What changed in this filing

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Item 1. Financial Statements

2021-07-30 compared with 2021-02-03 · 239 added, 353 removed, 520 unchanged (53% of the section changed)

35 unchanged sentences

650,000,000 shares authorized;

218,624,581 shares issued and 150,682,036 outstanding at December 26, 2020;

220,973,560 shares issued and 151,942,484 outstanding at June 26, 2021;

219,222,937 shares issued and 151,280,011 outstanding at March 27, 2021

Treasury shares, at cost ( 67,942,545 shares at December 26, 2020 and 67,894,398 shares at March 28, 2020)

Treasury shares, at cost ( 69,031,076 shares at June 26, 2021 and 67,942,926 shares at March 27, 2021)

( 3,385 ) ( 3,326 )

8 unchanged sentences

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In millions, except share and per share data)

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Three Months Ended

2021 June 27,

Total revenue $ 1,253 $ 451

Cost of goods sold 397 149

848 932 1,860 2,640

Selling, general and administrative expenses 545 402

Depreciation and amortization 50 54

Impairment of assets 90 19 110 220

Restructuring and other charges 3 8

Total operating expenses 598 464

Income from operations 167 205 158 344

Income (loss) from operations 258 ( 162 )

Other income, net — ( 1 )

Interest expense, net 1 17

Foreign currency (gain) loss ( 13 ) ( 2 ) ( 16 ) 4

Income before provision for income taxes 173 205 139 325

(Benefit from) provision for income taxes ( 5 ) ( 4 ) 20 ( 2 )

Net income 178 209 119 327

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

Net income attributable to Capri $ 179 $ 210 $ 121 $ 328

Foreign currency loss (gain) 1 ( 3 )

Income (loss) before provision for income taxes 256 ( 175 )

Provision for income taxes 37 5

Net income (loss) 219 ( 180 )

Net income attributable to noncontrolling interest — —

Net income (loss) attributable to Capri $ 219 $ ( 180 )

Weighted average ordinary shares outstanding:

1 unchanged sentence

Diluted 154,890,483 149,556,310

Net income per ordinary share attributable to Capri:

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

Basic $ 1.45 $ ( 1.21 )

Diluted $ 1.41 $ ( 1.21 )

Statements of Comprehensive Income:

Net income $ 178 $ 209 $ 119 $ 327

Statements of Comprehensive Income (Loss):

Net income (loss) $ 219 $ ( 180 )

Foreign currency translation adjustments 90 ( 3 )

Net loss on derivatives — ( 1 )

Comprehensive income 144 283 135 364

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

Comprehensive income attributable to Capri $ 145 $ 284 $ 137 $ 365

Comprehensive income (loss) 309 ( 184 )

Foreign currency translation adjustments attributable to noncontrolling interest ( 1 ) —

Comprehensive income (loss) attributable to Capri $ 310 $ ( 184 )

See accompanying notes to consolidated financial statements.

5 unchanged sentences

Comprehensive

Income (Loss) Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

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

Net income (loss) — — — — — — 179 179 ( 1 ) 178

Other comprehensive loss — — — — — ( 34 ) — ( 34 ) — ( 34 )

Total comprehensive income (loss) — — — — — — — 145 ( 1 ) 144

Vesting of restricted awards, net of forfeitures

41 — — — — — — — — —

Exercise of employee share options

21 — — — — — — — — —

Share based compensation expense — — 12 — — — — 12 — 12

Repurchase of common stock — — — ( 1 ) — — — — — —

Balance at December 26, 2020 218,625 $ — $ 1,138 ( 67,943 ) $ ( 3,326 ) $ 91 $ 4,453 $ 2,356 $ ( 1 ) $ 2,355

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive

Income Retained

2 unchanged sentences

Balance at March 27, 2021 219,223 $ — $ 1,158 ( 67,943 ) $ ( 3,326 ) $ 56 $ 4,270 $ 2,158 $ ( 1 ) $ 2,157

Net income (loss) — — — — — — 121 121 ( 2 ) 119

Other comprehensive income

— — — — — 16 — 16 — 16

Total comprehensive income (loss) — — — — — — — 137 ( 2 ) 135

Vesting of restricted awards, net of forfeitures

1,037 — — — — — — — — —

Exercise of employee share options

268 — — — — — — — — —

Share based compensation expense — — 53 — — — — 53 — 53

Repurchase of common stock — — — ( 49 ) ( 1 ) — — ( 1 ) — ( 1 )

Balance at December 26, 2020 218,625 $ — $ 1,138 ( 67,943 ) $ ( 3,326 ) $ 91 $ 4,453 $ 2,356 $ ( 1 ) $ 2,355

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive (Loss) Income Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

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

Net income (loss) — — — — — — 210 210 ( 1 ) 209

Other comprehensive income — — — — — 74 — 74 — 74

Net income — — — — — — 219 219 — 219

Other comprehensive income (loss) — — — — — 91 — 91 ( 1 ) 90

Total comprehensive income (loss) — — — — — — — 310 ( 1 ) 309

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Repurchase of common stock — — — ( 1,088 ) ( 59 ) — — ( 59 ) — ( 59 )

Adjustment of redeemable non-controlling interests to redemption value — — 4 — — — — 4 — 4

Balance at December 28, 2019 216,907 $ — $ 1,080 ( 67,894 ) $ ( 3,325 ) $ ( 29 ) $ 4,883 $ 2,609 $ 2 $ 2,611

