~~MICHAEL KORS~~

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

(Unaudited)

Ordinary Shares
Additional
Paid-in
Capital
Treasury Shares
Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
Total Equity of MKHL Non-controlling Interests Total Equity
Shares Amounts Shares Amounts
Balance at March 31, 2018, as previously reported 210,991
$ —
$ 831.1
(61,293 ) $ (3,015.9 ) $ 50.5
$ 4,152.0
$ 2,017.7
$ 3.8
$ 2,021.5
Adoption of accounting standards (See Note 2) —
—
—
—
—
—
11.7
11.7
—
11.7
Balance as of April 1, 2018 210,991
—
831.1
(61,293 ) (3,015.9 ) 50.5
4,163.7
2,029.4
3.8
2,033.2
Net income (loss) —
—
—
—
—
—
324.0
324.0
(0.7 ) 323.3
Other comprehensive loss —
—
—
—
—
(113.4 ) —
(113.4 ) (0.1 ) (113.5 )
Total comprehensive income (loss) —
—
—
—
—
—
—
210.6
(0.8 ) 209.8
Vesting of restricted awards, net of forfeitures 697
—
—
—
—
—
—
—
—
—
Exercise of employee share options 1,521
—
20.4
—
—
—
—
20.4
—
20.4
Equity compensation expense —
—
26.4
—
—
—
—
26.4
—
26.4
Purchase of treasury shares —
—
—
(1,766 ) (107.1 ) —
—
(107.1 ) —
(107.1 )
Increase in noncontrolling interest —
—
—
—
—
—
—
—
0.6
0.6
Balance at September 29, 2018 213,209
$ —
$ 877.9
(63,059 ) $ (3,123.0 ) $ (62.9 ) $ 4,487.7
$ 2,179.7
$ 3.6
$ 2,183.3



	Ordinary Shares			Additional Paid-in Capital		Treasury Shares					Accumulated Other Comprehensive Loss			Retained Earnings		Total Equity of Capri			Non-controlling Interests		Total Equity
	Shares	Amounts		Additional Paid-in Capital		Shares		Amounts			Accumulated Other Comprehensive Loss			Retained Earnings		Total Equity of Capri			Non-controlling Interests		Total Equity
Balance at June 29, 2019	216,742	$	—	$	1,039	(65,177	)	$	(3,225	)	$	(93	)	$	4,600	$	2,321		$	3	$	2,324
Net income	—	—		—		—		—			—			73		73			—		73
Other comprehensive loss	—	—		—		—		—			(10		)	—		(10		)	—		(10		)
Total comprehensive income	—	—		—		—		—			—			—		63			—		63
Vesting of restricted awards, net of forfeitures	73	—		—		—		—			—			—		—			—		—
Equity compensation expense	—	—		21		—		—			—			—		21			—		21
Purchase of treasury shares	—	—		—		(5	)	—			—			—		—			—		—
Balance at September 28, 2019	216,815	$	—	$	1,060	(65,182	)	$	(3,225	)	$	(103	)	$	4,673	$	2,405		$	3	$	2,408



	Ordinary Shares			Additional Paid-in Capital		Treasury Shares					Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity of Capri			Non-controlling Interests		Total Equity
	Shares	Amounts		Additional Paid-in Capital		Shares		Amounts			Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity of Capri			Non-controlling Interests		Total Equity
Balance at March 30, 2019, as previously reported	216,051	$	—	$	1,011	(65,119	)	$	(3,223	)	$	(66	)	$	4,707		$	2,429		$	3	$	2,432
Adoption of accounting standards (See Note 2)	—	—		—		—		—			—			(152		)	(152		)	—		(152		)
Balance as of March 31, 2019	216,051	—		1,011		(65,119	)	(3,223		)	(66		)	4,555			2,277			3		2,280
Net income	—	—		—		—		—			—			118			118			—		118
Other comprehensive loss	—	—		—		—		—			(37		)	—			(37		)	—		(37		)
Total comprehensive income	—	—		—		—		—			—			—			81			—		81
Vesting of restricted awards, net of forfeitures	764	—		—		—		—			—			—			—			—		—
Equity compensation expense	—	—		49		—		—			—			—			49			—		49
Purchase of treasury shares	—	—		—		(63	)	(2		)	—			—			(2		)	—		(2		)
Balance at September 28, 2019	216,815	$	—	$	1,060	(65,182	)	$	(3,225	)	$	(103	)	$	4,673		$	2,405		$	3	$	2,408

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Continued)

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

(Unaudited)



	Ordinary Shares			Additional Paid-in Capital		Treasury Shares					Accumulated Other Comprehensive Loss			Retained Earnings		Total Equity of Capri			Non-controlling Interests			Total Equity
	Shares	Amounts		Additional Paid-in Capital		Shares		Amounts			Accumulated Other Comprehensive Loss			Retained Earnings		Total Equity of Capri			Non-controlling Interests			Total Equity
Balance at June 30, 2018	212,210	$	—	$	850	(63,041	)	$	(3,122	)	$	(40	)	$	4,350	$	2,038		$	4		$	2,042
Net income (loss)	—	—		—		—		—			—			138		138			(1		)	137
Other comprehensive loss	—	—		—		—		—			(22		)	—		(22		)	—			(22		)
Total comprehensive income (loss)	—	—		—		—		—			—			—		116			(1		)	115
Vesting of restricted awards, net of forfeitures	97	—		—		—		—			—			—		—			—			—
Exercise of employee share options	902	—		14		—		—			—			—		14			—			14
Equity compensation expense	—	—		13		—		—			—			—		13			—			13
Purchase of treasury shares	—	—		—		(18	)	(1		)	—			—		(1		)	—			(1		)
Increase in noncontrolling interest	—	—		—		—		—			—			—		—			1			1
Balance at September 29, 2018	213,209	$	—	$	877	(63,059	)	$	(3,123	)	$	(62	)	$	4,488	$	2,180		$	4		$	2,184



	Ordinary Shares			Additional Paid-in Capital		Treasury Shares					Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity of Capri			Non-controlling Interests			Total Equity
	Shares	Amounts		Additional Paid-in Capital		Shares		Amounts			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity of Capri			Non-controlling Interests			Total Equity
Balance at March 31, 2018, as previously reported	210,991	$	—	$	831	(61,293	)	$	(3,016	)	$	51		$	4,152	$	2,018		$	4		$	2,022
Adoption of accounting standard	—	—		—		—		—			—			12		12			—			12
Balance as of April 1, 2018	210,991	—		831		(61,293	)	(3,016		)	51			4,164		2,030			4			2,034
Net income (loss)	—	—		—		—		—			—			324		324			(1		)	323
Other comprehensive loss	—	—		—		—		—			(113		)	—		(113		)	—			(113		)
Total comprehensive income (loss)	—	—		—		—		—			—			—		211			(1		)	210
Vesting of restricted awards, net of forfeitures	697	—		—		—		—			—			—		—			—			—
Exercise of employee share options	1,521	—		20		—		—			—			—		20			—			20
Equity compensation expense	—	—		26		—		—			—			—		26			—			26
Purchase of treasury shares	—	—		—		(1,766	)	(107		)	—			—		(107		)	—			(107		)
Increase in noncontrolling interest	—	—		—		—		—			—			—		—			1			1
Balance at September 29, 2018	213,209	$	—	$	877	(63,059	)	$	(3,123	)	$	(62	)	$	4,488	$	2,180		$	4		$	2,184

See accompanying notes to consolidated financial statements.

~~MICHAEL KORS~~

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended						Six Months Ended
	September 29, 2018			September 30, 2017			September 28, 2019			September 29, 2018
Cash flows from operating activities
Net income	$	323.3		$	328.2		$	118		$	323
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	108.6			95.9			125			109
Equity compensation expense	26.4			21.1			49			26
Deferred income taxes	12.8			5.6			(8		)	13
Impairment of long-lived assets	11.3			16.3			201			11
Tax (benefit) deficit on exercise of share options	(23.0		)	0.1
Changes to lease related balances, net							(26		)	—
Tax deficit (benefit) on exercise of share options							2			(23		)
Amortization of deferred financing costs	1.6			0.5			3			2
Foreign currency losses (gains)	5.5			(5.0		)
Foreign currency losses							6			5
Other non-cash charges	2.9			2.2			—			3
Change in assets and liabilities:
Receivables, net	(55.4		)	(2.4		)	8			(55		)
Inventories	(126.1		)	(128.4		)
Inventories, net							(141		)	(126		)
Prepaid expenses and other current assets	(68.0		)	(22.7		)	(86		)	(68		)
Accounts payable	10.0			(4.6		)	32			10
Accrued expenses and other current liabilities	12.2			21.2			(52		)	12
Other long-term assets and liabilities	21.6			1.1			12			22
Net cash provided by operating activities	263.7			329.1			243			264
Cash flows from investing activities
Capital expenditures	(89.8		)	(57.9		)	(105		)	(90		)
Purchase of intangible assets	(0.7		)	—			—			(1		)
Unrealized loss (gain) on hedge related to acquisitions	30.4			(36.7		)
Unrealized loss on hedge related to acquisitions							—			31
Cash paid for business acquisitions, net of cash acquired	(1.8		)	(1.4		)	(1		)	(2		)
Settlement of a net investment hedges							31			—
Net cash used in investing activities	(61.9		)	(96.0		)	(75		)	(62		)
Cash flows from financing activities
Debt borrowings	809.9			632.9			1,325			810
Debt repayments	(925.2		)	(766.0		)	(1,480		)	(925		)
Repurchase of treasury shares	(107.1		)	(160.9		)	(2		)	(107		)
Exercise of employee share options	20.4			3.0			—			20
Other financing activities	—			(0.1		)
Net cash used in financing activities	(202.0		)	(291.1		)	(157		)	(202		)
Effect of exchange rate changes on cash and cash equivalents	(7.7		)	6.6			(4		)	(8		)
Net decrease in cash and cash equivalents and restricted cash	(7.9		)	(51.4		)
Beginning of period (including restricted cash of $0.3 million at March 31, 2018 and $1.9 million at April 1, 2017)	163.4			229.6
End of period (including restricted cash of $0.3 million at September 29, 2018)	$	155.5		$	178.2
Net increase (decrease) in cash and cash equivalents							7			(8		)
Beginning of period							172			163
End of period							$	179		$	155
Supplemental disclosures of cash flow information
Cash paid for interest	$	16.1		$	2.2		$	45		$	16
Cash paid for income taxes	$	97.8		$	70.9		$	62		$	98
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures	$	23.1		$	15.9		$	27		$	23

See accompanying notes to consolidated financial statements.

~~MICHAEL KORS~~

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

~~Michael Kors Holdings Limited (“MKHL,” and together with its subsidiaries, the “Company”)~~The Company was incorporated in the British Virgin Islands (“BVI”) on December 13, ~~2002.~~2002 as Michael Kors Holdings Limited and changed its name to Capri Holdings Limited (“Capri,” and together with its subsidiaries, the “Company”) on December 31, 2018. The Company is a holding company that owns brands that are leading designers, marketers, distributors and retailers of branded women’s and men’s accessories, apparel and footwear bearing the Versace, Jimmy Choo and Michael Kors ~~and Jimmy Choo~~ tradenames and ~~related trademarks “MICHAEL KORS,” “MICHAEL MICHAEL KORS,” “JIMMY CHOO,” and various other~~ related trademarks and logos. The ~~Company’s business consists of four reportable segments: Michael Kors (“MK”) Retail, MK Wholesale, MK Licensing and Jimmy Choo. See Note 18 for additional information.~~

On September 24, 2018, the Company entered into a definitive agreement to acquire all of the outstanding shares of Italian luxury fashion house Gianni Versace S.p.A. (“Versace”) for an aggregate purchase price based on an enterprise value of approximately €1.830 billion (or approximately $2.120 billion), subject to certain adjustments. The transaction is subject to customary closing conditions and is expected to close during the fourth quarter of Fiscal 2019. In connection with the closing of the acquisition, the Company intends to change its name to “Capri Holdings Limited.”

~~On November 1, 2017, the~~ Company completed the acquisition of ~~Jimmy Choo Group Limited~~Gianni Versace S.r.l. (“~~Jimmy Choo”~~Versace”) ~~for a total transaction value of $1.447 billion.~~on December 31, 2018. As a result, the Company ~~has consolidated~~now operates in 3 reportable segments: Versace, Jimmy Choo ~~into its operations beginning on November 1, 2017. Jimmy Choo is being reported as a separate reporting segment.~~and Michael Kors. See ~~Note 4 and~~ Note 18 for additional information.

The interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The interim consolidated financial statements as of September ~~29, 2018~~28, 2019 and for the three and six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017~~29, 2018 are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March ~~31, 2018,~~30, 2019, as filed with the Securities and Exchange Commission on May ~~30, 2018,~~29, 2019, in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.

The Company utilizes a 52 to 53 week fiscal year ending on the Saturday closest to March 31. As such, the term “Fiscal Year” or “Fiscal” refers to the 52-week or 53-week period, ending on that day. The results for the three and six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017,~~29, 2018, are based on 13-week and 26-week periods, respectively.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. The most significant assumptions and estimates involved in preparing the financial statements include allowances for customer deductions, sales returns, sales discounts and doubtful accounts, estimates ~~related to the Company’s customer loyalty program and~~of gift card breakage, estimates of inventory recovery, the valuation of share-based compensation, valuation of deferred taxes and the valuation of and the estimated useful lives used for amortization and depreciation of intangible assets and property and equipment. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior periods’ financial information in order to conform to the current period’s ~~presentation. The Company reclassified $16.1 million and $17.4 million, respectively,~~presentation, including the realignment of ~~transaction costs recorded during~~ the ~~three and six months ended September 30, 2017, from selling, general and administrative expenses to restructuring and other charges~~Company’s segment reporting structure in the ~~Company’s consolidated statements~~fourth quarter of ~~operations and comprehensive income.~~Fiscal 2019, as further described in Note 18.

Seasonality

The Company experiences certain effects of seasonality with respect to its business. The ~~Company’s MK Retail segment~~Company generally experiences greater sales during its third fiscal quarter, ~~as a result of~~primarily driven by holiday season ~~sales. The MK Wholesale segment generally experiences~~sales, and the lowest ~~sales in its first fiscal quarter. The Jimmy Choo segment generally experiences greater~~ sales during its first fiscal quarter.

Inventories, net

Inventories mainly consist of finished goods with the exception of raw materials inventory of $22 million and ~~third fiscal quarters, primarily driven by the product launch calendar and holiday season sales. In the aggregate,~~$25 million, respectively, recorded on the Company’s ~~first fiscal quarter typically experiences less sales volume relative to the other three quarters~~consolidated balance sheets as of September 28, 2019 and ~~its third fiscal quarter generally has higher sales volume relative to the other three quarters.~~March 30, 2019.

Derivative Financial Instruments

Forward Foreign Currency Exchange Contracts

The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to these transactions. The Company employs these forward currency contracts to hedge the Company’s cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation.

In connection with the September 24, 2018 definitive agreement to acquire all of the outstanding shares of Versace, the Company entered into forward foreign currency exchange contracts in September 2018 with notional amounts totaling €1.680 billion (approximately $2.001 billion) to mitigate its foreign currency exchange risk through the expected closing date of the acquisition, expected during the fourth quarter of Fiscal 2019. Likewise, in connection with the July 25, 2017 cash offer to acquire Jimmy Choo, the Company entered into a forward foreign currency exchange contract with a notional amount of £1.115 billion (approximately $1.469 billion) to mitigate its foreign currency exchange risk through the expected closing date of the acquisition, which ~~was terminated~~were settled on ~~October 30, 2017.~~December 21, 2018. These derivative contracts were not designated as accounting hedges. Therefore, changes in fair value ~~are~~were recorded to foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income. The Company’s accounting policy is to classify cash flows from derivative instruments that are accounted for as cash flow hedges in the same category as the cash flows from the items being hedged. Accordingly, the Company classified the unrealized gains and losses relating to these derivative instruments within cash flows from investing activities.

The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including description of the hedged item and the hedging instrument and the risk being hedged. The changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income (loss) until the hedged item affects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive income (loss) are recognized within cost of goods sold. The Company uses regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which compares the change in the fair value of the derivative instrument to the change in the related hedged item. If the hedge is no longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings. For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income. The Company classifies cash flows relating to its forward foreign currency exchange contracts related to purchase of inventory consistently with the classification of the hedged item, within cash flows from operating activities.

The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit exposure. The aforementioned forward contracts generally have a term of no more than 12 months. The period of these contracts is directly related to the foreign transaction they are intended to hedge.

Net Investment Hedges

The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between ~~our~~its U.S. Dollars and these foreign currencies. The Company has elected the spot method of designating these contracts under ASU 2017-12 ~~as defined below,~~ and has designated these contracts as net investment hedges. The net gain or loss on the net investment ~~hedged~~hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense in the Company’s statement of operations and comprehensive income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the hedged net investment is sold, diluted, or liquidated.

Net Income per Share

The Company’s basic net income per ordinary share is calculated by dividing net income by the weighted average number of ordinary shares outstanding during the period. Diluted net income per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units (“RSUs”), were exercised or converted into ordinary shares. These potentially dilutive securities are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods. Performance-based RSUs are included in diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.

