Derivative Instruments and Hedging Activities

6 Months Ended

Dec. 28, 2013

Derivative Instruments And Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

11.Derivative Instruments and Hedging Activities

Substantially all of the Company’s transactions involving international parties, excluding international consumer sales, are denominated in U.S. dollars, which limits the Company’s exposure to the effects of foreign currency exchange rate fluctuations. However, the Company is exposed to foreign currency exchange risk related to its foreign operating subsidiaries’ U.S. dollar-denominated inventory purchases and various cross-currency intercompany and related party loans. Coach uses derivative financial instruments to manage these risks. These derivative transactions are in accordance with the Company’s risk management policies. Coach does not enter into derivative transactions for speculative or trading purposes.

Two of the Company’s businesses outside of the United States, Coach Japan and Coach Canada, enter into zero-cost collar options, to manage the exchange rate risk related to their inventory purchases.  As of December 28, 2013 and June 29, 2013, zero-cost collar options with aggregate notional amounts of $153,754 and $193,352were outstanding, respectively.  Current maturity dates range from January 2014 to August 2014.

As of December 28, 2013, and June 29, 2013, the Company had entered into various short-term and long-term intercompany and related party loans denominated in various foreign currencies, with a total principal amount of $288,821 and $253,037 at December 28, 2013, and June 29, 2013, respectively.  Currentmaturity dates range from February 2014 to November 2023. To manage the exchange rate risk related to these loans, the Company entered into forward exchange and cross-currency swap contracts with notional amounts of $102,240 and $147,591, respectively as of December 28, 2013, and June 29, 2013. The terms of these contracts include the exchange of foreign currency fixed interest for U.S. dollar fixed interest and an exchange of the foreign currency and U.S. dollar based notional values at the maturity dates.

As of December 28, 2013 and June 29, 2013, the Company had entered into forward contracts to manage the exchange rate risk of contractual obligations with notional values of $5,775 and $16,944, respectively.  Contractual obligations as of December 28, 2013 and June 29, 2013 consist of $1,775 and $6,944, respectively, due to Hackett Limited related to the European joint venture acquisition and $4,000 and $10,000, respectively, due to Shinsegae International related to the acquisition of the domestic retail business in Korea.

The Company’s derivative instruments are designated as cash flow hedges. The effective portion of gains or losses on the derivative instruments are reported as a component of other comprehensive income and reclassified into earnings in the same periods during which the hedged transaction affects earnings. The ineffective portion of gains or losses on the derivative instruments are recognized in current earnings and are included within net cash provided by operating activities.

The following tables provide information related to the Company’s derivatives:

	Notional Value		Derivative Assets (Other Current Assets)		Derivative Liabilities (Accrued Liabilities)
			Fair Value		Fair Value
Derivatives Designated as Hedging Instruments	December 28, 2013	June 29, 2013	December 28, 2013	June 29, 2013	December 28, 2013	June 29, 2013
Zero-cost collars	$             153,754	$             193,352	$                 8,225	$                 1,592	$                         -	$                 2,555
Cross currency swaps	98,847	111,195	814	1,366	11	85
Forward Contracts:
Intercompany & related party loans	3,393	36,396	-	1,024	40	-
Contractual obligations	5,775	16,944	77	523	116	255
Total	$             261,769	$             357,887	$                 9,116	$                 4,505	$                    167	$                 2,895

	Amount of Net Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)
	Quarter Ended		Six Months Ended
	December 28,	December 29,	December 28,	December 29,
Derivatives in Cash Flow Hedging Relationships	2013	2012	2013	2012
Zero-cost collars	$              6,735	$              9,991	$              5,274	$              5,583
Forward contracts and cross currency swaps	(1,584)	848	(1,962)	1,575
Total	$              5,151	$            10,839	$              3,312	$              7,158

For the second quarter of fiscal 2014 and fiscal 2013, the amounts above are net of tax of $(4,091) and $(6,493), respectively.For the first six months of fiscal 2014 and fiscal 2013, the amounts above are net of tax of $(3,229) and $(4,494), respectively.

	Amount of Net Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Quarter Ended		Six Months Ended
Location of Net Gain (Loss) Reclassified from	December 28,	December 29,	December 28,	December 29,
Accumulated OCI into Income (Effective Portion)	2013	2012	2013	2012
Cost of Sales	$                 711	$               (976)	$              3,956	$               (698)

For the second quarter of fiscal 2014 and fiscal 2013, the amounts above are net of tax of $(413) and $591, respectively. For the first six months of fiscal 2014 and fiscal 2013, the amounts above are net of tax of $(2,462) and $476, respectively.

During the six months ended December 28, 2013 and December 29, 2012, there were no material gains or losses recognized in income due to hedge ineffectiveness.

The Company expects$8,248of net derivative gains included in accumulated other comprehensive income at December 28, 2013 will be reclassified into earnings within the next 12 months.  This amount will vary due to fluctuations in the Japanese yen and Canadian dollar exchange rates.