What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-08 compared with 2022-11-09 · 174 added, 167 removed, 348 unchanged (49% of the section changed)

8 unchanged sentences

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, including that our estimates could materially differ if retail stores are forced to close, or if there are further supply chain disruptions, including production delays and increased costs, changes in consumer traffic and retail trends;

higher consumer debt level, recession and inflationary pressures;

higher consumer debt levels, recession and inflationary pressures;

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;

8 unchanged sentences

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 such share repurchases may be suspended or discontinued at any time;

the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions and/or pursuant to Rule 10b5-1 trading plans, 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;

8 unchanged sentences

“Risk Factors” in our Annual Report on Form 10-K for the year ended April 2, 2022, filed with the Securities and Exchange Commission on June 1, 2022.

Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design, style and craftsmanship, led by a world-class management team and renowned designers.

Our brands cover the full spectrum of fashion luxury categories including women’s and men’s accessories, footwear and ready-to-wear as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products.

Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA.

Capri Holdings is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors.

Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands.

We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories.

Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve.

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

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Certain Factors Affecting Financial Condition and Results of Operations

COVID-19 Pandemic.

The Company's performance during fiscal 2023 was adversely impacted due to lockdowns in certain regions, most notably in Greater China, as a result of an increase in infections due to variants of COVID-19.

These lockdowns resulted in store closures and an overall decline in demand in the region.

The situation continues to be very volatile and infection rates and government restrictions may continue to persist in Greater China or elsewhere.

Macroeconomic conditions and inflationary pressures.

Our business is affected by global economic conditions and the related impact on levels of consumer spending worldwide.

The war in Ukraine that began in February 2022 has created significant economic uncertainty in the region and caused us to stop all shipments to Russia and Ukraine.

While our business in Russia and Ukraine represented less than 1% of our total net sales for Fiscal 2022, the war has caused broader macroeconomic implications that we expect to continue for the foreseeable future, including the continued weakening of the Euro against the US dollar, increases in fuel prices, volatility in the financial markets and a decline in consumer spending which may negatively impact our business, financial condition, and results of operations for Fiscal 2023.

While our business in Russia and Ukraine represented less than 1% of our total net sales for Fiscal 2022, the war in Ukraine that began in February 2022 has created significant economic uncertainty in the region.

We stopped all wholesale shipments to Russia and our third-party partners are winding down retail operations in Russia, including through the closure of our retail stores in the territory.

The war has also caused broader macroeconomic implications that we expect to continue for the foreseeable future, including the continued weakening of the Euro against the US dollar and other foreign currency volatility, increases in fuel prices, volatility in the financial markets and a decline in consumer spending which may negatively impact our business, financial condition, and results of operations for Fiscal 2023.

In addition, inflationary pressures, including increased labor, raw materials, and freight costs are adversely impacting our earnings.

Purchases of discretionary luxury items, such as the accessories, footwear and apparel that we produce, tend to decline when disposable income is lower or when there are recessions, inflationary pressures or other economic uncertainty.

COVID-19 Pandemic.

These lockdowns resulted in store closures and an overall decline in demand in the region.

The situation continues to be very volatile and infection rates and government restrictions may continue to persist in Greater China or elsewhere.

Luxury goods trends and demand for our accessories and related merchandise .

5 unchanged sentences

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

however, growth may be limited by concerns over inflation and the possibility of a global recession.

however, growth may be limited by concerns over inflation, the possibility of a global recession, foreign currency volatility or worsening economic conditions.

Retail Fleet Optimization .

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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 throughout Fiscal 2023.

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.

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 and increased transportation costs, 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 April 2, 2022 for additional discussion.

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We generate revenue through the sale of Michael Kors products through four primary Michael Kors retail store formats:

“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our

products, as well as licensed products bearing our name, directly to consumers throughout the Americas, certain parts of EMEA and certain parts of Asia.

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

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

and certain parts of Asia.

Our Michael Kors e-commerce business includes e-commerce sites in the United States, Canada, 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.

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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 from operations by segment for the three and six months ended October 1, 2022 and September 25, 2021 (in millions):

Three Months Ended Six Months Ended

2022 September 25,

2021 October 1,

2022 September 25,

The following table presents our total revenue and income from operations by segment for the three and nine months ended December 31, 2022 and December 25, 2021 (in millions):

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Total revenue:

11 unchanged sentences

Impairment of assets (1)

(1) — (12) (33)

Restructuring and other charges (5) (14) (11) (25)

COVID-19 related charges 2 (1) 6 7

Impact of war in Ukraine 3 — 3 —

Total income from operations $ 236 $ 331 $ 719 $ 784

(1) Impairment of assets during the nine months ended December 31, 2022 and December 25, 2021, respectively, primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

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

2022 September 25,

2022 December 25,

Number of full price retail stores (including concessions):

12 unchanged sentences

The following table presents our retail stores by geographic location:

October 1, 2022 September 25, 2021

December 31, 2022 December 25, 2021

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

6 unchanged sentences

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

Three Months Ended Six Months Ended

2022 September 25, 2021 October 1,

2022 September 25, 2021

Three Months Ended Nine Months Ended

2022 December 25, 2021 December 31,

2022 December 25, 2021

Total revenue $ 1,512 $ 1,609 $ 4,284 $ 4,162

14 unchanged sentences

Results of Operations

Comparison of the three months ended October 1, 2022 with the three months ended September 25, 2021

