What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-07-30 · 267 added, 119 removed, 266 unchanged (59% of the section changed)

6 unchanged sentences

Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements.

These risks, uncertainties and other factors include the impact of the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition and to successfully execute our growth strategies;

These risks, uncertainties and other factors include the effect of the COVID-19 pandemic and its potential material and significant impact on the Company’s future financial and operational results if retail stores are forced to close again and the pandemic is prolonged, including that our estimates could materially differ if the severity of the COVID-19 situation worsens, or if there are further supply chain disruptions, including additional production delays and increased costs, the length and severity of such outbreak across the globe and the pace of recovery following the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition and to successfully execute our growth strategies;

the risk of disruptions to the Company’s businesses;

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levels of indebtedness (including the indebtedness incurred in connection with acquisitions);

the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash;

the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and such share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash;

changes in consumer traffic and retail trends;

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

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

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

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

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See Item 1A — "The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations" of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for additional discussion regarding risks to our business associated with the COVID-19 pandemic.

Establishing brand identity and enhancing global presence.

We intend to continue to increase our international presence and global brand recognition by growing our existing international operations through the formation of various joint ventures with international partners and continuing with our international licensing arrangements.

We feel this is an efficient method for continued penetration into the global luxury goods market, especially for markets where we have yet to establish a substantial presence.

In addition, our growth strategy includes assuming direct control of certain licensed international operations to better manage our growth opportunities in the related regions.

Channel shift and demand for our accessories and related merchandise .

Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences.

Although overall consumer spending for personal luxury products has increased in recent years, consumer shopping preferences have continued to shift from physical stores to online shopping.

We currently expect that this trend will continue in the foreseeable future.

We continue to adjust our operating strategy to the changing business environment.

In addition, last year we announced our Capri Retail Store Optimization Program to close approximately 170 of our retail stores over two fiscal years, which began during Fiscal 2021 and will continue into Fiscal 2022, in order to improve the profitability of our retail store fleet.

Over this time period, we expect to incur approximately $75 million of one-time costs associated with these store closures.

As of June 26, 2021, we have closed a total of 111 stores and recorded net restructuring charges of $2 million relating to the program since its inception.

Channel shift, macroeconomic factors, and demand for our accessories and related merchandise .

Our performance is affected by trends in the luxury goods industry, global consumer spending, macroeconomic factors, overall levels of consumer travel and spending on discretionary items as well as shifts in demographics and changes in lifestyle preferences.

Through 2019, the personal luxury goods market grew at a 5% rate over the past 20 years, with more recent growth driven by stronger Chinese demand from both international and local consumers and demographic and socioeconomic shifts resulting in younger consumers purchasing more luxury goods.

Then, in 2020, due to the impact of the COVID-19 crisis, the personal luxury goods market declined 23%.

Market studies indicate that the personal luxury goods market is predicted to increase at a 10% compound annual growth rate between 2020 and 2025, and will return to 2019 levels by the end of 2021 or in 2022.

Future growth is expected to be driven by e-commerce, Chinese consumers and younger generations.

As the personal luxury goods market continues to evolve, Capri is committed to creating engaging luxury experiences globally.

In our view, increased customer engagement and tailoring merchandise to customer shopping and communication preferences are key to growing market share.

We also continue to adjust our retail operating strategy to the changing business environment.

Last year, we announced our Capri Retail Store Optimization Program to close approximately 170 of our retail stores over two fiscal years, which began during Fiscal 2021 and will continue into Fiscal 2022, in order to improve the profitability of our retail store fleet.

Over this time period, we initially expected to incur approximately $75 million of one-time costs associated with these store closures, however, based on a reassessment, we expect these costs to be approximately $25 million.

As of September 25, 2021, we have closed a total of 127 stores and recorded net restructuring charges of $1 million relating to the program since its inception.

Collectively, we continue to anticipate ongoing savings as a result of the store closures and lower depreciation associated with the impairment charges being recorded.

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subsidiaries in the future, when translated to U.S.

Disruptions in shipping and distribution .

Our operations are subject to the impact of shipping disruptions as a result of changes or damage to our distribution infrastructure, as well as due to external factors, including the impacts of COVID-19.

Any future disruptions in our shipping and distribution network could have a negative impact on our results of operations.

See Item 1A — "Risk Factors" — "We primarily use foreign manufacturing contractors and independent third-party agents to

source our finished goods and our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or shipments" of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for additional discussion.

Costs of manufacturing and tariffs.

Disruptions or delays in shipping and distribution and other supply chain constraints .

We have been experiencing global logistics challenges, including delays as a result of port congestion, vessel availability, container shortages and temporary

factory closures which are expected to continue for the duration of Fiscal 2022.

Our freight costs have increased as carrier rates for ocean and air shipments have increased significantly, and the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past.

Any future disruptions in our shipping and distribution network, including impacts on our supply chain due to temporary closures of our manufacturing partners and shipping and fulfillment constraints, could have a negative impact on our results of operations.

See Item 1A — "Risk Factors" — "We primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods and our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or shipments" of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for additional discussion.

Costs of manufacturing, tariffs, and import regulations.

Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products.

