UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June ~~29, 2019~~27, 2020



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

For the transition period from to

Commission file number: 001-35368


CAPRI HOLDINGS LTD

(Exact Name of Registrant as Specified in Its Charter)



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

33 Kingsway

London,, United Kingdom

WC2B 6UF

(Address of principal executive offices)

(Registrant’s telephone number, including area code: 44207632 ~~8600~~)8600)

Securities registered pursuant to Section 12(b) of the Act:



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.

☒

Yes

☐

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).

☒

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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).

☐

~~Yes~~

☒☐

Yes

☒

As of ~~August 2, 2019,~~July 29, 2020, Capri Holdings Limited had ~~151,579,407~~150,344,703 ordinary shares outstanding.

TABLE OF CONTENTS


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

~~TABLE OF CONTENTS~~



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

	Consolidated Balance Sheets (unaudited) as of June ~~29, 2019~~27, 2020 and March ~~30, 2019~~31, 2020	3

			Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited) for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019	4

			Consolidated Statements of Shareholders’ Equity (unaudited) for the three months ended June 27, 2020 and June 29, 2019	5

			Consolidated Statements of Cash Flows (unaudited) for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019	6

			Notes to Consolidated Financial Statements (unaudited)	7

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2928

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	4542

Item 4.			Controls and Procedures	4744

			PART II OTHER INFORMATION

Item 1.			Legal Proceedings	4845

Item 1A.			Risk Factors	4845

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4845

Item 6.			Exhibits	4845

Signatures				49	46

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)


	June 29, 2019			March 30, 2019				June 27, 2020		March 28, 2020
Assets							Assets
Current assets							Current assets
Cash and cash equivalents	$	160		$	172		Cash and cash equivalents	$	207	$	592
Receivables, net	310			383			Receivables, net	183		308
Inventories	1,016			953
Inventories, net							Inventories, net	948		827
Prepaid expenses and other current assets	224			221			Prepaid expenses and other current assets	151		167
Total current assets	1,710			1,729			Total current assets	1,489		1,894
Property and equipment, net	608			615			Property and equipment, net	541		561
Operating lease right-of-use assets	1,718			—			Operating lease right-of-use assets	1,641		1,625
Intangible assets, net	2,250			2,293			Intangible assets, net	1,977		1,986
Goodwill	1,652			1,659			Goodwill	1,490		1,488
Deferred tax assets	149			112			Deferred tax assets	226		225
Other assets	221			242			Other assets	169		167
Total assets	$	8,308		$	6,650		Total assets	$	7,533	$	7,946
Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
Liabilities and Shareholders’ Equity							Liabilities and Shareholders’ Equity
Current liabilities							Current liabilities
Accounts payable	$	355		$	371		Accounts payable	$	596	$	428
Accrued payroll and payroll related expenses	96			133			Accrued payroll and payroll related expenses	94		93
Accrued income taxes	36			34			Accrued income taxes	34		42
Current operating lease liabilities	384			—
Short-term operating lease liabilities							Short-term operating lease liabilities	431		430
Short-term debt	514			630			Short-term debt	191		167
Accrued expenses and other current liabilities	283			374			Accrued expenses and other current liabilities	243		241
Total current liabilities	1,668			1,542			Total current liabilities	1,589		1,401
Long-term operating lease liabilities	1,754			—			Long-term operating lease liabilities	1,751		1,758
Deferred rent	—			132
Deferred tax liabilities	431			438			Deferred tax liabilities	465		465
Long-term debt	1,917			1,936			Long-term debt	1,577		2,012
Other long-term liabilities	210			166			Other long-term liabilities	144		142
Total liabilities	5,980			4,214			Total liabilities	5,526		5,778
Commitments and contingencies							Commitments and contingencies
Redeemable noncontrolling interest	4			4
Shareholders’ equity							Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized; 216,742,279 shares issued and 151,565,342 outstanding at June 29, 2019; 216,050,939 shares issued and 150,932,306 outstanding at March 30, 2019	—			—
Treasury shares, at cost (65,176,937 shares at June 29, 2019 and 65,118,633 shares at March 30, 2019)	(3,225		)	(3,223		)
Ordinary shares, 0 par value; 650,000,000 shares authorized; 218,272,709 shares issued and 150,340,192 outstanding at June 27, 2020; 217,320,010 shares issued and 149,425,612 outstanding at March 28, 2020							Ordinary shares, 0 par value; 650,000,000 shares authorized; 218,272,709 shares issued and 150,340,192 outstanding at June 27, 2020; 217,320,010 shares issued and 149,425,612 outstanding at March 28, 2020	—		—
Treasury shares, at cost (67,932,517 shares at June 27, 2020 and 67,894,398 shares at March 28, 2020)							Treasury shares, at cost (67,932,517 shares at June 27, 2020 and 67,894,398 shares at March 28, 2020)	(3,326)		(3,325)
Additional paid-in capital	1,039			1,011			Additional paid-in capital	1,109		1,085
Accumulated other comprehensive loss	(93		)	(66		)
Accumulated other comprehensive income							Accumulated other comprehensive income	71		75
Retained earnings	4,600			4,707			Retained earnings	4,152		4,332
Total shareholders’ equity of Capri	2,321			2,429			Total shareholders’ equity of Capri	2,006		2,167
Noncontrolling interest	3			3			Noncontrolling interest	1		1
Total shareholders’ equity	2,324			2,432			Total shareholders’ equity	2,007		2,168
Total liabilities and shareholders’ equity	$	8,308		$	6,650		Total liabilities and shareholders’ equity	$	7,533	$	7,946

See accompanying notes to consolidated financial statements.

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(In millions, except share and per share data)

(Unaudited)


	Three Months Ended
	June 27, 2020		June 29, 2019
Total revenue	$	451	$	1,346
Cost of goods sold	149		512
Gross profit	302		834
Selling, general and administrative expenses	402		598
Depreciation and amortization	54		60
Impairment of assets	—		97
Restructuring and other charges	8		15
Total operating expenses	464		770
(Loss) income from operations	(162)		64
Other income, net	(1)		(2)
Interest expense, net	17		13
Foreign currency (gain) loss	(3)		2
(Loss) income before provision for income taxes	(175)		51
Provision for income taxes	5		6


Net (loss) income attributable to Capri	$	(180)	$	45

Weighted average ordinary shares outstanding:
Basic	149,556,310		151,049,572
Diluted	149,556,310		152,334,153
Net (loss) income per ordinary share attributable to Capri:
Basic	$	(1.21)	$	0.30
Diluted	$	(1.21)	$	0.30

Statements of Comprehensive (Loss) Income:
Net (loss) income	$	(180)	$	45
Foreign currency translation adjustments	(3)		(25)
Net loss on derivatives	(1)		(2)



Comprehensive (loss) income attributable to Capri	$	(184)	$	18

Three Months Ended
June 29,
2019 June 30,
2018
Total revenue $ 1,346
$ 1,203
Cost of goods sold 512
452
Gross profit 834
751
Selling, general and administrative expenses 598
465
Depreciation and amortization 60
56
Impairment of long-lived assets 97
4
Restructuring and other charges⁽¹⁾
15
11
Total operating expenses 770
536
Income from operations 64
215
Other income, net (2 ) (1 )
Interest expense, net 13
8
Foreign currency loss 2
3
Income before provision for income taxes 51
205
Provision for income taxes 6
19
Net income attributable to Capri $ 45
$ 186

Weighted average ordinary shares outstanding:
Basic 151,049,572
149,502,101
Diluted 152,334,153
152,399,655
Net income per ordinary share attributable to Capri:
Basic $ 0.30
$ 1.25
Diluted $ 0.30
$ 1.22

Statements of Comprehensive Income:
Net income $ 45
$ 186
Foreign currency translation adjustments (25 ) (103 )
Net (loss) gain on derivatives (2 ) 12
Comprehensive income attributable to Capri $ 18
$ 95


⁽¹⁾	Restructuring and other charges includes store closure costs recorded in connection with the Michael Kors Retail Fleet Optimization Plan (as defined in Note 10) and other restructuring initiatives, and costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited.

See accompanying notes to consolidated financial statements.

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 Capri Non-controlling Interests Total Equity
Shares Amounts Shares Amounts
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 —
—
—
—
—
—
45
45
—
45
Other comprehensive loss —
—
—
—
—
(27 ) —
(27 ) —
(27 )
Total comprehensive income —
—
—
—
—
—
—
18
—
18
Vesting of restricted awards, net of forfeitures 691
—
—
—
—
—
—
—
—
—
Equity compensation expense —
—
28
—
—
—
—
28
—
28
Purchase of treasury shares —
—
—
(58 ) (2 ) —
—
(2 ) —
(2 )
Balance at June 29, 2019 216,742
$ —
$ 1,039
(65,177 ) $ (3,225 ) $ (93 ) $ 4,600
$ 2,321
$ 3
$ 2,324


	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					Shares			Amounts


Balance at March 28, 2020	217,320	$	—	$	1,085	(67,894)		$	(3,325)		$	75	$	4,332	$	2,167	$	1	$	2,168
Net loss	—	—		—		—		—			—		(180)		(180)		—		(180)
Other comprehensive loss	—	—		—		—		—			(4)		—		(4)		—		(4)
Total comprehensive loss	—	—		—		—		—			—		—		(184)		—		(184)
Vesting of restricted awards, net of forfeitures	953	—		—		—		—			—		—		—		—		—

Equity compensation expense	—	—		24		—		—			—		—		24		—		24
Purchase of treasury shares	—	—		—		(38)		(1)			—		—		(1)		—		(1)


Balance at June 27, 2020	218,273	$	—	$	1,109	(67,932)		$	(3,326)		$	71	$	4,152	$	2,006	$	1	$	2,007

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
(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 —
—
—
—
—
—
186
186
—
186
Other comprehensive loss —
—
—
—
—
(91 ) —
(91 ) —
(91 )
Total comprehensive income —
—
—
—
—
—
—
95
—
95
Vesting of restricted awards, net of forfeitures 600
—
—
—
—
—
—
—
—
—
Exercise of employee share options 619
—
6
—
—
—
—
6
—
6
Equity compensation expense —
—
13
—
—
—
—
13
—
13
Purchase of treasury shares —
—
—
(1,748 ) (106 ) —
—
(106 ) —
(106 )
Balance at June 30, 2018 212,210
$ —
$ 850
(63,041 ) $ (3,122 ) $ (40 ) $ 4,350
$ 2,038
$ 4
$ 2,042


	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					Shares			Amounts
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 (ASC 842)	—	—		—		—		—			—		(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	—	—		—		—		—			—		45		45		—		45
Other comprehensive loss	—	—		—		—		—			(27)		—		(27)		—		(27)
Total comprehensive income	—	—		—		—		—			—		—		18		—		18
Vesting of restricted awards, net of forfeitures	691	—		—		—		—			—		—		—		—		—

Equity compensation expense	—	—		28		—		—			—		—		28		—		28
Purchase of treasury shares	—	—		—		(58)		(2)			—		—		(2)		—		(2)

Balance at June 29, 2019	216,742	$	—	$	1,039	(65,177)		$	(3,225)		$	(93)	$	4,600	$	2,321	$	3	$	2,324

See accompanying notes to consolidated financial statements.

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three Months Ended							Three Months Ended
	June 29, 2019			June 30, 2018				June 27, 2020		June 29, 2019
Cash flows from operating activities							Cash flows from operating activities
Net income	$	45		$	186
Net (loss) income							Net (loss) income	$	(180)	$	45
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	60			56			Depreciation and amortization	54		60
Equity compensation expense	28			13			Equity compensation expense	24		28
Losses on store lease exits	—			2

Deferred income taxes	2			13			Deferred income taxes	—		2
Impairment of long-lived assets	97			4
Impairment of assets							Impairment of assets	—		97
Changes to lease related balances, net	(16		)	—			Changes to lease related balances, net	(24)		(16)
Tax deficit (benefit) on exercise of share options	2			(11		)	Tax deficit (benefit) on exercise of share options	5		2

Amortization of deferred financing costs	1			1			Amortization of deferred financing costs	1		1
Foreign currency losses	2			3

Foreign currency (gains) losses							Foreign currency (gains) losses	(3)		2
Other non-cash charges							Other non-cash charges	(6)		—
Change in assets and liabilities:							Change in assets and liabilities:
Receivables, net	73			24			Receivables, net	131		73
Inventories	(63		)	(52		)
Inventories, net							Inventories, net	(119)		(63)
Prepaid expenses and other current assets	(32		)	(21		)	Prepaid expenses and other current assets	15		(32)
Accounts payable	(8		)	(4		)	Accounts payable	167		(8)
Accrued expenses and other current liabilities	(51		)	(32		)	Accrued expenses and other current liabilities	—		(51)

Other long-term assets and liabilities	18			24			Other long-term assets and liabilities	2		18
Net cash provided by operating activities	158			206			Net cash provided by operating activities	67		158
Cash flows from investing activities							Cash flows from investing activities
Capital expenditures	(54		)	(41		)	Capital expenditures	(32)		(54)

Cash paid for business acquisitions, net of cash acquired	(1		)	—			Cash paid for business acquisitions, net of cash acquired	—		(1)
Settlement of a net investment hedges	23			—

Settlement of a net investment hedge							Settlement of a net investment hedge	—		23
Net cash used in investing activities	(32		)	(41		)	Net cash used in investing activities	(32)		(32)
Cash flows from financing activities							Cash flows from financing activities
Debt borrowings	390			434			Debt borrowings	396		390
Debt repayments	(526		)	(487		)	Debt repayments	(811)		(526)
Repurchase of treasury shares	(2		)	(106		)
Exercise of employee share options	—			6
Debt issuance costs							Debt issuance costs	(4)		—
Purchase of treasury shares							Purchase of treasury shares	(1)		(2)

Net cash used in financing activities	(138		)	(153		)	Net cash used in financing activities	(420)		(138)
Effect of exchange rate changes on cash and cash equivalents	—			(5		)	Effect of exchange rate changes on cash and cash equivalents	—		—
Net (decrease) increase in cash and cash equivalents	(12		)	7
Net decrease in cash and cash equivalents							Net decrease in cash and cash equivalents	(385)		(12)
Beginning of period	172			163			Beginning of period	592		172
End of period	$	160		$	170		End of period	$	207	$	160
Supplemental disclosures of cash flow information							Supplemental disclosures of cash flow information
Cash paid for interest	$	30		$	13		Cash paid for interest	$	20	$	30
Cash paid for income taxes	$	12		$	24
Cash received, net of cash paid, for income taxes							Cash received, net of cash paid, for income taxes	$	(6)	$	12
Supplemental disclosure of non-cash investing and financing activities							Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures	$	23		$	28		Accrued capital expenditures	$	20	$	23

See accompanying notes to consolidated financial statements.

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

The Company was incorporated in the British Virgin Islands (“BVI”) on December 13, 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 tradenames and related trademarks and logos. The Company ~~completed the acquisition of Gianni Versace S.r.l. (“Versace”) on December 31, 2018. As a result, the Company now~~ operates in ~~three~~3 reportable segments: Versace, Jimmy Choo and Michael Kors. See Note 1816 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 June ~~29, 2019~~27, 2020 and for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019 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 ~~30, 2019,~~28, 2020, as filed with the Securities and Exchange Commission on ~~May 29, 2019,~~July 8, 2020, 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 months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 2019, are based on 13-week periods.

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 of ~~gift card breakage, estimates of~~ inventory ~~recovery,~~net realizable value, the valuation of share-based compensation, the valuation of deferred taxes and the valuation of ~~and the estimated useful lives used for amortization and depreciation of~~goodwill, intangible assets and property and ~~equipment.~~equipment, along with the estimated useful lives assigned to these assets. 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, including the realignment of the Company’s segment reporting structure in the fourth quarter of Fiscal 2019, as further described in Note 18.~~presentation.

Seasonality

The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences greater sales during its third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during its first fiscal quarter.

