Capri Holdings Ltd 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a - 15(e) and 15(d) - 15(e) under the Securities and Exchange Act of 1934, as amended, (the “Exchange Act”)) as of March 27, 2021. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures are effective as of March 27, 2021. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined under the Exchange Act Rule 13a-15 (f)) to provide reasonable assurance regarding the reliability of financial reporting and that the consolidated financial statements have been prepared in accordance with U.S. GAAP. Such internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and (B) regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Our management assessed the effectiveness of our internal control over financial reporting as of March 27, 2021. In making this assessment, it used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), the 2013 Framework. Based on this assessment, management has determined that, as of March 27, 2021, our internal control over financial reporting is effective based on those criteria. The Company’s internal control over financial reporting as of March 27, 2021, as well as the consolidated financial statements, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein. Changes in Internal Control over Financial Reporting Except as discussed below, there have been no changes in our internal control over financial reporting during the three months ended March 27, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 60 Table of Contents COVID-19 We expect to continue to experience varying degrees of business disruptions related to the COVID-19 pandemic, including periods of closures of our retail stores, distribution centers and corporate facilities. In addition, many of our corporate employees in affected regions continue to work remotely. Despite such actions, we have not experienced any material changes to our internal controls over financial reporting. We will continue to evaluate and monitor the impact of the COVID-19 pandemic on our internal controls. See Item 1A — "Risk Factors" — "The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations." for additional discussion regarding risks to our business associated with the COVID-19 pandemic. Item 9B. Other Information As previously announced, the Board of Directors of the Company approved a retail optimization program (the “Capri Retail Store Optimization Program”) to improve the profitability of its retail store fleet. As part of the Capri Retail Store Optimization Program, the Company intends to close approximately 170 of its retail stores over two fiscal years, which began during Fiscal 2021 and will continue into Fiscal 2022. In addition, in connection with the Capri Retail Store Optimization Program, the Company expects to incur approximately $75 million of one-time costs, including lease termination and other store closure costs, the majority of which are expected to result in future cash expenditures. During Fiscal 2021, the Company closed 101 of its retail stores as part of the Capri Retail Store Optimization Program. Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program during Fiscal 2021 were $5 million, which was comprised of lease-related and other store closing costs. The exact amounts and timing of the Capri Retail Optimization Program charges and future cash expenditures associated therewith are undeterminable at this time. The Company will either disclose in a Current Report on Form 8-K, or disclose in another periodic filing with the U.S. Securities and Exchange Commission, the amount of any material charges relating to the Capri Retail Optimization Program by major type of cost once such amounts or range of amounts are determinable. This disclosure is intended to satisfy the requirements of Item 2.05 of Form 8-K. 61 Table of Contents Part III Item 10. Directors, Executive Officers and Corporate Governance Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is incorporated herein by reference. Item 11. Executive Compensation Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information as of March 27, 2021 regarding compensation plans under which the Company’s equity securities are authorized for issuance: Equity Compensation Plan Information (a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1) 6,585,275 $ 37.58 (2) 4,998,829 Equity compensation plans not approved by security holders (3) 42,761 $ 12.12 (2) — Total 6,628,036 $ 37.41 (2) 4,998,829 (1) Reflects share options and restricted stock units issued under the Company’s Amended and Restated Omnibus Incentive Plan. (2) Represents the weighted average exercise price of outstanding share awards only. (3) Reflects share options issued under the Company’s Amended and Restated Stock Option Plan (the “Option Plan”), which was in effect prior to our initial public offering. As of March 27, 2021, there were no shares available for future issuance under the Option Plan. Item 13. Certain Relationships, Related Transactions and Director Independence Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is incorporated herein by reference. Item 14. Principal Accountant Fees and Services Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is incorporated herein by reference. 62 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this annual report on Form 10-K: 1. The following consolidated financial statements listed below are filed as a separate section of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm - Ernst & Young LLP. Consolidated Balance Sheets as of March 27, 2021 and March 28, 2020. Consolidated Statements of Operations and Comprehensive (Loss) Income for the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019. Consolidated Statements of Shareholders’ Equity for the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019. Consolidated Statements of Cash Flows for the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019. Notes to Consolidated Financial Statements for the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019. 2. Exhibits: EXHIBIT INDEX Exhibit No. Document Description 2.1 Stock Purchase Agreement, dated as of September 24, 2018, by and among Allegra Donata Versace Beck, Donatella Versace, Santo Versace, Borgo Luxembourg S.À R.L., Blackstone GPV Capital Partners (Mauritius) VI-D FDI Ltd., Blackstone GPV Tactical Partners (Mauritius)-N Ltd. and Capri Holdings Limited (f/k/a Michael Kors Holdings Limited) (included as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-35368), filed on September 25, 2018 and incorporated herein by reference). 3.1 Amended and Restated Memorandum and Articles of Association of Capri Holdings Limited (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 31, 2018 and incorporated herein by reference). 4.1 Specimen of Ordinary Share Certificate of Capri Holdings Limited (included as Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 2019 (File No. 001-35368), filed on May 29, 2019 and incorporated herein by reference). 4.2 Shareholders Agreement, dated as of July 11, 2011, among Michael Kors Holdings Limited and certain shareholders of Michael Kors Holdings Limited (included as Exhibit 10.2 to the Company’s Registration Statement on Form F-1, as amended (File No. 333-178282), filed on December 2, 2011 and incorporated herein by reference). 4.3 Indenture, dated as of October 20, 2017, by and among Michael Kors (USA), Inc., Michael Kors Holdings Limited, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (included as Exhibit 4.1 to the Company's Current Report on Form 8-K (File No. 001-35368), filed on October 20, 2017 and incorporated herein by reference). 10.1 Second Amendment, dated as of June 25, 2020, to the Third Amended and Restated Credit Agreement dated as of November 15, 2018 among Capri Holdings Limited, Michael Kors (USA), Inc., the foreign subsidiary borrowers party thereto, the guarantors party thereto, the financial institutions party thereto as lenders and issuing banks and JPMorgan Chase Bank, N.A., as administrative agent (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35368), filed on July 1, 2020 and incorporated herein by reference). 10.2 Form of Indemnification Agreement between Michael Kors Holdings Limited and its directors and executive officers (included as Exhibit 10.5 to the Company’s Registration Statement on Form F-1, as amended (File No. 333-178282), filed on December 2, 2011 and incorporated herein by reference). 63 Table of Contents Exhibit No. Document Description 10.3 Amended and Restated Michael Kors (USA), Inc. Stock Option Plan (included as Exhibit 10.4 to the Company’s Registration Statement on Form F-1, as amended (File No. 333-178282), filed on December 2, 2011 and incorporated herein by reference). 10.4 Amendment No. 1 to the Amended and Restated Michael Kors (USA), Inc. Share Option Plan (included as Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2012, filed on June 12, 2012 and incorporated herein by reference). 10.5 Capri Holdings Limited Second Amended and Restated Omnibus Incentive Plan (included as Annex A to the Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-35368), filed on July 22, 2020 and incorporated herein by reference). 10.6 Third Amended and Restated Employment Agreement, dated as of March 28, 2018, by and among Michael Kors (USA), Inc., Michael Kors Holdings Limited and John D. Idol (included as Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed on May 30, 2018 and incorporated herein by reference). 10.7 Executive Bonus Program (included as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2013 filed on August 8, 2013 and incorporated herein by reference). 10.8 Form of Employee Non-Qualified Option Award Agreement (included as Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by reference). 10.9 Form of Employee Restricted Stock Unit Award Agreement (included as Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by reference). 10.10 Form of Performance-Based Restricted Stock Unit Award Agreement (included as Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by reference). 10.11 Form of Independent Director Restricted Stock Unit Award Agreement (included as Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by reference). 10.12 Aircraft Time Sharing Agreement, dated November 24, 2014, by and between Michael Kors (USA), Inc. and John Idol (included as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by reference). 10.13 Employment Agreement, dated as of April 17, 2017, by and among Michael Kors (USA), Inc., Michael Kors Holdings Limited and Thomas J. Edwards, Jr. (including as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017, filed on May 31, 2017 and incorporated herein by reference). 10.14 Capri Holdings Limited Deferred Compensation Plan (included as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001.35368), filed on November 14, 2019 and incorporated herein by reference). 10.15 Employment Agreement between Michael Kors (USA), Inc. and Krista McDonough made as of October 1, 2016 (included as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2020 (File No 001-35368), filed on July 8, 2020 and incorporated herein by reference). 10.16 Employment Agreement, dated as of March 30, 2020, by and among Capri Holdings Limited, Michael Kors (USA), Inc. and Daniel Purefoy. 21.1 List of subsidiaries of Capri Holdings Limited. 23.2 Consent of Ernst & Young LLP. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.1 Interactive Data Files. 64 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 26, 2021 CAPRI HOLDINGS LIMITED By: /s/ John D. Idol Name: John D. Idol Title: Chairman & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John D. Idol Chairman, Chief Executive Officer and Director (Principal Executive Officer) May 26, 2021 John D. Idol By: /s/ Thomas J. Edwards, Jr. Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer) May 26, 2021 Thomas J. Edwards Jr. By: /s/ M. William Benedetto Director May 26, 2021 M. William Benedetto By: /s/ Robin Freestone Director May 26, 2021 Robin Freestone By: /s/ Judy Gibbons Director May 26, 2021 Judy Gibbons By: /s/ Ann Korologos Director May 26, 2021 Ann Korologos By: /s/ Stephen F. Reitman Director May 26, 2021 Stephen F. Reitman By: /s/ Jane Thompson Director May 26, 2021 Jane Thompson By: /s/ Jean Tomlin Director May 26, 2021 Jean Tomlin 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Capri Holdings Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Capri Holdings Limited and subsidiaries (“the Company”) as of March 27, 2021 and March 28, 2020, and the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended March 27, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 27, 2021 and March 28, 2020, and the results of its operations and its cash flow for each of the three years in the period ended March 27, 2021, in conformity with the U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 27, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 26, 2021 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 2 and Note 4 to the consolidated financial statements, the Company changed its method of accounting for leases in the fiscal year ended March 28, 2020 due to the adoption of ASU No. 2016-02, Leases and associated amendments (Topic 842). Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 66 Table of Contents Valuation of Goodwill and Indefinite-lived Intangible Assets Description of the Matter At March 27, 2021, the Company’s goodwill and indefinite-lived intangible assets, consisting of brand names, totaled $1.5 billion and $1.3 billion, respectively. As discussed in Note 2 to the consolidated financial statements, goodwill and indefinite-lived intangible assets are assessed for impairment on an annual basis, or whenever impairment indicators exist. During Fiscal 2021, the Company recognized a goodwill impairment charge of $94 million associated with two of its Jimmy Choo reporting units. The Company also recognized an impairment charge of $69 million associated with the Jimmy Choo indefinite-lived brand name intangible asset. Auditing the Company’s annual impairment assessments was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units for goodwill and the fair value of indefinite-lived brand name intangible assets. In particular, the fair value estimates were sensitive to significant assumptions, such as changes in the discount rate, revenue growth rate, margin and royalty rates, which are affected by expectations about future market or economic conditions (including the effects of the global pandemic). How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and indefinite-lived intangible assets impairment review process, including controls over management’s review of the significant assumptions described above. To test the estimated fair value of the Company’s reporting units and indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing the valuation methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends and evaluated whether changes to the Company’s business environment would affect the significant assumptions. For example, we compared the royalty rates used in estimating the fair value of certain indefinite-lived brand name intangible assets to current industry licensing agreements. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units and indefinite-lived brand name intangible assets that would result from changes in the assumptions. We also involved our internal valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company in developing the fair value estimates. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. Impairment of Retail Store Long-Lived assets Description of the Matter As discussed in Note 2 to the consolidated financial statements, the Company evaluates its long-lived assets, which primarily include property, plant, and equipment and operating lease right-of-use assets at retail stores, for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. During the year ended March 27, 2021, the Company recognized an impairment charge of $158 million related to the long-lived assets. Auditing the Company’s impairment assessment of retail store long-lived assets was complex and highly judgmental due to the significant estimation required in determining the future cash flows used to assess recoverability of each retail store long-lived asset group (undiscounted) and determining the fair value (discounted). The significant assumptions used include estimated future cash flows directly related to the future operation of the stores (including sales and expense growth rates) and the discount rate used to determine fair value. Significant assumptions used in determining the fair value of certain operating lease right-of-use assets include the current market rent and discount rate for the remaining lease term of the related stores. These assumptions are subjective in nature and are affected by expectations about future market or economic conditions (including the effects of the global pandemic). 