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

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

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

In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of products, including jeans, fragrances, watches, jewelry, eyewear and home furnishings.

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Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and EMEA and Asia.

We also sell Michael Kors products directly to department stores, primarily located across the Americas and EMEA, to specialty stores and travel retail shops in the Americas, Europe and Asia, and to our geographic licensees in certain parts of EMEA, Asia and Brazil.

We also sell Michael Kors products directly to department stores, primarily located across the Americas and EMEA,

to specialty stores and travel retail shops in the Americas, Europe and Asia, and to our geographic licensees in certain parts of EMEA, Asia and Brazil.

In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions.

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

The following table presents our total revenue and income (loss) from operations by segment for the three months ended June 26, 2021 and June 27, 2020 (in millions):

Three Months Ended

2021 June 27,

The following table presents our total revenue and income (loss) from operations by segment for the three and six months ended September 25, 2021 and September 26, 2020 (in millions):

Three Months Ended Six Months Ended

September 25,

2021 September 26,

2020 September 25,

2021 September 26,

Total revenue:

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Michael Kors 220 190 460 142

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

Total segment income from operations 276 210 575 92

Corporate expenses (45) (30) (86) (61)

Restructuring and other charges (8) (9) (11) (17)

Impairment of assets (33) (20) (33) (20)

COVID-19 related charges 5 2 8 (3)

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

2021 June 27,

September 25,

2021 September 26,

Number of full price retail stores (including concessions):

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The following table presents our retail stores by geographic location:

June 26, 2021 June 27, 2020

September 25, 2021 September 26, 2020

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

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Key Consolidated Performance Indicators and Statistics

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

Three Months Ended

June 26, 2021 June 27, 2020

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

Three Months Ended Six Months Ended

September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020

Total revenue $ 1,300 $ 1,110 $ 2,553 $ 1,561

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Results of Operations

Comparison of the three months ended June 26, 2021 with the three months ended June 27, 2020

The following table details the results of our operations for the three months ended June 26, 2021 and June 27, 2020, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Comparison of the three months ended September 25, 2021 with the three months ended September 26, 2020

The following table details the results of our operations for the three months ended September 25, 2021 and September 26, 2020, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

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

the Three Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

September 25,

2021 September 26,

2020 September 25,

2021 September 26,

Statements of Operations Data:

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Depreciation and amortization 49 54 (5) (9.3) % 3.8 % 4.9 %

Impairment of assets 33 20 13 65.0 % 2.5 % 1.8 %

Restructuring and other charges 8 9 (1) (11.1) % 0.6 % 0.8 %

Total operating expenses 689 557 132 23.7 % 53.0 % 50.2 %

Income (loss) from operations 258 (162) 420 259.3 % 20.6 % (35.9) %

Income from operations 195 153 42 27.5 % 15.0 % 13.8 %

Other income, net (2) — (2) NM (0.2) % — %

Interest expense, net 1 17 (16) (94.1) % 0.1 % 3.8 %

Interest (income) expense, net (5) 12 (17) NM (0.4) % 1.1 %

Foreign currency loss 4 — 4 NM 0.3 % — %

Income before (benefit) provision for income taxes 198 141 57 40.4 % 15.2 % 12.7 %

(Benefit) provision for income taxes (2) 20 (22) NM (0.2) % 1.8 %

Net income 200 121 79 (65.3) %

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

Net income attributable to Capri $ 200 $ 122 $ 78 (63.9) %

NM Not meaningful

Total Revenue

Total revenue increased $190 million, or 17.1%, to $1.300 billion for the three months ended September 25, 2021, compared to $1.110 billion for the three months ended September 26, 2020, which included net favorable foreign currency effects of approximately $23 million, primarily related to the strengthening of the Euro, British Pound, Chinese Renminbi and Canadian Dollar against the U.S.

Dollar during the three months ended September 25, 2021.

On a constant currency basis, our total revenue increased $167 million, or 15.0%.

The increase is attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Gross profit increased $174 million, or 24.5%, to $884 million for the three months ended September 25, 2021, compared to $710 million for the three months ended September 26, 2020, which included net favorable foreign currency effects of $15 million.

Gross profit as a percentage of total revenue increased 400 basis points to 68.0% during the three months ended September 25, 2021, compared to 64.0% during the three months ended September 26, 2020.

The increase in our gross profit margin was primarily attributable to a higher average unit price and lower promotional activity, partially offset by increases in supply chain costs during the three months ended September 25, 2021, as compared to the three months ended September 26, 2020.

Total Operating Expenses

Total operating expenses increased $132 million, or 23.7%, to $689 million during the three months ended September 25, 2021, compared to $557 million for the three months ended September 26, 2020.

Our operating expenses included a net unfavorable foreign currency impact of approximately $13 million.

Total operating expenses increased to 53.0% as a percentage of total revenue for the three months ended September 25, 2021, compared to 50.2% for the three months ended September 26, 2020.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $125 million, or 26.4%, to $599 million during the three months ended September 25, 2021, compared to $474 million for the three months ended September 26, 2020, primarily due to increased retail store, corporate, advertising, and e-commerce costs during the three months ended September 25, 2021.

