What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-02-08 · 200 added, 315 removed, 567 unchanged (48% of the section changed)

35 unchanged sentences

650,000,000 shares authorized;

223,781,728 shares issued and 125,398,217 outstanding at December 31, 2022;

225,684,542 shares issued and 116,064,396 outstanding at July 1, 2023;

224,166,250 shares issued and 117,347,045 outstanding at April 1, 2023

Treasury shares, at cost ( 98,383,511 shares at December 31, 2022 and 79,161,330 shares at April 2, 2022)

Treasury shares, at cost ( 109,620,146 shares at July 1, 2023 and 106,819,205 shares at April 1, 2023)

( 5,457 ) ( 5,351 )

10 unchanged sentences

(In millions, except share and per share data)

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

Total revenue $ 1,229 $ 1,360

Cost of goods sold 417 459

1,005 1,048 2,857 2,788

Selling, general and administrative expenses 689 622

Depreciation and amortization 45 45

Impairment of assets 1 — 12 33

Restructuring and other charges 5 14 11 25

Restructuring and other (income) expense ( 2 ) 3

Total operating expenses 732 670

Income from operations 80 231

Other income, net ( 1 ) — ( 2 ) ( 2 )

Other expense, net 1 —

Interest expense (income), net 8 ( 4 )

Foreign currency (gain) loss ( 3 ) ( 4 ) ( 10 ) 1

Foreign currency loss 21 4

Income before income taxes 50 231

15 unchanged sentences

Net income attributable to noncontrolling interest — 2

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

Comprehensive income attributable to Capri $ 38 $ 96

4 unchanged sentences

Ordinary Shares Additional

Capital Treasury Shares Accumulated Other Comprehensive (Loss) Income Retained

Earnings Total Equity of Capri Non-controlling Interest Total Equity

Shares Amounts Shares Amounts

Balance at October 1, 2022 223,707 $ — $ 1,311 ( 92,618 ) $ ( 4,650 ) $ ( 35 ) $ 5,517 $ 2,143 $ — $ 2,143

Net income — — — — — — 225 225 — 225

Other comprehensive income — — — — — 140 — 140 — 140

Total comprehensive income — — — — — — — 365 — 365

Vesting of restricted awards, net of forfeitures

75 — — — — — — — — —

Share-based compensation expense — — 16 — — — — 16 — 16

Repurchase of ordinary shares — — — ( 5,766 ) ( 301 ) — — ( 301 ) — ( 301 )

Balance at December 31, 2022 223,782 $ — $ 1,327 ( 98,384 ) $ ( 4,951 ) $ 105 $ 5,742 $ 2,223 $ — $ 2,223

Ordinary Shares Additional

Capital Treasury Shares Accumulated Other Comprehensive Income (Loss) Retained

Capital Treasury Shares Accumulated Other Comprehensive Income Retained

Earnings Total Equity of Capri Non-controlling Interest Total Equity

1 unchanged sentence

Balance at April 1, 2023 224,166 $ — $ 1,344 ( 106,819 ) $ ( 5,351 ) $ 147 $ 5,708 $ 1,848 $ 1 $ 1,849

221,967 $ — $ 1,260 ( 79,161 ) $ ( 3,987 ) $ 194 $ 5,092 $ 2,559 $ ( 1 ) $ 2,558

Net income — — — — — — 48 48 — 48

5 unchanged sentences

Repurchase of ordinary shares — — — ( 2,801 ) ( 106 ) — — ( 106 ) — ( 106 )

Other — — 1 — — — — 1 ( 1 ) —

Balance at December 31, 2022 223,782 $ — $ 1,327 ( 98,384 ) $ ( 4,951 ) $ 105 $ 5,742 $ 2,223 $ — $ 2,223

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

Ordinary Shares Additional

Capital Treasury Shares Accumulated Other Comprehensive Income Retained

Earnings Total Equity of Capri Non-controlling Interest Total Equity

Shares Amounts Shares Amounts

Balance at September 25, 2021 221,296 $ — $ 1,225 ( 70,849 ) $ ( 3,486 ) $ 174 $ 4,689 $ 2,602 $ ( 2 ) $ 2,600

Net income — — — — — — 322 322 1 323

Other comprehensive income — — — — — 39 — 39 — 39

Total comprehensive income — — — — — — — 361 1 362

Vesting of restricted awards, net of forfeitures

27 — — — — — — — — —

Exercise of employee share options

— — — — — — — — — —

Share-based compensation expense — — 13 — — — — 13 — 13

Repurchase of ordinary shares — — — ( 3,222 ) ( 200 ) — — ( 200 ) — ( 200 )

Balance at December 25, 2021 221,323 $ — $ 1,238 ( 74,071 ) $ ( 3,686 ) $ 213 $ 5,011 $ 2,776 $ ( 1 ) $ 2,775

Balance at July 1, 2023 225,684 $ — $ 1,375 ( 109,620 ) $ ( 5,457 ) $ 137 $ 5,756 $ 1,811 $ 1 $ 1,812

Ordinary Shares Additional

2 unchanged sentences

Shares Amounts Shares Amounts

Balance at March 27, 2021

Balance at April 2, 2022

221,967 $ — $ 1,260 ( 79,161 ) $ ( 3,987 ) $ 194 $ 5,092 $ 2,559 $ ( 1 ) $ 2,558

Net income — — — — — — 201 201 2 203

Other comprehensive income (loss) — — — — — 157 — 157 ( 1 ) 156

Other comprehensive loss — — — — — ( 105 ) — ( 105 ) — ( 105 )

Total comprehensive income — — — — — — — 96 2 98

5 unchanged sentences

Repurchase of ordinary shares — — — ( 6,386 ) ( 312 ) — — ( 312 ) — ( 312 )

Balance at December 25, 2021 221,323 $ — $ 1,238 ( 74,071 ) $ ( 3,686 ) $ 213 $ 5,011 $ 2,776 $ ( 1 ) $ 2,775

Balance at July 2, 2022

223,504 $ — $ 1,294 ( 85,547 ) $ ( 4,299 ) $ 89 $ 5,293 $ 2,377 $ 1 $ 2,378

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In millions)

Nine Months Ended

2022 December 25,

Three Months Ended

Cash flows from operating activities

4 unchanged sentences

Deferred income taxes ( 2 ) 1

Impairment of assets 12 43

Changes to lease related balances, net ( 29 ) ( 33 )

Foreign currency loss (gain) 10 ( 7 )

Foreign currency loss 20 1

Other non-cash adjustments 2 1

10 unchanged sentences

Settlement of net investment hedges — 66

Net cash provided by (used in) investing activities 241 ( 26 )

Net cash (used in) provided by investing activities ( 50 ) 30

Cash flows from financing activities

4 unchanged sentences

Exercise of employee share options 1 6

Other financing activities — 31

Net cash used in financing activities ( 3 ) ( 50 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3 ) ( 65 )

Net increase in cash, cash equivalents and restricted cash 112 30

Net (decrease) increase in cash, cash equivalents and restricted cash ( 16 ) 52

Beginning of period 256 172

2 unchanged sentences

Cash paid for interest $ 22 $ 18

Net cash paid for income taxes $ 113 $ 49

Net cash paid (received) for income taxes $ 15 $ ( 72 )

Supplemental disclosure of non-cash investing and financing activities

12 unchanged sentences

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

The interim consolidated financial statements as of December 31, 2022 and for the three and nine months ended December 31, 2022 and December 25, 2021 are unaudited.