Balance at June 26, 2021 220,974 $ — $ 1,201 ( 69,031 ) $ ( 3,385 ) $ 147 $ 4,489 $ 2,452 $ ( 2 ) $ 2,450

Ordinary Shares Additional

Capital Treasury Shares Accumulated

Comprehensive (Loss) Income Retained

Capital Treasury Shares Accumulated Other Comprehensive Income (Loss) Retained

Earnings Total Equity of Capri Non-controlling Interests Total Equity

Shares Amounts Shares Amounts

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 standards ( ASC 842 )

— — — — — — ( 152 ) ( 152 ) — ( 152 )

Balance as of March 31, 2019

Balance at March 28, 2020

217,320 $ — $ 1,085 ( 67,894 ) $ ( 3,325 ) $ 75 $ 4,332 $ 2,167 $ 1 $ 2,168

Net income (loss) — — — — — — 328 328 ( 1 ) 327

Other comprehensive income — — — — — 37 — 37 — 37

Total comprehensive income (loss) — — — — — — — 365 ( 1 ) 364

Net loss — — — — — — ( 180 ) ( 180 ) — ( 180 )

Other comprehensive loss — — — — — ( 4 ) — ( 4 ) — ( 4 )

Total comprehensive loss — — — — — — — ( 184 ) — ( 184 )

Vesting of restricted awards, net of forfeitures

953 — — — — — — — — —

Exercise of employee share options

5 — — — — — — — — —

Share based compensation expense — — 24 — — — — 24 — 24

Repurchase of common stock — — — ( 38 ) ( 1 ) — — ( 1 ) — ( 1 )

Adjustment of redeemable non-controlling interests to redemption value — — 4 — — — — 4 — 4

Balance at December 28, 2019 216,907 $ — $ 1,080 ( 67,894 ) $ ( 3,325 ) $ ( 29 ) $ 4,883 $ 2,609 $ 2 $ 2,611

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

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In millions)

Nine Months Ended

2020 December 28,

Three Months Ended

2021 June 27,

Cash flows from operating activities

Net income $ 119 $ 327

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

Net income (loss) $ 219 $ ( 180 )

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

Depreciation and amortization 50 54

1 unchanged sentence

Deferred income taxes 22 —

Impairment of assets 113 220

Changes to lease related balances, net ( 36 ) ( 24 )

Tax deficit on exercise of share options 5 2

Tax (benefit) deficit on exercise of share options ( 3 ) 5

Amortization of deferred financing costs 1 1

Foreign currency (gains) losses ( 16 ) 4

Other non-cash charges ( 5 ) 1

Foreign currency gains ( 12 ) ( 3 )

Credit losses ( 1 ) ( 6 )

Change in assets and liabilities:

8 unchanged sentences

Capital expenditures ( 23 ) ( 32 )

Cash paid for asset acquisitions ( 12 ) ( 1 )

Settlement of net investment hedges — 32

Net cash used in investing activities ( 23 ) ( 32 )

4 unchanged sentences

Repurchase of common stock ( 59 ) ( 1 )

Exercise of employee share options 7 —

Other financing activities 8 —

Net cash used in financing activities ( 55 ) ( 420 )

Effect of exchange rate changes on cash and cash equivalents ( 8 ) —

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

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2 ) —

Net increase (decrease) in cash, cash equivalents and restricted cash 124 ( 385 )

Beginning of period 234 592

2 unchanged sentences

Cash paid for interest $ 17 $ 20

Net cash (received) paid for income taxes $ ( 33 ) $ 75

Net cash paid (received) for income taxes $ 28 $ ( 6 )

Supplemental disclosure of non-cash investing and financing activities

4 unchanged sentences

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.

Capri Holdings Limited ("Capri," and together with its subsidiaries, the "Company") was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002.

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, ready-to-wear and footwear bearing the Versace, Jimmy Choo and Michael Kors tradenames and related trademarks and logos.

The Company operates in three reportable segments:

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

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

The interim consolidated financial statements as of June 26, 2021 and for the three months ended June 26, 2021 and June 27, 2020 are unaudited.

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

2 unchanged sentences

The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S.

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March 28, 2020, as filed with the Securities and Exchange Commission on July 8, 2020, in the Company’s Annual Report on Form 10-K.

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March 27, 2021, as filed with the Securities and Exchange Commission on May 26, 2021, in the Company’s Annual Report on Form 10-K.

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

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

The results for the three and nine months ended December 26, 2020 and December 28, 2019 are based on 13-week and 39-week periods, respectively.

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

The results for the three months ended June 26, 2021 and June 27, 2020 are based on 13-week periods.

The Company’s Fiscal Year 2022 is a 53-week period ending April 2, 2022.

Summary of Significant Accounting Policies

3 unchanged sentences

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

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

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.

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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.

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 income (loss).

During the three months ended June 26, 2021 and June 27, 2020, the Company recognized $ 4 million and $ 14 million, respectively, 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 June 26, 2021 and March 27, 2021 are credit card receivables of $ 27 million and $ 25 million, respectively, which generally settle within two to three business days.

