UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 2017
For the quarterly period ended June 27, 2020
or
o

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-13057
Ralph Lauren Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-2622036
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
650 Madison Avenue,
New York, New York
 
10022
New York,New York(Zip Code)
(Address of principal executive offices)  
(212) (212) 318-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Class A Common Stock, $.01 par valueRLNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ ☑No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ ☑No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ☑Accelerated filero☐
Non-accelerated filer
o (Do not check if a smaller reporting company)
☐		Smaller reporting companyo☐
  Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o . Yes ☐No þ☑
At February 2, 2018, 55,408,452July 31, 2020, 48,163,405 shares of the registrant's Class A common stock, $.01 par value, and 25,881,27624,881,276 shares of the registrant's Class B common stock, $.01 par value, were outstanding.






  


RALPH LAUREN CORPORATION
INDEX
 
 Page
 
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1.Financial Statements: 
 
Consolidated Balance Sheets
2
Consolidated Statements of Operations
3
 
Consolidated Statements of OperationsComprehensive Income (Loss)
4
 
Consolidated Statements of Comprehensive Income (Loss)Cash Flows
5
 
Consolidated Statements of Cash FlowsEquity
6
 
Notes to Consolidated Financial Statements
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3938
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
6458
Item 4.
Controls and Procedures
6458
 
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
6559
Item 1A.    
Risk Factors
6559
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6659
Item 6.
Exhibits
6760
Signatures
6861
  
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101INSTANCE DOCUMENT
EX-101SCHEMA DOCUMENT
EX-101CALCULATION LINKBASE DOCUMENT
EX-101LABELS LINKBASE DOCUMENT
EX-101PRESENTATION LINKBASE DOCUMENT
EX-101DEFINITION LINKBASE DOCUMENT 
   







21 


RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 December 30,
2017		 April 1,
2017		 June 27,
2020		 March 28,
2020
 
(millions)
(unaudited)
 (millions)
ASSETS
Current assets:        
Cash and cash equivalents $1,175.7
 $668.3
 $2,451.3
 $1,620.4
Short-term investments 862.3
 684.7
 259.3
 495.9
Accounts receivable, net of allowances of $218.6 million and $214.4 million 295.2
 450.2
Accounts receivable, net of allowances of $239.9 million and $276.2 million 108.7
 277.1
Inventories 825.4
 791.5
 773.2
 736.2
Income tax receivable 69.8
 79.4
 63.9
 84.8
Prepaid expenses and other current assets 304.8
 280.4
 200.6
 160.8
Total current assets 3,533.2
 2,954.5
 3,857.0
 3,375.2
Property and equipment, net 1,215.9
 1,316.0
 945.8
 979.5
Operating lease right-of-use assets 1,464.1
 1,511.6
Deferred tax assets 133.1
 125.9
 309.5
 245.2
Goodwill 935.0
 904.6
 921.9
 915.5
Intangible assets, net 201.5
 219.8
 136.1
 141.0
Other non-current assets 180.3
 131.2
 106.0
 111.9
Total assets $6,199.0
 $5,652.0
 $7,740.4
 $7,279.9
LIABILITIES AND EQUITY
Current liabilities:        
Short-term debt $—
 $475.0
Current portion of long-term debt $298.3
 $—
 299.9
 299.6
Accounts payable 184.3
 147.7
 144.2
 246.8
Income tax payable 138.5
 29.5
 70.9
 65.1
Current operating lease liabilities 314.7
 288.4
Accrued expenses and other current liabilities 1,089.1
 982.7
 657.2
 717.1
Total current liabilities 1,710.2
 1,159.9
 1,486.9
 2,092.0
Long-term debt 290.3
 588.2
 1,630.1
 396.4
Long-term operating lease liabilities 1,517.7
 1,568.3
Income tax payable 150.8
 —
 132.7
 132.7
Non-current liability for unrecognized tax benefits 76.4
 62.7
 91.7
 88.9
Other non-current liabilities 563.8
 541.6
 325.8
 308.5
Commitments and contingencies (Note 13) 
 
 

 

Total liabilities 2,791.5
 2,352.4
 5,184.9
 4,586.8
Equity:        
Class A common stock, par value $.01 per share; 102.0 million and 101.5 million shares issued; 55.4 million and 55.1 million shares outstanding 1.0
 0.9
Class B common stock, par value $.01 per share; 25.9 million shares issued and outstanding 0.3
 0.3
Class A common stock, par value $.01 per share; 106.0 million and 104.9 million shares issued; 48.2 million and 47.6 million shares outstanding 1.0
 1.0
Class B common stock, par value $.01 per share; 24.9 million shares issued and outstanding 0.3
 0.3
Additional paid-in-capital 2,365.1
 2,308.8
 2,609.5
 2,594.4
Retained earnings 5,751.5
 5,751.9
 5,866.3
 5,994.0
Treasury stock, Class A, at cost; 46.6 million and 46.4 million shares (4,579.8) (4,563.9)
Treasury stock, Class A, at cost; 57.8 million and 57.3 million shares (5,812.3) (5,778.4)
Accumulated other comprehensive loss (130.6) (198.4) (109.3) (118.2)
Total equity 3,407.5
 3,299.6
 2,555.5
 2,693.1
Total liabilities and equity $6,199.0
 $5,652.0
 $7,740.4
 $7,279.9
See accompanying notes.





32 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 
(millions, except per share data)
(unaudited)
 (millions, except per share data)
Net revenues $1,641.8
 $1,714.6
 $4,653.1
 $5,087.4
 $487.5
 $1,428.8
Cost of goods sold(a)
 (645.6) (731.4) (1,809.9) (2,255.4) (138.8) (508.0)
Gross profit 996.2
 983.2
 2,843.2
 2,832.0
 348.7
 920.8
Selling, general, and administrative expenses(a)
 (773.8) (771.9) (2,248.9) (2,389.9) (507.6) (746.7)
Amortization of intangible assets (6.0) (6.0) (18.0) (18.1)
Impairment of assets (3.9) (10.3) (24.8) (56.7) (2.1) (1.2)
Restructuring and other charges(a)
 (23.3) (66.7) (78.7) (193.9)
Restructuring and other charges (7.0) (29.6)
Total other operating expenses, net (807.0) (854.9) (2,370.4) (2,658.6) (516.7) (777.5)
Operating income 189.2
 128.3
 472.8
 173.4
Foreign currency gains (losses) 0.6
 (2.7) 2.4
 0.8
Operating income (loss) (168.0) 143.3
Interest expense (4.8) (3.6) (14.4) (11.1) (9.6) (4.2)
Interest and other income, net 2.8
 2.5
 7.1
 5.7
Equity in losses of equity-method investees (1.5) (1.4) (3.6) (5.2)
Income before income taxes 186.3
 123.1
 464.3
 163.6
Income tax provision (268.1) (41.8) (342.8) (58.9)
Interest income 2.9
 11.6
Other income (expense), net 2.1
 (4.1)
Income (loss) before income taxes (172.6) 146.6
Income tax benefit (provision) 44.9
 (29.5)
Net income (loss) $(81.8) $81.3
 $121.5
 $104.7
 $(127.7) $117.1
Net income (loss) per common share:            
Basic $(1.00) $0.98
 $1.49
 $1.26
 $(1.75) $1.50
Diluted $(1.00) $0.98
 $1.47
 $1.25
 $(1.75) $1.47
Weighted average common shares outstanding:            
Basic 81.7
 82.6
 81.7
 82.9
 73.1
 78.2
Diluted 81.7
 83.3
 82.5
 83.6
 73.1
 79.9
Dividends declared per share $0.50
 $0.50
 $1.50
 $1.50
 $—
 $0.6875
(a) Includes total depreciation expense of:
 $(66.7) $(71.9) $(201.4) $(213.8)
See accompanying notes.







43 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 Three Months Ended Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 
(millions)
(unaudited)
 (millions)
Net income (loss) $(81.8) $81.3
 $121.5
 $104.7
 $(127.7) $117.1
Other comprehensive income (loss), net of tax:            
Foreign currency translation gains (losses) 3.0
 (88.8) 90.7
 (86.7)
Net gains (losses) on cash flow hedges 2.3
 45.0
 (22.0) 43.2
Net gains (losses) on defined benefit plans (0.5) 1.1
 (0.9) 2.0
Foreign currency translation gains 13.0
 4.0
Net losses on cash flow hedges (4.0) (9.7)
Net losses on defined benefit plans (0.1) (0.1)
Other comprehensive income (loss), net of tax 4.8
 (42.7) 67.8
 (41.5) 8.9
 (5.8)
Total comprehensive income (loss) $(77.0) $38.6
 $189.3
 $63.2
 $(118.8) $111.3
See accompanying notes.





54 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 
(millions)
(unaudited)
 (millions)
Cash flows from operating activities:        
Net income $121.5
 $104.7
Adjustments to reconcile net income to net cash provided by operating activities:    
Net income (loss) $(127.7) $117.1
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization expense 219.4
 231.9
 63.7
 66.2
Deferred income tax expense (benefit) (8.0) 9.8
Equity in losses of equity-method investees 3.6
 5.2
Deferred income tax benefit (66.9) (8.1)
Non-cash stock-based compensation expense 56.3
 46.4
 15.1
 23.0
Non-cash impairment of assets 24.8
 56.7
 2.1
 1.2
Non-cash restructuring-related inventory charges 1.3
 149.4
Other non-cash charges 6.7
 18.1
Bad debt expense (benefit) (16.5) 0.1
Other non-cash benefits —
 (2.0)
Changes in operating assets and liabilities:        
Accounts receivable 158.9
 214.9
 186.3
 108.6
Inventories (11.6) (36.5) (29.0) (165.7)
Prepaid expenses and other current assets (4.2) (72.8) (37.4) (48.8)
Accounts payable and accrued liabilities 105.0
 98.4
 (119.2) 82.9
Income tax receivables and payables 279.7
 (2.6) 35.2
 13.3
Deferred income 3.8
 (15.5) 0.3
 1.8
Other balance sheet changes (6.1) 42.6
 23.7
 7.8
Net cash provided by operating activities 951.1
 850.7
Net cash provided by (used in) operating activities (70.3) 197.4
Cash flows from investing activities:        
Capital expenditures (123.0) (225.5) (21.3) (49.4)
Purchases of investments (985.5) (460.5) (63.6) (173.5)
Proceeds from sales and maturities of investments 795.3
 704.8
 301.9
 308.4
Acquisitions and ventures (4.6) (2.5) —
 0.9
Net cash provided by (used in) investing activities (317.8) 16.3
Proceeds from sale of property —
 20.8
Settlement of net investment hedges 3.7
 —
Net cash provided by investing activities 220.7
 107.2
Cash flows from financing activities:        
Proceeds from issuance of short-term debt —
 3,735.2
Repayments of short-term debt —
 (3,851.3)
Payments of capital lease obligations (21.2) (19.4)
Repayments of borrowings on credit facilities (475.0) —
Proceeds from the issuance of long-term debt 1,241.9
 —
Payments of finance lease obligations (1.6) (4.9)
Payments of dividends (121.7) (123.7) (49.8) (48.8)
Repurchases of common stock, including shares surrendered for tax withholdings (15.9) (115.0) (33.9) (191.1)
Proceeds from exercise of stock options 0.1
 4.7
Net cash used in financing activities (158.7) (369.5)
Other financing activities (8.5) —
Net cash provided by (used in) financing activities 673.1
 (244.8)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36.8
 (29.0) 7.6
 5.1
Net increase in cash, cash equivalents, and restricted cash 511.4
 468.5
 831.1
 64.9
Cash, cash equivalents, and restricted cash at beginning of period 711.8
 502.1
 1,629.8
 626.5
Cash, cash equivalents, and restricted cash at end of period $1,223.2
 $970.6
 $2,460.9
 $691.4
See accompanying notes.





5

RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
  Three Months Ended June 27, 2020
  
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
    
Retained
Earnings
    
Total
Equity
  Shares Amount   Shares Amount 
AOCI(b)
 
  (millions)
Balance at March 28, 2020 129.8
 $1.3
 $2,594.4
 $5,994.0
 57.3
 $(5,778.4) $(118.2) $2,693.1
Comprehensive loss:                
Net loss       (127.7)        
Other comprehensive income             8.9
  
Total comprehensive loss               (118.8)
Dividends declared       —
       —
Repurchases of common stock         0.5
 (33.9)   (33.9)
Stock-based compensation     15.1
         15.1
Shares issued pursuant to stock-based compensation plans 1.1
 —
 —
         —
Balance at June 27, 2020 130.9
 $1.3
 $2,609.5
 $5,866.3
 57.8
 $(5,812.3) $(109.3) $2,555.5
                 
  Three Months Ended June 29, 2019
  
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
    
Retained
Earnings
    
Total
Equity
  Shares Amount   Shares Amount 
AOCI(b)
 
  (millions)
Balance at March 30, 2019 128.8
 $1.3
 $2,493.8
 $5,979.1
 50.7
 $(5,083.6) $(103.4) $3,287.2
Comprehensive income:                
Net income       117.1
        
Other comprehensive loss             (5.8)  
Total comprehensive income               111.3
Dividends declared       (53.1)       (53.1)
Repurchases of common stock         1.7
 (191.1)   (191.1)
Stock-based compensation     23.0
         23.0
Shares issued pursuant to stock-based compensation plans 0.8
 —
 —
         —
Cumulative adjustment from adoption of new accounting standards       (164.5)       (164.5)
Balance at June 29, 2019 129.6
 $1.3
 $2,516.8
 $5,878.6
 52.4
 $(5,274.7) $(109.2) $3,012.8
(a)
Includes Class A and Class B common stock. During the three months ended June 29, 2019, 0.5 million shares of Class B common stock were converted into an equal number of shares of Class A common stock pursuant to the terms of the Class B common stock (see Note 14).
(b)
Accumulated other comprehensive income (loss).
See accompanying notes.




6 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data and where otherwise indicated)
(Unaudited)
1.Description of Business
Ralph Lauren Corporation ("RLC") is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, fragrances, and other licensed product categories.hospitality. RLC's long-standing reputation and distinctive image have been developed across an expanding number of products, brands, sales channels, and international markets. RLC's brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others. RLC and its subsidiaries are collectively referred to herein as the "Company," "we," "us," "our," and "ourselves," unless the context indicates otherwise.
The Company diversifies its business by geography (North America, Europe, and Asia, among other regions) and channelschannel of distribution (wholesale, retail,(retail, wholesale, and licensing). This allows the Company to maintain a dynamic balance as its operating results do not depend solely on the performance of any single geographic area or channel of distribution. The Company's wholesale sales are made principally to major department stores and specialty stores around the world. The Company also sells directly to consumers through its integrated retail channel, which includes its retail stores, concession-based shop-within-shops, and e-commercedigital commerce operations around the world. The Company's wholesale sales are made principally to major department stores, specialty stores, and third-party digital partners around the world, as well as to certain third-party-owned stores to which the Company has licensed the right to operate in defined geographic territories using its trademarks. In addition, the Company licenses to unrelated third parties for specified periods the right to operate retail stores and/or to useaccess its various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.
The Company organizes its business into the following three3 reportable segments: North America, Europe, and Asia. In addition to these reportable segments, the Company also has other non-reportable segments. See Note 17 for further discussion of the Company's segment reporting structure.
2.Basis of Presentation
Interim Financial Statements
These interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") and are unaudited. In the opinion of management, these consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company for the interim periods presented. In addition, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") and the notes thereto have been condensed or omitted from this report as is permitted by the SEC's rules and regulations. However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.
This report should be read in conjunction with the Company's Annual Report on Form 10-K filed with the SEC for the fiscal year ended April 1, 2017March 28, 2020 (the "Fiscal 20172020 10-K").
Basis of Consolidation
These unaudited interim consolidated financial statements present the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company, including all entities in which the Company has a controlling financial interest and is determined to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.




7

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Periods
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 20182021 will end on March 31, 201827, 2021 and will be a 52-week period ("Fiscal 20182021"). Fiscal year 20172020 ended on April 1, 2017March 28, 2020 and was also a 52-week period ("Fiscal 2017"2020"). The thirdfirst quarter of Fiscal 20182021 ended on December 30, 2017June 27, 2020 and was a 13-week period. The thirdfirst quarter of Fiscal 20172020 ended on December 31, 2016June 29, 2019 and was also a 13-week period.

7

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ materially from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include reserves for bad debt, customer returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances; the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived tangible and intangible assets; fair value measurements; accounting for income taxes and related uncertain tax positions; valuation of stock-based compensation awards and related estimated forfeiture rates; reserves for restructuring activity; and accounting for business combinations, among others.
Reclassifications
Certain reclassifications have been made to the prior period'speriod financial information in order to conform to the current period's presentation, including the realignment of the Company's segment reporting structure, as further described in Note 17.presentation.
Seasonality of Business
The Company's business is typically affected by seasonal trends, with higher levels of retail sales in its second and third fiscal quarters and higher wholesale sales in its second and fourth fiscal quarters and higher retail sales in its second and third fiscal quarters. These trends result primarily from the timing of seasonal wholesale shipments and key vacation travel, back-to-school, and holiday shopping periods impacting ourits retail business.business and the timing of seasonal wholesale shipments. As a result of changes in its business, consumer spending patterns, and the macroeconomic environment, including those resulting from disease pandemics and other catastrophic events, historical quarterly operating trends and working capital requirements may not be indicative of the Company's future performance. In addition, fluctuations in sales, operating income (loss), and cash flows in any fiscal quarter may be affected by other events affecting retail sales, such as changes in weather patterns. Accordingly, the Company's operating results and cash flows for the three-month and nine-month periodsperiod ended December 30, 2017June 27, 2020 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2018.2021.
COVID-19 Pandemic
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all major geographies in which the Company operates (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs and reduced pay, which could lower consumers' disposable income levels or willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, the Company has experienced varying degrees of business disruptions and periods of closure of its stores, distribution centers, and corporate facilities, as have the Company's wholesale customers, licensing partners, suppliers, and vendors. During the first quarter of Fiscal 2021, the majority of the Company's stores in key markets were closed for an average of 8 to 10 weeks, resulting in significant adverse impacts to its operating results. Although nearly all of the Company's stores were reopened by the end of the first quarter of Fiscal 2021, the majority are operating at limited hours and




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. The Company's wholesale business has also been adversely affected, particularly in North America and Europe, as a result of department store closures and lower traffic and consumer demand.
Throughout the pandemic, the Company's priority has been to ensure the safety and well-being of its employees, consumers, and the communities in which it operates around the world. The Company continues to take into account the guidance of local governments and global health organizations and has implemented new health and safety protocols in its stores, distribution centers, and corporate facilities. The Company has also taken various preemptive actions to preserve cash and strengthen its liquidity position, including:
amending its Global Credit Facility in May 2020 to temporarily waive its leverage ratio requirement (see Note 10);
issuing $1.250 billion of unsecured senior notes in June 2020, the proceeds of which are being used for general corporate purposes (see Note 10);
temporarily suspending its quarterly cash dividend and common stock repurchase program, effective beginning in the first quarter of Fiscal 2021 (see Note 14);
temporarily reducing the base compensation of its executives and senior management team, as well as its Board of Directors, for the first quarter of Fiscal 2021;
temporarily furloughing or reducing work hours for a significant portion of its employees, who nevertheless remain eligible to receive employee benefits during such period;
carefully managing its expense structure across all key areas of spend, including aligning inventory levels with anticipated demand, negotiating rent abatements with certain of its landlords, and postponing non-critical capital build-out and other investments and activities;
pursuing relevant government subsidy programs related to COVID-19 business disruptions; and
improving upon its cash conversion cycle largely driven by its accounts receivable collection efforts and extended vendor payment terms.
The COVID-19 pandemic remains highly volatile and continues to evolve daily. Accordingly, the Company cannot predict for how long and to what extent the pandemic will impact its business operations or the global economy as a whole. The Company will continue to assess its operations location-by-location, taking into account the guidance of local governments and global health organizations to determine when its operations can begin returning to normal levels of business.
3.Summary of Significant Accounting Policies
Revenue Recognition
Revenue is recognizedThe Company recognizes revenue across all segmentschannels of the business when thereit satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is persuasive evidence ofsubject to an arrangement, delivery has occurred, the price has been fixed or is determinable,overall constraint that a significant revenue reversal will not occur in future periods. Sales and collectability is reasonably assured.other related taxes collected from customers and remitted to government authorities are excluded from revenue.
Revenue withinfrom the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merchandise purchased at the Company's retail stores and concession-based shop-within-shops, or upon receipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale.




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gift cards issued to customers by the Company are recorded as a liability until they are redeemed, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions.
Revenue from the Company's wholesale business is generally recognized upon shipment of products, at the timewhich point title passes and risk of loss is transferred to customers.the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Returns and allowances require pre-approval from management and discounts are based on trade terms. Estimates for end-of-season markdown reserves are based on historical trends, actual and forecasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these costsamounts have not differed materially from actual results.
Retail store and concession-based shop-within-shop revenueRevenue from the Company's licensing arrangements is recognized netover time during the period that licensees are provided access to the Company's trademarks (i.e., symbolic intellectual property) and benefit from such access through their sales of estimated returns at thelicensed products. These arrangements require licensees to pay a sales-based royalty which, for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of sale to consumers. E-commerce revenue from sales of products ordered through the Company's e-commerce sites and third-party digital partner e-commerce sites is recognized upon delivery of the shipment to its customers. Such revenue is also reduced by an estimate of returns.
Gift cards issued by the Company arereceipt, may be recorded as a liability until they are redeemed, at which point revenue is recognized.recognized as revenue. The Company recognizes incomerevenue for unredeemed gift cards whensales-based royalty arrangements (including those for which the likelihoodroyalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the minimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of redemption by a customer is remoteprogress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company determines that it does not have a legal obligationis entitled to remit the valuereceive in exchange for providing access to its trademarks. As of the unredeemed gift cardJune 27, 2020, contractually-guaranteed minimum royalty amounts expected to the relevant jurisdictionbe recognized as unclaimed or abandoned property.revenue during future periods were as follows:

  
Contractually-Guaranteed
Minimum Royalties(a)
  (millions)
Remainder of Fiscal 2021 $56.7
Fiscal 2022 67.3
Fiscal 2023 43.6
Fiscal 2024 26.6
Fiscal 2025 and thereafter 1.1
Total $195.3

(a)
Amounts presented do not contemplate anticipated contract renewals or royalties earned in excess of the contractually-guaranteed minimums.




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RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Revenue from licensing arrangements is recognized when earnedDisaggregated Net Revenues
The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors for the fiscal periods presented:
  Three Months Ended
  June 27, 2020 June 29, 2019
  North America Europe Asia Other Total North America Europe Asia Other Total
  (millions)
Sales Channel(a):
                    
Retail $142.6
 $79.2
 $166.5
 $6.5
 $394.8
 $403.1
 $218.5
 $246.5
 $49.5
 $917.6
Wholesale 22.5
 41.5
 5.4
 0.5
 69.9
 316.3
 142.3
 12.1
 1.8
 472.5
Licensing —
 —
 —
 22.8
 22.8
 —
 —
 —
 38.7
 38.7
Total $165.1
 $120.7
 $171.9
 $29.8
 $487.5
 $719.4
 $360.8
 $258.6
 $90.0
 $1,428.8
(a)
Net revenues from the Company's retail and wholesale businesses are recognized at a point in time. Net revenues from the Company's licensing business are recognized over time.
Deferred Income
Deferred income represents cash payments received in accordance with the termsadvance of the underlying agreements,Company's transfer of control of products or services to its customers and is generally based upon the highercomprised of (i) contractually guaranteed minimumunredeemed gift cards, net of breakage, and advance royalty levels or (ii) actual salespayments from licensees. The Company's deferred income balances were $15.1 million and royalty data, or estimates thereof, received from the Company's licensees.
The Company accounts for sales taxes$14.6 million as of June 27, 2020 and March 28, 2020, respectively, and were primarily recorded within accrued expenses and other related taxes on acurrent liabilities within the consolidated balance sheets. During the three months ended June 27, 2020, the Company recognized $3.4 million of net basis, excluding such taxesrevenues from revenue.amounts recorded as deferred income as of March 28, 2020. The majority of the deferred income balance as of June 27, 2020 is expected to be recognized as revenue within the next twelve months.
Shipping and Handling Costs
The costsCosts associated with shipping goods to the Company's customers are accounted for as fulfillment activities and reflected as a component of selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations. The costsCosts of preparing merchandise for sale, such as picking, packing, warehousing, and order charges ("handling costs"), are also included in SG&A expenses. Shipping and handling costs billed to customers are included in revenue.
A summary of shipping and handling costs recognized duringfor the three-month and nine-monthfiscal periods ended December 30, 2017 and December 31, 2016presented is as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Shipping costs $8.4
 $9.9
Handling costs 26.5
 36.2
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Shipping costs $11.7
 $12.8
 $28.4
 $32.2
Handling costs 39.7
 44.1
 115.3
 127.8

Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shares by the weighted-average number of common shares outstanding during the period. Weighted-average common shares include shares of the Company's Class A and Class B common stock. Diluted net income (loss) per common share adjusts basic net income (loss) per common share for the dilutive effects of outstanding stock options, restricted stock units ("RSUs"), stock options, and any other potentially dilutive instruments, only in the periods in which such effects are dilutive.




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average number of common shares outstanding used to calculate basic net income (loss) per common share is reconciled to shares used to calculate diluted net income (loss) per common share as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Basic shares 73.1
 78.2
Dilutive effect of RSUs and stock options —
(a) 
1.7
Diluted shares 73.1
 79.9

  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Basic shares 81.7
 82.6
 81.7
 82.9
Dilutive effect of stock options and RSUs —
(a) 
0.7
 0.8
 0.7
Diluted shares 81.7
 83.3
 82.5
 83.6
 
(a) 
Incremental shares of 0.91.6 million attributable to outstanding stock options and RSUs were excluded from the computation of diluted shares for the three months ended December 30, 2017,June 27, 2020, as such shares would not be dilutive as a result of the net loss incurred during the period.incurred.
All earnings per share amounts have been calculated using unrounded numbers. OptionsThe Company has outstanding performance-based and market-based RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance or market conditions (i) have been satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. In addition, options to purchase shares of the Company's Class A common stock at an exercise price greater than the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income (loss) per common share. In addition, the Company has outstanding performance-based RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance conditions (and applicable market condition modifiers, if any) (i) have been satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. As of December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019, there were 2.00.8 million and

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RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.21.0 million, respectively, of additional shares issuable contingent upon vesting of performance-based RSUs and upon exercise of anti-dilutive stock options, and contingent vesting of performance-based RSUs that were excluded from the diluted shares calculations.
Accounts Receivable
In the normal course of business, the Company extends credit to wholesale customers that satisfy defined credit criteria. Payment is generally due within 30 to 120 days and does not include a significant financing component. Accounts receivable is recorded at carrying value,amortized cost, which approximates fair value, and is presented in the Company's consolidated balance sheets net of certain reserves and allowances. These reserves and allowances consist of (i) reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances (see the "Revenue Recognition" section above for further discussion of related accounting policies) and (ii) allowances for doubtful accounts.
A rollforward of the activity in the Company's reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances is presented below:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Beginning reserve balance $204.7
 $176.5
Amount charged against revenue to increase reserve 11.3
 113.9
Amount credited against customer accounts to decrease reserve (33.9) (125.9)
Foreign currency translation 1.9
 1.0
Ending reserve balance $184.0
 $165.5
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Beginning reserve balance $231.5
 $228.9
 $202.8
 $239.7
Amount charged against revenue to increase reserve 125.3
 151.8
 418.6
 479.6
Amount credited against customer accounts to decrease reserve (155.6) (171.8) (427.8) (511.1)
Foreign currency translation 0.4
 (7.8) 8.0
 (7.1)
Ending reserve balance $201.6
 $201.1
 $201.6
 $201.1

An allowance for doubtful accounts is determined through an analysis of accounts receivable aging, assessments of collectability based on an evaluation of historical and anticipated trends, the financial condition of the Company's customers and antheir ability to withstand prolonged periods of adverse economic conditions, and evaluation of the impact of current and forecasted economic and market conditions over the related asset's contractual life, among other factors. The Company's estimated allowance for doubtful accounts as of June 27, 2020 reflects adverse impacts associated with COVID-19 business disruptions, which include temporary department and specialty store closures worldwide, as well as declines in retail traffic, tourism, and consumer spending on discretionary items.