Inventories, net

Inventories mainly consist of finished goods with the exception of raw materials ~~inventory~~and work in process inventory. The combined total of ~~$23 million~~raw materials and ~~$25 million, respectively,~~work in process inventory recorded on the ~~Company’s~~Company's consolidated balance sheets was $27 million as of both June 27, 2020 and March 28, 2020.

The net realizable value of the Company's inventory as of June ~~29, 2019~~27, 2020 and March ~~30, 2019.~~

28, 2020 includes the expected adverse impacts of the COVID-19 pandemic. This includes the impact from temporary retail store closures, wholesale customer store closures, reductions in retail store traffic, a decline in international tourism and a decrease in consumer consumption.

Derivative Financial Instruments

Forward Foreign Currency Exchange Contracts

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

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 a 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 (loss) 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 (loss) 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 loss (gain) ~~loss~~ in the Company’s consolidated statements of operations and comprehensive (loss) income. The Company classifies cash flows relating to its forward foreign currency exchange contracts related to the 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 its U.S. Dollars and these foreign currencies. The Company has elected the spot method of designating these contracts under ASU 2017-12 and has designated these contracts as net investment hedges. The net gain or ~~loss~~(loss) on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive (loss) 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 (loss) income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the ~~hedged~~ net investment is sold, diluted or liquidated.

Interest Rate Swap Agreements

The Company also uses interest rate swap agreements to hedge the variability of its cash flows resulting from floating interest rates on the Company's borrowings. When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive (loss) income and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

Leases

On March 31, 2019, the Company adopted ASU 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. The Company adopted the new standard recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating the comparative prior year periods.

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 June 2024. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its restructuring activities, as discussed in Note 8. 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 expected interest rate it would incur 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 cash flow information related to leases (in millions):

Three Months Ended

June 27, 2020

June 29, 2019

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

Operating cash flows used in operating leases

⁽¹⁾

120

⁽¹⁾Operating cash flows used in operating leases for the three months ended June 27, 2020 reflect $85 million of rent payments that have been deferred due to the COVID-19 pandemic.

During the three months ended June 27, 2020 and June 29, 2019, the Company recorded sublease income of $2 million and $1 million, respectively, within selling, general, and administrative expenses. During the three months ended June 27, 2020, the Company recorded $15 million in rent relief for rent concessions negotiated in connection with COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as variable lease costs within selling, general and administrative expenses.

Net (Loss) Income per Share

The Company’s basic net (loss) income per ordinary share is calculated by dividing net (loss) income by the weighted average number of ordinary shares outstanding during the period. Diluted net (loss) 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”~~("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 (loss) income per ordinary share and diluted net ~~income~~loss per ordinary share are as follows (in millions, except share and per share data):


	Three Months Ended
	June 27, 2020		June 29, 2019
Numerator:
Net (loss) income attributable to Capri	$	(180)	$	45
Denominator:
Basic weighted average shares	149,556,310		151,049,572
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units	—		1,284,581
Diluted weighted average shares	149,556,310		152,334,153

Basic net (loss) income per share ⁽¹⁾	$	(1.21)	$	0.30
Diluted net (loss) income per share ⁽¹⁾	$	(1.21)	$	0.30

Three Months Ended
June 29,
2019 June 30,
2018
Numerator:
Net income attributable to Capri $ 45
$ 186
Denominator:
Basic weighted average shares 151,049,572
149,502,101
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units 1,284,581
2,897,554
Diluted weighted average shares 152,334,153
152,399,655

Basic net income per share ⁽¹⁾
$ 0.30
$ 1.25
Diluted net income per share ⁽¹⁾
$ 0.30
$ 1.22


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

Share equivalents of ~~2,374,578 shares~~5,388,905 and ~~648,398 shares~~2,374,578 for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 2019, respectively, have been excluded from the above calculations due to their anti-dilutive effect.

Diluted net loss per share attributable to Capri for the three months ended June 27, 2020 excluded all potentially dilutive securities because there was a net loss attributable to Capri for the period and, as such, the inclusion of these securities would have been anti-dilutive.

See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~30, 2019~~28, 2020 for a complete disclosure of the Company’s significant accounting policies.

Recently Adopted Accounting Pronouncements

~~Lease Accounting~~Measurement of Credit Losses on Financial Instruments

On March ~~31, 2019,~~29, 2020, the Company adopted ASU ~~2016-02, “Leases (Topic 842)~~No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”),” which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The Financial Accounting Standards Board has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires ~~lessees~~entities to recognize an allowance for credit losses using a ~~lease liability~~forward-looking expected loss impairment model, taking into consideration historical experience, current conditions and supportable forecasts that impact collectibility. The adoption of this update did not have a ~~right-of-use asset~~material impact 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, “Company's consolidated financial statements.

~~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~~

Implementation Costs Associated with ~~its implementation of ASU 2016-02,~~Cloud Computing Arrangements

On March 29, 2020, the Company adopted ~~the package of three practical expedients, allowing it to carry forward its previous lease classification~~ASU No. 2018-15, “Intangibles – Goodwill and ~~embedded lease evaluations and not to reassess initial direct costs as of the date of adoption. The Company also adopted, the practical expedient allowing it to combine lease and non-lease components~~Other – Internal-Use Software: Customer's Accounting for ~~its real estate leases. Lastly, the Company adopted the practical expedient provided by~~ Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU ~~2018-11, “Leases (Topic 842): Targeted Improvements,” allowing it to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating the comparative prior year periods~~.

~~The Company’s existing lease obligations,~~2018-15"), 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 balance sheet adjustments recorded on March 31, 2019 in connection with the Company’s adoption of ASU 2016-02 (in millions):~~

March 30, 2019
As Reported under ASC 840 ASC 842 Adjustments March 31, 2019
As Reported Under ASC 842
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 374
(72 )
⁽⁶⁾
302
Long-term portion of operating lease liabilities —
1,828
⁽⁵⁾
1,828
Deferred Rent 132
(132 )
⁽⁷⁾
—
Deferred tax liabilities 438
(7 )
⁽⁴⁾
431
Shareholders’ Equity
Retained earnings 4,707
(152 )
⁽⁴⁾
4,555


⁽¹⁾	~~Represents the reclassification of rent paid in advance to current operating lease liabilities.~~


⁽²⁾	Represents the recognition of operating lease right-of-use assets, reflecting the reclassifications of deferred rent, sublease liabilities, tenant allowances and favorable and unfavorable lease rights. This balance also reflects the initial impairments of the right-of-use assets recorded through retained earnings, as described below.


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


⁽⁴⁾	Represents the initial impairment recognized through retained earnings for certain underperforming retail store locations for which fixed assets were previously impaired, net of associated deferred taxes.


⁽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 Company’s Retail Fleet Optimization Plan as described 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 4 for additional disclosures~~provides guidance related to the ~~Company’s lease~~ accounting ~~policy.~~for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The adoption of this update did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

~~We have~~The Company has 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.

~~Intangibles~~

~~In August 2018, the FASB issued ASU 2018-15, “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.

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 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 the Company’s brands.

The Company has chosen to ~~apply~~utilize the ~~practical expedient~~exemption allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations that have an expected duration of 12twelve months or less.

Retail

The Company generates sales through directly operated stores and e-commerce throughout the Americas (U.S., Canada and Latin ~~America, excluding Brazil)~~America), EMEA (Europe, Middle East and Africa) and certain parts of Asia. 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 12 months. The~~ contract liability related to gift cards, net of estimated “breakage,” ~~was $12 million and $13~~of $11 million as of both June ~~29, 2019~~27, 2020 and March ~~30, 2019, respectively, and~~28, 2020, 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 U.S. 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 $3$2 million as of both June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020, is recorded as a reduction to revenue in the consolidated statements of ~~income~~operations and comprehensive (loss) 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 12 months.

Wholesale

The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops throughout the Americas, EMEA and Asia. The Company also has arrangements where its products are sold to geographic licensees in certain parts of EMEA, Asia and South America. 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 12 months.

Licensing

The Company provides its third-party licensees with the right to access its Versace, Jimmy Choo and Michael Kors 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 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 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. Generally the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, some of our guaranteed minimums for Versace are multi-year based. As of June ~~29, 2019,~~27, 2020, 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

Remainder of Fiscal 2020 $ 20
Fiscal 2021 27
Fiscal 2022 27
Fiscal 2023 20
Fiscal 2024 10
Fiscal 2025 and thereafter 36
Total $ 140


	Contractually Guaranteed Minimum Fees

Remainder of Fiscal 2021	$	19
Fiscal 2022	27
Fiscal 2023	23
Fiscal 2024	20
Fiscal 2025	17
Fiscal 2026 and thereafter	82
Total	$	188

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 June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020 was ~~$36~~$35 million and ~~$35~~$37 million, respectively, and the related asset for the right to recover returned product as of June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020 was ~~$12~~$10 million ~~in each period.~~and $14 million, respectively.

Contract Balances

The Company’s contract liabilities are recorded within accrued expenses and other current liabilities and other long-term liabilities in its consolidated balance sheets depending on the short or long-term nature of the payments to be recognized. The Company’s contract liabilities primarily consist of gift card liabilities, loyalty program liabilities and advanced payments from product licensees. Total contract liabilities were ~~$27~~$21 million and ~~$31~~$22 million as of June ~~29, 2019~~27, 2020 and March ~~30, 2019,~~28, 2020, respectively. For the three months ended June 27, 2020, the Company recognized $3 million in revenue which related to contract liabilities that existed at March 28, 2020. For the three months ended June 29, 2019, the Company recognized $14 million in revenue which related to contract liabilities that existed at March 30, 2019. There were no0 contract assets recorded as of June ~~29, 2019~~27, 2020 and March ~~30, 2019.~~28, 2020.

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
June 29,
2019 June 30,
2018
Versace revenue - the Americas $ 44
$ —
Versace revenue - EMEA 92
—
Versace revenue - Asia 71
—
Total Versace 207
—

Jimmy Choo revenue - the Americas 30
26
Jimmy Choo revenue - EMEA 79
102
Jimmy Choo revenue - Asia 49
45
Total Jimmy Choo 158
173

Michael Kors revenue - the Americas 655
692
Michael Kors revenue - the EMEA 189
200
Michael Kors revenue - the Asia 137
138
Total Michael Kors 981
1,030

Total revenue - the Americas 729
718
Total revenue - EMEA 360
302
Total revenue - Asia 257
183
Total revenue $ 1,346
$ 1,203


	Three Months Ended
	June 27, 2020		June 29, 2019
Versace revenue - the Americas	$	15	$	44
Versace revenue - EMEA	27		92
Versace revenue - Asia	51		71
Total Versace	93		207

Jimmy Choo revenue - the Americas	6		30
Jimmy Choo revenue - EMEA	16		79
Jimmy Choo revenue - Asia	29		49
Total Jimmy Choo	51		158

Michael Kors revenue - the Americas	156		655
Michael Kors revenue - EMEA	79		189
Michael Kors revenue - Asia	72		137
Total Michael Kors	307		981

Total revenue - the Americas	177		729
Total revenue - EMEA	122		360
Total revenue - Asia	152		257
Total revenue	$	451	$	1,346

~~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 April 2023. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its Retail Fleet Optimization Plan. Fixed sublease payments received are recognized on a straight-line basis of 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 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 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.

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 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 June 29,
2019
Assets
Operating leases Operating lease right-of-use assets $ 1,718

Liabilities
Current:
Operating leases Current portion of operating lease liabilities $ 384
Non-current:
Operating leases Long-term portion of operating lease liabilities $ 1,754

~~The components of net lease costs for the three months ended June 29, 2019 was as follows (in millions):~~

Three Months Ended
Statement of Operations and Comprehensive Income Location June 29, 2019
Operating lease cost Selling, general and administrative expenses $ 109
Short-term lease cost Selling, general and administrative expenses 10
Variable lease cost Selling, general and administrative expenses 40
Sublease income Selling, general and administrative expenses (1 )
Total lease cost $ 158

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

Three Months Ended
June 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 120
Non-cash transactions:
Lease assets obtained in exchange for new lease liabilities $ 30

The following tables summarizes the weighted average remaining lease term and weighted average discount rate related to the Company’s right-of-use assets and lease liabilities recorded on the balance sheet as of June 29, 2019:



	June 29, 2019
~~Operating leases:~~
~~Weighted average remaining lease term (years)~~	~~6.6~~
~~Weighted average discount rate~~	~~2.9~~	%

~~At June 29, 2019, the future minimum lease payments under the terms of these noncancelable operating lease agreements are as follows (in millions):~~

June 29,
2019
Remainder of Fiscal 2020 $ 352
Fiscal 2021 432
Fiscal 2022 373
Fiscal 2023 320
Fiscal 2024 268
Thereafter 659
Total lease payments 2,404
Less: interest (266 )
Total lease liabilities $ 2,138

~~At June 29, 2019, the future minimum sublease income under the terms of these noncancelable operating lease agreements are as follows (in millions):~~

June 29,
2019
Remainder of Fiscal 2020 $ 4
Fiscal 2021 6
Fiscal 2022 5
Fiscal 2023 5
Fiscal 2024 4
Thereafter 16
Total sublease income $ 40

~~Additionally, the Company had approximately $83 million of future payment obligations related to executed lease agreements for which the related lease has not yet commenced as of June 29, 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. 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 $207 million and a net loss from operations of $3 million, after amortization of non-cash purchase accounting adjustments, for the three months ended May 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 43 in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~30, 2019~~28, 2020 for ~~additional disclosures relating to~~a complete disclosure of the Company’s ~~acquisitions.~~revenue recognition policy.

6.4. Receivables, net

Receivables, net, consist of (in millions):


	June 27, 2020		March 28, 2020
Trade receivables⁽¹⁾	$	263	$	432
Receivables due from licensees	21		14
	284		446
Less: allowances	(101)		(138)
	$	183	$	308

June 29,
2019 March 30,
2019
Trade receivables⁽¹⁾
$ 387
$ 459
Receivables due from licensees 16
23
403
482
Less: allowances (93 ) (99 )
$ 310
$ 383


⁽¹⁾ ⁽¹⁾As of June 27, 2020 and March 28, 2020, $56 million and $80 million, respectively, of trade receivables were insured.	~~As of June 29, 2019 and March 30, 2019, $226 million and $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 ~~$16~~$31 million and ~~$18~~$39 million ~~respectively,~~ as of June ~~29, 2019~~27, 2020 and March ~~30, 2019.~~28, 2020, respectively, including the impact related to COVID-19. The Company had ~~immaterial amounts~~a credit loss of ~~bad debt provisions~~$(6) million for ~~both~~the three months ended June 27, 2020. All other periods ~~presented.~~presented were immaterial.

5. Property and Equipment, net

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

June 29,
2019 March 30,
2019
Leasehold improvements $ 654
$ 639
Computer equipment and software 305
292
Furniture and fixtures 297
292
In-store shops 272
270
Equipment 125
123
Building 48
47
Land 18
15
1,719
1,678
Less: accumulated depreciation and amortization (1,169 ) (1,115 )
550
563
Construction-in-progress 58
52
$ 608
$ 615


	June 27, 2020		March 28, 2020
Leasehold improvements	$	706	$	704
Computer equipment and software	342		329
Furniture and fixtures	332		329
In-store shops	236		236
Equipment	137		136
Building	49		49
Land	19		19
	1,821		1,802
Less: accumulated depreciation and amortization	(1,343)		(1,310)
	478		492
Construction-in-progress	63		69
	$	541	$	561

Depreciation and amortization of property and equipment for ~~each of~~ the three months ended June 27, 2020 and June 29, 2019 was $43 million and $47 million, respectively. During the three months ended June ~~30, 2018 was $47 million.~~27, 2020, the Company did 0t record any property and equipment impairment charges. During the three months ended June 29, 2019, the Company recorded ~~fixed asset~~property and equipment impairment charges of $13 million, $11 million of which related to determining asset groups for the ~~Company's~~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~~ (see Note ~~13)~~11 for additional information). During the three months ended June 30, 2018, the Company recorded fixed asset impairment charges of $3 million, which were related to underperforming Michael Kors full-price retail store locations, some of which related to the Retail Fleet Optimization Plan.

