What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-03 compared with 2020-11-05 · 178 added, 180 removed, 337 unchanged (52% of the section changed)

29 unchanged sentences

Our Versace brand has long been recognized as one of the world’s leading international fashion design houses and is synonymous with Italian glamour and style.

Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship, over the past several decades the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings businesses.

Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship.

Over the past several decades, the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings businesses.

Versace’s design team is led by Donatella Versace, who has been the brand’s artistic director for over 20 years.

52 unchanged sentences

We operate in three reportable segments, which are as follows:

We generate revenue 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 (Europe, Middle East and Africa) and certain parts of Asia, including Australia, 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), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of products, including jeans, fragrances, watches, jewelry and eyewear.

We generate revenue through the sale of Jimmy Choo luxury goods to end clients through directly operated Jimmy Choo retail and outlet stores throughout the Americas (United States, Canada and Latin America), EMEA and certain parts of Asia, including Australia, through our 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 tradename 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.

We generate revenue through the sale of Versace luxury ready-to-wear, accessories and footwear through directly operated Versace boutiques throughout North America (United States and Canada), EMEA (Europe, Middle East and Africa) and certain parts of Asia, including Australia, as well as through Versace outlet stores and e-commerce sites.

We generate revenue through the sale of Jimmy Choo luxury goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas (United States, Canada and Latin America), EMEA and certain parts of Asia, including Australia, through our 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 tradename 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 products, including fragrances and eyewear.

We generate revenue 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, through which we sell our products, as well as licensed products bearing our name, directly to the end consumer throughout the Americas, Europe and certain parts of Asia, including Australia.

“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to consumers throughout the Americas, Europe and certain parts of Asia, including Australia.

Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and certain parts of Europe and Asia.

6 unchanged sentences

The segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages the business and assesses performance.

The following table presents our total revenue and income (loss) from operations by segment 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,

The following table presents our total revenue and income (loss) from operations by segment for the three and nine months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Total revenue:

12 unchanged sentences

COVID-19 related charges 1 — (2) —

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

___________________

(1) COVID-19 related charges for the three months ended September 26, 2020 primarily relate to an inventory reserve credit 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.

Total income from operations $ 167 $ 205 $ 158 $ 344

The following table presents our global network of retail stores and wholesale doors by brand:

September 26,

2020 September 28,

2020 December 28,

Number of full price retail stores (including concessions):

12 unchanged sentences

The following table presents our retail stores by geographic location:

September 26, 2020 September 28, 2019

December 26, 2020 December 28, 2019

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

6 unchanged sentences

We use a number of key indicators of operating results to evaluate our Company’s performance, including the following (dollars in millions):

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

December 26, 2020 December 28, 2019 December 26, 2020 December 28, 2019

Total revenue $ 1,302 $ 1,571 $ 2,863 $ 4,359

Gross profit as a percent of total revenue 65.1 % 59.3 % 65.0 % 60.6 %

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

Income (loss) from operations as a percent of total revenue 13.8 % 5.2 % (0.6) % 5.0 %

Income from operations $ 167 $ 205 $ 158 $ 344

Income from operations as a percent of total revenue 12.8 % 13.0 % 5.5 % 7.9 %

We experience certain effects of seasonality with respect to our business.

10 unchanged sentences

Results of Operations

Comparison of the three months ended September 26, 2020 with the three months ended September 28, 2019

The following table details the results of our operations for the three months ended September 26, 2020 and September 28, 2019, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Comparison of the three months ended December 26, 2020 with the three months ended December 28, 2019

The following table details the results of our operations for the three months ended December 26, 2020 and December 28, 2019, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Three Months Ended $ Change % Change % of Total Revenue for

the Three Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

2020 December 28,

2019 December 26,

2020 December 28,

Statements of Operations Data:

4 unchanged sentences

Depreciation and amortization 52 63 (11) (17.5) % 4.0 % 4.0 %

Impairment of assets 20 104 (84) (80.8) % 1.8 % 7.2 %

Impairment of assets 90 19 71 NM 6.9 % 1.2 %

Restructuring and other charges 1 15 (14) (93.3) % 0.1 % 1.0 %

1 unchanged sentence

Income from operations 167 205 (38) (18.5) % 12.8 % 13.0 %

Other income, net — (1) 1 (100.0) % — % (0.1) %

Other income, net (3) (1) (2) NM (0.2) % (0.1) %

Interest expense, net 10 3 7 NM 0.8 % 0.2 %

Foreign currency loss — 4 (4) (100.0) % — % 0.3 %

Foreign currency gain (13) (2) (11) NM (1.0) % (0.1) %

Income before provision for income taxes 173 205 (32) (15.6) % 13.3 % 13.0 %

Provision for (benefit from) income taxes 20 (4) 24 NM 1.8 % (0.3) %

Benefit from income taxes (5) (4) (1) 25.0 % (0.4) % (0.3) %

Net income 178 209 (31) (14.8) %

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

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

Net income attributable to Capri $ 179 $ 210 $ (31) (14.8) %

2 unchanged sentences

Total Revenue

Total revenue decreased $332 million, or 23.0%, to $1.110 billion for the three months ended September 26, 2020, compared to $1.442 billion for the three months ended September 28, 2019, which included net favorable foreign currency effects of approximately $23 million, primarily related to the strengthening of the Euro, Chinese Renminbi and British Pound against the U.S.

Dollar during the three months ended September 26, 2020 as compared to the same prior year period.

Total revenue decreased $269 million, or 17.1%, to $1.302 billion for the three months ended December 26, 2020, compared to $1.571 billion for the three months ended December 28, 2019, which included net favorable foreign currency effects of approximately $38 million, primarily related to the strengthening of the Euro, Chinese Renminbi and British Pound against the U.S.

Dollar during the three months ended December 26, 2020 as compared to the same prior year period.

On a constant currency basis, our total revenue decreased $307 million, or 19.5%.