The interim consolidated financial statements as of July 1, 2023 and for the three months ended July 1, 2023 and July 2, 2022 are unaudited.

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

2 unchanged sentences

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

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended April 2, 2022, as filed with the Securities and Exchange Commission on June 1, 2022, in the Company’s Annual Report on Form 10-K.

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended April 1, 2023, as filed with the Securities and Exchange Commission on May 31, 2023, in the Company’s Annual Report on Form 10-K.

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

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

The results for the three and nine months ended December 31, 2022 and December 25, 2021 are based on 13-week and 39-week periods, respectively.

The Company’s Fiscal Year 2023 is a 52-week period ending April 1, 2023.

The results for the three months ended July 1, 2023 and July 2, 2022 are based on 13-week periods.

The Company’s Fiscal Year 2024 is a 52-week period ending March 30, 2024.

Summary of Significant Accounting Policies

9 unchanged sentences

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Included in the Company’s cash and cash equivalents as of December 31, 2022 and April 2, 2022 are credit card receivables of $ 31 million and $ 18 million, respectively, which generally settle within two to three business days.

A reconciliation of cash, cash equivalents and restricted cash as of December 31, 2022 and April 2, 2022 from the consolidated balance sheets to the consolidated statements of cash flows is as follows (in millions):

Included in the Company’s cash and cash equivalents as of July 1, 2023 and April 1, 2023 are credit card receivables of $ 31 million and $ 22 million, respectively, which generally settle within two to three business days.

A reconciliation of cash, cash equivalents and restricted cash as of July 1, 2023 and April 1, 2023 from the consolidated balance sheets to the consolidated statements of cash flows is as follows (in millions):

2023 April 1,

5 unchanged sentences

Inventories primarily consist of finished goods with the exception of raw materials and work in process inventory.

The combined total of raw materials and work in process inventory, net, recorded on the Company’s consolidated balance sheets was $ 46 million and $ 31 million as of December 31, 2022 and April 2, 2022, respectively.

The combined total of raw materials and work in process inventory, net, recorded on the Company’s consolidated balance sheets was $ 47 million as of July 1, 2023 and April 1, 2023.

Derivative Financial Instruments

11 unchanged sentences

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

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

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

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

4 unchanged sentences

Net Investment Hedges

The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between the U.S.

Dollars and the associated foreign currencies.

The Company also uses cross-currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between different currencies.

The Company has elected the spot method of designating these contracts under Accounting Standards Update (“ASU”) 2017-12, “Derivatives and Hedging (Topic 815):

1 unchanged sentence

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

Interest accruals and coupon payments are recognized directly in interest expense (income), net, in the Company’s consolidated

statements of operations and comprehensive income.

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

comprehensive income.

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

Fair Value Hedges

When a cross-currency swap is designated as a fair value hedge and qualifies as highly effective, the fair value hedge will be recorded at fair value each period on the Company’s consolidated balance sheets, with the difference resulting from the changes in the spot rate recognized in foreign currency loss on the Company’s consolidated statements of operations and comprehensive income, which will offset the related foreign currency impact of the underlying transaction being hedged.

The Company leases retail stores, office space and warehouse space under operating lease agreements that expire at various dates through September 2043.

The Company’s leases generally have terms of up to 10 years, generally require a fixed annual rent and may require the payment of additional rent if store sales exceed a negotiated amount.

Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through May 2027.

Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through August 2027.

The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores from previous restructuring activities.

6 unchanged sentences

The exercise of lease renewal options is generally at the Company’s sole discretion and as such, the Company typically determines that exercise of these renewal options is not reasonably certain.

As a result, the Company generally does not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the operating lease right-of-use asset and lease liability.

As a result, the Company generally does not include renewal options in the expected lease term and the associated lease payments are not included in the measurement of the operating lease right-of-use asset and lease liability.

Certain leases also contain termination options with an associated penalty.

8 unchanged sentences

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

Nine Months Ended

2022 December 25, 2021

Three Months Ended

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

Operating cash flows used in operating leases

During the three and nine months ended December 31, 2022, the Company recorded sublease income of $ 2 million and $ 7 million, respectively, within selling, general and administrative expenses.

During the three and nine months ended December 25, 2021, the Company recorded $ 2 million and $ 6 million, respectively, within restructuring and other charges for stores relating to our restructuring plan and selling, general and administrative expenses for all other locations.

During the three and nine months ended December 31, 2022, the Company recorded $ 3 million and $ 8 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract.

During the three and nine months ended December 25, 2021, the Company recorded $ 3 million and $ 13 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract.

The aforementioned rent concessions were recorded as a reduction to variable lease expense within selling, general and administrative expenses.

During each of the three months ended July 1, 2023 and July 2, 2022, the Company recorded sublease income of $ 2 million within selling, general and administrative expenses.

Net Income per Share

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

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

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

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

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

Net income attributable to Capri $ 48 $ 201

9 unchanged sentences

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

During the three and nine months ended December 31, 2022, share equivalents of 187,547 shares and 546,607 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect.

Share equivalents of 208,168 shares and 411,394 shares have been excluded from the above calculations for the three and nine months ended December 25, 2021, respectively, due to their anti-dilutive effect.

During the three months ended July 1, 2023, share equivalents of 287,571 shares have been excluded from the above calculations due to their anti-dilutive effect.

Share equivalents of 657,340 shares have been excluded from the above calculations for the three months ended July 2, 2022 due to their anti-dilutive effect.

See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2023 for a complete disclosure of the Company’s significant accounting policies.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Supplier Finance Programs

1 unchanged sentence

The amendments require a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this standard on the Company's disclosures.

The amendments in this update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs.

The Company adopted the update in the first quarter of Fiscal 2024 on a retrospective basis, except for the requirement to disclose rollforward information, which will be effective for the Company in the first quarter of Fiscal 2025 on a prospective basis.

See Note 9 for the Company’s disclosures relating to this update.

Recently Issued Accounting Pronouncements

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on the Company’s results of operations, financial condition or cash flows based on current information.

10 unchanged sentences

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

The contract liability related to gift cards, net of estimated “breakage”, of $ 15 million and $ 13 million as of December 31, 2022 and April 2, 2022, respectively, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

The contract liability related to gift cards, net of estimated “breakage” of $ 14 million as of July 1, 2023 and April 1, 2023, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

Loyalty Program .

8 unchanged sentences

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

As of December 31, 2022, contractually guaranteed minimum fees from the Company’s license agreements expected to be recognized as revenue during future periods were as follows (in millions):

As of July 1, 2023, contractually guaranteed minimum fees from the Company’s license agreements expected to be recognized as revenue during future periods were as follows (in millions):

Contractually Guaranteed Minimum Fees

6 unchanged sentences

Sales Returns

The refund liability recorded as of December 31, 2022 was $ 64 million, and the related asset for the right to recover returned product as of December 31, 2022 was $ 15 million.

