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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 
Commission file number: 1-16153
Tapestry, Inc.
(Exact name of registrant as specified in its charter)
Maryland 52-2242751
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

10 Hudson Yards, New York, NY 10001
(Address of principal executive offices); (Zip Code) 
(212) 946-8400
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on which Registered
Common Stock, par value $.01 per shareTPRNew 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 No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition 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 7(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
On January 22, 2021, the Registrant had 277,838,123 outstanding shares of common stock, which is the Registrant’s only class of common stock.



TAPESTRY, INC.
INDEX
 
  Page Number
PART I – FINANCIAL INFORMATION (unaudited)
   
ITEM 1.Financial Statements: 
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
PART II – OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 4.
ITEM 6.
 

 



In this Form 10-Q, references to “we,” “our,” “us,” "Tapestry" and the “Company” refer to Tapestry, Inc., including consolidated subsidiaries. References to "Coach," "Kate Spade," "kate spade new york" or "Stuart Weitzman" refer only to the referenced brand.
SPECIAL NOTE ON FORWARD-LOOKING INFORMATION
This document, and the documents incorporated by reference in this document, in our press releases and in oral statements made from time to time by us or on our behalf, contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and are based on management’s current expectations, that involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. These forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "may," "will," "should," "expect," "confidence," "trends," "intend," "estimate," "on track," "are positioned to," "on course," "opportunity," "continue," "project," "guidance," "target," "forecast," "anticipated," "plan," "potential," the negative of these terms or comparable terms. The Company's actual results could differ materially from the results contemplated by these forward-looking statements and are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from current expectations due to a number of important factors, including but not limited to: (i) the impact of the novel coronavirus ("Covid-19") global pandemic on our business and financial results; (ii) our ability to successfully execute our multi-year growth agenda under our Acceleration Program; (iii) the impact of economic conditions; (iv) our ability to control costs; (v) our exposure to international risks, including currency fluctuations, changes in economic or political conditions in the markets where we sell or source our products and increased regulation impacting our global sourcing activities; (vi) the risk of cyber security threats and privacy or data security breaches; (vii) the effect of existing and new competition in the marketplace; (viii) our ability to retain the value of our brands and to respond to changing fashion and retail trends in a timely manner; (ix) the effect of seasonal and quarterly fluctuations on our sales or operating results; (x) our ability to protect against infringement of our trademarks and other proprietary rights; (xi) the impact of tax and other legislation; (xii) our ability to achieve intended benefits, cost savings and synergies from acquisitions; (xiii) the risks associated with potential changes to international trade agreements and the imposition of additional duties on importing our products; (xiv) the impact of pending and potential future legal proceedings, (xv) the risks associated with climate change and other corporate responsibility issues; and (xvi) such other risk factors as set forth in Part II, Item 1A. "Risk Factors". The Company assumes no obligation to revise or update any such forward-looking statements for any reason, except as required by law.
 WHERE YOU CAN FIND MORE INFORMATION
Tapestry's quarterly financial results and other important information are available by calling the Investor Relations Department at (212) 629-2618.
Tapestry maintains its website at www.tapestry.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the SEC.



 





TAPESTRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

December 26,
2020
June 27,
2020
(millions)
(unaudited)
ASSETS  
Current Assets:  
Cash and cash equivalents$1,642.6 $1,426.3 
Short-term investments9.2 8.1 
Trade accounts receivable, less allowances for credit losses of $4.1 and $15.9, respectively
331.7 193.3 
Inventories631.9 736.9 
Prepaid expenses67.8 57.5 
Income tax receivable104.6 46.0 
Other current assets89.4 85.0 
Total current assets2,877.2 2,553.1 
Property and equipment, net730.2 775.2 
Operating lease right-of-use assets1,674.9 1,757.0 
Goodwill1,317.1 1,301.1 
Intangible assets1,376.3 1,379.4 
Deferred income taxes61.1 55.9 
Other assets113.6 102.5 
Total assets$8,150.4 $7,924.2 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current Liabilities:  
Accounts payable$386.3 $130.8 
Accrued liabilities559.1 410.5 
Current portion of operating lease liabilities360.4 388.8 
Accrued income taxes27.3 100.5 
Current debt200.0 711.5 
Total current liabilities1,533.1 1,742.1 
Long-term debt1,589.3 1,587.9 
Long-term operating lease liabilities1,658.9 1,799.8 
Deferred income taxes113.0 155.1 
Long-term income taxes payable135.5 144.0 
Other liabilities229.9 218.9 
Total liabilities5,259.7 5,647.8 
See Note 16 on commitments and contingencies
Stockholders' Equity:
  