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



	Three Months Ended				Six Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Numerator:
Net income attributable to Capri	$	73	$	138	$	118	$	324
Denominator:
Basic weighted average shares	151,602,502		149,575,112		151,326,037		149,538,607
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units	973,781		2,130,573		1,129,181		2,514,064
Diluted weighted average shares	152,576,283		151,705,685		152,455,218		152,052,671

Basic net income per share ⁽¹⁾	$	0.48	$	0.92	$	0.78	$	2.17
Diluted net income per share ⁽¹⁾	$	0.47	$	0.91	$	0.77	$	2.13

Three Months Ended Six Months Ended
September 29,
2018 September 30,
2017 September 29,
2018 September 30,
2017
Numerator:
Net income attributable to MKHL $ 137.6
$ 202.9
$ 324.0
$ 328.4
Denominator:
Basic weighted average shares 149,575,112
151,781,340
149,538,607
153,134,119
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units 2,130,573
2,386,754
2,514,064
2,385,687
Diluted weighted average shares 151,705,685
154,168,094
152,052,671
155,519,806

Basic net income per share $ 0.92
$ 1.34
$ 2.17
$ 2.14
Diluted net income per share $ 0.91
$ 1.32
$ 2.13
$ 2.11


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

During the three and six months ended September ~~29, 2018,~~28, 2019, share equivalents of ~~680,869~~5,822,186 shares and ~~664,633~~4,098,382 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect. Share equivalents of ~~2,782,083~~680,869 shares and ~~2,633,955~~664,633 shares, respectively, have been excluded from the above calculations during the three and six months ended September ~~30, 2017.~~29, 2018.

See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~31, 2018~~30, 2019 for a complete disclosure of the Company’s significant accounting policies.

Recently Adopted Accounting Pronouncements

~~Hedge~~Lease Accounting

On ~~August 28, 2017,~~March 31, 2019, the ~~FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~” The new standard is intended to improve and simplify rules relating to hedge accounting, including the elimination of periodic hedge ineffectiveness, recognition and presentation of components excluded from hedge effectiveness assessment, the ability to elect to perform subsequent effectiveness assessments qualitatively, and other provisions designed to provide more transparency around the economics of a company’s hedging strategy. ASU 2017-12 is effective for the Company in Fiscal 2020, with early adoption permitted. The Company adopted ASU ~~2017-12 during~~2016-02, “Leases (Topic 842),” which requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet for all leases, except certain short-term leases. In evaluating the impact of ASU 2016-02, the Company considered guidance provided by several additional ASUs issued by the FASB, including ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842” in January 2018, ASU 2018-10, “CodificationImprovements to Topic 842, Leases” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” both issued in July 2018, and ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors” issued in December 2018. In connection with its implementation of ASU 2016-02, the Company adopted the package of three ~~months ended June 30, 2018, which resulted in a net increase~~practical expedients, allowing it to ~~opening retained earnings of less than $0.1 million as of April 1, 2018, due~~carry forward its previous lease classification and embedded lease evaluations and not to ~~the elimination of ineffectiveness for cash flow hedges in effect~~reassess initial direct costs as of the date of adoption. The Company ~~has applied~~also adopted, the ~~spot method of designating~~practical expedient allowing it to combine lease and non-lease components for its ~~net investment hedges, which were executed during the six months ended September 29, 2018.~~

~~Revenue Recognition~~

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)~~,” which provides new guidance for revenues recognized from contracts with customers, requiring that revenue is recognized at an amount the Company is entitled to upon transferring control of goods or services to customers, as opposed to when risks and rewards transfer to a customer. In July 2015, ASU 2015-14, “~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~” deferred the effective date of ASU 2014-09 by one year, to interim reporting periods within the annual reporting period beginning after December 15, 2017, or the first quarter of the Company’s Fiscal 2019. This standard may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption (“modified retrospective method”).

~~The FASB has issued several additional ASUs to provide implementation guidance on ASU 2014-09, including ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” in December 2016; ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~”~~in May 2016; ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~”~~in April 2016; and ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~”~~in March 2016. The Company has considered this guidance in evaluating the impact of ASU 2014-09 (collectively, “ASC 606”).~~

~~On April 1, 2018,~~real estate leases. Lastly, the Company adopted ~~ASC 606 using~~ the ~~modified retrospective method and recognized the $6.7 million (net of~~practical expedient provided by ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” allowing it to recognize a ~~tax of $1.7 million) cumulative effect of adoption as an~~cumulative-effect adjustment to the opening balance of retained ~~earnings.~~ earnings in the period of adoption without restating the comparative prior year periods.

The Company’s existing lease obligations, which relate to stores, corporate locations, warehouses, and equipment, are subject to the new standard and resulted in recording of lease liabilities and right-of-use assets for operating leases on the Company’s consolidated balance sheet.

The below table details the ~~components of the cumulative adjustment~~balance sheet adjustments recorded on ~~April 1, 2018~~March 31, 2019 in connection with the Company’s adoption of ASU 2016-02 (in millions):


	March 31, 2018 As Reported under ASC 605		ASC 606 Adjustments				April 1, 2018 As Reported Under ASC 606		March 30, 2019 As Reported under ASC 840		ASC 842 Adjustments				March 31, 2019 As Reported Under ASC 842
Receivables, net	$	290.5	$	3.8		⁽¹⁾	$	294.3
Assets
Prepaid expenses and other current assets									$	221	$	(23	)	⁽¹⁾	$	198
Operating lease right-of-use assets									—		1,856			⁽²⁾	1,856
Intangible assets, net									2,293		(20		)	⁽³⁾	2,273
Deferred tax assets									112		38			⁽⁴⁾	150
Liabilities
Current portion of operating lease liabilities									—		386			⁽⁵⁾	386
Accrued expenses and other current liabilities	295.6		(4.6		)	⁽²⁾	291.0		374		(72		)	⁽⁶⁾	302
Long-term portion of operating lease liabilities									—		1,828			⁽⁵⁾	1,828
Deferred Rent									132		(132		)	⁽⁷⁾	—
Deferred tax liabilities	186.3		1.7			⁽³⁾	188.0		438		(7		)	⁽⁴⁾	431
Shareholders’ Equity
Retained earnings	4,152.0		6.7				4,158.7		4,707		(152		)	⁽⁴⁾	4,555

~~_________________________~~


⁽¹⁾	~~Includes a $3.5 million adjustment related~~Represents the reclassification of rent paid in advance to product licensing revenue, which was previously recorded on a one-month lag and $0.3 million of guaranteed advertising minimums recognized by product licensees on a straight-line basis over the contract year.current operating lease liabilities.

⁽²⁾

~~Relates to~~Represents the recognition of ~~breakage revenue associated with gift card~~operating lease right-of-use assets, reflecting the reclassifications of deferred rent, sublease liabilities, ~~not subject to escheatment.~~tenant allowances and favorable and unfavorable lease rights. This balance also reflects the initial impairments of the operating lease right-of-use assets recorded through retained earnings, as described below.


⁽³⁾	~~Relates~~Represents the reclassifications favorable and unfavorable purchase accounting adjustments for leases recorded in conjunction with the Company’s acquisitions to ~~income tax effect~~operating lease right-of-use assets.


⁽⁴⁾	Represents the initial impairment recognized through retained earnings for certain underperforming retail store locations for which property and equipments were previously impaired, net of ~~the above adjustments.~~associated deferred taxes.

In addition, while the Company has previously recorded the right of return asset and liability on a gross basis, in connection with its adoption of ASC 606, it has reclassified the return liability of $16.3 million from receivables, net to accrued expenses and other current liabilities in its consolidated balance sheets as of September 29, 2018. Otherwise, the adoption of this standard did not have a material impact on the Company's consolidated financial statements as of and for the three and six months ended September 29, 2018, or any individual line items therein.


⁽⁵⁾	Represents the recognition of current and non-current lease liabilities for fixed payments associated with the Company’s operating leases.


⁽⁶⁾	Represents the reclassification of $54 million in sublease liabilities, primarily related to Michael Kors retail stores closed under the Retail Fleet Optimization Plan as defined in Note 10, as well as the reclassification of $18 million of deferred rent and tenant allowances to operating lease right-of-use assets.


⁽⁷⁾	Represents the reclassification of noncurrent deferred rent and tenant improvement allowances to operating lease right-of-use assets.

See Note 34 for additional disclosures related to the Company’s ~~revenue recognition~~lease accounting policy.

~~Share-Based Compensation~~

~~In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~”, which simplifies modification accounting for entities that change the terms or conditions of share-based awards. ASU 2017-09 was adopted during the first quarter of Fiscal 2019, as required, on a prospective basis. The adoption of this standard did not have an impact on the Company's consolidated financial statements. The Company will apply ASU 2017-09 to any future changes to the terms and conditions of its share-based compensation awards.

~~Income Taxes~~

~~In October 2016, the FASB issued ASU 2016-16,~~“~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~”,which requires recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company adopted ASU 2016-16 in the beginning of Fiscal 2019, as required, using the modified retrospective method. On April 1, 2018, the Company recorded the $4.9 million cumulative effect of adoption as an adjustment to the opening balance of retained earnings.

Recently Issued Accounting Pronouncements

We have considered all new accounting pronouncements and, other than the recent pronouncements discussed below, have concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition or cash flows based on current information.

~~Lease Accounting~~

~~In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),~~” which requires lessees to recognize a lease liability and a right-to-use asset on the balance sheet for all leases, except certain short-term leases. ASU 2016-02 is effective beginning with the Company’s Fiscal 2020, with early adoption permitted, and must be implemented using a modified retrospective approach for all leases existing at, or entered into after the beginning of the earliest comparative period that is presented in the financial statements. The Company is currently in the process of analyzing its lease portfolio and evaluating the impact of ASU 2016-02 on its consolidated financial statements. The Company expects that the adoption of this standard will result in a significant increase in assets and liabilities on its consolidated balance sheets.

~~The FASB has issued several additional ASUs to provide implementation guidance relating to ASU No. 2016-02, including ASU No. 2018-01, “Land Easement Practical Expedient for Transition to Topic 842” in January 2018, ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” both issued in July 2018. The Company will consider this guidance in evaluating the impact of ASU 2016-02.~~

Intangibles

In August 2018, the FASB issued ASU 2018-15, “I~~ntangibles—~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which reduces the complexity for the accounting for costs of implementing a cloud computing service arrangement. The standard aligns the accounting for capitalizing implementation costs of hosting arrangements, regardless of whether or not the contract conveys a license to the hosted software. ASU 2018-15 is effective beginning with the Company’s Fiscal 2021, with early adoption permitted, and can either be presented prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2018-15 on its consolidated financial statements, but believes it is generally consistent with its current accounting for cloud computing arrangements and will not have a material impact on its consolidated financial statements.

3. Revenue Recognition

The Company accounts for contracts with its customers when there is approval and commitment from both parties, the rights of the parties and payment terms have been identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the ~~Company's~~Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services.

The Company sells its products through three primary channels of distribution: retail, wholesale and licensing. Within the retail and wholesale channels, substantially all of the Company’s revenues consist of sales of products that represent a single performance obligation, where control transfers at a point in time to the customer. For licensing arrangements, royalty and advertising revenue is recognized over time based on access provided to ~~Michael Kors and Jimmy Choo trademarks.~~the Company’s brands.

Retail

The Company has chosen to apply the practical expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations that have an expected duration of twelve months or less.

~~Retail~~

~~Michael Kors~~ generates sales through ~~four primary retail store formats: “Collection” stores, “Lifestyle” stores, outlet~~directly operated stores and ~~e-commerce. Michael Kors sells its own products and licensed products bearing the Michael Kors name, directly to the end consumer~~e-commerce throughout the Americas (U.S., Canada and Latin America, excluding Brazil), ~~Europe and certain parts of Asia. Jimmy Choo generates sales through directly operated stores and e-commerce throughout North America (United States and Canada),~~ EMEA (Europe, Middle East, and Africa) and certain parts of Asia. ~~In addition to these retail formats, the Company operates concessions in a select number of department stores.~~

Retail revenue is recognized when control of the product is transferred at the point of sale at Company owned stores, including concessions. For e-commerce transactions, control is transferred when products are delivered to the customer, net of estimated returns. To arrive at net sales for retail, gross sales are reduced by actual customer returns, as well as by a provision for estimated future customer returns.

Sales taxes collected from retail customers are presented on a net basis and, as such, are excluded from revenue. Shipping and handling costs that are billed to customers are included in net sales, with the related costs recorded in cost of goods sold. Shipping and handling costs that are not billed to customers are accounted for as fulfillment costs.

Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability recorded upon issuance. Revenue is recognized when the gift card is redeemed or upon “breakage” for the estimated portion of gift cards that are not expected to be redeemed. “Breakage” revenue is calculated under the proportional redemption methodology, which considers the historical patterns of redemption in jurisdictions where the Company is not required to remit the value of the unredeemed gift cards as unclaimed property. The Company anticipates that substantially all of its outstanding gift cards will be redeemed within the next twelve months. The contract liability related to gift cards, net of estimated “breakage,” was ~~$10.6~~$12 million and $13 million as of September ~~29, 2018,~~28, 2019 and March 30, 2019, respectively, and is included in accrued expenses and other current liabilities in the Company’s consolidated balance sheet.

Loyalty Program. The Company offers a loyalty program, which allows its Michael Kors customers to earn points on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage” for points that are not expected to be redeemed. The contract liability, net of an estimated “breakage,” of ~~$5.8~~$3 million as of both September ~~29, 2018~~28, 2019 and March 30, 2019 is recorded as a reduction to revenue in the consolidated statements of ~~income~~operations and comprehensive income and within accrued expenses and other current liabilities in the Company’s consolidated balance sheet and is expected to be recognized within the next ~~twelve~~12 months.

Wholesale

~~Michael Kors~~The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops throughout the Americas, EMEA and Asia. ~~Jimmy Choo luxury products are sold throughout North America, EMEA, and certain parts of Asia.~~ The Company also has arrangements where ~~Michael Kors and Jimmy Choo~~its products are sold to ~~our~~ geographic licensees in certain parts of EMEA, Asia, and Asia, as well as in Brazil. Products sold through the wholesale channel include accessories (which include handbags and small leather goods such as wallets), footwear and women’s and men’s apparel.

Wholesale revenue is recognized net of estimates for sales returns, discounts, markdowns and allowances, after merchandise is shipped and control of the underlying product is transferred to the Company’s wholesale customers. To arrive at net sales for wholesale, gross sales are reduced by provisions for estimated future returns, as well as trade discounts, markdowns, allowances, operational chargebacks, and certain cooperative selling expenses. These estimates are developed based on the most likely amount using historical trends, actual and forecasted performance and market conditions, and are reviewed by management on a quarterly basis. Unfulfilled, noncancelable purchase orders for products from wholesale customers (including the Company’s geographic licensees) are expected to be fulfilled within the next twelve months.

South America.

Licensing

The Company provides its third-party licensees with the right to access its Versace, Jimmy Choo and Michael Kors ~~and Jimmy Choo~~ trademarks under product and geographic licensing arrangements. Under product licensing arrangements, the Company allows third parties to manufacture and sell luxury goods, including watches and jewelry, fragrances, sunglasses and eyewear, using the Company’s trademarks. Under geographic licensing arrangements, third party licensees receive the right to distribute and sell products bearing the ~~Company's~~Company’s trademarks in retail and/or wholesale channels within certain geographical areas, including Brazil, the Middle East, Eastern Europe, South Africa, certain parts of Asia and Australia.

The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the licensees. ~~Advertising contributions are received to support~~Generally the Company’s branded advertising and marketing campaigns and are viewed as part of a single performance obligation with the right to access the Company’s trademarks. Royalty revenue generated from licenses, which includes contributions for advertising, may be subject to contractual minimum levels, as defined in the contract. Such minimums are generally fixed annually, based on the previous year’s sales. Licensing revenue is based on reported current period sales of licensed products at rates that are specified in the license agreements for contracts that are expected to exceed the related guaranteed minimums. If the Company expects the minimum guaranteed amounts to exceed amounts calculated based on actual sales, the guaranteed minimums are recognized ratably over the contractual year to which they relate. As of September 29, 2018, guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed ~~twelve months.~~12 months, however, some of our guaranteed minimums for Versace are multi-year based. As of September 28, 2019, contractually guaranteed minimum fees from our license agreements expected to be recognized as revenue during future periods were as follows (in millions):



	Contractually Guaranteed Minimum Fees
	Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2020	$	14
Fiscal 2021	27
Fiscal 2022	27
Fiscal 2023	20
Fiscal 2024	10
Fiscal 2025 and thereafter	34
Total	$	132

Sales Returns

For the sale of goods with a right of return, the Company recognizes revenue for the consideration to which it expects to be entitled and a refund liability for the amount it expects to refund to its customers within accrued expenses and other current liabilities. The refund liability is determined based on the most likely amount and is based on management’s review of historical and current customer returns for its retail and wholesale customers, estimated future returns, adjusted for non-resalable products. The Company also considers its product strategies, as well as the financial condition of its customers, store closings by wholesale customers, changes in the retail environment and other macroeconomic factors. The Company recognizes an asset with a corresponding adjustment to cost of sales for the right to recover the products from its retail and wholesale customers, net of any costs to resell. The refund liability recorded as of September ~~29, 2018~~28, 2019 and March 30, 2019 was ~~$25.9~~$35 million in each period and the related asset for the right to recover returned product as of September ~~29, 2018~~28, 2019 and March 30, 2019 was ~~$7.5 million.~~$12 million in each period.

