UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 2019June 27, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-13057
Ralph Lauren Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-2622036
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
650 Madison Avenue, 10022
New York,New York (Zip Code)
(Address of principal executive offices)  
(212318-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Class A Common Stock, $.01 par valueRLNew 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, 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 Exchange Act). Yes No
At JanuaryJuly 31, 2020, 48,861,81548,163,405 shares of the registrant's Class A common stock, $.01 par value, and 24,881,276 shares of the registrant's Class B common stock, $.01 par value, were outstanding.






  


RALPH LAUREN CORPORATION
INDEX
 
 Page
 
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 6.
   
   





1 


RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 December 28,
2019
 March 30,
2019
 June 27,
2020
 March 28,
2020
 (millions) (millions)
ASSETS
Current assets:        
Cash and cash equivalents $1,079.9
 $584.1
 $2,451.3
 $1,620.4
Short-term investments 828.5
 1,403.4
 259.3
 495.9
Accounts receivable, net of allowances of $201.5 million and $192.2 million 349.4
 398.1
Accounts receivable, net of allowances of $239.9 million and $276.2 million 108.7
 277.1
Inventories 904.6
 817.8
 773.2
 736.2
Income tax receivable 32.3
 32.1
 63.9
 84.8
Prepaid expenses and other current assets 254.2
 359.3
 200.6
 160.8
Total current assets 3,448.9
 3,594.8
 3,857.0
 3,375.2
Property and equipment, net 1,028.2
 1,039.2
 945.8
 979.5
Operating lease right-of-use assets 1,573.4
 
 1,464.1
 1,511.6
Deferred tax assets 240.6
 67.0
 309.5
 245.2
Goodwill 917.1
 919.6
 921.9
 915.5
Intangible assets, net 146.2
 163.7
 136.1
 141.0
Other non-current assets 91.5
 158.5
 106.0
 111.9
Total assets $7,445.9
 $5,942.8
 $7,740.4
 $7,279.9
LIABILITIES AND EQUITY
Current liabilities:        
Short-term debt $
 $475.0
Current portion of long-term debt $298.1
 $
 299.9
 299.6
Accounts payable 267.6
 202.3
 144.2
 246.8
Income tax payable 69.1
 29.4
 70.9
 65.1
Current operating lease liabilities 287.5
 
 314.7
 288.4
Accrued expenses and other current liabilities 853.1
 968.4
 657.2
 717.1
Total current liabilities 1,775.4
 1,200.1
 1,486.9
 2,092.0
Long-term debt 396.3
 689.1
 1,630.1
 396.4
Long-term operating lease liabilities 1,637.5
 
 1,517.7
 1,568.3
Income tax payable 132.7
 146.7
 132.7
 132.7
Non-current liability for unrecognized tax benefits 70.6
 78.8
 91.7
 88.9
Other non-current liabilities 316.9
 540.9
 325.8
 308.5
Commitments and contingencies (Note 14) 

 

Commitments and contingencies (Note 13) 

 

Total liabilities 4,329.4
 2,655.6
 5,184.9
 4,586.8
Equity:        
Class A common stock, par value $.01 per share; 104.8 million and 102.9 million shares issued; 48.8 million and 52.2 million shares outstanding 1.0
 1.0
Class B common stock, par value $.01 per share; 24.9 million issued and outstanding; 25.9 million shares issued and outstanding 0.3
 0.3
Class A common stock, par value $.01 per share; 106.0 million and 104.9 million shares issued; 48.2 million and 47.6 million shares outstanding 1.0
 1.0
Class B common stock, par value $.01 per share; 24.9 million shares issued and outstanding 0.3
 0.3
Additional paid-in-capital 2,566.7
 2,493.8
 2,609.5
 2,594.4
Retained earnings 6,292.8
 5,979.1
 5,866.3
 5,994.0
Treasury stock, Class A, at cost; 56.0 million and 50.7 million shares (5,625.7) (5,083.6)
Treasury stock, Class A, at cost; 57.8 million and 57.3 million shares (5,812.3) (5,778.4)
Accumulated other comprehensive loss (118.6) (103.4) (109.3) (118.2)
Total equity 3,116.5
 3,287.2
 2,555.5
 2,693.1
Total liabilities and equity $7,445.9
 $5,942.8
 $7,740.4
 $7,279.9
See accompanying notes.




2 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(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
 (millions, except per share data) (millions, except per share data)
Net revenues $1,750.7
 $1,725.8
 $4,885.7
 $4,807.3
 $487.5
 $1,428.8
Cost of goods sold (661.6) (666.3) (1,826.8) (1,822.8) (138.8) (508.0)
Gross profit 1,089.1
 1,059.5
 3,058.9
 2,984.5
 348.7
 920.8
Selling, general, and administrative expenses (843.3) (823.4) (2,385.3) (2,358.9) (507.6) (746.7)
Impairment of assets (14.4) (2.2) (21.7) (13.3) (2.1) (1.2)
Restructuring and other charges (7.0) (40.1) (51.1) (78.4) (7.0) (29.6)
Total other operating expenses, net (864.7) (865.7) (2,458.1) (2,450.6) (516.7) (777.5)
Operating income 224.4
 193.8
 600.8
 533.9
Operating income (loss) (168.0) 143.3
Interest expense (4.2) (5.2) (12.8) (15.6) (9.6) (4.2)
Interest income 7.3
 9.9
 28.5
 29.5
 2.9
 11.6
Other income (expense), net 2.9
 1.0
 (2.9) (0.6) 2.1
 (4.1)
Income before income taxes 230.4
 199.5
 613.6
 547.2
Income (loss) before income taxes (172.6) 146.6
Income tax benefit (provision) 103.7
 (79.5) 19.7
 (147.9) 44.9
 (29.5)
Net income $334.1
 $120.0
 $633.3
 $399.3
Net income per common share:        
Net income (loss) $(127.7) $117.1
Net income (loss) per common share:    
Basic $4.47
 $1.50
 $8.28
 $4.92
 $(1.75) $1.50
Diluted $4.41
 $1.48
 $8.13
 $4.85
 $(1.75) $1.47
Weighted average common shares outstanding:            
Basic 74.7
 80.2
 76.5
 81.1
 73.1
 78.2
Diluted 75.8
 81.2
 77.9
 82.3
 73.1
 79.9
Dividends declared per share $0.6875
 $0.625
 $2.0625
 $1.875
 $
 $0.6875
See accompanying notes.





3 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
  Three Months Ended Nine Months Ended
  December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
  (millions)
Net income $334.1
 $120.0
 $633.3
 $399.3
Other comprehensive income (loss), net of tax:        
Foreign currency translation gains (losses) 5.5
 (0.3) (10.4) (37.2)
Net gains (losses) on cash flow hedges (8.6) 6.8
 (4.7) 34.3
Net gains (losses) on defined benefit plans (0.1) 
 (0.1) 0.1
Other comprehensive income (loss), net of tax (3.2) 6.5
 (15.2) (2.8)
Total comprehensive income $330.9
 $126.5
 $618.1
 $396.5
  Three Months Ended
  June 27,
2020
 June 29,
2019
  (millions)
Net income (loss) $(127.7) $117.1
Other comprehensive income (loss), net of tax:    
Foreign currency translation gains 13.0
 4.0
Net losses on cash flow hedges (4.0) (9.7)
Net losses on defined benefit plans (0.1) (0.1)
Other comprehensive income (loss), net of tax 8.9
 (5.8)
Total comprehensive income (loss) $(118.8) $111.3
See accompanying notes.




4 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended Three Months Ended
 December 28,
2019
 December 29,
2018
 June 27,
2020
 June 29,
2019
 (millions) (millions)
Cash flows from operating activities:        
Net income $633.3
 $399.3
Adjustments to reconcile net income to net cash provided by operating activities:    
Net income (loss) $(127.7) $117.1
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization expense 201.0
 212.0
 63.7
 66.2
Deferred income tax expense (benefit) (155.7) 13.7
Loss on sale of property 
 11.6
Deferred income tax benefit (66.9) (8.1)
Non-cash stock-based compensation expense 72.9
 65.3
 15.1
 23.0
Non-cash impairment of assets 21.7
 13.3
 2.1
 1.2
Non-cash restructuring-related inventory charges 1.0
 3.1
Other non-cash charges 1.6
 7.6
Bad debt expense (benefit) (16.5) 0.1
Other non-cash benefits 
 (2.0)
Changes in operating assets and liabilities:        
Accounts receivable 46.9
 105.9
 186.3
 108.6
Inventories (90.0) (179.3) (29.0) (165.7)
Prepaid expenses and other current assets (30.4) (75.7) (37.4) (48.8)
Accounts payable and accrued liabilities 56.3
 24.9
 (119.2) 82.9
Income tax receivables and payables 16.1
 82.7
 35.2
 13.3
Deferred income 0.6
 (10.6) 0.3
 1.8
Other balance sheet changes (27.3) 9.3
 23.7
 7.8
Net cash provided by operating activities 748.0
 683.1
Net cash provided by (used in) operating activities (70.3) 197.4
Cash flows from investing activities:        
Capital expenditures (216.0) (149.2) (21.3) (49.4)
Purchases of investments (890.1) (2,627.8) (63.6) (173.5)
Proceeds from sales and maturities of investments 1,510.3
 1,975.2
 301.9
 308.4
Acquisitions and ventures 0.9
 (4.5) 
 0.9
Proceeds from sale of property 20.8
 20.0
 
 20.8
Settlement of net investment hedges 
 (23.8) 3.7
 
Net cash provided by (used in) investing activities 425.9
 (810.1)
Net cash provided by investing activities 220.7
 107.2
Cash flows from financing activities:        
Repayments of short-term debt 
 (9.9)
Repayments of borrowings on credit facilities (475.0) 
Proceeds from the issuance of long-term debt 
 398.1
 1,241.9
 
Repayments of long-term debt 
 (300.0)
Payments of finance lease obligations (10.6) (14.8) (1.6) (4.9)
Payments of dividends (153.2) (141.6) (49.8) (48.8)
Repurchases of common stock, including shares surrendered for tax withholdings (542.1) (431.9) (33.9) (191.1)
Proceeds from exercise of stock options 
 21.8
Other financing activities (0.9) (2.8) (8.5) 
Net cash used in financing activities (706.8) (481.1)
Net cash provided by (used in) financing activities 673.1
 (244.8)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (4.2) (23.9) 7.6
 5.1
Net increase (decrease) in cash, cash equivalents, and restricted cash 462.9
 (632.0)
Net increase in cash, cash equivalents, and restricted cash 831.1
 64.9
Cash, cash equivalents, and restricted cash at beginning of period 626.5
 1,355.5
 1,629.8
 626.5
Cash, cash equivalents, and restricted cash at end of period $1,089.4
 $723.5
 $2,460.9
 $691.4
See accompanying notes.




5 


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
  Three Months Ended December 28, 2019
  
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
    
Retained
Earnings
    
Total
Equity
  Shares Amount   Shares Amount 
AOCI(b)
 
  (millions)
Balance at September 28, 2019 129.7
 $1.3
 $2,544.6
 $6,009.4
 55.1
 $(5,526.3) $(115.4) $2,913.6
Comprehensive income:                
Net income       334.1
        
Other comprehensive loss             (3.2)  
Total comprehensive income               330.9
Dividends declared       (50.7)       (50.7)
Repurchases of common stock         0.9
 (99.4)   (99.4)
Stock-based compensation     22.1
         22.1
Balance at December 28, 2019 129.7
 $1.3
 $2,566.7
 $6,292.8
 56.0
 $(5,625.7) $(118.6) $3,116.5
                 
  Three Months Ended December 29, 2018
  
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
    
Retained
Earnings
    
Total
Equity
  Shares Amount   Shares Amount 
AOCI(b)
 
  (millions)
Balance at September 29, 2018 128.8
 $1.3
 $2,448.0
 $5,925.4
 48.3
 $(4,804.9) $(107.8) $3,462.0
Comprehensive income:                
Net income       120.0
        
Other comprehensive income             6.5
  
Total comprehensive income               126.5
Dividends declared       (49.1)       (49.1)
Repurchases of common stock         1.8
 (208.0)   (208.0)
Stock-based compensation     22.5
         22.5
Balance at December 29, 2018 128.8
 $1.3
 $2,470.5
 $5,996.3
 50.1
 $(5,012.9) $(101.3) $3,353.9
(a)
Includes Class A and Class B common stock.
(b)
Accumulated other comprehensive income (loss).





6


RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
 Three Months Ended June 27, 2020
 
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
 
Retained
Earnings
   
Total
Equity
 Shares Amount Shares Amount 
AOCI(b)
 
 (millions)
Balance at March 28, 2020 129.8
 $1.3
 $2,594.4
 $5,994.0
 57.3
 $(5,778.4) $(118.2) $2,693.1
Comprehensive loss:                
Net loss       (127.7)        
Other comprehensive income             8.9
  
Total comprehensive loss               (118.8)
Dividends declared       
       
Repurchases of common stock         0.5
 (33.9)   (33.9)
Stock-based compensation     15.1
         15.1
Shares issued pursuant to stock-based compensation plans 1.1
 
 
         
Balance at June 27, 2020 130.9
 $1.3
 $2,609.5
 $5,866.3
 57.8
 $(5,812.3) $(109.3) $2,555.5
                
 Nine Months Ended December 28, 2019 Three Months Ended June 29, 2019
 
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
     
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
 
Retained
Earnings
   
Total
Equity
 
Retained
Earnings
   
Total
Equity
 Shares Amount Shares Amount 
AOCI(b)
  Shares Amount Shares Amount 
AOCI(b)
 
 (millions) (millions)
Balance at March 30, 2019 128.8
 $1.3
 $2,493.8
 $5,979.1
 50.7
 $(5,083.6) $(103.4) $3,287.2
 128.8
 $1.3
 $2,493.8
 $5,979.1
 50.7
 $(5,083.6) $(103.4) $3,287.2
Comprehensive income:                                
Net income       633.3
               117.1
        
Other comprehensive loss             (15.2)               (5.8)  
Total comprehensive income               618.1
               111.3
Dividends declared       (155.1)       (155.1)       (53.1)       (53.1)
Repurchases of common stock         5.3
 (542.1)   (542.1)         1.7
 (191.1)   (191.1)
Stock-based compensation     72.9
         72.9
     23.0
         23.0
Shares issued pursuant to stock-based compensation plans 0.9
 
 
         
 0.8
 
 
         
Cumulative adjustments from adoption of new accounting standards (see Note 4)       (164.5)       (164.5)
Balance at December 28, 2019 129.7
 $1.3
 $2,566.7
 $6,292.8
 56.0
 $(5,625.7) $(118.6) $3,116.5
                
 Nine Months Ended December 29, 2018
 
Common Stock(a)
 
Additional
Paid-in
Capital
   
Treasury Stock
at Cost
    
 
Retained
Earnings
   
Total
Equity
 Shares Amount Shares Amount 
AOCI(b)
 
 (millions)
Balance at March 31, 2018 127.9
 $1.3
 $2,383.4
 $5,752.2
 46.6
 $(4,581.0) $(98.5) $3,457.4
Comprehensive income:                
Net income       399.3
        
Other comprehensive loss             (2.8)  
Total comprehensive income               396.5
Dividends declared       (150.1)       (150.1)
Repurchases of common stock         3.5
 (431.9)   (431.9)
Stock-based compensation     65.3
         65.3
Shares issued pursuant to stock-based compensation plans 0.9
 
 21.8
         21.8
Cumulative adjustments from adoption of new accounting standards       (5.1)       (5.1)
Balance at December 29, 2018 128.8
 $1.3
 $2,470.5
 $5,996.3
 50.1
 $(5,012.9) $(101.3) $3,353.9
Cumulative adjustment from adoption of new accounting standards       (164.5)       (164.5)
Balance at June 29, 2019 129.6
 $1.3
 $2,516.8
 $5,878.6
 52.4
 $(5,274.7) $(109.2) $3,012.8
 
(a) 
Includes Class A and Class B common stock. During the ninethree months ended December 28,June 29, 2019, 1.00.5 million shares of Class B common stock were converted into an equal number of shares of Class A common stock pursuant to the terms of the Class B common stock (see Note 15)14).
(b) 
Accumulated other comprehensive income (loss).
See accompanying notes.




76 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data and where otherwise indicated)
(Unaudited)
1.Description of Business
Ralph Lauren Corporation ("RLC") is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, fragrances, and hospitality. RLC's long-standing reputation and distinctive image have been developed across an expanding number of products, brands, sales channels, and international markets. RLC's brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others. RLC and its subsidiaries are collectively referred to herein as the "Company," "we," "us," "our," and "ourselves," unless the context indicates otherwise.
The Company diversifies its business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail, wholesale, and licensing). This allows the Company to maintain a dynamic balance as its operating results do not depend solely on the performance of any single geographic area or channel of distribution. The Company sells directly to consumers through its integrated retail channel, which includes its retail stores, concession-based shop-within-shops, and digital commerce operations around the world. The Company's wholesale sales are made principally to major department stores, and specialty stores, and third-party digital partners around the world, as well as to certain third party-ownedthird-party-owned stores to which the Company has licensed the right to operate in defined geographic territories using its trademarks. In addition, the Company licenses to third parties for specified periods the right to access its various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.
The Company organizes its business into the following 3 reportable segments: North America, Europe, and Asia. In addition to these reportable segments, the Company also has other non-reportable segments. See Note 1817 for further discussion of the Company's segment reporting structure.
2.Basis of Presentation
Interim Financial Statements
These interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") and are unaudited. In the opinion of management, these consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company for the interim periods presented. In addition, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") and the notes thereto 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 Company's Annual Report on Form 10-K filed with the SEC for the fiscal year ended March 30, 201928, 2020 (the "Fiscal 20192020 10-K").
Basis of Consolidation
These unaudited interim consolidated financial statements present the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company, including all entities in which the Company has a controlling financial interest and is determined to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.




7


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Periods
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 20202021 will end on March 28, 202027, 2021 and will be a 52-week period ("Fiscal 20202021"). Fiscal year 20192020 ended on March 30, 201928, 2020 and was also a




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RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

52-week period ("Fiscal 2019"2020"). The thirdfirst quarter of Fiscal 20202021 ended on December 28, 2019June 27, 2020 and was a 13-week period. The thirdfirst quarter of Fiscal 20192020 ended on DecemberJune 29, 20182019 and was also a 13-week period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ materially from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include reserves for bad debt, customer returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances; the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived tangible and intangible assets; fair value measurements; accounting for income taxes and related uncertain tax positions; valuation of stock-based compensation awards and related pre-vesting forfeiture rates; reserves for restructuring activity; and accounting for business combinations, among others.
Reclassifications
Certain reclassifications have been made to prior period financial information in order to conform to the current period's presentation, including a change to the Company's segment reporting structure as further described in Note 18.presentation.
Seasonality of Business
The Company's business is typically affected by seasonal trends, with higher levels of retail sales in its second and third fiscal quarters and higher wholesale sales in its second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping periods impacting its retail business and the timing of seasonal wholesale shipments. As a result of changes in its business, consumer spending patterns, and the macroeconomic environment, including those resulting from disease pandemics and other catastrophic events, historical quarterly operating trends and working capital requirements may not be indicative of the Company's future performance. In addition, fluctuations in sales, operating income (loss), and cash flows in any fiscal quarter may be affected by other events affecting retail sales, such as changes in weather patterns. Accordingly, the Company's operating results and cash flows for the three-month and nine-month periodsperiod ended December 28, 2019June 27, 2020 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2020.2021.
COVID-19 Pandemic
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all major geographies in which the Company operates (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs and reduced pay, which could lower consumers' disposable income levels or willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, the Company has experienced varying degrees of business disruptions and periods of closure of its stores, distribution centers, and corporate facilities, as have the Company's wholesale customers, licensing partners, suppliers, and vendors. During the first quarter of Fiscal 2021, the majority of the Company's stores in key markets were closed for an average of 8 to 10 weeks, resulting in significant adverse impacts to its operating results. Although nearly all of the Company's stores were reopened by the end of the first quarter of Fiscal 2021, the majority are operating at limited hours and




8


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. The Company's wholesale business has also been adversely affected, particularly in North America and Europe, as a result of department store closures and lower traffic and consumer demand.
Throughout the pandemic, the Company's priority has been to ensure the safety and well-being of its employees, consumers, and the communities in which it operates around the world. The Company continues to take into account the guidance of local governments and global health organizations and has implemented new health and safety protocols in its stores, distribution centers, and corporate facilities. The Company has also taken various preemptive actions to preserve cash and strengthen its liquidity position, including:
amending its Global Credit Facility in May 2020 to temporarily waive its leverage ratio requirement (see Note 10);
issuing $1.250 billion of unsecured senior notes in June 2020, the proceeds of which are being used for general corporate purposes (see Note 10);
temporarily suspending its quarterly cash dividend and common stock repurchase program, effective beginning in the first quarter of Fiscal 2021 (see Note 14);
temporarily reducing the base compensation of its executives and senior management team, as well as its Board of Directors, for the first quarter of Fiscal 2021;
temporarily furloughing or reducing work hours for a significant portion of its employees, who nevertheless remain eligible to receive employee benefits during such period;
carefully managing its expense structure across all key areas of spend, including aligning inventory levels with anticipated demand, negotiating rent abatements with certain of its landlords, and postponing non-critical capital build-out and other investments and activities;
pursuing relevant government subsidy programs related to COVID-19 business disruptions; and
improving upon its cash conversion cycle largely driven by its accounts receivable collection efforts and extended vendor payment terms.
The COVID-19 pandemic remains highly volatile and continues to evolve daily. Accordingly, the Company cannot predict for how long and to what extent the pandemic will impact its business operations or the global economy as a whole. The Company will continue to assess its operations location-by-location, taking into account the guidance of local governments and global health organizations to determine when its operations can begin returning to normal levels of business.
3.Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on 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 considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related taxes collected from customers and remitted to government authorities are excluded from revenue.
Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merchandise purchased at the Company's retail stores and concession-based shop-within-shops, or upon receipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale.




9


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gift cards issued to customers by the Company are recorded as a liability until they are redeemed, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions.




9


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is transferred to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Returns and allowances require pre-approval from management and discounts are based on trade terms. Estimates for end-of-season markdown reserves are based on historical trends, actual and forecasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these amounts have not differed materially from actual results.
Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's trademarks (i.e., symbolic intellectual property) and benefit from such access through their sales of licensed products. These arrangements require licensees to pay a sales-based royalty which, for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Company recognizes revenue for sales-based royalty arrangements (including those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the minimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of progress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive in exchange for providing access to its trademarks. As of December 28, 2019,June 27, 2020, contractually-guaranteed minimum royalty amounts expected to be recognized as revenue during future periods were as follows:
 
Contractually-Guaranteed
Minimum Royalties(a)
 
Contractually-Guaranteed
Minimum Royalties(a)
 (millions) (millions)
Remainder of Fiscal 2020 $22.1
Fiscal 2021 117.3
Remainder of Fiscal 2021 $56.7
Fiscal 2022 78.9
 67.3
Fiscal 2023 43.4
 43.6
Fiscal 2024 and thereafter 26.1
Fiscal 2024 26.6
Fiscal 2025 and thereafter 1.1
Total $287.8
 $195.3

 
(a) 
Amounts presented do not contemplate anticipated contract renewals or royalties earned in excess of contractually guaranteedthe contractually-guaranteed minimums.




10


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Disaggregated Net Revenues
The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors for the fiscal periods presented:
  Three Months Ended
  December 28, 2019 December 29, 2018
  North America Europe Asia Other Total North America Europe Asia Other Total
  (millions)
Sales Channel(a):
                    
Retail $575.0
 $257.2
 $274.1
 $63.9
 $1,170.2
 $543.2
 $248.7
 $261.4
 $68.3
 $1,121.6
Wholesale 335.6
 180.6
 15.5
 2.9
 534.6
 365.5
 176.3
 13.4
 1.3
 556.5
Licensing 
 
 
 45.9
 45.9
 
 
 
 47.7
 47.7
Total $910.6
 $437.8
 $289.6
 $112.7
 $1,750.7
 $908.7
 $425.0
 $274.8
 $117.3
 $1,725.8




10


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 Nine Months Ended Three Months Ended
 December 28, 2019 December 29, 2018 June 27, 2020 June 29, 2019
 North America Europe Asia Other Total North America Europe Asia Other Total North America Europe Asia Other Total North America Europe Asia Other Total
 (millions) (millions)
Sales Channel(a):
                                        
Retail $1,436.0
 $714.3
 $753.9
 $158.8
 $3,063.0
 $1,366.1
 $688.9
 $719.3
 $165.6
 $2,939.9
 $142.6
 $79.2
 $166.5
 $6.5
 $394.8
 $403.1
 $218.5
 $246.5
 $49.5
 $917.6
Wholesale 1,075.2
 564.5
 49.6
 6.6
 1,695.9
 1,128.4
 556.1
 48.2
 3.6
 1,736.3
 22.5
 41.5
 5.4
 0.5
 69.9
 316.3
 142.3
 12.1
 1.8
 472.5
Licensing 
 
 
 126.8
 126.8
 
 
 
 131.1
 131.1
 
 
 
 22.8
 22.8
 
 
 
 38.7
 38.7
Total $2,511.2
 $1,278.8
 $803.5
 $292.2
 $4,885.7
 $2,494.5
 $1,245.0
 $767.5
 $300.3
 $4,807.3
 $165.1
 $120.7
 $171.9
 $29.8
 $487.5
 $719.4
 $360.8
 $258.6
 $90.0
 $1,428.8
 
(a) 
Net revenues from the Company's retail and wholesale businesses are recognized at a point in time. Net revenues from the Company's licensing business are recognized over time.
Deferred Income
Deferred income represents cash payments received in advance of the Company's transfer of control of products or services to its customers and is generally comprised of unredeemed gift cards, net of breakage, and advance royalty payments from licensees. The Company's deferred income balances were $15.3$15.1 million and $14.8$14.6 million as of December 28, 2019June 27, 2020 and March 30, 2019,28, 2020, respectively, and were primarily recorded within accrued expenses and other current liabilities within the consolidated balance sheets. During the three-month and nine-month periodsthree months ended December 28, 2019,June 27, 2020, the Company recognized $1.2$3.4 million and $8.4 million, respectively, of net revenues from amounts recorded as deferred income as of March 30, 2019.28, 2020. The majority of the deferred income balance as of December 28, 2019June 27, 2020 is expected to be recognized as revenue within the next twelve months.
Shipping and Handling Costs
Costs associated with shipping goods to the Company's customers are accounted for as fulfillment activities and reflected as a component of selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations. Costs of preparing merchandise for sale, such as picking, packing, warehousing, and order charges ("handling costs"), are also included in SG&A expenses. Shipping and handling costs billed to customers are included in revenue.
A summary of shipping and handling costs for the fiscal periods presented is as follows:
 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
 (millions) (millions)
Shipping costs $12.3
 $16.6
 $34.7
 $36.2
 $8.4
 $9.9
Handling costs 40.8
 41.6
 116.5
 116.3
 26.5
 36.2

Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shares by the weighted-average number of common shares outstanding during the period. Weighted-average common shares include shares of the Company's Class A and Class B common stock. Diluted net income (loss) per common share adjusts basic net income (loss) per common share for the dilutive effects of outstanding stock options, restricted stock units ("RSUs"), stock options, and any other potentially dilutive instruments, only in the periods in which such effects are dilutive.