The refund liability recorded as of July 1, 2023 was $ 58 million, and the related asset for the right to recover returned product as of July 1, 2023 was $ 18 million.

The refund liability recorded as of April 1, 2023 was $ 54 million, and the related asset for the right to recover returned product as of April 1, 2023 was $ 17 million.

Contract Balances

Total contract liabilities were $ 20 million and $ 30 million as of December 31, 2022 and April 2, 2022, respectively.

For the three and nine months ended December 31, 2022, the Company recognized $ 3 million and $ 11 million respectively, in revenue which related to contract liabilities that existed at April 2, 2022.

For the three and nine months ended December 25, 2021, the Company recognized $ 1 million and $ 9 million, respectively, in revenue which related to contract liabilities that existed at March 27, 2021.

There were no material contract assets recorded as of December 31, 2022 and April 2, 2022.

Total contract liabilities were $ 37 million and $ 36 million as of July 1, 2023 and April 1, 2023, respectively.

For the three months ended July 1, 2023, the Company recognized $ 5 million in revenue which related to contract liabilities that existed at April 1, 2023.

For the three months ended July 2, 2022, the Company recognized $ 5 million in revenue which related to contract liabilities that existed at April 2, 2022.

There were no material contract assets recorded as of July 1, 2023 and April 1, 2023.

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

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

Versace revenue - the Americas $ 82 $ 115

22 unchanged sentences

Total receivables, net $ 300 $ 369

(1) As of December 31, 2022 and April 2, 2022, $ 92 million and $ 83 million, respectively, of trade receivables were insured.

(1) As of July 1, 2023 and April 1, 2023, $ 97 million and $ 96 million, respectively, of trade receivables were insured.

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

6 unchanged sentences

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

Allowance for credit losses was $ 6 million and $ 10 million as of December 31, 2022 and April 2, 2022, respectively.

The Company had immaterial credit losses for the three months ended December 31, 2022 and $ 2 million for the nine months ended December 31, 2022.

The Company had $ 3 million of credit losses for the three months ended December 25, 2021 and $ 2 million for the nine months ended December 25, 2021.

Allowance for credit losses was $ 8 million as of July 1, 2023 and April 1, 2023.

The Company had credit losses of $ 1 million for the three months ended July 1, 2023 and July 2, 2022.

Property and Equipment, net

12 unchanged sentences

Total property and equipment, net $ 551 $ 552

Depreciation and amortization of property and equipment for the three and nine months ended December 31, 2022 was $ 32 million and $ 97 million, respectively.

Depreciation and amortization of property and equipment was $ 34 million and $ 109 million for the three and nine months ended December 25, 2021, respectively.

The Company recorded no property and equipment impairment charges for the three months ended December 31, 2022 and $ 2 million in property and equipment impairment charges for the nine months ended December 31, 2022.

The Company recorded no property and equipment impairment charges for the three months ended December 25, 2021 and $ 3 million for the nine months ended December 25, 2021.

Depreciation and amortization of property and equipment was $ 34 million for the three months ended July 1, 2023 and July 2, 2022.

The Company did not record any property and equipment impairment charges for the three months ended July 1, 2023 and July 2, 2022.

Intangible Assets and Goodwill

15 unchanged sentences

(1) The change in the carrying value since April 1, 2023 reflects the impact of foreign currency translation.

(2) Includes accumulated impairment of $ 249 million as of December 31, 2022 and April 2, 2022.

(2) Includes accumulated impairment of $ 273 million as of July 1, 2023 and April 1, 2023.

The change in the carrying value since April 1, 2023 reflects the impact of foreign currency translation.

(3) Includes accumulated impairment of $ 265 million related to the Jimmy Choo reporting units as of December 31, 2022 and April 2, 2022.

(3) Includes accumulated impairment of $ 347 million related to the Jimmy Choo reporting units as of July 1, 2023 and April 1, 2023.

The change in the carrying value since April 1, 2023 reflects the impact of foreign currency translation.

Amortization expense for the Company’s definite-lived intangible assets for the three and nine months ended December 31, 2022 was $ 11 million and $ 34 million, respectively.

Amortization expense for the Company’s definite-lived intangible assets for the three and nine months ended December 25, 2021 was $ 13 million and $ 37 million, respectively.

Amortization expense for the Company’s definite-lived intangible assets was $ 11 million for the three months ended July 1, 2023 and July 2, 2022.

Current Assets and Current Liabilities

3 unchanged sentences

Prepaid contracts 19 22

Prepaid insurance 14 2

Interest receivable related to hedges 13 10

Other accounts receivables 10 10

Interest receivable related to net investment hedges 3 13

Total prepaid expenses and other current assets $ 216 $ 195

1 unchanged sentence

2023 April 1,

Other taxes payable $ 81 $ 61

Return liabilities $ 58 $ 54

Accrued capital expenditures 51 39

Other taxes payable 39 32

Accrued advertising and marketing 34 26

Accrued capital expenditures 27 33

Accrued rent (1)

Advance royalties 18 18

Professional services 17 14

Gift cards and retail store credits 15 17

Accrued litigation 11 13

Accrued interest 16 16

Gift cards and retail store credits 14 14

Accrued purchases and samples 12 8

Charitable donations (2)

Accrued litigation 11 12

Total accrued expenses and other current liabilities $ 340 $ 314

(1) The accrued rent balance relates to variable lease payments.

(2) The charitable donations balance relates to a $ 10 million unconditional pledge to The Versace Foundation as of April 2, 2022 which was paid during the third quarter ended December 31, 2022.

Restructuring and Other Charges

Restructuring Charges - Capri Retail Store Optimization Program

During Fiscal 2022, the Company completed its plan to close certain retail stores as part of its Capri Retail Store Optimization Program.

During the three and nine months ended December 25, 2021, the Company closed 13 and 39 of its retail stores, respectively, which were incorporated into the Capri Retail Store Optimization Program.

Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program during the three and nine months ended December 25, 2021 were $ 10 million and $ 6 million, respectively.

Other Charges

During the three and nine months ended December 31, 2022, the Company recorded costs of $ 5 million and $ 11 million, respectively, primarily related to equity awards associated with the acquisition of Versace.

During the three and nine months ended December 25, 2021, the Company recorded costs of $ 4 million and $ 19 million, respectively, primarily related to equity awards associated with the acquisition of Versace.

Restructuring and Other (Income) Expense

During the three months ended July 1, 2023, the Company recorded other income of $ 2 million primarily related to a $ 10 million gain on the sale of a long-lived corporate asset partially offset by expenses related to equity awards associated with the acquisition of Versace and severance expenses incurred during the first quarter.

During the three months ended July 2, 2022, the Company recorded expenses of $ 3 million primarily related to equity awards associated with the acquisition of Versace .