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A rollforward of the activity in the Company's allowance for doubtful accounts is presented below:
 Three Months Ended Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 (millions) (millions)
Beginning reserve balance $17.3
 $15.8
 $11.6
 $14.5
 $71.5
 $15.7
Amount recorded to expense to increase reserve(a)
 0.1
 0.1
 6.4
 6.1
Amount recorded to expense to increase (decrease) reserve(a)
 (16.5) 0.1
Amount written-off against customer accounts to decrease reserve (0.4) (3.3) (1.8) (7.9) —
 (1.0)
Foreign currency translation —
 (0.7) 0.8
 (0.8) 0.9
 0.2
Ending reserve balance $17.0
 $11.9
 $17.0
 $11.9
 $55.9
 $15.0
 
(a) 
Amounts recorded to bad debt expense are included within SG&A expenses in the consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentration of Credit Risk
The Company sells its wholesale merchandise primarily to major department andstores, specialty stores, and third-party digital partners around the world, and extends credit based on an evaluation of each customer's financial capacity and condition, usually without requiring collateral. In the Company's wholesale business, concentration of credit risk is relatively limited due to the large number of customers and their dispersion across many geographic areas. However, the Company has three3 key wholesale customers that generate significant sales volume. During Fiscal 20172020, the Company's sales to its 3largest wholesale customer, Macy's, Inc. ("Macy's"),customers accounted for approximately 10% of total net revenues, and the Company's sales to its three largest wholesale customers (including Macy's) accounted for approximately 21%18% of total net revenues. Substantially all of the Company's sales to its three largest wholesale customers related to its North America segment. As of December 30, 2017June 27, 2020, these three3 key wholesale customers constituted approximately 27%16% of the Company's total gross accounts receivable.
Inventories
The Company holds inventory that is sold in its retail stores and digital commerce sites directly to consumers. The Company also holds inventory that is sold through wholesale distribution channels to major department stores, and specialty retail stores. The Company also holds retail inventory that is sold in its own stores, and e-commerce sites directly to consumers.third-party digital partners. Substantially all of the Company's inventories are comprisedconsist of finished goods, which are stated at the lower of cost or estimated realizable value, with cost primarily determined on a weighted-average cost basis. Inventory held by the Company totaled $825.4$773.2 million, $791.5$736.2 million, and $984.1$988.6 million as of December 30, 2017, April 1, 2017,June 27, 2020, March 28, 2020, and December 31, 2016,June 29, 2019, respectively.
Implementation Costs Incurred in Cloud Computing Arrangements
For cloud computing arrangements that are a service contract, the Company capitalizes certain implementation costs incurred (depending on their nature) during the application development stage of the related project, and expenses costs during the preliminary project and post-implementation stages as they are incurred. Capitalized implementation costs are expensed on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the module is ready for its intended use. The Company's cloud computing arrangements relate to various areas, including certain retail store and digital commerce operations, and corporate and administrative functions. Capitalized amounts related to such arrangements are recorded within prepaid expenses and other current assets and within other non-current assets in the consolidated balance sheets (see Note 6). Capitalized implementation costs expensed during the three-month periods ended June 27, 2020 and June 29, 2019 were $2.5 million and $0.8 million, respectively, and were recorded in SG&A expenses in the consolidated statements of operations.
See Note 4 for further discussion of the Company's adoption of a new accounting standard related to implementation costs incurred in connection with cloud computing arrangements that are a service contract as of the beginning of Fiscal 2021.
Derivative Financial Instruments
The Company records all derivative financial instruments on its consolidated balance sheets at fair value. ForChanges in the fair value of derivative instruments that are designated and qualify for hedge accounting the effective portion of changes in their fair value isare either (i) offset through earnings against the changes in fair value of the related hedged assets, liabilities, or firm commitments through earnings or (ii) recognized in equity as a component




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings, depending on whether the derivativeinstrument is being used to hedgehedging against changes in fair value or cash flows and net investments, respectively.
Each derivative instrument that qualifies for hedge accounting is expected to be highly effective at reducingin offsetting the risk associated with the exposure being hedged.related exposure. For each derivative instrument that is designated as a hedge, the Company formally documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item, and the risk exposure, as well as how hedge effectiveness will be assessed prospectively and retrospectively over the instrument's term. To assess hedge effectiveness at the inception of a hedging relationship, the Company generally uses regression analysis, a statistical method, to compare the changechanges in the fair value of the derivative instrument to changes in the change in fair value or cash flows of the related hedged item. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed and documented by the Company on at least a quarterly basis.
As a result ofGiven its use of derivative instruments, the Company is exposed to the risk that counterparties to such contracts will fail to meet their contractual obligations. To mitigate thissuch counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. The Company's established policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of its counterparties' creditworthiness. The Company also enters into master netting arrangements with counterparties, when possible, to further mitigate credit risk associated with its derivative instruments.risk. In the event of default or termination (as such terms are defined within the respective master netting arrangement), these arrangements allow the Company to net-settle amounts payable and receivable related to multiple derivative transactions with the same counterparty. The master netting arrangements specify a number of events of default and termination, including among others, the failure to make timely payments.
The fair values of the Company's derivative instruments are recorded on its consolidated balance sheets on a gross basis. For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged, primarily within cash flows from operating activities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

activities for its forward foreign exchange contracts and within cash flows from investing activities for its cross-currency swap contracts, both as discussed below.
Cash Flow Hedges
The Company uses forward foreign currency exchange contracts to reducemitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, intercompany royalty payments made by certain of its international operations, and the settlement of foreign currency-denominated operational balances.currency. To the extent forward foreign currency exchange contracts are designated as cash flow hedges, and are highly effective in offsetting changes in the value of the hedged items, the related gains or losses on such instruments are initially deferred in equity as a component of AOCI and are subsequently recognized within cost of goods sold in the consolidated statements of operations as follows:
Forecasted Inventory Transactions — recognized as part of the cost of the inventory being hedged within cost of goods sold when the related inventory is sold to a third party.
sold.
Intercompany Royalties/Settlement of Foreign Currency Balances — recognized within foreign currency gains (losses) during the period that the hedged balance is remeasured through earnings, generally through its settlement when the related payment occurs.
To the extent thatIf a derivative instrument designated as a cash flowis dedesignated or if hedge accounting is discontinued because the instrument is not considered effective, any change in its fair value relating to such ineffectiveness is immediately recognized in earnings within foreign currency gains (losses). If it is determined that a derivative instrument has not been highly effective, and will continue notexpected to be highly effective in hedging the designated exposure, hedge accounting is discontinued andany further gains (losses) are immediately recognized in earnings each period within foreign currency gains (losses).other income (expense), net. Upon discontinuance of hedge accounting, the cumulative change in fair value of the derivative instrument previously recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the originally-documented hedging strategy, unless the related forecasted transaction is no longer probable of not occurring, in which case the accumulated amount is immediately recognized within other income (expense), net.
Hedges of Net Investments in earnings within foreign currency gains (losses).
Hedge of a Net Investment in a Foreign OperationOperations
The Company periodically uses cross-currency swap contracts to reduce risk associated with exchange rate fluctuations on certain of its net investments in foreign subsidiaries. Changes in the fair values of such derivative instruments that are designated as hedges of net investments in foreign operations are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments, toadjustments. In assessing the extent they are effective as a hedge. To assess effectiveness of such hedges, the Company uses a method based on changes in spot rates to measure the impact of foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related derivative hedging instrument. Accordingly,Under this method, changes in the fair value of the hedging instrument other than those due to changes in the spot rate are excluded from the assessment of hedge effectivenessinitially recorded in AOCI as a translation adjustment and are recorded in the consolidated statement of operations with any other ineffectivenessamortized into earnings as interest expense. Amountsexpense using a systematic and rational method over the instrument's term. Changes in fair value associated with the effective portion of net investment hedges(i.e., those due to changes in the spot rate) are recorded in AOCI as a translation adjustment and are released from AOCI and recognized in earnings only upon the sale or liquidation of the hedged net investment.




14

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Hedges
Changes in the fair value of a derivative instrument that is designated as a fair value hedge, along with offsetting changes in the fair value of the related hedged item attributable to the hedged risk, are recorded in earnings. Hedge ineffectiveness is recorded in earnings toTo the extent that the change in the fair value of the hedged item does not fully offset the change in the fair value of the hedging instrument.instrument, the resulting net impact is reflected in earnings within the income statement line item associated with the hedged item.
Undesignated Hedges
All of the Company'sThe Company uses undesignated hedges are entered intoprimarily to hedge specific economic risks, particularly foreign currency exchange rate risk related to foreign currency-denominated balances.third-party and intercompany balances and exposures. Changes in the fair value of undesignated derivative instruments are immediately recognized in earnings each period within foreign currency gains (losses).other income (expense), net.
See Note 12 for further discussion of the Company's derivative financial instruments.
Refer to Note 3 of the Fiscal 20172020 10-K for a summary of all of the Company's significant accounting policies.

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RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.Recently Issued Accounting Standards
Targeted Improvements to Accounting for Hedging ActivitiesImplementation Costs Incurred in Cloud Computing Arrangements
In August 2017,2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-12, "Targeted Improvements to2018-15, "Customer's Accounting for Hedging Activities"Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2017-12"2018-15"). ASU 2017-12 amends existing hedge2018-15 addresses diversity in practice surrounding the accounting guidancefor costs incurred to implement a cloud computing hosting arrangement that is a service contract by better aligning an entity's financial reporting with its risk management activitiesestablishing a model for capitalizing or expensing such costs, depending on their nature and by simplifying its application. Among its provisions, ASU 2017-12 eliminates the requirementstage of the related project during which they are incurred. Any capitalized costs are to separately measurebe expensed over the reasonably certain term of the hosting arrangement and report ineffectiveness for instruments that qualify for hedge accounting, and generally requires that the entire change in fair value of such instruments ultimately be presented in the same income statement line as the respective hedged item. Additionally, the updated guidance reduces complexity in the accounting for certain hedging relationships, eases documentation and effectiveness assessment requirements, broadens the scope of risk components eligible to qualify for hedge accounting, and modifies certain disclosure requirements. ASU 2017-12 is effective for the Company beginning in its fiscal year ending March 28, 2020 ("Fiscal 2020"), with early adoption permitted, and is to be applied using a modified retrospective transition approach, except for the amended presentation and disclosure requirements, which are to be applied prospectively. The Company is currently evaluating the impact that ASU 2017-12 will have on its consolidated financial statements and related disclosures.
Restricted Cash
In November 2016, the FASB issued ASU No. 2016-18, "Restricted Cash" ("ASU 2016-18"). ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Accordingly, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. The Company early-adopted ASU 2016-18 during the first quarter of Fiscal 2018 and applied its provisions retrospectively. Other than the change in presentation within the statement of cash flows,operations as the expense for the arrangement's fees. ASU 2018-15 also requires enhanced qualitative and quantitative disclosures surrounding hosting arrangements that are service contracts.
The Company adopted ASU 2018-15 as of the beginning of Fiscal 2021. Prior to adoption, the Company had already generally accounted for implementation costs incurred in connection with cloud computing arrangements in a manner consistent with the new standard. Therefore, other than the new disclosure requirements, the adoption of ASU 2016-182018-15 did not have an impact on the Company's consolidated financial statements. See Note 183 for a reconciliationfurther discussion of cash, cash equivalents, and restricted cash from the consolidated balance sheets to the consolidated statementsCompany's accounting for cloud computing arrangements.
Measurement of cash flows.
Improvements to Employee Share-Based Payment AccountingCredit Losses on Financial Instruments
In MarchJune 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting"2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-09"2016-13"). ASU 2016-09 simplifies several aspects2016-13, which was further updated and clarified by the FASB through issuance of additional related ASUs, amends the guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and investments in certain debt securities, by requiring upfront recognition of an allowance for credit losses expected to be incurred over an asset's contractual life based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability. It is expected that application of this "expected loss" model will result in earlier recognition of credit losses than the current "as incurred" model, under which losses are recognized only upon occurrence of an event that gives rise to the accounting forincurrence of a probable loss. While the Company's historical bad debt write-off activity has generally been insignificant, similar to current practice, the extent of losses ultimately recognized will depend on prevailing conditions and financial statement presentationongoing consideration of share-based payments, including the accounting for income taxes upon award settlementinformation and forfeitures, and the classificationforecasts that inform assessments of excess tax benefits and shares surrendered for tax withholdings in the statement of cash flows.
collectability. The Company adopted ASU 2016-09 during2016-13 as of the first quarterbeginning of Fiscal 2018. Among its various provisions, ASU 2016-09 impacts2021 using the accounting for income taxes upon award settlement by requiring that all excess tax benefits and shortfalls be reflected inmodified retrospective basis. Overall, the income tax benefit (provision) in the statement of operations in the period that they are realized. This reflects a change from previous practice, which generally required that such activity be recorded in equity as additional paid-in-capital. This change, which was applied prospectively in the Company's consolidated financial statements, increased the Company's income tax provision by $0.5 million and $16.0 million for the three-month and nine-month periods ended December 30, 2017, respectively. Future impacts of this guidance on the Company's income tax benefit (provision) will depend largely on unpredictable events and other factors, including the timing of both employee stock option exercises and cancellations, if any, and the value realized upon vesting or exercise of shares compared to the grant date fair value of those shares, and will likely result in increased volatility. This increase in volatility is expected to be more pronounced during the first half of the Company's fiscal year due to the timing of annual stock-based compensation award vestings and stock option expirations.
Additionally, ASU 2016-09 changes the classification of excess tax benefits presented in the Company's consolidated statements of cash flows from a financing activity to an operating activity. The Company applied this change in classification on a retrospective basis by reclassifying $0.3 million of excess tax benefits from cash flows from financing activities to cash flows from operating activities for the nine months ended December 31, 2016.
Lastly, as permitted, the Company has elected to continue to estimate the impact of expected forfeitures when determining the amount of compensation cost to be recognized each period, as opposed to reflecting the impact of forfeitures only as they occur.

13

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The remaining provisionsadoption of ASU 2016-092016-13 did not have a material impact on the Company's consolidated financial statements.
Leases
In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"). ASU 2016-02 requires that a lessee's rights and fixed payment obligations under most leases be recognized as right-of-use assets and lease liabilities on the consolidated balance sheet. ASU 2016-02 retains a dual model for classifying leases as either financing or operating, which governs the pattern of expense recognition to be reflected in the consolidated statement of operations. Variable lease payments based on performance, such as percentage-of-sales-based payments, will not be included in the measurement of right-of-use assets and lease liabilities. Rather, consistent with current practice, such amounts will be recognized as an expense in the period incurred. ASU 2016-02 is effective for the Company beginning in Fiscal 2020, with early adoption permitted, and is to be adopted using a modified retrospective transition approach, which requires application of the guidance at the beginning of the earliest comparative period presented. However, the FASB recently proposed an optional transition alternative, currently subject to approval, which would allow for application of the guidance at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period presented.
The Company is currently in the process of evaluating the impact that ASU 2016-02 will have on its consolidated financial statements and related disclosures. The Company's assessment efforts to date have included reviewing the standard's provisions and beginning to gather information to evaluate the landscape of its real estate, personal property, and other arrangements that may meet the definition of a lease. Based on these efforts, the Company currently anticipates that the adoption of ASU 2016-02 will result in a significant increase to its long-term assets and liabilities as, at a minimum, most of its current operating lease commitments will be subject to balance sheet recognition. The standard is also expected to result in enhanced quantitative and qualitative lease-related disclosures. Recognition of lease expense in the consolidated statement of operations is not anticipated to significantly change.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). ASU 2014-09 provides a single, comprehensive accounting model for revenues arising from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue, representing the amount to which an entity expects to be entitled in exchange for providing promised goods or services (i.e., performance obligations), is recognized upon control of promised goods or services transferring to a customer. ASU 2014-09 also requires enhanced qualitative and quantitative revenue-related disclosures. Since its original issuance, the FASB has issued several additional related ASUs to address implementation concerns and further amend and clarify certain guidance within ASU 2014-09. ASU 2014-09 may be adopted on a full retrospective basis and applied to all prior periods presented, or on a modified retrospective basis through a cumulative adjustment recorded to opening retained earnings in the year of initial application.
The Company is currently in the process of evaluating the impact that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company's assessment efforts to date have included reviewing current accounting policies, processes, and arrangements to identify potential differences that could arise from the application of ASU 2014-09. Based on these efforts, the Company currently anticipates that the performance obligations underlying its core revenue streams (i.e., its retail and wholesale businesses), and the timing of recognition thereof, will remain substantially unchanged. Revenues for these businesses are generated through the sale of finished products, and will continue to be recognized at the point in time when merchandise is transferred to the customer and in an amount that considers the impacts of estimated returns, end-of-season markdowns, and other allowances that are variable in nature. For its licensing business, which has historically comprised approximately 2% of total revenues, the Company will continue to recognize the related revenue, including any contractually guaranteed minimum royalty amounts, over time consistent with current practice.
The Company will adopt ASU 2014-09 in its fiscal year ending March 30, 2019 ("Fiscal 2019") and anticipates doing so using the modified retrospective method through a cumulative adjustment recorded to the opening Fiscal 2019 retained earnings balance.





1415 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


5.Property and Equipment
Property and equipment, net consists of the following:
  June 27,
2020		 March 28,
2020
  (millions)
Land and improvements $15.3
 $15.3
Buildings and improvements 311.6
 309.0
Furniture and fixtures 637.7
 629.5
Machinery and equipment 383.2
 378.8
Capitalized software 547.4
 543.3
Leasehold improvements 1,213.6
 1,194.5
Construction in progress 33.0
 37.5
  3,141.8
 3,107.9
Less: accumulated depreciation (2,196.0) (2,128.4)
Property and equipment, net $945.8
 $979.5

  December 30,
2017		 April 1,
2017
  (millions)
Land and improvements $16.8
 $16.8
Buildings and improvements 458.6
 457.2
Furniture and fixtures 662.3
 687.2
Machinery and equipment 429.9
 414.0
Capitalized software 568.6
 549.0
Leasehold improvements 1,201.0
 1,179.1
Construction in progress 28.9
 33.4
  3,366.1
 3,336.7
Less: accumulated depreciation (2,150.2) (2,020.7)
Property and equipment, net $1,215.9
 $1,316.0
Depreciation expense was $58.5 million and $60.3 million during the three-month periods ended June 27, 2020 and June 29, 2019, respectively, and is recorded primarily within SG&A expenses in the consolidated statements of operations.
6.Other Assets and Liabilities
Prepaid expenses and other current assets consist of the following:
  June 27,
2020		 March 28,
2020
  (millions)
Prepaid inventory $41.8
 $0.2
Non-trade receivables 32.8
 27.0
Other taxes receivable 22.3
 24.7
Prepaid software maintenance 15.7
 14.8
Inventory return asset 10.5
 8.9
Cloud computing arrangement implementation costs 9.3
 8.4
Prepaid advertising and marketing 7.1
 10.1
Prepaid occupancy expense 5.8
 6.7
Derivative financial instruments 3.7
 13.7
Other prepaid expenses and current assets 51.6
 46.3
Total prepaid expenses and other current assets $200.6
 $160.8

  December 30,
2017		 April 1,
2017
  (millions)
Other taxes receivable $147.9
 $127.8
Prepaid rent expense 44.5
 37.4
Prepaid samples 14.0
 5.9
Restricted cash 13.4
 9.8
Prepaid advertising and marketing 10.4
 4.1
Prepaid software maintenance 7.4
 6.5
Tenant allowances receivable 6.9
 16.4
Derivative financial instruments 6.7
 23.0
Other prepaid expenses and current assets 53.6
 49.5
Total prepaid expenses and other current assets $304.8
 $280.4





1516 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Other non-current assets consist of the following:
  June 27,
2020		 March 28,
2020
  (millions)
Derivative financial instruments $42.9
 $48.6
Security deposits 29.2
 29.4
Restricted cash 8.2
 8.0
Cloud computing arrangement implementation costs 5.1
 4.9
Other non-current assets 20.6
 21.0
Total other non-current assets $106.0
 $111.9
  December 30,
2017		 April 1,
2017
  (millions)
Non-current investments $83.3
 $21.4
Restricted cash 34.1
 33.7
Security deposits 28.9
 26.5
Derivative financial instruments 0.2
 9.6
Other non-current assets 33.8
 40.0
Total other non-current assets $180.3
 $131.2

Accrued expenses and other current liabilities consist of the following:
  June 27,
2020		 March 28,
2020
  (millions)
Accrued inventory $181.5
 $167.1
Accrued operating expenses 181.0
 176.4
Accrued payroll and benefits 149.5
 186.2
Other taxes payable 65.0
 47.9
Accrued capital expenditures 26.4
 29.1
Restructuring reserve 17.1
 25.5
Deferred income 15.0
 14.6
Finance lease obligations 9.4
 9.8
Derivative financial instruments 0.7
 6.9
Dividends payable —
 49.8
Other accrued expenses and current liabilities 11.6
 3.8
Total accrued expenses and other current liabilities $657.2
 $717.1
  December 30,
2017		 April 1,
2017
  (millions)
Accrued operating expenses $223.9
 $188.0
Accrued payroll and benefits 215.6
 173.5
Other taxes payable 202.4
 172.2
Accrued inventory 179.9
 154.9
Restructuring reserve 84.0
 140.8
Derivative financial instruments 46.5
 12.3
Dividends payable 40.6
 40.5
Accrued capital expenditures 33.9
 45.7
Deferred income 33.9
 29.7
Capital lease obligations 22.1
 22.6
Other accrued expenses and current liabilities 6.3
 2.5
Total accrued expenses and other current liabilities $1,089.1
 $982.7

Other non-current liabilities consist of the following:
  June 27,
2020		 March 28,
2020
  (millions)
Finance lease obligations $189.7
 $189.4
Deferred lease incentives and obligations 55.8
 57.8
Accrued benefits and deferred compensation 18.6
 19.5
Derivative financial instruments 17.5
 —
Deferred tax liabilities 10.5
 10.0
Other non-current liabilities 33.7
 31.8
Total other non-current liabilities $325.8
 $308.5

  December 30,
2017		 April 1,
2017
  (millions)
Capital lease obligations $238.3
 $250.9
Deferred rent obligations 203.7
 211.1
Derivative financial instruments 37.8
 9.4
Deferred tax liabilities 7.5
 11.8
Deferred compensation 6.9
 7.8
Other non-current liabilities 69.6
 50.6
Total other non-current liabilities $563.8
 $541.6





1617 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


7.Impairment of Assets
The Company recorded non-cash impairment charges of $2.2 million and $14.0 million duringDuring the three-month and nine-month periods ended December 30, 2017, respectively,June 27, 2020 and $10.3 million and $56.7 million during the three-month and nine-month periods ended December 31, 2016, respectively, to write off certain fixed assets related to its domestic and international stores, shop-within-shops, and corporate offices in connection with the Way Forward Plan (see Note 8).
Additionally, during the three-month and nine-month periods ended December 30, 2017,June 29, 2019, the Company recorded non-cash impairment charges of $1.7$2.1 million and $10.8$1.2 million, respectively, to write off certain fixedlong-lived assets primarily related to underperforming stores and shop-within-shops as a result ofstore closures identified through its on-going store portfolio evaluation.evaluation and its restructuring plans (see Note 8), respectively.
See Note 11 for further discussion of the non-cashthese impairment charges recorded by the Company during the fiscal periods presented.charges.
8.Restructuring and Other Charges
A description of significant restructuring and other activities and their related costs is includedprovided below.
Way ForwardFiscal 2019 Restructuring Plan
On June 2, 2016,4, 2018, the Company's Board of Directors approved a restructuring plan associated with the Company's strategic objective of deliveringoperating with discipline to drive sustainable profitable sales growth and long-term value creation for shareholders (the "Way Forward"Fiscal 2019 Restructuring Plan"). The Company is refocusing on its core brands and evolving its product, marketing, and shopping experience to increase desirability and relevance. It is also evolving its operating model to enable sustainable, profitable sales growth by significantly improving quality of sales, reducing supply chain lead times, improving its sourcing, and executing a disciplined multi-channel distribution and expansion strategy. As part of the Way Forward Plan, the Company is rightsizing its cost structure and implementing a return on investment-driven financial model to free up resources to invest in the brand and drive high-quality sales. The Way ForwardFiscal 2019 Restructuring Plan includes strengthening the Company's leadership teamfollowing restructuring-related activities: (i) rightsizing and creating a more nimble organization by moving from an average of nine to six layers of management. The Way Forward Plan also includes the discontinuanceconsolidation of the Company's Denim & Supply brandglobal distribution network and the integration of its denim product offerings into its Polo Ralph Lauren brand. Collectively, these actions, which were substantially completed during Fiscal 2017, resulted in a reduction in workforcecorporate offices; (ii) targeted severance-related actions; and the(iii) closure of certain of its stores and shop-within-shops.
On March 30, 2017, the Company's Board of Directors approved the following additional restructuring-related activitiesActions associated with the Way Forward Plan: (i) the restructuring of its in-house global e-commerce platform which was in developmentFiscal 2019 Restructuring Plan are complete and shifting to a more cost-effective, flexible e-commerce platform through a new agreement with Salesforce's Commerce Cloud, formerly known as Demandware; (ii) the closure of its Polo store at 711 Fifth Avenue in New York City; and (iii) the further streamlining of the organization and the execution of other key corporate actions in line with the Company's Way Forward Plan. Together, these actions are an important part of the Company's efforts to achieve its stated objective to return to sustainable, profitable growth and invest in the future. Theseno additional restructuring-related activities will result in a further reduction in workforce and the closure of certain corporate office and store locations, andcharges are expected to be largely completed by the end of Fiscal 2018. The remaining activities, which are primarily lease-related, are expected to shift into Fiscal 2019.
Inincurred in connection with the Way Forward Plan, the Company currently expects to incur total estimated charges of approximately $770 million, comprised of cash-related restructuring charges of approximately $450 million and non-cash charges of approximately $320 million. Cumulative cash and non-cash charges incurred since inception were $352.1 million and $293.3 million, respectively. Of the remaining charges yet to be incurred, the Company expects approximately $50 million will be recorded during the fourth quarter of Fiscal 2018 and approximately $75 million to $85 million will be recorded during Fiscal 2019. In addition to these charges, the Company also incurred an additional non-cash charge of $155.2 million during Fiscal 2017 associated with the destruction of inventory out of current liquidation channels in line with its Way Forward Plan.

17

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

this plan. A summary of the charges recorded in connection with the Way ForwardFiscal 2019 Restructuring Plan during the three-month and nine-month periods ended December 30, 2017 and December 31, 2016,fiscal period presented, as well as the cumulative charges recorded since its inception, is as follows:
 Three Months Ended Nine Months Ended   Three Months Ended  
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 Cumulative Charges June 29,
2019		 Cumulative Charges
 (millions) (millions)
Cash-related restructuring charges:              
Severance and benefit costs $7.4
 $14.1
 $25.3
 $115.7
 $208.0
 $5.9
 $90.3
Lease termination and store closure costs 10.9
 49.5
 28.5
 64.2
 115.8
 0.3
 2.3
Other cash charges 0.8
 3.1
 9.2
 9.1
 28.3
 0.8
 10.8
Total cash-related restructuring charges 19.1
 66.7
 63.0
 189.0
 352.1
 7.0
 103.4
Non-cash charges:              
Impairment of assets (see Note 7) 2.2
 10.3
 14.0
 56.7
 248.6
 1.2
 19.0
Inventory-related charges(a)
 —
 14.4
 1.3
 149.4
 199.2
 0.6
 8.2
Accelerated stock-based compensation
expense(b)
 0.7
 —
 0.7
 —
 0.7
 —
 3.6
Loss on sale of property(c)
 —
 11.6
Total non-cash charges 2.9
 24.7
 16.0
 206.1
 448.5
 1.8
 42.4
Total charges $22.0
 $91.4
 $79.0
 $395.1
 $800.6
 $8.8
 $145.8
 
(a) 
Cumulative inventory-related charges include $155.2 million associated with the destruction of inventory out of current liquidation channels, of which $10.9 million and $124.7 million was recorded during the three-month and nine-month periods ended December 31, 2016, respectively. Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
(b) 
Accelerated stock-based compensation expense, which is recorded within restructuring and other charges in the consolidated statements of operations, was recorded in connection with vesting provisions associated with certain separation agreements.
(c)
Loss on sale of property, which was recorded within restructuring and other charges in the consolidated statements of operations, was incurred in connection with the sale of one of the Company's distribution centers in North America.




18

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of current period activity in the restructuring reserve related to the Way ForwardFiscal 2019 Restructuring Plan is as follows:
  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at March 28, 2020 $23.5
 $—
 $0.6
 $24.1
Additions charged to expense —
 —
 —
 —
Cash payments charged against reserve (8.0) —
 (0.6) (8.6)
Balance at June 27, 2020 $15.5
 $—
 $—
 $15.5

  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at April 1, 2017 $94.3
 $34.3
 $6.6
 $135.2
Additions charged to expense 25.3
 28.5
 9.2
 63.0
Cash payments charged against reserve (74.7) (18.0) (9.0) (101.7)
Non-cash adjustments 0.6
 7.8
 —
 8.4
Balance at December 30, 2017 $45.5
 $52.6
 $6.8
 $104.9
Other Restructuring Activities

18

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Global Reorganization Plan
On May 12, 2015,During the three months ended June 27, 2020, the Company recorded $2.6 million in cash-related restructuring charges, primarily associated with severance and benefit costs. As of June 27, 2020, the remaining restructuring liability related to these charges, together with the liability related to restructuring plans initiated prior to the Company's Boardfiscal year ended March 30, 2019 ("Fiscal 2019"), was $4.4 million, reflecting cash payments of Directors approved a reorganization and restructuring plan comprised$1.6 million made during the three months ended June 27, 2020.
The Company also recorded non-cash inventory-related charges of $1.3 million within cost of goods sold in the following major actions: (i)consolidated statements of operations during the reorganization of the Company's operating structure in order to streamline the Company's business processes to better align its cost structure with its long-term growth strategy; (ii) a strategic store and shop-within-shop performance review conducted by region and brand; (iii) a targeted corporate functional area review; and (iv) the consolidation of certain of the Company's luxury lines (collectively, the "Global Reorganization Plan"). The Global Reorganization Plan resulted in a reduction in workforce and the closure of certain stores and shop-within-shops.
Actions associated with the Global Reorganization Plan were completed by the end of the first quarter of Fiscal 2017 and no additional charges are expected to be incurred in relation to this plan. A summary of the charges recordedthree months ended June 27, 2020 in connection with the Global Reorganization Plan during the three-month and nine-month periods ended December 31, 2016, as well as the cumulative charges recorded since its inception, is as follows:
  December 31, 2016  
  Three Months Ended Nine Months Ended 
Cumulative
Charges
  (millions)
Cash-related restructuring charges:      
Severance and benefit costs $—
 $4.7
 $69.1
Lease termination and store closure costs —
 0.2
 8.0
Other cash charges —
 —
 13.8
Total cash-related restructuring charges —
 4.9
 90.9
Non-cash charges:      
Impairment of assets —
 —
 27.2
Inventory-related charges(a)
 —
 —
 20.4
Accelerated stock-based compensation expense(b)
 —
 —
 8.9
Total non-cash charges —
 —
 56.5
Total charges $—
 $4.9
 $147.4
(a)
Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
(b)
Accelerated stock-based compensation expense, which is recorded within restructuring and other charges in the consolidated statements of operations, was recorded in connection with vesting provisions associated with certain separation agreements.
A summary of current period activity in the restructuring reserve related to the Global Reorganization Plan is as follows:
  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at April 1, 2017 $8.6
 $3.4
 $0.2
 $12.2
Cash payments charged against reserve (4.6) (1.9) —
 (6.5)
Balance at December 30, 2017 $4.0
 $1.5
 $0.2
 $5.7

19

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

activities.
Other Charges
During the three-month and nine-month periods ended December 30, 2017,June 27, 2020 and June 29, 2019, the Company recorded other charges of $3.5$4.4 million and $10.5$1.8 million, respectively, primarily related to depreciation expenserent and occupancy costs associated with certain previously exited real estate locations for which the Company's former Polo store at 711 Fifth Avenue in New York City, recorded after the store closed during the first quarter of Fiscal 2018 in connection with the Way Forward Plan. Although therelated lease agreements have not yet expired.
The Company is no longer generating revenue or has any other economic activity associated with its former Polo store, it continues to incur depreciation expense due to its involvement at the time of construction.
Additionally, during the first quarter of Fiscal 2018, the Companyalso recorded other charges of $6.7$20.8 million (inclusive of accelerated stock-based compensation expense of $2.1 million), primarilyduring the three months ended June 29, 2019 related to the departuredonation of Mr. Stefan Larssonnet cash proceeds received from the sale of its corporate jet. This donation was made to the Ralph Lauren Corporate Foundation (formerly known as the Company's President and Chief Executive Officer and asPolo Ralph Lauren Foundation), a member of its Board of Directors, effective as of May 1, 2017. Refer to Note 10 of the Fiscal 2017 10-K for additional discussion regarding Mr. Larsson's departure.
These other charges were partially offset by the favorable impact of $2.2 million related to the reversal of reserves associated with the settlement of certain non-income tax issues during the second quarter of Fiscal 2018.non-profit, charitable foundation that supports various philanthropic programs.
9.Income Taxes
U.S. Tax Reform
On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"), which became effective January 1, 2018. The TCJA significantly revises U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate from 35% to 21%, creating a territorial tax system that includes a mandatory one-time transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax deductions.
ASC Topic 740, "Income Taxes," requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. However, due to the complexity and significance of the TCJA's provisions, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") on December 22, 2017, which allows companies to record the tax effects of the TCJA on a provisional basis based on a reasonable estimate, and then, if necessary, subsequently adjust such amounts during a limited measurement period as more information becomes available. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year from enactment.
During the third quarter of Fiscal 2018, the Company recorded one-time charges of $231.3 million within its income tax provision in connection with the TCJA, of which $215.5 million related to the mandatory transition tax, which it expects to pay over an eight-year period (see Note 13). The remaining charge of $15.8 million related to the revaluation of the Company's deferred tax assets and liabilities. Collectively, these one-time charges, which were recorded on a provisional basis, negatively impacted the Company's effective tax rate by 12,410 basis points and 4,980 basis points during the three-month and nine-month periods ended December 30, 2017, respectively, and lowered its diluted earnings per share by $2.80 during each of these periods. The provisional amounts were based on the Company's present interpretations of the TCJA and current available information, including assumptions and expectations about future events, such as its projected financial performance, and are subject to further refinement as additional information becomes available (including the Company's actual full Fiscal 2018 results of operations and financial condition, as well as potential new or interpretative guidance issued by the FASB or the Internal Revenue Service and other tax agencies) and further analyses are completed.
Effective Tax Rate
The Company's effective tax rate, which is calculated by dividing each fiscal period's income tax provisionbenefit (provision) by pretax income (loss), was 143.9%26.0% and 73.8%20.1% during the three-month and nine-month periods ended December 30, 2017, respectively,June 27, 2020 and 34.0% and 36.0% during the three-month and nine-month periods ended December 31, 2016,June 29, 2019, respectively.
The effective tax ratesrate for the three-month and nine-month periodsthree months ended December 30, 2017 wereJune 27, 2020 was higher than the U.S. federal statutory income tax rate of 35%21% primarily due to an income tax benefit recorded in connection with expected net operating loss carrybacks allowed under the CARES Act (as defined below), partially offset by valuation allowances recorded against certain deferred tax assets as a result of significant business disruptions attributable to COVID-19 that could impact the one-time charges recorded in connection withultimate realizability of such assets. The effective tax rate for the TCJA, as previously discussed, partially offset bythree months ended June 29, 2019 was lower than the U.S. federal statutory income tax rate of 21% primarily due to the favorable impact of the proportion of earnings generated in lower taxed foreign jurisdictions versus the U.S.
In response to the COVID-19 pandemic, various governments worldwide have enacted, or are in the process of enacting, measures to provide aid and foreign incomeeconomic relief to companies adversely impacted by the pandemic. For example, on March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act includes various provisions, including the modification of net operating loss carryback periods and limitation, modification to interest deduction limitations, and creation of refundable employee retention tax reserve releases. Additionally, the effective tax rate for the nine months endedcredits, among other provisions. The Company expects certain of these provisions to favorably impact its Fiscal 2021 operating results.