11 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average number of common shares outstanding used to calculate basic net income (loss) per common share is reconciled to shares used to calculate diluted net income (loss) per common share as follows:
 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
 (millions) (millions)
Basic shares 74.7
 80.2
 76.5
 81.1
 73.1
 78.2
Dilutive effect of stock options and RSUs 1.1
 1.0
 1.4
 1.2
Dilutive effect of RSUs and stock options 
(a) 
1.7
Diluted shares 75.8
 81.2
 77.9
 82.3
 73.1
 79.9

(a)
Incremental shares of 1.6 million attributable to outstanding RSUs were excluded from the computation of diluted shares for the three months ended June 27, 2020, as such shares would not be dilutive as a result of the net loss incurred.
All earnings per share amounts have been calculated using unrounded numbers. Options to purchase shares of the Company's Class A common stock at an exercise price greater than the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income per common share. In addition, theThe Company has outstanding performance-based and market-based RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance or market conditions (i) have been satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. In addition, options to purchase shares of the Company's Class A common stock at an exercise price greater than the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income (loss) per common share. As of December 28, 2019June 27, 2020 and DecemberJune 29, 20182019, there were 0.90.8 million and 1.51.0 million, respectively, of additional shares issuable contingent upon vesting of performance-based RSUs and upon exercise of anti-dilutive stock options, and contingent vesting of performance-based RSUs that were excluded from the diluted shares calculations.
Accounts Receivable
In the normal course of business, the Company extends credit to wholesale customers that satisfy defined credit criteria. Payment is generally due within 30 to 120 days and does not include a significant financing component. Accounts receivable is recorded at carrying value,amortized cost, which approximates fair value, and is presented in the Company's consolidated balance sheets net of certain reserves and allowances. These reserves and allowances consist of (i) reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances (see the "Revenue Recognition" section above for further discussion of related accounting policies) and (ii) allowances for doubtful accounts.
A rollforward of the activity in the Company's reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances is presented below:
 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
 (millions) (millions)
Beginning reserve balance $195.5
 $198.7
 $176.5
 $202.5
 $204.7
 $176.5
Amount charged against revenue to increase reserve 138.5
 146.1
 421.0
 396.3
 11.3
 113.9
Amount credited against customer accounts to decrease reserve (149.4) (149.1) (411.1) (398.4) (33.9) (125.9)
Foreign currency translation 1.1
 (1.1) (0.7) (5.8) 1.9
 1.0
Ending reserve balance $185.7
 $194.6
 $185.7
 $194.6
 $184.0
 $165.5

An allowance for doubtful accounts is determined through an analysis of accounts receivable aging, assessments of collectability based on evaluation of historical and anticipated trends, the financial condition of the Company's customers and their ability to withstand prolonged periods of adverse economic conditions, and evaluation of the impact of current and forecasted economic and market conditions over the related asset's contractual life, among other factors. The Company's estimated allowance for doubtful accounts as of June 27, 2020 reflects adverse impacts associated with COVID-19 business disruptions, which include temporary department and specialty store closures worldwide, as well as declines in retail traffic, tourism, and consumer spending on discretionary items.




12 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A rollforward of the activity in the Company's allowance for doubtful accounts is presented below:
 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
 (millions) (millions)
Beginning reserve balance $15.6
 $17.2
 $15.7
 $19.7
 $71.5
 $15.7
Amount recorded to expense to increase reserve(a)
 0.4
 1.7
 1.9
 1.2
Amount recorded to expense to increase (decrease) reserve(a)
 (16.5) 0.1
Amount written-off against customer accounts to decrease reserve (0.3) (0.4) (1.7) (1.8) 
 (1.0)
Foreign currency translation 0.1
 (0.2) (0.1) (0.8) 0.9
 0.2
Ending reserve balance $15.8
 $18.3
 $15.8
 $18.3
 $55.9
 $15.0
 
(a) 
Amounts recorded to bad debt expense are included within SG&A expenses in the consolidated statements of operations.
Concentration of Credit Risk
The Company sells its wholesale merchandise primarily to major department andstores, specialty stores, and third-party digital partners around the world, and extends credit based on an evaluation of each customer's financial capacity and condition, usually without requiring collateral. In the Company's wholesale business, concentration of credit risk is relatively limited due to the large number of customers and their dispersion across many geographic areas. However, the Company has 3 key wholesale customers that generate significant sales volume. During Fiscal 20192020, the Company's sales to its 3 largest wholesale customers accounted for approximately 19%18% of total net revenues. Substantially all of the Company's sales to its three largest wholesale customers related to its North America segment. As of December 28, 2019June 27, 2020, these 3 key wholesale customers constituted approximately 29%16% of total gross accounts receivable.
Inventories
The Company holds inventory that is sold in its retail stores and digital commerce sites directly to consumers. The Company also holds inventory that is sold through wholesale distribution channels to major department stores, specialty stores, and specialty retail stores.third-party digital partners. Substantially all of the Company's inventories are comprisedconsist of finished goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-average cost basis. Inventory held by the Company totaled $904.6$773.2 million, $817.8$736.2 million, and $914.5$988.6 million as of DecemberJune 27, 2020, March 28, 2019, March 30, 2019,2020, and DecemberJune 29, 2018,2019, respectively.
LeasesImplementation Costs Incurred in Cloud Computing Arrangements
As discussedFor cloud computing arrangements that are a service contract, the Company capitalizes certain implementation costs incurred (depending on their nature) during the application development stage of the related project, and expenses costs during the preliminary project and post-implementation stages as they are incurred. Capitalized implementation costs are expensed on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the module is ready for its intended use. The Company's cloud computing arrangements relate to various areas, including certain retail store and digital commerce operations, and corporate and administrative functions. Capitalized amounts related to such arrangements are recorded within prepaid expenses and other current assets and within other non-current assets in the consolidated balance sheets (see Note 6). Capitalized implementation costs expensed during the three-month periods ended June 27, 2020 and June 29, 2019 were $2.5 million and $0.8 million, respectively, and were recorded in SG&A expenses in the consolidated statements of operations.
See Note 4 for further discussion of the Company adoptedCompany's adoption of a new lease accounting standard related to implementation costs incurred in connection with cloud computing arrangements that are a service contract as of the beginning of Fiscal 2020.2021.
The Company's lease arrangements primarily relate to real estate, including its retail stores, concession-based shop-within-shops, corporate offices, and warehouse facilities, and to a lesser extent, certain equipment and other assets. The Company's leases generally have initial terms ranging from 3 to 15 years and may include renewal or early-termination options, rent escalation clauses, and/or lease incentives in the form of construction allowances and rent abatements. Renewal rent payment terms generally reflect market rates prevailing at the time of renewal. The Company is typically required to make fixed minimum rent payments, variable rent payments based on performance (e.g., percentage-of-sales-based payments), or a combination thereof, directly related to its right to use an underlying leased asset. The Company is also often required to pay for certain other costs that do not relate specifically to its right to use an underlying leased asset, but that are associated with the asset, including real estate taxes, insurance, common area maintenance fees, and/or certain other costs (referred to collectively herein as "non-lease components"), which may be fixed or variable in amount, depending on the terms of the respective lease agreement. The Company's leases do not contain significant residual value guarantees or restrictive covenants.Derivative Financial Instruments
The Company determines whether an arrangement contains a leaserecords derivative financial instruments on its consolidated balance sheets at fair value. Changes in the arrangement's inception. If a lease is determined to exist, its related term is assessed at lease commencement, oncefair value of derivative instruments that are designated and qualify for hedge accounting are either (i) offset through earnings against the underlying asset is made available by the lessor for the Company's use. The Company's assessmentchanges in fair value of the lease term reflects the non-cancellable period of the lease, inclusive of any rent-free periods and/related hedged assets, liabilities, or periods covered by early-termination options for which the Company is reasonably certain of not exercising,firm commitments or (ii) recognized in equity as well as periods covered by renewal options for which it is reasonably certain of exercising. The Company also determines leasea component




13 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

classification as either operating or finance (formerly referred to as "capital") at lease commencement, which governs the pattern of expense recognition and the presentation thereof reflected in the consolidated statements of operations over the lease term.
For leases with a lease term exceeding 12 months, a lease liability is recorded on the Company's consolidated balance sheet at lease commencement reflecting the present value of its fixed payment obligations over the lease term. A corresponding right-of-use ("ROU") asset equal to the initial lease liability is also recorded, increased by any prepaid rent and/or initial direct costs incurred in connection with execution of the lease, and reduced by any lease incentives received. The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as it elects to account for lease and non-lease components together as a single lease component. Variable lease payments are not included in the measurement of ROU assets and lease liabilities. ROU assets associated with finance leases are presented separate from those associated with operating leases, and are included within property and equipment, net on the Company's consolidated balance sheet. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the lease.
For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments as they are made. For leases with a lease term of 12 months or less (referred to as a "short-term lease"), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the consolidated balance sheet. Variable lease cost, if any, is recognized as incurred for all leases.
ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment (see Note 11). To the extent that an ROU asset and any related long-lived assets are determined to be impaired, they are written down accordingly on a relative carrying amount basis, with the ROU asset written down to an amount no lower than its estimated fair value. Subsequent to the recognition of any such impairment, total remaining lease cost is recognized on a front-loaded basis over the remaining lease term.
See Note 13 for further discussion of the Company's leases.
Derivative Financial Instruments
The Company records all derivative financial instruments on its consolidated balance sheets at fair value. Changes in the fair value of derivative instruments that qualify for hedge accounting are either (i) offset against the changes in fair value of the related hedged assets, liabilities, or firm commitments through earnings or (ii) recognized in equity as a component of accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings, depending on whether the derivativeinstrument is being used to hedgehedging against changes in fair value or cash flows and net investments, respectively.
Each derivative instrument that qualifies for hedge accounting is expected to be highly effective in reducing and offsetting the risk associated with the related exposure being hedged.exposure. For each derivative instrument that is designated as a hedge, the Company formally documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item, and the risk exposure, as well as how hedge effectiveness will be assessed over the instrument's term. To assess hedge effectiveness at the inception of a hedging relationship, the Company generally uses regression analysis, a statistical method, to compare changes in the fair value of the derivative instrument to changes in the fair value or cash flows of the related hedged item. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed by the Company on at least a quarterly basis.
As a result ofGiven its use of derivative instruments, the Company is exposed to the risk that counterparties to such contracts will fail to meet their contractual obligations. To mitigate thissuch counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. The Company's established policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of its counterparties' creditworthiness. The Company also enters into master netting arrangements with counterparties, when possible, to further mitigate credit risk. In the event of default or termination (as such terms are defined within the respective master netting arrangement), these arrangements allow the Company to net-settle amounts payable and receivable related to multiple derivative transactions with the same counterparty. The master




14


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

netting arrangements specify a number of events of default and termination, including among others, the failure to make timely payments.
The fair values of the Company's derivative instruments are recorded on its consolidated balance sheets on a gross basis. For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged, primarily within cash flows from operating activities.activities for its forward foreign exchange contracts and within cash flows from investing activities for its cross-currency swap contracts, both as discussed below.
Cash Flow Hedges
The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency and the settlement of foreign currency-denominated balances.currency. To the extent forward foreign currency exchange contracts are designated as qualifying cash flow hedges, the related gains or losses on such instruments are initially deferred in equity as a component of AOCI and are subsequently recognized within cost of goods sold in the consolidated statements of operations as follows:when the related inventory is sold.
Forecasted Inventory Transactions — recognized as part of the cost of the inventory being hedged within cost of goods sold when the related inventory is sold to a third party.
Settlement of Foreign Currency Balances — recognized within other income (expense), net during the period that the hedged balance is remeasured through earnings, generally through its ultimate settlement when the related payment occurs.
If it is determined that a derivative instrument hasis dedesignated or if hedge accounting is discontinued because the instrument is not been highly effective, and will continue notexpected to be highly effective in hedging the designated exposure, hedge accounting is discontinued andany further gains (losses) are immediately recognized in earnings each period within other income (expense), net. Upon discontinuance of hedge accounting, the cumulative change in fair value of the derivative instrument previously recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the originally-documented hedging strategy, unless the related forecasted transaction is no longer probable of not occurring, in which case the accumulated amount is immediately recognized in earnings within other income (expense), net.
Hedges of Net Investments in Foreign Operations
The Company periodically uses cross-currency swap contracts and forward foreign currency exchange contracts to reduce risk associated with exchange rate fluctuations on certain of its net investments in foreign subsidiaries. Changes in the fair values of such derivative instruments that are designated as qualifying hedges of net investments in foreign operations are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments. In assessing the effectiveness of such hedges, the Company uses a method based on changes in spot rates to measure the impact of foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related derivative hedging instrument. Under this method, changes in the fair value of the hedging instrument other than those due to changes in the spot rate are initially recorded in AOCI as a translation adjustment and are amortized into earnings as interest expense using a systematic and rational method over the instrument's term. Changes in fair value associated with the effective portion (i.e., those due to changes in the spot rate) are recorded in AOCI as a translation adjustment and are released and recognized in earnings only upon the sale or liquidation of the hedged net investment.




14


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Hedges
Changes in the fair value of a derivative instrument that is designated as a fair value hedge, along with offsetting changes in the fair value of the related hedged item attributable to the hedged risk, are recorded in earnings. To the extent that the change in the fair value of the hedged item does not fully offset the change in the fair value of the hedging instrument, the resulting net impact is reflected in earnings within the income statement line item associated with the hedged item.




15


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Undesignated Hedges
All of the Company'sThe Company uses undesignated hedges are entered intoprimarily to hedge specific economic risks, particularly foreign currency exchange rate risk related to foreign currency-denominated balances.third-party and intercompany balances and exposures. Changes in the fair value of undesignated derivative instruments are immediately recognized in earnings each period within other income (expense), net.
See Note 12 for further discussion of the Company's derivative financial instruments.
Refer to Note 3 of the Fiscal 20192020 10-K for a summary of all of the Company's significant accounting policies.
4.Recently Issued Accounting Standards
Implementation Costs Incurred in Cloud Computing Arrangements
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15"). ASU 2018-15 addresses diversity in practice surrounding the accounting for costs incurred to implement a cloud computing hosting arrangement that is a service contract by establishing a model for capitalizing or expensing such costs, depending on their nature and the stage of the implementationrelated project during which they are incurred. Any capitalized costs are to be amortizedexpensed over the reasonably certain term of the hosting arrangement and presented in the same line within the statement of operations as the related serviceexpense for the arrangement's fees. ASU 2018-15 also requires enhanced qualitative and quantitative disclosures surrounding hosting arrangements that are service contracts.
The Company adopted ASU 2018-15 is effective foras of the beginning of Fiscal 2021. Prior to adoption, the Company beginninghad already generally accounted for implementation costs incurred in its fiscal year ending March 27, 2021 ("Fiscal 2021"),connection with early adoption permitted, and may be adopted on eithercloud computing arrangements in a retrospective or prospective basis. Othermanner consistent with the new standard. Therefore, other than the new disclosure requirements, the Company does not currently expect that the adoption of ASU 2018-15 willdid not have a materialan impact on itsthe Company's consolidated financial statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"). Existing accounting guidance requires the remeasurement of deferred tax assets and liabilities resulting from a change in tax laws or rates to be included in net income, including the remeasurement of deferred taxes related to items recorded within AOCI. ASU 2018-02 provides an entity with the option to adjust AOCI See Note 3 for the "stranded" tax effect of such remeasurements resulting from the reduction in the U.S. federal statutory income tax rate under the 2017 Tax Cuts and Jobs Act (the "TCJA") through a reclassification to retained earnings.
The Company adopted ASU 2018-02 asfurther discussion of the beginning of the first quarter of Fiscal 2020 and elected to reclassify the income tax effect stranded in AOCI related to the TCJA, inclusive of state income tax-related effects, resulting in a $4.9 million increase to its opening retained earnings. The Company generally releases income tax effects from AOCI when the corresponding pretax AOCI items are reclassified to earnings.Company's accounting for cloud computing arrangements.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13, which was further updated and clarified by the FASB through issuance of additional related ASUs, amends the guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and investments in certain debt securities, by requiring upfront recognition of an allowance for credit losses expected to be incurred over an asset's lifetimecontractual life based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectibility. Thiscollectability. It is expected that application of this "expected loss" model will result in earlier recognition of credit losses than the current "as incurred" model, under which losses are recognized only upon occurrence of an event that gives rise to the incurrence of a probable loss. ASU 2016-13 is effective for the Company beginning in its Fiscal 2021, with early adoption permitted, and is to be adopted on a modified retrospective basis. The Company is evaluating the anticipated impact of adopting ASU 2016-13 and, based onWhile the Company's historically insignificant credit impairment andhistorical bad debt write-off activity doeshas generally been insignificant, similar to current practice, the extent of losses ultimately recognized will depend on prevailing conditions and ongoing consideration of information and forecasts that inform assessments of collectability. The Company adopted ASU 2016-13 as of the beginning of Fiscal 2021 using the modified retrospective basis. Overall, the adoption of ASU 2016-13 did not currently expect that the standard will have a material impact on itsthe Company's consolidated financial statements.




15


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.Property and Equipment
Property and equipment, net consists of the following:
  June 27,
2020
 March 28,
2020
  (millions)
Land and improvements $15.3
 $15.3
Buildings and improvements 311.6
 309.0
Furniture and fixtures 637.7
 629.5
Machinery and equipment 383.2
 378.8
Capitalized software 547.4
 543.3
Leasehold improvements 1,213.6
 1,194.5
Construction in progress 33.0
 37.5
  3,141.8
 3,107.9
Less: accumulated depreciation (2,196.0) (2,128.4)
Property and equipment, net $945.8
 $979.5

Depreciation expense was $58.5 million and $60.3 million during the three-month periods ended June 27, 2020 and June 29, 2019, respectively, and is recorded primarily within SG&A expenses in the consolidated statements of operations.
6.Other Assets and Liabilities
Prepaid expenses and other current assets consist of the following:
  June 27,
2020
 March 28,
2020
  (millions)
Prepaid inventory $41.8
 $0.2
Non-trade receivables 32.8
 27.0
Other taxes receivable 22.3
 24.7
Prepaid software maintenance 15.7
 14.8
Inventory return asset 10.5
 8.9
Cloud computing arrangement implementation costs 9.3
 8.4
Prepaid advertising and marketing 7.1
 10.1
Prepaid occupancy expense 5.8
 6.7
Derivative financial instruments 3.7
 13.7
Other prepaid expenses and current assets 51.6
 46.3
Total prepaid expenses and other current assets $200.6
 $160.8





16 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Leases
In February 2016, the FASB issued ASU No. 2016-02, "Leases." ASU No. 2016-02, along with certain other ASUs that were subsequently issued to clarify and modify certain of its provisions (collectively "ASU 2016-02"), supersedes historical lease accounting guidance and requires that, among its provisions, a lessee's rights and fixed payment obligations under most leases be recognized as ROUOther non-current assets and lease liabilities on its balance sheet, initially measured based on the present value of its fixed payment obligations over the lease term. Under historical guidance, only those leases classified as capital were recognized on a lessee's balance sheet; operating leases were not recognized on the balance sheet. ASU 2016-02 retains a dual model for classifying leases as either finance (formerly referred to as "capital") or operating, consistent with historical guidance, which governs the pattern of expense recognition reflected in the statement of operations over the lease term. Accordingly, recognition of lease expense in the statement of operations will not significantly change. Additionally, variable lease payments based on performance, such as percentage-of-sales-based payments, are not included in the measurement of ROU assets and lease liabilities and, consistent with historical practice, are recognized as an expense in the period incurred. The standard also requires enhanced quantitative and qualitative lease-related disclosures.
The Company adopted ASU 2016-02 asconsist of the beginningfollowing:
  June 27,
2020
 March 28,
2020
  (millions)
Derivative financial instruments $42.9
 $48.6
Security deposits 29.2
 29.4
Restricted cash 8.2
 8.0
Cloud computing arrangement implementation costs 5.1
 4.9
Other non-current assets 20.6
 21.0
Total other non-current assets $106.0
 $111.9

Accrued expenses and other current liabilities consist of the first quarter of Fiscal 2020 using a modified retrospective approach under which the cumulative effect of initially applying the standard was recognized as an adjustment to its opening retained earnings (discussed further below), with no restatement of prior year amounts. In connection therewith, the Company applied an optional package of practical expedients intended to ease transition to the standard for existing leases by, among its provisions, carrying forward its original lease classification conclusions without reassessment. Upon adoption of ASU 2016-02, the Company recognized initial ROU asset and lease liability balances of approximately $1.60 billion and $1.75 billion, respectively, on its consolidated balance sheet.following:
Additionally, in connection with its adoption of ASU 2016-02, the Company recorded an adjustment to reduce its opening retained earnings balance by $131.6 million, net of related income tax benefits, reflecting the impairment of an ROU asset for a certain real estate lease of which, under historical accounting guidance, the Company was previously deemed the owner for accounting purposes (commonly referred to as a "build-to-suit" lease arrangement). Specifically, although the Company no longer generates revenue or other cash flows from its rights underlying the leased asset given it no longer actively uses the space for commercial purposes, the asset was previously not considered impaired under historical accounting guidance as its fair value, assessed from an ownership perspective (and not from that of a lessee), exceeded its carrying value. However, in accordance with and upon transitioning to ASU 2016-02, the Company derecognized the remaining asset and liability balances previously recognized solely as a result
  June 27,
2020
 March 28,
2020
  (millions)
Accrued inventory $181.5
 $167.1
Accrued operating expenses 181.0
 176.4
Accrued payroll and benefits 149.5
 186.2
Other taxes payable 65.0
 47.9
Accrued capital expenditures 26.4
 29.1
Restructuring reserve 17.1
 25.5
Deferred income 15.0
 14.6
Finance lease obligations 9.4
 9.8
Derivative financial instruments 0.7
 6.9
Dividends payable 
 49.8
Other accrued expenses and current liabilities 11.6
 3.8
Total accrued expenses and other current liabilities $657.2
 $717.1

Other non-current liabilities consist of the arrangement's build-to-suit designation, as the related construction activities that originally gave rise to such designation have since ended, and established initial ROU asset and lease liability balances measured based on the Company's remaining fixed payment obligations under the lease. The initial ROU asset was then assessed for impairment based on the aggregate estimated cash flows that could be generated by transferring the lease to a market participant sublessee for the remainder of its term, which were lower than the aggregate remaining lease payments underlying the measurement of the initial ROU asset. Accordingly, the Company impaired the initial ROU asset by $175.4 million to its estimated fair value which was recorded as a reduction to its opening retained earnings balance, net of related income tax benefits of $43.8 million, upon adoption of ASU 2016-02, as previously noted.following:
The Company also recorded other initial ROU asset impairment adjustments to reduce its opening retained earnings balance upon adoption of the standard related to leases of certain underperforming retail locations for which the carrying value of the respective store's initial operating lease ROU asset exceeded its fair value. These impairments totaled $49.7 million and were recorded as adjustments to reduce the Company's opening retained earnings balance by $37.8 million, net of related income tax effects. Leasehold improvements related to these underperforming retail locations were previously fully-impaired prior to the adoption of ASU 2016-02.
  June 27,
2020
 March 28,
2020
  (millions)
Finance lease obligations $189.7
 $189.4
Deferred lease incentives and obligations 55.8
 57.8
Accrued benefits and deferred compensation 18.6
 19.5
Derivative financial instruments 17.5
 
Deferred tax liabilities 10.5
 10.0
Other non-current liabilities 33.7
 31.8
Total other non-current liabilities $325.8
 $308.5
See Notes 3 and 13 for further discussion of the Company's lease accounting policy and other related disclosures.




17 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.Property and Equipment
Property and equipment, net consists of the following:
  December 28,
2019
 March 30,
2019
  (millions)
Land and improvements $15.3
 $15.3
Buildings and improvements 310.9
 387.8
Furniture and fixtures 634.4
 626.4
Machinery and equipment 363.3
 350.4
Capitalized software 543.1
 534.0
Leasehold improvements 1,223.6
 1,169.4
Construction in progress 65.0
 58.7
  3,155.6
 3,142.0
Less: accumulated depreciation (2,127.4) (2,102.8)
Property and equipment, net $1,028.2
 $1,039.2

Depreciation expense was $62.3 million and $183.3 million during the three-month and nine-month periods ended December 28, 2019, respectively, and $66.0 million and $194.3 million during the three-month and nine-month periods ended December 29, 2018, respectively, and is recorded primarily within SG&A expenses in the consolidated statements of operations.
6.Other Assets and Liabilities
Prepaid expenses and other current assets consist of the following:
  December 28,
2019
 March 30,
2019
  (millions)
Other taxes receivable $63.4
 $137.9
Non-trade receivables 30.7
 30.8
Inventory return asset 28.4
 18.4
Tenant allowances receivable 23.4
 8.2
Prepaid software maintenance 20.2
 19.8
Prepaid advertising and marketing 12.1
 9.6
Derivative financial instruments 12.0
 19.8
Prepaid occupancy costs 9.8
 38.0
Restricted cash 1.5
 11.9
Asset held-for-sale(a)
 
 20.8
Other prepaid expenses and current assets 52.7
 44.1
Total prepaid expenses and other current assets $254.2
 $359.3

(a)
Balance as of March 30, 2019 related to the estimated fair value, less costs to sell, of the Company's corporate jet. The jet was sold during the first quarter of Fiscal 2020 with 0 gain or loss recognized on sale. The Company donated the $20.8 million net cash proceeds received from the sale to the Polo Ralph Lauren Foundation, a non-profit, charitable foundation that supports various philanthropic programs.




18


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other non-current assets consist of the following:
  December 28,
2019
 March 30,
2019
  (millions)
Security deposits $28.5
 $24.5
Derivative financial instruments 23.3
 12.2
Restricted cash 8.0
 30.5
Non-current investments 
 44.9
Other non-current assets 31.7
 46.4
Total other non-current assets $91.5
 $158.5

Accrued expenses and other current liabilities consist of the following:
  December 28,
2019
 March 30,
2019
  (millions)
Accrued operating expenses $232.0
 $235.2
Accrued inventory 178.1
 141.0
Accrued payroll and benefits 177.6
 232.5
Other taxes payable 89.8
 158.3
Accrued capital expenditures 56.6
 47.6
Dividends payable 50.7
 48.8
Restructuring reserve 23.1
 60.4
Deferred income 15.1
 14.1
Finance lease obligations 10.3
 22.3
Derivative financial instruments 9.2
 3.6
Other accrued expenses and current liabilities 10.6
 4.6
Total accrued expenses and other current liabilities $853.1
 $968.4

Other non-current liabilities consist of the following:
  December 28,
2019
 March 30,
2019
  (millions)
Finance lease obligations $191.1
 $212.6
Deferred lease incentives and obligations 61.4
 202.7
Accrued benefits and deferred compensation 20.1
 26.2
Deferred tax liabilities 11.8
 50.2
Restructuring reserve 2.1
 11.4
Derivative financial instruments 
 11.9
Other non-current liabilities 30.4
 25.9
Total other non-current liabilities $316.9
 $540.9





19


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.Impairment of Assets
The Company recorded non-cash impairment charges of $3.0 million and $6.5 million duringDuring the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019, respectively, and $1.7 million and $7.5 million during the three-month and nine-month periods ended December 29, 2018, respectively, to write-down certain long-lived assets in connection with its restructuring plans (see Note 8).
Additionally, the Company recorded non-cash impairment charges of $11.4$2.1 million and $15.2$1.2 million, during the three-month and nine-month periods ended December 28, 2019, respectively, and $0.5 million and $5.8 million during the three-month and nine-month periods ended December 29, 2018, respectively, to write-downwrite off certain long-lived assets primarily related to underperforming stores as a result ofstore closures identified through its ongoingon-going store portfolio evaluation.evaluation and its restructuring plans (see Note 8), respectively.
See Note 11 for further discussion of these impairment charges.
8.Restructuring and Other Charges
A description of significant restructuring and other activities and their related costs is provided below.
Fiscal 2019 Restructuring Plan
On June 4, 2018, the Company's Board of Directors approved a restructuring plan associated with the Company's strategic objective of operating with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i) rightsizing and consolidation of the Company's global distribution network and corporate offices; (ii) targeted severance-related actions; and (iii) closure of certain of its stores and shop-within-shops.
Actions associated with the Fiscal 2019 Restructuring Plan were largely completed during Fiscal 2019, with certain activities shifting into Fiscal 2020.
Inare complete and no additional charges are expected to be incurred in connection with the Fiscal 2019 Restructuring Plan, the Company expects to incur total estimated charges of approximately $135 million to $150 million, comprised of cash-related charges of approximately $95 million to $105 million and non-cash charges of approximately $40 million to $45 million.
this plan. A summary of the charges recorded in connection with the Fiscal 2019 Restructuring Plan during the fiscal periodsperiod presented, as well as the cumulative charges recorded since its inception, is as follows:
  Three Months Ended Nine Months Ended  
  December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
 Cumulative Charges
  (millions)
Cash-related restructuring charges:          
Severance and benefit costs $3.0
 $17.1
 $17.9
 $34.3
 $78.1
Lease termination and store closure costs 
 1.2
 0.5
 1.2
 2.3
Other cash charges 1.0
 1.9
 2.1
 3.5
 9.5
Total cash-related restructuring charges 4.0
 20.2
 20.5
 39.0
 89.9
Non-cash charges:          
Impairment of assets (see Note 7) 3.0
 1.3
 6.5
 7.1
 16.8
Inventory-related charges(a)
 
 1.9
 1.0
 1.9
 7.0
Accelerated stock-based compensation
    expense(b)
 
 
 3.6
 
 3.6
Loss on sale of property(c)
 
 11.6
 
 11.6
 11.6
Total non-cash charges 3.0
 14.8
 11.1
 20.6
 39.0
Total charges $7.0
 $35.0
 $31.6
 $59.6
 $128.9




20


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

  Three Months Ended  
  June 29,
2019
 Cumulative Charges
  (millions)
Cash-related restructuring charges:    
Severance and benefit costs $5.9
 $90.3
Lease termination and store closure costs 0.3
 2.3
Other cash charges 0.8
 10.8
Total cash-related restructuring charges 7.0
 103.4
Non-cash charges:    
Impairment of assets (see Note 7) 1.2
 19.0
Inventory-related charges(a)
 0.6
 8.2
Accelerated stock-based compensation expense(b)
 
 3.6
Loss on sale of property(c)
 
 11.6
Total non-cash charges 1.8
 42.4
Total charges $8.8
 $145.8
 
 
(a) 
Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
(b) 
Accelerated stock-based compensation expense, which is recorded within restructuring and other charges in the consolidated statements of operations, was recorded in connection with vesting provisions associated with certain separation agreements.
(c) 
Loss on sale of property, which was recorded within restructuring and other charges in the consolidated statements of operations, during the third quarter of Fiscal 2019, was incurred in connection with the sale of one of the Company's distribution centers in North America. Total cash proceeds from the sale were $20.0 million.
A summary of current period activity in the restructuring reserve related to the Fiscal 2019 Restructuring Plan is as follows:
  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at March 30, 2019 $41.0
 $0.5
 $0.1
 $41.6
Additions charged to expense 17.9
 0.5
 2.1
 20.5
Cash payments charged against reserve (38.1) (0.6) (1.6) (40.3)
Non-cash adjustments(a)
 
 (0.4) 
 (0.4)
Balance at December 28, 2019 $20.8
 $
 $0.6
 $21.4

(a)
Certain lease-related liabilities previously recognized in connection with the Company's closure and cessation of use of real estate locations were reclassified and reflected as reductions of the respective operating lease ROU assets initially recognized upon adoption of ASU 2016-02 (see Note 4).
Other Restructuring Plans
During the three-month and nine-month periods ended December 29, 2018, the Company recorded charges related to certain other restructuring plans initiated prior to Fiscal 2019, as follows:
  December 29, 2018
  Three Months Ended Nine Months Ended
  (millions)
Cash-related restructuring charges:    
Severance and benefit costs $0.1
 $6.6
Lease termination and store closure costs 2.1
 3.7
Other cash charges 0.6
 0.8
Total cash-related restructuring charges 2.8
 11.1
Non-cash charges:  �� 
Impairment of assets (see Note 7) 0.4
 0.4
Inventory-related charges(a)
 1.2
 1.2
Other non-cash charges 2.0
 2.0
Total non-cash charges 3.6
 3.6
Total charges $6.4
 $14.7
(a)
Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
Actions associated with these other plans were completed in previous fiscal years.