67 Table of Contents How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the retail store long-lived assets impairment process, including, determining the undiscounted future cash flows of the stores and the fair value of the long-lived assets (including those related to operating leases) for the stores that were deemed to be impaired. We also tested controls over management’s review of the significant assumptions described above. Our testing of the Company’s impairment measurement included, among other procedures, evaluating the significant assumptions and operating data used to calculate the estimated future cash flows and to determine the fair value of the store long lived asset groups. For a sample of retail stores, we tested the completeness and accuracy of the data used by the Company in its analyses and we compared the significant assumptions used to determine the forecasted cash flows to historical results of the retail stores, current industry and economic trends and inquired of the Company’s executives to understand the business initiatives supporting the assumptions in the future cash flows. We involved our internal valuation specialists to assist in evaluating the fair value of certain operating lease right-of-use assets, which included assessing the estimated market rental rates of these leases by comparing them to rental rates for comparable leases and evaluating the applied discount rate. /s/ ERNST & YOUNG LLP We have served as the Company’s auditor since 2014. New York, New York May 26, 2021 68 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Capri Holdings Limited Opinion on Internal Control over Financial Reporting We have audited Capri Holdings Limited and subsidiaries’ internal control over financial reporting as of March 27, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Capri Holdings Limited and subsidiaries (“the Company”) maintained, in all material respects, effective internal control over financial reporting as of March 27, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 27, 2021 and March 28, 2020, the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended March 27, 2021, and the related notes and our report dated May 26, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ ERNST & YOUNG LLP New York, New York May 26, 2021 69 Table of Contents CAPRI HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) March 27, 2021 March 28, 2020 Assets Current assets Cash and cash equivalents $ 232 $ 592 Receivables, net 373 308 Inventories, net 736 827 Prepaid expenses and other current assets 205 167 Total current assets 1,546 1,894 Property and equipment, net 485 561 Operating lease right-of-use assets 1,504 1,625 Intangible assets, net 1,992 1,986 Goodwill 1,498 1,488 Deferred tax assets 278 225 Other assets 178 167 Total assets $ 7,481 $ 7,946 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 512 $ 428 Accrued payroll and payroll related expenses 116 93 Accrued income taxes 126 42 Short-term operating lease liabilities 447 430 Short-term debt 123 167 Accrued expenses and other current liabilities 297 241 Total current liabilities 1,621 1,401 Long-term operating lease liabilities 1,657 1,758 Deferred tax liabilities 397 465 Long-term debt 1,219 2,012 Other long-term liabilities 430 142 Total liabilities 5,324 5,778 Commitments and contingencies Shareholders’ equity Ordinary shares, no par value; 650,000,000 shares authorized; 219,222,937 shares issued and 151,280,011 outstanding at March 27, 2021; 217,320,010 shares issued and 149,425,612 outstanding at March 28, 2020 — — Treasury shares, at cost ( 67,942,926 shares at March 27, 2021 and 67,894,398 shares at March 28, 2020) ( 3,326 ) ( 3,325 ) Additional paid-in capital 1,158 1,085 Accumulated other comprehensive income 56 75 Retained earnings 4,270 4,332 Total shareholders’ equity of Capri 2,158 2,167 Noncontrolling interest ( 1 ) 1 Total shareholders’ equity 2,157 2,168 Total liabilities and shareholders’ equity $ 7,481 $ 7,946 See accompanying notes to consolidated financial statements. 70 Table of Contents CAPRI HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (In millions, except share and per share data) Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Total revenue $ 4,060 $ 5,551 $ 5,238 Cost of goods sold 1,463 2,280 2,058 Gross profit 2,597 3,271 3,180 Selling, general and administrative expenses 2,018 2,464 2,075 Depreciation and amortization 212 249 225 Impairment of assets 316 708 21 Restructuring and other charges 32 42 124 Total operating expenses 2,578 3,463 2,445 Income (loss) from operations 19 ( 192 ) 735 Other income, net ( 7 ) ( 6 ) ( 4 ) Interest expense, net 43 18 38 Foreign currency (gain) loss ( 20 ) 11 80 Income (loss) before provision for income taxes 3 ( 215 ) 621 Provision for income taxes 66 10 79 Net (loss) income ( 63 ) ( 225 ) 542 Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 1 ) ( 2 ) ( 1 ) Net (loss) income attributable to Capri $ ( 62 ) $ ( 223 ) $ 543 Weighted average ordinary shares outstanding: Basic 150,453,568 150,714,598 149,765,468 Diluted 150,453,568 150,714,598 151,614,350 Net (loss) income per ordinary share attributable to Capri: Basic $ ( 0.41 ) $ ( 1.48 ) $ 3.62 Diluted $ ( 0.41 ) $ ( 1.48 ) $ 3.58 Statements of Comprehensive (Loss) Income: Net (loss) income $ ( 63 ) $ ( 225 ) $ 542 Foreign currency translation adjustments ( 15 ) 145 ( 134 ) Net (loss) gain on derivatives ( 4 ) ( 4 ) 17 Comprehensive (loss) income ( 82 ) ( 84 ) 425 Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 1 ) ( 2 ) ( 1 ) Comprehensive (loss) income attributable to Capri $ ( 81 ) $ ( 82 ) $ 426 See accompanying notes to consolidated financial statements. 71 Table of Contents CAPRI HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in millions, except share data which is in thousands) Ordinary Shares Additional Paid-in Capital Treasury Shares Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity of Capri Non-controlling Interests Total Equity Shares Amounts Shares Amounts Balance as of April 1, 2018 210,991 — 831 ( 61,293 ) ( 3,016 ) 51 4,164 2,030 4 2,034 Net income (loss) — — — — — — 543 543 ( 1 ) 542 Other comprehensive loss — — — — — ( 117 ) — ( 117 ) — ( 117 ) Total comprehensive income (loss) — — — — — — — 426 ( 1 ) 425 Issuance of ordinary shares 2,395 — 91 — — — — 91 — 91 Vesting of restricted awards, net of forfeitures 818 — — — — — — — — — Exercise of employee share options 1,847 — 29 — — — — 29 — 29 Share based compensation expense — — 60 — — — — 60 — 60 Repurchase of common stock — — — ( 3,826 ) ( 207 ) — — ( 207 ) — ( 207 ) Balance at March 30, 2019, as previously reported 216,051 $ — $ 1,011 ( 65,119 ) $ ( 3,223 ) $ ( 66 ) $ 4,707 $ 2,429 $ 3 $ 2,432 Adoption of accounting standard (See Note 2) — — — — — — ( 152 ) ( 152 ) — ( 152 ) Balance as of March 31, 2019 216,051 — 1,011 ( 65,119 ) ( 3,223 ) ( 66 ) 4,555 2,277 3 2,280 Net loss — — — — — — ( 223 ) ( 223 ) ( 2 ) ( 225 ) Other comprehensive income — — — — — 141 — 141 — 141 Total comprehensive loss — — — — — — — ( 82 ) ( 2 ) ( 84 ) Vesting of restricted awards, net of forfeitures 1,262 — — — — — — — — — Exercise of employee share options 7 — — — — — — — — — Share based compensation expense — — 70 — — — — 70 — 70 Repurchase of common stock — — — ( 2,775 ) ( 102 ) — — ( 102 ) — ( 102 ) Adjustment of redeemable non-controlling interests to redemption value — — 4 — — — — 4 — 4 Balance at March 28, 2020 217,320 $ — $ 1,085 ( 67,894 ) $ ( 3,325 ) $ 75 $ 4,332 $ 2,167 $ 1 $ 2,168 Net loss — — — — — — ( 62 ) ( 62 ) ( 1 ) ( 63 ) Other comprehensive loss — — — — — ( 19 ) — ( 19 ) — ( 19 ) Total comprehensive loss — — — — — — — ( 81 ) ( 1 ) ( 82 ) Vesting of restricted awards, net of forfeitures 1,456 — — — — — — — — — Exercise of employee share options 447 — 3 — — — — 3 — 3 Share based compensation expense — — 70 — — — — 70 — 70 Repurchase of common stock — — — ( 49 ) ( 1 ) — — ( 1 ) — ( 1 ) Other — — — — — — — — ( 1 ) ( 1 ) Balance at March 27, 2021 219,223 — $ 1,158 ( 67,943 ) $ ( 3,326 ) $ 56 $ 4,270 $ 2,158 $ ( 1 ) $ 2,157 See accompanying notes to consolidated financial statements. 72 Table of Contents CAPRI HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Cash flows from operating activities Net (loss) income $ ( 63 ) $ ( 225 ) $ 542 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 212 249 225 Share-based compensation expense 71 70 60 Impairment of assets 316 708 21 Credit loss ( 3 ) 29 4 Losses on store lease exits — — 18 Deferred income taxes ( 70 ) ( 73 ) ( 71 ) Changes to lease related balances, net ( 112 ) ( 55 ) — Amortization of deferred financing costs 6 8 4 Tax deficit (benefit) on exercise of share options 4 2 ( 24 ) Foreign currency (gains) losses ( 15 ) 11 80 Other non-cash charges — 3 — Change in assets and liabilities: Receivables, net ( 52 ) 42 ( 23 ) Inventories, net 145 115 ( 125 ) Prepaid expenses and other current assets ( 31 ) 20 ( 31 ) Accounts payable 50 63 ( 48 ) Accrued expenses and other current liabilities 153 ( 95 ) 20 Other long-term assets and liabilities 13 ( 13 ) 42 Net cash provided by operating activities 624 859 694 Cash flows from investing activities Capital expenditures ( 111 ) ( 223 ) ( 181 ) Purchase of intangible assets — — ( 3 ) Cash paid for asset/business acquisitions, net of cash acquired ( 13 ) ( 13 ) ( 1,875 ) Realized loss on hedge related to acquisitions — — ( 77 ) Settlement of net investment hedges — 298 11 Net cash (used in) provided by investing activities ( 124 ) 62 ( 2,125 ) Cash flows from financing activities Debt borrowings 2,443 2,282 4,204 Debt repayments ( 3,311 ) ( 2,676 ) ( 2,560 ) Debt issuance costs ( 4 ) ( 1 ) ( 15 ) Repurchase of common stock ( 1 ) ( 102 ) ( 207 ) Exercise of employee share options 3 — 29 Net cash (used in) provided by financing activities ( 870 ) ( 497 ) 1,451 Effect of exchange rate changes on cash and cash equivalents 12 ( 4 ) ( 11 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 358 ) 420 9 Beginning of period 592 172 163 End of period $ 234 $ 592 $ 172 Supplemental disclosures of cash flow information Cash paid for interest $ 52 $ 80 $ 45 Cash paid for income taxes $ 45 $ 98 $ 172 Supplemental disclosure of non-cash investing and financing activities Accrued capital expenditures $ 17 $ 30 $ 25 See accompanying notes to consolidated financial statements. 73 Table of Contents CAPRI HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business and Basis of Presentation The Company was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002 as Michael Kors Holdings Limited and changed its name to Capri Holdings Limited (“Capri,” and together with its subsidiaries, the “Company”) on December 31, 2018. The Company is a holding company that owns brands that are leading designers, marketers, distributors and retailers of branded women’s and men’s accessories, apparel and footwear bearing the Versace, Jimmy Choo and Michael Kors tradenames and related trademarks and logos. The Company operates in three reportable segments: Versace, Jimmy Choo and Michael Kors. See Note 20 for additional information. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 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 fiscal years ending on March 27, 2021, March 28, 2020 and March 30, 2019 (“Fiscal 2021”, “Fiscal 2020” and “Fiscal 2019”, respectively) contain 52 weeks. The Company’s Fiscal 2022 is a 53-week period ending April 2, 2022. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 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, operating lease right-of-use assets and property and equipment, along with the estimated useful lives assigned to these assets. Actual results could differ from those estimates. Seasonality The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences greater sales during its third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during its first fiscal quarter. Revenue Recognition The Company accounts for contracts with its customers when there is approval and commitment from both parties, the rights of the parties and payment terms have been identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. The Company recognizes retail store revenues when control of the product is transferred at the point of sale at Company owned stores, including concessions, net of estimated returns. Revenue from sales through the Company’s e-commerce sites is recognized at the time of delivery to the customer, reduced by an estimate of returns. Wholesale revenue is recognized net of estimates for sales returns, discounts, markdowns and allowances, after merchandise is shipped and control of the underlying product is transferred to the Company’s wholesale customers. To arrive at net sales for retail revenue, gross sales are reduced by actual customer returns as well as by a provision for estimated future customer returns, which is based on management’s review of historical and future customer return expectations. Sales taxes collected from retail customers are presented on a net basis and, as such, are excluded from revenue. To arrive at net sales for wholesale revenue, gross sales are reduced by provisions for estimated future returns, based on current expectations, as well as trade discounts, markdowns, allowances, operational chargebacks, and certain cooperative selling expenses. These estimates are based on such factors as 74 Table of Contents historical trends, actual and forecasted performance and current market conditions, which are reviewed by management on a quarterly basis. The following table details the activity and balances of the Company’s sales reserves for the fiscal years ended March 27, 2021, March 28, 2020, and March 30, 2019 (in millions): Balance Beginning of Year Amounts Charged to Revenue Write-offs Against Reserves Balance at Year End Retail Return Reserves: Fiscal Year Ended March 27, 2021 $ 12 $ 176 $ ( 168 ) $ 20 Fiscal Year Ended March 28, 2020 15 231 ( 234 ) 12 Fiscal Year Ended March 30, 2019 12 226 ( 223 ) 15 Balance Beginning of Year Amounts Charged to Revenue Write-offs Against Reserves Balance at Year End Wholesale Total Sales Reserves: Fiscal Year Ended March 27, 2021 $ 154 $ 137 $ ( 213 ) $ 78 Fiscal Year Ended March 28, 2020 112 266 ( 224 ) 154 Fiscal Year Ended March 30, 2019 109 262 ( 259 ) 112 Royalty revenue generated from product licenses, which includes contributions for advertising, is based on reported sales of licensed products bearing the Company’s trademarks at rates specified in the license agreements. These agreements are also subject to contractual minimum levels. Royalty revenue generated by geographic licensing agreements is recognized as it is earned under the licensing agreements based on reported sales of licensees applicable to specified periods, as outlined in the agreements. These agreements allow for the use of the Company’s tradenames to sell its branded products in specific geographic regions. The adverse impact from the COVID-19 pandemic which includes, but is not limited to, temporary retail store closures, wholesale customer store closures, a reduction in retail store traffic, a decline in international tourism and a decrease in consumer consumption is reflected in the Company's Fiscal 2021 and Fiscal 2020 total revenue. Loyalty Program The Company offers a loyalty program, which allows its Michael Kors U.S. customers to earn points on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage” for points that are not expected to be redeemed. The contract liability, net of an estimated “breakage,” is recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets and is expected to be recognized within the next 12 months. See Note 3 for additional information. Advertising and Marketing Costs Advertising and marketing costs are generally expensed when the advertisement is first exhibited and are recorded in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss) income. Advertising and marketing expense was $ 137 million, $ 201 million and $ 158 million in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively. Cooperative advertising expense, which represents the Company’s participation in advertising expenses of its wholesale customers, is reflected as a reduction of net sales. Expenses related to cooperative advertising for Fiscal 2021, Fiscal 2020 and Fiscal 2019, were $ 3 million, $ 7 million and $ 8 million, respectively. 75 Table of Contents Shipping and Handling Freight-in expenses are recorded as part of cost of goods sold, along with product costs and other costs to acquire inventory. The costs of preparing products for sale, including warehousing expenses, are included in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss) income. Selling, general and administrative expenses also include the costs of shipping products to the Company’s e-commerce customers. Shipping and handling costs included within selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss) income were $ 160 million, $ 157 million and $ 132 million for Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively. Shipping and handling costs charged to customers are included in total revenue. COVID-19 Related Government Assistance and Subsidies As there is no definitive guidance under U.S. GAAP, the Company has applied the guidance under International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). The Company has elected to follow the income approach under IAS 20 and recognize these funds as a reduction to the related expense in the Company’s consolidated statements of operations and comprehensive (loss) income. During Fiscal 2021, the Company recognized $ 37 million related to government assistance and subsidies. Cash, Cash Equivalents and Restricted Cash All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Included in the Company’s cash and cash equivalents as of March 27, 2021 and March 28, 2020 are credit card receivables of $ 25 million and $ 4 million, respectively, which generally settle within two to three business days. The increase in credit card receivables year over year is mainly due to the impact on sales from COVID-19. A reconciliation of cash, cash equivalents and restricted cash as of March 27, 2021 and March 28, 2020 from the consolidated balance sheets to the consolidated statements of cash flows is as follows: Fiscal Years Ended March 27, 2021 March 28, 2020 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 232 $ 592 Restricted cash included within prepaid expenses and other current assets 2 — Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 234 $ 592 Inventories Inventories primarily 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 as of March 27, 2021 and March 28, 2020 were $ 28 million and $ 27 million, respectively. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted-average cost method. Costs include amounts paid to independent manufacturers, plus duties and freight to bring the goods to the Company’s warehouses, as well as shipments to stores. The Company continuously evaluates the composition of its inventory and makes adjustments when the cost of inventory is not expected to be fully recoverable. The net realizable value of the Company’s inventory is estimated based on historical experience, current and forecasted demand, and market conditions. In addition, reserves for inventory losses are estimated based on historical experience and physical inventory counts. The Company’s inventory reserves are estimates, which could vary significantly from actual results if future economic conditions, customer demand or competition differ from expectations. Our historical estimates of these adjustments have not differed materially from actual results. The net realizable value of the Company's inventory as of March 27, 2021 and March 28, 2020 includes the adverse impacts connected to 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. 