2019 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 30, 2017 reflected the negative impact of the adoption of ASU 2016-09 (see Note 4), as well as the unfavorable impact of additional income tax reserves associated with certain income tax audits.
The effective tax rates for the three-month and nine-month periods ended December 31, 2016 reflected the favorable impact of the proportion of earnings generated in lower taxed foreign jurisdictions versus the U.S., partially offset by valuation allowances and adjustments recorded on deferred tax assets, certain nondeductible expenses, and unrecognized tax benefits recorded on current year tax positions. The effective tax rate for the nine months ended December 31, 2016 was also unfavorably impacted by additional tax reserves associated with an income tax settlement and certain income tax audits.
Uncertain Income Tax Benefits
The Company classifies interest and penalties related to unrecognized tax benefits as part of its income tax provision.benefit (provision). The total amount of unrecognized tax benefits, including interest and penalties, was $76.4$91.7 million and $62.7$88.9 million as of December 30, 2017June 27, 2020 and April 1, 2017,March 28, 2020, respectively, and is included within non-current liability for unrecognized tax benefits in the consolidated balance sheets. The net addition of $13.7 million in unrecognized tax benefits, including interest and penalties, primarily related to additional unrecognized tax benefits recorded.
The total amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate was $60.5$70.8 million and $46.7$71.7 million as of December 30, 2017June 27, 2020 and April 1, 2017,March 28, 2020, respectively.
Future Changes in Unrecognized Tax Benefits
The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not limited to, settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, the Company does not anticipate that the balance of gross unrecognized tax benefits, excluding interest and penalties, will change significantly during the next twelve months. However, changes in the occurrence, expected outcomes, and timing of such events could cause the Company's current estimate to change materially in the future.
The Company files a consolidated U.S. federal income tax return, as well as tax returns in various state, local, and foreign jurisdictions. The Company is generally no longer subject to incomeexaminations by the relevant tax examinationsauthorities for years prior to its fiscal year ended April 3, 2010.March 30, 2013.
10.Debt
Debt consists of the following:
  December 30,
2017		 April 1,
2017
  (millions)
$300 million 2.125% Senior Notes(a)
 $298.3
 $298.1
$300 million 2.625% Senior Notes(b)
 290.3
 290.1
Total debt 588.6
 588.2
Less: current portion of long-term debt 298.3
 —
Long-term debt $290.3
 $588.2
  June 27,
2020		 March 28,
2020
  (millions)
$300 million 2.625% Senior Notes(a)
 $299.9
 $299.6
$400 million 3.750% Senior Notes(b)
 396.6
 396.4
$500 million 1.700% Senior Notes(c)
 497.3
 —
$750 million 2.950% Senior Notes(d)
 736.2
 —
Borrowings outstanding under credit facilities —
 475.0
Total debt 1,930.0
 1,171.0
Less: short-term debt and current portion of long-term debt 299.9
 774.6
Total long-term debt $1,630.1
 $396.4
 
(a) 
During its fiscal year ended April 2, 2016 ("Fiscal 2016"), the Company entered into an interest rate swap contract which it designated as a hedge against changes in the fair value of its fixed-rate 2.125% Senior Notes, as defined below (see Note 12). Accordingly, the carrying value of the 2.125% Senior Notes as of December 30, 2017 and April 1, 2017 reflects adjustments of $1.3 million and $1.2 million, respectively, for the change in fair value attributable to the benchmark interest rate. The carrying value of the 2.125%2.625% Senior Notes is alsopresented net of unamortized debt issuance costs and original issue discount of $0.4$0.1 million and $0.7$0.2 million as of December 30, 2017June 27, 2020 and April 1, 2017,March 28, 2020, respectively. The carrying value of the 2.625% Senior Notes as of March 28, 2020 also reflects an adjustment of $0.2 million associated with a related interest rate swap contract (see Note 12).
(b)
The carrying value of the 3.750% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $3.4 million and $3.6 million as of June 27, 2020 and March 28, 2020, respectively.
(b)(c) 
During Fiscal 2016, the Company entered into an interest rate swap contract which it designated as a hedge against changes in the fairThe carrying value of its fixed-rate 2.625%the 1.700% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $2.7 million as defined below (see Note 12). Accordingly,of June 27, 2020.
(d)
The carrying value of the carrying2.950% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $13.8 million as of June 27, 2020.





2120 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value of the 2.625% Senior Notes as of December 30, 2017 and April 1, 2017 reflects adjustments of $8.4 million and $8.2 million, respectively, for the change in fair value attributable to the benchmark interest rate. The carrying value of the 2.625% Senior Notes is also net of unamortized debt issuance costs and discount of $1.3 million and $1.7 million as of December 30, 2017 and April 1, 2017, respectively.
Senior Notes
In September 2013,August 2015, the Company completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due September 26, 2018, which bear interest at a fixed rate of 2.125%, payable semi-annually (the "2.125% Senior Notes"). The 2.125% Senior Notes were issued at a price equal to 99.896% of their principal amount. The proceeds from this offering were used for general corporate purposes, including repayment of the Company's previously outstanding €209 million principal amount of 4.5% Euro-denominated notes, which matured on October 4, 2013.
In August 2015, the Company completed a second registered public debt offering and issued an additional $300 million aggregate principal amount of unsecured senior notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). The 2.625% Senior Notes were issued at a price equal to 99.795% of their principal amount. The proceeds from this offering were used for general corporate purposes.
In August 2018, the Company completed another registered public debt offering and issued an additional $400 million aggregate principal amount of unsecured senior notes due September 15, 2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes"). The 3.750% Senior Notes were issued at a price equal to 99.521% of their principal amount. The proceeds from this offering were used for general corporate purposes, including repayment of the Company's previously outstanding $300 million principal amount of unsecured 2.125% senior notes that matured September 26, 2018 (the "2.125% Senior Notes").
In June 2020, the Company completed another registered public debt offering and issued an additional $500 million aggregate principal amount of unsecured senior notes due June 15, 2022, which bear interest at a fixed rate of 1.700%, payable semi-annually (the "1.700% Senior Notes"), and $750 million aggregate principal amount of unsecured senior notes due June 15, 2030, which bear interest at a fixed rate of 2.950%, payable semi-annually (the "2.950% Senior Notes"). The 1.700% Senior Notes and 2.950% Senior Notes were issued at prices equal to 99.880% and 98.995% of their principal amounts, respectively. The proceeds from these offerings are being used for general corporate purposes, which included the repayment of $475 million previously outstanding under the Company's Global Credit Facility (as defined below) on June 3, 2020, and may also be used to repay the Company's $300 million aggregate principal amount outstanding of 2.625% Senior Notes.
The Company has the option to redeem the 2.125%2.625% Senior Notes, 3.750% Senior Notes, 1.700% Senior Notes, and 2.625%2.950% Senior Notes (collectively, the "Senior Notes"), in whole or in part, at any time at a price equal to accrued and unpaid interest on the redemption date plus the greater of (i) 100% of the principal amount of the series of Senior Notes to be redeemed or (ii) the sum of the present value of Remaining Scheduled Payments, as defined in the supplemental indentures governing such Senior Notes (together with the indenture governing the Senior Notes, the "Indenture"). The Indenture contains certain covenants that restrict the Company's ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of the Company's property or assets to another party. However, the Indenture does not contain any financial covenants.
Commercial Paper
In May 2014, theThe Company initiatedhas a commercial paper borrowing program (the "Commercial Paper Program") that allowedallows it to issue up to $300$500 million of unsecured commercial paper notes through private placement using third-party broker-dealers. In May 2015, the Company expanded its Commercialbroker-dealers (the "Commercial Paper Program to allow for a total issuance of up to $500 million of unsecured commercial paper notes.Program").
Borrowings under the Commercial Paper Program are supported by the Global Credit Facility, as defined below. Accordingly, the Company does not expect combined borrowings outstanding under the Commercial Paper Program and Global Credit Facility to exceed $500 million. Commercial Paper Program borrowings may be used to support the Company's general working capital and corporate needs. Maturities of commercial paper notes vary, but cannot exceed 397 days from the date of issuance. Commercial paper notes issued under the Commercial Paper Program rank equally with the Company's other forms of unsecured indebtedness. As of December 30, 2017,June 27, 2020, there were no0 borrowings outstanding under the Commercial Paper Program.
Revolving Credit Facilities
Global Credit Facility
In February 2015,August 2019, the Company replaced its existing credit facility and entered into an amended and restateda new credit facility (which was further amended in March 2016) that provides for a $500 million senior unsecured revolving line of credit through February 11, 2020August 12, 2024 (the "Global Credit Facility") under terms and conditions substantially similar to those previously in effect.of the previous facility. The Global Credit Facility is also used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program. Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and certain other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. TheYen, and are guaranteed by all of the Company's domestic significant subsidiaries. In accordance with the terms of the agreement governing




21

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the Global Credit Facility, the Company has the ability to expand its borrowing availability under the Global Credit Facility to $750 million1 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility. As
Under the Global Credit Facility as originally implemented, U.S. Dollar-denominated borrowings bear interest, at the Company's option, either at (a) a base rate, by reference to the greatest of: (i) the annual prime commercial lending rate of December 30, 2017, there were noJPMorgan Chase Bank, N.A. in effect from time to time, (ii) the weighted-average overnight Federal funds rate plus 50 basis points, or (iii) the one-month London Interbank Offered Rate ("LIBOR") plus 100 basis points; or (b) LIBOR, adjusted for the Federal Reserve Board's Eurocurrency liabilities maximum reserve percentage, plus a spread of 75 basis points, subject to adjustment based on the Company's credit ratings ("Adjusted LIBOR"). Foreign currency-denominated borrowings bear interest at Adjusted LIBOR. In addition to paying interest on any outstanding borrowings under the Global Credit Facility, and the Company was contingently liable for $9.3 millionis required to pay a commitment fee to the lenders under the Global Credit Facility relating to the unutilized commitments. The commitment fee rate of outstanding letters of credit.6.5 basis points is subject to adjustment based on the Company's credit ratings. These provisions were amended in May 2020, as discussed below.

22

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Global Credit Facility contains a number of covenants that, among other things, restrict the Company's ability, subject to specified exceptions, to incur additional debt; incur liens; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself; engage in businesses that are not in a related line of business; make loans, advances, or guarantees; engage in transactions with affiliates; and make certain investments. TheAs originally implemented, the Global Credit Facility also requiresrequired the Company to maintain a maximum ratio of Adjusted Debt to Consolidated EBITDAR (the "leverage ratio") of no greater than 3.754.25 as of the date of measurement for the four most recent consecutive fiscal quarters. Adjusted Debt is defined generally as consolidated debt outstanding, including finance lease obligations, plus four times consolidated rent expense for the four most recent consecutive fiscal quarters.all operating lease obligations. Consolidated EBITDAR is defined generally as consolidated net income plus (i) income tax expense, (ii) net interest expense, (iii) depreciation and amortization expense, (iv) consolidated rent expense,operating lease cost, (v) restructuring and other non-recurring expenses, and (vi) acquisition-related costs. This requirement was amended in May 2020, as discussed below.
In May 2020, the Company entered into an amendment of its Global Credit Facility (the "Amendment"). Under the Amendment, until the earlier of (a) the date on which the Company provides the periodic reporting information required under the Global Credit Facility for the quarter ending September 30, 2021 and (b) the date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no greater than 4.25 (the "Ratings-Based Toggle Date"), for loans based on Adjusted LIBOR, the spread over Adjusted LIBOR will be increased to 187.5 basis points, the spread on loans based on the base rate will be 87.5 basis points and the commitment fee will be increased to 25 basis points, in each case with no adjustments based on the Company's credit ratings. The pricing will return to the original levels set forth in the Global Credit Facility on the Ratings-Based Toggle Date. Additionally, the leverage ratio requirements have been waived until the quarter ending September 30, 2021. The maximum permitted leverage ratio for that fiscal quarter would be 5.25. For the fiscal quarters ending December 31, 2021 and March 31, 2022, the maximum permitted leverage ratio would be 4.75. For each fiscal quarter ending on or after June 30, 2022, the leverage ratio test would return to 4.25. The Amendment also (a) imposes a new requirement that would remain in effect until the Ratings-Based Toggle Date that the aggregate amount of unrestricted cash of the Company and its subsidiaries plus the undrawn amounts available under the Global Credit Facility may not be less than $750 million, (b) restricts the amount of dividends and distributions on, or purchases, redemptions, repurchases, retirements or acquisitions of, the Company's stock until the Specified Period Termination Date (as defined below), (c) until March 31, 2021, amends the material adverse change representation to disregard pandemic-related impacts to the business, and (d) until the Specified Period Termination Date, adds certain other restrictions on indebtedness incurred by the Company and its subsidiaries and investments and acquisitions by the Company and its subsidiaries. The "Specified Period Termination Date" is the earlier of (i) the date on which the Company provides the periodic reporting information required under the Global Credit Facility for the quarter ending June 30, 2022 and (ii) the date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no greater than 4.25.
Upon the occurrence of an Event of Default under the Global Credit Facility, the lenders may cease making loans, terminate the Global Credit Facility, and declare all amounts outstanding to be immediately due and payable. The Global Credit Facility specifies a number of events of default (many of which are subject to applicable grace periods), including, among others, the failure to make timely principal, interest, and fee payments or to satisfy the covenants, including the financial covenant described above. Additionally, the Global Credit Facility provides that an Event of Default will occur if Mr. Ralph Lauren, the Company's Executive Chairman and Chief Creative Officer, and entities controlled by the Lauren family fail to maintain a specified minimum percentage of the voting power of the Company's common stock. As of December 30, 2017, June 27, 2020, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under the Company's Global Credit Facility.




22

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In March 2020, the Company borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen its liquidity position in response to the COVID-19 pandemic. These borrowings were subsequently repaid in June 2020 with proceeds from the issuances of the 1.700% Senior Notes and 2.950% Senior Notes. As of June 27, 2020, there were 0 borrowings outstanding under the Global Credit Facility and the Company was contingently liable for $8.8 million of outstanding letters of credit.
364 Day Facility
In May 2020, the Company entered into a new credit facility with the same lenders that are parties to the Global Credit Facility (the "364 Day Facility") as a preemptive measure to strengthen its liquidity in response to the COVID-19 pandemic. The 364 Day Facility provided for a $500 million senior unsecured revolving line of credit through May 25, 2021, provided that the maturity date may be earlier if the Company issues senior notes other than to refinance the currently outstanding senior notes due August 18, 2020. In connection with the issuances of the 1.700% Senior Notes and 2.950% Senior Notes in June 2020, the 364 Day Facility automatically terminated in accordance with its terms because the aggregate proceeds received upon issuance of these senior notes exceeded the amount necessary to refinance the 2.625% Senior Notes.
Pan-Asia Credit Facilities
Certain of the Company's subsidiaries in Asia have uncommitted credit facilities with regional branches of JPMorgan Chase (the "Banks") in China and South Korea (the "Pan-Asia Credit Facilities"). These credit facilities are subject to annual renewal and may be used to fund general working capital and corporate needs of the Company's operations in the respective countries. Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the Banks, subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. The Pan-Asia Credit Facilities do not contain any financial covenants. The Company's Pan-Asia Credit Facilities by country are as follows:
•
China Credit Facility — provides Ralph Lauren Trading (Shanghai) Co., Ltd. with a revolving line of credit of up to 50 million Chinese Renminbi (approximately $7 million) through April 3, 2021, which is also able to be used to support bank guarantees.
•
South Korea Credit Facility — provides Ralph Lauren (Korea) Ltd. with a revolving line of credit of up to 30 billion South Korean Won (approximately $25 million) through October 30, 2020.
China Credit Facility — provides Ralph Lauren Trading (Shanghai) Co., Ltd. with a revolving line of credit of up to 50 million Chinese Renminbi (approximately $7 million) through April 5, 2018, and may also be used to support bank guarantees.
South Korea Credit Facility — provides Ralph Lauren (Korea) Ltd. with a revolving line of credit of up to 47 billion South Korean Won (approximately $44 million) through October 31, 2018.
As of December 30, 2017,June 27, 2020, there were no0 borrowings outstanding under the Pan-Asia Credit Facilities.
Refer to Note 1211 of the Fiscal 20172020 10-K for additional discussion of the terms and conditions of the Company's debt and credit facilities.
11.Fair Value Measurements
U.S. GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
•
Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.
•
Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.
Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.
Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.





23 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes the Company's financial assets and liabilities that are measured and recorded at fair value on a recurring basis, excluding accrued interest components:
 December 30,
2017		 April 1,
2017		 June 27,
2020		 March 28,
2020
 (millions) (millions)
Investments in commercial paper(a)(b)
 $154.4
 $—
 $50.0
 $243.6
Derivative assets(a)
 6.9
 32.6
 46.6
 62.3
Derivative liabilities(a)
 84.3
 21.7
 18.2
 6.9
 
(a) 
Based on Level 2 measurements.
(b) 
$25.0 million included within cash and cash equivalents and $129.4 millionAmounts are included within short-term investments in the consolidated balance sheets.sheet.
The Company's investments in commercial paper are classified as available-for-sale and recorded at fair value in its consolidated balance sheets using external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company's investments. To the extent the Company invests in bonds, such investments are also classified as available-for-sale and recorded at fair value in its consolidated balance sheets based on quoted prices in active markets.
The Company's derivative financial instruments are recorded at fair value in its consolidated balance sheets and are valued using pricing models that are primarily based on market observable external inputs, including spot and forward currency exchange rates, benchmark interest rates, and discount rates consistent with the instrument's tenor, and consider the impact of the Company's own credit risk, if any. Changes in counterparty credit risk are also considered in the valuation of derivative financial instruments.
The Company's cash and cash equivalents, restricted cash, and time deposits are recorded at carrying value, which generally approximates fair value based on Level 1 measurements.
The Company's debt instruments are recorded at their carrying values in its consolidated balance sheets, which may differ from their respective fair values. The fair values of the Senior Notes are estimated based on external pricing data, including available quoted market prices, and with reference to comparable debt instruments with similar interest rates, credit ratings, and trading frequency, among other factors. The fair values of the Company's commercial paper notes and borrowings outstanding under its credit facilities, if any, are estimated using external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company's outstanding borrowings. Due to their short-term nature, the fair values of the Company's commercial paper notes and borrowings outstanding under its credit facilities, if any, generally approximate their carrying values.
The following table summarizes the carrying values and the estimated fair values of the Company's debt instruments:
 December 30, 2017 April 1, 2017 June 27, 2020 March 28, 2020
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 (millions) (millions)
$300 million 2.125% Senior Notes $298.3
 $300.2
 $298.1
 $302.2
$300 million 2.625% Senior Notes 290.3
 302.2
 290.1
 302.8
 $299.9
 $300.4
 $299.6
 $299.8
$400 million 3.750% Senior Notes 396.6
 445.8
 396.4
 415.1
$500 million 1.700% Senior Notes 497.3
 507.6
 —
 —
$750 million 2.950% Senior Notes 736.2
 766.1
 —
 —
Borrowings outstanding under credit facilities —
 —
 475.0
 473.0
 
(a) 
See Note 10 for discussion of the carrying values of the Company's Senior Notes.senior notes.
(b) 
Based on Level 2 measurements.
Unrealized gains or losses resulting from changes in the fair value of the Company's debt instruments do not result in the realization or expenditure of cash, unless the debt is retired prior to its maturity.





24 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Non-financial Assets and Liabilities
The Company's non-financial assets, which primarily consist of goodwill, other intangible assets, and property and equipment, and lease-related right-of-use ("ROU") assets, are not required to be measured at fair value on a recurring basis, and instead are reported at carrying value.value in its consolidated balance sheet. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying valuethey may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), the respective carrying value of non-financial instrumentsassets are assessed for impairment and, if applicable,ultimately considered impaired, are adjusted and written down to and recorded attheir fair value, consideringas estimated based on consideration of external market participant assumptions.
During the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, the Company recorded non-cash impairment charges of $24.8 million and $56.7 million, respectively, to fully write offreduce the carrying values of certain long-lived assets based uponto their assumedestimated fair values of zero.values. The fair values of these assets were determined based on Level 3 measurements. Inputs to these fair value measurements, the related inputs of which included estimates of the amount and timing of the assets' net future discounted cash flows (including any potential sublease income for lease-related ROU assets), based on historical experience and consideration of current trends, market conditions, and market conditions. See Note 7 for further discussion of thecomparable sales, as applicable.
The following tables summarize non-cash impairment charges recorded by the Company during the fiscal periods presented in order to reduce the carrying values of certain long-lived assets to their estimated fair values as of the assessment date:
  Three Months Ended
  June 27, 2020 June 29, 2019
Long-Lived Asset Category 
Fair Value
As of Impairment Date
 Total Impairments 
Fair Value
As of Impairment Date
 Total Impairments
  (millions)
Property and equipment, net N/A
 $—
 $—
 $0.9
Operating lease right-of-use assets(a)
 $—
 2.1
 92.9
 225.4
(a)
Total impairment charges for the three months ended June 29, 2019 includes $225.1 million recorded in connection with the Company's adoption of ASU No. 2016-02, "Leases" as of the beginning of Fiscal 2020 which, net of related income tax benefits, reduced its opening retained earnings balance by $169.4 million.
See Note 7 for additional discussion regarding non-cash impairment charges recorded by the Company within the consolidated statements of operations during the fiscal periods presented.
NoNaN impairment charges associated with goodwill impairment chargesor other intangible assets were recorded during either of the nine-monththree-month periods ended December 30, 2017June 27, 2020 or December 31, 2016. The Company performed its annual goodwill impairment assessment using a qualitative approach as of the beginning of the second quarter of Fiscal 2018. In performing the assessment, the Company identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of its reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as the Company's actual and expected financial performance. Additionally, the results of the Company's most recent quantitative goodwill impairment test indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results of its qualitative goodwill impairment assessment, the Company concluded that it is not more likely than not that the fair values of its reporting units are less than their respective carrying values, and there were no reporting units at risk of impairment.June 29, 2019.




25

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.Financial Instruments
Derivative Financial Instruments
The Company is exposed to changes in foreign currency exchange rates, primarily relating to certain anticipated cash flows and the value of the reported net assets of its international operations, as well as changes in the fair value of its fixed-rate debt obligations attributed to changes in thea benchmark interest rate. Consequently,Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not enter into derivative transactionsuse derivatives for speculative or trading purposes.
The following table summarizes the Company's outstanding derivative instruments on a gross basis as recorded inon its consolidated balance sheets as of December 30, 2017June 27, 2020 and April 1, 2017March 28, 2020:
  Notional Amounts Derivative Assets Derivative Liabilities
Derivative Instrument(a)
 December 30,
2017		 April 1,
2017		 December 30,
2017		 April 1,
2017		 December 30,
2017		 April 1,
2017
      
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
  (millions)
Designated Hedges:                    
FC — Cash flow hedges $509.2
 $533.2
 
(d) 
 $3.0
 PP $17.7
 
(e) 
 $8.5
 AE $3.7
IRS — Fixed-rate debt 600.0
 600.0
   —
   —
 
(f) 
 9.8
 ONCL 9.4
CCS — NI 658.4
 591.2
   —
 ONCA 9.6
 
(g) 
 65.2
   —
Total Designated Hedges 1,767.6
 1,724.4
   3.0
   27.3
   83.5
   13.1
Undesignated Hedges:                    
FC — Undesignated hedges(c)
 455.8
 375.1
 PP 3.9
 PP 5.3
 AE 0.8
 AE 8.6
Total Hedges $2,223.4
 $2,099.5
   $6.9
   $32.6
   $84.3
   $21.7

25

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

  Notional Amounts Derivative Assets Derivative Liabilities
Derivative Instrument(a)
 June 27,
2020		 March 28,
2020		 June 27,
2020		 March 28,
2020		 June 27,
2020		 March 28,
2020
      
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
  (millions)
Designated Hedges:
                    
FC — Cash flow hedges $162.6
 $229.0
 PP $3.3
 PP $7.4
 AE $0.2
 AE $0.4
IRS — Fixed-rate debt —
 300.0
   —
   —
   —
 AE 0.2
Net investment hedges(c)
 689.6
 683.6
 ONCA 42.9
 ONCA 48.6
 ONCL 17.5
 AE 4.0
Total Designated Hedges 852.2
 1,212.6
   46.2
   56.0
   17.7
   4.6
Undesignated Hedges:
                    
FC — Undesignated hedges(d)
 212.6
 473.5
 PP 0.4
 PP 6.3
 AE 0.5
 AE 2.3
Total Hedges $1,064.8
 $1,686.1
   $46.6
   $62.3
   $18.2
   $6.9
 
(a) 
FC = Forward foreign currency exchange contracts; IRS = Interest rate swap contracts; CCS = Cross-currency swap contracts; NI = Net investment hedges.contracts.
(b) 
PP = Prepaid expenses and other current assets; AE = Accrued expenses and other current liabilities; ONCA = Other non-current assets; ONCL = Other non-current liabilities.
(c) 
Primarily includes undesignatedIncludes cross-currency swaps designated as hedges of the Company's net investment in certain foreign currency-denominated intercompany loans and other intercompany balances.operations.
(d) 
$2.8 million included within prepaid expensesRelates to third-party and other current assetsintercompany foreign currency-denominated exposures and $0.2 million included within other non-current assets.
(e)
$8.2 million included within accrued expenses and other current liabilities and $0.3 million included within other non-current liabilities.
(f)
$1.4 million included within accrued expenses and other current liabilities and $8.4 million included within other non-current liabilities.
(g)
$36.1 million included within accrued expenses and other current liabilities and $29.1 million included within other non-current liabilities.balances.
The Company records and presents the fair values of all of its derivative assets and liabilities inrecorded on its consolidated balance sheets on a gross basis, even when they are subject to master netting arrangements. However, if the Company were to offset and record the asset and liability balances of all of its derivative instruments on a net basis in accordance with the terms of each of its master netting arrangements, spread across eight10 separate counterparties, the amounts presented in the consolidated balance sheets as of December 30, 2017June 27, 2020 and April 1, 2017March 28, 2020 would be adjusted from the current gross presentation as detailed in the following table:
  June 27, 2020 March 28, 2020
  Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
  (millions)
Derivative assets $46.6
 $(0.5) $46.1
 $62.3
 $(6.1) $56.2
Derivative liabilities 18.2
 (0.5) 17.7
 6.9
 (6.1) 0.8

  December 30, 2017 April 1, 2017
  Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
  (millions)
Derivative assets $6.9
 $(3.1) $3.8
 $32.6
 $(18.3) $14.3
Derivative liabilities 84.3
 (3.1) 81.2
 21.7
 (18.3) 3.4
The Company's master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties. See Note 3 for further discussion of the Company's master netting arrangements.




26

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the pretax impact of the effective portion of gains and losses from the Company's designated derivative instruments on its consolidated financial statements for the three-month and nine-month periods endedDecember 30, 2017June 27, 2020 and December 31, 2016June 29, 2019:
  
Gains (Losses)
Recognized in OCI
  
  Three Months Ended Nine Months Ended  
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		  
  (millions)  
Designated Hedges:          
FC — Cash flow hedges $(2.9) $58.2
 $(28.8) $46.7
  
CCS — NI(a)
 (10.4) 38.1
 (73.1) 45.2
  
Total Designated Hedges $(13.3) $96.3
 $(101.9) $91.9
  

26

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

  
Gains (Losses)
Recognized in OCI
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Designated Hedges:    
FC — Cash flow hedges $(3.0) $(4.4)
Net investment hedges — effective portion 0.7
 (10.0)
Net investment hedges — portion excluded from assessment of hedge effectiveness (16.8) 2.5
Total Designated Hedges $(19.1) $(11.9)
 
Gains (Losses) Reclassified
from AOCI to Earnings
 
Location of Gains (Losses)
Reclassified from
AOCI to Earnings
 
Location and Amount of Gains (Losses)
from Cash Flow Hedges Reclassified from AOCI to Earnings
 Three Months Ended Nine Months Ended  Three Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		  June 27,
2020		 June 29,
2019
 (millions)   
Cost of
goods sold
 Other income (expense), net 
Cost of
goods sold
 Other income (expense), net
Designated Hedges:         
 (millions)
Total amounts presented in the consolidated statements of operations in which the effects of related cash flow hedges are recorded $(138.8) $2.1
 $(508.0) $(4.1)
Effects of cash flow hedging:        
FC — Cash flow hedges $(5.9) $(2.7) $(4.3) $(4.2) Cost of goods sold 1.7
 (0.3) 6.2
 0.2
FC — Cash flow hedges 0.6
 9.3
 (0.4) 3.3
 Foreign currency gains (losses)
Total Designated Hedges $(5.3) $6.6
 $(4.7) $(0.9) 
  
Gains (Losses) from Net Investment Hedges
Recognized in Earnings
 Location of Gains (Losses)
Recognized in Earnings
  Three Months Ended 
  June 27,
2020		 June 29,
2019		 
  (millions)  
Net Investment Hedges      
Net investment hedges — portion excluded from assessment of hedge effectiveness(a)
 $2.7
 $5.0
 Interest expense
Total Net Investment Hedges $2.7
 $5.0
  
 

(a) 
Amounts recognized in other comprehensive income (loss) ("OCI") relating to the effective portion of the Company's net investment hedges would be recognized in earnings only upon the sale or liquidation of the hedged net investment.
As of December 30, 2017,June 27, 2020, it is expectedestimated that $8.0$16.2 million of pretax net lossesgains on both outstanding and matured derivative instruments designated and qualifying as cash flow hedges deferred in AOCI will be recognized in earnings over the next twelve months. The amountsAmounts ultimately recognized in earnings will depend on exchange rates in effect when outstanding derivative instruments are settled. No material gains or losses relating to ineffective cash flow hedges were recognized during any of the fiscal periods presented.