2118 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of current period activity in the restructuring reserve related to these other plansthe Fiscal 2019 Restructuring Plan is as follows:
  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at March 30, 2019 $6.5
 $23.3
 $0.4
 $30.2
Additions charged to expense 
 
 
 
Cash payments charged against reserve (4.6) (2.8) (0.1) (7.5)
Non-cash adjustments(a)
 
 (18.9) 
 (18.9)
Balance at December 28, 2019 $1.9
 $1.6
 $0.3
 $3.8
  Severance and Benefit Costs 
Lease Termination
and Store
Closure Costs
 Other Cash Charges Total
  (millions)
Balance at March 28, 2020 $23.5
 $
 $0.6
 $24.1
Additions charged to expense 
 
 
 
Cash payments charged against reserve (8.0) 
 (0.6) (8.6)
Balance at June 27, 2020 $15.5
 $
 $
 $15.5

Other Restructuring Activities
(a)
Certain lease-related liabilities previously recognized in connection with the Company's closure and cessation of use of real estate locations were reclassified and reflected as reductions of the respective operating lease ROU assets initially recognized upon adoption of ASU 2016-02 (see Note 4).
ReferDuring the three months ended June 27, 2020, the Company recorded $2.6 million in cash-related restructuring charges, primarily associated with severance and benefit costs. As of June 27, 2020, the remaining restructuring liability related to Note 9these charges, together with the liability related to restructuring plans initiated prior to the Company's fiscal year ended March 30, 2019 ("Fiscal 2019"), was $4.4 million, reflecting cash payments of $1.6 million made during the Fiscal 2019 10-K for additional discussion regarding these otherthree months ended June 27, 2020.
The Company also recorded non-cash inventory-related charges of $1.3 million within cost of goods sold in the consolidated statements of operations during the three months ended June 27, 2020 in connection with its restructuring plans.activities.
Other Charges
During the first quarter of Fiscal 2020, the Company recorded other charges of $20.8 million related to the donation of net cash proceeds received from the sale of its corporate jet. This donation was made to the Polo Ralph Lauren Foundation, a non-profit, charitable foundation that supports various philanthropic programs. Additionally, during the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019, the Company recorded other charges of $3.0$4.4 million and $6.2$1.8 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired.
The Company also recorded other charges of $3.5 million and $10.5$20.8 million during the three-month and nine-month periodsthree months ended DecemberJune 29, 2018, respectively,2019 related to depreciation expense associated withthe donation of net cash proceeds received from the sale of its formercorporate jet. This donation was made to the Ralph Lauren Corporate Foundation (formerly known as the Polo store at 711 Fifth Avenue in New York City recorded after the store closed during the first quarter of Fiscal 2018. Additionally, during the first quarter of Fiscal 2019, the Company recorded other charges of $4.2 million primarily related toRalph Lauren Foundation), a customs audit. Refer to Note 14 of the Fiscal 2019 10-K for additional discussion regarding the Company's customs audit.non-profit, charitable foundation that supports various philanthropic programs.
9.Income Taxes
Swiss Tax Reform
In May 2019, a public referendum was held in Switzerland that approved the Federal Act on Tax Reform and AHV Financing (the "Swiss Tax Act"), which became effective January 1, 2020. The Swiss Tax Act eliminates certain preferential tax items at both the federal and cantonal levels for multinational companies, and provides the cantons with parameters for establishing local tax rates and regulations. The Swiss Tax Act also provides transitional provisions, one of which allows eligible companies to increase the tax basis of certain assets based on the value generated by their business in previous years, and to amortize such adjustment as a tax deduction over a transitional period.
During the second quarter of Fiscal 2020, the Swiss Tax Act was enacted into law, resulting in an immaterial adjustment associated with the revaluation of the Company's Swiss deferred tax assets and liabilities and estimated annual effective tax rate. Subsequently, as a result of additional information received from the tax authorities and analyses performed related to the transitional provision noted above, the Company recorded a one-time income tax benefit and corresponding deferred tax asset of $134.1 million during the third quarter of Fiscal 2020. This one-time benefit decreased the Company's effective tax rate by 5,820 basis points and 2,180 basis points during the three-month and nine-month periods ended December 28, 2019, respectively.




22


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Effective Tax Rate
The Company's effective tax rate, which is calculated by dividing each fiscal period's income tax benefit (provision) by pretax income (loss), was (45.1%)26.0% and (3.2%)20.1% during the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019, respectively, and 39.8% and 27.0% during the three-month and nine-month periods ended December 29, 2018, respectively. The negative effective tax ratesrate for the three-month and nine-month periodsthree months ended December 28,June 27, 2020 was higher than the U.S. federal statutory income tax rate of 21% primarily due to an income tax benefit recorded in connection with expected net operating loss carrybacks allowed under the CARES Act (as defined below), partially offset by valuation allowances recorded against certain deferred tax assets as a result of significant business disruptions attributable to COVID-19 that could impact the ultimate realizability of such assets. The effective tax rate for the three months ended June 29, 2019 werewas lower than the U.S. federal statutory income tax rate of 21% primarily due to the one-time income tax benefit recorded in connection with Swiss tax reform, as previously discussed, lower income tax reserves largely associated with the settlement of certain international income tax audits, and the favorable impact of tax benefits associated with provision to tax return adjustments. The effective tax rates for the three-month and nine-month periods ended December 29, 2018 were higher thanproportion of earnings generated in lower taxed foreign jurisdictions versus the U.S. federal statutory income tax rate of 21% primarily due to net unfavorable TCJA-related measurement period adjustments, as discussed below.
During the second quarter of Fiscal 2019, the Company recorded a TCJA measurement period adjustment as a result of the issuance of new interpretive guidance related to stock-based compensation for certain executives, whereby it recorded an income tax benefit and corresponding deferred tax asset of $4.7 million. Subsequently, during the third quarter of Fiscal 2019, the Company completed its analyses and recorded its final measurement period adjustments, whereby it recorded incremental charges of $32.3 million within its income tax provision, substantially all of which relatedIn response to the mandatory transition tax. These measurement period adjustments increasedCOVID-19 pandemic, various governments worldwide have enacted, or are in the Company's effectiveprocess of enacting, measures to provide aid and economic relief to companies adversely impacted by the pandemic. For example, on March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act includes various provisions, including the modification of net operating loss carryback periods and limitation, modification to interest deduction limitations, and creation of refundable employee retention tax rate by 1,610 basis points and 500 basis points during the three-month and nine-month periods ended December 29, 2018, respectively. Refercredits, among other provisions. The Company expects certain of these provisions to Note 10 of thefavorably impact its Fiscal 2019 10-K for further discussion regarding the TCJA.2021 operating results.




19


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Uncertain Income Tax Benefits
The Company classifies interest and penalties related to unrecognized tax benefits as part of its income tax provision.benefit (provision). The total amount of unrecognized tax benefits, including interest and penalties, was $70.6$91.7 million and $78.8$88.9 million as of December 28, 2019June 27, 2020 and March 30, 2019,28, 2020, respectively, and is included within non-current liability for unrecognized tax benefits in the consolidated balance sheets.
The total amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate was $60.2$70.8 million and $70.7$71.7 million as of December 28, 2019June 27, 2020 and March 30, 2019,28, 2020, respectively.
Future Changes in Unrecognized Tax Benefits
The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not limited to, settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, the Company does not anticipate that the balance of gross unrecognized tax benefits, excluding interest and penalties, will change significantly during the next twelve months. However, changes in the occurrence, expected outcomes, and timing of such events could cause the Company's current estimate to change materially in the future.
The Company files a consolidated U.S. federal income tax return, as well as tax returns in various state, local, and foreign jurisdictions. The Company is generally no longer subject to examinations by the relevant tax authorities for years prior to its fiscal year ended March 30, 2013.




23


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.Debt
Debt consists of the following:
 December 28,
2019
 March 30,
2019
 June 27,
2020
 March 28,
2020
 (millions) (millions)
$300 million 2.625% Senior Notes(a)
 $298.1
 $293.4
 $299.9
 $299.6
$400 million 3.750% Senior Notes(b)
 396.3
 395.7
 396.6
 396.4
$500 million 1.700% Senior Notes(c)
 497.3
 
$750 million 2.950% Senior Notes(d)
 736.2
 
Borrowings outstanding under credit facilities 
 475.0
Total debt 694.4
 689.1
 1,930.0
 1,171.0
Less: current portion of long-term debt 298.1
 
Long-term debt $396.3
 $689.1
Less: short-term debt and current portion of long-term debt 299.9
 774.6
Total long-term debt $1,630.1
 $396.4
 
 
(a) 
The carrying value of the 2.625% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $0.1 million and $0.2 million as of December 28, 2019June 27, 2020 and March 30, 201928, 2020, respectively. The carrying value of the 2.625% Senior Notes as of March 28, 2020 also reflects adjustmentsan adjustment of $1.6$0.2 million and $5.9 million, respectively, associated with the Company'sa related interest rate swap contract (see Note 12). The carrying value of the 2.625% Senior Notes is also presented net of unamortized debt issuance costs and discount of $0.3 million and $0.7 million as of December 28, 2019 and March 30, 2019, respectively.
(b) 
The carrying value of the 3.750% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $3.7$3.4 million and $4.3$3.6 million as of December 28, 2019June 27, 2020 and March 30, 2019,28, 2020, respectively.
(c)
The carrying value of the 1.700% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $2.7 million as of June 27, 2020.
(d)
The carrying value of the 2.950% Senior Notes is presented net of unamortized debt issuance costs and original issue discount of $13.8 million as of June 27, 2020.




20


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Senior Notes
In August 2015, the Company completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). The 2.625% Senior Notes were issued at a price equal to 99.795% of their principal amount. The proceeds from this offering were used for general corporate purposes.
In August 2018, the Company completed another registered public debt offering and issued an additional $400 million aggregate principal amount of unsecured senior notes due September 15, 2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes"). The 3.750% Senior Notes were issued at a price equal to 99.521% of their principal amount. The proceeds from this offering were used for general corporate purposes, including repayment of the Company's previously outstanding $300 million principal amount of unsecured 2.125% senior notes that matured September 26, 2018 (the "2.125% Senior Notes").
In June 2020, the Company completed another registered public debt offering and issued an additional $500 million aggregate principal amount of unsecured senior notes due June 15, 2022, which bear interest at a fixed rate of 1.700%, payable semi-annually (the "1.700% Senior Notes"), and $750 million aggregate principal amount of unsecured senior notes due June 15, 2030, which bear interest at a fixed rate of 2.950%, payable semi-annually (the "2.950% Senior Notes"). The 1.700% Senior Notes and 2.950% Senior Notes were issued at prices equal to 99.880% and 98.995% of their principal amounts, respectively. The proceeds from these offerings are being used for general corporate purposes, which included the repayment of $475 million previously outstanding under the Company's Global Credit Facility (as defined below) on June 3, 2020, and may also be used to repay the Company's $300 million aggregate principal amount outstanding of 2.625% Senior Notes.
The Company has the option to redeem the 2.625% Senior Notes, 3.750% Senior Notes, 1.700% Senior Notes, and 3.750%2.950% Senior Notes (collectively, the "Senior Notes"), in whole or in part, at any time at a price equal to accrued and unpaid interest on the redemption date plus the greater of (i) 100% of the principal amount of the series of Senior Notes to be redeemed or (ii) the sum of the present value of Remaining Scheduled Payments, as defined in the supplemental indentures governing such Senior Notes (together with the indenture governing the Senior Notes, the "Indenture"). The Indenture contains certain covenants that restrict the Company's ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of the Company's property or assets to another party. However, the Indenture does not contain any financial covenants.
Commercial Paper
The Company has a commercial paper borrowing program that allows it to issue up to $500 million of unsecured commercial paper notes through private placement using third-party broker-dealers (the "Commercial Paper Program").
Borrowings under the Commercial Paper Program are supported by the Global Credit Facility, as defined below. Accordingly, the Company does not expect combined borrowings outstanding under the Commercial Paper Program and Global Credit Facility to exceed $500 million. Commercial Paper Program borrowings may be used to support the Company's general working capital and corporate needs. Maturities of commercial paper notes vary, but cannot exceed 397 days from the date of issuance. Commercial paper notes issued under the Commercial Paper Program rank equally with the Company's other forms of unsecured indebtedness. As of December 28, 2019,June 27, 2020, there were 0 borrowings outstanding under the Commercial Paper Program.




24


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revolving Credit Facilities
Global Credit Facility
In August 2019, the Company terminatedreplaced its existing credit facility previously in place and entered into a new credit facility that provides for a $500 million senior unsecured revolving line of credit through August 12, 2024 (the "Global Credit Facility") under terms and conditions substantially similar to those previously in effect.of the previous facility. The Global Credit Facility is also used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program. Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and certain other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. TheYen, and are guaranteed by all of the Company's domestic significant subsidiaries. In accordance with the terms of the agreement governing




21


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the Global Credit Facility, the Company has the ability to expand its borrowing availability under the Global Credit Facility to $1 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility. As of December 28, 2019, there were 0 borrowings outstanding under
Under the Global Credit Facility and the Company was contingently liable for $9.0 million of outstanding letters of credit.
as originally implemented, U.S. Dollar-denominated borrowings under the Global Credit Facility bear interest, at the Company's option, either at (a) a base rate, by reference to the greatest of: (i) the annual prime commercial lending rate of JPMorgan Chase Bank, N.A. in effect from time to time, (ii) the weighted-average overnight Federal funds rate plus 50 basis points, or (iii) the one-month London Interbank Offered Rate ("LIBOR") plus 100 basis points; or (b) LIBOR, adjusted for the Federal Reserve Board's Eurocurrency liabilities maximum reserve percentage, plus a spread of 75 basis points, subject to adjustment based on the Company's credit ratings ("Adjusted LIBOR"). Foreign currency-denominated borrowings bear interest at Adjusted LIBOR.
In addition to paying interest on any outstanding borrowings under the Global Credit Facility, the Company is required to pay a commitment fee to the lenders under the Global Credit Facility with respectrelating to the unutilized commitments. The commitment fee rate of 6.5 basis points under the terms of the Global Credit Facility is subject to adjustment based on the Company's credit ratings. These provisions were amended in May 2020, as discussed below.
The Global Credit Facility contains a number of covenants that, among other things, restrict the Company's ability, subject to specified exceptions, to incur additional debt; incur liens; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself; engage in businesses that are not in a related line of business; make loans, advances, or guarantees; engage in transactions with affiliates; and make certain investments. TheAs originally implemented, the Global Credit Facility also requiresrequired the Company to maintain a maximum ratio of Adjusted Debt to Consolidated EBITDAR (the "leverage ratio") of no greater than 4.25 as of the date of measurement for the four most recent consecutive fiscal quarters. Adjusted Debt is defined generally as consolidated debt outstanding, including finance lease obligations, plus all operating lease obligations. Consolidated EBITDAR is defined generally as consolidated net income plus (i) income tax expense, (ii) net interest expense, (iii) depreciation and amortization expense, (iv) operating lease cost, (v) restructuring and other non-recurring expenses, and (vi) acquisition-related costs. AsThis requirement was amended in May 2020, as discussed below.
In May 2020, the Company entered into an amendment of December 28, 2019, no Eventits Global Credit Facility (the "Amendment"). Under the Amendment, until the earlier of Default (as such term is defined pursuant to(a) the date on which the Company provides the periodic reporting information required under the Global Credit Facility) has occurredFacility for the quarter ending September 30, 2021 and (b) the date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no greater than 4.25 (the "Ratings-Based Toggle Date"), for loans based on Adjusted LIBOR, the spread over Adjusted LIBOR will be increased to 187.5 basis points, the spread on loans based on the base rate will be 87.5 basis points and the commitment fee will be increased to 25 basis points, in each case with no adjustments based on the Company's credit ratings. The pricing will return to the original levels set forth in the Global Credit Facility on the Ratings-Based Toggle Date. Additionally, the leverage ratio requirements have been waived until the quarter ending September 30, 2021. The maximum permitted leverage ratio for that fiscal quarter would be 5.25. For the fiscal quarters ending December 31, 2021 and March 31, 2022, the maximum permitted leverage ratio would be 4.75. For each fiscal quarter ending on or after June 30, 2022, the leverage ratio test would return to 4.25. The Amendment also (a) imposes a new requirement that would remain in effect until the Ratings-Based Toggle Date that the aggregate amount of unrestricted cash of the Company and its subsidiaries plus the undrawn amounts available under the Company's Global Credit Facility. may not be less than $750 million, (b) restricts the amount of dividends and distributions on, or purchases, redemptions, repurchases, retirements or acquisitions of, the Company's stock until the Specified Period Termination Date (as defined below), (c) until March 31, 2021, amends the material adverse change representation to disregard pandemic-related impacts to the business, and (d) until the Specified Period Termination Date, adds certain other restrictions on indebtedness incurred by the Company and its subsidiaries and investments and acquisitions by the Company and its subsidiaries. The "Specified Period Termination Date" is the earlier of (i) the date on which the Company provides the periodic reporting information required under the Global Credit Facility for the quarter ending June 30, 2022 and (ii) the date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no greater than 4.25.
Upon the occurrence of an Event of Default under the Global Credit Facility, the lenders may cease making loans, terminate the Global Credit Facility, and declare all amounts outstanding to be immediately due and payable. The Global Credit Facility specifies a number of events of default (many of which are subject to applicable grace periods), including, among others, the failure to make timely principal, interest, and fee payments or to satisfy the covenants, including the financial covenant described above. Additionally, the Global Credit Facility provides that an Event of Default will occur if Mr. Ralph Lauren, the Company's Executive Chairman and Chief Creative Officer, and entities controlled by the Lauren family fail to maintain a specified minimum percentage of the voting power of the Company's common stock. As of June 27, 2020, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under the Company's Global Credit Facility.




2522 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In March 2020, the Company borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen its liquidity position in response to the COVID-19 pandemic. These borrowings were subsequently repaid in June 2020 with proceeds from the issuances of the 1.700% Senior Notes and 2.950% Senior Notes. As of June 27, 2020, there were 0 borrowings outstanding under the Global Credit Facility and the Company was contingently liable for $8.8 million of outstanding letters of credit.
364 Day Facility
In May 2020, the Company entered into a new credit facility with the same lenders that are parties to the Global Credit Facility (the "364 Day Facility") as a preemptive measure to strengthen its liquidity in response to the COVID-19 pandemic. The 364 Day Facility provided for a $500 million senior unsecured revolving line of credit through May 25, 2021, provided that the maturity date may be earlier if the Company issues senior notes other than to refinance the currently outstanding senior notes due August 18, 2020. In connection with the issuances of the 1.700% Senior Notes and 2.950% Senior Notes in June 2020, the 364 Day Facility automatically terminated in accordance with its terms because the aggregate proceeds received upon issuance of these senior notes exceeded the amount necessary to refinance the 2.625% Senior Notes.
Pan-Asia Credit Facilities
Certain of the Company's subsidiaries in Asia have uncommitted credit facilities with regional branches of JPMorgan Chase (the "Banks") in China and South Korea (the "Pan-Asia Credit Facilities"). These credit facilities are subject to annual renewal and may be used to fund general working capital and corporate needs of the Company's operations in the respective countries. Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the Banks, subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. The Pan-Asia Credit Facilities do not contain any financial covenants. The Company's Pan-Asia Credit Facilities by country are as follows:
China Credit Facility — provides Ralph Lauren Trading (Shanghai) Co., Ltd. with a revolving line of credit of up to 50 million Chinese Renminbi (approximately $7 million) through April 3, 20202021, which is also able to be used to support bank guarantees.
South Korea Credit Facility — provides Ralph Lauren (Korea) Ltd. with a revolving line of credit of up to 30 billion South Korean Won (approximately $26$25 million) through October 30, 2020.
As of December 28, 2019,June 27, 2020, there were 0 borrowings outstanding under the Pan-Asia Credit Facilities.
Refer to Note 11 of the Fiscal 20192020 10-K for additional discussion of the terms and conditions of the Company's debt and credit facilities.
11.Fair Value Measurements
U.S. GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.
Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.




23


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the Company's financial assets and liabilities that are measured and recorded at fair value on a recurring basis, excluding accrued interest components:
 December 28,
2019
 March 30,
2019
 June 27,
2020
 March 28,
2020
 (millions) (millions)
Investments in commercial paper(a)(b)
 $244.9
 $290.7
 $50.0
 $243.6
Derivative assets(a)
 35.3
 32.0
 46.6
 62.3
Derivative liabilities(a)
 9.2
 15.5
 18.2
 6.9
 
(a) 
Based on Level 2 measurements.
(b) 
Amount as of December 28, 2019 was included within short-term investments in the consolidated balance sheet. As of March 30, 2019, $54.7 million was included within cash and cash equivalents and $236.0 million wasAmounts are included within short-term investments in the consolidated balance sheet.




26


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company's investments in commercial paper are classified as available-for-sale and recorded at fair value in its consolidated balance sheets using external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company's investments. To the extent the Company invests in bonds, such investments are also classified as available-for-sale and recorded at fair value in its consolidated balance sheets based on quoted prices in active markets.
The Company's derivative financial instruments are recorded at fair value in its consolidated balance sheets and are valued using pricing models that are primarily based on market observable external inputs, including spot and forward currency exchange rates, benchmark interest rates, and discount rates consistent with the instrument's tenor, and consider the impact of the Company's own credit risk, if any. Changes in counterparty credit risk are also considered in the valuation of derivative financial instruments.
The Company's cash and cash equivalents, restricted cash, and time deposits are recorded at carrying value, which generally approximates fair value based on Level 1 measurements.
The Company's debt instruments are recorded at their carrying values in its consolidated balance sheets, which may differ from their respective fair values. The fair values of the Senior Notes are estimated based on external pricing data, including available quoted market prices, and with reference to comparable debt instruments with similar interest rates, credit ratings, and trading frequency, among other factors. The fair values of the Company's commercial paper notes and borrowings outstanding under its credit facilities, if any, are estimated using external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company's outstanding borrowings. Due to their short-term nature, the fair values of the Company's commercial paper notes and borrowings outstanding under its credit facilities, if any, generally approximate their carrying values.
The following table summarizes the carrying values and the estimated fair values of the Company's debt instruments:
 December 28, 2019 March 30, 2019 June 27, 2020 March 28, 2020
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 
Carrying Value(a)
 
Fair Value(b)
 (millions) (millions)
$300 million 2.625% Senior Notes $298.1
 $301.5
 $293.4
 $299.1
 $299.9
 $300.4
 $299.6
 $299.8
$400 million 3.750% Senior Notes 396.3
 430.2
 395.7
 410.0
 396.6
 445.8
 396.4
 415.1
$500 million 1.700% Senior Notes 497.3
 507.6
 
 
$750 million 2.950% Senior Notes 736.2
 766.1
 
 
Borrowings outstanding under credit facilities 
 
 475.0
 473.0
 
 
(a) 
See Note 10 for discussion of the carrying values of the Company's senior notes.
(b) 
Based on Level 2 measurements.
Unrealized gains or losses resulting from changes in the fair value of the Company's debt instruments do not result in the realization or expenditure of cash, unless the debt is retired prior to its maturity.




24


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-financial Assets and Liabilities
The Company's non-financial assets, which primarily consist of goodwill, other intangible assets, property and equipment, and lease-related ROUright-of-use ("ROU") assets, are not required to be measured at fair value on a recurring basis, and instead are reported at carrying value in its consolidated balance sheet. However, on a periodic basis or whenever events or changes in circumstances indicate that they may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), the respective carrying valuesvalue of non-financial assets are assessed for impairment and, if ultimately considered impaired, are adjusted and written down to their fair value, as estimated based on consideration of external market participant assumptions.
During the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, the Company recorded non-cash impairment adjustmentscharges to reduce the carrying values of certain long-lived assets to their estimated fair values. The fair values of these assets were determined based on Level 3 measurements, the related inputs of which included estimates of the amount and timing of the assets' net future discounted cash flows (including any potential sublease income for lease-related ROU assets), based on historical experience and consideration of current trends, market conditions, and comparable sales, as applicable.




27


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize non-cash impairment adjustmentscharges recorded by the Company during the fiscal periods presented in order to reduce the carrying values of certain long-lived assets to their estimated fair values as of the assessment date:
  Three Months Ended
  December 28, 2019 December 29, 2018
Long-Lived Asset Category 
Fair Value
As of Impairment Date
 Total Impairments 
Fair Value
As of Impairment Date
 Total Impairments
  (millions)
Property and equipment, net $
 $11.0
 $
 $2.2
Operating lease right-of-use assets 13.2
 3.4
 N/A
 N/A
 Nine Months Ended Three Months Ended
 December 28, 2019 December 29, 2018 June 27, 2020 June 29, 2019
Long-Lived Asset Category 
Fair Value
As of Impairment Date
 Total Impairments 
Fair Value
As of Impairment Date
 Total Impairments 
Fair Value
As of Impairment Date
 Total Impairments 
Fair Value
As of Impairment Date
 Total Impairments
 (millions) (millions)
Property and equipment, net $
 $13.6
 $
 $13.3
 N/A
 $
 $
 $0.9
Operating lease right-of-use assets(a) 109.6
 233.2
(a) 
N/A
 N/A
 $
 2.1
 92.9
 225.4
 
 
(a) 
IncludesTotal impairment charges for the three months ended June 29, 2019 includes $225.1 million recorded in connection with the Company's adoption of ASCASU No. 2016-02, "Leases" as of the beginning of Fiscal 2020 which, net of related income tax benefits, reduced its opening retained earnings balance by $169.4 million (see Note 4).million.
See Note 7 for additional discussion regarding non-cash impairment charges recorded by the Company within the consolidated statements of operations during the fiscal periods presented.
NaN impairment charges associated with goodwill or other intangible assets were recorded during either of the nine-monththree-month periods ended December 28, 2019June 27, 2020 or DecemberJune 29, 2018. The Company performed its annual goodwill impairment assessment using a qualitative approach as of the beginning of the second quarter of Fiscal 2020. In performing the assessment, the Company identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of its reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as the Company's actual and expected financial performance. Additionally, the results of the Company's most recent quantitative goodwill impairment test indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results of its qualitative goodwill impairment assessment, the Company concluded that it is not more likely than not that the fair values of its reporting units are less than their respective carrying values and there were no reporting units at risk of impairment.2019.