Debt Obligations

4 unchanged sentences

Senior Notes due 2024 450 450

2018 Term Loan — 497

Total debt 1,939 1,829

Unamortized debt issuance costs 2 2

Unamortized discount on senior notes 1 1

Total carrying value of debt 1,937 1,827

2 unchanged sentences

$ 1,924 $ 1,822

Senior Revolving Credit Facility

On July 1, 2022, the Company entered into a revolving credit facility (the “2022 Credit Facility”) with, among others, JPMorgan Chase Bank, N.A.

7 unchanged sentences

The Company has the ability to expand its borrowing availability under the 2022 Credit Facility in the form of increased revolving commitments or one or more tranches of term loans by up to an additional $ 500 million, subject to the agreement of the participating lenders and certain other customary conditions.

Borrowings under the 2022 Credit Facility bear interest, at the Company’s option, at the following rates:

• For loans denominated in U.S.

Dollars, (A) an alternate base rate, which is the greatest of (a) the prime rate publicly announced from time to time by JPMorgan Chase, (b) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate and zero , plus 50 basis points, and (c) the greater of term Secured Overnight Financing Rate (“SOFR”) for an interest period of one month plus 10 basis points and zero , plus 100 basis points, (B) the greater of term SOFR for the applicable interest period plus 10 basis points (“Adjusted Term SOFR”) and zero or (C) the greater of daily simple SOFR plus 10 basis points and zero ;

• For loans denominated in Pounds Sterling, the greater of Secured Overnight Index Average (“SONIA”) and zero ;

• For loans denominated in Swiss Francs, the greater of Swiss Average Rate Overnight (“SARON”) and zero ;

• For loans denominated in Euro, the greater of Euro Interbank Offer Rate (“EURIBOR”) for the applicable interest period adjusted for statutory reserve requirements (“Adjusted EURIBOR Rate”) and zero ;

• For loans denominated in Canadian Dollars, the greater of the rate applicable to Canadian Dollar Canadian banker’s acceptances quoted on Reuters for the applicable interest period adjusted for statutory reserve requirements (“Adjusted CDOR Rate”) and zero ;

• For loans denominated in Japanese Yen, the greater of Tokyo Interbank Offer Rate (“TIBOR”) for the applicable interest period adjusted for statutory reserve requirements (“Adjusted TIBOR Rate”) and zero ;

in each case, plus an applicable margin based on the Company’s public debt ratings and/or net leverage ratio.

The 2022 Credit Facility provides for an annual administration fee and a commitment fee equal to 7.5 basis points to 17.5 basis points per annum, which was 15.0 basis points as of December 31, 2022.

See Note 11 to the Company’s Fiscal 2023 Annual Report on Form 10-K for information regarding the Company’s interest rates associated with borrowings under the 2022 Credit Facility.

The 2022 Credit Facility provides for an annual administration fee and a commitment fee equal to 7.5 basis points to 17.5 basis points per annum, which was 15.0 basis points as of July 1, 2023.

The fees are based on the Company’s public debt ratings and/or net leverage ratio, applied to the average daily unused amount of the 2022 Credit Facility.

2 unchanged sentences

Such net leverage ratio is calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus the capitalized amount of all operating lease obligations, minus unrestricted cash and cash equivalents not to exceed $ 200 million, to Consolidated EBITDAR for the last four consecutive fiscal quarters.

Consolidated EBITDAR is defined as consolidated net income plus provision for taxes based on income, profits or capital, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash losses, charge and expenses, subject to certain additions and deductions.

Consolidated EBITDAR is defined as consolidated net income plus provision for taxes based on income, profits or capital, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash losses, charges and expenses, subject to certain additions and deductions.

The 2022 Credit Facility also includes covenants that limit additional indebtedness, liens, acquisitions and other investments, restricted payments and affiliate transactions.

The 2022 Credit Facility also contains events of default customary for financings of this type, including, but not limited to, payment defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy or insolvency, certain events under the Employee Retirement Income Security Act, material judgments, actual or asserted failure of any guaranty supporting the 2022 Credit Facility to be in full force and effect, and changes of control.

If such an event of default occurs and is continuing, the lenders under the 2022 Credit Facility would be entitled to take various actions, including, but not limited to, terminating the commitments and accelerating amounts outstanding under the 2022 Credit Facility.

On December 5, 2022, Gianni Versace S.r.l., a wholly owned subsidiary of Capri Holdings Limited, entered into a credit facility with Intesa Sanpaolo S.p.A., Banco Nazionale del Lavoro S.p.A., and UniCredit S.p.A., as arrangers and lenders, and Intesa Sanpaolo S.p.A., as agent, which provides a senior unsecured term loan (the “Versace Term Loan”) in an aggregate principal amount of € 450 million (approximately $ 482 million).

The Versace Term Loan is not subject to required amortization and matures on December 5, 2025.

If such an event of default occurs and is continuing, the lenders under the 2022 Credit Facility would be

entitled to take various actions, including, but not limited to, terminating the commitments and accelerating amounts outstanding under the 2022 Credit Facility.

As of July 1, 2023 and April 1, 2023, the Company had $ 973 million and $ 874 million of borrowings outstanding under the 2022 Revolving Credit Facility, respectively.

In addition, stand-by letters of credit of $ 3 million were outstanding as of both July 1, 2023 and April 1, 2023.

At July 1, 2023 and April 1, 2023, the amount available for future borrowings under the 2022 Revolving Credit Facility was $ 524 million and $ 623 million, respectively.

The Company had $ 6 million of deferred financing fees related to Revolving Credit Facilities for both July 1, 2023 and April 1, 2023, and are recorded within other assets in the Company’s consolidated balance sheets.

As of July 1, 2023, and the date these financial statements were issued, the Company was in compliance with all covenants related to the 2022 Credit Facility.

Versace Term Loan

The Versace Term Loan is not subject to amortization and matures on December 5, 2025.

The Company provides an unsecured guaranty of the Versace Term Loan.

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Consolidated EBITDAR is defined as consolidated net income plus provision for taxes based on income, profits or capital, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash losses, charges and expenses, subject to certain additions and deductions.

The Versace Term Loan also includes covenants that limit additional financial indebtedness, liens, acquisitions, loans and guarantees, restricted payments and mergers of GIVI Holding S.r.l., Gianni Versace S.r.l.

2 unchanged sentences

If such an event of default occurs and is continuing, the lenders under the Versace Term Loan would be entitled to take various actions, including, but not limited to, accelerating amounts outstanding under the Versace Term Loan.

As of December 31, 2022, and the date these financial statements were issued, the Company was in compliance with all covenants related to the 2022 Credit Facility and the Versace Term Loan.

As of December 31, 2022, the Company had $ 580 million of borrowings outstanding under the 2022 Revolving Credit Facility.

The Company had $ 175 million of borrowings outstanding under revolver in the 2018 Credit Facility as of April 2, 2022.

In addition, stand-by letters of credit of $ 15 million and $ 21 million were outstanding as of both December 31, 2022 and April 2, 2022, respectively.

At December 31, 2022, the amount available for future borrowings under the 2022 Revolving Credit Facility was $ 905 million.

The amount available for future borrowings under the revolver in the 2018 Credit Facility was $ 804 million as of April 2, 2022.