The following table details the results of our operations for the three months ended October 1, 2022 and September 25, 2021, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Comparison of the three months ended December 31, 2022 with the three months ended December 25, 2021

The following table details the results of our operations for the three months ended December 31, 2022 and December 25, 2021, 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

2022 September 25,

2021 October 1,

2022 September 25,

2022 December 25,

2021 December 31,

2022 December 25,

Statements of Operations Data:

4 unchanged sentences

Depreciation and amortization 43 47 (4) (8.5) % 2.8 % 2.9 %

Impairment of assets 11 33 (22) (66.7) % 0.8 % 2.5 %

Impairment of assets 1 — 1 NM 0.1 % — %

Restructuring and other charges 5 14 (9) (64.3) % 0.3 % 0.9 %

3 unchanged sentences

Interest expense (income), net 12 (7) 19 NM 0.8 % (0.4) %

Foreign currency (gain) loss (11) 4 (15) NM (0.8) % 0.3 %

Foreign currency gain (3) (4) 1 (25.0) % (0.2) % (0.2) %

Income before income taxes 228 342 (114) (33.3) % 15.1 % 21.3 %

Provision (benefit) for income taxes 35 (2) 37 NM 2.5 % (0.2) %

Provision for income taxes 3 19 (16) (84.2) % 0.2 % 1.2 %

Net income 225 323 (98) (30.3) %

3 unchanged sentences

Total Revenue

Total revenue increased $112 million, or 8.6%, to $1.412 billion for the three months ended October 1, 2022, compared to $1.300 billion for the three months ended September 25, 2021, which included net unfavorable foreign currency effects of approximately $116 million as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the three months ended October 1, 2022.

On a constant currency basis, our total revenue increased $228 million, or 17.5%.

The increase is attributable to increased retail and wholesale revenues throughout the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions, for each of our brands.

Gross profit increased $67 million, or 7.6%, to $951 million for the three months ended October 1, 2022, compared to $884 million for the three months ended September 25, 2021, which included net unfavorable foreign currency effects of $83 million.

Gross profit as a percentage of total revenue was 67.4% and 68.0% for the three months ended October 1, 2022 and September 25, 2021, respectively.

Our gross profit margin decreased primarily due to increased supply chain costs and unfavorable channel mix for the three months ended October 1, 2022, as compared to the three months ended September 25, 2021.

Total revenue decreased $97 million, or 6.0%, to $1.512 billion for the three months ended December 31, 2022, compared to $1.609 billion for the three months ended December 25, 2021, which included net unfavorable foreign currency effects of approximately $89 million as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the three months ended December 31, 2022.

On a constant currency basis, our total revenue decreased $8 million, or 0.5%.

The decrease is attributable to lower wholesale revenues throughout the Americas and EMEA and decreased revenues in Greater China due to COVID-19 related disruptions for each of our brands.

Gross profit decreased $43 million, or 4.1%, to $1.005 billion for the three months ended December 31, 2022, compared to $1.048 billion for the three months ended December 25, 2021, which included net unfavorable foreign currency effects of $60 million.

Gross profit as a percentage of total revenue was 66.5% and 65.1% for the three months ended December 31, 2022 and December 25, 2021, respectively.

Our gross profit margin increased primarily due to lower supply chain costs for the three months ended December 31, 2022, as compared to the three months ended December 25, 2021.

Total Operating Expenses

Total operating expenses increased $10 million, or 1.5%, to $699 million for the three months ended October 1, 2022, compared to $689 million for the three months ended September 25, 2021.

Total operating expenses increased $52 million, or 7.3%, to $769 million for the three months ended December 31, 2022, compared to $717 million for the three months ended December 25, 2021.

Our operating expenses included a net favorable foreign currency impact of approximately $55 million.

Total operating expenses decreased to 49.5% as a percentage of total revenue for the three months ended October 1, 2022, compared to 53.0% for the three months ended September 25, 2021.

Total operating expenses increased to 50.9% as a percentage of total revenue for the three months ended December 31, 2022, compared to 44.6% for the three months ended December 25, 2021.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $43 million, or 7.2%, to $642 million for the three months ended October 1, 2022, compared to $599 million for the three months ended September 25, 2021, primarily due to increased e-commerce costs from higher revenue and higher corporate costs for the three months ended October 1, 2022.

Selling, general, and administrative expenses as a percentage of total revenue decreased to 45.5% for the three months ended October 1, 2022, compared to 46.1% for the three months ended September 25, 2021, primarily due to decreased retail store costs as a percentage of revenue due to higher revenue, partially offset by increased e-commerce costs as a percentage of revenue for the three months ended October 1, 2022, as compared to the three months ended September 25, 2021.

Unallocated 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 22.2%, to $55 million for the three months ended October 1, 2022 as compared to $45 million for the three months ended September 25, 2021, primarily due to an increase in costs related to the ongoing ERP system implementation and Capri transformation projects.

Selling, general and administrative expenses increased $64 million, or 9.8%, to $720 million for the three months ended December 31, 2022, compared to $656 million for the three months ended December 25, 2021, primarily due to increased marketing and unallocated corporate expenses for the three months ended December 31, 2022.