76 Table of Contents Store Pre-opening Costs Costs associated with the opening of new retail stores and start up activities, are expensed as incurred. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization (carrying value). Depreciation is recorded on a straight-line basis over the expected remaining useful lives of the related assets. Equipment, furniture and fixtures, are depreciated over five to seven years , computer hardware and software are depreciated over three to five years . The Company’s share of the cost of constructing in-store shop displays within its wholesale customers’ floor-space (“shop-in-shops”), which is paid directly to third-party suppliers, is capitalized as property and equipment and is generally amortized over a useful life of three to five years . Leasehold improvements are amortized using the straight-line method over the shorter of the estimated remaining useful lives of the related assets or the remaining lease term, including highly probable renewal periods. The Company includes all depreciation and amortization expense as a component of total operating expenses, as the underlying long-lived assets are not directly or indirectly related to bringing the Company’s products to their existing location and condition. Maintenance and repairs are charged to expense in the year incurred. The Company capitalizes, in property and equipment, direct costs incurred during the application development stage and the implementation stage for developing, purchasing or otherwise acquiring software for its internal use. These costs are amortized over the estimated useful lives of the software, generally five years . All costs incurred during the preliminary project stage, including project scoping and identification and testing of alternatives, are expensed as incurred. Definite-Lived Intangible Assets The Company’s definite-lived intangible assets consist of trademarks and customer relationships which are stated at cost less accumulated amortization. The Company’s customer relationships are amortized over five to eighteen years . Reacquired rights recorded in connection with the acquisition of Michael Kors (HK) Limited and Subsidiaries (“MKHKL”) are amortized through March 31, 2041, the original expiration date of the Michael Kors license agreement in the Greater China region. The trademark for the Michael Kors brand is amortized over twenty years . Long-lived Assets The Company evaluates all long-lived assets, including operating lease right-of-use assets, property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. For the purposes of impairment testing, the Company groups long-lived assets at the lowest level of identifiable cash flow. The leasehold improvements are typically amortized over the life of the store lease, including reasonably assured renewals and the shop-in-shops are amortized over a useful life of three or four years . The Company's impairment testing is based on its best estimate of the future operating cash flows. If the sum of our estimated undiscounted future cash flows associated with the asset is less than the asset’s carrying value, the Company would recognize an impairment charge, which is measured as the amount by which the carrying value exceeds the fair value of the asset. The fair values determined by management require significant judgment and include certain assumptions regarding future sales and expense growth rates, discount rates and estimates of real estate market fair values. As such, these estimates may differ from actual results and are affected by future market and economic conditions. During Fiscal 2021, Fiscal 2020 and Fiscal 2019, the Company recorded impairment charges of $ 158 million, $ 357 million and $ 21 million, respectively, which were primarily related to operating lease right-of-use assets and fixed assets of our retail store locations. Please refer to Note 8, Note 9 and Note 14 for additional information. 77 Table of Contents Goodwill and Other Indefinite-lived Intangible Assets The Company records intangible assets based on their fair value on the date of acquisition. Goodwill is recorded as the difference between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible assets acquired. The brand intangible assets recorded in connection with the acquisitions of Versace and Jimmy Choo were determined to be indefinite-lived intangible assets, which are not subject to amortization. The Company performs an impairment assessment of goodwill, as well as the Versace brand and Jimmy Choo brand intangible assets on an annual basis, or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill, the Versace brand and the Jimmy Choo brand are assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business. The Company may assess its goodwill and its brand intangible assets for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value. When performing a qualitative test, the Company assesses various factors, including industry and market conditions, macroeconomic conditions and performance of its businesses. If the results of the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis is performed to determine if impairment is required. The Company may also elect to perform a quantitative analysis of goodwill and its indefinite-lived intangible assets initially rather than using a qualitative approach. The impairment testing for goodwill is performed at the reporting unit level. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, it engages independent third-party valuation specialists. To determine the fair value of a reporting unit, the Company uses a combination of the income and market approaches, when applicable. The Company believes the blended use of both models, when applicable, compensates for the inherent risk associated with either model if used on a stand-alone basis, and this combination is indicative of the factors a market participant would consider when performing a similar valuation. If the fair value of a reporting unit exceeds the related carrying value, the reporting unit’s goodwill is considered not to be impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. These valuations are affected by certain estimates, including future revenue growth rates, future operating expense growth rates, gross margins and discount rates. Future events could cause us to conclude that impairment indicators exist, and goodwill may be impaired. When performing a quantitative impairment assessment of our brand intangible assets, the fair value of the Versace and the Jimmy Choo brands is estimated using a discounted cash flow analysis based on the "relief from royalty" method, assuming that a third party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is dependent on many factors, including estimates of future revenue growth rates, royalty rates and discount rates. Actual future results may differ from these estimates. An impairment loss is recognized when the estimated fair value of the brand intangible assets is less than its carrying amount. During the fourth quarter of Fiscal 2021, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis for each brand. Based on qualitative impairment assessment of the Michael Kors reporting units, the Company concluded that it is more likely than not that the fair value of the Michael Kors reporting units exceeded its carrying value and, therefore, was not impaired. The Company elected to perform quantitative impairment analysis for both the Versace and Jimmy Choo reporting units, using a combination of income and market approaches to estimate the fair values of each brands' reporting units. The Company also elected to perform an impairment analysis for both the Versace and Jimmy Choo brand intangible assets using an income approach to estimate the fair values. Based on the results of these assessments, the Company determined there was no impairment loss for the Jimmy Choo retail reporting unit as its fair value is approximately 3 % higher than the carrying value, which has a goodwill balance of $ 221 million. The Company also concluded that the fair values of the Versace reporting units and the brand intangible assets exceeded the related carrying amounts and no impairment was required. The fair value of the Versace retail reporting unit, Versace wholesale reporting unit and Versace licensing reporting unit are at least 20 % higher than their respective carrying values. The fair value of the Versace retail brand and Versace wholesale brand are more than 10 % higher than their respective carrying values. However, the Company concluded that the fair values of the Jimmy Choo wholesale and Jimmy Choo licensing reporting units, along with the Jimmy Choo brand intangible assets, did not exceed their related carrying amounts. These impairment charges were primarily related to higher discount rates in the current year driven by a change in market factors as well as a shift in expected revenue and earnings mix to the retail segment. 78 Table of Contents Accordingly, the Company recorded impairment charges of $ 94 million related to the Jimmy Choo wholesale and Jimmy Choo licensing reporting units and $ 69 million related to the Jimmy Choo brand intangible assets during Fiscal 2021. The Company recorded impairment charges of $ 171 million related to the Jimmy Choo retail and Jimmy Choo licensing reporting units and $ 180 million related to the Jimmy Choo brand intangible assets during Fiscal 2020. The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive (loss) income for the fiscal years ended March 27, 2021 and March 28, 2020. The Company did not incur any impairment charges in Fiscal 2019. See Note 9 for information relating to its annual impairment analysis performed during the fourth quarter of Fiscal 2021, Fiscal 2020 and Fiscal 2019. It is possible that the Company's conclusions regarding impairment or recoverability of goodwill or other indefinite intangible assets could change in future periods if, for example, (i) the Company's businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions, (iii) business conditions or strategies change from our current assumptions, (iv) discount rates change, (v) market multiples change or (vi) the identification of the Company's reporting units change, among other factors. Such changes could result in a future impairment charge of goodwill or other indefinite-lived intangible assets. Insurance The Company uses a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation and employee-related health care benefits. The Company also maintains stop-loss coverage with third-party insurers to limit its exposure arising from claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of the discounted cost for self-insured claims incurred using actuarial assumptions, historical loss experience, actual payroll and other data. Although the Company believes that it can reasonably estimate losses related to these claims, actual results could differ from these estimates. The Company also maintains other types of customary business insurance policies, including general liability, marine transport and inventory and business interruption insurance. Insurance recoveries represent gain contingencies and are recorded upon actual settlement with the insurance carrier. Share-based Compensation The Company grants share-based awards to certain employees and directors of the Company. The grant date fair value of share options is calculated using the Black-Scholes option pricing model. The Company uses its own historical experience in determining the expected holding period and volatility of its time-based share option awards. The risk-free interest rate is derived from the zero-coupon United States (“U.S.”) Treasury Strips yield curve based on the grant’s estimated holding period. Determining the grant date fair value of share-based awards requires considerable judgment, including estimating expected volatility, expected term and risk-free rate. If factors change and the Company employs different assumptions, the fair value of future awards and the resulting share-based compensation expense may differ significantly from what the Company has estimated in the past. The closing market price of the Company’s shares on the date of grant is used to determine the grant date fair value of restricted shares, time-based restricted stock units (“RSUs") and performance-based RSUs. These fair values are recognized as expense over the requisite service period, net of estimated forfeitures, based on expected attainment of pre-established performance goals for performance grants, or the passage of time for those grants which have only time-based vesting requirements. Foreign Currency Translation and Transactions The financial statements of the majority of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. The Company’s functional currency is the United States Dollar (“USD”) for Capri and its United States based subsidiaries. Assets and liabilities are translated using period-end exchange rates, while revenues and expenses are translated using average exchange rates over the reporting period. The resulting translation adjustments are recorded separately in shareholders’ equity as a component of accumulated other comprehensive (loss) income. Foreign currency income and losses resulting from the re-measuring of transactions denominated in a currency other than the functional currency of a particular entity are included in foreign currency (gain) loss on the Company’s consolidated statements of operations and comprehensive (loss) income. 79 Table of Contents Derivative Financial Instruments Forward Foreign Currency Exchange Contracts The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to these transactions. The Company employs these forward currency contracts to hedge the Company’s cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation. In connection with the September 24, 2018 definitive agreement to acquire all of the outstanding shares of Versace, the Company entered into forward foreign currency exchange contracts with notional amounts totaling € 1.680 billion (approximately $ 2.001 billion) to mitigate its foreign currency exchange risk through the expected closing date of the acquisition, which were settled on December 21, 2018. This derivative contract was not designated as an accounting hedge. Therefore, changes in fair value were recorded to foreign currency loss (gain) in the Company’s consolidated statements of operations and comprehensive (loss) income. The Company’s accounting policy is to classify cash flows from derivative instruments in the same category as the cash flows from the items being hedged. Accordingly, the Company classified $ 77 million of realized losses relating to this derivative instrument within cash flows from investing activities during Fiscal 2019. The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including 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 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 (gain) loss 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 purchase of inventory consistently with the classification of the hedged item, within cash flows from operating activities. The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit exposure. The aforementioned forward contracts generally have a term of no more than 12 months. The period of these contracts is directly related to the foreign transaction they are intended to hedge. Net Investment Hedges The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between its U.S. Dollars and these foreign currencies. The Company has elected the spot method of designating these contracts under ASU 2017-12, “ Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, ” 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 income (loss) on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense in the Company’s consolidated statements of operations and comprehensive (loss) income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net investment is sold, diluted or liquidated. During the fourth quarter of Fiscal 2020, the Company terminated all of its net investment hedges related to its Euro-denominated subsidiaries. The early termination of these hedges resulted in the Company receiving $ 296 million in cash during the fourth quarter of Fiscal 2020. During Fiscal 2021, the Company resumed its normal hedging program and entered into multiple fixed-to-fixed cross-currency swap agreements to hedge its net investment in Euro-denominated and Japanese Yen-denominated subsidiaries against future volatility in the exchange rate between the U.S. Dollar and these currencies. 80 Table of Contents Interest Rate Swap Agreements 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 income (loss) and are reclassified into interest expense in the same period during which the hedged transactions affect earnings. Income Taxes Deferred income tax assets and liabilities have been provided for temporary differences between the tax bases and financial reporting bases of the Company’s assets and liabilities using the tax rates and laws in effect for the periods in which the differences are expected to reverse. The Company periodically assesses the realizability of deferred tax assets and the adequacy of deferred tax liabilities, based on the results of local, state, federal or foreign statutory tax audits or estimates and judgments used. Realization of deferred tax assets associated with net operating loss and tax credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration in the applicable tax jurisdiction. The Company periodically reviews the recoverability of its deferred tax assets and provides valuation allowances, as deemed necessary, to reduce deferred tax assets to amounts that more-likely-than-not will be realized. The Company’s management considers many factors when assessing the likelihood of future realization of deferred tax assets, including recent earnings within various taxing jurisdictions, expectations of future taxable income, the carryforward periods remaining and other factors. Changes in the required valuation allowance are recorded in income in the period such determination is made. Deferred tax assets could be reduced in the future if the Company’s estimates of taxable income during the carryforward period are significantly reduced or alternative tax strategies are no longer viable. The Company recognizes the impact of an uncertain income tax position taken on its income tax returns at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will be recognized if it has less than a 50% likelihood of being sustained. The tax positions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments for those positions. The Company records interest expense and penalties payable to relevant tax authorities as income tax expense. Leases 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. The Company adopted the new standard recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating the comparative prior year periods. The Company leases retail stores, office space and warehouse space under operating lease agreements that expire at various dates through September 2043. 