A reconciliation of cash, cash equivalents and restricted cash as of June 26, 2021 and March 27, 2021 from the consolidated balance sheets to the consolidated statements of cash flows is as follows (in millions):

2021 March 27,

Reconciliation of cash, cash equivalents and restricted cash

Cash and cash equivalents $ 356 $ 232

Restricted cash included within prepaid expenses and other current assets 2 2

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 358 $ 234

Inventories, net

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 was $ 25 million and $ 27 million, respectively, as of December 26, 2020 and March 28, 2020.

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

The combined total of raw materials and work in process inventory recorded on the Company’s consolidated balance sheets was $ 25 million and $ 28 million as of June 26, 2021 and March 27, 2021, respectively.

The net realizable value of the Company’s inventory as of June 26, 2021 and March 27, 2021 includes the adverse impacts associated with 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.

12 unchanged sentences

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

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

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

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.

8 unchanged sentences

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 on the Company’s consolidated balance sheets.

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

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

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

1 unchanged sentence

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

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

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

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.

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 and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

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.

Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through May 2025.

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

4 unchanged sentences

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.

Certain leases include one or more renewal options.

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.

10 unchanged sentences

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

Nine Months Ended Nine Months Ended

December 26, 2020 December 28, 2019

Three Months Ended Three Months Ended

June 26, 2021 June 27, 2020

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

Operating cash flows used in operating leases (1)

(1) Operating cash flows used in operating leases for the nine months ended December 26, 2020 exclude $ 41 million of rent payments that have been deferred due to the COVID-19 pandemic.

During the three and nine months ended December 26, 2020, the Company recorded sublease income of $ 1 million and $ 4 million, respectively, and $ 2 million and $ 5 million, respectively, for the three and nine months ended December 28, 2019, within selling, general and administrative expenses.

During the three and nine months ended December 26, 2020, the Company recorded $ 13 million and $ 37 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as a reduction to variable lease expense within selling, general and administrative expenses.

Net Income per Share

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

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

(1) Operating cash flows used in operating leases for the three months ended June 26, 2021 and June 27, 2020 excluded $ 4 million and $ 85 million, respectively, of rent payments that have been deferred due to the COVID-19 pandemic.

During the three months ended June 26, 2021 and June 27, 2020, the Company recorded sublease income of $ 2 million during both periods within restructuring and other charges for stores relating to our restructuring plan and selling, general and administrative expenses for all other locations.

During the three months ended June 26, 2021 and June 27, 2020, the Company recorded $ 7 million and $ 15 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as a reduction to variable lease expense within selling, general and administrative expenses.

Net Income (Loss) per Share

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

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

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

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

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Net income attributable to Capri $ 179 $ 210 $ 121 $ 328

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

Three Months Ended

2021 June 27,

Net income (loss) attributable to Capri $ 219 $ ( 180 )

Basic weighted average shares 151,312,103 149,556,310

1 unchanged sentence

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

1,296,805 1,328,176 1,180,845 1,195,513

Diluted weighted average shares 154,890,483 149,556,310

Basic net income per share (1)

Basic net income (loss) per share (1)

$ 1.45 $ ( 1.21 )

Diluted net income per share (1)

Diluted net income (loss) per share (1)

$ 1.41 $ ( 1.21 )

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

During the three and nine months ended December 26, 2020, share equivalents of 4,269,343 shares and 4,540,029 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect.

Share equivalents of 2,264,959 shares and 3,487,241 shares, respectively, have been excluded from the above calculations for the three and nine months ended December 28, 2019.

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

During the three months ended June 26, 2021, share equivalents of 610,684 shares have been excluded from the above calculations due to their anti-dilutive effect.

Share equivalents of 5,388,905 shares have been excluded from the above calculations for the three months ended June 27, 2020.

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

See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for a complete disclosure of the Company’s significant accounting policies.

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 collectibility.

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 has 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.

The Company has considered all new accounting pronouncements and, other than the recent pronouncement 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:

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.

Revenue Recognition

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

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

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

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

1 unchanged sentence

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

The contract liability related to gift cards, net of estimated “breakage”, of $ 13 million and $ 11 million as of December 26, 2020 and March 28, 2020, respectively, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

The contract liability related to gift cards, net of estimated “breakage”, of $ 12 million and $ 12 million as of June 26, 2021 and March 27, 2021, respectively, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

Loyalty Program .

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

The contract liability, net of an estimated “breakage”, of $ 2 million as of both December 26, 2020 and March 28, 2020, is recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheet and is expected to be recognized within the next 12 months.

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

1 unchanged sentence

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 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, certain parts of Asia and Australia.

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.

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

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

As of June 26, 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

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Sales Returns

The refund liability recorded as of December 26, 2020 and March 28, 2020 was $ 55 million and $ 37 million, respectively, and the related asset for the right to recover returned product as of December 26, 2020 and March 28, 2020 was $ 17 million and $ 14 million, respectively.

The refund liability recorded as of June 26, 2021 and March 27, 2021 was $ 48 million and $ 46 million, respectively, and the related asset for the right to recover returned product as of June 26, 2021 and March 27, 2021 was $ 14 million and $ 14 million, respectively.

Contract Balances

Total contract liabilities were $ 16 million and $ 22 million as of December 26, 2020 and March 28, 2020, respectively.

For the three and nine months ended December 26, 2020, the Company recognized $ 2 million and $ 7 million, respectively, in revenue which related to contract liabilities that existed at March 28, 2020.

