Coach (COH)

Assumptions
2009A

2010A

2011A

2012A

2013A

Mean

Income Statement
YoY sales growth
COGS % of sales
SG&A % of sales
Other Income (Expense)
D&A as % of PPE
Effective tax rate
FDSO
Dividend Payout Ratio

0.0%
24.1%
41.7%
(9)
12.6%
36.1%
325.6
0.0%

11.7%
23.3%
41.1%
(5)
12.3%
36.1%
315.8
12.8%

15.3%
23.9%
41.3%
(21)
10.7%
31.8%
301.6
20.2%

14.5%
24.3%
41.0%
(12)
10.0%
30.8%
294.1
25.1%

6.6%
23.9%
41.9%
(56)
11.1%
30.9%
286.3
32.8%

9.6%
23.9%
41.4%
(21)
11.3%
33.1%
304.7
18.2%

Balance Sheet
A/R (days receivable)
Inventory (days inventory)
Other current assets % of sales
Capex % of sales
Total Investments & Advances
Intangible Assets % of sales
Deferred Tax Assets % of sales
Other long term assets % of sales
A/P (days payable)
Other current liabilities % of COGS
Long term debt issuance
Long term debt repayment
Deffered Tax Liabilities
Other long term liabilities
Common stock
Accumulated Minority Interest

12.28
152.66
5.0%
7.4%
6.0
9.1%
4.9%
3.6%
51.97
44.7%
0
0.3
80.8
303
1196
0

11.03
157.53
3.7%
2.2%
6.0
8.7%
4.3%
3.8%
46.10
50.2%
0
0.7
65.2
343
1535
0

12.54
154.90
4.5%
3.6%
6.0
8.2%
2.5%
3.6%
43.85
47.6%
0
0.7
46.5
360
2058
0

13.37
158.89
4.4%
3.9%
6.0
8.1%
2.0%
3.5%
55.99
46.6%
0
0.8
22.5
370
2380
0

12.62
157.85
4.6%
4.8%
197.3
7.0%
1.7%
2.5%
53.96
44.8%
0
22.4
0.0
400
2511
0

12.37
156.37
4.4%
4.4%
44.3
8.2%
3.1%
3.4%
50.37
46.8%
0
5.0
43.0
355
1936
0

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

Interest Rates
Cash
Revolver
Long term debt

2014P

2015P

2016P

2017P

2018P

(3.3%)
27.5%
43.0%
(21.0)
11.3%
33.1%
286.3
35.0%

5.2%
27.5%
43.0%
(21.0)
11.3%
33.1%
286.3
35.0%

6.6%
27.5%
43.0%
(21.0)
11.3%
33.1%
286.3
30.0%

4.9%
27.5%
43.0%
(21.0)
11.3%
33.1%
286.3
30.0%

4.8%
27.5%
43.0%
(21.0)
11.3%
33.1%
286.3
30.0%

12.62
156.37
4.6%
5.5%
197.3
8.2%
1.7%
3.4%
53.00
45.0%
0
0.5
0.0
400
2511
0

12.62
156.37
4.6%
5.5%
197.3
8.2%
1.7%
3.4%
53.00
45.0%
0
0.0
0.0
400
2511
0

12.62
156.37
4.6%
5.5%
197.3
8.2%
1.7%
3.4%
53.00
45.0%
0
0.0
0.0
400
2511
0

12.62
156.37
4.6%
5.5%
197.3
8.2%
1.7%
3.4%
53.00
45.0%
0
0.0
0.0
400
2511
0

12.62
156.37
4.6%
5.5%
197.3
8.2%
1.7%
3.4%
53.00
45.0%
0
0.0
0.0
400
2511
0

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

2.4%
1.2%
4.5%

Coach (COH)
Calculations

PPE
Beginning
CAPEX
Depreciation
Ending
Retained Earnings
Beginning
NI
Dividends
Ending
Operating Working Capital
A/R
Inventory
Other Curr. Assets
A/P
Other Curr. Liabilities
Operating Working Capital