Selling, general, and administrative expenses as a percentage of total revenue increased to 46.1% for the three months ended September 25, 2021, compared to 42.7% for the three months ended September 26, 2020, primarily due to an increase in advertising, e-commerce and corporate costs during the three months ended September 25, 2021, as compared to the three months ended September 26, 2020.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $15 million, or 50.0%, to $45 million during the three months ended September 25, 2021 as compared to $30 million for the three months ended September 26, 2020, primarily due to an increase in compensation expense and professional fees.

Depreciation and Amortization

Depreciation and amortization decreased $5 million, or 9.3%, to $49 million during the three months ended September 25, 2021, compared to $54 million for the three months ended September 26, 2020.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to lower capital expenditures in Fiscal 2022 and Fiscal 2021.

Depreciation and amortization decreased to 3.8% as a percentage of total revenue during the three months ended September 25, 2021, compared to 4.9% for the three months ended September 26, 2020 primarily due to lower revenues during the prior year due to COVID-19.

Impairment of Assets

During the three months ended September 25, 2021, we recognized asset impairment charges of $33 million, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations (see Note 11 to the accompanying consolidated financial statements for additional information).

During the three months ended September 26, 2020, we recognized asset impairment charges of approximately $20 million, primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

Restructuring and Other Charges

During the three months ended September 25, 2021, we recognized restructuring and other charges of $8 million, which included other costs of $9 million primarily related to equity awards associated with the acquisition of Versace and partially offset by $1 million of gains related to our Capri Retail Store Optimization Program (see Note 8 to the accompanying consolidated financial statements for additional information).

During the three months ended September 26, 2020, we recognized restructuring and other charges of $9 million, which included other costs of $7 million primarily related to equity awards associated with the acquisition of Versace and $2 million related to our Capri Retail Store Optimization Program.

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

Income from Operations

As a result of the foregoing, income from operations increased $42 million, to $195 million during three months ended September 25, 2021, compared to $153 million for the three months ended September 26, 2020.

Income from operations as a percentage of total revenue increased to 15.0% during the three months ended September 25, 2021, compared to 13.8% for the three months ended September 26, 2020.

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

Interest (Income) Expense, net

During the three months ended September 25, 2021, we recognized $5 million of interest income compared to $12 million of interest expense for the three months ended September 26, 2020.

The $17 million improvement in interest (income) expense, net is primarily due to an increase of interest income from higher average notional amounts outstanding and more favorable interest rates on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss

During the three months ended September 25, 2021, we recognized a net foreign currency loss of $4 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

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

(Benefit) Provision for Income Taxes

The benefit for income taxes was $2 million for the three months ended September 25, 2021, compared to a provision of $20 million for the three months ended September 26, 2020.

Our effective tax rate was (1.0)% and 14.2% for the three months ended September 25, 2021 and September 26, 2020, respectively.

The decrease in our effective tax rate was primarily due to recently enacted tax legislation in Italy which allowed us to reduce our deferred tax liabilities.

Specifically, this change allowed us to step up certain intangible assets which will result in lower future cash taxes.

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

state and local taxes and tax rates in foreign jurisdictions.

In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.

Net Loss Attributable to Noncontrolling Interest

During the three months ended September 25, 2021, we recorded an immaterial net loss and during the three months ended September 26, 2020, we recorded a net loss of $1 million, attributable to the noncontrolling interest in our joint ventures.

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

Net Income Attributable to Capri

As a result of the foregoing, our net income increased $78 million to $200 million during the three months ended September 25, 2021, compared to a net income of $122 million for the three months ended September 26, 2020.

Segment Information

Three Months Ended % Change

(dollars in millions) September 25,

2021 September 26,

2020 $ Change As

Reported Constant

Revenues $ 282 $ 195 $ 87 44.6 % 42.6 %

Income from operations 55 20 35 175.0 %

Operating margin 19.5 % 10.3 %

Versace revenues increased $87 million, or 44.6% to $282 million during the three months ended September 25, 2021, compared to $195 million for the three months ended September 26, 2020, which included favorable foreign currency effects of $4 million.

On a constant currency basis, revenue increased $83 million, or 42.6%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income from Operations

During the three months ended September 25, 2021, Versace recorded income from operations of $55 million, compared to $20 million for the three months ended September 26, 2020.

Operating margin increased from 10.3% for the three months ended September 26, 2020, to 19.5% during the three months ended September 25, 2021, primarily due to higher average unit price and leveraging of operating expenses due to higher revenue.

Three Months Ended % Change

(dollars in millions) September 25,

2021 September 26,

2020 $ Change As

Reported Constant

Revenues $ 137 $ 122 $ 15 12.3 % 4.9 %

Income from operations 1 — 1 NM

Operating margin 0.7 % 0.0 %

NM Not meaningful

Jimmy Choo revenues increased $15 million, or 12.3%, to $137 million during the three months ended September 25, 2021, compared to $122 million for the three months ended September 26, 2020, which included favorable foreign currency effects of $9 million.

On a constant currency basis, revenue increased $6 million, or 4.9%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income from Operations

During the three months ended September 25, 2021, Jimmy Choo recorded income from operations of $1 million, compared to immaterial income from operations for the three months ended September 26, 2020.