Preferred stock: (authorized 25.0 million shares; $0.01 par value per share) none issued
  
Common stock: (authorized 1.0 billion shares; $0.01 par value per share) issued and outstanding - 277.8 million and 276.2 million shares, respectively
2.8 2.8 
Additional paid-in-capital
3,388.3 3,358.5 
Retained earnings (accumulated deficit)(450.0)(992.7)
Accumulated other comprehensive income (loss)(50.4)(92.2)
Total stockholders' equity2,890.7 2,276.4 
Total liabilities and stockholders' equity$8,150.4 $7,924.2 
See accompanying Notes.
1


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months EndedSix Months Ended
December 26,
2020
December 28,
2019
December 26,
2020
December 28,
2019
(millions, except per share data)(millions, except per share data)
(unaudited)(unaudited)
Net sales$1,685.4 $1,816.0 $2,857.6 $3,173.9 
Cost of sales511.7 606.3 853.7 1,049.7 
Gross profit1,173.7 1,209.7 2,003.9 2,124.2 
Selling, general and administrative expenses784.3 846.6 1,412.3 1,709.5 
Operating income (loss)389.4 363.1 591.6 414.7 
Interest expense, net18.7 14.0 38.1 26.3 
Other expense (income)(3.6)(5.9)(6.2)6.8 
Income (loss) before provision for income taxes374.3 355.0 559.7 381.6 
Provision for income taxes63.3 56.2 17.0 62.8 
Net income (loss)$311.0 $298.8 $542.7 $318.8 
Net income (loss) per share:    
Basic$1.12 $1.08 $1.96 $1.14 
Diluted$1.11 $1.08 $1.94 $1.13 
Shares used in computing net income (loss) per share:    
Basic277.5 276.0 277.1 280.8 
Diluted281.0 276.7 279.4 281.8 
Cash dividends declared per common share$ $0.3375 $ $0.6750 
 
See accompanying Notes.
 
2


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
 Three Months EndedSix Months Ended
December 26,
2020
December 28,
2019
December 26,
2020
December 28,
2019
(millions)(millions)
(unaudited)(unaudited)
Net income (loss)$311.0 $298.8 $542.7 $318.8 
Other comprehensive income (loss), net of tax:    
Unrealized gains (losses) on cash flow hedging derivatives, net(1.8)2.6 (5.3)5.3 
Foreign currency translation adjustments27.9 8.4 47.1 (5.4)
Other   (1.7)
Other comprehensive income (loss), net of tax26.1 11.0 41.8 (1.8)
Comprehensive income$337.1 $309.8 $584.5 $317.0 
 
See accompanying Notes.