27

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the pretax impact of gains and losses from the Company's undesignated derivative instruments on its consolidated financial statements for the three-month and nine-month periods endedDecember 30, 2017June 27, 2020 and December 31, 2016June 29, 2019:
  
Gains (Losses)
Recognized in Earnings
 
Location of Gains (Losses)
Recognized in Earnings
  Three Months Ended 
  June 27,
2020		 June 29,
2019		 
  (millions)  
Undesignated Hedges:      
FC — Undesignated hedges $4.7
 $1.9
 Other income (expense), net
Total Undesignated Hedges $4.7
 $1.9
  
  
Gains (Losses)
Recognized in Earnings
 
Location of Gains (Losses)
Recognized in Earnings
  Three Months Ended Nine Months Ended 
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 
  (millions)  
Undesignated Hedges:          
FC — Undesignated hedges $(1.9) $14.2
 $0.2
 $2.9
 Foreign currency gains (losses)
Total Undesignated Hedges $(1.9) $14.2
 $0.2
 $2.9
  

Risk Management Strategies
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to reducemitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, intercompany royalty payments made by certain of its international operations, and the settlement of foreign currency-denominated balances.balances, and the translation of certain foreign operations' net assets into U.S. dollars. As part of its overall strategy to managefor managing the level of exposure to the risk of foreign currencysuch exchange rate fluctuations,risk, relating primarily to changes in the value of the Euro, the Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, the Swedish Krona,and the Chinese Yuan,Renminbi, the New Taiwan Dollar, and the Hong Kong Dollar, the Company generally hedges a portion of its foreign currencyrelated exposures anticipated over a two-year period. In doing so, the Company usesnext twelve months using forward foreign currency exchange contracts that generally havewith maturities of two months to two yearsone year to provide continuing coverage throughoutover the hedging period of the respective exposure.
Interest Rate Swap Contracts
During Fiscal 2016, theThe Company entered into twoperiodically designates pay-floating rate, receive-fixed rate interest rate swap contracts which it designated as hedges against changes in the respective fair valuesvalue of its fixed-rate 2.125% Senior Notes and its fixed-rate 2.625% Senior Notesdebt attributed to changes in thea benchmark interest rate (the "Interest Rate Swaps"). The Interest Rate Swaps, which mature on September 26, 2018 and August 18, 2020, respectively, both haverate. To the extent of their notional amounts of $300 million andamount, such contracts effectively swap the fixed interest ratesrate on certain of the Company's 2.125% Senior Notes and 2.625% Senior Notesfixed-rate senior notes for a variable interest ratesrate based on the 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread. Changes in the fair valuesvalue of the Interest Rate SwapsCompany's interest rate swap contracts were offset by changes in the fair value of the corresponding senior notes attributed to changes in the benchmark interest rate, with no resulting net impact reflected in earnings during any of the fiscal periods presented. The following table summarizes the carrying value of the hedged senior notes and the impacts of the related fair value hedging adjustments as of June 27, 2020 and March 28, 2020:

    
Carrying Value of
the Hedged Item
 Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Item
Hedged Item Balance Sheet Line in which the Hedged Item is Included June 27,
2020		 March 28,
2020		 June 27,
2020		 March 28,
2020
    (millions)
$300 million 2.625% Senior Notes(a)
 Current portion of long-term debt $299.9
 $299.6
 $—
 $(0.2)

(a)
The interest rate swap contract designated as a fair value hedge of the Company's 2.625% Senior Notes was settled during the three months ended June 27, 2020 at a loss of $0.3 million.




2728 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

by changes in the fair values of the 2.125% Senior Notes and 2.625% Senior Notes attributed to changes in the benchmark interest rate, with no resulting ineffectiveness recognized in earnings during any of the fiscal periods presented.
Cross-Currency Swap Contracts
During Fiscal 2016, theThe Company entered into twoperiodically designates (i) pay-floating rate, receive-floating rate cross-currency swap contracts with notional amounts of €280 million and €274 million, which it designatedor (ii) pay-fixed rate, receive fixed-rate cross-currency swap contracts as hedges of its net investment in certain of its European subsidiaries (the "Cross-Currency Swaps"). subsidiaries.
The Cross-Currency Swaps, which mature on September 26, 2018 and August 18, 2020, respectively,Company's pay-floating rate, receive-floating rate cross-currency swap thecontracts swap U.S. Dollar-denominated variable interest rate payments based on the contract's notional amount and 3-month LIBOR plus a fixed spread (as paid under the Interest Rate Swaps describeda corresponding interest rate swap contract discussed above) for Euro-denominated variable interest rate payments based on the 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread. As a result, the Cross-Currency Swaps,spread, which, in conjunctioncombination with the Interest Rate Swaps,corresponding interest rate swap contract, economically convertconverts a portion of the Company's $300 million fixed-rate 2.125% and $300 million fixed-rate 2.625%US-denominated senior note obligations to €280 million and €274 million floating-rate Euro-denominated liabilities, respectively. No material gains or losses related toobligations.
The Company's pay-fixed rate, receive-fixed rate cross-currency swap contracts swap U.S. Dollar-denominated fixed interest rate payments based on the ineffective portion, orcontract's notional amount and the amount excluded from effectiveness testing, were recognized infixed rate of interest expense within the consolidated statements of operations during anypayable on certain of the fiscal periods presented.Company's senior notes for Euro-denominated fixed interest rate payments, thereby economically converting a portion of its fixed-rate US-denominated senior note obligations to fixed rate Euro-denominated obligations.
See Note 3 for further discussion of the Company's accounting policies relating to its derivative financial instruments.
Investments
As of December 30, 2017,June 27, 2020, the Company's investments were all classified as short-term investmentsand consisted of $732.9$209.3 million of time deposits and $129.4$50.0 million of commercial paper,paper. The Company's investments as of March 28, 2020 were also all classified as short-term and its non-current investments consisted of $83.3$252.3 million of time deposits. Asdeposits and $243.6 million of April 1, 2017, the Company held short-term investments of $684.7 million and non-current investments of $21.4 million, both consisting of time deposits.commercial paper.
No significant realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded during any of the fiscal periods presented.
Refer to Note 3 of the Fiscal 20172020 10-K for further discussion of the Company's accounting policies relating to its investments.
13.Commitments and Contingencies
U.S. Tax Reform
In connection with the TCJA's provision that subjects previously deferred foreign earnings to a one-time mandatory transition tax (as described in Note 9), the Company recorded a charge of $215.5 million within its income tax provision during the third quarter of Fiscal 2018, together with a corresponding current and non-current income tax payable obligation within its consolidated balance sheets based upon the estimated timing of payments. This obligation, which was recorded on a provisional basis and is subject to change, is expected to be paid over an eight-year period as follows:
  
Mandatory Transition
Tax Payments(a)
  (millions)
Fiscal 2019 $27.3
Fiscal 2020 14.0
Fiscal 2021 14.0
Fiscal 2022 14.0
Fiscal 2023 23.2
Fiscal 2024 and thereafter 85.5
Total mandatory transition tax payments $178.0

28

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(a)
The expected mandatory transition tax payments have been presented net of previously available foreign tax credit carryovers of $37.5 million, which the Company expects to utilize to partially reduce this tax obligation.
See Note 9 for further discussion of the TCJA and its enactment-related impacts on the Company's consolidated financial statements.
Customs Audit
In September 2014, one of the Company's international subsidiaries received a pre-assessment notice from the relevant customs officials concerning the method used to determine the dutiable value of imported inventory. The notice communicated the customs officials' assertion that the Company should have applied an alternative duty method, which could result in up to $46 million in incremental duty and non-creditable value-added tax, including $11 million in interest and penalties. The Company believes that the alternative duty method claimed by the customs officials is not applicable to the Company's facts and circumstances and is vigorously contesting their asserted methodology.
In October 2014, the Company filed an appeal of the pre-assessment notice in accordance with the standard procedures established by the relevant customs authorities. In response to the filing of the Company's appeal of the pre-assessment notice, the review committee instructed the customs officials to reconsider their assertion of the alternative duty method and conduct a re-audit to evaluate the facts and circumstances noted in the pre-assessment notice. In December 2015, the Company received the results of the re-audit conducted and a customs audit assessment notice in the amount of $34.1 million, which the Company recorded within restructuring and other charges in its consolidated statements of operations during the third quarter of Fiscal 2016. Although the Company disagrees with the assessment notice, in order to secure the Company's rights, the Company was required to pay the assessment amount and then subsequently file an appeal with the customs authorities. In October 2017, the tax tribunal presiding over the Company's appeal instructed the customs officials to reconsider their assertions under the alternative duty method and conduct a second re-audit to evaluate the facts and circumstances noted in the pre-assessment notice.
The Company continues to maintain its original filing position and will vigorously contest any other proposed methodology asserted by the customs officials. Should the Company be successful in its merits, a full refund for the amounts paid plus interest will be required to be paid by the customs authorities. If the Company is unsuccessful in its current appeal with the customs authorities, it may further appeal this decision within the courts. At this time, while the Company believes that the customs officials' claims are not meritorious and that the Company should prevail, the outcome of the appeals process is subject to risk and uncertainty.
Other Matters
The Company is involved, from time to time, in litigation, other legal claims, and proceedings involving matters associated with or incidental to its business, including, among other things, matters involving credit card fraud, trademark and other intellectual property, licensing, importation and exportation of its products, taxation, unclaimed property, and employee relations. The Company believes at present that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on its consolidated financial statements. However, the Company's assessment of any current litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management's evaluation of the possible liability or outcome of such litigation or claims.
In the normal course of business, the Company enters into agreements that provide general indemnifications. The Company has not made any significant indemnification payments under such agreements in the past and does not currently anticipate incurring any material indemnification payments.





29 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


14.Equity
SummaryClass B Common Stock Conversion
During the three months ended June 29, 2019, the Lauren Family, L.L.C., a limited liability company managed by the children of Changes in Equity
Mr. Ralph Lauren, converted 0.5 million shares of Class B common stock into an equal number of shares of Class A reconciliationcommon stock pursuant to the terms of the beginningsecurity. These conversions occurred in advance of a sales plan providing for the sale of such shares of Class A common stock pursuant to Rule 10b5-1 subject to the conditions set forth therein. These transactions resulted in a reclassification within equity and ending amounts of equity is presented below:
  Nine Months Ended
  December 30,
2017		 December 31,
2016
  (millions)
Balance at beginning of period $3,299.6
 $3,743.5
Comprehensive income 189.3
 63.2
Dividends declared (121.9) (123.2)
Repurchases of common stock, including shares surrendered for tax withholdings (15.9) (115.0)
Stock-based compensation 56.3
 46.4
Shares issued and tax benefits (shortfalls) recognized pursuant to stock-based compensation arrangements 0.1
 (4.3)
Balance at end of period $3,407.5
 $3,610.6
had no effect on the Company's consolidated balance sheet.
Common Stock Repurchase Program
In June 2016, as part of its common stock repurchase program, the Company entered into an accelerated share repurchase program with a third-party financial institution under which it made an upfront payment of $100 million in exchange for an initial delivery of 0.9 million shares of its Class A common stock, representing 90% of the total shares that were ultimately expected to be delivered over the program's term (the "ASR Program"). The initial shares received, which had an aggregate cost of $90 million based on the June 20, 2016 closing share price, were immediately retired and recorded as an increase to treasury stock.
In September 2016, at the ASR Program's conclusion, the Company received 0.1 million additional shares and accordingly recorded a related $10 million increase to treasury stock. The number of additional shares delivered was based on the volume-weighted average price per share of the Company's Class A common stock over the term of the ASR Program, less an agreed upon discount. The average price per share paid for all of the shares delivered under the ASR Program was $98.48.
A summary of the Company's repurchases of Class A common stock under its common stock repurchase program including the ASR Program, is as follows:
 Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 (millions) (millions)
Cost of shares repurchased $—
 $100.0
 $—
 $150.0
Number of shares repurchased —
 1.0
 —
 1.3
On May 13, 2019, the Company's Board of Directors approved an expansion of the Company's existing common stock repurchase program that allowed it to repurchase up to an additional $600 million of Class A common stock. As of December 30, 2017,June 27, 2020, the remaining availability under the Company's Class A common stock repurchase program was approximately $100$580 million. Repurchases of shares of Class A common stock are subject to certain restrictions under the Company's Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 the Company temporarily suspended its common stock repurchase program as a preemptive action to preserve cash and strengthen its liquidity position.
In addition, during each of the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016, 0.2June 29, 2019, 0.5 million and 0.4 million shares of Class A common stock, respectively, at a cost of $15.9$33.9 million and $15.0$41.1 million,, respectively, were surrendered to or withheld by the Company in satisfaction of withholding taxes in connection with the vesting of awards under the Company's 1997 Long-Term Stock Incentive Plan, as amended (the "1997 Incentive Plan"), and its Amended and Restated 2010 Long-Term Stock Incentive Plan (the "2010 Incentive Plan").long-term stock incentive plans.
Repurchased and surrendered shares are accounted for as treasury stock at cost and held in treasury for future use.

30

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dividends
Since 2003,Except as discussed below, the Company has maintained a regular quarterly cash dividend program on its common stock. The thirdstock since 2003. On May 13, 2019, the Company's Board of Directors approved an increase to the Company's quarterly cash dividend on its common stock from $0.625 to $0.6875 per share.
As a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 20182021 the Company temporarily suspended its quarterly cash dividend of $0.50 per share was declared on December 14, 2017, was payableprogram as a preemptive action to stockholders of recordpreserve cash and strengthen its liquidity position. Any decision to declare and pay dividends in the future will be made at the closediscretion of businessthe Company's Board of Directors and will depend on December 29, 2017,the Company's results of operations, cash requirements, financial condition, and was paid on January 12, 2018. Dividends paid amounted to $121.7 millionother factors that the Board of Directors may deem relevant, including economic and $123.7 million during the nine-month periods ended December 30, 2017 and December 31, 2016, respectively.market conditions.




30

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.Accumulated Other Comprehensive Income (Loss)
The following table presents OCI activity, net of tax, accumulated in equity:
 
Foreign Currency Translation Gains (Losses)(a)
 
Net Unrealized Gains (Losses) on Cash Flow Hedges(b)
 
Net Unrealized Gains (Losses) on Defined
Benefit Plans(c)
 Total Accumulated Other Comprehensive Income (Loss) 
Foreign Currency Translation Gains (Losses)(a)
 
Net Unrealized Gains (Losses) on Cash Flow Hedges(b)
 
Net Unrealized Gains (Losses) on Defined
Benefit Plans(c)
 Total Accumulated Other Comprehensive Income (Loss)
 (millions) (millions)
Balance at April 2, 2016 $(157.6) $(12.0) $(11.9) $(181.5)
Balance at March 28, 2020 $(130.4) $18.0
 $(5.8) $(118.2)
Other comprehensive income (loss), net of tax:                
OCI before reclassifications (86.7) 42.1
 1.0
 (43.6) 13.0
 (2.8) (0.1) 10.1
Amounts reclassified from AOCI to earnings —
 1.1
 1.0
 2.1
 —
 (1.2) —
 (1.2)
Other comprehensive income (loss), net of tax (86.7) 43.2
 2.0
 (41.5) 13.0
 (4.0) (0.1) 8.9
Balance at December 31, 2016 $(244.3) $31.2
 $(9.9) $(223.0)
Balance at June 27, 2020 $(117.4) $14.0
 $(5.9) $(109.3)
                
Balance at April 1, 2017 $(206.2) $14.6
 $(6.8) $(198.4)
Balance at March 30, 2019 $(118.5) $20.2
 $(5.1) $(103.4)
Other comprehensive income (loss), net of tax:                
OCI before reclassifications 90.7
 (26.4) (1.0) 63.3
 8.9
 (3.9) (0.1) 4.9
Amounts reclassified from AOCI to earnings —
 4.4
 0.1
 4.5
 (4.9) (5.8) —
 (10.7)
Other comprehensive income (loss), net of tax 90.7
 (22.0) (0.9) 67.8
 4.0
 (9.7) (0.1) (5.8)
Balance at December 30, 2017 $(115.5) $(7.4) $(7.7) $(130.6)
Balance at June 29, 2019 $(114.5) $10.5
 $(5.2) $(109.2)
 
(a)
OCI before reclassifications to earnings related to foreign currency translation gains (losses) includes an income tax benefitbenefits of $23.4$4.7 million and $2.0 million for the nine monthsthree-month periods ended December 30, 2017,June 27, 2020 and is presented net of an income tax provision of $19.1 million for the nine months ended December 31, 2016.June 29, 2019, respectively. OCI before reclassifications to earnings for the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019 include a losslosses of $45.5$12.2 million (net of a $27.6$3.9 million income tax benefit) and a gain of $27.8$5.7 million (net of a $17.4$1.8 million income tax provision)benefit), respectively, related to the effective portion of changes in the fair values of the Cross-Currency Swapsinstruments designated as hedges of the Company's net investment in certain of its European subsidiariesforeign operations (see Note 12). Amounts reclassified from AOCI to earnings related to foreign currency translation gains (losses) for the three months ended June 29, 2019 relate to the reclassification to retained earnings of income tax effects stranded in AOCI.
(b) 
OCI before reclassifications to earnings related to net unrealized gains (losses) on cash flow hedges are presented net of an income tax benefitbenefits of $2.4$0.2 million and an income tax provision of $4.6$0.5 million for the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively. The tax effects on amounts reclassified from AOCI to earnings are presented in a table below.
(c) 
Activity is presented net of taxes, which were immaterial for both periods presented.

31

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents reclassifications from AOCI to earnings for cash flow hedges, by component:
 Three Months Ended Nine Months Ended 
Location of Gains (Losses)
Reclassified from AOCI
to Earnings
 Three Months Ended 
Location of
Gains (Losses)
Reclassified from AOCI
to Earnings
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		  June 27,
2020		 June 29,
2019		 
 (millions)  (millions) 
Gains (losses) on cash flow hedges(a):
              
FC — Cash flow hedges
 $(5.9) $(2.7) $(4.3) $(4.2) Cost of goods sold $1.7
 $6.2
 Cost of goods sold
FC — Cash flow hedges
 0.6
 9.3
 (0.4) 3.3
 Foreign currency gains (losses) (0.3) 0.2
 Other income (expense), net
Tax effect 0.5
 (1.4) 0.3
 (0.2) Income tax benefit (provision) (0.2) (0.6) Income tax benefit (provision)
Net of tax $(4.8) $5.2
 $(4.4) $(1.1)  $1.2
 $5.8
 
 
(a) 
FC = Forward foreign currency exchange contracts.




31

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.Stock-based Compensation
The Company's stock-based compensation awards are currently issued under the 20102019 Incentive Plan, which was approved by its stockholders on August 5, 2010.1, 2019. However, any prior awards granted under either the Company's 2010 Incentive Plan or 1997 Incentive Plan remain subject to the terms of that plan.those plans as applicable. Any awards that expire, are forfeited, or are surrendered to the Company in satisfaction of taxes are available for issuance under the 20102019 Incentive Plan.
Refer to Note 18 of the Fiscal 20172020 10-K for a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service, performance, and performancemarket conditions and payout percentages.
Impact on Results
A summary of total stock-based compensation expense and the related income tax benefits recognized during the three-month and nine-month periods ended December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019 is as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Compensation expense $15.1
 $23.0
Income tax benefit (3.1) (3.6)

  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Compensation expense $16.9
(a) 
$14.5
 $56.3
(a) 
$46.4
Income tax benefit (6.3) (5.3) (20.9) (17.0)
(a)
The three-month and nine-month periods ended December 30, 2017 include $0.7 million and $2.8 million, respectively, of accelerated stock-based compensation expense recorded within restructuring and other charges in the consolidated statements of operations (see Note 8). All other stock-based compensation expense was recorded within SG&A expenses.
The Company issues its annual grants of stock-based compensation awards in the first half of each fiscal year. Due to the timing of the annual grants and other factors, including the timing and magnitude of forfeiture and performance goal achievement adjustments, as well as changes to the size and composition of the eligible employee population, stock-based compensation expense recognized during any given fiscal period is not indicative of the level of compensation expense expected to be incurred in future periods.

32

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options
A summary of stock option activity under all plans during the nine months endedDecember 30, 2017 is as follows:
Number of Options
(thousands)
Options outstanding at April 1, 20171,720
Granted—
Exercised—
Cancelled/Forfeited(537)
Options outstanding at December 30, 20171,183
Restricted Stock Awards and Service-based RSUs
The fair values of restrictedRestricted stock awards were granted to non-employee directors prior to Fiscal 2019. Effective beginning Fiscal 2019, non-employee directors are determined based on the fair valuenow granted service-based RSUs in lieu of the Company's Class A common stock on the date of grant. No such awards were granted during the nine-month periods ended December 30, 2017 and December 31, 2016.restricted shares.
The fair values of service-based RSUs granted to certain of the Company's senior executives and other employees, as well as to certain of its other employees,non-employee directors, are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which dividend equivalent amounts do not entitled to accrue dividend equivalents while outstanding.outstanding and unvested. The weighted-average grant date fair values of service-based RSU awards granted were $73.32$59.72 and $83.92$109.72 per share during the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively.
A summary of restricted stock and service-based RSU activity during the ninethree months ended December 30, 2017June 27, 2020 is as follows:
  Number of Shares/Units
  Restricted Stock Service-based RSUs
  (thousands)
Unvested at March 28, 2020 4
 1,094
Granted —
 645
Vested (4) (353)
Forfeited —
 (20)
Unvested at June 27, 2020 —
 1,366
  Number of Shares
  Restricted Stock Service-based RSUs
  (thousands)
Nonvested at April 1, 2017 19
 922
Granted —
 695
Vested —
 (325)
Forfeited —
 (140)
Nonvested at December 30, 2017 19
 1,152

Performance-based RSUs
The fair values of the Company's performance-based RSUs that are not subjectgranted to a market condition in the form of a total shareholder return ("TSR") modifierits senior executives and other key employees are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards not entitled to accrue dividend equivalents while outstanding. The weighted-average grant date fair values of performance-based RSUs that do not contain a TSR modifier granted during the nine-month periods ended December 30, 2017 and December 31, 2016 were $69.40 and $86.15 per share, respectively.
The fair values of the Company's performance-based RSUs with a TSR modifier are determined on the date of grant using a Monte Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the probability of the Company achieving various stock price levels to determine its expected TSR performance ranking. No such awards were granted during the nine-month periods ended December 30, 2017 and December 31, 2016.





3332 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


for any awards for which dividend equivalent amounts do not accrue while outstanding and unvested. The weighted-average grant date fair values of performance-based RSUs granted was $102.69 per share during the three months ended June 29, 2019. No such awards were granted during the three months ended June 27, 2020 as the Company has elected to temporarily issue service-based RSUs in lieu of performance-based RSUs as a result of business disruptions and uncertainty created by the COVID-19 pandemic.
A summary of performance-based RSU activity during the ninethree months ended December 30, 2017June 27, 2020 is as follows:
Number of
Performance-based
RSUs
(thousands)
Unvested at March 28, 2020934
Granted—
Change due to performance condition achievement185
Vested(720)
Forfeited(27)
Unvested at June 27, 2020372

Market-based RSUs
The Company grants market-based RSUs, which are based on TSR performance, to its senior executives and other key employees. The Company estimates the fair value of its TSR awards on the date of grant using a Monte Carlo simulation, which models multiple stock price paths of the Company's Class A common stock and that of its peer group to evaluate and determine its ultimate expected relative TSR performance ranking. Compensation expense, net of estimated forfeitures, is recorded regardless of whether, and the extent to which, the market condition is ultimately satisfied.
The weighted-average grant date fair values of market-based RSUs granted was $139.02 per share during the three months ended June 29, 2019. No such awards were granted during the three months ended June 27, 2020 as the Company has elected to temporarily issue service-based RSUs in lieu of market-based RSUs as a result of business disruptions and uncertainty created by the COVID-19 pandemic. The assumptions used to estimate the fair value of TSR awards granted during the three months ended June 29, 2019 were as follows:
Three Months Ended
June 29,
2019
Expected term (years)2.8
Expected volatility30.8%
Expected dividend yield2.4%
Risk-free interest rate1.7%

A summary of market-based RSU activity during the three months ended June 27, 2020 is as follows:
Number of
Market-based RSUs
(thousands)
Unvested at March 28, 2020234
Granted—
Change due to market condition achievement—
Vested—
Forfeited—
Unvested at June 27, 2020234


  Number of Shares
  
Performance-based
RSUs — without
TSR Modifier
 
Performance-based
RSUs — with
TSR Modifier
  (thousands)
Nonvested at April 1, 2017 788
 61
Granted 585
 —
Change due to performance/market condition achievement (12) (21)
Vested (149) (40)
Forfeited (28) —
Nonvested at December 30, 2017 1,184
 —



33

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options
A summary of stock option activity under all plans during the three months ended June 27, 2020 is as follows:
Number of Options
(thousands)
Options outstanding at March 28, 2020518
Granted—
Exercised—
Cancelled/Forfeited(34)
Options outstanding at June 27, 2020484

17.Segment Information
The Company has three3 reportable segments based on its business activities and organization:
North America — The North America segment primarily consists of sales of Ralph Lauren branded apparel, accessories, home furnishings, and related products made through the Company's wholesale and retail businesses in the U.S. and Canada, excluding Club Monaco. In North America, the Company's wholesale business is comprised primarily of sales to department stores, and to a lesser extent, specialty stores. The Company's retail business in North America is comprised of its Ralph Lauren stores, its factory stores, and its e-commerce site, www.RalphLauren.com.
Europe — The Europe segment primarily consists of sales of Ralph Lauren branded apparel, accessories, home furnishings, and related products made through the Company's wholesale and retail businesses in Europe and the Middle East, excluding Club Monaco. In Europe, the Company's wholesale business is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country. The Company's retail business in Europe is comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its various e-commerce sites.
Asia — The Asia segment primarily consists of sales of Ralph Lauren branded apparel, accessories, home furnishings, and related products made through the Company's wholesale and retail businesses in Asia, Australia, and New Zealand. The Company's retail business in Asia is comprised of its Ralph Lauren stores, its factory stores, and its concession-based shop-within-shops. In addition, the Company sells its products through various third-party digital partner e-commerce sites. In Asia, the Company's wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.
•
North America — The North America segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In North America, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, and its digital commerce site, www.RalphLauren.com. The Company's wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.
•
Europe — The Europe segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its various digital commerce sites. The Company's wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital partners.
•
Asia — The Asia segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in Asia, Australia, and New Zealand. The Company's retail business in Asia is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its digital commerce sites, www.RalphLauren.co.jp (which launched in June 2020) and www.RalphLauren.cn. In addition, the Company sells its products online through various third-party digital partner commerce sites. In Asia, the Company's wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.
No operating segments were aggregated to form the Company's reportable segments. In addition to these reportable segments, the Company also has other non-reportable segments, which primarily consist of (i) sales of Club Monaco branded products made through its retail and wholesale businesses in the U.S., Canada, and Europe, and its licensing alliances in Europe and Asia, (ii) sales of Ralph Lauren branded products made through its wholesale business in Latin America, and (iii)(ii) royalty revenues earned through its global licensing alliances, excluding Club Monaco.
The Company's segment reporting structure is consistent with how it establishes its overall business strategy, allocates resources, and assesses performance of its business. The accounting policies of the Company's segments are consistent with those described in Notes 2 and 3 of the Fiscal 20172020 10-K. Sales and transfers between segments are generally recorded at cost and treated as transfers of inventory. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. Each segment's performance is evaluated based upon net revenues and operating income before restructuringrestructuring-related charges, impairment of assets, and certain other one-time items, such as legal charges, if any. Certain corporate overhead expenses related to global functions, most notably the Company's executive office, information technology, finance and accounting, human resources, and legal departments, largely remain at corporate. Additionally, other costs that cannot be allocated to the segments based on specific usage are also maintained at corporate, including corporate advertising and marketing expenses, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-level activities and projects.





34 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fourth quarter of Fiscal 2017, the Company realigned its segment reporting structure as a result of significant organizational changes implemented in connection with the Way Forward Plan. Refer to Note 20 of the Company's Fiscal 2017 Form 10-K for further discussion. All prior period segment information has been recast to reflect the realignment of the Company's segment reporting structure on a comparative basis.
Net revenues and operating income (loss) for each of the Company's segments are as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Net revenues:    
North America $165.1
 $719.4
Europe 120.7
 360.8
Asia 171.9
 258.6
Other non-reportable segments 29.8
 90.0
Total net revenues $487.5
 $1,428.8

  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Net revenues:        
North America $886.4
 $1,000.8
 $2,471.7
 $2,901.2
Europe 378.5
 349.2
 1,165.0
 1,172.6
Asia 251.0
 235.2
 676.9
 662.8
Other non-reportable segments 125.9
 129.4
 339.5
 350.8
Total net revenues $1,641.8
 $1,714.6
 $4,653.1
 $5,087.4


  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Operating income (loss)(a):
    
North America $(24.8) $150.1
Europe (16.9) 79.4
Asia 10.1
 48.1
Other non-reportable segments 0.9
 32.9
  (30.7) 310.5
Unallocated corporate expenses (130.3) (137.6)
Unallocated restructuring and other charges(b)
 (7.0) (29.6)
Total operating income (loss) $(168.0) $143.3
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Operating income (loss)(a):
        
North America $196.6
 $206.4
 $549.3
 $574.6
Europe 81.0
 63.8
 273.6
 239.2
Asia 44.3
 23.3
 101.0
 (80.3)
Other non-reportable segments 37.1
 33.2
 96.9
 91.0
  359.0
 326.7
 1,020.8
 824.5
Unallocated corporate expenses (146.5) (131.7) (469.3) (457.2)
Unallocated restructuring and other charges(b)
 (23.3) (66.7) (78.7) (193.9)
Total operating income $189.2
 $128.3
 $472.8
 $173.4

 
(a) 
Segment operating income (loss) during the three months ended June 27, 2020 reflects bad debt expense reversals of $15.5 million and $1.0 million related to North America and Europe, respectively, primarily related to adjustments to reserves previously established in connection with COVID-19 business disruptions. Segment operating income (loss) and unallocated corporate expenses during the three-month and nine-month periods ended December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019 also included certain restructuring-related inventory charges (see Note 8) and asset impairment charges (see Note 7), which are detailed below:
   Three Months Ended
   June 27,
2020		 June 29,
2019
   (millions)
 Asset impairment charges:    
 North America $(0.2) $—
 Asia (1.3) —
 Other non-reportable segments (0.6) —
 Unallocated corporate expenses —
 (1.2)
 Total asset impairment charges $(2.1) $(1.2)

   Three Months Ended Nine Months Ended
   December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
   (millions)
 Restructuring-related inventory charges:        
 North America $—
 $(0.6) $(0.8) $(25.4)
 Europe —
 (1.3) (0.1) (13.8)
 Asia —
 (12.4) —
 (106.5)
 Other non-reportable segments —
 (0.1) (0.4) (3.7)
 Total restructuring-related inventory charges $—
 $(14.4) $(1.3) $(149.4)






35 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   Three Months Ended Nine Months Ended
   December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
   (millions)
 Asset impairment charges:        
 North America $(1.7) $(1.7) $(2.6) $(9.4)
 Europe —
 (0.3) (1.2) (1.9)
 Asia (0.2) (2.6) (1.1) (38.1)
 Other non-reportable segments (0.1) (5.5) (8.7) (6.5)
 Unallocated corporate expenses (1.9) (0.2) (11.2) (0.8)
 Total asset impairment charges $(3.9) $(10.3) $(24.8) $(56.7)


(b) 
The three-month and nine-month periods ended December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019 included certain unallocated restructuring and other charges (see Note 8), which are detailed below:
   Three Months Ended
   June 27,
2020		 June 29,
2019
   (millions)
 Unallocated restructuring and other charges:    
 North America-related $(0.1) $(0.7)
 Europe-related —
 (1.8)
 Asia-related 0.2
 (0.5)
 Other non-reportable segment-related (1.1) —
 Corporate operations-related (1.6) (4.0)
 Unallocated restructuring charges (2.6) (7.0)
 Other charges (see Note 8) (4.4) (22.6)
 Total unallocated restructuring and other charges $(7.0) $(29.6)
   Three Months Ended Nine Months Ended
   December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
   (millions)
 Unallocated restructuring and other charges:        
 North America-related $(1.3) $(5.3) $(14.5) $(27.8)
 Europe-related (0.5) (1.1) (5.6) (17.5)
 Asia-related 0.1
 (49.2) 1.0
 (57.5)
 Other non-reportable segment-related —
 0.2
 (6.8) (2.9)
 Corporate-related (18.1) (11.3) (37.8) (88.2)
 Unallocated restructuring charges (19.8) (66.7) (63.7) (193.9)
 Other charges (see Note 8) (3.5) —
 (15.0) —
 Total unallocated restructuring and other charges $(23.3) $(66.7) $(78.7) $(193.9)

Depreciation and amortization expense for the Company's segments is as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Depreciation and amortization expense:    
North America $18.1
 $18.9
Europe 7.7
 7.6
Asia 14.2
 15.0
Other non-reportable segments 1.1
 1.3
Unallocated corporate 22.6
 23.4
Total depreciation and amortization expense $63.7
 $66.2
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Depreciation and amortization:        
North America $19.5
 $27.8
 $61.1
 $84.0
Europe 9.1
 8.6
 25.7
 23.5
Asia 12.1
 11.3
 35.7
 36.8
Other non-reportable segments 2.6
 3.5
 8.2
 11.1
Unallocated corporate expenses 25.9
 26.7
 78.2
 76.5
Unallocated restructuring and other charges (see Note 8) 3.5
 —
 10.5
 —
Total depreciation and amortization $72.7
 $77.9
 $219.4
 $231.9

36

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Net revenues by geographic location of the reporting subsidiary are as follows:
 Three Months Ended Nine Months Ended Three Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
 (millions) (millions)
Net revenues(a):
            
The Americas(b)
 $1,009.5
 $1,126.7
 $2,801.8
 $3,242.4
 $194.7
 $810.4
Europe(c)
 381.0
 352.3
 1,173.3
 1,181.0
 120.9
 359.5
Asia(d)
 251.3
 235.6
 678.0
 664.0
 171.9
 258.9
Total net revenues $1,641.8
 $1,714.6
 $4,653.1
 $5,087.4
 $487.5
 $1,428.8
 
(a) 
Net revenues for certain of the Company's licensed operations are included within the geographic location of the reporting subsidiary which holds the respective license.
(b) 
Includes the U.S., Canada, and Latin America. Net revenues earned in the U.S. during the three-month and nine-month periods ended December 30, 2017June 27, 2020 and June 29, 2019 were $946.3$186.1 million and $2.629 billion, respectively, and $1.064 billion and $3.066 billion during the three-month and nine-month periods ended December 31, 2016,$760.1 million, respectively.
(c) 
Includes the Middle East.
(d) 
Includes Australia and New Zealand.