Operating margin increased from 0.0% for the three months ended September 26, 2020 to 0.7% during the three months ended September 25, 2021, primarily due to lower promotional activity, partially offset by increases in store operating costs and investments in marketing and advertising.

Three Months Ended % Change

(dollars in millions) September 25,

2021 September 26,

2020 $ Change As

Reported Constant

Revenues $ 881 $ 793 $ 88 11.1 % 9.8 %

Income from operations 220 190 30 15.8 %

Operating margin 25.0 % 24.0 %

Michael Kors revenues increased $88 million, or 11.1%, to $881 million during the three months ended September 25, 2021, compared to $793 million for the three months ended September 26, 2020, which included favorable foreign currency effects of $10 million.

On a constant currency basis, revenue increased $78 million, or 9.8%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income from Operations

During the three months ended September 25, 2021, Michael Kors recorded income from operations of $220 million, compared to $190 million for the three months ended September 26, 2020.

Operating margin increased from 24.0% for the three months ended September 26, 2020, to 25.0% during the three months ended September 25, 2021, primarily due to a higher average unit price, partially offset by increases in our supply chain costs and an increase in marketing and advertising as a percentage of revenue.

Results of Operations

Comparison of the six months ended September 25, 2021 with the six months ended September 26, 2020

The following table details the results of our operations for the six months ended September 25, 2021 and September 26, 2020, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

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

the Six Months Ended

September 25,

2021 September 26,

2020 September 25, 2021 September 26, 2020

Statements of Operations Data:

Total revenue $ 2,553 $ 1,561 $ 992 63.5 %

Cost of goods sold 813 549 264 48.1 % 31.8 % 35.2 %

Gross profit 1,740 1,012 728 71.9 % 68.2 % 64.8 %

Selling, general and administrative expenses 1,144 876 268 30.6 % 44.8 % 56.1 %

Depreciation and amortization 99 108 (9) (8.3) % 3.9 % 6.9 %

Impairment of assets 33 20 13 65.0 % 1.3 % 1.3 %

Restructuring and other charges 11 17 (6) (35.3) % 0.4 % 1.1 %

Total operating expenses 1,287 1,021 266 26.1 % 50.4 % 65.4 %

Income (loss) from operations 453 (9) 462 NM 17.7 % (0.6) %

Other income, net (2) (1) (1) 100.0 % (0.1) % (0.1) %

Interest (income) expense, net (4) 29 (33) NM (0.2) % 1.9 %

Foreign currency loss (gain) 5 (3) 8 NM 0.2 % (0.2) %

Income (loss) before provision for income taxes 454 (34) 488 NM 17.8 % (2.2) %

Provision for income taxes 37 5 32 NM 3.0 % 1.1 %

Provision for income taxes

35 25 10 40.0 % 1.4 % 1.6 %

Net income (loss) 419 (59) 478 NM

Net income attributable to noncontrolling interest — — — — %

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

Net income (loss) attributable to Capri $ 419 $ (58) $ 477 NM

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Total Revenue

Total revenue increased $802 million, or 177.8%, to $1.253 billion for the three months ended June 26, 2021, compared to $451 million for the three months ended June 27, 2020, which included net favorable foreign currency effects of approximately $63 million, primarily related to the strengthening of the Euro, British Pound, Chinese Renminbi, and Canadian Dollar against the U.S.

Dollar during the three months ended June 26, 2021 as compared to the same prior year period.

Total revenue increased $992 million, or 63.5%, to $2.553 billion for the six months ended September 25, 2021, compared to $1.561 billion for the six months ended September 26, 2020, which included net favorable foreign currency effects of approximately $86 million, primarily related to the strengthening of the Euro, British Pound, Chinese Renminbi and Canadian Dollar against the U.S.

Dollar during the six months ended September 25, 2021.

On a constant currency basis, our total revenue increased $906 million, or 58.0%.

1 unchanged sentence

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Gross profit increased $554 million, or 183.4%, to $856 million for the three months ended June 26, 2021, compared to $302 million for the three months ended June 27, 2020, which included net favorable foreign currency effects of $43 million.

Gross profit as a percentage of total revenue increased 130 basis points to 68.3% during the three months ended June 26, 2021, compared to 67.0% during the three months ended June 27, 2020.

The increase in our gross profit margin was primarily attributable to a higher average unit price, partially offset by unfavorable channel mix during the three months ended June 26, 2021, as compared to the three months ended June 27, 2020.

Gross profit increased $728 million, or 71.9%, to $1.740 billion for the six months ended September 25, 2021, compared to $1.012 billion for the six months ended September 26, 2020, which included net favorable foreign currency effects of $58 million.

Gross profit as a percentage of total revenue increased 340 basis points to 68.2% during the six months ended September 25, 2021, compared to 64.8% during the six months ended September 26, 2020.

The increase in gross profit margin was primarily attributable to a higher average unit price and lower promotional activity, partially offset by increases in our supply chain costs during the six months ended September 25, 2021, as compared to the six months ended September 26, 2020.

Total Operating Expenses

Total operating expenses increased $134 million, or 28.9%, to $598 million during the three months ended June 26, 2021, compared to $464 million for the three months ended June 27, 2020.