3


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended
December 26,
2020
December 28,
2019
(millions)
(unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES  
Net income (loss)$542.7 $318.8 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization102.4 125.0 
Provision for bad debt(1.7)4.2 
Share-based compensation28.9 33.8 
Acceleration Program charges(0.9) 
Organization-related and integration activities 15.3 
Impairment charges  75.6 
Changes to lease related balances, net(86.1)9.4 
Deferred income taxes(41.2)(5.8)
Gain on sale of building(13.2) 
Gain on deferred purchase price(12.5) 
Other non-cash charges, net8.3 2.3 
Changes in operating assets and liabilities:  
Trade accounts receivable(143.2)(78.7)
Inventories144.3 19.5 
Accounts payable253.8 19.3 
Accrued liabilities 54.4 63.3 
Other liabilities(12.9)(12.6)
Other assets(76.8)(27.7)
Net cash provided by (used in) operating activities746.3 561.7 
CASH FLOWS USED IN INVESTING ACTIVITIES  
Proceeds from sale of building23.9  
Purchases of investments(0.2)(157.0)
Proceeds from maturities and sales of investments0.2 151.3 
Purchases of property and equipment(49.7)(122.2)
Net cash used in investing activities(25.8)(127.9)
CASH FLOWS USED IN FINANCING ACTIVITIES  
Dividend payments (194.0)
Repurchase of common stock (300.0)
Proceeds from share-based awards6.2 1.7 
Repayment of short-term debt(11.5) 
Repayment of revolving credit facility(500.0) 
Payment of deferred purchase price(4.8) 
Taxes paid to net settle share-based awards(8.4)(13.8)
Payments of finance lease liabilities(0.4)(0.4)
Net cash used in financing activities(518.9)(506.5)
Effect of exchange rate changes on cash and cash equivalents14.7 0.4 
Net decrease in cash and cash equivalents216.3 (72.3)
Cash and cash equivalents at beginning of period1,426.3 969.2 
Cash and cash equivalents at end of period$1,642.6 $896.9 
Supplemental information:
Cash paid for income taxes, net$191.8 $54.8 
Cash paid for interest$37.2 $31.7 
Noncash investing activity - property and equipment obligations$19.7 $34.2 

See accompanying Notes.
4

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements
(Unaudited)


1. NATURE OF OPERATIONS
Tapestry, Inc. (the "Company") is a leading New York-based house of modern luxury accessories and lifestyle brands. Tapestry owns the Coach, Kate Spade and Stuart Weitzman brands. The Company’s primary product offerings, manufactured by third-party suppliers, include women’s and men’s bags, small leather goods, footwear, ready-to-wear including outerwear, watches, weekend and travel accessories, scarves, eyewear, fragrance, jewelry and other lifestyle products.
The Coach segment includes global sales of Coach products to customers through Coach operated stores, including the Internet and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors.
The Kate Spade segment includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors.
The Stuart Weitzman segment includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors.
2. BASIS OF PRESENTATION AND ORGANIZATION
Interim Financial Statements
These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and are unaudited. In the opinion of management, such condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position, results of operations, comprehensive income (loss) and cash flows of the Company for the interim periods presented. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") have been condensed or omitted from this report as is permitted by the SEC's rules and regulations. However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading. This report should be read in conjunction with the audited consolidated financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended June 27, 2020 ("fiscal 2020") and other filings filed with the SEC.
The results of operations, cash flows and comprehensive income for the six months ended December 26, 2020 are not necessarily indicative of results to be expected for the entire fiscal year, which will end on July 3, 2021 ("fiscal 2021"). 
Fiscal Periods
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30. Fiscal 2021 will be a 53-week period. Fiscal 2020, ended on June 27, 2020, was a 52-week period. The second quarter of fiscal 2021 ended on December 26, 2020 and the second quarter of fiscal 2020 ended on December 28, 2019, both of which were 13-week periods.
Covid-19 Pandemic
The outbreak of a novel strain of coronavirus continues to impact a significant majority of the regions in which we operate. In March 2020, the outbreak was labeled a global pandemic by the World Health Organization. National, state and local governments responded to the Covid-19 pandemic in a variety of ways, including, but not limited to, declaring states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing), requiring individuals to stay at home, and in most cases, ordering non-essential businesses to close or limit operations. The Company had temporarily closed the majority of its directly operated stores globally for some period of time to help reduce the spread of Covid-19 during fiscal 2020. The vast majority of the Company's stores re-opened for either in-store or pick-up service and have continued to operate since then, however, some store locations have experienced temporary re-closures or are operating under tighter restrictions in compliance with local government regulation. Many of the Company's wholesale and licensing partners also closed their bricks and mortar stores as required by government orders during the third and fourth quarters of fiscal 2020, and while the majority of stores have reopened, they have also been subject to temporary re-closures and tighter capacity restrictions operating in compliance with the rules of certain local governments.
The global Covid-19 pandemic is continuously evolving and the extent to which this impacts the Company - including unforeseen increased costs to the Company's business - will depend on future developments, which are highly uncertain and cannot be predicted, including the ultimate duration, severity and geographic resurgence of the virus and the success of actions to contain the virus, including variants of the novel strain, or treat its impact, among others. As the full magnitude of the effects on the Company's business is difficult to predict at this time, the Covid-19 pandemic has and is expected to continue to have a
5