8.6. Intangible Assets and Goodwill

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


	June 27, 2020		March 28, 2020
Definite-lived intangible assets:
Reacquired Rights	$	400	$	400
Trademarks	23		23

Customer Relationships	404		404
Total definite-lived intangible assets	827		827
Less: accumulated amortization	(144)		(132)
Net definite-lived intangible assets	683		695

Indefinite-lived intangible assets:
Jimmy Choo brand ⁽¹⁾	364		367
Versace brand ⁽²⁾	930		924
	1,294		1,291

Total intangible assets, excluding goodwill	$	1,977	$	1,986

Goodwill ⁽³⁾	$	1,490	$	1,488

June 29,
2019 March 30,
2019
Definite-lived intangible assets:
Reacquired Rights $ 400
$ 400
Trademarks 23
23
Key Money ⁽¹⁾
71
96
Customer Relationships 412
⁽²⁾
415
Total definite-lived intangible assets 906
934
Less: accumulated amortization (155 ) (143 )
Net definite-lived intangible assets 751
791

Indefinite-lived intangible assets:
Jimmy Choo brand 557
⁽²⁾
572
Versace brand 942
⁽²⁾
930
1,499
1,502

Total intangible assets, excluding goodwill $ 2,250
$ 2,293

Goodwill $ 1,652
⁽²⁾
$ 1,659

⁽¹⁾

⁽¹⁾Includes an accumulated impairment loss of $180 million recorded during the fourth quarter of Fiscal 2020. The change in the carrying value since March 28, 2020 reflects currency translation.

⁽²⁾The change in the carrying value since March 28, 2020 reflects currency translation.

⁽³⁾Includes an accumulated impairment loss of $171 million related to the Jimmy Choo retail and licensing reporting units recorded during the fourth quarter of Fiscal 2020. The change in the carrying value since March 28, 2020 reflects currency translation.

~~The March 30, 2019 balance includes certain lease rights that were reclassified to the right-of-use asset as part of the adoption of ASC 842.~~


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

Amortization expense for the Company’s definite-lived intangible assets for the three months ended June ~~29, 2019~~27, 2020 and ~~June 30, 2018 was $13 million and $9 million, respectively. During the three months ended~~ June 29, 2019 ~~the Company recorded impairment charges of $5~~was $11 million related to intangible assets associated with its premier Michael Kors store locations (see Note 13 for further information). Impairment charges recorded during the three months ended June 30, 2018 were $1 million.and $13 million, respectively. There were no0 goodwill or ~~other~~definite-lived and indefinite-lived intangible asset impairment charges recorded during any of the periods presented.

7. Current Assets and Current Liabilities

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


	June 27, 2020		March 28, 2020
Prepaid taxes	$	95	$	116







Prepaid contracts	15		17
Other accounts receivables	12		10
Other	29		24
	$	151	$	167

June 29,
2019 March 30,
2019
Prepaid taxes $ 154
$ 125
Prepaid rent ⁽¹⁾
—
24
Interest receivable related to net investment hedges 7
11
Prepaid fixed assets 7
7
Prepaid advertising 5
5
Other 51
49
$ 224
$ 221

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


	June 27, 2020		March 28, 2020
Other taxes payable	$	51	$	38
Return liabilities	35		37
Accrued capital expenditures	20		31
Accrued rent ⁽¹⁾	18		10
Accrued advertising and marketing	6		9
Gift cards and retail store credits	11		11
Professional services	9		10
Restructuring liability	14		9
Accrued litigation	11		10





Other	68		76
	$	243	$	241

June 29,
2019 March 30,
2019
Other taxes payable $ 61
$ 47
Return liabilities 36
35
Accrued capital expenditures 23
25
Accrued rent ⁽²⁾
17
34
Gift cards and retail store credits 12
13
Professional services 12
12
Accrued litigation 12
11
Accrued advertising and marketing 9
10
Accrued purchases and samples 9
29
Advance royalties 9
6
Accrued interest 5
10
Restructuring liability ⁽¹⁾
5
64
Other 73
78
$ 283
$ 374


⁽¹⁾ ⁽¹⁾The accrued rent balance relates to variable lease payments.	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 June 29, 2019. See Note 2 and Note 4 for additional information.


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

~~10.~~

8. Restructuring and Other Charges

Capri Retail ~~Fleet~~Store Optimization ~~Plan~~Program

~~On May 31, 2017,~~As previously announced, the Company ~~announced that it plans~~intends to close ~~between 100 and 125~~approximately 170 of its ~~Michael Kors~~ retail stores over the next two fiscal years (Fiscal 2021 and Fiscal 2022) in connection with its Capri Retail Store Optimization Program in order to improve the profitability of its retail store ~~fleet (“Retail Fleet Optimization Plan”). The Company anticipates finalizing~~fleet. In addition, 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~~$75 million of one-time costs ~~associated with these~~related to this program, including lease termination and other store ~~closures. Collectively,~~closure costs, the majority of which are expected to result in future cash expenditures.

During the three months ended June 27, 2020, the Company ~~anticipates lower depreciation and amortization expense as a result~~closed 28 of its retail stores which have been incorporated into the ~~impairment~~Capri Retail Store Optimization Program. Net restructuring charges recorded ~~once these initiatives are completed.~~in connection with the Capri Retail Store Optimization Program during the three months ended June 27, 2020 were $3 million.

Michael Kors Retail Fleet Optimization Plan

During the three months ended June 29, 2019, the Company closed 13 of its Michael Kors retail stores under the Retail Fleet Optimization Plan, for a total of 113 stores closed since plan inception. Restructuring charges recorded in connection with the Retail Fleet Optimization Plan during the three months ended June 29, 2019 were $1 million. The below table presents a rollforward of the Company’s remaining restructuring liability related to this plan (in millions):

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 —
(5 ) (5 )
Balance at June 29, 2019 $ 2
$ 3
$ 5


⁽¹⁾	~~Consists of the reclassification of sublease liabilities to an offset of the related right-of-use asset due to the adoption of ASC 842. See Note 2 and Note 4 for further information.~~

~~During the three months ended June 30, 2018, the Company recorded restructuring~~incurred charges of $4$1 million ~~under~~relating to the Michael Kors Retail Fleet Optimization Plan, which ~~were comprised~~was completed during the fourth quarter of ~~lease-related charges.~~Fiscal 2020.

Other Restructuring Charges

In addition to the restructuring charges related to the Michael Kors Retail Fleet Optimization Plan, the Company incurred charges of $2 million relating to Jimmy Choo lease-related charges during the three months ended June 29, 2019.

Other Costs

During the three months ended June 27, 2020, the Company recorded costs of $5 million, primarily related to equity awards associated with the acquisition of Versace.

During the three months ended June 29, 2019, the Company recorded costs of $12 million, which included $7 million in connection with the acquisition of Versace and $5 million in connection with the Jimmy Choo acquisition.

~~During the three months ended June 30, 2018, the Company recorded costs of $7 million in connection with the Jimmy Choo acquisition.~~

~~11.~~

9. Debt Obligations

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

June 29,
2019 March 30,
2019
Term Loan $ 1,560
$ 1,580
Revolving Credit Facilities 434
550
4.000% Senior Notes due 2024 450
450
Other 1
1
Total debt 2,445
2,581
Less: Unamortized debt issuance costs 12
13
Less: Unamortized discount on long-term debt 2
2
Total carrying value of debt 2,431
2,566
Less: Short-term debt 514
630
Total long-term debt $ 1,917
$ 1,936


	June 27, 2020		March 28, 2020
Term Loan	$	991	$	1,015
Revolving Credit Facilities	333		720
4.000% Senior Notes due 2024	450		450
Other	4		3
Total debt	1,778		2,188
Less: Unamortized debt issuance costs	9		8
Less: Unamortized discount on long-term debt	1		1
Total carrying value of debt	1,768		2,179
Less: Short-term debt	191		167
Total long-term debt	$	1,577	$	2,012

Senior Unsecured Revolving Credit Facility

~~The~~On June 25, 2020, the Company entered into the second amendment (the “Second Amendment”) to its third amended and restated senior unsecured credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”), with, among others, JPMorgan Chase Bank, N.A., as administrative agent. Pursuant to the Second Amendment, the obligations under the 2018 Credit Facility ~~requires~~will be secured by liens on substantially all of the assets of the Company and its U.S. subsidiaries that are borrowers and guarantors, subject to certain exceptions, and substantially all of the registered intellectual property of the Company and its subsidiaries. This requirement for collateral will fall away if the Company achieves an investment grade ratings requirement for two consecutive full fiscal quarters. The Amendment adds a restriction on the disposition of assets and a requirement to prepay the term loans with certain net cash proceeds of non-ordinary course asset sales, subject to certain exceptions and a reinvestment option with respect to up to $100 million of net cash proceeds in the aggregate.

Pursuant to the Second Amendment, the financial covenant in the Company's 2018 Credit Facility requiring it to maintain a ~~leverage ratio as of the end of each fiscal quarter of no greater than 3.75 to 1. Such leverage ratio is calculated as the~~ ratio of the sum of total indebtedness asplus the capitalized amount of ~~the date of the measurement plus six times the consolidated rent expense~~all operating lease obligations for the last four ~~consecutive~~ fiscal quarters to Consolidated EBITDAR ~~(as defined below) for~~of no greater than 3.75 to 1.0 has been waived through the ~~last four consecutive~~ fiscal ~~quarters. Consolidated EBITDAR~~quarter ending June 26, 2021. When this financial covenant is ~~defined~~reinstated, the applicable ratio will be calculated net of the Company's unrestricted cash and cash equivalents in excess of $100 million and shall exclude up to $150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0. In addition, until March 31, 2021, the material adverse change representation required to be made in connection with revolving borrowings and the issuance or amendment of letters of credit will be modified to disregard certain COVID-19 pandemic-related impacts to the business, results of operations or financial condition of the Company and its subsidiaries, taken as ~~consolidated net income~~a whole. The Second Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with respect to the fiscal quarter ending June 26, 2021, to maintain at all times unrestricted cash and cash equivalents plus ~~income tax expense, net interest expense, depreciation~~the aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $300 million, increasing to $400 million on October 1, 2020 and ~~amortization expense, consolidated rent expense and other non-cash charges, subject to certain additions and deductions.~~ $500 million on December 1, 2020.

The 2018 Credit Facility ~~also includes~~and the Indenture governing the Company's senior notes contain certain restrictive covenants that ~~limit~~impose operating and financial restrictions on the Company, and the Second Amendment imposes incremental restrictions on certain of these covenants during the covenant relief period provided under the 2018 Credit Facility, including restrictions on its ability to incur additional indebtedness ~~guarantees,~~and guarantee indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, make loans and investments, including acquisitions, sell assets, incur liens, ~~acquisitions~~enter into transactions with affiliates and ~~other investments~~consolidate, merge or sell all or substantially all of its assets.

In addition, the Second Amendment adds a new $230 million revolving line of credit that matures on June 24, 2021 (the “364 Day Facility”). The terms of the 364 Day Facility are substantially similar to the terms of the existing revolving facility under the 2018 Credit Facility except that (i) no letters of credit or swingline loans are provided and (ii) for loans subject to Adjusted LIBOR, the applicable margin is 225 basis points per annum, for loans subject to the base rate the applicable margin is 125 basis points per annum and the commitment fee is 35 basis points per annum. In addition, while the 364 Day Facility is outstanding, (i) if the Company incurs any incremental indebtedness under the 2018 Credit Facility or certain permitted indebtedness in lieu of such incremental indebtedness, the 364 Day Facility will be reduced on a dollar for dollar basis and the Company will be required to make corresponding prepayments and (ii) the Company will be required to prepay amounts outstanding under the 364 Day Facility on a weekly basis to the extent that cash and cash ~~dividends that are customary for~~equivalents of the Company and its subsidiaries exceed $200 million.

The Second Amendment also permits certain working capital facilities between the Company or any of its subsidiaries with a lender or an affiliate of a lender under the 2018 Credit Facility to be guaranteed under the 2018 Credit Facility guarantees and certain supply chain financings with, and up to $50 million outstanding principal amount of ~~this type.~~ bilateral letters of credit and bilateral bank guarantees issued by a lender or an affiliate of a lender to be guaranteed and secured under the 2018 Credit Facility guarantees and collateral documents.

As of June ~~29, 2019,~~27, 2020 and the date these financial statements were issued, the Company was in compliance with all covenants related to ~~this agreement.~~the 2018 Credit Facility as amended by the Second Amendment.

As of June ~~29, 2019~~27, 2020 and March ~~30, 2019,~~28, 2020, the Company had borrowings of ~~$422~~$270 million and ~~$539~~$681 million, respectively, outstanding under the 2018 Revolving Credit Facility, which were recorded within ~~short-term~~long-term debt in its consolidated balance sheets. In addition, stand-by letters of credit of ~~$17~~$22 million were outstanding as of June ~~29, 2019.~~27, 2020. At June ~~29, 2019,~~27, 2020, the amount available for future borrowings under the 2018 Revolving Credit Facility was ~~$561~~$938 million. As of June ~~29, 2019~~27, 2020 and March ~~30, 2019,~~28, 2020, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was ~~$1.551 billion~~$985 million and ~~$1.570~~$1.010 billion, respectively, of which ~~$80~~$128 million was recorded within short-term debt ~~in each period~~for both periods and ~~$1.471 billion~~$857 million and ~~$1.490 billion,~~$882 million, respectively, was recorded within long-term debt in its consolidated balance sheets.

~~On July 19, 2019, the Company repaid $125 million of borrowings outstanding under the 2018 Term Loan Facility.~~

See Note 1112 to the Company’s Fiscal ~~2019~~2020 Annual Report on Form 10-K for additional information regarding the Company’s credit facilities and debt obligations.

~~12.~~10. 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 ~~30, 2019~~28, 2020 for a detailed disclosure of other commitments and contractual obligations as of March ~~30, 2019.~~28, 2020.

~~13.~~

11. 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 prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices ~~included within Level 1,~~ that are observable for the asset or liability ~~either directly~~and inputs derived principally from or ~~indirectly through corroboration with~~corroborated by observable market data.

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

At June ~~29, 2019~~27, 2020 and March ~~30, 2019,~~28, 2020, 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 ~~14.~~12.

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 June 29, 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 $ —
$ 2
$ —
$ —
$ 5
$ —
Net investment hedges —
12
—
—
37
—
Other undesignated derivative contracts —
1
—
—
—
—
Total derivative assets $ —
$ 15
$ —
$ —
$ 42
$ —

Derivative liabilities:
Net investment hedges $ —
$ 24
$ —
$ —
$ —
$ —
Other undesignated derivative contracts —
4
—
—
5
—
Total derivative liabilities $ —
$ 28
$ —
$ —
$ 5
$ —


	Fair value at June 27, 2020 using:										Fair value at March 28, 2020 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	$	—	$	—	$	—	$	—	$	1	$	—
Net investment hedges	—		3		—		—		3		—

Total derivative assets	$	—	$	3	$	—	$	—	$	4	$	—

Derivative liabilities:


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

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 119 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):

June 29, 2019 March 30, 2019

Carrying
Value

Estimated
Fair Value

Carrying
Value

Estimated
Fair Value
4.000% Senior Notes $ 445
$ 456
$ 445
$ 438
Term Loan $ 1,551
$ 1,563
$ 1,570
$ 1,574
Revolving Credit Facilities $ 434
$ 434
$ 550
$ 550


	June 27, 2020						March 28, 2020
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
4.000% Senior Notes	$	446	$	422	$	446	$	443
Term Loan	$	985	$	817	$	1,010	$	957
Revolving Credit Facilities	$	333	$	333	$	720	$	720

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 assets (Versace and Jimmy Choo brands) are assessed for impairment at least annually, ~~during the fourth quarter of each fiscal year,~~ while its other long-lived assets, including operating lease right-of-use assets, ~~fixed 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.