Contract Balances

The Company’s contract liabilities, which are recorded within accrued expenses and other current liabilities in its consolidated balance sheets, primarily consist of gift card liabilities, loyalty program liabilities and advanced payments from product licensees. Total contract liabilities were ~~$17.5~~$17 million and ~~$23.3~~$31 million as of September ~~29, 2018~~28, 2019 and March ~~31, 2018,~~30, 2019, respectively. ~~Contract liabilities decreased $4.6 million as a result of~~For the ~~adoption of ASC 606 on April 1, 2018, due to recognition of gift card breakage revenue (see Note 2). For~~ three and six months ended September ~~29, 2018,~~28, 2019, the Company recognized ~~$3.2~~$3 million and ~~$11.3~~$17 million, respectively, in revenue which related to contract liabilities that existed at March ~~31,~~30, 2019. For the three and six months ended September 29, 2018, the Company recognized $3 million and $11 million, respectively, in revenue which related to contract liabilities that existed at April 1, 2018. There were no0 contract assets recorded as of September ~~29, 2018~~28, 2019 and ~~April 1, 2018.~~March 30, 2019.

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

Disaggregation of Revenue

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

Three Months Ended Six Months Ended
September 29,
2018 September 30,
2017 September 29,
2018 September 30,
2017
MK Retail revenue - the Americas $ 394.9
$ 385.5
$ 797.1
$ 777.6
MK Retail revenue - Europe 139.2
154.2
258.7
276.3
MK Retail revenue - Asia 109.8
105.3
227.6
211.0
Total MK Retail 643.9
645.0
1,283.4
1,264.9
MK Wholesale revenue - the Americas 354.3
340.4
629.4
567.6
MK Wholesale revenue - EMEA ⁽¹⁾
80.9
104.5
149.3
169.5
MK Wholesale revenue - Asia 22.6
18.7
41.9
30.1
Total MK Wholesale 457.8
463.6
820.6
767.2
MK Licensing revenue - the Americas 23.1
26.0
38.4
40.8
MK Licensing revenue - EMEA ⁽¹⁾
12.3
12.0
24.5
26.1
Total MK Licensing 35.4
38.0
62.9
66.9
Total Michael Kors 1,137.1
1,146.6
2,166.9
2,099.0

Jimmy Choo revenue - the Americas 20.4
—
46.0
—
Jimmy Choo revenue - EMEA ⁽¹⁾
56.8
—
158.5
—
Jimmy Choo revenue - Asia 39.5
—
84.9
—
Total Jimmy Choo 116.7
—
289.4
—

Total revenue - the Americas 792.7
751.9
1,510.9
1,386.0
Total revenue - EMEA ⁽¹⁾
289.2
270.7
591.0
471.9
Total revenue - Asia 171.9
124.0
354.4
241.1
Total revenue $ 1,253.8
$ 1,146.6
$ 2,456.3
$ 2,099.0



	Three Months Ended				Six Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Versace revenue - the Americas	$	48	$	—	$	92	$	—
Versace revenue - EMEA	121		—		213		—
Versace revenue - Asia	59		—		130		—
Total Versace	228		—		435		—

Jimmy Choo revenue - the Americas	21		20		51		46
Jimmy Choo revenue - EMEA	64		56		143		158
Jimmy Choo revenue - Asia	40		40		89		85
Total Jimmy Choo	125		116		283		289

Michael Kors revenue - the Americas	733		773		1,388		1,465
Michael Kors revenue - the EMEA	224		233		413		433
Michael Kors revenue - the Asia	132		131		269		269
Total Michael Kors	1,089		1,137		2,070		2,167

Total revenue - the Americas	802		793		1,531		1,511
Total revenue - EMEA	409		289		769		591
Total revenue - Asia	231		171		488		354
Total revenue	$	1,442	$	1,253	$	2,788	$	2,456

See Note 3 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019 for a complete disclosure of the Company’s revenue recognition.

4. Leases

The Company leases retail stores, office space and warehouse space under operating lease agreements that expire at various dates through September 2043. The Company’s leases generally have terms of up to 10 years, generally require a fixed annual rent and may require the payment of additional rent if store sales exceed a negotiated amount. Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through February 2024. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its Retail Fleet Optimization Plan, as defined in Note 10. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. The Company determines the sublease term based on the date it provides possession to the subtenant through the expiration date of the sublease.

The Company recognizes operating lease right-of-use assets and lease liabilities at lease commencement date, based on the present value of fixed lease payments over the expected lease term. The Company uses its incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable for the Company’s leases. The Company’s incremental borrowing rates are based on the term of the leases, the economic environment of the leases, and reflect the rate it would pay to borrow on a secured basis. Certain leases include one or more renewal options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at the Company’s sole discretion and as such, the Company typically determines that exercise of these renewal options is not reasonably certain. As a result, the Company generally does not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the operating lease right-of-use asset and lease liability. Certain leases also contain termination options with an associated penalty. Generally, the Company is reasonably certain not to exercise these options and as such, they are not included in the determination of the expected lease term. The Company recognizes operating lease expense on a straight-line basis over the lease term.

Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term.

The Company’s leases generally provide for payments of non-lease components, such as common area maintenance, real estate taxes and other costs associated with the leased property. The Company accounts for lease and non-lease components of its real estate leases together as a single lease component and, as such, includes fixed payments of non-lease components in the measurement of the operating lease right-of-use assets and lease liabilities for its real estate leases. Variable lease payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property are expensed as incurred as variable lease costs and are not recorded on the balance sheet. The Company’s lease agreements do not contain any material residual value guarantees or material restrictions or covenants.

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



	Balance Sheet Location	September 28, 2019
Assets
Operating leases	Operating lease right-of-use assets	$	1,671

Liabilities
Current:
Operating leases	Current portion of operating lease liabilities	$	403
Non-current:
Operating leases	Long-term portion of operating lease liabilities	$	1,766

The components of net lease costs for the three and six months ended September 28, 2019 were as follows (in millions):



		September 28, 2019
	Statement of Operations and Comprehensive Income Location	Three Months Ended			Six Months Ended
Operating lease cost	Selling, general and administrative expenses	$	115		$	224
Short-term lease cost	Selling, general and administrative expenses	3			13
Variable lease cost	Selling, general and administrative expenses	39			79
Sublease income	Selling, general and administrative expenses	(2		)	(3		)
Total lease cost		$	155		$	313

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



	Six Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	244
Non-cash transactions:
Lease assets obtained in exchange for new lease liabilities	$	168

The following tables summarizes the weighted average remaining lease term and weighted average discount rate related to the Company’s operating lease right-of-use assets and lease liabilities recorded on the balance sheet as of September 28, 2019:



	September 28, 2019
Operating leases:
Weighted average remaining lease term (years)	6.5
Weighted average discount rate	3.0	%

At September 28, 2019, the future minimum lease payments under the terms of these noncancelable operating lease agreements are as follows (in millions):



	September 28, 2019
Remainder of Fiscal 2020	$	243
Fiscal 2021	459
Fiscal 2022	404
Fiscal 2023	346
Fiscal 2024	292
Thereafter	668
Total lease payments	2,412
Less: interest	(243		)
Total lease liabilities	$	2,169

At September 28, 2019, the future minimum sublease income under the terms of these noncancelable operating lease agreements are as follows (in millions):



	September 28, 2019
Remainder of Fiscal 2020	$	3
Fiscal 2021	6
Fiscal 2022	5
Fiscal 2023	5
Fiscal 2024	4
Thereafter	15
Total sublease income	$	38

Additionally, the Company had approximately $15 million of future payment obligations related to executed lease agreements for which the related lease has not yet commenced as of September 28, 2019.

5. Acquisitions

Acquisition of Versace

On December 31, 2018, the Company completed the acquisition of Versace for a total enterprise value of approximately €1.753 billion (or approximately $2.005 billion), giving effect to an investment made by the Versace family at acquisition of 2.4 million shares of CPRI stock. The acquisition was funded through a combination of borrowings under the Company’s 2018 Term Loan Facility, drawings under the Company’s Revolving Credit Facility and cash on hand (see Note 11 for additional information).

Versace’s results of operations have been included in our consolidated financial statements beginning on December 31, 2018. Versace contributed total revenue of $228 million and $435 million, respectively, for the three and six months ended August 31, 2019 and net income from operations of $9 million and $6 million, respectively, after amortization of non-cash purchase accounting adjustments, for the three and six months ended August 31, 2019 (reflecting a one-month reporting lag).

As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. See Note 4 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019 for additional disclosures relating to the Company’s acquisitions.

6. Receivables, net

Receivables, net, consist of (in millions):



	September 28, 2019			March 30, 2019
Trade receivables⁽¹⁾	$	428		$	459
Receivables due from licensees	26			23
	454			482
Less: allowances	(86		)	(99		)
	$	368		$	383


⁽¹⁾	~~EMEA is comprised of Europe, the Middle East and Africa.~~

~~4. Acquisitions~~

~~Acquisition of Jimmy Choo Group Limited~~

On November 1, 2017, the Company completed the acquisition of Jimmy Choo, whereby the Company acquired all of Jimmy Choo’s issued and to be issued shares at a purchase price of 230 pence per share in cash, for a total transaction value of $1.447 billion, including the repayment of existing debt obligations, which was funded through a combination of borrowings under the Company’s $1.0 billion term loan facility and the issuance of the Senior Notes.

Jimmy Choo’s results of operations have been included in our consolidated financial statements beginning on November 1, 2017. Jimmy Choo contributed revenue of $116.7 million and $289.4 million, respectively, for the three and six months ended September 29, 2018 and net loss of $16.2 million and $3.0 million, respectively, (after amortization of non-cash purchase accounting adjustments and transition costs) for the three and six months ended September 29, 2018.

See Note 1 for the Company’s definitive agreement to acquire Versace, as well as Note 3 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018 for additional disclosures relating to the Company’s acquisitions.

~~5. Receivables, net~~

~~Receivables, net, consist of (in millions):~~

September 29,
2018 March 31,
2018
Trade receivables⁽¹⁾
$ 393.7
$ 383.3
Receivables due from licensees 34.1
15.8
427.8
399.1
Less: allowances (87.9 ) (108.6 )
$ 339.9
$ 290.5


⁽¹⁾	As of September ~~29, 2018~~28, 2019 and March ~~31, 2018, $305.2~~30, 2019, $64 million and ~~$296.2~~$317 million, respectively, of trade receivables were insured.

Receivables are presented net of allowances for discounts, markdowns, operational chargebacks and doubtful accounts. Discounts are based on open invoices where trade discounts have been extended to customers. ~~Allowances~~Markdowns are based on wholesale customers’ sales performance, seasonal negotiations with customers, historical deduction trends and an evaluation of current market conditions. Operational chargebacks are based on deductions taken by customers, net of expected recoveries. Such provisions, and related recoveries, are reflected in revenues.

The Company’s allowance for doubtful accounts is determined through analysis of periodic aging of receivables that are not covered by insurance and assessments of collectability based on an evaluation of historic and anticipated trends, the financial condition of the Company’s customers and the impact of general economic conditions. The past due status of a receivable is based on its contractual terms. Amounts deemed uncollectible are written off against the allowance when it is probable the amounts will not be recovered. Allowance for doubtful accounts was ~~$5.1~~$15 million and $18 million, respectively, as of September ~~29, 2018~~28, 2019 and March ~~31, 2018.~~30, 2019. The Company had ~~provisions for~~ bad debt expense of ~~$0.4~~$4 million and ~~$3.8~~$1 million, ~~for the three months ended September 29, 2018 and September 30, 2017,~~ respectively, ~~and $1.0 million and $4.4 million~~ for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017, respectively.~~29, 2018. All other periods presented were immaterial.

7. Property and Equipment, net

Property and equipment, net, consists of (in millions):



	September 28, 2019			March 30, 2019
Leasehold improvements	$	656		$	639
Computer equipment and software	307			292
Furniture and fixtures	298			292
In-store shops	272			270
Equipment	124			123
Building	46			47
Land	17			15
	1,720			1,678
Less: accumulated depreciation and amortization	(1,205		)	(1,115		)
	515			563
Construction-in-progress	74			52
	$	589		$	615

September 29,
2018 March 31,
2018
Leasehold improvements $ 551.9
$ 551.0
Computer equipment and software 270.4
266.3
Furniture and fixtures 269.4
270.9
In-store shops 268.0
273.9
Equipment 120.0
116.7
Building 50.2
51.6
Land 15.3
16.2
1,545.2
1,546.6
Less: accumulated depreciation and amortization (1,042.3 ) (1,001.6 )
502.9
545.0
Construction-in-progress 49.1
38.2
$ 552.0
$ 583.2

Depreciation and amortization of property and equipment for the three months ended September 28, 2019 and September 29, 2018 ~~and September 30, 2017~~ was ~~$44.6~~$52 million and ~~$43.3~~$45 million, respectively, and was ~~$92.0~~$99 million and ~~$85.8~~$92 million, respectively, for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017.~~29, 2018. During the three months ended September 28, 2019, the Company recorded property and equipment impairment charges of $10 million, primarily related to Jimmy Choo and Versace store locations. During the six months ended September 28, 2019, the Company recorded property and equipment impairment charges of $23 million, $11 million of which related to determining asset groups for the Company’s premier store locations at an individual store level, $7 million of which related to Michael Kors and $4 million related to Jimmy Choo. In addition, during the six months ended September 28, 2019, the Company recorded property and equipment impairment charges of $12 million, primarily related to Jimmy Choo and Versace store locations (see Note 13 for additional information). During the three and six months ended September 29, 2018, the Company recorded ~~fixed asset~~property and equipment impairment charges of ~~$5.7~~$6 million and ~~$9.4~~$9 million, respectively, of which ~~$4.4~~$4 million and ~~$8.1~~$8 million, respectively, were related to underperforming Michael Kors full-price retail store locations, some of which ~~will be closed as part of~~related to the ~~Company’s previously announced~~ Retail Fleet Optimization Plan, as defined in Note 9. In addition, during the three months ended September 29, 2018, the Company recorded fixed asset impairment charges of $1.3 million related to Jimmy Choo retail store locations. During the three and six months ended September 30, 2017, the Company recorded fixed asset impairment charges of $11.9 million, which were related to underperforming Michael Kors retail store locations.10.

8. Intangible Assets and Goodwill

The following table details the carrying values of the Company’s intangible assets ~~other than~~and goodwill (in millions):



	September 28, 2019				March 30, 2019
Definite-lived intangible assets:
Reacquired Rights	$	400			$	400
Trademarks	23				23
Key Money ⁽¹⁾	68				96
Customer Relationships	398			⁽²⁾	415
Total definite-lived intangible assets	889				934
Less: accumulated amortization	(164		)		(143		)
Net definite-lived intangible assets	725				791

Indefinite-lived intangible assets:
Jimmy Choo brand	539			⁽²⁾	572
Versace brand	907			⁽²⁾	930
	1,446				1,502

Total intangible assets, excluding goodwill	$	2,171			$	2,293

Goodwill	$	1,598		⁽²⁾	$	1,659

September 29,
2018 March 31,
2018
Definite-lived intangible assets:
Reacquired Rights $ 400.4
$ 400.4
Trademarks 23.0
23.0
Lease Rights 71.8
80.1
Customer Relationships 215.4
231.3
Total definite-lived intangible assets 710.6
734.8
Less: accumulated amortization (123.3 ) (113.2 )
Net definite-lived intangible assets 587.3
621.6

Indefinite-lived intangible assets:
Jimmy Choo brand 571.3
614.1

Total intangible assets, excluding goodwill $ 1,158.6
$ 1,235.7

Goodwill $ 796.9
$ 847.7


⁽¹⁾	The March 30, 2019 balance includes certain lease rights that were reclassified to the operating lease right-of-use asset as part of the adoption of ASU 2016-02.


⁽²⁾	The change in the carrying values since March 30, 2019 reflects currency translation.

Amortization expense for the Company’s definite-lived ~~intangibles~~intangible assets for the three months ended September 28, 2019 and September 29, 2018 ~~and September 30, 2017~~ was ~~$8.1~~$13 million and ~~$5.0~~$8 million, respectively, and was ~~$16.6~~$26 million and ~~$10.1~~$17 million, respectively, for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017.~~29, 2018. During the three and six months ended September 28, 2019, the Company recorded impairment charges of $1 million and $6 million, respectively, primarily related to intangible assets associated with its premier Michael Kors store locations (see Note 13 for further information). Impairment charges recorded during the three and six months ended September 29, 2018 ~~the Company recorded impairment charges of $1.3~~were $1 million and ~~$1.9~~$2 million, respectively, relating to its intangible assets within MK Retail segment. For the three and six months ended September 30, 2017, the Company recorded impairment charges of $4.4 million relating to its intangible assets (See Note 12 for further information).respectively. There were no0 goodwill or other indefinite-lived intangible asset impairment charges recorded during any of the periods presented.

8.9. Current Assets and Current Liabilities

Prepaid expenses and other current assets consist of the following (in millions):



	September 28, 2019		March 30, 2019
Prepaid taxes	$	187	$	125
Interest receivable related to net investment hedges	25		11
Unrealized gains on forward foreign currency exchange contracts	7		5
Prepaid property and equipment	6		7
Prepaid rent ⁽¹⁾	—		24
Other	50		49
	$	275	$	221

September 29,
2018 March 31,
2018
Prepaid taxes $ 126.9
$ 78.5
Prepaid rent 23.7
22.7
Leasehold incentive receivable 12.2
9.4
Prepaid insurance 5.1
1.5
Unrealized gains on forward foreign currency exchange contracts 4.3
—
Prepaid duties —
7.0
Other 39.2
28.7
$ 211.4
$ 147.8

Accrued expenses and other current liabilities consist of the following (in millions):



	September 28, 2019		March 30, 2019
Other taxes payable	$	60	$	47
Return liabilities	35		35
Accrued capital expenditures	27		25
Accrued advertising and marketing	23		10
Accrued rent ⁽²⁾	18		34
Gift cards and retail store credits	12		13
Professional services	10		12
Accrued litigation	10		11
Accrued interest	10		10
Restructuring liability ⁽¹⁾	7		64
Accrued purchases and samples	5		29
Other	66		84
	$	283	$	374

September 29,
2018 March 31,
2018
Other taxes payable $ 60.8
$ 54.3
Accrued rent 39.8
34.5
Restructuring liability 35.2
44.8
Unrealized loss on forward foreign currency exchange contracts 30.8
7.7
Accrued advertising and marketing 30.6
22.6
Return liabilities 25.9
12.1
Accrued capital expenditures 23.1
26.4
Professional services 21.8
14.1
Gift cards and retail store credits 10.6
16.0
Accrued interest 8.4
8.7
Deferred income 6.0
4.3
Deferred loyalty program liabilities 5.8
2.2
Advance royalties 1.1
4.1
Other 45.9
43.8
$ 345.8
$ 295.6


⁽¹⁾	In connection with the adoption of ASU 2016-02, certain lease related assets and liabilities were reflected within operating lease right-of-use assets and liabilities as of September 28, 2019. See Note 2 and Note 4 for additional information.


