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 ~~December 28, 2019~~June 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: 44 207 632 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

☒

As of ~~January 31,~~July 29, 2020, Capri Holdings Limited had ~~149,365,397~~150,344,703 ordinary shares outstanding.

TABLE OF CONTENTS


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

	Consolidated Balance Sheets (unaudited) as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019~~31, 2020	3

	Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited) for the three months ended June 27, 2020 and ~~nine months ended December 28,~~June 29, 2019 ~~and December 29, 2018~~	4

	Consolidated Statements of Shareholders’ Equity (unaudited) for the three months ended June 27, 2020 and ~~nine months ended December 28,~~June 29, 2019 ~~and December 29, 2018~~	5

	Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~	76

	Notes to Consolidated Financial Statements (unaudited)	87

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3328

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5442

Item 4.	Controls and Procedures	5644

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	5745

Item 1A.	Risk Factors	5745

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5845

Item 6.	Exhibits	5845

Signatures			5946

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)


		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	237	$	172	Cash and cash equivalents	$	207	$	592
Receivables, net	Receivables, net	321		383		Receivables, net	183		308
Inventories, net	Inventories, net	960		953		Inventories, net	948		827
Prepaid expenses and other current assets	Prepaid expenses and other current assets	263		221		Prepaid expenses and other current assets	151		167
Total current assets	Total current assets	1,781		1,729		Total current assets	1,489		1,894
Property and equipment, net	Property and equipment, net	596		615		Property and equipment, net	541		561
Operating lease right-of-use assets	Operating lease right-of-use assets	1,665		—		Operating lease right-of-use assets	1,641		1,625
Intangible assets, net	Intangible assets, net	2,225		2,293		Intangible assets, net	1,977		1,986
Goodwill	Goodwill	1,681		1,659		Goodwill	1,490		1,488
Deferred tax assets	Deferred tax assets	165		112		Deferred tax assets	226		225
Other assets	Other assets	212		242		Other assets	169		167
Total assets	Total assets	$	8,325	$	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					Current liabilities
Accounts payable	Accounts payable	$	375	$	371	Accounts payable	$	596	$	428
Accrued payroll and payroll related expenses	Accrued payroll and payroll related expenses	110		133		Accrued payroll and payroll related expenses	94		93
Accrued income taxes	Accrued income taxes	30		34		Accrued income taxes	34		42
Short-term operating lease liabilities	Short-term operating lease liabilities	406		—		Short-term operating lease liabilities	431		430
Short-term debt	Short-term debt	1,031		630		Short-term debt	191		167
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	353		374		Accrued expenses and other current liabilities	243		241
Total current liabilities	Total current liabilities	2,305		1,542		Total current liabilities	1,589		1,401
Long-term operating lease liabilities	Long-term operating lease liabilities	1,751		—		Long-term operating lease liabilities	1,751		1,758
Deferred rent		—		132
Deferred tax liabilities	Deferred tax liabilities	440		438		Deferred tax liabilities	465		465
Long-term debt	Long-term debt	1,085		1,936		Long-term debt	1,577		2,012
Other long-term liabilities	Other long-term liabilities	133		166		Other long-term liabilities	144		142
Total liabilities	Total liabilities	5,714		4,214		Total liabilities	5,526		5,778
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Redeemable noncontrolling interest		—		4
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Ordinary shares, 0 par value; 650,000,000 shares authorized; 216,906,643 shares issued and 149,012,245 outstanding at December 28, 2019; 216,050,939 shares issued and 150,932,306 outstanding at March 30, 2019		—		—
Treasury shares, at cost (67,894,398 shares at December 28, 2019 and 65,118,633 shares at March 30, 2019)		(3,325)		(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	Additional paid-in capital	1,080		1,011		Additional paid-in capital	1,109		1,085
Accumulated other comprehensive loss		(29)		(66)
Accumulated other comprehensive income						Accumulated other comprehensive income	71		75
Retained earnings	Retained earnings	4,883		4,707		Retained earnings	4,152		4,332
Total shareholders’ equity of Capri	Total shareholders’ equity of Capri	2,609		2,429		Total shareholders’ equity of Capri	2,006		2,167
Noncontrolling interest	Noncontrolling interest	2		3		Noncontrolling interest	1		1
Total shareholders’ equity	Total shareholders’ equity	2,611		2,432		Total shareholders’ equity	2,007		2,168
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	8,325	$	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						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Total revenue	Total revenue	$	1,571	$	1,438	$	4,359	$	3,894	Total revenue	$	451	$	1,346
Cost of goods sold	Cost of goods sold	639		565		1,719		1,507		Cost of goods sold	149		512
Gross profit	Gross profit	932		873		2,640		2,387		Gross profit	302		834
Selling, general and administrative expenses	Selling, general and administrative expenses	630		507		1,851		1,466		Selling, general and administrative expenses	402		598
Depreciation and amortization	Depreciation and amortization	63		51		188		160		Depreciation and amortization	54		60
Impairment of long-lived assets		19		6		220		17
Impairment of assets										Impairment of assets	—		97
Restructuring and other charges⁽¹⁾	Restructuring and other charges⁽¹⁾	15		19		37		49		Restructuring and other charges⁽¹⁾	8		15
Total operating expenses	Total operating expenses	727		583		2,296		1,692		Total operating expenses	464		770
Income from operations		205		290		344		695
(Loss) income from operations										(Loss) income from operations	(162)		64
Other income, net	Other income, net	(1)		(2)		(4)		(4)		Other income, net	(1)		(2)
Interest expense, net	Interest expense, net	3		7		19		21		Interest expense, net	17		13
Foreign currency (gain) loss	Foreign currency (gain) loss	(2)		43		4		79		Foreign currency (gain) loss	(3)		2
Income before provision for income taxes		205		242		325		599
(Benefit from) provision for income taxes		(4)		42		(2)		76
Net income		209		200		327		523
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest		(1)		—		(1)		(1)
Net income attributable to Capri		$	210	$	200	$	328	$	524
(Loss) income before provision for income taxes										(Loss) income before provision for income taxes	(175)		51
Provision for income taxes										Provision for income taxes	5		6

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

Weighted average ordinary shares outstanding:	Weighted average ordinary shares outstanding:									Weighted average ordinary shares outstanding:
Basic	Basic	150,826,196		149,183,049		151,159,423		149,420,087		Basic	149,556,310		151,049,572
Diluted	Diluted	152,154,372		150,268,424		152,354,936		151,457,921		Diluted	149,556,310		152,334,153
Net income per ordinary share attributable to Capri:
Net (loss) income per ordinary share attributable to Capri:										Net (loss) income per ordinary share attributable to Capri:
Basic	Basic	$	1.39	$	1.34	$	2.17	$	3.50	Basic	$	(1.21)	$	0.30
Diluted	Diluted	$	1.38	$	1.33	$	2.15	$	3.46	Diluted	$	(1.21)	$	0.30

Statements of Comprehensive Income:
Net income		$	209	$	200	$	327	$	523
Statements of Comprehensive (Loss) Income:										Statements of Comprehensive (Loss) Income:
Net (loss) income										Net (loss) income	$	(180)	$	45
Foreign currency translation adjustments	Foreign currency translation adjustments	78		(32)		40		(160)		Foreign currency translation adjustments	(3)		(25)
Net (loss) gain on derivatives		(4)		1		(3)		16
Comprehensive income		283		169		364		379
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest		(1)		—		(1)		(1)
Net loss on derivatives										Net loss on derivatives	(1)		(2)

Comprehensive income attributable to Capri		$	284	$	169	$	365	$	380

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

⁽¹⁾Restructuring and other charges includes store closure costs recorded in connection with the 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
Loss (Income) Retained
Earnings Total Equity of Capri Non-controlling Interests Total Equity
Shares Amounts Shares Amounts
Balance at September 28, 2019 216,815 $ — $ 1,060 (65,182) $ (3,225) $ (103) $ 4,673 $ 2,405 $ 3 $ 2,408
Net income (loss) — — — — — — 210 210 (1) 209
Other comprehensive income — — — — — 74 — 74 — 74
Total comprehensive income (loss) — — — — — — — 284 (1) 283
Vesting of restricted awards, net of forfeitures 87 — — — — — — — — —
Exercise of employee share options 5 — — — — — — — — —
Equity compensation expense — — 16 — — — — 16 — 16
Purchase of treasury shares — — — (2,712) (100) — — (100) — (100)
Adjustment of redeemable non-controlling interests to redemption value — — 4 — — — — 4 — 4
Balance at December 28, 2019 216,907 $ — $ 1,080 (67,894) $ (3,325) $ (29) $ 4,883 $ 2,609 $ 2 $ 2,611

Ordinary Shares Additional
Paid-in
Capital Treasury Shares Accumulated
Other
Comprehensive
Loss (Income) 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 (loss) — — — — — — 328 328 (1) 327
Other comprehensive income — — — — — 37 — 37 — 37
Total comprehensive income (loss) — — — — — — — 365 (1) 364
Vesting of restricted awards, net of forfeitures 851 — — — — — — — — —
Exercise of employee share options 5 — — — — — — — — —
Equity compensation expense — — 65 — — — — 65 — 65
Purchase of treasury shares — — — (2,775) (102) — — (102) — (102)
Adjustment of redeemable non-controlling interests to redemption value — — 4 — — — — 4 — 4
Balance at December 28, 2019 216,907 $ — $ 1,080 (67,894) $ (3,325) $ (29) $ 4,883 $ 2,609 $ 2 $ 2,611


	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

~~CAPRI HOLDINGS LIMITED AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~

~~(Continued)~~

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

~~(Unaudited)~~

Ordinary Shares Additional
Paid-in
Capital Treasury Shares Accumulated
Other
Comprehensive Loss Retained
Earnings Total Equity of Capri Non-controlling Interests Total Equity
Shares Amounts Shares Amounts
Balance at September 29, 2018 213,209 $ — $ 877 (63,059) $ (3,123) $ (62) $ 4,488 $ 2,180 $ 4 $ 2,184
Net income — — — — — — 200 200 — 200
Other comprehensive loss — — — — — (31) — (31) — (31)
Total comprehensive income — — — — — — — 169 — 169
Vesting of restricted awards, net of forfeitures 84 — — — — — — — — —
Exercise of employee share options 139 — 3 — — — — 3 — 3
Equity compensation expense — — 12 — — — — 12 — 12
Purchase of treasury shares — — — (2,060) (100) — — (100) — (100)
Increase in noncontrolling interest — — — — — — — — (1) (1)
Balance at December 29, 2018 213,432 $ — $ 892 (65,119) $ (3,223) $ (93) $ 4,688 $ 2,264 $ 3 $ 2,267

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 31, 2018, as previously reported 210,991 $ — $ 831 (61,293) $ (3,016) $ 51 $ 4,152 $ 2,018 $ 4 $ 2,022
Adoption of accounting standard (ASC 606) — — — — — — 12 12 — 12
Balance as of April 1, 2018 210,991 — 831 (61,293) (3,016) 51 4,164 2,030 4 2,034
Net income (loss) — — — — — — 524 524 (1) 523
Other comprehensive loss — — — — — (144) — (144) — (144)
Total comprehensive income (loss) — — — — — — — 380 (1) 379
Vesting of restricted awards, net of forfeitures 781 — — — — — — — — —
Exercise of employee share options 1,660 — 23 — — — — 23 — 23
Equity compensation expense — — 38 — — — — 38 — 38
Purchase of treasury shares — — — (3,826) (207) — — (207) — (207)
Balance at December 29, 2018 213,432 $ — $ 892 (65,119) $ (3,223) $ (93) $ 4,688 $ 2,264 $ 3 $ 2,267


	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)


		Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	327	$	523
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:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	188		160		Depreciation and amortization	54		60
Equity compensation expense	Equity compensation expense	65		38		Equity compensation expense	24		28

Deferred income taxes	Deferred income taxes	—		12		Deferred income taxes	—		2
Impairment of long-lived assets		220		17
Impairment of assets						Impairment of assets	—		97
Changes to lease related balances, net	Changes to lease related balances, net	(47)		—		Changes to lease related balances, net	(24)		(16)
Tax deficit (benefit) on exercise of share options	Tax deficit (benefit) on exercise of share options	2		(24)		Tax deficit (benefit) on exercise of share options	5		2

Amortization of deferred financing costs	Amortization of deferred financing costs	6		3		Amortization of deferred financing costs	1		1

Foreign currency losses		4		79
Foreign currency (gains) losses						Foreign currency (gains) losses	(3)		2
Other non-cash charges	Other non-cash charges	1		2		Other non-cash charges	(6)		—
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Receivables, net	Receivables, net	11		(9)		Receivables, net	131		73
Inventories, net	Inventories, net	(8)		(127)		Inventories, net	(119)		(63)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(72)		(51)		Prepaid expenses and other current assets	15		(32)
Accounts payable	Accounts payable	6		52		Accounts payable	167		(8)
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	24		75		Accrued expenses and other current liabilities	—		(51)

Other long-term assets and liabilities	Other long-term assets and liabilities	25		26		Other long-term assets and liabilities	2		18
Net cash provided by operating activities	Net cash provided by operating activities	752		776		Net cash provided by operating activities	67		158
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Capital expenditures	Capital expenditures	(164)		(135)		Capital expenditures	(32)		(54)
Purchase of intangible assets		—		(2)

Cash paid for business acquisitions, net of cash acquired	Cash paid for business acquisitions, net of cash acquired	(1)		(2)		Cash paid for business acquisitions, net of cash acquired	—		(1)
Realized loss on hedge related to Versace acquisition		—		(77)
Settlement of a net investment hedges		32		—

Settlement of a net investment hedge						Settlement of a net investment hedge	—		23
Net cash used in investing activities	Net cash used in investing activities	(133)		(216)		Net cash used in investing activities	(32)		(32)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Debt borrowings	Debt borrowings	1,844		3,597		Debt borrowings	396		390
Debt repayments	Debt repayments	(2,296)		(1,926)		Debt repayments	(811)		(526)
Debt issuance costs	Debt issuance costs	—		(15)		Debt issuance costs	(4)		—
Purchase of treasury shares	Purchase of treasury shares	(102)		(207)		Purchase of treasury shares	(1)		(2)
Exercise of employee share options		—		23

Net cash (used in) provided by financing activities		(554)		1,472

Net cash used in financing activities						Net cash used in financing activities	(420)		(138)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	—		(9)		Effect of exchange rate changes on cash and cash equivalents	—		—
Net increase in cash and cash equivalents		65		2,023
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(385)		(12)
Beginning of period	Beginning of period	172		163		Beginning of period	592		172
End of period (including restricted cash of $1.922 billion at December 29, 2018)		$	237	$	2,186
End of period						End of period	$	207	$	160
Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information					Supplemental disclosures of cash flow information
Cash paid for interest	Cash paid for interest	$	67	$	24	Cash paid for interest	$	20	$	30
Cash paid for income taxes		$	75	$	128
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					Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures	Accrued capital expenditures	$	27	$	23	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~~ operates in 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 ~~December 28, 2019~~June 27, 2020 and for the three ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March ~~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 ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~and December 29, 2018,~~ are based on 13-week ~~and 39-week periods, respectively.~~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 and work in process inventory. The combined total of ~~$20 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 ~~December 28, 2019~~both June 27, 2020 and March ~~30, 2019.~~28, 2020.