36

RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.Additional Financial Information
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
A reconciliation of cash, cash equivalents, and restricted cash as of December 30, 2017June 27, 2020 and April 1, 2017March 28, 2020 from the consolidated balance sheets to the consolidated statements of cash flows is as follows:
  June 27,
2020		 March 28,
2020
  (millions)
Cash and cash equivalents $2,451.3
 $1,620.4
Restricted cash included within prepaid expenses and other current assets 1.4
 1.4
Restricted cash included within other non-current assets 8.2
 8.0
Total cash, cash equivalents, and restricted cash $2,460.9
 $1,629.8

  December 30,
2017		 April 1,
2017
  (millions)
Cash and cash equivalents $1,175.7
 $668.3
Restricted cash included within prepaid expenses and other current assets 13.4
 9.8
Restricted cash included within other non-current assets 34.1
 33.7
Total cash, cash equivalents, and restricted cash $1,223.2
 $711.8
Amounts included in restrictedRestricted cash relaterelates to cash placedheld in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters.matters and real estate leases.
Cash Interest and Taxes
Cash paid for interest and income taxes is as follows:
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Cash paid for interest $3.3
 $2.4
Cash paid for income taxes 18.9
 22.3
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Cash paid for interest $3.6
 $2.9
 $9.2
 $9.7
Cash paid for income taxes 19.4
 19.2
 47.7
 69.5

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RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Non-cash Transactions
Operating lease ROU assets recorded in connection with the recognition of new lease liabilities were $13.1 million during the three months ended June 27, 2020. Operating and finance lease ROU assets recorded in connection with the recognition of new lease liabilities were $17.7 million and $64.0 million, respectively, during the three months ended June 29, 2019.
Non-cash investing activities also included capital expenditures incurred but not yet paid of $33.9$26.4 million and $55.9$44.2 million for the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively. Additionally, the Company recorded capital lease assets and corresponding capital lease obligations of $3.3 million and $5.5 million within its consolidated balance sheet
Non-cash financing activities during the nine-month periodsthree months ended December 30, 2017 and December 31, 2016, respectively.June 29, 2019 included the conversion of 0.5 million shares of Class B common stock into an equal number of shares of Class A common stock, as discussed in Note 14.
There were no other significant non-cash investing or financing activities for any of the fiscal periods presented.






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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Special Note Regarding Forward-Looking Statements
Various statements in this Form 10-Q, or incorporated by reference into this Form 10-Q, in future filings by us with the Securities and Exchange Commission (the "SEC"), in our press releases, and in oral statements made from time to time by us or on our behalf constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding our future operating results and sources of liquidity (especially in light of the COVID-19 pandemic), the impact of our strategic plans, initiatives and capital expenses, and our ability to meet environmental, social, and governance goals. Forward-looking statements are based on current expectations and are indicated by words or phrases such as "anticipate," "outlook," "estimate," "expect," "project," "we believe,"believe," "is or remains optimistic,"envision," "currently envisions,"goal," "target," "can," "will," and similar words or phrases and involve known and unknown risks, uncertainties, and other factors which may cause actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed in or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others:
the loss of key personnel, including Mr. Ralph Lauren, or other changes in our executive and senior management team or to our operating structure, and our ability to effectively transfer knowledge during periods of transition;
the impact to our business resulting from the COVID-19 pandemic, including the temporary closure of our stores, distribution centers, and corporate facilities, as well as those of our wholesale customers, licensing partners, suppliers, and vendors, and potential changes to consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations;
our ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments;
our ability to maintain adequate levels of liquidity to provide for our cash needs, including our debt obligations, tax obligations, capital expenditures, and potential payment of dividends and repurchases of our Class A common stock, as well as the ability of our customers, suppliers, vendors, and lenders to access sources of liquidity to provide for their own cash needs;
the impact to our business resulting from changes in consumers' ability, willingness, or preferences to purchase discretionary items and luxury retail products, which tends to decline during recessionary periods, and our ability to accurately forecast consumer demand, the failure of which could result in either a build-up or shortage of inventory;
the impact of economic, political, and other conditions on us, our customers, suppliers, vendors, and lenders, including business disruptions related to pandemic diseases such as COVID-19, civil and political unrest such as the recent protests in the U.S. and Hong Kong, and escalating diplomatic tensions between the U.S. and China;
the potential impact to our business and future strategic direction resulting from the financial difficulties of certain of our transition tolarge wholesale customers, which may result in consolidations, liquidations, restructurings, and other ownership changes in the retail industry, as well as other changes in the competitive marketplace, including the introduction of new products or pricing changes by our new Chief Executive Officer;competitors;
our ability to successfully implement our long-term growth strategystrategy;
our ability to continue to expand and achieve anticipated operating enhancementsgrow our business internationally and cost reductions from our restructuring plans;
the impact of related changes in our customer, channel, and geographic sales mix as a result, as well as our ability to accelerate growth in certain product categories;
our business resulting from investmentsability to open new retail stores and other costs incurredconcession shops, as well as enhance and expand our digital footprint and capabilities, all in connectionan effort to expand our direct-to-consumer presence;
our ability to respond to constantly changing fashion and retail trends and consumer demands in a timely manner, develop products that resonate with the execution of our long-term growth strategy, including restructuring-related charges, which may be dilutiveexisting customers and attract new customers, and execute marketing and advertising programs that appeal to our earnings in the short term;consumers;
our ability to effectively manage inventory levels and the increasing pressure on our margins in a highly promotional retail environment;
the impactour ability to continue to maintain our business resulting from potential costsbrand image and obligations related to the early closure ofreputation and protect our stores or termination of our long-term, non-cancellable leases;trademarks;
our efforts to successfully enhance, upgrade, and/or transition our global information technology systems and e-commerce platform;



38

our ability to securecompetitively price our facilitiesproducts and systems and those of our third-party service providers from, among other things, cybersecurity breaches, acts of vandalism, computer viruses, or similar Internet or email events;
the impact to our business resulting from the recently enacted U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act, including related changes to our tax obligations and effective tax rate in future periods, as well as the one-time enactment-related charges that were recorded during the third quarter of Fiscal 2018 on a provisional basis based on a reasonable estimate and are subject to change, all of which could differ materially from our current expectations and/or investors' expectations;
changes in our tax obligations and effective tax rate due to a variety of other factors, including potential additional changes in U.S. or foreign tax laws and regulations, accounting rules, or the mix and level of earnings by jurisdiction in future periods that are not currently known or anticipated;create an acceptable value proposition for consumers;
a variety of legal, regulatory, tax, political, and economic risks, including risks related to the importation and exportation of products tariffs, and other trade barriers which our operations are currently subject to, or may become subject to as a result of potential changes in legislation, and other risks associated with our international operations, such as compliance with the Foreign Corrupt Practices Act or violations of other anti-bribery and corruption laws prohibiting improper payments, and the burdens of complying with a variety of foreign laws and regulations, including tax laws, trade and labor restrictions, and related laws that may reduce the flexibility of our business;
the potential impact to our business resulting from the imposition of additional duties, tariffs, taxes, and other charges or barriers to trade, including those resulting from current trade developments with China and the related impact to global stock markets, as well as our ability to implement mitigating sourcing strategies;
the impact to our business resulting from the United Kingdom's exit from the European Union and the uncertainty surrounding its future relationship with the European Union, including trade agreements, as well as the related impact to global stock markets and currency exchange rates;
the impact to our business resulting from increases in the costs of raw materials, transportation, and labor, including wages, healthcare, and other benefit-related costs;
our ability to secure our facilities and systems and those of our third-party service providers from, among other things, cybersecurity breaches, acts of vandalism, computer viruses, or similar Internet or email events;
our efforts to successfully enhance, upgrade, and/or transition our global information technology systems and digital commerce platforms;
the potential impact to our business if any of our distribution centers were to become inoperable or inaccessible;
the potential impact on our operations and on our suppliers and customers resulting from man-made or natural disasters, including pandemic diseases such as COVID-19, severe weather, geological events, and other catastrophic events;
changes in our tax obligations and effective tax rate due to a variety of other factors, including potential changes in U.S. or foreign tax laws and regulations, accounting rules, or the mix and level of earnings by jurisdiction in future periods that are not currently known or anticipated;
our exposure to currency exchange rate fluctuations from both a transactional and translational perspective;
the impact to our business resulting from increases inpotential costs and obligations related to the costs of raw materials, transportation, and labor;

39

the potential impact to our business resulting from the financial difficulties of certainearly or temporary closure of our large wholesale customers, which may result in consolidations, liquidations, restructurings,stores or termination of our long-term, non-cancellable leases;
our ability to achieve anticipated operating enhancements and other ownership changes in the retail industry,cost reductions from our restructuring plans, as well as other changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors;
the impact to our business resulting from changesrestructuring-related charges, which may be dilutive to our earnings in consumers' ability or preferences to purchase premium lifestyle products that we offer for sale and our ability to forecast consumer demand, which could result in either a build-up or shortage of inventory;
our ability to maintain our credit profile and ratings within the financial community;
our ability to access sources of liquidity to provide for our cash needs, including our debt obligations, tax obligations, payment of dividends, capital expenditures, and potential repurchases of our Class A common stock, as well as the ability of our customers, suppliers, vendors, and lenders to access sources of liquidity to provide for their own cash needs;
the potential impact to the trading prices of our securities if our Class A common stock share repurchase activity and/or cash dividend payments differ from investors' expectations;
the impact of the volatile state of the global economy, stock markets, and other global economic conditions on us, our customers, suppliers, vendors, and lenders;short term;
the impact to our business of events of unrest and instability that are currently taking place in certain parts of the world, as well as from any terrorist action, retaliation, and the threat of further action or retaliation;
the potential impact to the trading prices of our ability to open new retail stores, concession shops, and e-commerce sites in an effort to expandsecurities if our direct-to-consumer presence;Class A common stock share repurchase activity and/or cash dividend payments differ from investors' expectations;
our ability to continue to expand or grow our business internationally and the impact of related changes in our customer, channel, and geographic sales mix as a result;
our ability to continue to maintain our brand imagecredit profile and reputation and protect our trademarks;ratings within the financial community;
our intention to introduce new products or brands, or enter into or renew alliances and exclusive relationships;alliances;
changes in the business of, and our relationships with, major department storewholesale customers and licensing partners;
the potential impact on our operationsability to achieve our goals regarding environmental, social, and on our suppliers and customers resulting from natural or man-made disasters;
the impact to our business resulting from the United Kingdom's decision to exit the European Union and the uncertainty surrounding the terms and conditions of such a withdrawal, as well as the related impact to global stock markets and currency exchange rates;governance practices; and
our ability to make certain strategic acquisitions and successfully integrate the acquired businesses into our existing operations.




39

These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2017March 28, 2020 (the "Fiscal 20172020 10-K"). There are no material changes to such risk factors, other thannor have we identified any previously undisclosed risks that could materially adversely affect our business, operating results, and/or financial condition, as set forth in Part II, Item 1A — "Risk Factors" of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
In this Form 10-Q, references to "Ralph Lauren," "ourselves," "we," "our," "us," and the "Company" refer to Ralph Lauren Corporation and its subsidiaries, unless the context indicates otherwise. We utilize a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 20182021 will end on March 31, 201827, 2021 and will be a 52-week period ("Fiscal 2018"2021"). Fiscal year 20172020 ended on April 1, 2017March 28, 2020 and was also a 52-week period ("Fiscal 2017"2020"). The thirdfirst quarter of Fiscal 20182021 ended on December 30, 2017June 27, 2020 and was a 13-week period. The thirdfirst quarter of Fiscal 20172020 ended on December 31, 2016June 29, 2019 and was also a 13-week period.

40

INTRODUCTION
Management's discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the accompanying consolidated financial statements and notes thereto to help provide an understanding of our results of operations, financial condition, and liquidity. MD&A is organized as follows:
Overview.    This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for the three-month and nine-month periods ended December 30, 2017. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.
Results of operations.    This section provides an analysis of our results of operations for the three-month and nine-month periods ended December 30, 2017 as compared to the three-month and nine-month periods ended December 31, 2016.
Financial condition and liquidity.    This section provides a discussion of our financial condition and liquidity as of December 30, 2017, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, common stock repurchases, payments of dividends, and our outstanding debt and covenant compliance; and (iv) a description of any material changes in our contractual and other obligations since April 1, 2017.
Market risk management.    This section discusses any significant changes in our risk exposures related to foreign currency exchange rates, interest rates, and our investments since April 1, 2017.
Critical accounting policies.    This section discusses any significant changes in our critical accounting policies since April 1, 2017. Critical accounting policies typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 3 of the Fiscal 2017 10-K.
Recently issued accounting standards.    This section discusses the potential impact on our reported results of operations and financial condition of certain accounting standards that have been recently issued or proposed.
•
Overview.    This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for the three-month period ended June 27, 2020. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.
•
Results of operations.    This section provides an analysis of our results of operations for the three-month period ended June 27, 2020 as compared to the three-month period ended June 29, 2019.
•
Financial condition and liquidity.    This section provides a discussion of our financial condition and liquidity as of June 27, 2020, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for the three months ended June 27, 2020 as compared to the three months ended June 29, 2019; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, our outstanding debt and covenant compliance, common stock repurchases, and payments of dividends; and (iv) a description of any material changes in our contractual and other obligations since March 28, 2020.
•
Market risk management.    This section discusses any significant changes in our risk exposures related to foreign currency exchange rates, interest rates, and our investments since March 28, 2020.
•
Critical accounting policies.    This section discusses any significant changes in our critical accounting policies since March 28, 2020. Critical accounting policies typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 3 of the Fiscal 2020 10-K.
•
Recently issued accounting standards.    This section discusses the potential impact on our reported results of operations and financial condition of certain accounting standards that have been recently issued.
OVERVIEW
Our Business
Our Company is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, fragrances, and other licensed product categories.hospitality. Our long-standing reputation and distinctive image have been developed across an expanding number of products, brands, sales channels, and international markets. Our brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others.




40

We diversify our business by geography (North America, Europe, and Asia, among other regions) and channelschannel of distribution (wholesale, retail,(retail, wholesale, and licensing). This allows us to maintain a dynamic balance as our operating results do not depend solely on the performance of any single geographic area or channel of distribution. Our wholesale sales are made principally to major department stores and specialty stores around the world. We also sell directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-shops, and e-commercedigital commerce operations around the world. Our wholesale sales are made principally to major department stores, specialty stores, and third-party digital partners around the world, as well as to certain third party-owned stores to which we have licensed the right to operate in defined geographic territories using our trademarks. In addition, we license to unrelated third parties for specified periods the right to operate retail stores and/or to useaccess our various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.

41

We organize our business into the following three reportable segments:
•
North America — Our North America segment, representing approximately 51% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In North America, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, and our digital commerce site, www.RalphLauren.com. Our wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.
•
Europe — Our Europe segment, representing approximately 26% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital partners.
•
Asia — Our Asia segment, representing approximately 17% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Asia, Australia, and New Zealand. Our retail business in Asia is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our digital commerce sites, www.RalphLauren.co.jp (which launched in June 2020) and www.RalphLauren.cn. In addition, we sell our products online through various third-party digital partner commerce sites. In Asia, our wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.
North America — Our North America segment, representing approximately 57% ofNo operating segments were aggregated to form our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in the U.S. and Canada, excluding Club Monaco. In North America, our wholesale business is comprised primarily of sales to department stores, and to a lesser extent, specialty stores. Our retail business in North America is comprised of our Ralph Lauren stores, our factory stores, and our e-commerce site, www.RalphLauren.com.
Europe — Our Europe segment, representing approximately 23% of our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in Europe and the Middle East, excluding Club Monaco. In Europe, our wholesale business is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country. Our retail business in Europe is comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our various e-commerce sites.
Asia — Our Asia segment, representing approximately 13% of our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in Asia, Australia, and New Zealand. Our retail business in Asia is comprised of our Ralph Lauren stores, our factory stores, and our concession-based shop-within-shops. In addition, we sell our products through various third-party digital partner e-commerce sites. In Asia, our wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.
reportable segments. In addition to these reportable segments, we also have other non-reportable segments, representing approximately 7%6% of our Fiscal 20172020 net revenues, which primarily consist of (i) sales of our Club Monaco branded products made through our retail and wholesale businesses in the U.S., Canada, and Europe, and our licensing alliances in Europe and Asia, (ii) sales of our Ralph Lauren branded products made through our wholesale business in Latin America, and (iii)(ii) royalty revenues earned through our global licensing alliances, excluding Club Monaco.
During the fourth quarter of Fiscal 2017, we realigned our segment reporting structure as a result of significant organizational changes implemented in connection with the Way Forward Plan, as defined within "Recent Developments"below. Refer to Note 20Approximately 46% of our Fiscal 2017 Form 10-K for further discussion. All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparative basis.
Approximately 40% of our Fiscal 20172020 net revenues were earned outside of the U.S. See Note 17 to the accompanying consolidated financial statements for a summaryfurther discussion of net revenues and operating income (loss) byour segment as well as net revenues by geographic location.reporting structure.
Our business is typically affected by seasonal trends, with higher levels of retail sales in our second and third fiscal quarters and higher wholesale sales in our second and fourth fiscal quarters and higher retail sales in our second and third fiscal quarters. These trends result primarily from the timing of seasonal wholesale shipments and key vacation travel, back-to-school, and holiday shopping periods impacting our retail business.business and the timing of seasonal wholesale shipments. As a result of changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from disease pandemics and other catastrophic events, historical quarterly operating trends and working capital requirements may not be indicative of our future performance. In addition, fluctuations in net sales, operating income (loss), and cash flows in any fiscal quarter may be affected by other events impacting retail sales, such as changes in weather patterns. Accordingly, our operating results and cash flows for the three-month and nine-month periodsperiod endedDecember 30, 2017June 27, 2020 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 20182021.
Global Economic Conditions and Industry Trends
The global economy and our industry are impacted by many different influences. Most recently, the U.S. enacted new tax legislation known as the TCJA (as defined in "Recent Developments" below)
COVID-19 Pandemic
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all major geographies in which we operate (North America, Europe, and Asia), which is intended to stimulateresulting in adverse economic growthconditions and capital investment in the U.S. by, among its other provisions, lowering tax rates for both corporations and individuals alike. Certain other worldwide events, including political unrest, acts of terrorism, monetary policy changes, and currency and commodity price changes, increasebusiness disruptions, as well as significant volatility in the global economy. In addition, the current domestic and international political environment, including potential changes to other U.S. policies related to global trade, immigration, and healthcare,financial markets. Governments worldwide have also resulted in uncertainty surrounding the future state of the global economy. As our international business continues to grow, and because the majority of our products are produced outside of the U.S., major changes in global tax policies or trade relations could have a material adverse effect on our business or operating results. Our results also have been, and are expected to continue to be, impacted by foreign exchange rate fluctuations.





41

imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs and reduced pay, which could lower consumers' disposable income levels or willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores, distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors. During the first quarter of Fiscal 2021, the majority of our stores in key markets were closed for an average of 8 to 10 weeks, resulting in significant adverse impacts to our operating results. Although nearly all of our stores were reopened by the end of the first quarter of Fiscal 2021, the majority are operating at limited hours and customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. Our wholesale business has also been adversely affected, particularly in North America and Europe, as a result of department store closures and lower traffic and consumer demand.
Throughout the pandemic, our priority has been to ensure the safety and well-being of our employees, consumers, and the communities in which we operate around the world. We continue to take into account the guidance of local governments and global health organizations and have implemented new health and safety protocols in our stores, distribution centers, and corporate facilities. We have also taken various preemptive actions to preserve cash and strengthen our liquidity position, including:
amending our Global Credit Facility in May 2020 to temporarily waive our leverage ratio requirement (see Note 10 to the accompanying consolidated financial statements);
issuing $1.250 billion of unsecured senior notes in June 2020, the proceeds of which are being used for general corporate purposes (see Note 10 to the accompanying consolidated financial statements);
temporarily suspending our quarterly cash dividend and common stock repurchase program, effective beginning in the first quarter of Fiscal 2021 (see Note 14 to the accompanying consolidated financial statements);
temporarily reducing the base compensation of our executives and senior management team, as well as our Board of Directors, for the first quarter of Fiscal 2021;
temporarily furloughing or reducing work hours for a significant portion of our employees, who nevertheless remain eligible to receive employee benefits during such period;
carefully managing our expense structure across all key areas of spend, including aligning inventory levels with anticipated demand, negotiating rent abatements with certain of our landlords, and postponing non-critical capital build-out and other investments and activities;
pursuing relevant government subsidy programs related to COVID-19 business disruptions; and
improving upon our cash conversion cycle largely driven by our accounts receivable collection efforts and extended vendor payment terms.
The COVID-19 pandemic remains highly volatile and continues to evolve daily. Accordingly, we cannot predict for how long and to what extent the pandemic will impact our business operations or the global economy as a whole. We will continue to assess our operations location-by-location, taking into account the guidance of local governments and global health organizations to determine when our operations can begin returning to normal levels of business. See Item 1A — "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business" in the Fiscal 2020 10-K for additional discussion regarding risks to our business associated with the COVID-19 pandemic.
Fiscal 2019 Restructuring Plan
On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i) rightsizing and consolidation of our global distribution network and corporate




42 


offices; (ii) targeted severance-related actions; and (iii) closure of certain of our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan are expected to result in gross annualized expense savings of approximately $60 million to $80 million.
In addition,connection with the Fiscal 2019 Restructuring Plan, we have recorded cumulative charges of approximately $146 million since its inception. Actions associated with the Fiscal 2019 Restructuring Plan are complete and no additional charges are expected to be incurred in connection with this plan.
See Note 8 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal 2019 Restructuring Plan.
Global Economic Conditions and Industry Trends
The global economy and retail industry are impacted by many different factors. The recent outbreak of COVID-19 has resulted in heightened uncertainty surrounding the future state of the global economy, as well as significant volatility in global financial markets. As discussed in "Recent Developments," governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such actions, together with changes in consumers' willingness to congregate in populated areas and lower levels of disposal income due to rising unemployment rates, have resulted in significant business disruptions across a wide array of industries and an overall decline of the global economy.
The global economy has also been impacted by the domestic and international political environment, including volatile international trade relations and civil and political unrest. Concerns continue to exist regarding the United Kingdom's recent withdrawal from the European Union, commonly referred to as "Brexit." The United Kingdom ceased to be a member of the European Union, effective January 31, 2020, and has entered a "transition period" during which its existing trading relationship with the European Union will remain in place and it will continue to follow the European Union's rules. Negotiations during the transition period to determine the United Kingdom's future relationship with the European Union, including terms of trade, are expected to be complex. It is not clear at this time what, if any, agreements will be reached by the current December 31, 2020 transition period deadline and the resulting impact on consumer sentiment. Additionally, certain other worldwide events, including escalating diplomatic tensions between the U.S. and China, civil and political protests such as those taking place in the U.S. and Hong Kong, acts of terrorism, taxation or monetary policy changes, fluctuations in commodity prices, and rising healthcare costs, also increase volatility in the global economy.
The retail landscape in which we operate is evolving, withhas been significantly disrupted by the COVID-19 pandemic, including widespread temporary closures of stores and distribution centers and declines in retail traffic, tourism, and consumer spending on discretionary items. Prior to the COVID-19 pandemic, consumers continuing to diversify the channels in which they transact andhad been increasingly shifting their shopping preference from physical stores to online. This along with other factors, has resultedshift in preference could potentially be amplified in the future as a byproduct of the COVID-19 pandemic, as consumers may prefer to avoid populated locations, such as shopping centers, in fear of exposing themselves to infectious diseases. Even before the COVID-19 pandemic, many retailers, including certain of our large wholesale customers, becominghave been highly promotional and have aggressively markingmarked down their merchandise on a periodic basis in an attempt to offset declines in physical store traffic. The retail industry, particularly in the U.S., has also experienced numerous bankruptcies, restructurings, and ownership changes in recent years. CertainThe COVID-19 pandemic could exacerbate these trends if companies do not have adequate financial resources and/or access to additional capital to withstand prolonged periods of our operations, including our North America wholesale business, have been negatively impacted by these dynamics.adverse economic conditions. The continuation of these industry trends could further impact consumer spending and consumption behavior in our industry, which could have a material adverse effect on our business or operating results. Additionally, changes in economic conditions, including those that may result from the TCJA, can further impact consumer discretionary income levels and spending. While we are optimistic that the TCJA will stimulate economic growth, it is still too early to determine the resulting impact on consumer spending and consumption behavior.
We have implemented various operating strategies globally to help address many of these current challenges and continue to build a foundation for long-term profitable growth centered around strengthening our consumer-facing areas of product, stores, and marketing across channels and driving a more efficient operating model. In connection with these strategies,response to the COVID-19 pandemic, we are takinghave taken preemptive actions to preserve cash and strengthen our liquidity position, as described in "Recent Developments." Investing in our digital ecosystem remains a primary focus and is a key component of our integrated global omni-channel strategy, particularly in light of the current COVID-19 pandemic, which could reshape consumer shopping preferences. We have recently bolstered our capabilities including digital clienteling, Buy Online Ship From Store, Buy Online Pick Up From Store, curbside pickup, and other initiatives to facilitate and enhance the consumer experience. We also continue to take deliberate actions to ensure promotional consistency across channels and to enhance the overall brand and shopping experience, including reducingbetter aligning shipments to better alignand inventory levels with underlying demand and lower inventory levels. Additionally, we aredemand. We also remain committed to optimizing our wholesale distribution channel by closing 20% to 25% ofand enhancing our underperforming U.S. department store points of distribution byconsumer experience. We are also closely monitoring the end of Fiscal 2018. Further,latest Brexit developments and are




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assessing risks and opportunities and developing strategies to mitigate our exposure once the transition period expires, including evaluating scenarios in October 2017, we began to shift to a more cost-effective and flexible e-commerce platform for our directly operated digital businesses, which is expected to deliver a more brand-enhancing and consistent customer experience across our global digital ecosystem. See our restructuring activities as described within "Recent Developments" below for further discussion. Although the investments that we are makingtransition period ends without trade agreements in our business and our quality of sales initiatives may create operating profit pressure in the near-term, we expect that these initiatives will create longer-term shareholder value.place.
We will continue to monitor these conditions and trends and will evaluate and adjust our operating strategies and foreign currency and cost management opportunities to help mitigate the related impactimpacts on our results of operations, while remaining focused on the long-term growth of our business and protecting and elevating the value of our brand.
For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A — "Risk Factors" in our Fiscal 2017 10-K, as well as Part II, Item 1A — "Risk Factors" of this Form 10-Q.2020 10-K.
Summary of Financial Performance
Operating Results
During the three months ended December 30, 2017,June 27, 2020, we reported net revenues of $1.642 billion,$487.5 million, a net loss of $81.8$127.7 million, and net loss per diluted share of $1.00,$1.75, as compared to net revenues of $1.715$1.429 billion, net income of $81.3 million, and net income per diluted share of $0.98 during the three months ended December 31, 2016. During the nine months ended December 30, 2017, we reported net revenues of $4.653 billion, net income of $121.5$117.1 million, and net income per diluted share of $1.47 as compared to net revenues of $5.087 billion, net income of $104.7 million, and net income per diluted share of $1.25 during the ninethree months ended December 31, 2016.June 29, 2019. The comparability of our operating results has been affected by one-time charges recorded during the third quarter of Fiscal 2018 in connection with the TCJA,net adverse impacts related to COVID-19 business disruptions, as well as restructuring-related charges, impairment of assets, and certain other charges,benefits (charges), as discussed further below.
Our operating performance for the three-month and nine-month periodsthree months ended December 30, 2017June 27, 2020 reflected revenue declines in net revenues of 4.2% and 8.5%, respectively,65.9% on a reported basis and 6.1% and 8.9%, respectively,64.9% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition"below. The declinesdecrease in reported net revenues for the three-month and nine-month periods ended December 30, 2017 were primarily due to lower sales from our North America segmentreflected declines across all regions driven by the impact of our quality of distribution and sales initiatives, including lower levels of promotional activity and a strategic reduction in shipments, as well as brand discontinuances and lower consumer demand.COVID-19 business disruptions.
Our gross profit as a percentage of net revenues increased by 340710 basis points to 60.7%71.5% during the three months ended December 30, 2017, and by 540 basis points to 61.1% during the nine months ended December 30, 2017. These increases wereJune 27, 2020, primarily driven by lower levels of promotional activity in connection with our long-term growth strategy, favorable geographic and channel mix due to COVID-19 business disruptions, improved pricing, and lower sourcing costs, as well as lower non-cash inventory-related charges recorded in connection with the Way Forward Plan.

