What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-05 · 334 added, 224 removed, 540 unchanged (51% of the section changed)

3 unchanged sentences

(In millions, except share data)

September 26,

2020 March 28,

30 unchanged sentences

650,000,000 shares authorized;

218,272,709 shares issued and 150,340,192 outstanding at June 27, 2020;

218,563,307 shares issued and 150,621,274 outstanding at September 26, 2020;

217,320,010 shares issued and 149,425,612 outstanding at March 28, 2020

Treasury shares, at cost ( 67,932,517 shares at June 27, 2020 and 67,894,398 shares at March 28, 2020)

Treasury shares, at cost ( 67,942,033 shares at September 26, 2020 and 67,894,398 shares at March 28, 2020)

( 3,326 ) ( 3,325 )

8 unchanged sentences

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In millions, except share and per share data)

Three Months Ended

2020 June 29,

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Total revenue $ 1,110 $ 1,442 $ 1,561 $ 2,788

Cost of goods sold 400 568 549 1,080

710 874 1,012 1,708

Selling, general and administrative expenses 474 623 876 1,221

3 unchanged sentences

Total operating expenses 557 799 1,021 1,569

(Loss) income from operations

Income (loss) from operations 153 75 ( 9 ) 139

Other income, net — ( 1 ) ( 1 ) ( 3 )

Interest expense, net 12 3 29 16

Foreign currency (gain) loss ( 3 ) 2

(Loss) income before provision for income taxes

Provision for income taxes 5 6

Net (loss) income attributable to Capri $ ( 180 ) $ 45

Foreign currency loss (gain) — 4 ( 3 ) 6

Income (loss) before provision for income taxes 141 69 ( 34 ) 120

Provision for (benefit from) income taxes 20 ( 4 ) 25 2

Net income (loss) 121 73 ( 59 ) 118

Net loss attributable to noncontrolling interest ( 1 ) — ( 1 ) —

Net income (loss) attributable to Capri $ 122 $ 73 $ ( 58 ) $ 118

Weighted average ordinary shares outstanding:

1 unchanged sentence

Diluted 151,677,242 152,576,283 150,024,293 152,455,218

Net (loss) income per ordinary share attributable to Capri:

Net income (loss) per ordinary share attributable to Capri:

Basic $ 0.81 $ 0.48 $ ( 0.39 ) $ 0.78

Diluted $ 0.81 $ 0.47 $ ( 0.39 ) $ 0.77

Statements of Comprehensive (Loss) Income:

Net (loss) income $ ( 180 ) $ 45

Statements of Comprehensive Income (Loss):

Net income (loss) $ 121 $ 73 $ ( 59 ) $ 118

Foreign currency translation adjustments 56 ( 13 ) 53 ( 38 )

Net loss on derivatives ( 1 ) ( 2 )

Comprehensive (loss) income attributable to Capri $ ( 184 ) $ 18

Net (loss) income on derivatives ( 2 ) 3 ( 3 ) 1

Comprehensive income (loss) 175 63 ( 9 ) 81

Net loss attributable to noncontrolling interest ( 1 ) — ( 1 ) —

Comprehensive income (loss) attributable to Capri $ 176 $ 63 $ ( 8 ) $ 81

See accompanying notes to consolidated financial statements.

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except share data which is in thousands)

2 unchanged sentences

Comprehensive

Income (Loss) Retained

Income Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

Balance at June 27, 2020 218,273 $ — $ 1,109 ( 67,932 ) $ ( 3,326 ) $ 71 $ 4,152 $ 2,006 $ 1 $ 2,007

Net income (loss) — — — — — — 122 122 ( 1 ) 121

Other comprehensive income

— — — — — 54 — 54 — 54

Total comprehensive income (loss) — — — — — — — 176 ( 1 ) 175

Vesting of restricted awards, net of forfeitures

43 — — — — — — — — —

Exercise of employee share options

247 — — — — — — — — —

Share based compensation expense — — 17 — — — — 17 — 17

Purchase of treasury shares — — — ( 10 ) — — — — — —

Balance at September 26, 2020 218,563 $ — $ 1,126 ( 67,942 ) $ ( 3,326 ) $ 125 $ 4,274 $ 2,199 $ — $ 2,199

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive

Income Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

Balance at March 28, 2020 217,320 $ — $ 1,085 ( 67,894 ) $ ( 3,325 ) $ 75 $ 4,332 $ 2,167 $ 1 $ 2,168

Net loss — — — — — — ( 58 ) ( 58 ) ( 1 ) ( 59 )

Other comprehensive loss

Other comprehensive income

— — — — — 50 — 50 — 50

Total comprehensive loss — — — — — — — ( 8 ) ( 1 ) ( 9 )

— — — — — — — ( 184 ) — ( 184 )

Vesting of restricted awards, net of forfeitures

996 — — — — — — — — —

Equity compensation expense — — 24 — — — — 24 — 24

Exercise of employee share options

247 — — — — — — — — —

Share based compensation expense — — 41 — — — — 41 — 41

Purchase of treasury shares — — — ( 48 ) ( 1 ) — — ( 1 ) — ( 1 )

Balance at September 26, 2020 218,563 $ — $ 1,126 ( 67,942 ) $ ( 3,326 ) $ 125 $ 4,274 $ 2,199 $ — $ 2,199

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except share data which is in thousands)

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive Loss Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

Balance at June 29, 2019 216,742 $ — $ 1,039 ( 65,177 ) $ ( 3,225 ) $ ( 93 ) $ 4,600 $ 2,321 $ 3 $ 2,324

Net income — — — — — — 73 73 — 73

Other comprehensive loss

— — — — — ( 10 ) — ( 10 ) — ( 10 )

Total comprehensive income

— — — — — — — 63 — 63

Vesting of restricted awards, net of forfeitures

73 — — — — — — — — —

Share based compensation expense — — 21 — — — — 21 — 21

Purchase of treasury shares — — — ( 5 ) — — — — — —

Balance at September 28, 2019 216,815 $ — $ 1,060 ( 65,182 ) $ ( 3,225 ) $ ( 103 ) $ 4,673 $ 2,405 $ 3 $ 2,408

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive

Income (Loss) Retained

Comprehensive Loss Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

8 unchanged sentences

Other comprehensive loss — — — — — ( 37 ) — ( 37 ) — ( 37 )

— — — — — ( 27 ) — ( 27 ) — ( 27 )

Total comprehensive income

2 unchanged sentences

764 — — — — — — — — —

Equity compensation expense — — 28 — — — — 28 — 28

Share based compensation expense — — 49 — — — — 49 — 49

Purchase of treasury shares — — — ( 63 ) ( 2 ) — — ( 2 ) — ( 2 )

Balance at June 29, 2019 216,742 $ — $ 1,039 ( 65,177 ) $ ( 3,225 ) $ ( 93 ) $ 4,600 $ 2,321 $ 3 $ 2,324

Balance at September 28, 2019 216,815 $ — $ 1,060 ( 65,182 ) $ ( 3,225 ) $ ( 103 ) $ 4,673 $ 2,405 $ 3 $ 2,408

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In millions)

Three Months Ended

2020 June 29,

Six Months Ended

September 26,

2020 September 28,

Cash flows from operating activities

Net (loss) income $ ( 59 ) $ 118

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 108 125

Equity compensation expense 24 28

Share based compensation expense 41 49

Deferred income taxes 15 ( 8 )

1 unchanged sentence

Changes to lease related balances, net ( 58 ) ( 26 )