Selling, general, and administrative expenses as a percentage of total revenue increased to 47.6% for the three months ended December 31, 2022, compared to 40.8% for the three months ended December 25, 2021, primarily due to deleverage of costs on lower revenue for the three months ended December 31, 2022, as compared to the three months ended December 25, 2021.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $19 million, or 51.4%, to $56 million for the three months ended December 31, 2022 as compared to $37 million for the three months ended December 25, 2021, primarily due to an increase in professional fees and information technology costs related to the ongoing ERP system implementation and Capri transformation projects.

Depreciation and Amortization

Depreciation and amortization decreased $6 million, or 12.2%, to $43 million for the three months ended October 1, 2022, compared to $49 million for the three months ended September 25, 2021.

As a percentage of total revenue, depreciation and amortization decreased to 3.0% for the three months ended October 1, 2022, compared to 3.8% for the three months ended September 25, 2021.

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 $4 million, or 8.5%, to $43 million for the three months ended December 31, 2022, compared to $47 million for the three months ended December 25, 2021.

As a percentage of total revenue, depreciation and amortization decreased to 2.8% for the three months ended December 31, 2022, compared to 2.9% for the three months ended December 25, 2021.

Impairment of Assets

During the three months ended October 1, 2022 and September 25, 2021, we recognized asset impairment charges of $11 million and $33 million, respectively, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

During the three months ended December 31, 2022, we recognized asset impairment charges of $1 million, which primarily related to operating lease right-of-use assets at a Jimmy Choo store location.

During the three months ended December 25, 2021, we did not recognize any impairment charges.

See Note 11 to the accompanying consolidated financial statements for additional information.

Restructuring and Other Charges

We recognized restructuring and other charges of $3 million and $8 million for the three months ended October 1, 2022 and September 25, 2021, respectively.

We recognized restructuring and other charges of $5 million and $14 million for the three months ended December 31, 2022 and December 25, 2021, respectively.

The charges are primarily related to equity awards associated with the acquisition of Versace.

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Income from Operations

As a result of the foregoing, income from operations increased $57 million, to $252 million for three months ended October 1, 2022, compared to $195 million for the three months ended September 25, 2021.

Income from operations as a percentage of total revenue increased to 17.8% for the three months ended October 1, 2022, compared to 15.0% for the three months ended September 25, 2021.

As a result of the foregoing, income from operations decreased $95 million, to $236 million for three months ended December 31, 2022, compared to $331 million for the three months ended December 25, 2021.

Income from operations as a percentage of total revenue decreased to 15.6% for the three months ended December 31, 2022, compared to 20.6% for the three months ended December 25, 2021.

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

Interest Expense (Income), net

For the three months ended October 1, 2022, we recognized $5 million of interest expense compared to $5 million of interest income for the three months ended September 25, 2021.

For the three months ended December 31, 2022, we recognized $12 million of interest expense compared to $7 million of interest income for the three months ended December 25, 2021.

The $19 million increase in interest expense (income), net, is primarily due to higher effective interest rates on our outstanding debt, higher average borrowings outstanding and lower interest income from our net investment hedges, partially offset by higher interest income earned on our cash and cash equivalents (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

For the three months ended October 1, 2022, we recognized a net foreign currency gain of $11 million, primarily attributable to a gain related to an undesignated forward foreign currency exchange contract partially offset by losses attributable to intercompany transactions among our subsidiaries.

For 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.

Provision (Benefit) for Income Taxes

The provision for income taxes was $35 million for the three months ended October 1, 2022, compared to a benefit of $2 million for the three months ended September 25, 2021.

Our effective tax rates were 13.5% and (1.0)% for the three months ended October 1, 2022 and September 25, 2021, respectively.

The increase in our effective tax rate was primarily related to a benefit recognized during the prior year due to newly enacted tax legislation in Italy, which allowed a step up in certain intangible assets and a reduction of deferred tax liabilities.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the current fiscal year quarter.

Foreign Currency Gain

For the three months ended December 31, 2022 and December 25, 2021, we recognized a net foreign currency gain of $3 million and $4 million, respectively, primarily attributable to intercompany transactions among our subsidiaries.

Provision for Income Taxes

The provision for income taxes was $3 million for the three months ended December 31, 2022, compared to $19 million for the three months ended December 25, 2021.

Our effective tax rates were 1.3% and 5.6% for the three months ended December 31, 2022 and December 25, 2021, respectively.

In the current year, the decrease in our effective tax rate was primarily related to the release of a valuation allowance in the United Kingdom.

In the prior year, our effective tax rate included a favorable impact from a net operating loss carryback claim made in the United States as a result of COVID-19 related losses.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the third quarter of Fiscal 2023.

Our effective tax rate may fluctuate from time to time due to the effects of changes in United States federal, state and local taxes and tax rates in foreign jurisdictions.

1 unchanged sentence

Net Income Attributable to Capri

As a result of the foregoing, our net income increased $24 million to $224 million for the three months ended October 1, 2022, compared to $200 million for the three months ended September 25, 2021.

As a result of the foregoing, our net income decreased $97 million to $225 million for the three months ended December 31, 2022, compared to $322 million for the three months ended December 25, 2021.

Segment Information

Three Months Ended % Change

(dollars in millions) October 1,

2022 September 25,

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

3 unchanged sentences

Operating margin 9.6 % 12.7 %

Versace revenues increased $26 million, or 9.2%, to $308 million for the three months ended October 1, 2022, compared to $282 million for the three months ended September 25, 2021, which included unfavorable foreign currency effects of $52 million.