The decrease is attributable to lower revenues across all three brands, as compared to the prior year, reflecting the adverse impact of COVID-19.

Gross profit decreased $164 million, or 18.8%, to $710 million for the three months ended September 26, 2020, compared to $874 million for the three months ended September 28, 2019, which included net favorable foreign currency effects of $11 million.

Gross profit as a percentage of total revenue increased 340 basis points to 64.0% during the three months ended September 26, 2020, compared to 60.6% during the three months ended September 28, 2019.

The increase in our gross profit margin was primarily attributable to higher gross profit margin for Michael Kors primarily driven by a higher average unit price and favorable channel mix during the three months ended September 26, 2020, as compared to the three months ended September 28, 2019.

Gross profit decreased $84 million, or 9.0%, to $848 million for the three months ended December 26, 2020, compared to $932 million for the three months ended December 28, 2019, which included net favorable foreign currency effects of $27 million.

Gross profit as a percentage of total revenue increased 580 basis points to 65.1% during the three months ended December 26, 2020, compared to 59.3% during the three months ended December 28, 2019.

The increase in our gross profit margin was primarily attributable to a higher gross profit margin for Michael Kors primarily driven by a higher average unit price during the three months ended December 26, 2020, as compared to the three months ended December 28, 2019.

Total Operating Expenses

Total operating expenses decreased $242 million, or 30.3%, to $557 million during the three months ended September 26, 2020, compared to $799 million for the three months ended September 28, 2019.

Total operating expenses decreased $46 million, or 6.3%, to $681 million during the three months ended December 26, 2020, compared to $727 million for the three months ended December 28, 2019.

Our operating expenses included a net unfavorable foreign currency impact of approximately $29 million.

Total operating expenses decreased to 50.2% as a percentage of total revenue for the three months ended September 26, 2020, compared to 55.4% for the three months ended September 28, 2019.

Total operating expenses increased to 52.3% as a percentage of total revenue for the three months ended December 26, 2020, compared to 46.3% for the three months ended December 28, 2019.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $149 million, or 23.9%, to $474 million during the three months ended September 26, 2020, compared to $623 million for the three months ended September 28, 2019, primarily due to lower variable costs, as well as decreased costs from our cost reduction initiatives as a result of COVID-19.

Selling, general, and administrative expenses as a percentage of total revenue decreased to 42.7% for the three months ended September 26, 2020, compared to 43.2% for the three months ended September 28, 2019, primarily due to our cost reduction initiatives, such as advertising expenses, as a result of COVID-19, during the three months ended September 26, 2020, as compared to the three months ended September 28, 2019.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $5 million, or 14.3%, to $30 million during the three months ended September 26, 2020 as compared to $35 million for the three months ended September 28, 2019, primarily due to a reduction in ERP system implementation costs, as well as our cost reduction initiatives as a result of COVID-19.

Selling, general and administrative expenses decreased $92 million, or 14.6%, to $538 million during the three months ended December 26, 2020, compared to $630 million for the three months ended December 28, 2019, primarily due to lower variable costs, as well as decreased costs from our cost reduction initiatives as a result of COVID-19.

Selling, general, and administrative expenses as a percentage of total revenue increased to 41.3% for the three months ended December 26, 2020, compared to 40.1% for the three months ended December 28, 2019, primarily due to increased e-commerce related costs as a percentage of revenue, partially offset by a decrease in retail store related costs as a percentage of revenue during the three months ended December 26, 2020, as compared to the three months ended December 28, 2019.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $17 million, or 37.0%, to $29 million during the three months ended December 26, 2020 as compared to $46 million for the three months ended December 28, 2019, primarily due to a reduction in ERP system implementation costs, as well as our cost reduction initiatives as a result of COVID-19.

Depreciation and Amortization

Depreciation and amortization decreased $11 million, or 16.9%, to $54 million during the three months ended September 26, 2020, compared to $65 million for the three months ended September 28, 2019.

Depreciation and amortization decreased $11 million, or 17.5%, to $52 million during the three months ended December 26, 2020, compared to $63 million for the three months ended December 28, 2019.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to previously recorded property and equipment impairment charges.

Depreciation and amortization increased to 4.9% as a percentage of total revenue during the three months ended September 26, 2020, compared to 4.5% for the three months ended September 28, 2019.

Depreciation and amortization as a percentage of total revenue was 4.0% for both the three months ended December 26, 2020 and December 28, 2019.

Impairment of Assets

During the three months ended September 26, 2020, we recognized asset impairment charges of $20 million, primarily related to operating lease right-of-use assets at our Michael Kors store locations (see Note 11 to the accompanying consolidated financial statements for additional information).

During the three months ended September 28, 2019, we recognized asset impairment charges of approximately $104 million, which primarily related to operating lease right-of-use assets largely driven by the unfavorable operating results in Hong Kong.

During the three months ended December 26, 2020, we recognized asset impairment charges of $90 million, primarily related to operating lease right-of-use assets across our brands (see Note 11 to the accompanying consolidated financial statements for additional information).

During the three months ended December 28, 2019, we recognized asset impairment charges of approximately $19 million, primarily related to property and equipment and operating lease right-of-use assets at our Michael Kors store locations.

Restructuring and Other Charges

During the three months ended September 26, 2020, we recognized restructuring and other charges of $9 million, which included other costs of $7 million primarily related to equity awards associated with the acquisition of Versace (see Note 8 to the accompanying consolidated financial statements for additional information) and $2 million related to our Capri Retail Store Optimization Program.

During the three months ended September 28, 2019, we recognized restructuring and other charges of $7 million, which primarily included other costs of $6 million primarily related to equity awards associated with the acquisition of Versace.

During the three months ended December 26, 2020, we recognized restructuring and other charges of $1 million, which included other costs of $5 million primarily related to equity awards associated with the acquisition of Versace and closures of certain corporate locations, offset by $4 million of gains recognized on lease terminations related to our Capri Retail Store Optimization Program (see Note 8 to the accompanying consolidated financial statements for additional information).