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
material adverse impact on the Company's business, financial condition, results of operations and cash flows for the foreseeable future. The Company believes that cash flows from operations, access to the credit and capital markets and our credit lines, on-hand cash and cash equivalents and our investments provide adequate funds to support our operating, capital, and debt service requirements for fiscal 2021 and beyond. There can be no assurance, however, that any such capital will be available to the Company on acceptable terms or at all. The Company could experience other potential adverse impacts as a result of the Covid-19 pandemic, including, but not limited to, further charges from adjustments to the carrying amount of goodwill and other intangible assets, long-lived asset impairment charges, reserves for uncollectible accounts receivable and reserves for the realizability of inventory. In addition, the negative impacts of the Covid-19 pandemic could result in the establishment of additional valuation allowances in certain jurisdictions.
In response to the Covid-19 pandemic, the Company took actions to reinforce its liquidity and financial flexibility. Specific actions included: suspending its quarterly dividend and all share repurchases, actively reducing non-essential SG&A expense, reducing its corporate and retail workforce, temporarily reducing corporate compensation, tightly managing inventory and reducing capital expenditures. During the second quarter of fiscal 2021, compensation resumed normal levels.
Furthermore, in fiscal 2020, the Company borrowed $700 million under its $900 million definitive credit agreement, as entered into on October 24, 2019 ("Revolving Credit Facility") as a precautionary measure. Of the $700 million borrowed, $500 million was repaid during the second quarter of fiscal 2021 and the remaining $200 million was repaid on January 25, 2021.
If stores are required to close again for an extended period of time due to a resurgence of increased infections, the Company's liquidity may continue to be negatively impacted and it may need to draw additional funds from our Revolving Credit Facility or seek additional sources of financing, which may or may not be available. On May 19, 2020, the Company entered into Amendment No. 1 (the “Amendment”) to the Revolving Credit Facility, which sets forth the modifications pertaining to the leverage ratio financial covenant required. Refer to Note 12, "Debt" and Note 18, "Subsequent Events", for additional information regarding the Company's outstanding notes payable and applicable amendments.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes thereto. Actual results could differ from estimates in amounts that may be material to the financial statements.
Significant estimates inherent in the preparation of the condensed consolidated financial statements include useful lives and impairments of long-lived tangible and intangible assets; reserves for the realizability of inventory; customer returns, end-of-season markdowns and operational chargebacks; accounting for income taxes (including the impacts of tax legislation) and related uncertain tax positions; accounting for business combinations; the valuation of stock-based compensation awards and related expected forfeiture rates; reserves for restructuring; and reserves for litigation and other contingencies, amongst others.
Share Repurchases
The Company accounts for share repurchases by allocating the repurchase price to common stock and retained earnings. As a result, all repurchased shares are authorized but unissued shares. Under Maryland law, the Company's state of incorporation, there are no treasury shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. Purchases of the Company's common stock are executed through open market purchases, including through a purchase agreement under Rule 10b5-1. The Company may terminate or limit the share repurchase program at any time.
Principles of Consolidation
These unaudited interim condensed consolidated financial statements include the accounts of the Company and all 100% owned and controlled subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
Cash Paid for Interest
Cash paid for interest includes payments related to the Company's debt instruments, as described in Note 12, "Debt", and is disclosed as supplemental information on the Condensed Consolidated Statement of Cash Flows. The amount previously reported as cash paid for interest in the second quarter of fiscal 2020 has been corrected in the current year disclosure.
6