On a constant currency basis, revenue increased $78 million, or 27.7%, primarily attributable to increased retail revenue and higher wholesale shipments in the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Versace revenues decreased $2 million, or 0.8%, to $249 million for the three months ended December 31, 2022, compared to $251 million for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $30 million.

On a constant currency basis, revenue increased $28 million, or 11.2%, primarily attributable to increased retail revenue and higher wholesale shipments in EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended October 1, 2022, Versace recorded income from operations of $62 million, compared to $55 million for the three months ended September 25, 2021.

Operating margin increased from 19.5% for the three months ended September 25, 2021, to 20.1% for the three months ended October 1, 2022, primarily due to leveraging of operating expenses on higher revenue and higher average unit price partially offset by unfavorable channel mix.

For the three months ended December 31, 2022, Versace recorded income from operations of $24 million, compared to $32 million for the three months ended December 25, 2021.

Operating margin decreased from 12.7% for the three months ended December 25, 2021, to 9.6% for the three months ended December 31, 2022, primarily due to higher employee costs.

Three Months Ended % Change

(dollars in millions) October 1,

2022 September 25,

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

1 unchanged sentence

Revenues $ 168 $ 178 $ (10) (5.6) % 3.4 %

Income from operations $ 8 $ 1 $ 7 NM

Income from operations $ 18 $ 16 $ 2 12.5 %

Operating margin 10.7 % 9.0 %

NM Not meaningful

Jimmy Choo revenues increased $5 million, or 3.6%, to $142 million for the three months ended October 1, 2022, compared to $137 million for the three months ended September 25, 2021, which included unfavorable foreign currency effects of $16 million.

On a constant currency basis, revenue increased $21 million, or 15.3%, primarily attributable to increased retail revenue in the Americas.

Jimmy Choo revenues decreased $10 million, or 5.6%, to $168 million for the three months ended December 31, 2022, compared to $178 million for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $16 million.

On a constant currency basis, revenue increased $6 million, or 3.4%, primarily attributable to increased revenue in the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended October 1, 2022, Jimmy Choo recorded income from operations of $8 million, compared to $1 million for the three months ended September 25, 2021.

Operating margin increased from 0.7% for the three months ended September 25, 2021 to 5.6% for the three months ended October 1, 2022, primarily due to higher average unit price and lower promotional activity.

For the three months ended December 31, 2022, Jimmy Choo recorded income from operations of $18 million, compared to $16 million for the three months ended December 25, 2021.

Operating margin increased from 9.0% for the three months ended December 25, 2021 to 10.7% for the three months ended December 31, 2022, primarily due to higher average unit price partially offset by deleverage of expense on lower revenues.

Three Months Ended % Change

(dollars in millions) October 1,

2022 September 25,

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

3 unchanged sentences

Operating margin 22.9 % 28.4 %

Michael Kors revenues increased $81 million, or 9.2%, to $962 million for the three months ended October 1, 2022, compared to $881 million for the three months ended September 25, 2021, which included unfavorable foreign currency effects of $48 million.

On a constant currency basis, revenue increased $129 million, or 14.6%, primarily due to higher wholesale shipments and increased retail revenue in the Americas and EMEA, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Michael Kors revenues decreased $85 million, or 7.2%, to $1.095 billion for the three months ended December 31, 2022, compared to $1.180 billion for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $43 million.

On a constant currency basis, revenue decreased $42 million, or 3.6%, primarily due to decreased wholesale revenues throughout the Americas and EMEA and decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended October 1, 2022, Michael Kors recorded income from operations of $248 million, compared to $220 million for the three months ended September 25, 2021.

Operating margin increased from 25.0% for the three months ended September 25, 2021, to 25.8% for the three months ended October 1, 2022, primarily due to leveraging of operating expenses on higher revenue, partially offset by increased supply chain costs.

For the three months ended December 31, 2022, Michael Kors recorded income from operations of $251 million, compared to $335 million for the three months ended December 25, 2021.

Operating margin decreased from 28.4% for the three months ended December 25, 2021, to 22.9% for the three months ended December 31, 2022, primarily due to increased marketing investments and deleverage of expenses on lower revenues partially offset by lower supply chain costs.

Results of Operations

Comparison of the six months ended October 1, 2022 with the six months ended September 25, 2021

The following table details the results of our operations for the six months ended October 1, 2022 and September 25, 2021, 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

2022 September 25,

2021 October 1, 2022 September 25, 2021

Comparison of the nine months ended December 31, 2022 with the nine months ended December 25, 2021

The following table details the results of our operations for the nine months ended December 31, 2022 and December 25, 2021, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

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

2022 December 25,

2021 December 31, 2022 December 25, 2021

Statements of Operations Data:

8 unchanged sentences

Income from operations 719 784 (65) (8.3) % 16.8 % 18.8 %

Other income, net (1) (2) 1 NM — % (0.1) %

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

Interest expense (income), net 13 (11) 24 NM 0.3 % (0.3) %

4 unchanged sentences

Net income 652 742 (90) (12.1) %

Net income attributable to noncontrolling interest 2 — 2 NM

Net income attributable to noncontrolling interest 2 1 1 100.0 %

Net income attributable to Capri $ 650 $ 741 $ (91) (12.3) %

1 unchanged sentence

Total Revenue

Total revenue increased $219 million, or 8.6%, to $2.772 billion for the six months ended October 1, 2022, compared to $2.553 billion for the six months ended September 25, 2021, which included net unfavorable foreign currency effects of approximately $199 million, as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the six months ended October 1, 2022.