2013A

2014P

2015P

2016P

2017P

2018P

1,197

1,197
270
135
1,332

1,332
284
151
1,466

1,466
303
166
1,603

1,603
318
181
1,739

1,739
333
197
1,876

476
940
329
1,088

1,088
1,009
303
1,794

1,794
1,065
319
2,539

2,539
1,123
337
3,325

179
609
238
206
639
179

190
649
253
220
682
191

200
681
266
231
715
201

209
713
278
242
749
210

(102)

(102)
890
311
476

175
525
236
179
543
214

170
578
226
196
608
170

Coach (COH)
Debt Schedule

Revolver
Balance
Interest Rate
Interest Expense
Debt
Beginning
Issuance
Repayment
Ending
Interest Rate
Interest Expense

2013A

2014P

2015P

2016P

2017P

2018P

0.00
1.2%

0.00
1.2%
0.00

0.00
1.2%
0.00

0.00
1.2%
0.00

0.00
1.2%
0.00

0.00
1.2%
0.00

0.49
0.00
0.49
0.00
4.5%
0.01

0.00
0.00
0.00
0.00
4.5%
0.00

0.00
0.00
0.00
0.00
4.5%
0.00

0.00
0.00
0.00
0.00
4.5%
0.00

0.00
0.00
0.00
0.00
4.5%
0.00

0.01

0.00

0.00

0.00

0.00

0.49
4.5%

Total Interest Expense

Cash
Balance
Interest Rate
Interest Income

1,134.89
2.41%

1,536.91
2.41%
32.20

1,971.38
2.41%
42.27

2,483.04
2.41%
53.68

3,046.38
2.41%
66.63

3,649.77
2.41%
80.69

Coach (COH)
Income Statement
(All figures in millions of U.S. Dollar, except per share items.)

2009A

2010A

2011A

2012A

2013A

3,230

3,608

4,159

4,763

5,075

COGS excluding D&A

780

842

994

1,159

1,213

Depreciation & Amortization Expense

123

127

125

133

163

Gross Income

2,328

2,639

3,039

3,471

3,699

SG&A Expense

1,347

1,484

1,719

1,954

2,125

EBIT (Operating Income)

980

1,156

1,321

1,517

1,574

Interest Income

5.17

1.76

1.03

0.72

2.37

Interest Expense

0.00

0.00

0.00

0.00

0.00

(8.53)

(5.45)

(20.62)

(12.33)

(55.78)

Pretax Income

977

1,152

1,301

1,506

1,521

Income Taxes

354

417

420

467

486

Consolidated Net Income

623

735

881

1,039

1,034

Minority Interest Expense

Net Income

623

735

881

1,039

1,034

Net Income available to Common

623

735

881

1,039

1,034

EBIT

980

1,156

1,321

1,517

1,574

Depreciation & Amortization Expense

123

127

125

133

163

Shareholder Data
Dividends
Diluted Shares Outstanding
EPS (recurring)

0
326
1.93

94
316
2.34

178
302
2.96

260
294
3.54

340
286
3.73

Sales/Revenue

Other Income (Expense)

2014P

2015P

2016P

2017P

2018P

4,910

5,166

5,507

5,777

6,052

1,350

1,421

1,514

1,589

1,664

135

151

166

181

197

3,424

3,595

3,827

4,007

4,191

2,111

2,221

2,368

2,484

2,602

1,313

1,374

1,459

1,523

1,589

32.20

42.27

53.68

66.63

80.69

Circ

0.01

0.00

0.00

0.00

0.00

1.0

(21.00)

(21.00)

(21.00)

(21.00)

(21.00)

1,324

1,395

1,492

1,569

1,648

435

455

483

504

526

890

940

1,009

1,065

1,123

890

940

1,009

1,065

1,123

890

940

1,009

1,065

1,123

1,313

1,374

1,459

1,523

1,589

135

151

166

181

197

311
286
3.11

329
286
3.28

303
286
3.52

319
286
3.72

337
286
3.92

Coach (COH)
Balance Sheet
(All figures in millions of U.S. Dollar, except per share items.)