Tax deficit (benefit) on exercise of share options 5 2

Tax deficit on exercise of share options 5 2

Amortization of deferred financing costs 2 3

11 unchanged sentences

Capital expenditures ( 59 ) ( 105 )

Cash paid for business acquisitions, net of cash acquired — ( 1 )

Settlement of a net investment hedge — 23

Cash paid for asset acquisitions ( 12 ) ( 1 )

Settlement of net investment hedges — 31

Net cash used in investing activities ( 71 ) ( 75 )

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 1 ( 4 )

Net decrease in cash and cash equivalents ( 385 ) ( 12 )

Net (decrease) increase in cash and cash equivalents ( 354 ) 7

Beginning of period 592 172

2 unchanged sentences

Cash paid for interest $ 28 $ 45

Cash received, net of cash paid, for income taxes $ ( 6 ) $ 12

Net cash (received) paid for income taxes $ ( 44 ) $ 62

Supplemental disclosure of non-cash investing and financing activities

12 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

The interim consolidated financial statements as of June 27, 2020 and for the three months ended June 27, 2020 and June 29, 2019 are unaudited.

The interim consolidated financial statements as of September 26, 2020 and for the three and six months ended September 26, 2020 and September 28, 2019 are unaudited.

The Company consolidates the results of its Versace business on a one-month lag, as consisent with prior periods.

In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

3 unchanged sentences

The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.

The Company utilizes a 52 to 53 week fiscal year ending on the Saturday closest to March 31.

As such, the term “Fiscal Year” or “Fiscal” refers to the 52-week or 53-week period, ending on that day.

The results for the three months ended June 27, 2020 and June 29, 2019, are based on 13-week periods.

The Company utilizes a 52 to 53 week fiscal year and the term “Fiscal Year” or “Fiscal” refers to that 52-week or 53-week period.

The results for the three and six months ended September 26, 2020 and September 28, 2019 are based on 13-week and 26-week periods, respectively.

The Company’s Fiscal Year 2021 will be a 52-week period ending March 27, 2021.

Summary of Significant Accounting Policies

3 unchanged sentences

The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed.

The most significant assumptions and estimates involved in preparing the financial statements include allowances for customer deductions, sales returns, sales discounts and doubtful accounts, estimates of inventory net realizable value, the valuation of share-based compensation, the valuation of deferred taxes and the valuation of goodwill, intangible assets and property and equipment, along with the estimated useful lives assigned to these assets.

The most significant assumptions and estimates involved in preparing the financial statements include allowances for customer deductions, sales returns, sales discounts and credit losses, estimates of inventory net realizable value, the valuation of share-based compensation, the valuation of deferred taxes and the valuation of goodwill, intangible assets and property and equipment, along with the estimated useful lives assigned to these assets.

Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior periods’ financial information in order to conform to the current period’s presentation.

The Company experiences certain effects of seasonality with respect to its business.

2 unchanged sentences

Inventories mainly consist of finished goods with the exception of raw materials and work in process inventory.

The combined total of raw materials and work in process inventory recorded on the Company's consolidated balance sheets was $ 27 million as of both June 27, 2020 and March 28, 2020.

The net realizable value of the Company's inventory as of June 27, 2020 and March 28, 2020 includes the expected adverse impacts of the COVID-19 pandemic.

The combined total of raw materials and work in process inventory recorded on the Company's consolidated balance sheets was $ 22 million and $ 27 million, respectively, as of September 26, 2020 and March 28, 2020.

The net realizable value of the Company's inventory as of September 26, 2020 and March 28, 2020 includes the expected adverse impacts of the COVID-19 pandemic.

This includes the impact from temporary retail store closures, wholesale customer store closures, reductions in retail store traffic, a decline in international tourism and a decrease in consumer consumption.

8 unchanged sentences

Formal hedge documentation is prepared for all derivative instruments designated as hedges, including a description of the hedged item and the hedging instrument and the risk being hedged.

The changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive (loss) income until the hedged item affects earnings.

When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive (loss) income are recognized within cost of goods sold.

The changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income (loss) until the hedged item affects earnings.

When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive income (loss) are recognized within cost of goods sold.

The Company uses regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which compares the change in the fair value of the derivative instrument to the change in the related hedged item.

If the hedge is no longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings.

For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency loss (gain) in the Company’s consolidated statements of operations and comprehensive (loss) income.

The Company classifies cash flows relating to its forward foreign currency exchange contracts related to the purchase of inventory consistently with the classification of the hedged item, within cash flows from operating activities.

7 unchanged sentences

The Company has elected the spot method of designating these contracts under ASU 2017-12 and has designated these contracts as net investment hedges.

The net gain or (loss) on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive (loss) income on the Company’s consolidated balance sheets.

Interest accruals and coupon payments are recognized directly in interest expense in the Company’s statement of operations and comprehensive (loss) income.

The net gain or (loss) on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets.

Interest accruals and coupon payments are recognized directly in interest expense in the Company’s statement of operations and comprehensive income (loss).

Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net investment is sold, diluted or liquidated.

1 unchanged sentence

The Company also uses interest rate swap agreements to hedge the variability of its cash flows resulting from floating interest rates on the Company's borrowings.

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive (loss) income and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive income (loss) and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

On March 31, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet for all leases, except certain short-term leases.

2 unchanged sentences

The Company’s leases generally have terms of up to 10 years, generally require a fixed annual rent and may require the payment of additional rent if store sales exceed a negotiated amount.

Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through June 2024.

Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through July 2024.

The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its restructuring activities, as discussed in Note 8.

17 unchanged sentences

The following table presents the Company’s supplemental cash flow information related to leases (in millions):

Three Months Ended Three Months Ended

June 27, 2020 June 29, 2019

Six Months Ended Six Months Ended

September 26, 2020 September 28, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in operating leases $ 191 (1)

(1) Operating cash flows used in operating leases for the three months ended June 27, 2020 reflect $ 85 million of rent payments that have been deferred due to the COVID-19 pandemic.

During the three months ended June 27, 2020 and June 29, 2019, the Company recorded sublease income of $ 2 million and $ 1 million, respectively, within selling, general, and administrative expenses.

During the three months ended June 27, 2020, the Company recorded $ 15 million in rent relief for rent concessions negotiated in connection with COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as variable lease costs within selling, general and administrative expenses.

Net (Loss) Income per Share

The Company’s basic net (loss) income per ordinary share is calculated by dividing net (loss) income by the weighted average number of ordinary shares outstanding during the period.

Diluted net (loss) income per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units ("RSUs"), were exercised or converted into ordinary shares.

(1) Operating cash flows used in operating leases for the six months ended September 26, 2020 exclude $ 60 million of rent payments that have been deferred due to the COVID-19 pandemic.

During the three and six months ended September 26, 2020, the Company recorded sublease income of $ 1 million and $ 3 million, respectively, and $ 2 million and $ 3 million, respectively, for the three and six months ended September 28, 2019, within selling, general, and administrative expenses.

During the three and six months ended September 26, 2020, the Company recorded $ 9 million and $ 24 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as a reduction to variable lease expense within selling, general and administrative expenses.

Net Income (Loss) per Share

The Company’s basic net income (loss) per ordinary share is calculated by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period.

Diluted net income (loss) per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units ("RSUs"), were exercised or converted into ordinary shares.

These potentially dilutive securities are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods.