43

levels of promotional activity.
Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 2105,190 basis points to 47.1% during the three months ended December 30, 2017, and104.2%, largely driven by 130 basis points to 48.3% during the nine months ended December 30, 2017. These increases were primarily due to operating deleverage on lower net revenues, and the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our international retail businesses (which typically carry higher operating expense margins). These increases were largelypartially offset by our operational discipline and costexpense savings associated with our restructuring activities.across various categories.
Net income decreased by $163.1$244.8 million to a loss of $127.7 million during the three months ended December 30, 2017 to a loss of $81.8 millionJune 27, 2020 as compared to the three months ended December 31, 2016,June 29, 2019, primarily due to a $226.3$311.3 million increasedecline in operating income driven by COVID-19 business disruptions, partially offset by a $74.4 million decrease in our income tax provision largely driven by one-time charges recorded in connection with the TCJA, partially offset by a $60.9 million increase in operating income. Net income increased by $16.8 million during the nine months ended December 30, 2017 to $121.5 million as compared to the nine months ended December 31, 2016, primarily due to a $299.4 million increase in operating income, partially offset by a $283.9 million increasedecline in our income tax provision largely driven by one-time charges recorded in connection with the TCJA.
pretax income. Net income per diluted share declineddecreased by $1.98$3.22 to a loss of $1.00$1.75 per share during the three months ended December 30, 2017,June 27, 2020, due to the lower level of net income and lower weighted-average diluted shares outstanding. Net income per diluted share increased by $0.22 to $1.47 per share during the nine months ended December 30, 2017, due to the higher level of net income and lower weighted-average diluted shares outstanding.
Net income for the three-month and nine-month periods ended December 30, 2017 reflected one-time charges of $231.3 million, or $2.80 per diluted share, recorded in connection with the TCJA. Our operating results during the three-monththree months ended June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and nine-month periodsimpairment of assets, which had an after-tax effect of increasing net income by $5.5 million, or $0.07 per diluted share. During the three months ended December 30, 2017June 29, 2019, our operating results were also negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges totaling $27.2$31.4 million, and $104.8 million, respectively, which had an after-tax effect of reducing net income by $17.9$24.4 million, or $0.23$0.30 per diluted share, and $69.8 million, or $0.85 per diluted share, respectively. Our operating results during the three-month and nine-month periods ended December 31, 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $91.4 million and $400.0 million, respectively, which had an after-tax effect of reducing net income by $73.6 million, or $0.88 per diluted share, and $298.0 million, or $3.57 per diluted share, respectively.share.
Financial Condition and Liquidity
We ended the thirdfirst quarter of Fiscal 20182021 in a net cash and investments position (cash and cash equivalents plus short-term and non-current investments, less total debt) of $1.533 billion,$780.6 million, as compared to $786.2$945.3 million as of the end of Fiscal 2017.2020. The increasedecline in our net cash and investments position at December 30, 2017June 27, 2020 as compared to April 1, 2017March 28, 2020 was primarily due to ourcash used in operating cash flowsactivities of $951.1$70.3 million, partially offset byas well as our use of cash to make dividend payments of $49.8 million (which had been previously declared during the fourth quarter of Fiscal 2020) and to invest in our business through $123.0$21.3 million in capital expenditures and to make dividend payments of $121.7 million.expenditures.
We generated $951.1 million ofNet cash from operations during the nine months ended December 30, 2017, compared to $850.7used in operating activities was $70.3 million during the ninethree months ended December 31, 2016.June 27, 2020, compared to net cash provided by operating activities of $197.4 million during the three months ended June 29, 2019. The increasedecrease in ourcash provided by operating cash flowsactivities was due to a decrease in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period, partially offset by a decline in net income before non-cash charges.period.
Our equity increaseddecreased to $3.408$2.556 billion as of December 30, 2017June 27, 2020 compared to $3.300$2.693 billion as of April 1, 2017,March 28, 2020, primarily attributabledue to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our dividends declaredloss during the ninethree months ended December 30, 2017.June 27, 2020.
Recent Developments
U.S. Tax Reform
On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"), which became effective January 1, 2018. The TCJA significantly revises U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate from 35% to 21%, creating a territorial tax system that includes a mandatory one-time transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax deductions.
During the third quarter of Fiscal 2018, we recorded one-time charges of $231.3 million within our income tax provision in connection with the TCJA, of which $215.5 million related to the mandatory transition tax, which we expect to pay over an





44 

eight-year period. The remaining charge of $15.8 million related to the revaluation of our deferred tax assets and liabilities. Collectively, these one-time charges, which were recorded on a provisional basis as permitted by SEC Staff Accounting Bulletin No. 118 ("SAB 118"), negatively impacted our effective tax rate by 12,410 basis points and 4,980 basis points during the three-month and nine-month periods ended December 30, 2017, respectively, and lowered our diluted earnings per share by $2.80 during each of these periods. The provisional amounts were based on our present interpretations of the TCJA and current available information, including assumptions and expectations about future events, such as our projected financial performance, and are subject to further refinement as additional information becomes available (including our actual full Fiscal 2018 results of operations and financial condition, as well as potential new or interpretative guidance issued by the Financial Accounting Standards Board or the Internal Revenue Service and other tax agencies) and further analyses are completed.
Despite these one-time charges, we expect the TCJA will ultimately benefit our results of operations and financial condition in future periods, primarily due to the lower U.S. federal statutory income tax rate.
See Note 9 to the accompanying consolidated financial statements and Part II, Item 1A — "Risk Factors" of this Form 10-Q for additional discussion.
Change in Chief Executive Officer
Consistent with our announcement on February 2, 2017, Mr. Stefan Larsson departed as the Company's President and Chief Executive Officer and as a member of our Board of Directors, effective as of May 1, 2017. In connection with Mr. Larsson's departure, we recorded cumulative other charges of $17.0 million, of which $5.6 million and $11.4 million was recorded during the first quarter of Fiscal 2018 and fourth quarter of Fiscal 2017, respectively. We do not expect to incur additional charges related to Mr. Larsson's departure. See Note 8 to our accompanying consolidated financial statements for further discussion of the charges recorded in connection with Mr. Larsson's departure.
Subsequent to Mr. Larsson's departure, Mr. Patrice Louvet was appointed as the Company's new President and Chief Executive Officer and as a member of our Board of Directors, effective in July 2017.
Way Forward Plan
On June 2, 2016, our Board of Directors approved a restructuring plan with the objective of delivering sustainable, profitable sales growth and long-term value creation for shareholders (the "Way Forward Plan"). We are refocusing on our core brands and evolving our product, marketing, and shopping experience to increase desirability and relevance. We are also evolving our operating model to enable sustainable, profitable sales growth by significantly improving quality of sales, reducing supply chain lead times, improving our sourcing, and executing a disciplined multi-channel distribution and expansion strategy. As part of the Way Forward Plan, we are rightsizing our cost structure and implementing a return on investment-driven financial model to free up resources to invest in the brand and drive high-quality sales. The Way Forward Plan includes strengthening our leadership team and creating a more nimble organization by moving from an average of nine to six layers of management. The Way Forward Plan also includes the discontinuance of our Denim & Supply brand and the integration of our denim product offerings into our Polo Ralph Lauren brand. Collectively, these actions, which were substantially completed during Fiscal 2017, resulted in a reduction in workforce and the closure of certain stores and shop-within-shops, and are expected to result in gross annualized expense savings of approximately $180 million to $220 million.
On March 30, 2017, our Board of Directors approved the following additional restructuring-related activities associated with the Way Forward Plan: (i) the restructuring of our in-house global e-commerce platform which was in development and shifting to a more cost-effective, flexible e-commerce platform through a new agreement with Salesforce's Commerce Cloud, formerly known as Demandware; (ii) the closure of our Polo store at 711 Fifth Avenue in New York City; and (iii) the further streamlining of the organization and the execution of other key corporate actions in line with the Way Forward Plan. These actions, which are expected to result in additional gross annualized expense savings of approximately $140 million, are an important part of our efforts to achieve our stated objective to return to sustainable, profitable growth and invest in the future. These additional restructuring-related activities will result in a further reduction in workforce and the closure of certain corporate office and store locations, and are expected to be largely completed by the end of Fiscal 2018. The remaining activities, which are primarily lease-related, are expected to shift into Fiscal 2019.
In connection with the Way Forward Plan, we currently expect to incur total estimated charges of approximately $770 million, comprised of cash-related restructuring charges of approximately $450 million and non-cash charges of approximately $320 million. Cumulative charges incurred since inception were $645.4 million, of which $22.0 million and $79.0 million were recorded during the three-month and nine-month periods ended December 30, 2017, respectively. Of the remaining charges yet

45

to be incurred, we expect approximately $50 million will be recorded during the fourth quarter of Fiscal 2018 and approximately $75 million to $85 million will be recorded during Fiscal 2019. In addition to these charges, we also incurred an additional non-cash charge of $155.2 million during Fiscal 2017 associated with the destruction of inventory out of current liquidation channels in line with our Way Forward Plan. See Notes 7 and 8 to our accompanying consolidated financial statements for detailed discussions of the charges recorded in connection with the Way Forward Plan.
Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition
The comparability of our operating results for the three-month and nine-month periods endedDecember 30, 2017June 27, 2020 and December 31, 2016June 29, 2019 has been affected by restructuring-related charges, impairment of assets, andcertain events, including:
pretax benefits (charges) incurred in connection with our restructuring activities, as well as certain other charges,asset impairments and other benefits (charges), including those related to COVID-19 business disruptions, as summarized below (references to "Notes" are to the notes to the accompanying consolidated financial statements):
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
  (millions)
Impairment of assets (see Note 7) $(3.9) $(10.3) $(24.8) $(56.7)
Restructuring and other charges (see Note 8) (23.3) (66.7) (78.7) (193.9)
Restructuring-related inventory charges (see Note 8)(a)
 —
 (14.4) (1.3) (149.4)
Total charges $(27.2) $(91.4) $(104.8) $(400.0)
  Three Months Ended
  June 27,
2020		 June 29,
2019
  (millions)
Impairment of assets (see Note 7) $(2.1) $(1.2)
Restructuring and other charges (see Note 8) (7.0) (29.6)
Non-routine inventory charges(a)
 (1.3) (0.6)
COVID-19-related bad debt expense adjustments(b)
 16.5
 —
Total benefits (charges) $6.1
 $(31.4)
 
(a) 
Non-cash restructuring-relatedNon-routine inventory charges are recorded within cost of goods sold in the consolidated statements of operations.
(b)
COVID-19-related bad debt expense is recorded within SG&A expenses in the consolidated statements of operations.
Additionally,net adverse impacts related to COVID-19 business disruptions during the third quarter of Fiscal 2018, we recorded one-time charges of $231.3 million within our income tax provision in connection with the TCJA, which negatively impacted our effective tax rate by 12,410 basis points and 4,980 basis points during the three-month and nine-month periodsthree months ended December 30, 2017, respectively. See Note 9 to the accompanying consolidated financial statements for further discussion of the TCJA.June 27, 2020.
Since we are a global company, the comparability of our operating results reported in U.S. Dollars is also affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. These rateSuch fluctuations can have a significant effect on our reported results. As such, in addition to financial measures prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"), our discussions often contain references to constant currency measures, which are calculated by translating the current-year and prior-year reported amounts into comparable amounts using a single foreign exchange rate for each currency. We present constant currency financial information, which is a non-U.S. GAAP financial measure, as a supplement to our reported operating results. We use constant currency information to provide a framework to assessfor assessing how our businesses performed excluding the effects of foreign currency exchange rate fluctuations. We believe this information is useful to investors to facilitatefor facilitating comparisons of operating results and better identifyidentifying trends in our businesses. The constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with U.S. GAAP. Reconciliations between this non-U.S. GAAP financial measure and the most directly comparable U.S. GAAP measure are included in the "Results of Operations" section where applicable.
Our discussion also includes reference to comparable store sales. Comparable store sales refer to the growthchange in sales of sales inour stores that arehave been open for at least one13 full fiscal year.months. Sales from our digital commerce sites are also included within comparable sales for those geographies that have been serviced by the related site for at least 13 full fiscal months. Sales for stores or digital commerce sites that are closed or shut down during a fiscalthe year are excluded from the calculation of comparable store sales. Sales for stores that are either relocated, enlarged (as defined by gross square footage expansion of 25% or greater), or generally closed for 30 or more consecutive days for renovation are also excluded from the calculation of comparable store sales until such stores have been operating in their new location or in their newly renovated state for at least one13 full fiscal year. Sales from our e-commerce sites are included withinmonths. All comparable store sales for those geographies that have been serviced by the related site for at least one full fiscal year. Sales for e-commerce sites thatmetrics are shut down duringcalculated on a fiscal year are excluded from the calculation of comparable store sales. We use an integrated omni-channel strategy to operate our retail business, in which our e-commerce operations are interdependent with our physical stores.constant currency basis.
Our "Results of Operations" discussion that follows includes the significant changes in operating results arising from these items affecting comparability. However, unusual items or transactions may occur in any period. Accordingly, investors and other financial statement users should consider the types of events and transactions that have affected operating trends.





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RESULTS OF OPERATIONS
Three Months Ended December 30, 2017June 27, 2020 Compared to Three Months Ended December 31, 2016June 29, 2019
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
  Three Months Ended    
  December 30,
2017		 December 31,
2016		 
$
Change
 
% / bps
Change
  (millions, except per share data)  
Net revenues $1,641.8
 $1,714.6
 $(72.8) (4.2%)
Cost of goods sold(a) 
 (645.6) (731.4) 85.8
 (11.7%)
Gross profit 996.2
 983.2
 13.0
 1.3%
Gross profit as % of net revenues 60.7% 57.3%   340 bps
Selling, general, and administrative expenses(a) 
 (773.8) (771.9) (1.9) 0.2%
SG&A expenses as % of net revenues 47.1% 45.0%   210 bps
Amortization of intangible assets (6.0) (6.0) —
 (0.6%)
Impairment of assets (3.9) (10.3) 6.4
 (62.3%)
Restructuring and other charges(a)
 (23.3) (66.7) 43.4
 (65.1%)
Operating income 189.2
 128.3
 60.9
 47.5%
Operating income as % of net revenues 11.5% 7.5%   400 bps
Foreign currency gains (losses) 0.6
 (2.7) 3.3
 (120.8%)
Interest expense (4.8) (3.6) (1.2) 37.2%
Interest and other income, net 2.8
 2.5
 0.3
 13.6%
Equity in losses of equity-method investees (1.5) (1.4) (0.1) 5.2%
Income before income taxes 186.3
 123.1
 63.2
 51.4%
Income tax provision (268.1) (41.8) (226.3) 540.9%
Effective tax rate(b)
 143.9% 34.0%   10,990 bps
Net income (loss) $(81.8) $81.3
 $(163.1) (200.7%)
Net income (loss) per common share:        
Basic $(1.00) $0.98
 $(1.98) (202.0%)
Diluted $(1.00) $0.98
 $(1.98) (202.0%)
  Three Months Ended    
  June 27,
2020		 June 29,
2019		 
$
Change
 
% / bps
Change
  (millions, except per share data)  
Net revenues $487.5
 $1,428.8
 $(941.3) (65.9%)
Cost of goods sold (138.8) (508.0) 369.2
 (72.7%)
Gross profit 348.7
 920.8
 (572.1) (62.1%)
Gross profit as % of net revenues 71.5% 64.4%   710 bps
Selling, general, and administrative expenses (507.6) (746.7) 239.1
 (32.0%)
SG&A expenses as % of net revenues 104.2% 52.3%   5,190 bps
Impairment of assets (2.1) (1.2) (0.9) 74.8%
Restructuring and other charges (7.0) (29.6) 22.6
 (76.5%)
Operating income (loss) (168.0) 143.3
 (311.3) NM
Operating income (loss) as % of net revenues (34.5%) 10.0%   (4,450 bps)
Interest expense (9.6) (4.2) (5.4) 126.2%
Interest income 2.9
 11.6
 (8.7) (75.1%)
Other income (expense), net 2.1
 (4.1) 6.2
 NM
Income (loss) before income taxes (172.6) 146.6
 (319.2) NM
Income tax benefit (provision) 44.9
 (29.5) 74.4
 NM
Effective tax rate(a) 
 26.0% 20.1%   590 bps
Net income (loss) $(127.7) $117.1
 $(244.8) NM
Net income (loss) per common share:        
Basic $(1.75) $1.50
 $(3.25) NM
Diluted $(1.75) $1.47
 $(3.22) NM
 
(a) 
Includes total depreciation expense of $66.7 million and $71.9 million for the three-month periods ended December 30, 2017 and December 31, 2016, respectively.
(b)
Effective tax rate is calculated by dividing the income tax provisionbenefit (provision) by income (loss) before income taxes.
NM Not meaningful.
Net Revenues.    Net revenues decreased by $72.8$941.3 million, or 4.2%65.9%, to $1.642 billion$487.5 million during the three months ended December 30, 2017June 27, 2020 as compared to the three months ended December 31, 2016,June 29, 2019, including net favorableunfavorable foreign currency effects of $31.3$13.7 million. On a constant currency basis, net revenues decreased by $104.1$927.6 million, or 6.1%64.9%.
The following table summarizes the percentage change in our consolidated comparable store sales for the three months ended December 30, 2017June 27, 2020 as compared to the prior fiscal year period, on both a reported and constant currency basis:inclusive of adverse impacts related to COVID-19 business disruptions:
  
As
Reported
 
Constant
Currency
E-commerce comparable store sales (19%) (20%)
Comparable store sales excluding e-commerce (1%) (3%)
Total comparable store sales (5%) (6%)
% Change
Digital commerce comparable store sales13%
Comparable store sales excluding digital commerce(66%)
Total comparable store sales(57%)





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Our global average store count decreasedincreased by 621 stores and concession shops during the three months ended December 30, 2017June 27, 2020 compared with the three months ended December 31, 2016, primarily due to global store closures primarily associated with the Way Forward Plan,June 29, 2019, largely offsetdriven by new concession shop openings in Asia. The following table details our retail store presence by segment as of the periods presented:
 December 30,
2017		 December 31,
2016		 June 27,
2020		 June 29,
2019
Freestanding Stores:        
North America 218
 222
 230
 224
Europe 82
 87
 95
 92
Asia 103
 93
 136
 119
Other non-reportable segments 78
 83
 72
 75
Total freestanding stores 481
 485
 533
 510
        
Concession Shops:        
North America 2
 1
 2
 3
Europe 25
 34
 29
 29
Asia 599
 598
 619
 624
Other non-reportable segments 2
 2
 4
 5
Total concession shops 628
 635
 654
 661
Total stores 1,109
 1,120
 1,187
 1,171
In addition to our stores, we sell products online in North America and Europe through our various e-commercedigital commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others.others, as well as through our Polo mobile app in North America and the United Kingdom. In Asia, we sell products online through e-commerceour digital commerce sites, ofwww.RalphLauren.co.jp (which launched in June 2020) and www.RalphLauren.cn, as well as through various third-party digital partners.partner commerce sites.
Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the comparable prior fiscal year period, are provided below:
 Three Months Ended $ Change Foreign Exchange Impact $ Change % Change Three Months Ended $ Change Foreign Exchange Impact $ Change % Change
 December 30,
2017		 December 31,
2016		 
As
Reported
 
Constant
Currency
 
As
Reported
 
Constant
Currency
 June 27,
2020		 June 29,
2019		 
As
Reported
 
Constant
Currency
 
As
Reported
 
Constant
Currency
 (millions)     (millions)    
Net Revenues:                            
North America $886.4
 $1,000.8
 $(114.4) $1.3
 $(115.7) (11.4%) (11.6%) $165.1
 $719.4
 $(554.3) $(0.3) $(554.0) (77.0%) (77.0%)
Europe 378.5
 349.2
 29.3
 28.1
 1.2
 8.4% 0.3% 120.7
 360.8
 (240.1) (9.2) (230.9) (66.6%) (64.0%)
Asia 251.0
 235.2
 15.8
 0.3
 15.5
 6.7% 6.6% 171.9
 258.6
 (86.7) (4.1) (82.6) (33.5%) (31.9%)
Other non-reportable segments 125.9
 129.4
 (3.5) 1.6
 (5.1) (2.7%) (4.0%) 29.8
 90.0
 (60.2) (0.1) (60.1) (66.9%) (66.8%)
Total net revenues $1,641.8
 $1,714.6
 $(72.8) $31.3
 $(104.1) (4.2%) (6.1%) $487.5
 $1,428.8
 $(941.3) $(13.7) $(927.6) (65.9%) (64.9%)
North America net revenues — Net revenues decreased by $114.4approximately $554 million, or 11.4%77.0%, during the three months ended December 30, 2017June 27, 2020 as compared to the three months ended December 31, 2016, including net favorable foreign currency effects of $1.3 million. OnJune 29, 2019, on both a reported and constant currency basis, net revenues decreased by $115.7 million, or 11.6%.basis.
The $114.4$554.3 million net decline in North America net revenues was driven by:
a $66.6$293.8 million net decrease related to our North America wholesale business, largely driven by a strategic reduction of shipments (including within the off-price channel) and points of distribution in connection with our long-term growth strategy, the impact of brand discontinuances,COVID-19 business disruptions and the continued challenging department store traffic trends; and

48

a $48.2$260.5 million net decrease related to our North America retail business, inclusive of the adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues decreased by $260.3 million driven by decreases of $248.9 million in comparable store sales primarily driven by lower sales from our Ralph Lauren e-commerce operations and certain of our retail stores due$11.4 million in part to a decline in traffic, as well as lower levels of promotional activity and a planned reduction in inventory in connection with our long-term growth strategy.non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business, on both a reported and constant currency basis:inclusive of adverse impacts related to COVID-19 business disruptions:




47

  
As
Reported
 
Constant
Currency
E-commerce comparable store sales (27%) (27%)
Comparable store sales excluding e-commerce (3%) (3%)
Total comparable store sales (10%) (10%)
% Change
Digital commerce comparable store sales3%
Comparable store sales excluding digital commerce(77%)
Total comparable store sales(64%)
These decreases were partially offset by a $0.4 million net increase in non-comparable store sales.
Europe net revenues — Net revenues increaseddecreased by $29.3$240.1 million, or 8.4%66.6%, during the three months ended December 30, 2017June 27, 2020 as compared to the three months ended December 31, 2016,June 29, 2019, including net favorableunfavorable foreign currency effects of $28.1$9.2 million. On a constant currency basis, net revenues increaseddecreased by $1.2$230.9 million, or 0.3%64.0%.
The $29.3$240.1 million net increasedecline in Europe net revenues was driven by:
a $21.9$139.3 million net increasedecrease related to our Europe wholesaleretail business, primarily driven byinclusive of the adverse impact of COVID-19 business disruptions, as well as net favorableunfavorable foreign currency effects of $11.7$5.3 million. On a constant currency basis, net revenues decreased by $134.0 million and a shift in the timing of certain shipments that occurred during the prior fiscal year period; and
an $8.8 million net increase in non-comparable store sales, primarily driven by new store openings and net favorable foreign currency effectsdecreases of $3.9 million.
These increases were partially offset by:
a $1.4$123.7 million net decrease in comparable store sales including net favorable foreign currency effects of $12.5 million. Our comparableand $10.3 million in non-comparable store sales decreased by $13.9 million on a constant currency basis, primarily driven by lower sales from certain of our retail stores due in part to lower levels of promotional activity in connection with our long-term growth strategy.sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business, on both a reported and constant currency basis:inclusive of adverse impacts related to COVID-19 business disruptions:
  
As
Reported
 
Constant
Currency
E-commerce comparable store sales 8% (1%)
Comparable store sales excluding e-commerce (2%) (9%)
Total comparable store sales (1%) (8%)
% Change
Digital commerce comparable store sales44%
Comparable store sales excluding digital commerce(75%)
Total comparable store sales(62%)
a $100.8 million net decrease related to our Europe wholesale business driven by COVID-19 business disruptions. The decline also reflected net unfavorable foreign currency effects of $3.9 million.
Asia net revenues — Net revenues increaseddecreased by $15.8$86.7 million, or 6.7%33.5%, during the three months ended December 30, 2017June 27, 2020 as compared to the three months ended December 31, 2016,June 29, 2019, including net favorableunfavorable foreign currency effects of $0.3$4.1 million. On a constant currency basis, net revenues increaseddecreased by $15.5$82.6 million, or 6.6%31.9%.
The $15.8$86.7 million net increasedecline in Asia net revenues was driven by:
a $5.8an $80.0 million net increase in non-comparable store sales, primarily driven by new concession shop openings and net favorable foreign currency effects of $0.4 million, partially offset by the strategic closure of certain of our retail stores;
a $5.7 million net increasedecrease related to our Asia wholesaleretail business, primarily driven by our expansion in Japan and net favorable foreign currency effectsinclusive of $0.1 million; and
a $4.3 million net increase in comparable store sales, includingthe adverse impact of COVID-19 business disruptions, as well as net unfavorable foreign currency effects of $0.2$3.9 million. Our comparable store sales increased by $4.5 million onOn a constant currency basis, primarily drivennet revenues decreased by higher$76.1 million, reflecting decreases of $67.0 million in comparable store sales from certain of our retail locations dueand $9.1 million in part to improved conversion, partially offset by the impact of lower levels of promotional activity in connection with our long-term growth strategy.non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business, on both a reported and constant currency basis:

inclusive of adverse impacts related to COVID-19 business disruptions:
49

  
As
Reported
 
Constant
Currency
Total comparable store sales(a)
 3% 3%
 
% Change
(a)
Digital commerce comparable store sales		68%
Comparable store sales for our Asia segment were comprised primarily ofexcluding digital commerce(35%)
Total comparable store sales made through our stores and concession shops.(33%)
a $6.7 million net decrease related to our Asia wholesale business driven by COVID-19 business disruptions.
Gross Profit.   Gross profit increaseddecreased by $13.0$572.1 million, or 1.3%62.1%, to $996.2$348.7 million for the three months ended December 30, 2017. Gross profit during the three months ended December 31, 2016 reflected non-cash inventory-related charges of $14.4 million recorded in connection with the Way Forward Plan. The increase in gross profit also included aJune 27, 2020, including net favorableunfavorable foreign currency effecteffects of $23.7$17.3 million. Gross profit as a percentage of net revenues increased to 60.7%71.5% for the three months ended December 30, 2017June 27, 2020 from 57.3%64.4% for the three months ended December 31, 2016.June 29, 2019. The 340710 basis point increase was primarily driven by lower levels of promotional activity in connection with our long-term growth strategy, favorable geographic and channel mix due to COVID-19 business disruptions, improved pricing, and lower sourcing costs, as well as the absencelevels of non-cash inventory-related charges recorded in connection with the Way Forward Plan during the three months ended December 30, 2017 as compared to the comparable prior year period.promotional activity.
Gross profit as a percentage of net revenues is dependent upon a variety of factors, including changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of promotional activities, foreign currency exchange rates, and fluctuations in material costs. These factors, among others, may cause gross profit as a percentage of net revenues to fluctuate from period to period.




48

Selling, General, and Administrative Expenses.    SG&A expenses primarily include compensation and benefits, advertising and marketing, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, information technology, facilities, legal, and other costs associated with financeselling and administration.administrative costs. SG&A expenses increaseddecreased by $1.9$239.1 million, or 0.2%32.0%, to $773.8$507.6 million for the three months ended December 30, 2017. This increase included aJune 27, 2020, including net unfavorablefavorable foreign currency effecteffects of $12.3$4.8 million. The decrease in SG&A expenses reflects impacts related to COVID-19 business disruptions and our related mitigating actions, including (i) lower compensation-related expenses largely driven by employee furloughs, reduced pay for our executives, senior management team, and Board of Directors, and COVID-19-related government subsidies, (ii) lower rent and occupancy costs largely driven by reduced percentage-of-sales-based rent due to store closures and rent abatements negotiated with certain of our landlords, (iii) favorable COVID-19-related bad debt expense adjustments, and (iv) our operational discipline. SG&A expenses as a percentage of net revenues increased to 47.1%104.2% for the three months ended December 30, 2017June 27, 2020 from 45.0%52.3% for the three months ended December 31, 2016.June 29, 2019. The 2105,190 basis point increase was primarily due to operating deleverage on lower net revenues, as previously discussed, and the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our international retail businesses (which typically carry higher operating expense margins). These increases were partially offset by our operational discipline and costexpense savings associated with our restructuring activities.across various categories.
The $1.9$239.1 million net increasedecrease in SG&A expenses was driven by:
 
Three Months Ended December 30, 2017
Compared to
Three Months Ended December 31, 2016
 
Three Months Ended June 27, 2020 Compared to
Three Months Ended June 29, 2019
 (millions) (millions)
SG&A expense category:    
Compensation-related expenses $(106.0)
Rent and occupancy costs (43.6)
Selling-related expenses (22.1)
Staff-related expenses (18.0)
Marketing and advertising expenses $13.2
 (17.9)
Compensation-related expenses 9.2
Depreciation expense (8.7)
Bad debt expense (16.6)
Shipping and handling costs (5.5) (11.2)
Selling-related expenses (3.3)
Other (3.0) (3.7)
Total change in SG&A expenses $1.9
Total net decrease in SG&A expenses $(239.1)
DuringIn response to the fourth quarterCOVID-19 pandemic, we are carefully evaluating our organizational and operating cost structures to better support long-term growth, with a focus on (i) our team organizational structures, (ii) enterprise-wide processes, (iii) our distribution center and corporate office footprint, (iv) our direct-to-consumer and wholesale door presence, (v) discretionary expenses, and (vi) our brand portfolio.
Impairment of Fiscal 2018, we continue to expect a certain amount of operating expense deleverage driven by the anticipated decline in sales associated with our quality of sale initiatives outpacing the decline in our operating expenses, as we anniversary certain cost savings initiatives executed during Fiscal 2017 in connection with the Way Forward Plan. In addition, we will continue to invest in our key strategic initiatives, including our marketing and advertising programs, as well as expansion and renovations of our retail stores and concession shops.
Amortization of Intangible Assets.    Amortization of intangible assets remained flat at $6.0 million duringDuring the three-month periods ended December 30, 2017June 27, 2020 and December 31, 2016.June 29, 2019, we recorded non-cash impairment charges of $2.1 million and $1.2 million, respectively, to write-down certain long-lived assets. See Note 7 to the accompanying consolidated financial statements.