2009A

2010A

2011A

2012A

2013A

Cash & ST Investments

800.4

696.4

702.0

917.2

1,134.9

Accounts Receivables

108.7

109.1

142.9

174.5

175.5

Inventory

326.1

363.3

421.8

504.5

524.7

Other Current Assets

161.2

133.9

185.6

208.4

235.9

1,396.4

1,302.6

1,452.4

1,804.5

2,070.9

593.0

548.5

582.3

644.4

694.8

6.0

6.0

6.0

6.0

197.3

Intangible Assets

293.2

315.6

340.8

385.8

354.8

Deferred Tax Assets

159.1

156.5

103.7

95.2

84.8

Other Long Term Assets

116.7

137.9

149.9

168.3

129.2

2,564.3

2,467.1

2,635.1

3,104.3

3,531.9

0.0

0.0

0.0

0.0

0.0

Accounts Payable

111.0

106.3

119.4

177.8

179.4

Other Current Liabilities

348.6

422.7

473.6

540.4

543.2

Total Current Liabilities

459.7

529.0

593.0

718.2

722.5

Long-Term Debt

25.1

24.2

23.4

1.0

0.5

Deferred Tax Liabilities

80.8

65.2

46.5

22.5

0.0

Other Long Term Liabilities

302.8

343.4

359.6

369.7

399.7

Total Liabilities

868.3

961.8

1,022.5

1,111.4

1,122.7

1,196.1

1,535.3

2,058.2

2,380.4

2,511.0

Assets

Total Current Assets

Net PPE
Total Investments and Advances

Total Assets
Liabilities & Shareholders' Equity
Revolver

Common Stock
Retained Earnings
Total Shareholders' Equity

500.0

(30.1)

(445.7)

(387.5)

(101.9)

1,696.0

1,505.3

1,612.6

1,992.9

2,409.2

0.0

0.0

0.0

0.0

0.0

Total Equity

1,696.0

1,505.3

1,612.6

1,992.9

2,409.2

Liabilities & Shareholders' Equity

2,564.3

2,467.1

2,635.1

3,104.3

3,531.9

0.000

0.000

0.000

0.000

0.000

Cash Conversion Cycle (Days)

98.8

103.1

104.4

106.6

105.4

Days of Sales Outstanding

12.2

11.0

11.1

12.2

12.6

Accumulated Minority Interest

Balanced?

Days of Inventory on Hand

Days of Payables Outstanding

135.8

129.9

128.0

130.9

136.5

49.1

37.9

34.7

36.4

43.7

2014P

2015P

2016P

2017P

2018P

1,536.9

1,971.4

2,483.0

3,046.4

3,649.8

169.8

178.6

190.4

199.7

209.2

578.4

608.6

648.8

680.6

713.0

225.9

237.6

253.3

265.7

278.4

2,511.0

2,996.3

3,575.6

4,192.5

4,850.4

829.5

963.2

1,100.5

1,237.1

1,373.4

o,i

197.3

197.3

197.3

197.3

197.3

402.6

423.6

451.6

473.7

496.3

o,i

83.5

87.8

93.6

98.2

102.9

166.9

175.7

187.2

196.4

205.8

4,190.8

4,843.9

5,605.9

6,395.2

7,226.1

0.0

0.0

0.0

0.0

0.0

196.1

206.3

219.9

230.7

241.7

607.6

639.3

681.5

714.9

748.9

803.6

845.6

901.4

945.6

990.6

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

399.7

399.7

399.7

399.7

399.7

1,203.4

1,245.4

1,301.2

1,345.3

1,390.3

2,511.0

2,511.0

2,511.0

2,511.0

2,511.0

476.4

1,087.5

1,793.7

2,538.9

3,324.7

o,f

2,987.5

3,598.6

4,304.7

5,049.9

5,835.7

0.0

0.0

0.0

0.0

0.0

2,987.5

3,598.6

4,304.7

5,049.9

5,835.7

4,190.8

4,843.9

5,605.9

6,395.2

7,226.1

0.000

0.000

0.000

0.000

0.000

12.6

12.6

12.6

12.6

12.6

O,I,F?