There were 0 impairment charges recorded during three months ended June 27, 2020. The ~~Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that~~following table details the carrying ~~amounts of such assets may not be recoverable. This assessment is performed for each long-lived asset group that represents the lowest level for which identifiable cash flows are largely independent~~values and fair values of the ~~cash flows of other~~Company’s 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 quarter ended June 29, 2019, the Company determined that 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, the Company identified impairment indicators at certain premier retail store locations and recorded lease right of use assets and fixed assets impairment charges of $68 million and $11 million, respectively,have been impaired during the three months ended June 29, 2019 ~~which are included in the impairment charges, detailed in the table below~~ (in millions):

Three Months Ended
June 29, 2019
Carrying Value Prior to Impairment Fair Value Impairment Charge
Operating Lease Right-of-Use Assets $ 132
$ 53
$ 79
Fixed Assets $ 20
$ 7
$ 13
Key Money 8
3
5
Total $ 160
$ 63
$ 97


	Three Months Ended June 29, 2019
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Operating Lease Right-of-Use Assets	$	140	$	56	$	84
Property and Equipment	20		7		13

Total	$	160	$	63	$	97

Three Months Ended
June 30, 2018
Carrying Value Prior to Impairment Fair Value Impairment Charge
Fixed Assets $ 5
$ 2
$ 3
Lease Rights 2
1
1
Total $ 7
$ 3
$ 4

In addition to the impairment charges above, the Company recorded an adjustment to reduce its opening balance of retained earnings by $152 million, net of tax, reflecting impairments of right-of-use assets for certain underperforming real estate locations for which the carrying value of the opening right-of-use asset exceeded its related fair value. Fixed assets related to these underperforming locations were fully impaired to the adoption of ASU 2016-02. See Note 2 and Note 4 for additional information.

~~14.~~12. Derivative Financial Instruments

Forward Foreign Currency Exchange Contracts

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

Net Investment Hedges

As of June ~~29, 2019,~~27, 2020, the Company had ~~multiple~~one fixed-to-fixed cross-currency swap ~~agreements~~agreement with ~~aggregate~~a notional ~~amounts~~amount of ~~$3.190 billion to hedge its net investment in Euro-denominated subsidiaries and~~ $44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange ~~rates~~rate between the U.S. Dollar and ~~these currencies.~~Japanese Yen. Under the ~~terms~~term of ~~these contracts,~~this contract, which ~~have~~has a maturity ~~dates between January 2022 and June 2026,~~date of November 2024, the Company will exchange the semi-annual fixed rate payments on ~~U.S~~U.S. denominated debt for fixed rate payments of ~~0% to 1.674% in Euros and~~ 0.89% in Japanese Yen. ~~These contracts have~~This contract has been designated as a net investment ~~hedges.~~hedge.

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 (loss) income. Accordingly, the Company recorded a reduction in interest expense of ~~$15~~$0 million and $1$15 million ~~respectively,~~ during the three months ended June 27, 2020 and June 29, 2019, respectively. This decrease from prior year reflects the Company’s early termination of certain net investment hedges related to its Euro-denominated subsidiaries during the fourth quarter of Fiscal 2020.

Interest Rate Swap

During the first quarter of Fiscal 2021, the Company entered into an interest rate swap with an initial notional amount of $500 million that will decrease to $350 million in April 2022. The swap was designated as a cash flow hedge designed to mitigate the impact of adverse interest rate fluctuations for a portion of the Company's variable-rate debt equal to the notional amount of the swap. The interest rate swap converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through December 2022.

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive (loss) income and ~~June 30, 2018.~~are reclassified into interest expense in the same period during which the hedged transactions affect earnings.

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 June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020 (in millions):


					Fair Values
	Notional Amounts							Assets								Liabilities
	June 27, 2020		March 28, 2020		June 27, 2020			March 28, 2020			June 27, 2020			March 28, 2020
Designated forward foreign currency exchange contracts	$	80	$	161	$	—		$	1	⁽¹⁾	$	—		$	—
Designated net investment hedge	44		44		3		⁽²⁾	3		⁽²⁾	—			—
Designated interest rate swaps	500		—		—			—			1		⁽³⁾	—
Total designated hedges	624		205		3			4			1			—
Undesignated derivative contracts ⁽⁴⁾	29		—		—			—			—			—
Total	$	653	$	205	$	3		$	4		$	1		$	—

Fair Values
Notional Amounts Assets Liabilities
June 29,
2019 March 30,
2019 June 29,
2019 March 30,
2019 June 29,
2019 March 30,
2019
Designated forward foreign currency exchange contracts $ 156
$ 166
$ 2
⁽¹⁾
$ 5
⁽¹⁾
$ —
$ —

Designated net investment hedge 3,234
2,234
12
⁽²⁾
37
⁽²⁾
24
⁽³⁾
—

Total designated hedges $ 3,390
$ 2,400
$ 14
$ 42
$ 24
$ —

Undesignated derivative contracts ⁽⁵⁾
191
199
1
⁽¹⁾
—
4
⁽⁴⁾
5
⁽⁴⁾
Total $ 3,581
$ 2,599
$ 15
$ 42
$ 28
$ 5


⁽¹⁾ ⁽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 other long-term liabilities in the Company’s consolidated balance sheets. ⁽⁴⁾Primarily includes undesignated hedges of inventory purchases.	~~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 other long-term liabilities in the Company’s consolidated balance sheets.~~


⁽⁴⁾	~~Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.~~


⁽⁵⁾	~~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 June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020 would be as follows (in millions):

Forward Currency Exchange Contracts
Net Investment
Hedges
June 29,
2019 March 30,
2019 June 29,
2019 March 30,
2019
Assets subject to master netting arrangements $ 3
$ 5
$ 12
$ 37
Liabilities subject to master netting arrangements $ 4
$ 5
$ 24
$ —
Derivative assets, net $ 3
$ 5
$ 7
$ 37
Derivative liabilities, net $ 4
$ 5
$ 19
$ —


	Forward Currency Exchange Contracts						Net Investment Hedges						Interest Rate Swaps
	June 27, 2020		March 28, 2020		June 27, 2020		March 28, 2020		June 27, 2020		March 28, 2020
Assets subject to master netting arrangements	$	—	$	1	$	3	$	3	$	—	$	—
Liabilities subject to master netting arrangements	$	—	$	—	$	—	$	—	$	1	$	—
Derivative assets, net	$	—	$	1	$	3	$	3	$	—	$	—
Derivative liabilities, net	$	—	$	—	$	—	$	—	$	1	$	—

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 (loss) income, ~~(loss),~~ and are reclassified from accumulated other comprehensive (loss) 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 (loss) 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. Changes in the fair value of the Company’s interest rate swaps that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive (loss) income, and are reclassified from accumulated other comprehensive (loss) income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of operations and comprehensive (loss) income.

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 and interest rate swaps (in millions):

Three Months Ended
June 29, 2019 June 30, 2018
Pre-Tax Losses Recognized in OCI Pre-Tax Gains Recognized in OCI
Designated forward foreign currency exchange contracts $ —
$ 9
Designated net investment hedges $ (25 ) $ 5


	Three Months Ended
	June 27, 2020		June 29, 2019
	Pre-Tax Losses Recognized in OCI		Pre-Tax Losses Recognized in OCI
Designated forward foreign currency exchange contracts	$	—	$	—
Designated net investment hedges	$	—	$	(25)
Designated interest rate swaps	$	(1)	$	—

The following ~~tables summarize~~table summarizes the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive (loss) income related to the designated forward foreign currency exchange contracts for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019 (in millions):

Three Months Ended

Pre-Tax (Gain) Loss Reclassified from
Accumulated OCI
Location of (Gain) Loss recognized Total Cost of Sales
June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018
Designated forward currency exchange contracts $ (3 ) $ 5
Cost of Sales $ 512
$ 452


	Three Months Ended
	Pre-Tax (Gain) Loss Reclassified from Accumulated OCI					Location of (Gain) Loss recognized				Total Cost of goods sold
	June 27, 2020		June 29, 2019						June 27, 2020			June 29, 2019
Designated forward foreign currency exchange contracts	$	(1)	$	(3)	Cost of goods sold		$	149		$	512

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

Undesignated Hedges

During the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 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 (loss) income was ~~not material.~~immaterial.

~~15.~~

13. Shareholders’ Equity

Share Repurchase Program

During the first quarter of Fiscal 2021, the Company suspended its $500 million share-repurchase program in response to the continued impact of the COVID-19 pandemic. During the three months ended June ~~30, 2018,~~27, 2020, the Company ~~repurchased 1,659,941~~did 0t purchase any shares ~~at a cost of $100 million under its $1.0 billion~~ through open market transactions under the current plan. As of June 27, 2020, the remaining availability under the Company’s share repurchase program was $400 million. During the three months ended June 29, 2019, the Company did 0t purchase any shares through open market transactions under its previous $1.0 billion share-repurchase program, which expired on May 25, 2019. 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 awards. During the three month periods ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 2019, the Company withheld ~~58,304~~38,119 shares and ~~88,325~~58,304 shares, respectively, with a fair value of $2$1 million and $6$2 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

On August 1, 2019, the Company's Board of Directors authorized a new $500 million share repurchase program, which which expires August 1, 2021. Share repurchases maybe made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading under the Company’s insider trading policy and other relevant factors. The program may be suspended or discontinued at any time.

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

The following table details changes in the components of accumulated other comprehensive (loss) income ~~(loss)~~ (“AOCI”), net of taxes for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 2019, respectively (in millions):


	Foreign Currency Translation (Losses) Gains ⁽¹⁾		Net Gains (Losses) on Derivatives ⁽²⁾		Other Comprehensive (Loss) Income Attributable to Capri
Balance at March 30, 2019	$	(73)	$	7	$	(66)
Other comprehensive (loss) income before reclassifications	(25)		—		(25)
Less: amounts reclassified from AOCI to earnings	—		2		2
Other comprehensive (loss) income, net of tax	(25)		(2)		(27)
Balance at June 29, 2019	$	(98)	$	5	$	(93)

Balance at March 28, 2020	$	72	$	3	$	75
Other comprehensive (loss) income before reclassifications	(3)		—		(3)
Less: amounts reclassified from AOCI to earnings	—		1		1
Other comprehensive (loss) income, net of tax	(3)		(1)		(4)
Balance at June 27, 2020	$	69	$	2	$	71

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
$ (10 ) $ 51
Other comprehensive (loss) income before reclassifications (103 ) 8
(95 )
Less: amounts reclassified from AOCI to earnings
—
(4 ) (4 )
Other comprehensive (loss) income, net of tax (103 ) 12
(91 )
Balance at June 30, 2018 $ (42 ) $ 2
$ (40 )

Balance at March 30, 2019 $ (73 ) $ 7
$ (66 )
Other comprehensive (loss) income before reclassifications (25 ) —
(25 )
Less: amounts reclassified from AOCI to earnings —
2
2
Other comprehensive (loss) income, net of tax (25 ) (2 ) (27 )
Balance at June 29, 2019 $ (98 ) $ 5
$ (93 )

⁽¹⁾

⁽¹⁾Foreign currency translation gains and losses for the three months ended June 27, 2020 include net gains of $1 million on intra-entity transactions that are of a long-term investment nature. Foreign currency translation gains and losses for the three months ended June 29, 2019 include net gains of $3 million on intra-entity transactions that are of a long-term investment nature, a $28 million translation gain relating to the Versace business and a $21 million loss, net of taxes of $4 million, relating to the Company’s net investment hedges.

Foreign currency translation gains and losses for the three months ended June 29, 2019 and June 30, 2018 include net gains of $3 million and net gains of $5 million, respectively, on intra-entity transactions that are of a long-term investment nature. Foreign currency translation losses for the three months ended June 29, 2019 include a $28 million translation gain relating to the Versace business and a $21 million loss, net of taxes of $4 million relating to the Company’s net investment hedges. Foreign currency translation losses for the three months ended June 30, 2018 include a $4 million gain relating to the Company’s net investment hedges.


⁽²⁾	Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations and comprehensive income. All tax effects were not material for the periods presented.

~~16.~~⁽²⁾Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations and comprehensive (loss) income. All tax effects were not material for the periods presented.

14. Share-Based Compensation

The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation and Talent Committee. The Company has ~~two~~2 equity plans, ~~one~~1 stock option plan adopted in Fiscal 2008 (as amended and restated, the “2008 Plan”), and the Omnibus Incentive Plan adopted in the third fiscal quarter of Fiscal 2012 and amended and restated with shareholder approval in May 2015 (the “Incentive Plan”). The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares. As of June ~~29, 2019,~~27, 2020, there were no0 shares available to grant equity awards under the 2008 Plan. The Incentive Plan allows for grants of share options, restricted shares and RSUs, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares. At June ~~29, 2019,~~27, 2020, there were ~~2,524,023~~1,554,923 ordinary shares available for future grants of equity awards under the Incentive Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the Incentive Plan generally expire seven years from the date of the grant.

The following table summarizes the Company’s share-based compensation activity during the three months ended June ~~29, 2019:~~27, 2020:

Options Service-Based RSUs Performance-Based RSUs
Outstanding/Unvested at March 30, 2019 2,131,259
3,839,862
737,074
Granted —
1,820,790
169,817
Exercised/Vested —
(638,315 ) (53,025 )
Decrease due to performance condition —
—
(39,999 )
Canceled/forfeited (1,063 ) (71,009 ) —
Outstanding/Unvested at June 29, 2019 2,130,196
4,951,328
813,867


	Options	Service-Based RSUs	Performance-Based RSUs
Outstanding/Unvested at March 28, 2020	2,071,096	4,311,683	772,172
Granted	—	1,772,553	—
Exercised/Vested	—	(850,621)	(102,078)
Change due to performance condition	—	—	5,926
Canceled/forfeited	(363,087)	(152,289)	(131,107)
Outstanding/Unvested at June 27, 2020	1,708,009	5,081,326	544,913

The weighted average grant date fair value of service-based RSUs granted during the three months ended June 27, 2020 was $16.24. The weighted average grant date fair value of service-based and performance-based RSUs granted during the three months ended June 29, 2019 was $33.90 and $33.86, ~~respectively, and $67.47 and $67.52, respectively, during the three months ended June 30, 2018.~~respectively.

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019 (in millions):

Three Months Ended
June 29,
2019 June 30,
2018
Share-based compensation expense $ 28
$ 13
Tax benefit (deficit) related to share-based compensation expense $ 5
$ 2


	Three Months Ended
	June 27, 2020		June 29, 2019
Share-based compensation expense	$	24	$	28
Tax benefit related to share-based compensation expense	$	5	$	5

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture ~~rate to date.~~rates. The estimated value of future forfeitures for equity grants as of June ~~29, 2019~~27, 2020 is approximately ~~$14~~$13 million.

See Note 17 in the Company’s Fiscal ~~2019~~2020 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.

~~17.~~

15. Income Taxes

The Company’s effective tax rate for the three months ended June ~~29, 2019 is 11.8%~~27, 2020 was (2.9)%. Such rate differs from the United Kingdom (“U.K.”) federal statutory rate of ~~19%~~17% primarily due to the ~~favorable effects~~existence of ~~global financing arrangements~~a valuation allowance on a portion of our consolidated pre-tax loss and ~~net~~a tax ~~benefits in the US (including federal and state benefits) and Europe that~~detriment related to ~~prior tax year positions.~~share-based compensation. These decreases ~~in the effective tax rate for the three months ended June 29, 2019~~ were partially offset by ~~tax deficits~~the favorable effects related to ~~share-based compensation awards.~~global financing activities. The global financing activities are related to the Company’s 2014 move of its principal executive office from Hong Kong to the U.K. and decision to become a U.K. tax resident. In connection with this decision, the Company funded its international growth strategy through intercompany debt financing arrangements between certain of our U.S., U.K. and Switzerland subsidiaries in December 2015. Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized a ~~lower~~higher effective tax ~~rate.~~rate on the consolidated pre-tax loss.