During the three months ended December 28, 2019, we recognized restructuring and other charges of $15 million, which primarily included other costs of $10 million primarily related to equity awards associated with the acquisition of Versace and $5 million related to our Michael Kors Retail Fleet Optimization Plan.

Income from Operations

As a result, income from operations increased $78 million, to $153 million during three months ended September 26, 2020, compared to $75 million for the three months ended September 28, 2019.

Income from operations as a percentage of total revenue increased to 13.8% during the three months ended September 26, 2020, compared to 5.2% for the three months ended September 28, 2019.

As a result, income from operations decreased $38 million, to $167 million during three months ended December 26, 2020, compared to $205 million for the three months ended December 28, 2019.

Income from operations as a percentage of total revenue decreased to 12.8% during the three months ended December 26, 2020, compared to 13.0% for the three months ended December 28, 2019.

See Segment Information above for a reconciliation of our segment operating income to total operating income.

Interest Expense, net

Interest expense, net, increased $9 million to $12 million during the three months ended September 26, 2020, compared to $3 million for the three months ended September 28, 2019, primarily due to a decrease of interest income attributable to lower average net investment hedges outstanding in the current year.

Interest expense, net, increased $7 million to $10 million during the three months ended December 26, 2020, compared to $3 million for the three months ended December 28, 2019, primarily due to a decrease of interest income attributable to lower average interest rates and lower average notional amount outstanding on our net investment hedges in the current year.

The decrease in interest income was largely offset by a decrease in interest expense attributable to lower average borrowings outstanding in the current year and the addition of an interest rate swap in the current year which converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through December 2022 (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss

During the three months ended September 26, 2020, we recognized an immaterial net foreign currency loss.

During the three months ended September 28, 2019, we recognized a net foreign currency loss of $4 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for (Benefit from) Income Taxes

The provision for incomes taxes was $20 million during the three months ended September 26, 2020, compared to a $4 million tax benefit for the three months ended September 28, 2019.

Our effective tax rate were 14.2% and (5.8)% for the three months ended September 26, 2020 and September 28, 2019, respectively.

The increase in our effective tax rate was primarily related to the impact from the realization of previously unrecognized tax benefits for the three months ended September 28, 2019 and the tax rate change in the United Kingdom on the Company's net deferred tax liabilities recorded for the three months ended September 26, 2020.

Foreign Currency Gain

During the three months ended December 26, 2020, we recognized a net foreign currency gain of $13 million, primarily attributable to the remeasurement of U.S.

dollar-denominated intercompany payables with certain of our subsidiaries.

During the three months ended December 28, 2019, we recognized a net foreign currency gain of $2 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany payables with certain of our subsidiaries.

Benefit from Income Taxes

We recognized $5 million of income tax benefit during the three months ended December 26, 2020, compared to a $4 million income tax benefit for the three months ended December 28, 2019.

Our effective tax rates were (2.9)% and (2.0)% for the three months ended December 26, 2020 and December 28, 2019, respectively.

The decrease in our effective tax rate was primarily related to the impact of the release of a valuation allowance on tax loss carryforwards of a U.S.

subsidiary during the three months ended December 26, 2020.

The decrease was partially offset by the existence of favorable impacts of benefits recognized from the resolution of uncertain tax positions and return to provision adjustments for the three months ended December 28, 2019 when compared to the three months ended December 26, 2020.

Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S.

2 unchanged sentences

Net Loss Attributable to Noncontrolling Interest

During the three months ended September 26, 2020, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $1 million.

During the three months ended December 26, 2020 and December 28, 2019, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $1 million in each period.

This loss represents the share of income that is not attributable to the Company.

Net Income Attributable to Capri

As a result of the foregoing, our net income increased $49 million to a net income of $122 million during the three months ended September 26, 2020, compared to net income of $73 million for the three months ended September 28, 2019.

As a result of the foregoing, our net income decreased $31 million to a net income of $179 million during the three months ended December 26, 2020, compared to net income of $210 million for the three months ended December 28, 2019.

Segment Information

Three Months Ended % Change

(dollars in millions) September 26,

2020 September 28,

(dollars in millions) December 26,

2020 December 28,

2019 $ Change As Reported Constant

Revenues $ 195 $ 195 $ — — % (6.7) %

Income from operations 20 9 11 NM

Income (loss) from operations 13 (12) 25 NM

Operating margin 6.7 % (6.2) %

1 unchanged sentence

NM Not meaningful

Versace revenues decreased $33 million, or 14.5%, to $195 million during the three months ended September 26, 2020, compared to $228 million for the three months ended September 28, 2019, which included favorable foreign currency effects of $10 million.

Versace revenues were $195 million during the three months ended December 26, 2020 and December 28, 2019.

Revenue during the three months ended December 26, 2020 included favorable foreign currency effects of $13 million.

On a constant currency basis, revenue decreased $13 million, or 6.7%, primarily reflecting the adverse impacts related to COVID-19.

Income from Operations

During the three months ended September 26, 2020, Versace recorded income from operations of $20 million, compared to $9 million for the three months ended September 28, 2019.

Operating margin increased from 3.9% for the three months ended September 28, 2019, to 10.3% during the three months ended September 26, 2020, primarily due to our cost reduction initiatives as a result of COVID-19 and favorable channel mix.

Income (Loss) from Operations

During the three months ended December 26, 2020, Versace recorded income from operations of $13 million, compared to a loss from operations of $12 million for the three months ended December 28, 2019.

Operating margin increased from (6.2)% for the three months ended December 28, 2019, to 6.7% during the three months ended December 26, 2020, primarily due to our cost reduction initiatives as a result of COVID-19 and favorable channel mix.