156.4

156.4

156.4

156.4

156.4

53.0

53.0

53.0

53.0

53.0

Coach (COH)
Cash Flow Statement
(All figures in millions of U.S. Dollar, except per share items. )

2014P
Net Income / Starting Line
Depreciation, Depletion & Amortization
(Increase) / Decrease in OWC

2015P

2016P

2017P

890

940

1,009

1,065

135.3

150.5

165.6

181.1

43.1

(8.9)

(11.8)

(9.4)

(37.8)

(8.7)

(11.6)

(9.2)

(Increase) / Decrease Deferred Tax Assets

1.4

(4.4)

(5.8)

(4.6)

Increase / (Decrease) in other LT Liabilities

0.0

0.0

0.0

0.0

1,031.7

1,068.7

1,145.1

1,222.6

(Increase) / Decrease in other LT Assets

Operating Cash Flow

Capital Expenditures

(270.0)

(284.1)

(302.9)

(317.7)

Addition to Intangibles

(47.8)

(21.0)

(28.0)

(22.1)

Investing Cash Flow

(317.8)

(305.2)

(330.9)

(339.9)

Cash Dividends Paid

(311.4)

(329.1)

(302.6)

(319.4)

Increase / (Decrease) in LTD

(0.5)

0.0

0.0

0.0

Increase / (Decrease) in other LTL

0.0

0.0

0.0

0.0

Increase / (Decrease) in Common Stock

0.0

0.0

0.0

0.0

Financing Cash Flow

(311.9)

(329.1)

(302.6)

(319.4)

Net Change in Cash

402.0

434.5

511.7

563.3

1,134.9
402.0
1,536.9

1,536.9
434.5
1,971.4

1,971.4
511.7
2,483.0

2,483.0
563.3
3,046.4

Beginning Cash
Change in Cash
Ending Cash

1,134.9

2018P
1,123
196.6
(9.5)
(9.4)
(4.7)
0.0
1,295.6
(332.9)
(22.6)
(355.4)
(336.8)
0.0
0.0
0.0
(336.8)
603.4
3,046.4
603.4
3,649.8

Coach (COH)
Summary
(All figures in millions of U.S. Dollar, except per share items. )

2009A

2010A

2011A

2012A

2013A

2014P

Sales
Net Income

3,230
623

3,608
735

4,159
881

4,763
1,039

5,075
1,034

4,910
890

Profitability
Gross Profit
EBIT
EBITDA
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin

2,328
980
1,103
72.1%
30.3%
34.2%
19.3%

2,639
1,156
1,282
73.2%
32.0%
35.5%
20.4%

3,039
1,321
1,446
73.1%
31.8%
34.8%
21.2%

3,471
1,517
1,650
72.9%
31.9%
34.6%
21.8%

3,699
1,574
1,737
72.9%
31.0%
34.2%
20.4%

3,424
1,313
1,448
69.7%
26.7%
29.5%
18.1%

1.5%
N/A

1.6%
N/A

1.4%
N/A

0.0%
N/A

0.0%
N/A

0.0%
132728.3

56
1.5%

132
3.2%

166
3.5%

15.2%

14.0%

13.5%

135
2.7%
4.2%
13.7%

270
5.5%
3.5%
16.9%

Size

Leverage & Coverage

Total Debt to Equity
EBITDA / Interest
Asset Management
CAPEX
CAPEX to Sales
OWC to Sales
Net PPE to Sales