Total revenue increased $122 million, or 2.9%, to $4.284 billion for the nine months ended December 31, 2022, compared to $4.162 billion for the nine months ended December 25, 2021, which included net unfavorable foreign currency effects of approximately $288 million, as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the nine months ended December 31, 2022.

On a constant currency basis, our total revenue increased $410 million, or 9.9%.

Gross profit increased $112 million, or 6.4%, to $1.852 billion for the six months ended October 1, 2022, compared to $1.740 billion for the six months ended September 25, 2021, which included net unfavorable foreign currency effects of $141 million.

Gross profit as a percentage of total revenue was 66.8% for the six months ended October 1, 2022, compared to 68.2% for the six months ended September 25, 2021.

The decrease in gross profit margin was primarily attributable to increased supply chain costs and unfavorable channel mix for the six months ended October 1, 2022, as compared to the six months ended September 25, 2021.

Gross profit increased $69 million, or 2.5%, to $2.857 billion for the nine months ended December 31, 2022, compared to $2.788 billion for the nine months ended December 25, 2021, which included net unfavorable foreign currency effects of $201 million.

Gross profit as a percentage of total revenue was 66.7% for the nine months ended December 31, 2022, compared to 67.0% for the nine months ended December 25, 2021.

The decrease in gross profit margin was primarily attributable to increased supply chain costs and unfavorable channel mix for the nine months ended December 31, 2022, as compared to the nine months ended December 25, 2021.

Total Operating Expenses

Total operating expenses increased $82 million, or 6.4%, to $1.369 billion for the six months ended October 1, 2022, compared to $1.287 billion for the six months ended September 25, 2021.

Total operating expenses increased $134 million, or 6.7%, to $2.138 billion for the nine months ended December 31, 2022, compared to $2.004 billion for the nine months ended December 25, 2021.

Our operating expenses included a net favorable foreign currency impact of approximately $167 million.

Total operating expenses decreased to 49.4% as a percentage of total revenue for the six months ended October 1, 2022, compared to 50.4% for the six months ended September 25, 2021.

Total operating expenses increased to 49.9% as a percentage of total revenue for the nine months ended December 31, 2022, compared to 48.1% for the nine months ended December 25, 2021.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $120 million, or 10.5%, to $1.264 billion for the six months ended October 1, 2022, compared to $1.144 billion for the six months ended September 25, 2021, primarily due to increased e-commerce costs on higher revenue, higher retail store and corporate costs and increased marketing investments for the six months ended October 1, 2022.

Selling, general and administrative expenses as a percentage of total revenue increased to 45.6% for the six months ended October 1, 2022, compared to 44.8% for the six months ended September 25, 2021, primarily due to increased e-commerce costs partially offset by leveraging retail store costs as a percentage of revenue for the six months ended October 1, 2022, as compared to the six months ended September 25, 2021.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $29 million, or 33.7%, to $115 million for the six months ended October 1, 2022 as compared to $86 million for the six months ended September 25, 2021, primarily due to an increase in costs related to the ongoing ERP system implementation and Capri transformation projects.

Selling, general and administrative expenses increased $184 million, or 10.2%, to $1.984 billion for the nine months ended December 31, 2022, compared to $1.800 billion for the nine months ended December 25, 2021, primarily due to increased marketing and unallocated corporate expenses for the nine months ended December 31, 2022.

Selling, general and administrative expenses as a percentage of total revenue increased to 46.3% for the nine months ended December 31, 2022, compared to 43.2% for the nine months ended December 25, 2021, primarily due to increased marketing investments and unallocated corporate expenses as a percentage of revenue for the nine months ended December 31, 2022, as compared to the nine months ended December 25, 2021.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $48 million, or 39.0%, to $171 million for the nine months ended December 31, 2022 as compared to $123 million for the nine months ended December 25, 2021, primarily due to an increase in professional fees and information technology costs related to the ongoing ERP system implementation and Capri transformation projects.

Depreciation and Amortization

Depreciation and amortization decreased $11 million, or 11.1%, to $88 million for the six months ended October 1, 2022, compared to $99 million for the six months ended September 25, 2021.

Depreciation and amortization decreased to 3.2% as a percentage of total revenue for the six months ended October 1, 2022, compared to 3.9% for the six months ended September 25, 2021.

Depreciation and amortization decreased $15 million, or 10.3%, to $131 million for the nine months ended December 31, 2022, compared to $146 million for the nine months ended December 25, 2021.

Depreciation and amortization decreased to 3.1% as a percentage of total revenue for the nine months ended December 31, 2022, compared to 3.5% for the nine months ended December 25, 2021.

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

Impairment of Assets

For the six months ended October 1, 2022 and September 25, 2021, we recognized asset impairment charges of $11 million and $33 million, respectively, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

For the nine months ended December 31, 2022 and December 25, 2021, we recognized asset impairment charges of $12 million and $33 million, respectively, which are 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.

Restructuring and Other Charges

We recognized restructuring and other charges of $6 million and $11 million for the six months ended October 1, 2022 and September 25, 2021, respectively.