For the three and nine months ended December 28, 2019, the Company recognized $ 2 million and $ 19 million, respectively, in revenue which related to contract liabilities that existed at March 30, 2019.

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

Total contract liabilities were $ 19 million and $ 18 million as of June 26, 2021 and March 27, 2021, respectively.

For the three months ended June 26, 2021, the Company recognized $ 6 million in revenue which related to contract liabilities that existed at March 27, 2021.

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

There were no material contract assets recorded as of June 26, 2021 and March 27, 2021.

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

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Three Months Ended

2021 June 27,

Versace revenue - the Americas $ 87 $ 15

2 unchanged sentences

Total Versace

195 195 483 630

Jimmy Choo revenue - the Americas 38 6

6 unchanged sentences

Total Michael Kors

986 1,211 2,086 3,281

Total revenue - the Americas 715 177

9 unchanged sentences

allowances ( 53 ) ( 59 )

(1) As of December 26, 2020 and March 28, 2020, $ 75 million and $ 80 million, respectively, of trade receivables were insured.

(1) As of June 26, 2021 and March 27, 2021, $ 72 million and $ 81 million, respectively, of trade receivables were insured.

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

3 unchanged sentences

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 collectibility based on an evaluation of historic and anticipated trends, the financial condition of the Company’s customers and the impact of general economic conditions.

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

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

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

Allowance for credit losses was $ 29 million and $ 39 million as of December 26, 2020 and March 28, 2020, respectively, including the impact related to COVID-19.

The Company had a credit loss of $( 3 ) million and $( 5 ) million, respectively, for the three and nine months ended December 26, 2020.

The Company had bad debt expense of $ 0 million and $ 3 million for the three and nine months ended December 28, 2019, respectively.

Allowance for credit losses was $ 22 million and $ 25 million as of June 26, 2021 and March 27, 2021, respectively, including the impact related to COVID-19.

The Company had credit losses of $( 1 ) million and $( 6 ) million for the three months ended June 26, 2021 and June 27, 2020, respectively.

Property and Equipment, net

4 unchanged sentences

Furniture and fixtures 350 350

In-store shops 239 236

Equipment 140 139

In-store shops 53 53

Building 52 51

1 unchanged sentence

Construction-in-progress 49 47

Depreciation and amortization of property and equipment for the three months ended December 26, 2020 and December 28, 2019 was $ 41 million and $ 50 million, respectively, and was $ 125 million and $ 149 million, respectively, for the nine months ended December 26, 2020 and December 28, 2019.

During the three and nine months ended December 26, 2020, the Company recorded $ 13 million and $ 15 million in property and equipment impairment charges, respectively.

During the three and nine months ended December 28, 2019, the Company recorded property and equipment impairment charges of $ 10 million and $ 33 million, respectively, primarily related to Michael Kors retail store locations and determining asset groups for the Company’s premier store locations at an individual store level (see Note 11 for additional information).

Depreciation and amortization of property and equipment for the three months ended June 26, 2021 and June 27, 2020 was $ 38 million and $ 43 million, respectively.

During the three months ended June 26, 2021 and June 27, 2020, the Company did no t record any property and equipment impairment charges.

Intangible Assets and Goodwill

13 unchanged sentences

$ 1,512 $ 1,498

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

(1) Includes accumulated impairment of $ 249 million as of June 26, 2021 and March 27, 2021.

The change in the carrying value since March 27, 2021 reflects the impact of foreign currency translation.

(2) The change in the carrying value since March 27, 2021 reflects the impact of foreign currency translation.

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

(3) Includes accumulated impairment of $ 265 million related to the Jimmy Choo reporting units as of June 26, 2021 and March 27, 2021.

The change in the carrying value since March 27, 2021 reflects the impact of foreign currency translation.

Amortization expense for the Company’s definite-lived intangible assets for the three months ended December 26, 2020 and December 28, 2019 was $ 12 million and $ 13 million, respectively, and was $ 35 million and $ 39 million for the nine months ended December 26, 2020 and December 28, 2019, respectively.

Amortization expense for the Company’s definite-lived intangible assets for the three months ended June 26, 2021 and June 27, 2020 was $ 12 million and $ 11 million, respectively.

Current Assets and Current Liabilities

4 unchanged sentences

Prepaid contracts 11 11

Prepaid insurance 5 2

Interest receivable related to net investment hedges 7 12

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Accrued capital expenditures 15 17

Accrued litigation 13 10

Gift cards and retail store credits 13 11

Professional services 12 13

Gift cards and retail store credits 12 12

Accrued litigation 12 12

Accrued purchases and samples 11 8

Accrued advertising and marketing 7 11

Accrued interest 5 10

Restructuring liability 5 9

Derivative liability 7 —

Charitable donations (2)

(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 as of June 26, 2021 and March 27, 2021.

Restructuring and Other Charges

Capri Retail Store Optimization Program

As previously announced, the Company intends to close approximately 170 of its retail stores over the next two fiscal years (Fiscal 2021 and Fiscal 2022) in connection with its Capri Retail Store Optimization Program in order to improve the profitability of its retail store fleet.

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.

During the nine months ended December 26, 2020, the Company closed 66 of its retail stores which have been incorporated into the Capri Retail Store Optimization Program.

Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program during the three and nine months ended December 26, 2020 were $( 4 ) million and $ 1 million, respectively.