18.4%

2015P

2016P

2017P

2018P

5,166
940

5,507
1,009

5,777
1,065

6,052
1,123

3,595
1,374
1,524
69.6%
26.6%
29.5%
18.2%

3,827
1,459
1,625
69.5%
26.5%
29.5%
18.3%

4,007
1,523
1,704
69.4%
26.4%
29.5%
18.4%

4,191
1,589
1,785
69.3%
26.3%
29.5%
18.5%

0.0%
N/A

0.0%
N/A

0.0%
N/A

0.0%
N/A

284
5.5%
3.5%
18.6%

303
5.5%
3.5%
20.0%

318
5.5%
3.5%
21.4%

333
5.5%
3.5%
22.7%

WACC Calculation
Target Capital Structure
Debt-to-Total Capitalization
Equity-to-Total Capitalization

-%
100.0%

Cost of Debt
Cost of Debt
Tax Rate
After-tax Cost of Debt

-%
35.0%
-%

Cost of Equity
Risk-free Rate
Market Risk Premium
Levered Beta
Size Premium
Cost of Equity

2.4%
6.7%
1.04
0.00
9.4%

WACC

9.4%

Beta Calculation
(All figures in millions of U.S. Dollar, except per share items. )

Company
Hermes International SCA
Prada S.p.A.
The Jones Group Inc.
Tiffany & Co.
Ralph Lauren Corporation Class A
Mean
Median

Predicted
Levered Beta
0.51
1.16
1.77
1.32
1.21

Market
Value of Debt
287
386
1,035
1,008
846

Market
Value of Equity
35,409
21,664
1,182
11,300
15,129

1.19
1.21

Debt/
Equity
0.8%
1.8%
87.6%
8.9%
5.6%
0.21
0.06

ValueCo Relevered Beta

Relevered Beta

Mean
Unlevered
Beta
1.04

Target
Debt/
Equity
-

Marginal
Tax Rate
35.0%
35.0%
35.0%
35.0%
35.0%

Unlevered
Beta
0.51
1.15
1.13
1.25
1.17
1.04
1.15

Target
Marginal
Tax Rate
35.00%

Relevered
Beta
1.04

DCF
(All figures in millions of U.S. Dollar, except per share items. )

Historical Data
Income Statement
EBITDA
Tax Expenses
EBIAT (Earnings Before Interest, After Tax)
Less: Capital Expenditure
Less: Increase in Net Working Capital
Unlevered Free Cash Flow
Weighted Average Cost of Capital
Discounting Period
Discounting Factor
Present Value of Projected Free Cash Flow
NPV of Projected Free Cash Flow
Exit Multiplie Method
Terminal Value Calculation
Terminal Year EBITDA
Assumed Exit Multiple
Terminal Value
Discount Factor
Present Value of Terminal Value
Enterprise Value

2009A
1,103
35%

9.44%

818
1,785

Implied Perpetuity Growth Rate

Perpetuity Growth Model Calculation

Terminal Year Free Cash Flow
Perpetuity Growth Rate
Discount Rate (WACC)
Terminal Value
Discount Factor
Present Value of Terminal Value
Enterprise Value

818
3.00%
9.44%
13,075
61%
7,960
10,699

Implied Share Price Calculation

Enterprise Value
Less: Total Debt
Less: Preferred Securities
Less: Non-Controlling Interest
Plus: Cash and Cash Equiv.
Implied Equity Value

10,699
0
0
0
3,650
14,349

2010A
1,282
35%

2011A
1,446
35%

2012A
1,650
35%

Shares Outstanding Calculation

Basic Shares O/S
Plus: In-The-Money Options
Less: Shares Repurchased
Fully Diluted Shares O/S

282.49
3.81
3.30
283.01

Implied Share Price

50.70

Current Share Price

48.81

Upside / (Downside)

3.87%

ta

Projected Data
2013A
1,737
35%

2014P
1,448
35%
941
270
(43)
715

2015P
1,524
35%
991
284
9
698

2016P
1,625
35%
1,056
303
12
741

2017P
1,704
35%
1,108
318
9
781

2018P
1,785
35%
1,160
333
10
818

1.50
87%
624.09
2,739

2.50
80%
556.69

3.50
73%
540.51

4.50
67%
520.09

5.50
61%
498.00