Performance-based RSUs are included in diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.

The components of the calculation of basic net (loss) income per ordinary share and diluted net loss per ordinary share are as follows (in millions, except share and per share data):

Three Months Ended

2020 June 29,

Net (loss) income attributable to Capri $ ( 180 ) $ 45

Performance-based RSUs are included as diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.

The components of the calculation of basic net income (loss) per ordinary share and diluted net income (loss) per ordinary share are as follows (in millions, except share and per share data):

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Net income (loss) attributable to Capri $ 122 $ 73 $ ( 58 ) $ 118

Basic weighted average shares 150,492,275 151,602,502 150,024,293 151,326,037

1 unchanged sentence

Share options and restricted shares/units, and performance restricted share units

1,184,967 973,781 — 1,129,181

Diluted weighted average shares 151,677,242 152,576,283 150,024,293 152,455,218

Basic net (loss) income per share (1)

Basic net income (loss) per share (1)

$ 0.81 $ 0.48 $ ( 0.39 ) $ 0.78

Diluted net (loss) income per share (1)

Diluted net income (loss) per share (1)

$ 0.81 $ 0.47 $ ( 0.39 ) $ 0.77

(1) Basic and diluted net (loss) income per share are calculated using unrounded numbers.

Share equivalents of 5,388,905 and 2,374,578 for the three months ended June 27, 2020 and June 29, 2019, respectively, have been excluded from the above calculations due to their anti-dilutive effect.

Diluted net loss per share attributable to Capri for the three months ended June 27, 2020 excluded all potentially dilutive securities because there was a net loss attributable to Capri for the period and, as such, the inclusion of these securities would have been anti-dilutive.

(1) Basic and diluted net income (loss) per share are calculated using unrounded numbers.

During the three and six months ended September 26, 2020, share equivalents of 3,961,838 shares and 4,675,372 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect.

Share equivalents of 5,822,186 shares and 4,098,382 shares, respectively, have been excluded from the above calculations for the three and six months ended September 28, 2019.

Diluted net income (loss) per share attributable to Capri for the six months ended September 26, 2020 excluded all potentially dilutive securities because there was a net loss attributable to Capri for the period and, as such, the inclusion of these securities would have been anti-dilutive.

See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020 for a complete disclosure of the Company’s significant accounting policies.

13 unchanged sentences

Recently Issued Accounting Pronouncements

The Company has considered all new accounting pronouncements and have concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition or cash flows based on current information.

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition or cash flows based on current information.

Revenue Recognition

4 unchanged sentences

Within the retail and wholesale channels, substantially all of the Company’s revenues consist of sales of products that represent a single performance obligation, where control transfers at a point in time to the customer.

For licensing arrangements, royalty and advertising revenue is recognized over time based on access provided to the Company’s brands.

The Company has chosen to utilize the exemption allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations that have an expected duration of twelve months or less.

The Company generates sales through directly operated stores and e-commerce throughout the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia.

For licensing arrangements, royalty and advertising revenue is recognized over time based on access provided to the Company’s trademarks.

The Company generates sales through directly operated stores and e-commerce sites throughout the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia, including Australia.

The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability upon issuance.

1 unchanged sentence

“Breakage” revenue is calculated under the proportional redemption methodology, which considers the historical patterns of redemption in jurisdictions where the Company is not required to remit the value of the unredeemed gift cards as unclaimed property.

The contract liability related to gift cards, net of estimated “breakage,” of $ 11 million as of both June 27, 2020 and March 28, 2020, is included in accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

The contract liability related to gift cards, net of estimated “breakage,” of $ 11 million as of both September 26, 2020 and March 28, 2020, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

Loyalty Program .

3 unchanged sentences

These amounts include estimated “breakage” for points that are not expected to be redeemed.

The contract liability, net of an estimated “breakage,” of $ 2 million as of both June 27, 2020 and March 28, 2020, is recorded as a reduction to revenue in the consolidated statements of operations and comprehensive (loss) income and within accrued expenses and other current liabilities in the Company’s consolidated balance sheet and is expected to be recognized within the next 12 months.

The contract liability, net of an estimated “breakage,” of $ 2 million as of both September 26, 2020 and March 28, 2020, is recorded as a reduction to revenue in the consolidated statements of operations and comprehensive income (loss) and within accrued expenses and other current liabilities in the Company’s consolidated balance sheet and is expected to be recognized within the next 12 months.

The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops throughout the Americas, EMEA and Asia.

3 unchanged sentences

The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the licensees.

Generally the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, some of our guaranteed minimums for Versace are multi-year based.

As of June 27, 2020, contractually guaranteed minimum fees from our license agreements expected to be recognized as revenue during future periods were as follows (in millions):

Generally, the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, certain guaranteed minimums for Versace are multi-year based.

As of September 26, 2020, contractually guaranteed minimum fees from our license agreements expected to be recognized as revenue during future periods were as follows (in millions):

Contractually Guaranteed Minimum Fees

6 unchanged sentences

Sales Returns

The refund liability recorded as of June 27, 2020 and March 28, 2020 was $ 35 million and $ 37 million, respectively, and the related asset for the right to recover returned product as of June 27, 2020 and March 28, 2020 was $ 10 million and $ 14 million, respectively.

The refund liability recorded as of September 26, 2020 and March 28, 2020 was $ 40 million and $ 37 million, respectively, and the related asset for the right to recover returned product as of September 26, 2020 and March 28, 2020 was $ 12 million and $ 14 million, respectively.

Contract Balances

Total contract liabilities were $ 21 million and $ 22 million as of June 27, 2020 and March 28, 2020, respectively.

For the three months ended June 27, 2020, the Company recognized $ 3 million in revenue which related to contract liabilities that existed at March 28, 2020.

For the three months ended June 29, 2019, the Company recognized $ 14 million in revenue which related to contract liabilities that existed at March 30, 2019.

There were no contract assets recorded as of June 27, 2020 and March 28, 2020.

Total contract liabilities were $ 14 million and $ 22 million as of September 26, 2020 and March 28, 2020, respectively.

For the three and six months ended September 26, 2020, the Company recognized $ 2 million and $ 5 million, respectively, in revenue which related to contract liabilities that existed at March 28, 2020.

For the three and six months ended September 28, 2019, the Company recognized $ 3 million and $ 17 million, respectively, in revenue which related to contract liabilities that existed at March 30, 2019.

There were no material contract assets recorded as of September 26, 2020 and March 28, 2020.

There were no changes in historical variable consideration estimates that were materially different from actual results.

Disaggregation of Revenue

The following table presents the Company’s segment revenues disaggregated by geographic location (in millions):

Three Months Ended

2020 June 29,

The following table presents the Company’s segment revenue disaggregated by geographic location (in millions):

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Versace revenue - the Americas $ 60 $ 48 $ 75 $ 92

2 unchanged sentences

Total Versace

195 228 288 435

Jimmy Choo revenue - the Americas 33 21 39 51

6 unchanged sentences

Total Michael Kors

793 1,089 1,100 2,070

Total revenue - the Americas 587 802 764 1,531

5 unchanged sentences

Receivables, net, consist of (in millions):

September 26,

2020 March 28,

2 unchanged sentences

allowances ( 64 ) ( 138 )

(1) As of June 27, 2020 and March 28, 2020, $ 56 million and $ 80 million, respectively, of trade receivables were insured.

Receivables are presented net of allowances for discounts, markdowns, operational chargebacks and doubtful accounts.