During the three months ended June 26, 2021, the Company closed 10 of its retail stores which have been incorporated into the Capri Retail Store Optimization Program.

Net restructuring charges (gains) recorded in connection with the Capri Retail Store Optimization Program during the three months ended June 26, 2021 and June 27, 2020 were $( 3 ) million and $ 3 million, respectively.

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

3 unchanged sentences

Payments — ( 1 ) ( 1 )

Balance at December 26, 2020 $ — $ 2 $ 2

(1) Excludes a net credit of $ 9 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 the nine months ended December 26, 2020.

Michael Kors Retail Fleet Optimization Plan

During the three and nine months ended December 28, 2019, the Company incurred charges of $ 5 million and $ 6 million, respectively, relating to the Michael Kors Retail Fleet Optimization Plan, which was completed during the fourth quarter of Fiscal 2020.

Balance at June 26, 2021 $ — $ 2 $ 2

(1) Excludes a net credit of $ 3 million related to gains on certain lease terminations partially offset by store operating costs for previously closed stores during the three months ended June 26, 2021.

Other Restructuring Charges

In addition to the restructuring charges related to the Capri Retail Store Optimization Program, the Company incurred charges of $ 2 million during the three and nine months ended December 26, 2020, respectively, primarily relating to closures of corporate locations.

The Company incurred $ 2 million and $ 5 million of restructuring charges related to the Michael Kors Retail Fleet Optimization Plan, during the three and nine months ended December 28, 2019, respectively, primarily consisting of lease-related costs.

During the three and nine months ended December 26, 2020, the Company recorded costs of $ 3 million and $ 15 million, respectively, primarily related to equity awards associated with the acquisition of Versace.

During the three months ended December 28, 2019, the Company recorded costs of $ 8 million, primarily related to equity awards associated with the acquisition of Versace.

During the nine months ended December 28, 2019, the Company recorded costs of $ 26 million, which included $ 18 million, primarily related to equity awards associated with the acquisition of Versace, and $ 8 million, primarily related to equity awards associated with the acquisition of Jimmy Choo.

In addition to the restructuring charges related to the Capri Retail Store Optimization Program, the Company incurred charges of $ 1 million during the three months ended June 26, 2021, primarily relating to closures of corporate locations.

There were no charges for the three months ended June 27, 2020.

During the three months ended June 26, 2021 and June 27, 2020, the Company recorded costs of $ 5 million for both periods, primarily related to equity awards associated with the acquisition of Versace.

Debt Obligations

3 unchanged sentences

Senior Notes due 2024 450 450

Revolving Credit Facilities 65 720

Total debt 1,340 1,350

6 unchanged sentences

Senior Secured Revolving Credit Facility

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

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

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

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.

When this financial covenant is reinstated, 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.

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.

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

As of December 26, 2020 the Company had no borrowings outstanding under the 2018 Revolving Credit Facility as a result of paying off the remaining borrowings during the period and $ 681 million as of March 28, 2020, which were recorded within long-term debt in its consolidated balance sheets.

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

At December 26, 2020, the amount available for future borrowings under the 2018 Revolving Credit Facility and the 364 Day Facility were $ 978 million and $ 230 million, respectively.

As of December 26, 2020 and March 28, 2020, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was $ 890 million and $ 1.010 billion, respectively, of which $ 97 million and $ 128 million, respectively, was recorded within short-term debt and $ 793 million and $ 882 million, respectively, was recorded within long-term debt in its consolidated balance sheets.

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.

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 (as amended, the “2018 Credit Facility”), with, among others, JPMorgan Chase Bank, N.A., as administrative agent.

Pursuant to the Second Amendment, the financial covenant in the Company’s 2018 Credit Facility required 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 had been waived through the fiscal quarter ending June 26, 2021.

In addition, the Second Amendment added a new $ 230 million revolving line of credit with a maturity date of June 24, 2021 (the “ 364 Day Facility”).

The Second Amendment also permitted 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.

The Second 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”).

On May 20, 2021, the Company determined it no longer desired 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.

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.

As of June 26, 2021, and the date these financial statements were issued, the Company was in compliance with all covenants related to the 2018 Credit Facility.

As of June 26, 2021 and March 27, 2021, the Company had no borrowings outstanding under the 2018 Revolving Credit Facility.

In addition, stand-by letters of credit of $ 28 million and $ 27 million were outstanding as of June 26, 2021 and March 27, 2021, respectively.

At June 26, 2021 and March 27, 2021, the amount available for future borrowings under the 2018 Revolving Credit Facility were $ 972 million and $ 973 million, respectively.

As of June 26, 2021 and March 27, 2021, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was $ 842 million and $ 865 million, respectively, of which $ 97 million for both June 26, 2021 and March 27, 2021 was recorded within short-term debt and $ 745 million and $ 768 million, respectively, and was recorded within long-term debt in its consolidated balance sheets.

During 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.

1 unchanged sentence

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 December 26, 2020 is $ 7 million and is presented as short-term debt in the Company’s consolidated balance sheets.

The amount outstanding under this program as of June 26, 2021 and March 27, 2021 was $ 21 million and $ 17 million, respectively, and was recorded within short-term debt in the Company’s consolidated balance sheets.

During the first quarter of Fiscal 2022, the Company's subsidiary, Versace, entered into an agreement with Banco BPM Banking Group ("the Bank") to sell certain tax receivables to the Bank in exchange for cash.