⁽²⁾	The accrued rent balance relates to variable lease payments.

9.10. Restructuring and Other Charges

Retail Fleet Optimization Plan

On May 31, 2017, the Company announced that it plans to close between 100 and 125 of its Michael Kors retail stores in order to improve the profitability of its retail store fleet (“Retail Fleet Optimization Plan”). The Company anticipates finalizing the remainder of the planned store closures under the Retail Fleet Optimization Plan by the end of Fiscal 2020. The Company expects to incur approximately $100 - $125 million of one-time costs associated with these store closures. Collectively, the Company anticipates ~~ongoing annual savings of approximately $60 million as a result of store closures and~~ lower depreciation and amortization expense as a result of the impairment charges recorded once these initiatives are completed.

During the six months ended September ~~29, 2018,~~28, 2019, the Company closed 1923 of its Michael Kors retail stores under the Retail Fleet Optimization Plan, for a total of 66123 stores closed at a cost of $95 million since plan inception. Restructuring charges recorded in connection with the Retail Fleet Optimization Plan during the ~~three and~~ six months ended September ~~29, 2018~~28, 2019 were ~~$1.2 million and $5.4 million, respectively.~~$1 million. The below table presents a ~~summary~~rollforward of ~~charges recorded in connection with this plan for the MK Retail segment and~~ the Company’s remaining restructuring liability related to this plan (in millions):

Severance and benefit costs Lease-related costs Total
Balance at March 31, 2018 $ 0.2
$ 44.6
$ 44.8
Additions charged to expense 0.3
5.1
5.4
Balance sheet reclassifications ⁽¹⁾
—
1.1
1.1
Payments (0.1 ) (16.0 ) (16.1 )
Balance at September 29, 2018 $ 0.4
$ 34.8
$ 35.2



	Severance and benefit costs		Lease-related and other costs			Total
Balance at March 30, 2019	$	2	$	53		$	55
ASC 842 (Leases) Adjustment ⁽¹⁾	—		(46		)	(46		)
Balance at March 31, 2019	2		7			9
Additions charged to expense	—		1			1
Payments	—		(7		)	(7		)
Balance at September 28, 2019	$	2	$	1		$	3


⁽¹⁾	~~Primarily consists~~Consists of the reclassification of ~~deferred rent~~sublease liabilities to an offset of the related operating lease right-of-use asset due to the adoption of ASC 842. See Note 2 and Note 4 for ~~locations subject to closure to a restructuring liability.~~further information.

During the three and six months ended September ~~30, 2017,~~29, 2018, the Company recorded restructuring charges of ~~$5.9~~$2 million and $6 million, respectively, under the Retail Fleet Optimization Plan, which were comprised of lease-related ~~charges of $5.3 million and severance and benefit costs of $0.6 million.~~charges.

Other Restructuring Charges

In addition to the restructuring charges related to the Retail Fleet Optimization Plan, the Company incurred charges of ~~$1.0~~$1 million during the three and six months ended September 28, 2019 related to the Company’s intent to exit certain of its agreements in the EMEA region. During the six months ended September 28, 2019 the Company also incurred charges of $2 million relating to Jimmy Choo lease-related charges. The Company also incurred charges of $1 million relating to Jimmy Choo lease-related charges during the three and six months ended September 29, 2018.

~~Transaction~~Other Costs

During the three months ended September 28, 2019, the Company recorded costs of $6 million primarily in connection with the acquisition of Versace. During the six months ended September 28, 2019, the Company recorded costs of $18 million, which included $13 million in connection with the acquisition of Versace and ~~Transition Costs~~$5 million in connection with the Jimmy Choo acquisition.

During the three and six months ended September 29, 2018, the Company recorded ~~transaction and transition~~ costs of ~~$16.0~~$16 million and ~~$23.1~~$23 million, respectively, which included ~~transition costs of $6.8~~$9 million ~~and $13.9 million, respectively,~~in each period in connection with the ~~Jimmy Choo~~ acquisition of Versace, as well as ~~transaction costs of $6.5~~$7 million and ~~transition costs of $2.7 million recorded in connection with the Company's agreement to acquire Versace during the three and six months ended September 29, 2018.~~

~~During the three and six months ended September 30, 2017, the Company recorded transaction costs of $16.1 million and $17.4~~$14 million, respectively, in connection with the Jimmy Choo acquisition.

~~10.~~11. Debt Obligations

The following table presents the Company’s debt obligations (in millions):



	September 28, 2019		March 30, 2019
Term Loan	$	1,435	$	1,580
Revolving Credit Facilities	523		550
4.000% Senior Notes due 2024	450		450
Other	3		1
Total debt	2,411		2,581
Less: Unamortized debt issuance costs	10		13
Less: Unamortized discount on long-term debt	2		2
Total carrying value of debt	2,399		2,566
Less: Short-term debt	603		630
Total long-term debt	$	1,796	$	1,936

September 29,
2018 March 31,
2018
4.000% Senior Notes due 2024 $ 450.0
$ 450.0
Revolving Credit Facilities 255.0
200.0
Term Loan 59.0
229.8
Other 0.9
0.9
Total debt 764.9
880.7
Less: Unamortized debt issuance costs 3.4
4.2
Less: Unamortized discount on long-term debt 1.9
2.1
Total carrying value of debt 759.6
874.4
Less: Short-term debt 255.0
200.0
Total long-term debt $ 504.6
$ 674.4

Senior Unsecured Revolving Credit Facility

The ~~2017~~2018 Credit Facility requires the Company to maintain a leverage ratio as of the end of each fiscal quarter of no greater than ~~3.5~~3.75 to 1. Such leverage ratio is calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus six times the consolidated rent expense for the last four consecutive fiscal quarters, to Consolidated EBITDAR (as defined below) for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash charges, subject to certain additions and deductions. The ~~2017~~2018 Credit Facility also includes covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends that are customary for financings of this type. As of September ~~29, 2018,~~28, 2019, the Company was in compliance with all covenants related to this agreement.

As of September ~~29, 2018~~28, 2019 and March ~~31, 2018,~~30, 2019, the Company had borrowings of ~~$255.0~~$513 million and ~~$200.0~~$539 million, respectively, outstanding under the ~~2017~~2018 Revolving Credit Facility, which were recorded within short-term debt in its consolidated balance sheets. ~~Stand-by~~In addition, stand-by letters of credit of ~~$16.1~~$16 million were outstanding as of September ~~29, 2018.~~28, 2019. At September ~~29, 2018,~~28, 2019, the amount available for future borrowings under the ~~2017~~2018 Revolving Credit Facility was ~~$728.9~~$471 million.

~~During the third quarter~~ As of ~~Fiscal~~September 28, 2019 and March 30, 2019, the ~~Company repaid the remaining $59.0 million~~carrying value of borrowings outstanding under the 2018 Term Loan ~~Facility.~~Facility was $1.428 billion and $1.570 billion, respectively, of which $80 million was recorded within short-term debt in each period and $1.348 billion and $1.490 billion, respectively, was recorded within long-term debt in its consolidated balance sheets.

The Company's definitive agreement to acquire Versace entered into on September 24, 2018 (see Note 1) is not subject to financing conditions. The cash portion of the purchase price is expected to be funded by a combination of cash on hand, drawings under the Company’s existing revolving credit facility, and committed underwritten bank term loans from our advisors JPMorgan Chase Bank, N.A. and Barclays, which the Company is in the process of syndicating.

See Note 1011 to the Company’s Fiscal ~~2018~~2019 Annual Report on Form 10-K for additional information regarding the Company’s credit facilities and debt obligations.

~~11.~~12. Commitments and Contingencies

In the ordinary course of business, the Company is party to various legal proceedings and claims. Although the outcome of such items cannot be determined with certainty, the Company’s management does not believe that the outcome of all pending legal proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.

Please refer to the Contractual Obligations and Commercial Commitments disclosure within the Liquidity section of the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~31, 2018~~30, 2019 for a detailed disclosure of other commitments and contractual obligations as of March ~~31, 2018.~~30, 2019.

~~12.~~13. Fair Value Measurements

Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability

to access at the measurement date.

Level 2 – Valuations based on quoted inputs other than quoted prices included within Level 1, that are observable for the

asset or liability, either directly or indirectly through corroboration with observable market data.

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

At September ~~29, 2018~~28, 2019 and March ~~31, 2018,~~30, 2019, the fair values of the Company’s forward foreign currency exchange contracts and net investment hedges were determined using broker quotations, which were calculations derived from observable market information: the applicable currency rates at the balance sheet date and those forward rates particular to the contract at inception. The Company makes no adjustments to these broker obtained quotes or prices, but assesses the credit risk of the counterparty and would adjust the provided valuations for counterparty credit risk when appropriate. The fair values of the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company. The fair values of net investment hedges are included in other assets, as detailed in Note ~~13.~~14.

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



	Fair value at September 28, 2019 using:						Fair value at March 30, 2019 using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivative assets:
Forward foreign currency exchange contracts	$	—	$	6	$	—	$	—	$	5	$	—
Net investment hedges	—		109		—		—		37		—
Other undesignated derivative contracts	—		1		—		—		—		—
Total derivative assets	$	—	$	116	$	—	$	—	$	42	$	—

Derivative liabilities:
Other undesignated derivative contracts	$	—	$	4	$	—	$	—	$	5	$	—
Total derivative liabilities	$	—	$	4	$	—	$	—	$	5	$	—

Fair value at September 29, 2018 using: Fair value at March 31, 2018 using:

Quoted prices in
active markets for
identical assets
(Level 1)

Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Quoted prices in
active markets for
identical assets
(Level 1)

Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Derivative assets:
Forward foreign currency exchange contracts $ —
$ 4.3
$ —
$ —
$ —
$ —
Net investment hedges —
6.2
—
—
—
—
Total derivative assets $ —
$ 10.5
$ —
$ —
$ —
$ —

Derivative liabilities:
Forward foreign currency exchange contracts $ —
$ 30.8
$ —
$ —
$ 7.7
$ —
Net investment hedges —
1.6
—
—
—
—
Total derivative liabilities $ —
$ 32.4
$ —
$ —
$ 7.7
$ —

The Company’s long-term debt obligations are recorded in its consolidated balance sheets at carrying values, which may differ from the related fair values. The fair value of the Company’s long-term debt is estimated using external pricing data, including any available quoted market prices and based on other debt instruments with similar characteristics. Borrowings under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the short-term nature of such borrowings. See Note 1011 for detailed information relating to carrying values of the Company’s outstanding debt. The following table summarizes the carrying values and estimated fair values of the Company’s short- and long-term debt, based on Level 2 measurements (in millions):



	September 28, 2019				March 30, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
4.000% Senior Notes	$	445	$	459	$	445	$	438
Term Loan	$	1,428	$	1,438	$	1,570	$	1,574
Revolving Credit Facilities	$	523	$	523	$	550	$	550

September 29, 2018 March 31, 2018
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
4.000% Senior Notes $ 444.9
$ 430.1
$ 444.5
$ 448.1
Term Loan $ 58.8
$ 59.4
$ 229.0
$ 231.2
Revolving Credit Facilities $ 255.0
$ 255.0
$ 200.0
$ 200.0

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

Non-Financial Assets and Liabilities

The Company’s non-financial assets include goodwill, intangible assets, operating lease right-of-use assets and property and equipment. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The Company’s goodwill and its indefinite-lived intangible ~~asset (Jimmy~~assets (Versace and Jimmy Choo ~~brand)~~brands) are assessed for impairment at least annually during the fourth quarter of each fiscal year, while its other long-lived assets, including ~~fixed~~operating lease right-of-use assets, property and equipment and definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The fair values of these assets were determined based on Level 3 measurements using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

The ~~following tables detail~~Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. This assessment is performed for each long-lived asset group that represents the ~~carrying values and fair values~~lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The grouping of assets requires a significant amount of judgment. The Company historically grouped certain premier store locations, primarily Michael Kors premier stores, with other Michael Kors stores within the immediate geographic area surrounding the premier store as the Company believed the assets of the store group benefited from the Company’s investments in the premier store. Due to the Company’s recent significant expansion in luxury retail, as well as its continued growth in its global digital business, the Company reassessed its methodology for evaluating impairment of long-lived assets, including the determination of asset groupings. The Company’s luxury retail business generally operates only premier, more luxurious, retail store locations with consistent investments across its individual stores. As a result, during the six months ended September 28, 2019, the Company determined that ~~have been impaired~~asset groups at an individual store level represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As a result of this determination, in the first quarter of Fiscal 2020, the Company identified impairment indicators at certain premier retail store locations and recorded operating lease right-of-use asset and property and equipment impairment charges of $68 million and $11 million, respectively, which are included in the impairment charges detailed in the table below (in millions):



	Three Months Ended September 28, 2019						Six Months Ended September 28, 2019
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge		Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Operating Lease Right-of-Use Assets	$	174	$	81	$	93	$	306	$	134	$	172
Property and Equipment	24		14		10		44		21		23
Key Money	2		1		1		10		4		6
Total	$	200	$	96	$	104	$	360	$	159	$	201

Three Months Ended
September 29, 2018 Six Months Ended
September 29, 2018
Carrying Value Prior to Impairment Fair Value Impairment Charge Carrying Value Prior to Impairment Fair Value Impairment Charge
Fixed Assets $ 8.8
$ 3.1
$ 5.7
$ 14.2
$ 4.8
$ 9.4
Lease Rights 2.0
0.7
1.3
3.4
1.5
1.9
Total $ 10.8
$ 3.8
$ 7.0
$ 17.6
$ 6.3
$ 11.3



	Three Months Ended September 29, 2018						Six Months Ended September 29, 2018
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge		Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Property and Equipment	$	9	$	3	$	6	$	14	$	5	$	9
Lease Rights	2		1		1		4		2		2
Total	$	11	$	4	$	7	$	18	$	7	$	11

Three Months Ended
September 30, 2017 Six Months Ended
September 30, 2017
Carrying Value Prior to Impairment Fair Value Impairment Charge Carrying Value Prior to Impairment Fair Value Impairment Charge
Fixed Assets $ 13.4
$ 1.5
$ 11.9
$ 13.4
$ 1.5
$ 11.9
Lease Rights 3.6
0.2
3.4
3.6
0.2
3.4
Customer Relationships 1.0
—
1.0
1.0
—
1.0
Total $ 18.0
$ 1.7
$ 16.3
$ 18.0
$ 1.7
$ 16.3

In addition to the impairment charges above, the Company recorded an adjustment to reduce its March 31, 2019 opening balance of retained earnings by $152 million, net of tax, reflecting impairments of operating lease right-of-use assets for certain underperforming real estate locations for which the carrying value of the opening operating lease right-of-use asset exceeded its related fair value. Property and equipment related to these underperforming locations were fully impaired due to the adoption of ASU 2016-02. See Note 62 and Note 74 for additional information.

~~13.~~14. Derivative Financial Instruments

During the first quarter of Fiscal 2019, the Company early-adopted the new hedge accounting guidance prescribed by ASU 2017-12. The cumulative impact of adoption, which related to elimination of ineffectiveness for the Company’s designated forward foreign currency exchange contracts, was recorded within retained earnings as of the beginning of Fiscal 2019. See Note 2 for additional information.

Forward Foreign Currency Exchange Contracts

The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company does not enter into derivative contracts for trading or speculative purposes.

~~On September 25, 2018, in~~

In connection with the ~~intended acquisition~~September 24, 2018 definitive agreement to acquire all of the outstanding shares of Versace, the Company entered into forward foreign currency exchange contracts in September 2018 with ~~a total~~ notional ~~amount of~~amounts totaling €1.680 billion (approximately $2.001 billion) to mitigate its foreign currency exchange risk through the ~~expected~~ closing date of the ~~acquisition.~~acquisition, which were settled on December 21, 2018. These derivative contracts were not designated as an accounting ~~hedge.~~hedges. Therefore, ~~the~~ changes ~~in fair value are recorded to foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive income for the three and six months ended September 29, 2018.~~

On July 25, 2017, in connection with the acquisition of Jimmy Choo, which closed on November 1, 2017, the Company entered into a forward foreign currency exchange contract with a notional amount of £1.115 billion (approximately $1.469 billion) to mitigate its foreign currency exchange risk through the date of the acquisition. This derivative contract was not designated as an accounting hedge and was terminated on October 30, 2017. Changes in fair value were recorded to foreign currency (gain) loss in the Company’s consolidated ~~statement~~statements of operations and comprehensive ~~income~~income. The Company’s accounting policy is to classify cash flows from derivative instruments that are accounted for as cash flow hedges in the ~~three~~same category as the cash flows from the items being hedged. Accordingly, the Company classified the unrealized gains and ~~six months ended September 30, 2017.~~

losses relating to these derivative instruments within cash flows from investing activities.