As of December 31, 2022, the carrying value of the Versace Term Loan was $ 481 million, which was recorded within long-term debt in the Company’s consolidated balance sheets.

As of December 31, 2022, the Company no longer had an outstanding balance related to the 2018 Term Loan.

As of April 2, 2022, the carrying value of the 2018 Term Loan was $ 495 million, which was recorded within long-term debt in the Company’s consolidated balance sheets.

The Company had $ 6 million and $ 3 million of deferred financing fees related to Revolving Credit Facilities as of December 31, 2022 and April 2, 2022, respectively, and are recorded within other assets in the Company’s consolidated balance sheets.

The Company had $ 1 million of deferred financing fees related to the Versace Term Loan and $ 2 million of deferred financing fees related to the 2018 Term Loan as of December 31, 2022 and April 2, 2022, respectively, which are both recorded within long-term debt in the Company’s consolidated balance sheets.

The Company offers a supplier financing program which enables suppliers, at their sole discretion, to sell their receivables (i.e., the Company’s payment obligations to suppliers) to a financial institution on a non-recourse basis in order to be paid earlier than current payment terms provide.

The Company’s obligations, including the amount due and scheduled payment dates, are not impacted by a suppliers’ decision to participate in this program.

The Company does not reimburse suppliers for any costs they incur to participate in the program and their participation is voluntary.

The amount outstanding under this program as of December 31, 2022 and April 2, 2022 was $ 18 million and $ 21 million, respectively, and is presented as short-term debt in the Company’s consolidated balance sheets.

As of July 1, 2023 and April 1, 2023, the carrying value of the Versace Term Loan was $ 490 million and $ 487 million, respectively, net of $ 1 million of deferred financing fees for both July 1, 2023 and April 1, 2023, which were recorded within long-term debt in the Company’s consolidated balance sheets.

As of July 1, 2023, and the date these financial statements were issued, the Company was in compliance with all covenants related to the Versace Term Loan.

Versace Facilities

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

The arrangement was determined to be a financing arrangement as the de-recognition criteria for the receivables was not met at the time of the cash receipt from the Bank.

As of December 31, 2022, the outstanding balance was $ 11 million, with $ 1 million and $ 10 million recorded within short-term debt and long-term debt in the Company’s consolidated balance sheets, respectively.

As of April 2, 2022, the outstanding balance was $ 18 million, with $ 8 million and $ 10 million recorded within short-term debt and long-term debt in the Company’s consolidated balance sheets, respectively.

As of July 1, 2023 and April 1, 2023, the outstanding balance was $ 11 million, with $ 1 million and $ 10 million recorded within short-term debt and long-term debt in the Company’s consolidated balance sheets, respectively.

Supplier Financing Program

The Company offers a supplier financing program which enables the Company’s inventory suppliers, at their sole discretion, to sell their receivables (i.e., the Company’s payment obligations to suppliers) to a financial institution on a non-recourse basis in order to be paid earlier than current payment terms provide.

The Company’s obligations, including the amount due and scheduled payment dates, which generally do not exceed 90 days, are not impacted by a suppliers’ decision to participate in this program.

The Company does not reimburse suppliers for any costs they incur to participate in the program and their participation is voluntary.

The amount outstanding under this program as of July 1, 2023 and April 1, 2023 was $ 12 million and $ 4 million, respectively, and is presented as short-term debt in the Company’s consolidated balance sheets.

See Note 11 to the Company’s Fiscal 2023 Annual Report on Form 10-K for additional information regarding the Company’s credit facilities and debt obligations.

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

At December 31, 2022 and April 2, 2022, the fair values of the Company’s derivative contracts were determined using broker quotations, which were calculations derived from observable market information:

At July 1, 2023 and April 1, 2023, the fair values of the Company’s derivative contracts were determined using broker quotations, which were calculations derived from observable market information:

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

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All contracts are measured and recorded at fair value on a recurring basis and are categorized in Level 2 of the fair value hierarchy, as shown in the following table (in millions):

Fair value at December 31, 2022 using:

Fair value at July 1, 2023 using:

Fair value at April 1, 2023 using:

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Derivative assets:

Forward foreign currency exchange contracts

$ — $ — $ — $ — $ 4 $ —

Net investment hedges $ — $ 4 $ — $ — $ 1 $ —

Undesignated derivative contracts — — — — 4 —

Fair value hedges — 1 — — — —

Total derivative assets $ — $ 5 $ — $ — $ 1 $ —

1 unchanged sentence

Net investment hedges $ — $ 93 $ — $ — $ 36 $ —

Fair value hedges — 3 — — 3 —

Total derivative liabilities $ — $ 96 $ — $ — $ 39 $ —

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

The following table summarizes the carrying values and estimated fair values of the Company’s short- and long-term debt, based on Level 2 measurements (in millions):

December 31, 2022 April 2, 2022

The following table summarizes the carrying values and estimated fair values of the Company’s long-term debt, based on Level 2 measurements (in millions):

July 1, 2023 April 1, 2023

Value Estimated

4 unchanged sentences

Senior Notes due 2024 $ 449 $ 432 $ 449 $ 435

2018 Term Loan — — $ 495 $ 490

The Company’s cash and cash equivalents, accounts receivable and accounts payable are recorded at carrying value, which approximates fair value.

4 unchanged sentences

The Company determines the fair values of these assets based on Level 3 measurements using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

The Company recorded $ 1 million and $ 12 million in impairment charges during the three and nine months ended December 31, 2022, respectively.

The Company recorded $ 10 million and $ 43 million in impairment charges during the three and nine months ended December 25, 2021, respectively.

The following table details the carrying values and fair values of the Company’s assets that have been impaired during the three and nine months ended December 31, 2022 and the three and nine months ended December 25, 2021 (in millions):

Three Months Ended

December 31, 2022

Nine Months Ended

December 31, 2022

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

Operating Lease Right-of-Use Assets

$ 27 $ 17 $ 10

Property and Equipment — — — 3 1 2

Total $ 2 $ 1 $ 1 $ 30 $ 18 $ 12

Three Months Ended

December 25, 2021

Nine Months Ended

December 25, 2021

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

Operating Lease Right-of-Use Assets

$ 10 $ — $ 10

$ 93 $ 53 $ 40

Property and Equipment — — — 4 1 3

Total $ 10 $ — $ 10 $ 97 $ 54 $ 43

(1) Includes $ 10 million of impairment charges that were recorded within restructuring and other charges related to the Capri Retail Store Optimization Program for both the three and nine months ended December 25, 2021.

The Company recorded no impairment charges during the three months ended July 1, 2023 and July 2, 2022.

Derivative Financial Instruments

Forward Foreign Currency Exchange Contracts

The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions.

The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currencies for certain of its transactions.

The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency exchange contracts.

2 unchanged sentences

Net Investment Hedges

During the first quarter of Fiscal 2023, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 1.094 billion to hedge its net investment, of which $ 900 million was in Euro denominated subsidiaries and $ 194 million was in Japanese Yen denominated subsidiaries.

The modification of these swaps resulted in the Company receiving $ 66 million in cash during the first quarter of Fiscal 2023.

These contracts have been designated as net investment hedges.