As of June 26, 2021, the outstanding balance was $ 20 million, with $ 9 million and $ 11 million respectively, recorded within short-term debt and long-term debt in the Company’s consolidated balance sheets.

See Note 12 to the Company’s Fiscal 2021 Annual Report on Form 10-K for additional information regarding the Company’s credit facilities and debt obligations.

2 unchanged sentences

Although the outcome of such claims 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.

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

Please refer to the Contractual Obligations and Commercial Commitments disclosure within the Liquidity and Capital Resources section of the Company’s Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for a detailed disclosure of other commitments and contractual obligations as of March 27, 2021.

Fair Value Measurements

7 unchanged sentences

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

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

At June 26, 2021 and March 27, 2021, the fair values of the Company’s forward foreign currency exchange contracts, interest rate swaps and net investment hedges were determined using broker quotations, which were calculations derived from observable market information:

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

1 unchanged sentence

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

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

See Note 12 for detail.

See Note 12 for further 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 December 26, 2020 using:

Fair value at June 26, 2021 using:

Fair value at March 27, 2021 using:

20 unchanged sentences

Net investment hedges — 190 — — 263 —

Interest rate swaps — 1 — — — —

Interest rate swap — — — — 1 —

Undesignated forward currency exchange contracts — — — — — —

2 unchanged sentences

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 frequency nature of such borrowings and repayments.

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

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 9 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):

December 26, 2020 March 28, 2020

June 26, 2021 March 27, 2021

Value Estimated

9 unchanged sentences

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 Company recorded $ 91 million and $ 113 million in impairment charges during the three and nine months ended December 26, 2020, respectively.

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

Three Months Ended

December 26, 2020 Nine Months Ended

December 26, 2020

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

Operating Lease Right-of-Use Assets

$ 284 $ 206 $ 78 $ 321 $ 223 $ 98

Property and Equipment 17 4 13 21 6 15

Total $ 301 $ 210 $ 91 $ 342 $ 229 $ 113

(1) Includes $ 1 million and $ 3 million of impairment charges that were recorded within restructuring and other charges related to the Capri Retail Store Optimization Program during the three and nine months ended December 26, 2020, respectively.

Three Months Ended

December 28, 2019 Nine Months Ended

December 28, 2019

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

Operating Lease Right-of-Use Assets

$ 30 $ 21 $ 9 $ 326 $ 139 $ 187

Property and Equipment 13 3 10 51 18 33

Total $ 43 $ 24 $ 19 $ 377 $ 157 $ 220

The Company determines the fair values of these assets 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 Company recorded no impairment charges during the three months ended June 26, 2021 and June 27, 2020.

Derivative Financial Instruments

5 unchanged sentences

Net Investment Hedges

As of December 26, 2020, 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 $ 44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S.

During the three months ended June 26, 2021, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 2.875 billion to hedge its net investment in Euro denominated subsidiaries.

Certain of these contracts are supported by a credit support annex ("CSA") which provides for collateral exchange with the earliest effective date being May 2023.

If the outstanding position of a contract exceeds a certain threshold governed by the aforementioned CSA's, either party is required to post cash collateral.

Due to an-other-than-insignificant financing element on certain of these modified contracts, the net interest cash inflows of $ 8 million related to these contracts are classified as financing activities in the Company’s consolidated statements of cash flows.

As of June 26, 2021, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 4 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.

Under the terms 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 4.457 % in Euros and 3.588 % in Japanese Yen.

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

Certain of these contracts include mandatory early termination dates between February 2024 and February 2026, while the remaining contracts have maturity dates between March 2024 and August 2050.

These contracts have been designated as net investment hedges.

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 income.

Accordingly, the Company recorded a reduction in interest expense of $ 6 million and $ 8 million during the three and nine months ended December 26, 2020, respectively, and $ 19 million and $ 53 million during the three and nine months ended December 28, 2019, respectively.

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

Accordingly, the Company recorded a reduction in interest expense of $ 12 million during the three months ended June 26, 2021, and an immaterial amount during the three months ended June 27, 2020.

This increase from prior year is primarily due to the Company having higher average notional amounts outstanding on these hedges.

Interest Rate Swap

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

As of June 26, 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.

1 unchanged sentence

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 and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

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

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

During the three months ended June 26, 2021 and June 27, 2020, the Company recorded an immaterial amount of interest expense related to this agreement for both periods.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of June 26, 2021 and March 27, 2021 (in millions):

Notional Amounts Assets Liabilities

2021 March 27,

2020 December 26,

2021 June 26,

2021 March 27,

2020 December 26,

2021 June 26,

2021 March 27,

Designated forward foreign currency exchange contracts

$ 146 $ 161 $ — $ 1 (1)

Designated net investment hedges 3,044 44 1 (3)

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

Forward foreign currency exchange contracts $ 154 $ 155 $ 1 (1)

Net investment hedges 4,194 3,194 13 (3)

Interest rate swap 500 500 — — — 1 (4)

Total designated hedges 4,848 3,849 14 5 190 265

8 unchanged sentences

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

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

However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of June 26, 2021 and March 27, 2021 would be as follows (in millions):

Forward Currency Exchange Contracts Net Investment

1 unchanged sentence

2021 March 27,

2020 December 26,

2021 June 26,

2021 March 27,

2020 December 26,

2021 June 26,

2021 March 27,

5 unchanged sentences

Derivative liabilities, net $ — $ — $ 189 $ 263 $ — $ 1

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

accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive income.