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820)" ("ASU 2018-13"), which is intended to improve the effectiveness of fair value disclosures. The ASU removes or modifies certain disclosure requirements related to fair value information, as well as adds new disclosure requirements for Level 3 fair value measurements. The Company adopted ASU 2018-13 as of the beginning of Fiscal 2021. The adoption of ASU 2018-13 did not have a material impact on the Company's condensed consolidated financial statements and notes thereto.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)" ("ASU 2018-15"), which is intended to clarify the accounting for implementation costs of cloud computing arrangements which are deemed to be a service contract rather than a software license. The Company adopted ASU 2018-15 as of the beginning of Fiscal 2021 on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company's condensed consolidated financial statements and notes thereto.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), and subsequent clarifying updates, which requires companies to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The standard requires upfront recognition of an allowance for credit losses expected to be incurred over an asset's contractual life based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability. The Company adopted ASU 2016-13 as of the beginning of Fiscal 2021 using the modified retrospective basis. The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements and notes thereto.
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.
4. REVENUE
The Company recognizes revenue primarily from sales of the products of its brands through retail and wholesale channels, including the Internet. The Company also generates revenue from royalties related to licensing its trademarks, as well as sales in ancillary channels. In all cases, revenue is recognized upon the transfer of control of the promised products or services to the customer, which may be at a point in time or over time. Control is transferred when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized is the amount of consideration to which the Company expects to be entitled, including estimation of sale terms that may create variability in the consideration. Revenue subject to variability is constrained to an amount which will not result in a significant reversal in future periods when the contingency that creates variability is resolved.
The Company recognizes revenue in its retail stores, including concession shop-in-shops, at the point-of-sale when the customer obtains physical possession of the products. Internet revenue from sales of products ordered through the Company's e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers. Retail and Internet revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience. Payment is due at the point of sale.
Gift cards issued by the Company are recorded as a liability until redeemed by the customer, at which point revenue is recognized. The Company also uses historical information to estimate the amount of gift card balances that will never be redeemed and recognizes that amount as revenue over time in proportion to actual customer redemptions if the Company does not have a legal obligation to remit unredeemed gift cards to any jurisdiction as unclaimed property.
The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases. Payment is generally due 30 to 90 days after shipment. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. Discounts are based on contract terms with the customer, while cooperative advertising allowances and other consideration may be based on contract terms or negotiated on a case-by-case basis. Returns and markdowns generally require approval from the Company and are estimated based on historical trends, current season results and inventory positions at the wholesale locations, current market and economic conditions as well as, in select cases, contractual terms. The Company's historical estimates of these variable amounts have not differed materially from actual results.
7

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
The Company recognizes licensing revenue over time during the contract period in which licensees are granted access to the Company's trademarks. These arrangements require licensees to pay a sales-based royalty and may include a contractually guaranteed minimum royalty amount. Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved. Payments from the customer are generally due quarterly in an amount based on the licensee's sales of goods bearing the licensed trademarks during the period, which may differ from the amount of revenue recorded during the period thereby generating a contract asset or liability. Contract assets and liabilities and contract costs related to the licensing arrangements are immaterial as the licensing business represents approximately 1% of total net sales in the six months ended December 26, 2020.
The Company has elected not to disclose the remaining performance obligations that are unsatisfied as of the end of the period related to contracts with an original duration of one year or less or variable consideration related to sales-based royalty arrangements. There are no other contracts with transaction price allocated to remaining performance obligations other than future minimum royalties as discussed above, which are not material.
Other elections made by the Company include (i) assuming no significant financing component exists for any contract with a duration of one year or less, (ii) accounting for shipping and handling as a fulfillment activity within SG&A expense regardless of the timing of the shipment in relation to the transfer of control and (iii) excluding sales and value added tax from the transaction price.
8