The Company’s effective tax rate for the three months ended June ~~30, 2018~~29, 2019 was ~~9.4%~~11.8%. Such rate differed from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable effects of global financing arrangements and net tax benefits ofin the US and Europe that related to prior tax year positions. These decreases in the effective tax rate for the three months ended June 29, 2019 were partially offset by tax deficits related to share-based ~~compensation.~~compensation awards.

~~18.~~16. Segment Information

The Company operates its business through ~~three~~3 operating segments—Versace, Jimmy Choo and Michael Kors, which are based on its business activities and organization. The reportable segments are segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by the Company’s chief operating decision maker ("CODM") in deciding how to allocate resources, as well as in assessing performance. The primary key performance indicators are revenue and operating income for each segment. The Company’s reportable segments represent components of the business that offer similar merchandise, customer experience and sales/marketing strategies.

The Company’s ~~three~~3 reportable segments are as follows:

•Versace — segment includes revenue generated through the sale of Versace luxury ready-to-wear, accessories, footwear and home furnishings through directly operated Versace boutiques throughout North America (United States and Canada), EMEA and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites. In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements that allow third parties to use the Versace trademarks in connection with retail and/or wholesale sales of Versace branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of jeans, fragrances, watches, jewelry and eyewear.

•Jimmy Choo — segment includes revenue generated through the sale of Jimmy Choo luxury footwear, handbags and small leather goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, EMEA and certain parts of Asia, through its 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 trademarks 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.

•Michael Kors — segment includes revenue generated through the sale of Michael Kors products through ~~four~~4 primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce sites, through which the Company sells Michael Kors products, as well as licensed products bearing the Michael Kors name, directly to the end consumer throughout the Americas, ~~(U.S., Canada and Latin America, excluding Brazil),~~ Europe and certain parts of Asia. ~~The Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada, certain parts of Europe, China, Japan and South Korea.~~ The Company also sells Michael Kors products directly to department stores, primarily located across the Americas and Europe, to specialty stores and travel retail shops, ~~in the Americas, Europe and Asia,~~ and to its geographic ~~licensees in certain parts of EMEA (Europe, Middle East and Africa), Asia and Brazil.~~licensees. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear.

In addition to these reportable segments, the Company has certain corporate costs that are not directly attributable to its brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, and information systems expenses, including enterprise resource planning system implementation costs. In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transition costs related to the Company’s recent acquisitions), impairment costs and ~~impairment costs.~~COVID-19 related charges. The segment structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses performance. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance.

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


	Three Months Ended
	June 27, 2020		June 29, 2019
Total revenue:
Versace	$	93	$	207
Jimmy Choo	51		158
Michael Kors	307		981
Total revenue	$	451	$	1,346

(Loss) income from operations:
Versace	$	(41)	$	(3)
Jimmy Choo	(29)		11
Michael Kors	(48)		201
Total segment income from operations	(118)		209
Less: Corporate expenses	(31)		(33)
Restructuring and other charges	(8)		(15)
Impairment of assets	—		(97)
COVID-19 related charges ⁽¹⁾	(5)		—
Total (loss) income from operations	$	(162)	$	64

Three Months Ended
June 29,
2019 June 30,
2018
Total revenue:
Versace $ 207
$ —
Jimmy Choo 158
173
Michael Kors 981
1,030
Total revenue $ 1,346
$ 1,203

Income from operations:
Versace $ (3 ) $ —
Jimmy Choo 11
22
Michael Kors 201
230
Total segment income from operations 209
252
Less: Corporate expenses
(33 ) (22 )
Restructuring and other charges (15 ) (11 )
Impairment of long-lived assets (97 ) (4 )
Total income from operations $ 64
$ 215
___________________

⁽¹⁾
COVID-19 related charges primarily related to severance costs, partially offset by a credit loss of $(6) million.

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


	Three Months Ended
	June 27, 2020		June 29, 2019
Depreciation and amortization:
Versace	$	13	$	14
Jimmy Choo	7		8
Michael Kors	34		38
Total depreciation and amortization	$	54	$	60

Three Months Ended
June 29,
2019 June 30,
2018
Depreciation and amortization:
Versace $ 14
$ —
Jimmy Choo 8
8
Michael Kors 38
48
Total depreciation and amortization $ 60
$ 56

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


	Three Months Ended
	June 27, 2020		June 29, 2019
Total revenue:
The Americas ⁽¹⁾	$	177	$	729
EMEA	122		360
Asia	152		257
Total revenue	$	451	$	1,346

Three Months Ended
June 29,
2019 June 30,
2018
Total revenue:
The Americas ⁽¹⁾
$ 729
$ 718
EMEA 360
302
Asia 257
183
Total revenue $ 1,346
$ 1,203


⁽¹⁾ ⁽¹⁾Total revenue earned in the U.S. were $161 million for the three months ended June 27, 2020 and $681 million for the three months ended June 29, 2019, respectively.	~~Total revenue earned in the U.S. were $681 million for the three months ended June 29, 2019 and $668 million for the three months ended June 30, 2018.~~

As of June ~~29, 2019~~27, 2020 and March ~~30, 2019,~~28, 2020, the Company's total assets were ~~$8.308~~$7.533 billion and ~~$6.650~~$7.946 billion, respectively. The ~~increase~~decrease in total assets was primarily due to the ~~adoption~~reduction of ~~ASC 842 in~~ the ~~first~~Company's cash and cash equivalents from $592 million as of March 28, 2020 to $207 million as of June 27, 2020, due to net payments the Company made to lower the outstanding balance of its Revolving Credit Facilities.

17. Subsequent Events

Net Investment Hedges

During the second quarter of Fiscal ~~2020, which resulted~~2021, the Company entered into multiple fixed-to-fixed cross currency swap agreements with an aggregate notional amount of $1 billion to hedge its net investments in Euro-denominated subsidiaries against future volatility in the ~~Company recording operating lease right-of-use assets of $1.718 billion, of which $1.010 billion related to Michael Kors, $471 million related to Versace,~~exchange rates between the U.S. Dollar and ~~$237 million related to Jimmy Choo.~~the Euro. These contracts have been designated as net investment hedges.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of our Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this interim report. ~~This discussion contains forward-looking~~Forward-looking statements ~~that~~ are prospective in nature and are not based ~~upon~~on historical facts, but rather on current expectations. We sometimes identify forward-looking statements with such words as “may,” “expect,” “anticipate,” “estimate,” “seek,” “intend,” “believe” or similar words concerning future events. The forward-looking statements contained herein, include, without limitation, statements concerning our ability to execute on our future growth strategies, our ability to achieve intended benefits from acquisitions, future revenue sourcesexpectations and concentration, gross profit margins, selling and marketing expenses, capital expenditures, general and administrative expenses, capital resources, new stores, Retail Fleet Optimization Plan and anticipated cost savings, share buybacks, additional financings or borrowings and additional losses and future prospectsprojections of the ~~Company,~~management of Capri Holdings Limited (the “Company”) about future events, and are therefore subject to risks and uncertainties ~~including, but not limited to, those discussed in this report that~~which could cause actual results to differ materially from the future results ~~contemplated~~expressed or implied by ~~these~~the forward-looking statements. ~~We also urge you~~All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “plans”, “believes”, “expects”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “might” or similar words or phrases, are forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to ~~carefully review~~differ materially from those projected or implied in any forward-looking statements. These risks, uncertainties and other factors include the effect of the COVID-19 pandemic and its potential material and significant impact on the Company’s future financial and operational results if retail stores are forced to close again and the pandemic is prolonged, including that our estimates could materially differ if the severity of the COVID-19 situation worsens, the length and severity of such outbreak across the globe and the pace of recovery following the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition; the risk of disruptions to the Company’s businesses; the negative effects of events on the market price of the Company’s ordinary shares and its operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the Company’s businesses; fluctuations in demand for the Company’s products; levels of indebtedness (including the indebtedness incurred in connection with acquisitions); the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash; changes in consumer traffic and retail trends; loss of market share and industry competition; fluctuations in the capital markets; fluctuations in interest and exchange rates; the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as those risks set forth ~~under~~in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March ~~30, 2019,~~28, 2020, filed with the Securities and Exchange Commission on ~~May 29, 2019.~~July 8, 2020.

Overview

Our Business

Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design, style and craftsmanship, led by a world-class management team and renowned designers. Our brands cover the full spectrum of fashion luxury categories including women’s and men’s accessories, footwear and ready-to-wear as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA.

Our Versace brand ~~which was acquired on December 31, 2018,~~ has long been recognized as one of the world’s leading international fashion design houses and is synonymous with Italian glamour and style. Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship, over the past several decades the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings businesses. Versace’s design team is led by Donatella Versace, who has been the brand’s artistic director for over 20 years. Versace distributes its products through a worldwide distribution network, which includes boutiques in some of the world’s most glamorous cities, its e-commerce site, as well as through the most prestigious department and specialty stores worldwide.

Our Jimmy Choo brand ~~which was acquired on November 1, 2017,~~ offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessories brand, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, scarves and belts, as well as a growing men’s luxury shoes and accessory business. In addition, certain categories, such as fragrances, sunglasses and eyewear are produced under licensing agreements. Jimmy Choo’s design team is led by Sandra Choi, who has been the Creative Director for the brand since its inception in 1996. Jimmy Choo products are unique, instinctively seductive and chic. The brand offers classic and timeless luxury products, as well as innovative products that are intended to set and lead fashion trends. Jimmy Choo is represented through its global store network, its e-commerce sites, as well as through the most prestigious department and specialty stores worldwide.

Our Michael Kors brand was launched ~~over 35~~almost 40 years ago by Michael Kors, whose vision has taken the Company from its beginnings as an American luxury sportswear house to a global accessories, footwear and apparel company with a global distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites, leading department stores, specialty stores and select licensing partners. Michael Kors is a highly recognized luxury fashion brand in the Americas and Europe with growing brand awareness in other international markets. Michael Kors features distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude. Michael Kors offers three primary collections: the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible luxury line and the Michael Kors Mens line. The Michael Kors Collection establishes the aesthetic authority of the entire brand and is carried by many of our retail stores, our e-commerce sites, as well as in the finest luxury department stores in the world. MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and apparel, and addresses the significant demand opportunity in accessible luxury goods.We have also been developing our men’s business in recognition of the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s market. Taken together, our Michael Kors collections target a broad customer base while retaining our premium luxury image.

Certain Factors Affecting Financial Condition and Results of Operations

COVID-19 Pandemic. See Item 1A — "The COVID-19 pandemic could have a material adverse effect on our business and results of operations" of our Annual Report on Form 10-K for the fiscal year ended March 28, 2020 for additional discussion regarding risks to our business associated with the COVID-19 pandemic.

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

Channel shift and demand for our accessories and related merchandise. Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences. Although the overall consumer spending for personal luxury products has increased in recent years, 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. In addition, we recently announced our Capri Retail Store Optimization Program to close approximately 170 of our retail stores over the next two years, in order to improve the profitability of our retail store fleet. Over this time period, we expect to incur approximately $75 million of one-time costs associated with these store closures. During the first quarter of Fiscal 2021, we closed 28 of our retail stores, which have been incorporated into the Capri Retail Store Optimization Program, at a cost of $3 million.

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, particularly the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, 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, including the impact of COVID-19. 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 sanction tariffs imposed on our products due to changes in trade terms. On May 10, 2019, the U.S. increased the sanction tariffs rate from 10% to 25% on $200 billion of imports of select product categories (Tranche 3), which includes handbags and travel goods 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 an impact on our revenues, results of operations and cash flows. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as 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.

Segment Information

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

Versace

We generate revenue through the sale of Versace luxury ready-to-wear, accessories, footwear and home furnishings through directly operated Versace boutiques throughout North America (United States and Canada), EMEA (Europe, Middle East and Africa) and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites. In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of jeans, fragrances, watches, jewelry and eyewear.

Jimmy Choo

We generate revenue through the sale of Jimmy Choo luxury goods to end clients through directly operated Jimmy Choo stores throughout the Americas (United States, Canada and Latin America), 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 tradename 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.

Michael Kors

~~The Michael Kors brand was launched over 35 years ago and is the foundation to our global fashion luxury group.~~ We generate ~~sales~~revenue through the sale of Michael Kors products through four primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to the end consumer throughout the Americas, Europe and certain parts of Asia. Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and certain parts of Europe ~~China, South Korea~~ and ~~Japan.~~Asia. We also sell Michael Kors products directly to department stores, primarily located across the Americas and Europe, to specialty stores and travel retail shops in the Americas, Europe and Asia, and to our geographic licensees in certain parts of EMEA, Asia and Brazil. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and ~~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, such as Brazil, the Middle East, South Africa, Eastern Europe, certain parts of Asia and Australia.~~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 and information systems expenses, including ~~Enterprise Resource Planning (“ERP”)~~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), impairment costs and ~~impairment costs.~~COVID-19 related charges. The ~~new~~ segment structure is consistent with how ~~we plan~~our chief operating decision maker plans and ~~allocate~~allocates resources, ~~manage our~~manages the business and ~~assess our~~assesses performance. ~~All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis.~~ The following table presents our total revenue and (loss) income from operations by segment for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019 (in millions):


		Three Months Ended
		June 27, 2020				June 29, 2019
Total revenue:
	Versace	$	93			$	207
	Jimmy Choo	51				158
	Michael Kors	307				981
Total revenue				$	451			$	1,346

(Loss) income from operations:
	Versace	$	(41)			$	(3)
	Jimmy Choo	(29)				11
	Michael Kors	(48)				201
Total segment (loss) income from operations				(118)				209
Less:	Corporate expenses	(31)				(33)
	Restructuring and other charges	(8)				(15)
	Impairment of assets	—				(97)
	COVID-19 related charges ⁽¹⁾	(5)				—
Total (loss) income from operations				$	(162)			$	64

___________________

⁽¹⁾COVID-19 related charges primarily relate to severance costs, partially offset by a credit loss of $(6) million.

Three Months Ended
June 29,
2019 June 30,
2018
Total revenue:
Versace $ 207
$ —
Jimmy Choo 158
173
Michael Kors 981
1,030
Total revenue $ 1,346
$ 1,203

Income (loss) from operations:
Versace $ (3 ) $ —
Jimmy Choo 11
22
Michael Kors 201
230
Total segment income from operations 209
252
Less: Corporate expenses (33 ) (22 )
Restructuring and other charges (15 ) (11 )
Impairment of long-lived assets (97 ) (4 )
Total income from operations $ 64
$ 215

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


	As of			As of
	June 29, 2019	June 30, 2018		June 27, 2020	June 29, 2019
Number of full price retail stores (including concessions):			Number of full price retail stores (including concessions):
Versace	152	—	Versace	154	152
Jimmy Choo	173	160	Jimmy Choo	181	173
Michael Kors	583	593	Michael Kors	549	583
	908	753		884	908

Number of outlet stores:			Number of outlet stores:
Versace	44	—	Versace	50	44
Jimmy Choo	42	31	Jimmy Choo	47	42
Michael Kors	270	254	Michael Kors	273	270
	356	285		370	356

Total number of retail stores	1,264	1,038	Total number of retail stores	1,254	1,264

Total number of wholesale doors			Total number of wholesale doors
Versace	795	—	Versace	818	795
Jimmy Choo	581	623	Jimmy Choo	535	581
Michael Kors	3,191	3,470	Michael Kors	2,829	3,191
	4,567	4,093		4,182	4,567

The following table presents our retail stores by geographic location:


	As of			As of			As of					As of
	June 29, 2019			June 30, 2018			June 27, 2020					June 29, 2019
	Versace	Jimmy Choo	Michael Kors	Jimmy Choo	Michael Kors		Versace	Jimmy Choo	Michael Kors	Versace	Jimmy Choo	Michael Kors
Store count by region:						Store count by region:
The Americas	28	44	387	38	395	The Americas	30	47	365	28	44	387
EMEA	56	73	184	66	192	EMEA	59	76	180	56	73	184
Asia	112	98	282	87	260	Asia	115	105	277	112	98	282
	196	215	853	191	847		204	228	822	196	215	853

Key Consolidated Performance Indicators and Statistics

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

Three Months Ended
June 29, 2019 June 30, 2018
Total revenue $ 1,346
$ 1,203
Gross profit as a percent of total revenue 62.0 % 62.4 %
Income from operations $ 64
$ 215
Income from operations as a percent of total revenue 4.8 % 17.9 %


	Three Months Ended
	June 27, 2020			June 29, 2019
Total revenue	$	451		$	1,346
Gross profit as a percent of total revenue	67.0		%	62.0		%
(Loss) income from operations	$	(162)		$	64
(Loss) income from operations as a percent of total revenue	(35.9)		%	4.8		%

Seasonality

We experience certain effects of seasonality with respect to our business. We generally experience greater sales during our third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during our first fiscal quarter.