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

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

The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including 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) 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						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Numerator:	Numerator:									Numerator:
Net income attributable to Capri		$	210	$	200	$	328	$	524
Net (loss) income attributable to Capri										Net (loss) income attributable to Capri	$	(180)	$	45
Denominator:	Denominator:									Denominator:
Basic weighted average shares	Basic weighted average shares	150,826,196		149,183,049		151,159,423		149,420,087		Basic weighted average shares	149,556,310		151,049,572
Weighted average dilutive share equivalents:	Weighted average dilutive share equivalents:									Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units	Share options and restricted shares/units, and performance restricted share units	1,328,176		1,085,375		1,195,513		2,037,834		Share options and restricted shares/units, and performance restricted share units	—		1,284,581
Diluted weighted average shares	Diluted weighted average shares	152,154,372		150,268,424		152,354,936		151,457,921		Diluted weighted average shares	149,556,310		152,334,153

Basic net income per share ⁽¹⁾		$	1.39	$	1.34	$	2.17	$	3.50
Diluted net income per share ⁽¹⁾		$	1.38	$	1.33	$	2.15	$	3.46
Basic net (loss) income per share ⁽¹⁾										Basic net (loss) income per share ⁽¹⁾	$	(1.21)	$	0.30
Diluted net (loss) income per share ⁽¹⁾										Diluted net (loss) income per share ⁽¹⁾	$	(1.21)	$	0.30

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

~~During~~Share equivalents of 5,388,905 and 2,374,578 for the three ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~share equivalents of 2,264,959 shares and 3,487,241 shares,~~ respectively, have been excluded from the above calculations due to their anti-dilutive effect. ~~Share equivalents~~

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 ~~2,022,564 shares and 1,117,277 shares, respectively,~~these securities would have been ~~excluded from the above calculations during the three and nine months ended December 29, 2018.~~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, “~~Land Easement Practical Expedient for Transition to Topic 842” in January 2018, ASU 2018-10, “CodificationImprovements to Topic 842, Leases” and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” both issued in July 2018, and ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors~~” issued in December 2018. In connection with its implementation of ASU 2016-02, the Company adopted the package of three practical expedients, allowing it to carry forward its previous lease classification 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 for its real estate leases. Lastly, the Company adopted the practical expedient provided by 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~~.Company's consolidated financial statements.

~~The Company’s existing lease obligations,~~Implementation Costs Associated with Cloud Computing Arrangements

On March 29, 2020, the Company adopted ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 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 operating lease right-of-use assets recorded through retained earnings, as described below.

⁽³⁾~~Represents the reclassifications of favorable and unfavorable lease rights 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 property and equipment 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 Retail Fleet Optimization Plan as defined in Note 10, as well as the reclassification of $18 million of deferred rent and tenant allowances to operating lease right-of-use assets.

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

~~See Note 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

The Company has considered all new accounting pronouncements and 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.

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 ~~are~~is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for ~~those~~ 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 utilize the exemption allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations that have an expected duration of twelve months or less.

Retail

The Company generates sales through directly operated stores and e-commerce throughout the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia.

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 contract liability related to gift cards, net of estimated “breakage,” ~~was $13~~of $11 million as of both ~~December 28, 2019~~June 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 ~~$4 million and $3~~$2 million as of ~~December 28, 2019~~both June 27, 2020 and March ~~30, 2019, respectively,~~28, 2020, is recorded as a reduction to revenue in the consolidated statements of 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.

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 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. 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 ~~December 28, 2019,~~June 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~~2021	$	7
~~Fiscal 2021~~	2719
Fiscal 2022	27
Fiscal 2023	23
Fiscal 2024	2120
Fiscal 2025	17
Fiscal 2026 and thereafter	~~100~~82
Total	$	~~205~~188

Sales Returns

The refund liability recorded as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019~~28, 2020 was ~~$51~~$35 million and ~~$35~~$37 million, respectively, and the related asset for the right to recover returned product as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019~~28, 2020 was ~~$16~~$10 million and ~~$12~~$14 million, respectively.

Contract Balances

Total contract liabilities were ~~$19~~$21 million and ~~$31~~$22 million as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, respectively. For the three ~~and nine~~ months ended ~~December~~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 $2$14 million ~~and $19 million, respectively,~~ in revenue which related to contract liabilities that existed at March 30, 2019. ~~For the three and nine months ended December 29, 2018, the Company recognized $3 million and $14 million, respectively, in revenue which related to contract liabilities that existed at April 1, 2018.~~ There were 0 contract assets recorded as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019.~~28, 2020.

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

1312

Disaggregation of Revenue

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Versace revenue - the Americas	Versace revenue - the Americas	$	41	$	—	$	133	$	—	Versace revenue - the Americas	$	15	$	44
Versace revenue - EMEA	Versace revenue - EMEA	98		—		311		—		Versace revenue - EMEA	27		92
Versace revenue - Asia	Versace revenue - Asia	56		—		186		—		Versace revenue - Asia	51		71
Total Versace	Total Versace	195		—		630		—		Total Versace	93		207

Jimmy Choo revenue - the Americas	Jimmy Choo revenue - the Americas	34		29		85		75		Jimmy Choo revenue - the Americas	6		30
Jimmy Choo revenue - EMEA	Jimmy Choo revenue - EMEA	85		90		228		248		Jimmy Choo revenue - EMEA	16		79
Jimmy Choo revenue - Asia	Jimmy Choo revenue - Asia	46		43		135		128		Jimmy Choo revenue - Asia	29		49
Total Jimmy Choo	Total Jimmy Choo	165		162		448		451		Total Jimmy Choo	51		158

Michael Kors revenue - the Americas	Michael Kors revenue - the Americas	834		898		2,222		2,363		Michael Kors revenue - the Americas	156		655
Michael Kors revenue - EMEA	Michael Kors revenue - EMEA	239		244		652		677		Michael Kors revenue - EMEA	79		189
Michael Kors revenue - Asia	Michael Kors revenue - Asia	138		134		407		403		Michael Kors revenue - Asia	72		137
Total Michael Kors	Total Michael Kors	1,211		1,276		3,281		3,443		Total Michael Kors	307		981

Total revenue - the Americas	Total revenue - the Americas	909		927		2,440		2,438		Total revenue - the Americas	177		729
Total revenue - EMEA	Total revenue - EMEA	422		334		1,191		925		Total revenue - EMEA	122		360
Total revenue - Asia	Total revenue - Asia	240		177		728		531		Total revenue - Asia	152		257
Total revenue	Total revenue	$	1,571	$	1,438	$	4,359	$	3,894	Total revenue	$	451	$	1,346

See Note 3 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 revenue recognition policy.

~~4. Leases~~

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

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

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

~~Balance Sheet Location~~

December 28,
2019

~~Assets~~

~~Operating leases~~

~~Operating lease right-of-use assets~~

~~1,665~~

~~Liabilities~~

~~Current:~~

~~Operating leases~~

~~Short-term portion of operating lease liabilities~~

~~406~~

~~Non-current:~~

~~Operating leases~~

~~Long-term portion of operating lease liabilities~~

~~1,751~~

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

December 28, 2019
Statement of Operations and
Comprehensive Income Location Three Months Ended Nine Months Ended
Operating lease cost Selling, general and administrative expenses $ 114 $ 338
Short-term lease cost Selling, general and administrative expenses 5 18
Variable lease cost Selling, general and administrative expenses 39 118
Sublease income Selling, general and administrative expenses (2) (5)
Total lease cost $ 156 $ 469

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

~~Nine Months Ended~~

~~December 28, 2019~~

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

~~Operating cash flows used in operating leases~~

~~372~~

~~Non-cash transactions:~~

~~Lease assets obtained in exchange for new lease liabilities~~

~~270~~

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

December 28,
2019

~~Operating leases:~~

~~Weighted average remaining lease term (years)~~

~~6.3~~

~~Weighted average discount rate~~

~~3.0~~

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

December 28,
2019

~~Remainder of Fiscal 2020~~

~~127~~

~~Fiscal 2021~~

~~484~~

~~Fiscal 2022~~

~~425~~

~~Fiscal 2023~~

~~356~~

~~Fiscal 2024~~

~~301~~

~~Thereafter~~

~~707~~

~~Total lease payments~~

~~2,400~~

~~Less: interest~~

~~(243)~~

~~Total lease liabilities~~

~~2,157~~

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


	December 28, 2019
~~Remainder of Fiscal 2020~~	$	1
~~Fiscal 2021~~	6
~~Fiscal 2022~~	5
~~Fiscal 2023~~	5
~~Fiscal 2024~~	4
~~Thereafter~~	16
~~Total sublease income~~	$	37

~~Additionally, the Company had approximately $94 million of future payment obligations related to executed lease agreements for which the related lease has not yet commenced as of December 28, 2019.~~

~~5. Acquisitions~~

~~Acquisition of Versace~~

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

Versace’s results of operations have been included in our consolidated financial statements beginning on December 31, 2018. Versace contributed total revenue of $195 million and $630 million, respectively, for the three and nine months ended November 30, 2019 and net loss from operations of $12 million and $6 million, respectively, after amortization of non-cash purchase accounting adjustments, for the three and nine months ended November 30, 2019 (reflecting a one-month reporting lag).

The Company recorded measurement period adjustments during the three months ended December 28, 2019. The measurement period adjustments related to conclusions reached on the ability to utilize certain deferred tax assets based on new facts and circumstances identified which existed at the acquisition date and if known, would have affected the measurement of the amounts recognized as of that date. The net measurement period adjustments increased goodwill by $23 million. As the Company continues to finalize the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. See Note 4 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019 for additional disclosures relating to the Company’s acquisitions.

6.4. Receivables, net

Receivables, net, consist of (in millions):


		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Trade receivables⁽¹⁾	Trade receivables⁽¹⁾	$	404	$	459	Trade receivables⁽¹⁾	$	263	$	432
Receivables due from licensees	Receivables due from licensees	31		23		Receivables due from licensees	21		14
		435		482			284		446
Less: allowances	Less: allowances	(114)		(99)		Less: allowances	(101)		(138)
		$	321	$	383		$	183	$	308

⁽¹⁾As of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019, $73~~28, 2020, $56 million and ~~$317~~$80 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. 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 ~~$14~~$31 million and ~~$18~~$39 million as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019, respectively.~~28, 2020, respectively, including the impact related to COVID-19. The Company had ~~bad debt expense~~a credit loss of ~~$3 million and $1~~$(6) million for the ~~nine~~three months ended ~~December 28, 2019 and December 29, 2018, respectively.~~June 27, 2020. All other periods presented were immaterial.

7.5. Property and Equipment, net

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


		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Leasehold improvements	Leasehold improvements	$	686	$	639	Leasehold improvements	$	706	$	704
Computer equipment and software	Computer equipment and software	315		292		Computer equipment and software	342		329
Furniture and fixtures	Furniture and fixtures	316		292		Furniture and fixtures	332		329
In-store shops	In-store shops	275		270		In-store shops	236		236
Equipment	Equipment	130		123		Equipment	137		136
Building	Building	47		47		Building	49		49
Land	Land	18		15		Land	19		19
		1,787		1,678			1,821		1,802
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(1,260)		(1,115)		Less: accumulated depreciation and amortization	(1,343)		(1,310)
		527		563			478		492
Construction-in-progress	Construction-in-progress	69		52		Construction-in-progress	63		69
		$	596	$	615		$	541	$	561

Depreciation and amortization of property and equipment for the three months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ was ~~$50~~$43 million and ~~$44~~$47 million, ~~respectively, and was $149 million and $136 million, respectively, for the nine months ended December 28, 2019 and December 29, 2018.~~respectively. During the three months ended ~~December 28,~~June 27, 2020, the Company did 0t record any property and equipment impairment charges. During the three months ended June 29, 2019, the Company recorded property and equipment impairment charges of ~~$10 million, primarily related to Michael Kors retail store locations. During the nine months ended December 28, 2019, the Company recorded property and equipment impairment charges of $33~~$13 million, $11 million of which related to determining asset groups for the Company’s premier store locations at an individual store level $7 million of which related to Michael Kors and $4 million related to Jimmy Choo. In addition, during the nine months ended December 28, 2019, the Company recorded property and equipment impairment charges of $22 million, related to the Company's retail store locations (see Note 1311 for additional information). During the three and nine months ended December 29, 2018, the Company recorded property and equipment impairment charges of $6 million and $15 million, respectively, of which $5 million and $13 million, respectively, were related to underperforming Michael Kors full-price retail store locations, some of which related to the Retail Fleet Optimization Plan, as defined in Note 10.