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Disaggregated Net Sales
The following table disaggregates the Company's net sales into geographies that depict how economic factors may impact the revenues and cash flows for the periods presented. Each geography presented includes net sales related to the Company's directly operated channels, global travel retail business and to wholesale customers, including distributors, in locations within the specified geographic area.    
North America
Greater China(1)
Other Asia(2)
Other(3)
Total
(millions)
Three Months Ended December 26, 2020
Coach$742.6 $242.6 $188.0 $52.1 $1,225.3 
Kate Spade303.7 13.4 35.6 22.9 375.6 
Stuart Weitzman41.9 35.6 0.3 6.7 84.5 
Total$1,088.2 $291.6 $223.9 $81.7 $1,685.4 
Three Months Ended December 28, 2019
Coach$780.0 $188.1 $229.4 $72.4 $1,269.9 
Kate Spade348.5 13.6 41.9 26.4 430.4 
Stuart Weitzman62.3 32.7 6.5 14.2 115.7 
Total$1,190.8 $234.4 $277.8 $113.0 $1,816.0 
Six Months Ended December 26, 2020
Coach$1,209.3 $438.8 $350.3 $102.3 $2,100.7 
Kate Spade476.0 27.2 70.0 42.8 616.0 
Stuart Weitzman68.2 53.3 2.8 16.6 140.9 
Total$1,753.5 $519.3 $423.1 $161.7 $2,857.6 
Six Months Ended December 28, 2019
Coach$1,323.7 $347.3 $428.2 $136.6 $2,235.8 
Kate Spade580.4 25.9 84.1 45.5 735.9 
Stuart Weitzman109.0 52.1 11.9 29.2 202.2 
Total$2,013.1 $425.3 $524.2 $211.3 $3,173.9 
(1)    Greater China includes mainland China, Hong Kong SAR, Macao SAR and Taiwan.
(2)    Other Asia includes Japan, Australia, New Zealand, South Korea, Thailand and other countries within Asia.
(3)    Other sales primarily represents sales in Europe, the Middle East and royalties related to licensing.
Deferred Revenue
Deferred revenue results from cash payments received or receivable from customers prior to the transfer of the promised goods or services, and is generally comprised of unredeemed gift cards, net of breakage which has been recognized. Additional deferred revenue may result from sales-based royalty payments received or receivable which exceed the revenue recognized during the contractual period. The balance of such amounts as of December 26, 2020 and June 27, 2020 was $32.0 million and $28.1 million, respectively, which were primarily recorded within Accrued liabilities on the Company's Condensed Consolidated Balance Sheets and are generally expected to be recognized as revenue within a year. For the six months ended December 26, 2020, net sales of $7.6 million were recognized from amounts recorded as deferred revenue as of June 27, 2020. For the six months ended December 28, 2019, net sales of $8.3 million were recognized from amounts recorded as deferred revenue as of June 29, 2019.
9