As of July 2, 2022, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 4 billion to hedge its net investment in Euro denominated subsidiaries (the “Euro Net Investment Hedges”) and $ 194 million to hedge its net investment in Japanese Yen denominated subsidiaries (the “Japanese Yen Net Investment Hedges”).

During the month of July 2022, the Euro Net Investment Hedges with aggregate notional amount of $ 4 billion outstanding as of July 2, 2022 were terminated resulting in the Company receiving $ 237 million in cash.

During the second quarter of Fiscal 2023, the Company also entered into, and subsequently terminated, additional Euro Net Investment Hedges with aggregate notional amount of $ 4 billion.

The termination of these contracts resulted in the Company receiving additional $ 100 million in cash.

During the second quarter of Fiscal 2023, the Company modified certain Japanese Yen Net Investment Hedges with notional amounts of $ 100 million.

The modification of these hedges resulted in the Company receiving $ 6 million in cash during the second quarter of Fiscal 2023.

The Company entered into additional Japanese Net Investment Hedges with notional amount of $ 100 million.

These contracts have been designated as net investment hedges.

During the second quarter of Fiscal 2023, the Company received $ 343 million from the termination of Euro Net Investment Hedges and the modification of Japanese Yen Net Investment Hedges.

During the third quarter of Fiscal 2023, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of € 1 billion (approximately $ 1.07 billion) to hedge its net investment in GBP denominated subsidiaries (the “GBP Net Investment Hedges”).

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP denominated debt for fixed rate payments of 0 % in Euro.

During the first quarter of Fiscal 2024, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $ 2.5 billion to hedge its net investment in Swiss Franc (“CHF”) denominated subsidiaries.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0 % in CHF.

These contracts have maturity dates between September 2024 and June 2028 and are designated as net investment hedges.

During the first quarter of Fiscal 2024, the Company entered into multiple float-to-float cross-currency swap agreements with aggregate notional amounts of $ 1.0 billion to hedge its net investment in Euro denominated subsidiaries.

The Company will exchange Euro floating rate payments based on EURIBOR for the United States dollar floating rate amounts based on SOFR CME Term over the life of the agreement.

The fixed rate component of semi-annual Euro payments range from 1.149 % to 1.215 %.

These contracts have maturity dates between May 2028 and August 2030 and are designated as net investment hedges.

During the first quarter of Fiscal 2024, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with an aggregate notional amount of $ 350 million to hedge its net investment in Euro denominated subsidiaries.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0 % in Euro.

These contracts have maturity dates between January 2027 and April 2027 and have been designated as net investment hedges.

During the first quarter of Fiscal 2024, the Company entered into a fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of € 150 million to hedge its net investment in British Pound (“GBP”) denominated subsidiaries (the “GBP/EUR Net Investment Hedges”).

As of July 1, 2023, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of € 1.15 billion to hedge its net investment in GBP denominated subsidiaries.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP notional amounts for fixed rate payments of 0.0 % in Euro.

These contracts have maturity dates between November 2024 and November 2027 and are designated as net investment hedges.

As of December 31, 2022, the Company had Japanese Yen Net Investment Hedges with aggregate notional amounts of $ 294 million.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on U.S.

denominated debt for fixed rate payments of 0 % to 2.665 % in Japanese Yen.

As of July 1, 2023, the Company had Japanese Yen net investment hedges with aggregate notional amounts of $ 294 million.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States notional amounts for fixed rate payments of 0 % to 2.665 % in Japanese Yen.

These contracts have maturity dates between May 2027 and February 2051 and are designated as net investment hedges.

2 unchanged sentences

When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense in the Company’s consolidated statements of operations and comprehensive income.

Accordingly, the Company recorded interest income of $ 4 million and $ 32 million during the three and nine months ended December 31, 2022, respectively.

Additionally, the Company recorded interest income of $ 17 million and $ 44 million during the three and nine months ended December 25, 2021, respectively.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of December 31, 2022 and April 2, 2022 (in millions):

Accordingly, the Company recorded interest income of $ 15 million and $ 17 million during the three months ended July 1, 2023 and July 2, 2022, respectively.

Fair Value Hedges

The Company is exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans which will impact earnings on a consolidated basis.

To manage the foreign currency exchange rate risk related to these balances, the Company entered into fair value cross-currency swap agreements to hedge its exposure in GBP denominated subsidiaries (the “GBP Fair Value Hedge”) on a Euro denominated intercompany loan.

As of July 1, 2023, the total notional values of outstanding fair value cross-currency swaps related to these loans were € 1 billion.

Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP notional amounts for fixed rate payments of 0 % in Euro.

These contracts have maturity dates between March 2025 and March 2026 and are designated as fair value hedges.

When a cross-currency swap is designated as a fair value hedge and qualifies as highly effective, the fair value hedge will be recorded at fair value each period on the Company’s consolidated balance sheets, with the difference resulting from the changes in the spot rate recognized in foreign currency loss on the Company’s consolidated statements of operations and comprehensive income, which will offset the earnings impact of the underlying transaction being hedged.

Accordingly, the Company recorded a foreign currency gain of $ 28 million during the three months ended July 1, 2023.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of July 1, 2023 and April 1, 2023 (in millions):

Notional Amounts Assets Liabilities

2023 April 1,

2022 December 31,

2023 April 1,

2022 December 31,

2023 April 1,

Designated forward foreign currency exchange contracts $ 18 $ 119 $ — $ 4 (1)

Designated net investment hedges $ 5,399 $ 1,378 $ 4 (1)

Total designated hedges 1,382 4,313 — 48 41 37

Undesignated derivative contracts (4)

Designated fair value hedges 1,091 1,084 1 (1)

Total $ 6,490 $ 2,462 $ 5 $ 1 $ 96 $ 39

(1) Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.

(1) Recorded within other assets in the Company’s consolidated balance sheets.

(2) Recorded within other long-term liabilities in the Company’s consolidated balance sheets.

(4) Represents undesignated hedges of inventory purchases.

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

However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of December 31, 2022 and April 2, 2022 would be as follows (in millions):

Forward Currency

Exchange Contracts Net Investment

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

However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies and with the same banks, the resulting impact as of July 1, 2023 and April 1, 2023 would be as follows (in millions):

Net Investment

Hedges Fair Value Hedges

2023 April 1,

2022 December 31,

2023 April 1,

8 unchanged sentences

The net gain or loss on net investment hedges are reported within CTA as a component of accumulated other comprehensive income on the Company’s consolidated balance sheets.

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

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

Three Months Ended Nine Months Ended

December 31, 2022 December 25, 2021 December 31, 2022 December 25, 2021

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

The net gain or loss on cross-currency swap contracts

designated as fair value hedges and associated with cross-currency intercompany loans are recognized within foreign currency loss on the Company’s consolidated statements of operations and comprehensive income generally in the period in which the related balances being hedged are revalued.