Net Investment Hedges

~~During the six months ended~~As of September ~~29, 2018,~~28, 2019, the Company ~~entered into~~had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of ~~$390.0 million~~$3.190 billion to hedge its net investment in Euro-denominated subsidiaries and ~~$44.0~~$44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between U.S. Dollar and these currencies. Under the terms of these contracts, which ~~mature in November 2024,~~have maturity dates between January 2022 and June 2026, the Company will exchange the ~~quarterly~~semi-annual fixed rate payments ~~made under its Senior Notes~~on U.S. denominated debt for fixed rate payments of ~~1.472%~~0% to ~~1.585%~~1.674% in Euros and 0.89% in Japanese Yen. These contracts have been designated as net investment hedges.

When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense in the Company’s consolidated statements of operations and comprehensive income. Accordingly, the Company recorded a reduction in interest expense of ~~$2.5~~$19 million and ~~$3.9~~$34 million, respectively, during the three and six months ended September 28, 2019 and $3 million and $4 million, respectively, during the three and six months ended September 29, 2018.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of September ~~29, 2018~~28, 2019 and March ~~31, 2018~~30, 2019 (in millions):


					Fair Values															Fair Values
	Notional Amounts				Assets					Liabilities						Notional Amounts				Assets						Liabilities
	September 29, 2018		March 31, 2018		September 29, 2018			March 31, 2018		September 29, 2018			March 31, 2018			September 28, 2019		March 30, 2019		September 28, 2019			March 30, 2019			September 28, 2019			March 30, 2019
Designated forward currency exchange contracts	$	139.4	$	161.7	$	4.3	⁽¹⁾	$	—	$	0.4	⁽²⁾	$	7.7	⁽²⁾
Designated forward foreign currency exchange contracts																$	150	$	166	$	6	⁽¹⁾	$	5	⁽¹⁾	$	—		$	—
Designated net investment hedge	434.0		—		6.2		⁽³⁾	—		1.6		⁽⁴⁾	—			3,234		2,234		109		⁽²⁾	37		⁽²⁾	—			—
Total designated hedges	$	573.4	$	161.7	$	10.5		$	—	$	2.0		$	7.7		3,384		2,400		115			42			—			—
Undesignated forward currency exchange contracts	2,000.8		—		—			—		30.4		⁽²⁾	—
Undesignated derivative contracts ⁽⁴⁾																170		199		1		⁽¹⁾	—			4		⁽³⁾	5		⁽³⁾
Total	$	2,574.2	$	161.7	$	10.5		$	—	$	32.4		$	7.7		$	3,554	$	2,599	$	116		$	42		$	4		$	5

^{____________________________________}


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


⁽²⁾	Recorded within other assets in the Company’s consolidated balance sheets.


⁽³⁾	Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.


⁽³⁾	~~Recorded within other assets in the Company’s consolidated balance sheets.~~


⁽⁴⁾	~~Recorded within other long-term liabilities in the Company's consolidated balance sheets.~~Primarily includes undesignated hedges of foreign currency denominated intercompany balances and inventory purchases.

The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance sheets on a gross basis, as shown in the ~~above~~previous table. However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to ~~setoff~~set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of September ~~29, 2018~~28, 2019 and March ~~31, 2018~~30, 2019 would be as follows (in millions):



	Forward Currency Exchange Contracts				Net Investment Hedges
	September 28, 2019		March 30, 2019		September 28, 2019		March 30, 2019
Assets subject to master netting arrangements	$	7	$	5	$	109	$	37
Liabilities subject to master netting arrangements	$	4	$	5	$	—	$	—
Derivative assets, net	$	6	$	5	$	109	$	37
Derivative liabilities, net	$	3	$	5	$	—	$	—

Forward Currency Exchange Contracts Net Investment Hedges Acquisition Hedges
September 29,
2018 March 31,
2018 September 29,
2018 March 31,
2018 September 29,
2018 March 31,
2018
Assets subject to master netting arrangements $ 4.3
$ —
$ 6.2
$ —
$ —
$ —
Liabilities subject to master netting arrangements $ 0.4
$ 7.7
$ 1.6
$ —
$ 17.5
$ —
Derivative assets, net $ 3.9
$ —
$ 6.2
$ —
$ —
$ —
Derivative liabilities, net $ —
$ 7.7
$ 1.6
$ —
$ 30.4
$ —

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

Changes in the fair value of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive ~~income (loss).~~income. The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets. Upon discontinuation of the hedge, such amounts remain in CTA until the related investment is sold or liquidated.

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


	Three Months Ended						Six Months Ended					Three Months Ended				Six Months Ended
	September 29, 2018			September 30, 2017			September 29, 2018		September 30, 2017			September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
	Pre-Tax Gains (Losses) Recognized in OCI			Pre-Tax Loss Recognized in OCI			Pre-Tax Gains Recognized in OCI		Pre-Tax Loss Recognized in OCI			Gains Recognized in OCI		Gains Recognized in OCI		Gains Recognized in OCI		Gains Recognized in OCI
Designated forward foreign currency exchange contracts	$	1.0		$	(6.0	)	$	9.7	$	(15.3	)	$	6	$	1	$	6	$	10
Designated net investment hedges	$	(0.2	)	$	—		$	4.6	$	—		$	129	$	—	$	104	$	5

The following ~~table summarizes~~tables summarize the impact of the gains and losses within the consolidated statements of operations and comprehensive income related to the designated forward foreign currency exchange contracts for the three and six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017~~29, 2018 (in millions):

Three Months Ended

Pre-Tax (Gain) Loss Reclassified from
Accumulated OCI
Location of (Gain) Loss recognized Total Cost of Sales
September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017
Designated forward currency exchange contracts $ 2.0
$ (1.3 ) Cost of Sales $ 490.7
$ 455.8



	Three Months Ended
	(Gain) Loss Reclassified from Accumulated OCI					Location of (Gain) Loss recognized	Total Cost of goods sold
	September 28, 2019			September 29, 2018		Location of (Gain) Loss recognized	September 28, 2019		September 29, 2018
Designated forward foreign currency exchange contracts	$	(2	)	$	2	Cost of goods sold	$	568	$	490



	Six Months Ended
	(Gain) Loss Reclassified from Accumulated OCI					Location of (Gain) Loss recognized	Total Cost of goods sold
	September 28, 2019			September 29, 2018		Location of (Gain) Loss recognized	September 28, 2019		September 29, 2018
Designated forward foreign currency exchange contracts	$	(5	)	$	7	Cost of goods sold	$	1,080	$	942

Six Months Ended

Pre-Tax (Gain) Loss Reclassified from
Accumulated OCI
Location of (Gain) Loss recognized Total Cost of Sales
September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017
Designated forward currency exchange contracts $ 6.9
$ (3.2 ) Cost of Sales $ 942.4
$ 833.5

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

Undesignated Hedges

During the three and six months ended September 28, 2019, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss (gain) in the Company’s consolidated statement of operations and comprehensive income was not material.

During the three and six months ended September 29, 2018, the Company recognized a net loss of ~~$30.0~~$30 million and ~~$28.9~~$29 million, respectively, related to changes in the fair value of undesignated forward foreign currency exchange contracts within foreign currency loss (gain) in the Company’s consolidated statement of operations and comprehensive ~~income, $30.4~~income. These amounts were primarily comprised of a $30 million ~~of which~~loss related to the derivative contracts entered into ~~during the three months ended~~on September ~~29,~~25, 2018 to mitigate foreign currency exchange risk ~~through the expected closing date of~~associated with the Versace ~~acquisition.~~

During the three and six months ended September 30, 2017, the Company recognized net gains of $36.6 million and $35.2 million, respectively, related to changes in the fair value of undesignated forward foreign currency exchange contracts within foreign currency (gain) loss in the Company’s consolidated statement of operations and comprehensive income, $36.7 million of which related to the derivative contract entered into during the three months ended September 30, 2017 to mitigate foreign currency exchange risk through the closing date of the Jimmy Choo acquisition.acquisition that were settled on December 21, 2018.

~~14.~~15. Shareholders’ Equity

Share Repurchase Program

During the six months ended September 29, 2018, ~~and September 30, 2017,~~ the Company repurchased 1,659,941 shares ~~and 4,543,500 shares, respectively,~~ at a cost of ~~$100.0~~$100 million ~~and $157.8 million, respectively,~~through open market transactions under its $1.0 billion share-repurchase program, ~~through open market transactions. As~~which expired on May 25, 2019. On August 1, 2019, the Company’s Board of ~~September 29, 2018, the remaining availability under the Company’s~~Directors authorized a new $500 million share repurchase program, ~~was $542.2 million.~~which expires August 1, 2021. Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading ~~transactions~~ under the Company’s insider trading policy and other relevant factors. The program may be suspended or discontinued at any time.

The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the vesting of their restricted share ~~unit~~ awards. During the six month periods ended September ~~29, 2018~~28, 2019 and September ~~30, 2017,~~29, 2018, the Company withheld ~~106,002~~63,223 shares and ~~91,122~~106,002 shares, respectively, with a fair value of ~~$7.1~~$2 million and ~~$3.1~~$7 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share ~~unit~~ awards.

~~15.~~ Accumulated Other Comprehensive Income (Loss) ~~Income~~

The following table details changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017,~~29, 2018, respectively (in millions):


	Foreign Currency Translation (Losses) Gains ⁽¹⁾			Net Gains (Losses) on Derivatives ⁽²⁾			Other Comprehensive (Loss) Income Attributable to MKHL			Other Comprehensive (Loss) Income Attributable to Noncontrolling Interest			Total Accumulated Other Comprehensive (Loss) Income
Balance at April 1, 2017	$	(86.1	)	$	5.5		$	(80.6	)	$	(0.3	)	$	(80.9	)
Other comprehensive income (loss) before reclassifications	37.1			(13.2		)	23.9			—			23.9
Less: amounts reclassified from AOCI to earnings	—			2.9			2.9			—			2.9
Other comprehensive income (loss), net of tax	37.1			(16.1		)	21.0			—			21.0
Balance at September 30, 2017	$	(49.0	)	$	(10.6	)	$	(59.6	)	$	(0.3	)	$	(59.9	)
																Foreign Currency Translation Gains (Losses) ⁽¹⁾			Net (Losses) Gains on Derivatives ⁽²⁾			Other Comprehensive Income (Loss) Attributable to Capri
Balance at March 31, 2018	$	61.2		$	(10.7	)	$	50.5		$	(0.2	)	$	50.3		$	61		$	(10	)	$	51
Other comprehensive (loss) income before reclassifications	(128.1		)	8.7			(119.4		)	(0.1		)	(119.5		)	(128		)	9			(119		)
Less: amounts reclassified from AOCI to earnings	—			(6.0		)	(6.0		)	—			(6.0		)	—			(6		)	(6		)
Other comprehensive (loss) income, net of tax	(128.1		)	14.7			(113.4		)	(0.1		)	(113.5		)	(128		)	15			(113		)
Balance at September 29, 2018	$	(66.9	)	$	4.0		$	(62.9	)	$	(0.3	)	$	(63.2	)	$	(67	)	$	5		$	(62	)

Balance at March 30, 2019																$	(73	)	$	7		$	(66	)
Other comprehensive (loss) income before reclassifications																(38		)	5			(33		)
Less: amounts reclassified from AOCI to earnings																—			4			4
Other comprehensive (loss) income, net of tax																(38		)	1			(37		)
Balance at September 28, 2019																$	(111	)	$	8		$	(103	)

~~Jimmy Choo~~ ~~— includes worldwide sales~~parts of ~~Jimmy Choo products from 204 retail stores (including concessions)~~EMEA, Asia and ~~Jimmy Choo e-commerce sites, through 616 wholesale doors, as well as~~Brazil. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and beauty, and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions.

Unallocated Expenses

In addition to the reportable segments discussed above, we have certain corporate costs that are not directly attributable to our brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, information systems expenses, including Enterprise Resource Planning (“ERP”) system implementation costs. In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transaction and transition costs related to our recent acquisitions) and impairment costs. The new segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages our business and assesses our performance. All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis, which occurred in the fourth quarter of Fiscal 2019. The following table presents our total revenue and income from operations by segment for the three and six months ended September 28, 2019 and September 29, ~~2018.~~2018 (in millions):



		Three Months Ended						Six Months Ended
		September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Total revenue:
	Versace	$	228		$	—		$	435		$	—
	Jimmy Choo	125			116			283			289
	Michael Kors	1,089			1,137			2,070			2,167
Total revenue		$	1,442		$	1,253		$	2,788		$	2,456

Income (loss) from operations:
	Versace	$	9		$	—		$	6		$	—
	Jimmy Choo	(10		)	(9		)	1			13
	Michael Kors	222			248			423			478
Total segment income from operations		221			239			430			491
Less:	Corporate expenses	(35		)	(23		)	(68		)	(45		)
	Restructuring and other charges	(7		)	(19		)	(22		)	(30		)
	Impairment of long-lived assets	(104		)	(7		)	(201		)	(11		)
Total income from operations		$	75		$	190		$	139		$	405

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



	As of
	September 28, 2019	September 29, 2018
Number of full price retail stores (including concessions):
Versace	152	—
Jimmy Choo	171	168
Michael Kors	580	594
	903	762

Number of outlet stores:
Versace	46	—
Jimmy Choo	45	36
Michael Kors	270	260
	361	296

Total number of retail stores	1,264	1,058

Total number of wholesale doors
Versace	819	—
Jimmy Choo	586	616
Michael Kors	3,138	3,513
	4,543	4,129

The following table presents our retail stores by geographic location:



	As of			As of
	September 28, 2019			September 29, 2018
	Versace	Jimmy Choo	Michael Kors	Jimmy Choo	Michael Kors
Store count by region:
The Americas	28	45	386	44	398
EMEA	57	73	181	70	195
Asia	113	98	283	90	261
	198	216	850	204	854

Key Consolidated Performance Indicators and Statistics

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



	Three Months Ended						Six Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Total revenue	$	1,442		$	1,253		$	2,788		$	2,456
Gross profit as a percent of total revenue	60.6		%	60.9		%	61.3		%	61.6		%
Income from operations	$	75		$	190		$	139		$	405
Income from operations as a percent of total revenue	5.2		%	15.2		%	5.0		%	16.5		%

Seasonality

We experience certain effects of seasonality with respect to our business. ~~Our MK Retail segment~~We generally ~~experiences~~experience greater sales during its third fiscal quarter as a result of holiday season sales. Our MK Wholesale segment generally experiences the lowest sales in its first fiscal quarter. Our Jimmy Choo segment generally experiences greater sales during its first and third fiscal quarters, primarily driven by the product launch calendar and holiday season sales. In the aggregate, our first fiscal quarter typically experiences less sales volume relative to the other three quarters and our third fiscal quarter, ~~generally has higher~~primarily driven by holiday season sales, ~~volume relative to~~and the ~~other three quarters.~~lowest sales during our first fiscal quarter.

Certain Factors Affecting Financial Condition and Results of Operations

Establishing brand identity and enhancing global presence. We intend to grow our international presence through our global fashion luxury group, bringing together industry-leading fashion luxury brands.

As mentioned above, on November 1, 2017, we acquired Jimmy Choo for a total transaction value of $1.447 billion. Jimmy Choo has a rich history as a leading global luxury house, renowned for its glamorous and fashion-forward footwear, and is an excellent complement to the Michael Kors brand. On September 24, 2018, we entered into a definitive agreement to acquire all of the outstanding shares of Italian luxury fashion house Gianni Versace S.p.A. (“Versace”) for a total enterprise value of €1.83 billion (or approximately $2.12 billion), subject to certain adjustments.The transaction is subject to customary closing conditions and is expected to close during the fourth quarter of Fiscal 2019. Versace is one of the leading international fashion design houses and a symbol of Italian luxury worldwide. It designs, manufactures, distributes and retails fashion and lifestyle products including haute couture, apparel, accessories, jewelry, watches, eyewear, fragrances, and home furnishings. We believe that ~~these combinations~~our recent acquisitions of Versace and Jimmy Choo significantly strengthen our future growth opportunities, while also increasing both product and geographic diversification. However, there are risks associated with new acquisitions and the anticipated benefits of acquisitions on our financial results may not be in line with our expectations.

We ~~also~~ intend to continue to increase our international presence and global brand recognition by growing our existing international operations through acquisitions, the formation of various joint ventures with international partners and continuing with our international licensing arrangements. We feel this is an efficient method for continued penetration into the global luxury goods market, especially for markets where we have yet to establish a substantial presence. In addition, our growth strategy includes assuming direct control of certain licensed international operations to better manage our growth opportunities in the related regions.

See Note 45 to the accompanying consolidated financial statements for additional information regarding our recent acquisitions.

Channel Shift and Demand for Our Accessories and Related Merchandise. Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences. Although the overall consumer spending for personal luxury products has recently increased, consumer shopping preferences have continued to shift from physical stores to on-line shopping. We currently expect that this trend will continue in the foreseeable future. We continue to adjust our operating strategy to the changing business environment. We ~~are continuing to make~~have made significant progress toward our previously announced plan to close between 100 and 125 of our Michael Kors retail stores at an expected total one-time cost of approximately $100 - $125 million, in order to improve the profitability of our Michael Kors retail store fleet (“Retail Fleet Optimization Plan”)~~, with 66 stores~~. As of September 28, 2019, we closed ~~since the plan's inception. We continue to expect to incur~~ a total of ~~approximately $100 - $125~~123 stores at a cost of $95 million ~~of one-time costs associated with these store closures. During the six months ended September 29, 2018, we closed 19 of our Michael Kors retail stores under the Retail Fleet Optimization Plan~~to date and recorded ~~related~~ restructuring charges of ~~$5.4~~$1 million and $6 million during the six months ended September 28, 2019 and September 29, ~~2018.~~2018, respectively. We ~~currently~~ anticipate finalizing the remainder of the planned store closures under the Retail Fleet Optimization Plan by the end of Fiscal 2020. Collectively, we continue to anticipate ~~ongoing annual savings of approximately $60 million as a result of the store closures and~~ lower depreciation and amortization associated with the impairment charges recorded once these initiatives are completed.