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
5. INTEGRATION
The Company did not incur integration costs during the three and six months ended December 26, 2020.
During the three and six months ended December 28, 2019, the Company incurred integration costs of $3.9 million and $8.2 million, respectively. The charges recorded in Cost of sales for the three and six months ended December 28, 2019 were $1.5 million and $5.6 million, respectively. Of the amount recorded to Cost of sales, $1.5 million and $4.3 million was recorded in the Stuart Weitzman segment, $0.0 million and $1.2 million was recorded in the Kate Spade segment and $0.0 million and $0.1 million was recorded in the Coach segment, respectively. The charges recorded to SG&A expenses for the three and six months ended December 28, 2019 were $2.4 million and $2.6 million, respectively. Of the amount recorded to SG&A expenses, $1.8 million and $4.0 million was recorded within Corporate, $0.3 million and a reduction of expense of $2.1 million was recorded in the Stuart Weitzman segment, $0.7 million and $0.8 million was recorded in the Kate Spade segment and a reduction of expense of $0.4 million and $0.1 million was recorded in the Coach segment, respectively. Of the total costs of $3.9 million, $1.1 million were non-cash charges related to inventory-related charges, organization-related costs and purchase accounting adjustments. Of the total costs of $8.2 million, $3.9 million were non-cash charges related to inventory-related charges, organization-related costs and purchase accounting adjustments.
A summary of the integration charges for the three and six months ended December 28, 2019 is as follows:
Three Months EndedSix Months Ended
December 28, 2019December 28, 2019
(millions)
Purchase accounting adjustments(1)
$0.2 $0.8 
Inventory-related charges(2)
1.3 4.9 
Other(3)
2.4 2.5 
Total$3.9 $8.2 
(1)    Purchase accounting adjustments primarily relate to the short-term impact of the amortization of fair value adjustments.
(2)    Inventory-related charges primarily relate to inventory reserves.
(3)    Other primarily relates to share-based compensation, severance charges, professional fees and asset write-offs.
6. RESTRUCTURING ACTIVITIES
Acceleration Program
The Company has implemented a strategic growth plan after undergoing a review of its business under its multi-year growth agenda. This multi-faceted, multi-year strategic growth plan (the "Acceleration Program") reflects: (i) actions to streamline the Company's organization; (ii) select store closures as the Company optimizes its fleet (including store closure costs incurred as the Company exits certain regions in which it currently operates); and (iii) professional fees and compensation costs incurred as a result of the development and execution of the Company's comprehensive strategic initiatives aimed at increasing profitability. Under the Acceleration Program, the Company expects to incur total pre-tax charges of approximately $185 - $200 million. The Acceleration Program is expected to be substantially complete by the end of fiscal 2022.
Under the Acceleration Program, the Company incurred charges of $21.7 million and $48.3 million during the three and six months ended December 26, 2020, respectively, all of which was recorded within SG&A expenses. Of the $21.7 million and $48.3 million recorded within SG&A expenses, $15.8 million and $33.1 million was recorded within Corporate, $5.8 million and $16.5 million was recorded within the Coach segment, $2.4 million and $3.4 million was recorded within the Kate Spade segment and a reduction of expense of $2.3 million and $4.7 million was recorded within the Stuart Weitzman segment, respectively. A summary of charges and related liabilities under the Acceleration Program is as follows:
10

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Organization-Related(1)
Store Closure(2)
Other(3)
Total
(millions)
Fiscal 2020 charges$44.7 $32.3 $10.0 $87.0 
Cash payments(15.8)(11.0)(7.1)(33.9)
Non-cash charges(4.0)(20.8) (24.8)
Liability balance as of June 27, 2020$24.9 $0.5 $2.9 $28.3 
Fiscal 2021 charges$15.5 $2.0 $30.8 $48.3 
Cash payments(34.8)(6.2)(18.3)(59.3)
Non-cash charges 4.1 (3.2)0.9 
Liability balance as of December 26, 2020$5.6 $0.4 $12.2 $18.2 
(1)    Organization-related charges, recorded within SG&A expenses, primarily relates to severance and other related costs.
(2)    Store closure charges represent lease termination penalties, removal or modification of lease assets and liabilities, establishing inventory reserves, accelerated depreciation and severance.
(3)    Other charges, recorded within SG&A, primarily relates to professional fees incurred related to the Acceleration Program.
The Company expects to incur approximately $50 - $65 million in additional charges under the Acceleration Program, of which the majority is estimated to be cash and primarily to be incurred during the remainder of fiscal 2021.
11