8.6. Intangible Assets and Goodwill

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


		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Definite-lived intangible assets:	Definite-lived intangible assets:					Definite-lived intangible assets:
Reacquired Rights	Reacquired Rights	$	400	$	400	Reacquired Rights	$	400	$	400
Trademarks	Trademarks	23		23		Trademarks	23		23
Key Money ⁽¹⁾		68		96

Customer Relationships	Customer Relationships	415		415		Customer Relationships	404		404
Total definite-lived intangible assets	Total definite-lived intangible assets	906		934		Total definite-lived intangible assets	827		827
Less: accumulated amortization	Less: accumulated amortization	(181)		(143)		Less: accumulated amortization	(144)		(132)
Net definite-lived intangible assets	Net definite-lived intangible assets	725		791		Net definite-lived intangible assets	683		695

Indefinite-lived intangible assets:	Indefinite-lived intangible assets:					Indefinite-lived intangible assets:
Jimmy Choo brand(1)	Jimmy Choo brand(1)	574		572		Jimmy Choo brand(1)	364		367
Versace brand(2)	Versace brand(2)	926		930		Versace brand(2)	930		924
		1,500		1,502			1,294		1,291

Total intangible assets, excluding goodwill	Total intangible assets, excluding goodwill	$	2,225	$	2,293	Total intangible assets, excluding goodwill	$	1,977	$	1,986

Goodwill ⁽²⁾⁽³⁾	Goodwill ⁽²⁾⁽³⁾	$	1,681	$	1,659	Goodwill ⁽²⁾⁽³⁾	$	1,490	$	1,488

⁽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.

Amortization expense for the Company’s definite-lived intangible assets for the three months ended June 27, 2020 and June 29, 2019 was $11 million and $13 million, respectively. There were 0 goodwill or 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

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

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

⁽²⁾~~The change in the carrying values since March 30, 2019 primarily relates to the goodwill adjustment discussed in Note 5.~~

Amortization expense for the Company’s definite-lived intangible assets for the three months ended December 28, 2019 and December 29, 2018 was $13 million and $7 million, respectively, and was $39 million and $24 million, respectively, for the nine months ended December 28, 2019 and December 29, 2018. During the three and nine months ended December 28, 2019, the Company recorded impairment charges of $2 million and $8 million, respectively, primarily related to intangible assets associated with its premier Michael Kors store locations (see Note 13 for further information). Impairment charges recorded during the nine months ended December 29, 2018 were $2 million. There were 0 goodwill or other indefinite-lived intangible asset impairment charges recorded during any of the periods presented.

~~9. Current Assets and Current Liabilities~~

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

December 28,
2019 March 30,
2019
Prepaid taxes $ 189 $ 125
Interest receivable related to net investment hedges 12 11
Prepaid property and equipment 8 7
Prepaid rent ⁽¹⁾
— 24
Other 54 54
$ 263 $ 221

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

December 28,
2019 March 30,
2019
Other taxes payable $ 95 $ 47
Return liabilities 51 35
Accrued capital expenditures 27 25
Accrued rent ⁽²⁾
22 34
Accrued advertising and marketing 16 10
Gift cards and retail store credits 13 13
Professional services 11 12
Restructuring liability ⁽¹⁾
11 64
Accrued litigation 10 11
Accrued interest 5 10
Accrued purchases and samples 4 29
Other 88 84
$ 353 $ 374

⁽¹⁾In connection with the adoption of ASU 2016-02, certain lease related assets and liabilities were reflected within operating lease right-of-use assets and liabilities as of December 28, 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

~~The~~As previously announced, the Company ~~plans~~intends to close ~~between 100 and 150~~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 ~~Company anticipates lower depreciation and amortization expense as a~~majority of which are expected to result ~~of the impairment charges recorded once these initiatives are completed.~~in future cash expenditures.

During the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, the Company closed 2928 of its ~~Michael Kors~~ retail stores ~~under~~which have been incorporated into the Capri Retail ~~Fleet~~Store Optimization ~~Plan, for a total of 129 stores closed at a cost of $100 million since plan inception. Restructuring~~Program. Net restructuring charges recorded 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 and nine months ended December 28, 2019 were $5 million and $6 million, respectively. 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 — 6 6
Payments (1) (7) (8)
Balance at December 28, 2019 $ 1 $ 6 $ 7

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

During the three ~~and nine~~ months ended ~~December~~June 29, ~~2018,~~2019, the Company ~~recorded restructuring~~incurred charges of $4$1 million ~~and $10 million, respectively, 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 ~~and $5 million during the three and nine months ended December 28, 2019, respectively, primarily consisting of lease-related costs. The Company also incurred charges of $3 million and $4 million~~ relating to Jimmy Choo lease-related charges during the three ~~and nine~~ months ended ~~December~~June 29, ~~2018, respectively.~~2019.

Other Costs

During the three months ended ~~December 28,~~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 $8$12 million, which included $5$7 million in connection with the acquisition of Versace and $3 million in connection with the Jimmy Choo acquisition. During the nine months ended December 28, 2019, the Company recorded costs of $26 million, which included $18 million in connection with the acquisition of Versace and $8$5 million in connection with the Jimmy Choo acquisition.

During the three months ended December 29, 2018, the Company recorded costs of $12 million, which included $6 million in connection with the acquisition of Versace and $6 million in connection with the Jimmy Choo acquisition. During the nine months ended December 29, 2018, the Company recorded costs of $35 million, which included $20 million in connection with the Jimmy Choo acquisition and $15 million in connection with the acquisition of Versace.

~~11.~~9. Debt Obligations

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


		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Term Loan	Term Loan	$	1,125	$	1,580	Term Loan	$	991	$	1,015
Revolving Credit Facilities	Revolving Credit Facilities	548		550		Revolving Credit Facilities	333		720
4.000% Senior Notes due 2024	4.000% Senior Notes due 2024	450		450		4.000% Senior Notes due 2024	450		450
Other	Other	3		1		Other	4		3
Total debt	Total debt	2,126		2,581		Total debt	1,778		2,188
Less: Unamortized debt issuance costs	Less: Unamortized debt issuance costs	8		13		Less: Unamortized debt issuance costs	9		8
Less: Unamortized discount on long-term debt	Less: Unamortized discount on long-term debt	2		2		Less: Unamortized discount on long-term debt	1		1
Total carrying value of debt	Total carrying value of debt	2,116		2,566		Total carrying value of debt	1,768		2,179
Less: Short-term debt	Less: Short-term debt	1,031		630		Less: Short-term debt	191		167
Total long-term debt	Total long-term debt	$	1,085	$	1,936	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 ~~December 28, 2019,~~June 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 ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, the Company had borrowings of ~~$503~~$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 ~~$16~~$22 million were outstanding as of ~~December 28, 2019.~~June 27, 2020. At ~~December 28, 2019,~~June 27, 2020, the amount available for future borrowings under the 2018 Revolving Credit Facility was ~~$481~~$938 million. As of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, the carrying value of borrowings outstanding under the 2018 Term Loan Facility was ~~$1.119 billion~~$985 million and ~~$1.570~~$1.010 billion, respectively, of which ~~$483~~$128 million ~~and $80 million, respectively,~~ was recorded within short-term debt for both periods and ~~$636~~$857 million and ~~$1.490 billion,~~$882 million, respectively, was recorded within long-term debt in its consolidated balance sheets.

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 ~~December 28, 2019~~June 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 December 28, 2019 using:										Fair value at March 30, 2019 using:											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)			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:	Derivative assets:													Derivative assets:
Forward foreign currency exchange contracts	Forward foreign currency exchange contracts	$	—	$	1	$	—	$	—	$	5	$	—	Forward foreign currency exchange contracts	$	—	$	—	$	—	$	—	$	1	$	—
Net investment hedges	Net investment hedges	—		58		—		—		37		—		Net investment hedges	—		3		—		—		3		—
Other undesignated derivative contracts		—		1		—		—		—		—

Total derivative assets	Total derivative assets	$	—	$	60	$	—	$	—	$	42	$	—	Total derivative assets	$	—	$	3	$	—	$	—	$	4	$	—

Derivative liabilities:	Derivative liabilities:													Derivative liabilities:
Forward foreign currency exchange contracts		$	—	$	1	$	—	$	—	$	—	$	—

Other undesignated derivative contracts		—		—		—		—		5		—
Total derivative liabilities		$	—	$	1	$	—	$	—	$	5	$	—

Designated interest rate swaps														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):


		December 28, 2019						March 30, 2019							June 27, 2020				March 28, 2020
		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value			Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
4.000% Senior Notes	4.000% Senior Notes	$	446	$	468	$	445	$	438	4.000% Senior Notes	$	446	$	422	$	446	$	443
Term Loan	Term Loan	$	1,119	$	1,125	$	1,570	$	1,574	Term Loan	$	985	$	817	$	1,010	$	957
Revolving Credit Facilities	Revolving Credit Facilities	$	548	$	548	$	550	$	550	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, 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.

2319

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,that have been impaired during the ~~nine~~three months ended ~~December 28,~~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, in the first quarter of Fiscal 2020, the Company identified impairment indicators at certain premier retail store locations and recorded operating lease right-of-use asset and property and equipment impairment charges of $68 million and $11 million, respectively, which are included in the impairment charges detailed in the table below (in millions):

Three Months Ended
December 28, 2019 Nine Months Ended
December 28, 2019
Carrying Value Prior to Impairment Fair Value Impairment Charge Carrying Value Prior to Impairment Fair Value Impairment Charge
Operating Lease Right-of-Use Assets $ 27 $ 20 $ 7 $ 314 $ 135 $ 179
Property and Equipment 13 3 10 51 18 33
Key Money 3 1 2 12 4 8
Total $ 43 $ 24 $ 19 $ 377 $ 157 $ 220

Three Months Ended
December 29, 2018 Nine Months Ended
December 29, 2018
Carrying Value Prior to Impairment Fair Value Impairment Charge Carrying Value Prior to Impairment Fair Value Impairment Charge
Property and Equipment $ 6 $ — $ 6 $ 20 $ 5 $ 15
Lease Rights — — — 4 2 2
Total $ 6 $ — $ 6 $ 24 $ 7 $ 17

In addition to the impairment charges above, the Company recorded an adjustment to reduce its March 31, 2019 opening balance of retained earnings by $152 million, net of tax, reflecting impairments of operating lease right-of-use assets for certain underperforming real estate locations for which the carrying value of the opening operating lease right-of-use asset exceeded its related fair value. Property and equipment related to these underperforming locations were fully impaired due to the adoption of ASU 2016-02. See Note 2 and Note 4 for additional information.


	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

~~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 ~~December 28, 2019,~~June 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. 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 ~~$19~~$0 million and ~~$53~~$15 million ~~respectively,~~ during the three ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~and $3 million and $7 million, respectively,~~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 ~~three~~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 ~~nine months ended December 29, 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 ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019~~28, 2020 (in millions):


						Fair Values																										Fair Values
		Notional Amounts							Assets									Liabilities								Notional Amounts								Assets	Liabilities
		December 28, 2019		March 30, 2019		December 28, 2019			March 30, 2019			December 28, 2019			March 30, 2019				June 27, 2020		March 28, 2020		June 27, 2020			March 28, 2020			June 27, 2020			March 28, 2020
Designated forward foreign currency exchange contracts	Designated forward foreign currency exchange contracts	$	162	$	166	$	1	⁽¹⁾	$	5	⁽¹⁾	$	1	⁽³⁾	$	—		Designated forward foreign currency exchange contracts	$	80	$	161	$	—		$	1	⁽¹⁾	$	—		$	—
Designated net investment hedge	Designated net investment hedge	3,234		2,234		58		⁽²⁾	37		⁽²⁾	—			—			Designated net investment hedge	44		44		3		⁽²⁾	3		⁽²⁾	—			—
Designated interest rate swaps																		Designated interest rate swaps	500		—		—			—			1		⁽³⁾	—
Total designated hedges	Total designated hedges	3,396		2,400		59			42			1			—			Total designated hedges	624		205		3			4			1			—
Undesignated derivative contracts ⁽⁴⁾	Undesignated derivative contracts ⁽⁴⁾	15		199		1		⁽¹⁾	—			—			5		⁽³⁾	Undesignated derivative contracts ⁽⁴⁾	29		—		—			—			—			—
Total	Total	$	3,411	$	2,599	$	60		$	42		$	1		$	5		Total	$	653	$	205	$	3		$	4		$	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 ~~accrued expenses and~~ other ~~current~~long-term liabilities in the Company’s consolidated balance sheets.