(1) As of September 26, 2020 and March 28, 2020, $ 78 million and $ 80 million, respectively, of trade receivables were insured.

Receivables are presented net of allowances for discounts, markdowns, operational chargebacks and credit losses.

Discounts are based on open invoices where trade discounts have been extended to customers.

2 unchanged sentences

Such provisions, and related recoveries, are reflected in revenues.

The Company’s allowance for doubtful accounts is determined through analysis of periodic aging of receivables that are not covered by insurance and assessments of collectability based on an evaluation of historic and anticipated trends, the financial condition of the Company’s customers and the impact of general economic conditions.

The Company’s allowance for credit losses is determined through analysis of periodic aging of receivables and assessments of collectability based on an evaluation of historic and anticipated trends, the financial condition of the Company’s customers and the impact of general economic conditions.

The past due status of a receivable is based on its contractual terms.

Amounts deemed uncollectible are written off against the allowance when it is probable the amounts will not be recovered.

Allowance for doubtful accounts was $ 31 million and $ 39 million as of June 27, 2020 and March 28, 2020, respectively, including the impact related to COVID-19.

The Company had a credit loss of $( 6 ) million for the three months ended June 27, 2020.

All other periods presented were immaterial.

Allowance for credit losses was $ 31 million and $ 39 million as of September 26, 2020 and March 28, 2020, respectively, including the impact related to COVID-19.

The Company had a credit loss of $ 4 million and $( 2 ) million, respectively, for the three and six months ended September 26, 2020.

The Company had bad debt expense of $ 4 million for the six months ended September 28, 2019.

The Company had immaterial bad debt expense for the three months ended September 28, 2019.

Property and Equipment, net

Property and equipment, net, consists of (in millions):

September 26,

2020 March 28,

7 unchanged sentences

Construction-in-progress 58 69

Depreciation and amortization of property and equipment for the three months ended June 27, 2020 and June 29, 2019 was $ 43 million and $ 47 million, respectively.

During the three months ended June 27, 2020, the Company did no t record any property and equipment impairment charges.

During the three months ended June 29, 2019, the Company recorded property and equipment impairment charges of $ 13 million, $ 11 million of which related to determining asset groups for the Company’s premier store locations at an individual store level (see Note 11 for additional information).

Depreciation and amortization of property and equipment for the three months ended September 26, 2020 and September 28, 2019 was $ 41 million and $ 52 million, respectively, and was $ 84 million and $ 99 million, respectively, for the six months ended September 26, 2020 and September 28, 2019.

During the three and six months ended September 26, 2020, the Company recorded $ 2 million in property and equipment impairment charges.

During the three and six months ended September 28, 2019, the Company recorded property and equipment impairment charges of $ 10 million and $ 23 million, respectively, primarily related to Jimmy Choo and Versace store locations and determining asset groups for the Company's premier store locations at an individual store level, respectively (see Note 11 for additional information).

Intangible Assets and Goodwill

The following table details the carrying values of the Company’s intangible assets and goodwill (in millions):

September 26,

2020 March 28,

11 unchanged sentences

$ 1,539 $ 1,488

(1) Includes an accumulated impairment loss of $ 180 million recorded during the fourth quarter of Fiscal 2020.

The change in the carrying value since March 28, 2020 reflects currency translation.

(2) The change in the carrying value since March 28, 2020 reflects currency translation.

(3) Includes an accumulated impairment loss of $ 171 million related to the Jimmy Choo retail and licensing reporting units recorded during the fourth quarter of Fiscal 2020.

The change in the carrying value since March 28, 2020 reflects currency translation.

Amortization expense for the Company’s definite-lived intangible assets for the three months ended June 27, 2020 and June 29, 2019 was $ 11 million and $ 13 million, respectively.

There were no goodwill or definite-lived and indefinite-lived intangible asset impairment charges recorded during any of the periods presented.

(1) Includes accumulated impairment of $ 180 million recorded during the fourth quarter of Fiscal 2020.

The change in the carrying value since March 28, 2020 reflects the impact of foreign currency translation.

(2) The change in the carrying value since March 28, 2020 reflects the impact of foreign currency translation.

(3) Includes accumulated impairment of $ 171 million related to the Jimmy Choo retail and licensing reporting units recorded during the fourth quarter of Fiscal 2020.

The change in the carrying value since March 28, 2020 reflects the impact of foreign currency translation.

Amortization expense for the Company’s definite-lived intangible assets for the three months ended September 26, 2020 and September 28, 2019 was $ 12 million and $ 13 million, respectively, and was $ 23 million and $ 26 million for the six months ended September 26, 2020 and September 28, 2019, respectively.

Current Assets and Current Liabilities

Prepaid expenses and other current assets consist of the following (in millions):

September 26,

2020 March 28,

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Accrued expenses and other current liabilities consist of the following (in millions):

September 26,

2020 March 28,

1 unchanged sentence

Return liabilities 40 37

Accrued capital expenditures 20 31

Accrued rent (1)

Accrued advertising and marketing 6 9

Accrued capital expenditures 17 31

Accrued litigation 12 10

Gift cards and retail store credits 11 11

Professional services 11 10

Accrued advertising and marketing 9 9

Restructuring liability 5 9

Accrued litigation 11 10

(1) The accrued rent balance relates to variable lease payments.

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In addition, the Company expects to incur approximately $ 75 million of one-time costs related to this program, including lease termination and other store closure costs, the majority of which are expected to result in future cash expenditures.

During the three months ended June 27, 2020, the Company closed 28 of its retail stores which have been incorporated into the Capri Retail Store Optimization Program.

Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program during the three months ended June 27, 2020 were $ 3 million.

During the six months ended September 26, 2020, the Company closed 48 of its retail stores which have been incorporated into the Capri Retail Store Optimization Program.

Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program during the three and six months ended September 26, 2020 were $ 2 million and $ 5 million, respectively.

The below table presents a roll forward of the Company's restructuring liability related to its Capri Retail Store Optimization Program (in millions):

Severance and benefit costs Lease-related and other costs Total

Balance at March 28, 2020 $ — $ — $ —

Additions charged to expense (1)

Payments ( 1 ) ( 8 ) ( 9 )

Balance at September 26, 2020 $ — $ 1 $ 1

(1) Excludes a net credit of $ 3 million related to lease termination gains of previously impaired operating lease right-of-use assets partially offset by additional impairments on the stores closing under our Capri Retail Store Optimization Program during the six months ended September 26, 2020.

Michael Kors Retail Fleet Optimization Plan

During the three months ended June 29, 2019, the Company incurred charges of $ 1 million relating to the Michael Kors Retail Fleet Optimization Plan, which was completed during the fourth quarter of Fiscal 2020.

During the six months ended September 28, 2019, the Company incurred charges of $ 1 million relating to the Michael Kors Retail Fleet Optimization Plan, which was completed during the fourth quarter of Fiscal 2020.

Other Restructuring Charges

In addition to the restructuring charges related to the Michael Kors Retail Fleet Optimization Plan, the Company incurred charges of $ 2 million relating to Jimmy Choo lease-related charges during the three months ended June 29, 2019.

During the three months ended June 27, 2020, the Company recorded costs of $ 5 million, primarily related to equity awards associated with the acquisition of Versace.

During the three months ended June 29, 2019, the Company recorded costs of $ 12 million, which included $ 7 million in connection with the acquisition of Versace and $ 5 million in connection with the Jimmy Choo acquisition.