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 November 2024. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its restructuring initiatives, as defined in Note 11. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. The Company determines the sublease term based on the date it provides possession to the subtenant through the expiration date of the sublease. The Company recognizes operating lease right-of-use assets and lease liabilities at lease commencement date, based on the present value of fixed lease payments over the expected lease term. The Company uses its incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable for the Company’s leases. The Company’s incremental borrowing rates are based on the term of the leases, the economic environment of the leases and reflect the expected interest rate it would incur to borrow on a secured basis. Certain leases include one or more renewal options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at the Company’s sole discretion and as such, the Company typically determines that exercise of these renewal options is not reasonably certain. As a result, the Company generally does not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the operating lease right-of-use asset and lease liability. Certain leases also contain termination options with an associated penalty. Generally, the Company is reasonably certain not to exercise these options and as such, they are not 81 Table of Contents included in the determination of the expected lease term. The Company recognizes operating lease expense on a straight-line basis over the lease term. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term. The Company’s leases generally provide for payments of non-lease components, such as common area maintenance, real estate taxes and other costs associated with the leased property. The Company accounts for lease and non-lease components of its real estate leases together as a single lease component and, as such, includes fixed payments of non-lease components in the measurement of the operating lease right-of-use assets and lease liabilities for its real estate leases. Variable lease payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property, are expensed as incurred as variable lease costs and are not recorded on the balance sheet. The Company’s lease agreements do not contain any material residual value guarantees or material restrictions or covenants. Debt Issuance Costs and Unamortized Discounts The Company defers debt issuance costs directly associated with acquiring third party financing. These debt issuance costs and any discounts on issued debt are amortized on a straight-line basis, which approximates the effective interest method, as interest expense over the term of the related indebtedness. Deferred financing fees associated with the Company’s Revolving Credit Facilities are primarily recorded within other assets in the Company’s consolidated balance sheets. Deferred financing fees and unamortized discounts associated with the Company’s other borrowings are primarily recorded as an offset to long-term debt in the Company’s consolidated balance sheets. See Note 12 for additional information. 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 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) income per ordinary share are as follows (in millions, except share and per share data): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Numerator: Net (loss) income attributable to Capri $ ( 62 ) $ ( 223 ) $ 543 Denominator: Basic weighted average shares 150,453,568 150,714,598 149,765,468 Weighted average dilutive share equivalents: Share options and restricted stock units, and performance restricted stock units — — 1,848,882 Diluted weighted average shares 150,453,568 150,714,598 151,614,350 Basic net (loss) income per share (1) $ ( 0.41 ) $ ( 1.48 ) $ 3.62 Diluted net (loss) income per share (1) $ ( 0.41 ) $ ( 1.48 ) $ 3.58 (1) Basic and diluted net (loss) income per share are calculated using unrounded numbers. Share equivalents of 3,658,959 shares, 3,752,560 shares and 1,409,415 shares, for Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively, have been excluded from the above calculation due to their anti-dilutive effect. 82 Table of Contents Diluted net loss per share attributable to Capri for Fiscal 2021 and Fiscal 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. Noncontrolling Interest The Company has an ownership interest in the Michael Kors Latin American joint venture, MK (Panama) Holdings, S.A. and subsidiaries of 75 %, an ownership interest in the Jimmy Choo EMEA joint venture JC Gulf Trading LLC of 49 %, an ownership interest in the Jimmy Choo Macau joint venture J. Choo (Macau) Co. Limited of 70 %, and a 50 % ownership interest in J. Choo Russia J.V. Limited and its subsidiary. Recently Adopted Accounting Pronouncements Measurement of Credit Losses on Financial Instruments On March 29, 2020, the Company adopted ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The Financial Accounting Standards Board has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to recognize an allowance for credit losses using a forward-looking expected loss impairment model, taking into consideration historical experience, current conditions and supportable forecasts that impact collectability. The adoption of this update did not have a material impact on the Company’s consolidated financial statements. Implementation Costs Associated with Cloud Computing Arrangements On March 29, 2020, the Company adopted ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15"), which provides guidance related to the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The adoption of this update did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements The Company has considered all new accounting pronouncements and, other than the recent pronouncements discussed below, have concluded that there are no new pronouncements that may have a material impact on the Company’s results of operations, financial condition or cash flows based on current information Reference Rate Reform In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and in January 2021, issued ASU 2021-01, "Reference Rate Reform: Scope". Both of these updates aim to ease the potential burden in accounting for reference rate reform. These updates provide optional expedients and exceptions, if certain criteria are met, for applying accounting principles generally accepted in the United States to contract modifications, hedging relationships and other transactions affected by the expected market transition from the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The amendments were effective upon issuance and allow companies to adopt the amendments on a prospective basis through December 31, 2022. The Company is currently evaluating the impact of these updates on its consolidated financial statements. 83 Table of Contents 3. Revenue Recognition The Company accounts for contracts with its customers when there is approval and commitment from both parties, the rights of the parties and payment terms have been identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. The Company sells its products through three primary channels of distribution: retail, wholesale and licensing. 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 apply the practical expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations that have an expected duration of 12 months or less. Retail 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 (including Australia). Retail revenue is recognized when control of the product is transferred at the point of sale at Company owned stores, including concessions. For e-commerce transactions, control is transferred and revenue is recognized when products are delivered to the customer, net of estimated returns. To arrive at net sales for retail, gross sales are reduced by actual customer returns, as well as by a provision for estimated future customer returns. Sales tax collected from retail customers are presented on a net basis and, as such, are excluded from revenue. Shipping and handling costs that are billed to customers are included in net sales, with the related costs recorded in cost of goods sold. Shipping and handling costs that are not billed to customers are accounted for as fulfillment costs. Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability upon issuance. Revenue is recognized when the gift card is redeemed or upon “breakage” for the estimated portion of gift cards that are not expected to be redeemed. “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 Company anticipates that substantially all of its outstanding gift cards will be redeemed within the next 12 months. The contract liability related to gift cards, net of estimated “breakage,” was $ 12 million and $ 11 million as of March 27, 2021 and March 28, 2020, respectively, and is included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets. Loyalty Program . The Company offers a loyalty program, which allows its Michael Kors U.S. customers to earn points on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage” for points that are not expected to be redeemed. Wholesale The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops throughout the Americas, EMEA and Asia. The Company also has arrangements where its products are sold to geographic licensees in certain parts of EMEA, Asia and South America. Wholesale revenue is recognized net of estimates for sales returns, discounts, markdowns and allowances, when merchandise is shipped and control of the underlying product is transferred to the Company’s wholesale customers. To arrive at net sales for wholesale, gross sales are reduced by provisions for estimated future returns, as well as trade discounts, markdowns, allowances, operational chargebacks and certain cooperative selling expenses. These estimates are developed based on historical trends, actual and forecasted performance and market conditions, and are reviewed by management on a quarterly basis. Unfulfilled, non-cancelable purchase orders for products from wholesale customers (including the Company’s geographic licensees) are expected to be fulfilled within the next 12 months. 84 Table of Contents Licensing The Company provides its third-party licensees with the right to access its Versace, Jimmy Choo and Michael Kors trademarks under product and geographic licensing arrangements. Under product licensing arrangements, the Company allows third parties to manufacture and sell luxury goods, including watches and jewelry, fragrances, eyewear and home furnishings, using the Company’s trademarks. Under geographic licensing arrangements, third party licensees receive the right to distribute and sell products bearing the Company’s trademarks in retail and/or wholesale channels within certain geographical areas, including Brazil, the Middle East, Eastern Europe, South Africa and certain parts of Asia. The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the licensees. Advertising contributions are received to support the Company’s branded advertising and marketing campaigns and are viewed as part of a single performance obligation with the right to access the Company’s trademarks. Royalty revenue generated from licenses, which includes contributions for advertising, may be subject to contractual minimum levels, as defined in the contract. Such minimums are generally fixed annually, based on the previous year’s sales. Licensing revenue is based on reported current period sales of licensed products at rates that are specified in the license agreements for contracts that are expected to exceed the related guaranteed minimums. If the Company expects the minimum guaranteed amounts to exceed amounts calculated based on actual sales, the guaranteed minimums are recognized ratably over the contractual year to which they relate. 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 March 27, 2021, contractually guaranteed minimum fees from the Company's license agreements expected to be recognized as revenue during future periods were as follows (in millions): Contractually Guaranteed Minimum Fees Fiscal 2022 $ 29 Fiscal 2023 25 Fiscal 2024 22 Fiscal 2025 18 Fiscal 2026 19 Fiscal 2027 and thereafter 71 Total $ 184 Sales Returns For the sale of goods with a right of return, the Company recognizes revenue for the consideration to which it expects to be entitled and a refund liability for the amount it expects to refund to its customers within accrued expenses and other current liabilities. The refund liability is estimated based on management’s review of historical and current customer returns for its retail and wholesale customers, estimated future returns, adjusted for non-resalable products. The Company also considers its product strategies, as well as the financial condition of its customers, store closings by wholesale customers, changes in the retail environment and other macroeconomic factors. The Company recognizes an asset with a corresponding adjustment to cost of sales for the right to recover the products from its retail and wholesale customers. The refund liability recorded as of March 27, 2021 and March 28, 2020 was $ 46 million and $ 37 million, respectively, and the related asset for the right to recover returned product as of March 27, 2021 and March 28, 2020 was $ 14 million and $ 14 million, respectively. Contract Balances The Company’s contract liabilities are recorded within accrued expenses and other current liabilities and other long-term liabilities in its consolidated balance sheets depending on the short- or long-term nature of the payments to be recognized. The Company’s contract liabilities primarily consist of gift card liabilities, loyalty program liabilities and advanced payments from product licensees. Total contract liabilities were $ 18 million and $ 22 million as of March 27, 2021 and March 28, 2020, respectively. During Fiscal 2021 and Fiscal 2020, the Company recognized $ 9 million and $ 20 million in revenue, respectively, relating to contract liabilities that existed at March 28, 2020 and March 30, 2019 , respectively. There were no material contract assets recorded as of March 27, 2021 and March 28, 2020. There were no changes in historical variable consideration estimates that were materially different from actual results. 85 Table of Contents Disaggregation of Revenue The following table presents the Company’s segment revenues disaggregated by geographic location (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Versace revenue - the Americas $ 201 $ 186 $ 22 Versace revenue - EMEA 276 420 66 Versace revenue - Asia 241 237 49 Total Versace 718 843 137 Jimmy Choo revenue - the Americas 102 107 96 Jimmy Choo revenue - EMEA 146 282 321 Jimmy Choo revenue - Asia 170 166 173 Total Jimmy Choo 418 555 590 Michael Kors revenue - the Americas 1,869 2,822 3,064 Michael Kors revenue - EMEA 607 821 892 Michael Kors revenue - Asia 448 510 555 Total Michael Kors 2,924 4,153 4,511 Total revenue - the Americas 2,172 3,115 3,182 Total revenue - EMEA 1,029 1,523 1,279 Total revenue - Asia 859 913 777 Total revenue $ 4,060 $ 5,551 $ 5,238 4. Leases The following table presents the Company’s supplemental balance sheets information related to leases (in millions): Balance Sheet Location March 27, 2021 March 28, 2020 Assets Operating leases Operating lease right-of-use assets $ 1,504 $ 1,625 Liabilities Current: Operating leases Short-term portion of operating lease liabilities $ 447 $ 430 Non-current: Operating leases Long-term portion of operating lease liabilities $ 1,657 $ 1,758 86 Table of Contents The components of net lease costs for the fiscal year ended March 27, 2021 and March 28, 2020 were as follows (in millions): Consolidated Statement of Operations and Comprehensive (Loss) Income Location March 27, 2021 March 28, 2020 Operating lease cost Selling, general and administrative expenses $ 432 $ 449 Variable lease cost (1) Selling, general and administrative expenses 69 155 Short-term lease cost Selling, general and administrative expenses 15 18 Sublease income Selling, general and administrative expenses ( 6 ) ( 6 ) Total lease cost $ 510 $ 616 (1) The Company elected to account 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 expense. As of the fiscal year ended March 27, 2021, rent concessions due to COVID-19 were $ 52 million. There is an immaterial impact from these concessions for the fiscal year ended March 28, 2020. The following table presents the Company’s supplemental cash flow information related to leases (in millions): March 27, 2021 March 28, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 488 $ 495 Non-cash transactions: Lease assets obtained in exchange for new lease liabilities 348 428 Rent concessions due to COVID-19 52 — The following tables summarizes the weighted average remaining lease term and weighted average discount rate related to the Company’s operating lease right-of-use assets and lease liabilities recorded on the balance sheets as of March 27, 2021 and March 28, 2020: March 27, 2021 March 28, 2020 Operating leases: Weighted average remaining lease term (years) 6.2 6.6 Weighted average discount rate 3.1 % 2.9 % At March 27, 2021, the future minimum lease payments under the terms of these noncancelable operating lease agreements are as follows (in millions): March 27, 2021 Fiscal 2022 $ 502 Fiscal 2023 437 Fiscal 2024 370 Fiscal 2025 291 Fiscal 2026 221 Thereafter 493 Total lease payments 2,314 Less: interest ( 210 ) Total lease liabilities $ 2,104 Table of Contents At March 27, 2021, the future minimum sublease income under the terms of these noncancelable operating lease agreements are as follows (in millions): March 27, 2021 Fiscal 2022 $ 5 Fiscal 2023 5 Fiscal 2024 4 Fiscal 2025 4 Fiscal 2026 3 Thereafter 8 Total sublease income $ 29 Additionally, the Company had approximately $ 23 million and $ 13 million of future payment obligations related to executed lease agreements for which the related lease has not yet commenced as of March 27, 2021 and March 28, 2020, respectively. See Note 2 for additional information on the Company's accounting policies related to leases. 