⁽⁴⁾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 previous table. However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019~~28, 2020 would be as follows (in millions):


		Forward Currency Exchange Contracts						Net Investment Hedges							Forward Currency Exchange Contracts						Net Investment Hedges		Interest Rate Swaps
		December 28, 2019		March 30, 2019		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020		June 27, 2020		March 28, 2020		June 27, 2020		March 28, 2020
Assets subject to master netting arrangements	Assets subject to master netting arrangements	$	2	$	5	$	58	$	37	Assets subject to master netting arrangements	$	—	$	1	$	3	$	3	$	—	$	—
Liabilities subject to master netting arrangements	Liabilities subject to master netting arrangements	$	1	$	5	$	—	$	—	Liabilities subject to master netting arrangements	$	—	$	—	$	—	$	—	$	1	$	—
Derivative assets, net	Derivative assets, net	$	1	$	5	$	58	$	37	Derivative assets, net	$	—	$	1	$	3	$	3	$	—	$	—
Derivative liabilities, net	Derivative liabilities, net	$	—	$	5	$	—	$	—	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 (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 Nine Months Ended
December 28, 2019 December 29, 2018 December 28, 2019 December 29, 2018
Losses
Recognized in OCI Gains
Recognized in OCI Gains
Recognized in OCI Gains
Recognized in OCI
Designated forward foreign currency exchange contracts $ (2) $ 2 $ 4 $ 12
Designated net investment hedges $ (51) $ 10 $ 53 $ 15


	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 ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ (in millions):

Three Months Ended
Gain Reclassified from
Accumulated OCI Location of (Gain) Loss recognized Total Cost of goods sold
December 28, 2019 December 29, 2018 December 28, 2019 December 29, 2018
Designated forward foreign currency exchange contracts $ (3) $ (1) Cost of goods sold $ 639 $ 565

Nine Months Ended
(Gain) Loss Reclassified from
Accumulated OCI Location of (Gain) Loss recognized Total Cost of goods sold
December 28, 2019 December 29, 2018 December 28, 2019 December 29, 2018
Designated forward foreign currency exchange contracts $ (8) $ 6 Cost of goods sold $ 1,719 $ 1,507


	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 ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 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.~~

During the three and nine months ended December 29, 2018, the Company recognized a net loss of $47 million and $76 million, respectively, primarily related to the derivative contracts entered into on September 25, 2018 to mitigate foreign currency exchange risk associated with the Versace acquisition that were settled on December 21, 2018.immaterial.

~~15.~~13. Shareholders’ Equity

Share Repurchase Program

During the ~~nine~~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 ~~December 28, 2019,~~June 27, 2020, the Company ~~repurchased 2,711,807~~did 0t purchase any shares through open market transactions ~~at a cost~~under the current plan. As of ~~$100 million~~June 27, 2020, the remaining availability under ~~its new $500 million share-repurchase program, which was authorized by~~ the Company’s ~~Board of Directors on August 1, 2019 and which expires on August 1, 2021.~~share repurchase program was $400 million. During the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, the Company ~~repurchased 3,718,237~~did 0t purchase any shares through open market transactions ~~at a cost of $200 million~~ under its previous $1.0 billion share-repurchase program, which expired on May 25, 2019. ~~As of December 28, 2019, the remaining availability under the Company’s 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 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 ~~nine~~three month periods ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~and December 29, 2018,~~ the Company withheld ~~63,958~~38,119 shares and ~~107,712~~58,304 shares, respectively, with a fair value of $2$1 million and $7$2 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.

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 ~~nine~~three months ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~and December 29, 2018,~~ respectively (in millions):


		Foreign Currency Translation Gains (Losses) ⁽¹⁾		Net (Losses) Gains on Derivatives ⁽²⁾		Other Comprehensive Income (Loss) Attributable to Capri			Foreign Currency Translation (Losses) Gains ⁽¹⁾		Net Gains (Losses) on Derivatives ⁽²⁾		Other Comprehensive (Loss) Income Attributable to Capri
Balance at March 31, 2018		$	61	$	(10)	$	51
Balance at March 30, 2019								Balance at March 30, 2019	$	(73)	$	7	$	(66)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(160)		11		(149)		Other comprehensive (loss) income before reclassifications	(25)		—		(25)
Less: amounts reclassified from AOCI to earnings	Less: amounts reclassified from AOCI to earnings	—		(5)		(5)		Less: amounts reclassified from AOCI to earnings	—		2		2
Other comprehensive (loss) income, net of tax	Other comprehensive (loss) income, net of tax	(160)		16		(144)		Other comprehensive (loss) income, net of tax	(25)		(2)		(27)
Balance at December 29, 2018		$	(99)	$	6	$	(93)
Balance at June 29, 2019								Balance at June 29, 2019	$	(98)	$	5	$	(93)

Balance at March 30, 2019		$	(73)	$	7	$	(66)
Other comprehensive income before reclassifications		40		4		44
Balance at March 28, 2020								Balance at March 28, 2020	$	72	$	3	$	75
Other comprehensive (loss) income before reclassifications								Other comprehensive (loss) income before reclassifications	(3)		—		(3)
Less: amounts reclassified from AOCI to earnings	Less: amounts reclassified from AOCI to earnings	—		7		7		Less: amounts reclassified from AOCI to earnings	—		1		1
Other comprehensive income (loss), net of tax		40		(3)		37
Balance at December 28, 2019		$	(33)	$	4	$	(29)
Other comprehensive (loss) income, net of tax								Other comprehensive (loss) income, net of tax	(3)		(1)		(4)
Balance at June 27, 2020								Balance at June 27, 2020	$	69	$	2	$	71

⁽¹⁾Foreign currency translation gains and losses for the ~~nine~~three months ended ~~December 28,~~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 $4$28 million translation ~~loss~~gain relating to ~~the inclusion of~~ the Versace business and a ~~$44~~$21 million ~~gain,~~loss, net of taxes of $9 million, relating to the Company’s net investment hedges. Foreign currency translation gains and losses for the nine months ended December 29, 2018 include net gains of $10 million on intra-entity transactions that are of a long-term investment nature, a $139 million translation loss relating to the inclusion of the Jimmy Choo business and a $13 million gain, net of taxes of $3$4 million, 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 (loss) income. All tax effects were not material for the periods presented.

~~16.~~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 2 equity plans, 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 ~~December 28, 2019,~~June 27, 2020, there were 0 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 ~~December 28, 2019,~~June 27, 2020, there were ~~2,642,854~~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 ~~nine~~three months ended ~~December 28, 2019:~~June 27, 2020:


		Options	Service-Based RSUs	Performance-Based RSUs		Options	Service-Based RSUs	Performance-Based RSUs
Outstanding/Unvested at March 30, 2019		2,131,259	3,839,862	737,074
Outstanding/Unvested at March 28, 2020					Outstanding/Unvested at March 28, 2020	2,071,096	4,311,683	772,172
Granted	Granted	—	1,901,539	169,817	Granted	—	1,772,553	—
Exercised/Vested	Exercised/Vested	(5,082)	(797,597)	(53,025)	Exercised/Vested	—	(850,621)	(102,078)
Decrease due to performance condition		—	—	(39,999)
Change due to performance condition					Change due to performance condition	—	—	5,926
Canceled/forfeited	Canceled/forfeited	(93,298)	(178,354)	—	Canceled/forfeited	(363,087)	(152,289)	(131,107)
Outstanding/Unvested at December 28, 2019		2,032,879	4,765,450	813,867
Outstanding/Unvested at June 27, 2020					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 ~~nine~~three months ended ~~December 28,~~June 29, 2019 was ~~$33.89~~$33.90 and $33.86, ~~respectively, and $67.03 and $67.52, respectively, during the nine months ended December 29, 2018.~~respectively.

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation for the three ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ (in millions):


		Three Months Ended						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Share-based compensation expense	Share-based compensation expense	$	16	$	12	$	65	$	38	Share-based compensation expense	$	24	$	28
Tax benefit related to share-based compensation expense	Tax benefit related to share-based compensation expense	$	3	$	2	$	12	$	7	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 rates. The estimated value of future forfeitures for equity grants as of ~~December 28, 2019~~June 27, 2020 is approximately $9$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 ~~rates~~rate for the three ~~and nine~~ months ended ~~December 28, 2019 are a benefit of 2.0% and 0.6%, respectively.~~June 27, 2020 was (2.9)%. Such ~~rates differ~~rate differs from the United Kingdom (“U.K.”) federal statutory rate of ~~19%~~17% primarily due to the ~~favorable impact~~existence of ~~recognizing benefits from~~a valuation allowance on a portion of our consolidated pre-tax loss and a tax detriment related to share-based compensation. These decreases were partially offset by the resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, which resulted in a decrease to the Company’s effective income tax rate for the three and nine months ended December 28, 2019. In addition, the Company had favorable effects related to 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 ~~rates~~rate for the three ~~and nine~~ months ended ~~December~~June 29, ~~2018 were a provision of 17.4% and 12.7%, respectively.~~2019 was 11.8%. Such ~~rates~~rate differed from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable effects of global financing arrangements and ~~the favorable impact of~~net tax benefits ~~recognized on~~in 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 ~~during the quarter.~~awards.

~~18.~~

16. Segment Information

The Company operates its business through 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 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 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, Europe and certain parts of Asia. 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, and to its geographic 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						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Total revenue:	Total revenue:									Total revenue:
Versace	Versace	$	195	$	—	$	630	$	—	Versace	$	93	$	207
Jimmy Choo	Jimmy Choo	165		162		448		451		Jimmy Choo	51		158
Michael Kors	Michael Kors	1,211		1,276		3,281		3,443		Michael Kors	307		981
Total revenue	Total revenue	$	1,571	$	1,438	$	4,359	$	3,894	Total revenue	$	451	$	1,346

Income (loss) from operations:
(Loss) income from operations:										(Loss) income from operations:
Versace	Versace	$	(12)	$	—	$	(6)	$	—	Versace	$	(41)	$	(3)
Jimmy Choo	Jimmy Choo	9		15		10		28		Jimmy Choo	(29)		11
Michael Kors	Michael Kors	288		320		711		798		Michael Kors	(48)		201
Total segment income from operations	Total segment income from operations	285		335		715		826		Total segment income from operations	(118)		209
Less: Corporate expenses	Less: Corporate expenses	(46)		(20)		(114)		(65)		Less: Corporate expenses	(31)		(33)
Restructuring and other charges	Restructuring and other charges	(15)		(19)		(37)		(49)		Restructuring and other charges	(8)		(15)
Impairment of long-lived assets		(19)		(6)		(220)		(17)
Total income from operations		$	205	$	290	$	344	$	695
Impairment of assets										Impairment of assets	—		(97)
COVID-19 related charges ⁽¹⁾										COVID-19 related charges ⁽¹⁾	(5)		—
Total (loss) income from operations										Total (loss) income from operations	$	(162)	$	64

___________________

⁽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						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Depreciation and amortization:	Depreciation and amortization:									Depreciation and amortization:
Versace	Versace	$	17	$	—	$	46	$	—	Versace	$	13	$	14
Jimmy Choo	Jimmy Choo	9		8		26		25		Jimmy Choo	7		8
Michael Kors	Michael Kors	37		43		116		135		Michael Kors	34		38
Total depreciation and amortization	Total depreciation and amortization	$	63	$	51	$	188	$	160	Total depreciation and amortization	$	54	$	60

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018			June 27, 2020		June 29, 2019
Total revenue:	Total revenue:									Total revenue:
The Americas ⁽¹⁾	The Americas ⁽¹⁾	$	909	$	927	$	2,440	$	2,438	The Americas ⁽¹⁾	$	177	$	729
EMEA	EMEA	422		334		1,191		925		EMEA	122		360
Asia	Asia	240		177		728		531		Asia	152		257
Total revenue	Total revenue	$	1,571	$	1,438	$	4,359	$	3,894	Total revenue	$	451	$	1,346

⁽¹⁾Total revenue earned in the U.S. were ~~$845~~$161 million ~~and $2.267 billion, respectively,~~ for the three ~~and nine~~ months ended ~~December 28, 2019~~June 27, 2020 and ~~$869~~$681 million ~~and $2.274 billion, respectively,~~ for the three ~~and nine~~ months ended ~~December~~June 29, ~~2018.~~2019, respectively.

As of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, the Company's total assets were ~~$8.325~~$7.533 billion and ~~$6.650~~$7.946 billion, respectively. The ~~increase~~decrease in total assets was primarily due to the ~~adoption~~reduction of ~~ASU 2016-02 in~~ the ~~first quarter~~Company's cash and cash equivalents from $592 million as of ~~Fiscal 2020. As~~March 28, 2020 to $207 million as of ~~December 28, 2019,~~June 27, 2020, due to net payments the Company ~~had operating lease right-of-use assets recorded on~~made to lower the outstanding balance of its ~~consolidated balance sheets of $1.665 billion, of which $1.060 billion related to Michael Kors, $379 million related to Versace, and $226 million related to Jimmy Choo.~~

Revolving Credit Facilities.

3126

~~19.~~17. Subsequent Events

~~Acquisition~~Net Investment Hedges

During the second quarter of ~~Alberto Gozzi S.r.L.~~

~~On December 16, 2019,~~Fiscal 2021, the Company entered into ~~a definitive agreement~~multiple fixed-to-fixed cross currency swap agreements with an aggregate notional amount of $1 billion to ~~acquire Italian atelier and shoe manufacturer Alberto Gozzi S.r.L. The transaction was completed~~hedge its net investments in Euro-denominated subsidiaries against future volatility in the ~~Company's fourth quarter of Fiscal 2020.~~

~~Coronavirus~~

~~During~~exchange rates between the ~~fourth quarter of Fiscal 2020, there has~~U.S. Dollar and the Euro. These contracts have been an outbreak of coronavirus in China which the Company expects will materially impact its financial results. As of February 5, 2020, approximately 150 of the Company’s stores in Mainland China were closed. Additionally, most of the stores that remain open are operating with reduced hours and experiencing significantly reduced customer traffic. While this global health emergency is expected to be temporary, the duration and intensity of the disruption is uncertain, including potential broader impacts outside of China if travel and tourist traffic is further restricted and there is a resulting decline in Chinese tourist spending in other regions. Given the dynamic nature of these circumstances, the related financial impact for the fourth quarter could materially differ from our current expectations.

In addition, the Company sources finished goods inventory from manufacturers in China for the Michael Kors brand. As a result of potential factory closures, reduced workforces, scarcity of raw materials and potential disruption of transportation of goods produced in China, the Company may be unable to obtain inventory or samples sourced from this region, which may materially impact Fiscal 2021. Given the uncertainty regarding these circumstances, the related financial impact cannot be reasonably estimated at this time.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. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri Holdings Limited (the “Company”) about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. 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 ~~“targets”,~~ “plans”, “believes”, “expects”~~, “aims”~~, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, ~~“estimates”, “synergy”, “cost-saving”, “projects”, “goal”, “strategy”, “budget”, “forecast” or~~ “might” or similar words or ~~terms of similar substance or the negative thereof,~~phrases, are forward-looking statements. Forward-looking statements include statements relating to future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, share buybacks, dividend policy, losses and future prospects of the Company, business and management strategies and the expansion and growth of the Company’s operations, and benefits from any acquisition. 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 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); ~~future availability of credit;~~ 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 ~~(including the outbreak of the coronavirus in China~~ and ~~its potential impact on our future financial results),~~pandemics, disasters or catastrophes; political or economic instability in principal ~~markets (including the continuing business disruption in Hong Kong);~~markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as those risks set forth 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.

3328

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 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 ~~retail and outlet~~ stores throughout the Americas (United States, Canada and Latin ~~America, excluding Brazil)~~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

We generate revenue through the sale of Michael Kors products through four primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to 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 and 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.

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 segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages the business and assesses performance. ~~All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis, which occurred in the fourth quarter of Fiscal 2019.~~ The following table presents our total revenue and (loss) income from operations by segment for the three ~~and nine~~ months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ (in millions):


			Three Months Ended												Nine Months Ended														Three Months Ended
			December 28, 2019				December 29, 2018				December 28, 2019				December 29, 2018						June 27, 2020				June 29, 2019
Total revenue:	Total revenue:																			Total revenue:
		Versace	$	195			$	—			$	630			$	—			Versace		$	93			$	207
		Jimmy Choo	165				162				448				451				Jimmy Choo		51				158
		Michael Kors	1,211				1,276				3,281				3,443				Michael Kors		307				981
Total revenue	Total revenue				$	1,571			$	1,438			$	4,359			$	3,894		Total revenue					$	451			$	1,346

Income (loss) from operations:
(Loss) income from operations:																	(Loss) income from operations:
		Versace	$	(12)			$	—			$	(6)			$	—			Versace		$	(41)			$	(3)
		Jimmy Choo	9				15				10				28				Jimmy Choo		(29)				11
		Michael Kors	288				320				711				798				Michael Kors		(48)				201
Total segment income from operations					285				335				715				826
Total segment (loss) income from operations																	Total segment (loss) income from operations						(118)				209
Less:	Less:	Corporate expenses	(46)				(20)				(114)				(65)		Less:		Corporate expenses		(31)				(33)
		Restructuring and other charges	(15)				(19)				(37)				(49)				Restructuring and other charges		(8)				(15)
		Impairment of long-lived assets	(19)				(6)				(220)				(17)				Impairment of assets		—				(97)
Total income from operations					$	205			$	290			$	344			$	695
																			COVID-19 related charges ⁽¹⁾		(5)				—
Total (loss) income from operations																	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.

3531

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


		As of				As of
		December 28, 2019	December 29, 2018		June 27, 2020	June 29, 2019
Number of full price retail stores (including concessions):	Number of full price retail stores (including concessions):			Number of full price retail stores (including concessions):
Versace	Versace	158	—	Versace	154	152
Jimmy Choo	Jimmy Choo	176	168	Jimmy Choo	181	173
Michael Kors	Michael Kors	575	606	Michael Kors	549	583
		909	774		884	908

Number of outlet stores:	Number of outlet stores:			Number of outlet stores:
Versace	Versace	50	—	Versace	50	44
Jimmy Choo	Jimmy Choo	47	38	Jimmy Choo	47	42
Michael Kors	Michael Kors	271	264	Michael Kors	273	270
		368	302		370	356

Total number of retail stores	Total number of retail stores	1,277	1,076	Total number of retail stores	1,254	1,264

Total number of wholesale doors	Total number of wholesale doors			Total number of wholesale doors
Versace	Versace	823	—	Versace	818	795
Jimmy Choo	Jimmy Choo	558	592	Jimmy Choo	535	581
Michael Kors	Michael Kors	2,999	3,414	Michael Kors	2,829	3,191
		4,380	4,006		4,182	4,567

The following table presents our retail stores by geographic location:


		As of							As of			As of			As of
		December 28, 2019							December 29, 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:						Store count by region:
The Americas	The Americas	30	44	387	44	401	The Americas	30		47	365	28	44	387
EMEA	EMEA	62	77	180	69	198	EMEA	59		76	180	56	73	184
Asia	Asia	116	102	279	93	271	Asia	115		105	277	112	98	282
		208	223	846	206	870		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									Nine Months Ended										Three Months Ended
		December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018				June 27, 2020			June 29, 2019
Total revenue	Total revenue	$	1,571		$	1,438		$	4,359		$	3,894		Total revenue	$	451		$	1,346
Gross profit as a percent of total revenue	Gross profit as a percent of total revenue	59.3		%	60.7		%	60.6		%	61.3		%	Gross profit as a percent of total revenue	67.0		%	62.0		%
Income from operations		$	205		$	290		$	344		$	695
Income from operations as a percent of total revenue		13.0		%	20.2		%	7.9		%	17.8		%
(Loss) income from operations														(Loss) income from operations	$	(162)		$	64
(Loss) income from operations as a percent of total revenue														(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.

3632

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

~~Establishing brand identity and enhancing global presence.~~ We intend to grow our international presence through our global fashion luxury group, bringing together industry-leading fashion luxury brands. 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 plan to close between 100 and 150 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 December 28, 2019, we closed a total of 129 stores at a cost of $100 million to date and recorded restructuring charges of $6 million and $10 million during the nine months ended December 28, 2019 and December 29, 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 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.

Critical Accounting Policies

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

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

~~Selling, general and administrative expenses~~ consist of warehousing and distribution costs, rent for our distribution centers, payroll, store occupancy costs (such as rent, common area maintenance, store pre-opening, real estate taxes and utilities), information technology and systems costs, corporate payroll and related benefits, advertising and promotion expense and other general expenses, as well as sublease income. Selling, general and administrative expenses include charges that are not allocated to our reportable segments.

3833

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

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

~~Restructuring and other charges~~ includes store closure costs recorded in connection with the Retail Fleet Optimization Plan and other restructuring initiatives, as well as 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., as well as the redeemable noncontrolling interest in Versace Australia PTY Limited.

Results of Operations

Comparison of the three months ended ~~December 28, 2019~~June 27, 2020 with the three months ended ~~December~~June 29, ~~2018~~2019

The following table details the results of our operations for the three months ended ~~December 28,~~June 27, 2020 and June 29, 2019, ~~and December 29, 2018,~~ and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):


		Three Months Ended						$ Change		% Change		% of Total Revenue for the Three Months Ended								Three Months Ended						$ Change		% Change	% of Total Revenue for the Three Months Ended
		December 28, 2019		December 29, 2018								December 28, 2019				December 29, 2018		June 27, 2020		June 29, 2019									June 27, 2020	June 29, 2019
Statements of Operations Data:	Statements of Operations Data:																Statements of Operations Data:
Total revenue	Total revenue	$	1,571	$	1,438	$	133	9.2	%					Total revenue	$	451		$	1,346	$	(895)	(66.5)	%
Cost of goods sold	Cost of goods sold	639		565		74		13.1	%	40.7	%	39.3	%	Cost of goods sold	149			512		(363)		(70.9)	%	33.0	%	38.0	%
Gross profit	Gross profit	932		873		59		6.8	%	59.3	%	60.7	%	Gross profit	302			834		(532)		(63.8)	%	67.0	%	62.0	%
Selling, general and administrative expenses	Selling, general and administrative expenses	630		507		123		24.3	%	40.1	%	35.3	%	Selling, general and administrative expenses	402			598		(196)		(32.8)	%	89.1	%	44.4	%
Depreciation and amortization	Depreciation and amortization	63		51		12		23.5	%	4.0	%	3.5	%	Depreciation and amortization	54			60		(6)		(10.0)	%	12.0	%	4.5	%
Impairment of long-lived assets		19		6		13		NM		1.2	%	0.4	%
Impairment of assets														Impairment of assets	—			97		(97)		NM		—	%	7.2	%
Restructuring and other charges ⁽¹⁾	Restructuring and other charges ⁽¹⁾	15		19		(4)		(21.1)	%	1.0	%	1.3	%	Restructuring and other charges ⁽¹⁾	8			15		(7)		(46.7)	%	1.8	%	1.1	%
Total operating expenses	Total operating expenses	727		583		144		24.7	%	46.3	%	40.5	%	Total operating expenses	464			770		(306)		(39.7)	%	102.9	%	57.2	%
Income from operations		205		290		(85)		(29.3)	%	13.0	%	20.2	%
(Loss) income from operations														(Loss) income from operations	(162)			64		(226)		NM		(35.9)	%	4.8	%
Other income, net	Other income, net	(1)		(2)		1		(50.0)	%	(0.1)	%	(0.1)	%	Other income, net	(1)			(2)		1		(50.0)	%	(0.2)	%	(0.1)	%
Interest expense, net	Interest expense, net	3		7		(4)		(57.1)	%	0.2	%	0.5	%	Interest expense, net	17			13		4		30.8	%	3.8	%	1.0	%
Foreign currency (gain) loss	Foreign currency (gain) loss	(2)		43		(45)		NM		(0.1)	%	3.0	%	Foreign currency (gain) loss	(3)			2		(5)		NM		(0.7)	%	0.1	%
Income before provision for income taxes		205		242		(37)		(15.3)	%	13.0	%	16.8	%
(Benefit from) provision for income taxes		(4)		42		(46)		NM		(0.3)	%	2.9	%
Net income		209		200		9		4.5	%
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest		(1)		—		(1)		NM
Net income attributable to Capri		$	210	$	200	$	10	5.0	%
(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														Provision for income taxes	5			6		(1)		(16.7)	%	1.1	%	0.4	%

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

___________________

NM Not meaningful

Total Revenue

Total revenue ~~increased $133~~decreased $895 million, or ~~9.2%~~66.5%, to ~~$1.571~~$451 million for the three months ended June 27, 2020, compared to $1.346 billion for the three months ended ~~December 28,~~June 29, 2019, ~~compared to $1.438 billion for the three months ended December 29, 2018,~~ which included net unfavorable foreign currency effects of approximately $5$4 million, primarily related to the weakening of the Chinese Renminbi and Euro against the U.S. Dollar during the three months ended ~~December 28, 2019~~June 27, 2020 as compared to the same prior year period. On a constant currency basis, our total revenue ~~increased $138~~decreased $891 million, or ~~9.6%~~66.2%. ~~Total revenue for the three months ended December 28, 2019 includes approximately $195 million of incremental revenue~~The decrease is attributable to ~~Versace, which was acquired and consolidated into our results of operations effective December 31, 2018, offset in part by~~ lower ~~revenue~~revenues from ~~our Michael Kors business,~~all three brands, as compared to the prior ~~year.~~year, reflecting the adverse impact of COVID-19.

Gross Profit

Gross profit ~~increased $59~~decreased $532 million, or ~~6.8%~~63.8%, to ~~$932~~$302 million for the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$873~~$834 million for the three months ended ~~December~~June 29, ~~2018,~~2019, which included net unfavorable foreign currency effects of $3 million. Gross profit as a percentage of total revenue ~~decreased 140~~increased 500 basis points to ~~59.3%~~67.0% during the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~60.7%~~62.0% during the three months ended ~~December~~June 29, ~~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 ~~December 28, 2019,~~June 27, 2020, as compared to the three months ended ~~December~~June 29, ~~2018, partially offset by the inclusion of Versace, which benefited our gross margin 130 basis points.~~

2019.

Total Operating Expenses

Total operating expenses ~~increased $144~~decreased $306 million, or ~~24.7%~~39.7%, to ~~$727~~$464 million during the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$583~~$770 million for the three months ended ~~December~~June 29, ~~2018, which included incremental operating expenses of $146 million associated with the recently acquired Versace business.~~2019. Our operating expenses included a net favorable foreign currency impact of approximately $5$2 million. Total operating expenses increased to ~~46.3%~~102.9% as a percentage of total revenue for the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~40.5%~~57.2% for the three months ended ~~December~~June 29, ~~2018.~~2019. The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~increased $123~~decreased $196 million, or ~~24.3%~~32.8%, to ~~$630~~$402 million during the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$507~~$598 million for the three months ended ~~December~~June 29, ~~2018. The increase in selling,~~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 ~~$130 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 $26~~decreased $2 million, or ~~130.0%~~6.1%, to ~~$46~~$31 million during the three months ended ~~December 28, 2019~~June 27, 2020 as compared to ~~$20~~$33 million for the three months ended ~~December~~June 29, ~~2018, primarily attributable to the inclusion of ERP system implementation costs in the current year.~~

Selling, general, and administrative expenses as a percentage of total revenue increased to 40.1% for the three months ended December 28, 2019, compared to 35.3% for the three months ended December 29, 2018, primarily due to the inclusion of expenses associated with the Versace business, and increased retail store and e-commerce related costs as a percentage of total revenue during the three months ended December 28, 2019, as compared to the three months ended December 29, 2018.2019.

Depreciation and Amortization

Depreciation and amortization ~~increased $12~~decreased $6 million, or ~~23.5%~~10.0%, to ~~$63~~$54 million during the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$51~~$60 million for the three months ended ~~December~~June 29, ~~2018.~~2019. The ~~increase~~decrease in depreciation and amortization expense was primarily attributable to ~~incremental depreciation and amortization expense of $17 million attributable to our Versace business (including amortization of purchase accounting adjustments), partially offset by~~ lower depreciation due to previously recorded property and equipment impairment charges. Depreciation and amortization increased to ~~4.0%~~12.0% as a percentage of total revenue during the three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~3.5%~~4.5% for the three months ended ~~December~~June 29, ~~2018.~~2019.

Impairment of ~~Long-Lived~~ Assets

During the three months ended ~~December 28, 2019,~~June 27, 2020, we ~~recognized long-lived~~did not recognize any asset impairment charges of $19 million, primarily related to property and equipment and operating lease right-of-use assets at our Michael Kors store locations (see Note 13 to the accompanying consolidated financial statements for additional information).charges. During the three months ended ~~December~~June 29, ~~2018,~~2019, we recognized ~~long-lived~~ asset impairment charges of approximately $6$97 million, which were primarily related to ~~underperforming Michael Kors retail~~determining asset groups for our premier store locations ~~which related to closures~~at an individual store level, as well as operating lease right-of-use assets as part of our ~~Retail Fleet Optimization Plan.~~quarterly impairment assessments.

~~Restructuring and Other Charges~~

During the three months ended December 28, 2019, we recognized restructuring and other charges of $15 million, which included other costs of $8 million primarily in connection with the acquisition of Versace (see Note 10 to the accompanying consolidated financial statements for additional information) and $5 million related to our Retail Fleet Optimization Plan.

During the three months ended December 29, 2018, we recognized restructuring and other charges of $19 million, which were comprised of $12 million of other costs and restructuring charges of $7 million primarily recorded in connection with our Retail Fleet Optimization Plan. The other costs recorded during the three months ended December 29, 2018 included $6 million related to our agreement to acquire Versace and $6 million in connection with the Jimmy Choo acquisition. Restructuring and other charges are not evaluated as part of our reportable segments’ results (See ~~Segment Information~~ ~~above for additional information).~~

~~Income from Operations~~

As a result of the foregoing, income from operations decreased $85 million, or 29.3%, to $205 million during three months ended ended December 28, 2019, compared to $290 million for the three months ended December 29, 2018. Income from operations as a percentage of total revenue decreased to 13.0% during the three months ended December 28, 2019, compared to 20.2% for the three months ended December 29, 2018. See ~~Segment Information~~ ~~above for a reconciliation of our segment operating income to total operating income.~~

~~Interest Expense, net~~

Interest expense, net decreased $4 million to $3 million during the three months ended December 28, 2019, compared to $7 million for the three months ended December 29, 2018, primarily due to a reduction to interest expense related to the cross-currency swap used in the net investment hedge during the three months ended December 28, 2019, as compared to the three months ended December 29, 2018, largely offset by increased interest expense attributable to higher average borrowings outstanding in the current year (see Note 11 and Note 14 to the accompanying consolidated financial statements for additional information).

~~Foreign Currency (Gain) Loss~~

During the three months ended December 28, 2019, we recognized a net foreign currency gain of $2 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 December 29, 2018, we recognized a net foreign currency loss of $43 million, primarily attributable to a $47 million unrealized loss related to a forward foreign currency exchange derivative contract entered into to mitigate foreign currency exchange risk relating to the Versace acquisition.

~~(Benefit from) Provision for Income Taxes~~

We recognized $4 million of income tax benefit during the three months ended December 28, 2019, compared to $42 million of income tax expense for the three months ended December 29, 2018. Our effective tax rate for the three months ended December 28, 2019, was a benefit of 2.0%, compared to a provision of 17.4% for the three months ended December 29, 2018. The decrease in our effective tax rate was primarily related to the favorable impact of recognizing benefits from the resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, as well as the impact of the change in the geographic mix of earnings during the three months ended December 28, 2019, compared to three months ended December 29, 2018. These decreases were partially offset by the unfavorable impact of tax deficits recognized on shared-based compensation.

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

~~Net Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest~~

During the three months ended December 28, 2019, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $1 million. This loss represents the share of income that is not attributable to the Company.

~~Net Income Attributable to Capri~~

As a result of the foregoing, our net income increased $10 million, or 5.0%, to $210 million during the three months ended December 28, 2019, compared to $200 million for the three months ended December 29, 2018.

~~Segment Information~~

~~Versace~~

~~Three Months Ended~~

~~(dollars in millions)~~

December 28,
2019

December 29,
2018

~~$ Change~~

~~Revenues~~

~~195~~

—

~~Loss from operations~~

~~(12)~~

—

~~Operating margin~~

~~(6.2)~~

—

~~___________________~~

~~NM Not meaningful~~

~~Revenues~~

~~The Versace business, acquired on December 31, 2018, contributed $195 million to our total revenue during the three months ended December 28, 2019.~~

~~Loss from Operations~~

~~During the three months ended December 28, 2019, we recorded a loss from operations of $12 million (after amortization of non-cash purchase accounting adjustments).~~

~~Jimmy Choo~~

Three Months Ended % Change
(dollars in millions) December 28,
2019 December 29,
2018 $ Change As
Reported Constant
Currency
Revenues $ 165 $ 162 $ 3 1.9 % 1.9 %
Income from operations 9 15 (6) (40.0) %
Operating margin 5.5 % 9.3 %

~~Revenues~~

~~Revenue from Jimmy Choo increased $3 million, or 1.9%, to $165 million during the three months ended December 28, 2019, compared to $162 million for the three months ended December 29, 2018.~~

~~Income from Operations~~

Income from operations for our Jimmy Choo segment decreased $6 million, or 40.0%, to $9 million during the three months ended December 28, 2019, compared to $15 million for the three months ended December 29, 2018. Income from operations as a percentage of Jimmy Choo revenue declined 380 basis points from 9.3% for the three months ended December 29, 2018, to 5.5% during the three months ended December 28, 2019, primarily due to manufacturing benefits recognized in the prior year, as well as increased expenses in the current year related to investments in new stores.

~~Michael Kors~~

Three Months Ended % Change
(dollars in millions) December 28,
2019 December 29,
2018 $ Change As
Reported Constant
Currency
Revenues $ 1,211 $ 1,276 $ (65) (5.1) % (4.7) %
Income from operations 288 320 (32) (10.0) %
Operating margin 23.8 % 25.1 %

~~Revenues~~

Michael Kors revenues decreased $65 million, or 5.1%, to $1.211 billion during the three months ended December 28, 2019, compared to $1.276 billion for the three months ended December 29, 2018, which included unfavorable foreign currency effects of $5 million. On a constant currency basis, revenue decreased $60 million, or 4.7%. The decrease in revenues was primarily due to lower sales of women's accessories and watches and a decrease in comparable store sales of $17 million. This decrease was partially offset by higher sales of women's footwear, men's accessories, and women's apparel.

~~Our comparable store sales benefited approximately 180 basis points from the inclusion of e-commerce sales.~~

~~Income from Operations~~

Income from operations for our Michael Kors segment decreased $32 million, or 10.0%, to $288 million during the three months ended December 28, 2019, compared to $320 million for the three months ended December 29, 2018. Income from operations as a percentage of Michael Kors revenue declined 130 basis points from 25.1% for the three months ended December 29, 2018, to 23.8% during the three months ended December 28, 2019, largely due to a decrease in gross profit margin, as previously discussed, partially offset by lower retail operating expenses.

~~Results of Operations~~

~~Comparison of the nine months ended December 28, 2019 with the ninemonths ended December 29, 2018~~

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

Nine Months Ended $ Change % Change % of Total Revenue for
the Nine Months Ended
December 28,
2019 December 29,
2018 December 28, 2019 December 29, 2018
Statements of Operations Data:
Total revenue $ 4,359 $ 3,894 $ 465 11.9 %
Cost of goods sold 1,719 1,507 212 14.1 % 39.4 % 38.7 %
Gross profit 2,640 2,387 253 10.6 % 60.6 % 61.3 %
Selling, general and administrative expenses 1,851 1,466 385 26.3 % 42.5 % 37.6 %
Depreciation and amortization 188 160 28 17.5 % 4.3 % 4.1 %
Impairment of long-lived assets 220 17 203 NM 5.0 % 0.4 %
Restructuring and other charges ⁽¹⁾
37 49 (12) (24.5) % 0.8 % 1.3 %
Total operating expenses 2,296 1,692 604 35.7 % 52.7 % 43.5 %
Income from operations 344 695 (351) (50.5) % 7.9 % 17.8 %
Other income, net (4) (4) — — % (0.1) % (0.1) %
Interest expense, net 19 21 (2) (9.5) % 0.4 % 0.5 %
Foreign currency loss 4 79 (75) (94.9) % 0.1 % 2.0 %
Income before provision for income taxes 325 599 (274) (45.7) % 7.5 % 15.4 %
(Benefit from) provision for income taxes
(2) 76 (78) (102.6) % — % 2.0 %
Net income 327 523 (196) (37.5) %
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest (1) (1) — —
Net income attributable to Capri $ 328 $ 524 $ (196) (37.4) %

~~___________________~~

~~NM Not meaningful~~

~~Total Revenue~~

Total revenue increased $465 million, or 11.9%, to $4.359 billion for the nine months ended December 28, 2019, compared to $3.894 billion for the nine months ended December 29, 2018, which included net unfavorable foreign currency effects of approximately $41 million, primarily related to the weakening of the Euro, the Chinese Renminbi, the British Pound, and the Canadian Dollar against the U.S. Dollar during the nine months ended December 28, 2019 as compared to the same prior year period. On a constant currency basis, our total revenue increased $506 million, or 13.0%. Total revenue for the nine months ended December 28, 2019 includes approximately $630 million of incremental revenue attributable to Versace, which was acquired and consolidated into our results of operations effective December 31, 2018, offset in part by lower revenue from our Michael Kors business, as compared to the prior year.

~~Gross Profit~~

Gross profit increased $253 million, or 10.6%, to $2.640 billion for the nine months ended December 28, 2019, compared to $2.387 billion for the nine months ended December 29, 2018, which included net unfavorable foreign currency effects of $27 million. Gross profit as a percentage of total revenue decreased 70 basis points to 60.6% during the nine months ended December 28, 2019, compared to 61.3% during the nine months ended December 29, 2018. The decrease in our gross profit margin was primarily attributable to lower gross profit for Michael Kors primarily driven by increased markdowns during the nine months ended December 28, 2019, as compared to the nine months ended December 29, 2018, partially offset by the inclusion of Versace, which benefited our gross margin 100 basis points.

~~Total Operating Expenses~~

Total operating expenses increased $604 million, or 35.7%, to $2.296 billion during the nine months ended December 28, 2019, compared to $1.692 billion for the nine months ended December 29, 2018, which included incremental operating expenses of $427 million associated with the recently acquired Versace business. Our operating expenses included a net favorable foreign currency impact of approximately $37 million. Total operating expenses increased to 52.7% as a percentage of total revenue for the nine months ended December 28, 2019, compared to 43.5% for the nine months ended December 29, 2018. The components that comprise total operating expenses are explained below.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increase $385 million, or 26.3%, to $1.851 billion during the nine months ended December 28, 2019, compared to $1.466 billion for the nine months ended December 29, 2018. The increase in selling, general and administrative expenses was primarily due to incremental costs of $381 million associated with the recently acquired Versace business, which has been consolidated in our operations beginning on December 31, 2018.

Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $49 million, or 75.4%, to $114 million during the nine months ended December 28, 2019 as compared to $65 million for the nine months ended December 29, 2018, primarily attributable to the inclusion of ERP system implementation costs in the current year.

Selling, general and administrative expenses as a percentage of total revenue increase to 42.5% during the nine months ended December 28, 2019, compared to 37.6% for the nine months ended December 29, 2018, primarily due to the inclusion of expenses associated with the Versace business and increased retail store and e-commerce related costs as a percentage of total revenue during the nine months ended December 28, 2019, as compared to the nine months ended December 29, 2018.

~~Depreciation and Amortization~~

Depreciation and amortization increased $28 million, or 17.5%, to $188 million during the nine months ended December 28, 2019, compared to $160 million for the nine months ended December 29, 2018. The increase in depreciation and amortization expense was primarily attributable to incremental depreciation and amortization expense of $46 million attributable to the Versace business (including amortization of purchase accounting adjustments), partially offset by lower depreciation due to previously recorded property and equipment impairment charges. Depreciation and amortization increased to 4.3% as a percentage of total revenue during the nine months ended December 28, 2019, compared to 4.1% for the nine months ended December 29, 2018.

~~Impairment of Long-Lived Assets~~

During the nine months ended December 28, 2019, we recognized long-lived asset impairment charges of $220 million, which primarily related to operating lease right-of-use assets as part of our quarterly impairment assessments (see Note 13 to the accompanying consolidated financial statements for additional information). During the nine months ended December 29, 2018, we recognized long-lived asset impairment charges of approximately $17 million, which were related to underperforming Michael Kors retail store locations, which related to closures as part of our Retail Fleet Optimization Plan.

Restructuring and Other Charges

During the ~~nine~~three months ended ~~December 28,~~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 8 to the accompanying consolidated financial statements for additional information) and $3 million related to our Capri Retail Store Optimization Program.

During the three months ended June 29, 2019, we recognized restructuring and other charges of $37 million, which included restructuring charges of $11 million, primarily related to Jimmy Choo lease-related charges and our Retail Fleet Optimization Plan, and other costs of $26 million. The other costs recorded during the nine months ended December 28, 2019 included $18 million related to the acquisition of Versace and $8 million in connection with the Jimmy Choo acquisition (see Note 10 to the accompanying consolidated financial statements for additional information).

~~During the nine months ended December 29, 2018, we recognized restructuring and other charges of $49~~$15 million, which were ~~primarily~~ comprised of ~~$35~~$12 million of other costs and restructuring charges of ~~$14~~$3 million, ~~primarily~~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. The other costs recorded during the ~~nine~~three months ended ~~December~~June 29, ~~2018~~2019 included ~~$20~~$7 million in connection with the acquisition of Versace and $5 million in connection with the Jimmy Choo ~~acquisition and $15 million in connection with the acquisition of Versace.~~acquisition. 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 ~~$351~~$226 million, ~~or 50.5%,~~ to ~~$344~~a loss from operations of $162 million during ~~the nine~~three months ended ~~December 28, 2019,~~ended June 27, 2020, compared to ~~$695~~income from operations of $64 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~2019. Income from operations as a percentage of total revenue decreased to ~~7.9%~~(35.9)% during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~17.8%~~4.8% for the ~~nine~~three months ended ~~December~~June 29, ~~2018 (see~~2019. See Segment Information above for a reconciliation of our segment operating income to total operating ~~income).~~income.

Interest Expense,net

Interest expense, net, ~~decreased $2~~increased $4 million to ~~$19~~$17 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$21~~$13 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, primarily due to a ~~reduction~~decrease to interest ~~expense~~income as a result of the Company’s early termination of its net investment hedges related to ~~the cross-currency swap used in the net investment hedge~~its Euro-denominated subsidiaries during the ~~nine months ended December 28, 2019, as compared~~fourth quarter. The decrease to ~~the nine months ended December 29, 2018,~~interest income was largely offset by ~~increased~~a decrease in interest expense attributable to ~~higher~~lower average borrowings outstanding in the current year (see Note 119 and Note 1412 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

During the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, we recognized a net foreign currency ~~loss~~gain of $4$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 ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, we recognized a net foreign currency loss of ~~$79~~$2 million, primarily attributable to ~~a $77 million realized loss related to forward foreign currency exchange derivative contracts to hedge~~ the ~~transaction price~~revaluation and settlement of certain of our accounts payable in currencies other than the ~~Versace acquisition.~~functional currency.

~~(Benefit from)~~ Provision for Income Taxes

~~We recognized $2~~The provision for incomes taxes was $5 million ~~of income tax benefit~~ during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$76~~$6 million ~~of income tax expense~~ for the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~2019. Our effective tax rate for the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, was ~~a benefit of 0.6%~~(2.9)%, compared to ~~a provision of 12.7%~~11.8% for the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~2019. The decrease in our effective tax rate was primarily related to the ~~favorable~~ impact of ~~recognizing benefits from~~a valuation allowance on a portion of our consolidated pre-tax loss and a tax detriment related to share based compensation for the ~~resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, as well as the impact of the change in the geographic mix of earnings during the nine~~three months ended ~~December 28, 2019~~June 27, 2020, compared to ~~the nine~~three months ended ~~December~~June 29, ~~2018.~~2019. These decreases were partially offset by the ~~unfavorable~~ impact of ~~tax deficits recognized~~the favorable effects related to global financing activities on ~~shared-based compensation.~~our consolidated pre-tax loss.

Net ~~Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest~~

During the nine months ended December 28, 2019 and December 29, 2018, we recorded a net loss attributable to the noncontrolling interest in our joint ventures in each period of $1 million. These losses represent the share of income that is not attributable to the Company.

~~Net~~(Loss) Income Attributable to Capri

As a result of the foregoing, our net income decreased ~~$196~~$225 million ~~or 37.4%,~~ to ~~$328~~a net loss of $180 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$524~~net income of $45 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~

2019.

Segment Information

Versace

~~Nine Months Ended~~

~~(dollars in millions)~~

December 28,
2019

December 29,
2018

~~$ Change~~

~~Revenues~~

~~630~~

—

~~Loss from operations~~

~~(6)~~

—

~~Operating margin~~

~~(1.0)~~

—


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

___________________

NM Not meaningful

Revenues

~~The~~ Versace ~~business acquired on December 31, 2018 contributed $630 million to our total revenue during the nine months ended December 28, 2019.~~

~~Loss from Operations~~

~~During the nine months ended December 28, 2019, we recorded a loss from operations of $6 million (after amortization of non-cash purchase accounting adjustments).~~

~~Jimmy Choo~~

Nine Months Ended % Change
(dollars in millions) December 28,
2019 December 29,
2018 $ Change As
Reported Constant
Currency
Revenues $ 448 $ 451 $ (3) (0.7) % 0.9 %
Income from operations 10 28 (18) (64.3) %
Operating margin 2.2 % 6.2 %

~~Revenues~~

~~Revenue from Jimmy Choo~~revenues decreased $3$114 million, or ~~0.7%~~55.1%, to ~~$448~~$93 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$451~~$207 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, which included unfavorable foreign currency effects of ~~$7 million. On a constant currency basis, revenue increased $4 million, or 0.9%.~~

~~Income from Operations~~

Income from operations for our Jimmy Choo segment decreased $18 million, or 64.3%, to $10 million during the nine months ended December 28, 2019, compared to $28 million for the nine months ended December 29, 2018. Income from operations as a percentage of Jimmy Choo revenue declined 400 basis points from 6.2% for the nine months ended December 29, 2018, to 2.2% during the nine months ended December 28, 2019, primarily due to an increase in operating expenses, including retail store expenses, advertising, marketing and corporate expenses, as well as investments in new stores.

~~Michael Kors~~

Nine Months Ended % Change
(dollars in millions) December 28,
2019 December 29,
2018 $ Change As
Reported Constant
Currency
Revenues $ 3,281 $ 3,443 $ (162) (4.7) % (3.7) %
Income from operations 711 798 (87) (10.9) %
Operating margin 21.7 % 23.2 %

~~Revenues~~

Michael Kors revenues decreased $162 million, or 4.7%, to $3.281 billion during the nine months ended December 28, 2019, compared to $3.443 billion for the nine months ended December 29, 2018, which included unfavorable foreign currency effects of $34$2 million. On a constant currency basis, revenue decreased ~~$128~~$112 million, or ~~3.7%. The decrease in revenues was~~54.1%, primarily reflecting adverse impacts related to COVID-19.

Loss from Operations

During the three months ended June 27, 2020 Versace recorded a loss from operations of $41 million during the three months ended June 27, 2020, compared to $3 million for the three months ended June 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 lower sales of women’s accessories and watches and a decrease in comparable store sales of $32 million. This decrease was partially offset by higher sales of women's footwear, men's accessories and women's apparel.the adverse impacts related to COVID-19.

~~Our comparable store sales benefited approximately 170 basis points from~~

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 ~~inclusion of e-commerce sales.~~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

~~Income~~During the three months ended June 27, 2020, Jimmy Choo recorded a loss from operations ~~for our Michael Kors segment decreased $87 million, or 10.9%, to $711~~of $29 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, compared to ~~$798~~income from operations of $11 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~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 $2 million. On a constant currency basis, revenue decreased $672 million, or 68.5%, primarily due to adverse impacts related to COVID-19.

(Loss) Income from ~~operations as a percentage of~~Operations

During the three months ended June 27, 2020, Michael Kors ~~revenue declined 150 basis points~~recorded a loss from ~~23.2%~~operations of $48 million during the three months ended June 27, 2020, compared to income from operations of $201 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019. Operating margin declined from 20.5% for the three months ended June 29, 2019, to ~~21.7%~~(15.6)% during the ~~nine~~three months ended ~~December 28, 2019, largely~~June 27, 2020, primarily due to ~~a decrease in gross profit margin, as previously discussed.~~adverse impacts related to COVID-19.

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 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 ~~$164~~$32 million on capital expenditures during the ~~nine~~three months ended ~~December 28, 2019.~~June 27, 2020.

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


		As of							As of
		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Balance Sheet Data:	Balance Sheet Data:					Balance Sheet Data:
Cash and cash equivalents	Cash and cash equivalents	$	237	$	172	Cash and cash equivalents	$	207	$	592
Working capital	Working capital	$	(524)	$	187	Working capital	$	(100)	$	493
Total assets	Total assets	$	8,325	$	6,650	Total assets	$	7,533	$	7,946
Short-term debt	Short-term debt	$	1,031	$	630	Short-term debt	$	191	$	167
Long-term debt	Long-term debt	$	1,085	$	1,936	Long-term debt	$	1,577	$	2,012


	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)

Nine Months Ended
December 28,
2019 December 29,
2018
Cash Flows Provided By (Used In):
Operating activities $ 752 $ 776
Investing activities (133) (216)
Financing activities (554) 1,472
Effect of exchange rate changes — (9)
Net increase in cash and cash equivalents and restricted cash ⁽¹⁾
$ 65 $ 2,023

~~_____________________________~~

⁽¹⁾~~The prior year balance includes restricted cash placed in escrow in connection with the acquisition of Versace.~~

Cash Provided by Operating Activities

Net cash provided by operating activities decreased ~~$24~~$91 million to ~~$752~~$67 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, as compared to ~~$776~~$158 million for the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, as a result of a ~~$44 million~~ decrease in our net income after non-cash adjustments, partially offset by ~~a $21 million net favorable change~~increases related to ~~operating assets~~changes in our working capital, primarily attributable to the timing of payments and ~~liabilities.~~receipts due to the impact of COVID-19.

Cash Used in Investing Activities

Net cash used in investing activities ~~decreased $83 million to $133~~was $32 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, as compared to ~~$216~~$32 million during the ~~nine~~three months ended ~~December~~June 29, ~~2018,~~2019, which was primarily attributable to ~~a $77 million realized loss related to~~ an ~~undesignated derivative contract during the nine months ended December 29, 2018. The decrease also included $32~~increase of $23 million related to the settlement of a net investment hedge during the ~~nine~~three months ended ~~December 28,~~June 29, 2019, ~~partially~~ offset by ~~higher~~lower capital expenditures of ~~$29~~$22 million compared to prior year.

Cash ~~(Used in) Provided by~~Used in Financing Activities

Net cash used in financing activities was ~~$554~~$420 million during the ~~nine~~three months ended ~~December 28, 2019,~~June 27, 2020, as compared to ~~net cash provided by financing activities of $1.472 billion~~$138 million during the ~~nine~~three months ended ~~December~~June 29, ~~2018.~~2019. The increase of cash used in financing activities of ~~$2.026 billion~~$282 million was primarily attributable to ~~decreased~~increased debt ~~borrowings of $2.123 billion, net of debt repayments, partially offset by a $105 million decrease in cash payments to repurchase our ordinary shares compared to prior year.~~repayments.

5038

Debt ~~Obligations~~Facilities

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


		As of							As of
		December 28, 2019		March 30, 2019			June 27, 2020		March 28, 2020
Senior Unsecured Revolving Credit Facility:	Senior Unsecured Revolving Credit Facility:					Senior Unsecured Revolving Credit Facility:
Revolving Credit Facility (excluding up to a $500 million accordion feature) ⁽¹⁾	Revolving Credit Facility (excluding up to a $500 million accordion feature) ⁽¹⁾					Revolving Credit Facility (excluding up to a $500 million accordion feature) ⁽¹⁾
Total Availability	Total Availability	$	1,000	$	1,000	Total Availability	$	1,230	$	1,000
Borrowings outstanding ⁽²⁾		503		539
Borrowings outstanding						Borrowings outstanding	270		681
Letter of credit outstanding	Letter of credit outstanding	16		17		Letter of credit outstanding	22		18
Remaining availability	Remaining availability	$	481	$	444	Remaining availability	$	938	$	301

Term Loan Facility ($1.6 billion)	Term Loan Facility ($1.6 billion)					Term Loan Facility ($1.6 billion)
Borrowings Outstanding, net of debt issuance costs ⁽³⁾⁽²⁾	Borrowings Outstanding, net of debt issuance costs ⁽³⁾⁽²⁾	$	1,119	$	1,570	Borrowings Outstanding, net of debt issuance costs ⁽³⁾⁽²⁾	$	985	$	1,010
Remaining availability	Remaining availability	$	—	$	—	Remaining availability	$	—	$	—

4.000% Senior Notes	4.000% Senior Notes					4.000% Senior Notes
Borrowings Outstanding, net of debt issuance costs and discount amortization ⁽³⁾⁽²⁾	Borrowings Outstanding, net of debt issuance costs and discount amortization ⁽³⁾⁽²⁾	$	446	$	445	Borrowings Outstanding, net of debt issuance costs and discount amortization ⁽³⁾⁽²⁾	$	446	$	446

Other Borrowings ⁽³⁾⁽²⁾	Other Borrowings ⁽³⁾⁽²⁾	$	3	$	1	Other Borrowings ⁽³⁾⁽²⁾	$	4	$	3

Hong Kong Uncommitted Credit Facility:	Hong Kong Uncommitted Credit Facility:					Hong Kong Uncommitted Credit Facility:
Total availability (100 million Hong Kong Dollars)	Total availability (100 million Hong Kong Dollars)	$	13	$	13	Total availability (100 million Hong Kong Dollars)	$	13	$	14
Borrowings outstanding		—		—
Bank guarantees outstanding (12 million Hong Kong Dollars)		1		2
Remaining availability		$	12	$	11
Borrowings outstanding (85 million Hong Kong Dollars) ⁽³⁾						Borrowings outstanding (85 million Hong Kong Dollars) ⁽³⁾	11		—
Bank guarantees outstanding (4 million Hong Kong Dollars)						Bank guarantees outstanding (4 million Hong Kong Dollars)	1		1
Remaining availability (11 million and 96 million Hong Kong Dollars)						Remaining availability (11 million and 96 million Hong Kong Dollars)	$	1	$	13

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

Japan Credit Facility:	Japan Credit Facility:					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)		$	22	$	22
Borrowings outstanding (10 million Euro) ⁽²⁾		16		11
Remaining availability		$	6	$	11
Total availability (1.0 billion Japanese Yen)						Total availability (1.0 billion Japanese Yen)	$	9	$	9
Borrowings outstanding (223 million Japanese Yen) ⁽³⁾						Borrowings outstanding (223 million Japanese Yen) ⁽³⁾	2		—
Remaining availability (777 million and 1.0 billion Japanese Yen)						Remaining availability (777 million and 1.0 billion Japanese Yen)	$	7	$	9

Versace Uncommitted Credit Facilities:	Versace Uncommitted Credit Facilities:					Versace Uncommitted Credit Facilities:
Total availability (32 million Euro)		$	36	$	—
Borrowings outstanding (26 million Euro) ⁽²⁾		29		—
Remaining availability		$	7	$	—
Total availability (55 million and 52 million Euro)						Total availability (55 million and 52 million Euro)	$	61	$	58
Borrowings outstanding (45 million and 35 million Euro) ⁽³⁾						Borrowings outstanding (45 million and 35 million Euro) ⁽³⁾	50		39
Remaining availability (10 million and 17 million Euro)						Remaining availability (10 million and 17 million Euro)	$	11	$	19

Total borrowings outstanding ⁽¹⁾	Total borrowings outstanding ⁽¹⁾	$	2,116	$	2,566	Total borrowings outstanding ⁽¹⁾	$	1,768	$	2,179
Total remaining availability	Total remaining availability	$	529	$	489	Total remaining availability	$	971	$	356

5139

_____________________________

⁽¹⁾The financial covenant in our 2018 Credit Facility ~~contains customary events of default and requires~~requiring 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 asplus the capitalized amount of ~~the date of the measurement plus 6.0 times the consolidated rent expense~~all operating lease obligations for the last four ~~consecutive~~ fiscal quarters to Consolidated EBITDAR ~~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 as consolidated~~reinstated, the applicable ratio will be calculated 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 investmentsof our unrestricted cash and cash ~~dividends.~~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 ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, we were in compliance with all covenants related to our agreements then in effect governing our debt.

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

⁽³⁾~~Recorded as~~ long-term debt in our consolidated balance sheets as of ~~December 28, 2019~~June 27, 2020 and March ~~30, 2019,~~28, 2020, except for the current portion of ~~$483~~$128 million ~~and $80 million, respectively,~~ outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt at ~~December 28, 2019~~both June 27, 2020 and March ~~30, 2019.~~28, 2020.

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

We believe that our 2018 Credit Facility is adequately diversified with no undue concentration in any one financial institution. As of ~~December 28, 2019~~,June 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 ~~nine~~three months ended ~~December 28,~~June 27, 2020 and June 29, 2019 ~~and December 29, 2018~~ (dollars in millions):


		Nine Months Ended								Three Months Ended
		December 28, 2019		December 29, 2018				June 27, 2020		June 29, 2019
Cost of shares repurchased under share repurchase program	Cost of shares repurchased under share repurchase program	$	100	$	200	⁽¹⁾	Cost of shares repurchased under share repurchase program	$	—	$	—
Fair value of shares withheld to cover tax obligations for vested restricted share awards	Fair value of shares withheld to cover tax obligations for vested restricted share awards	2		7			Fair value of shares withheld to cover tax obligations for vested restricted share awards	1		2
Total cost of treasury shares repurchased	Total cost of treasury shares repurchased	$	102	$	207		Total cost of treasury shares repurchased	$	1	$	2

Shares repurchased under share repurchase program	Shares repurchased under share repurchase program	2,711,807		3,718,237			Shares repurchased under share repurchase program	—		—
Shares withheld to cover tax withholding obligations	Shares withheld to cover tax withholding obligations	63,958		107,712			Shares withheld to cover tax withholding obligations	38,119		58,304
		2,775,765		3,825,949				38,119		58,304

~~_____________________________~~

⁽¹⁾~~The~~During the first quarter of Fiscal 2021, we suspended our $500 million share-repurchase program ~~expired on May 25, 2019.~~

~~On August 1, 2019, our Board~~in response to the continued impact of ~~Directors authorized a new $500 million share repurchase program, which expires August 1, 2021.~~the COVID-19 pandemic. As of ~~December 28, 2019,~~June 27, 2020, the remaining availability under ~~the Company's~~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 our insider trading policy, and other relevant factors. This program may be suspended or discontinued at any time.

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 December~~ 28, ~~2019.~~2020.

5240

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 ~~$23~~$27 million at ~~December 28, 2019,~~June 27, 2020, including $6$5 million in letters of credit issued outside of the 2018 Credit Facility. In addition, as of ~~December 28, 2019,~~June 27, 2020, bank guarantees of approximately ~~$19~~$18 million were supported by the 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, ~~(loss),~~ 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 ~~December 28, 2019,~~June 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 ~~December 28, 2019,~~June 27, 2020, would result in a net increase and decrease, respectively, of approximately ~~$17~~$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 ~~December 28, 2019,~~June 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 ~~December 28, 2019,~~June 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 ~~December 28, 2019,~~June 27, 2020, would result in a potential net ~~cash~~ increase or decrease upon settlement of approximately ~~$329~~$5 million in the fair value of ~~these contracts,~~this contract, which ~~have staggered maturities of 3 to 7~~matures in 4 years.

5442

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 ~~December 28, 2019,~~June 27, 2020, we had ~~$503~~$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 ~~$1.119~~$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 ~~$45~~$39 million outstanding under our Versace Credit Facilities. 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. 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 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.

5543

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 ~~December 28, 2019.~~June 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 ~~December 28, 2019~~June 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 ~~nine~~three months ended ~~December 28, 2019~~June 27, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5644

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, as amended and supplemented by the risk factor set forth below,~~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.

~~The following is an amended and restated version of a Risk Factor included in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended March 30, 2019:~~

~~We face risks associated with operating globally and our strategy to continue to expand internationally.~~

We operate on a global basis, with approximately 48% of our total revenue from operations outside of the U.S. as of the end of the third quarter of Fiscal 2020. As a result, we are subject to the risks of doing business internationally, including:

•political or civil unrest, including protests and other civil disruption, such as the continuing business disruption in Hong Kong, which has negatively affected our business and is expected to continue to cause disruptions to our business for the foreseeable future;

•unforeseen public health crises, such as pandemic and epidemic diseases, including the recent outbreak of coronavirus in China which could result in closed offices, retail stores and factories, reduced workforces, scarcity of raw materials, embargoing of goods produced in areas infected by the virus, and reduced consumer traffic and spending within China and outside of China if the virus continues to spread, and could materially adversely affect our business and financial condition;

•~~economic instability and unsettled regional and global conflicts, which may negatively affect consumer spending by foreign tourists and local consumers in the various regions where we operate;~~

•~~laws, regulations and policies of foreign governments;~~

•~~potential negative consequences from changes in taxation policies;~~

•~~natural disasters or other extreme weather events, including those attributed to climate change; and~~

•~~acts of terrorism, military actions or other conditions over which we have no control.~~

In addition, on June 23, 2016, voters in the United Kingdom (“U.K.”) approved an advisory referendum to withdraw from the European Union (“Brexit”). On March 29, 2017, the U.K. triggered Article 50 of the Lisbon Treaty formally starting negotiations with the EU. The U.K. formally left the EU on January 31, 2020. There is an agreement in principle to transitional provisions under which EU law would remain in force in the U.K. until the end of December 2020, but this remains subject to the successful conclusion of a final withdrawal agreement between the parties. Although the terms of the U.K.’s future relationship with the EU are still unknown, it is possible that there will be increased regulatory and legal complexities, including potentially divergent national laws and regulations between the U.K. and EU. Brexit may also cause disruption and create uncertainty surrounding our business, including affecting our relationship with our existing and future customers, suppliers and employees and resulting in increased cost by way of new or elevated customs duties or financial implications from operational challenges.

Finally, if our international expansion plans are unsuccessful, it could have a material adverse effect on our business, results of operations and financial condition. We sell our products at varying retail price points based on geographic location that yield different gross profit margins and we achieve different operating profit margins, depending on geographic region, due to a variety of factors including product mix, store size, occupancy costs, labor costs and retail pricing. Changes in any one or more of these factors could result in lower revenues, increased costs, and negatively impact our business, results of operations and financial condition. There are also some countries where we do not yet have significant operating experience, and in most of these countries we face established competitors with significantly more operating experience in those locations. Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ in these countries and, as a result, sales of our product may not be successful, or the margins on those sales may not be in line with those we currently anticipate.

~~There can be no assurance that any or all of these events will not have a material adverse effect on our business, results of operations and financial condition.~~

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

~~The Company’s share repurchases are made under~~During the first quarter of Fiscal 2021, the Company suspended its $500 million ~~share repurchase~~share-repurchase program ~~which was approved by its Board~~in response to the continued impact of ~~Directors on August 1, 2019.~~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 ~~December 28, 2019:~~June 27, 2020:

Total Number
of Shares
Purchased Average Price
Paid per Share Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs Approximated Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
September 29 – October 26 — $ — — $ 500
October 27 – November 23 958,783 $ 36.53 958,048 $ 465
November 24 – December 28 1,753,759 $ 37.06 1,753,759 $ 400
2,712,542 2,711,807


	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			—

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 ~~February~~August 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

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, ~~Deferred Compensation Plan~~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 ~~November 14, 2019~~July 1, 2020 and incorporated herein by ~~reference)~~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 ~~December 28, 2019,~~June 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.

6047


	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


		December 28, 2019
	Statement of Operations and Comprehensive Income Location	Three Months Ended		Nine Months Ended
Operating lease cost	Selling, general and administrative expenses	$	114	$	338
Short-term lease cost	Selling, general and administrative expenses	5		18
Variable lease cost	Selling, general and administrative expenses	39		118
Sublease income	Selling, general and administrative expenses	(2)		(5)
Total lease cost		$	156	$	469


	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	—		6		6

Payments	(1)		(7)		(8)
Balance at December 28, 2019	$	1	$	6	$	7


	Three Months Ended December 28, 2019										Nine Months Ended December 28, 2019
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge		Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Operating Lease Right-of-Use Assets	$	27	$	20	$	7	$	314	$	135	$	179
Property and Equipment	13		3		10		51		18		33
Key Money	3		1		2		12		4		8
Total	$	43	$	24	$	19	$	377	$	157	$	220


	Three Months Ended December 29, 2018										Nine Months Ended December 29, 2018
	Carrying Value Prior to Impairment		Fair Value		Impairment Charge		Carrying Value Prior to Impairment		Fair Value		Impairment Charge
Property and Equipment	$	6	$	—	$	6	$	20	$	5	$	15
Lease Rights	—		—		—		4		2		2
Total	$	6	$	—	$	6	$	24	$	7	$	17


	Three Months Ended
	Gain Reclassified from Accumulated OCI					Location of (Gain) Loss recognized				Total Cost of goods sold
	December 28, 2019		December 29, 2018						December 28, 2019			December 29, 2018
Designated forward foreign currency exchange contracts	$	(3)	$	(1)	Cost of goods sold		$	639		$	565


	Nine Months Ended
	(Gain) Loss Reclassified from Accumulated OCI					Location of (Gain) Loss recognized				Total Cost of goods sold
	December 28, 2019		December 29, 2018						December 28, 2019			December 29, 2018
Designated forward foreign currency exchange contracts	$	(8)	$	6	Cost of goods sold		$	1,719		$	1,507


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Approximated Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
September 29 – October 26	—	$	—	—	$	500
October 27 – November 23	958,783	$	36.53	958,048	$	465
November 24 – December 28	1,753,759	$	37.06	1,753,759	$	400
	2,712,542			2,711,807