Total operating expenses increased $266 million, or 26.1%, to $1.287 billion during the six months ended September 25, 2021, compared to $1.021 billion for the six months ended September 26, 2020.

Our operating expenses included a net unfavorable foreign currency impact of approximately $51 million.

Total operating expenses decreased to 47.7% as a percentage of total revenue for the three months ended June 26, 2021, compared to 102.9% for the three months ended June 27, 2020.

Total operating expenses decreased to 50.4% as a percentage of total revenue for the six months ended September 25, 2021, compared to 65.4% for the six months ended September 26, 2020.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $143 million, or 35.6%, to $545 million during the three months ended June 26, 2021, compared to $402 million for the three months ended June 27, 2020, primarily due to increased retail store, e-commerce and corporate costs during the three months ended June 26, 2021, as well as decreased costs during the three months ended June 27, 2020 from our cost reduction initiatives as a direct result of COVID-19.

Selling, general, and administrative expenses as a percentage of total revenue decreased to 43.5% for the three months ended June 26, 2021, compared to 89.1% for the three months ended June 27, 2020, primarily due to better leverage on higher revenue during the three months ended June 26, 2021, as compared to the three months ended June 27, 2020.

Corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $10 million, or 32.3%, to $41 million during the three months ended June 26, 2021 as compared to $31 million for the three months ended June 27, 2020, primarily due to an increase in compensation expense during the three months ended June 26, 2021, as well as lower costs as a result of COVID-19 during the three months ended June 27, 2020.

Selling, general and administrative expenses increased $268 million, or 30.6%, to $1.144 billion during the six months ended September 25, 2021, compared to $876 million for the six months ended September 26, 2020, primarily due to increased retail store, corporate, e-commerce, and advertising costs during the six months ended September 25, 2021.

Selling, general and administrative expenses as a percentage of total revenue decreased to 44.8% during the six months ended September 25, 2021, compared to 56.1% for the six months ended September 26, 2020, primarily due to leveraging of operating expenses as a result of higher revenue during the six months ended September 25, 2021, as compared to the six months ended September 26, 2020.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $25 million, or 41.0%, to $86 million during the six months ended September 25, 2021 as compared to $61 million for the six months ended September 26, 2020, primarily due to an increase in compensation expense and professional fees.

Depreciation and Amortization

Depreciation and amortization decreased $4 million, or 7.4%, to $50 million during the three months ended June 26, 2021, compared to $54 million for the three months ended June 27, 2020.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to lower capital expenditures in Fiscal 2021.

Depreciation and amortization decreased to 4.0% as a percentage of total revenue during the three months ended June 26, 2021, compared to 12.0% for the three months ended June 27, 2020 primarily due to lower revenues during the prior year due to COVID-19.

Depreciation and amortization decreased $9 million, or 8.3%, to $99 million during the six months ended September 25, 2021, compared to $108 million for the six months ended September 26, 2020.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to lower capital expenditures in Fiscal 2022 and Fiscal 2021.

Depreciation and amortization decreased to 3.9% as a percentage of total revenue during the six months ended September 25, 2021, compared to 6.9% for the six months ended September 26, 2020 primarily due to higher revenues during the six months ended September 25, 2021 as a result of COVID-19.

Impairment of Assets

During the six months ended September 25, 2021, we recognized asset impairment charges of $33 million, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations (see Note 11 to the accompanying consolidated financial statements for additional information).

During the six months ended September 26, 2020, we recognized asset impairment charges of approximately $20 million, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

Restructuring and Other Charges

During the three months ended June 26, 2021, we recognized restructuring and other charges of $3 million, which included other costs of $6 million primarily related to equity awards associated with the acquisition of Versace and partially offset by $3 million of gains related to our Capri Retail Store Optimization Program (see Note 8 to the accompanying consolidated financial statements for additional information).

During the three months ended June 27, 2020, we recognized restructuring and other charges of $8 million, which included other costs of $5 million primarily related to equity awards associated with the acquisition of Versace and $3 million related to our Capri Retail Store Optimization Program.

During the six months ended September 25, 2021, we recognized restructuring and other charges of $11 million, which included other costs of $15 million primarily related to equity awards associated with the acquisition of Versace and partially offset by $4 million of gains related to our Capri Retail Store Optimization Program (see Note 8 to the accompanying consolidated financial statements for additional information).

During the six months ended September 26, 2020, we recognized restructuring and other charges of $17 million, which were primarily comprised of $12 million primarily related to equity awards associated with the acquisition of Versace and $5 million related to our Capri Retail Store Optimization Program.

Income (loss) from Operations

As a result of the foregoing, income from operations increased $420 million, to $258 million during three months ended June 26, 2021, compared to a loss from operations of $162 million for the three months ended June 27, 2020.

Income (loss) from operations as a percentage of total revenue increased to 20.6% during the three months ended June 26, 2021, compared to (35.9)% for the three months ended June 27, 2020.

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

Interest Expense, net

Interest expense, net, decreased $16 million to $1 million during the three months ended June 26, 2021, compared to $17 million for the three months ended June 27, 2020, primarily due to an increase of interest income attributable to higher average notional amounts outstanding on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

As a result of the foregoing, income from operations increased $462 million, to $453 million during the six months ended September 25, 2021, compared to a loss from operations of $9 million for the six months ended September 26, 2020.