Currently, 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 and are reclassified from accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of goods sold within the Company’s consolidated statements of operations and comprehensive income (loss).

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

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

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

when the items underlying the hedged transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of operations and comprehensive income (loss).

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

Three Months Ended Nine Months Ended

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

Pre-Tax Losses

Recognized in OCI Pre-Tax Losses

Three Months Ended

June 26, 2021 June 27, 2020

Pre-Tax Gains (Losses)

Recognized in OCI Pre-Tax Losses

Recognized in OCI Pre-Tax Gains

Recognized in OCI

Designated forward foreign currency exchange contracts

$ ( 7 ) $ ( 2 ) $ ( 7 ) $ 4

Designated net investment hedges $ 83 $ —

Designated interest rate swaps $ — $ ( 1 )

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

The following tables summarize the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive income (loss) related to the designated forward foreign currency exchange contracts for the three months ended June 26, 2021 and June 27, 2020 (in millions):

Three Months Ended

Pre-Tax Gain Reclassified from

Accumulated OCI Location of Gain recognized

December 26, 2020 December 28, 2019

Designated forward foreign currency exchange contracts

$ ( 1 ) $ ( 3 ) Cost of goods sold

Nine Months Ended

Pre-Tax Gain Reclassified from

Pre-Tax Loss (Gain) Reclassified from

Accumulated OCI Location of Gain Recognized

December 26, 2020 December 28, 2019

June 26, 2021 June 27, 2020

Designated forward foreign currency exchange contracts

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Undesignated Hedges

During the three and nine months ended December 26, 2020, a loss of $ 2 million was recognized within foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive income as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts.

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

During the three months ended June 26, 2021 and June 27, 2020, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss (gain) in the Company’s consolidated statements of operations and comprehensive income (loss) was immaterial.

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

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

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

During the nine months ended December 28, 2019, the Company repurchased 2,711,807 shares through open market transactions at a cost of $ 100 million under its $ 500 million share-repurchase program.

During the first quarter of Fiscal 2022, the Company reinstated its $ 500 million share-repurchase program, which was previously suspended during the first quarter of Fiscal 2021 in response to the impact of the COVID-19 pandemic and the provisions of the Second Amendment of the 2018 Credit Facility.

During the three months ended June 26, 2021, the Company purchased 921,080 shares for a total cost of approximately $ 50 million including commission, through open market transactions under the current plan.

As of June 26, 2021, the remaining availability under the Company’s share repurchase program was $ 350 million.

During the three months ended June 27, 2020, the Company did no t purchase any shares through open market transactions under the current plan, as the Company's share-repurchase plan was suspended at that time.

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

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

During the nine month periods ended December 26, 2020 and December 28, 2019, the Company withheld 48,147 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.

During the three month periods ended June 26, 2021 and June 27, 2020, the Company

withheld 167,070 shares and 38,119 shares, respectively, with a fair value of $ 9 million and $ 1 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

Accumulated Other Comprehensive Income (Loss)

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

The following table details changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes, for the three months ended June 26, 2021 and June 27, 2020, respectively (in millions):

Gains (Losses) (1)

Net Gains (Losses) on Derivatives (2)

Net (Losses) Gains on Derivatives (2)

Other Comprehensive Income (Loss) Attributable to Capri

2 unchanged sentences

amounts reclassified from AOCI to earnings

Other comprehensive income (loss), net of tax 26 ( 10 ) 16

Balance at December 26, 2020 $ 98 $ ( 7 ) $ 91

— ( 1 ) ( 1 )

Other comprehensive income, net of tax 91 — 91

Balance at June 26, 2021 $ 148 $ ( 1 ) $ 147

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

Other comprehensive income before reclassifications 40 4 44

Other comprehensive loss before reclassifications ( 3 ) — ( 3 )

amounts reclassified from AOCI to earnings

Other comprehensive income (loss), net of tax 40 ( 3 ) 37

Balance at December 28, 2019 $ ( 33 ) $ 4 $ ( 29 )

(1) Foreign currency translation gains and losses for the nine months ended December 26, 2020 include a net loss of $ 7 million on intra-entity transactions that are of a long-term investment nature, and a $ 198 million loss, net of taxes of $ 64 million, relating to the Company's net investment hedges, which was offset by a net $ 227 million translation gain.

Foreign currency translation gains and losses for the nine months ended December 28, 2019 include net gains of $ 3 million on intra-entity transactions that are of a long-term investment nature, a $ 4 million translation loss relating to the Versace business and an $ 44 million gain, net of taxes of $ 9 million, relating to the Company’s net investment hedges.

(2) Reclassified amounts primarily 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 income.

Other comprehensive loss, net of tax ( 3 ) ( 1 ) ( 4 )

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

(1) Foreign currency translation gains and losses for the three months ended June 26, 2021 primarily include a net loss of $ 1 million on intra-entity transactions that are of a long-term investment nature, and a $ 64 million gain, net of taxes of $ 19 million, relating to the Company's net investment hedges, in addition to a net $ 27 million translation gain.

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

All tax effects were not material for the periods presented.

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

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

As of June 26, 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 RSUs, and other equity awards, and authorizes a total issuance of up to 18,846,000 ordinary shares after amendments in June 2020.