We recognized restructuring and other charges of $11 million and $25 million for the nine months ended December 31, 2022 and December 25, 2021, respectively.

These charges are primarily related to equity awards associated with the acquisition of Versace.

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Income from Operations

As a result of the foregoing, income from operations increased $30 million, to $483 million for the six months ended October 1, 2022, compared to $453 million for the six months ended September 25, 2021.

Income from operations as a percentage of total revenue decreased to 17.4% for the six months ended October 1, 2022, compared to 17.7% for the six months ended September 25, 2021.

As a result of the foregoing, income from operations decreased $65 million, to $719 million for the nine months ended December 31, 2022, compared to $784 million for the nine months ended December 25, 2021.

Income from operations as a percentage of total revenue decreased to 16.8% for the nine months ended December 31, 2022, compared to 18.8% for the nine months ended December 25, 2021.

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

Interest Expense (Income), net

For the six months ended October 1, 2022, we recognized $1 million of interest expense compared to $4 million of interest income for the six months ended September 25, 2021.

The $5 million increase in interest expense (income), net, is primarily due to higher effective interest rates on our outstanding debt and higher average borrowings outstanding, partially

offset by higher interest income earned on our cash and cash equivalents (see Note 9 to the accompanying consolidated financial statements for additional information).

For the nine months ended December 31, 2022, we recognized $13 million of interest expense compared to $11 million of interest income for the nine months ended December 25, 2021.

The $24 million increase in interest expense (income), net, is primarily due to higher effective interest rates on our outstanding debt, higher average borrowings outstanding and lower

interest income from our net investment hedges, partially offset by higher interest income earned on our cash and cash equivalents (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

For the six months ended October 1, 2022, we recognized a net foreign currency gain of $7 million, primarily attributable to a gain related to an undesignated forward foreign currency exchange contract partially offset by losses attributable to intercompany transactions among our subsidiaries.

For the six months ended September 25, 2021, we recognized a net foreign currency loss of $5 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.

For the nine months ended December 31, 2022, we recognized a net foreign currency gain of $10 million, primarily attributable to a gain related to an undesignated forward foreign currency exchange contract partially offset by losses attributable to intercompany transactions among our subsidiaries.

For the nine months ended December 25, 2021, we recognized a net foreign currency loss of $1 million, primarily attributable to the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

For the six months ended October 1, 2022, we recognized $63 million of income tax expense compared to $35 million for the six months ended September 25, 2021.

Our effective tax rate was 12.9% and 7.7% for the six months ended October 1, 2022 and September 25, 2021, respectively.

The increase in our effective rate was primarily due to a net benefit recognized in the prior year due to newly enacted tax legislation in Italy, partially offset by the impact of the tax rate change in the United Kingdom during the prior year.

For the nine months ended December 31, 2022, we recognized $66 million of income tax expense compared to $54 million for the nine months ended December 25, 2021.

Our effective tax rate was 9.2% and 6.8% for the nine months ended December 31, 2022 and December 25, 2021, respectively.

In the current year, our effective tax rate benefited from the release of a valuation allowance in the United Kingdom.

In the prior year, our effective tax rate included a favorable impact from a net benefit recognized as a result of newly enacted tax legislation in Italy and a net operating loss carryback claim made in the United States as a result of COVID-19 related losses.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the current fiscal year.

Our effective tax rate may fluctuate from time to time due to the effects of changes in United States federal, state and local taxes and tax rates in foreign jurisdictions.

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Net Income Attributable to Capri

As a result of the foregoing, our net income increased $6 million to $425 million for the six months ended October 1, 2022, compared to $419 million for the six months ended September 25, 2021.

As a result of the foregoing, our net income decreased $91 million to $650 million for the nine months ended December 31, 2022, compared to $741 million for the nine months ended December 25, 2021.

Segment Information

Six Months Ended % Change

(dollars in millions) October 1,

2022 September 25,

Nine Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

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Operating margin 16.6 % 17.5 %

Versace revenues increased $61 million, or 11.7%, to $583 million for the six months ended October 1, 2022, compared to $522 million for the six months ended September 25, 2021, which included unfavorable foreign currency effects of $88 million.

On a constant currency basis, revenue increased $149 million, or 28.5%, primarily attributable to increased retail revenue and higher wholesale shipments in the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Versace revenues increased $59 million, or 7.6%, to $832 million for the nine months ended December 31, 2022, compared to $773 million for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $118 million.

On a constant currency basis, revenue increased $177 million, or 22.9%, primarily attributable to increased retail revenue and wholesale shipments in the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the six months ended October 1, 2022, Versace recorded income from operations of $114 million, compared to $103 million for the six months ended September 25, 2021.

Operating margin decreased from 19.7% for the six months ended September 25, 2021, to 19.6% for the six months ended October 1, 2022, primarily due to unfavorable channel mix offset by higher average unit price.

Six Months Ended % Change

(dollars in millions) October 1,

2022 September 25,

For the nine months ended December 31, 2022, Versace recorded income from operations of $138 million, compared to $135 million for the nine months ended December 25, 2021.

Operating margin decreased from 17.5% for the nine months ended December 25, 2021, to 16.6% for the nine months ended December 31, 2022, primarily due to unfavorable channel mix offset by higher average unit price.