In addition to the restructuring charges related to the Michael Kors Retail Fleet Optimization Plan, the Company incurred charges of $ 1 million during the three and six months ended September 28, 2019 related to the Company's intent to exit certain of its agreements in the EMEA region.

During the six months ended September 28, 2019, the Company also incurred charges of $ 2 million relating to Jimmy Choo lease-related charges.

During the three and six months ended September 26, 2020, the Company recorded costs of $ 7 million and $ 12 million, respectively, primarily related to equity awards associated with the acquisition of Versace.

During the three months ended September 28, 2019, the Company recorded costs of $ 6 million, primarily related to equity awards associated with the acquisition of Versace.

During the six months ended September 28, 2019, the Company recorded costs of $ 18 million, which included $ 13 million, primarily related to equity awards associated with the acquisition of Versace, and $ 5 million, primarily related to equity awards associated with the acquisition of Jimmy Choo.

Debt Obligations

The following table presents the Company’s debt obligations (in millions):

September 26,

2020 March 28,

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$ 1,581 $ 2,012

Senior Unsecured Revolving Credit Facility

On June 25, 2020, the Company entered into the second amendment (the “Second Amendment”) to its third amended and restated senior unsecured credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”), with, among others, JPMorgan Chase Bank, N.A., as administrative agent.

Pursuant to the Second Amendment, the obligations under the 2018 Credit Facility will be secured by liens on substantially all of the assets of the Company and its U.S.

Senior Secured Revolving Credit Facility

On June 25, 2020, the Company entered into the second amendment (the “Second Amendment”) to its third amended and restated credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”), with, among others, JPMorgan Chase Bank, N.A., as administrative agent.

Pursuant to the Second Amendment, the obligations under the 2018 Credit Facility are secured by liens on substantially all of the assets of the Company and its U.S.

subsidiaries that are borrowers and guarantors, subject to certain exceptions, and substantially all of the registered intellectual property of the Company and its subsidiaries.

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In addition, until March 31, 2021, the material adverse change representation required to be made in connection with revolving borrowings and the issuance or amendment of letters of credit will be modified to disregard certain COVID-19 pandemic-related impacts to the business, results of operations or financial condition of the Company and its subsidiaries, taken as a whole.

The Second Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with respect to the fiscal quarter ending June 26, 2021, to maintain at all times unrestricted cash and cash equivalents plus the aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $ 300 million, increasing to $ 400 million on October 1, 2020 and $ 500 million on December 1, 2020.

The Second Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with respect to the fiscal quarter ending June 26, 2021, to

maintain at all times unrestricted cash and cash equivalents plus the aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $ 300 million, increasing to $ 400 million on October 1, 2020 and $ 500 million on December 1, 2020.

The 2018 Credit Facility and the Indenture governing the Company's senior notes contain certain restrictive covenants that impose operating and financial restrictions on the Company, and the Second Amendment imposes incremental restrictions on certain of these covenants during the covenant relief period provided under the 2018 Credit Facility, including restrictions on its ability to incur additional indebtedness and guarantee indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, make loans and investments, including acquisitions, sell assets, incur liens, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of its assets.

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The Second Amendment also permits certain working capital facilities between the Company or any of its subsidiaries with a lender or an affiliate of a lender under the 2018 Credit Facility to be guaranteed under the 2018 Credit Facility guarantees and certain supply chain financings with, and up to $ 50 million outstanding principal amount of bilateral letters of credit and bilateral bank guarantees issued by a lender or an affiliate of a lender to be guaranteed and secured under the 2018 Credit Facility guarantees and collateral documents.

As of June 27, 2020 and the date these financial statements were issued, the Company was in compliance with all covenants related to the 2018 Credit Facility as amended by the Second Amendment.

As of June 27, 2020 and March 28, 2020, the Company had borrowings of $ 270 million and $ 681 million, respectively, outstanding under the 2018 Revolving Credit Facility, which were recorded within long-term debt in its consolidated balance sheets.

In addition, stand-by letters of credit of $ 22 million were outstanding as of June 27, 2020.

At June 27, 2020, the amount available for future borrowings under the 2018 Revolving Credit Facility was $ 938 million.

As of June 27, 2020 and March 28, 2020, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was $ 985 million and $ 1.010 billion, respectively, of which $ 128 million was recorded within short-term debt for both periods and $ 857 million and $ 882 million, respectively, was recorded within long-term debt in its consolidated balance sheets.

As of September 26, 2020, and the date these financial statements were issued, the Company was in compliance with all covenants related to the 2018 Credit Facility as amended by the Second Amendment.

As of September 26, 2020 and March 28, 2020, the Company had borrowings of $ 274 million and $ 681 million, respectively, outstanding under the 2018 Revolving Credit Facility, which were recorded within long-term debt in its consolidated balance sheets.

In addition, stand-by letters of credit of $ 22 million were outstanding as of September 26, 2020.

At September 26, 2020, the amount available for future borrowings under the 2018 Revolving Credit Facility and the 364 Day Facility were $ 704 million and $ 230 million, respectively.

As of September 26, 2020 and March 28, 2020, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was $ 985 million and $ 1.010 billion, respectively, of which $ 128 million was recorded within short-term debt for both periods and $ 857 million and $ 882 million, respectively, was recorded within long-term debt in its consolidated balance sheets.

See Note 12 to the Company’s Fiscal 2020 Annual Report on Form 10-K for additional information regarding the Company’s credit facilities and debt obligations.

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In the ordinary course of business, the Company is party to various legal proceedings and claims.

Although the outcome of such items cannot be determined with certainty, the Company’s management does not believe that the outcome of all pending legal proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.

Although the outcome of such claims cannot be determined with certainty, the Company’s management does not believe that the outcome of all pending legal proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.

Please refer to the Contractual Obligations and Commercial Commitments disclosure within the Liquidity section of the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020 for a detailed disclosure of other commitments and contractual obligations as of March 28, 2020.

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Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

At June 27, 2020 and March 28, 2020, the fair values of the Company’s forward foreign currency exchange contracts and net investment hedges were determined using broker quotations, which were calculations derived from observable market information:

At September 26, 2020 and March 28, 2020, the fair values of the Company’s forward foreign currency exchange contracts, interest rate swaps and net investment hedges were determined using broker quotations, which were calculations derived from observable market information:

the applicable currency rates at the balance sheet date and those forward rates particular to the contract at inception.

1 unchanged sentence

The fair values of the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company.

The fair values of net investment hedges are included in other assets, as detailed in Note 12.

The fair values of net investment hedges and interest rate swaps are included in other assets, and in other long-term liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company.

See Note 12 for detail.

All contracts are measured and recorded at fair value on a recurring basis and are categorized in Level 2 of the fair value hierarchy, as shown in the following table (in millions):

Fair value at June 27, 2020 using:

Fair value at September 26, 2020 using:

Fair value at March 28, 2020 using:

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Derivative liabilities:

Designated interest rate swaps $ — $ 1 $ — $ — $ — $ —

Forward foreign currency exchange contracts

$ — $ 3 $ — $ — $ — $ —

Net investment hedges — 42 — — — —

Interest rate swaps — 1 — — — —

Total derivative liabilities $ — $ 46 $ — $ — $ — $ —

The Company’s long-term debt obligations are recorded in its consolidated balance sheets at carrying values, which may differ from the related fair values.

The fair value of the Company’s long-term debt is estimated using external pricing data, including any available quoted market prices and based on other debt instruments with similar characteristics.