Foreign currency fluctuation. Our consolidated operations are impacted by the relationships between our reporting currency, the U.S. dollar, and those of our non-U.S. subsidiaries whose functional/local currency is other than the U.S. ~~dollar. During~~dollar, particularly the ~~three months ended September 29, 2018, our results have been negatively impacted by~~Euro, the ~~declines in value of~~British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, the Chinese Renminbi and the Euro relative to the U.S. Dollar of 4%, 2% and 1% respectively, as compared to the three months ended September 30, 2017. During the six months ended September 29, 2018, our results have been positively impacted by the strengthening of the Euro and the Chinese Renminbi relative to the U.S. Dollar of 4% and 3%, respectively, as compared to the six months ended September 30, 2017.among others. We continue to expect volatility in the global foreign currency exchange rates, which may have a negative impact on the reported results of certain of our non-U.S. subsidiaries in the future, when translated to U.S. Dollars.

Disruptions in shipping and distribution. Our operations are subject to the impact of shipping disruptions as a result of changes or damage to our distribution infrastructure, as well as due to external factors. Any future disruptions in our shipping and distribution network could have a negative impact on our results of operations.

Costs of Manufacturing and Tariffs. Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products. This volatility applies primarily to costs driven by commodity prices, which can increase or decrease dramatically over a short period of time. In addition, our costs may be impacted by tariffs imposed on our products and increased duties due to changes in trade terms. ~~These factors~~On May 10, 2019, the U.S. increased the tariff rate from 10% to 25% on $200 billion of imports of select product categories from China, and effective September 1, 2019, a 10% tariff on an additional $300 billion of goods from China, including ready-to-wear, footwear and men’s products, went into effect. If additional tariffs or trade restrictions are implemented by the U.S. or other countries, the cost of our products could increase which could adversely affect our business. In addition, commodity prices and tariffs may have ~~a material~~an impact on our revenues, results of operations and cash ~~flows to the extent they occur.~~flows. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as ~~possible.~~possible and diversifying the countries where we produce. In addition, manufacturing labor costs are also subject to degrees of volatility based on local and global economic conditions. We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs to our products.

~~U.S. Tax Reform.~~ On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including, among other things, lowering U.S. statutory federal tax rate and implementing a territorial tax system. The U.S. statutory federal tax rate has been decreased to 21% for Fiscal 2019 and thereafter. The Tax Act also added many new provisions, including changes to bonus depreciation, limits on the deductions for executive compensation and interest expense, a tax on global intangible low-taxed income, the base erosion anti-abuse tax and a deduction for foreign derived intangible income.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance for companies that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final transition impacts of the Tax Act may differ from the recorded amounts, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, or any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. Our estimates were provisional and subject to adjustment in Fiscal 2019 under the measurement period allowed by the SEC. The Company expects to finalize its accounting related to the impacts of the Tax Act on deferred taxes, valuation allowances, state tax considerations, and any remaining basis differences in our foreign subsidiaries when our income tax returns are finalized during the third quarter of Fiscal 2019. As we complete our analysis of the Tax Act, collect and prepare necessary data and interpret any additional guidance issued by the United States Department of the Treasury, the Internal Revenue Service and other standard-setting bodies, we may make adjustments during Fiscal 2019 to the provisional amounts recorded in Fiscal 2018.

~~Critical Accounting Policies~~

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those that are the most important to the portrayal of our results of operations and financial condition and that require our most difficult, subjective and complex judgments to make estimates about the effect of matters that are inherently uncertain. In applying such policies, we must use certain assumptions that are based on our informed judgments, assessments of probability and best estimates. Estimates, by their nature, are subjective and are based on analysis of available information, including current and historical factors and the experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis. During the first quarter of Fiscal ~~2019,~~2020, we adopted the new accounting guidance related to ~~revenue recognition,~~lease accounting, as described in Note 2 and Note 34 to the accompanying consolidated financial statements. Under this guidance, our existing lease obligations, which relate to stores, corporate locations, warehouses, and equipment, will be recorded as a lease liability and right-of-use asset for operating leases on our consolidated balance sheet. Accordingly, adoption of this standard significantly increased the ~~timing of revenue recognition for royalty~~Company’s total assets and advertising revenue under certain of our licensing agreements may shift among fiscal quarters. In addition, we eliminated a one-month reporting lag for one of our licensees, and began to recognize revenue for the unredeemed portion of our gift cards that are not required to be remitted as unclaimed property proportionally over the estimated customer redemption period.total liabilities. Our critical accounting policies are disclosed in full in the MD&A section of our Annual Report on Form 10-K for the fiscal year ended March ~~31, 2018.~~30, 2019. There have been no significant changes in our critical accounting policies since March ~~31, 2018,~~30, 2019, other than described above.

~~Segment Information~~

We generate revenue through four business segments: MK Retail, MK Wholesale, MK Licensing and Jimmy Choo. The following table presents our total revenue and income from operations by segment for the three and six months ended September 29, 2018 and September 30, 2017 (in millions):

Three Months Ended Six Months Ended
September 29,
2018 September 30,
2017 September 29,
2018 September 30,
2017
Total revenue:
MK Retail $ 643.9
$ 645.0
$ 1,283.4
$ 1,264.9
MK Wholesale 457.8
463.6
820.6
767.2
MK Licensing 35.4
38.0
62.9
66.9
Michael Kors 1,137.1
1,146.6
2,166.9
2,099.0
Jimmy Choo 116.7
—
289.4
—
Total revenue $ 1,253.8
$ 1,146.6
$ 2,456.3
$ 2,099.0

Income from operations:
MK Retail $ 67.9
$ 69.0
$ 160.4
$ 161.2
MK Wholesale 130.1
119.6
227.6
163.1
MK Licensing 9.8
10.5
18.9
24.2
Michael Kors 207.8
199.1
406.9
348.5
Jimmy Choo (18.4 ) —
(2.3 ) —
Income from operations $ 189.4
$ 199.1
$ 404.6
$ 348.5

~~MK Retail~~

We have four primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores, outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to the end consumer throughout the Americas (United States (“U.S.”), Canada and Latin America, excluding Brazil), Europe and certain parts of Asia. In addition to these four retail formats, we operate concessions in a select number of department stores. Michael Kors “Collection” stores are located in highly prestigious shopping areas, while Michael Kors “Lifestyle” stores are located in well-populated commercial shopping locations and leading regional shopping centers. Michael Kors outlet stores, which are generally in outlet centers, extend our reach to additional consumer groups. Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada, certain parts of Europe, China, Japan and South Korea.

The following table presents the change in our global network of Michael Kors retail stores and revenue for the MK Retail segment by geographic location for the three and six months ended September 29, 2018 and September 30, 2017 (dollars in millions):

Three Months Ended Six Months Ended
September 29,
2018 September 30,
2017 September 29,
2018 September 30,
2017
Full price retail stores including concessions:
Number of stores 594
620
594
620
Increase (decrease) during period 1
—
(2 ) 6
Percentage (decrease) increase vs. prior year (4.2 )% 6.3 % (4.2 )% 6.3 %
Total gross square footage 1,351,549
1,430,018
1,351,549
1,430,018
Average square footage per store 2,275
2,306
2,275
2,306

Outlet stores:
Number of stores 260
223
260
223
Increase during period 6
5
27
10
Percentage increase vs. prior year 16.6 % 9.3 % 16.6 % 9.3 %
Total gross square footage 1,109,063
889,102
1,109,063
889,102
Average square footage per store 4,266
3,987
4,266
3,987

MK Retail revenue - the Americas $ 394.9
$ 385.5
$ 797.1
$ 777.6
MK Retail revenue - Europe $ 139.2
$ 154.2
$ 258.7
$ 276.3
MK Retail revenue - Asia $ 109.8
$ 105.3
$ 227.6
$ 211.0

~~The following table presents our Michael Kors retail stores by geographic location:~~

As of
September 29,
2018 September 30,
2017
Store count by region:
The Americas 398
398
Europe 195
201
Asia 261
244
Total 854
843

~~MK Wholesale~~

Michael Kors products are sold directly to department stores, primarily located across the Americas and Europe to accommodate consumers who prefer to shop at major department stores. In addition, we sell to specialty stores for those consumers who enjoy the boutique experience afforded by such stores, as well as to travel retail shops in the Americas, Europe and Asia. We also have wholesale arrangements pursuant to which we sell Michael Kors products to our geographic licensees in certain parts of EMEA (Europe, Middle East and Africa) and Asia, as well as in Brazil. We continue to focus our sales efforts and drive sales in existing locations by enhancing presentation with our specialized fixtures that effectively communicate our brand and create a more personalized shopping experience for consumers. We tailor our assortments through wholesale product planning and allocation processes to better match the demands of our department store customers in each local market.

The following table presents the change in our global network of Michael Kors wholesale doors, as well as revenue for our MK Wholesale segment by geographic location during the three and six months ended September 29, 2018 and September 30, 2017 (dollars in millions):

Three Months Ended Six Months Ended
September 29,
2018 September 30,
2017 September 29,
2018 September 30,
2017
Number of full-price wholesale doors 3,513
3,618
3,513
3,618
Increase (decrease) during period 43
59
(31 ) 11

MK Wholesale revenue - the Americas $ 354.3
$ 340.4
$ 629.4
$ 567.6
MK Wholesale revenue - EMEA $ 80.9
$ 104.5
$ 149.3
$ 169.5
MK Wholesale revenue - Asia $ 22.6
$ 18.7
$ 41.9
$ 30.1

~~MK Licensing~~

We generate licensing revenue through product and geographic licensing arrangements. Our Michael Kors product license agreements allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of a variety of products, including watches, jewelry, fragrances and beauty, and eyewear. In Michael Kors product licensing arrangements, we take an active role in the design, marketing and distribution of products under the Michael Kors brand. Our geographic licensing arrangements allow third parties to use our Michael Kors tradenames in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions, such as Brazil, the Middle East, South Africa, Eastern Europe, certain parts of Asia and Australia.

~~Jimmy Choo~~

The Jimmy Choo business was acquired and consolidated beginning on November 1, 2017. We generate revenue through the sale of Jimmy Choo luxury goods to end clients through directly operated Jimmy Choo stores throughout North America (U.S. and Canada), EMEA and certain parts of Asia, through our e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo tradenames in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through product licensing agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in connection with the manufacturing and sale of fragrances, sunglasses and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Jimmy Choo tradenames in connections with the retail and/or wholesale sales of our Jimmy Choo branded products in specific geographic regions.

~~The following table presents our global network of Jimmy Choo retail stores and wholesale doors as of September 29, 2018:~~



	~~September 29,~~ ~~2018~~
~~Store count:~~
~~Full-price retail stores including concessions~~	~~168~~
~~Outlet stores~~	36
~~Total stores~~	~~204~~

~~Number of full-price wholesale doors~~	~~616~~

~~The following table presents Jimmy Choo revenue by geographic location (in millions):~~

Three Months Ended Six Months Ended
September 29, 2018 September 29, 2018
Jimmy Choo revenue:
The Americas $ 20.4
$ 46.0
EMEA 56.8
158.5
Asia 39.5
84.9
Total Jimmy Choo revenue $ 116.7
$ 289.4

~~Key Consolidated Performance Indicators and Statistics~~

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

Three Months Ended Six Months Ended
September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017
Total revenue $ 1,253.8
$ 1,146.6
$ 2,456.3
$ 2,099.0
Decrease in Michael Kors comparable store sales (2.1 )% (1.8 )% (1.0 )% (3.8 )%
Gross profit as a percent of total revenue 60.9 % 60.2 % 61.6 % 60.3 %
Income from operations $ 189.4
$ 199.1
$ 404.6
$ 348.5
Income from operations as a percent of total revenue 15.1 % 17.4 % 16.5 % 16.6 %

General Definitions for Operating Results

Total revenue consists of sales from comparable retail stores and e-commerce sites and non-comparable retail stores and e-commerce sites, net of returns and markdowns, as well as those made to our wholesale customers, net of returns, discounts, markdowns and allowances. Additionally, revenue includes royalties and other contributions earned on sales of licensed products by our licensees as well as contractual royalty rates for the use of our trademarks in certain geographic territories.

Comparable store sales include sales from a retail store or an e-commerce site that has been operating for one full year after the end of the first month of its operation under our ownership. For stores that are closed, sales that were made in the final month of their operations (assuming closure prior to the fiscal month’s end), are excluded from the calculation of comparable store sales. Additionally, sales for stores that are either relocated, or expanded by a square footage of 25% or greater, in any given fiscal year, are also excluded from the calculation of comparable store sales at the time of their move or interruption, until such stores have been in their new location, or are operating under their new size/capacity, for at least one full year after the end of the first month of their relocation or expansion. All comparable store sales are presented on a 52-week basis. Comparable store sales are reported on a global basis, which represents management’s view of our Company as an expanding global business.

Constant currency effects are non-U.S. GAAP financial measures, which are provided to supplement our reported operating results to facilitate comparisons of our operating results and trends in our business, excluding the effects of foreign currency rate fluctuations. Because we are a global company, foreign currency exchange rates may have a significant effect on our reported results. We calculate constant currency measures and the related foreign currency impacts by translating the current-year’s reported amounts into comparable amounts using prior year’s foreign exchange rates for each currency. All constant currency performance measures discussed below should be considered a supplement to and not in lieu of our operating performance measures calculated in accordance with U.S. GAAP.

Cost of goods sold includes the cost of inventory sold and related duties and tariffs, freight-in on merchandise and foreign currency exchange gains/losses related to designated forward contracts for purchase commitments. All retail operating and occupancy costs are included in Selling, general and administrative expenses (see below) and, as a result, our cost of goods sold may not be comparable to that of other entities that have chosen to include some or all of those expenses as a component of their cost of goods sold.

Gross profit is total revenue minus cost of goods sold. As a result of retail operating and occupancy costs being excluded from our cost of goods sold, our gross profit may not be comparable to that of other entities that have chosen to include some or all of those expenses as a component of their gross profit.

Selling, general and administrative expenses consist of warehousing and distribution costs, rent for our distribution centers, payroll, store occupancy costs (such as rent, common area maintenance, store pre-opening, real estate taxes and utilities), information technology and systems costs, corporate payroll and related benefits, advertising and promotion expense and other general ~~expenses.~~expenses, as well as sublease income.

Depreciation and amortization includes depreciation and amortization of ~~fixed~~property and equipment and definite-lived intangible assets.

Impairment of long-lived assets consists of charges to write-down ~~fixed~~operating lease right-of-use assets, property and equipment and finite-lived intangible assets to fair value. Impairment charges are not allocated to our reportable segments.

Restructuring and other charges includes store closure costs recorded in connection with the Retail Fleet Optimization Plan and other restructuring initiatives, as well as ~~transaction and transition~~ costs recorded in connection with our ~~acquisition~~acquisitions of Versace and Jimmy Choo ~~and our agreement to acquire Versace~~ (see Note ~~1, Note 4~~5 and Note 910 to the accompanying consolidated financial statements for additional information). Restructuring and other charges are not allocated to our reportable segments.

Income from operations consists of gross profit minus total operating expenses.

Other (income) expense, net includes insurance settlements and proceeds received related to our anti-counterfeiting ~~efforts and rental income from our owned distribution center in Europe.~~efforts. In future periods, it may include any other miscellaneous activities not directly related to our operations.

Interest expense, net represents interest and fees on our revolving credit facilities, senior notes, term loan facilities and letters of credit (see “Liquidity and Capital Resources” for further detail on our credit facilities), as well as amortization of deferred financing costs and original issue discount, offset by interest earned on highly liquid investments (investments purchased with an original maturity of three months or less, classified as cash equivalents) and interest on cross-currency swaps designated as net investment hedges (see Note 1314 to the accompanying consolidated financial statements for additional information).

Foreign currency (gain)/loss ~~(gain)~~ includes net gains or losses related to the mark-to-market (fair value) on our forward currency contracts not designated as accounting hedges, ~~including acquisition-related contracts,~~ and unrealized income or loss from the re-measurement of monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.

Noncontrolling interests/Redeemable noncontrolling interest represents the portion of the equity ownership in the Michael Kors Latin American joint venture, MK (Panama) Holdings, S.A. and subsidiaries (“MK Panama”), ~~as well as the portion of the equity ownership~~noncontrolling interests in ~~the Jimmy Choo Middle East Joint Venture,~~ JC Industry S.r.L ~~(“JCI”),~~ and JC Gulf Trading LLC, ~~(“JC Gulf”)~~as well as in J. Choo Russia J.V. Limited, and noncontrolling interests in Versace Singapore Pte. Ltd., ~~which is not attributable to our Company.~~as well as the redeemable noncontrolling interest in Versace Australia PTY Limited.