2825 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.Financial Instruments
Derivative Financial Instruments
The Company is exposed to changes in foreign currency exchange rates, primarily relating to certain anticipated cash flows and the value of the reported net assets of its international operations, as well as changes in the fair value of its fixed-rate debt obligations attributed to changes in a benchmark interest rate. Consequently,Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not enter into derivative transactionsuse derivatives for speculative or trading purposes.
The following table summarizes the Company's outstanding derivative instruments on a gross basis as recorded inon its consolidated balance sheets as of December 28, 2019June 27, 2020 and March 30, 201928, 2020:
 Notional Amounts Derivative Assets Derivative Liabilities Notional Amounts Derivative Assets Derivative Liabilities
Derivative Instrument(a)
 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
     
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
     
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 
Balance
Sheet
Line(b)
 
Fair
Value
 (millions) (millions)
Designated Hedges:
                        
FC — Cash flow hedges $597.0
 $636.3
 
(e) 
 $13.1
 PP $19.5
 AE $1.3
 AE $2.3
 $162.6
 $229.0
 PP $3.3
 PP $7.4
 AE $0.2
 AE $0.4
IRS — Fixed-rate debt 300.0
 300.0
 
 
 AE 1.6
 ONCL 5.9
 
 300.0
 
 
 
 AE 0.2
Net investment hedges(c)
 687.7
 695.3
 ONCA 21.9
 ONCA 12.2
 AE 6.0
 ONCL 6.0
 689.6
 683.6
 ONCA 42.9
 ONCA 48.6
 ONCL 17.5
 AE 4.0
Total Designated Hedges 1,584.7
 1,631.6
 35.0
 31.7
 8.9
 14.2
 852.2
 1,212.6
 46.2
 56.0
 17.7
 4.6
Undesignated Hedges:
                        
FC — Undesignated hedges(d)
 291.3
 146.6
 PP 0.3
 PP 0.3
 AE 0.3
 AE 1.3
 212.6
 473.5
 PP 0.4
 PP 6.3
 AE 0.5
 AE 2.3
Total Hedges $1,876.0
 $1,778.2
 $35.3
 $32.0
 $9.2
 $15.5
 $1,064.8
 $1,686.1
 $46.6
 $62.3
 $18.2
 $6.9
 
(a) 
FC = Forward foreign currency exchange contracts; IRS = Interest rate swap contracts.
(b) 
PP = Prepaid expenses and other current assets; AE = Accrued expenses and other current liabilities; ONCA = Other non-current assets; ONCL = Other non-current liabilities.
(c) 
Includes cross-currency swaps designated as hedges of the Company's net investment in certain foreign operations.
(d) 
Primarily includes undesignated hedges ofRelates to third-party and intercompany foreign currency-denominated intercompany loansexposures and other intercompany balances.
(e)
$11.7 million included within prepaid expenses and other current assets and $1.4 million included within other non-current assets.
The Company records and presents the fair values of all of its derivative assets and liabilities inrecorded on its consolidated balance sheets on a gross basis, even when they are subject to master netting arrangements. However, if the Company were to offset and record the asset and liability balances of all of its derivative instruments on a net basis in accordance with the terms of each of its master netting arrangements, spread across 810 separate counterparties, the amounts presented in the consolidated balance sheets as of December 28, 2019June 27, 2020 and March 30, 201928, 2020 would be adjusted from the current gross presentation as detailed in the following table:
 December 28, 2019 March 30, 2019 June 27, 2020 March 28, 2020
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet that are Subject to Master Netting Agreements 
Net
Amount
 (millions) (millions)
Derivative assets $35.3
 $(6.5) $28.8
 $32.0
 $(4.8) $27.2
 $46.6
 $(0.5) $46.1
 $62.3
 $(6.1) $56.2
Derivative liabilities 9.2
 (6.5) 2.7
 15.5
 (4.8) 10.7
 18.2
 (0.5) 17.7
 6.9
 (6.1) 0.8





29


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company's master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties. See Note 3 for further discussion of the Company's master netting arrangements.




26


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the pretax impact of gains and losses from the Company's designated derivative instruments on its consolidated financial statements for the three-month and nine-month periods ended December 28, 2019June 27, 2020 and DecemberJune 29, 20182019:
 
Gains (Losses)
Recognized in OCI
 
Gains (Losses)
Recognized in OCI
 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
 (millions) (millions)
Designated Hedges:            
FC — Cash flow hedges $(2.4) $11.1
 $13.2
 $38.5
 $(3.0) $(4.4)
Net investment hedges — effective portion (14.7) 10.6
 2.4
 50.8
 0.7
 (10.0)
Net investment hedges — portion excluded from assessment of hedge effectiveness 2.1
 6.8
 7.3
 0.1
 (16.8) 2.5
Total Designated Hedges $(15.0) $28.5
 $22.9
 $89.4
 $(19.1) $(11.9)
 
Location and Amount of Gains (Losses)
from Cash Flow Hedges Reclassified from AOCI to Earnings
 
Location and Amount of Gains (Losses)
from Cash Flow Hedges Reclassified from AOCI to Earnings
 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
 Cost of
goods sold
 Other income (expense), net Cost of
goods sold
 Other income (expense), net 
Cost of
goods sold
 Other income (expense), net 
Cost of
goods sold
 Other income (expense), net 
Cost of
goods sold
 Other income (expense), net 
Cost of
goods sold
 Other income (expense), net
 (millions) (millions)
Total amounts presented in the consolidated statements of operations in which the effects of related cash flow hedges are recorded $(661.6) $2.9
 $(666.3) $1.0
 $(1,826.8) $(2.9) $(1,822.8) $(0.6) $(138.8) $2.1
 $(508.0) $(4.1)
Effects of cash flow hedging:                        
FC — Cash flow hedges 7.1
 (0.1) 4.3
 (0.4) 17.7
 0.3
 (1.2) 1.7
 1.7
 (0.3) 6.2
 0.2
 
Gains (Losses) from Net Investment Hedges
Recognized in Earnings
 Location of Gains (Losses)
Recognized in Earnings
 
Gains (Losses) from Net Investment Hedges
Recognized in Earnings
 Location of Gains (Losses)
Recognized in Earnings
 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
 
 (millions)   (millions)  
Net Investment Hedges              
Net investment hedges — portion excluded from assessment of hedge effectiveness(a)
 $4.7
 $4.8
 $14.5
 $13.9
 Interest expense $2.7
 $5.0
 Interest expense
Total Net Investment Hedges $4.7
 $4.8
 $14.5
 $13.9
  $2.7
 $5.0
 
 

(a) 
Amounts recognized in other comprehensive income (loss) ("OCI") relatedrelating to the effective portion of the Company's net investment hedges would be recognized in earnings only upon the sale or liquidation of the hedged net investment.
As of December 28, 2019,June 27, 2020, it is estimated that $16.6$16.2 million of pretax net gains on both outstanding and matured derivative instruments designated and qualifying as cash flow hedges deferred in AOCI will be recognized in earnings over the next twelve months. Amounts ultimately recognized in earnings will depend on exchange rates in effect when outstanding derivative instruments are settled.




3027 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the pretax impact of gains and losses from the Company's undesignated derivative instruments on its consolidated financial statements for the three-month and nine-month periods ended December 28, 2019June 27, 2020 and DecemberJune 29, 20182019:
 
Gains (Losses)
Recognized in Earnings
 
Location of Gains (Losses)
Recognized in Earnings
 
Gains (Losses)
Recognized in Earnings
 
Location of Gains (Losses)
Recognized in Earnings
 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
 
 (millions)   (millions)  
Undesignated Hedges:              
FC — Undesignated hedges $(2.7) $(1.0) $2.4
 $4.7
 Other income (expense), net $4.7
 $1.9
 Other income (expense), net
Total Undesignated Hedges $(2.7) $(1.0) $2.4
 $4.7
  $4.7
 $1.9
 

Risk Management Strategies
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, the settlement of foreign currency-denominated balances, and the translation of certain foreign operations' net assets into U.S. dollars. As part of its overall strategy to managefor managing the level of exposure to the risk of foreign currencysuch exchange rate fluctuations,risk, relating primarily to changes in the value of the Euro, the Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, and the Chinese Renminbi, and the Hong Kong Dollar, the Company generally hedges a portion of its foreign currencyrelated exposures anticipated over a two-year period. In doing so, the Company usesnext twelve months using forward foreign currency exchange contracts that generally havewith maturities of two months to two yearsone year to provide continuing coverage throughoutover the hedging period of the respective exposure.
Interest Rate Swap ContractContracts
During Fiscal 2016, theThe Company entered into aperiodically designates pay-floating rate, receive-fixed rate interest rate swap contract which it designatedcontracts as a hedgehedges against changes in the fair value of its fixed-rate 2.625% Senior Notesdebt attributed to changes in a benchmark interest rate (the "2.625% Interest Rate Swap"). The 2.625% Interest Rate Swap, which matures on August 18, 2020 and has arate. To the extent of their notional amount, of $300 million, swapssuch contracts effectively swap the fixed interest rate on certain of the 2.625% Senior NotesCompany's fixed-rate senior notes for a variable interest rate based on the 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread. Changes in the fair value of the 2.625% Interest Rate SwapCompany's interest rate swap contracts were offset by changes in the fair value of the 2.625% Senior Notescorresponding senior notes attributed to changes in the benchmark interest rate, with no resulting net impact reflected in earnings during any of the fiscal periods presented. The following table summarizes the carrying value of the 2.625% Senior Noteshedged senior notes and the impacts of the related fair value hedging adjustments as of December 28, 2019June 27, 2020 and March 30, 2019:28, 2020:
 
Carrying Value of
the Hedged Item
 Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Item 
Carrying Value of
the Hedged Item
 Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Item
Hedged Item Balance Sheet Line in which the Hedged Item is Included December 28,
2019
 March 30,
2019
 December 28,
2019
 March 30,
2019
 Balance Sheet Line in which the Hedged Item is Included June 27,
2020
 March 28,
2020
 June 27,
2020
 March 28,
2020
 (millions) (millions)
$300 million 2.625% Senior Notes(a) Current portion of long-term debt $298.1
 N/A
 $(1.6) N/A
 Current portion of long-term debt $299.9
 $299.6
 $
 $(0.2)
$300 million 2.625% Senior Notes Long-term debt N/A
 $293.4
 N/A
 $(5.9)

(a)
The interest rate swap contract designated as a fair value hedge of the Company's 2.625% Senior Notes was settled during the three months ended June 27, 2020 at a loss of $0.3 million.




3128 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cross-Currency Swap Contracts
During Fiscal 2016, theThe Company entered into aperiodically designates (i) pay-floating rate, receive-floating rate cross-currency swap contract with a notional amount of €274 million that was designatedcontracts or (ii) pay-fixed rate, receive fixed-rate cross-currency swap contracts as a hedgehedges of its net investment in certain of its European subsidiaries. This
The Company's pay-floating rate, receive-floating rate cross-currency swap which matures on August 18, 2020, swaps thecontracts swap U.S. Dollar-denominated variable interest rate payments based on the contract's notional amount and 3-month LIBOR plus a fixed spread (as paid under the 2.625% Interest Rate Swapa corresponding interest rate swap contract discussed above) for Euro-denominated variable interest rate payments based on 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread, which, in conjunctioncombination with the 2.625% Interest Rate Swap,corresponding interest rate swap contract, economically converts a portion of the Company's $300 million fixed-rate 2.625% Senior Notes obligationUS-denominated senior note obligations to a €274 million floating-rate Euro-denominated obligation.obligations.
Additionally, in August 2018, the Company entered intoThe Company's pay-fixed rate, receive-fixed rate cross-currency swap contracts with an aggregate notional amount of €346 million that were designated as hedges of its net investment in certain of its European subsidiaries. These contracts, which mature on September 15, 2025, swap the U.S. Dollar-denominated fixed interest rate payments based on the contract's notional amount and the fixed rate of interest payable on certain of the Company's 3.750% Senior Notessenior notes for Euro-denominated 1.29% fixed interest rate payments, thereby economically converting the Company's $400 milliona portion of its fixed-rate 3.750% Senior Notes obligationUS-denominated senior note obligations to a €346 million fixed-rate 1.29%fixed rate Euro-denominated obligation.obligations.
See Note 3 for further discussion of the Company's accounting policies relating to its derivative financial instruments.
Investments
As of December 28, 2019,June 27, 2020, the Company's investments were all classified as short-term and consisted of $583.6$209.3 million of time deposits and $244.9$50.0 million of commercial paper. AsThe Company's investments as of March 30, 2019, the Company's28, 2020 were also all classified as short-term investmentsand consisted of $1.167 billion$252.3 million of time deposits and $236.0$243.6 million of commercial paper, and its non-current investments consisted of $44.9 million of time deposits.paper.
No significant realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded during any of the fiscal periods presented.
Refer to Note 3 of the Fiscal 20192020 10-K for further discussion of the Company's accounting policies relating to its investments.




32


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.Leases
The following table summarizes ROU assets and lease liabilities recorded on the Company's consolidated balance sheet as of December 28, 2019:
  December 28,
2019
 Location Recorded on Balance Sheet
  (millions)  
Assets:    
Operating leases $1,573.4
 Operating lease right-of-use assets
Finance leases 171.1
 Property and equipment, net
Total lease assets $1,744.5
  
Liabilities:    
Operating leases:
    
Current portion $287.5
 Current operating lease liabilities
Non-current portion 1,637.5
 
Long-term operating lease liabilities
Total operating lease liabilities 1,925.0
  
Finance leases:
    
Current portion 10.3
 Accrued expenses and other current liabilities
Non-current portion 191.1
 Other non-current liabilities
Total finance lease liabilities 201.4
  
Total lease liabilities $2,126.4
  

The following table summarizes the composition of net lease cost during the three-month and nine-month periods ended December 28, 2019:
  December 28, 2019  
  Three Months Ended Nine Months Ended Location Recorded in Earnings
  (millions)  
Operating lease cost $81.5
 $241.6
 
(a) 
Finance lease costs:
      
Depreciation of leased assets 4.5
 13.4
 SG&A expenses
Accretion of lease liabilities 2.0
 6.0
 Interest expense
Variable lease cost 82.5
 236.2
 
(b) 
Short-term lease cost 0.6
 4.1
 SG&A expenses
Sublease income (0.7) (2.4) Restructuring and other charges
Total lease cost $170.4
 $498.9
  
(a)
During the three months ended December 28, 2019, $1.1 million included within cost of goods sold, $77.3 million included within SG&A expenses, and $3.1 million included within restructuring and other charges. During the nine months ended December 28, 2019, $3.4 million included within cost of goods sold, $229.7 million included within SG&A expenses, and $8.5 million included within restructuring and other charges.
(b)
During the three months ended December 28, 2019, $1.3 million included within cost of goods sold, $80.6 million included within SG&A expenses, and $0.6 million included within restructuring and other charges. During the nine months ended December 28, 2019, $3.4 million included within cost of goods sold, $230.7 million included within SG&A expenses, and $2.1 million included within restructuring and other charges.




33


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with lease accounting guidance in effect prior to its adoption of ASU 2016-02, during the three-month and nine-month periods ended December 29, 2018, the Company recognized rent expense of approximately $115 million and $337 million, respectively, net of insignificant sublease income, related to its operating leases, which included contingent rental charges of approximately $53 million and $146 million, respectively. Such amounts do not include expense recognized related to non-lease components.
The following table summarizes certain cash flow information related to the Company's leases for the nine months ended ended December 28, 2019:
  December 28, 2019
  Nine Months Ended
  (millions)
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases $289.2
Operating cash flows from finance leases 5.9
Financing cash flows from finance leases 10.6

See Note 19 for supplemental non-cash information related to ROU assets obtained in exchange for new lease liabilities.
The following table provides a maturity analysis summary of the Company's lease liabilities recorded on the consolidated balance sheet as of December 28, 2019:
  December 28, 2019
  
Operating
Leases
 
Finance
Leases
  (millions)
Remainder of Fiscal 2020 $57.5
 $4.7
Fiscal 2021 354.2
 16.6
Fiscal 2022 318.5
 22.6
Fiscal 2023 286.4
 22.4
Fiscal 2024 258.7
 22.3
Fiscal 2025 and thereafter 829.5
 175.0
Total lease payments 2,104.8
 263.6
Less: interest (179.8) (62.2)
Total lease liabilities $1,925.0
 $201.4

Additionally, the Company had approximately $123 million of future payment obligations related to executed lease agreements for which the related leases had not yet commenced as of December 28, 2019.
The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates related to the Company's operating and finance leases recorded on the consolidated balance sheet as of December 28, 2019:
  December 28, 2019
  
Operating
Leases
 
Finance
Leases
Weighted-average remaining lease term (years) 8.0
 12.8
Weighted-average discount rate 2.1% 4.1%

See Note 3 for discussion of the Company's accounting policies related to its leasing activities.




34


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.Commitments and Contingencies
The Company is involved, from time to time, in litigation, other legal claims, and proceedings involving matters associated with or incidental to its business, including, among other things, matters involving credit card fraud, trademark and other intellectual property, licensing, importation and exportation of its products, taxation, unclaimed property, and employee relations. The Company believes at present that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on its consolidated financial statements. However, the Company's assessment of any current litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management's evaluation of the possible liability or outcome of such litigation or claims.
In the normal course of business, the Company enters into agreements that provide general indemnifications. The Company has not made any significant indemnification payments under such agreements in the past and does not currently anticipate incurring any material indemnification payments.




29


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.14.Equity
Class B Common Stock Conversion
During the ninethree months ended December 28,June 29, 2019, the Lauren Family, L.L.C., a limited liability company managed by the children of Mr. Ralph Lauren, converted 1.00.5 million shares of Class B common stock into an equal number of shares of Class A common stock pursuant to the terms of the security. These conversions occurred in advance of a sales plan providing for the sale of such shares of Class A common stock pursuant to Rule 10b5-1 subject to the conditions set forth therein. These transactions resulted in a reclassification within equity and had no effect on the Company's consolidated balance sheet.
Common Stock Repurchase Program
A summary of the Company's repurchases of Class A common stock under its common stock repurchase program is as follows:
 Nine Months Ended Three Months Ended
 December 28,
2019
 December 29,
2018
 June 27,
2020
 June 29,
2019
 (millions) (millions)
Cost of shares repurchased $498.3
 $400.0
 $
 $150.0
Number of shares repurchased 4.9
 3.2
 
 1.3
On May 13, 2019, the Company's Board of Directors approved an expansion of the Company's existing common stock repurchase program that allowsallowed it to repurchase up to an additional $600 million of Class A Commoncommon stock. As of December 28, 2019,June 27, 2020, the remaining availability under the Company's Class A common stock repurchase program was approximately $732$580 million. Repurchases of shares of Class A common stock are subject to certain restrictions under the Company's Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 the Company temporarily suspended its common stock repurchase program as a preemptive action to preserve cash and strengthen its liquidity position.
In addition, during the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, 0.40.5 million and 0.30.4 million shares of Class A common stock, respectively, at a cost of $43.8$33.9 million and $31.9$41.1 million, respectively, were surrendered to or withheld by the Company in satisfaction of withholding taxes in connection with the vesting of awards under the Company's long-term stock incentive plans.
Repurchased and surrendered shares are accounted for as treasury stock at cost and held in treasury for future use.
Dividends
Since 2003,Except as discussed below, the Company has maintained a regular quarterly cash dividend program on its common stock.stock since 2003. On May 13, 2019, the Company's Board of Directors approved an increase to the Company's quarterly cash dividend on its common stock from $0.625 to $0.6875 per share. The third
As a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 20202021 the Company temporarily suspended its quarterly cash dividend of $0.6875 per share was declared on December 13, 2019, was payableprogram as a preemptive action to stockholders of recordpreserve cash and strengthen its liquidity position. Any decision to declare and pay dividends in the future will be made at the closediscretion of businessthe Company's Board of Directors and will depend on December 27, 2019,the Company's results of operations, cash requirements, financial condition, and was paid on January 10, 2020. Dividends paid amounted to $153.2 millionother factors that the Board of Directors may deem relevant, including economic and $141.6 million during the nine-month periods ended December 28, 2019 and December 29, 2018, respectively.market conditions.




3530 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.15.Accumulated Other Comprehensive Income (Loss)
The following table presents OCI activity, net of tax, which is accumulated in equity:
 
Foreign Currency Translation Gains (Losses)(a)
 
Net Unrealized Gains (Losses) on Cash Flow Hedges(b)
 
Net Unrealized Gains (Losses) on Defined
Benefit Plans(c)
 Total Accumulated Other Comprehensive Income (Loss) 
Foreign Currency Translation Gains (Losses)(a)
 
Net Unrealized Gains (Losses) on Cash Flow Hedges(b)
 
Net Unrealized Gains (Losses) on Defined
Benefit Plans(c)
 Total Accumulated Other Comprehensive Income (Loss)
 (millions)
Balance at March 28, 2020 $(130.4) $18.0
 $(5.8) $(118.2)
Other comprehensive income (loss), net of tax:        
OCI before reclassifications 13.0
 (2.8) (0.1) 10.1
Amounts reclassified from AOCI to earnings 
 (1.2) 
 (1.2)
Other comprehensive income (loss), net of tax 13.0
 (4.0) (0.1) 8.9
Balance at June 27, 2020 $(117.4) $14.0
 $(5.9) $(109.3)
 (millions)        
Balance at March 30, 2019 $(118.5) $20.2
 $(5.1) $(103.4) $(118.5) $20.2
 $(5.1) $(103.4)
Other comprehensive income (loss), net of tax:                
OCI before reclassifications (5.5) 11.5
 
 6.0
 8.9
 (3.9) (0.1) 4.9
Amounts reclassified from AOCI to earnings (4.9) (16.2) (0.1) (21.2) (4.9) (5.8) 
 (10.7)
Other comprehensive income (loss), net of tax (10.4) (4.7) (0.1) (15.2) 4.0
 (9.7) (0.1) (5.8)
Balance at December 28, 2019 $(128.9) $15.5
 $(5.2) $(118.6)
        
Balance at March 31, 2018 $(79.3) $(16.0) $(3.2) $(98.5)
Other comprehensive income (loss), net of tax:        
OCI before reclassifications (37.2) 34.8
 0.3
 (2.1)
Amounts reclassified from AOCI to earnings 
 (0.5) (0.2) (0.7)
Other comprehensive income (loss), net of tax (37.2) 34.3
 0.1
 (2.8)
Balance at December 29, 2018 $(116.5) $18.3
 $(3.1) $(101.3)
Balance at June 29, 2019 $(114.5) $10.5
 $(5.2) $(109.2)
 
(a)
OCI before reclassifications to earnings related to foreign currency translation gains (losses) includes income tax provisionsbenefits of $1.8$4.7 million and $7.3$2.0 million for the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, respectively. OCI before reclassifications to earnings for the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019 and December 29, 2018 includes a gaininclude losses of $7.4$12.2 million (net of a $2.3$3.9 million income tax provision)benefit) and a gain of $38.7$5.7 million (net of a $12.2$1.8 million income tax provision)benefit), respectively, related to changes in the fair values of instruments designated as hedges of the Company's net investment in certain foreign operations (see Note 12). Amounts reclassified from AOCI to earnings related to foreign currency translation gains (losses) for the ninethree months ended December 28,June 29, 2019 relate to the reclassification to retained earnings of income tax effects stranded in AOCI (see Note 4).AOCI.
(b) 
OCI before reclassifications to earnings related to net unrealized gains (losses) on cash flow hedges are presented net of income tax provisionsbenefits of $1.7$0.2 million and $3.7$0.5 million for the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, respectively. The tax effects on amounts reclassified from AOCI to earnings are presented in a table below.
(c) 
Activity is presented net of taxes, which were immaterial for both periods presented.
The following table presents reclassifications from AOCI to earnings for cash flow hedges, by component:
 Three Months Ended Nine Months Ended 
Location of
Gains (Losses)
Reclassified from AOCI
to Earnings
 Three Months Ended 
Location of
Gains (Losses)
Reclassified from AOCI
to Earnings
 December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
  June 27,
2020
 June 29,
2019
 
 (millions)  (millions) 
Gains (losses) on cash flow hedges(a):
              
FC — Cash flow hedges $7.1
 $4.3
 $17.7
 $(1.2) Cost of goods sold $1.7
 $6.2
 Cost of goods sold
FC — Cash flow hedges (0.1) (0.4) 0.3
 1.7
 Other income (expense), net (0.3) 0.2
 Other income (expense), net
Tax effect (0.7) (0.3) (1.8) 
 Income tax benefit (provision) (0.2) (0.6) Income tax benefit (provision)
Net of tax $6.3
 $3.6
 $16.2
 $0.5
  $1.2
 $5.8
 
 
(a) 
FC = Forward foreign currency exchange contracts.




3631 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.16.Stock-based Compensation
On August 1, 2019,The Company's stock-based compensation awards are currently issued under the Company's shareholders approved the 2019 Long-Term Stock Incentive Plan (the "2019 Incentive Plan"), which replaced the Company's Amended and Restated 2010 Long-Term Stock Incentive Plan (the "2010 Incentive Plan"). The 2019 Incentive Plan, provides for 1.2 million of new shares authorized for issuance to the participants, in addition to the approximately 3.0 million shares that remained available for issuance under the 2010 Incentive Plan as ofwhich was approved by its stockholders on August 1, 2019. In addition,However, any outstandingprior awards granted under either the Company's 2010 Incentive Plan or the Company's 1997 Long-Term Stock Incentive Plan (the "1997 Incentive Plan")remain subject to the terms of those plans as applicable. Any awards that expire, are forfeited, or are surrendered to the Company in satisfaction of taxes will becomeare available for issuance under the 2019 Incentive Plan. The 2019 Incentive Plan became effective August 1, 2019 and no further grants will be made under the 2010 Incentive Plan. Outstanding awards issued prior to August 1, 2019 will continue to remain subject to the terms of the 2010 Incentive Plan or 1997 Incentive Plan, as applicable. Stock-based compensation awards that may be made under the 2019 Incentive Plan include, but are not limited to, (i) stock options, (ii) restricted stock, and (iii) RSUs.
Refer to Note 1718 of the Fiscal 20192020 10-K for a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service, performance, and market conditions and payout percentages.
Impact on Results
A summary of total stock-based compensation expense and the related income tax benefits recognized during the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019 and December 29, 2018 is as follows:
 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
 (millions) (millions)
Compensation expense $22.1
 $22.5
 $72.9
(a) 
$65.3
 $15.1
 $23.0
Income tax benefit (3.4) (3.4) (11.1) (9.9) (3.1) (3.6)


(a)
Includes $3.6 million of accelerated stock-based compensation expense recorded within restructuring and other charges in the consolidated statements of operations during the second quarter of Fiscal 2020 (see Note 8). All other stock-based compensation expense was recorded within SG&A expenses.
The Company issues its annual grants of stock-based compensation awards in the first half of each fiscal year. Due to the timing of the annual grants and other factors, including the timing and magnitude of forfeiture and performance goal achievement adjustments, as well as changes to the size and composition of the eligible employee population, stock-based compensation expense recognized during any given fiscal period is not indicative of the level of compensation expense expected to be incurred in future periods.
Stock Options
A summary of stock option activity under all plans during the nine months endedDecember 28, 2019 is as follows:
Number of Options
(thousands)
Options outstanding at March 30, 2019834
Granted
Exercised
Cancelled/Forfeited(275)
Options outstanding at December 28, 2019559





37


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Awards and Service-based RSUs
Restricted stock awards were granted to non-employee directors prior to Fiscal 2019. Effective beginning Fiscal 2019, non-employee directors are now granted service-based RSUs in lieu of restricted shares.
The fair values of service-based RSUs granted to certain of the Company's senior executives and other employees, as well as non-employee directors, are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which dividend equivalent amounts do not accrue while outstanding and unvested. The weighted-average grant date fair values of service-based RSU awards granted were $102.96$59.72 and $113.30$109.72 per share during the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, respectively.
A summary of restricted stock and service-based RSU activity during the ninethree months ended December 28, 2019June 27, 2020 is as follows:
 Number of Shares/Units Number of Shares/Units
 Restricted Stock Service-based RSUs Restricted Stock Service-based RSUs
 (thousands) (thousands)
Unvested at March 30, 2019 10
 1,112
Unvested at March 28, 2020 4
 1,094
Granted 
 533
 
 645
Vested (6) (451) (4) (353)
Forfeited 
 (68) 
 (20)
Unvested at December 28, 2019 4
 1,126
Unvested at June 27, 2020 
 1,366

Performance-based RSUs
The fair values of the Company's performance-based RSUs granted to its senior executives and other key employees are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends




32


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for any awards for which dividend equivalent amounts do not accrue while outstanding and unvested. The weighted-average grant date fair values of performance-based RSUs granted were $83.16 and $129.78was $102.69 per share during the ninethree months ended December 28, 2019June 29, 2019. No such awards were granted during the three months ended June 27, 2020 as the Company has elected to temporarily issue service-based RSUs in lieu of performance-based RSUs as a result of business disruptions and December 29, 2018, respectively.uncertainty created by the COVID-19 pandemic.
A summary of performance-based RSU activity during the ninethree months ended December 28, 2019June 27, 2020 is as follows:
  
Number of
Performance-based
RSUs
  (thousands)
Unvested at March 30, 201928, 2020 1,011934
Granted 289
Change due to performance condition achievement 123185
Vested (482720)
Forfeited (627)
Unvested at December 28, 2019June 27, 2020 935372

Market-based RSUs
The Company grants market-based RSUs, which are based on TSR performance, to its senior executives and other key employees. The Company estimates the fair value of its TSR awards on the date of grant using a Monte Carlo simulation, which models multiple stock price paths of the Company's Class A common stock and that of its peer group to evaluate and determine its ultimate expected relative TSR performance ranking, adjustedranking. Compensation expense, net of estimated forfeitures, is recorded regardless of whether, and the extent to reflectwhich, the absence of dividends for any awards for which dividend equivalent amounts do not accrue while outstanding and unvested.