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

Three Months Ended

July 1, 2023 July 2, 2022

Pre-Tax Losses

Recognized in OCI Pre-Tax Gains

Recognized in OCI

Designated forward foreign currency exchange contracts

$ ( 3 ) $ 5 $ 8 $ 7

Designated net investment hedges $ ( 54 ) $ 213

Designated interest rate swaps $ — $ 1 $ — $ 1

The following tables summarize the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive income related to the designated forward foreign currency exchange contracts for the three and nine months ended December 31, 2022 and December 25, 2021 (in millions):

Designated fair value hedge $ ( 25 ) $ —

The following tables summarize the pre-tax impact of the gains within the consolidated statements of operations and comprehensive income related to the designated forward foreign currency exchange contracts for the three months ended July 1, 2023 and July 2, 2022 (in millions):

Three Months Ended

Pre-Tax (Gain) Loss Reclassified from

Accumulated OCI Location of (Gain) Loss Recognized

2022 December 25, 2021

Designated forward foreign currency exchange contracts

$ ( 3 ) $ — Cost of goods sold

Nine Months Ended

Pre-Tax (Gain) Loss Reclassified from

Accumulated OCI Location of (Gain) Loss Recognized

2022 December 25, 2021

Pre-Tax Gain Reclassified from

Accumulated OCI Location of Gain Recognized

July 1, 2023 July 2, 2022

Designated forward foreign currency exchange contracts

$ 3 $ 4 Cost of goods sold

The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive income for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and turnover.

The Company expects that substantially all of the amounts recorded in accumulated other comprehensive income for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and turnover.

Undesignated Hedges

During the three months ended December 31, 2022, there was no gain recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income, while during the nine months ended December 31, 2022, a $ 2 million gain was recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts.

During the three and nine months ended December 25, 2021, a $ 1 million gain was recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts.

During the three months ended July 1, 2023, there was no gain or loss recognized within foreign currency loss in the Company’s consolidated statements of operations and comprehensive income as there were no undesignated hedges outstanding.

During the three months ended July 2, 2022, a $ 2 million gain was recognized within foreign currency loss in the Company’s consolidated statements of operations and comprehensive income as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts.

Shareholders’ Equity

Share Repurchase Program

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

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 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 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.

On June 1, 2022, the Company announced its Board of Directors authorized a share repurchase program (the “Fiscal 2023 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 November 9, 2022, the Company announced its Board of Directors approved a new share repurchase program (the “Existing Share Repurchase Plan”) to purchase up to $ 1.0 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.

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.

During the nine months ended December 31, 2022, the Company purchased 18,921,459 shares for a total cost of approximately $ 950 million, including commissions, through open market transactions, with 15,479,200 shares purchased for a total cost of $ 750 million including commissions under the Fiscal 2023 plan and 3,442,259 shares purchased for a total cost of $ 200 million under the Existing Share Repurchase Plan.

As of December 31, 2022, the remaining availability under the Company’s Existing Share Repurchase Plan was $ 800 million.

During the nine months ended December 25, 2021, the Company purchased 5,934,244 shares for a total cost of approximately $ 350 million including commissions, through open market transactions, with 2,712,275 shares purchased for a total cost of $ 150 million including commissions under the Prior Plan and 3,221,969 shares purchased for a total cost of $ 200 million including commissions under the Fiscal 2022 Plan.

During the three months ended July 1, 2023, the Company purchased 2,636,564 shares for a total cost of approximately $ 100 million, including commissions, through open market transactions under the Existing Share Repurchase Plan.

As of July 1, 2023, the remaining availability under the Company’s Existing Share Repurchase Plan was $ 300 million.

During the three months ended July 2, 2022, the Company purchased 6,120,174 shares for a total cost of approximately $ 300 million including commissions, through open market transactions under the Fiscal 2023 Plan.

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

During the nine month periods ended December 31, 2022 and December 25, 2021, the Company withheld 300,722 shares and 193,322 shares, respectively, with a fair value of $ 14 million and $ 10 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

During the three month periods ended July 1, 2023 and July 2, 2022, the Company withheld 164,377 shares and 265,311 shares, respectively, with a fair value of $ 6 million and $ 12 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

Accumulated Other Comprehensive Income

The following table details changes in the components of accumulated other comprehensive income (“AOCI”), net of taxes, for the nine months ended December 31, 2022 and December 25, 2021, respectively (in millions):

The following table details changes in the components of accumulated other comprehensive income (“AOCI”), net of taxes, for the three months ended July 1, 2023 and July 2, 2022, respectively (in millions):

Foreign Currency Adjustments (1)

Net Gain (Loss) on Derivatives (2)

Other Comprehensive Income (Loss) Attributable to Capri

Net Gain on Derivatives (2)

Other Comprehensive Income Attributable to Capri

Balance at April 1, 2023 $ 143 $ 4 $ 147

Other comprehensive loss before reclassifications ( 7 ) — ( 7 )

amounts reclassified from AOCI to earnings

Other comprehensive loss, net of tax ( 7 ) ( 3 ) ( 10 )

Balance at July 1, 2023 $ 136 $ 1 $ 137

Balance at April 2, 2022 $ 184 $ 10 $ 194

Other comprehensive (loss) income before reclassifications ( 107 ) 6 ( 101 )

1 unchanged sentence

Other comprehensive (loss) income, net of tax ( 107 ) 2 ( 105 )

Balance at December 31, 2022 $ 97 $ 8 $ 105

Balance at March 27, 2021 $ 57 $ ( 1 ) $ 56

Other comprehensive income before reclassifications 148 7 155

amounts reclassified from AOCI to earnings

— ( 2 ) ( 2 )

Other comprehensive income, net of tax 148 9 157

Balance at December 25, 2021 $ 205 $ 8 $ 213

(1) Foreign currency translation adjustments for the nine months ended December 31, 2022 primarily include a net $ 310 million translation loss partially offset by a $ 219 million gain, net of taxes of $ 113 million, relating to the Company’s net investment hedges.

Foreign currency translation adjustments for the nine months ended December 25, 2021 primarily include a $ 249 million gain, net of taxes of $ 78 million, relating to the Company’s net investment hedges, and a net $ 102 million translation loss.

Balance at July 2, 2022 $ 77 $ 12 $ 89

(1) Foreign currency translation adjustments for the three months ended July 1, 2023 primarily include a $ 58 million loss, net of taxes of $ 21 million, relating to the Company’s net investment and fair value hedges partially offset by a net $ 51 million translation gain.

Foreign currency translation adjustments for the three months ended July 2, 2022 primarily include a $ 151 million gain, net of taxes of $ 62 million, relating to the Company’s net investment hedges, and a net $ 253 million translation loss.

(2) Reclassified amounts primarily relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations and comprehensive income.

4 unchanged sentences

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

As of December 31, 2022, there were no shares available to grant equity awards under the 2008 Plan.

As of July 1, 2023, there were no shares available to grant equity awards under the 2008 Plan.

The Incentive Plan allows for grants of share options, restricted shares and RSUs, and other equity awards, and authorizes a total issuance of up to 22,471,000 ordinary shares after amendments in August 2022.

At December 31, 2022, there were 6,151,690 ordinary shares available for future grants of equity awards under the Incentive Plan.

At July 1, 2023, there were 4,150,946 ordinary shares available for future grants of equity awards under the Incentive Plan.