Restructuring and Other Charges. During the three-month periods ended June 27, 2020 and June 29, 2019, we recorded restructuring charges of $2.6 million and $7.0 million, respectively, primarily consisting of severance and benefit costs. Additionally, during the three months ended June 27, 2020, we recorded other charges of $4.4 million primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. During the three months ended June 29, 2019, we recorded other charges of $22.6 million primarily related to the charitable donation of the net cash proceeds received from the sale of our corporate jet, and rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. See Note 8 to the accompanying consolidated financial statements.
Operating Income (Loss).    We reported an operating loss of $168.0 million for the three months ended June 27, 2020, as compared to operating income of $143.3 million for the three months ended June 29, 2019, including net unfavorable foreign currency effects of $12.5 million. The decline in operating income reflects net adverse impacts related to COVID-19 business disruptions. Our operating results during the three months ended June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and impairment of assets. During the three months ended June 29, 2019, our operating results were unfavorably impacted by net restructuring-related charges, impairment of assets, and certain other charges totaling $31.4 million. Operating loss as a percentage of net revenues was 34.5% for the three months ended June 27, 2020, reflecting a 4,450 basis point decline from the prior fiscal year period. The decline in operating income as a percentage of net revenues was




5049 


Impairment of Assets. During the three-month periods ended December 30, 2017 and December 31, 2016, we recorded non-cash impairment charges of $2.2 million and $10.3 million, respectively, to write off certain fixed assets related to our domestic and international stores, shop-within-shops, and corporate offices in connection with the Way Forward Plan. Additionally, during the three months ended December 30, 2017, we recorded non-cash impairment charges of $1.7 million to write off certain fixed assets related to underperforming shop-within-shops as a result of our on-going store portfolio evaluation. See Note 7 to the accompanying consolidated financial statements.
Restructuring and Other Charges. During the three-month periods ended December 30, 2017 and December 31, 2016, we recorded restructuring charges of $19.8 million and $66.7 million, respectively, in connection with the Way Forward Plan, consisting of severance and benefit costs, lease termination and store closure costs, other cash charges, and non-cash accelerated stock-based compensation expense. In addition, during the three months ended December 30, 2017, we recorded other charges of $3.5 million related to depreciation expense associated with our former Polo store at 711 Fifth Avenue in New York City recorded after the store closed during the first quarter of Fiscal 2018 in connection with the Way Forward Plan. See Note 8 to the accompanying consolidated financial statements.
Operating Income.    Operating income increased to $189.2 million for the three months ended December 30, 2017, from $128.3 million for the three months ended December 31, 2016. Our operating results during the three-month periods ended December 30, 2017 and December 31, 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $27.2 million and $91.4 million, respectively, as previously discussed. The increase in operating income also included a net favorable foreign currency effect of $11.4 million. Operating income as a percentage of net revenues increased to 11.5% for the three months ended December 30, 2017 from 7.5% for the three months ended December 31, 2016. The 400 basis point increase was primarily driven by the net decline in restructuring-related charges, impairment of assets, and certain other charges and the increase in our gross profit margin, partially offset by the increase in SG&A expenses as a percentage of net revenues, partially offset by the increase in our gross margin and lower restructuring-related and other charges recorded during the three months ended June 27, 2020 as compared to the prior fiscal year period, all as previously discussed.
Operating income (loss) and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the comparable prior fiscal year period, are provided below:
 Three Months Ended     Three Months Ended    
December 30, 2017 December 31, 2016     June 27, 2020 June 29, 2019    
Operating
Income (Loss)		 Operating
Margin		 Operating
Income (Loss)		 Operating
Margin		 $
Change		 Margin
Change
Operating
Income (Loss)
 
Operating
Margin
 Operating
Income (Loss)		 
Operating
Margin
 
$
Change
 
Margin
Change
(millions)   (millions)   (millions)   (millions)   (millions)   (millions)  
Segment:              
North America $196.6
 22.2% $206.4
 20.6% $(9.8) 160 bps $(24.8) (15.0%) $150.1
 20.9% $(174.9) (3,590 bps)
Europe 81.0
 21.4% 63.8
 18.3% 17.2
 310 bps (16.9) (14.0%) 79.4
 22.0% (96.3) (3,600 bps)
Asia 44.3
 17.6% 23.3
 9.9% 21.0
 770 bps 10.1
 5.9% 48.1
 18.6% (38.0) (1,270 bps)
Other non-reportable segments 37.1
 29.5% 33.2
 25.7% 3.9
 380 bps 0.9
 3.0% 32.9
 36.5% (32.0) (3,350 bps)
 359.0
 326.7
 32.3
  (30.7) 310.5
 (341.2) 
Unallocated corporate expenses (146.5) (131.7) (14.8)  (130.3) (137.6) 7.3
 
Unallocated restructuring and other charges (23.3) (66.7) 43.4
  (7.0) (29.6) 22.6
 
Total operating income $189.2
 11.5% $128.3
 7.5% $60.9
 400 bps
Total operating income (loss) $(168.0) (34.5%) $143.3
 10.0% $(311.3) (4,450 bps)
North America operating margin improveddeclined by 1603,590 basis points, primarily due to the favorable impactunfavorable impacts of 80approximately 6,180 basis points related to our retail business and 801,660 basis points related to our wholesale business,and retail businesses, respectively, both largely driven bydue to the increase in our gross profit margin, partially offset by an increase in SG&A expenses as a percentage of net revenues.
Europerevenues driven by COVID-19 business disruptions. These declines were partially offset by favorable channel mix of approximately 3,300 basis points and 930 basis points attributable to favorable COVID-19-related bad debt expense adjustments recorded during the three months ended June 27, 2020. The decline in operating margin improved by 310 basis points, primarily due to the favorable impact of 180 basis points related to our wholesale business, largely driven by a decline in SG&A expenses as a percentage of net revenues. The increase also reflected favorable foreign currency effects of 5020 basis points.
Europe operating margin declined by 3,600 basis points, primarily due to the unfavorable impacts of approximately 1,940 basis points and the favorable impact of 40790 basis points related to lower non-cash charges recorded in connection with the Way Forward Plan during the three months ended December 30, 2017 as comparedour retail and wholesale businesses, respectively, both largely due to the prior fiscal year period. The remaining 40 basis point increase in operating margin related to our retail business, largely driven by the increase in our gross profit margin, partially offset by an increase in SG&A expenses as a percentage of net revenues.revenues driven by COVID-19 business disruptions. The decline in operating margin also reflected unfavorable foreign currency effects of 910 basis points and approximately 40 basis points attributable to other factors. These declines were partially offset by 80 basis points attributable to favorable COVID-19-related bad debt expense adjustments recorded during the three months ended June 27, 2020.

51

Asia operating margin improved declined by 7701,270 basis points, primarily due to the favorable impactunfavorable impacts of 630approximately 870 basis points related to lower non-cash charges recorded in connection with the Way Forward Plan during the three months ended December 30, 2017 as compared to the prior fiscal year period, as well as favorable foreign currency effects of 130 basis points. The increase also reflected the favorable impact of 30and 180 basis points related to our retail business, primarily driven byand wholesale businesses, respectively, both largely due to the increase in our gross profit margin, partially offset by an increase in SG&A expenses as a percentage of net revenues. These increasesrevenues driven by COVID-19 business disruptions. The decline in operating margin also reflected the unfavorable impact of 130 basis points attributable to higher non-cash restructuring charges recorded during the three months ended June 27, 2020 as compared to the prior fiscal year period and unfavorable foreign currency effects of 120 basis points. These declines were partially offset by a 20approximately 30 basis point decline relatedpoints attributable to our wholesale business.other factors.
Unallocated corporate expenses increased decreased by $14.8$7.3 million to $146.5$130.3 million during the three months ended December 30, 2017June 27, 2020. The decline in unallocated corporate expenses was due to higherlower compensation-related expenses of $8.4$31.0 million higher marketing and advertising expenseslower rent and occupancy costs of $2.5$7.1 million, higher impairmentpartially offset by lower intercompany sourcing commission income of asset charges of $1.7$22.5 million (which is offset at the segment level and eliminates in consolidation) and higher other expenses of $2.2$8.3 million.
Unallocated restructuring and other charges decreased by $43.4$22.6 million to $23.3$7.0 million during the three months ended December 30, 2017,June 27, 2020, as previously discussed above and in Note 8 to the accompanying consolidated financial statements.




50

Non-operating Expense, net. Income (Expense), Net. Non-operating expense,income (expense), net is comprised of interest expense, interest income, and other income (expense), net, which includes foreign currency gains (losses), interest expense, interest and other income, net, and equity in lossesincome (losses) from our equity-method investees. Non-operatinginvestees, and other non-operating expenses. During the three months ended June 27, 2020, we reported non-operating expense, net, decreased by $2.3of $4.6 million, as compared to $2.9non-operating income, net of $3.3 million during the three months ended December 30, 2017June 29, 2019. The $7.9 million decline in non-operating income, net was driven by:
an $8.7 million decline in interest income, primarily driven by the decrease in our investment portfolio and lower available interest rates in financial markets; and
•
a $5.4 million increase in interest expense, primarily driven by the increase in our borrowings during the three months ended June 27, 2020 as compared to the prior fiscal year period (see "Financial Condition and Liquidity — Cash Flows").
These declines were partially offset by a $6.2 million favorable change in other income (expense), net, primarily driven by higher net foreign currency gains during the three months ended June 27, 2020 as compared to the three months ended December 31, 2016, as the increases in foreign currency gains and interest and other income, net were partially offset by the increases in interest expense and equity in losses of equity-method investees.prior fiscal year period.
Income Tax Provision.Benefit (Provision).    The income tax provisionbenefit (provision) represents federal, foreign, state and local income taxes. TheWe reported an income tax provisionbenefit of $44.9 million and an effective tax rate of 26.0% for the three months ended December 30, 2017 were $268.1 million and 143.9%, respectively,June 27, 2020, as compared to $41.8an income tax provision of $29.5 million and 34.0%, respectively,an effective tax rate of 20.1% for the three months ended December 31, 2016.June 29, 2019. The $226.3$74.4 million increaseimprovement in theour income tax provision was primarily due to one-time charges of $231.3 million recorded during the third quarter of Fiscal 2018decline in connection with the TCJA (as discussed within "Recent Developments"), which negatively impacted our effective tax ratepretax income driven by 12,410 basis points,COVID-19 business disruptions, as well as the 590 basis point increase in pretax income.our reported effective tax rate. The increase in our effective tax rate also reflectedwas driven by an income tax benefit recorded in connection with expected net operating loss carrybacks allowed under the net favorable impact of 1,420 basis points, primarily dueCARES Act (see Note 9 to the accompanying consolidated financial statements), partially offset by valuation allowances recorded against certain deferred tax assets as a result of significant business disruptions attributable to COVID-19 that could impact the ultimate realizability of earnings in lower taxed foreign jurisdictions versus the U.S. and foreign income tax reserve releases. The effective tax rate differs from the statutory tax rate due to the effect of state and local taxes, tax rates in foreign jurisdictions, and certain nondeductible expenses.such assets. Our effective tax rate will change from period to period based on various factors including, but not limited to, the geographic mix of earnings, the timing and amount of foreign dividends,dividend payments, enacted tax legislation, state and local taxes, tax audit findings and settlements, and the interaction of various global tax strategies.
Net Income (Loss).    We reported a net loss of $81.8$127.7 million for the three months ended December 30, 2017,June 27, 2020, as compared to net income of $81.3$117.1 million for the three months ended December 31, 2016.June 29, 2019. The $163.1$244.8 million decrease in net income was primarily due to the increasedecline in our operating income driven by COVID-19 business disruptions, partially offset by the improvement in our income tax provision, partially offset by the increase in operating income, as previously discussed. Net loss for the three months ended December 30, 2017 reflected one-time charges of $231.3 million recorded in connection with the TCJA,both as previously discussed. Our operating results during the three-month periodsthree months ended December 30, 2017June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and December 31, 2016impairment of assets, which had an after-tax effect of increasing net income by $5.5 million. During the three months ended June 29, 2019, our operating results were also negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges totaling $27.2$31.4 million, and $91.4 million, respectively, which had an after-tax effect of reducing net income by $17.9 million and $73.6 million, respectively.$24.4 million.
Net Income (Loss) per Diluted Share.    We reported a net loss per diluted share of $1.00$1.75 for the three months ended December 30, 2017,June 27, 2020, as compared to net income per diluted share of $0.98$1.47 for the three months ended December 31, 2016.June 29, 2019. The $1.98$3.22 per share declinedecrease was due to the lower level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the three months ended December 30, 2017June 27, 2020 driven by our share repurchases during the last twelve months. Net loss per diluted share for the three months ended December 30, 2017June 27, 2020 included a net favorable impact of $0.07 per share related to certain net benefits partially offset by restructuring-related charges and impairment of assets, as previously discussed. During the three months ended June 29, 2019, net income per diluted share was negatively impacted by approximately $2.80$0.30 per share as a result of one-time charges recorded in connection with the TCJA, as previously discussed. Net income (loss) per diluted share for the three-month periods ended December 30, 2017 and December 31, 2016 were also negatively impacted by approximately $0.23 per share and $0.88 per share, respectively, as a result ofnet restructuring-related charges, impairment of assets, and certain other charges, as previously discussed.





5251 


Nine Months Ended December 30, 2017 Compared to Nine Months Ended December 31, 2016
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
  Nine Months Ended    
  December 30,
2017		 December 31,
2016		 
$
Change
 
% / bps
Change
  (millions, except per share data)  
Net revenues $4,653.1
 $5,087.4
 $(434.3) (8.5%)
Cost of goods sold(a) 
 (1,809.9) (2,255.4) 445.5
 (19.8%)
Gross profit 2,843.2
 2,832.0
 11.2
 0.4%
Gross profit as % of net revenues 61.1% 55.7%   540 bps
Selling, general, and administrative expenses(a) 
 (2,248.9) (2,389.9) 141.0
 (5.9%)
SG&A expenses as % of net revenues 48.3% 47.0%   130 bps
Amortization of intangible assets (18.0) (18.1) 0.1
 (0.9%)
Impairment of assets (24.8) (56.7) 31.9
 (56.3%)
Restructuring and other charges(a)
 (78.7) (193.9) 115.2
 (59.4%)
Operating income 472.8
 173.4
 299.4
 172.7%
Operating income as % of net revenues 10.2% 3.4%   680 bps
Foreign currency gains 2.4
 0.8
 1.6
 201.1%
Interest expense (14.4) (11.1) (3.3) 30.6%
Interest and other income, net 7.1
 5.7
 1.4
 23.0%
Equity in losses of equity-method investees (3.6) (5.2) 1.6
 (31.1%)
Income before income taxes 464.3
 163.6
 300.7
 183.7%
Income tax provision (342.8) (58.9) (283.9) 481.5%
Effective tax rate(b) 
 73.8% 36.0%   3,780 bps
Net income $121.5
 $104.7
 $16.8
 16.0%
Net income per common share:        
Basic $1.49
 $1.26
 $0.23
 18.3%
Diluted $1.47
 $1.25
 $0.22
 17.6%
(a)
Includes total depreciation expense of $201.4 million and $213.8 million for the nine-month periods ended December 30, 2017 and December 31, 2016, respectively.
(b)
Effective tax rate is calculated by dividing the income tax provision by income before income taxes.
Net Revenues.    Net revenues decreased by $434.3 million, or 8.5%, to $4.653 billion during the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016, including net favorable foreign currency effects of $18.3 million. On a constant currency basis, net revenues decreased by $452.6 million, or 8.9%.
The following table summarizes the percentage change in our consolidated comparable store sales for the nine months ended December 30, 2017 as compared to the prior fiscal year period on both a reported and constant currency basis:
  
As
Reported
 
Constant
Currency
E-commerce comparable store sales (16%) (17%)
Comparable store sales excluding e-commerce (3%) (4%)
Total comparable store sales (6%) (6%)

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Our global average store count decreased by 2 stores and concession shops during the nine months ended December 30, 2017 compared with the nine months ended December 31, 2016, primarily due to global store closures primarily associated with the Way Forward Plan, largely offset by new concession shop openings in Asia.
Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the comparable prior year period, are provided below:
  Nine Months Ended $ Change Foreign Exchange Impact $ Change % Change
  December 30,
2017		 December 31,
2016		 
As
Reported
  
Constant
Currency
 
As
Reported
 
Constant
Currency
  (millions)    
Net Revenues:              
North America $2,471.7
 $2,901.2
 $(429.5) $1.6
 $(431.1) (14.8%) (14.9%)
Europe 1,165.0
 1,172.6
 (7.6) 28.4
 (36.0) (0.7%) (3.1%)
Asia 676.9
 662.8
 14.1
 (11.8) 25.9
 2.1% 3.9%
Other non-reportable segments 339.5
 350.8
 (11.3) 0.1
 (11.4) (3.2%) (3.2%)
Total net revenues $4,653.1
 $5,087.4
 $(434.3) $18.3
 $(452.6) (8.5%) (8.9%)
North America net revenues — Net revenues decreased by $429.5 million, or 14.8%, during the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016, including net favorable foreign currency effects of $1.6 million. On a constant currency basis, net revenues decreased by $431.1 million, or 14.9%.
The $429.5 million net decline in North America net revenues was driven by:
a $311.7 million net decrease related to our North America wholesale business, largely driven by a strategic reduction of shipments (including within the off-price channel) and points of distribution in connection with our long-term growth strategy, the impact of brand discontinuances, and the continued challenging department store traffic trends; and
a $115.0 million net decrease in comparable store sales, primarily driven by lower sales from our Ralph Lauren e-commerce operations and certain of our retail stores due in part to a decline in traffic, as well as lower levels of promotional activity and a planned reduction in inventory in connection with our long-term growth strategy. The following table summarizes the percentage change in comparable store sales related to our North America retail business on both a reported and constant currency basis:
  
As
Reported
 
Constant
Currency
E-commerce comparable store sales (23%) (23%)
Comparable store sales excluding e-commerce (5%) (5%)
Total comparable store sales (9%) (9%)
a $2.8 million net decrease in non-comparable store sales.
Europe net revenues — Net revenues decreased by $7.6 million, or 0.7%, during the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016, including net favorable foreign currency effects of $28.4 million. On a constant currency basis, net revenues decreased by $36.0 million, or 3.1%.
The $7.6 million net decline in Europe net revenues was driven by:
a $26.4 million net decrease in comparable store sales, including net favorable foreign currency effects of $9.3 million. Our comparable store sales decreased by $35.7 million on a constant currency basis, primarily driven by lower sales from certain of our retail stores due in part to lower levels of promotional activity in connection with our long-term growth strategy. The following table summarizes the percentage change in comparable store sales related to our Europe retail business on both a reported and constant currency basis:

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As
Reported
 
Constant
Currency
E-commerce comparable store sales (2%) (6%)
Comparable store sales excluding e-commerce (5%) (8%)
Total comparable store sales (5%) (7%)
a $15.9 million net decrease related to our Europe wholesale business, driven by the impact of brand discontinuances and a strategic reduction of shipments within the off-price channel in connection with our long-term growth strategy, partially offset by net favorable foreign currency effects of $15.2 million.
These declines were partially offset by a $34.7 million net increase in non-comparable store sales, primarily driven by new store openings and net favorable foreign currency effects of $3.9 million.
Asia net revenues — Net revenues increased by $14.1 million, or 2.1%, during the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016, including net unfavorable foreign currency effects of $11.8 million. On a constant currency basis, net revenues increased by $25.9 million, or 3.9%.
The $14.1 million net increase in Asia net revenues was driven by:
a $5.8 million net increase related to our Asia wholesale business, primarily driven by our expansion in Japan, partially offset by net unfavorable foreign currency effects of $0.6 million; and
a $4.8 million net increase in comparable store sales, including net unfavorable foreign currency effects of $6.9 million. Our comparable store sales increased by $11.7 million on a constant currency basis, primarily driven by higher sales from certain of our retail locations due in part to improved conversion, partially offset by the impact of lower levels of promotional activity in connection with our long-term growth strategy. The following table summarizes the percentage change in comparable store sales related to our Asia retail business on both a reported and constant currency basis:
  
As
Reported
 
Constant
Currency
Total comparable store sales(a)
 1% 3%
(a)
Comparable store sales for our Asia segment were comprised primarily of sales made through our stores and concession shops.
a $3.5 million net increase in non-comparable store sales, primarily driven by new store openings, partially offset by net unfavorable foreign currency effects of $4.3 million.
Gross Profit.    Gross profit increased by $11.2 million, or 0.4%, to $2.843 billion for the nine months ended December 30, 2017. Gross profit during the nine-month periods ended December 30, 2017 and December 31, 2016 reflected non-cash inventory-related charges of $1.3 million and $149.4 million, respectively, recorded in connection with the Way Forward Plan. The increase in gross profit also included a net favorable foreign currency effect of $10.4 million. Gross profit as a percentage of net revenues increased to 61.1% for the nine months ended December 30, 2017 from 55.7% for the nine months ended December 31, 2016. The 540 basis point increase was primarily driven by the lower non-cash inventory-related charges recorded in connection with the Way Forward Plan during the nine months ended December 30, 2017 as compared to the comparable prior year period, lower levels of promotional activity in connection with our long-term growth strategy, favorable geographic and channel mix, and lower sourcing costs.
Selling, General, and Administrative Expenses.    SG&A expenses decreased by $141.0 million, or 5.9%, to $2.249 billion for the nine months ended December 30, 2017. This decrease included a net unfavorable foreign currency effect of $1.7 million. SG&A expenses as a percentage of net revenues increased to 48.3% for the nine months ended December 30, 2017 from 47.0% for the nine months ended December 31, 2016. The 130 basis point increase was primarily due to operating deleverage on lower net revenues, as previously discussed, and the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our international retail businesses (which typically carry higher operating expense margins). These increases were partially offset by our operational discipline and cost savings associated with our restructuring activities, as well as the favorable impact related to Mr. Ralph Lauren electing to forgo his Fiscal 2017 executive incentive bonus.

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The $141.0 million net decline in SG&A expenses was driven by:
  
Nine Months Ended December 30, 2017
Compared to
Nine Months Ended December 31, 2016
  (millions)
SG&A expense category:  
Compensation-related expenses(a)
 $(40.3)
Depreciation expense (22.7)
Shipping and handling costs (16.3)
Rent and occupancy expenses (16.2)
Consulting fees (11.6)
Marketing and advertising expenses (9.9)
Selling-related expenses (9.1)
Other (14.9)
Total change in SG&A expenses $(141.0)
(a)
Includes the favorable impact of $7.6 million related to Mr. Ralph Lauren electing to forgo his Fiscal 2017 executive incentive bonus.
Amortization of Intangible Assets.    Amortization of intangible assets decreased slightly by $0.1 million, or 0.9%, to $18.0 million during the nine months ended December 30, 2017 due to favorable foreign currency effects.
Impairment of Assets. During the nine-month periods ended December 30, 2017 and December 31, 2016, we recorded non-cash impairment charges of $14.0 million and $56.7 million, respectively, to write off certain fixed assets related to our domestic and international stores, shop-within-shops, and corporate offices in connection with the Way Forward Plan. Additionally, during the nine months ended December 30, 2017, we recorded non-cash impairment charges of $10.8 million to write off certain fixed assets related to underperforming stores and shop-within-shops as a result of our on-going store portfolio evaluation. See Note 7 to the accompanying consolidated financial statements.
Restructuring and Other Charges. During the nine-month periods ended December 30, 2017 and December 31, 2016, we recorded restructuring charges of $63.7 million and $193.9 million, respectively, in connection with our restructuring plans, consisting of severance and benefit costs, lease termination and store closure costs, other cash charges, and non-cash accelerated stock-based compensation expense. In addition, during the nine months ended December 30, 2017, we recorded net other charges of $15.0 million primarily related to depreciation expense associated with our former Polo store at 711 Fifth Avenue in New York City recorded after the store closed during the first quarter of Fiscal 2018 in connection with the Way Forward Plan, the departure of Mr. Stefan Larsson, and the reversal of reserves associated with the settlement of certain non-income tax issues. See Note 8 to the accompanying consolidated financial statements.
Operating Income.    Operating income increased to $472.8 million for the nine months ended December 30, 2017, from $173.4 million for the nine months ended December 31, 2016. Our operating results during the nine-month periods ended December 30, 2017 and December 31, 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $104.8 million and $400.0 million, respectively, as previously discussed. The increase in operating income also included a net favorable foreign currency effect of $8.7 million. Operating income as a percentage of net revenues increased to 10.2% for the nine months ended December 30, 2017 from 3.4% for the nine months ended December 31, 2016. The 680 basis point increase was primarily driven by the net decline in restructuring-related charges, impairment of assets, and certain other charges and the increase in our gross profit margin, partially offset by the increase in SG&A expenses as a percentage of net revenues, all as previously discussed.

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Operating income (loss) and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the comparable prior year period, are provided below:
  Nine Months Ended    
 December 30, 2017 December 31, 2016    
 
Operating
Income (Loss)
 
Operating
Margin
 Operating
Income (Loss)		 
Operating
Margin
 
$
Change
 
Margin
Change
 (millions)   (millions)   (millions)  
Segment:            
North America $549.3
 22.2% $574.6
 19.8% $(25.3) 240 bps
Europe 273.6
 23.5% 239.2
 20.4% 34.4
 310 bps
Asia 101.0
 14.9% (80.3) (12.1%) 181.3
 2,700 bps
Other non-reportable segments 96.9
 28.6% 91.0
 25.9% 5.9
 270 bps
  1,020.8
   824.5
   196.3
  
Unallocated corporate expenses (469.3)   (457.2)   (12.1)  
Unallocated restructuring and other charges (78.7)   (193.9)   115.2
  
Total operating income $472.8
 10.2% $173.4
 3.4% $299.4
 680 bps
North America operating margin improved by 240 basis points, primarily due to the favorable impact of 140 basis points related to our retail business, largely driven by the increase in our gross profit margin and decline in SG&A expenses as a percentage of net revenues. The increase also reflected the favorable impact of 100 basis points related to lower non-cash charges recorded in connection with the Way Forward Plan during the nine months ended December 30, 2017 as compared to the prior fiscal year period. Our wholesale business did not have a meaningful impact on our North America operating margin, as the improved gross margin was offset by operating expense deleverage on lower net revenues.
Europe operating margin improved by 310 basis points, primarily due to the favorable impact of 180 basis points related to our retail business, largely driven by the increase in our gross profit margin, partially offset by an increase in SG&A expenses as a percentage of net revenues. The increase also reflected the favorable impact of 120 basis points related to lower non-cash charges recorded in connection with the Way Forward Plan during the nine months ended December 30, 2017 as compared to the prior fiscal year period, as well as the favorable impact of 60 basis points related to our wholesale business, largely driven by a decrease in SG&A expenses as a percentage of net revenues. These increases in operating margin were partially offset by unfavorable foreign currency effects of 50 basis points.
Asia operating margin improved by 2,700 basis points, primarily due to the favorable impact of 2,160 basis points related to lower non-cash charges recorded in connection with the Way Forward Plan during the nine months ended December 30, 2017 as compared to the prior fiscal year period. The increase also reflected the favorable impact of 420 basis points related to our retail business, largely driven by a decline in SG&A expenses as a percentage of net revenues and the increase in our gross profit margin. The improvement also reflected favorable foreign currency effects of 150 basis points. These increases in operating margin were partially offset by a 30 basis point decline related to our wholesale business.
Unallocated corporate expenses increased by $12.1 million to $469.3 million during the nine months ended December 30, 2017. The increase in unallocated corporate expenses was primarily due to lower intercompany sourcing commission income of $28.0 million (which is offset at the segment level and eliminates in consolidation) driven by the planned reduction in inventory, and higher impairment of asset charges of $10.4 million, partially offset by lower marketing and advertising expenses of $12.6 million, lower consulting fees of $6.3 million, lower compensation-related expenses of $5.9 million, and lower other expenses of $1.5 million.
Unallocated restructuring and other charges decreased by $115.2 million to $78.7 million during the nine months ended December 30, 2017, as previously discussed and in Note 8 to the accompanying consolidated financial statements.
Non-operating Expense, net. Non-operating expense, net decreased by $1.3 million to $8.5 million during the nine months ended December 30, 2017 as compared to the nine months ended December 31, 2016, as the decline in equity in losses of equity-method investees and increases in foreign currency gains and interest and other income, net were largely offset by the increase in interest expense.

57

Income Tax Provision.    The income tax provision and effective tax rate for the nine months ended December 30, 2017 were $342.8 million and 73.8%, respectively, as compared to $58.9 million and 36.0%, respectively, for the nine months ended December 31, 2016. The $283.9 million increase in the income tax provision was primarily due to one-time charges of $231.3 million recorded during the third quarter of Fiscal 2018 in connection with the TCJA (as discussed within "Recent Developments"), which negatively impacted our effective tax rate by 4,980 basis points, as well as the increase in pretax income. The increase in our effective tax rate also reflected the net favorable impact of 1,200 basis points, primarily due to the tax impact of earnings in lower taxed foreign jurisdictions versus the U.S. and the absence of (i) income tax reserve adjustments largely associated with an income tax settlement and certain income tax audits, and (ii) valuation allowances on and adjustments to deferred tax assets, both of which were recorded during the nine months ended December 31, 2016. The 1,200 basis points also reflected the unfavorable tax impact of the adoption of Accounting Standards Update No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). See Note 4 to the accompanying consolidated financial statements for additional information relating to our adoption of ASU 2016-09.
Net Income.    Net income increased to $121.5 million for the nine months ended December 30, 2017, from $104.7 million for the nine months ended December 31, 2016. The $16.8 million increase in net income was primarily due to the $299.4 million increase in operating income, partially offset by the $283.9 million increase in our income tax provision, as previously discussed. Net income for the nine months ended December 30, 2017 reflected one-time charges of $231.3 million recorded in connection with the TCJA, as previously discussed. Our operating results during the nine-month periods ended December 30, 2017 and December 31, 2016 were also negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $104.8 million and $400.0 million, respectively, which had an after-tax effect of reducing net income by $69.8 million and $298.0 million, respectively.
Net Income per Diluted Share.    Net income per diluted share increased to $1.47 per share for the nine months ended December 30, 2017, from $1.25 for the nine months ended December 31, 2016. The $0.22 per share increase was due to the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the nine months ended December 30, 2017 driven by our share repurchases during the last twelve months. Net income per diluted share for the nine months ended December 30, 2017 was negatively impacted by approximately $2.80 per share as a result of one-time charges recorded in connection with the TCJA, as previously discussed. Net income per diluted share for the nine-month periods ended December 30, 2017 and December 31, 2016 were also negatively impacted by $0.85 per share and $3.57 per share, respectively, as a result of restructuring-related charges, impairment of assets, and certain other charges, as previously discussed.
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition
The following table presents our financial condition as of December 30, 2017June 27, 2020 and April 1, 2017March 28, 2020:
 December 30,
2017		 April 1,
2017		 $
Change		 June 27,
2020		 March 28,
2020		 $
Change
 (millions) (millions)
Cash and cash equivalents $1,175.7
 $668.3
 $507.4
 $2,451.3
 $1,620.4
 $830.9
Short-term investments 862.3
 684.7
 177.6
 259.3
 495.9
 (236.6)
Non-current investments(a)
 83.3
 21.4
 61.9
Short-term debt(a)
 —
 (475.0) 475.0
Current portion of long-term debt(b)(a)
 (298.3) —
 (298.3) (299.9) (299.6) (0.3)
Long-term debt(b)(a)
 (290.3) (588.2) 297.9
 (1,630.1) (396.4) (1,233.7)
Net cash and investments(c)
 $1,532.7
 $786.2
 $746.5
Net cash and investments(b)
 $780.6
 $945.3
 $(164.7)
Equity $3,407.5
 $3,299.6
 $107.9
 $2,555.5
 $2,693.1
 $(137.6)
 
(a) 
Recorded within other non-current assets in our consolidated balance sheets.
(b)
See Note 10 to the accompanying consolidated financial statements for discussion of the carrying valuevalues of our debt.
(c)(b) 
"Net cash and investments" is defined as cash and cash equivalents, plus short-term and non-current investments, less total debt.