~~Certain Factors Affecting Financial Condition and Results of Operations~~

Critical Accounting Policies

~~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. We believe that 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 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 5 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 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”). As of June 29, 2019, we closed a total of 113 stores to date and recorded restructuring charges of $1 million and $4 million during the three months ended June 29, 2019 and June 30, 2018, respectively. We 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 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, particularly the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, 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. 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, will go 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 impact on our revenues, results of operations and cash flows. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as 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.

The preparation of financial statements in conformity with accounting principles generally accepted in the ~~U.S.~~United States (“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 2020, we adopted the new~~While our significant accounting ~~guidance related to lease accounting, as described~~policies are detailed in Note 2 ~~and Note 4~~ to the accompanying consolidated financial ~~statements. Under this guidance,~~statements, 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 Company’s total assets and 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 ~~30, 2019.~~28, 2020. There have been no significant changes in our critical accounting policies since March ~~30, 2019, other than described above.~~

~~General Definitions for Operating Results~~28, 2020.

~~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, 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, as well as sublease income.

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

~~Impairment of long-lived assets~~ ~~consists of charges to write-down right of use lease assets, fixed assets 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 Michael Kors Retail Fleet Optimization Plan and other restructuring initiatives, as well as costs recorded in connection with our acquisitions of Versace and Jimmy Choo (see Note 5 and Note 10 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. 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 14 to the accompanying consolidated financial statements for additional information).

~~Foreign currency (gain)/loss~~ includes net gains or losses related to the mark-to-market (fair value) on our forward currency contracts not designated as accounting hedges, 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”), noncontrolling interests in JC Industry S.r.L and JC Gulf Trading LLC, as well as in J. Choo Russia J.V. Limited, and noncontrolling interests in Versace Singapore Pte. Ltd. and Versace Korea Co. Ltd, as well as the redeemable noncontrolling interest in Versace Australia PTY Limited.

Results of Operations

Comparison of the three months ended June ~~29, 2019~~27, 2020 with the three months ended June ~~30, 2018~~29, 2019

The following table details the results of our operations for the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018,~~29, 2019, 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
	June 29, 2019			June 30, 2018								June 29, 2019		June 30, 2018			June 27, 2020		June 29, 2019								June 27, 2020		June 29, 2019
Statements of Operations Data:																Statements of Operations Data:
Total revenue	$	1,346		$	1,203		$	143		11.9	%					Total revenue	$	451	$	1,346	$	(895)	(66.5)	%
Cost of goods sold	512			452			60			13.3	%	38.0	%	37.6	%	Cost of goods sold	149		512		(363)		(70.9)	%	33.0	%	38.0	%
Gross profit	834			751			83			11.1	%	62.0	%	62.4	%	Gross profit	302		834		(532)		(63.8)	%	67.0	%	62.0	%
Selling, general and administrative expenses	598			465			133			28.6	%	44.4	%	38.7	%	Selling, general and administrative expenses	402		598		(196)		(32.8)	%	89.1	%	44.4	%
Depreciation and amortization	60			56			4			7.1	%	4.5	%	4.7	%	Depreciation and amortization	54		60		(6)		(10.0)	%	12.0	%	4.5	%
Impairment of long-lived assets	97			4			93			NM		7.2	%	0.3	%
Restructuring and other charges ⁽¹⁾	15			11			4			36.4	%	1.1	%	0.9	%
Impairment of assets																Impairment of assets	—		97		(97)		NM		—	%	7.2	%
Restructuring and other charges																Restructuring and other charges	8		15		(7)		(46.7)	%	1.8	%	1.1	%
Total operating expenses	770			536			234			43.7	%	57.2	%	44.6	%	Total operating expenses	464		770		(306)		(39.7)	%	102.9	%	57.2	%
Income from operations	64			215			(151		)	(70.2	)%	4.8	%	17.9	%
(Loss) income from operations																(Loss) income from operations	(162)		64		(226)		NM		(35.9)	%	4.8	%
Other income, net	(2		)	(1		)	(1		)	(100.0	)%	0.1	%	(0.1	)%	Other income, net	(1)		(2)		1		(50.0)	%	(0.2)	%	(0.1)	%
Interest expense, net	13			8			5			62.5	%	1.0	%	0.7	%	Interest expense, net	17		13		4		30.8	%	3.8	%	1.0	%
Foreign currency loss	2			3			(1		)	(33.3	)%	0.1	%	0.2	%
Income before provision for income taxes	51			205			(154		)	(75.1	)%	3.8	%	17.0	%
Foreign currency (gain) loss																Foreign currency (gain) loss	(3)		2		(5)		NM		(0.7)	%	0.1	%
(Loss) income before provision for income taxes																(Loss) income before provision for income taxes	(175)		51		(226)		NM		(38.8)	%	3.8	%
Provision for income taxes	6			19			(13		)	(68.4	)%	0.4	%	1.6	%	Provision for income taxes	5		6		(1)		(16.7)	%	1.1	%	0.4	%
Net income attributable to Capri	$	45		$	186		$	(141	)	(75.8	)%

Net (loss) income attributable to Capri																Net (loss) income attributable to Capri	$	(180)	$	45	$	(225)	NM

___________________

NM Not meaningful


⁽¹⁾	Includes store closure costs recorded in connection with the Michael Kors Retail Fleet Optimization Plan (as defined in Note 10) and other restructuring initiatives, as well as costs recorded in connection with our acquisitions of Jimmy Choo and Versace.

Total Revenue

Total revenue ~~increased $143~~decreased $895 million, or ~~11.9%~~66.5%, to $451 million for the three months ended June 27, 2020, compared to $1.346 billion for the three months ended June 29, 2019, ~~compared to $1.203 billion for the three months ended June 30, 2018,~~ which included net unfavorable foreign currency effects of approximately ~~$23~~$4 million, primarily related to the weakening of the ~~Euro, the~~ Chinese Renminbi ~~the British Pound~~ and ~~the Canadian Dollar~~Euro against the U.S. Dollar during the three months ended June ~~29, 2019~~27, 2020 as compared to the same prior year period. On a constant currency basis, our total revenue ~~increased $166~~decreased $891 million, or ~~13.8%~~66.2%. ~~Total revenue~~The decrease is attributable to lower revenues from all three brands, as compared to the prior year, reflecting the adverse impact of COVID-19.

Gross Profit

Gross profit decreased $532 million, or 63.8%, to $302 million for the three months ended June 29, 2019 includes approximately $207 million of incremental revenue attributable to Versace, which was acquired and consolidated into the our results of operations effective December 31, 2018, offset in part by lower revenue from our Michael Kors and Jimmy Choo businesses, as27, 2020, compared ~~to the prior year.~~

~~Gross Profit~~

~~Gross profit increased $83 million, or 11.1%,~~ to $834 million for the three months ended June 29, 2019, ~~compared to $751 million for the three months ended June 30, 2018,~~ which included net unfavorable foreign currency effects of ~~$15~~$3 million. Gross profit as a percentage of total revenue ~~decreased 40~~increased 500 basis points to 67.0% during the three months ended June 27, 2020, compared to 62.0% during the three months ended June 29, ~~2019, compared to 62.4% during the three months ended June 30, 2018.~~2019. The ~~decrease~~increase in our gross profit margin was primarily attributable to ~~lower~~higher gross profit margin for Michael Kors primarily driven by ~~increased markdowns~~lower promotional activity and favorable channel mix, including a higher proportion of sales in Asia during the three months ended June ~~29, 2019,~~27, 2020, as compared to the three months ended June ~~30, 2018, partially offset by the inclusion of Versace, which benefited our gross margin 90 basis points.~~

29, 2019.

Total Operating Expenses

Total operating expenses ~~increased $234~~decreased $306 million, or ~~43.7%~~39.7%, to ~~$770~~$464 million during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$536~~$770 million for the three months ended June ~~30, 2018, which included incremental operating expenses of $142 million associated with the recently acquired Versace business.~~29, 2019. Our operating expenses included a net favorable foreign currency impact of approximately $9$2 million. Total operating expenses increased to ~~57.2%~~102.9% as a percentage of total revenue for the three months ended June ~~29, 2019,~~27, 2020, compared to ~~44.6%~~57.2% for the three months ended June ~~30, 2018.~~29, 2019. The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~increased $133~~decreased $196 million, or ~~28.6%~~32.8%, to ~~$598~~$402 million during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$465~~$598 million for the three months ended June ~~30, 2018. The increase in selling,~~29, 2019, primarily due to lower variable costs, as well as decreases from our cost reduction initiatives as a result of COVID-19.

Selling, general, and administrative expenses ~~was~~as a percentage of total revenue increased to 89.1% for the three months ended June 27, 2020, compared to 44.4% for the three months ended June 29, 2019, primarily due to ~~incremental~~the adverse impacts of COVID-19 and increased retail store and e-commerce related costs as a percentage of ~~$128 million associated with~~total revenue during the ~~recently acquired Versace business, which has been consolidated in our operations beginning on December 31, 2018.~~three months ended June 27, 2020, as compared to the three months ended June 29, 2019.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, ~~increased $11~~decreased $2 million, or ~~50.0%~~6.1%, to ~~$33~~$31 million during the three months ended June ~~29, 2019~~27, 2020 as compared to ~~$22~~$33 million for the three months ended June ~~30, 2018. Selling, general,~~29, 2019.

Depreciation and ~~administrative expenses as a percentage of total revenue increased~~Amortization

Depreciation and amortization decreased $6 million, or 10.0%, to ~~44.4%~~$54 million during the three months ended June 27, 2020, compared to $60 million for the three months ended June 29, ~~2019, compared~~2019. The decrease in depreciation and amortization expense was primarily attributable to ~~38.7% for the three months ended June 30, 2018, primarily~~lower depreciation due to ~~the inclusion of expenses associated with the Versace business,~~previously recorded property and equipment impairment charges. Depreciation and amortization increased ~~retail store and e-commerce related costs~~to 12.0% as a percentage of total revenue during the three months ended June ~~29, 2019, as~~27, 2020, compared to ~~the three months ended June 30, 2018.~~

~~Depreciation and Amortization~~

~~Depreciation and amortization increased $4 million, or 7.1%, to $60 million during~~4.5% for the three months ended June 29, ~~2019, compared to $56 million for~~2019.

Impairment of Assets

During the three months ended June 30, 2018. The increase in depreciation and amortization expense was primarily attributable to incremental depreciation and amortization expense of $14 million attributable to our Versace business (including amortization of purchase accounting adjustments), partially offset by lower depreciation due to fixed27, 2020, we did not recognize any asset impairment charges. ~~Depreciation and amortization decreased to 4.5% as a percentage of total revenue during the three months ended June 29, 2019, compared to 4.7% for the three months ended June 30, 2018.~~

~~Impairment of Long-Lived Assets~~

During the three months ended June 29, 2019, we recognized ~~long-lived~~ asset impairment charges of approximately $97 million, which were primarily ~~comprised of $79 million~~ related to determining asset groups for our premier store locations at an individual store level, $68 million of which related to operating lease right-of-use assets and $11 million of which related to fixed assets. In addition, we recognized impairment charges of $18 million, which primarily related toas well as operating lease right-of-use assets as of part of our quarterly impairment ~~assessments~~assessments.

Restructuring and Other Charges

During the three months ended June 27, 2020, we recognized restructuring and other charges of $8 million, which included other costs of $5 million primarily related to equity awards associated with the acquisition of Versace (see Note 138 to the accompanying consolidated financial statements for additional information)~~. During the three months ended June 30, 2018, we recognized long-lived asset impairment charges of approximately $4~~ and $3 million ~~which were~~ related to ~~underperforming Michael Kors retail store locations, some of which related to closures as part of~~ our Capri Retail ~~Fleet~~Store Optimization ~~Plan. Impairment charges are not evaluated as part of our reportable segments’ results (See~~ ~~Segment Information~~ ~~above for additional information).~~Program.

~~Restructuring and Other Charges~~

During the three months ended June 29, 2019, we recognized restructuring and other charges of $15 million, which ~~included other costs~~were comprised of $12 million of other costs and restructuring charges of $3 million, of which $2 million was recorded in connection with Jimmy Choo lease termination charges and $1 million related to our Michael Kors Retail Fleet Optimization ~~Plan (see Note 10 to the accompanying consolidated financial statements for additional information).~~Plan. The other costs recorded during the three months ended June 29, 2019 included $7 million in connection with the acquisition of Versace and $5 million in connection with the Jimmy Choo acquisition.

During the three months ended June 30, 2018, we recognized restructuring and other charges of $11 million, which were comprised of $7 million of other costs in connection with the Jimmy Choo acquisition and restructuring charges of $4 million recorded in connection with our Retail Fleet Optimization Plan. Restructuring and other charges are not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).

(Loss) Income from Operations

As a result of the foregoing, income from operations decreased ~~$151~~$226 million, ~~or 70.2%,~~ to ~~$64~~a loss from operations of $162 million during three months ended ended June ~~29, 2019,~~27, 2020, compared to ~~$215~~income from operations of $64 million for the three months ended June ~~30, 2018.~~29, 2019. Income from operations as a percentage of total revenue decreased to ~~4.8%~~(35.9)% during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~17.9%~~4.8% for the three months ended June ~~30, 2018.~~29, 2019. See Segment Information above for a reconciliation of our segment operating income to total operating income.

Interest Expense, net

Interest expense, net, increased $5$4 million to ~~$13~~$17 million during the three months ended June ~~29, 2019,~~27, 2020, compared to $8$13 million for the three months ended June ~~30, 2018,~~29, 2019, primarily due to ~~increased~~a decrease to interest ~~expense attributable~~income as a result of the Company’s early termination of its net investment hedges related to ~~higher borrowings than in prior year (see Note 11~~its Euro-denominated subsidiaries during the fourth quarter. The decrease to ~~the accompanying consolidated financial statements for additional information). This increase~~interest income was largely offset by a ~~$15 million reduction to~~decrease in interest expense ~~related~~attributable to ~~the cross-currency swap used~~lower average borrowings outstanding in the ~~net investment hedge during the three months ended June 29, 2019, as compared to $1 million during the three months ended June 30, 2018~~current year (see Note 149 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

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

During the three months ended June 29, 2019, we recognized a net foreign currency loss of $2 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional ~~currency of the applicable reporting units.~~

During the three months ended June 30, 2018, we recognized a net foreign currency loss of $3 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency of the applicable reporting units, and the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries. These amounts were partially offset by mark-to-market adjustments on our forward foreign currency contracts not designated as accounting hedges.currency.