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The change in the carrying amount of the Company’s goodwill by segment is as follows:
 CoachKate Spade
Stuart Weitzman(1)
Total
(millions)
Balance at June 27, 2020$661.7 $639.4 $ $1,301.1 
Foreign exchange impact12.5 3.5  16.0 
Balance at December 26, 2020$674.2 $642.9 $ $1,317.1 
(1)    Amount is net of accumulated goodwill impairment charges of $210.7 million as of December 26, 2020 and June 27, 2020.
Intangible Assets
Intangible assets consist of the following:
December 26, 2020June 27, 2020
Gross
Carrying
Amount
Accum.
Amort.
NetGross
Carrying
Amount
Accum.
Amort.
Net
(millions)
Intangible assets subject to amortization:
Customer relationships$100.5 $(34.0)$66.5 $100.6 $(31.0)$69.6 
Intangible assets not subject to amortization:
Trademarks and trade names1,309.8  1,309.8 1,309.8 — 1,309.8 
Total intangible assets$1,410.3 $(34.0)$1,376.3 $1,410.4 $(31.0)$1,379.4 
As of December 26, 2020, the expected amortization expense for intangible assets is as follows:
 Amortization Expense
(millions)
Remainder of fiscal 2021$3.2 
Fiscal 20226.5 
Fiscal 20236.5 
Fiscal 20246.5 
Fiscal 20256.5 
Fiscal 20266.5 
Fiscal 2027 and thereafter30.8 
Total$66.5 
The expected amortization expense above reflects remaining useful lives ranging from approximately 9.3 to 11.5 years for customer relationships.
12

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
8. STOCKHOLDERS' EQUITY
A reconciliation of stockholders' equity is presented below:
Shares of
Common
Stock
Common StockAdditional
Paid-in-
Capital
Retained Earnings / (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(millions, except per share data)
Balance at June 29, 2019286.8 $2.9 $3,302.1 $291.6 $(83.2)$3,513.4 
Net income (loss)— — — 20.0 — 20.0 
Other comprehensive income (loss)— — — — (12.8)(12.8)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
1.0 — (14.5)— — (14.5)
Share-based compensation— — 26.8 — — 26.8 
 Repurchase of common stock(11.9)(0.1)— (299.9)— (300.0)
Dividends declared ($0.3375 per share)
— — — (97.1)— (97.1)
Cumulative adjustment from adoption of new accounting standard— — — (48.9)— (48.9)
Balance at September 28, 2019275.9 $2.8 $3,314.4 $(134.3)$(96.0)$3,086.9 
Net income (loss)— — — 298.8 — 298.8 
Other comprehensive income (loss)— — — — 11.0 11.0 
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
0.1 — 2.1 — — 2.1 
Share-based compensation— — 16.8 — — 16.8 
Dividends declared ($0.3375 per share)
— — — (93.2)— (93.2)
Balance at December 28, 2019276.0 $2.8 $3,333.3 $71.3 $(85.0)$3,322.4 
Shares of
Common
Stock
Common StockAdditional
Paid-in-
Capital
Retained Earnings / (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(millions, except per share data)
Balance at June 27, 2020276.2 $2.8 $3,358.5 $(992.7)$(92.2)$2,276.4 
Net income (loss)   231.7  231.7 
Other comprehensive income (loss)    15.7 15.7 
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
1.2  (8.3)  (8.3)
Share-based compensation  14.6   14.6 
Balance at September 26, 2020277.4 $2.8 $3,364.8 $(761.0)$(76.5)$2,530.1 
Net income (loss)   311.0  311.0 
Other comprehensive income (loss)    26.1 26.1 
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes
0.4  6.1   6.1 
Share-based compensation  17.4   17.4 
Balance at December 26, 2020277.8 $2.8 $3,388.3 $(450.0)$(50.4)$2,890.7 
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TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
The components of accumulated other comprehensive income (loss) ("AOCI"), as of the dates indicated, are as follows:
Unrealized Gains (Losses) on Cash
Flow
Hedging Derivatives(1)
Unrealized Gains
(Losses) on Available-
for-Sale Investments
Cumulative
Translation
Adjustment
Other(2)
Total
(millions)
Balances at June 29, 2019$(4.5)$(0.5)$(79.9)$1.7 $(83.2)
Other comprehensive income (loss) before reclassifications
3.7  (5.4) (1.7)
Less: amounts reclassified from accumulated other comprehensive income to earnings
(1.6)  1.7 0.1 
Net current-period other comprehensive income (loss)5.3  (5.4)(1.7)(1.8)
Balances at December 28, 2019$0.8 $(0.5)$(85.3)$ $(85.0)
Balances at June 27, 2020$1.1 $