5. Acquisitions Fiscal 2020 Acquisition of Alberto Gozzi S.r.L. On December 16, 2019, the Company entered into a definitive agreement to acquire Italian atelier and shoe manufacturer Alberto Gozzi S.r.L. The transaction was completed in the Company's fourth quarter of Fiscal 2020 and the assets and liabilities acquired approximated fair value. The acquired identifiable assets and liabilities net to a nominal amount, with $ 11 million recognized in goodwill allocated to the Jimmy Choo reportable segment. Fiscal 2019 Acquisition of Versace On December 31, 2018, the Company completed the acquisition of Versace for a total enterprise value of approximately € 1.753 billion (or approximately $ 2.005 billion), giving effect to an investment made by the Versace family at acquisition of 2.4 million shares. The acquisition was funded through a combination of borrowings under the Company’s 2018 Term Loan Facility, drawings under the Company’s Revolving Credit Facility and cash on hand. Versace’s results of operations have been included in our consolidated financial statements beginning on December 31, 2018. Versace contributed total revenue of $ 137 million and net loss of $ 12 million, after amortization of non-cash purchase accounting adjustments and transition and transaction costs, from the date of acquisition on December 31, 2018 through February 28, 2019 (reflecting a one-month reporting lag). The Company recorded measurement period adjustments during Fiscal 2020. The measurement period adjustments are primarily related to conclusions reached on the ability to utilize certain deferred tax assets based on new facts and circumstances identified which existed at the acquisition date and if known, would have affected the measurement of the amounts recognized as of that date. The net measurement period adjustments increased goodwill by $ 26 million. Table of Contents The following table summarizes the unaudited pro-forma consolidated results of operations for the fiscal year ended March 30, 2019 as if the acquisition had occurred on April 2, 2017, the beginning of Fiscal 2018 (in millions): March 30, 2019 Pro-forma total revenue $ 5,983 Pro-forma net income 579 Pro-forma net income per ordinary share attributable to Capri: Basic $ 3.82 Diluted $ 3.78 The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and Versace and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2018 and are not indicative of the future operating results of the combined company. The financial information for Versace prior to the acquisition has been included in the pro-forma results of operations on a calendar-year basis and includes certain adjustments to Versace’s historical consolidated financial statements to align with U.S. GAAP and the Company’s accounting policies. The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments, including amortization charges related to the definite-lived intangible assets acquired, fair value adjustments relating to leases and property and equipment, and the related tax effects assuming that the business combination occurred on April 2, 2017. Purchase accounting amortization of the inventory step-up adjustment has been excluded from the above pro-forma amounts due to the short-term nature of this adjustment. The pro-forma consolidated financial statements also reflect the impact of debt repayment and borrowings made to finance the acquisition and exclude historical interest expenses related to Versace’s € 90 million pre-existing debt. Transaction costs of $ 41 million for Fiscal 2019, which have been recorded within restructuring and other charges in the Company’s consolidated statements of operations and comprehensive (loss) income, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature. The shares used to calculate the pro-forma net income per ordinary share attributable to Capri reflect the weighted average impact of a 2.4 million ordinary share investment made by the Versace family at acquisition date. 6. Receivables, net Receivables, net consist of (in millions): March 27, 2021 March 28, 2020 Trade receivables (1) $ 412 $ 432 Receivables due from licensees 20 14 432 446 Less: allowances ( 59 ) ( 138 ) $ 373 $ 308 (1) As of March 27, 2021 and March 28, 2020, $ 81 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. Markdowns are based on wholesale customers’ sales performance, seasonal negotiations with customers, historical deduction trends and an evaluation of current market conditions. Operational chargebacks are based on deductions taken by customers, net of expected recoveries. Such provisions, and related recoveries, are reflected in revenues. 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 credit losses was $ 25 million and $ 39 million as of March 27, 2021 and March 28, 2020, respectively, including the impact related to COVID-19. The Company had credit loss of $( 3 ) million, $ 29 million and $ 4 million, respectively, for Fiscal 2021, Fiscal 2020 and Fiscal 2019. 89 Table of Contents 7. Concentration of Credit Risk, Major Customers and Suppliers Financial instruments that subject the Company to concentration of credit risk are cash and cash equivalents and receivables. As part of its ongoing procedures, the Company monitors its concentration of deposits with various financial institutions in order to avoid any undue exposure. The Company mitigates its risk by depositing cash and cash equivalents in major financial institutions. The Company also mitigates its credit risk by obtaining insurance coverage for a portion of its receivables (see Note 6). No individual customer accounted for 10% or more of the Company’s total revenues during Fiscal 2021, Fiscal 2020 or Fiscal 2019. The Company contracts for the purchase of finished goods principally with independent third-party contractors, whereby the contractor is generally responsible for all manufacturing processes. Although the Company does not have any long-term agreements with any of its manufacturing contractors, the Company believes it has mutually satisfactory relationships with them. The Company allocates product manufacturing among agents and contractors based on their capabilities, the availability of production capacity, quality, pricing and delivery. The inability of certain contractors to provide needed services on a timely basis could adversely affect the Company’s operations and financial condition. For Fiscal 2021, Fiscal 2020 and Fiscal 2019, one contractor accounted for approximately 18 %, 20 % and 21 %, respectively, of the Company’s total finished goods purchases, based on dollar volume. The Company also has relationships with various agents who source finished goods with numerous contractors on behalf of its Michael Kors brand. For Fiscal 2021, Fiscal 2020 and Fiscal 2019, one agent sourced approximately 26 %, 26 % and 24 %, respectively, of Michael Kors finished goods, based on unit volume. 8. Property and Equipment, net Property and equipment, net, consists of (in millions): March 27, 2021 March 28, 2020 Leasehold improvements $ 737 $ 704 Computer equipment and software 359 329 Furniture and fixtures 350 329 Equipment 139 136 In-store shops (1) 53 236 Building 51 49 Land 20 19 1,709 1,802 Less: accumulated depreciation and amortization (1) ( 1,271 ) ( 1,310 ) 438 492 Construction-in-progress 47 69 $ 485 $ 561 (1) The Company wrote off $ 179 million of fully depreciated assets which were no longer in service from in-store shops and related accumulated depreciation during the fiscal year ended March 27, 2021. Depreciation and amortization of property and equipment for the fiscal years ended March 27, 2021, March 28, 2020, and March 30, 2019 totaled $ 165 million, $ 200 million and $ 188 million, respectively. During Fiscal 2021, Fiscal 2020 and Fiscal 2019, the Company recorded property and equipment impairment charges of $ 23 million, $ 77 million and $ 19 million, respectively, primarily related to the Company's retail store locations. See Note 14 for additional information. 90 Table of Contents 9. Intangible Assets and Goodwill The following table details the carrying values of the Company’s intangible assets other than goodwill (in millions): March 27, 2021 March 28, 2020 Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Definite-lived intangible assets: Reacquired rights $ 400 $ 77 $ 323 $ 400 $ 61 $ 339 Trademarks 23 21 2 23 20 3 Customer relationships 437 86 351 404 51 353 860 184 676 827 132 695 Indefinite-lived intangible assets: Jimmy Choo brand (1) 587 249 338 547 180 367 Versace brand (2) 978 — 978 924 — 924 1,565 249 1,316 1,471 180 1,291 Total intangible assets, excluding goodwill $ 2,425 $ 433 $ 1,992 $ 2,298 $ 312 $ 1,986 (1) The year-over-year change in carrying value reflects an impairment charge of $ 69 million and foreign currency translation of $ 40 million for the fiscal year ended March 27, 2021. The Company recorded an impairment charge of $ 180 million for the fiscal year ended March 28, 2020. (2) The year-over-year change in value relates to foreign currency translation. Reacquired rights relate to the Company’s reacquisition of the rights to use the Michael Kors trademarks and to import, sell, advertise and promote certain of its products in the previously licensed territories in the Greater China region and are being amortized through March 31, 2041, the expiration date of the related license agreement. The trademarks relate to the Michael Kors brand name and are amortized over twenty years . Customer relationships are generally amortized over five to eighteen years . Amortization expense for the Company’s definite-lived intangibles was $ 47 million, $ 49 million and $ 37 million, respectively, for each of the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019. Indefinite-lived intangible assets other than goodwill included the Versace and Jimmy Choo brands, which were recorded in connection with the acquisitions of Versace and Jimmy Choo, and have an indefinite life due to being essential to the Company’s ability to operate the Versace and Jimmy Choo businesses for the foreseeable future. Estimated amortization expense for each of the next five years is as follows (in millions): Fiscal 2022 $ 47 Fiscal 2023 47 Fiscal 2024 47 Fiscal 2025 47 Fiscal 2026 47 Fiscal 2027 and thereafter 441 $ 676 The future amortization expense above reflects weighted-average estimated remaining useful lives of 20 years for reacquired rights, 2 years for trademarks and 12 years for customer relationships. 91 Table of Contents The following table details the changes in goodwill for each of the Company’s reportable segments (in millions): Versace Jimmy Choo Michael Kors Total Balance at March 30, 2019 861 678 120 $ 1,659 Acquisition — 11 — 11 Measurement period adjustment (1) 26 — — 26 Impairment charges (2) — ( 171 ) — ( 171 ) Foreign currency translation ( 6 ) ( 31 ) — ( 37 ) Balance at March 28, 2020 881 487 120 1,488 Impairment charges (2) — ( 94 ) — ( 94 ) Foreign currency translation 52 52 — 104 Balance at March 27, 2021 $ 933 $ 445 $ 120 $ 1,498 (1) See Note 5 for additional information. (2) The Company recorded impairment charges during Fiscal 2021 of $ 94 million related to the Jimmy Choo wholesale and licensing reporting units, and $ 171 million during Fiscal 2020 related to the Jimmy Choo retail and licensing reporting units. The Company’s goodwill and the Versace and Jimmy Choo brands are not subject to amortization but are evaluated for impairment annually in the last quarter of each fiscal year, or whenever impairment indicators exist. During the fourth quarter of Fiscal 2021, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis for its three segments. The Company performed its goodwill impairment assessment for its Michael Kors segment using a qualitative assessment. Based on the results of the Company’s qualitative impairment assessment, the Company concluded that it is more likely than not that the fair value of the Michael Kors’ reporting units exceeded their carrying value and, therefore, were not impaired. The Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis for both the Versace and Jimmy Choo reporting units, using a combination of income and market approaches to estimate the fair value of each brands' reporting units. The Company also elected to perform an impairment analysis for both the Versace and Jimmy Choo brand indefinite-lived intangible assets using an income approach to estimate the fair values. Based on the results of these assessments, the Company determined there was no impairment loss for the Jimmy Choo Retail reporting unit. The Company also concluded that the fair values of the Versace reporting units and the brand intangible assets exceeded the related carrying amounts and no impairment was required. However, the Company concluded that the fair value of the Jimmy Choo Wholesale and Jimmy Choo Licensing reporting units, along with the Jimmy Choo brand indefinite-lived intangible assets, did not exceed their related carrying amounts. These impairment charges were primarily related to higher discount rates in the current year driven by a change in market factors as well as a shift in expected revenue and earnings mix to the retail segment. Accordingly, the Company recorded impairment charges of $ 94 million related to the Jimmy Choo Retail and Jimmy Choo Licensing reporting units and $ 69 million related to the Jimmy Choo brand intangible assets during Fiscal 2021. The Company recorded impairment charges of $ 171 million related to the Jimmy Choo Retail and Jimmy Choo Licensing reporting units and $ 180 million related to the Jimmy Choo brand intangible assets during Fiscal 2020. The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive (loss) income for the fiscal years ended March 27, 2021 and March 28, 2020. The Company did not record any such impairment charges in Fiscal 2019. See Note 14 for additional information. 92 Table of Contents 10. Current Assets and Current Liabilities Prepaid expenses and other current assets consist of the following (in millions): March 27, 2021 March 28, 2020 Prepaid taxes $ 133 $ 116 Other accounts receivables 13 10 Interest receivable related to net investment hedges 12 1 Prepaid contracts 11 17 Other 36 23 $ 205 $ 167 Accrued expenses and other current liabilities consist of the following (in millions): March 27, 2021 March 28, 2020 Other taxes payable $ 46 $ 38 Return liabilities 46 37 Accrued rent (1) 20 10 Charitable donations (2) 20 — Accrued capital expenditures 17 31 Professional services 13 10 Accrued litigation 12 10 Gift and retail store credits 12 11 Accrued advertising and marketing 11 9 Accrued interest 10 8 Restructuring liability 9 9 Accrued purchases and samples 8 3 Other 73 65 $ 297 $ 241 (1) The accrued rent balance relates to variable lease payments. (2) Relates to a $ 20 million unconditional pledge to The Capri Holdings Foundation for the Advancement of Diversity in Fashion. 11. Restructuring and Other Charges Capri Retail Store Optimization Program As previously announced, the Company intends to close approximately 170 of its retail stores over two fiscal years, which began during Fiscal 2021 and will continue into Fiscal 2022, in connection with its Capri Retail Store Optimization Program in order to improve the profitability of its retail store fleet. 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. 93 Table of Contents During Fiscal 2021, the Company closed 101 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 Fiscal 2021 was $ 5 million. 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) 2 11 13 Payments ( 2 ) ( 11 ) ( 13 ) Other — 3 3 Balance at March 27, 2021 $ — $ 3 $ 3 (1) Excludes a net credit of $ 8 million related to lease termination gains of previously impaired operating lease right-of-use assets partially offset by additional impairments for the stores closing under the Company’s Capri Retail Store Optimization Program during Fiscal 2021. Michael Kors Retail Fleet Optimization Plan During Fiscal 2020, the Company recorded restructuring charges of $ 5 million under 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 Capri Retail Store Optimization Plan, the Company incurred charges of $ 8 million primarily relating to closures of corporate locations during Fiscal 2021. The Company incurred $ 3 million of restructuring charges related to the Michael Kors Retail Fleet Optimization Plan during Fiscal 2020, primarily consisting of lease-related costs. Other Costs During Fiscal 2021, the Company recorded costs of $ 19 million primarily related to equity awards associated with the acquisition of Versace. During Fiscal 2020, the Company recorded costs of $ 34 million, which included $ 24 million in connection with the Versace acquisition, $ 9 million in connection with the acquisition of Jimmy Choo and $ 1 million in connection with the acquisition of Gozzi. 