Provision for Income Taxes

~~We recognized $6~~The provision for incomes taxes was $5 million ~~of income tax expense~~ during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$19~~$6 million for the three months ended June ~~30, 2018.~~29, 2019. Our effective tax rate for the three months ended June ~~29, 2019,~~27, 2020, was ~~11.8%~~(2.9)%, compared to ~~9.3%~~11.8% for the three months ended June ~~30, 2018.~~29, 2019. The ~~increase~~decrease in our effective tax rate was primarily ~~due~~related to the ~~unfavorable~~ impact of a valuation allowance on a portion of our consolidated pre-tax loss and a tax ~~deficits on~~detriment related to share based compensation compared with tax benefits on share based compensation in the prior year. This increase was partially offset by net tax benefits in the US (including federal and state benefits) and Europe that related to prior tax year positions and a higher proportion of our earnings being generated in lower tax jurisdictions duringfor the three months ended June ~~29, 2019,~~27, 2020, compared to three months ended June ~~30, 2018. The~~29, 2019. These decreases were partially offset by the impact of the favorable effects related to global financing activities ~~are related to~~on 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 certain of 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.consolidated pre-tax loss.

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) Income Attributable to Capri

As a result of the foregoing, our net income decreased ~~$141~~$225 million ~~or 75.8%,~~ to ~~$45~~a net loss of $180 million during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$186~~net income of $45 million for the three months ended June ~~30, 2018.~~

29, 2019.

Segment Information

Versace


									Three Months Ended										% Change
	Fiscal Years Ended
	June 29, 2019			June 30, 2018			$ Change
(dollars in millions)								(dollars in millions)	June 27, 2020			June 29, 2019			$ Change		As Reported		Constant Currency
Revenues	$	207		$	—		NM	Revenues	$	93		$	207		$	(114)	(55.1)	%	(54.1)	%
Loss from operations	(3		)	—			NM	Loss from operations	(41)			(3)			(38)		NM
Operating margin	(1.4		)%	—		%		Operating margin	(44.1)		%	(1.4)		%

___________________

NM Not meaningful

Revenues

~~The~~ Versace ~~business acquired on December 31, 2018 contributed approximately $207~~revenues decreased $114 million, or 55.1%, to ~~our total revenue~~$93 million during the three months ended June 27, 2020, compared to $207 million for the three months ended June 29, ~~2019.~~2019, which included unfavorable foreign currency effects of $2 million. On a constant currency basis, revenue decreased $112 million, or 54.1%, primarily reflecting adverse impacts related to COVID-19.

Loss from Operations

During the three months ended June ~~29, 2019, we~~27, 2020 Versace recorded a ~~net~~ loss from operations of ~~$3 million (after amortization of non-cash purchase accounting adjustments).~~

~~Jimmy Choo~~

Fiscal Years Ended % Change
June 29,
2019 June 30,
2018 $ Change
As
Reported

Constant
Currency
Revenues $ 158
$ 173
$ (15 ) (8.7 )% (5.8 )%
Income from operations 11
22
(11 ) (50.0 )%
Operating margin 7.0 % 12.7 %

~~Revenues~~

~~Revenue from Jimmy Choo decreased $15 million, or 8.7%, to $158~~$41 million during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$173~~$3 million for the three months ended June ~~30, 2018,~~29, 2019. Operating margin declined from (1.4)% for the three months ended June 29, 2019, to (44.1)% during the three months ended June 27, 2020, primarily due to the adverse impacts related to COVID-19.

Jimmy Choo


	Three Months Ended										% Change
(dollars in millions)	June 27, 2020			June 29, 2019			$ Change		As Reported		Constant Currency
Revenues	$	51		$	158		$	(107)	(67.7)	%	(67.7)	%
(Loss) income from operations	(29)			11			(40)		NM
Operating margin	(56.9)		%	7.0		%

___________________

NM Not meaningful

Revenues

Jimmy Choo revenues decreased $107 million, or 67.7%, to $51 million during the three months ended June 27, 2020, compared to $158 million for the three months ended June 29, 2019, primarily reflecting adverse impacts related to COVID-19.

(Loss) Income from Operations

During the three months ended June 27, 2020, Jimmy Choo recorded a loss from operations of $29 million during the three months ended June 27, 2020, compared to income from operations of $11 million for the three months ended June 29, 2019. Operating margin declined from 7.0% for the three months ended June 29, 2019, to (56.9)% during the three months ended June 27, 2020, primarily due to the adverse impacts related to COVID-19.

Michael Kors


	Three Months Ended										% Change
(dollars in millions)	June 27, 2020			June 29, 2019			$ Change		As Reported		Constant Currency
Revenues	$	307		$	981		$	(674)	(68.7)	%	(68.5)	%
(Loss) income from operations	(48)			201			(249)		NM
Operating margin	(15.6)		%	20.5		%

___________________

NM Not meaningful

Revenues

Michael Kors revenues decreased $674 million, or 68.7%, to $307 million during the three months ended June 27, 2020, compared to $981 million for the three months ended June 29, 2019, which included unfavorable foreign currency effects of $5$2 million. On a constant currency basis, revenue decreased ~~$10~~$672 million, or ~~5.8%~~68.5%, primarily due to ~~a decrease in wholesale revenue primarily attributable~~adverse impacts related to ~~lower women’s and men’s footwear sales, offset in part by increased retail sales in women’s footwear.~~COVID-19.

(Loss) Income from Operations

~~Income~~During the three months ended June 27, 2020, Michael Kors recorded a loss from operations ~~for our Jimmy Choo segment decreased $11 million, or 50.0%, to $11~~of $48 million during the three months ended June ~~29, 2019,~~27, 2020, compared to ~~$22~~income from operations of $201 million for the three months ended June ~~30, 2018. Income~~29, 2019. Operating margin declined from ~~operations as a percentage of Jimmy Choo revenue declined 570 basis points from 12.7%~~20.5% for ~~the three months ended June 30, 2018, to 7.0% during~~ the three months ended June 29, 2019, ~~which was primarily due~~ to ~~an increase in operating expenses, including retail store related and advertising and marketing, as well as an increase in other corporate expenses.~~

~~Michael Kors~~

Fiscal Years Ended % Change
June 29,
2019 June 30,
2018 $ Change
As
Reported

Constant
Currency
Revenues $ 981
$ 1,030
$ (49 ) (4.8 )% (3.0 )%
Income from operations 201
230
(29 ) (12.6 )%
Operating margin 20.5 % 22.3 %

~~Revenues~~

~~Michael Kors revenues decreased $49 million, or 4.8%, to $981 million~~(15.6)% during the three months ended June 29, 2019, compared to $1.030 billion for the three months ended June 30, 2018, which included unfavorable foreign currency effects of $18 million. On a constant currency basis, revenue decreased $31 million, or 3.0%. The decrease in revenues was27, 2020, primarily due ~~to:~~to adverse impacts related to COVID-19.

~~a $27 million decrease in revenues, primarily driven by lower sales of women’s accessories, partially offset by increased sales of footwear and women’s apparel; and~~

a decrease in comparable store sales of $18 million, including net unfavorable foreign currency effects of $10 million, which was primarily attributable to lower sales from our women’s accessories, watches and jewelry product categories, offset in part by higher sales from women’s footwear, men’s accessories and women’s apparel. Our comparable store sales benefited approximately 130 basis points from the inclusion of e-commerce sales.

~~Income from Operations~~

Income from operations for our Michael Kors segment decreased $29 million, or 12.6%, to $201 million during the three months ended June 29, 2019, compared to $230 million for the three months ended June 30, 2018. Income from operations as a percentage of Michael Kors revenue declined 180 basis points from 22.3% for the three months ended June 30, 2018, to 20.5% during the three months ended June 29, 2019, largely due to a decrease in gross profit margin, as previously discussed, as well as increased retail-store related costs, offset in part by decreased depreciation and amortization expenses.

Liquidity and Capital Resources

Liquidity

Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our credit facilities ~~(see below discussion regarding “Revolving Credit Facilities”)~~ and available cash and cash equivalents. Our primary use of this liquidity is to fund our ongoing cash requirements, including working capital requirements, acquisitions, debt repayments, investment in information systems infrastructure, global retail store construction, expansion and renovation, distribution and corporate facilities, construction and renovation of shop-in-shops, share repurchases and other corporate activities. We believe that the cash generated from our operations, together with borrowings available under our revolving credit facility and available cash and cash equivalents, will be sufficient to meet our working capital needs for the next 12 months, including investments made and expenses incurred in connection with our store growth plans, shop-in-shop growth, investments in corporate and distribution facilities, continued systems development, e-commerce and marketing initiatives. We spent ~~$54~~$32 million on capital expenditures during the three months ended June ~~29, 2019, and expect to spend approximately $250 million on capital expenditures during the remainder of Fiscal~~27, 2020.

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


	As of
	June 27, 2020		March 28, 2020
Balance Sheet Data:
Cash and cash equivalents	$	207	$	592
Working capital	$	(100)	$	493
Total assets	$	7,533	$	7,946
Short-term debt	$	191	$	167
Long-term debt	$	1,577	$	2,012

As of
June 29,
2019 March 30,
2019
Balance Sheet Data:
Cash and cash equivalents $ 160
$ 172
Working capital $ 42
$ 187
Total assets $ 8,308
$ 6,650
Short-term debt $ 514
$ 630
Long-term debt $ 1,917
$ 1,936


	Three Months Ended
	June 27, 2020		June 29, 2019
Cash Flows Provided By (Used In):
Operating activities	$	67	$	158
Investing activities	(32)		(32)
Financing activities	(420)		(138)
Effect of exchange rate changes	—		—
Net decrease in cash and cash equivalents and restricted cash	$	(385)	$	(12)

Three Months Ended
June 29,
2019 June 30,
2018
Cash Flows Provided By (Used In):
Operating activities $ 158
$ 206
Investing activities (32 ) (41 )
Financing activities (138 ) (153 )
Effect of exchange rate changes —
(5 )
Net (decrease) increase in cash and cash equivalents and restricted cash $ (12 ) $ 7

Cash Provided by Operating Activities

~~Cash~~Net cash provided by operating activities decreased ~~$48~~$91 million to $67 million during the three months ended June 27, 2020, as compared to $158 million ~~during~~for the three months ended June 29, 2019, as ~~compared to $206 million for the three months ended June 30, 2018, which was primarily due to~~a result of a decrease in our net income after non-cash ~~adjustments.~~adjustments, partially offset by increases related to changes in our working capital, primarily attributable to the timing of payments and receipts due to the impact of COVID-19.

Cash Used in Investing Activities

Net cash used in investing activities ~~decreased $9~~was $32 million during the three months ended June 27, 2020, as compared to $32 million during the three months ended June 29, 2019, ~~as compared to $41 million during the three months ended June 30, 2018,~~ which was primarily attributable to an increase of $23 million related to the settlement of a net investment ~~hedges of $23 million, partially offset by higher capital expenditures of $13 million~~hedge during the three months ended June 29, 2019, offset by lower capital expenditures of $22 million compared to prior year.

Cash Used in Financing Activities

Net cash used in financing activities ~~decreased $15~~was $420 million during the three months ended June 27, 2020, as compared to $138 million during the three months ended June 29, ~~2019, from $153~~2019. The increase of cash used in financing activities of $282 million ~~during the three months ended June 30, 2018, which~~ was primarily attributable to ~~a $104 million decrease in cash payments to repurchase our ordinary shares, partially offset by~~ increased debt ~~repayments of $83 million, net of debt borrowings.~~repayments.

Debt ~~Obligations~~Facilities

The following table presents a summary of our borrowing capacity and amounts outstanding as of June ~~29, 2019~~27, 2020 and March ~~30, 2019~~28, 2020 (dollars in millions):


	As of
	June 27, 2020		March 28, 2020
Senior Unsecured Revolving Credit Facility:
Revolving Credit Facility (excluding up to a $500 million accordion feature) ⁽¹⁾
Total Availability	$	1,230	$	1,000
Borrowings outstanding	270		681
Letter of credit outstanding	22		18
Remaining availability	$	938	$	301

Term Loan Facility ($1.6 billion)
Borrowings Outstanding, net of debt issuance costs ⁽²⁾	$	985	$	1,010
Remaining availability	$	—	$	—

4.000% Senior Notes
Borrowings Outstanding, net of debt issuance costs and discount amortization ⁽²⁾	$	446	$	446

Other Borrowings ⁽²⁾	$	4	$	3

Hong Kong Uncommitted Credit Facility:
Total availability (100 million Hong Kong Dollars)	$	13	$	14
Borrowings outstanding (85 million Hong Kong Dollars) ⁽³⁾	11		—
Bank guarantees outstanding (4 million Hong Kong Dollars)	1		1
Remaining availability (11 million and 96 million Hong Kong Dollars)	$	1	$	13

China Uncommitted Credit Facility:
Borrowings outstanding	$	—	$	—
Total and remaining availability (100 million Chinese Yuan)	$	14	$	14

Japan Credit Facility:
Total availability (1.0 billion Japanese Yen)	$	9	$	9
Borrowings outstanding (223 million Japanese Yen) ⁽³⁾	2		—
Remaining availability (777 million and 1.0 billion Japanese Yen)	$	7	$	9

Versace Uncommitted Credit Facilities:
Total availability (55 million and 52 million Euro)	$	61	$	58
Borrowings outstanding (45 million and 35 million Euro) ⁽³⁾	50		39
Remaining availability (10 million and 17 million Euro)	$	11	$	19

Total borrowings outstanding ⁽¹⁾	$	1,768	$	2,179
Total remaining availability	$	971	$	356

As of
June 29,
2019 March 30,
2019
Senior Unsecured Revolving Credit Facility:
Revolving Credit Facility (excluding up to a $500 million accordion feature) ⁽¹⁾

Total Availability $ 1,000
$ 1,000
Borrowings outstanding ⁽²⁾
422
539
Letter of credit outstanding 17
17
Remaining availability $ 561
$ 444

Term Loan Facility ($1.6 billion)
Borrowings Outstanding, net of debt issuance costs ⁽³⁾
$ 1,551
$ 1,570
Remaining availability $ —
$ —

4.000% Senior Notes
Borrowings Outstanding, net of debt issuance costs and discount amortization ⁽³⁾
$ 445
$ 445

Other Borrowings ⁽³⁾
$ 1
$ 1

Hong Kong Uncommitted Credit Facility:
Total availability (100 million Hong Kong Dollars) $ 13
$ 13
Borrowings outstanding —
—
Bank guarantees outstanding (12 million Hong Kong Dollars) 2
2
Remaining availability $ 11
$ 11

China Uncommitted Credit Facility:
Borrowings outstanding $ —
$ —
Total and remaining availability (100 million Chinese Yuan) $ 15
$ 14

Japan Credit Facility:
Borrowings outstanding $ —
$ —
Total and remaining availability (1.0 billion Japanese Yen) $ 9
$ 9

Versace Uncommitted Credit Facility:
Total availability (20 million Euro) $ 23
$ 22
Borrowings outstanding (10 million Euro) ⁽²⁾
12
11
Remaining availability $ 11
$ 11

Total borrowings outstanding ⁽¹⁾
$ 2,431
$ 2,566
Total remaining availability $ 607
$ 489

_____________________________

⁽¹⁾

⁽¹⁾The financial covenant in our 2018 Credit Facility requiring us to maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.0 has been waived through the fiscal quarter ending June 26, 2021. When this financial covenant is reinstated, the applicable ratio will be calculated net of our unrestricted cash and cash equivalents to the extent in excess of $100 million and shall exclude up to $150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0. As of June 27, 2020 and March 28, 2020, we were in compliance with all covenants related to our agreements then in effect governing our debt.

The 2018 Credit Facility contains customary events of default and requires us to maintain a leverage ratio at the end of each fiscal quarter of no greater than 3.75 to 1, calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus 6.0 times the consolidated rent expense for the last four consecutive fiscal quarters, to Consolidated EBITDAR 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 deductions. The 2018 Credit Facility also includes other customary covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends. As of June 29, 2019 and March 30, 2019, we were in compliance with all covenants related to our agreements then in effect governing our debt.