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The increasedecrease in our net cash and investments position at December 30, 2017June 27, 2020 as compared to April 1, 2017March 28, 2020 was primarily due to ourcash used in operating cash flowsactivities of $951.1$70.3 million, partially offset byas well as our use of cash to make dividend payments of $49.8 million (which had been previously declared during the fourth quarter of Fiscal 2020) and to invest in our business through $123.0$21.3 million in capital expenditures and to make dividend payments of $121.7 million.expenditures.
The increasedecrease in equity was primarily attributable to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our dividends declaredloss during the ninethree months ended December 30, 2017.June 27, 2020.
Cash Flows
The following table details our cash flows for the nine-monththree-month periods ended December 30, 2017June 27, 2020 and December 31, 2016:June 29, 2019:
  Nine Months Ended  
  December 30,
2017		 December 31,
2016		 $
Change
  (millions)
Net cash provided by operating activities $951.1
 $850.7
 $100.4
Net cash provided by (used in) investing activities (317.8) 16.3
 (334.1)
Net cash used in financing activities (158.7) (369.5) 210.8
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36.8
 (29.0) 65.8
Net increase in cash, cash equivalents, and restricted cash $511.4
 $468.5
 $42.9
  Three Months Ended  
  June 27,
2020		 June 29,
2019		 $
Change
  (millions)
Net cash provided by (used in) operating activities $(70.3) $197.4
 $(267.7)
Net cash provided by investing activities 220.7
 107.2
 113.5
Net cash provided by (used in) financing activities 673.1
 (244.8) 917.9
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 7.6
 5.1
 2.5
Net increase in cash, cash equivalents, and restricted cash $831.1
 $64.9
 $766.2
Net Cash Provided by (Used in) Operating Activities.    Net cash used in operating activities was $70.3 million during the three months ended June 27, 2020, as compared to net cash provided by operating activities increased to $951.1of $197.4 million during the ninethree months ended December 30, 2017, as compared to $850.7 million during the nine months ended December 31, 2016.June 29, 2019. The $100.4$267.7 million net increasedecrease in cash provided by operating activities was due to a decrease in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period, partially offset by a decline inperiod. The net income before non-cash charges. The decline in net income before non-cash charges reflected a one-time charge of $215.5 million recorded in connection with the TCJA's mandatory transition tax. This charge, which is expected to be paid over an eight-year period net of previously available foreign tax credit carryovers (see "Contractual and Other Obligations" below), did not impact our cash flows from operating activities during the nine months ended December 30, 2017 as reflected in the offsetting favorable change in our income taxes payable. Excluding the impact of this one-time charge,related to our operating assets and liabilities, including our working capital, increasedwas primarily driven by:
a reduction in inventory receipts to align with anticipated product demand;
a favorable change related to our accounts receivable, largely driven by our collection efforts, as well as a decline in wholesale revenue due to:to COVID-19 business disruptions; and




52

a favorable changes inchange related to our (i) other income tax receivables and payables (excluding the impact of the one-time mandatory transition tax) and (ii) prepaid expenses and other current assets, both largely driven by the timing of cash collectionsreceipts and payments; and
a decline in our inventory levels, largely driven by our inventory management initiatives, lower sourcing costs, and the timing of inventory receipts.payments, respectively.
These increases related to our operating assets and liabilities were partially offset by by:
an unfavorable change inrelated to our accounts receivable,payable, largely driven by the timing of cash collections.a decrease in expenses due to COVID-19 business disruptions, partially offset by extended vendor payment terms.
Net Cash Provided by (Used in) Investing Activities.    Net cash used in investing activities was $317.8 million during the nine months ended December 30, 2017, as compared to net cash provided by investing activities of $16.3was $220.7 million during the ninethree months ended December 31, 2016.June 27, 2020, as compared to $107.2 million during the three months ended June 29, 2019. The $334.1$113.5 million net increase in cash used inprovided by investing activities was primarily driven by:
a $434.5$103.4 million increase in purchases of investments, less proceeds from sales and maturities of investments, less purchases of investments. During the ninethree months ended December 30, 2017,June 27, 2020, we madereceived net investment purchasesproceeds from sales and maturities of $190.2investments of $238.3 million, as compared to net investment sales of $244.3$134.9 million during the ninethree months ended December 31, 2016.
This increase in cash used in investing activities was partially offset by:June 29, 2019; and
a $102.5$28.1 million declinedecrease in capital expenditures. During the ninethree months ended December 30, 2017,June 27, 2020, we spent $123.0$21.3 million on capital expenditures, as compared to $225.5$49.4 million during the ninethree months ended December 31, 2016.June 29, 2019. This decline reflects the temporary postponement of non-critical capital expenditures as a preemptive action to preserve cash and strengthen our liquidity position in response to current business disruptions related to the COVID-19 pandemic. Our capital expenditures during the ninethree months ended December 30, 2017June 27, 2020 primarily related to our global retail and

59

department store renovations, newinternational store openings and the continuedrenovations, as well as enhancements to our global information technology systems.
We currently expect to spend approximately $200These increases in cash provided by investing activities were partially offset by:
a $20.8 million in capital expenditures during Fiscal 2018, lower than our previous estimate of $225 million, as we shift certain capital investments into Fiscal 2019 and focus on consumer-facing initiatives that have demonstrated a proof of concept and healthy rates of return.
Net Cash Used in Financing Activities.    Net cash used in financing activities was $158.7 million during the nine months ended December 30, 2017, as compared to $369.5 million during the nine months ended December 31, 2016. The $210.8 million net decrease in cash used in financing activities was primarily driven by:
a $116.1 million decline in cash used to repay debt, less proceeds from debt issuances. We did not issue or repay any debtthe sale of property. No property was sold during the ninethree months ended December 30, 2017.June 27, 2020. On a comparative basis, during the ninethree months ended December 31, 2016,June 29, 2019, we made $90.0received net cash proceeds of $20.8 million from the sale of our corporate jet. These proceeds were donated to the Ralph Lauren Corporate Foundation (formerly known as the Polo Ralph Lauren Foundation), which is reflected within cash flows from operating activities for the three months ended June 29, 2019.
Net Cash Provided by (Used in) Financing Activities.    Net cash provided by financing activities was $673.1 million during the three months ended June 27, 2020, as compared to net cash used in financing activities of $244.8 million during the three months ended June 29, 2019. The $917.9 million net repayments relatedincrease in cash provided by financing activities was primarily driven by:
a $766.9 million increase in cash proceeds from the issuance of debt, less debt repayments. During the three months ended June 27, 2020, we received $1.242 billion in proceeds from our issuance of 1.700% unsecured notes and 2.950% unsecured senior notes, a portion of which was used to our commercial paper note issuances and repayments and repaid $26.1repay $475.0 million of borrowings previously outstanding under our credit facilities;facilities. On a comparative basis, during the three months ended June 29, 2019, we did not issue or repay any debt; and
a $99.1$157.2 million declinedecrease in cash used to repurchase shares of our Class A common stock. During the ninethree months ended December 30, 2017, $15.9June 27, 2020, $33.9 million in shares of Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our long-term stock incentive plans.plans, and no shares of Class A common stock were repurchased pursuant to our common stock repurchase program, which we have temporarily suspended as a preemptive action to preserve cash and strengthen our liquidity position in response to current business disruptions related to the COVID-19 pandemic. On a comparative basis, during the ninethree months ended December 31, 2016,June 29, 2019, we used $100.0$150.0 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $15.0$41.1 million in shares of Class A common stock were surrendered or withheld for taxes.




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Sources of Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term investments, availability under our credit facilities our issuances ofand commercial paper notes,program, and other available financing options.
During the ninethree months ended December 30, 2017,June 27, 2020, we generated $951.1used $70.3 million of net cash flows fromin our operations. As of December 30, 2017,June 27, 2020, we had $2.038$2.711 billion in cash, cash equivalents, and short-term investments, of which $1.203 billion$613.6 million were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations. Given recent changesUndistributed foreign earnings that were subject to the taxationTax Cuts and Jobs Act's one-time mandatory transition tax as of December 31, 2017 are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We intend to permanently reinvest undistributed foreign earnings in connection withgenerated after December 31, 2017 that were not subject to the TCJA (as discussed within "Recent Developments"), we are exploring repatriation possibilities. Ifone-time mandatory transition tax. However, if our plans change and we choose to repatriate any fundspost-2017 earnings to the U.S. in the future, we could potentiallywould be subject to applicable state, local, and/orU.S. and foreign taxes. Any further changes in tax regulations could potentially change our future intentions regarding the reinvestment of our foreign earnings and we continue to monitor governing tax rules, as well as our cash needs.
The following table presents our total availability, borrowings outstanding, and remaining availability under our credit facilities and Commercial Paper Program as of December 30, 2017:June 27, 2020:
 December 30, 2017 June 27, 2020
Description(a)
 
Total
Availability
 
Borrowings
Outstanding
 
Remaining
Availability
 
Total
Availability
 
Borrowings
Outstanding
 
Remaining
Availability
 (millions) (millions)
Global Credit Facility and Commercial Paper Program(b)
 $500
 $9
(c) 
$491
 $500
 $9
(c) 
$491
Pan-Asia Credit Facilities 51
 —
 51
 32
 —
 32
 
(a) 
As defined in Note 10 to the accompanying consolidated financial statements.
(b) 
Borrowings under the Commercial Paper Program are supported by the Global Credit Facility. Accordingly, we do not expect combined borrowings outstanding under the Commercial Paper Program and the Global Credit Facility to exceed $500 million.
(c) 
Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of December 30, 2017.June 27, 2020.

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We believe that ourthe Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of December 30, 2017,June 27, 2020, there were nineeight financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. In accordance with the terms of the agreement, we have the ability to expand our borrowing availability under the Global Credit Facility to $1 billion through the full term of the facility, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments.
Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the participating regional branches of JPMorgan Chase (the "Banks"), subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. 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 Global Credit Facility and the Pan-Asia Credit Facilities in the event of our election to draw additional funds in the foreseeable future.
Our sources of liquidity are used to fund our ongoing cash requirements, including working capital requirements, global retail store and e-commercedigital commerce expansion, construction and renovation of shop-within-shops, investment in infrastructure, including technology, acquisitions, joint ventures, payment of dividends, debt repayments, Class A common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and other corporate activities, including our restructuring actions. We believe that our existing sources of cash, the availability under our credit facilities, and our ability to access capital markets will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, the ongoing development of our businesses, and our plans for further business expansion. However, prolonged periods of adverse economic conditions or business disruptions in any of our key regions, or a combination thereof, such as those resulting from the COVID-19 pandemic, could impede our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our operations.
See Note 10 to the accompanying consolidated financial statements and Note 1211 of the Fiscal 20172020 10-K for detailed disclosure of the terms and conditions of our credit facilities.
Common Stock Repurchase Program
As of December 30, 2017, the remaining availability under our Class A common stock repurchase program was approximately $100 million. Repurchases of shares of Class A common stock are subject to overall business and market conditions. We currently do not expect to repurchase shares under our Class A common stock repurchase program during Fiscal 2018, as we evaluate the cash needs of our business, the sector dynamics, and recent changes to U.S. tax law.
See Note 14 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.



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Dividends
Since 2003, we have maintained, and intend to continue to maintain, a regular quarterly cash dividend program on our common stock. However, any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our results of operations, cash requirements, financial condition, and other factors that the Board of Directors may deem relevant.
See Note 14 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.
Debt and Covenant Compliance
In September 2013,August 2015, we completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due September 26, 2018, which bear interest at a fixed rate of 2.125%, payable semi-annually (the "2.125% Senior Notes"). In August 2015, we completed a second registered public debt offering and issued an additional $300 million aggregate principal amount of unsecured senior notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). In August 2018, we completed another registered public debt offering and issued an additional $400 million aggregate principal amount of unsecured senior notes due September 15, 2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes"). In June 2020, we completed another registered public debt offering and issued an additional $500 million aggregate principal amount of unsecured senior notes due June 15, 2022, which bear interest at a fixed rate of 1.700% payable semi-annually (the "1.700% Senior Notes"), and $750 million aggregate principal amount of unsecured senior notes due June 15, 2030, which bear interest at a fixed rate of 2.950%, payable semi-annually (the "2.950% Senior Notes").
The indenture and supplemental indentures governing the 2.125%2.625% Senior Notes, 3.750% Senior Notes, 1.700% Senior Notes, and 2.625%2.950% Senior Notes (as supplemented, the "Indenture") contain certain covenants that restrict our ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of our property or assets to another party. However, the Indenture does not contain any financial covenants.
We have a credit facility that provides for a $500 million senior unsecured revolving line of credit through August 12, 2024, which is also used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program (the "Global Credit Facility"). Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. We have the ability to expand the borrowing availability under the Global Credit Facility to $1 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility. In March 2020, we borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen our liquidity position in response to the COVID-19 pandemic, which was subsequently repaid in June 2020 using a portion of the proceeds from our issuances of the 1.700% Senior Notes and 2.950% Senior Notes.
The Global Credit Facility contains a number of covenants, as described in Note 10 to the accompanying consolidated financial statements. As of December 30, 2017,June 27, 2020, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The Pan-Asia Credit Facilities do not contain any financial covenants.

See Note 10 to the accompanying consolidated financial statements and Note 11 of the Fiscal 2020 10-K for additional information relating to our debt and covenant compliance.
Common Stock Repurchase Program
On May 13, 2019, our Board of Directors approved an expansion of our existing common stock repurchase program that allowed us to repurchase up to an additional $600 million of Class A common stock. As of June 27, 2020, the remaining availability under our Class A common stock repurchase program was approximately $580 million. Repurchases of shares of Class A common stock are subject to certain restrictions under our Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our common stock repurchase program as a preemptive action to preserve cash and strengthen our liquidity position.
See Note 14 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.
Dividends
Except as discussed below, we have maintained a regular quarterly cash dividend program on our common stock since 2003. On May 13, 2019, our Board of Directors approved an increase to the quarterly cash dividend on our common stock from $0.625 to $0.6875 per share.
As a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our quarterly cash dividend program as a preemptive action to preserve cash and strengthen our liquidity position. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our results of operations, cash requirements, financial condition, and other factors that the Board of Directors may deem relevant, including economic and market conditions.




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See Note 1014 to the accompanying consolidated financial statements and Note 12 of the Fiscal 2017 10-K for additional information relating to our debt and covenant compliance.quarterly cash dividend program.
Contractual and Other Obligations
In connection withThere have been no material changes to our contractual and other obligations as disclosed in our Fiscal 2020 10-K, other than those which occur in the TCJA's provision that subjects previously deferred foreign earnings to a one-time mandatory transition tax (as described in "Recent Developments"), we recorded a chargeordinary course of $215.5 million within our income tax provision during the third quarter of Fiscal 2018, together with a corresponding current and non-current income tax payable obligation within our consolidated balance sheets based upon the estimated timing of payments. This obligation, which was recorded on a provisional basis and is subject to change, is expected to be paid over an eight-year period as follows:
  
Mandatory Transition
Tax Payments(a)
  (millions)
Fiscal 2019 $27.3
Fiscal 2020 14.0
Fiscal 2021 14.0
Fiscal 2022 14.0
Fiscal 2023 23.2
Fiscal 2024 and thereafter 85.5
Total mandatory transition tax payments $178.0
(a)
The expected mandatory transition tax payments have been presented net of previously available foreign tax credit carryovers of $37.5 million, which we expect to utilize to partially reduce this tax obligation.
business. Refer to the"Financial Condition and Liquidity — Contractual and Other Obligations"section of the MD&A in our Fiscal 20172020 10-K for detailed disclosure of our other commitmentscontractual and contractualother obligations as of April 1, 2017.March 28, 2020.
MARKET RISK MANAGEMENT
As discussed in Note 1413 of the Fiscal 20172020 10-K and Note 12 to the accompanying consolidated financial statements, we are exposed to a variety of risks, including the impact of changes in foreign currency exchange rates relating toon foreign currency-denominated balances, certain anticipated cash flows fromof our international operations, and possible declines in the value of reported net assets of our foreign operations, as well as changes in the fair value of our fixed-rate debt obligations relating to changesfluctuations in benchmark interest rates. Consequently,Accordingly, at times, in the normal course of business, we employ established policies and procedures to manage such risks, including the use of derivative financial instruments, to manage such risks.instruments. We do not enter into derivative transactionsuse derivatives for speculative or trading purposes.
As a result of theGiven our use of derivative instruments, we are exposed to the risk that the counterparties to oursuch contracts will fail to meet their contractual obligations. To mitigate thissuch counterparty credit risk, we have ait is our policy ofto only enteringenter into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to further mitigate credit risk associated with our derivative instruments.risk. As a result of the above considerations, we do not believe that we are exposed to any undue concentration of counterparty risk with respect to our derivative contracts as of December 30, 2017.June 27, 2020. However, we do have in aggregate $4.2$49.0 million of derivative instruments in net asset positions with threesix creditworthy financial institutions.
Foreign Currency Risk Management
We manage our exposure to changes in foreign currency exchange rates through the use ofusing forward foreign currency exchange and cross-currency swap contracts. See Refer to Note 12 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward foreign currency exchange and cross-currency swap contracts, outstandingas well as the impact on earnings and other comprehensive income of such instruments as of December 30, 2017.

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June 27, 2020.
Forward Foreign Currency Exchange Contracts
We enter into forward foreign currency exchange contracts as hedges to reduce ourmitigate risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, intercompany royalty payments made by certain of our international operations, and the settlement of foreign currency-denominated balances.balances, and the translation of certain foreign operations' net assets into U.S. Dollars. As part of our overall strategy to managefor managing the level of exposure to the risk of foreign currencysuch exchange rate fluctuations,risk, relating primarily to changes in the value of the Euro, the Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, the Swedish Krona,and the Chinese Yuan, the New Taiwan Dollar, and the Hong Kong Dollar,Renminbi, we generally hedge a portion of our foreign currencyrelated exposures anticipated over a two-year period. In doing so, we usethe next twelve months using forward foreign currency exchange contracts that generally havewith maturities of two months to two yearsone year to provide continuing coverage throughoutover the hedging period of the respective exposure.
Our foreign exchange risk management activities are governed by our Company's established policies and procedures. These policies and procedures provide a framework that allows for the management of currency exposures while ensuring the activities are conducted within our established guidelines. Our policies include guidelines for the organizational structure of our risk management function and for internal controls over foreign exchange risk management activities, including, but not limited to, authorization levels, transaction limits, and credit quality controls, as well as various measurements for monitoring compliance. We monitor foreign exchange risk using different techniques, including a periodic review of market values and performance of sensitivity analyses.
Our forward foreign currency exchange contracts are recorded at fair value in our consolidated balance sheets. To the extent such contracts are designated as qualifying cash flow hedges of inventory transactions, related gains or losses are initially deferred in equity as a component of accumulated other comprehensive income ("AOCI") and are subsequently recognized within cost of goods sold in our consolidated statements of operations when the related inventory is sold.




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Cross-Currency Swap Contracts
During our fiscal year ended April 2, 2016 ("Fiscal 2016"), we entered into twoWe periodically designate (i) pay-floating rate, receive-floating rate cross-currency swaps, with notional amounts of €280 million and €274 million, which we designatedswap contracts or (ii) pay-fixed rate, receive fixed-rate cross-currency swap contracts as hedges of our net investment in certain of our European subsidiaries (the "Cross-Currency Swaps"). The Cross-Currency Swaps, which mature on September 26, 2018 and August 18, 2020, respectively,subsidiaries.
Our pay-floating rate, receive-floating rate cross-currency swap thecontracts swap U.S. Dollar-denominated variable interest rate payments based on the contract's notional amount and 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread (as paid under a corresponding interest rate swap contract discussed below) for Euro-denominated variable interest rate payments based on the 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread. As a result, the Cross-Currency Swaps,spread, which, in conjunctioncombination with the Interest Rate Swaps (as defined below),corresponding interest rate swap contract, economically convertconverts a portion of our $300 million fixed-rate 2.125% and $300 million fixed-rate 2.625%US-denominated senior note obligations to €280 million and €274 million floating-rate Euro-denominated liabilities, respectively.obligations.
Our pay-fixed rate, receive-fixed rate cross-currency swap contracts swap U.S. Dollar-denominated fixed interest rate payments based on the contract's notional amount and the fixed rate of interest payable on certain of our senior notes for Euro-denominated fixed interest rate payments, thereby economically converting a portion of our fixed-rate US-denominated senior note obligations to fixed rate Euro-denominated obligations.
See Note 3 to the accompanying consolidated financial statements for further discussion of our foreign currency exposures, and the types of derivative instruments used to hedge those exposures.
Interest Rate Risk Management
During Fiscal 2016, we entered into twoWe periodically designate pay-floating rate, receive-fixed rate interest rate swap contracts which we designated as hedges against changes in the respective fair valuesvalue of certain of our fixed-rate 2.125% Senior Notes and our fixed-rate 2.625% Senior Notesdebt attributed to changes in thea benchmark interest rate (the "Interest Rate Swaps"). The Interest Rate Swaps, which mature on September 26, 2018 and August 18, 2020, respectively, both haverate. To the extent of their notional amounts of $300 million andamount, such contracts effectively swap the fixed interest ratesrate on certain of our 2.125% Senior Notes and 2.625% Senior Notesfixed-rate senior notes for a variable interest ratesrate based on 3-month LIBOR plus a fixed spread.
Investment Risk Management
As of December 30, 2017,June 27, 2020, we had cash and cash equivalents on-hand of $1.176$2.451 billion, consisting of deposits in interest bearing accounts, investments in money market deposit accounts, and investments in time deposits and commercial paper with original maturities of 90 days or less. Our other significant investments included $862.3$259.3 million of short-term investments, consisting of investments in time deposits and commercial paper with original maturities greater than 90 days; $47.5and $9.6 million of restricted cash placedheld in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters;matters and $83.3 million of investments with maturities greater than one year, consisting of time deposits.real estate leases.
We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and procedures, which include monitoring both general and issuer-specific economic conditions, as discussed further below.in Note 3 to the accompanying consolidated financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 12 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of December 30, 2017June 27, 2020.

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We evaluate investments held in unrealized loss positions, if any, for other-than-temporary impairment on a quarterly basis. This evaluation involves a variety of considerations, including assessments of risks and uncertainties associated with general economic conditions and distinct conditions affecting specific issuers. We consider the following factors: (i) the length of time and the extent to which the fair value has been below cost, (ii) the financial condition, credit worthiness, and near-term prospects of the issuer, (iii) the length of time to maturity, (iv) anticipated future economic conditions and market forecasts, (v) our intent and ability to retain our investment for a period of time sufficient to allow for recovery of market value, and (vi) an assessment of whether it is more likely than not that we will be required to sell our investment before recovery of market value. No material realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded in any of the fiscal periods presented.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are described in Note 3 of the Fiscal 20172020 10-K. Our estimates are often based on complex judgments, assessments of probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting policies, seerefer to the "Critical Accounting Policies" section of the MD&A in our Fiscal 20172020 10-K.
There have been no significant changes in the application of our critical accounting policies since April 1, 2017.March 28, 2020.
Goodwill Impairment Assessment
We performed our annual goodwill impairment assessment using a qualitative approach as of the beginning of the second quarter of Fiscal 2018. In performing the assessment, we identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of our reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and expected financial performance. Additionally, the results of our most recent quantitative goodwill impairment test indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results of our qualitative goodwill impairment assessment, we concluded that it is not more likely than not that the fair values of our reporting units are less than their respective carrying values, and there were no reporting units at risk of impairment.



57

RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 4 to the accompanying consolidated financial statements for a description of certain recently issued or proposed accounting standards which have impacted our consolidated financial statements, or may impact our consolidated financial statements in future reporting periods.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
For a discussion of the Company's exposure to market risk, see "Market Risk Management" presented in Part I, Item 2 — MD&A of this Form 10-Q and incorporated herein by reference.
Item 4.Controls and Procedures.
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
We carried out an evaluation based on criteria established in the Internal Control -— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) under the supervision and with the participation of management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Securities

64

Exchange Act of 1934. Based on that evaluation, our principal executive and principal financial officers have concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of December 30, 2017. Except as discussed below, thereJune 27, 2020. There has been no change in the Company's internal control over financial reporting during the fiscal quarter ended December 30, 2017June 27, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Operating and Financial Reporting System Implementation
DuringAlthough there have been no material changes in the first quarter of Fiscal 2018, we completed the migration of our European operations to an operating andCompany's internal control over financial reporting, information technology system, SAP, as part of a multi-year plan to integrate and upgrade our global systems and processes.
As a result of the implementation of this system, we have experienced certain changesvarying degrees of business disruptions related to the COVID-19 pandemic, including periods of closure of our processesstores, distribution centers, and procedures which,corporate facilities, as described within "Recent Developments." In response to the COVID-19 pandemic, we have taken various preemptive actions to preserve cash and strengthen our liquidity position, including temporarily furloughing and/or reducing work hours for a significant portion of both our store and corporate employees, with those corporate employees not furloughed in turn, resulted inaffected regions working remotely. Despite such actions, we have not experienced any material changes to our internal controlcontrols over financial reporting. While we expect SAP to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, managementWe will continue to evaluate and monitor the impact of the COVID-19 pandemic on our internal controls as processes and procedures in each of the affected areas evolve. For a discussion of risks related to the implementation of new systems, seecontrols. See Item 1A — "Risk Factors — Risks and uncertaintiesInfectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business" in the Fiscal 2020 10-K for additional discussion regarding risks to our business associated with the implementation of information systems may negatively impact our business" in the Fiscal 2017 10-K.COVID-19 pandemic.



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PART II. OTHER INFORMATION
Item 1.Legal Proceedings.
Reference is made to the information disclosed under Item 3 — "Legal Proceedings" in the Fiscal 20172020 10-K.
Item 1A.Risk Factors.
Reference is made to the information disclosed under Part I, Item 1A — "Risk Factors" in the Fiscal 20172020 10-K, which contains a detailed discussion of certain risk factors that could materially adversely affect the Company's business, operating results, and/or financial condition. The following information amends, updates, and should be read in conjunction withThere are no material changes to the risk factors and informationpreviously disclosed, innor has the Fiscal 2017 10-K.
The impact to ourCompany identified any previously undisclosed risks that could materially adversely affect the Company's business, of recently enacted U.S. tax legislation could differ materially from our current estimates.
On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"), which became effective January 1, 2018. The TCJA is complex and widely considered to be the most significant overhaul to the U.S. federal tax code since 1986.
Although we expect the TCJA will ultimately benefit ouroperating results, of operations andand/or financial condition in future periods, primarily due to it reducing the U.S. federal statutory income tax rate from 35% to 21%, its enactment resulted in the recognition of one-time charges of $231.3 million within our income tax provision during the third quarter of Fiscal 2018. These charges were recorded on a provisional basis, as permitted by SEC Staff Accounting Bulletin No. 118 ("SAB 118"), based on our present interpretations of the TCJA and current available information, including assumptions and expectations about future events, such as our projected financial performance. Although we believe these provisional amounts represent a reasonable estimate of the ultimate enactment-related impact the TCJA will have on our consolidated financial statements, the amounts could be adjusted materially as additional information becomes available (including our actual full Fiscal 2018 results of operations and financial condition, which were projected for purposes of calculating the provisional amounts) and further analyses are completed. The impact of the TCJA to our business in future periods is also subject to a variety of factors beyond our control including, but not limited to, (i) potential amendments to the TCJA; (ii) potential changes to state, local, and foreign tax laws in response to the TCJA; and (iii) potential new or interpretative guidance issued by the Financial Accounting Standards Board or the Internal Revenue Service and other tax agencies. Any of these factors could cause our actual results to differ materiality from our current expectations and/or investors' expectations and there can be no assurance that the TCJA will ultimately benefit our results of operations and financial condition in future periods.

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For further discussion of risks related to the potential imposition of additional regulations and laws and changes to our tax obligations and effective tax rate, refer to Part I, Item 1A — "Risk Factors — Our ability to conduct business globally may be affected by a variety of legal, regulatory, political, and economic risks" and "Risk Factors — Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results" in the Fiscal 2017 10-K.
See Note 9 to the accompanying consolidated financial statements for further discussion of the TCJA.condition.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
(a)Sales of Unregistered Securities
Shares of the Company's Class B Common Stock may be converted immediately into Class A Common Stock on a one-for-one basis by the holder. There is no cash or other consideration paid by the holder converting the shares and, accordingly, there is no cash or other consideration received by the Company. The shares of Class A Common Stock issued by the Company in such conversions are exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
No shares of the Company's Class B common stock were converted into Class A common stock during the three months ended December 30, 2017.June 27, 2020.
(b)Not Applicable
(c)Stock Repurchases
The following table sets forth the repurchases of shares of the Company's Class A common stock during the three months ended December 30, 2017:June 27, 2020:
 
Total  Number of Shares Purchased(a)
 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar  Value of Shares That May Yet be Purchased Under the  Plans or Programs(b)
       (millions)
October 1, 2017 to October 28, 201711,257
 $88.92
 —
 $100
October 29, 2017 to December 2, 2017—
 —
 —
 100
December 3, 2017 to December 30, 20173,238

101.38
 —
 100
 14,495
   —
  
 
Total Number of Shares Purchased(a)
 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar 
Value of Shares
That May Yet be
Purchased Under the
Plans or Programs(b)
       (millions)
March 29, 2020 to April 25, 20203,105
 $68.85
 —
 $580
April 26, 2020 to May 23, 2020115,780
 65.31
 —
 580
May 24, 2020 to June 27, 2020342,936

76.30
 —
 580
 461,821
   —
  
 
(a) 
Represents shares surrendered to or withheld by the Company in satisfaction of withholding taxes in connection with the vesting of awards issued under its long-term stock incentive plans.
(b) 
Repurchases of shares of Class A common stock are subject to certain restrictions under the Company's Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, we have temporarily suspended our common stock repurchase program as a preemptive action to preserve cash and strengthen our liquidity position.





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Item 6.Exhibits.
3.1
Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-1/A (File No. 333-24733) filed June 10, 1997).
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Form 8-K filed August 16, 2011).
3.3
Fourth Amended and Restated By-Laws of the Company (filed as Exhibit 3.3 to the Form 10-Q filed on August 10, 2017).
12.1*4.1
ComputationFourth Supplemental Indenture, dated as of Ratio of EarningsJune 3, 2020, by and between Ralph Lauren Corporation and Wells Fargo Bank, National Association (filed as Exhibit 4.2 to Fixed Charges.the Form 8-K filed June 3, 2020).
10.1*
Amendment No. 1 to the Amended and Restated Employment Agreement, dated June 16, 2020, between the Company and Ralph Lauren†.
10.2*
Amendment No. 2 to the Employment Agreement, dated June 17, 2020, between the Company and Patrice Louvet†.
10.3*
Amendment No. 1 to the Amended and Restated Employment Agreement, dated June 17, 2020, between the Company and Jane Nielsen†.
31.1*
Certification of Principal Executive Officer pursuant to 17 CFR 240.13a-14(a).
31.2*
Certification of Principal Financial Officer pursuant to 17 CFR 240.13a-14(a).
32.1*
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*101.INS*XBRL Instance Document - the instance document does not appear in the Interactive data files pursuant to Rule 405 of Regulation S-T: (i)Data File because its XBRL tags are embedded within the Consolidated Balance Sheets at December 30, 2017 and April 1, 2017, (ii) the Consolidated Statements of Operations for the three-month and nine-month periods ended December 30, 2017 and December 31, 2016, (iii) the Consolidated Statements of Comprehensive Income (Loss) for the three-month and nine-month periods ended December 30, 2017 and December 31, 2016, (iv) the Consolidated Statements of Cash Flows for the nine-month periods ended December 30, 2017 and December 31, 2016, and (v) the Notes to the Consolidated Financial Statements.Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document.
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.
Exhibits 32.1 and 32.2 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
 
* Filed herewith.

*Filed herewith.
†Management contract or compensatory plan or arrangement.






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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
RALPH LAUREN CORPORATION
   
 By:
/S/    JANE HAMILTON NIELSEN        
  Jane Hamilton Nielsen
  Chief Operating Officer and Chief Financial Officer
  (Principal Financial and Accounting Officer)
   
Date: February 8, 2018August 4, 2020  







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