38


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

market condition is ultimately satisfied.
The weighted-average grant date fair values of market-based RSUs granted were $90.59 and $177.13was $139.02 per share during the ninethree months ended December 28, 2019June 29, 2019. No such awards were granted during the three months ended June 27, 2020 as the Company has elected to temporarily issue service-based RSUs in lieu of market-based RSUs as a result of business disruptions and December 29, 2018, respectively.uncertainty created by the COVID-19 pandemic. The assumptions used to estimate the fair value of TSR awards granted during the ninethree months ended December 28,June 29, 2019 and December 29, 2018 were as follows:
 Nine Months Ended
 December 28,
2019
 December 29,
2018
Expected term (years)2.6
 2.6
Expected volatility31.4% 33.5%
Expected dividend yield3.2% 1.9%
Risk-free interest rate1.4% 2.6%
Three Months Ended
June 29,
2019
Expected term (years)2.8
Expected volatility30.8%
Expected dividend yield2.4%
Risk-free interest rate1.7%

A summary of market-based RSU activity during the ninethree months ended December 28, 2019June 27, 2020 is as follows:
  
Number of
Market-based RSUs
  (thousands)
Unvested at March 30, 201928, 2020 76234
Granted 159
Change due to market condition achievement 
Vested 
Forfeited (1)
Unvested at December 28, 2019June 27, 2020 234





33


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options
A summary of stock option activity under all plans during the three months ended June 27, 2020 is as follows:
Number of Options
(thousands)
Options outstanding at March 28, 2020518
Granted
Exercised
Cancelled/Forfeited(34)
Options outstanding at June 27, 2020484

18.17.Segment Information
The Company has 3 reportable segments based on its business activities and organization:
North America — The North America segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In North America, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, and its digital commerce site, www.RalphLauren.com. The Company's wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.
Europe — The Europe segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its various digital commerce sites. The Company's wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country.country, as well as to various third-party digital partners.
Asia — The Asia segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through the Company's retail and wholesale businesses in Asia, Australia, and New Zealand. The Company's retail business in Asia is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its digital commerce site, www.RalphLauren.cn, whichsites, www.RalphLauren.co.jp (which launched in September 2018.June 2020) and www.RalphLauren.cn. In addition, the Company sells its products online through various third-party digital partner commerce sites. In Asia, the Company's wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.




39


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

No operating segments were aggregated to form the Company's reportable segments. In addition to these reportable segments, the Company also has other non-reportable segments, which primarily consist of (i) sales of Club Monaco branded products made through its retail and wholesale businesses in the U.S., Canada, and Europe, and its licensing alliances in Europe and Asia, and (ii) royalty revenues earned through its global licensing alliances, excluding Club Monaco.
The Company's segment reporting structure is consistent with how it establishes its overall business strategy, allocates resources, and assesses performance of its business. The accounting policies of the Company's segments are consistent with those described in Notes 2 and 3 of the Fiscal 20192020 10-K. Sales and transfers between segments are generally recorded at cost and treated as transfers of inventory. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. Each segment's performance is evaluated based upon net revenues and operating income before restructuring-related charges, impairment of assets, and certain other one-time items, if any. Certain corporate overhead expenses related to global functions, most notably the Company's executive office, information technology, finance and accounting, human resources, and legal departments, largely remain at corporate. Additionally, other costs that cannot be allocated to the segments based on specific usage are also maintained at corporate, including corporate advertising and marketing expenses, depreciation and amortization of corporate assets, and other general and administrative expenses resulting from corporate-level activities and projects.
Effective beginning in the first quarter of Fiscal 2020, operating results related to the Company's business in Latin America are included within its Europe segment due to a change in the way in which the Company manages this business. Previously, such results were included within the Company's other non-reportable segments. All prior period segment information has been recast to reflect this change on a comparative basis.
Net revenues and operating income for each of the Company's segments are as follows:
  Three Months Ended Nine Months Ended
  December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
  (millions)
Net revenues:        
North America $910.6
 $908.7
 $2,511.2
 $2,494.5
Europe 437.8
 425.0
 1,278.8
 1,245.0
Asia 289.6
 274.8
 803.5
 767.5
Other non-reportable segments 112.7
 117.3
 292.2
 300.3
Total net revenues $1,750.7
 $1,725.8
 $4,885.7
 $4,807.3


  Three Months Ended Nine Months Ended
  December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
  (millions)
Operating income(a):
        
North America $202.7
 $204.3
 $560.5
 $574.0
Europe 111.9
 92.6
 331.9
 294.2
Asia 46.6
 47.9
 135.6
 123.3
Other non-reportable segments 29.5
 41.4
 85.2
 95.6
  390.7
 386.2
 1,113.2
 1,087.1
Unallocated corporate expenses (159.3) (152.3) (461.3) (474.8)
Unallocated restructuring and other charges(b)
 (7.0) (40.1) (51.1) (78.4)
Total operating income $224.4
 $193.8
 $600.8
 $533.9





4034 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net revenues and operating income (loss) for each of the Company's segments are as follows:
  Three Months Ended
  June 27,
2020
 June 29,
2019
  (millions)
Net revenues:    
North America $165.1
 $719.4
Europe 120.7
 360.8
Asia 171.9
 258.6
Other non-reportable segments 29.8
 90.0
Total net revenues $487.5
 $1,428.8


  Three Months Ended
  June 27,
2020
 June 29,
2019
  (millions)
Operating income (loss)(a):
    
North America $(24.8) $150.1
Europe (16.9) 79.4
Asia 10.1
 48.1
Other non-reportable segments 0.9
 32.9
  (30.7) 310.5
Unallocated corporate expenses (130.3) (137.6)
Unallocated restructuring and other charges(b)
 (7.0) (29.6)
Total operating income (loss) $(168.0) $143.3

 
(a) 
Segment operating income (loss) during the three months ended June 27, 2020 reflects bad debt expense reversals of $15.5 million and $1.0 million related to North America and Europe, respectively, primarily related to adjustments to reserves previously established in connection with COVID-19 business disruptions. Segment operating income (loss) and unallocated corporate expenses during the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019 and December 29, 2018also included certain restructuring-related inventory charges (see Note 8) and asset impairment charges (see Note 7), which are detailed below:
   Three Months Ended Nine Months Ended
   December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
   (millions)
 Restructuring-related inventory charges:        
 Europe $
 $(3.1) $(0.1) $(3.1)
 Asia 
 
 (0.9) 
 Total restructuring-related inventory charges $
 $(3.1) $(1.0) $(3.1)
   Three Months Ended Nine Months Ended
   December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
   (millions)
 Asset impairment charges:        
 North America $(0.4) $(1.1) $(0.4) $(1.4)
 Europe 
 (0.3) 
 (1.8)
 Asia (2.4) 
 (2.4) (3.7)
 Other non-reportable segments (8.6) (0.5) (12.4) (5.8)
 Unallocated corporate expenses (3.0) (0.3) (6.5) (0.6)
 Total asset impairment charges $(14.4) $(2.2) $(21.7) $(13.3)
   Three Months Ended
   June 27,
2020
 June 29,
2019
   (millions)
 Asset impairment charges:    
 North America $(0.2) $
 Asia (1.3) 
 Other non-reportable segments (0.6) 
 Unallocated corporate expenses 
 (1.2)
 Total asset impairment charges $(2.1) $(1.2)


(b)
The three-month and nine-month periods ended December 28, 2019 and December 29, 2018 included certain unallocated restructuring and other charges (see Note 8), which are detailed below:
   Three Months Ended Nine Months Ended
   December 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
   (millions)
 Unallocated restructuring and other charges:        
 North America-related $
 $(14.1) $(0.7) $(17.6)
 Europe-related (0.1) (3.7) (3.2) (12.7)
 Asia-related (0.1) (0.4) (0.9) (0.2)
 Other non-reportable segment-related (0.1) (1.5) (0.8) (2.7)
 Corporate-related (3.7) (16.9) (18.5) (30.5)
 Unallocated restructuring charges (4.0) (36.6) (24.1) (63.7)
 Other charges (see Note 8) (3.0) (3.5) (27.0) (14.7)
 Total unallocated restructuring and other charges $(7.0) $(40.1) $(51.1) $(78.4)





4135 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(b)
The three-month periods ended June 27, 2020 and June 29, 2019 included certain unallocated restructuring and other charges (see Note 8), which are detailed below:
   Three Months Ended
   June 27,
2020
 June 29,
2019
   (millions)
 Unallocated restructuring and other charges:    
 North America-related $(0.1) $(0.7)
 Europe-related 
 (1.8)
 Asia-related 0.2
 (0.5)
 Other non-reportable segment-related (1.1) 
 Corporate operations-related (1.6) (4.0)
 Unallocated restructuring charges (2.6) (7.0)
 Other charges (see Note 8) (4.4) (22.6)
 Total unallocated restructuring and other charges $(7.0) $(29.6)

Depreciation and amortization expense for the Company's segments is as follows:
 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
 (millions) (millions)
Depreciation and amortization:        
Depreciation and amortization expense:    
North America $18.9
 $21.7
 $56.4
 $61.8
 $18.1
 $18.9
Europe 8.4
 8.6
 23.7
 25.1
 7.7
 7.6
Asia 14.9
 12.2
 44.6
 36.8
 14.2
 15.0
Other non-reportable segments 1.4
 1.8
 4.2
 5.6
 1.1
 1.3
Unallocated corporate expenses 24.6
 24.2
 72.1
 72.2
Unallocated restructuring and other charges (see Note 8) 
 3.5
 
 10.5
Total depreciation and amortization $68.2
 $72.0
 $201.0
 $212.0
Unallocated corporate 22.6
 23.4
Total depreciation and amortization expense $63.7
 $66.2

Net revenues by geographic location of the reporting subsidiary are as follows:
 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
 (millions) (millions)
Net revenues(a):
            
The Americas(b)
 $1,025.4
 $1,033.4
 $2,808.4
 $2,807.0
 $194.7
 $810.4
Europe(c)
 435.5
 417.4
 1,273.0
 1,231.8
 120.9
 359.5
Asia(d)
 289.8
 275.0
 804.3
 768.5
 171.9
 258.9
Total net revenues $1,750.7
 $1,725.8
 $4,885.7
 $4,807.3
 $487.5
 $1,428.8
 
(a) 
Net revenues for certain of the Company's licensed operations are included within the geographic location of the reporting subsidiary which holds the respective license.
(b) 
Includes the U.S., Canada, and Latin America. Net revenues earned in the U.S. during the three-month and nine-month periods ended December 28,June 27, 2020 and June 29, 2019 were $966.0$186.1 million and $2.637 billion, respectively, and $968.9$760.1 million, and $2.631 billion during the three-month and nine-month periods ended December 29, 2018.respectively.
(c) 
Includes the Middle East.
(d) 
Includes Australia and New Zealand.




4236 


RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.18.Additional Financial Information
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
A reconciliation of cash, cash equivalents, and restricted cash as of December 28, 2019June 27, 2020 and March 30, 201928, 2020 from the consolidated balance sheets to the consolidated statements of cash flows is as follows:
 December 28,
2019
 March 30,
2019
 June 27,
2020
 March 28,
2020
 (millions) (millions)
Cash and cash equivalents $1,079.9
 $584.1
 $2,451.3
 $1,620.4
Restricted cash included within prepaid expenses and other current assets 1.5
 11.9
 1.4
 1.4
Restricted cash included within other non-current assets 8.0
 30.5
 8.2
 8.0
Total cash, cash equivalents, and restricted cash $1,089.4
 $626.5
 $2,460.9
 $1,629.8

Restricted cash relates to cash held in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters and real estate leases.
Cash Interest and Taxes
Cash paid for interest and income taxes is as follows:
 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
 (millions) (millions)
Cash paid for interest $2.5
 $2.8
 $10.3
 $10.9
 $3.3
 $2.4
Cash paid for income taxes 32.8
 26.3
 114.9
 56.9
 18.9
 22.3

Non-cash Transactions
Operating lease ROU assets recorded in connection with the recognition of new lease liabilities were $13.1 million during the three months ended June 27, 2020. Operating and finance lease ROU assets recorded in connection with the recognition of new lease liabilities were $326.6$17.7 million and $64.0 million, respectively, during the ninethree months ended December 28,June 29, 2019.
Non-cash investing activities also included capital expenditures incurred but not yet paid of $56.6$26.4 million and $35.9$44.2 million for the nine-monththree-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, respectively.
Non-cash financing activities during the three months ended June 29, 2019 included the conversion of 1.00.5 million shares of Class B common stock into an equal number of shares of Class A common stock, during the nine months ended December 28, 2019, as discussed in Note 15.14.
There were no other significant non-cash investing or financing activities for any of the fiscal periods presented.





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Item 2. 
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Special Note Regarding Forward-Looking Statements
Various statements in this Form 10-Q, or incorporated by reference into this Form 10-Q, in future filings by us with the Securities and Exchange Commission (the "SEC"), in our press releases, and in oral statements made from time to time by us or on our behalf constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding our future operating results and sources of liquidity (especially in light of the COVID-19 pandemic), the impact of our strategic plans, initiatives and capital expenses, and our ability to meet environmental, social, and governance goals. Forward-looking statements are based on current expectations and are indicated by words or phrases such as "anticipate," "outlook," "estimate," "expect," "project," "we believe,"believe," "is or remains optimistic,"envision," "currently envisions,"goal," "target," "can," "will," and similar words or phrases and involve known and unknown risks, uncertainties, and other factors which may cause actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed in or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others:
the loss of key personnel, including Mr. Ralph Lauren, or other changes in our executive and senior management team or to our operating structure, and our ability to effectively transfer knowledge during periods of transition;
the impact to our business resulting from the COVID-19 pandemic, including the temporary closure of our stores, distribution centers, and corporate facilities, as well as those of our wholesale customers, licensing partners, suppliers, and vendors, and potential changes to consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations;
our ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments;
our ability to maintain adequate levels of liquidity to provide for our cash needs, including our debt obligations, tax obligations, capital expenditures, and potential payment of dividends and repurchases of our Class A common stock, as well as the ability of our customers, suppliers, vendors, and lenders to access sources of liquidity to provide for their own cash needs;
the impact to our business resulting from changes in consumers' ability, willingness, or preferences to purchase discretionary items and luxury retail products, which tends to decline during recessionary periods, and our ability to accurately forecast consumer demand, the failure of which could result in either a build-up or shortage of inventory;
the impact of economic, political, and other conditions on us, our customers, suppliers, vendors, and lenders, including business disruptions related to pandemic diseases such as COVID-19, civil and political unrest such as the recent protests in the U.S. and Hong Kong, and escalating diplomatic tensions between the U.S. and China;
the potential impact to our business resulting from the financial difficulties of certain of our large wholesale customers, which may result in consolidations, liquidations, restructurings, and other ownership changes in the retail industry, as well as other changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors;
our ability to successfully implement our long-term growth strategy;
our ability to continue to expand and grow our business internationally and the impact of related changes in our customer, channel, and geographic sales mix as a result, as well as our ability to accelerate growth in certain product categories;
our ability to open new retail stores and concession shops, as well as enhance and expand our digital footprint and capabilities, all in an effort to expand our direct-to-consumer presence;
our ability to respond to constantly changing fashion and retail trends and consumer demands in a timely manner, develop products that resonate with our existing customers and attract new customers, and execute marketing and advertising programs that appeal to consumers;
our ability to effectively manage inventory levels and the increasing pressure on our margins in a highly promotional retail environment;
our ability to continue to maintain our brand image and reputation and protect our trademarks;




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our ability to competitively price our products and create an acceptable value proposition for consumers;
the impact to our business resulting from changes in consumers' ability, willingness, or preferences to purchase discretionary items and luxury retail products, which tends to decline during recessionary periods, and our ability to accurately forecast consumer demand, the failure of which could result in either a build-up or shortage of inventory;
our ability to achieve anticipated operating enhancements and cost reductions from our restructuring plans, as well as the impact to our business resulting from restructuring-related charges, which may be dilutive to our earnings in the short term;
the impact to our business resulting from potential costs and obligations related to the early closure of our stores or termination of our long-term, non-cancellable leases;
a variety of legal, regulatory, tax, political, and economic risks, including risks related to the importation and exportation of products which our operations are currently subject to, or may become subject to as a result of potential changes in legislation, and other risks associated with our international operations, such as compliance with the Foreign Corrupt Practices Act or violations of other anti-bribery and corruption laws prohibiting improper payments, and the burdens of complying with a variety of foreign laws and regulations, including tax laws, trade and labor restrictions, and related laws that may reduce the flexibility of our business;
the potential impact to our business resulting from the imposition of additional duties, tariffs, taxes, and other charges or barriers to trade, including those resulting from current trade developments with China and the related impact to global stock markets, as well as our ability to implement mitigating sourcing strategies;
the impact to our business resulting from the United Kingdom's exit from the European Union and the uncertainty surrounding its future relationship with the European Union, including trade agreements, as well as the related impact to global stock markets and currency exchange rates;




44


the impact to our business resulting from increases in the costs of raw materials, transportation, and labor, including wages, healthcare, and other benefit-related costs;
our ability to secure our facilities and systems and those of our third-party service providers from, among other things, cybersecurity breaches, acts of vandalism, computer viruses, or similar Internet or email events;
our efforts to successfully enhance, upgrade, and/or transition our global information technology systems and digital commerce platforms;
the potential impact to our business if any of our distribution centers were to become inoperable or inaccessible;
the potential impact on our operations and on our suppliers and customers resulting from man-made or natural disasters, including pandemic diseases such as COVID-19, severe weather, geological events, and other catastrophic events;
changes in our tax obligations and effective tax rate due to a variety of other factors, including potential changes in U.S. or foreign tax laws and regulations, accounting rules, or the mix and level of earnings by jurisdiction in future periods that are not currently known or anticipated;
our exposure to currency exchange rate fluctuations from both a transactional and translational perspective;
the potential impact to our business resulting from potential costs and obligations related to the financial difficulties of certainearly or temporary closure of our large wholesale customers, which may result in consolidations, liquidations, restructurings,stores or termination of our long-term, non-cancellable leases;
our ability to achieve anticipated operating enhancements and other ownership changes in the retail industry,cost reductions from our restructuring plans, as well as other changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors;
the impact of economic, political, and other conditions on us, our customers, suppliers, vendors, and lenders, including business disruptions in Hong Kong resulting from ongoing protests and political unrest;
the potential impact to our business if any of our distribution centers were to become inoperable or inaccessible;
the potential impact on our operations and on our suppliers and customers resulting from man-made or natural disasters, such as severe weather, geological events, and epidemic diseases such asrestructuring-related charges, which may be dilutive to our earnings in the coronavirus outbreak, and other catastrophic events;short term;
the impact to our business of events of unrest and instability that are currently taking place in certain parts of the world, as well as from any terrorist action, retaliation, and the threat of further action or retaliation;
our ability to access sources of liquidity to provide for our cash needs, including our debt obligations, tax obligations, payment of dividends, capital expenditures, and potential repurchases of our Class A common stock, as well as the ability of our customers, suppliers, vendors, and lenders to access sources of liquidity to provide for their own cash needs;
the potential impact to the trading prices of our securities if our Class A common stock share repurchase activity and/or cash dividend payments differ from investors' expectations;
our ability to maintain our credit profile and ratings within the financial community;
our intention to introduce new products or brands, or enter into or renew alliances;
changes in the business of, and our relationships with, major department storewholesale customers and licensing partners;
our ability to achieve our goals regarding environmental, social, and governance practices; and
our ability to make certain strategic acquisitions and successfully integrate the acquired businesses into our existing operations.




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These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is included in our Annual Report on Form 10-K for the fiscal year ended March 30, 201928, 2020 (the "Fiscal 20192020 10-K"). There are no material changes to such risk factors, nor have we identified any previously undisclosed risks that could materially adversely affect our business, operating results, and/or financial condition, as set forth in Part II, Item 1A — "Risk Factors" of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
In this Form 10-Q, references to "Ralph Lauren," "ourselves," "we," "our," "us," and the "Company" refer to Ralph Lauren Corporation and its subsidiaries, unless the context indicates otherwise. We utilize a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 20202021 will end on March 28, 202027, 2021 and will be a 52-week period ("Fiscal 2020"2021"). Fiscal




45


year 20192020 ended on March 30, 201928, 2020 and was also a 52-week period ("Fiscal 2019"2020"). The thirdfirst quarter of Fiscal 2021 ended on June 27, 2020 and was a 13-week period. The first quarter of Fiscal 2020 ended on December 28,June 29, 2019 and was a 13-week period. The third quarter of Fiscal 2019 ended on December 29, 2018 and was also a 13-week period.
INTRODUCTION
Management's discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the accompanying consolidated financial statements and notes thereto to help provide an understanding of our results of operations, financial condition, and liquidity. MD&A is organized as follows:
Overview.    This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for the three-month and nine-month periodsperiod ended December 28, 2019.June 27, 2020. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.
Results of operations.    This section provides an analysis of our results of operations for the three-month and nine-month periodsperiod ended December 28, 2019June 27, 2020 as compared to the three-month and nine-month periodsperiod ended DecemberJune 29, 2018.2019.
Financial condition and liquidity.    This section provides a discussion of our financial condition and liquidity as of December 28, 2019June 27, 2020, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for the ninethree months ended December 28, 2019June 27, 2020 as compared to the ninethree months ended DecemberJune 29, 2018;2019; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, common stock repurchases, payments of dividends, and our outstanding debt and covenant compliance;compliance, common stock repurchases, and payments of dividends; and (iv) a description of any material changes in our contractual and other obligations since March 30, 2019.28, 2020.
Market risk management.    This section discusses any significant changes in our risk exposures related to foreign currency exchange rates, interest rates, and our investments since March 30, 2019.28, 2020.
Critical accounting policies.    This section discusses any significant changes in our critical accounting policies since March 30, 2019.28, 2020. Critical accounting policies typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 3 of the Fiscal 20192020 10-K.
Recently issued accounting standards.    This section discusses the potential impact on our reported results of operations and financial condition of certain accounting standards that have been recently issued or proposed.issued.
OVERVIEW
Our Business
Our Company is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, fragrances, and hospitality. Our long-standing reputation and distinctive image have been developed across an expanding number of products, brands, sales channels, and international markets. Our brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others.




40


We diversify our business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail, wholesale, and licensing). This allows us to maintain a dynamic balance as our operating results do not depend solely on the performance of any single geographic area or channel of distribution. We sell directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-shops, and digital commerce operations around the world. Our wholesale sales are made principally to major department stores, and specialty stores, and third-party digital partners around the world, as well as to certain third party-owned stores to which we have licensed the right to operate in defined geographic territories using our trademarks. In addition, we license to third parties for specified periods the right to access our various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.




46


We organize our business into the following three reportable segments:
North America — Our North America segment, representing approximately 51% of our Fiscal 20192020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In North America, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, and our digital commerce site, www.RalphLauren.com. Our wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.
Europe — Our Europe segment, representing approximately 26% of our Fiscal 20192020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country.country, as well as to various third-party digital partners.
Asia — Our Asia segment, representing approximately 17% of our Fiscal 20192020 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Asia, Australia, and New Zealand. Our retail business in Asia is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our digital commerce site, www.RalphLauren.cn, whichsites, www.RalphLauren.co.jp (which launched in September 2018.June 2020) and www.RalphLauren.cn. In addition, we sell our products online through various third-party digital partner commerce sites. In Asia, our wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.
No operating segments were aggregated to form our reportable segments. In addition to these reportable segments, we also have other non-reportable segments, representing approximately 6% of our Fiscal 20192020 net revenues, which primarily consist of (i) sales of Club Monaco branded products made through our retail and wholesale businesses in the U.S., Canada, and Europe, and our licensing alliances in Europe and Asia, and (ii) royalty revenues earned through our global licensing alliances, excluding Club Monaco.
Effective beginning in the first quarter of Fiscal 2020, operating results related to our business in Latin America are included within our Europe segment due to a change in the way in which we manage this business. Previously, such results were included within our other non-reportable segments. All prior period segment information has been recast to reflect this change on a comparative basis.
Approximately 46% of our Fiscal 20192020 net revenues were earned outside of the U.S. See Note 1817 to the accompanying consolidated financial statements for a summaryfurther discussion of net revenues and operating income byour segment as well as net revenues by geographic location.reporting structure.
Our business is typically affected by seasonal trends, with higher levels of retail sales in our second and third fiscal quarters and higher wholesale sales in our second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping periods impacting our retail business and the timing of seasonal wholesale shipments. As a result of changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from disease pandemics and other catastrophic events, historical quarterly operating trends and working capital requirements may not be indicative of our future performance. In addition, fluctuations in net sales, operating income (loss), and cash flows in any fiscal quarter may be affected by other events impacting retail sales, such as changes in weather patterns. Accordingly, our operating results and cash flows for the three-month and nine-month periodsperiod ended December 28, 2019June 27, 2020 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 20202021.
Recent Developments
COVID-19 Pandemic
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all major geographies in which we operate (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as significant volatility in global financial markets. Governments worldwide have




41


imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs and reduced pay, which could lower consumers' disposable income levels or willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores, distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors. During the first quarter of Fiscal 2021, the majority of our stores in key markets were closed for an average of 8 to 10 weeks, resulting in significant adverse impacts to our operating results. Although nearly all of our stores were reopened by the end of the first quarter of Fiscal 2021, the majority are operating at limited hours and customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. Our wholesale business has also been adversely affected, particularly in North America and Europe, as a result of department store closures and lower traffic and consumer demand.
Throughout the pandemic, our priority has been to ensure the safety and well-being of our employees, consumers, and the communities in which we operate around the world. We continue to take into account the guidance of local governments and global health organizations and have implemented new health and safety protocols in our stores, distribution centers, and corporate facilities. We have also taken various preemptive actions to preserve cash and strengthen our liquidity position, including:
amending our Global Credit Facility in May 2020 to temporarily waive our leverage ratio requirement (see Note 10 to the accompanying consolidated financial statements);
issuing $1.250 billion of unsecured senior notes in June 2020, the proceeds of which are being used for general corporate purposes (see Note 10 to the accompanying consolidated financial statements);
temporarily suspending our quarterly cash dividend and common stock repurchase program, effective beginning in the first quarter of Fiscal 2021 (see Note 14 to the accompanying consolidated financial statements);
temporarily reducing the base compensation of our executives and senior management team, as well as our Board of Directors, for the first quarter of Fiscal 2021;
temporarily furloughing or reducing work hours for a significant portion of our employees, who nevertheless remain eligible to receive employee benefits during such period;
carefully managing our expense structure across all key areas of spend, including aligning inventory levels with anticipated demand, negotiating rent abatements with certain of our landlords, and postponing non-critical capital build-out and other investments and activities;
pursuing relevant government subsidy programs related to COVID-19 business disruptions; and
improving upon our cash conversion cycle largely driven by our accounts receivable collection efforts and extended vendor payment terms.
The COVID-19 pandemic remains highly volatile and continues to evolve daily. Accordingly, we cannot predict for how long and to what extent the pandemic will impact our business operations or the global economy as a whole. We will continue to assess our operations location-by-location, taking into account the guidance of local governments and global health organizations to determine when our operations can begin returning to normal levels of business. See Item 1A  "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business" in the Fiscal 2020 10-K for additional discussion regarding risks to our business associated with the COVID-19 pandemic.
Fiscal 2019 Restructuring Plan
On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i) rightsizing and consolidation of our global distribution network and corporate