Three Months Ended % Change

(dollars in millions) September 26,

2020 September 28,

(dollars in millions) December 26,

2020 December 28,

2019 $ Change As

1 unchanged sentence

Revenues $ 121 $ 165 $ (44) (26.7) % (27.3) %

Loss from operations — (10) 10 NM

(Loss) income from operations (8) 9 (17) NM

Operating margin (6.6) % 5.5 %

1 unchanged sentence

NM Not meaningful

Jimmy Choo revenues decreased $3 million, or 2.4%, to $122 million during the three months ended September 26, 2020, compared to $125 million for the three months ended September 28, 2019, which included favorable foreign currency effects of $5 million.

On a constant currency basis, revenue decreased $8 million, or 6.4%, primarily reflecting the adverse impacts related to COVID-19.

Loss from Operations

During the three months ended September 26, 2020, Jimmy Choo recorded immaterial income from operations, compared to loss from operations of $10 million for the three months ended September 28, 2019.

Operating margin improved to 0.0% from (8.0)% for the three months ended September 28, 2019 due to our costs reduction initiatives as a result of COVID-19 and reduction in expense as our strategic investments have normalized.

Jimmy Choo revenues decreased $44 million, or 26.7%, to $121 million during the three months ended December 26, 2020, compared to $165 million for the three months ended December 28, 2019, which included favorable foreign currency effects of $1 million.

On a constant currency basis, revenue decreased $45 million, or 27.3%, primarily reflecting the adverse impacts related to COVID-19, including the cancellation of the holiday collection in the current year.

(Loss) Income from Operations

During the three months ended December 26, 2020, Jimmy Choo recorded a loss from operations of $8 million, compared to income from operations of $9 million for the three months ended December 28, 2019.

Operating margin declined from 5.5% for the three months ended December 28, 2019 to (6.6)% during the three months ended December 26, 2020, primarily due to expense deleverage due to lower revenue as noted above.

Three Months Ended % Change

(dollars in millions) September 26,

2020 September 28,

(dollars in millions) December 26,

2020 December 28,

2019 $ Change As

3 unchanged sentences

Operating margin 28.5 % 23.8 %

Michael Kors revenues decreased $296 million, or 27.2%, to $793 million during the three months ended September 26, 2020, compared to $1.089 billion for the three months ended September 28, 2019, which included favorable foreign currency effects of $8 million.

Michael Kors revenues decreased $225 million, or 18.6%, to $986 million during the three months ended December 26, 2020, compared to $1.211 billion for the three months ended December 28, 2019, which included favorable foreign currency effects of $24 million.

On a constant currency basis, revenue decreased $249 million, or 20.6%, primarily reflecting the adverse impacts related to COVID-19.

Income from Operations

During the three months ended September 26, 2020, Michael Kors recorded income from operations of $190 million, compared to $222 million for the three months ended September 28, 2019.

Operating margin increased from 20.4% for the three months ended September 28, 2019, to 24.0% during the three months ended September 26, 2020, primarily due to a higher average unit price and favorable channel mix.

During the three months ended December 26, 2020, Michael Kors recorded income from operations of $281 million, compared to $288 million for the three months ended December 28, 2019.

Operating margin increased from 23.8% for the three months ended December 28, 2019, to 28.5% during the three months ended December 26, 2020, primarily due to a higher average unit price and favorable channel mix.

Results of Operations

Comparison of the six months ended September 26, 2020 with the six months ended September 28, 2019

The following table details the results of our operations for the six months ended September 26, 2020 and September 28, 2019, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Six Months Ended $ Change % Change % of Total Revenue for

the Six Months Ended

September 26,

2020 September 28,

2019 September 26, 2020 September 28, 2019

Comparison of the nine months ended December 26, 2020 with the nine months ended December 28, 2019

The following table details the results of our operations for the nine months ended December 26, 2020 and December 28, 2019, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Nine Months Ended $ Change % Change % of Total Revenue for

the Nine Months Ended

2020 December 28,

2019 December 26, 2020 December 28, 2019

Statements of Operations Data:

7 unchanged sentences

Total operating expenses 1,702 2,296 (594) (25.9) % 59.4 % 52.7 %

(Loss) income from operations (9) 139 (148) (106.5) % (0.6) % 5.0 %

Income from operations 158 344 (186) (54.1) % 5.5 % 7.9 %

Other income, net (4) (4) — — % (0.1) % (0.1) %

Interest expense, net 29 16 13 81.3 % 1.9 % 0.6 %

Interest expense, net 39 19 20 NM 1.4 % 0.4 %

Foreign currency (gain) loss (16) 4 (20) NM (0.6) % 0.1 %

(Loss) income before provision for income taxes (34) 120 (154) NM (2.2) % 4.3 %

Provision for income taxes

Income before provision for income taxes 139 325 (186) (57.2) % 4.9 % 7.5 %

Provision for (benefit from) income taxes

20 (2) 22 NM 0.7 % — %

Net (loss) income (59) 118 (177) NM

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

Net (loss) income attributable to Capri $ (58) $ 118 $ (176) NM

Net income 119 327 (208) (63.6) %

Net loss attributable to noncontrolling interest (2) (1) (1) 100.0 %

Net income attributable to Capri $ 121 $ 328 $ (207) (63.1) %

___________________

1 unchanged sentence

Total Revenue

Total revenue decreased $1.227 billion, or 44.0%, to $1.561 billion for the six months ended September 26, 2020, compared to $2.788 billion for the six months ended September 28, 2019, which included net favorable foreign currency effects of approximately $19 million, primarily related to the strengthening of the Euro and British Pound against the U.S.

Dollar during the six months ended September 26, 2020 as compared to the same prior year period.

Total revenue decreased $1.496 billion, or 34.3%, to $2.863 billion for the nine months ended December 26, 2020, compared to $4.359 billion for the nine months ended December 28, 2019, which included net favorable foreign currency effects of approximately $57 million, primarily related to the strengthening of the Euro, British Pound and Chinese Renminbi against the U.S.

Dollar during the nine months ended December 26, 2020 as compared to the same prior year period.

On a constant currency basis, our total revenue decreased $1.553 billion, or 35.6%.