Income from operations as a percentage of total revenue increased to 17.7% during the six months ended September 25, 2021, compared to a loss from operations of (0.6)% for the six months ended September 26, 2020.

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

Interest (Income) Expense, net

During the six months ended September 25, 2021, we recognized $4 million of interest income compared to $29 million of interest expense for the six months ended September 26, 2020.

The $33 million improvement in interest (income) expense, net is primarily due to an increase of interest income from higher average notional amounts outstanding and more favorable interest rates on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss (Gain)

During the three months ended June 26, 2021, we recognized a net foreign currency loss of $1 million, primarily attributable to the evaluation and settlement of certain of our accounts payable in currencies other than the functional currency.

During the three months ended June 27, 2020, we recognized a net foreign currency gain of $3 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

During the six months ended September 25, 2021 and September 26, 2020, we recognized a net foreign currency loss of $5 million and a net foreign currency gains of $3 million, respectively, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

We recognized $37 million of income tax expense on pre-tax income of $256 million during the three months ended June 26, 2021, compared to $5 million on pre-tax loss of $175 million for the three months ended June 27, 2020.

Our effective tax rates were 14.5% and (2.9)% for the three months ended June 26, 2021 and June 27, 2020, respectively.

Our effective tax rate for three months ended June 26, 2021 was significantly higher than our effective tax rate in the three months ended June 27, 2020 and not a meaningful or comparable metric, primarily due to the relationship between income tax expense and pre-tax loss in the prior year.

The increase in our income tax expense was primarily related to the increase in earnings during the three months ended June 26, 2021, compared to the three months ended June 27, 2020 and due to the revaluation of our net deferred tax liabilities as a result of the tax rate change in the United Kingdom during the period.

We recognized $35 million of income tax expense during the six months ended September 25, 2021, compared to $25 million for the six months ended September 26, 2020.

Our effective tax rate was 7.7% and (73.5)% for the six months ended September 25, 2021 and September 26, 2020, respectively.

Our effective tax rate for the six months ended September 25, 2021 was significantly higher than our effective tax rate for the six months ended September 26, 2020 and not a meaningful or comparable metric, primarily due to the relationship between income tax expense and pre-tax loss in the prior period.

The increase in income tax expense primarily related to the increase in earnings during the six months ended September 25, 2021 compared to the six months ended September 26, 2020.

This increase was partially offset by the favorable effects of recently enacted tax legislation in Italy which allowed us to reduce our deferred tax liabilities.

Specifically, this change allowed us to step up certain intangible assets which will result in lower future cash taxes.

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

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In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.

Net Loss Attributable to Noncontrolling Interest

During the six months ended September 25, 2021, we recorded an immaterial net loss and during the six months ended September 26, 2020, we recorded a net loss of $1 million, attributable to the noncontrolling interest in our joint ventures.

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

Net Income (Loss) Attributable to Capri

As a result of the foregoing, our net income increased $399 million to a net income of $219 million during the three months ended June 26, 2021, compared to a net loss of $180 million for the three months ended June 27, 2020.

As a result of the foregoing, our net income increased $477 million to a net income of $419 million during the six months ended September 25, 2021, compared to net loss of $58 million for the six months ended September 26, 2020.

Segment Information

Three Months Ended % Change

(dollars in millions) June 26,

2021 June 27,

2020 $ Change As Reported Constant

Six Months Ended % Change

(dollars in millions) September 25,

2021 September 26,

2020 $ Change As

Reported Constant

Revenues $ 522 $ 288 $ 234 81.3 % 72.6 %

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Operating margin 19.7 % (7.3) %

Versace revenues increased $147 million, or 158.1% to $240 million during the three months ended June 26, 2021, compared to $93 million for the three months ended June 27, 2020, which included favorable foreign currency effects of $21 million.

Versace revenues increased $234 million, or 81.3%, to $522 million during the six months ended September 25, 2021, compared to $288 million for the six months ended September 26, 2020, which included favorable foreign currency effects of $25 million.

On a constant currency basis, revenue increased $209 million, or 72.6%, primarily attributable to the continued recovery from the COVID-19 pandemic.

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Income (Loss) from Operations

During the three months ended June 26, 2021, Versace recorded income from operations of $48 million, compared to a loss from operations of $41 million for the three months ended June 27, 2020.

Operating margin increased from (44.1)% for the three months ended June 27, 2020, to 20.0% during the three months ended June 26, 2021, primarily due to higher average unit retail and leveraging of operating expenses due to higher revenue.

Three Months Ended % Change

(dollars in millions) June 26,

2021 June 27,

During the six months ended September 25, 2021, Versace recorded income from operations of $103 million, compared to a loss from operations of $21 million for the six months ended September 26, 2020.

Operating margin improved from (7.3)% for the six months ended September 26, 2020, to 19.7% during the six months ended September 25, 2021, primarily due to lower promotional activity and leveraging of operating expenses due to higher revenue.

Six Months Ended % Change

(dollars in millions) September 25,

2021 September 26,

2020 $ Change As

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Operating margin 4.3 % (16.8) %

Jimmy Choo revenues increased $91 million, or 178.4%, to $142 million during the three months ended June 26, 2021, compared to $51 million for the three months ended June 27, 2020, which included favorable foreign currency effects of $16 million.