Borrowings under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the short-term nature of such borrowings.

Borrowings under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the frequency nature of such borrowings and repayments.

See Note 9 for detailed information relating to carrying values of the Company’s outstanding debt.

The following table summarizes the carrying values and estimated fair values of the Company’s short- and long-term debt, based on Level 2 measurements (in millions):

June 27, 2020 March 28, 2020

September 26, 2020 March 28, 2020

Value Estimated

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The fair values of these assets were determined based on Level 3 measurements using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

There were no impairment charges recorded during three months ended June 27, 2020.

The following table details the carrying values and fair values of the Company’s assets that have been impaired during the three months ended June 29, 2019 (in millions):

Three Months Ended

June 29, 2019

The Company recorded $ 22 million in impairment charges during the three and six months ended September 26, 2020.

The following table details the carrying values and fair values of the Company’s assets that have been impaired during the three and six months ended September 26, 2020 and three and six months ended September 28, 2019 (in millions):

Three and Six Months Ended

September 26, 2020

Carrying Value Prior to Impairment Fair Value Impairment Charge (1)

Operating Lease Right-of-Use Assets

Property and Equipment 5 3 2

Total $ 51 $ 29 $ 22

(1) Includes $ 2 million of impairment charges that were recorded within restructuring and other charges related to the Capri Retail Store Optimization Program.

Three Months Ended

September 28, 2019 Six Months Ended

September 28, 2019

Carrying Value Prior to Impairment Fair Value Impairment Charge Carrying Value Prior to Impairment Fair Value Impairment Charge

Operating Lease Right-of-Use Assets

$ 176 $ 82 $ 94 $ 316 $ 138 $ 178

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Net Investment Hedges

As of June 27, 2020, the Company had one fixed-to-fixed cross-currency swap agreement with a notional amount of $ 44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rate between the U.S.

Dollar and Japanese Yen.

Under the term of this contract, which has a maturity date of November 2024, the Company will exchange the semi-annual fixed rate payments on U.S.

denominated debt for fixed rate payments of 0.89 % in Japanese Yen.

This contract has been designated as a net investment hedge.

When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense in the Company’s consolidated statements of operations and comprehensive (loss) income.

Accordingly, the Company recorded a reduction in interest expense of $ 0 million and $ 15 million during the three months ended June 27, 2020 and June 29, 2019, respectively.

This decrease from prior year reflects the Company’s early termination of certain net investment hedges related to its Euro-denominated subsidiaries during the fourth quarter of Fiscal 2020.

As of September 26, 2020, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 2 billion to hedge its net investment in Euro-denominated subsidiaries and $ 44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S.

Dollar and these currencies.

Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on U.S.

denominated debt for fixed rate payments of 0 % to 4.508 % in Euros and 0.89 % in Japanese Yen.

Certain of these contracts include mandatory early termination dates between September 2023 and September 2025, while the remaining contracts have maturity dates between July 2022 and August 2027.

These contracts have been designated as net investment hedges.

Accordingly, the Company recorded a reduction in interest expense of $ 2 million during the three and six months ended September 26, 2020 and $ 19 million and $ 34 million, respectively, during the three and six months ended September 28, 2019.

This decrease from prior year is due to the Company having a lower average notional amount outstanding and lower interest rates on these hedges compared to the prior year.

Interest Rate Swap

During the first quarter of Fiscal 2021, the Company entered into an interest rate swap with an initial notional amount of $ 500 million that will decrease to $ 350 million in April 2022.

As of September 26, 2020, the Company had an interest rate swap with an initial notional amount of $ 500 million that will decrease to $ 350 million in April 2022.

The swap was designated as a cash flow hedge designed to mitigate the impact of adverse interest rate fluctuations for a portion of the Company's variable-rate debt equal to the notional amount of the swap.

The interest rate swap converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237 % through December 2022.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of June 27, 2020 and March 28, 2020 (in millions):

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive income (loss) and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

During the three and six months ended September 26, 2020, the Company recorded an immaterial amount of interest expense related to this agreement.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of September 26, 2020 and March 28, 2020 (in millions):

Notional Amounts Assets Liabilities

September 26,

2020 March 28,

2020 June 27,

2020 September 26,

2020 March 28,

2020 June 27,

2020 September 26,

2020 March 28,

1 unchanged sentence

$ 177 $ 161 $ 2 (1)

Designated net investment hedge

Designated interest rate swaps

500 — — — 1 (3)

Designated net investment hedges 2,044 44 3 (3)

Designated interest rate swap 500 — — — 1 (4)

Total designated hedges $ 2,721 $ 205 $ 5 $ 4 $ 46 $ —

Undesignated derivative contracts (4)

Total $ 653 $ 205 $ 3 $ 4 $ 1 $ —

(1) Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.

(2) Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.

(3) Recorded within other assets in the Company’s consolidated balance sheets.

(4) Recorded within other long-term liabilities in the Company’s consolidated balance sheets.

(4) Primarily includes undesignated hedges of inventory purchases.

The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance sheets on a gross basis, as shown in the previous table.

However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of June 27, 2020 and March 28, 2020 would be as follows (in millions):

However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of September 26, 2020 and March 28, 2020 would be as follows (in millions):

Forward Currency Exchange Contracts Net Investment

Hedges Interest Rate

September 26,

2020 March 28,

2020 June 27,

2020 September 26,

2020 March 28,

2020 June 27,

2020 September 26,

2020 March 28,

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The Company’s master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties.

Changes in the fair value of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive (loss) income, and are reclassified from accumulated other comprehensive (loss) income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive (loss) income.

The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive (loss) income on the Company’s consolidated balance sheets.

Changes in the fair value of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive income (loss).

The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets.

Upon discontinuation of the hedge, such amounts remain in CTA until the related investment is sold or liquidated.

Changes in the fair value of the Company’s interest rate swaps that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive (loss) income, and are reclassified from accumulated other comprehensive (loss) income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of operations and comprehensive (loss) income.

Changes in the fair value of the Company’s interest rate swaps that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of operations and comprehensive income (loss).

The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts, net investment hedges and interest rate swaps (in millions):

Three Months Ended

June 27, 2020 June 29, 2019

Three Months Ended Six Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

Pre-Tax Losses

Recognized in OCI Pre-Tax Gains

Recognized in OCI Pre-Tax Losses

Recognized in OCI Pre-Tax Gains

Recognized in OCI

Designated forward foreign currency exchange contracts

$ — $ 6 $ — $ 6

Designated net investment hedges $ ( 42 ) $ 129 $ ( 42 ) $ 104

Designated interest rate swaps $ — $ — $ ( 1 ) $ —

The following table summarizes the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive (loss) income related to the designated forward foreign currency exchange contracts for the three months ended June 27, 2020 and June 29, 2019 (in millions):

The following tables summarize the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive income (loss) related to the designated forward foreign currency exchange contracts for the three and six months ended September 26, 2020 and September 28, 2019 (in millions):

Three Months Ended

Pre-Tax (Gain) Loss Reclassified from

Accumulated OCI Location of (Gain) Loss recognized Total Cost of goods sold

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Pre-Tax Gain Reclassified from

Accumulated OCI Location of Gain recognized

September 26, 2020 September 28, 2019

Designated forward foreign currency exchange contracts

$ ( 2 ) $ ( 2 ) Cost of goods sold

The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive (loss) income for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and turnover.