42


offices; (ii) targeted severance-related actions; and (iii) closure of certain of our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan are expected to result in gross annualized expense savings of approximately $60 million to $80 million.
In connection with the Fiscal 2019 Restructuring Plan, we have recorded cumulative charges of approximately $146 million since its inception. Actions associated with the Fiscal 2019 Restructuring Plan are complete and no additional charges are expected to be incurred in connection with this plan.
See Note 8 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal 2019 Restructuring Plan.
Global Economic Conditions and Industry Trends
The global economy and ourretail industry are impacted by many different variables.factors. The current domestic and international political environmentrecent outbreak of COVID-19 has resulted in heightened uncertainty surrounding the future state of the global economy, as well as significant volatility in global financial markets. As discussed in "Recent Developments," governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such actions, together with changes in consumers' willingness to congregate in populated areas and lower levels of disposal income due to rising unemployment rates, have resulted in significant business disruptions across a wide array of industries and an overall decline of the global economy.
The global economy has also been impacted by the domestic and international political environment, including volatile international trade relations and civil and political unrest. Although trade relations between the U.S. and China have begunConcerns continue to ease, both have imposed new tariffs on each other related to the importation of certain product categories. Additionally, ongoing protests in Hong Kong have resulted in a significant decline in local retail traffic and tourism and forced temporary store closures. There are also concernsexist regarding the United Kingdom's recent withdrawal from the European Union, commonly referred to as "Brexit." Although theThe United Kingdom ceased to be a member of the European Union, effective January 31, 2020, itand has now entered a "transition period" during which its existing trading relationship with the European Union will remain in place and it will continue to follow the European Union's rules. Negotiations during the transition period to determine the United Kingdom's future relationship with the European Union, including terms of trade, are expected to be complex. It is not clear at this time what, if any, agreements will be reached by the current December 31, 2020 transition period deadline and the resulting impact on consumer sentiment. As our




47


international business continues to grow and because the majority of our products are produced outside of the U.S., major changes in global trade and diplomatic relations as well as any resulting anti-American sentiment could have a material adverse effect on our business or operating results. CertainAdditionally, certain other worldwide events, including disease epidemicsescalating diplomatic tensions between the U.S. and China, civil and political protests such as those taking place in the recent coronavirus outbreak,U.S. and Hong Kong, acts of terrorism, taxation or monetary policy changes, fluctuations in commodity prices, and rising healthcare costs, also increase volatility in the global economy. In addition, our results have been, and are expected to continue to be, impacted by foreign exchange rate fluctuations.
The retail landscape in which we operate is also evolving, withhas been significantly disrupted by the COVID-19 pandemic, including widespread temporary closures of stores and distribution centers and declines in retail traffic, tourism, and consumer spending on discretionary items. Prior to the COVID-19 pandemic, consumers continuing to diversify the channels in which they transact andhad been increasingly shifting their shopping preference from physical stores to online. This along with other factors has resultedshift in preference could potentially be amplified in the future as a byproduct of the COVID-19 pandemic, as consumers may prefer to avoid populated locations, such as shopping centers, in fear of exposing themselves to infectious diseases. Even before the COVID-19 pandemic, many retailers, including certain of our large wholesale customers, becominghave been highly promotional and have aggressively markingmarked down their merchandise on a periodic basis in an attempt to offset declines in physical store traffic. The retail industry, particularly in the U.S., has also experienced numerous bankruptcies, restructurings, and ownership changes in recent years, particularly in the U.S. which continuesyears. The COVID-19 pandemic could exacerbate these trends if companies do not have adequate financial resources and/or access to experience challenging department store traffic trends. Certainadditional capital to withstand prolonged periods of our operations, notably our North America wholesale business, have been negatively impacted by these dynamics.adverse economic conditions. The continuation of these industry trends could further impact consumer spending and consumption behavior in our industry, which could have a material adverse effect on our business or operating results. Additionally, changes in economic conditions, including a recession or the fear of a recession, may further impact consumer discretionary income levels and spending.
We have implemented various operating strategies globally to help address many of these current challenges and continue to build a foundation for long-term profitable growth centered around strengthening our consumer-facing areas of product, stores, and marketing across channels and driving a more efficient operating model. In connection with these strategies,response to the COVID-19 pandemic, we are taking deliberatehave taken preemptive actions to ensure promotional consistency across channelspreserve cash and enhance the overall brand and shopping experience, including better aligning shipments and inventory levels with underlying demand.strengthen our liquidity position, as described in "Recent Developments." Investing in our digital ecosystem remains a primary focus and is a key component of our integrated global omni-channel strategy.strategy, particularly in light of the current COVID-19 pandemic, which could reshape consumer shopping preferences. We have recently bolstered our capabilities including digital clienteling, Buy Online Ship From Store, Buy Online Pick Up From Store, curbside pickup, and other initiatives to facilitate and enhance the consumer experience. We also continue to take deliberate actions to ensure promotional consistency across channels and to enhance the overall brand and shopping experience, including better aligning shipments and inventory levels with underlying demand. We also remain committed to optimizing our wholesale distribution channel and enhancing our department store consumer experience. Although the investments that we are making in our business and our quality of sales initiatives may create operating profit pressure in the near-term, we expect that these initiatives will create longer-term shareholder value. Further, in response to the recent trade developments between the U.S. and China, we are actively reviewing and acting upon options to mitigate our exposure to the resulting tariffs, including diverting production to and sourcing from other countries, driving productivity within our existing supplier base, and taking pricing actions. As a result of these efforts, the tariffs enacted to date are not expected to have a material impact on our consolidated financial statements. We are also closely monitoring the latest Brexit developments regarding Brexit and are




43


assessing risks and opportunities and developing strategies to mitigate our exposure once the transition period expires, including evaluating scenarios in which the transition period ends without trade agreements in place.
We will continue to monitor these conditions and trends and will evaluate and adjust our operating strategies and foreign currency and cost management opportunities to help mitigate the related impactimpacts on our results of operations, while remaining focused on the long-term growth of our business and protecting and elevating the value of our brand.
For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A — "Risk Factors" in our Fiscal 20192020 10-K.
Summary of Financial Performance
Operating Results
During the three months ended December 28, 2019,June 27, 2020, we reported net revenues of $1.751$487.5 million, a net loss of $127.7 million, and net loss per diluted share of $1.75, as compared to net revenues of $1.429 billion, net income of $334.1$117.1 million, and net income per diluted share of $4.41, as compared to net revenues of $1.726 billion, net income of $120.0 million, and net income per diluted share of $1.48$1.47 during the three months ended DecemberJune 29, 2018. During the nine months ended December 28, 2019, we reported net revenues of $4.886 billion, net income of $633.3 million, and net income per diluted share of $8.13, as compared to net revenues of $4.807 billion, net income of $399.3 million, and net income per diluted share of $4.85 during the nine months ended December 29, 2018.2019. The comparability of our operating results has been affected by international and domestic tax reform,net adverse impacts related to COVID-19 business disruptions, as well as restructuring-related charges, impairment of assets, and certain other charges,benefits (charges), as discussed further below.
Our operating performance for the three-month and nine-month periodsthree months ended December 28, 2019June 27, 2020 reflected revenue growthdeclines of 1.4% and 1.6%, respectively,65.9% on a reported basis and 2.0% and 2.9%, respectively,64.9% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. The increasesdecrease in net revenues on both a reported and constant currency basis were largelyreflected declines across all regions driven by our Europe and Asia businesses.COVID-19 business disruptions.




48


Our gross profit as a percentage of net revenues increased by 80710 basis points to 62.2%71.5% during the three months ended December 28, 2019, and by 50 basis points to 62.6% during the nine months ended December 28, 2019. These increases wereJune 27, 2020, primarily driven by favorable geographic and channel mix due to COVID-19 business disruptions, improved pricing, and lower levels of promotional activity, as well as favorable geographic and channel mix.activity.
Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 505,190 basis points to 48.2% during the three months ended December 28, 2019, largely driven by our increased marketing investment and the unfavorable impact attributable to geographic and channel mix due in part to our new store expansion. During the nine months ended December 28, 2019, SG&A expenses as a percentage of net revenues declined by 30 basis points to 48.8%104.2%, largely driven by a decrease in corporate expenses and operating leveragedeleverage on higherlower net revenues, partially offset by our increased marketing investment and the unfavorable impact attributable to geographic and channel mix due in part to our new store expansion.expense savings across various categories.
Net income increaseddecreased by $214.1$244.8 million to $334.1a loss of $127.7 million during the three months ended December 28, 2019June 27, 2020 as compared to the three months ended DecemberJune 29, 2018,2019, primarily due to a $183.2$311.3 million decline in operating income driven by COVID-19 business disruptions, partially offset by a $74.4 million decrease in our income tax provision largely driven by the combined impact of international and domestic tax reform, as well as a $30.6 million increasedecline in our operating income. Net income increased by $234.0 million to $633.3 million during the nine months ended December 28, 2019 as compared to the nine months ended December 29, 2018, primarily due to a $167.6 million decrease in our income tax provision largely driven by the combined impact of international and domestic tax reform, as well as a $66.9 million increase in operatingpretax income. Net income per diluted share increaseddecreased by $2.93$3.22 to $4.41a loss of $1.75 per share during the three months ended December 28, 2019, and by $3.28 to $8.13 per share during the nine months ended December 28, 2019, bothJune 27, 2020, due to the higherlower level of net income and lower weighted-average diluted shares outstanding.
Net income during the three-month and nine-month periods ended December 28, 2019 reflected a one-time benefit recorded within our income tax provision during the third quarter of Fiscal 2020 of $134.1 million, or $1.77 per diluted share and $1.72 per diluted share, respectively, in connection with Swiss tax reform. Our operating results during the three-monththree months ended June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and nine-month periodsimpairment of assets, which had an after-tax effect of increasing net income by $5.5 million, or $0.07 per diluted share. During the three months ended December 28,June 29, 2019, also reflectedour operating results were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges totaling $21.4$31.4 million, and $73.8 million, respectively, which had an after-tax effect of reducing net income by $16.8$24.4 million, or $0.22$0.30 per diluted share, and $57.5 million, or $0.74 per diluted share, respectively.share.
Net income during the three-month and nine-month periods ended December 29, 2018 reflected unfavorable measurement period adjustments within our income tax provision of $32.3 million, or $0.40 per diluted share, and $27.6 million, or $0.34 per diluted share, respectively, recorded in connection with tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). Our operating results during the three-month and nine-month periods ended December 29, 2018 also reflected restructuring-related charges, impairment of assets, and certain other charges totaling $45.4 million and $94.8 million, respectively, which had an after-tax effect of reducing net income by $35.7 million, or $0.44 per diluted share, and $75.2 million, or $0.91 per diluted share, respectively.
Financial Condition and Liquidity
We ended the thirdfirst quarter of Fiscal 20202021 in a net cash and investments position (cash and cash equivalents plus short-term and non-current investments, less total debt) of $1.214 billion,$780.6 million, as compared to $1.343 billion$945.3 million as of the end of Fiscal 2019.2020. The decline in our net cash and investments position at December 28, 2019June 27, 2020 as compared to March 30, 201928, 2020 was primarily due to cash used in operating activities of $70.3 million, as well as our use of cash to support Class A common stock repurchasesmake dividend payments of $542.1$49.8 million including withholdings in satisfaction(which had been previously declared during the fourth quarter of tax obligations for stock-based compensation awards,Fiscal 2020) and to invest in our business through $216.0$21.3 million in capital expenditures, and to make dividend payments of $153.2 million, partially offset by ourexpenditures.
Net cash used in operating cash flows of $748.0 million.
We generated $748.0 million of cash from operations during the nine months ended December 28, 2019, compared to $683.1activities was $70.3 million during the ninethree months ended DecemberJune 27, 2020, compared to net cash provided by operating activities of $197.4 million during the three months ended June 29, 2018.2019. The increasedecrease in cash provided by operating activities was due to an increasea decrease in net income before non-cash charges, andpartially offset by a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period.
Our equity decreased to $3.117$2.556 billion as of December 28, 2019June 27, 2020 compared to $3.287$2.693 billion as of March 30, 2019,28, 2020, primarily due to our share repurchase activity, cumulative adjustments from our adoption of new accounting standards, and dividends declared, partially offset by our comprehensive income and the impact of stock-based compensation arrangementsloss during the ninethree months ended December 28, 2019.June 27, 2020.




4944 


Recent Developments
Fiscal 2019 Restructuring Plan
On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i) rightsizing and consolidation of our global distribution network and corporate offices; (ii) targeted severance-related actions; and (iii) closure of certain of our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan were largely completed during Fiscal 2019, with certain activities shifting into Fiscal 2020. Total actions associated with the Fiscal 2019 Restructuring Plan are expected to result in gross annualized expense savings of approximately $60 million to $80 million.
In connection with the Fiscal 2019 Restructuring Plan, we expect to incur total estimated charges of approximately $135 million to $150 million, comprised of cash-related charges of approximately $95 million to $105 million and non-cash charges of approximately $40 million to $45 million. Cumulative charges incurred since inception were approximately $129 million. See Note 8 to our accompanying consolidated financial statements for detailed discussions of the charges recorded in connection with the Fiscal 2019 Restructuring Plan.
Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition
The comparability of our operating results for the three-month and nine-month periods ended December 28, 2019June 27, 2020 and DecemberJune 29, 20182019 has been affected by certain events, including:
pretax restructuring-related charges, impairment of assets, andbenefits (charges) incurred in connection with our restructuring activities, as well as certain other charges,asset impairments and other benefits (charges), including those related to COVID-19 business disruptions, as summarized below (references to "Notes" are to the notes to the accompanying consolidated financial statements):
 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
 (millions) (millions)
Impairment of assets (see Note 7) $(14.4) $(2.2) $(21.7) $(13.3) $(2.1) $(1.2)
Restructuring and other charges (see Note 8) (7.0) (40.1) (51.1) (78.4) (7.0) (29.6)
Restructuring-related inventory charges (see Note 8)(a)
 
 (3.1) (1.0) (3.1)
Total charges $(21.4) $(45.4) $(73.8) $(94.8)
Non-routine inventory charges(a)
 (1.3) (0.6)
COVID-19-related bad debt expense adjustments(b)
 16.5
 
Total benefits (charges) $6.1
 $(31.4)
 
 
(a) 
Non-cash restructuring-relatedNon-routine inventory charges are recorded within cost of goods sold in the consolidated statements of operations.
a one-time benefit of $134.1 million recorded within our income tax provision during the third quarter of Fiscal 2020 in connection with Swiss tax reform, which decreased our effective tax rate by 5,820 basis points and 2,180 basis points during the three-month and nine-month periods ended December 28, 2019, respectively. See Note 9 to the accompanying consolidated financial statements for further discussion; and
TCJA enactment-related charges of $32.3 million and $27.6 million recorded within our income tax provision during the three-month and nine-month periods ended December 29, 2018, respectively, which increased our effective tax rate by 1,610 basis points and 500 basis points, respectively. See Note 9 to the accompanying consolidated financial statements for further discussion.




(b)
50COVID-19-related bad debt expense is recorded within SG&A expenses in the consolidated statements of operations.


net adverse impacts related to COVID-19 business disruptions during the three months ended June 27, 2020.
Since we are a global company, the comparability of our operating results reported in U.S. Dollars is also affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. These rateSuch fluctuations can have a significant effect on our reported results. As such, in addition to financial measures prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"), our discussions often contain references to constant currency measures, which are calculated by translating the current-year and prior-year reported amounts into comparable amounts using a single foreign exchange rate for each currency. We present constant currency financial information, which is a non-U.S. GAAP financial measure, as a supplement to our reported operating results. We use constant currency information to provide a framework for assessing how our businesses performed excluding the effects of foreign currency exchange rate fluctuations. We believe this information is useful to investors for facilitating comparisons of operating results and better identifying trends in our businesses. The constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with U.S. GAAP. Reconciliations between this non-U.S. GAAP financial measure and the most directly comparable U.S. GAAP measure are included in the "Results of Operations" section where applicable.
Our discussion also includes reference to comparable store sales. Comparable store sales refer to the change in sales of our stores that have been open for at least 13 full fiscal months. Sales from our digital commerce sites are also included within comparable sales for those geographies that have been serviced by the related site for at least 13 full fiscal months. Sales for stores or digital commerce sites that are closed or shut down during the year are excluded from the calculation of comparable store sales. Sales for stores that are either relocated, enlarged (as defined by gross square footage expansion of 25% or greater), or generally closed for 30 or more consecutive days for renovation are also excluded from the calculation of comparable store sales until such stores have been operating in their new location or in their newly renovated state for at least 13 full fiscal months. All comparable store sales metrics are calculated on a constant currency basis.
Our "Results of Operations" discussion that follows includes the significant changes in operating results arising from these items affecting comparability. However, unusual items or transactions may occur in any period. Accordingly, investors and other financial statement users should consider the types of events and transactions that have affected operating trends.




5145 


RESULTS OF OPERATIONS
Three Months Ended December 28, 2019June 27, 2020 Compared to Three Months Ended DecemberJune 29, 20182019
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
 Three Months Ended     Three Months Ended    
 December 28,
2019
 December 29,
2018
 
$
Change
 
% / bps
Change
 June 27,
2020
 June 29,
2019
 
$
Change
 
% / bps
Change
 (millions, except per share data)   (millions, except per share data)  
Net revenues $1,750.7
 $1,725.8
 $24.9
 1.4% $487.5
 $1,428.8
 $(941.3) (65.9%)
Cost of goods sold (661.6) (666.3) 4.7
 (0.7%) (138.8) (508.0) 369.2
 (72.7%)
Gross profit 1,089.1
 1,059.5
 29.6
 2.8% 348.7
 920.8
 (572.1) (62.1%)
Gross profit as % of net revenues 62.2% 61.4%   80 bps
 71.5% 64.4%   710 bps
Selling, general, and administrative expenses (843.3) (823.4) (19.9) 2.4% (507.6) (746.7) 239.1
 (32.0%)
SG&A expenses as % of net revenues 48.2% 47.7%   50 bps
 104.2% 52.3%   5,190 bps
Impairment of assets (14.4) (2.2) (12.2) 545.8% (2.1) (1.2) (0.9) 74.8%
Restructuring and other charges (7.0) (40.1) 33.1
 (82.5%) (7.0) (29.6) 22.6
 (76.5%)
Operating income 224.4
 193.8
 30.6
 15.8%
Operating income as % of net revenues 12.8% 11.2%   160 bps
Operating income (loss) (168.0) 143.3
 (311.3) NM
Operating income (loss) as % of net revenues (34.5%) 10.0%   (4,450 bps)
Interest expense (4.2) (5.2) 1.0
 (18.9%) (9.6) (4.2) (5.4) 126.2%
Interest income 7.3
 9.9
 (2.6) (26.9%) 2.9
 11.6
 (8.7) (75.1%)
Other income, net 2.9
 1.0
 1.9
 186.3%
Income before income taxes 230.4
 199.5
 30.9
 15.5%
Other income (expense), net 2.1
 (4.1) 6.2
 NM
Income (loss) before income taxes (172.6) 146.6
 (319.2) NM
Income tax benefit (provision) 103.7
 (79.5) 183.2
 NM
 44.9
 (29.5) 74.4
 NM
Effective tax rate(a)
 (45.1%) 39.8%   (8,490 bps)
 26.0% 20.1%   590 bps
Net income $334.1
 $120.0
 $214.1
 178.5%
Net income per common share:        
Net income (loss) $(127.7) $117.1
 $(244.8) NM
Net income (loss) per common share:        
Basic $4.47
 $1.50
 $2.97
 198.0% $(1.75) $1.50
 $(3.25) NM
Diluted $4.41
 $1.48
 $2.93
 198.0% $(1.75) $1.47
 $(3.22) NM
 
(a) 
Effective tax rate is calculated by dividing the income tax benefit (provision) by income (loss) before income taxes.
NM Not meaningful.
Net Revenues.    Net revenues increaseddecreased by $24.9$941.3 million, or 1.4%65.9%, to $1.751 billion$487.5 million during the three months ended December 28, 2019June 27, 2020 as compared to the three months ended DecemberJune 29, 2018,2019, including net unfavorable foreign currency effects of $9.6$13.7 million. On a constant currency basis, net revenues increaseddecreased by $34.5$927.6 million, or 2.0%64.9%.
The following table summarizes the percentage change in our consolidated comparable store sales for the three months ended December 28, 2019June 27, 2020 as compared to the prior fiscal year period:period, inclusive of adverse impacts related to COVID-19 business disruptions:
  % Change
Digital commerce comparable store sales 813%
Comparable store sales excluding digital commerce 1(66%)
Total comparable store sales 2(57%)




5246 


Our global average store count increased by 4021 stores and concession shops during the three months ended December 28, 2019June 27, 2020 compared with the three months ended DecemberJune 29, 2018,2019, largely driven by new openings in Asia and Europe.Asia. The following table details our retail store presence by segment as of the periods presented:
 December 28,
2019
 December 29,
2018
 June 27,
2020
 June 29,
2019
Freestanding Stores:        
North America 232
 227
 230
 224
Europe 94
 87
 95
 92
Asia 130
 111
 136
 119
Other non-reportable segments 76
 76
 72
 75
Total freestanding stores 532
 501
 533
 510
        
Concession Shops:        
North America 2
 2
 2
 3
Europe 29
 25
 29
 29
Asia 620
 619
 619
 624
Other non-reportable segments 4
 5
 4
 5
Total concession shops 655
 651
 654
 661
Total stores 1,187
 1,152
 1,187
 1,171
In addition to our stores, we sell products online in North America and Europe through our various digital commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others.others, as well as through our Polo mobile app in North America and the United Kingdom. In Asia, we sell products online through our digital commerce site, www.RalphLauren.cn, whichsites, www.RalphLauren.co.jp (which launched in September 2018,June 2020) and www.RalphLauren.cn, as well as through various third-party digital partner commerce sites.
Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the comparable prior fiscal year period, are provided below:
 Three Months Ended $ Change Foreign Exchange Impact $ Change % Change Three Months Ended $ Change Foreign Exchange Impact $ Change % Change
 December 28,
2019
 December 29,
2018
 
As
Reported
 
Constant
Currency
 
As
Reported
 
Constant
Currency
 June 27,
2020
 June 29,
2019
 
As
Reported
 
Constant
Currency
 
As
Reported
 
Constant
Currency
 (millions)     (millions)    
Net Revenues:                            
North America $910.6
 $908.7
 $1.9
 $
 $1.9
 0.2% 0.2% $165.1
 $719.4
 $(554.3) $(0.3) $(554.0) (77.0%) (77.0%)
Europe 437.8
 425.0
 12.8
 (10.3) 23.1
 3.0% 5.4% 120.7
 360.8
 (240.1) (9.2) (230.9) (66.6%) (64.0%)
Asia 289.6
 274.8
 14.8
 0.7
 14.1
 5.4% 5.1% 171.9
 258.6
 (86.7) (4.1) (82.6) (33.5%) (31.9%)
Other non-reportable segments 112.7
 117.3
 (4.6) 
 (4.6) (3.8%) (3.8%) 29.8
 90.0
 (60.2) (0.1) (60.1) (66.9%) (66.8%)
Total net revenues $1,750.7
 $1,725.8
 $24.9
 $(9.6) $34.5
 1.4% 2.0% $487.5
 $1,428.8
 $(941.3) $(13.7) $(927.6) (65.9%) (64.9%)
North America net revenues — Net revenues increased slightlydecreased by $1.9approximately $554 million, or 0.2%77.0%, during the three months ended December 28, 2019June 27, 2020 as compared to the three months ended DecemberJune 29, 2018,2019, on both a reported and constant currency basis.
The $1.9$554.3 million net increasedecline in North America net revenues was driven by:
a $31.9$293.8 million net increasedecrease related to our North America wholesale business, driven by COVID-19 business disruptions and the continued challenging department store traffic trends; and
a $260.5 million net decrease related to our North America retail business, on bothinclusive of the adverse impact of COVID-19 business disruptions. On a reported and constant currency basis, reflecting increasesnet revenues decreased by $260.3 million driven by decreases of $22.4$248.9 million in comparable store sales and $9.5$11.4 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business:business, inclusive of adverse impacts related to COVID-19 business disruptions:




5347 


  % Change
Digital commerce comparable store sales 63%
Comparable store sales excluding digital commerce 4(77%)
Total comparable store sales 4(64%)
This increase was largely offset by a $30.0 million net decrease related to our North America wholesale business, largely driven by weaker demand and the continued challenging department store traffic trends.
Europe net revenues — Net revenues increaseddecreased by $12.8$240.1 million, or 3.0%66.6%, during the three months ended December 28, 2019June 27, 2020 as compared to the three months ended DecemberJune 29, 2018,2019, including net unfavorable foreign currency effects of $10.3$9.2 million. On a constant currency basis, net revenues increaseddecreased by $23.1$230.9 million, or 5.4%64.0%.
The $12.8$240.1 million net increasedecline in Europe net revenues was driven by:
an $8.5a $139.3 million net increasedecrease related to our Europe retail business, inclusive of the adverse impact of COVID-19 business disruptions, as well as net unfavorable foreign currency effects of $5.0$5.3 million. On a constant currency basis, net revenues increaseddecreased by $13.5$134.0 million driven by increasesdecreases of $7.0$123.7 million in non-comparablecomparable store sales and $6.5$10.3 million in comparablenon-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:business, inclusive of adverse impacts related to COVID-19 business disruptions:
  % Change
Digital commerce comparable store sales 1544%
Comparable store sales excluding digital commerce 2(75%)
Total comparable store sales 3(62%)
a $4.3$100.8 million net increasedecrease related to our Europe wholesale business driven by stronger demand, partially offset byCOVID-19 business disruptions. The decline also reflected net unfavorable foreign currency effects of $5.3$3.9 million.
Asia net revenues — Net revenues increaseddecreased by $14.8$86.7 million, or 5.4%33.5%, during the three months ended December 28, 2019June 27, 2020 as compared to the three months ended DecemberJune 29, 2018,2019, including net favorableunfavorable foreign currency effects of $0.7$4.1 million. On a constant currency basis, net revenues increaseddecreased by $14.1$82.6 million, or 5.1%, despite the unfavorable impact of approximately 400 basis points related to ongoing protests in Hong Kong.31.9%.
The $14.8$86.7 million net increasedecline in Asia net revenues was driven by:
a $12.7an $80.0 million net increasedecrease related to our Asia retail business, inclusive of the adverse impact of COVID-19 business disruptions, as well as net favorableunfavorable foreign currency effects of $0.7$3.9 million. On a constant currency basis, net revenues increaseddecreased by $12.0$76.1 million, reflecting an increasedecreases of $14.3$67.0 million in non-comparablecomparable store sales partially offset by a decrease of $2.3and $9.1 million in comparablenon-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business:business, inclusive of adverse impacts related to COVID-19 business disruptions:
  % Change
Digital commerce comparable store sales 3668%
Comparable store sales excluding digital commerce (235%)
Total comparable store sales (133%)
The decline in comparable store sales was primarily driven by Hong Kong. Excluding Hong Kong, comparable store sales were up 2% as compared to the prior fiscal year period.
a $2.1$6.7 million net increasedecrease related to our Asia wholesale business.business driven by COVID-19 business disruptions.
Gross Profit.   Gross profit increaseddecreased by $29.6$572.1 million, or 2.8%62.1%, to $1.089 billion$348.7 million for the three months ended December 28, 2019. The increase in gross profit included aJune 27, 2020, including net unfavorable foreign currency effecteffects of $6.6$17.3 million. Gross profit as a percentage of net revenues increased to 62.2%71.5% for the three months ended December 28, 2019June 27, 2020 from 61.4%64.4% for the three months ended DecemberJune 29, 2018.2019. The 80710 basis point increase was primarily driven by favorable geographic and channel mix due to COVID-19 business disruptions, improved pricing, and lower levels of promotional activity, as well as favorable geographic and channel mix.activity.




54


Gross profit as a percentage of net revenues is dependent upon a variety of factors, including changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of promotional activities, foreign currency exchange rates, and fluctuations in material costs. These factors, among others, may cause gross profit as a percentage of net revenues to fluctuate from period to period.