The decrease is attributable to lower revenues across all three brands, as compared to the prior year, reflecting the adverse impact of COVID-19.

Gross profit decreased $696 million, or 40.7%, to $1.012 billion for the six months ended September 26, 2020, compared to $1.708 billion for the six months ended September 28, 2019, which included net favorable foreign currency effects of $8 million.

Gross profit as a percentage of total revenue increased 350 basis points to 64.8% during the six months ended September 26, 2020, compared to 61.3% during the six months ended September 28, 2019.

The increase in gross profit margin was primarily attributable to higher gross profit margin for Michael Kors driven by a higher average unit price and favorable channel mix during the six months ended September 26, 2020, as compared to the six months ended September 28, 2019.

Gross profit decreased $780 million, or 29.5%, to $1.860 billion for the nine months ended December 26, 2020, compared to $2.640 billion for the nine months ended December 28, 2019, which included net favorable foreign currency effects of $35 million.

Gross profit as a percentage of total revenue increased 440 basis points to 65.0% during the nine months ended December 26, 2020, compared to 60.6% during the nine months ended December 28, 2019.

The increase in gross profit margin was primarily attributable to a higher gross profit margin for Michael Kors driven by a higher average unit price and favorable channel mix during the nine months ended December 26, 2020, as compared to the nine months ended December 28, 2019.

Total Operating Expenses

Total operating expenses decreased $548 million, or 34.9%, to $1.021 billion during the six months ended September 26, 2020, compared to $1.569 billion for the six months ended September 28, 2019.

Total operating expenses decreased $594 million, or 25.9%, to $1.702 billion during the nine months ended December 26, 2020, compared to $2.296 billion for the nine months ended December 28, 2019.

Our operating expenses included a net unfavorable foreign currency impact of approximately $43 million.

Total operating expenses increased to 65.4% as a percentage of total revenue for the six months ended September 26, 2020, compared to 56.3% for the six months ended September 28, 2019.

Total operating expenses increased to 59.4% as a percentage of total revenue for the nine months ended December 26, 2020, compared to 52.7% for the nine months ended December 28, 2019.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $345 million, or 28.3%, to $876 million during the six months ended September 26, 2020, compared to $1.221 billion for the six months ended September 28, 2019, primarily due to lower variable costs, as well as decreases from our cost reduction initiatives as a result of COVID-19.

Selling, general and administrative expenses as a percentage of total revenue increased to 56.1% during the six months ended September 26, 2020, compared to 43.8% for the six months ended September 28, 2019, primarily due to the adverse impacts of COVID-19 and increased retail store and e-commerce related costs as a percentage of total revenue during the six months ended September 26, 2020, as compared to the six months ended September 28, 2019.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $7 million, or 10.3%, to $61 million during the six months ended September 26, 2020 as compared to $68 million for the six months ended September 28, 2019, primarily due to a reduction in ERP system implementation costs, as well as our cost reduction initiatives as a result of COVID-19.

Selling, general and administrative expenses decreased $437 million, or 23.6%, to $1.414 billion during the nine months ended December 26, 2020, compared to $1.851 billion for the nine months ended December 28, 2019, primarily due to lower variable costs, as well as decreases from our cost reduction initiatives as a result of COVID-19.

Selling, general and administrative expenses as a percentage of total revenue increased to 49.4% during the nine months ended December 26, 2020, compared to 42.5% for the nine months ended December 28, 2019, primarily due to increased retail store and e-commerce related costs as a percentage of total revenue during the nine months ended December 26, 2020, as compared to the nine months ended December 28, 2019.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $24 million, or 21.1%, to $90 million during the nine months ended December 26, 2020 as compared to $114 million for the nine months ended December 28, 2019, primarily due to a reduction in ERP system implementation costs, as well as our cost reduction initiatives as a result of COVID-19.

Depreciation and Amortization

Depreciation and amortization decreased $17 million, or 13.6%, to $108 million during the six months ended September 26, 2020, compared to $125 million for the six months ended September 28, 2019.

Depreciation and amortization decreased $28 million, or 14.9%, to $160 million during the nine months ended December 26, 2020, compared to $188 million for the nine months ended December 28, 2019.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to previously recorded property and equipment impairment charges.

Depreciation and amortization increased to 6.9% as a percentage of total revenue during the six months ended September 26, 2020, compared to 4.5% for the six months ended September 28, 2019 primarily due to lower revenues during the six months ended September 26, 2020 as a result of COVID-19.

Depreciation and amortization increased to 5.6% as a percentage of total revenue during the nine months ended December 26, 2020, compared to 4.3% for the nine months ended December 28, 2019 primarily due to lower revenues during the nine months ended December 26, 2020 as a result of COVID-19.

Impairment of Assets

During the six months ended September 26, 2020, we recognized asset impairment charges of $20 million, which primarily related to operating lease right-of-use assets at our Michael Kors store locations (see Note 11 to the accompanying consolidated financial statements for additional information).

During the six months ended September 28, 2019, we recognized asset impairment charges of approximately $201 million, which primarily related to operating lease right-of-use assets.

During the nine months ended December 26, 2020, we recognized asset impairment charges of $110 million, which primarily related to operating lease right-of-use assets across our brands (see Note 11 to the accompanying consolidated financial statements for additional information).

During the nine months ended December 28, 2019, we recognized asset impairment charges of approximately $220 million, which primarily related to operating lease right-of-use assets across our brands.

Restructuring and Other Charges

During the six months ended September 26, 2020, we recognized restructuring and other charges of $17 million, which included other costs of $12 million primarily related to equity awards associated with the acquisition of Versace (see Note 8 to the accompanying consolidated financial statements for additional information) and $5 million related to our Capri Retail Store Optimization Program.

During the six months ended September 28, 2019, we recognized restructuring and other charges of $22 million, which were primarily comprised of $18 million of other costs and restructuring charges of $4 million primarily related to Jimmy Choo lease-related charges and our previous Michael Kors Retail Fleet Optimization Plan.