Six Months Ended

Pre-Tax Gain Reclassified from

Accumulated OCI Location of Gain recognized

September 26, 2020 September 28, 2019

Designated forward foreign currency exchange contracts

$ ( 3 ) $ ( 5 ) Cost of goods sold

The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive income (loss) for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and turnover.

Undesignated Hedges

During the three months ended June 27, 2020 and June 29, 2019, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss (gain) in the Company’s consolidated statement of operations and comprehensive (loss) income was immaterial.

During the three and six months ended September 26, 2020 and September 28, 2019, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive income (loss) was immaterial.

There were no undesignated hedges outstanding as of September 26, 2020.

Shareholders’ Equity

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During the first quarter of Fiscal 2021, the Company suspended its $ 500 million share-repurchase program in response to the continued impact of the COVID-19 pandemic.

During the three months ended June 27, 2020, the Company did no t purchase any shares through open market transactions under the current plan.

As of June 27, 2020, the remaining availability under the Company’s share repurchase program was $ 400 million.

During the three months ended June 29, 2019, the Company did no t purchase any shares through open market transactions under its previous $ 1.0 billion share-repurchase program, which expired on May 25, 2019.

During the six months ended September 26, 2020, the Company did no t purchase any shares through open market transactions under the current plan.

As of September 26, 2020, the remaining availability under the Company’s share repurchase program was $ 400 million.

During the six months ended September 28, 2019, the Company did no t purchase any shares through open market transactions under its previous $ 1.0 billion share-repurchase program, which expired on May 25, 2019.

Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading transactions under the Company’s insider trading policy and other relevant factors.

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The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the vesting of their restricted share awards.

During the three month periods ended June 27, 2020 and June 29, 2019, the Company withheld 38,119 shares and 58,304 shares, respectively, with a fair value of $ 1 million and $ 2 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

Accumulated Other Comprehensive (Loss) Income

The following table details changes in the components of accumulated other comprehensive (loss) income (“AOCI”), net of taxes for the three months ended June 27, 2020 and June 29, 2019, respectively (in millions):

During the six month periods ended September 26, 2020 and September 28, 2019, the

Company withheld 47,635 shares and 63,223 shares, respectively, with a fair value of $ 1 million and $ 2 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

Accumulated Other Comprehensive Income (Loss)

The following table details changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes for the six months ended September 26, 2020 and September 28, 2019, respectively (in millions):

Translation (Losses) Gains (1)

Net Gains (Losses) on Derivatives (2)

Other Comprehensive (Loss) Income Attributable to Capri

Other Comprehensive Income (Loss) Attributable to Capri

Balance at March 30, 2019 $ ( 73 ) $ 7 $ ( 66 )

Other comprehensive (loss) income before reclassifications

( 25 ) — ( 25 )

Other comprehensive income (loss) before reclassifications ( 38 ) 5 ( 33 )

amounts reclassified from AOCI to earnings

Other comprehensive (loss) income, net of tax

( 25 ) ( 2 ) ( 27 )

Balance at June 29, 2019 $ ( 98 ) $ 5 $ ( 93 )

Other comprehensive income (loss), net of tax ( 38 ) 1 ( 37 )

Balance at September 28, 2019 $ ( 111 ) $ 8 $ ( 103 )

Balance at March 28, 2020 $ 72 $ 3 $ 75

Other comprehensive (loss) income before reclassifications

( 3 ) — ( 3 )

Other comprehensive income before reclassifications 53 — 53

amounts reclassified from AOCI to earnings

Other comprehensive (loss) income, net of tax

( 3 ) ( 1 ) ( 4 )

Balance at June 27, 2020 $ 69 $ 2 $ 71

(1) Foreign currency translation gains and losses for the three months ended June 27, 2020 include net gains of $ 1 million on intra-entity transactions that are of a long-term investment nature.

Foreign currency translation gains and losses for the three months ended June 29, 2019 include net gains of $ 3 million on intra-entity transactions that are of a long-term investment nature, a $ 28 million translation gain relating to the Versace business and a $ 21 million loss, net of taxes of $ 4 million, relating to the Company’s net investment hedges.

(2) Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations and comprehensive (loss) income.

Other comprehensive income (loss), net of tax 53 ( 3 ) 50

Balance at September 26, 2020 $ 125 $ — $ 125

(1) Foreign currency translation gains and losses for the six months ended September 26, 2020 include net loss of $ 2 million on intra-entity transactions that are of a long-term investment nature.

Foreign currency translation gains and losses for the six months ended September 28, 2019 include net gains of $ 6 million on intra-entity transactions that are of a long-term investment nature, a $ 42 million translation loss relating to the Versace business and an $ 86 million gain, net of taxes of $ 18 million, relating to the Company’s net investment hedges.

All tax effects were not material for the periods presented.

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The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation and Talent Committee.

The Company has two equity plans, one stock option plan adopted in Fiscal 2008 (as amended and restated, the “2008 Plan”), and the Omnibus Incentive Plan adopted in the third fiscal quarter of Fiscal 2012 and amended and restated with shareholder approval in May 2015 (the “Incentive Plan”).

The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares.

As of June 27, 2020, there were no shares available to grant equity awards under the 2008 Plan.

The Incentive Plan allows for grants of share options, restricted shares and RSUs, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares.

At June 27, 2020, there were 1,554,923 ordinary shares available for future grants of equity awards under the Incentive Plan.

As of September 26, 2020, there were no shares available to grant equity awards under the 2008 Plan.

The Incentive Plan allows for grants of share options, restricted shares and RSUs, and other equity awards, and authorizes a total issuance of up to 18,846,000 ordinary shares after amendments in June 2020.

At September 26, 2020, there were 5,174,442 ordinary shares available for future grants of equity awards under the Incentive Plan.

Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the Incentive Plan generally expire seven years from the date of the grant.

The following table summarizes the Company’s share-based compensation activity during the three months ended June 27, 2020:

The following table summarizes the Company’s share-based compensation activity during the six months ended September 26, 2020:

Options Service-Based RSUs Performance-Based RSUs

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Canceled/forfeited ( 457,964 ) ( 336,091 ) ( 144,414 )

Outstanding/Unvested at June 27, 2020

Outstanding/Unvested at September 26, 2020

1,365,796 5,088,994 569,341

The weighted average grant date fair value of service-based RSUs granted during the three months ended June 27, 2020 was $ 16.24 .

The weighted average grant date fair value of service-based and performance-based RSUs granted during the three months ended June 29, 2019 was $ 33.90 and $ 33.86 , respectively.

The weighted average grant date fair value of service-based RSUs granted during the six months ended September 26, 2020 was $ 15.98 .

The weighted average grant date fair value of service-based and performance-based RSUs granted during the six months ended September 28, 2019 was $ 33.90 and $ 33.86 , respectively.

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation for the three months ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended

2020 June 29,

The following table summarizes compensation expense attributable to share-based compensation for the three and six months ended September 26, 2020 and September 28, 2019 (in millions):

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Share-based compensation expense $ 17 $ 21 $ 41 $ 49

Tax benefit related to share-based compensation expense

$ 4 $ 4 $ 9 $ 9

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company estimates forfeitures based on its historical forfeiture rates.

The estimated value of future forfeitures for equity grants as of June 27, 2020 is approximately $ 13 million.

The estimated value of future forfeitures for equity grants as of September 26, 2020 is approximately $ 12 million.