48


Selling, General, and Administrative Expenses.    SG&A expenses include compensation and benefits, advertising and marketing, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses increaseddecreased by $19.9$239.1 million, or 2.4%32.0%, to $843.3$507.6 million for the three months ended December 28, 2019. This increase included aJune 27, 2020, including net favorable foreign currency effecteffects of $5.7$4.8 million. The decrease in SG&A expenses reflects impacts related to COVID-19 business disruptions and our related mitigating actions, including (i) lower compensation-related expenses largely driven by employee furloughs, reduced pay for our executives, senior management team, and Board of Directors, and COVID-19-related government subsidies, (ii) lower rent and occupancy costs largely driven by reduced percentage-of-sales-based rent due to store closures and rent abatements negotiated with certain of our landlords, (iii) favorable COVID-19-related bad debt expense adjustments, and (iv) our operational discipline. SG&A expenses as a percentage of net revenues increased to 48.2%104.2% for the three months ended December 28, 2019June 27, 2020 from 47.7%52.3% for the three months ended DecemberJune 29, 2018.2019. The 505,190 basis point increase was primarily due to our increased marketing investment and the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generatedoperating deleverage on lower net revenues, partially offset by our retail businesses (which typically carry higher operating expense margins).savings across various categories.
The $19.9$239.1 million net increasedecrease in SG&A expenses was driven by:
 
Three Months Ended December 28, 2019
Compared to
Three Months Ended December 29, 2018
 
Three Months Ended June 27, 2020 Compared to
Three Months Ended June 29, 2019
 (millions) (millions)
SG&A expense category:    
Compensation-related expenses $(106.0)
Rent and occupancy costs (43.6)
Selling-related expenses (22.1)
Staff-related expenses (18.0)
Marketing and advertising expenses $11.7
 (17.9)
Compensation-related expenses 8.1
Consulting fees 4.7
Bad debt expense (16.6)
Shipping and handling costs (11.2)
Other (4.6) (3.7)
Total change in SG&A expenses $19.9
Total net decrease in SG&A expenses $(239.1)
DuringIn response to the remainder of Fiscal 2020,COVID-19 pandemic, we continueare carefully evaluating our organizational and operating cost structures to expect to spendbetter support long-term growth, with a focus on key strategic initiatives including marketing, digital, expanding(i) our team organizational structures, (ii) enterprise-wide processes, (iii) our distribution center and renovating our global retail stores and concession shops, and investing in productivity-enhancing infrastructure. We expect to make these investments while continuing to manage our cost base with discipline, including the consolidation of our corporate office footprint.footprint, (iv) our direct-to-consumer and wholesale door presence, (v) discretionary expenses, and (vi) our brand portfolio.
Impairment of Assets. During the three-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, we recorded non-cash impairment charges of $14.4$2.1 million and $2.2$1.2 million, respectively, to write-down certain long-lived assets. See Note 7 to the accompanying consolidated financial statements.
Restructuring and Other Charges. During the three-month periods ended December 28,June 27, 2020 and June 29, 2019, and December 29, 2018, we recorded restructuring charges of $4.0$2.6 million and $36.6$7.0 million, respectively, in connection with our restructuring plans, primarily consisting of severance and benefit costs, as well as a loss on sale of property during the prior fiscal year period.costs. Additionally, during the three months ended December 28, 2019,June 27, 2020, we recorded other charges of $3.0$4.4 million primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. During the three months ended DecemberJune 29, 2018,2019, we recorded other charges of $3.5$22.6 million primarily related to depreciation expensethe charitable donation of the net cash proceeds received from the sale of our corporate jet, and rent and occupancy costs associated with our former Polo store at 711 Fifth Avenue in New York City.certain previously exited real estate locations for which the related lease agreements have not yet expired. See Note 8 to the accompanying consolidated financial statements.
Operating Income.Income (Loss).    Operating income increased by $30.6 million, or 15.8%, to $224.4We reported an operating loss of $168.0 million for the three months ended December 28, 2019.June 27, 2020, as compared to operating income of $143.3 million for the three months ended June 29, 2019, including net unfavorable foreign currency effects of $12.5 million. The decline in operating income reflects net adverse impacts related to COVID-19 business disruptions. Our operating results during the three-month periodsthree months ended December 28,June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and impairment of assets. During the three months ended June 29, 2019, and December 29, 2018 our operating results were negativelyunfavorably impacted by restructuring-relatednet restructuring-related charges, impairment of assets, and certain other charges totaling $21.4 million and $45.4 million, respectively,$31.4 million. Operating loss as previously discussed. Operatinga percentage of net revenues was 34.5% for the three months ended June 27, 2020, reflecting a 4,450 basis point decline from the prior fiscal year period. The decline in operating income as a percentage of net revenues increased to 12.8% for the three months ended December 28, 2019 from 11.2% for the three months ended December 29, 2018. The 160 basis point increase was primarily driven by the increase in our gross margin and lower restructuring-related charges recorded as compared to the prior fiscal year period, partially offset by an increase in SG&A expenses as a percentage of net revenues, all as previously discussed.




5549 


primarily driven by the increase in SG&A expenses as a percentage of net revenues, partially offset by the increase in our gross margin and lower restructuring-related and other charges recorded during the three months ended June 27, 2020 as compared to the prior fiscal year period, all as previously discussed.
Operating income (loss) and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the comparable prior fiscal year period, are provided below:
 Three Months Ended     Three Months Ended    
December 28, 2019 December 29, 2018     June 27, 2020 June 29, 2019    
Operating
Income
 Operating
Margin
 Operating
Income
 Operating
Margin
 $
Change
 Margin
Change
Operating
Income (Loss)
 
Operating
Margin
 Operating
Income (Loss)
 
Operating
Margin
 
$
Change
 
Margin
Change
(millions)   (millions)   (millions)   (millions)   (millions)   (millions)  
Segment:              
North America $202.7
 22.3% $204.3
 22.5% $(1.6) (20 bps) $(24.8) (15.0%) $150.1
 20.9% $(174.9) (3,590 bps)
Europe 111.9
 25.6% 92.6
 21.8% 19.3
 380 bps (16.9) (14.0%) 79.4
 22.0% (96.3) (3,600 bps)
Asia 46.6
 16.1% 47.9
 17.4% (1.3) (130 bps) 10.1
 5.9% 48.1
 18.6% (38.0) (1,270 bps)
Other non-reportable segments 29.5
 26.2% 41.4
 35.3% (11.9) (910 bps) 0.9
 3.0% 32.9
 36.5% (32.0) (3,350 bps)
 390.7
 386.2
 4.5
  (30.7) 310.5
 (341.2) 
Unallocated corporate expenses (159.3) (152.3) (7.0)  (130.3) (137.6) 7.3
 
Unallocated restructuring and other charges (7.0) (40.1) 33.1
  (7.0) (29.6) 22.6
 
Total operating income $224.4
 12.8% $193.8
 11.2% $30.6
 160 bps
Total operating income (loss) $(168.0) (34.5%) $143.3
 10.0% $(311.3) (4,450 bps)
North America operating margin declined by 203,590 basis points, primarily due to the unfavorable impact of approximately 60 basis points related to our wholesale business, largely driven by an increase in SG&A expenses as a percentage of net revenues. Partially offsetting this decline in our operating margin was an approximate 30 basis point increase related to our retail business, largely driven by an increase in our gross margin. The remaining 10 basis point improvement was attributable to lower non-cash charges recorded in connection with our restructuring plans during the three months ended December 28, 2019 as compared to the prior fiscal year period.
Europe operating margin improved by 380 basis points, primarily due to the favorable impacts of approximately 1806,180 basis points and 1201,660 basis points related to our wholesale and retail businesses, respectively, both largely driven by andue to the increase in our gross margin and a decline in SG&A expenses as a percentage of net revenues. The remaining 80revenues driven by COVID-19 business disruptions. These declines were partially offset by favorable channel mix of approximately 3,300 basis point improvement waspoints and 930 basis points attributable to lower non-cash chargesfavorable COVID-19-related bad debt expense adjustments recorded in connection with our restructuring plans during the three months ended December 28, 2019 as comparedJune 27, 2020. The decline in operating margin also reflected favorable foreign currency effects of 20 basis points.
Europe operating margin declined by 3,600 basis points, primarily due to the prior fiscal year period.unfavorable impacts of approximately 1,940 basis points and 790 basis points related to our retail and wholesale businesses, respectively, both largely due to the increase in SG&A expenses as a percentage of net revenues driven by COVID-19 business disruptions. The decline in operating margin also reflected unfavorable foreign currency effects of 910 basis points and approximately 40 basis points attributable to other factors. These declines were partially offset by 80 basis points attributable to favorable COVID-19-related bad debt expense adjustments recorded during the three months ended June 27, 2020.
Asia operating margin declined by 1301,270 basis points, primarily due to the unfavorable impactimpacts of approximately 80870 basis points and 180 basis points related to our retail businessand wholesale businesses, respectively, both largely due to the increase in SG&A expenses as a percentage of net revenues driven by the impact of ongoing protestsCOVID-19 business disruptions. The decline in Hong Kong. Our operating margin also reflected the unfavorable impact of 80130 basis points attributable to higher non-cash restructuring charges recorded in connection with our restructuring plans during the three months ended December 28, 2019June 27, 2020 as compared to the prior fiscal year period. Partially offsetting these declines in our operating margin were favorableperiod and unfavorable foreign currency effects of 20120 basis points. These declines were partially offset by approximately 30 basis points and an approximate 10 basis point improvement in our wholesale business.attributable to other factors.
Unallocated corporate expenses increaseddecreased by $7.0$7.3 million to $159.3$130.3 million during the three months ended December 28, 2019.June 27, 2020. The increasedecline in unallocated corporate expenses was due to higher impairmentlower compensation-related expenses of asset charges$31.0 million and lower rent and occupancy costs of $2.7$7.1 million, partially offset by lower intercompany sourcing commission income of $1.7$22.5 million (which is offset at the segment level and eliminates in consolidation), higher consulting fees of $1.6 million, and higher other expenses of $1.0$8.3 million.
Unallocated restructuring and other charges decreased by $33.1$22.6 million to $7.0 million during the three months ended December 28, 2019,June 27, 2020, as previously discussed above and in Note 8 to the accompanying consolidated financial statements.




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Non-operating Income (Expense), Net. Non-operating income (expense), net is comprised of interest expense, interest income, and other income (expense), net, which includes foreign currency gains (losses), equity in income (losses) from our equity-method investees, and other non-operating expenses. During the three months ended December 28, 2019,June 27, 2020, we reported non-operating expense, net, of $4.6 million, as compared to non-operating income, net of $6.0 million, as compared to $5.7$3.3 million during the three months ended DecemberJune 29, 2018.2019. The $7.9 million decline in non-operating income, net was driven by:

an $8.7 million decline in interest income, primarily driven by the decrease in our investment portfolio and lower available interest rates in financial markets; and



56
a $5.4 million increase in interest expense, primarily driven by the increase in our borrowings during the three months ended June 27, 2020 as compared to the prior fiscal year period (see "Financial Condition and Liquidity — Cash Flows").


These declines were partially offset by a $6.2 million favorable change in other income (expense), net, primarily driven by higher net foreign currency gains during the three months ended June 27, 2020 as compared to the prior fiscal year period.
Income Tax Benefit (Provision).    The income tax benefit (provision) represents federal, foreign, state and local income taxes. TheWe reported an income tax benefit of $44.9 million and an effective tax rate of 26.0% for the three months ended December 28, 2019 were $103.7 million and (45.1%), respectively,June 27, 2020, as compared to an income tax provision of $29.5 million and an effective tax rate of $79.5 million and 39.8%, respectively,20.1% for the three months ended DecemberJune 29, 2018.2019. The $183.2$74.4 million improvement in our income tax provision was primarilydue to the decline in our pretax income driven by a one-time benefit of $134.1 million recorded during the third quarter of Fiscal 2020 in connection with Swiss tax reform, which lowered our effective tax rate by 5,820 basis points,COVID-19 business disruptions, as well as the absence of a $32.3 million TCJA enactment-related charge recorded during the prior fiscal year period, which negatively impacted590 basis point increase in our prior fiscal year periodreported effective tax rate by 1,610 basis points. In addition to this combined 7,430 basis point improvement related to tax reform impacts, the declinerate. The increase in our effective tax rate also reflectedwas driven by an income tax benefit recorded in connection with expected net operating loss carrybacks allowed under the net favorable impactCARES Act (see Note 9 to the accompanying consolidated financial statements), partially offset by valuation allowances recorded against certain deferred tax assets as a result of 1,060 basis points primarilysignificant business disruptions attributable to lower income tax reserves largely associated withCOVID-19 that could impact the settlementultimate realizability of certain international income tax audits.such assets. Our effective tax rate will change from period to period based on various factors including, but not limited to, the geographic mix of earnings, the timing and amount of foreign dividends,dividend payments, enacted tax legislation, state and local taxes, tax audit findings and settlements, and the interaction of various global tax strategies. See Note 9 to the accompanying consolidated financial statements for discussion regarding Swiss tax reform and the TCJA.
Net Income.Income (Loss).    Net income increased to $334.1We reported a net loss of $127.7 million for the three months ended December 28, 2019, from $120.0June 27, 2020, as compared to net income of $117.1 million for the three months ended DecemberJune 29, 2018.2019. The $214.1$244.8 million increasedecrease in net income was primarily due to the decreasedecline in our operating income driven by COVID-19 business disruptions, partially offset by the improvement in our income tax provision, and the increase in our operating income, both as previously discussed. Net income during the three-month periods ended December 28, 2019 and December 29, 2018 reflected a one-time benefit of $134.1 million recorded in connection with Swiss tax reform and TCJA enactment-related charges of $32.3 million, respectively, both as previously discussed. Our operating results during the three-month periodsthree months ended December 28,June 27, 2020 included a net favorable impact of $6.1 million related to certain net benefits partially offset by restructuring-related charges and impairment of assets, which had an after-tax effect of increasing net income by $5.5 million. During the three months ended June 29, 2019, and December 29, 2018our operating results were also negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges totaling $21.4$31.4 million, and $45.4 million, respectively, which had an after-tax effect of reducing net income by $16.8 million and $35.7 million, respectively.$24.4 million.
Net Income (Loss) per Diluted Share.    Net incomeWe reported a net loss per diluted share increased to $4.41of $1.75 for the three months ended December 28, 2019, from $1.48June 27, 2020, as compared to net income per diluted share of $1.47 for the three months ended DecemberJune 29, 2018.2019. The $2.93$3.22 per share increasedecrease was due to the higherlower level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the three months ended December 28, 2019June 27, 2020 driven by our share repurchases during the last twelve months. Net incomeloss per diluted share for the three-month periodsthree months ended December 28,June 27, 2020 included a net favorable impact of $0.07 per share related to certain net benefits partially offset by restructuring-related charges and impairment of assets, as previously discussed. During the three months ended June 29, 2019, and December 29, 2018 were favorablynet income per diluted share was negatively impacted by $1.77$0.30 per share as a result of a one-time benefit recorded in connection with Swiss tax reform and negatively impacted by $0.40 per share as a result of TCJA enactment-related charges, respectively, both as previously discussed. Net income per diluted share for the three-month periods ended December 28, 2019 and December 29, 2018 were also negatively impacted by $0.22 per share and $0.44 per share, respectively, as a result ofnet restructuring-related charges, impairment of assets, and certain other charges, as previously discussed.




5751 


Nine Months Ended December 28, 2019 Compared to Nine Months Ended December 29, 2018
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
  Nine Months Ended    
  December 28,
2019
 December 29,
2018
 
$
Change
 
% / bps
Change
  (millions, except per share data)  
Net revenues $4,885.7
 $4,807.3
 $78.4
 1.6%
Cost of goods sold (1,826.8) (1,822.8) (4.0) 0.2%
Gross profit 3,058.9
 2,984.5
 74.4
 2.5%
Gross profit as % of net revenues 62.6% 62.1%   50 bps
Selling, general, and administrative expenses (2,385.3) (2,358.9) (26.4) 1.1%
SG&A expenses as % of net revenues 48.8% 49.1%   (30 bps)
Impairment of assets (21.7) (13.3) (8.4) 63.7%
Restructuring and other charges (51.1) (78.4) 27.3
 (34.9%)
Operating income 600.8
 533.9
 66.9
 12.5%
Operating income as % of net revenues 12.3% 11.1%   120 bps
Interest expense (12.8) (15.6) 2.8
 (18.0%)
Interest income 28.5
 29.5
 (1.0) (3.6%)
Other expense, net (2.9) (0.6) (2.3) 403.6%
Income before income taxes 613.6
 547.2
 66.4
 12.1%
Income tax benefit (provision) 19.7
 (147.9) 167.6
 NM
Effective tax rate(a) 
 (3.2%) 27.0%   (3,020 bps)
Net income $633.3
 $399.3
 $234.0
 58.6%
Net income per common share:        
Basic $8.28
 $4.92
 $3.36
 68.3%
Diluted $8.13
 $4.85
 $3.28
 67.6%
(a)
Effective tax rate is calculated by dividing the income tax benefit (provision) by income before income taxes.
NM Not meaningful.
Net Revenues.    Net revenues increased by $78.4 million, or 1.6%, to $4.886 billion during the nine months ended December 28, 2019 as compared to the nine months ended December 29, 2018, including net unfavorable foreign currency effects of $61.5 million. On a constant currency basis, net revenues increased by $139.9 million, or 2.9%.
The following table summarizes the percentage change in our consolidated comparable store sales for the nine months ended December 28, 2019 as compared to the prior fiscal year period:
% Change
Digital commerce comparable store sales6%
Comparable store sales excluding digital commerce2%
Total comparable store sales2%
Our global average store count increased by 47 stores and concession shops during the nine months ended December 28, 2019 compared with the nine months ended December 29, 2018, largely driven by new openings in Asia and Europe.




58


Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the comparable prior fiscal year period, are provided below:
  Nine Months Ended $ Change Foreign Exchange Impact $ Change % Change
  December 28,
2019
 December 29,
2018
 
As
Reported
  
Constant
Currency
 
As
Reported
 
Constant
Currency
  (millions)    
Net Revenues:              
North America $2,511.2
 $2,494.5
 $16.7
 $(1.4) $18.1
 0.7% 0.7%
Europe 1,278.8
 1,245.0
 33.8
 (51.2) 85.0
 2.7% 6.8%
Asia 803.5
 767.5
 36.0
 (8.6) 44.6
 4.7% 5.8%
Other non-reportable segments 292.2
 300.3
 (8.1) (0.3) (7.8) (2.7%) (2.5%)
Total net revenues $4,885.7
 $4,807.3
 $78.4
 $(61.5) $139.9
 1.6% 2.9%
North America net revenues — Net revenues increased by $16.7 million, or 0.7%, during the nine months ended December 28, 2019 as compared to the nine months ended December 29, 2018, including net unfavorable foreign currency effects of $1.4 million. On a constant currency basis, net revenues increased by $18.1 million, or 0.7%.
The $16.7 million net increase in North America net revenues was driven by:
a $70.0 million net increase related to our North America retail business, inclusive of net unfavorable foreign currency effects of $0.7 million. On a constant currency basis, net revenues increased by $70.7 million driven by increases of $39.2 million in non-comparable store sales and $31.5 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business:
% Change
Digital commerce comparable store sales3%
Comparable store sales excluding digital commerce2%
Total comparable store sales2%
This increase was largely offset by a $53.3 million decrease related to our North America wholesale business, largely driven by weaker demand and the continued challenging department store traffic trends.
Europe net revenues — Net revenues increased by $33.8 million, or 2.7%, during the nine months ended December 28, 2019 as compared to the nine months ended December 29, 2018, including net unfavorable foreign currency effects of $51.2 million. On a constant currency basis, net revenues increased by $85.0 million, or 6.8%.
The $33.8 million net increase in Europe net revenues was driven by:
a $25.4 million net increase related to our Europe retail business, inclusive of net unfavorable foreign currency effects of $26.6 million. On a constant currency basis, net revenues increased by $52.0 million driven by increases of $31.4 million in non-comparable store sales and $20.6 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:
% Change
Digital commerce comparable store sales16%
Comparable store sales excluding digital commerce2%
Total comparable store sales3%
an $8.4 million increase related to our Europe wholesale business driven by stronger demand, partially offset by net unfavorable foreign currency effects of $24.6 million.




59


Asia net revenues — Net revenues increased by $36.0 million, or 4.7%, during the nine months ended December 28, 2019 as compared to the nine months ended December 29, 2018, including net unfavorable foreign currency effects of $8.6 million. On a constant currency basis, net revenues increased by $44.6 million, or 5.8%, despite the unfavorable impact of approximately 200 basis points related to ongoing protests in Hong Kong.
The $36.0 million net increase in Asia net revenues was driven by:
a $34.5 million net increase related to our Asia retail business, inclusive of net unfavorable foreign currency effects of $8.1 million. On a constant currency basis, net revenues increased by $42.6 million, reflecting increases of $32.6 million in non-comparable store sales and $10.0 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business:
% Change
Digital commerce comparable store sales25%
Comparable store sales excluding digital commerce1%
Total comparable store sales2%
The increase in comparable store sales reflected the impact of Hong Kong. Excluding Hong Kong, comparable store sales were up 4% as compared to the prior fiscal year period.
a $1.5 million net increase related to our Asia wholesale business.
Gross Profit.    Gross profit increased by $74.4 million, or 2.5%, to $3.059 billion for the nine months ended December 28, 2019. The increase in gross profit included a net unfavorable foreign currency effect of $41.3 million. Gross profit as a percentage of net revenues increased to 62.6% for the nine months ended December 28, 2019 from 62.1% for the nine months ended December 29, 2018. The 50 basis point increase was primarily driven by favorable geographic, channel, and product mix, improved pricing, and lower levels of promotional activity, partially offset by higher inventory reserves.
Selling, General, and Administrative Expenses.    SG&A expenses increased by $26.4 million, or 1.1%, to $2.385 billion for the nine months ended December 28, 2019. This increase included a net favorable foreign currency effect of $28.0 million. SG&A expenses as a percentage of net revenues declined to 48.8% for the nine months ended December 28, 2019 from 49.1% for the nine months ended December 29, 2018. The 30 basis point decline was primarily due to a decrease in corporate expenses and operating leverage on higher net revenues, partially offset by our increased marketing investment and the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our retail businesses (which typically carry higher operating expense margins).
The $26.4 million net increase in SG&A expenses was driven by:
  
Nine Months Ended December 28, 2019 Compared to
Nine Months Ended December 29, 2018
  (millions)
SG&A expense category:  
Compensation-related expenses $13.3
Marketing and advertising expenses 12.4
Selling-related expenses 5.1
Other (4.4)
Total change in SG&A expenses $26.4
Impairment of Assets. During the nine-month periods ended December 28, 2019 and December 29, 2018, we recorded non-cash impairment charges of $21.7 million and $13.3 million, respectively, to write-down certain long-lived assets. See Note 7 to the accompanying consolidated financial statements.
Restructuring and Other Charges. During the nine-month periods ended December 28, 2019 and December 29, 2018, we recorded restructuring charges of $24.1 million and $63.7 million, respectively, in connection with our restructuring plans, primarily consisting of severance and benefit costs, as well as a loss on sale of property during the prior fiscal year period. Additionally,




60


during the nine months ended December 28, 2019, we recorded other charges of $27.0 million primarily related to the charitable donation of the net cash proceeds received from the sale of our corporate jet, and rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. During the nine months ended December 29, 2018, we recorded other charges of $14.7 million primarily related to depreciation expense associated with our former Polo store at 711 Fifth Avenue and a customs audit. See Note 8 to the accompanying consolidated financial statements.
Operating Income.    Operating income increased by $66.9 million, or 12.5%, to $600.8 million for the nine months ended December 28, 2019. Our operating results during the nine-month periods ended December 28, 2019 and December 29, 2018 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $73.8 million and $94.8 million, respectively, as previously discussed. The increase in operating income also included a net unfavorable foreign currency effect of $13.3 million. Operating income as a percentage of net revenues increased to 12.3% for the nine months ended December 28, 2019 from 11.1% for the nine months ended December 29, 2018. The 120 basis point increase was primarily driven by the increase in our gross margin and the decline in SG&A expenses as a percentage of net revenues, as well as lower restructuring-related charges recorded as compared to the prior fiscal year period, all as previously discussed.
Operating income and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the comparable prior fiscal year period, are provided below:
  Nine Months Ended    
 December 28, 2019 December 29, 2018    
 
Operating
Income
 
Operating
Margin
 Operating
Income
 
Operating
Margin
 
$
Change
 
Margin
Change
 (millions)   (millions)   (millions)  
Segment:            
North America $560.5
 22.3% $574.0
 23.0% $(13.5) (70 bps)
Europe 331.9
 26.0% 294.2
 23.6% 37.7
 240 bps
Asia 135.6
 16.9% 123.3
 16.1% 12.3
 80 bps
Other non-reportable segments 85.2
 29.2% 95.6
 31.9% (10.4) (270 bps)
  1,113.2
   1,087.1
   26.1
  
Unallocated corporate expenses (461.3)   (474.8)   13.5
  
Unallocated restructuring and other charges (51.1)   (78.4)   27.3
  
Total operating income $600.8
 12.3% $533.9
 11.1% $66.9
 120 bps
North America operating margin declined by 70 basis points, primarily due to the unfavorable impact of approximately 60 basis points related to our wholesale business, largely driven by a decline in our gross margin and an increase in SG&A expenses as a percentage of net revenues. The remaining 10 basis point decline was primarily attributable to our retail business, largely driven by an increase in SG&A expenses as a percentage of net revenues.
Europe operating margin improved by 240 basis points, primarily due to the favorable impact of approximately 160 basis points related to our retail business, largely driven by an increase in our gross margin and a decline in SG&A expenses as a percentage of net revenues. The increase in operating margin also reflected the favorable impacts of approximately 30 basis points related to our wholesale business, largely driven by a decline in SG&A expenses as a percentage of net revenues, and 40 basis points attributable to lower non-cash charges recorded in connection with our restructuring plans during the nine months ended December 28, 2019 as compared to the prior fiscal year period. The remaining 10 basis point improvement was related to foreign currency effects.
Asia operating margin improved by 80 basis points, primarily due to the favorable impact of approximately 70 basis points related to our retail business despite the impact of ongoing protests in Hong Kong, largely driven by an increase in our gross margin, partially offset by an increase in SG&A expenses as a percentage of net revenues. The remaining 10 basis point improvement was attributable to our wholesale business, largely driven by an increase in our gross margin.
Unallocated corporate expenses decreased by $13.5 million to $461.3 million during the nine months ended December 28, 2019. The decline in unallocated corporate expenses was due to lower compensation-related expenses of $20.3 million, lower consulting fees of $5.0 million, and lower marketing and advertising expenses of $4.7 million, partially offset by lower intercompany sourcing commission income of $8.1 million (which is offset at the segment level and eliminates in consolidation), higher impairment of asset charges of $5.9 million, and higher other expenses of $2.5 million.




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Unallocated restructuring and other charges decreased by $27.3 million to $51.1 million during the nine months ended December 28, 2019, as previously discussed above and in Note 8 to the accompanying consolidated financial statements.
Non-operating Income (Expense), Net. During the nine months ended December 28, 2019, we reported non-operating income, net, of $12.8 million, as compared to $13.3 million during the nine months ended December 29, 2018.
Income Tax Benefit (Provision).    The income tax benefit and effective tax rate for the nine months ended December 28, 2019 were $19.7 million and (3.2%), respectively, as compared to an income tax provision and effective tax rate of $147.9 million and 27.0%, respectively, for the nine months ended December 29, 2018. The $167.6 million improvement in our income tax provision was primarily driven by a one-time benefit of $134.1 million recorded during the third quarter of Fiscal 2020 in connection with Swiss tax reform, which lowered our effective tax rate by 2,180 basis points, as well as the absence of a $27.6 million TCJA enactment-related charge recorded during the prior fiscal year period, which negatively impacted our prior fiscal year period effective tax rate by 500 basis points. In addition to this combined 2,680 basis point improvement related to tax reform impacts, the decline in our effective tax rate also reflected the net favorable impact of 340 basis points primarily attributable to lower income tax reserves largely associated with the settlement of certain international income tax audits. See Note 9 to the accompanying consolidated financial statements for discussion regarding Swiss tax reform and the TCJA.
Net Income.    Net income increased to $633.3 million for the nine months ended December 28, 2019, from $399.3 million for the nine months ended December 29, 2018. The $234.0 million increase in net income was primarily due to the decrease in our income tax provision and the increase in operating income, both as previously discussed. Net income during the nine months ended December 28, 2019 and December 29, 2018 reflected a one-time benefit of $134.1 million recorded in connection with Swiss tax reform and TCJA enactment-related charges of $27.6 million, respectively, both as previously discussed. Our operating results during the nine months ended December 28, 2019 and December 29, 2018 were also negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $73.8 million and $94.8 million, respectively, which had an after-tax effect of reducing net income by $57.5 million and $75.2 million, respectively.
Net Income per Diluted Share.    Net income per diluted share increased to $8.13 for the nine months ended December 28, 2019, from $4.85 for the nine months ended December 29, 2018. The $3.28 per share increase was due to the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the nine months ended December 28, 2019 driven by our share repurchases during the last twelve months. Net income per diluted share for the nine-month periods ended ended December 28, 2019 and December 29, 2018 were favorably impacted by $1.72 per share as a result of a one-time benefit recorded in connection with Swiss tax reform and negatively impacted by $0.34 per share as a result of TCJA enactment-related charges, respectively, both as previously discussed. Net income per diluted share for the nine-month periods ended December 28, 2019 and December 29, 2018 were also negatively impacted by $0.74 per share and $0.91 per share, respectively, as a result of restructuring-related charges, impairment of assets, and certain other charges, as previously discussed.
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition 
The following table presents our financial condition as of December 28, 2019June 27, 2020 and March 30, 201928, 2020:
 December 28,
2019
 March 30,
2019
 $
Change
 June 27,
2020
 March 28,
2020
 $
Change
 (millions) (millions)
Cash and cash equivalents $1,079.9
 $584.1
 $495.8
 $2,451.3
 $1,620.4
 $830.9
Short-term investments 828.5
 1,403.4
 (574.9) 259.3
 495.9
 (236.6)
Non-current investments(a)
 
 44.9
 (44.9)
Short-term debt(a)
 
 (475.0) 475.0
Current portion of long-term debt(b)(a)
 (298.1) 
 (298.1) (299.9) (299.6) (0.3)
Long-term debt(b)(a)
 (396.3) (689.1) 292.8
 (1,630.1) (396.4) (1,233.7)
Net cash and investments(c)
 $1,214.0
 $1,343.3
 $(129.3)
Net cash and investments(b)
 $780.6
 $945.3
 $(164.7)
Equity $3,116.5
 $3,287.2
 $(170.7) $2,555.5
 $2,693.1
 $(137.6)
 
(a)
Recorded within other non-current assets in our consolidated balance sheets.