94 Table of Contents 12. Debt Obligations The following table presents the Company’s debt obligations (in millions): March 27, 2021 March 28, 2020 Term Loan $ 870 $ 1,015 Senior Notes due 2024 450 450 Revolving Credit Facility — 720 Other 30 3 Total debt 1,350 2,188 Less: Unamortized debt issuance costs 7 8 Less: Unamortized discount on long-term debt 1 1 Total carrying value of debt 1,342 2,179 Less: Short-term debt 123 167 Total long-term debt $ 1,219 $ 2,012 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 (the “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. This requirement for collateral will fall away if the Company achieves an investment grade ratings requirement for two consecutive full fiscal quarters. The Amendment adds a restriction on the disposition of assets and a requirement to prepay the term loans with certain net cash proceeds of non-ordinary course asset sales, subject to certain exceptions and a reinvestment option with respect to up to $ 100 million of net cash proceeds in the aggregate. Pursuant to the Second Amendment, the financial covenant in the Company’s 2018 Credit Facility requiring it to maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.0 has been waived through the fiscal quarter ending June 26, 2021. The Company terminated the waiver period effective May 26, 2021. Effective as of that date, the applicable ratio will be calculated net of the Company’s unrestricted cash and cash equivalents 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. 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 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. The 2018 Credit Facility provides for a $ 1 billion revolving credit facility (the "Revolving Credit Facility"), which may be denominated in U.S. dollars and other currencies, including Euros, Canadian Dollars, Pounds Sterling, Japanese Yen and Swiss Francs. The Revolving Credit Facility also provides sub-facilities for the issuance of letters of credit of up to $ 75 million and swing loans of up to $ 75 million. The 2018 Credit Facility also provides for a $ 1.6 billion term loan facility (the "2018 Term Loan Facility"). The 2018 Term Loan Facility is divided into two tranches, with the second tranche maturing in December 2023, which requires a quarterly payment of $ 24 million. As of March 27, 2021, the Company has fully paid off Tranche 1 of the 2018 Term Loan Facility. 95 Table of Contents In addition, the Second Amendment adds a new $ 230 million revolving line of credit that matures on June 24, 2021 (the “ 364 Day Facility”). The terms of the 364 Day Facility are substantially similar to the terms of the existing revolving facility under the 2018 Credit Facility except that (i) no letters of credit or swingline loans are provided and (ii) for loans subject to Adjusted LIBOR, the applicable margin is 225 basis points per annum, for loans subject to the base rate the applicable margin is 125 basis points per annum and the commitment fee is 35 basis points per annum. In addition, while the 364 Day Facility is outstanding, (i) if the Company incurs any incremental indebtedness under the 2018 Credit Facility or certain permitted indebtedness in lieu of such incremental indebtedness, the 364 Day Facility will be reduced on a dollar for dollar basis and the Company will be required to make corresponding prepayments and (ii) the Company will be required to prepay amounts outstanding under the 364 Day Facility on a weekly basis to the extent that cash and cash equivalents of the Company and its subsidiaries exceed $ 200 million. 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. Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at the following rates: • for any loans (except loans denominated in Canadian Dollars), the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt rating; • for loans denominated in U.S. Dollars, an alternate base rate, which is the greatest of: (a) the prime rate publicly announced from time to time by JPMorgan Chase, (b) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate and zero, plus 50 basis points, and (c) the greater of the one-month London Interbank Offered Rate adjusted for statutory reserve requirements for Eurocurrency liabilities (“Adjusted LIBOR”) and zero, plus 100 basis points, in each case, plus an applicable margin based on the Company’s public debt ratings; • for loans denominated in Canadian Dollars, the Canadian prime rate, which is the greater of the PRIMCAN Index rate and the rate applicable to one-month Canadian Dollar banker’s acceptances quoted on Reuters (“CDOR”), plus 100 basis points, plus an applicable margin based on the Company’s public debt ratings; or • for loans denominated in Canadian Dollars, the average CDOR rate for the applicable interest period, plus 10 basis points per annum, plus an applicable margin based on the Company’s public debt ratings. Borrowings under the 2018 Term Loan Facility bear interest, at the Company’s option, at (a) the alternate base rate plus an applicable margin based on the Company’s public debt ratings; or (b) the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt ratings. The Revolving Credit Facility also provides for an annual administration fee and a commitment fee equal to 0.10 % to 0.25 % per annum, based on the Company’s public debt ratings, applied to the average daily unused amount of the Revolving Credit Facility. The 2018 Term Loan Facility provides for a commitment fee equal to 0.10 % to 0.25 % per annum, based on the Company’s public debt ratings, applied to the undrawn amount of the 2018 Term Loan Facility, from January 6, 2019 until the term loans are fully drawn or the commitments under the 2018 Term Loan Facility terminate or expire. Loans under the 2018 Credit Facility may be repaid and commitments may be terminated or reduced by the borrowers without premium or penalty other than the customary breakage costs with respect to loans bearing interest based on Adjusted LIBOR or the CDOR rate. As of the last day of Fiscal 2021, the 2018 Credit Facility requirement of the Company to maintain a leverage ratio as of the end of each fiscal quarter of no greater than 3.75 to 1 has been waived through the fiscal quarter ending June 26, 2021. Such leverage ratio is calculated based on the ratio of consolidated total indebtedness plus the capitalized amount of all operating lease liabilities presented on our consolidated balance sheets to Consolidated EBITDAR (as defined below) for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash charges, subject to certain additions and deductions. The 2018 Credit Facility also includes covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends that are customary for financings of this type. See Note 22 for additional information. As of March 27, 2021 and the date these financial statements were issued, the Company was in compliance with 96 Table of Contents all covenants related to this agreement, which was calculated based on the unrestricted cash and cash equivalents plus the aggregate undrawn amounts of no less than $ 500 million under the 2018 Credit Facility. The 2018 Credit Facility contains events of default customary for financings of this type, including, but not limited to, payment of defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy or insolvency, certain events under The Employee Retirement Income Security Act, material judgments, actual or asserted failure of any guaranty supporting the 2018 Credit Facility to be in full force and effect, and changes of control. If such an event of default occurs, the lenders under the 2018 Credit Facility would be entitled to take various actions, including, but not limited to, terminating the commitments and accelerating amounts outstanding under the 2018 Credit Facility, subject to “certain funds” limitations in connection with the transaction governing the 2018 Term Loan Facility. As of March 27, 2021, the Company had no borrowings outstanding under the Revolving Credit Facility as a result of repaying the remaining borrowings. As of March 28, 2020, the Company had $ 681 million borrowings outstanding under the Revolving Credit Facility, which were recorded within long-term debt in its consolidated balance sheets. In addition, stand-by letters of credit of $ 27 million and $ 18 million were outstanding as of March 27, 2021 and March 28, 2020, respectively. At March 27, 2021, the amount available for future borrowings under the Revolving Credit Facility and the 364 Day facility were $ 973 million and $ 230 million, respectively. As of March 27, 2021, the carrying values of borrowings outstanding under the 2018 Term Loan Facility were $ 865 million, net of debt issuance costs of $ 5 million, $ 97 million of which was recorded within short-term debt while $ 768 million was recorded within long-term debt in the Company's consolidated balance sheets. As of March 28, 2020, the carrying values of borrowings outstanding under the 2018 Term Loan Facility were $ 1.010 billion, net of debt issuance costs of $ 5 million, $ 128 million of which was recorded within short-term debt while $ 882 million was recorded within long-term debt in the Company's consolidated balance sheets. Senior Notes On October 20, 2017, Michael Kors (USA), Inc. (the “Issuer”), the Company’s wholly owned subsidiary, completed its offering of $ 450 million aggregate principal amount of 4.000 % senior notes due 2024 (the “Senior Notes”) at an issue price of 99.508 % of aggregate principal amount, pursuant to an exemption from registration under the Securities Act of 1933, as amended. The Senior Notes were issued under an indenture dated October 20, 2017, among the Issuer, the Company, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes were issued to finance a portion of the Company’s acquisition of Jimmy Choo and certain related refinancing transactions. As of March 27, 2021, the Senior Notes bear interest at a rate of 4.500 % per year, subject to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency therefore) downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the Senior Notes. Interest on the Senior Notes is payable semi-annually on May 1 and November 1 of each year, beginning on May 1, 2018. The Senior Notes are unsecured and are guaranteed by the Company and its existing and future subsidiaries that guarantee or are borrowers under the 2018 Credit Facility (subject to certain exceptions, including subsidiaries organized in China). The Senior Notes may be redeemed at the Company’s option at any time in whole or in part at a price equal to 100 % of the principal amount, plus accrued and unpaid interest, plus a “make-whole” amount calculated at the applicable Treasury Rate plus 30 basis points. The Senior Notes rank equally in right of payment with all of the Issuer’s and guarantors’ existing and future senior unsecured indebtedness, senior in right of payment to any future subordinated indebtedness, effectively subordinated in right of payment to any of the Company’s subsidiaries’ obligations (including secured and unsecured obligations) and any of the Company’s secured obligations, to the extent of the assets securing such obligations. The Indenture contains covenants, including those that limit the Company’s ability to create certain liens and enter into certain sale and leaseback transactions. In the event of a “Change of Control Triggering Event,” as defined in the Indenture, the Issuer will be required to make an offer to repurchase the Senior Notes at a repurchase price in cash equal to 101 % of the aggregate principal amount of the Senior Notes being repurchased plus any unpaid interest. These covenants are subject to important limitations and exceptions, as per the Indenture. 97 Table of Contents As of March 27, 2021 and March 28, 2020, the carrying value of the Senior Notes was $ 447 million and $ 446 million, respectively, net of issuance costs and unamortized discount, which were recorded within long-term debt in the Company's consolidated balance sheets. Supplier Financing Program During the third quarter of Fiscal 2021, the Company began offering a supplier financing program to certain suppliers as the Company continues to identify opportunities to improve liquidity. This program enables suppliers, at their sole discretion, to sell their receivables (i.e., the Company’s payment obligations to suppliers) to a financial institution on a non-recourse basis in order to be paid earlier than current payment terms provide. The Company’s obligations, including the amount due and scheduled payment dates, are not impacted by a suppliers’ decision to participate in this program. The Company does not reimburse suppliers for any costs they incur to participate in the program and their participation is voluntary. The amount outstanding under this program as of March 27, 2021 was $ 17 million and is presented as short-term debt in the Company’s consolidated balance sheets. Japan Credit Facility In Fiscal 2021, the Company’s subsidiary in Japan renewed a short term credit facility (“Japan Credit Facility”) with Mitsubishi UFJ Financial Group (“MUFJ”), which may be used to fund general working capital needs of Michael Kors Japan K.K., subject to the bank’s discretion. The Japan Credit Facility is in effect through November 30, 2021. The Japan Credit Facility provides Michael Kors Japan K.K. with a revolving credit line of up to ¥ 1.0 billion (approximately $ 9 million). The Japan Credit Facility bears interest at a rate posted by the Bank plus 0.300 % two business days prior to the date of borrowing or the date of interest renewal. As of March 27, 2021 the Company had $ 9 million borrowings outstanding under the Japan Credit Facility and no borrowings outstanding as of March 28, 2020, which were recorded within short-term debt in the Company's consolidated balance sheets. Hong Kong Credit Facility In May 2020, the Company’s Hong Kong subsidiary, MKHKL, renewed its uncommitted credit facility (“HK Credit Facility”) with HSBC, which may be used to fund general working capital needs of MKHKL through September 30, 2021 subject to the bank’s discretion. The HK Credit Facility provides MKHKL with a revolving line of credit of up to 100 million Hong Kong Dollars (approximately $ 13 million), and may be used to support bank guarantees. Borrowings under the HK Credit Facility must be made in increments of at least 5 million Hong Kong Dollars and bear interest at the Hong Kong Interbank Offered Rate (“HIBOR”) plus 150 basis points. As of March 27, 2021 and March 28, 2020, there were no borrowings outstanding under the HK Credit Fac ility. As of March 27, 2021, bank guarantees supported by this facility were 3 million Hong Kong Dollars (less than $ 1 million). At March 27, 2021, the amount available for future borrowings under the HK Credit Facility was 97 million Hong Kong Dollars (approximately $ 13 million). China Credit Facility In January 2019, the Company’s subsidiary in China, MKTSCL, entered into a short-term credit facility (“China Credit Facility”) with HSBC, which may be used to fund general working capital needs, not to exceed 12 months. The China Credit Facility is in effect through December 31, 2021. The China Credit Facility provides MKTSCL with a Revolving Loan Facility of up to RMB 70 million (approximately $ 11 million), an overdraft facility with a credit line of RMB 10 million (approximately $ 1 million) and a non-financial bank guarantee facility of RMB 20 million (approximately $ 3 million) or its equivalent in another currency, at lender’s discretion. Borrowings under the China Credit Facility bear interest at 105 % of the applicable People’s Bank of China’s Benchmark lending rate at the time of borrowing. As of March 27, 2021 and March 28, 2020, the Company had no borrowings outstanding under the China Credit Facility. Versace Credit Facilities In June 2019, the Company’s subsidiary, Versace, entered into two uncommitted short-term credit facilities, one with Unicredit and the other with Intesa (“Versace Credit Facilities”), which may be used for general working capital needs of Versace. The Versace Credit Facilities provide Versace with a swing line of credit of up to € 32 million (approximately $ 38 million), with interest set by the bank on the date of borrowing. As of March 27, 2021, there were no borrowings outstanding under the Versace Credit Facility. As of March 28, 2020, there were borrowings outstanding of € 25 million (approximately $ 28 million), which were recorded within short-term debt in the Company's consolidated balance sheets. 98 Table of Contents In November 2018, Versace entered into an overdraft facility ("Versace Overdraft Facility"), which may be used for general working capital needs of Versace. The overdraft facility provides Versace with a line of credit of up to € 5 million (approximately $ 6 million). As of March 27, 2021 and March 28, 2020, there were no borrowings outstanding under the Versace Overdraft Facility. In January 2018, Versace entered into an uncommitted short-term credit facility (“Versace Credit Facility”), which may be used for general working capital needs of Versace. The Versace Credit Facility provides Versace with a swing line of credit of up to € 20 million (approximately $ 24 million), with interest set by the bank on the date of borrowing. As of March 27, 2021, there were no borrowings outstanding under the Versace Credit Facility. As of March 28, 2020, there were borrowings outstanding of € 10 million (approximately $ 11 million), which were recorded within short-term debt in the Company's consolidated balance sheets. 13. Commitments and Contingencies Commitments The Company has issued stand-by letters of credit to guarantee certain of its retail and corporate operating lease commitments, aggregating $ 33 million at March 27, 2021, including $ 27 million in letters of credit issued under the Revolving Credit Facility. Other Commitments As of March 27, 2021, the Company also has other contractual commitments aggregating $ 2.108 billion, which consist of inventory purchase commitments of $ 688 million, debt obligations of $ 1.350 billion and other contractual obligations of $ 70 million, which primarily relate to the Company’s marketing and advertising obligations, information technology agreements and supply agreements. Long-term Employment Contract The Company has an employment agreement with the Chief Creative Officer of the Michael Kors brand that provides for continuous employment through the date of the officer’s death or permanent disability at an annual salary of $ 1 million. In addition to salary, the agreement provides for an annual bonus and other employee related benefits. In response to the continued global health and economic impact of the COVID-19 pandemic, the Chief Creative Officer of the Michael Kors brand voluntarily elected to forgo his salary for Fiscal 2021. Contingencies 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 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. 