Nine Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

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Revenues $ 482 $ 457 $ 25 5.5 % 15.1 %

Income from operations $ 27 $ 12 $ 15 NM

Income from operations $ 45 $ 28 $ 17 60.7 %

Operating margin 9.3 % 6.1 %

NM Not meaningful

Jimmy Choo revenues increased $35 million, or 12.5%, to $314 million for the six months ended October 1, 2022, compared to $279 million for the six months ended September 25, 2021, which included unfavorable foreign currency effects of $29 million.

On a constant currency basis, revenue increased $64 million, or 22.9%, primarily attributable to increased retail revenue and higher wholesale shipments in the Americas and EMEA, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Jimmy Choo revenues increased $25 million, or 5.5%, to $482 million for the nine months ended December 31, 2022, compared to $457 million for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $44 million.

On a constant currency basis, revenue increased $69 million, or 15.1%, primarily attributable to increased retail revenue and wholesale shipments in the Americas and EMEA, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Income from Operations

For the six months ended October 1, 2022, Jimmy Choo recorded income from operations of $27 million, compared to $12 million for the six months ended September 25, 2021.

Operating margin increased from 4.3% for the six months ended September 25, 2021, to 8.6% for the six months ended October 1, 2022, primarily due to higher average unit price and leveraging of operating expenses on higher revenue.

Six Months Ended % Change

For the nine months ended December 31, 2022, Jimmy Choo recorded income from operations of $45 million, compared to $28 million for the nine months ended December 25, 2021.

Operating margin increased from 6.1% for the nine months ended December 25, 2021, to 9.3% for the nine months ended December 31, 2022, primarily due to higher average unit price and leveraging of operating expenses on higher revenue.

Nine Months Ended % Change

(dollars in millions)

2022 September 25,

2022 December 25,

2021 $ Change As

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Operating margin 24.3 % 27.1 %

Michael Kors revenues increased $123 million, or 7.0%, to $1.875 billion for the six months ended October 1, 2022, compared to $1.752 billion for the six months ended September 25, 2021, which included unfavorable foreign currency effects of $82 million.

Michael Kors revenues increased $38 million, or 1.3%, to $2.970 billion for the nine months ended December 31, 2022, compared to $2.932 billion for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $126 million.

On a constant currency basis, revenue increased $164 million, or 5.6%, primarily due to higher wholesale shipments and increased retail revenue in the Americas and EMEA, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Income from Operations

For the six months ended October 1, 2022, Michael Kors recorded income from operations of $470 million, compared to $460 million for the six months ended September 25, 2021.

Operating margin decreased from 26.3% for the six months ended September 25, 2021, to 25.1% for the six months ended October 1, 2022, primarily due to increased supply chain costs.

For the nine months ended December 31, 2022, Michael Kors recorded income from operations of $721 million, compared to $795 million for the nine months ended December 25, 2021.

Operating margin decreased from 27.1% for the nine months ended December 25, 2021, to 24.3% for the nine months ended December 31, 2022, primarily due to increased supply chain costs, unfavorable regional mix and increased marketing investments.

Liquidity and Capital Resources

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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, investments in corporate and distribution facilities, continued systems development, e-commerce and marketing initiatives.

We spent $86 million on capital expenditures during the six months ended October 1, 2022.

We spent $168 million on capital expenditures during the nine months ended December 31, 2022.

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

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Long-term debt $ 1,521 $ 1,131

Six Months Ended

2022 September 25,

Nine Months Ended

2022 December 25,

Cash Flows Provided By (Used In):

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Cash Provided by Operating Activities

Net cash provided by operating activities decreased $357 million to $39 million during the six months ended October 1, 2022, as compared to $396 million for the six months ended September 25, 2021, as a result of a decrease in our net income after non-cash adjustments and 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 when compared to the prior year.

Net cash provided by operating activities decreased $97 million to $616 million during the nine months ended December 31, 2022, as compared to $713 million for the nine months ended December 25, 2021, as a result of a decrease in our net income after non-cash adjustments partially offset by deceleration of inventory receipts compared to prior year.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $323 million during the six months ended October 1, 2022, as compared to net cash used in investing activities of $48 million during the six months ended September 25, 2021.

The increase in net cash provided by investing activities were primarily attributable to the settlement of certain net investment hedges of $409 million during the six months ended October 1, 2022 partially offset by higher capital expenditures of $38 million compared to prior year.

Net cash provided by investing activities was $241 million during the nine months ended December 31, 2022, as compared to net cash used in investing activities of $26 million during the nine months ended December 25, 2021.

The increase in net cash provided by investing activities were primarily attributable to the higher settlement of net investment hedges of $350 million during the nine months ended December 31, 2022 partially offset by higher capital expenditures of $83 million compared to prior year.

Cash Used in Financing Activities

Net cash used in financing activities was $209 million during the six months ended October 1, 2022, as compared to $342 million during the six months ended September 25, 2021.

Net cash used in financing activities was $651 million during the nine months ended December 31, 2022, as compared to $663 million during the nine months ended December 25, 2021.