Results of Operations

Comparison of the three months ended September ~~29, 2018~~28, 2019 with the three months ended September ~~30, 2017~~29, 2018

The following table details the results of our operations for the three months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017,~~29, 2018, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):


	Three Months Ended						$ Change			% Change		% of Total Revenue for the Three Months Ended				Three Months Ended						$ Change			% Change		% of Total Revenue for the Three Months Ended
	September 29, 2018			September 30, 2017			$ Change			% Change		September 29, 2018		September 30, 2017		September 28, 2019			September 29, 2018			$ Change			% Change		September 28, 2019		September 29, 2018
Statements of Operations Data:
Total revenue	$	1,253.8		$	1,146.6		$	107.2		9.3	%					$	1,442		$	1,253		$	189		15.1	%
Cost of goods sold	490.7			455.8			34.9			7.7	%	39.1	%	39.8	%	568			490			78			15.9	%	39.4	%	39.1	%
Gross profit	763.1			690.8			72.3			10.5	%	60.9	%	60.2	%	874			763			111			14.5	%	60.6	%	60.9	%
Selling, general and administrative expenses	495.8			405.1			90.7			22.4	%	39.5	%	35.3	%	623			494			129			26.1	%	43.2	%	39.4	%
Depreciation and amortization	52.7			48.3			4.4			9.1	%	4.2	%	4.2	%	65			53			12			22.6	%	4.5	%	4.2	%
Impairment of long-lived assets	7.0			16.3			(9.3		)	(57.1	)%	0.6	%	1.4	%	104			7			97			NM		7.2	%	0.6	%
Restructuring and other charges ⁽¹⁾	18.2			22.0			(3.8		)	(17.3	)%	1.5	%	1.9	%	7			19			(12		)	(63.2	)%	0.5	%	1.5	%
Total operating expenses	573.7			491.7			82.0			16.7	%	45.8	%	42.9	%	799			573			226			39.4	%	55.4	%	45.7	%
Income from operations	189.4			199.1			(9.7		)	(4.9	)%	15.1	%	17.4	%	75			190			(115		)	(60.5	)%	5.2	%	15.2	%
Other income, net	(1.5		)	(0.3		)	(1.2		)	NM		0.1	%	—	%	(1		)	(1		)	—			—	%	(0.1	)%	(0.1	)%
Interest expense, net	5.9			0.8			5.1			NM		0.5	%	0.1	%	3			6			(3		)	(50.0	)%	0.2	%	0.5	%
Foreign currency loss (gain)	33.0			(40.5		)	73.5			NM		2.6	%	(3.5	)%
Foreign currency loss																4			33			(29		)	(87.9	)%	0.3	%	2.6	%
Income before provision for income taxes	152.0			239.1			(87.1		)	(36.4	)%	12.1	%	20.9	%	69			152			(83		)	(54.6	)%	4.8	%	12.1	%
Provision for income taxes	14.9			36.4			(21.5		)	(59.1	)%	1.2	%	3.2	%
(Benefit from) provision for income taxes																(4		)	15			(19		)	NM		(0.3	)%	1.2	%
Net income	137.1			202.7			(65.6		)	(32.4	)%					73			137			(64		)	(46.7	)%
Less: Net loss attributable to noncontrolling interest	(0.5		)	(0.2		)	(0.3		)	NM
Net income attributable to MKHL	$	137.6		$	202.9		$	(65.3	)	(32.2	)%
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest																—			(1		)	1			NM
Net income attributable to Capri																$	73		$	138		$	(65	)	(47.1	)%

___________________

NM Not meaningful

⁽¹⁾

Includes store closure costs recorded in connection with the Retail Fleet Optimization Plan (as defined in Note 10) and other restructuring initiatives, ~~transition~~as well as costs recorded in connection with our ~~acquisition~~acquisitions of Jimmy Choo and ~~transaction and transition costs recorded in connection with our agreement to acquire Versace (see Note 1, Note 4 and Note 9 to the accompanying consolidated financial statements).~~Versace.

Total Revenue

Total revenue increased ~~$107.2~~$189 million, or ~~9.3%~~15.1%, to ~~$1.254~~$1.442 billion for the three months ended September 28, 2019, compared to $1.253 billion for the three months ended September 29, 2018, ~~compared to $1.147 billion for the three months ended September 30, 2017,~~ which included net unfavorable foreign currency effects of approximately ~~$6.1~~$13 million, primarily related to the weakening of the ~~Canadian Dollar,~~Euro, the ~~Euro~~British Pound, and the Chinese Renminbi against the U.S. Dollar during the three months ended September ~~29, 2018~~28, 2019 as compared to the same prior year period. On a constant currency basis, our total revenue increased $202 million, or 16.1%. Total revenue for the three months ended September ~~29, 2018~~28, 2019 includes approximately ~~$116.7~~$228 million of incremental revenue attributable to ~~Jimmy Choo,~~Versace, which was acquired and consolidated into ~~the Company’s~~our results of operations effective ~~November 1, 2017.~~

~~The following table details revenues for~~December 31, 2018, as well as increased revenue from our ~~four~~Jimmy Choo business, ~~segments (dollars~~offset in ~~millions):~~

Three Months Ended % Change % of Total Revenue for
the Three Months Ended
September 29,
2018 September 30,
2017 $ Change As Reported Constant
Currency September 29,
2018 September 30,
2017
Total revenue:
MK Retail $ 643.9
$ 645.0
$ (1.1 ) (0.2 )% 0.5 % 51.4 % 56.3 %
MK Wholesale 457.8
463.6
(5.8 ) (1.3 )% (0.9 )% 36.5 % 40.4 %
MK Licensing 35.4
38.0
(2.6 ) (6.8 )% (6.8 )% 2.8 % 3.3 %
Michael Kors 1,137.1
1,146.6
(9.5 ) (0.8 )% (0.3 )% 90.7 % 100 %
Jimmy Choo 116.7
—
116.7
NM
NM
9.3 % — %
Total revenue $ 1,253.8
$ 1,146.6
$ 107.2
9.3 % 9.9 %

~~MK Retail~~

~~Revenue~~part by lower revenue from our Michael Kors ~~retail stores decreased $1.1~~business, as compared to the prior year.

Gross Profit

Gross profit increased $111 million, or ~~0.2%~~14.5%, to ~~$643.9~~$874 million for the three months ended September 28, 2019, compared to $763 million for the three months ended September 29, 2018, ~~compared to $645.0 million for the three months ended September 30, 2017,~~ which included net unfavorable foreign currency effects of ~~$4.5~~$9 million.

~~During~~ Gross profit as a percentage of total revenue decreased 30 basis points to 60.6% during the three months ended September ~~29, 2018, our comparable store sales decreased $11.3 million, or 2.1%, primarily attributable~~28, 2019, compared to lower sales from our women’s accessories, watches and jewelry product categories, offset in part by higher sales from women’s footwear and apparel. Our comparable store sales benefited approximately 190 basis points from the inclusion of e-commerce sales in comparable store sales. Our comparable store sales included net unfavorable foreign currency effects of approximately $3.9 million. On a constant currency basis, our comparable store sales decreased $7.4 million, or 1.3%.

~~Our non-comparable store sales increased $10.2 million~~60.9% during the three months ended September 29, 2018. The ~~increase~~decrease in ~~non-comparable store sales~~our gross profit margin was primarily attributable to ~~a net increase of 11 stores to 854~~lower gross profit margin for Michael Kors ~~retail stores~~primarily driven by increased markdowns during the three months ended September 28, 2019, as ofcompared to the three months ended September 29, 2018, ~~as well as due to newly renovated and expanded stores.~~partially offset by the inclusion of Versace, which benefited our gross margin 80 basis points.

~~MK Wholesale~~

~~Revenue from our Michael Kors wholesale customers decreased $5.8~~

Total Operating Expenses

Total operating expenses increased $226 million, or ~~1.3%~~39.4%, to ~~$457.8~~$799 million during the three months ended September 28, 2019, compared to $573 million for the three months ended September 29, 2018, compared to $463.6 million for the three months ended September 30, 2017. The decrease in our wholesale revenue was primarily attributable to lower sales of accessories and women's apparel, partially offset by increased sales of footwear during the three months ended September 29, 2018, compared to the three months ended September 30, 2017.

~~MK Licensing~~

Royalties earned on our Michael Kors licensing agreements decreased $2.6 million, or 6.8%, to $35.4 million for the three months ended September 29, 2018, compared to $38.0 million for the three months ended September 30, 2017. This decrease was primarily attributable to lower licensing revenues related to the sales of fashion watches and jewelry, largely offset by higher licensing revenues related to sales of Michael Kors ACCESS smartwatches.

~~Jimmy Choo~~

~~The Jimmy Choo business acquired on November 1, 2017 contributed approximately $116.7 million to total revenue for the three months ended September 29, 2018.~~

~~Gross Profit~~

Gross profit increased $72.3 million, or 10.5%, to $763.1 million for the three months ended September 29, 2018, compared to $690.8 million for the three months ended September 30, 2017, which included net unfavorable foreign currency effects of $3.4 million. Gross profit as a percentage of total revenue increased 70 basis points to 60.9% during the three months ended September 29, 2018, compared to 60.2% during the three months ended September 30, 2017. The increase in our gross profit margin was primarily attributable to the inclusion of Jimmy Choo, which benefited our gross margin 100 basis points, as well as an increase in gross profit margin from our MK Wholesale Segment of 130 basis points, primarily driven by lower costs of goods, partially offset by unfavorable geographic mix during three months ended September 29, 2018, as compared to the three months ended September 30, 2017. The increase in our gross profit margin was offset in part by a decrease in our gross profit margin from our MK Retail Segment of 150 basis points, primarily driven by increased markdowns, partially offset by lower cost of goods.

~~Total Operating Expenses~~

Total operating expenses increased $82.0 million, or 16.7%, to $573.7 million during the three months ended September 29, 2018, compared to $491.7 million for the three months ended September 30, 2017, which included incremental operating expenses of ~~$100.8~~$139 million associated with the recently acquired ~~Jimmy Choo~~Versace business. Our operating expenses included a net favorable foreign currency impact of approximately ~~$3.0~~$23 million. Total operating expenses increased to ~~45.8%~~55.4% as a percentage of total revenue for the three months ended September ~~29, 2018,~~28, 2019, compared to ~~42.9%~~45.7% for the three months ended September ~~30, 2017.~~29, 2018. The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$90.7~~$129 million, or ~~22.4%~~26.1%, to ~~$495.8~~$623 million during the three months ended September ~~29, 2018,~~28, 2019, compared to ~~$405.1~~$494 million for the three months ended September ~~30, 2017.~~29, 2018. The increase in selling, general and administrative expenses was primarily due to ~~the following:~~

incremental costs of ~~$83.9~~$123 million associated with the recently acquired ~~Jimmy Choo~~Versace business, which has been consolidated in our operations beginning on ~~November 1, 2017;~~December 31, 2018.

Corporate unallocated expenses, which are included within selling, general and

~~an increase of $10.8~~ administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $12 million, ~~in Michael Kors retail store-related costs, primarily comprised of increased advertising costs of $6.9 million.~~

or 52.2%, to $35 million during the three months ended September 28, 2019 as compared to $23 million for the three months ended September 29, 2018. Selling, general, and administrative expenses as a percentage of total revenue increased to ~~39.5%~~43.2% for the three months ended September 28, 2019, compared to 39.4% for the three months ended September 29, 2018, ~~compared to 35.3% for the three months ended September 30, 2017,~~ primarily due to the inclusion of expenses associated with the ~~Jimmy Choo~~Versace business, and increased retail ~~store-related~~store and e-commerce related costs ~~and increased corporate expenses~~ as a percentage of total revenue during the three months ended September ~~29, 2018,~~28, 2019, as compared to the three months ended September ~~30, 2017.~~29, 2018.

Depreciation and Amortization

Depreciation and amortization increased ~~$4.4~~$12 million, or ~~9.1%~~22.6%, to ~~$52.7~~$65 million during the three months ended September ~~29, 2018,~~28, 2019, compared to ~~$48.3~~$53 million for the three months ended September ~~30, 2017.~~29, 2018. The increase in depreciation and amortization expense was primarily attributable to incremental depreciation and amortization expense of ~~$8.2~~$15 million attributable to our ~~Jimmy Choo~~Versace business (including amortization of purchase accounting adjustments), partially offset by lower depreciation due to previously recorded ~~fixed asset~~property and equipment impairment charges. Depreciation and amortization increased to 4.5% as a percentage of total revenue ~~was flat at 4.2%~~ during the three months ended September ~~29, 2018 and~~28, 2019, compared to 4.2% for the three months ended September ~~30, 2017.~~29, 2018.

Impairment of Long-Lived Assets

During the three months ended September ~~29, 2018,~~28, 2019, we recognized long-lived asset impairment charges of ~~$7.0~~$104 million, which ~~were~~ primarily ~~comprised of $5.7 million of impairment charges~~ related to ~~underperforming Michael Kors retail store locations, some of which will be closed as part of our previously announced Retail Fleet Optimization Plan~~operating lease right-of-use assets largely driven by the negative impact from the situation in Hong Kong (see Note ~~9 and Note 12~~13 to the accompanying consolidated financial statements for additional information). During the three months ended September ~~30, 2017,~~29, 2018, we recognized long-lived asset impairment charges of approximately ~~$16.3~~$7 million, which were primarily related to underperforming Michael Kors retail store locations, some of which related to closures as part of our Retail Fleet Optimization Plan.

Restructuring and Other Charges

During the three months ended September 28, 2019, we recognized restructuring and other charges of $7 million, which primarily included other costs of $6 million primarily in connection with the acquisition of Versace (see Note 10 to the accompanying consolidated financial statements for additional information).

During the three months ended September 29, 2018, we recognized restructuring and other charges of ~~$18.2~~$19 million, which ~~included~~were comprised of $16 million of other costs and restructuring charges of ~~$2.2~~$3 million primarily recorded in connection with our Retail Fleet Optimization ~~Plan (see Note 9 to the accompanying consolidated financial statements for additional information) and transaction and transition costs of $16.0 million.~~Plan. The ~~transaction and transition~~other costs recorded during the three months ended September 29, 2018 included ~~$6.8~~$9 million ~~of transition costs recorded in connection with the Jimmy Choo acquisition and $9.2 million of transaction and transition costs~~ related to our agreement to acquire ~~Versace.~~

~~During the three months ended September 30, 2017, we recognized restructuring~~Versace and other charges of $22.0 million in connection with our Retail Fleet Optimization Plan, which included restructuring costs of $5.9 million in connection with our Retail Fleet Optimization Plan and transaction and transition costs of $16.1$7 million in connection with the Jimmy Choo acquisition. Restructuring and other charges are not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).

Income from Operations

As a result of the foregoing, income from operations decreased ~~$9.7~~$115 million, or ~~4.9%~~60.5%, to ~~$189.4~~$75 million during three months ended ended September ~~29, 2018,~~28, 2019, compared to ~~$199.1~~$190 million for the three months ended September ~~30, 2017.~~29, 2018. Income from operations as a percentage of total revenue decreased to ~~15.1%~~5.2% during the three months ended September ~~29, 2018,~~28, 2019, compared to ~~17.4%~~15.2% for the three months ended September ~~30, 2017.~~29, 2018. See Segment Information above for a reconciliation of our segment operating income to total operating income.

~~The following table details income from operations for our four business segments (dollars in millions):~~Interest Expense, net

Three Months Ended % of Total Revenue for
the Three Months Ended
September 29,
2018 September 30,
2017 $ Change % Change September 29,
2018 September 30,
2017
Income from operations:
MK Retail $ 67.9
$ 69.0
$ (1.1 ) (1.6 )% 10.5 % 10.7 %
MK Wholesale 130.1
119.6
10.5
8.8 % 28.4 % 25.8 %
MK Licensing 9.8
10.5
(0.7 ) (6.7 )% 27.7 % 27.6 %
Michael Kors 207.8
199.1
8.7
4.4 % 18.3 % 17.4 %
Jimmy Choo (18.4 ) —
(18.4 ) NM
(15.8 )% — %
Income from operations $ 189.4
$ 199.1
$ (9.7 ) (4.9 )% 15.1 % 17.4 %

~~MK Retail~~

~~Income from operations for our MK Retail segment~~Interest expense, net decreased ~~$1.1~~$3 million ~~or 1.6%,~~ to ~~$67.9~~$3 million during the three months ended September ~~29, 2018,~~28, 2019, compared to $69.0 million for the three months ended September 30, 2017. Income from operations as a percentage of retail revenue decreased 20 basis points from 10.7% for the three months ended September 30, 2017, to 10.5% during the three months ended September 29, 2018. The decrease in income from operations as a percentage of retail revenue was primarily due to a decrease in gross profit margin of 150 basis points, as previously discussed, largely offset by a decrease in operating expenses of 130 basis points. The decrease in operating expenses as a percentage of total revenue was primarily due to lower impairment and restructuring charges, offset in part by increased retail store related costs.

~~MK Wholesale~~

Income from operations for our MK Wholesale segment increased $10.5 million, or 8.8%, to $130.1 million during the three months ended September 29, 2018, compared to $119.6 million for the three months ended September 30, 2017. Income from operations as a percentage of wholesale revenue increased approximately 260 basis points from 25.8% for the three months ended September 30, 2017 to 28.4% during the three months ended September 29, 2018, which was attributable to an increase in our wholesale gross profit margin of approximately 130 basis points, as previously discussed, as well as a 130 basis point decrease in operating expenses as a percentage of wholesale revenue. The decrease in operating expenses as a percentage of total revenue was largely due to decreased distribution and selling costs.

~~MK Licensing~~

Income from operations for our MK Licensing segment decreased $0.7 million, or 6.7%, to $9.8 million during the three months ended September 29, 2018, compared to $10.5 million for the three months ended September 30, 2017. Income from operations as a percentage of licensing revenue increased slightly from 27.6% during the three months ended September 30, 2017 to 27.7% during the three months ended September 29, 2018.