⁽²⁾Recorded as long-term debt in our consolidated balance sheets as of June 27, 2020 and March 28, 2020, except for the current portion of $128 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt at both June 27, 2020 and March 28, 2020.


⁽³⁾Recorded as short-term debt in our consolidated balance sheets as of June 27, 2020 and March 28, 2020. ⁽²⁾	~~Recorded as short-term debt in our consolidated balance sheets as of June 29, 2019 and March 30, 2019.~~


⁽³⁾	Recorded as long-term debt in our consolidated balance sheets as of June 29, 2019 and March 30, 2019, except for the current portion of $80 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt at June 29, 2019 and March 30, 2019.

We believe that our 2018 Credit Facility is adequately diversified with no undue concentration in any one financial institution. As of June ~~29, 2019~~,27, 2020, there were 1826 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%. We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the 2018 Credit Facility.

See Note 119 in the accompanying financial statements and Note 1112 in our Fiscal ~~2019~~2020 Annual Report on Form 10-K for detailed information relating to our credit facilities and debt obligations.

Share Repurchase Program

The following table presents our treasury share repurchases during the three months ended June ~~29, 2019~~27, 2020 and June ~~30, 2018~~29, 2019 (dollars in millions):


	Three Months Ended
	June 27, 2020		June 29, 2019
Cost of shares repurchased under share repurchase program	$	—	$	—
Fair value of shares withheld to cover tax obligations for vested restricted share awards	1		2
Total cost of treasury shares repurchased	$	1	$	2

Shares repurchased under share repurchase program	—		—
Shares withheld to cover tax withholding obligations	38,119		58,304
	38,119		58,304

Three Months Ended
June 29,
2019 June 30,
2018
Cost of shares repurchased under share repurchase program ⁽¹⁾
$ —
$ 100
Fair value of shares withheld to cover tax obligations for vested restricted share awards 2
6
Total cost of treasury shares repurchased $ 2
$ 106

Shares repurchased under share repurchase program —
1,659,941
Shares withheld to cover tax withholding obligations 58,304
88,325
58,304
1,748,266

~~_____________________________~~


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

During the first quarter of Fiscal 2021, we suspended our $500 million share-repurchase program in response to the continued impact of the COVID-19 pandemic. As of June 27, 2020, the remaining availability under our share repurchase program was $400 million. Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under ~~the~~ our insider trading policy, and other relevant factors. This program may be suspended or discontinued at any time.

~~On August 1, 2019, our Board of Directors authorized a new $500 million share repurchase program, which expires August 1, 2021.~~

See Note 1513 to the accompanying consolidated financial statements for additional information.

Contractual Obligations and Commercial Commitments

Please refer to the “Contractual Obligations and Commercial Commitments” disclosure within the “Liquidity and Capital Resources” section of our Fiscal ~~2019~~2020 Form 10-K for a detailed disclosure of our other contractual obligations and commitments as of March ~~30, 2019, as well as Note 4 to the accompanying consolidated financial statements for future lease obligations as of June 29, 2019.~~28, 2020.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. Our off-balance sheet commitments relating to our outstanding letters of credit were ~~$18~~$27 million at June ~~29, 2019,~~27, 2020, including $1$5 million in letters of credit issued outside of the 2018 Credit Facility. In addition, as of June ~~29, 2019,~~27, 2020, bank guarantees of approximately $2$18 million were supported by the ~~Hong Kong~~Versace Credit ~~Facility.~~Facilities. We do not have any other off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See Note 2 to the accompanying interim consolidated financial statements for recently issued accounting standards, which may have an impact on our financial statements and/or disclosures upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks during the normal course of our business, such as ~~risk~~risks arising from fluctuations in foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to manage these risks, we employ certain strategies to mitigate the effect of these fluctuations. We enter into foreign currency forward contracts to manage our foreign currency exposure to the fluctuations of certain foreign currencies. The use of these instruments primarily helps to manage our exposure to our foreign purchase commitments and better control our product costs. We do not use derivatives for trading or speculative purposes.

Foreign Currency Exchange Risk

Forward Foreign Currency Exchange Contracts

We are exposed to risks on certain purchase commitments to foreign suppliers based on the value of our purchasing subsidiaries’ local currency relative to the currency requirement of the supplier on the date of the commitment. As such, we enter into forward currency exchange contracts that generally mature in 12 months or less and are consistent with the related purchase commitments, to manage our exposure to the changes in the value of the Euro and the Canadian Dollar. These contracts are recorded at fair value in our consolidated balance sheets as either an asset or liability, and are derivative contracts to hedge cash flow risks. Certain of these contracts are designated as hedges for hedge accounting purposes, while certain of these contracts, are not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of the majority of these contracts at the balance sheet date are recorded in our equity as a component of accumulated other comprehensive (loss) income, and upon maturity (settlement) are recorded in, or reclassified into, our cost of sales or operating expenses, in our consolidated statement of operations and comprehensive (loss) income, as applicable, tobased on the underlying transactions for which the forward currency exchange contracts were established.

We perform a sensitivity analysis on our forward currency contracts, both designated and not designated as hedges for accounting purposes, to determine the effects of fluctuations in foreign currency exchange rates. For this sensitivity analysis, we assume a hypothetical change in U.S. Dollar against foreign exchange rates. Based on all foreign currency exchange contracts outstanding as of June ~~29, 2019,~~27, 2020, a 10% appreciation or devaluation of the U.S. Dollar compared to the level of foreign currency exchange rates for currencies under contract as of June ~~29, 2019,~~27, 2020, would result in a net increase and decrease, respectively, of approximately ~~$18~~$10 million in the fair value of these contracts.

Net Investment ~~Hedges~~Hedge

We are exposed to adverse foreign currency exchange rate movements related to interest from our net investment ~~hedges.~~hedge. As of June ~~29, 2019,~~27, 2020, the net investment ~~hedges have~~hedge has an aggregate notional ~~amounts~~amount of ~~$3.190 billion to hedge our net investments in Euro-denominated subsidiaries, and~~ $44 million to hedge our net investments in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S. Dollar and ~~these currencies.~~this currency. Under the terms of ~~these contracts,~~this contract, which ~~mature between January 2022 and June 2026,~~matures November 2024, we will exchange the semi-annual fixed rate payments made under our Senior Notes for fixed rate payments of ~~0% to 1.674% in Euros and~~ 0.89% in Japanese Yen. Based on ~~all~~the net investment ~~hedges~~hedge outstanding as of June ~~29, 2019,~~27, 2020, a 10% appreciation or devaluation of the U.S. Dollar compared to the level of foreign currency exchange rates for currencies under contract as of June ~~29, 2019,~~27, 2020, would result in a potential net ~~cash~~ increase or decrease upon settlement of approximately ~~$327~~$5 million in the fair value of ~~these contracts,~~this contract, which ~~have staggered maturities of 3 to 7~~matures in 4 years.

Interest Rate Risk

We are exposed to interest rate risk in relation to borrowings outstanding under our 2018 Term Loan Facility, our 2018 Credit Facility, our Hong Kong Credit Facility, our Japan Credit Facility and our Versace Credit ~~Facility.~~Facilities. Our 2018 Term Loan Facility carries interest at a rate that is based on LIBOR. Our 2018 Credit Facility carries interest rates that are tied to LIBOR and the prime rate, among other institutional lending rates (depending on the particular origination of borrowing), as further described in Note 119 to the accompanying consolidated financial statements. Our Hong Kong Credit Facility carries interest at a rate that is tied to the Hong Kong Interbank Offered Rate. Our China Credit Facility carries interest at a rate that is tied to the People’s Bank of China’s Benchmark lending rate. Our Japan Credit Facility carries interest at a rate posted by the Mitsubishi UFJ Financial Group. Our Versace Credit Facility carries interest at a rate set by the bank on the date of borrowing that is tied to the European Central Bank. Therefore, our statements of operations and comprehensive (loss) income and cash flows are exposed to changes in those interest rates. As part of our strategy to limit exposure to interest rate risk, we entered into an interest rate swap agreement with a notional amount of $500 million that will decrease to $350 million in April 2022. The swap was designated as a cash flow hedge designed to mitigate the impact of adverse interest rate fluctuations for a portion of our variable-rate debt equal to the notional amount of the swap. The interest rate swap converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through December 2022. At June ~~29, 2019,~~27, 2020, we had ~~$422~~$270 million in ~~short-term~~long-term borrowings outstanding under our 2018 Credit Facility, $985 million, net of debt issuance costs, outstanding under our 2018 Term Loan Facility and ~~$1.551~~$50 million outstanding under our Versace Credit Facility. At March 28, 2020, we had $681 million in long-term borrowings outstanding under our 2018 Credit Facility, $1.010 billion, net of debt issuance costs, outstanding under our 2018 Term Loan Facility and ~~$12~~$39 million outstanding under our Versace Credit Facility. At March 30, 2019, we had $539 million in short-term borrowings outstanding under our 2018 Credit Facility, $1.570 billion, net of debt issuance costs, outstanding under our 2018 Term Loan Facility and $11 million outstanding under our Versace Credit Facility.Facilities. These balances are not indicative of future balances that may be outstanding under our revolving credit facilities that may be subject to fluctuations in interest rates. Any increases in the applicable interest rate(s) would cause an increase to the interest expense relative to any outstanding balance at that date.

Credit Risk

We have outstanding $450 million aggregate principal amount of Senior Notes due in 2024. The Senior Notes bear interest at a fixed rate equal to 4.000% per year, payable semi-annually. Our Senior Notes interest rate payable may be subject to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency), downgrades (or downgrades and ~~subsequently~~subsequent upgrades) the credit rating assigned to the Senior Notes.

On an overall basis, our exposure to market risk has not significantly changed from what we reported in our Annual Report on Form 10-K. The COVID-19 pandemic does present new and emerging uncertainty to the financial markets. See Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 28, 2020 for additional information.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)) as of June ~~29, 2019.~~27, 2020. This evaluation was performed based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), the 2013 Framework. Based on this assessment, our CEO and CFO concluded that our disclosure controls and procedures as of June ~~29, 2019~~27, 2020 are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

~~In the first quarter of Fiscal 2020, we implemented additional internal controls in connection with our adoption of ASU 2016-02,~~ ~~Leases (Topic 842), none of which materially affected our internal control over financial reporting~~. There ~~were~~have been no ~~other~~ changes in our internal control over financial reporting during the three months ended June ~~29, 2019~~27, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Acquisition of Versace~~

On December 31, 2018, we acquired Versace (see Note 5 to the accompanying consolidated financial statements for additional information). We are in the process of evaluating the internal controls of the acquired business and integrating it into our existing operations.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various routine legal proceedings incident to the ordinary course of our business. We believe that the outcome of all pending legal proceedings in the aggregate will not have a material adverse effect on our business, results of operations and financial condition.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March ~~30, 2019,~~28, 2020, which could materially and adversely affect our business, financial condition or future results. These risks are not the only risks that we face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter of Fiscal 2021, the Company suspended its $500 million share-repurchase program in response to the continued impact of the COVID-19 pandemic. The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the vesting of their restricted share awards.

The following table provides information of the Company’s ordinary shares repurchased or withheld during the three months ended June ~~29, 2019:~~27, 2020:


	Total Number of Shares	Average Price Paid per Share		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Approximated Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
March 29 – April 25	—	$	—	—	$	400
April 26 – May 23	7,016	$	13.96	—	$	400
May 24 – June 27	31,103	$	16.87	—	$	400
	38,119			—

Total Number
of Shares
Purchased

Average Price
Paid per Share
March 31 – April 27 —
$ —
April 28 – May 25 9,262
$ 43.19
May 26 – June 29 49,042
$ 33.86
58,304

~~On August 1, 2019, our Board of Directors authorized a new $500 million share repurchase program, which expires August 1, 2021.~~

ITEM 6. EXHIBITS

a. Exhibits

Please refer to the accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August ~~13, 2019.~~

5, 2020.




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

INDEX TO EXHIBITS




Exhibit No.	Description

~~31.1~~10.1		Second Amendment to the Third Amended and Restated Credit Agreement dated as of November 15, 2018 and First Amendment to the Third Amended and Restated Guarantee Agreement, dated as of June 25, 2020, among Capri Holdings Limited, Michael Kors (USA), Inc., the foreign subsidiary borrowers party thereto, the guarantors party thereto, the financial institutions party thereto as lenders and issuing banks and JPMorgan Chase Bank, N.A., as administrative agent (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35368), filed on July 1, 2020 and incorporated herein by reference .

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 June ~~29, 2019,~~27, 2020 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.



	March 30, 2019 As Reported under ASC 840		ASC 842 Adjustments				March 31, 2019 As Reported Under ASC 842
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	374		(72		)	⁽⁶⁾	302
Long-term portion of operating lease liabilities	—		1,828			⁽⁵⁾	1,828
Deferred Rent	132		(132		)	⁽⁷⁾	—
Deferred tax liabilities	438		(7		)	⁽⁴⁾	431
Shareholders’ Equity
Retained earnings	4,707		(152		)	⁽⁴⁾	4,555



	Contractually Guaranteed Minimum Fees
	Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2020	$	20
Fiscal 2021	27
Fiscal 2022	27
Fiscal 2023	20
Fiscal 2024	10
Fiscal 2025 and thereafter	36
Total	$	140



	Balance Sheet Location	June 29, 2019
Assets
Operating leases	Operating lease right-of-use assets	$	1,718

Liabilities
Current:
Operating leases	Current portion of operating lease liabilities	$	384
Non-current:
Operating leases	Long-term portion of operating lease liabilities	$	1,754



		Three Months Ended
	Statement of Operations and Comprehensive Income Location	June 29, 2019
Operating lease cost	Selling, general and administrative expenses	$	109
Short-term lease cost	Selling, general and administrative expenses	10
Variable lease cost	Selling, general and administrative expenses	40
Sublease income	Selling, general and administrative expenses	(1		)
Total lease cost		$	158



	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	—		(5		)	(5		)
Balance at June 29, 2019	$	2	$	3		$	5



	Fair value at June 29, 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	$	—	$	2	$	—	$	—	$	5	$	—
Net investment hedges	—		12		—		—		37		—
Other undesignated derivative contracts	—		1		—		—		—		—
Total derivative assets	$	—	$	15	$	—	$	—	$	42	$	—

Derivative liabilities:
Net investment hedges	$	—	$	24	$	—	$	—	$	—	$	—
Other undesignated derivative contracts	—		4		—		—		5		—
Total derivative liabilities	$	—	$	28	$	—	$	—	$	5	$	—



	June 29, 2019				March 30, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
4.000% Senior Notes	$	445	$	456	$	445	$	438
Term Loan	$	1,551	$	1,563	$	1,570	$	1,574
Revolving Credit Facilities	$	434	$	434	$	550	$	550



	Three Months Ended June 30, 2018
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Fixed Assets	$	5	$	2	$	3
Lease Rights	2		1		1
Total	$	7	$	3	$	4



	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		$	(10	)	$	51
Other comprehensive (loss) income before reclassifications	(103		)	8			(95		)
Less: amounts reclassified from AOCI to earnings	—			(4		)	(4		)
Other comprehensive (loss) income, net of tax	(103		)	12			(91		)
Balance at June 30, 2018	$	(42	)	$	2		$	(40	)

Balance at March 30, 2019	$	(73	)	$	7		$	(66	)
Other comprehensive (loss) income before reclassifications	(25		)	—			(25		)
Less: amounts reclassified from AOCI to earnings	—			2			2
Other comprehensive (loss) income, net of tax	(25		)	(2		)	(27		)
Balance at June 29, 2019	$	(98	)	$	5		$	(93	)



	Total Number of Shares Purchased	Average Price Paid per Share
March 31 – April 27	—	$	—
April 28 – May 25	9,262	$	43.19
May 26 – June 29	49,042	$	33.86
	58,304