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

The following table summarizes the Company’s share-based compensation activity during the nine months ended December 31, 2022:

The following table summarizes the Company’s share-based compensation activity during the three months ended July 1, 2023:

Options Service-Based RSUs Performance-Based RSUs

4 unchanged sentences

Canceled/Forfeited ( 23,205 ) ( 36,481 ) —

Outstanding/Unvested at December 31, 2022

Outstanding/Unvested at July 1, 2023

191,967 3,431,102 368,932

The weighted average grant date fair value of service-based and performance-based RSUs granted during the nine months ended December 31, 2022 was $ 48.39 and $ 47.41 , respectively.

The weighted average grant date fair value of service-based RSUs granted during the nine months ended December 25, 2021 was $ 51.75 .

The weighted average grant date fair value of service-based and performance-based RSUs granted during the three months ended July 1, 2023 was $ 36.86 and $ 36.82 , respectively.

The weighted average grant date fair value of service-based and performance-based RSUs granted during the three months ended July 2, 2022 was $ 49.02 and $ 47.41 , respectively.

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation 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,

The following table summarizes compensation expense attributable to share-based compensation for the three months ended July 1, 2023 and July 2, 2022 (in millions):

Three Months Ended

Share-based compensation expense $ 30 $ 28

2 unchanged sentences

The Company estimates forfeitures based on historical forfeiture rates.

The estimated value of future forfeitures for equity awards as of December 31, 2022 is approximately $ 12 million.

The estimated value of future forfeitures for equity awards as of July 1, 2023 is approximately $ 14 million.

See Note 16 in the Company’s Fiscal 2023 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.

The Company’s effective tax rate for the three and nine months ended December 31, 2022 was 1.3 % and 9.2 %, respectively.

For both periods, such rates differ from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the impact of global financing activities and the release of a valuation allowance on UK deferred tax assets.

The Company’s effective tax rate for the three and nine months ended December 25, 2021 was 5.6 % and 6.8 %, respectively.

Such rates differ from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable effect of a net operating loss carryback claim made in the United States as a result of COVID-19 related losses generated in the prior fiscal year and the impact of global financing activities partially offset by the increases in uncertain tax positions during the three and nine months ended December 25, 2021.

The tax rate for the nine months ended December 25, 2021 also benefited from enacted tax legislation in Italy which allowed the Company to reduce its deferred tax liabilities by allowing a step up of certain intangible assets resulting in lower future cash taxes partially offset by the impact of tax rate changes in the United Kingdom on the Company’s net deferred tax liabilities.

The Company’s effective tax rate for the three months ended July 1, 2023 was 4.0 %.

This rate differs from the United Kingdom (“U.K.”) federal statutory rate of 25% primarily due to the release of a valuation allowance on Korean deferred tax assets during the three months ended July 1, 2023 and the impact of global financing activities.

The Company’s effective tax rate for the three months ended July 2, 2022 was 12.1 %.

Such rates differed from the U.K.

federal statutory rate of 19% primarily due to the impact of global financing activities.

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

2 unchanged sentences

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

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

and Hungarian subsidiaries.

Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized lower effective tax rates for the three and nine months ended December 31, 2022.

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

subsidiaries.

Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized lower effective tax rates for the three months ended July 1, 2023.

Segment Information

13 unchanged sentences

In addition to these reportable segments, the Company has certain corporate costs that are not directly attributable to its brands and, therefore, are not allocated to its segments.

Such costs primarily include certain administrative, corporate occupancy, shared service and information system expenses, including enterprise resource planning system implementation costs.

In addition, certain other costs are not allocated to segments, including restructuring and other charges and COVID-19 related charges.

Such costs primarily include certain administrative, corporate occupancy, shared service and information system expenses, including enterprise resource planning system implementation costs and Capri transformation program costs.

In addition, certain other costs are not allocated to segments, including restructuring and other (income) expense and COVID-19 related expenses.

The segment structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses performance.

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

Total revenue:

10 unchanged sentences

( 71 ) ( 60 )

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 —

Restructuring and other income (expense) 2 ( 3 )

COVID-19 related expenses — 1

Total income from operations $ 80 $ 231

(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.

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

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

Depreciation and amortization:

5 unchanged sentences

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

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

Three Months Ended

The Americas (United States, Canada and Latin America) (1)

$ 916 $ 954 $ 2,516 $ 2,370

EMEA 395 405 1,159 1,095

Asia 201 250 609 697

Total revenue $ 1,229 $ 1,360

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

was $ 840 million and $ 2.312 billion, respectively, for the three and nine months ended December 31, 2022.

Total revenue earned in the U.S.

was $ 885 million and $ 2.207 billion, respectively, for the three and nine months ended December 25, 2021.

was $ 578 million and $ 733 million for the three months ended July 1, 2023 and July 2, 2022, respectively.

Subsequent Events

On August 10, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tapestry, Inc., a Maryland corporation (“Tapestry”), and Sunrise Merger Sub, Inc., a British Virgin Islands business company limited by shares and a direct wholly owned subsidiary of Tapestry (“Merger Sub”).

The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Tapestry will acquire Capri in an all-cash transaction by means of a merger of Merger Sub with and into Capri (the “Merger”), with Capri surviving the Merger as a wholly owned subsidiary of Tapestry.

On the terms and subject to the conditions set forth therein, at the effective time of the Merger (the “Effective Time”), each issued and outstanding ordinary share, no par value, of the Company (an “Ordinary Share”) (other than (a) Ordinary Shares that are issued and outstanding immediately prior to the Effective Time that are owned or held in treasury by the Company or by Tapestry or any of its direct or indirect subsidiaries and (b) Ordinary Shares that are issued and outstanding immediately prior to the Effective Time that are held by holders who have properly exercised dissenters’ rights in accordance with, and who have complied with, Section 179 of the BVI Business Companies Act, 2004 (as amended) of the British Virgin Islands) will be converted into the right to receive $ 57.00 in cash, without interest, subject to any required tax withholding as provided in the Merger Agreement.

The Company’s Board of Directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and, subject to certain exceptions set forth in the Merger Agreement, resolved to recommend that Capri’s shareholders adopt a resolution authorizing the Merger Agreement and the Plan of Merger (as defined in the Merger Agreement) and approving the Merger and the other transactions contemplated by the Merger Agreement (“Shareholder Approval”).

The completion of the Merger is subject to the fulfillment or waiver of certain customary mutual closing conditions, including (a) the Shareholder Approval having been obtained, (b) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain other regulatory approvals, and (c) the absence of any injunction or order by a court or other governmental entity of competent jurisdiction in U.S.

or other specified jurisdictions preventing, enjoining, prohibiting or making illegal the consummation of the Merger.

The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain customary materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement.

Tapestry’s obligation to consummate the Merger is also conditioned upon the absence of a material adverse effect on Capri’s business prior to the Effective Time as more specifically defined in the Merger Agreement.

The consummation of the Merger is not subject to any financing condition.

Additional information about the Merger Agreement is set forth in the Company's Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission on August 10, 2023.

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

What changed 10-Q

Item 1. Financial Statements