The other costs recorded during the six months ended September 28, 2019 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.

During the nine months ended December 26, 2020, we recognized restructuring and other charges of $18 million, which included other costs of $17 million primarily related to equity awards associated with the acquisition of Versace (see Note 8 to the accompanying consolidated financial statements for additional information) and $1 million related to our Capri Retail Store Optimization Program.

During the nine months ended December 28, 2019, we recognized restructuring and other charges of $37 million, which were primarily comprised of $26 million of other costs and restructuring charges of $11 million primarily related to Jimmy Choo lease-related charges and our previous Michael Kors Retail Fleet Optimization Plan.

The other costs recorded during the nine months ended December 28, 2019 included $18 million, primarily related to equity awards associated with the acquisition of Versace and $8 million, primarily related to equity awards associated with the acquisition of Jimmy Choo.

Restructuring and other charges are not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).

(Loss) Income from Operations

As a result of the foregoing, income from operations decreased $148 million or 106.5%, to a net loss from operations of $9 million during the six months ended September 26, 2020, compared to income from operations of $139 million for the six months ended September 28, 2019.

(Loss) income from operations as a percentage of total revenue decreased to (0.6)% during the six months ended September 26, 2020, compared to 5.0% for the six months ended September 28, 2019 (see Segment Information above for a reconciliation of our segment operating income to total operating income).

Income from Operations

As a result of the foregoing, income from operations decreased $186 million or 54.1%, to $158 million during the nine months ended December 26, 2020, compared to $344 million for the nine months ended December 28, 2019.

Income from operations as a percentage of total revenue decreased to 5.5% during the nine months ended December 26, 2020, compared to 7.9% for the nine months ended December 28, 2019 (see Segment Information above for a reconciliation of our segment operating income to total operating income).

Interest Expense,net

Interest expense, net, increased $13 million to $29 million during the six months ended September 26, 2020, compared to $16 million for the six months ended September 28, 2019, primarily due to a decrease to interest income attributable to lower average net investment hedges outstanding in the current year.

Interest expense, net, increased $20 million to $39 million during the nine months ended December 26, 2020, compared to $19 million for the nine months ended December 28, 2019, primarily due to a decrease to interest income attributable to lower average net investment hedges outstanding and lower interest rates in the current year.

The decrease to interest income was largely offset by a decrease in interest expense attributable to lower average borrowings outstanding in the current year and the addition of an interest rate swap in the current year which converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through December 2022 (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

During the six months ended September 26, 2020, we recognized a net foreign currency gain of $3 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

During the six months ended September 28, 2019, we recognized a net foreign currency loss of $6 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

We recognized $25 million of income tax expense during the six months ended September 26, 2020, compared to $2 million of income tax expense for the six months ended September 28, 2019.

Our effective tax rates were (73.5)% and 1.7% for the six months ended September 26, 2020 and September 28, 2019, respectively.

The change in our effective tax rate was primarily related to the impact 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 United Kingdom on the Company's net deferred tax liabilities recorded for the six months ended September 26, 2020, compared to six months ended September 28, 2019.

These impacts were partially offset by the effects related to global financing activities on our consolidated pre-tax loss.

During the nine months ended December 26, 2020, we recognized a net foreign currency gain of $16 million, primarily attributable to the remeasurement of U.S.

dollar-denominated intercompany payables with certain of our subsidiaries.

During the nine months ended December 28, 2019, we recognized a net foreign currency loss of $4 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of U.S.

dollar-denominated intercompany payables with certain of our subsidiaries.

Provision for (Benefit from) Income Taxes

We recognized $20 million of income tax expense during the nine months ended December 26, 2020, compared to a $2 million tax benefit for the nine months ended December 28, 2019.

Our effective tax rates were 14.4% and (0.6)% for the nine months ended December 26, 2020 and December 28, 2019, respectively.

The increase in our effective tax rate was primarily related to the impact of the tax rate change in the United Kingdom on the Company's net deferred tax liabilities and a tax detriment related to share based compensation recorded for the nine months ended December 26, 2020.

The additional increase is due to favorable impacts of benefits recognized from the resolution of uncertain tax positions and return to provision adjustments for the nine months ended December 28, 2019 when compared to the nine months ended December 26, 2020.

These increases were partially offset by the favorable effects related to global activities on our consolidated pre-tax income in the current year compared to the prior year.

Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S.

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Net Loss Attributable to Noncontrolling Interest

During the six months ended September 26, 2020, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $1 million .

This loss represents the share of income that is not attributable to the Company.

Net (Loss) Income Attributable to Capri

As a result of the foregoing, our net income decreased $176 million to a net loss of $58 million during the six months ended September 26, 2020, compared to net income of $118 million for the six months ended September 28, 2019.

During the nine months ended December 26, 2020 and December 28, 2019, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $2 million and $1 million, respectively.

These losses represent the share of income that is not attributable to the Company.

Net Income Attributable to Capri

As a result of the foregoing, our net income decreased $207 million to a net income of $121 million during the nine months ended December 26, 2020, compared to net income of $328 million for the nine months ended December 28, 2019.

Segment Information

Six Months Ended % Change

(dollars in millions) September 26,

2020 September 28,

Nine Months Ended % Change

(dollars in millions) December 26,

2020 December 28,

2019 $ Change As

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Revenues $ 483 $ 630 $ (147) (23.3) % (26.7) %

(Loss) income from operations (21) 6 (27) NM

Loss from operations (8) (6) (2) 33.3 %

Operating margin (1.7) % (1.0) %

___________________

NM Not meaningful

Versace revenues decreased $147 million, or 33.8%, to $288 million during the six months ended September 26, 2020, compared to $435 million for the six months ended September 28, 2019, which included favorable foreign currency effects of $8 million.

Versace revenues decreased $147 million, or 23.3%, to $483 million during the nine months ended December 26, 2020, compared to $630 million for the nine months ended December 28, 2019, which included favorable foreign currency effects of $21 million.