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(b) 
See Note 10 to the accompanying consolidated financial statements for discussion of the carrying values of our debt.
(c)(b) 
"Net cash and investments" is defined as cash and cash equivalents, plus short-term and non-current investments, less total debt.
The decrease in our net cash and investments position at December 28, 2019June 27, 2020 as compared to March 30, 201928, 2020 was primarily due to cash used in operating activities of $70.3 million, as well as our use of cash to support Class A common stock repurchasesmake dividend payments of $542.1$49.8 million including withholdings in satisfaction(which had been previously declared during the fourth quarter of tax obligations for stock-based compensation awards,Fiscal 2020) and to invest in our business through $216.0$21.3 million in capital expenditures, and to make dividend payments of $153.2 million, partially offset by our operating cash flows of $748.0 million.expenditures.
The decrease in equity was primarily attributable to our share repurchase activity, cumulative adjustments from our adoption of new accounting standards, and dividends declared, partially offset by our comprehensive income and the impact of stock-based compensation arrangementsloss during the ninethree months ended December 28, 2019.June 27, 2020.
Cash Flows
The following table details our cash flows for the nine-monththree-month periods ended December 28, 2019June 27, 2020 and DecemberJune 29, 2018:2019:
  Nine Months Ended  
  December 28,
2019
 December 29,
2018
 $
Change
  (millions)
Net cash provided by operating activities $748.0
 $683.1
 $64.9
Net cash provided by (used in) investing activities 425.9
 (810.1) 1,236.0
Net cash used in financing activities (706.8) (481.1) (225.7)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (4.2) (23.9) 19.7
Net increase (decrease) in cash, cash equivalents, and restricted cash $462.9
 $(632.0) $1,094.9
  Three Months Ended  
  June 27,
2020
 June 29,
2019
 $
Change
  (millions)
Net cash provided by (used in) operating activities $(70.3) $197.4
 $(267.7)
Net cash provided by investing activities 220.7
 107.2
 113.5
Net cash provided by (used in) financing activities 673.1
 (244.8) 917.9
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 7.6
 5.1
 2.5
Net increase in cash, cash equivalents, and restricted cash $831.1
 $64.9
 $766.2
Net Cash Provided by (Used in) Operating Activities.    Net cash used in operating activities was $70.3 million during the three months ended June 27, 2020, as compared to net cash provided by operating activities increased to $748.0of $197.4 million during the ninethree months ended December 28, 2019, as compared to $683.1 million during the nine months ended DecemberJune 29, 2018.2019. The $64.9$267.7 million net increasedecrease in cash provided by operating activities was due to an increasea decrease in net income before non-cash charges, andpartially offset by a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period. The net favorable change related to our operating assets and liabilities, including our working capital, was primarily driven by:
a favorable change relatedreduction in inventory receipts to our inventory due to the timing of inventory receipts; andalign with anticipated product demand;
a favorable change related to our prepaidaccounts receivable, largely driven by our collection efforts, as well as a decline in wholesale revenue due to COVID-19 business disruptions; and other current assets,




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a favorable change related to our income tax receivables and payables largely driven by the timing of cash payments.receipts and payments, respectively.
These increases related to our operating assets and liabilities were partially offset by:
an unfavorable change related to our income taxaccounts payable, largely as a result of the absence of charges recorded during the prior fiscal year period in connection with the TCJA's mandatory transition tax; and
an unfavorable change related to our accounts receivable, largely driven by the timing of cash receipts.a decrease in expenses due to COVID-19 business disruptions, partially offset by extended vendor payment terms.
Net Cash Provided by (Used in) Investing Activities.    Net cash provided by investing activities was $425.9$220.7 million during the ninethree months ended December 28, 2019,June 27, 2020, as compared to net cash used in investing activities of $810.1$107.2 million during the ninethree months ended DecemberJune 29, 2018.2019. The $1.236 billion$113.5 million net increase in cash provided by investing activities was primarily driven by:
a $1.273 billion$103.4 million increase in proceeds from sales and maturities of investments, less purchases of investments. During the ninethree months ended December 28, 2019,June 27, 2020, we received net proceeds from sales and maturities of investments of $620.2$238.3 million, as compared to making net investment purchases of $652.6$134.9 million during the ninethree months ended DecemberJune 29, 2018;2019; and




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a $23.8$28.1 million decrease in paymentscapital expenditures. During the three months ended June 27, 2020, we spent $21.3 million on capital expenditures, as compared to settle net investment hedges.$49.4 million during the three months ended June 29, 2019. This decline reflects the temporary postponement of non-critical capital expenditures as a preemptive action to preserve cash and strengthen our liquidity position in response to current business disruptions related to the COVID-19 pandemic. Our capital expenditures during the three months ended June 27, 2020 primarily related to international store openings and renovations, as well as enhancements to our information technology systems.
These increases in cash provided by investing activities were partially offset by:
a $66.8$20.8 million increasedecrease in capital expenditures. Duringcash proceeds from the ninesale of property. No property was sold during the three months ended December 28,June 27, 2020. On a comparative basis, during the three months ended June 29, 2019, we spent $216.0received net cash proceeds of $20.8 million on capital expenditures, as compared to $149.2 million duringfrom the nine months ended December 29, 2018. Our capital expenditures during the nine months ended December 28, 2019 primarily related to new store openings, retail and department store renovations, enhancements to our information technology systems, and the consolidationsale of our corporate office footprint.jet. These proceeds were donated to the Ralph Lauren Corporate Foundation (formerly known as the Polo Ralph Lauren Foundation), which is reflected within cash flows from operating activities for the three months ended June 29, 2019.
Net Cash Used inProvided by (Used in) Financing Activities.    Net cash provided by financing activities was $673.1 million during the three months ended June 27, 2020, as compared to net cash used in financing activities was $706.8of $244.8 million during the ninethree months ended December 28, 2019, as compared to $481.1 million during the nine months ended DecemberJune 29, 2018.2019. The $225.7$917.9 million net increase in cash used inprovided by financing activities was primarily driven by:
a $110.2$766.9 million increase in cash proceeds from the issuance of debt, less debt repayments. During the three months ended June 27, 2020, we received $1.242 billion in proceeds from our issuance of 1.700% unsecured notes and 2.950% unsecured senior notes, a portion of which was used to repay $475.0 million of borrowings previously outstanding under our credit facilities. On a comparative basis, during the three months ended June 29, 2019, we did not issue or repay any debt; and
a $157.2 million decrease in cash used to repurchase shares of our Class A common stock. During the ninethree months ended December 28, 2019, we used $498.3 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $43.8June 27, 2020, $33.9 million in shares of Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our long-term stock incentive plans.plans, and no shares of Class A common stock were repurchased pursuant to our common stock repurchase program, which we have temporarily suspended as a preemptive action to preserve cash and strengthen our liquidity position in response to current business disruptions related to the COVID-19 pandemic. On a comparative basis, during the ninethree months ended DecemberJune 29, 2018,2019, we used $400.0$150.0 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $31.9$41.1 million in shares of Class A common stock were surrendered or withheld for taxes;taxes.
an $88.2 million increase in cash proceeds from the issuance of debt, less debt repayments. During the nine months ended December 28, 2019, we did not issue or repay any debt. On a comparative basis, during the nine months ended December 29, 2018, we received $398.1 million in proceeds from our issuance of 3.750% unsecured senior notes in August 2018, a portion of which was used to repay $300.0 million of our 2.125% unsecured senior notes that matured in September 2018. Additionally, during the nine months ended December 29, 2018, we repaid $9.9 million of borrowings previously outstanding under our credit facilities;
a $21.8 million decrease in proceeds from exercise of stock options; and
an $11.6 million increase in payments of dividends, driven by an increase to the quarterly cash dividend per share. Dividends paid amounted to $153.2 million and $141.6 million during the nine-month periods ended December 28, 2019 and December 29, 2018, respectively.



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Sources of Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term investments, availability under our credit facilities and commercial paper program, and other available financing options.
During the ninethree months ended December 28, 2019,June 27, 2020, we generated $748.0used $70.3 million of net cash flows fromin our operations. As of December 28, 2019,June 27, 2020, we had $1.908$2.711 billion in cash, cash equivalents, and short-term investments, of which $747.4$613.6 million were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations. Undistributed foreign earnings that were subject to the TCJA'sTax Cuts and Jobs Act's one-time mandatory transition tax as of December 31, 2017 are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We intend to permanently reinvest undistributed foreign earnings generated after December 31, 2017 that were not subject to the one-time mandatory transition tax. However, if our plans change and we choose to repatriate post-2017 earnings to the U.S. in the future, we would be subject to applicable U.S. and foreign taxes.
The following table presents our total availability, borrowings outstanding, and remaining availability under our credit facilities and Commercial Paper Program as of December 28, 2019:June 27, 2020:
  December 28, 2019
Description(a)
 
Total
Availability
 
Borrowings
Outstanding
 
Remaining
Availability
  (millions)
Global Credit Facility and Commercial Paper Program(b)
 $500
 $9
(c) 
$491
Pan-Asia Credit Facilities 33
 
 33




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  June 27, 2020
Description(a)
 
Total
Availability
 
Borrowings
Outstanding
 
Remaining
Availability
  (millions)
Global Credit Facility and Commercial Paper Program(b)
 $500
 $9
(c) 
$491
Pan-Asia Credit Facilities 32
 
 32
 
(a) 
As defined in Note 10 to the accompanying consolidated financial statements.
(b) 
Borrowings under the Commercial Paper Program are supported by the Global Credit Facility. Accordingly, we do not expect combined borrowings outstanding under the Commercial Paper Program and the Global Credit Facility to exceed $500 million.
(c) 
Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of December 28, 2019.June 27, 2020.
We believe that ourthe Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of December 28, 2019,June 27, 2020, there were eight financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. In accordance with the terms of the agreement, we have the ability to expand our borrowing availability under the Global Credit Facility to $1 billion through the full term of the facility, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments.
Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the participating regional branches of JPMorgan Chase (the "Banks"), subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. 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 Global Credit Facility and the Pan-Asia Credit Facilities in the event of our election to draw additional funds in the foreseeable future.
Our sources of liquidity are used to fund our ongoing cash requirements, including working capital requirements, global retail store and digital commerce expansion, construction and renovation of shop-within-shops, investment in infrastructure, including technology, acquisitions, joint ventures, payment of dividends, debt repayments, Class A common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and other corporate activities, including our restructuring actions. We believe that our existing sources of cash, the availability under our credit facilities, and our ability to access capital markets will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, the ongoing development of our businesses, and our plans for further business expansion. However, prolonged periods of adverse economic conditions or business disruptions in any of our key regions, or a combination thereof, such as those resulting from the COVID-19 pandemic, could impede our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our operations.
See Note 10 to the accompanying consolidated financial statements and Note 11 of the Fiscal 20192020 10-K for detailed disclosure of the terms and conditions of our credit facilities.
Common Stock Repurchase Program
On May 13, 2019, our Board of Directors approved an expansion of our existing common stock repurchase program that allows us to repurchase up to an additional $600 million of Class A Common stock. As of December 28, 2019, the remaining availability under our Class A common stock repurchase program was approximately $732 million. Repurchases of shares of Class A common stock are subject to overall business and market conditions.
See Note 15 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.



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Dividends
Since 2003, we have maintained a regular quarterly cash dividend program on our common stock. On May 13, 2019 our Board of Directors approved an increase to the quarterly cash dividend on our common stock from $0.625 to $0.6875 per share.
We intend to continue to pay regular quarterly dividends on our outstanding common stock. However, any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our results of operations, cash requirements, financial condition, and other factors that the Board of Directors may deem relevant.
See Note 15 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.
Debt and Covenant Compliance
In August 2015, we completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). In August 2018, we completed another registered public debt offering and issued an additional $400 million aggregate principal amount of unsecured senior notes due September 15, 2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes").




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In June 2020, we completed another registered public debt offering and issued an additional $500 million aggregate principal amount of unsecured senior notes due June 15, 2022, which bear interest at a fixed rate of 1.700% payable semi-annually (the "1.700% Senior Notes"), and $750 million aggregate principal amount of unsecured senior notes due June 15, 2030, which bear interest at a fixed rate of 2.950%, payable semi-annually (the "2.950% Senior Notes").
The indenture and supplemental indentures governing the 2.625% Senior Notes, 3.750% Senior Notes, 1.700% Senior Notes, and 3.750%2.950% Senior Notes (as supplemented, the "Indenture") contain certain covenants that restrict our ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of our property or assets to another party. However, the Indenture does not contain any financial covenants.
We have a credit facility that provides for a $500 million senior unsecured revolving line of credit through August 12, 2024, which is also used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program (the "Global Credit Facility"). Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. We have the ability to expand the borrowing availability under the Global Credit Facility to $1 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility. In March 2020, we borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen our liquidity position in response to the COVID-19 pandemic, which was subsequently repaid in June 2020 using a portion of the proceeds from our issuances of the 1.700% Senior Notes and 2.950% Senior Notes.
The Global Credit Facility contains a number of covenants, as described in Note 10 to the accompanying consolidated financial statements. As of December 28, 2019,June 27, 2020, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The Pan-Asia Credit Facilities do not contain any financial covenants.
See Note 10 to the accompanying consolidated financial statements and Note 11 of the Fiscal 20192020 10-K for additional information relating to our debt and covenant compliance.
Common Stock Repurchase Program
On May 13, 2019, our Board of Directors approved an expansion of our existing common stock repurchase program that allowed us to repurchase up to an additional $600 million of Class A common stock. As of June 27, 2020, the remaining availability under our Class A common stock repurchase program was approximately $580 million. Repurchases of shares of Class A common stock are subject to certain restrictions under our Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our common stock repurchase program as a preemptive action to preserve cash and strengthen our liquidity position.
See Note 14 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.
Dividends
Except as discussed below, we have maintained a regular quarterly cash dividend program on our common stock since 2003. On May 13, 2019, our Board of Directors approved an increase to the quarterly cash dividend on our common stock from $0.625 to $0.6875 per share.
As a result of current business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our quarterly cash dividend program as a preemptive action to preserve cash and strengthen our liquidity position. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our results of operations, cash requirements, financial condition, and other factors that the Board of Directors may deem relevant, including economic and market conditions.




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See Note 14 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.
Contractual and Other Obligations
There have been no material changes to our contractual and other obligations as disclosed in our Fiscal 20192020 10-K, other than those which occur in the ordinary course of business. Refer to the "Financial Condition and Liquidity — Contractual and Other Obligations" section of the MD&A in our Fiscal 20192020 10-K for detailed disclosure of our contractual and other obligations as of March 30, 2019.28, 2020.
MARKET RISK MANAGEMENT
As discussed in Note 13 of the Fiscal 20192020 10-K and Note 12 to the accompanying consolidated financial statements, we are exposed to a variety of risks, including the impact of changes in foreign currency exchange rates relating toon foreign currency-denominated balances, certain anticipated cash flows fromof our international operations, and possible declines in the value of reported net assets of our foreign operations, as well as changes in the fair value of our fixed-rate debt obligations relating to changesfluctuations in benchmark interest rates. Consequently,Accordingly, at times, in the normal course of business, we employ established policies and procedures to manage such risks, including the use of derivative financial instruments, to manage such risks.instruments. We do not enter into derivative transactionsuse derivatives for speculative or trading purposes.
As a result of theGiven our use of derivative instruments, we are exposed to the risk that the counterparties to oursuch contracts will fail to meet their contractual obligations. To mitigate thissuch counterparty credit risk, we have ait is our policy ofto only enteringenter into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to further mitigate credit risk. As a result of the above considerations, we do not believe that we are exposed to any undue concentration of counterparty risk with respect to our derivative contracts as of December 28, 2019.June 27, 2020. However, we do have in aggregate $31.9$49.0 million of derivative instruments in net asset positions with eightsix creditworthy financial institutions.
Foreign Currency Risk Management
We manage our exposure to changes in foreign currency exchange rates through the use ofusing forward foreign currency exchange and cross-currency swap contracts. SeeRefer to Note 12 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward foreign currency exchange and cross-currency swap contracts, outstandingas well as the impact on earnings and other comprehensive income of such instruments as of December 28, 2019.June 27, 2020.
Forward Foreign Currency Exchange Contracts
We enter into forward foreign currency exchange contracts as hedges to mitigate our risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, the settlement of foreign currency-denominated balances, and the translation of certain foreign operations' net assets into U.S. Dollars. As part of our overall strategy to managefor managing the level of exposure to the risk of foreign currencysuch exchange rate fluctuations,risk, relating primarily to changes in the value of the Euro, the Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, and the Chinese Renminbi, and the Hong Kong Dollar, we generally hedge a portion of our foreign currencyrelated exposures anticipated over a two-year period. In doing so, we usethe next twelve months using forward foreign currency exchange contracts that generally havewith maturities of two months to two yearsone year to provide continuing coverage throughoutover the hedging period of the respective exposure.




66


Our foreign exchange risk management activities are governed by our Company's established policies and procedures. These policies and procedures provide a framework that allows for the management of currency exposures while ensuring the activities are conducted within our established guidelines. Our policies include guidelines for the organizational structure of our risk management function and for internal controls over foreign exchange risk management activities, including, but not limited to, authorization levels, transaction limits, and credit quality controls, as well as various measurements for monitoring compliance. We monitor foreign exchange risk using different techniques, including a periodic review of market values and performance of sensitivity analyses.
Our forward foreign currency exchange contracts are recorded at fair value in our consolidated balance sheets. To the extent such contracts are designated as qualifying cash flow hedges of inventory transactions, related gains or losses are initially deferred in equity as a component of accumulated other comprehensive income ("AOCI") and are subsequently recognized within cost of goods sold in our consolidated statements of operations when the related inventory is sold.




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Cross-Currency Swap Contracts
During our fiscal year ended April 2, 2016 ("Fiscal 2016"), we entered into aWe periodically designate (i) pay-floating rate, receive-floating rate cross-currency swap with a notional amount of €274 million which we designatedcontracts or (ii) pay-fixed rate, receive fixed-rate cross-currency swap contracts as a hedgehedges of our net investment in certain of our European subsidiaries. This
Our pay-floating rate, receive-floating rate cross-currency swap which matures on August 18, 2020, swaps thecontracts swap U.S. Dollar-denominated variable interest rate payments based on the contract's notional amount and 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread (as paid under the 2.625% Interest Rate Swapa corresponding interest rate swap contract discussed below) for Euro-denominated variable interest rate payments based on the 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread, which, in conjunctioncombination with the 2.625% Interest Rate Swap,corresponding interest rate swap contract, economically converts a portion of our $300 million fixed-rate 2.625% Senior Notes obligationUS-denominated senior note obligations to a €274 million floating-rate Euro-denominated obligation.obligations.
Additionally, in August 2018, we entered intoOur pay-fixed rate, receive-fixed rate cross-currency swap contracts with an aggregate notional amount of €346 million which we designated as hedges of our net investment in certain of our European subsidiaries. These contracts, which mature on September 15, 2025, swap the U.S. Dollar-denominated fixed interest rate payments based on the contract's notional amount and the fixed rate of interest payable on certain of our 3.750% Senior Notessenior notes for Euro-denominated 1.29% fixed interest rate payments, thereby economically converting a portion of our $400 million fixed-rate 3.750% Senior Notes obligationUS-denominated senior note obligations to a €346 million fixed-rate 1.29%fixed rate Euro-denominated obligation.obligations.
See Note 3 to the accompanying consolidated financial statements for further discussion of our foreign currency exposures, and the types of derivative instruments used to hedge those exposures.
Interest Rate Risk Management
During Fiscal 2016, we entered into aWe periodically designate pay-floating rate, receive-fixed rate interest rate swap contract which we designatedcontracts as a hedgehedges against changes in the fair value of certain of our fixed-rate 2.625% Senior Notesdebt attributed to changes in thea benchmark interest rate (the "2.625% Interest Rate Swap"). The 2.625% Interest Rate Swap, which matures on August 18, 2020 and has arate. To the extent of their notional amount, of $300 million, swapssuch contracts effectively swap the fixed interest rate on the 2.625% Senior Notescertain of our fixed-rate senior notes for a variable interest rate based on 3-month LIBOR plus a fixed spread.
Investment Risk Management
As of December 28, 2019,June 27, 2020, we had cash and cash equivalents on-hand of $1.080$2.451 billion, consisting of deposits in interest bearing accounts, investments in money market deposit accounts, and investments in time deposits with original maturities of 90 days or less. Our other significant investments included $828.5$259.3 million of short-term investments, consisting of investments in time deposits and commercial paper with original maturities greater than 90 days; and $9.5$9.6 million of restricted cash held in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters and real estate leases.
We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and procedures, which include monitoring both general and issuer-specific economic conditions, as discussed further below.in Note 3 to the accompanying consolidated financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 12 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of December 28, 2019June 27, 2020.
We evaluate investments held in unrealized loss positions, if any, for other-than-temporary impairment on a quarterly basis. This evaluation involves a variety of considerations, including assessments of risks and uncertainties associated with general economic conditions and distinct conditions affecting specific issuers. We consider the following factors: (i) the length of time and the extent to which the fair value has been below cost, (ii) the financial condition, credit worthiness, and near-term prospects of the issuer, (iii) the length of time to maturity, (iv) anticipated future economic conditions and market forecasts, (v) our intent and ability to retain our investment for a period of time sufficient to allow for recovery of market value, and (vi) an assessment of whether it is more likely than not that we will be required to sell our investment before recovery of market value. No material




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realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded in any of the fiscal periods presented.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are described in Note 3 of the Fiscal 20192020 10-K. Our estimates are often based on complex judgments, assessments of probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting policies, refer to the "Critical Accounting Policies" section of the MD&A in our Fiscal 20192020 10-K.
There have been no significant changes in the application of our critical accounting policies since March 30, 2019, other than those related to our adoption of Accounting Standards Update ("ASU") No. 2016-02, "Leases" ("ASU 2016-02") as of the beginning of the first quarter of Fiscal 2020, as described in Note 3 to the accompanying consolidated financial statements.28, 2020.
Goodwill Impairment Assessment
We performed our annual goodwill impairment assessment using a qualitative approach as of the beginning of the second quarter of Fiscal 2020. In performing the assessment, we identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of our reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and expected financial performance. Additionally, the results of our most recent quantitative goodwill impairment test indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results of our qualitative goodwill impairment assessment, we concluded that it is not more likely than not that the fair values of our reporting units are less than their respective carrying values, and there were no reporting units at risk of impairment.



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RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 4 to the accompanying consolidated financial statements for a description of certain recently issued or proposed accounting standards which have impacted our consolidated financial statements, or may impact our consolidated financial statements in future reporting periods.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
For a discussion of the Company's exposure to market risk, see "Market Risk Management" presented in Part I, Item 2 — MD&A of this Form 10-Q and incorporated herein by reference.
Item 4.Controls and Procedures.
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
We carried out an evaluation based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) under the supervision and with the participation of management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our principal executive and principal financial officers have concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of December 28, 2019. Except as discussed below, thereJune 27, 2020. There has been no change in the Company's internal control over financial reporting during the fiscal quarter ended December 28, 2019June 27, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Although there have been no material changes in the Company's internal control over financial reporting, we have experienced varying degrees of business disruptions related to the COVID-19 pandemic, including periods of closure of our stores, distribution centers, and corporate facilities, as described within "Recent Developments." In response to the COVID-19 pandemic, we have taken various preemptive actions to preserve cash and strengthen our liquidity position, including temporarily furloughing and/or reducing work hours for a significant portion of both our store and corporate employees, with those corporate employees not furloughed in affected regions working remotely. Despite such actions, we have not experienced any material changes to our internal controls over financial reporting. We will continue to evaluate and monitor the impact of the COVID-19 pandemic on our internal controls. See Item 1A — "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business" in the Fiscal 2020 10-K for additional discussion regarding risks to our business associated with the COVID-19 pandemic.




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Leases
In connection with our adoption of ASU 2016-02 as of the beginning of the first quarter of Fiscal 2020, changes were made to certain lease-related processes and control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting. Management will continue to evaluate and monitor our internal controls as our lease-related processes and procedures evolve. See Note 4 to the accompanying consolidated financial statements for additional discussion regarding our adoption of ASU 2016-02.
Implementation and Reconfiguration of Financial Reporting Systems
In connection with our initiative to integrate and upgrade our global systems and processes, we migrated our Asia operations to a new financial reporting information technology system, Microsoft AX Dynamics 365, during the first quarter of Fiscal 2020. In addition to this system implementation, during the first quarter of Fiscal 2020, we began reconfiguring the financial reporting information technology system used by our Europe operations, SAP, in order to utilize enhanced financial reporting functionality.
As a result of these actions, we expect to experience certain changes to our processes and procedures which, in turn, will result in changes to our internal control over financial reporting. While we expect these system changes to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as processes and procedures in each of the affected areas evolve. For a discussion of risks related to the implementation of new systems, see Item 1A — "Risk Factors — Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively" in the Fiscal 2019 10-K.

PART II. OTHER INFORMATION
Item 1.Legal Proceedings.
Reference is made to the information disclosed under Item 3 — "Legal Proceedings" in the Fiscal 20192020 10-K.
Item 1A.Risk Factors.
Reference is made to the information disclosed under Part I, Item 1A — "Risk Factors" in the Fiscal 20192020 10-K, which contains a detailed discussion of certain risk factors that could materially adversely affect the Company's business, operating results, and/or financial condition. There are no material changes to the risk factors previously disclosed, nor has the Company identified any previously undisclosed risks that could materially adversely affect the Company's business, operating results, and/or financial condition.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
(a)Sales of Unregistered Securities
Shares of the Company's Class B Common Stock may be converted immediately into Class A Common Stock on a one-for-one basis by the holder. There is no cash or other consideration paid by the holder converting the shares and, accordingly, there is no cash or other consideration received by the Company. The shares of Class A Common Stock issued by the Company in such conversions are exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
No shares of the Company's Class B common stock were converted into Class A common stock during the fiscal quarterthree months ended December 28, 2019.June 27, 2020.
(b)Not Applicable




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(c)Stock Repurchases
The following table sets forth the repurchases of shares of the Company's Class A common stock 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 Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar 
Value of Shares
That May Yet be
Purchased Under the
Plans or Programs(a)
       (millions)
September 29, 2019 to October 26, 2019
 $
 
 $830
October 27, 2019 to November 30, 2019882,061
 111.47
 882,061
 732
December 1, 2019 to December 28, 20195,675
(b) 
118.24
 
 732
 887,736
   882,061
  
 
Total Number of Shares Purchased(a)
 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar 
Value of Shares
That May Yet be
Purchased Under the
Plans or Programs(b)
       (millions)
March 29, 2020 to April 25, 20203,105
 $68.85
 
 $580
April 26, 2020 to May 23, 2020115,780
 65.31
 
 580
May 24, 2020 to June 27, 2020342,936

76.30
 
 580
 461,821
   
  
 
(a)
Repurchases of shares of Class A common stock are subject to overall business and market conditions.
(b) 
Represents shares surrendered to or withheld by the Company in satisfaction of withholding taxes in connection with the vesting of awards issued under its long-term stock incentive plans.
(b)
Repurchases of shares of Class A common stock are subject to certain restrictions under the Company's Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, we have temporarily suspended our common stock repurchase program as a preemptive action to preserve cash and strengthen our liquidity position.




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Item 6.Exhibits.
3.1
3.2
3.3
4.1
10.1*
10.2*
10.3*
31.1*
31.2*
32.1*
32.2*
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document.
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.
Exhibits 32.1 and 32.2 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
 
 
*Filed herewith.
Management contract or compensatory plan or arrangement.




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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.
 
  
RALPH LAUREN CORPORATION
   
 By:
/S/    JANE HAMILTON NIELSEN        
  Jane Hamilton Nielsen
  Chief Operating Officer and Chief Financial Officer
  (Principal Financial and Accounting Officer)
   
Date: February 6,August 4, 2020  





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