and Use of
Proceeds
|
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
per
Share
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
or
Programs (1)
|
Approximate
Dollar
Value
of Shares that
May
Yet be Purchased
Under
the Plans or
Programs
(1)
|
||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Period
7 (12/28/08 - 1/31/09)
|
- | $ | - | - | $ | 759,623 | ||||||||||
Period
8 (2/1/09 - 2/28/09)
|
- | - | - | 759,623 | ||||||||||||
Period
9 (3/1/09 - 3/28/09)
|
3,577 | 13.98 | 3,577 | 709,625 | ||||||||||||
Total
|
3,577 | $ | 13.98 | 3,577 |
(1)
|
The
Company repurchases its common shares under repurchase programs that were
approved by the Board of Directors as
follows:
|
Date Share
Repurchase
Programs were
Publicly
Announced
|
Total Dollar
Amount
Approved
|
Expiration Date of
Plan
|
||
August 25,
2008
|
$ 1.0
billion
|
June
2010
|
ITEM 6.
|
Exhibits
|
|
(a)
|
Exhibits
|
|
18
|
Letter
re: change in accounting principle, dated October 31, 2008, which is
incorporated herein by reference from Exhibit 18 to Coach’s Quarterly
Report on Form 10-Q for the fiscal quarter ended September 27,
2008
|
|
31.1
|
Rule
13(a) – 14(a)/15(d) – 14(a)
Certifications
|
|
32.1
|
Section
1350 Certifications
|