14. Fair Value Measurements Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market participant assumptions based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data. 99 Table of Contents Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. At March 27, 2021 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. The Company makes no adjustments to these broker obtained quotes or prices, but assesses the credit risk of the counterparty and would adjust the provided valuations for counterparty credit risk when appropriate. 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 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 of the Company. See Note 15 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 March 27, 2021, using: Fair value at March 28, 2020, using: Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Derivative assets: Forward foreign currency exchange contracts $ — $ 2 $ — $ — $ 1 $ — Net investment hedges — 3 — — 3 — Total derivative assets $ — $ 5 $ — $ — $ 4 $ — Derivative liabilities: Forward foreign currency exchange contracts $ — $ 1 $ — $ — $ — $ — Net investment hedges — 263 — — — — Designated interest rate swaps — 1 — — — — Total derivative liabilities $ — $ 265 $ — $ — $ — $ — 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 frequent nature of such borrowings and repayments. See Note 12 for detailed information related 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): March 27, 2021 March 28, 2020 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Senior Notes due 2024 $ 447 $ 470 $ 446 $ 443 Term Loan $ 865 $ 866 $ 1,010 $ 957 Revolving Credit Facilities $ — $ — $ 720 $ 720 The Company’s cash and cash equivalents, accounts receivable and accounts payable, are recorded at carrying value, which approximates fair value. 100 Table of Contents Non-Financial Assets and Liabilities The Company’s non-financial assets include goodwill, intangible assets, operating lease right-of-use assets and property and equipment. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The Company’s goodwill and its indefinite-lived intangible assets (Versace and Jimmy Choo brands) are assessed for impairment at least annually, while its other long-lived assets, including operating lease right-of-use assets, property and equipment and definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. 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. The following table details the carrying values and fair values of the Company’s assets that have been impaired (in millions): Carrying Value Prior to Impairment Fair Value Impairment Charge (1) Fiscal 2021: Operating Lease Right-of-Use Assets $ 326 $ 191 $ 135 Goodwill 319 225 94 Brands 407 338 69 Property and Equipment 30 7 23 Total $ 1,082 $ 761 $ 321 Fiscal 2020: Operating Lease Right-of-Use Assets $ 717 $ 437 $ 280 Brands 547 367 180 Goodwill 474 303 171 Property and Equipment 105 28 77 Total $ 1,843 $ 1,135 $ 708 Fiscal 2019: Property and Equipment 26 7 19 Lease Rights 3 1 2 Total $ 29 $ 8 $ 21 (1) Includes $ 5 million of impairment charges that were recorded within restructuring and other charges related to the Capri Retail Store Optimization Program during the Fiscal 2021. In addition to the impairment charges above, the Company recorded an adjustment to reduce its March 31, 2019 opening balance of retained earnings by $ 152 million, net of tax, reflecting impairments of operating lease right-of-use assets for certain underperforming real estate locations for which the carrying value of the opening operating lease right-of-use asset exceeded its related fair value. Property and equipment related to these underperforming locations were fully impaired due to the adoption of ASU 2016-02. See Note 2 and Note 4 for additional information. There were no impairment charges related to goodwill or indefinite-lived intangible assets in Fiscal 2019. 101 Table of Contents 15. Derivative Financial Instruments Forward Foreign Currency Exchange Contracts The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company does not enter into derivative contracts for trading or speculative purposes. On September 24, 2018, in connection with the acquisition of Versace, the Company entered into forward foreign currency exchange contracts with a total notional amount of € 1.680 billion (approximately $ 2.001 billion) to mitigate its foreign currency exchange risk through the expected closing date of the acquisition. This derivative contract was not designated as an accounting hedge and was settled on December 21, 2018 as a result of the debt issued in connection with the acquisition of Versace (see Note 12 for further information). Changes in fair value were recorded to foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive (loss) income for Fiscal 2019. Net Investment Hedges As of March 27, 2021, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 3 billion to hedge its net investment in Euro-denominated subsidiaries and $ 194 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 % to 3.588 % in Japanese Yen. Certain of these contracts include mandatory early termination dates between November 2022 and February 2026, while the remaining contracts have maturity dates between July 2022 and August 2027. These contracts have been designated as net investment hedges During the fourth quarter of Fiscal 2020, the Company terminated all of its net investment hedges related to its Euro-denominated subsidiaries. The early termination of these hedges resulted in the Company receiving $ 296 million in cash during the fourth quarter of Fiscal 2020. This resulted in a pre-tax gain of $ 211 million being recognized in other comprehensive income (loss) ("OCI") during the fourth quarter of Fiscal 2020. 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 $ 16 million, $ 71 million and $ 17 million, respectively, during Fiscal 2021, Fiscal 2020 and Fiscal 2019. Interest Rate Swap As of March 27, 2021, 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. 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 Fiscal 2021, the Company recorded an immaterial amount of interest expense related to this agreement. 102 Table of Contents 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 March 27, 2021 and March 28, 2020 (in millions): Fair Values Notional Amounts Assets Liabilities March 27, 2021 March 28, 2020 March 27, 2021 March 28, 2020 March 27, 2021 March 28, 2020 Designated forward foreign currency exchange contracts $ 155 $ 161 $ 2 (1) $ 1 (1) $ 1 (2) $ — Designated net investment hedge 3,194 44 3 (3) 3 (3) 263 (4) — Designated interest rate swap 500 — — — 1 (4) — Total designated hedges 3,849 205 5 4 265 — Undesignated derivative contracts (5) 13 — — — — — Total $ 3,862 $ 205 $ 5 $ 4 $ 265 $ — (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. (5) 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 above 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 March 27, 2021 and March 28, 2020 would be as follows (in millions): Forward Currency Exchange Contracts Net Investment Hedges Interest Rate Swap March 27, 2021 March 28, 2020 March 27, 2021 March 28, 2020 March 27, 2021 March 28, 2020 Assets subject to master netting arrangements $ 2 $ 1 $ 3 $ 3 $ — $ — Liabilities subject to master netting arrangements $ 1 $ — $ 263 $ — $ 1 $ — Derivative assets, net $ 1 $ 1 $ 3 $ 3 $ — $ — Derivative liabilities, net $ — $ — $ 263 $ — $ 1 $ — 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 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 (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 income (loss) on the Company’s consolidated balance sheets. Upon discontinuation of the hedge, such amounts remain in CTA until the related net 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 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 (loss) income. 103 Table of Contents 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): Fiscal Year Ended March 27, 2021 Fiscal Year Ended March 28, 2020 Fiscal Year Ended March 30, 2019 Pre-Tax Losses Recognized in OCI Pre-Tax Gains Recognized in OCI Pre-Tax Gains Recognized in OCI Designated forward foreign currency exchange contracts $ ( 2 ) $ 6 $ 16 Designated net investment hedges $ ( 263 ) $ 264 $ 47 Designated interest rate swaps $ ( 1 ) $ — $ — The following tables summarize the 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 (in millions): Fiscal Year Ended Pre-Tax (Gains) Losses Reclassified from Accumulated OCI Location of (Gains) Losses Recognized March 27, 2021 March 28, 2020 March 30, 2019 Designated forward currency exchange contracts $ ( 2 ) $ ( 10 ) $ 4 Cost of Sales The Company expects that substantially all of the amounts 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 Fiscal 2021 and Fiscal 2020, the Company recognized an immaterial amount of net gains and losses and during Fiscal 2019, the Company recognized a net loss of $ 78 million within foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive (loss) income as a result of the changes in the fair value of undesignated forward foreign currency contracts. The Fiscal 2019 amount was primarily comprised of a $ 77 million loss related to the derivative contracts entered into on September 25, 2018 to mitigate foreign currency exchange risk associated with the Versace acquisition that were settled on December 21, 2018. 16. Shareholders’ Equity Share Repurchase Program 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 Fiscal 2021, the Company did no t purchase any shares through open market transactions under the current plan. As of March 27, 2021, the remaining availability under the Company’s 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 transactions under the Company’s insider trading policy and other relevant factors. The program may be suspended or discontinued at any time. 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 Fiscal 2021 and Fiscal 2020, the Company withheld 48,528 shares and 63,958 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. 104 Table of Contents Accumulated Other Comprehensive Income (Loss) The following table details changes in the components of accumulated other comprehensive income (loss) ("AOCI"), net of taxes for Fiscal 2021, Fiscal 2020 and Fiscal 2019 (in millions): Foreign Currency Translation Income (Loss) (1) Net (Loss) Income on Derivatives (2) Other Comprehensive Income (Loss) Attributable to Capri Balance at April 1, 2018 $ 61 $ ( 10 ) $ 51 Other comprehensive (loss) income before reclassifications ( 134 ) 14 ( 120 ) Less: amounts reclassified from AOCI to earnings — ( 3 ) ( 3 ) Other comprehensive (loss) income, net of tax ( 134 ) 17 ( 117 ) Balance at March 30, 2019 ( 73 ) 7 ( 66 ) Other comprehensive income before reclassifications 145 5 150 Less: amounts reclassified from AOCI to earnings — 9 9 Other comprehensive income (loss), net of tax 145 ( 4 ) 141 Balance at March 28, 2020 72 3 75 Other comprehensive loss before reclassifications ( 15 ) ( 2 ) ( 17 ) Less: amounts reclassified from AOCI to earnings — 2 2 Other comprehensive loss, net of tax ( 15 ) ( 4 ) ( 19 ) Balance at March 27, 2021 $ 57 $ ( 1 ) $ 56 (1) Foreign currency translation losses for Fiscal 2021 primarily include a $ 199 million loss, net of taxes of $ 63 million, primarily relating to the Company’s net investment hedges, a net $ 189 million translation gain and a net loss of $ 8 million, on intra-entity transactions that are of a long-term investment nature. Foreign currency translation gains for Fiscal 2020 includes a $ 219 million gain, net of taxes of $ 45 million, relating to the Company's net investment hedges, a $ 60 million translation loss relating to the Jimmy Choo business, a $ 10 million translation loss relating to the Versace business and a net gain of $ 6 million, on intra-entity transactions that are of a long-term investment nature. (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) before reclassifications related to derivative instruments for Fiscal 2021 was immaterial. Other comprehensive income (loss) before reclassifications related to derivative instruments for Fiscal 2020 and Fiscal 2019 is net of a tax benefits of $ 0 million and $ 2 million, respectively. All tax effects were not material for the periods presented. 17. Share-Based Compensation The Company grants equity awards 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 which includes one stock option plan adopted in Fiscal 2008 (as amended and restated, the “2008 Plan”), and an Omnibus Incentive Plan adopted in the third fiscal quarter of Fiscal 2012 and amended and restated with shareholder approval in May 2015 and again in June 2020 (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 March 27, 2021, 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 restricted stock units ("RSUs"), and other equity awards, and authorizes a total issuance of up to 18,846,000 ordinary shares. At March 27, 2021, there were 4,998,829 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. 105 Table of Contents Share Options Share options are generally exercisable at the fair market value on the date of grant and vest on a pro-rata basis over a four year service period. The following table summarizes the share options activity during Fiscal 2021, and information about options outstanding at March 27, 2021: Number of Options Weighted Average Exercise price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (in millions) Outstanding at March 28, 2020 2,071,096 $ 50.66 Granted — $ — Exercised ( 446,564 ) $ 6.06 Canceled/forfeited ( 474,272 ) $ 61.73 Outstanding at March 27, 2021 1,150,260 $ 63.42 1.67 $ 4 Vested or expected to vest at March 27, 2021 1,150,260 $ 63.42 1.67 Vested and exercisable at March 27, 2021 1,014,945 $ 64.01 1.37 $ 4 There were 135,315 unvested options and 1,014,945 vested options outstanding at March 27, 2021. The total intrinsic value of options exercised during Fiscal 2021 was $ 10 million and immaterial during Fiscal 2020. The cash received from options exercised during Fiscal 2021 was $ 3 million and immaterial during Fiscal 2020. As of March 27, 2021, the remaining unrecognized share-based compensation expense for unvested share options was $ 1 million, which is expected to be recognized over the related weighted-average period of approximately 1.05 years. There were no options granted during Fiscal 2021 or Fiscal 2020. The weighted average grant date fair value for options granted during Fiscal 2019 was $ 24.49 . The following table represents assumptions used to estimate the fair value of options for the fiscal year ended March 30, 2019: March 30, 2019 Expected dividend yield 0.0 % Volatility factor 36.9 % Weighted average risk-free interest rate 2.8 % Expected life of option 4.85 years Restricted Awards The Company grants RSUs at the fair market value on the date of the grant. The expense related to RSUs is based on the closing market price of the Company’s shares on the date of grant and is recognized ratably over the vesting period, net of expected forfeitures. The Company grants two types of RSUs: time-based RSUs and performance-based RSUs. Time-based RSUs generally vest in full on the first anniversary of the date of grant for our independent directors, or in equal increments on each of the third or fourth anniversaries of the date of grant (unless the employee is retirement-eligible). Performance-based RSUs generally vest in full on the second or third anniversary of the date of grant, subject to the employee’s continued employment during the vesting period and only if certain pre-established cumulative performance targets are met. Expense related to performance-based RSUs is recognized ratably over the performance period, net of forfeitures, based on the probability of attainment of the related performance targets. The potential number of shares that may be earned ranges from 0 %, if the minimum level of performance is not attained, to 150 %, if the level of performance is at or above the predetermined maximum achievement level. 106 Table of Contents The following table summarizes the RSU activity during Fiscal 2021: Service-based Performance-based Number of Restricted Stock Units Weighted Average Grant Date Fair Value Number of Restricted Stock Units Weighted Average Grant Date Fair Value Unvested at March 28, 2020 4,311,683 $ 40.34 772,172 $ 49.13 Granted 2,349,594 $ 19.21 12,318 $ 39.43 Change due to performance conditions — $ — 43,661 $ 57.70 Vested ( 1,354,285 ) $ 41.46 ( 102,078 ) $ 34.68 Canceled/forfeited ( 411,475 ) $ 40.18 ( 144,414 ) $ 61.07 Unvested at March 27, 2021 4,895,517 $ 29.91 581,659 $ 49.17 The total fair value of service-based RSUs vested during Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $ 56 million, $ 56 million and $ 47 million, respectively. The total fair value of performance-based RSUs vested during Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $ 6 million, $ 3 million and $ 7 million, respectively. As of March 27, 2021, the remaining unrecognized share-based compensation expense for unvested service-based and performance-based RSU grants was $ 86 million and $ 4 million, respectively, which is expected to be recognized over the related weighted-average periods of approximately 2.32 years and 1.15 years, respectively. There were no restricted shares vested during Fiscal 2021 or Fiscal 2020. The total fair value of restricted shares vested was $ 4 million during Fiscal 2019. Share-Based Compensation Expense The following table summarizes compensation expense attributable to share-based compensation for Fiscal 2021, Fiscal 2020 and Fiscal 2019 (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Share-based compensation expense $ 70 $ 70 $ 60 Tax benefits related to share-based compensation expense $ 12 $ 7 $ 11 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 awards as of March 27, 2021 is $ 13 million. 