On a constant currency basis, revenue decreased $168 million, or 26.7%, primarily reflecting the adverse impacts related to COVID-19.

(Loss) Income from Operations

During the six months ended September 26, 2020, Versace recorded a loss from operations of $21 million, compared to income from operations of $6 million for the six months ended September 28, 2019.

Operating margin declined from 1.4% for the six months ended September 28, 2019, to (7.3)% during the six months ended September 26, 2020, primarily due to the adverse impacts related to COVID-19.

Six Months Ended % Change

(dollars in millions) September 26,

2020 September 28,

Loss from Operations

During the nine months ended December 26, 2020, Versace recorded a loss from operations of $8 million, compared to $6 million for the nine months ended December 28, 2019.

Operating margin declined from (1.0)% for the nine months ended December 28, 2019, to (1.7)% during the nine months ended December 26, 2020, primarily due to a decline in revenue as a result of COVID-19, partially offset by favorable channel mix.

Nine Months Ended % Change

(dollars in millions) December 26,

2020 December 28,

2019 $ Change As

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NM Not meaningful

Revenue from Jimmy Choo decreased $110 million, or 38.9%, to $173 million during the six months ended September 26, 2020, compared to $283 million for the six months ended September 28, 2019, which included favorable foreign currency effects of $5 million.

Revenue from Jimmy Choo decreased $154 million, or 34.4%, to $294 million during the nine months ended December 26, 2020, compared to $448 million for the nine months ended December 28, 2019, which included favorable foreign currency effects of $6 million.

On a constant currency basis, revenue decreased $160 million, or 35.7%, primarily reflecting the adverse impacts related to COVID-19.

(Loss) Income from Operations

During the six months ended September 26, 2020, Jimmy Choo recorded a loss from operations of $29 million, compared to income from operations of $1 million for the six months ended September 28, 2019.

Operating margin declined from 0.4% for the six months ended September 28, 2019, to (16.8)% during the six months ended September 26, 2020, primarily due to the adverse impacts related to COVID-19.

Six Months Ended % Change

During the nine months ended December 26, 2020, Jimmy Choo recorded a loss from operations of $37 million, compared to income from operations of $10 million for the nine months ended December 28, 2019.

Operating margin declined from 2.2% for the nine months ended December 28, 2019, to (12.6)% during the nine months ended December 26, 2020, primarily due to a decline in revenue related to COVID-19.

Nine Months Ended % Change

(dollars in millions)

September 26,

2020 September 28,

2020 December 28,

2019 $ Change As

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Operating margin 20.3 % 21.7 %

Michael Kors revenues decreased $970 million, or 46.9%, to $1.100 billion during the six months ended September 26, 2020, compared to $2.070 billion for the six months ended September 28, 2019, which included favorable foreign currency effects of $6 million.

On a constant currency basis, revenue decreased $976 million, or 47.1%, primarily due to the adverse impacts related to COVID-19.

Michael Kors revenues decreased $1.195 billion, or 36.4%, to $2.086 billion during the nine months ended December 26, 2020, compared to $3.281 billion for the nine months ended December 28, 2019, which included favorable foreign currency effects of $30 million.

On a constant currency basis, revenue decreased $1.225 billion, or 37.3%, primarily due to the adverse impacts related to COVID-19.

Income from Operations

During the six months ended September 26, 2020, Michael Kors recorded income from operations of $142 million, compared to $423 million for the six months ended September 28, 2019.

Operating margin declined from 20.4% for the six months ended September 28, 2019, to 12.9% during the six months ended September 26, 2020, primarily due to adverse impacts related to COVID-19, partially offset by higher gross profit margins related to a higher average unit price and favorable channel mix.

During the nine months ended December 26, 2020, Michael Kors recorded income from operations of $423 million, compared to $711 million for the nine months ended December 28, 2019.

Operating margin declined from 21.7% for the nine months ended December 28, 2019, to 20.3% during the nine months ended December 26, 2020, primarily due to a decline in revenue related to COVID-19, partially offset by higher gross profit margins related to a higher average unit price, favorable channel mix as well as our cost reduction initiatives as a result of COVID-19.

Liquidity and Capital Resources

Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our credit facilities and available cash and cash equivalents.

Our primary use of this liquidity is to fund our ongoing cash requirements, including working capital requirements, acquisitions, debt repayments, investment in information systems infrastructure, global retail store construction, expansion and renovation, distribution and corporate facilities, construction and renovation of shop-in-shops, share repurchases and other corporate activities.

We believe that the cash generated from our operations, together with borrowings available under our revolving credit facility and available cash and cash equivalents, will be sufficient to meet our working capital needs for the next 12 months, including investments made and expenses incurred in connection with our store growth plans, shop-in-shop growth, investments in corporate and distribution facilities, continued systems development, e-commerce and marketing initiatives.

We spent $59 million on capital expenditures during the six months ended September 26, 2020.

We spent $85 million on capital expenditures during the nine months ended December 26, 2020.

The following table sets forth key indicators of our liquidity and capital resources (in millions):

September 26,

2020 March 28,

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Long-term debt $ 1,243 $ 2,012

Six Months Ended

September 26,

2020 September 28,

Nine Months Ended

2020 December 28,

Cash Flows Provided By (Used In):

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Effect of exchange rate changes (8) —

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

Net (decrease) increase in cash and cash equivalents $ (363) $ 65

Cash Provided by Operating Activities

Net cash provided by operating activities decreased $106 million to $137 million during the six months ended September 26, 2020, as compared to $243 million for the six months ended September 28, 2019, as a result of a decrease in our net income after non-cash adjustments, partially offset by increases related to changes in our working capital, primarily attributable to the timing of payments and receipts due to the impact of COVID-19.

Net cash provided by operating activities decreased $207 million to $545 million during the nine months ended December 26, 2020, as compared to $752 million for the nine months ended December 28, 2019, as a result of a decrease in our net income after non-cash adjustments, partially offset by increases related to changes in our working capital, primarily attributable to a lower inventory balance and the timing of payments and receipts due to the impact of COVID-19.