Jimmy Choo revenues increased $106 million, or 61.3%, to $279 million during the six months ended September 25, 2021, compared to $173 million for the six months ended September 26, 2020, which included favorable foreign currency effects of $25 million.

On a constant currency basis, revenue increased $81 million, or 46.8%, primarily attributable to the continued recovery from the COVID-19 pandemic.

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Income (Loss) from Operations

During the three months ended June 26, 2021, Jimmy Choo recorded income from operations of $11 million, compared to a loss from operations of $29 million for the three months ended June 27, 2020.

Operating margin increased from (56.9)% for the three months ended June 27, 2020 to 7.7% during the three months ended June 26, 2021, primarily due to higher average unit retail and leveraging of operating expenses due to higher revenue.

Three Months Ended % Change

(dollars in millions) June 26,

2021 June 27,

During the six months ended September 25, 2021, Jimmy Choo recorded income from operations of $12 million, compared to a loss from operations of $29 million for the six months ended September 26, 2020.

Operating margin improved from (16.8)% for the six months ended September 26, 2020, to 4.3% during the six months ended September 25, 2021, primarily due to lower promotional activity and leveraging of operating expenses due to higher revenue.

Six Months Ended % Change

(dollars in millions)

September 25,

2021 September 26,

2020 $ Change As

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Revenues $ 1,752 $ 1,100 $ 652 59.3 % 56.0 %

Income (loss) from operations 240 (48) 288 600.0 %

Income from operations 460 142 318 223.9 %

Operating margin 26.3 % 12.9 %

Michael Kors revenues increased $564 million, or 183.7%, to $871 million during the three months ended June 26, 2021, compared to $307 million for the three months ended June 27, 2020, which included favorable foreign currency effects of $26 million.

Michael Kors revenues increased $652 million, or 59.3%, to $1.752 billion during the six months ended September 25, 2021, compared to $1.100 billion for the six months ended September 26, 2020, which included favorable foreign currency effects of $36 million.

On a constant currency basis, revenue increased $616 million, or 56.0%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income (Loss) from Operations

During the three months ended June 26, 2021, Michael Kors recorded income from operations of $240 million, compared to a loss from operations of $48 million for the three months ended June 27, 2020.

Operating margin increased from (15.6)% for the three months ended June 27, 2020, to 27.6% during the three months ended June 26, 2021, primarily due to leveraging of operating expenses on higher revenues, partially offset by unfavorable channel mix as wholesale sales were significantly lower due to the initial impact of COVID-19 in the three months ended June 27, 2020.

Income from Operations

During the six months ended September 25, 2021, Michael Kors recorded income from operations of $460 million, compared to $142 million for the six months ended September 26, 2020.

Operating margin improved from 12.9% for the six months ended September 26, 2020, to 26.3% during the six months ended September 25, 2021, primarily due to a higher average unit price and leveraging of operating expenses due to higher revenue, partially offset by increases in our supply chain costs.

Liquidity and Capital Resources

Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our credit facilities (see below discussion regarding “Revolving Credit Facilities”) and available cash and cash equivalents.

Our primary sources of liquidity are the cash flows generated from operations, along with borrowings available under our credit facilities (see below discussion regarding “Revolving Credit Facilities”) and available cash and cash equivalents.

Our primary use of this liquidity is to fund the ongoing cash requirements, including our working capital needs and capital investments in our business, debt repayments, acquisitions, returns of capital, including share repurchases and other corporate activities.

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

We spent $23 million on capital expenditures during the three months ended June 26, 2021.

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

We spent $48 million on capital expenditures during the six months ended September 25, 2021.

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

September 25,

2021 March 27,

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Long-term debt $ 1,104 $ 1,219

Three Months Ended

2021 June 27,

Six Months Ended

September 25,

2021 September 26,

Cash Flows Provided By (Used In):

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Cash Provided by Operating Activities

Net cash provided by operating activities increased $137 million to $204 million during the three months ended June 26, 2021, as compared to $67 million for the three months ended June 27, 2020, as a result of an increase in our net income after non-cash adjustments, partially offset by decreases related to changes in our working capital.

The decreases related to the changes in our working capital are primarily attributable to fluctuations in the timing of payments and receipts, partially offset by a decrease in our inventory levels when compared to the prior year.

Net cash provided by operating activities increased $259 million to $396 million during the six months ended September 25, 2021, as compared to $137 million for the six months ended September 26, 2020, as a result of an increase in our net income after non-cash adjustments, partially offset by decreases related to changes in our working capital.

The decreases related to the changes in our working capital are primarily attributable to fluctuations in the timing of payments and receipts and an increase in our inventory levels when compared to the prior year.

Cash Used in Investing Activities

Net cash used in investing activities was $23 million during the three months ended June 26, 2021, as compared to $32 million during the three months ended June 27, 2020, which was primarily attributable to lower capital expenditures of $9 million compared to prior year.

Net cash used in investing activities was $48 million during the six months ended September 25, 2021, as compared to $71 million during the six months ended September 26, 2020, which was primarily attributable to lower cash paid for asset acquisitions and lower capital expenditures compared to prior year.