107 Table of Contents 18. Taxes The Company is a United Kingdom tax resident and is incorporated in the British Virgin Islands. Capri’s subsidiaries are subject to taxation in the U.S. and various other foreign jurisdictions, which are aggregated in the “Non-U.S.” information captioned below. Income (loss) before provision for income taxes consisted of the following (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 U.S. $ ( 56 ) $ ( 28 ) $ 191 Non-U.S. 59 ( 187 ) 430 Total income (loss) before provision for income taxes $ 3 $ ( 215 ) $ 621 The provision for income taxes was as follows (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Current U.S. Federal $ 35 $ 4 (2) $ 82 (1) U.S. State 20 19 24 Non-U.S. 81 60 44 Total current 136 83 150 Deferred U.S. Federal ( 37 ) ( 22 ) ( 34 ) (1) U.S. State ( 4 ) ( 3 ) ( 4 ) Non-U.S. ( 29 ) ( 48 ) ( 33 ) Total deferred ( 70 ) ( 73 ) ( 71 ) Total provision for income taxes $ 66 $ 10 $ 79 (1) Includes a $ 25 million current tax provision and deferred tax benefit related to the U.S. Tax Act impact to business interest disallowance provisions. (2) Includes a $ 35 million current tax benefit due to a release of income tax reserves in the U.S. 108 Table of Contents The Company’s provision for income taxes for the years ended March 27, 2021, March 28, 2020 and March 30, 2019 was different from the amount computed by applying the statutory U.K. income tax rates to the underlying income (loss) from operations before income taxes as a result of the following (amounts in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Amount % (1) Amount % (1) Amount % (1) Provision for income taxes at the U.K. statutory tax rate $ 1 19.0 % $ ( 41 ) 19.0 % $ 118 19.0 % Effects of global financing arrangements ( 24 ) ( 953.4 ) % ( 41 ) 21.7 % (4) ( 50 ) ( 8.1 ) % Effect of changes in valuation allowances on deferred tax assets 24 955.7 % 67 ( 30.9 ) % (5) 11 2.8 % (3) Non-deductible goodwill impairment 18 700.2 % (6) 32 ( 15.1 ) % (6) — — % Differences in tax effects on foreign income 13 522.4 % ( 7 ) 1.2 % ( 15 ) ( 1.8 ) % (2) Liability for uncertain tax positions 11 414.2 % ( 12 ) 5.7 % 8 1.3 % Tax rate change impact on deferred items 9 351.3 % — — % — — % Share based compensation 6 247.7 % 9 ( 4.2 ) % ( 12 ) ( 2.6 ) % State and local income taxes, net of federal benefit 5 201.5 % 4 ( 1.9 ) % 6 0.9 % Withholding tax 4 165.0 % 3 ( 1.6 ) % 3 0.6 % Transaction cost — — % — — % 9 1.5 % Other ( 1 ) ( 33.1 ) % (7) ( 4 ) 1.4 % 1 ( 0.9 ) % $ 66 2,590.5 % $ 10 ( 4.7 ) % $ 79 12.7 % (1) Tax rates are calculated using unrounded numbers. (2) Mainly attributable to the United States statutory federal income tax rate change from a blended rate for Fiscal 2018 of 31.54 % to 21 % in Fiscal 2019. (3) Includes an $ 11 million provision related to a United Kingdom capital loss. (4) Mainly attributable to pre-tax loss position in Fiscal 2020. (5) Mainly attributable to valuation allowances established on a portion of non-U.S. deferred tax assets. (6) Attributable to goodwill impairment charges related to Jimmy Choo reporting units in Fiscal 2021 and Fiscal 2020. (7) Primarily relates to individually immaterial U.S. and foreign permanent adjustments. 109 Table of Contents Significant components of the Company’s deferred tax assets (liabilities) consist of the following (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 Deferred tax assets Operating lease liabilities 501 521 Net operating loss carryforwards 139 109 Depreciation 54 33 Sales allowances 50 37 Accrued Interest 44 40 Derivative Financial Instruments 32 — Inventories 25 34 Stock compensation 12 13 Payroll related accruals 3 3 Other 42 — Total deferred tax assets 902 790 Valuation allowance ( 159 ) ( 134 ) Net deferred tax assets 743 656 Deferred tax liabilities Goodwill and intangibles ( 495 ) ( 481 ) Operating lease right-of-use-assets ( 367 ) ( 401 ) Other — ( 14 ) Total deferred tax liabilities ( 862 ) ( 896 ) Net deferred tax liabilities $ ( 119 ) $ ( 240 ) The Company maintains valuation allowances on deferred tax assets applicable to subsidiaries in jurisdictions for which separate income tax returns are filed and where realization of the related deferred tax assets from future profitable operations is not reasonably assured. The valuation allowance increased $ 24 million, $ 94 million and $ 26 million in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively. In certain jurisdictions, the Company increased the valuation allowance by $ 56 million, $ 113 million and $ 29 million and released valuation allowances of $ 32 million, $ 19 million and $ 3 million in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively. At March 27, 2021, the Company had non-U.S. and U.S. net operating loss carryforwards of $ 667 million, a portion of which will begin to expire in Fiscal 2022. As of March 27, 2021 and March 28, 2020, the Company had liabilities related to its uncertain tax positions, including accrued interest, of $ 121 million and $ 109 million, respectively, which are included in other long-term liabilities in the Company’s consolidated balance sheets. 110 Table of Contents The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $ 92 million, $ 82 million and $ 112 million as of March 27, 2021, March 28, 2020 and March 30, 2019, respectively. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding accrued interest, for Fiscal 2021, Fiscal 2020 and Fiscal 2019, are presented below (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Unrecognized tax benefits beginning balance $ 99 $ 192 $ 101 Additions related to prior period tax positions 12 29 81 (1) Additions related to current period tax positions 9 4 21 Decreases in prior period positions due to lapses in statute of limitations ( 4 ) ( 3 ) ( 1 ) Decreases related to prior period tax positions ( 3 ) ( 99 ) (2) ( 3 ) Decreases related to audit settlements ( 6 ) ( 24 ) (3) ( 7 ) Unrecognized tax benefits ending balance $ 107 $ 99 $ 192 (1) Primarily relates to the Versace acquisition. (2) Primarily relates to releases of North American and European tax reserves. (3) Primarily relates to the effective settlement of a U.S. audit. The Company classifies interest and penalties related to unrecognized tax benefits as components of the provision for income taxes. Interest expense recognized in the consolidated statements of operations and comprehensive (loss) income for Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $ 15 million, $ 11 million and $ 11 million, respectively. The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. The Company anticipates that the balance of gross unrecognized tax benefits, excluding interest and penalties, will be reduced by $ 31 million during the next 12 months, primarily due to the anticipated settlement of tax examinations as well as statute of limitation expirations. However, the outcomes and timing of such events are highly uncertain and changes in the occurrence, expected outcomes and timing of such events could cause the Company’s current estimate to change materially in the future. The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. Most examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through Fiscal 2015 (March 28, 2015). Prior to the enactment of the Tax Cuts and Jobs Act, the Company's undistributed foreign earnings were considered permanently reinvested and, as such, United States federal and state income taxes were not previously recorded on these earnings. As a result of the Tax Act, substantially all of the Company’s earnings in foreign subsidiaries generated prior to the enactment of the Tax Act were deemed to have been repatriated. It remains the Company's intent to either reinvest indefinitely substantially all of its foreign earnings outside of the United States or repatriate them tax neutrally. However, if future earnings are repatriated, the potential exists that the Company may be required to accrue and pay additional taxes, including any applicable foreign withholding tax and income taxes. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. Cares Act On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act require the Company to make significant judgments and estimates in the interpretation of the law and in the calculation of the provision for income taxes. However, additional guidance may be issued by the Internal Revenue Service (“IRS”), the Department of the Treasury or other governing body that may significantly differ from our interpretation of the law, which may result in a material effect on our business, cash flow, results of operations, or financial conditions. 111 Table of Contents 19. Retirement Plans The Company maintains defined contribution plans for employees, who generally become eligible to participate after three months of service. Features of these plans allow participants to contribute to a plan a percentage of their compensation, up to statutory limits depending upon the country in which a plan operates, and provide for mandatory and/or discretionary matching contributions by the Company, which vary by country. During Fiscal 2021, Fiscal 2020, and Fiscal 2019, the Company recognized expenses of approximately $ 20 million, $ 12 million and $ 14 million, respectively, related to these retirement plans. 20. Segment Information The Company operates its business through three operating segments—Versace, Jimmy Choo and Michael Kors, which are based on its business activities and organization. The reportable segments are segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources, as well as in assessing performance. The primary key performance indicators are revenue and operating income for each segment. The Company’s reportable segments represent components of the business that offer similar merchandise, customer experience and sales/marketing strategies. The Company’s three reportable segments are as follows: • Versace — segment includes revenue generated 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 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, eyewear and home furnishings. • 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 and eyewear. • 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 consumers 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. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear. In addition to these reportable segments, the Company has certain corporate costs that are not directly attributable to its brands and, therefore, are not allocated to its segments. Such costs primarily include certain administrative, corporate occupancy, shared service 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. The segment structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses performance. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. 112 Table of Contents The following table presents the key performance information of the Company’s reportable segments (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Total revenue: Versace $ 718 $ 843 $ 137 Jimmy Choo 418 555 590 Michael Kors 2,924 4,153 4,511 Total revenue $ 4,060 $ 5,551 $ 5,238 Income (loss) from operations: Versace $ 21 $ ( 8 ) $ ( 11 ) Jimmy Choo ( 55 ) ( 13 ) 20 Michael Kors 595 850 964 Total segment income from operations 561 829 973 Less: Corporate expenses ( 152 ) ( 152 ) ( 93 ) Impairment of assets (1) ( 316 ) ( 708 ) ( 21 ) COVID-19 related charges (2) ( 42 ) ( 119 ) — Restructuring and other charges ( 32 ) ( 42 ) ( 124 ) Total income (loss) from operations $ 19 $ ( 192 ) $ 735 (1) Impairment of assets during Fiscal 2021 includes $ 191 million, $ 91 million and $ 34 million of impairment charges related to the Jimmy Choo, Michael Kors and Versace reportable segments, respectively. Impairment of assets during Fiscal 2020 includes $ 434 million, $ 187 million and $ 87 million of impairment charges related to the Jimmy Choo, Michael Kors and Versace reportable segments, respectively. The impairment charges during Fiscal 2019 were primarily related to the Michael Kors reportable segment. (2) COVID-19 related charges during Fiscal 2021 primarily include net incremental inventory reserves and severance expense of $ 10 million and $ 24 million, respectively, recorded within costs of goods sold and selling, general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. COVID-19 related charges during Fiscal 2020, primarily include additional inventory reserves and credit losses of $ 92 million and $ 25 million, respectively, recorded within costs of goods sold and selling, general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. Depreciation and amortization expense for each segment are as follows (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Depreciation and amortization (1) : Versace $ 54 $ 61 $ 9 Jimmy Choo 31 33 34 Michael Kors 127 155 182 Total depreciation and amortization $ 212 $ 249 $ 225 (1) Excluded from the above table are impairment charges, which are detailed in the below table and in Note 8, Note 9 and Note 14. See Note 9 to the accompanying consolidated financial statements for the Company’s goodwill by reportable segment. 113 Table of Contents Total revenue (based on country of origin) and long-lived assets by geographic location are as follows (in millions): Fiscal Years Ended March 27, 2021 March 28, 2020 March 30, 2019 Revenue: The Americas (U.S., Canada and Latin America) (1) $ 2,172 $ 3,115 $ 3,182 EMEA 1,029 1,523 1,279 Asia 859 913 777 Total revenue $ 4,060 $ 5,551 $ 5,238 As of March 27, 2021 March 28, 2020 March 30, 2019 Long-lived assets: (2) The Americas (U.S., Canada and Latin America) (1) $ 1,001 $ 1,132 $ 319 EMEA 2,384 2,432 2,123 Asia 596 608 466 Total long-lived assets: $ 3,981 $ 4,172 $ 2,908 (1) Net revenues earned in the U.S. during Fiscal 2021, Fiscal 2020, and Fiscal 2019 were $ 2.016 billion, $ 2.898 billion and $ 2.972 billion, respectively. Long-lived assets located in the U.S. as of March 27, 2021 and March 28, 2020 were $ 942 million and $ 1.060 billion, respectively. (2) Long-lived assets as of March 27, 2021 and March 28, 2020 include property and equipment, net, intangible assets, net and operating lease right-of-use assets resulting from the Company’s adoption of ASU 2016-02. See Note 4 for additional information. As of March 27, 2021, the Company's total long-lived assets on its consolidated balance sheet were $ 3.981 billion, of which, $ 1.729 billion related to Versace, $ 1.515 billion related to Michael Kors and $ 737 million related to Jimmy Choo. Total revenue by major product category are as follows (in millions): Fiscal Years Ended March 27, 2021 % of Total March 28, 2020 % of Total March 30, 2019 % of Total Accessories $ 2,158 53.2 % $ 2,933 52.8 % $ 3,139 59.9 % Footwear 796 19.6 % 1,100 19.8 % 1,023 19.5 % Apparel 720 17.7 % 1,069 19.3 % 698 13.3 % Licensed product 185 4.6 % 222 4.0 % 218 4.2 % Licensing revenue 155 3.8 % 201 3.6 % 156 3.0 % Other 46 1.1 % 26 0.5 % 4 0.1 % Total revenue $ 4,060 $ 5,551 $ 5,238 21. Non-cash Investing Activities Significant non-cash investing activities for Fiscal 2019 included non-cash allocations of the fair values of the net assets acquired in connection with the Company’s acquisition of Versace. In addition, non-cash investing activities for Fiscal 2019 included an investment of 2.4 million of the Company’s ordinary shares made by the Versace family at acquisition date, which was valued at $ 91 million. See Note 5 for additional information. There were no other significant non-cash investing or financing activities during the fiscal periods presented. 114 Table of Contents 22. Subsequent Events Termination of 364 Day Facility and Reinstatement of Leverage Ratio Covenant As noted in Note 12, on June 25, 2020, the Company entered into an amendment (the "Amendment") to its third amended and restated senior secured credit facility with among others, JPMorgan Chase Bank, N.A., as administrative agent, to, among other things, add a $ 230 million revolving line of credit (" 364 Day Facility") that matures on June 24, 2021. On May 20, 2021, the Company determined it no longer desires to maintain this additional line of credit and consequently delivered a notice to the administrative agent terminating the 364 Day Facility, and the 364 Day Facility terminated on May 25, 2021. The remainder of the 2018 Credit Facility remains in full force and effect. As previously disclosed, the Amendment, among other things, also temporarily suspended the quarterly maximum leverage ratio covenant and imposed a minimum liquidity test during the period from June 25, 2020 until the earlier of (x) the date on which the Company delivers its financial statements for the fiscal quarter ending June 26, 2021 and (y) the date on which the Company certifies that its net leverage ratio as of the last day of the most recently ended fiscal quarter was no greater than 4.00 to 1.00 (the “Applicable Period”). During the Applicable Period, applicable margins and commitment fees under the Credit Facility are increased and certain covenant baskets for restricted payments, the incurrence of indebtedness, acquisitions and other investments made by the Company are more restrictive. On May 26, 2021 (the “Election Date”), the Company delivered to the Administrative Agent the certificate required to terminate the Applicable Period. Effective as of the Election Date, the Company will be required to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.00, and the applicable margins, commitment fees and covenant baskets will revert to the levels in effect prior to the effective date of the Amendment. Share Repurchase Authorization The Company also announced that its previously suspended share-repurchase program will be reinstated. The availability under this program remains at $ 400 million. Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy, and other relevant factors. The program may be suspended or discontinued at any time. Net Investment Hedges During the first quarter of Fiscal 2022, the Company restructured approximately $ 2.9 billion of its net investment hedges by terminating these hedges and entered into multiple fixed-to-fixed cross currency swap agreements with an aggregate notional amount of approximately $ 2.9 billion to hedge the Company's net investment 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. 115