The decrease of cash used in financing activities of $12 million was primarily attributable to an increase in net debt borrowing of $657 million, partially offset by a $604 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 October 1, 2022 and April 2, 2022 (in millions):

The following table presents a summary of our borrowing capacity and amounts outstanding as of December 31, 2022 and April 2, 2022 (in millions):

2022 April 2,

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Remaining availability $ 905 $ 804

Term Loan Facility ($1.6 billion)

2018 Term Loan ($1.6 billion)

Borrowings outstanding, net of debt issuance costs (3)

Versace Term Loan (450 million Euro)

Borrowings outstanding, net of debt issuance costs (4)

Senior Notes due 2024

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Versace Uncommitted Credit Facilities:

Total availability (48 million Euro) (5)

Total availability (40 million Euro and 48 million Euro) (6)

Borrowings outstanding — —

Remaining availability (48 million Euro) $ 47 $ 52

Remaining availability (40 million Euro and 48 million Euro) $ 43 $ 52

Total borrowings outstanding (1)

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(1) The financial covenant in our 2022 Credit Facility requires us to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.0.

As of October 1, 2022 and April 2, 2022, we were in compliance with all covenants related to our agreements then in effect governing our debt.

As of December 31, 2022 and April 2, 2022, 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) As of October 1, 2022 and April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(3) As of October 1, 2022, we no longer had a Term Loan Facility under our 2022 Credit Facility as it was fully repaid.

(2) As of December 31, 2022 and April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(3) As of December 31, 2022, we no longer had an outstanding balance under the 2018 Term Loan as it was repaid.

As of April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(4) The balance as of October 1, 2022 consists of $14 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $10 million related to the sale of certain Versace tax receivables, with $1 million and $9 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $2 million of other loans recorded as long-term debt in our consolidated balance sheets.

(4) On December 5, 2022, Gianni Versace S.r.l., our wholly owned subsidiary, entered into a credit facility, which provides a senior unsecured term loan in an aggregate principal amount of €450 million (approximately $482 million).

As of December 31, 2022 all amounts are recorded as long-term debt in our consolidated balance sheets.

(5) The balance as of December 31, 2022 consists of $18 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $11 million related to the sale of certain Versace tax receivables, with $1 million and $10 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $2 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of April 2, 2022 consists of $21 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets, $18 million related to the sale of certain Versace tax receivables, with $8 million and $10 million, respectively, 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.

(5) The balance as of October 1, 2022 and April 2, 2022 represents the total availability of the credit facility, which excludes bank guarantees.

(6) The balance as of December 31, 2022 and April 2, 2022 represents the total availability of the credit facility, which excludes bank guarantees.

We believe that our 2022 Credit Facility is adequately diversified with no undue concentration in any one financial institution.

As of October 1, 2022, there were 17 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of December 31, 2022, there were 17 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 2022 Credit Facility.

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Share Repurchase Program

The following table presents our ordinary share repurchases during the six months ended October 1, 2022 and September 25, 2021 (dollars in millions):

Six Months Ended

2022 September 25,

The following table presents our ordinary share repurchases during the nine months ended December 31, 2022 and December 25, 2021 (dollars in millions):

Nine Months Ended

2022 December 25,

Cost of shares repurchased under share repurchase program $ 950 $ 350

4 unchanged sentences

19,222,181 6,127,566

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.

Subsequently, on November 3, 2021, we announced that our Board of Directors had terminated our existing $500 million share repurchase program (the “Prior Plan”), with $250 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2022 Plan”) 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.

On June 1, 2022, we announced that our Board of Directors had terminated our Fiscal 2022 Plan, with $500 million of availability remaining, and authorized a new share repurchase program (the “Existing Share Repurchase Plan”) pursuant to which we may, from time to time, repurchase up to $1.0 billion of our outstanding ordinary shares within period of two years from the effective date of the 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.

Subsequently, on November 3, 2021, the Company announced that its Board of Directors had terminated the Company’s existing $500 million share repurchase program (the “Prior Plan”), which had $250 million of availability remaining at the time, and authorized a new share repurchase program (the “Fiscal 2022 Plan”) pursuant to which the Company was permitted, from time to time, to repurchase up to $1.0 billion of its outstanding ordinary shares within a period of two years from the effective date of the program.

On June 1, 2022, the Company announced that its Board of Directors had terminated the Fiscal 2022 Plan, with $500 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2023 Plan”) pursuant to

which the Company may, from time to time, repurchase up to $1.0 billion of its outstanding ordinary shares within a period of 2 years from the effective date of the program.

On November 9, 2022, the Company announced that its Board of Directors approved a new share repurchase program (the “Existing Share Repurchase Plan”) of up to $1 billion of its outstanding ordinary shares, providing additional capacity to return cash to shareholders over the longer term.

This new two-year program replaced the Fiscal 2023 Plan which had $250 million of availability remaining.

Share repurchases may be made in open market or privately negotiated transactions and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors.

The program may be suspended or discontinued at any time.

Subsequent to October 1, 2022, we purchased 2,295,845 shares for a total cost of approximately $100 million, including commissions, under the Existing Share Repurchase Plan pursuant to a Rule 10b5-1 trading plan.

On November 9, 2022, we terminated the Existing Share Repurchase Plan and implemented a new share repurchase plan.

See Note 17 to the accompanying consolidated financial statements for additional information.

Contractual Obligations and Commercial Commitments

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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 $34 million at October 1, 2022, including $12 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of October 1, 2022, bank guarantees of approximately $32 million were supported by our various credit facilities.

Our off-balance sheet commitments relating to our outstanding letters of credit were $35 million at December 31, 2022, including $20 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of December 31, 2022, 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