Cash Used in Investing Activities

Net cash used in investing activities was $71 million during the six months ended September 26, 2020, as compared to $75 million during the six months ended September 28, 2019, which was primarily attributable to lower capital expenditures of $46 million compared to prior year, offset by an increase of $31 million related to the settlement of a net investment hedge during the six months ended September 28, 2019 and an increase of $11 million due to asset acquisitions during the six months ended September 26, 2020.

Net cash used in investing activities was $97 million during the nine months ended December 26, 2020, as compared to $133 million during the nine months ended December 28, 2019, which was primarily attributable to lower capital expenditures of $79 million compared to prior year, offset by an increase of $32 million related to the settlement of a net investment hedge during the nine months ended December 28, 2019 and an increase of $11 million due to asset acquisitions during the nine months ended December 26, 2020.

Cash Used in Financing Activities

Net cash used in financing activities was $421 million during the six months ended September 26, 2020, as compared to $157 million during the six months ended September 28, 2019.

The increase of cash used in financing activities of $264 million was primarily attributable to increased net debt repayments.

Net cash used in financing activities was $803 million during the nine months ended December 26, 2020, as compared to $554 million during the nine months ended December 28, 2019.

The increase of cash used in financing activities of $249 million was primarily attributable to an increase in net debt repayments of $346 million, partially offset by a $101 million decrease in cash payments to repurchase our ordinary shares compared to prior year.

Debt Facilities

The following table presents a summary of our borrowing capacity and amounts outstanding as of September 26, 2020 and March 28, 2020 (dollars in millions):

September 26,

The following table presents a summary of our borrowing capacity and amounts outstanding as of December 26, 2020 and March 28, 2020 (dollars in millions):

2020 March 28,

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Remaining availability $ 230 $ —

4.000% Senior Notes

Senior Notes due 2024

Borrowings outstanding, net of debt issuance costs and discount amortization (2)

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Total availability (100 million Hong Kong Dollars) $ 13 $ 14

Borrowings outstanding (85 million Hong Kong Dollars) (3)

Bank guarantees outstanding (3 million and 4 million Hong Kong Dollars) — 1

5 unchanged sentences

Total availability (1.0 billion Japanese Yen) $ 10 $ 9

Borrowings outstanding (1.0 billion Japanese Yen) (3)

Remaining availability (1.0 billion Japanese Yen) $ — $ 9

Borrowings outstanding (1.0 billion and 0.0 billion Japanese Yen) (3)

Remaining availability (0.0 billion and 1.0 billion Japanese Yen) $ — $ 9

Versace Uncommitted Credit Facilities:

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When this financial covenant is reinstated, the applicable ratio will be calculated net of our unrestricted cash and cash equivalents to the extent in excess of $100 million and shall exclude up to $150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0.

As of September 26, 2020 and March 28, 2020, we were in compliance with all covenants related to our agreements then in effect governing our debt.

As of December 26, 2020 and March 28, 2020, we were in compliance with all covenants related to our agreements then in effect governing our debt.

See Note 9 to the accompanying consolidated financial statements for additional information.

(2) Recorded as long-term debt in our consolidated balance sheets as of September 26, 2020 and March 28, 2020, except for the current portion of $128 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt at both September 26, 2020 and March 28, 2020.

(3) Recorded as short-term debt in our consolidated balance sheets as of September 26, 2020 and March 28, 2020.

(2) Recorded as long-term debt in our consolidated balance sheets as of December 26, 2020 and March 28, 2020, except for the current portion of $97 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt at both December 26, 2020 and March 28, 2020.

(3) Recorded as short-term debt in our consolidated balance sheets as of December 26, 2020 and March 28, 2020.

(4) The balance as of December 26, 2020 consists of $7 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets and $4 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of March 28, 2020 consists of $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

We believe that our 2018 Credit Facility is adequately diversified with no undue concentration in any one financial institution.

As of September 26, 2020, there were 27 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of December 26, 2020, there were 28 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the 2018 Credit Facility.

During the third quarter of Fiscal 2021, we began offering a supplier financing program to certain suppliers as we continue to identify opportunities to improve liquidity.

See Note 9 in the accompanying financial statements for additional information.

See Note 9 in the accompanying financial statements and Note 12 in our Fiscal 2020 Annual Report on Form 10-K for detailed information relating to our credit facilities and debt obligations.

Share Repurchase Program

The following table presents our treasury share repurchases during the six months ended September 26, 2020 and September 28, 2019 (dollars in millions):

Six Months Ended

September 26,

2020 September 28,

The following table presents our treasury share repurchases during the nine months ended December 26, 2020 and December 28, 2019 (dollars in millions):

Nine Months Ended

2020 December 28,

Cost of shares repurchased under share repurchase program $ — $ 100

4 unchanged sentences

48,147 2,775,765

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

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

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

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 and the provisions of the Second Amendment of the 2018 Credit Facility, which imposes incremental restrictions, including restrictions to pay dividends or make other distribution or repurchase or redeem capital stocks.

See Note 9 in the accompanying financial statements for additional information.

As of December 26, 2020, the remaining availability under our share repurchase program was $400 million.

Under this program, share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under our insider trading policy and other relevant factors.

This program may be suspended or discontinued at any time.

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We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business.

Our off-balance sheet commitments relating to our outstanding letters of credit were $28 million at September 26, 2020, including $6 million in letters of credit issued outside of the 2018 Credit Facility.

In addition, as of September 26, 2020, bank guarantees of approximately $28 million were supported by our various credit facilities.

Our off-balance sheet commitments relating to our outstanding letters of credit were $28 million at December 26, 2020, including $6 million in letters of credit issued outside of the 2018 Credit Facility.

In addition, as of December 26, 2020, bank guarantees of approximately $37 million were supported by our various credit facilities.

We do not have any other off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

2 unchanged sentences

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 2. Management’s Discussion and Analysis