At December 26, 2020, there were 5,138,884 ordinary shares available for future grants of equity awards under the Incentive Plan.

At June 26, 2021, there were 4,064,983 ordinary shares available for future grants of equity awards under the Incentive Plan.

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

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

The following table summarizes the Company’s share-based compensation activity during the three months ended June 26, 2021:

Options Service-Based RSUs Performance-Based RSUs

5 unchanged sentences

Canceled/Forfeited ( 345,546 ) ( 60,727 ) —

Outstanding/Unvested at December 26, 2020

Outstanding/Unvested at June 26, 2021

644,326 4,552,448 260,207

The weighted average grant date fair value of service-based RSUs granted during the nine months ended December 26, 2020 was $ 16.72 .

The weighted average grant date fair value of service-based and performance-based RSUs granted during the nine months ended December 28, 2019 was $ 33.89 and $ 33.86 , respectively.

The weighted average grant date fair value of service-based RSUs granted during the three months ended June 26, 2021 was $ 54.67 .

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

Share-Based Compensation Expense

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

The following table summarizes compensation expense attributable to share-based compensation for the three months ended June 26, 2021 and June 27, 2020 (in millions):

Three Months Ended

2021 June 27,

Share-based compensation expense $ 36 $ 24

Tax benefit related to share-based compensation expense

$ 2 $ 3 $ 11 $ 12

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

The Company estimates forfeitures based on its historical forfeiture rates.

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

The estimated value of future forfeitures for equity grants as of June 26, 2021 is approximately $ 16 million.

See Note 17 in the Company’s Fiscal 2021 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.

The Company’s effective tax rate for the three and nine months ended December 26, 2020 was ( 2.9 )% and 14.4 %, respectively.

Such rates differs from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable impact of global financing activities as well as the release of a valuation allowance on tax loss carryforwards of one of our U.S.

subsidiaries during the three months ended December 26, 2020.

The favorable impacts are partially offset by the impact of the tax rate change in the United Kingdom on the Company's net deferred tax liabilities recorded for the nine months ended December 26, 2020, as well as tax detriments related to share based compensation.

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

and decision to become a U.K.

tax resident.

In connection with this decision, the Company funded its international growth strategy through intercompany debt

financing arrangements between certain of our U.S., U.K.

and Switzerland subsidiaries in December 2015.

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

The Company’s effective tax rate for the three and nine months ended December 28, 2019 was 2.0 % and 0.6 %, respectively.

Such rates differed from the U.K.

federal statutory rate of 19% primarily due to the favorable impact from the realization of previously unrecognized tax benefits associated with certain positions in Europe realized during the period and return to provision adjustments in the U.S.

and Europe, which resulted in a benefit to the Company’s effective income tax rate for the three and nine months ended December 28, 2019.

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

The Company’s effective tax rate for the three months ended June 26, 2021 was 14.5 %.

Such rates differs from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable impact of global financing activities, and the impact of the variation of the proportionate geographical mix of earnings, particularly jurisdictions for which a valuation allowance is maintained.

The favorable impacts are partially offset by the impact of the tax rate change in the United Kingdom on the Company's net deferred tax liabilities recorded for the three months ended June 26, 2021.

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

1 unchanged sentence

tax resident.

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

and Switzerland subsidiaries in December 2015.

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

In connection with this decision, the Company funded its international growth strategy through intercompany debt financing arrangements.

These debt financing arrangements reside between certain of our U.S., U.K.

and Hungarian subsidiaries.

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

Segment Information

4 unchanged sentences

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, including Australia, as well as through Versace outlet stores and e-commerce sites.

In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements 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 products, including 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, including Australia, through its e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo trademarks in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide.

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

• 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), certain parts of 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 and accessories through directly operated Jimmy Choo retail and outlet stores throughout the Americas, certain parts of 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.

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

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

“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, certain parts of EMEA 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.

1 unchanged sentence

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, and information systems expenses, including enterprise resource planning system implementation costs.

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 acquisitions), impairment costs and COVID-19 related charges.

2 unchanged sentences

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Three Months Ended

2021 June 27,

Total revenue:

7 unchanged sentences

Michael Kors 240 ( 48 )

Total segment income from operations 286 285 378 715

Total segment income (loss) from operations 299 ( 118 )

Corporate expenses

1 unchanged sentence

Restructuring and other charges ( 3 ) ( 8 )

Impairment of assets ( 90 ) ( 19 ) ( 110 ) ( 220 )

COVID-19 related charges 3 ( 5 )

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

Total income (loss) from operations $ 258 $ ( 162 )

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Three Months Ended

2021 June 27,

Depreciation and amortization:

4 unchanged sentences

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

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Total revenue:

The Americas (1)

$ 760 $ 909 $ 1,524 $ 2,440

EMEA 299 422 732 1,191

Asia 243 240 607 728

Three Months Ended

2021 June 27,

The Americas (U.S., Canada and Latin America) (1)

Total revenue $ 1,253 $ 451

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

were $ 722 million and $ 1.414 billion, respectively, for the three and nine months ended December 26, 2020 and $ 845 million and $ 2.267 billion, respectively, for the three and nine months ended December 28, 2019.

was $ 671 million and $ 161 million for the three months ended June 26, 2021 and June 27, 2020, respectively.

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

What changed 10-Q

Item 1. Financial Statements