~~Jimmy Choo~~

~~The Jimmy Choo business acquired on November 1, 2017 recorded a net loss from operations of $18.4~~$6 million for the three months ended September 29, 2018, ~~(after amortization of non-cash purchase accounting adjustments and transition related costs).~~

~~Interest Expense, net~~

~~Interest expense, net increased $5.1 million to $5.9 million during the three months ended September 29, 2018, compared to $0.8 million for the three months ended September 30, 2017,~~ primarily due to higher interest expense from long-term borrowings used to finance the acquisition of Jimmy Choo (see Note 10 to the accompanying consolidated financial statements for additional information). This increase was partially offset by a ~~$2.5~~$19 million reduction to interest expense related to the cross-currency swap used in the net investment hedge during the three months ended September 28, 2019, as compared to $3 million during the three months ended September 29, 2018, largely offset by increased interest expense attributable to higher borrowings than in prior year (see Note 1311 and Note 14 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss ~~(Gain)~~

During the three months ended September 28, 2019, we recognized a net foreign currency loss of $4 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

During the three months ended September 29, 2018, we recognized a net foreign currency loss of ~~$33.0~~$33 million, primarily attributable to a ~~$30.4~~$30 million unrealized loss related to a forward foreign currency exchange derivative contract entered into to mitigate foreign currency exchange risk ~~through the expected closing date of~~relating to the Versace acquisition.

During the three months ended September 30, 2017, we recognized a net foreign currency gain of $40.5 million, primarily attributable to a $36.7 million unrealized gain related to a forward foreign currency exchange derivative contract to hedge the transaction price of the Jimmy Choo business, as well as net gains on the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency of the applicable reporting units, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries (see Note 13 to the accompanying consolidated financial statements for additional information).

Provision for Income Taxes

We recognized ~~$14.9~~$4 million of income tax ~~expense~~benefit during the three months ended September ~~29, 2018,~~28, 2019, compared to ~~$36.4~~$15 million of income tax expense for the three months ended September ~~30, 2017.~~29, 2018. Our effective tax rate for the three months ended September ~~29, 2018,~~28, 2019, was ~~9.8%~~a benefit of 5.8%, compared to ~~15.2%~~a provision of 9.9% for the three months ended September ~~30, 2017.~~29, 2018. The decrease in our effective tax rate was primarily ~~due~~related to the realization of previously unrecognized tax benefits associated with ~~share-based compensation~~certain positions in Europe realized during the period and return to provision adjustments in the ~~favorable~~US and Europe, offset by the unfavorable impact of ~~the Tax Cuts and Jobs Act enacted~~tax deficits recognized on ~~December 22, 2017, which lowered the U.S. statutory federal tax rate for Fiscal 2019 to 21%. This decrease was partially offset by a lower favorable effect of our global financing activities~~shared based compensation during the three months ended September ~~29, 2018,~~28, 2019, compared to three months ended September 30, 2017. The global financing activities are related to our previously disclosed 2014 move of our principal executive office from Hong Kong to the United Kingdom (“U.K.”) and decision to become a U.K. tax resident. In connection with this decision, we funded our international growth strategy through intercompany debt financing arrangements between our U.S., U.K. and Switzerland subsidiaries in December 2015. Accordingly, due to the difference in the statutory income tax rates between these jurisdictions, we realized a lower effective tax rate.29, 2018.

Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.

Net Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest

During the three months ended September 29, 2018, ~~and September 30, 2017,~~ we recorded a net ~~losses~~loss attributable to the noncontrolling interest in our joint ventures of ~~$0.5 million and $0.2 million, respectively. These losses represent~~$1 million. This loss represents the share of income that is not attributable to the Company.

Net Income Attributable to ~~MKHL~~Capri

As a result of the foregoing, our net income ~~attributable to MKHL~~ decreased ~~$65.3~~$65 million, or ~~32.2%~~47.1%, to ~~$137.6~~$73 million during the three months ended September ~~29, 2018,~~28, 2019, compared to ~~$202.9~~$138 million for the three months ended September ~~30, 2017.~~29, 2018.

Segment Information

Versace



	Three Months Ended
	September 28, 2019			September 29, 2018			$ Change
Revenues	$	228		$	—		NM
Income from operations	9			—			NM
Operating margin	3.9		%	—		%

___________________

NM Not meaningful

Revenues

The Versace business acquired on December 31, 2018 contributed $228 million to our total revenue during the three months ended September 28, 2019.

Income from Operations

During the three months ended September 28, 2019, we recorded income from operations of $9 million (after amortization of non-cash purchase accounting adjustments).

Jimmy Choo



	Three Months Ended									% Change
	September 28, 2019			September 29, 2018			$ Change			As Reported		Constant Currency
Revenues	$	125		$	116		$	9		7.8	%	9.5	%
Loss from operations	(10		)	(9		)	(1		)	11.1	%
Operating margin	(8.0		)%	(7.8		)%

Revenues

Revenue from Jimmy Choo increased $9 million, or 7.8%, to $125 million during the three months ended September 28, 2019, compared to $116 million for the three months ended September 29, 2018, which included unfavorable foreign currency effects of $2 million. On a constant currency basis, revenue increased $11 million, or 9.5% primarily due to higher women’s footwear sales.

Loss from Operations

Loss from operations for our Jimmy Choo segment increased $1 million, or 11.1%, to $10 million during the three months ended September 28, 2019, compared to $9 million for the three months ended September 29, 2018. Loss from operations as a percentage of Jimmy Choo revenue increased 20 basis points from (7.8)% for the three months ended September 29, 2018, to (8.0)% during the three months ended September 28, 2019.

Michael Kors



	Three Months Ended									% Change
	September 28, 2019			September 29, 2018			$ Change			As Reported		Constant Currency
Revenues	$	1,089		$	1,137		$	(48	)	(4.2	)%	(3.3	)%
Income from operations	222			248			(26		)	(10.5	)%
Operating margin	20.4		%	21.8		%

Revenues

Michael Kors revenues decreased $48 million, or 4.2%, to $1.089 billion during the three months ended September 28, 2019, compared to $1.137 billion for the three months ended September 29, 2018, which included unfavorable foreign currency effects of $11 million. On a constant currency basis, revenue decreased $37 million, or 3.3%. The decrease in revenues was primarily due to:

a $56 million decrease in revenues, primarily driven by lower sales of women’s accessories and footwear, partially offset by increased sales of men’s apparel.

This decrease was partially offset by:

an increase in comparable store sales of $3 million, including net unfavorable foreign currency effects of $6 million, which was primarily attributable to higher sales from women’s footwear, women’s apparel and men’s accessories, offset in part by lower sales from our watches, women’s accessories and jewelry product categories. Our comparable store sales benefited approximately 220 basis points from the inclusion of e-commerce sales.

Income from Operations

Income from operations for our Michael Kors segment decreased $26 million, or 10.5%, to $222 million during the three months ended September 28, 2019, compared to $248 million for the three months ended September 29, 2018. Income from operations as a percentage of Michael Kors revenue declined 140 basis points from 21.8% for the three months ended September 29, 2018, to 20.4% during the three months ended September 28, 2019, largely due to a decrease in gross profit margin, as previously discussed.

Results of Operations

Comparison of the six months ended September ~~29, 2018~~28, 2019 with the sixmonths ended September ~~30, 2017~~29, 2018

The following table details the results of our operations for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017,~~29, 2018, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):


	Six Months Ended						$ Change			% Change		% of Total Revenue for the Six Months Ended				Six Months Ended						$ Change			% Change		% of Total Revenue for the Six Months Ended
	September 29, 2018			September 30, 2017			$ Change			% Change		September 29, 2018		September 30, 2017		September 28, 2019			September 29, 2018			$ Change			% Change		September 28, 2019		September 29, 2018
Statements of Operations Data:
Total revenue	$	2,456.3		$	2,099.0		$	357.3		17.0	%					$	2,788		$	2,456		$	332		13.5	%
Cost of goods sold	942.4			833.5			108.9			13.1	%	38.4	%	39.7	%	1,080			942			138			14.6	%	38.7	%	38.4	%
Gross profit	1,513.9			1,265.5			248.4			19.6	%	61.6	%	60.3	%	1,708			1,514			194			12.8	%	61.3	%	61.6	%
Selling, general and administrative expenses	959.9			781.5			178.4			22.8	%	39.1	%	37.2	%	1,221			959			262			27.3	%	43.8	%	39.0	%
Depreciation and amortization	108.6			95.9			12.7			13.2	%	4.4	%	4.6	%	125			109			16			14.7	%	4.5	%	4.4	%
Impairment of long-lived assets	11.3			16.3			(5.0		)	(30.7	)%	0.5	%	0.8	%	201			11			190			NM		7.2	%	0.4	%
Restructuring and other charges ⁽¹⁾	29.5			23.3			6.2			26.6	%	1.2	%	1.1	%	22			30			(8		)	(26.7	)%	0.8	%	1.2	%
Total operating expenses	1,109.3			917.0			192.3			21.0	%	45.2	%	43.7	%	1,569			1,109			460			41.5	%	56.3	%	45.2	%
Income from operations	404.6			348.5			56.1			16.1	%	16.5	%	16.6	%	139			405			(266		)	(65.7	)%	5.0	%	16.5	%
Other income, net	(2.3		)	(0.9		)	(1.4		)	NM		0.1	%	—	%	(3		)	(2		)	(1		)	50.0	%	(0.1	)%	(0.1	)%
Interest expense, net	13.4			1.9			11.5			NM		0.5	%	0.1	%	16			14			2			14.3	%	0.6	%	0.6	%
Foreign currency loss (gain)	35.9			(41.7		)	77.6			NM		1.5	%	(2.0	)%
Foreign currency loss																6			36			(30		)	(83.3	)%	0.2	%	1.5	%
Income before provision for income taxes	357.6			389.2			(31.6		)	(8.1	)%	14.6	%	18.5	%	120			357			(237		)	(66.4	)%	4.3	%	14.5	%
Provision for income taxes	34.3			61.0			(26.7		)	(43.8	)%	1.4	%	2.9	%	2			34			(32		)	(94.1	)%	0.1	%	1.4	%
Net income	323.3			328.2			(4.9		)	(1.5	)%					118			323			(205		)	(63.5	)%
Less: Net loss attributable to noncontrolling interest	(0.7		)	(0.2		)	(0.5		)	NM
Net income attributable to MKHL	$	324.0		$	328.4		$	(4.4	)	(1.3	)%
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest																—			(1		)	1			NM
Net income attributable to Capri																$	118		$	324		$	(206	)	(63.6	)%

___________________



British Virgin Islands	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Ordinary Shares, no par value	CPRI	New 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.	x☒	Yes¨	☐	No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).	x☒	Yes¨	☐	No



Large accelerated filer	ý☒	Accelerated filer	¨ ☐
Non-accelerated filer	¨ ~~(Do not check if smaller reporting company)~~ ☐	Smaller reporting company	¨ ☐
		Emerging growth company	¨☐
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.			¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).			¨☐	Yesx	☒	No



		Page No.
	PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	3

	Consolidated Balance Sheets (unaudited) as of September ~~29, 2018~~28, 2019 and March ~~31, 2018~~30, 2019	3

	Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three months and six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017~~29, 2018	4

	Consolidated Statements of Shareholders’ Equity (unaudited) for the three months and six months ended September 28, 2019 and September 29, 2018	5

	Consolidated Statements of Cash Flows (unaudited) for the six months ended September ~~29, 2018~~28, 2019 and September ~~30, 2017~~29, 2018	67

	Notes to Consolidated Financial Statements (unaudited)	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3031

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5152

Item 4.	Controls and Procedures	5354

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	5455

Item 1A.	Risk Factors	5455

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5455

Item 6.	Exhibits	5455

Signatures		5556



ý☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Severance and benefit costs			Lease-related costs			Total
Balance at March 31, 2018	$	0.2		$	44.6		$	44.8
Additions charged to expense	0.3			5.1			5.4
Balance sheet reclassifications ⁽¹⁾	—			1.1			1.1
Payments	(0.1		)	(16.0		)	(16.1		)
Balance at September 29, 2018	$	0.4		$	34.8		$	35.2



	Fair value at September 29, 2018 using:						Fair value at March 31, 2018 using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivative assets:
Forward foreign currency exchange contracts	$	—	$	4.3	$	—	$	—	$	—	$	—
Net investment hedges	—		6.2		—		—		—		—
Total derivative assets	$	—	$	10.5	$	—	$	—	$	—	$	—

Derivative liabilities:
Forward foreign currency exchange contracts	$	—	$	30.8	$	—	$	—	$	7.7	$	—
Net investment hedges	—		1.6		—		—		—		—
Total derivative liabilities	$	—	$	32.4	$	—	$	—	$	7.7	$	—



	September 29, 2018				March 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
4.000% Senior Notes	$	444.9	$	430.1	$	444.5	$	448.1
Term Loan	$	58.8	$	59.4	$	229.0	$	231.2
Revolving Credit Facilities	$	255.0	$	255.0	$	200.0	$	200.0



	Three Months Ended September 30, 2017						Six Months Ended September 30, 2017
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge		Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Fixed Assets	$	13.4	$	1.5	$	11.9	$	13.4	$	1.5	$	11.9
Lease Rights	3.6		0.2		3.4		3.6		0.2		3.4
Customer Relationships	1.0		—		1.0		1.0		—		1.0
Total	$	18.0	$	1.7	$	16.3	$	18.0	$	1.7	$	16.3



	Forward Currency Exchange Contracts				Net Investment Hedges				Acquisition Hedges
	September 29, 2018		March 31, 2018		September 29, 2018		March 31, 2018		September 29, 2018		March 31, 2018
Assets subject to master netting arrangements	$	4.3	$	—	$	6.2	$	—	$	—	$	—
Liabilities subject to master netting arrangements	$	0.4	$	7.7	$	1.6	$	—	$	17.5	$	—
Derivative assets, net	$	3.9	$	—	$	6.2	$	—	$	—	$	—
Derivative liabilities, net	$	—	$	7.7	$	1.6	$	—	$	30.4	$	—



	Three Months Ended
	Pre-Tax (Gain) Loss Reclassified from Accumulated OCI					Location of (Gain) Loss recognized	Total Cost of Sales
	September 29, 2018		September 30, 2017			Location of (Gain) Loss recognized	September 29, 2018		September 30, 2017
Designated forward currency exchange contracts	$	2.0	$	(1.3	)	Cost of Sales	$	490.7	$	455.8



	Options		Service-Based RSUs		Performance-Based RSUs
Outstanding/Unvested at March 30, 2019	2,131,259		3,839,862		737,074
Granted	—		1,869,918		169,817
Exercised/Vested	—		(711,173	)	(53,025	)
Decrease due to performance condition	—		—		(39,999	)
Canceled/forfeited	(6,452	)	(120,970	)	—
Outstanding/Unvested at September 28, 2019	2,124,807		4,877,637		813,867



	Options		Restricted Shares		Service-Based RSUs		Performance-Based RSUs
Outstanding/Unvested at March 31, 2018	3,796,620		64,148		2,127,517		657,532
Granted	224,582		—		808,512		166,617
Exercised/Vested	(1,521,633	)	(53,473	)	(590,765	)	(105,900	)
Decrease due to performance condition	—		—		—		(101,744	)
Canceled/forfeited	(24,869	)	(429	)	(115,419	)	(29,477	)
Outstanding/Unvested at September 29, 2018	2,474,700		10,246		2,229,845		587,028


⁽²⁾	Recorded as short-term debt in our consolidated balance sheets as of September ~~29, 2018~~28, 2019 and March ~~31, 2018.~~30, 2019.


⁽³⁾	~~The~~ ~~$1.0 billion~~ ~~facility was fully utilized to finance a portion of the purchase price of our acquisition of Jimmy Choo on November 1, 2017, a large portion of which was repaid as of September 29, 2018. See~~ ~~Note 4to the accompanying consolidated financial statements~~ ~~for additional information.~~


⁽⁴⁾	Recorded as long-term debt in our consolidated balance sheets as of September ~~29, 2018~~28, 2019 and March ~~31, 2018. Borrowings~~30, 2019, except for the current portion of $80 million outstanding ~~as of~~under the 2018 Term Loan Facility, which was recorded within short-term debt at September ~~29, 2018 were repaid in full during the third quarter of Fiscal~~28, 2019 and March 30, 2019.


⁽¹⁾	The share-repurchase program expired on May 25, 2019.



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximated Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (in millions)
July 1 – July 28	—	$	—	—	$	542.2
July 29 – August 25	11,910	$	65.76	—	$	542.2
August 26 – September 29	5,767	$	72.06	—	$	542.2
	17,677			—




	~~MICHAEL KORS~~CAPRI HOLDINGS LIMITED

	By:	/s/ John D. Idol
	Name:	John D. Idol
	Title:	Chairman & Chief Executive Officer

	By:	/s/ Thomas J. Edwards, Jr.
	Name:	Thomas J. Edwards, Jr.
	Title:	Executive Vice President, Chief Financial Officer and Chief Operating Officer ~~and Treasurer~~




Exhibit No.			Description


~~2.1~~10.1			~~Stock Purchase~~ Agreement ~~dated as of September 24, 2018 by~~ and among Allegra Donata Versace Beck, Donatella Versace, Santo Versace, Borgo Luxembourg S.À R.L., Blackstone GPV Capital Partners (Mauritius) VI-D FDI Ltd., Blackstone GPV Tactical Partners (Mauritius)—N Ltd.General Release between Pascale Meyran and Michael Kors ~~Holdings Limited (included as Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 001-35368)~~(USA), ~~filed on September 25, 2018 and incorporated herein by reference).~~Inc., dated July 9, 2019.

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1			The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September ~~29, 2018,~~28, 2019, formatted in Inline eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statements of Shareholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.