Cash Used in Financing Activities

Net cash used in financing activities was $55 million during the three months ended June 26, 2021, as compared to $420 million during the three months ended June 27, 2020.

The decrease of cash used in financing activities of $365 million was primarily attributable to a decrease in net debt repayments of $404 million, partially offset by a $58 million increase in cash payments to repurchase our common stock compared to prior year.

Net cash used in financing activities was $342 million during the six months ended September 25, 2021, as compared to $421 million during the six months ended September 26, 2020.

The decrease of cash used in financing activities of $79 million was primarily attributable to a decrease in net debt repayments of $215 million, partially offset by a $159 million increase in cash payments to repurchase our ordinary shares compared to prior year.

Debt Facilities

The following table presents a summary of our borrowing capacity and amounts outstanding as of June 26, 2021 and March 27, 2021 (in millions):

The following table presents a summary of our borrowing capacity and amounts outstanding as of September 25, 2021 and March 27, 2021 (in millions):

September 25,

2021 March 27,

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Hong Kong Uncommitted Credit Facility:

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

Bank guarantees outstanding (2 million and 3 million Hong Kong Dollars) — —

Total availability (80 million and 100 million Hong Kong Dollars) $ 10 $ 13

Borrowings outstanding — —

Remaining availability (80 million and 100 million Hong Kong Dollars) $ 10 $ 13

China Uncommitted Credit Facility:

Total availability (45 million and 100 million Chinese Yuan) $ 7 $ 15

Borrowings outstanding — —

Total and remaining availability (100 million Chinese Yuan) $ 15 $ 15

Total and remaining availability (45 million and 100 million Chinese Yuan) $ 7 $ 15

Japan Credit Facility:

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Versace Uncommitted Credit Facilities:

Total availability (57 million Euro) $ 68 $ 67

Total availability (48 million and 57 million Euro) $ 56 $ 67

Borrowings outstanding (0 million Euro) (4)

Remaining availability (57 million Euro) $ 68 $ 67

Remaining availability (48 million and 57 million Euro) $ 56 $ 67

Total borrowings outstanding (1)

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Effective as of the Election Date, the Company is required to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.00.

As of June 26, 2021 and March 27, 2021, we were in compliance with all covenants related to our agreements then in effect governing our debt.

As of September 25, 2021 and March 27, 2021, we were in compliance with all covenants related to our agreements then in effect governing our debt.

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

(2) Recorded as long-term debt in our consolidated balance sheets as of June 26, 2021 and March 27, 2021, except for the current portion of $97 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt in our consolidated balance sheets at both June 26, 2021 and March 27, 2021.

(3) The balance as of June 26, 2021 consists of $21 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $20 million of sales of certain Versace tax receivable, with $9 million and $11 million, respectively, was recorded within short-term debt and long-term debt in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

(2) Recorded as long-term debt in our consolidated balance sheets as of September 25, 2021 and March 27, 2021, except for the current portion of $97 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt in our consolidated balance sheets at March 27, 2021.

(3) The balance as of September 25, 2021 consists of $31 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $19 million related to the sale of certain Versace tax receivables, with $9 million and $10 million, respectively, was recorded within short-term debt and long-term debt in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of March 27, 2021 consists of $17 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets and $4 million of other loans recorded as long-term debt in our consolidated balance sheets.

(4) Recorded as short-term debt in our consolidated balance sheets as of June 26, 2021 and March 27, 2021.

(4) Recorded as short-term debt in our consolidated balance sheets as of March 27, 2021.

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

As of June 26, 2021, there were 29 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of September 25, 2021, there were 25 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

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

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Share Repurchase Program

The following table presents our treasury share repurchases during the three months ended June 26, 2021 and June 27, 2020 (dollars in millions):

Three Months Ended

2021 June 27,

The following table presents our ordinary share repurchases during the six months ended September 25, 2021 and September 26, 2020 (dollars in millions):

Six Months Ended

September 25,

2021 September 26,

Cost of shares repurchased under share repurchase program $ 150 $ —

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2,905,597 47,635

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 first quarter of Fiscal 2022, we reinstated our $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.

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

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

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

This program may be suspended or discontinued at any time.

On November 3, 2021, we announced that our Board of Directors has terminated our existing $500 million share repurchase program, with $250 million of availability remaining, and authorized a new share repurchase program pursuant to which we may, from time to time, repurchase up to $1.0 billion of our outstanding ordinary shares within a period of two years from the effective date of the program.

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

The program may be suspended or discontinued at any time.

See Note 13 to the accompanying consolidated financial statements for additional information.

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

Our off-balance sheet commitments relating to our outstanding letters of credit were $35 million at June 26, 2021, including $6 million in letters of credit issued outside of the 2018 Credit Facility.

In addition, as of June 26, 2021, bank guarantees of approximately $35 million were supported by our various credit facilities.

Our off-balance sheet commitments relating to our outstanding letters of credit were $34 million at September 25, 2021, including $6 million in letters of credit issued outside of the 2018 Credit Facility.

In addition, as of September 25, 2021, bank guarantees of approximately $35 million were supported by our various credit facilities.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis