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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 26, 2020
or
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
 
cpri-20201226_g1.jpg
CAPRI HOLDINGS LTD
(Exact Name of Registrant as Specified in Its Charter)

British Virgin IslandsN/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 ClassTrading Symbol(s)Name of Each Exchange on which Registered
Ordinary Shares, no par valueCPRINew 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. 
YesNo
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). 
YesNo
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 filerAccelerated filer
Non-accelerated filerSmaller 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).
YesNo
As of January 26, 2021, Capri Holdings Limited had 151,044,176 ordinary shares outstanding.



TABLE OF CONTENTS
 
  Page
No.
Item 1.Financial Statements
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

2



PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
December 26,
2020
March 28,
2020
Assets
Current assets
Cash and cash equivalents$229 $592 
Receivables, net369 308 
Inventories, net789 827 
Prepaid expenses and other current assets106 167 
Total current assets1,493 1,894 
Property and equipment, net518 561 
Operating lease right-of-use assets1,575 1,625 
Intangible assets, net2,102 1,986 
Goodwill1,615 1,488 
Deferred tax assets283 225 
Other assets179 167 
Total assets$7,765 $7,946 
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable$495 $428 
Accrued payroll and payroll related expenses107 93 
Accrued income taxes66 42 
Short-term operating lease liabilities448 430 
Short-term debt169 167 
Accrued expenses and other current liabilities309 241 
Total current liabilities1,594 1,401 
Long-term operating lease liabilities1,724 1,758 
Deferred tax liabilities444 465 
Long-term debt1,243 2,012 
Other long-term liabilities405 142 
Total liabilities5,410 5,778 
Commitments and contingencies
Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized; 218,624,581 shares issued and 150,682,036 outstanding at December 26, 2020; 217,320,010 shares issued and 149,425,612 outstanding at March 28, 2020
  
Treasury shares, at cost (67,942,545 shares at December 26, 2020 and 67,894,398 shares at March 28, 2020)
(3,326)(3,325)
Additional paid-in capital1,138 1,085 
Accumulated other comprehensive income91 75 
Retained earnings4,453 4,332 
Total shareholders’ equity of Capri2,356 2,167 
Noncontrolling interest(1)1 
Total shareholders’ equity2,355 2,168 
Total liabilities and shareholders’ equity$7,765 $7,946 
See accompanying notes to consolidated financial statements.
3


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In millions, except share and per share data)
(Unaudited)
 Three Months EndedNine Months Ended
 December 26,
2020
December 28,
2019
December 26,
2020
December 28,
2019
Total revenue$1,302 $1,571 $2,863 $4,359 
Cost of goods sold454 639 1,003 1,719 
Gross profit
848 932 1,860 2,640 
Selling, general and administrative expenses538 630 1,414 1,851 
Depreciation and amortization52 63 160 188 
Impairment of assets90 19 110 220 
Restructuring and other charges1 15 18 37 
Total operating expenses681 727 1,702 2,296 
Income from operations167 205 158 344 
Other income, net(3)(1)(4)(4)
Interest expense, net10 3 39 19 
Foreign currency (gain) loss(13)(2)(16)4 
Income before provision for income taxes173 205 139 325 
(Benefit from) provision for income taxes(5)(4)20 (2)
Net income178 209 119 327 
Less: Net loss attributable to noncontrolling interest(1)(1)(2)(1)
Net income attributable to Capri$179 $210 $121 $328 
Weighted average ordinary shares outstanding:
Basic150,661,252 150,826,196 150,236,612 151,159,423 
Diluted151,958,057 152,154,372 151,417,457 152,354,936 
Net income per ordinary share attributable to Capri:
Basic$1.19 $1.39 $0.80 $2.17 
Diluted$1.18 $1.38 $0.80 $2.15 
Statements of Comprehensive Income:
Net income$178 $209 $119 $327 
Foreign currency translation adjustments(27)78 26 40 
Net loss on derivatives(7)(4)(10)(3)
Comprehensive income144 283 135 364 
Less: Net loss attributable to noncontrolling interest(1)(1)(2)(1)
Comprehensive income attributable to Capri$145 $284 $137 $365 

See accompanying notes to consolidated financial statements.
4


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data which is in thousands)
(Unaudited)
 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at September 26, 2020218,563 $ $1,126 (67,942)$(3,326)$125 $4,274 $2,199 $ $2,199 
Net income (loss)— — — — — — 179 179 (1)178 
Other comprehensive loss— — — — — (34)— (34) (34)
Total comprehensive income (loss)— — — — — — — 145 (1)144 
Vesting of restricted awards, net of forfeitures
41 — — — — — — — — — 
Exercise of employee share options
21 — — — — — — — — — 
Share based compensation expense— — 12 — — — — 12 — 12 
Repurchase of common stock— — — (1)— — — — —  
Balance at December 26, 2020218,625 $ $1,138 (67,943)$(3,326)$91 $4,453 $2,356 $(1)$2,355 

 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated
Other
Comprehensive
Income
Retained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at March 28, 2020217,320 $ $1,085 (67,894)$(3,325)$75 $4,332 $2,167 $1 $2,168 
Net income (loss)— — — — — — 121 121 (2)119 
Other comprehensive income
— — — — — 16 — 16  16 
Total comprehensive income (loss)— — — — — — — 137 (2)135 
Vesting of restricted awards, net of forfeitures
1,037 — — — — — — — — — 
Exercise of employee share options
268 — — — — — — — — — 
Share based compensation expense— — 53 — — — — 53 — 53 
Repurchase of common stock— — — (49)(1)— — (1)— (1)
Balance at December 26, 2020218,625 $ $1,138 (67,943)$(3,326)$91 $4,453 $2,356 $(1)$2,355 




















5


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Continued)
(In millions, except share data which is in thousands)
(Unaudited) 

 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated
Other
Comprehensive (Loss) Income
Retained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at September 28, 2019216,815 $ $1,060 (65,182)$(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 — — — — — — — — — 
Share based compensation expense— — 16 — — — — 16 — 16 
Repurchase of common stock— — — (2,712)(100)— — (100)— (100)
Adjustment of redeemable non-controlling interests to redemption value— — 4 — — — — 4 — 4 
Balance at December 28, 2019216,907 $ $1,080 (67,894)$(3,325)$(29)$4,883 $2,609 $2 $2,611 

 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated
Other
Comprehensive (Loss) Income
Retained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
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 (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 — — — — — — — — — 
Share based compensation expense— — 65 — — — — 65 — 65 
Repurchase of common stock— — — (2,775)(102)— — (102)— (102)
Adjustment of redeemable non-controlling interests to redemption value— — 4 — — — — 4 — 4 
Balance at December 28, 2019216,907 $ $1,080 (67,894)$(3,325)$(29)$4,883 $2,609 $2 $2,611 

See accompanying notes to consolidated financial statements.
6


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 Nine Months Ended
 December 26,
2020
December 28,
2019
Cash flows from operating activities
Net income$119 $327 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization160 188 
Share based compensation expense53 65 
Deferred income taxes(37) 
Impairment of assets113 220 
Changes to lease related balances, net(86)(47)
Tax deficit on exercise of share options5 2 
Amortization of deferred financing costs4 6 
Foreign currency (gains) losses(16)4 
Other non-cash charges(5)1 
Change in assets and liabilities:
Receivables, net(43)11 
Inventories, net99 (8)
Prepaid expenses and other current assets67 (72)
Accounts payable34 6 
Accrued expenses and other current liabilities80 24 
Other long-term assets and liabilities(2)25 
Net cash provided by operating activities545 752 
Cash flows from investing activities
Capital expenditures(85)(164)
Cash paid for asset acquisitions(12)(1)
Settlement of net investment hedges 32 
Net cash used in investing activities(97)(133)
Cash flows from financing activities
Debt borrowings2,276 1,844 
Debt repayments(3,074)(2,296)
Debt issuance costs(4) 
Repurchase of common stock(1)(102)
Net cash used in financing activities(803)(554)
Effect of exchange rate changes on cash and cash equivalents(8) 
Net (decrease) increase in cash and cash equivalents(363)65 
Beginning of period592 172 
End of period$229 $237 
Supplemental disclosures of cash flow information
Cash paid for interest$46 $67 
Net cash (received) paid for income taxes$(33)$75 
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures$18 $27 
See accompanying notes to consolidated financial statements.
7


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 operates in three reportable segments: Versace, Jimmy Choo and Michael Kors. See Note 16 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 26, 2020 and for the three and nine months ended December 26, 2020 and December 28, 2019 are unaudited. The Company consolidates the results of its Versace business on a one-month lag, as consistent with prior periods. 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 28, 2020, as filed with the Securities and Exchange Commission on 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 and the term “Fiscal Year” or “Fiscal” refers to that 52-week or 53-week period. The results for the three and nine months ended December 26, 2020 and December 28, 2019 are based on 13-week and 39-week periods, respectively. The Company’s Fiscal Year 2021 is a 52-week period ending March 27, 2021.

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 credit losses, estimates of inventory net realizable value, the valuation of share-based compensation, the valuation of deferred taxes and the valuation of goodwill, intangible assets and property and equipment, along with the estimated useful lives assigned to these assets. Actual results could differ from those estimates.
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 primarily consist of finished goods with the exception of raw materials and work in process inventory. The combined total of raw materials and work in process inventory recorded on the Company’s consolidated balance sheets was $25 million and $27 million, respectively, as of December 26, 2020 and March 28, 2020.
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The net realizable value of the Company’s inventory as of December 26, 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 contracts to hedge the Company’s cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation.
The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including a description of the hedged item and the hedging instrument and the risk being hedged. The changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income until the hedged item affects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive income 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) in the Company’s consolidated statements of operations and comprehensive income. The Company classifies cash flows relating to its forward foreign currency exchange contracts related to 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, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” 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 income on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense in the Company’s statement of operations and comprehensive income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the 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 income (loss) 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.
9



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 November 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):
Nine Months EndedNine Months Ended
December 26, 2020December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases$341 
(1)
$372 

(1)Operating cash flows used in operating leases for the nine months ended December 26, 2020 exclude $41 million of rent payments that have been deferred due to the COVID-19 pandemic.
During the three and nine months ended December 26, 2020, the Company recorded sublease income of $1 million and $4 million, respectively, and $2 million and $5 million, respectively, for the three and nine months ended December 28, 2019, within selling, general and administrative expenses. During the three and nine months ended December 26, 2020, the Company recorded $13 million and $37 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as a reduction to variable lease expense within selling, general and administrative expenses.
10


Net Income per Share
The Company’s basic net income per ordinary share is calculated by dividing net income by the weighted average number of ordinary shares outstanding during the period. Diluted net income per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units ("RSUs"), were exercised or converted into ordinary shares. These potentially dilutive securities are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods. Performance-based RSUs are included as diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.
The components of the calculation of basic net income per ordinary share and diluted net income per ordinary share are as follows (in millions, except share and per share data):
 Three Months EndedNine Months Ended
December 26,
2020
December 28,
2019
December 26,
2020
December 28,
2019
Numerator:
Net income attributable to Capri$179 $210 $121 $328 
Denominator:
Basic weighted average shares150,661,252 150,826,196 150,236,612 151,159,423 
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units
1,296,805 1,328,176 1,180,845 1,195,513 
Diluted weighted average shares151,958,057 152,154,372 151,417,457 152,354,936 
Basic net income per share (1)
$1.19 $1.39 $0.80 $2.17 
Diluted net income per share (1)
$1.18 $1.38 $0.80 $2.15 

(1)Basic and diluted net income per share are calculated using unrounded numbers.
During the three and nine months ended December 26, 2020, share equivalents of 4,269,343 shares and 4,540,029 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect. Share equivalents of 2,264,959 shares and 3,487,241 shares, respectively, have been excluded from the above calculations for the three and nine months ended December 28, 2019.
See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020 for a complete disclosure of the Company’s significant accounting policies.
Recently Adopted Accounting Pronouncements
Measurement of Credit Losses on Financial Instruments
On March 29, 2020, the Company adopted ASU 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 entities to recognize an allowance for credit losses using a 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 material impact on the Company’s consolidated financial statements.
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 provides guidance related to the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs
11


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

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 collectibility of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services.
The Company sells its products through three primary channels of distribution: retail, wholesale and licensing. Within the retail and wholesale channels, substantially all of the Company’s revenues consist of sales of products that represent a single performance obligation, where control transfers at a point in time to the customer. For licensing arrangements, royalty and advertising revenue is recognized over time based on access provided to the Company’s trademarks.
Retail
The Company generates sales through directly operated stores and e-commerce sites throughout the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia, including Australia.
Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability 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”, of $13 million and $11 million as of December 26, 2020 and March 28, 2020, respectively, is included within 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 $2 million as of both December 26, 2020 and March 28, 2020, is recorded 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
12


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, certain guaranteed minimums for Versace are multi-year based. As of December 26, 2020, contractually guaranteed minimum fees from the Company’s license agreements expected to be recognized as revenue during future periods were as follows (in millions):
Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2021$7 
Fiscal 202229 
Fiscal 202325 
Fiscal 202422 
Fiscal 202518 
Fiscal 2026 and thereafter87 
 Total
$188 
Sales Returns
The refund liability recorded as of December 26, 2020 and March 28, 2020 was $55 million and $37 million, respectively, and the related asset for the right to recover returned product as of December 26, 2020 and March 28, 2020 was $17 million and $14 million, respectively.
Contract Balances
Total contract liabilities were $16 million and $22 million as of December 26, 2020 and March 28, 2020, respectively. For the three and nine months ended December 26, 2020, the Company recognized $2 million and $7 million, respectively, in revenue which related to contract liabilities that existed at March 28, 2020. For the three and nine months ended December 28, 2019, the Company recognized $2 million and $19 million, respectively, in revenue which related to contract liabilities that existed at March 30, 2019. There were no material contract assets recorded as of December 26, 2020 and March 28, 2020.
There were no changes in historical variable consideration estimates that were materially different from actual results.
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Disaggregation of Revenue
The following table presents the Company’s segment revenue disaggregated by geographic location (in millions):
 Three Months EndedNine Months Ended
 December 26,
2020
December 28,
2019
December 26,
2020
December 28,
2019
Versace revenue - the Americas$57 $41 $132 $133 
Versace revenue - EMEA76 98 183 311 
Versace revenue - Asia62 56 168 186 
 Total Versace
195 195 483 630 
Jimmy Choo revenue - the Americas32 34 71 85 
Jimmy Choo revenue - EMEA40 85 102 228