See Note 17 in the Company’s Fiscal 2020 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.

The Company’s effective tax rate for the three months ended June 27, 2020 was ( 2.9 )%.

Such rate differs from the United Kingdom (“U.K.”) federal statutory rate of 17 % primarily due to the existence of a valuation allowance on a portion of our consolidated pre-tax loss and a tax detriment related to share-based compensation.

These decreases were partially offset by the favorable effects related to global financing activities.

The Company’s effective tax rate for the three and six months ended September 26, 2020 was 14.2 % and ( 73.5 )%, respectively.

Such rates differs from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the impacts of a valuation allowance on a portion of our consolidated pre-tax loss, a tax detriment related to share-based compensation and the impact of the tax rate change in the U.K.

on the Company’s net deferred tax liabilities recorded as of September 26, 2020, as well as the impact of global financing activities.

The global financing activities are related to the Company’s 2014 move of its principal executive office from Hong Kong to the U.K.

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and Switzerland subsidiaries in December 2015.

Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized a higher effective tax rate on the consolidated pre-tax loss.

The Company’s effective tax rate for the three months ended June 29, 2019 was 11.8 %.

Such rate differed from the United Kingdom (“U.K.”) federal statutory rate of 19 % primarily due to the favorable effects of global financing arrangements and net tax benefits in the US and Europe that related to prior tax year positions.

These decreases in the effective tax rate for the three months ended June 29, 2019 were partially offset by tax deficits related to share-based compensation awards.

Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized a lower effective tax rate on the consolidated pre-tax income for the three months ended September 26, 2020 and a higher effective tax rate on the consolidated pre-tax loss for the six months ended September 26, 2020, respectively.

The Company’s effective tax rate for the three and six months ended September 28, 2019 was ( 5.8 )% and 1.7 %, respectively.

Such rates differed from the U.K.

federal statutory rate of 19% primarily due to the favorable impact from the realization of previously unrecognized tax benefits associated with certain positions in Europe realized during the period and return to provision adjustments in the US and Europe, which resulted in a benefit to the Company’s effective income tax rate for the three and six months ended September 28, 2019.

In addition, the Company had favorable effects related to global financing activities.

The global financing activities are related to the Company’s 2014 move of its principal executive office from Hong Kong to the U.K.

and decision to become a U.K.

tax resident.

In connection with this decision, the Company funded its international growth strategy through intercompany debt financing arrangements between certain of our U.S., U.K.

Switzerland subsidiaries in December 2015.

Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized a lower effective tax rate.

Segment Information

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The Company’s three reportable segments are as follows:

• Versace — segment includes revenue generated through the sale of Versace luxury ready-to-wear, accessories, footwear and home furnishings through directly operated Versace boutiques throughout North America (United States and Canada), EMEA and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites.

In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements that allow third parties to use the Versace trademarks in connection with retail and/or wholesale sales of Versace branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of jeans, fragrances, watches, jewelry and eyewear.

• Jimmy Choo — segment includes revenue generated through the sale of Jimmy Choo luxury footwear, handbags and small leather goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, EMEA and certain parts of Asia, through its e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo trademarks in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide.

In addition, revenue is generated through product licensing agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in connection with the manufacturing and sale of fragrances, sunglasses and eyewear.

• Versace — segment includes revenue generated through the sale of Versace luxury ready-to-wear, accessories, footwear and home furnishings through directly operated Versace boutiques throughout North America (United States and Canada), EMEA and certain parts of Asia, including Australia, as well as through Versace outlet stores and e-commerce sites.

• Jimmy Choo — segment includes revenue generated through the sale of Jimmy Choo luxury footwear, handbags and small leather goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, EMEA and certain parts of Asia, including Australia, through its e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo trademarks in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide.

• Michael Kors — segment includes revenue generated through the sale of Michael Kors products through four primary Michael Kors retail store formats:

“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce sites, through which the Company sells Michael Kors products, as well as licensed products bearing the Michael Kors name, directly to the end consumer throughout the Americas, Europe and certain parts of Asia.

The Company also sells Michael Kors products directly to department stores, primarily located across the Americas and Europe, to specialty stores and travel retail shops, and to its geographic licensees.

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Such costs primarily include certain administrative, corporate occupancy, and information systems expenses, including enterprise resource planning system implementation costs.

In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transition costs related to the Company’s recent acquisitions), impairment costs and COVID-19 related charges.

In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transition costs related to the Company’s acquisitions), impairment costs and COVID-19 related charges.

The segment structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses performance.

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The following table presents the key performance information of the Company’s reportable segments (in millions):

Three Months Ended

2020 June 29,

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Total revenue:

3 unchanged sentences

Total revenue $ 1,110 $ 1,442 $ 1,561 $ 2,788

(Loss) income from operations:

Income (loss) from operations:

Versace $ 20 $ 9 $ ( 21 ) $ 6

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COVID-19 related charges (1)

Total (loss) income from operations $ ( 162 ) $ 64

Total income (loss) from operations $ 153 $ 75 $ ( 9 ) $ 139

___________________

(1) COVID-19 related charges primarily related to severance costs, partially offset by a credit loss of $( 6 ) million.

(1) COVID-19 related charges for the three months ended September 26, 2020 primarily relate to the reversal of previously recorded inventory reserves as a result of improved sell through of excess inventory, partially offset by increased credit losses.

COVID-19 related charges for the six months ended September 26, 2020 primarily relate to severance and other COVID-19 related operating expenses, partially offset by a reduction to COVID-19 related inventory reserves.

Depreciation and amortization expense for each segment are as follows (in millions):

Three Months Ended

2020 June 29,

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Depreciation and amortization:

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Total revenue (based on country of origin) by geographic location are as follows (in millions):

Three Months Ended

2020 June 29,

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Total revenue:

The Americas (1)

$ 587 $ 802 $ 764 $ 1,531

EMEA 311 409 433 769

Asia 212 231 364 488

Total revenue $ 1,110 $ 1,442 $ 1,561 $ 2,788

(1) Total revenue earned in the U.S.

were $ 161 million for the three months ended June 27, 2020 and $ 681 million for the three months ended June 29, 2019, respectively.

As of June 27, 2020 and March 28, 2020, the Company's total assets were $ 7.533 billion and $ 7.946 billion, respectively.

The decrease in total assets was primarily due to the reduction of the Company's cash and cash equivalents from $ 592 million as of March 28, 2020 to $ 207 million as of June 27, 2020, due to net payments the Company made to lower the outstanding balance of its Revolving Credit Facilities.

Subsequent Events

Net Investment Hedges

During the second quarter of Fiscal 2021, the Company entered into multiple fixed-to-fixed cross currency swap agreements with an aggregate notional amount of $ 1 billion to hedge its net investments in Euro-denominated subsidiaries against future volatility in the exchange rates between the U.S.

Dollar and the Euro.

These contracts have been designated as net investment hedges.

were $ 531 million and $ 692 million, respectively, for the three and six months ended September 26, 2020 and $ 741 million and $ 1.422 billion, respectively, for the three and six months ended September 28, 2019.

As of September 26, 2020 and March 28, 2020, the Company's total assets were $ 7.803 billion and $ 7.946 billion, respectively.

The decrease in total assets was primarily due to the reduction of the Company's cash and cash equivalents from $ 592 million as of March 28, 2020 to $ 238 million as of September 26, 2020, due to net payments the Company made to lower the outstanding balance of its Revolving Credit Facilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements