UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 201728, 2019
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file numbernumber: 001-35368
cpri-20191228_g1.jpg
CAPRI HOLDINGS LTD
Michael Kors Holdings Limited
(Exact Name of Registrant as Specified in Its Charter)

British Virgin IslandsN/A
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
33 Kingsway
London, United Kingdom
WC2B 6UF
(Address of Principal Executive Offices)principal executive offices)
(Registrant’s telephone number, including area code: 44 207 632 8600)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Ordinary Shares, no par valueCPRINew York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None


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. 
x☒
Yes¨☐No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). 
x☒
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 filerý☒Accelerated filer
¨
☐
Non-accelerated filer
¨ (Do not check if smaller reporting company)
☐		Smaller reporting company
¨
☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
¨
☐Yesx☒No
As of February 5, 2018, Michael KorsJanuary 31, 2020, Capri Holdings Limited had 152,184,610149,365,397 ordinary shares outstanding.



TABLE OF CONTENTS
Page
No.
PART I FINANCIAL INFORMATION
Item 1.Financial Statements3 

TABLE OF CONTENTS
Page
No.
PART I FINANCIAL INFORMATION
Item 1.Financial Statements3
Condensed Consolidated Balance Sheets (unaudited) as of December 28, 2019 and March 30, 2017 and April 1, 20172019
3

Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three months and nine months ended December 30, 201728, 2019 and December 31, 201629, 2018
4

Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three months and nine months ended December 30, 201728, 2019 and December 29, 2018
5

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended December 30, 201728, 2019 and December 31, 201629, 2018
67

Notes to Condensed Consolidated Financial Statements (unaudited)
78

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3133

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5354

Item 4.
Controls and Procedures
5456

PART II OTHER INFORMATION
Item 1.
5557

Item 1A.
5557

Item 2.
5558

Item 6.
5558

56

59





2

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MICHAEL KORSCAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
December 30,
2017		 April 1,
2017		December 28,
2019		March 30,
2019
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$317.1
 $227.7
Cash and cash equivalents$237  $172  
Receivables, net288.0
 265.8
Receivables, net321  383  
Inventories677.2
 549.3
Inventories, netInventories, net960  953  
Prepaid expenses and other current assets162.3
 121.9
Prepaid expenses and other current assets263  221  
Total current assets1,444.6
 1,164.7
Total current assets1,781  1,729  
Property and equipment, net599.4
 591.5
Property and equipment, net596  615  
Operating lease right-of-use assetsOperating lease right-of-use assets1,665  —  
Intangible assets, net1,215.4
 418.1
Intangible assets, net2,225  2,293  
Goodwill822.0
 119.7
Goodwill1,681  1,659  
Deferred tax assets64.7
 73.3
Deferred tax assets165  112  
Other assets70.7
 42.3
Other assets212  242  
Total assets$4,216.8
 $2,409.6
Total assets$8,325  $6,650  
Liabilities and Shareholders’ Equity   
Liabilities, Redeemable Noncontrolling Interest and Shareholders’ EquityLiabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
Current liabilities   Current liabilities
Accounts payable$290.2
 $176.3
Accounts payable$375  $371  
Accrued payroll and payroll related expenses85.7
 61.1
Accrued payroll and payroll related expenses110  133  
Accrued income taxes68.7
 60.3
Accrued income taxes30  34  
Short-term operating lease liabilitiesShort-term operating lease liabilities406  —  
Short-term debt0.1
 133.1
Short-term debt1,031  630  
Accrued expenses and other current liabilities277.4
 135.0
Accrued expenses and other current liabilities353  374  
Total current liabilities722.1
 565.8
Total current liabilities2,305  1,542  
Long-term operating lease liabilitiesLong-term operating lease liabilities1,751  —  
Deferred rent134.8
 137.8
Deferred rent—  132  
Deferred tax liabilities217.0
 80.0
Deferred tax liabilities440  438  
Long-term debt992.4
 —
Long-term debt1,085  1,936  
Other long-term liabilities70.2
 31.0
Other long-term liabilities133  166  
Total liabilities2,136.5
 814.6
Total liabilities5,714  4,214  
Commitments and contingencies
 
Commitments and contingencies
Redeemable noncontrolling interestRedeemable noncontrolling interest—  4  
Shareholders’ equity   Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized; 210,302,628 shares issued and 152,167,403 outstanding at December 30, 2017; 209,332,493 shares issued and 155,833,304 outstanding at April 1, 2017—
 —
Treasury shares, at cost (58,135,225 shares at December 30, 2017 and 53,499,189 shares at April 1, 2017)(2,815.9) (2,654.9)
Ordinary shares, 0 par value; 650,000,000 shares authorized; 216,906,643 shares issued and 149,012,245 outstanding at December 28, 2019; 216,050,939 shares issued and 150,932,306 outstanding at March 30, 2019Ordinary shares, 0 par value; 650,000,000 shares authorized; 216,906,643 shares issued and 149,012,245 outstanding at December 28, 2019; 216,050,939 shares issued and 150,932,306 outstanding at March 30, 2019—  —  
Treasury shares, at cost (67,894,398 shares at December 28, 2019 and 65,118,633 shares at March 30, 2019)Treasury shares, at cost (67,894,398 shares at December 28, 2019 and 65,118,633 shares at March 30, 2019)(3,325) (3,223) 
Additional paid-in capital803.3
 767.8
Additional paid-in capital1,080  1,011  
Accumulated other comprehensive loss(18.4) (80.6)Accumulated other comprehensive loss(29) (66) 
Retained earnings4,107.9
 3,560.3
Retained earnings4,883  4,707  
Total shareholders’ equity of MKHL2,076.9
 1,592.6
Total shareholders’ equity of CapriTotal shareholders’ equity of Capri2,609  2,429  
Noncontrolling interest3.4
 2.4
Noncontrolling interest2  3  
Total shareholders' equity2,080.3
 1,595.0
Total shareholders’ equityTotal shareholders’ equity2,611  2,432  
Total liabilities and shareholders’ equity$4,216.8
 $2,409.6
Total liabilities and shareholders’ equity$8,325  $6,650  
See accompanying notes to consolidated financial statements.


3

MICHAEL KORSCAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In millions, except share and per share data)
(Unaudited)
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Total revenue$1,571  $1,438  $4,359  $3,894  
Cost of goods sold639  565  1,719  1,507  
Gross profit932  873  2,640  2,387  
Selling, general and administrative expenses630  507  1,851  1,466  
Depreciation and amortization63  51  188  160  
Impairment of long-lived assets19  6  220  17  
Restructuring and other charges (1)
15  19  37  49  
Total operating expenses727  583  2,296  1,692  
Income from operations205  290  344  695  
Other income, net(1) (2) (4) (4) 
Interest expense, net3  7  19  21  
Foreign currency (gain) loss(2) 43  4  79  
Income before provision for income taxes205  242  325  599  
(Benefit from) provision for income taxes(4) 42  (2) 76  
Net income209  200  327  523  
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest(1) —  (1) (1) 
Net income attributable to Capri$210  $200  $328  $524  
Weighted average ordinary shares outstanding:
Basic150,826,196  149,183,049  151,159,423  149,420,087  
Diluted152,154,372  150,268,424  152,354,936  151,457,921  
Net income per ordinary share attributable to Capri:
Basic$1.39  $1.34  $2.17  $3.50  
Diluted$1.38  $1.33  $2.15  $3.46  
Statements of Comprehensive Income:
Net income$209  $200  $327  $523  
Foreign currency translation adjustments78  (32) 40  (160) 
Net (loss) gain on derivatives(4) 1  (3) 16  
Comprehensive income283  169  364  379  
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest(1) —  (1) (1) 
Comprehensive income attributable to Capri$284  $169  $365  $380  
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Total revenue$1,440.1
 $1,352.8
 $3,539.1
 $3,428.9
Cost of goods sold556.1
 547.1
 1,389.6
 1,387.2
Gross profit884.0
 805.7
 2,149.5
 2,041.7
Selling, general and administrative expenses485.9
 407.6
 1,267.4
 1,130.0
Depreciation and amortization54.0
 55.7
 149.9
 162.5
Impairment of long-lived assets2.6
 0.5
 18.9
 5.4
Restructuring and other charges (1)
28.0
 —
 51.3
 11.3
Total operating expenses570.5
 463.8
 1,487.5
 1,309.2
Income from operations313.5
 341.9
 662.0
 732.5
Other income, net(0.1) (4.1) (1.0) (4.7)
Interest expense, net8.3
 3.4
 10.2
 5.1
Foreign currency loss (gain)27.0
 0.9
 (14.7) 2.2
Income before provision for income taxes278.3
 341.7
 667.5
 729.9
Provision for income taxes58.9
 70.4
 119.9
 151.6
Net income219.4
 271.3
 547.6
 578.3
Less: Net loss attributable to noncontrolling interest—
 —
 (0.2) (1.0)
Net income attributable to MKHL$219.4
 $271.3
 $547.8
 $579.3
        
Weighted average ordinary shares outstanding:
      
Basic152,047,963
 163,148,597
 152,772,067
 168,000,933
Diluted154,623,339
 165,214,045
 155,220,984
 170,222,588
Net income per ordinary share attributable to MKHL:
      
Basic$1.44
 $1.66
 $3.59
 $3.45
Diluted$1.42
 $1.64
 $3.53
 $3.40
        
Statements of Comprehensive Income:
      
Net income$219.4
 $271.3
 $547.6
 $578.3
Foreign currency translation adjustments41.6
 (20.1) 78.7
 (20.8)
Net (loss) gain on derivatives(0.3) 9.4
 (16.4) 11.2
Comprehensive income260.7
 260.6
 609.9
 568.7
Less: Net loss attributable to noncontrolling interest—
 —
 (0.2) (1.0)
Less: Other comprehensive income (loss) attributable to noncontrolling interest0.1
 (0.4) 0.1
 (0.4)
Comprehensive income attributable to MKHL$260.6
 $261.0
 $610.0
 $570.1

((1)1) Restructuring and other charges includes store closure costs recorded in connection with the Retail Fleet Optimization Plan as well as transaction(as defined in Note 10) and transitionother restructuring initiatives, and costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited (formerly known as Jimmy Choo PLC) and Michael Kors (HK) Limited and Subsidiaries (see Note 3 and Note 8).Limited.
See accompanying notes to consolidated financial statements.


4

MICHAEL KORSCAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In millions, except share data which is in thousands)
(Unaudited)
 Ordinary SharesAdditional
Paid-in
Capital		Treasury SharesAccumulated
Other
Comprehensive
Loss (Income)		Retained
Earnings		Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at September 28, 2019216,815  $—  $1,060  (65,182) $(3,225) $(103) $4,673  $2,405  $3  $2,408  
Net income (loss)—  —  —  —  —  —  210  210  (1) 209  
Other comprehensive income—  —  —  —  —  74  —  74  —  74  
Total comprehensive income (loss)—  —  —  —  —  —  —  284  (1) 283  
Vesting of restricted awards, net of forfeitures87  —  —  —  —  —  —  —  —  —  
Exercise of employee share options5  —  —  —  —  —  —  —  —  —  
Equity compensation expense—  —  16  —  —  —  —  16  —  16  
Purchase of treasury shares—  —  —  (2,712) (100) —  —  (100) —  (100) 
Adjustment of redeemable non-controlling interests to redemption value—  —  4  —  —  —  —  4  —  4  
Balance at December 28, 2019216,907  $—  $1,080  (67,894) $(3,325) $(29) $4,883  $2,609  $2  $2,611  

 Ordinary SharesAdditional
Paid-in
Capital		Treasury SharesAccumulated
Other
Comprehensive
Loss (Income)		Retained
Earnings		Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at March 30, 2019, as previously reported216,051  $—  $1,011  (65,119) $(3,223) $(66) $4,707  $2,429  $3  $2,432  
Adoption of accounting standards (See Note 2)—  —  —  —  —  —  (152) (152) —  (152) 
Balance as of March 31, 2019216,051  —  1,011  (65,119) (3,223) (66) 4,555  2,277  3  2,280  
Net income (loss)—  —  —  —  —  —  328  328  (1) 327  
Other comprehensive income—  —  —  —  —  37  —  37  —  37  
Total comprehensive income (loss)—  —  —  —  —  —  —  365  (1) 364  
Vesting of restricted awards, net of forfeitures851  —  —  —  —  —  —  —  —  —  
Exercise of employee share options5  —  —  —  —  —  —  —  —  —  
Equity compensation expense—  —  65  —  —  —  —  65  —  65  
Purchase of treasury shares—  —  —  (2,775) (102) —  —  (102) —  (102) 
Adjustment of redeemable non-controlling interests to redemption value—  —  4  —  —  —  —  4  —  4  
Balance at December 28, 2019216,907  $—  $1,080  (67,894) $(3,325) $(29) $4,883  $2,609  $2  $2,611  

5

 Ordinary Shares 
Additional
Paid-in
Capital
 Treasury Shares 
Accumulated
Other
Comprehensive
(Loss) Income
 
Retained
Earnings
 Total Equity of MKHL Non-controlling Interest Total Equity
 Shares Amounts  Shares Amounts   
Balance at April 1, 2017209,332
 $—
 $767.8
 (53,499) $(2,654.9) $(80.6) $3,560.3
 $1,592.6
 $2.4
 $1,595.0
Net income—
 —
 —
 —
 —
 —
 547.8
 547.8
 (0.2) 547.6
Other comprehensive income—
 —
 —
 —
 —
 62.2
 —
 62.2
 0.1
 62.3
Total comprehensive income—
 —
 —
 —
 —
 —
 —
 610.0
 (0.1) 609.9
Non-controlling interest for Jimmy Choo joint ventures

—
 —
 —
 —
 —
 —
 —
—
—
 3.1
 3.1
Partial repurchase of non-controlling interest—
 —
 0.5
 —
 —
 —
 —
 0.5
 (1.0) (0.5)
Vesting of restricted awards, net of forfeitures476
 —
 —
 —
 —
 —
 —
 —
 —
 —
Exercises of employee share options495
 —
 5.5
 —
 —
 —
 —
 5.5
 —
 5.5
Equity compensation expense

 —
 29.6
 —
 —
 —
 —
 29.6
 —
 29.6
Purchase of treasury shares—
 —
 —
 (4,636) (161.0) —
 —
 (161.0) —
 (161.0)
Redemption of capital/dividends—
 —
 —
 —
 —
 —
 (0.2) (0.2) (1.0) (1.2)
Other—
 —
 (0.1) —
 —
 —
 —
 (0.1) —
 (0.1)
Balance at December 30, 2017210,303
 $—
 $803.3
 (58,135) $(2,815.9) $(18.4) $4,107.9
 $2,076.9
 $3.4
 $2,080.3
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Continued)
(In millions, except share data which is in thousands)
(Unaudited)
 Ordinary SharesAdditional
Paid-in
Capital		Treasury SharesAccumulated
Other
Comprehensive Loss		Retained
Earnings		Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at September 29, 2018213,209  $—  $877  (63,059) $(3,123) $(62) $4,488  $2,180  $4  $2,184  
Net income—  —  —  —  —  —  200  200  —  200  
Other comprehensive loss—  —  —  —  —  (31) —  (31) —  (31) 
Total comprehensive income—  —  —  —  —  —  —  169  —  169  
Vesting of restricted awards, net of forfeitures84  —  —  —  —  —  —  —  —  —  
Exercise of employee share options139  —  3  —  —  —  —  3  —  3  
Equity compensation expense—  —  12  —  —  —  —  12  —  12  
Purchase of treasury shares—  —  —  (2,060) (100) —  —  (100) —  (100) 
Increase in noncontrolling interest—  —  —  —  —  —  —  —  (1) (1) 
Balance at December 29, 2018213,432  $—  $892  (65,119) $(3,223) $(93) $4,688  $2,264  $3  $2,267  

 Ordinary SharesAdditional
Paid-in
Capital		Treasury SharesAccumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings		Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at March 31, 2018, as previously reported210,991  $—  $831  (61,293) $(3,016) $51  $4,152  $2,018  $4  $2,022  
Adoption of accounting standard (ASC 606)—  —  —  —  —  —  12  12  —  12  
Balance as of April 1, 2018210,991  —  831  (61,293) (3,016) 51  4,164  2,030  4  2,034  
Net income (loss)—  —  —  —  —  —  524  524  (1) 523  
Other comprehensive loss—  —  —  —  —  (144) —  (144) —  (144) 
Total comprehensive income (loss)—  —  —  —  —  —  —  380  (1) 379  
Vesting of restricted awards, net of forfeitures781  —  —  —  —  —  —  —  —  —  
Exercise of employee share options1,660  —  23  —  —  —  —  23  —  23  
Equity compensation expense—  —  38  —  —  —  —  38  —  38  
Purchase of treasury shares—  —  —  (3,826) (207) —  —  (207) —  (207) 
Balance at December 29, 2018213,432  $—  $892  (65,119) $(3,223) $(93) $4,688  $2,264  $3  $2,267  

See accompanying notes to consolidated financial statements.


6

MICHAEL KORSCAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended Nine Months Ended
December 30,
2017		 December 31,
2016		 December 28,
2019		December 29,
2018
Cash flows from operating activities   Cash flows from operating activities
Net income$547.6
 $578.3
Net income$327  $523  
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization149.9
 162.5
Depreciation and amortization188  160  
Equity compensation expense29.6
 26.7
Equity compensation expense65  38  
Deferred income taxes33.1
 3.6
Deferred income taxes—  12  
Impairment of long-lived assets

18.9
 5.4
Impairment of long-lived assets220  17  
Tax benefit on exercise of share options(0.2) (6.4)
Foreign currency (gains) losses(14.7) 2.2
Changes to lease related balances, netChanges to lease related balances, net(47) —  
Tax deficit (benefit) on exercise of share optionsTax deficit (benefit) on exercise of share options2  (24) 
Amortization of deferred financing costsAmortization of deferred financing costs6  3  
Foreign currency lossesForeign currency losses4  79  
Other non-cash charges5.1
 5.3
Other non-cash charges1  2  
Change in assets and liabilities:   Change in assets and liabilities:
Receivables, net17.1
 73.6
Receivables, net11  (9) 
Inventories20.8
 (20.2)
Inventories, netInventories, net(8) (127) 
Prepaid expenses and other current assets31.9
 (39.2)Prepaid expenses and other current assets(72) (51) 
Accounts payable(21.4) 74.4
Accounts payable6  52  
Accrued expenses and other current liabilities54.6
 11.8
Accrued expenses and other current liabilities24  75  
Other1.0
 17.7
Other long-term assets and liabilitiesOther long-term assets and liabilities25  26  
Net cash provided by operating activities873.3
 895.7
Net cash provided by operating activities752  776  
Cash flows from investing activities   Cash flows from investing activities
Capital expenditures(83.8) (147.7)Capital expenditures(164) (135) 
Purchase of intangible assets(3.2) (5.6)Purchase of intangible assets—  (2) 
Cash paid for business acquisitions, net of cash acquired(1,414.5) (480.6)Cash paid for business acquisitions, net of cash acquired(1) (2) 
Realized gain on hedge related to Jimmy Choo acquisition4.7
 —
Realized loss on hedge related to Versace acquisitionRealized loss on hedge related to Versace acquisition—  (77) 
Settlement of a net investment hedgesSettlement of a net investment hedges32  —  
Net cash used in investing activities(1,496.8) (633.9)Net cash used in investing activities(133) (216) 
Cash flows from financing activities   Cash flows from financing activities
Debt borrowings2,078.8
 361.8
Debt borrowings1,844  3,597  
Debt repayments(1,222.1) (199.6)Debt repayments(2,296) (1,926) 
Repurchases of treasury shares(161.0) (754.8)
Exercises of employee share options5.5
 8.0
Other financing activities(0.2) —
Net cash used in financing activities701.0
 (584.6)
Debt issuance costsDebt issuance costs—  (15) 
Purchase of treasury sharesPurchase of treasury shares(102) (207) 
Exercise of employee share optionsExercise of employee share options—  23  
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(554) 1,472  
Effect of exchange rate changes on cash and cash equivalents10.3
 (9.3)Effect of exchange rate changes on cash and cash equivalents—  (9) 
Net increase (decrease) in cash and cash equivalents and restricted cash87.8
 (332.1)
Beginning of period (including restricted cash of $1.9 million at April 1, 2017)229.6
 702.0
End of period (including restricted cash of $0.3 million at December 30, 2017 and $1.1 million at December 31, 2016)$317.4
 $369.9
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents65  2,023  
Beginning of periodBeginning of period172  163  
End of period (including restricted cash of $1.922 billion at December 29, 2018)End of period (including restricted cash of $1.922 billion at December 29, 2018)$237  $2,186  
Supplemental disclosures of cash flow information   Supplemental disclosures of cash flow information
Cash paid for interest$6.5
 $3.1
Cash paid for interest$67  $24  
Cash paid for income taxes$85.0
 $164.7
Cash paid for income taxes$75  $128  
Supplemental disclosure of non-cash investing and financing activities   Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures$22.0
 $36.2
Accrued capital expenditures$27  $23  
See accompanying notes to consolidated financial statements.


7

MICHAEL KORSCAPRI HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Basis of Presentation
Michael Kors Holdings Limited (“MKHL,” and together with its subsidiaries, the “Company”)The Company was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002.2002 as Michael Kors Holdings Limited and changed its name to Capri Holdings Limited (“Capri,” and together with its subsidiaries, the “Company”) on December 31, 2018. The Company is a holding company that owns brands that are leading designer, marketer, distributordesigners, marketers, distributors and retailerretailers of branded women’s and men'smen’s accessories, apparel and footwear bearing the Versace, Jimmy Choo and Michael Kors and Jimmy Choo tradenames and related trademarks “MICHAEL KORS,” “MICHAEL MICHAEL KORS,” “JIMMY CHOO,” and various other related trademarks and logos. The Company's business consists of four reportable segments: Michael Kors ("MK") Retail, MK Wholesale, MK Licensing and Jimmy Choo. See Note 16 for additional information.
On November 1, 2017, the Company completed the acquisition of Jimmy Choo Group Limited, formerly known as Jimmy Choo PLCGianni Versace S.r.l. (“Jimmy Choo”Versace”) in cash for a total transaction value of $1.447 billion, including the repayment of existing debt obligations.on December 31, 2018. As a result, the Company began consolidatingoperates in 3 reportable segments: Versace, Jimmy Choo into its operations beginning on November 1, 2017. Jimmy Choo is being reported as a separate reporting segment.and Michael Kors. See Note 3 and Note 16 for additional information.
On May 31, 2016, the Company acquired 100% of the stock of its previously licensed business in the Greater China region, Michael Kors (HK) Limited and Subsidiaries (“MKHKL”), which has operations in China, Hong Kong, Macau and Taiwan. As a result, the Company began consolidating MKHKL into its operations beginning on June 1, 2016. See Note 318 for additional information.
The interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The interim consolidated financial statements as of December 30, 201728, 2019 and for the three and nine months ended December 30, 201728, 2019 and December 31, 201629, 2018 are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended April 1, 2017,March 30, 2019, as filed with the Securities and Exchange Commission on May 31, 2017,29, 2019, in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.
The Company utilizes a 52 to 53 week fiscal year ending on the Saturday closest to March 31. As such, the term “Fiscal Year” or “Fiscal” refers to the 52-week or 53-week period, ending on that day. The results for the three and nine months ended December 30, 201728, 2019 and December 31, 2016,29, 2018, are based on 13-week and 39-week periods, respectively.

2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. The most significant assumptions and estimates involved in preparing the consolidated financial statements include allowances for customer deductions, sales returns, sales discounts and doubtful accounts, estimates of gift card breakage, estimates of inventory recovery, business combinations, fair value measurements, the valuation of share-based compensation, valuation of deferred taxes and the valuation of and the estimated useful lives used for amortization and depreciation of intangible assets and property and equipment. Actual results could differ from those estimates.


Reclassifications
Certain reclassifications have been made to the prior periods’ financial information in order to conform to the current period’s presentation. The Company reclassified $17.4 millionpresentation, including the realignment of the previously recorded Fiscal 2018 transaction and transition costs related to the acquisition of Jimmy Choo and $11.3 million of transaction costs recorded in Fiscal 2017 in connection with the acquisition of MKHKL from selling, general and administrative expenses to restructuring and other chargesCompany’s segment reporting structure in the Company's consolidated statementsfourth quarter of operations and comprehensive income for the nine months ended December 30, 2017 and December 31, 2016, respectively, to provide a more transparent disclosure of these costs.Fiscal 2019, as further described in Note 18.
Seasonality
The Company experiences certain effects of seasonality with respect to its wholesale and retail segments.business. The Company’s MK Wholesale segment generally experiences its lowest sales in its first fiscal quarter. The Company’s MK Retail segmentCompany generally experiences greater sales during its third fiscal quarter, as a result ofprimarily driven by holiday season sales. Insales, and the aggregate,lowest sales during its first fiscal quarter.
8

Inventories, net
Inventories mainly consist of finished goods with the exception of raw materials of $20 million and $25 million, respectively, recorded on the Company’s first fiscal quarter typically experiences significantly less sales volume relative to the other three quartersconsolidated balance sheets as of December 28, 2019 and its third fiscal quarter generally has higher sales volume relative to the other three quarters.

March 30, 2019.
Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to these transactions. The Company employs these forward currency contracts to hedge the Company’s cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation.
In connection with the July 25, 2017 recommended cash offer forSeptember 24, 2018 definitive agreement to acquire all of the entire issued and to be issued share capitaloutstanding shares of Jimmy Choo,Versace, the Company entered into a forward foreign currency exchange contractcontracts in September 2018 with a notional amount of £1.115amounts totaling €1.680 billion (approximately $2.001 billion) to mitigate its foreign currency exchange risk related tothrough the acquisition. Thisclosing date of the acquisition, which were settled on December 21, 2018. These derivative contract wascontracts were not designated as an accounting hedge.hedges. Therefore, changes in fair value were recorded to foreign currency (gain) loss in the Company'sCompany’s consolidated statementstatements of operations.operations and comprehensive income. The Company’s accounting policy is to classify cash flows from derivative instruments that are accounted for as cash flow hedges in the same category as the cash flows from the items being hedged. Accordingly, the Company classified the $4.7 million realized gainunrealized gains and losses relating to thisthese derivative instrumentinstruments within cash flows from investing activities for the nine months ended December 30, 2017.activities.
The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including a description of the hedged item and the hedging instrument and the risk being hedged, and the manner in which hedge effectiveness will be assessed prospectively and retrospectively.hedged. The effective portion of changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income (loss) until the hedged item effectsaffects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive income (loss) are recognized within cost of goods sold. The Company uses regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which compares the change in the fair value of the derivative instrument to the change in the related hedged item. Effectiveness is assessed on a quarterly basis and any portion of the designated hedge contracts deemed ineffective is recorded to foreign currency gain (loss). If the hedge is no longer expected to be highly effective, in the future, future changes in the fair value are recognized in earnings. For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency gain (loss)(gain) loss in the Company’s consolidated statements of operations and comprehensive income. The Company classifies cash flows relating to its derivative instrumentsforward foreign currency exchange contracts related to purchase of inventory consistently with the classification of the hedged item, or within cash flows from operating activities for contracts related to inventory purchases.activities.
The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit exposure. The aforementioned forward contracts generally have a term of no more than 12 months. The period of these contracts is directly related to the foreign currency transaction they are intended to hedge.

Net Investment Hedges

The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between its U.S. Dollars and these foreign currencies. The Company has elected the spot method of designating these contracts under ASU 2017-12 and has designated these contracts as net investment hedges. The net gain or (loss) on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense in the Company’s statement of operations and comprehensive income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the hedged net investment is sold, diluted, or liquidated.
9

Net Income per Share
The Company’s basic net income per ordinary share is calculated by dividing net income by the weighted average number of ordinary shares outstanding during the period. Diluted net income per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units (“RSUs”), were exercised or converted into ordinary shares. These potentially dilutive securities are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods. Performance-based RSUs are included in diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.
The components of the calculation of basic net income per ordinary share and diluted net income per ordinary share are as follows (in millions, except share and per share data):
 Three Months EndedNine Months Ended
December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Numerator:
Net income attributable to Capri$210  $200  $328  $524  
Denominator:
Basic weighted average shares150,826,196  149,183,049  151,159,423  149,420,087  
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units1,328,176  1,085,375  1,195,513  2,037,834  
Diluted weighted average shares152,154,372  150,268,424  152,354,936  151,457,921  
Basic net income per share (1)
$1.39  $1.34  $2.17  $3.50  
Diluted net income per share (1)
$1.38  $1.33  $2.15  $3.46  
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Numerator:       
Net income attributable to MKHL$219.4
 $271.3
 $547.8
 $579.3
Denominator:       
Basic weighted average shares152,047,963
 163,148,597
 152,772,067
 168,000,933
Weighted average dilutive share equivalents:       
Share options, restricted shares/units, and performance restricted share units2,575,376
 2,065,448
 2,448,917
 2,221,655
Diluted weighted average shares154,623,339
 165,214,045
 155,220,984
 170,222,588
        
Basic net income per share$1.44
 $1.66
 $3.59
 $3.45
Diluted net income per share$1.42
 $1.64
 $3.53
 $3.40

(1)Basic and diluted net income per share are calculated using unrounded numbers.
During the three and nine months ended December 30, 2017,28, 2019, share equivalents of 2,243,4362,264,959 shares and 2,503,7823,487,241 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect. Share equivalents of 1,906,9412,022,564 shares and 2,002,3001,117,277 shares, respectively, have been excluded from the above calculations during the three and nine months ended December 31, 2016.29, 2018.
Please refer toSee Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017March 30, 2019 for a complete disclosure of the Company’s significant accounting policies.
U.S. Tax Reform
On December 22, 2017, the United States ("U.S.") government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including, among other things, lowering U.S. statutory federal tax rate and implementing a territorial tax system. As the Company has a March 31 fiscal year-end, the lower tax rate will be phased in, resulting in a U.S. statutory federal tax rate of approximately 32% for the fiscal year ended March 31, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter. The Tax Act also adds many new provisions, including changes to bonus depreciation, limits on the deductions for executive compensation and interest expense, a tax on global intangible low-taxed income ("GILTI"), the base erosion anti-abuse tax ("BEAT") and a deduction for foreign derived intangible income ("FDII"). The Company is still evaluating the impact of these provisions of the Tax Act, which do not apply until 2019, and thus, has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax.


As part of the transition to the new territorial tax system, the Tax Act imposes a tax on the mandatory deemed repatriation of earnings of the Company’s foreign subsidiaries. In addition, the reduction of the U.S. statutory federal tax rate will cause the Company to re-measure its U.S. deferred tax assets and liabilities.  In accordance with Accounting Standards Codification ("ASC") 740, the Company recorded the effects of the tax law change during the three months ended December 30, 2017, which resulted in a provisional charge of $12.4 million, comprised of an estimated deemed repatriation tax charge of $0.3 million and an estimated deferred tax charge of $12.1 million due to the re-measurement of the Company’s net U.S. deferred tax assets. Conversely, the Company realized a $2.0 million net benefit for the three and nine month periods ended December 30, 2017 due to the corporate tax rate reductions. While the Tax Act has negatively impacted the Company's results of operations for the three and nine months ended December 30, 2017 by approximately 370 basis points and 160 basis points, respectively, the lower corporate rate is expected to to result in an ongoing reduced tax rate for the Company.
In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 118 to provide guidance for companies that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, or any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. In addition, once the Company finalizes certain tax positions when it files its 2017 U.S. tax return, it will be able to conclude whether any further adjustments are required to its deferred tax balances in the U.S., as well as to the total liability associated with the one-time mandatory tax. The Company believes that the analysis performed to date is sufficient to calculate a reasonable estimate of the impacts of the Tax Act.
Recently Adopted Accounting Pronouncements
Business CombinationsLease Accounting
In January 2017,On March 31, 2019, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition of a Business," to clarify the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted. The Company adopted ASU 2017-01 during2016-02, “Leases (Topic 842),” which requires lessees to recognize a lease liability and a right-of-use asset on the three months ended December 30, 2017, which did not have a materialbalance sheet for all leases, except certain short-term leases. In evaluating the impact on its consolidated financial statements.
Share-Based Compensation
In March 2016,of ASU 2016-02, the Financial Accounting Standards Board (“FASB”)Company considered guidance provided by several additional ASUs issued Accounting Standards Update (“ASU”) No. 2016-09,by the FASB, including ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842” in January 2018, ASU 2018-10, “CodificationImprovements to Employee Share-Based Payment Accounting,Topic 842, Leases” which simplifies accounting and presentationASU 2018-11, “Leases (Topic 842): Targeted Improvements,” both issued in July 2018, and ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors” issued in December 2018. In connection with its implementation of share-based payments, primarily relatingASU 2016-02, the Company adopted the package of three practical expedients, allowing it to carry forward its previous lease classification and embedded lease evaluations and not to reassess initial direct costs as of the date of adoption. The Company also adopted the practical expedient allowing it to combine lease and non-lease components for its real estate leases. Lastly, the Company adopted the practical expedient provided by ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” allowing it to recognize a cumulative-effect adjustment to the recognitionopening balance of retained earnings in the period of adoption without restating the comparative prior year periods.
10

The Company’s existing lease obligations, which relate to stores, corporate locations, warehouses, and classificationequipment, are subject to the new standard and resulted in recording of excess tax benefits, accountinglease liabilities and right-of-use assets for forfeitures and tax withholding requirements. The Company adopted ASU 2016-09 during the first quarter of Fiscal 2018, as required. Accordingly, during the three and nine months ended December 30, 2017, excess tax benefits of $0.1 million and $0.2 million, respectively, which would have been previously reflected within additional paid-in capital, were recognized within the Company’s provision of income taxes. This change is expected to increase volatility in future provisions for income taxes. In addition, the Company eliminated windfall tax benefits from the treasury stock method calculation used to compute its diluted earnings per share. Both of the above changes have been adoptedoperating leases on a prospective basis, whereas cash flows related to excess tax benefits, previously reflected within financing activities, have been presented within operating activities within the Company’s consolidated statementsbalance sheet.
The below table details the balance sheet adjustments recorded on March 31, 2019 in connection with the Company’s adoption of cash flows on a retrospective basis. Cash flowsASU 2016-02 (in millions):
March 30, 2019
As Reported under ASC 840		ASC 842 AdjustmentsMarch 31, 2019
As Reported Under ASC 842
Assets
Prepaid expenses and other current assets$221  $(23) 
(1)
$198  
Operating lease right-of-use assets—  1,856  
(2)
1,856  
Intangible assets, net2,293  (20) 
(3)
2,273  
Deferred tax assets112  38  
(4)
150  
Liabilities
Current portion of operating lease liabilities—  386  
(5)
386  
Accrued expenses and other current liabilities374  (72) 
(6)
302  
Long-term portion of operating lease liabilities—  1,828  
(5)
1,828  
Deferred Rent132  (132) 
(7)
—  
Deferred tax liabilities438  (7) 
(4)
431  
Shareholders’ Equity
Retained earnings4,707  (152) 
(4)
4,555  

(1)Represents the reclassification of rent paid in advance to current operating lease liabilities.
(2)Represents the recognition of operating lease right-of-use assets, reflecting the reclassifications of deferred rent, sublease liabilities, tenant allowances and favorable and unfavorable lease rights. This balance also reflects the initial impairments of the operating lease right-of-use assets recorded through retained earnings, as described below.
(3)Represents the reclassifications of favorable and unfavorable lease rights for leases recorded in conjunction with the Company’s acquisitions to operating lease right-of-use assets.
(4)Represents the initial impairment recognized through retained earnings for certain underperforming retail store locations for which property and equipment were previously impaired, net of associated deferred taxes.
(5)Represents the recognition of current and non-current lease liabilities for fixed payments associated with the Company’s operating leases.
(6)Represents the reclassification of $54 million in sublease liabilities, primarily related to excess tax benefits were $6.4Michael Kors retail stores closed under the Retail Fleet Optimization Plan as defined in Note 10, as well as the reclassification of $18 million duringof deferred rent and tenant allowances to operating lease right-of-use assets.
(7)Represents the nine months ended December 31, 2016. The Company continuesreclassification of noncurrent deferred rent and tenant improvement allowances to reflect estimated forfeitures in its share-based compensation expense.operating lease right-of-use assets.
See Note 4 for additional disclosures related to the Company’s lease accounting policy.
Recently Issued Accounting Pronouncements
We haveThe Company has considered all new accounting pronouncements and other than the recent pronouncements discussed below, have concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition or cash flows based on current information.



Hedge Accounting
11

On August 28, 2017,3. Revenue Recognition
The Company accounts for contracts with its customers when there is approval and commitment from both parties, the FASB issued ASU No. 2017-12, “Targeted Improvementsrights of the parties and payment terms have been identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised goods or services are transferred to Accounting for Hedging Activities.” The new standard is intended to improve and simplify rules relating to hedge accounting, including the elimination of periodic hedge ineffectiveness, recognition and presentation of components excluded from hedge effectiveness assessment,Company’s customers in an amount that reflects the ability to elect to perform subsequent effectiveness assessments qualitatively, and other provisions designed to provide more transparency around the economics of a company’s hedging strategy. ASU 2017-12 is effective forconsideration the Company expects to be entitled to in Fiscal 2020, with early adoption permitted. exchange for those goods or services.
The Company is currently evaluatingsells its products through three primary channels of distribution: retail, wholesale and licensing. Within the impactretail and wholesale channels, substantially all of ASU 2017-12 on its consolidated financial statements.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which provides new guidance forCompany’s revenues recognized from contracts with customers,consist of sales of products that represent a single performance obligation, where control transfers at a point in time to the customer. For licensing arrangements, royalty and will replace the existing revenue recognition guidance. ASU 2014-09 requires thatadvertising revenue is recognized at an amountover time based on access provided to the companyCompany’s brands.
Retail
The Company generates sales through directly operated stores and e-commerce throughout the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia.
Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability recorded upon issuance. Revenue is entitled torecognized when the gift card is redeemed or upon transferring control of goods or services to customers, as opposed to when risks and rewards transfer to a customer. In July 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 by one year, making it effective“breakage” for the interim reporting periods withinestimated portion of gift cards that are not expected to be redeemed. “Breakage” revenue is calculated under the annual reporting period beginning after December 15, 2017, or beginning withproportional redemption methodology, which considers the Company’s Fiscal 2019. This standard may be applied retrospectively to all prior periods presented, or using a modified retrospective method with a cumulative adjustment to retained earningshistorical patterns of redemption in jurisdictions where the year of adoption.
The FASB has issued several additional ASUs to provide implementation guidance on ASU No. 2014-09, including ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” issued in December 2016, ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” issued in May 2016, ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” issued in April 2016, and ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” issued in March 2016 . The Company is considering this guidance in evaluatingnot required to remit the impactvalue of ASU 2014-09.
Most of our business is comprised of retail and wholesale operations, where revenue is recognized at a point of time. The Company has completed the initial assessment of the new standard and is currently progressing in its implementation. While the evaluation process is not complete, based on our assessment to date, the Company believes that some of the potential impacts of implementing this standard will include the timing of revenue recognition for its licensing royalties, recognition of breakage revenue for unredeemed gift cards as wellunclaimed property. The contract liability related to gift cards, net of estimated “breakage,” was $13 million as expanded financial statement disclosures,of both December 28, 2019 and March 30, 2019, respectively, and is included in accrued expenses and other current liabilities in the Company’s consolidated balance sheet.
Loyalty Program. The Company offers a loyalty program, which allows its Michael Kors customers to earn points on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage” for points that are not expected to be redeemed. The contract liability, net of an estimated “breakage,” of $4 million and $3 million as of December 28, 2019 and March 30, 2019, respectively, is recorded as a reduction to revenue in the consolidated statements of operations and comprehensive income and within accrued expenses and other current liabilities in the Company’s consolidated balance sheet and is expected to be recognized within the next 12 months.
Wholesale
The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops throughout the Americas, EMEA and Asia. The Company also has arrangements where its products are sold to geographic licensees in certain parts of EMEA, Asia and South America.
Licensing
The Company provides its third-party licensees with the right to access its Versace, Jimmy Choo and Michael Kors trademarks under product and geographic licensing arrangements. Under geographic licensing arrangements, third party licensees receive the right to distribute and sell products bearing the Company’s trademarks in retail and/or wholesale channels within certain geographical areas, including Brazil, the Middle East, Eastern Europe, South Africa, certain parts of Asia and Australia.
12

The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the licensees. Generally the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, some of our guaranteed minimums for Versace are multi-year based. As of December 28, 2019, contractually guaranteed minimum fees from our license agreements expected to be recognized as revenue during future periods were as follows (in millions):
Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2020$7 
Fiscal 202127 
Fiscal 202227 
Fiscal 202323 
Fiscal 202421 
Fiscal 2025 and thereafter100 
 Total$205 
Sales Returns
The refund liability recorded as of December 28, 2019 and March 30, 2019 was $51 million and $35 million, respectively, and the related asset for the right to recover returned product as of December 28, 2019 and March 30, 2019 was $16 million and $12 million, respectively.
Contract Balances
Total contract liabilities were $19 million and $31 million as of December 28, 2019 and March 30, 2019, respectively. For the three and nine months ended December 28, 2019, the Company recognized $2 million and $19 million, respectively, in revenue which related to contract liabilities that existed at March 30, 2019. For the three and nine months ended December 29, 2018, the Company recognized $3 million and $14 million, respectively, in revenue which related to contract liabilities that existed at April 1, 2018. There were 0 contract assets recorded as of December 28, 2019 and March 30, 2019.
There were no changes in historical variable consideration estimates that were materially different from actual results.
13

Disaggregation of Revenue
The following table presents the Company’s segment revenues disaggregated by geographic location (in millions):
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Versace revenue - the Americas$41  $—  $133  $—  
Versace revenue - EMEA98  —  311  —  
Versace revenue - Asia56  —  186  —  
 Total Versace195  —  630  —  
Jimmy Choo revenue - the Americas34  29  85  75  
Jimmy Choo revenue - EMEA85  90  228  248  
Jimmy Choo revenue - Asia46  43  135  128  
Total Jimmy Choo165  162  448  451  
Michael Kors revenue - the Americas834  898  2,222  2,363  
Michael Kors revenue - EMEA239  244  652  677  
Michael Kors revenue - Asia138  134  407  403  
 Total Michael Kors1,211  1,276  3,281  3,443  
Total revenue - the Americas909  927  2,440  2,438  
Total revenue - EMEA422  334  1,191  925  
Total revenue - Asia240  177  728  531  
Total revenue$1,571  $1,438  $4,359  $3,894  
See Note 3 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2019 for a complete disclosure of the Company’s revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. policy.

4. Leases
The Company currently anticipates adopting this standard usingleases retail stores, office space and warehouse space under operating lease agreements that expire at various dates through September 2043. The Company’s leases generally have terms of up to 10 years, generally require a fixed annual rent and may require the modified retrospective methodpayment of additional rent if store sales exceed a negotiated amount. Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through February 2024. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its Retail Fleet Optimization Plan, as defined in Note 10. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. The Company determines the sublease term based on the date it provides possession to the subtenant through the expiration date of the sublease.
The Company recognizes operating lease right-of-use assets and lease liabilities at lease commencement date, based on the present value of fixed lease payments over the expected lease term. The Company uses its incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable for the Company’s leases. The Company’s incremental borrowing rates are based on the term of the leases, the economic environment of the leases, and reflect the rate it would pay to borrow on a secured basis. Certain leases include one or more renewal options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at the Company’s sole discretion and as such, the Company typically determines that exercise of these renewal options is not reasonably certain. As a result, the Company generally does not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the operating lease right-of-use asset and lease liability. Certain leases also contain termination options with an associated penalty. Generally, the Company is reasonably certain not to exercise these options and as such, they are not included in the determination of the expected lease term. The Company recognizes operating lease expense on a straight-line basis over the lease term.
Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term.
14

The Company’s leases generally provide for payments of non-lease components, such as common area maintenance, real estate taxes and other costs associated with the cumulative adjustmentleased property. The Company accounts for lease and non-lease components of its real estate leases together as a single lease component and, as such, includes fixed payments of non-lease components in the measurement of the operating lease right-of-use assets and lease liabilities for its real estate leases. Variable lease payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property are expensed as incurred as variable lease costs and are not recorded on the balance sheet. The Company’s lease agreements do not contain any material residual value guarantees or material restrictions or covenants.
The following table presents the Company’s supplemental balance sheet information related to retained earningsleases (in millions):
Balance Sheet LocationDecember 28,
2019
Assets
Operating leasesOperating lease right-of-use assets$1,665 
Liabilities
Current:
Operating leasesShort-term portion of operating lease liabilities$406 
Non-current:
Operating leasesLong-term portion of operating lease liabilities$1,751 
The components of net lease costs for the three and nine months ended December 28, 2019 were as follows (in millions):
December 28, 2019
Statement of Operations and
Comprehensive Income Location		Three Months EndedNine Months Ended
Operating lease costSelling, general and administrative expenses$114  $338  
Short-term lease costSelling, general and administrative expenses5  18  
Variable lease costSelling, general and administrative expenses39  118  
Sublease incomeSelling, general and administrative expenses(2) (5) 
Total lease cost$156  $469  
The following table presents the Company’s supplemental cash flow information related to leases (in millions):
Nine Months Ended
December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases$372 
Non-cash transactions:
Lease assets obtained in exchange for new lease liabilities$270 
15

The following tables summarizes the weighted average remaining lease term and weighted average discount rate related to the Company’s operating lease right-of-use assets and lease liabilities recorded during the first quarter of Fiscal 2019.
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a lease liability and a right-to-use asset on the balance sheet for all leases, except certain short-term leases. ASU 2016-02 is effective beginning withas of December 28, 2019:
December 28,
2019
Operating leases:
Weighted average remaining lease term (years)6.3
Weighted average discount rate3.0 %
At December 28, 2019, the Company’s Fiscal 2020, with early adoption permitted, and must be implemented using a modified retrospective approach for all leases existing at, or entered into after the beginning of the earliest comparative period that is presented in the financial statements. The Company is currently evaluating the impact of ASU 2016-02 on its consolidated financial statements but expects that the adoption of this standard will result in a significant increase in assets and liabilities on its consolidated balance sheets.
Goodwill
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies the test for goodwill impairment by eliminating Step 2 of the goodwill impairment analysis, while retaining the option to perform an initial qualitative assessment for a reporting unit to determine if a quantitative impairment test is required. ASU 2017-04 is effective in the Company’s Fiscal 2021 with early adoption permitted and should be applied on a prospective basis. The Company is currently evaluating the impact of ASU 2017-04 on its consolidated financial statements.


Share-Based Compensation
In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”, which simplifies modification accounting for entities that changefuture minimum lease payments under the terms or conditions of share-based awards. ASU 2017-09 is effective forthese noncancelable operating lease agreements are as follows (in millions):
December 28,
2019
Remainder of Fiscal 2020$127 
Fiscal 2021484 
Fiscal 2022425 
Fiscal 2023356 
Fiscal 2024301 
Thereafter707 
Total lease payments2,400 
Less: interest(243)
Total lease liabilities$2,157 
At December 28, 2019, the Company’s Fiscal 2019 with early adoption permitted and is required to be applied on a prospective basis. The Company will evaluate the impact of ASU 2017-09 on any future changes tominimum sublease income under the terms and conditions of its share-based compensation awards.these noncancelable operating lease agreements are as follows (in millions):
December 28,
2019
Remainder of Fiscal 2020$1 
Fiscal 20216 
Fiscal 20225 
Fiscal 20235 
Fiscal 20244 
Thereafter16 
Total sublease income$37 
3.Additionally, the Company had approximately $94 million of future payment obligations related to executed lease agreements for which the related lease has not yet commenced as of December 28, 2019.

16

5. Acquisitions
Acquisition of Jimmy Choo Group LimitedVersace
On November 1, 2017,December 31, 2018, the Company completed the acquisition of Jimmy Choo, whereby JAG Acquisitions (UK) Limited, the Company’s wholly-owned subsidiary, acquired all of Jimmy Choo’s issued and to be issued shares at a purchase price of 230 pence per share in cash,Versace for a total transactionenterprise value of $1.447approximately €1.753 billion including(or approximately $2.005 billion), giving effect to an investment made by the repaymentVersace family at acquisition of existing debt obligations, which2.4 million shares of CPRI stock. The acquisition was funded through a combination of borrowings under the Company’s new $1.0 billion term loan facility,2018 Term Loan Facility, drawings under the issuance of the Senior NotesCompany’s Revolving Credit Facility and cash on hand (please refer to(see Note 911 for additional information).
The following table summarizes the aggregate purchase price consideration paid to acquire Jimmy Choo in cash (in millions):
 November 1, 2017
Consideration paid to Jimmy Choo shareholders$1,181.2
Repayment of debt and related obligations266.2
Total purchase price$1,447.4


The Company believes that this combination will further strengthen its future growth opportunities while also increasing both product and geographic diversification and will allow it to grow its international presence through the formation of a global fashion luxury group, bringing together industry-leading luxury fashion brands. The Company accounted for this acquisition as a business combination under the acquisition method of accounting. The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition (in millions):
 November 1, 2017
Cash and cash equivalents$34.3
Accounts receivable30.7
Inventory(1)
126.2
Other current assets63.9
Current assets255.1
Property and equipment(2)
51.0
Goodwill(3)
684.9
Brand(4)
577.8
Customer relationships(5)
212.8
Lease rights5.9
Deferred tax assets22.5
Other assets28.1
Total assets acquired$1,838.1
  
Accounts payable$129.3
Other current liabilities96.5
Current liabilities225.8
Deferred tax liabilities134.9
Other liabilities26.9
Total liabilities assumed$387.6
  
Less: Noncontrolling interest in joint ventures$3.1
  
Fair value of net assets acquired$1,447.4
Fair value of acquisition consideration$1,447.4
(1) Includes an inventory step-up adjustment of $9.5 million, which will be recognized as an adjustment to the Company's cost of goods sold in its statement of operations over twelve months.
(2) Includes a $7.0 million adjustment to reduce the fair value of Jimmy Choo's leasehold improvements, which will be recognized over the remaining lease term.
(3) Represents the difference between the purchase price over the net identifiable tangible and intangible assets acquired has been allocated to goodwill, which is not deductible for tax purposes.
(4)
Represents the fair value Jimmy Choo's brand, which is an indefinite-lived intangible asset due to being essential to the Company's ability to operate the Jimmy Choo business for the foreseeable future. The Jimmy Choo brand was valued using the relief-from-royalty method of the income valuation approach.
(5) Represents customer relationships associated with Jimmy Choo wholesale customers and geographic licensees, which are being amortized over 15 years and customer relationships with product licensees, which are being amortized over 18 years. These useful lives were estimated based on the time to recover the related future discounted cash flows. These intangible assets were valued using multi-period excess-earnings valuation method.
Jimmy Choo'sVersace’s results of operations have been included in our consolidated financial statements beginning on November 1, 2017. Jimmy ChooDecember 31, 2018. Versace contributed total revenue of $114.7$195 million and net income of $8.1 million (after amortization of non-cash purchase accounting adjustments and transition and transaction costs) for the period from the date of acquisition through December 30, 2017.


The following table summarizes the unaudited pro-forma consolidated results of operations for the three and nine months ended December 30, 2017 and December 31, 2016 as if the acquisition had occurred on April 3, 2016, the beginning of Fiscal 2017 (in millions):
 Three Months Ended Nine Months Ended
 December 30, 2017December 31, 2016 December 30, 2017December 31, 2016
Pro-forma total revenue$1,478.5
$1,499.1
 $3,832.6
$3,819.6
Pro-forma net income242.8
279.4
 574.2
586.2
Pro-forma net income per ordinary share attributable to MKHL:     
Basic$1.60
$1.71
 $3.76
$3.49
Diluted$1.57
$1.69
 $3.70
$3.44
The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and Jimmy Choo and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2017 and are not indicative of the future operating results of the combined company. The financial information for Jimmy Choo prior to the acquisition has been included in the pro-forma results of operations on a calendar-year basis and includes certain adjustments to Jimmy Choo’s historical consolidated financial statements to align with U.S. GAAP and the Company's accounting policies. The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired, fair value adjustments relating to leases and fixed assets, and the related tax effects assuming that the business combination occurred on April 3, 2016. Purchase accounting amortization of the inventory step-up adjustment has been excluded from the above pro-forma amounts due to the short-term nature of this adjustment. The pro-forma consolidated financial statement also reflect the impact of debt repayment and borrowings made to finance the acquisition (see Note 9) and exclude historical interest expense for Jimmy Choo. Transaction costs of $22.2 million and $39.6 million for the three and nine months ended December 30, 2017, which have been recorded within restructuring and other charges in the Company’s consolidated statements of operations and comprehensive income, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.
Acquisition of Michael Kors (HK) Limited
On May 31, 2016, the Company acquired 100% of the stock of MKHKL, its licensee in the Greater China region, which includes China, Hong Kong, Macau and Taiwan, to allow it to better manage opportunities and capitalize on the growth potential in the region. This acquisition was funded by a cash payment of $500.0 million. The Company accounted for the acquisition as a business combination and MKHKL’s results of operations have been included in its consolidated financial statements beginning on June 1, 2016.
MKHKL contributed revenue of $79.8 million and $216.5$630 million, respectively, for the three and nine months ended DecemberNovember 30, 2017,2019 and net incomeloss from operations of $0.4$12 million and $2.8$6 million, respectively, after amortization of non-cash purchase accounting adjustments, for the three and nine months ended DecemberNovember 30, 2017. During2019 (reflecting a one-month reporting lag).
The Company recorded measurement period adjustments during the three months ended December 31, 2016, MKHKL contributed revenue of $65.7 million28, 2019. The measurement period adjustments related to conclusions reached on the ability to utilize certain deferred tax assets based on new facts and net loss of $5.3 million, and revenue of $137.7 million and net loss of $11.3 million for the period from the date of acquisition through December 31, 2016 (after amortization of non-cash valuation adjustments and integration costs).


The following table summarizes the unaudited pro-forma consolidated results of operations for the three and nine months ended December 31, 2016 as ifcircumstances identified which existed at the acquisition had occurred on March 29, 2015,date and if known, would have affected the beginning of Fiscal 2016 (in millions):
 Three Months Ended Nine Months Ended
 December 31, 2016 December 31, 2016
Pro-forma total revenue$1,352.8
 $3,455.3
Pro-forma net income271.0
 584.0
Pro-forma net income per ordinary share attributable to MKHL:   
Basic$1.66
 $3.48
Diluted$1.64
 $3.43
The unaudited pro-forma consolidated results above are based on the historical financial statementsmeasurement of the amounts recognized as of that date. The net measurement period adjustments increased goodwill by $23 million. As the Company and MKHKL and are not necessarily indicativecontinues to finalize the fair value of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2016 and are not indicative of the future operating results of the combined company. The pro-forma consolidated results of operations reflect the elimination of intercompany transactions and include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired (reacquired rights and customer relationships), fair valueliabilities assumed, additional purchase price adjustments relating to leases, fixed assets and inventory, andmay be recorded during the related tax effects assuming that the business combination occurred on March 29, 2015. The pro-forma consolidated results of operations for the nine months ended December 31, 2016 also reflect the elimination of transaction costs of approximately $11.3 million, which have been recorded within restructuring and other chargesmeasurement period. See Note 4 in the Company’s consolidated statements of operations and comprehensive incomeAnnual Report on Form 10-K for the nine monthsfiscal year ended December 31, 2016.March 30, 2019 for additional disclosures relating to the Company’s acquisitions.
Other Acquisitions
During the three months ended July 1, 2017, the Company repurchased a portion of the non-controlling interest in its Latin American joint venture, MK (Panama) Holdings, S.A. and subsidiaries (“MK Panama”) for approximately $0.5 million. As of December 30, 2017, the Company has a 75% ownership interest in MK Panama.
4.6. Receivables, net
Receivables, net, consist of (in millions):
December 28,
2019		March 30,
2019
Trade receivables (1)
$404  $459  
Receivables due from licensees31  23  
435  482  
Less: allowances(114) (99) 
$321  $383  
 December 30,
2017		 April 1,
2017
Trade receivables:   
Credit risk assumed by insured$283.1
 $294.0
Credit risk retained by Company90.6
 63.8
Receivables due from licensees31.0
 11.9
 404.7
 369.7
Less: allowances(116.7) (103.9)
 $288.0
 $265.8

(1)As of December 28, 2019 and March 30, 2019, $73 million and $317 million, respectively, of trade receivables were insured.
Receivables are presented net of allowances for sales returns, discounts, markdowns, operational chargebacks and doubtful accounts. Sales returns are determined based on an evaluation of current market conditions and historical returns experience. Discounts are based on open invoices where trade discounts have been extended to customers. Markdowns are based on wholesale customers’ sales performance, seasonal negotiations with customers, historical deduction trends and an evaluation of current market conditions. Operational chargebacks are based on deductions taken by customers, net of expected recoveries. Such provisions, and related recoveries, are reflected in revenues.
The Company’s allowance for doubtful accounts is determined through analysis of periodic aging of receivables that are not covered by insurance and assessments of collectability based on an evaluation of historic and anticipated trends, the financial condition of the Company’s customers and the impact of general economic conditions. The past due status of a receivable is based on its contractual terms. Amounts deemed uncollectible are written off against the allowance when it is probable the amounts will not be recovered. Allowance for doubtful accounts was $14 million and $18 million as of December 28, 2019 and March 30, 2017 was $5.32019, respectively. The Company had bad debt expense of $3 million and $0.9$1 million as of April 1, 2017.

for the nine months ended December 28, 2019 and December 29, 2018, respectively. All other periods presented were immaterial.


5.
17

7. Property and Equipment, net
Property and equipment, net, consistconsists of (in millions):
December 30,
2017		 April 1,
2017		December 28,
2019		March 30,
2019
Leasehold improvements$562.0
 $507.9
Leasehold improvements$686  $639  
Computer equipment and softwareComputer equipment and software315  292  
Furniture and fixtures270.4
 244.1
Furniture and fixtures316  292  
In-store shops269.4
 256.0
In-store shops275  270  
Computer equipment and software262.1
 226.2
Equipment116.5
 104.4
Equipment130  123  
Building50.3
 40.6
Building47  47  
Land15.8
 14.0
Land18  15  
1,546.5
 1,393.2
1,787  1,678  
Less: accumulated depreciation and amortization(969.9) (833.9)Less: accumulated depreciation and amortization(1,260) (1,115) 
576.6
 559.3
527  563  
Construction-in-progress22.8
 32.2
Construction-in-progress69  52  
$599.4
 $591.5
$596  $615  
Depreciation and amortization of property and equipment for the three months ended December 30, 201728, 2019 and December 31, 201629, 2018 was $46.9$50 million and $49.4$44 million, respectively, and was $132.7$149 million and $146.5$136 million, respectively, for the nine months ended December 30, 201728, 2019 and December 31, 2016.29, 2018. During the three months ended December 28, 2019, the Company recorded property and equipment impairment charges of $10 million, primarily related to Michael Kors retail store locations. During the nine months ended December 28, 2019, the Company recorded property and equipment impairment charges of $33 million, $11 million of which related to determining asset groups for the Company’s premier store locations at an individual store level, $7 million of which related to Michael Kors and $4 million related to Jimmy Choo. In addition, during the nine months ended December 28, 2019, the Company recorded property and equipment impairment charges of $22 million, related to the Company's retail store locations (see Note 13 for additional information). During the three and nine months ended December 30, 2017,29, 2018, the Company recorded fixed assetproperty and equipment impairment charges of $2.6$6 million and $14.5$15 million, respectively, of which $5 million and $13 million, respectively, were related to underperforming Michael Kors full-price retail store locations, some of which will be closed as part ofrelated to the Company's previously announced Retail Fleet Optimization Plan, as defined in Note 8. During the three and nine months ended December 31, 2016, the Company recorded fixed asset impairment charges of $0.5 million and $5.4 million, respectively, $0.5 million of which related to our wholesale operations and $4.9 million of which were related to underperforming Michael Kors full-price retail store locations.10.

6.
18

8. Intangible Assets and Goodwill
The following table details the carrying values of the Company’s intangible assets other thanand goodwill (in millions):
 December 28,
2019		March 30,
2019
Definite-lived intangible assets:
Reacquired Rights$400  $400  
Trademarks23  23  
Key Money (1)
68  96  
Customer Relationships415  415  
Total definite-lived intangible assets906  934  
Less: accumulated amortization(181) (143) 
Net definite-lived intangible assets725  791  
Indefinite-lived intangible assets:
Jimmy Choo brand574  572  
Versace brand926  930  
1,500  1,502  
Total intangible assets, excluding goodwill$2,225  $2,293  
Goodwill (2)
$1,681  $1,659  
 December 30,
2017		 April 1,
2017
Definite-lived intangible assets:   
Reacquired Rights$400.4
 $400.4
Trademarks23.0
 23.0
Lease Rights78.9
 74.2
Customer Relationships223.3
 5.0
Total definite-lived intangible assets725.6
 502.6
Less: accumulated amortization(102.7) (84.5)
Net definite-lived intangible assets$622.9
 $418.1
    
Indefinite-lived intangible assets:   
Jimmy Choo brand$592.5
 $—

(1)The March 30, 2019 balance includes certain lease rights that were reclassified to the operating lease right-of-use asset as part of the adoption of ASU 2016-02.
(2)The change in the carrying values since March 30, 2019 primarily relates to the goodwill adjustment discussed in Note 5.
Amortization expense for the Company’s definite-lived intangiblesintangible assets for the three months ended December 30, 201728, 2019 and December 31, 201629, 2018 was $7.1$13 million and $6.3$7 million, respectively, and was $17.2$39 million and $16.0$24 million, respectively, for the nine months ended December 30, 201728, 2019 and December 31, 2016.29, 2018. During the nine months ended December 30, 2017, the Company recorded impairment charges of $4.4 million relating to its intangible assets (See Note 11 for further information).


Estimated amortization expense for each of the next five years is as follows (in millions):
Remainder of Fiscal 2018$8.4
Fiscal 201933.7
Fiscal 202033.6
Fiscal 202133.5
Fiscal 202233.3
Thereafter480.4
 $622.9
The following table details the changes in goodwill for each of the Company's reportable segments (in millions):
 MK Retail MK Wholesale MK Licensing Jimmy Choo Total
Balance at April 1, 2017$91.9
 $25.9
 $1.9
 $—
 $119.7
Acquisition of Jimmy Choo—
 —
 —
 684.9
 684.9
Foreign currency translation—
 —
 —
 17.4
 17.4
Balance at December 30, 2017$91.9
 $25.9
 $1.9
 $702.3
 $822.0
Goodwill is not amortized but will be evaluated for impairment in the fourth quarter of Fiscal 2018, or whenever impairment indicators exist. There were no goodwill impairment charges recorded during the three and nine months ended December 30, 201728, 2019, the Company recorded impairment charges of $2 million and $8 million, respectively, primarily related to intangible assets associated with its premier Michael Kors store locations (see Note 13 for further information). Impairment charges recorded during the nine months ended December 31, 2016.29, 2018 were $2 million. There were 0 goodwill or other indefinite-lived intangible asset impairment charges recorded during any of the periods presented.

7.
9. Current Assets and Current Liabilities
Prepaid expenses and other current assets consist of the following (in millions):
December 28,
2019		March 30,
2019
Prepaid taxes$189  $125  
Interest receivable related to net investment hedges12  11  
Prepaid property and equipment8  7  
Prepaid rent (1)
—  24  
Other54  54  
$263  $221  

19
 December 30,
2017		 April 1,
2017
Prepaid taxes$96.1
 $56.6
Prepaid rent22.9
 21.7
Leasehold incentive receivable9.5
 12.0
Prepaid insurance2.9
 3.2
Restricted cash0.3
 1.9
Unrealized gains on forward foreign exchange contracts—
 4.7
Other30.6
 21.8
 $162.3
 $121.9



Accrued expenses and other current liabilities consist of the following (in millions):
December 28,
2019		March 30,
2019
Other taxes payable$95  $47  
Return liabilities51  35  
Accrued capital expenditures27  25  
Accrued rent (2)
22  34  
Accrued advertising and marketing16  10  
Gift cards and retail store credits13  13  
Professional services11  12  
Restructuring liability (1)
11  64  
Accrued litigation10  11  
Accrued interest5  10  
Accrued purchases and samples4  29  
Other88  84  
$353  $374  

(1)In connection with the adoption of ASU 2016-02, certain lease related assets and liabilities were reflected within operating lease right-of-use assets and liabilities as of December 28, 2019. See Note 2 and Note 4 for additional information.
(2)The accrued rent balance relates to variable lease payments.

 December 30,
2017		 April 1,
2017
Other taxes payable$72.0
 $29.2
Accrued rent36.0
 21.5
Accrued advertising and marketing30.9
 10.7
Accrued capital expenditures22.0
 20.5
Professional services16.4
 7.1
Gift cards and retail store credits14.3
 12.9
Unrealized loss on forward foreign currency exchange contracts9.5
 0.4
Accrued samples7.0
 2.2
Accrued interest3.8
 0.3
Deferred income3.2
 0.1
Advance royalties0.6
 5.0
Other61.7
 25.1
 $277.4
 $135.0
8.10. Restructuring and Other Charges
On May 31, 2017, theRetail Fleet Optimization Plan
The Company announced that it plans to close between 100 and 125150 of its Michael Kors full-price retail stores over the next two years, in order to improve the profitability of its retail store fleet (“Retail Fleet Optimization Plan”). Over this time period,The Company anticipates finalizing the remainder of the planned store closures under the Retail Fleet Optimization Plan by the end of Fiscal 2020. The Company expects to incur approximately $100 - $125 million of one-time costs associated with these store closures. Collectively, the Company anticipates ongoing annual savings of approximately $60 million as a result of store closures and lower depreciation and amortization expense as a result of the impairment charges recorded during Fiscal 2017 and Fiscal 2018.once these initiatives are completed.
During the nine months ended December 30, 2017,28, 2019, the Company closed 2429 of its Michael Kors full-price retail stores under the Retail Fleet Optimization Plan.Plan, for a total of 129 stores closed at a cost of $100 million since plan inception. Restructuring charges recorded in connection with the Retail Fleet Optimization Plan during the three and nine months ended December 28, 2019 were $5 million and $6 million, respectively. The below table presents a summaryrollforward of cash charges recorded in connection with this plan for the MK Retail segment (in millions):
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 30,
2017
Lease termination and store closure costs$2.4
 $7.7
Severance and benefits costs—
 0.6
Total restructuring charges$2.4
 $8.3
During the nine months ended December 30, 2017, the Company made payments of $6.8 million, primarily relating to lease termination and store closure costs. As of December 30, 2017, the Company’s remaining restructuring liability was $1.5related to this plan (in millions):
Severance and benefit costsLease-related and other costsTotal
Balance at March 30, 2019$2  $53  $55  
ASC 842 (Leases) Adjustment (1)
—  (46) (46) 
Balance at March 31, 20192  7  9  
Additions charged to expense—  6  6  
Payments(1) (7) (8) 
Balance at December 28, 2019$1  $6  $7  

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

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During the three and nine months ended December 29, 2018, the Company recorded restructuring charges of $4 million and $10 million, respectively, under the Retail Fleet Optimization Plan, which were comprised of lease-related charges.

Other Restructuring Charges
In addition to the restructuring charges related to the Retail Fleet Optimization Plan, the Company incurred charges of $2 million and $5 million during the three and nine months ended December 28, 2019, respectively, primarily consisting of lease-related costs. The Company also incurred charges of $3 million and $4 million relating to lease terminationJimmy Choo lease-related charges during the three and store closure costs.nine months ended December 29, 2018, respectively.
Other ChargesCosts
During the three months and nine months ended December 30, 2017,28, 2019, the Company recorded transaction costs of $22.2$8 million, and $39.6which included $5 million respectively, in connection with the Jimmy Choo acquisition (see Note 3) within restructuringof Versace and other charges in its consolidated statements of operations. In addition, restructuring and other charges included transition costs of $3.4$3 million for the three months ended December 30, 2017, which were incurred in connection with the Jimmy Choo acquisition. During the nine months ended December 31, 201628, 2019, the Company recorded transaction costs of $11.3$26 million, related towhich included $18 million in connection with the acquisition of Versace and $8 million in connection with the Greater China business.

Jimmy Choo acquisition.

During the three months ended December 29, 2018, the Company recorded costs of $12 million, which included $6 million in connection with the acquisition of Versace and $6 million in connection with the Jimmy Choo acquisition. During the nine months ended December 29, 2018, the Company recorded costs of $35 million, which included $20 million in connection with the Jimmy Choo acquisition and $15 million in connection with the acquisition of Versace.
9.
11. Debt Obligations
The following table presents the Company'sCompany’s debt obligations (in millions):
December 28,
2019		March 30,
2019
Term Loan$1,125  $1,580  
Revolving Credit Facilities548  550  
4.000% Senior Notes due 2024450  450  
Other3  1  
Total debt2,126  2,581  
Less: Unamortized debt issuance costs8  13  
Less: Unamortized discount on long-term debt2  2  
Total carrying value of debt2,116  2,566  
Less: Short-term debt1,031  630  
Total long-term debt$1,085  $1,936  
 December 30,
2017		 April 1,
2017
Term Loan$550.0
 $—
4.000% Senior Notes450.0
 —
Revolving Credit Facilities—
 133.1
Other0.1
 —
Total debt1,000.1
 133.1
Less: Debt issuance costs5.4
 —
Less: Unamortized discount on long-term debt2.2
 —
Total carrying value of debt992.5
 133.1
Less: Short-term debt0.1
 133.1
Total long-term debt$992.4
 $—
Bridge Credit Agreement
On July 25, 2017, the Company and certain of its subsidiaries, as loan parties, entered into a bridge credit agreement providing for a term loan facility in the principal amount of £1.115 billion with the lenders from time to time party thereto and JPMorgan Europe Limited, as administrative agent. In connection with Term Loan Facility provided for under the 2017 Credit Facility, as described and defined below, the commitments under the bridge credit agreement were reduced to approximately £344.2 million as of September 30, 2017 and eliminated in their entirety as a result of the October 20, 2017 issuance of $450.0 million 4.000% senior notes due 2024. As a result, the bridge credit agreement was terminated.
Senior Unsecured Revolving Credit Facility
On August 22, 2017, the Company entered into a second amended and restated senior unsecured credit facility (as amended, the “2017 Credit Facility”) with, among others, JPMorgan Chase Bank, N.A., as administrative agent, which replaced its prior 2015 senior unsecured revolving credit facility (“2015 Credit Facility”). The Company and its U.S., Canadian, Dutch and Swiss subsidiaries are the borrowers under the 2017 Credit Facility. The borrowers and certain material subsidiaries of the Company provide unsecured guarantees of the 2017 Credit Facility. The 2017 Credit Facility provides for a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), which may be denominated in U.S. Dollars and other currencies, including Euros, Canadian Dollars, Pounds Sterling, Japanese Yen and Swiss Francs. The Revolving Credit Facility also provides sub-facilities for the issuance of letters of credit of up to $75.0 million and swing line loans of up to $50.0 million. The 2017 Credit Facility also provides for a $1.0 billion term loan facility (the “Term Loan Facility”) to finance a portion of the purchase price of the Company’s acquisition of Jimmy Choo. The Revolving Credit Facility expires on August 22, 2022. The Term Loan Facility is divided into two tranches, a $600.0 million tranche that matures on the third anniversary of the initial borrowing of the term loans and a $400.0 million tranche that matures on the fifth anniversary of the initial borrowing of the term loans. The Company has the right to prepay its borrowings under the Term Loan Facility at any time in whole or in part. The Company has the ability to expand its borrowing availability under the 2017 Credit Facility in the form of revolving commitments or term loans by up to an additional $500.0 million, subject to the agreement of the participating lenders and certain other customary conditions.
On November 1, 2017, the Company's $1.0 billion Term Loan Facility was fully drawn to pay a portion of the acquisition consideration for Jimmy Choo and other fees and expenses related thereto. The loans under the Term Loan Facility are required to be repaid on the last business day of March, June, September and December of each year, commencing after the last business day of the first full fiscal quarter after the initial borrowing, in installments equal to 2.50% of the aggregate original principal amount of the term loans. During the three months ended December 30, 2017, the Company made accelerated payments on the Term Loans on a pro-rata basis. As of December 30, 2017, the carrying value of borrowings outstanding under the Term Loan Facility was $548.2 million, net of debt issuance costs of $1.8 million.


Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at the following rates:
for any loans (except loans denominated in Canadian Dollars), the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt rating;
for loans denominated in U.S. Dollars, an alternate base rate, which is the greatest of: (a) the prime rate publicly announced from time to time by JPMorgan Chase, (b) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate and zero, plus 50 basis points, and (c) the greater of the one-month London Interbank Offered Rate adjusted for statutory reserve requirements for Eurocurrency liabilities (“Adjusted LIBOR”) and zero, plus 100 basis points, in each case, plus an applicable margin based on the Company’s public debt ratings;
for loans denominated in Canadian Dollars, the Canadian prime rate, which is the greater of the PRIMCAN Index rate and the rate applicable to one-month Canadian Dollar banker’s acceptances quoted on Reuters (“CDOR”), plus 100 basis points, plus an applicable margin based on the Company’s public debt ratings; or
for loans denominated in Canadian Dollars, the average CDOR rate for the applicable interest period, plus 10 basis points per annum, plus an applicable margin based on the Company’s public debt ratings.
Borrowings under the Term Loan Facility bear interest, at the Company’s option, at (a) the alternate base rate plus an applicable margin based on the Company’s public debt ratings; or (b) the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt ratings.
The Revolving Credit Facility also provides for an annual administration fee and a commitment fee equal to 0.10% to 0.25% per annum, based on the Company’s public debt ratings, applied to the average daily unused amount of the Revolving Credit Facility. The Term Loan Facility provides for a commitment fee equal to 0.10% to 0.25% per annum, based on the Company’s public debt ratings, applied to the undrawn amount of the Term Loan Facility, from September 23, 2017 until the term loans are fully drawn or the commitments under the Term Loan Facility terminate or expire. Loans under the 2017 Credit facility may be repaid and commitments may be terminated or reduced by the borrowers without premium or penalty other than the customary breakage costs with respect to loans bearing interest based on Adjusted LIBOR or the CDOR rate.
The 20172018 Credit Facility requires the Company to maintain a leverage ratio as of the end of each fiscal quarter of no greater than 3.53.75 to 1. Such leverage ratio is calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus six times the consolidated rent expense for the last four consecutive fiscal quarters, to Consolidated EBITDAR (as defined below) for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash charges, subject to certain additions and deductions. The 20172018 Credit Facility also includes covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends that are customary for financings of this type. As of December 30, 2017,28, 2019, the Company was in compliance with all covenants related to this agreement.
The 2017 Credit Facility contains events of default customary for financings of this type, including, but not limited to, payment of defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy or insolvency, certain events under The Employee Retirement Income Security Act, material judgments, actual or asserted failure of any guaranty supporting the 2017 Credit Facility to be in full force and effect, and changes of control. If such an event of default occurs, the lenders under the 2017 Credit Facility would be entitled to take various actions, including, but not limited to, terminating the commitments and accelerating amounts outstanding under the 2017 Credit Facility, subject to “certain funds” limitations in connection with the transaction governing the Term Loan Facility.
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As of December 28, 2019 and March 30, 2017,2019, the Company had no borrowings of $503 million and $539 million, respectively, outstanding under the 20172018 Revolving Credit Facility. Stand-by letters of credit of $11.3 million were outstanding as of December 30, 2017. There were borrowings of $127.3 million outstanding under the prior 2015 Revolving Credit Facility, as of April 1, 2017, which were recorded within short-term debt in the Company’sits consolidated balance sheetsheets. In addition, stand-by letters of credit of $16 million were outstanding as of April 1, 2017.December 28, 2019. At December 30, 2017,28, 2019, the amount available for future borrowings under the 20172018 Revolving Credit Facility was $988.7$481 million.

In January 2018, As of December 28, 2019 and March 30, 2019, the Company repaid an additional $210.0 million principal amountcarrying value of borrowings outstanding under the 2018 Term Loan Facility on a pro-rata basis.


Senior Notes
On October 20, 2017, Michael Kors (USA), Inc. (the “Issuer”), the Company’s wholly owned subsidiary, completed its offeringwas $1.119 billion and $1.570 billion, respectively, of $450.0which $483 million aggregate principal amount of 4.000% senior notes due 2024 (the “Senior Notes”) at an issue price of 99.508% of aggregate principal amount, pursuant to an exemption from registration under the Securities Act of 1933, as amended. The Senior Notes were issued under an indenture dated October 20, 2017, among the Issuer, the Company, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes were issued to finance a portion of the Company’s acquisition of Jimmy Choo and certain related refinancing transactions.
The Senior Notes bear interest at a rate of 4.000% per year, subject to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency therefore) downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the Senior Notes. Interest on the Senior Notes is payable semi-annually on May 1 and November 1 of each year, beginning on May 1, 2018.

The Senior Notes are unsecured and are guaranteed by the Company and its existing and future subsidiaries that guarantee or are borrowers under the 2017 Credit Facility (subject to certain exceptions, including subsidiaries organized in China), including, following the closing of the acquisition, Jimmy Choo and all of its existing and future subsidiaries who are guarantors or borrowers under the 2017 Credit Facility (subject to certain exceptions, including subsidiaries organized in China).

The Senior Notes may be redeemed at the Company's option at any time in whole or in part at a price equal to 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” amount calculated at the applicable Treasury Rate plus 30 basis points.
The Senior Notes rank equally in right of payment with all of the Issuer’s and guarantors’ existing and future senior unsecured indebtedness, senior in right of payment to any future subordinated indebtedness, effectively subordinated in right of payment to any of the Company’s subsidiaries’ obligations (including secured and unsecured obligations) and any of the Company’s secured obligations, to the extent of the assets securing such obligations.
The Indenture contains covenants, including those that limit the Company’s ability to create certain liens and enter into certain sale and leaseback transactions. In the event of a “Change of Control Triggering Event,” as defined in the Indenture, the Issuer will be required to make an offer to repurchase the Senior Notes at a repurchase price in cash equal to 101% of the aggregate principal amount of the Senior Notes being repurchased plus any unpaid interest. These covenants are subject to important limitations and exceptions, as per the Indenture.
As of December 30, 2017, the carrying value of the Senior Notes$80 million, respectively, was $444.2 million, net of issuance costs and unamortized discount of $5.8 million.
Japan Credit Facility
In November 2017, the Company’s subsidiary in Japan entered into a short term credit facility (“Japan Credit Facility”) with Mitsubishi UFJ Financial Group (“MUFJ”) (the “Bank”) which may be used to fund general working capitals needs of Michael Kors Japan K.K. through November 29, 2018, subject to the Bank’s discretion. The Japan Credit Facility provides Michael Kors Japan K.K. with a revolving credit line of up to ¥1.0 billion (approximately $8.9 million). The Japan Credit Facility bears interest at a rate posted by the Bank plus 0.300% two business days prior to the date of borrowing or the date of interest renewal. As of December 30, 2017, the Company had no borrowings outstanding under the Japan Credit Facility.
Hong Kong Credit Facility
In November 2017, the Company’s Hong Kong subsidiary, MKHKL, renewed its uncommitted credit facility (“HK Credit Facility”) with HSBC (the “Bank”), which may be used to fund general working capital needs of MKHKL through November 30, 2018, subject to the Bank’s discretion. The HK Credit Facility provides MKHKL with a revolving line of credit of up to 100.0 million Hong Kong Dollars (approximately $12.8 million), and may be used to support bank guarantees. In addition, this credit facility provides for a business card facility of up to 0.4 million Hong Kong Dollars (less than $0.1 million). Borrowings under the HK Credit Facility must be made in increments of at least 5.0 million Hong Kong Dollars and bear interest at the Hong Kong Interbank Offered Rate (“HIBOR”) plus 150 basis points. As of April 1, 2017, borrowings outstanding under the HK Credit facility were 45.0 million Hong Kong Dollars (approximately $5.8 million), which were recorded within short-term debt and $636 million and $1.490 billion, respectively, was recorded within long-term debt in its consolidated balance sheets.
See Note 11 to the Company’s consolidated balance sheet as of April 1, 2017. As of December 30, 2017, there were no borrowings outstanding underFiscal 2019 Annual Report on Form 10-K for additional information regarding the HK Credit Facility. As of December 30, 2017, bank guarantees supported by this facility were 11.8 million Hong Kong Dollars (approximately $1.5 million). At December 30, 2017, the amount available for future borrowings under the Hong Kong Credit Facility was 88.2 million Hong Kong Dollars (approximately $11.3 million).Company’s credit facilities and debt obligations.



Other
In addition to the above, the Company also had letters of credit outstanding of $4.4 million as of December 30, 2017, which have been issued outside its credit facilities.
10.12. Commitments and Contingencies
In the ordinary course of business, the Company is party to various legal proceedings and claims. Although the outcome of such items cannot be determined with certainty, the Company’s management does not believe that the outcome of all pending legal proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.
Leases
Future minimum lease payments as of December 30, 2017 under the terms of the Company's noncancelable operating lease agreements are as follows (in millions):
Remainder of Fiscal 2018$98.9
Fiscal 2019304.5
Fiscal 2020280.4
Fiscal 2021262.2
Fiscal 2022234.1
Thereafter689.3
 $1,869.4
Please refer to the Contractual Obligations and Commercial Commitments disclosure within the Liquidity section of the Company’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017March 30, 2019 for a detailed disclosure of other commitments and contractual obligations as of April 1, 2017.March 30, 2019.

11.
13. Fair Value Measurements
Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-basemarket-based (observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability
to access at the measurement date.
Level 2 – Valuations based on quoted inputs other than quoted prices included within Level 1, that are observable for the
asset or liability, either directly or indirectly through corroboration with observable market data.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.


At December 28, 2019 and March 30, 2017 and April 1, 2017,2019, the fair values of the Company’s forward foreign currency forwardexchange contracts the Company’s only derivative instruments,and net investment hedges were determined using broker quotations, which were calculations derived from observable market information: the applicable currency rates at the balance sheet date and those forward rates particular to the contract at inception. The Company makes no adjustments to these broker obtained quotes or prices, but assesses the credit risk of the counterparty and would adjust the provided valuations for counterparty credit risk when appropriate. The fair values of the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company,Company. The fair values of net investment hedges are included in other assets, as detailed in Note 12.14.

22


All contracts are measured and recorded at fair value on a recurring basis and are categorized in Level 2 of the fair value hierarchy, as shown in the following table (in millions):
 Fair value at December 30, 2017 using: Fair value at April 1, 2017 using:
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Forward foreign currency exchange contracts - assets$—
 $—
 $—
 $—
 $4.7
 $—
Forward foreign currency exchange contracts - liabilities$—
 $9.5
 $—
 $—
 $0.4
 $—
 Fair value at December 28, 2019 using:Fair value at March 30, 2019 using:
 Quoted prices in
active markets for
identical assets
(Level 1)		Significant
other observable
inputs
(Level 2)		Significant
unobservable
inputs
(Level 3)		Quoted prices in
active markets for
identical assets
(Level 1)		Significant
other observable
inputs
(Level 2)		Significant
unobservable
inputs
(Level 3)
Derivative assets:
Forward foreign currency exchange contracts$—  $1  $—  $—  $5  $—  
Net investment hedges—  58  —  —  37  —  
Other undesignated derivative contracts—  1  —  —  —  —  
Total derivative assets$—  $60  $—  $—  $42  $—  
Derivative liabilities:
Forward foreign currency exchange contracts$—  $1  $—  $—  $—  $—  
Other undesignated derivative contracts—  —  —  —  5  —  
Total derivative liabilities$—  $1  $—  $—  $5  $—  
The Company'sCompany’s long-term debt obligations are recorded in its consolidated balance sheets at carrying values, which may differ from the related fair values. The fair value of the Company'sCompany’s long-term debt is estimated using external pricing data, including any available quoted market prices and based on other debt instruments with similar characteristics. Borrowings under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the short-term nature of such borrowings. Please refer toSee Note 911 for detailed information relating to carrying values of the Company'sCompany’s outstanding debt. The following table summarizes the carrying values and estimated fair values of the Company'sCompany’s short- and long-term debt, based on Level 2 measurements (in millions):
 December 30, 2017December 28, 2019March 30, 2019
 Carrying Value Estimated Fair ValueCarrying
Value		Estimated
Fair Value		Carrying
Value		Estimated
Fair Value
4.000% Senior Notes $444.2
 $453.0
4.000% Senior Notes$446  $468  $445  $438  
Term Loan $548.2
 $553.4
Term Loan$1,119  $1,125  $1,570  $1,574  
Revolving Credit FacilitiesRevolving Credit Facilities$548  $548  $550  $550  
The Company’s cash and cash equivalents, accounts receivable and accounts payable, and restructuring liabilities are recorded at carrying value, which approximates fair value.
Non-Financial Assets and Liabilities
The Company’s non-financial assets include goodwill, intangible assets, operating lease right-of-use assets and property and equipment. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The Company’s goodwill isand its indefinite-lived intangible assets (Versace and Jimmy Choo brands) are assessed for impairment at least annually during the fourth quarter of each fiscal year, while its other long-lived assets, including fixedoperating lease right-of-use assets, property and finite-livedequipment and definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The fair values of these assets arewere determined based on Level 3 measurements using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.
During
23

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. This assessment is performed for each long-lived asset group that represents the three monthslowest level for which identifiable cash flows are largely independent of the cash flows of other assets and nine months ended December 30, 2017,liabilities. The grouping of assets requires a significant amount of judgment. The Company historically grouped certain premier store locations, primarily Michael Kors premier stores, with other Michael Kors stores within the immediate geographic area surrounding the premier store as the Company recorded impairment charges of $2.6 million and $18.9 million, respectively, withinbelieved the MK Retail segment. The following table details the carrying values and fair valuesassets of the store group benefited from the Company’s investments in the premier store. Due to the Company’s recent significant expansion in luxury retail, as well as its continued growth in its global digital business, the Company reassessed its methodology for evaluating impairment of long-lived assets, that have been impaired (in millions):
 Three Months Ended Nine Months Ended
 December 30, 2017 December 30, 2017
 Carrying Value Prior to Impairment Fair Value Carrying Value Prior to Impairment Fair Value
Fixed assets$3.5
 $0.9
 $16.9
 $2.4
Lease Rights—
 —
 3.6
 0.2
Customer relationships—
 —
 1.0
 —
Total$3.5
 $0.9
 $21.5
 $2.6
Duringincluding the determination of asset groupings. The Company’s luxury retail business generally operates only premier, more luxurious, retail store locations with consistent investments across its individual stores. As a result, during the nine months ended December 31, 2016,28, 2019, the Company determined that asset groups at an individual store level represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As a result of this determination, in the first quarter of Fiscal 2020, the Company identified impairment indicators at certain premier retail store locations and recorded operating lease right-of-use asset and property and equipment impairment charges of $68 million and $11 million, respectively, which are included in the impairment charges detailed in the table below (in millions):
Three Months Ended
December 28, 2019		Nine Months Ended
December 28, 2019
Carrying Value Prior to ImpairmentFair ValueImpairment ChargeCarrying Value Prior to ImpairmentFair ValueImpairment Charge
Operating Lease Right-of-Use Assets$27  $20  $7  $314  $135  $179  
Property and Equipment13  3  10  51  18  33  
Key Money3  1  2  12  4  8  
Total$43  $24  $19  $377  $157  $220  

Three Months Ended
December 29, 2018		Nine Months Ended
December 29, 2018
Carrying Value Prior to ImpairmentFair ValueImpairment ChargeCarrying Value Prior to ImpairmentFair ValueImpairment Charge
Property and Equipment$6  $—  $6  $20  $5  $15  
Lease Rights—  —  —  4  2  2  
Total$6  $—  $6  $24  $7  $17  
In addition to the impairment charges above, the Company recorded impairment chargesan adjustment to reduce its March 31, 2019 opening balance of $5.4retained earnings by $152 million, which included $4.9 million to impair Michael Kors full-price retail store fixed assets with a book valuenet of $5.4 million and a fair valuetax, reflecting impairments of $0.5 million, as well as $0.5 million to fully impair fixedoperating lease right-of-use assets for certain Michael Kors U.S. wholesale operations.

underperforming real estate locations for which the carrying value of the opening operating lease right-of-use asset exceeded its related fair value. Property and equipment related to these underperforming locations were fully impaired due to the adoption of ASU 2016-02. See Note 2 and Note 4 for additional information.


12.
14. Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company does not enter into derivative contracts for trading or speculative purposes.
24

In connection with the September 24, 2018 definitive agreement to acquire all of the outstanding shares of Versace, the Company entered into forward foreign currency exchange contracts in September 2018 with notional amounts totaling €1.680 billion (approximately $2.001 billion) to mitigate its foreign currency exchange risk through the closing date of the acquisition, which were settled on December 21, 2018. These derivative contracts were not designated as accounting hedges. Therefore, changes in fair value were recorded to foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income. The Company’s accounting policy is to classify cash flows from derivative instruments that are accounted for as cash flow hedges in the same category as the cash flows from the items being hedged. Accordingly, the Company classified the unrealized gains and losses relating to these derivative instruments within cash flows from investing activities.
Net Investment Hedges
As of December 28, 2019, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $3.190 billion to hedge its net investment in Euro-denominated subsidiaries and $44 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between U.S. Dollar and these currencies. Under the terms of these contracts, which have maturity dates between January 2022 and June 2026, the Company will exchange the semi-annual fixed rate payments on U.S. denominated debt for fixed rate payments of 0% to 1.674% in Euros and 0.89% in Japanese Yen. These contracts have been designated as net investment hedges.
When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense in the Company’s consolidated statements of operations and comprehensive income. Accordingly, the Company recorded a reduction in interest expense of $19 million and $53 million, respectively, during the three and nine months ended December 28, 2019 and $3 million and $7 million, respectively, during the three and nine months ended December 29, 2018.
The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of December 28, 2019 and March 30, 2017 and April 1, 20172019 (in millions):
Fair Values
 Notional AmountsAssetsLiabilities
 December 28,
2019		March 30,
2019		December 28,
2019		March 30,
2019		December 28,
2019		March 30,
2019
Designated forward foreign currency exchange contracts$162  $166  $1  
(1)
$5  
(1)
$1  
(3)
$—  
Designated net investment hedge3,234  2,234  58  
(2)
37  
(2)
—  —  
Total designated hedges3,396  2,400  59  42  1  —  
Undesignated derivative contracts (4)
15  199  1  
(1)
—  —  5  
(3)
Total$3,411  $2,599  $60  $42  $1  $5  
     Fair Values
 Notional Amounts 
Current Assets (1)
 
Current Liabilities (2)
 December 30,
2017		 April 1,
2017		 December 30,
2017		 April 1,
2017		 December 30,
2017		 April 1,
2017
Designated forward foreign currency exchange contracts$168.9
 $167.5
 $—
 $4.7
 $7.1
 $0.4
Undesignated forward foreign currency exchange contracts20.6
 —
 —
 —
 2.4
 —
Total$189.5
 $167.5
 $—
 $4.7
 $9.5
 $0.4

(1)
(1)Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.
(2)Recorded within other assets in the Company’s consolidated balance sheets.
(3)Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.
(4)Primarily includes undesignated hedges of foreign currency denominated intercompany balances and inventory purchases.
25

Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.
(2)
Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.
The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance sheetsheets on a gross basis, as shown in the aboveprevious table. As of April 1, 2017, the Company had derivative assets of $4.7 million that were subject to master netting arrangements. As of December 30, 2017 and April 1, 2017, the Company had derivative liabilities of $9.5 million and $0.3 million, respectively, that were subject to master netting arrangements. IfHowever, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to setoffset-off amounts for similar transactions denominated in the same currencies, its net derivative liabilitiesthe resulting impact as of December 28, 2019 and March 30, 2017 and April 1, 20172019 would be $9.5 million and $0.2 million, respectively, and it would have derivative net assets of $4.5 million as of April 1, 2017. follows (in millions):
Forward Currency Exchange ContractsNet Investment
Hedges
December 28,
2019		March 30,
2019		December 28,
2019		March 30,
2019
Assets subject to master netting arrangements$2  $5  $58  $37  
Liabilities subject to master netting arrangements$1  $5  $—  $—  
Derivative assets, net$1  $5  $58  $37  
Derivative liabilities, net$—  $5  $—  $—  
The Company’s master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties.
Changes in the fair value of the effective portion of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive income. The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive income (loss). on the Company’s consolidated balance sheets. Upon discontinuation of the hedge, such amounts remain in CTA until the related investment is sold or liquidated.
The following table summarizes the impact of the effective portion of gains and losses on the Company’s designated forward foreign currency exchange contracts designated asand net investment hedges (in millions):
Three Months EndedNine Months Ended
December 28, 2019December 29, 2018December 28, 2019December 29, 2018
Losses
Recognized in OCI 		 Gains
Recognized in OCI 		 Gains
Recognized in OCI 		 Gains
Recognized in OCI 		 
Designated forward foreign currency exchange contracts$(2) $2  $4  $12  
Designated net investment hedges$(51) $10  $53  $15  
 Three Months Ended
 December 30, 2017 December 31, 2016
 
Pre-Tax Loss
Recognized
in OCI
(Effective Portion)
 
Pre-Tax Loss
Reclassified from
Accumulated OCI
into Earnings
(Effective Portion)
 
Pre-Tax Gain
Recognized
in OCI
(Effective Portion)
 
Pre-Tax Loss
Reclassified from
Accumulated OCI
into Earnings
(Effective Portion)
Forward foreign currency exchange contracts$(2.4) $(2.2) $10.2
 $(0.2)


 Nine Months Ended
 December 30, 2017 December 31, 2016
 Pre-Tax Loss
Recognized
in OCI
(Effective Portion)		 Pre-Tax Gain
Reclassified from
Accumulated OCI
into Earnings
(Effective Portion)		 Pre-Tax Gain
Recognized
in OCI
(Effective Portion)		 Pre-Tax Amount
Reclassified from
Accumulated OCI
into Earnings
(Effective Portion)
Forward foreign currency exchange contracts$(17.7) $1.0
 $12.3
 $—
AmountsThe following tables summarize the impact of the gains and losses within the consolidated statements of operations and comprehensive income related to ineffectiveness were not material during all periods presented. the designated forward foreign currency exchange contracts for the three and nine months ended December 28, 2019 and December 29, 2018 (in millions):
Three Months Ended
Gain Reclassified from
Accumulated OCI		Location of (Gain) Loss recognizedTotal Cost of goods sold
December 28, 2019December 29, 2018December 28, 2019December 29, 2018
Designated forward foreign currency exchange contracts$(3) $(1) Cost of goods sold  $639  $565  

Nine Months Ended
(Gain) Loss Reclassified from
Accumulated OCI		Location of (Gain) Loss recognizedTotal Cost of goods sold
December 28, 2019December 29, 2018December 28, 2019December 29, 2018
Designated forward foreign currency exchange contracts$(8) $6  Cost of goods sold  $1,719  $1,507  
26

The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive lossincome (loss) for its forward foreign currency exchange contracts will be reclassified into earnings during the next twelve12 months, based upon the timing of inventory purchases and turnover. These amounts are subject to fluctuations in the applicable currency exchange rates.
Undesignated Hedges
During the three and nine months ended December 30, 2017,28, 2019, the Company recognized a net lossimpact of $31.8 million and a net gain of $3.4 million, respectively, related to changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss (gain) in the Company’s consolidated statement of operations. These amounts were primarily comprised of a $32.0 million lossoperations and a $4.7 million gain duringcomprehensive income was not material.
During the three and nine months ended December 30, 2017,29, 2018, the Company recognized a net loss of $47 million and $76 million, respectively, primarily related to the derivative contractcontracts entered into on JulySeptember 25, 20172018 to mitigate foreign currency exchange risk associated with the Jimmy ChooVersace acquisition that was subsequentlywere settled on October 30, 2017. During the three and nine months ended December 31, 2016, the Company recognized net gains of $1.8 million and $2.1 million, respectively, related to changes in the fair value of undesignated forward currency exchange contracts within foreign currency loss (gain).21, 2018.

13.
15. Shareholders’ Equity
Share Repurchase Program
On May 25, 2017, the Company’s Board of Directors authorized a $1.0 billion share repurchase program. During the nine months ended December 30, 2017 and December 31, 2016,28, 2019, the Company repurchased 4,543,5002,711,807 shares and 15,114,538 shares, respectively,through open market transactions at a cost of $157.8$100 million and $750.0 million, respectively, under its new $500 million share-repurchase programsprogram, which was authorized by the Company’s Board of Directors on August 1, 2019 and which expires on August 1, 2021. During the nine months ended December 29, 2018, the Company repurchased 3,718,237 shares through open market transactions.transactions at a cost of $200 million under its previous $1.0 billion share-repurchase program, which expired on May 25, 2019. As of December 30, 2017,28, 2019, the remaining availability under the Company’s share repurchase program was $842.2$400 million. Share repurchases aremay be made in open market or privately negotiated transactions, subject to market conditions, andapplicable legal requirements, trading under the Company’s business priorities.insider trading policy and other relevant factors. The program may be suspended or discontinued at any time.
The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the vesting of their restricted share awards. During the nine month periods ended December 30, 201728, 2019 and December 31, 2016,29, 2018, the Company withheld 92,53663,958 shares and 100,552107,712 shares, respectively, atwith a costfair value of $3.2$2 million and $4.8$7 million, respectively, in satisfaction of minimum tax withholding obligations relating to the vesting of restricted share awards.


14. Accumulated Other Comprehensive Income (Loss)
The following table details changes in the components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes for the nine months ended December 30, 201728, 2019 and December 31, 2016,29, 2018, respectively (in millions):
Foreign
Currency
Translation
Gains (Losses) (1)
Net (Losses) Gains on
Derivatives (2)
Other Comprehensive Income (Loss) Attributable to Capri
Balance at March 31, 2018$61  $(10) $51  
Other comprehensive (loss) income before reclassifications(160) 11  (149) 
Less: amounts reclassified from AOCI to earnings
—  (5) (5) 
Other comprehensive (loss) income, net of tax(160) 16  (144) 
Balance at December 29, 2018$(99) $6  $(93) 
Balance at March 30, 2019$(73) $7  $(66) 
Other comprehensive income before reclassifications40  4  44  
Less: amounts reclassified from AOCI to earnings—  7  7  
Other comprehensive income (loss), net of tax40  (3) 37  
Balance at December 28, 2019$(33) $4  $(29) 

27

 Foreign Currency
Translation
(Losses) Gains		 
Net (Losses) Gains on
Derivatives (1)
 Other Comprehensive (Loss) Income Attributable to MKHL Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest Total Accumulated Other Comprehensive (Loss) Income
Balance at April 2, 2016$(77.7) $(3.2) $(80.9) $0.1
 $(80.8)
Other comprehensive (loss) income before reclassifications (2)
(20.4) 11.1
 (9.3) (0.4) (9.7)
Less: amounts reclassified from AOCI to earnings (3)
—
 (0.1) (0.1) —
 (0.1)
Other comprehensive (loss) income net of tax(20.4) 11.2
 (9.2) (0.4) (9.6)
Balance at December 31, 2016$(98.1) $8.0
 $(90.1) $(0.3) $(90.4)
          
Balance at April 1, 2017$(86.1) $5.5
 $(80.6) $(0.3) $(80.9)
Other comprehensive income (loss) before reclassifications (2)
78.6
 (15.4) 63.2
 0.1
 63.3
Less: amounts reclassified from AOCI to earnings (3)
—
 1.0
 1.0
 —
 1.0
Other comprehensive income (loss) net of tax78.6
 (16.4) 62.2
 0.1
 62.3
Balance at December 30, 2017$(7.5) $(10.9) $(18.4) $(0.2) $(18.6)
_________________________
(1)
Accumulated other comprehensive income balance related to net gains on derivative financial instruments as of December 30, 2017 and April 1, 2017 is net of a tax benefit of $1.5 million and a tax provision $0.8 million, respectively. Other comprehensive income (loss) before reclassifications related to derivative financial instruments for the nine months ended December 30, 2017 and December 31, 2016 is net of a tax provisions of $2.3 million and $1.1 million, respectively. All other tax effects were not material for the periods presented.
(2)
Foreign currency translation losses for the nine months ended December 30, 2017 and December 31, 2016 include net losses of $4.4 million and $3.1 million respectively on intra-entity transactions that are of a long-term investment nature. Foreign currency translation losses for the nine months ended December 30, 2017 are net of a $35.2 million translation gain relating to the newly acquired Jimmy Choo business.
(3)
Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations.
15.(1)Foreign currency translation gains and losses for the nine months ended December 28, 2019 include net gains of $3 million on intra-entity transactions that are of a long-term investment nature, a $4 million translation loss relating to the inclusion of the Versace business and a $44 million gain, net of taxes of $9 million, relating to the Company’s net investment hedges. Foreign currency translation gains and losses for the nine months ended December 29, 2018 include net gains of $10 million on intra-entity transactions that are of a long-term investment nature, a $139 million translation loss relating to the inclusion of the Jimmy Choo business and a $13 million gain, net of taxes of $3 million, relating to the Company’s net investment hedges.
(2)Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases and are recorded within cost of goods sold in the Company’s consolidated statements of operations and comprehensive income. All tax effects were not material for the periods presented.

16. Share-Based Compensation
The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation and Talent Committee. The Company has two2 equity plans, one1 stock option plan adopted in Fiscal 2008 the Michael Kors (USA), Inc. Stock Option Plan (as amended and restated, the “2008 Plan”), and the otherOmnibus Incentive Plan adopted in the third fiscal quarter of Fiscal 2012 and amended and restated with shareholder approval in May 2015 the Michael Kors Holdings Limited Amended and Restated Omnibus Incentive Plan (the “Incentive Plan”). The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares. As of December 30, 2017,28, 2019, there were no0 shares available to grant equity awards under the 2008 Plan. The Incentive Plan allows for grants of share options, restricted shares and restricted share units,RSUs, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares. At December 30, 2017,28, 2019, there were 7,156,4452,642,854 ordinary shares available for future grants of equity awards under the Incentive Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the Incentive Plan generally expire seven years from the date of the grant.


The following table summarizes the Company’s share-based compensation activity during the nine months ended December 30, 2017:28, 2019:
 OptionsService-Based RSUsPerformance-Based RSUs
Outstanding/Unvested at March 30, 20192,131,259  3,839,862  737,074  
Granted—  1,901,539  169,817  
Exercised/Vested(5,082) (797,597) (53,025) 
Decrease due to performance condition—  —  (39,999) 
Canceled/forfeited(93,298) (178,354) —  
Outstanding/Unvested at December 28, 20192,032,879  4,765,450  813,867  
 Options Restricted Shares Service-Based RSUs Performance-Based RSUs
Outstanding/Unvested at April 1, 20174,791,045
 185,425
 1,470,767
 401,777
Granted208,264
 —
 1,325,307
 139,562
Exercised/Vested(494,926) (113,999) (400,057) (81,212)
Decrease due to performance condition—
 —
 —
 (12,891)
Canceled/forfeited(75,167) (6,060) (189,305) —
Outstanding/Unvested at December 30, 20174,429,216
 65,366
 2,206,712
 447,236
The weighted average grant date fair value for options granted during the nine months ended December 30, 2017 and December 31, 2016 was $11.62 and $13.79, respectively. The weighted average grant date fair value of service-based and performance-based RSUs granted during the nine months ended December 30, 201728, 2019 was $37.33$33.89 and $34.68,$33.86, respectively, and $50.08$67.03 and $49.88,$67.52, respectively, during the nine months ended December 31, 2016.
The Company uses the Black-Scholes valuation model to estimate the grant date fair value of its share option awards. Beginning in Fiscal 2018, the Company started using its own historical experience in determining the expected holding period and volatility of its time-based share option awards. In prior periods, the Company used the simplified method for determining the expected life of its options and average volatility rates of similar actively traded companies over the estimated holding period, due to insufficient historical option exercise experience as a public company. The following table presents assumptions used to estimate the fair value of options granted during the nine months ended December 30, 2017 and December 31, 2016:
 Nine Months Ended
 December 30
2017		 December 31
2016
Expected dividend yield0.0% 0.0%
Volatility factor36.3% 30.1%
Weighted average risk-free interest rate1.8% 1.1%
Expected life of option4.69 years
 4.75 years
29, 2018.
Share-Based Compensation Expense
The following table summarizes compensation expense attributable to share-based compensation for the three and nine months ended December 30, 201728, 2019 and December 31, 201629, 2018 (in millions):
Three Months EndedNine Months Ended
December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Share-based compensation expense$16  $12  $65  $38  
Tax benefit related to share-based compensation expense$3  $2  $12  $7  
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Share-based compensation expense$8.5
 $5.3
 $29.6
 $26.7
Tax (deficit) benefits related to share-based compensation expense (1)
$(0.6) $1.6
 $6.2
 $9.1
________________________
(1)
Due to the reduction in the corporate tax rate introduced by the Tax Act enacted on December 22, 2017 (see Note 2 for additional information), the Company has realized a net tax deficit during the three months ended December 30, 2017, as the benefit of the tax deduction was revalued to the lower tax rate during this period.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate to date.rates. The estimated value of future forfeitures for equity grants as of December 30, 201728, 2019 is approximately $7.6$9 million.
Please refer to
28

See Note 1517 in the Company’s Fiscal 20172019 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.



16.17. Income Taxes
The Company’s effective tax rates for the three and nine months ended December 28, 2019 are a benefit of 2.0% and 0.6%, respectively. Such rates differ from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable impact of recognizing benefits from the resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, which resulted in a decrease to the Company’s effective income tax rate for the three and nine months ended December 28, 2019. In addition, the Company had favorable effects related to global financing activities. The global financing activities are related to the Company’s 2014 move of its principal executive office from Hong Kong to the U.K. and decision to become a U.K. tax resident. In connection with this decision, the Company funded its international growth strategy through intercompany debt financing arrangements between certain of our U.S., U.K. and Switzerland subsidiaries in December 2015. Due to the difference in the statutory income tax rates between these jurisdictions, the Company realized a lower effective tax rate.
The Company’s effective tax rates for the three and nine months ended December 29, 2018 were a provision of 17.4% and 12.7%, respectively. Such rates differed from the United Kingdom (“U.K.”) federal statutory rate of 19% primarily due to the favorable effects of global financing arrangements and the favorable impact of tax benefits recognized on share-based compensation during the quarter.

18. Segment Information
Prior to the third quarter of Fiscal 2018, the Company’s business consisted of three reportable segments for its Michael Kors brand: Retail, Wholesale and Licensing. In connection with the acquisition of Jimmy Choo, theThe Company evaluated its reportable segments and concluded that Jimmy Choo represents a separate reportable segment. As such, the Company now operates its business through four reportable3 operating segments—MK Retail, MK Wholesale, MK LicensingVersace, Jimmy Choo and Jimmy Choo—Michael Kors, which are based on its business activities and organization. The reportable segments are segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by the Company’s chief operating decision maker ("CODM") in deciding how to allocate resources, as well as in assessing performance. The primary key performance indicators are revenue and operating income for each segment. The Company does not have identifiable assets separated by segment. The Company’s reportable segments represent channelscomponents of distributionthe business that offer similar merchandise, customer experience and sales/marketing strategies.
The Company's fourCompany’s 3 reportable segments are as follows:
MK Retail — segment includes sales through Michael Kors operated stores, including “Collection,” “Lifestyle” including “concessions,” and outlet stores located throughout the Americas (U.S., Canada and Latin America, excluding Brazil), Europe and certain parts of Asia, as well as Michael Kors e-commerce sales. Products sold through the MK Retail segment include women’s apparel, accessories (which include handbags and small leather goods such as wallets), men’s apparel, footwear and licensed products, such as watches, jewelry, fragrances and beauty, and eyewear.
MK Wholesale — segment includes sales primarily to major department stores and specialty shops throughout the Americas, Europe and Asia. Products sold through the MK Wholesale segment include accessories (which include handbags and small leather goods such as wallets), footwear and women’s and men’s apparel. The Company also has wholesale arrangements pursuant to which it sells products to Michael Kors geographic licensees in certain parts of EMEA (Europe, Middle East and Africa) and Asia, as well as in Brazil.
MK Licensing — segment includes royalties and other contributions earned on licensed products and use of the Company’s trademarks, and rights granted to third parties for the right to operate retail stores and/or sell the Company’s products in certain geographic regions such as Brazil, the Middle East, South Africa, Eastern Europe, certain parts of Asia and Australia.
Jimmy Choo•Versace — segment includes revenue generated from salesthrough the sale of Versace luxury ready-to-wear, accessories, footwear handbags and small leather goodshome furnishings through directly operated Jimmy Choo storesVersace boutiques throughout the AmericasNorth America (United States Canada and Latin America, excluding Brazil)Canada), EMEA and certain parts of Asia, as well as through the Jimmy ChooVersace outlet stores and e-commerce site.sites. In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements that allow third parties to use the Versace trademarks in connection with retail and/or wholesale sales of Versace branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of sunglasses, eyewear, fragrancejeans, fragrances, watches, jewelry and soft accessories,eyewear.
•Jimmy Choo — segment includes revenue generated through the sale of Jimmy Choo luxury footwear, handbags and small leather goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, EMEA and certain parts of Asia, through its e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements.arrangements that allow third parties to use the Jimmy Choo trademarks in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through product licensing agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in connection with the manufacturing and sale of fragrances, sunglasses and eyewear.
29

•Michael Kors — segment includes revenue generated through the sale of Michael Kors products through 4 primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce sites, through which the Company sells Michael Kors products, as well as licensed products bearing the Michael Kors name, directly to the end consumer throughout the Americas, Europe and certain parts of Asia. The Company also sells Michael Kors products directly to department stores, primarily located across the Americas and Europe, to specialty stores and travel retail shops, and to its geographic licensees. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear.
In addition to these reportable segments, the Company has certain corporate costs that are not directly attributable to its brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, and information systems expenses, including enterprise resource planning system implementation costs. In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transition costs related to the Company’s recent acquisitions) and impairment costs. The segment structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses performance. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. Corporate overhead expenses are allocated to the segments based upon specific usage or other allocation methods.
The following table presents the Company’s goodwill by reportable segment (in millions):
 As of
 December 30,
2017		 April 1,
2017
MK Retail$91.9
 $91.9
MK Wholesale25.9
 25.9
MK Licensing1.9
 1.9
Jimmy Choo702.3
 —
Total Goodwill$822.0
 $119.7


The following table presents the key performance information of the Company’s reportable segments (in millions):
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Total revenue:       
MK Retail$846.3
 $836.7
 $2,111.2
 $1,996.8
MK Wholesale430.8
 473.1
 1,198.0
 1,319.7
MK Licensing48.3
 43.0
 115.2
 112.4
Michael Kors1,325.4
 1,352.8
 3,424.4
 3,428.9
Jimmy Choo114.7
 —
 114.7
 —
Total revenue$1,440.1
 $1,352.8
 $3,539.1
 $3,428.9
        
Income from operations:       
MK Retail$180.4
 $178.2
 $341.6
 $314.4
MK Wholesale100.5
 140.2
 263.6
 367.2
MK Licensing26.9
 23.5
 51.1
 50.9
Michael Kors307.8
 341.9
 656.3
 732.5
Jimmy Choo5.7
 —
 5.7
 —
Income from operations$313.5
 $341.9
 $662.0
 $732.5
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Total revenue:
Versace$195  $—  $630  $—  
Jimmy Choo165  162  448  451  
Michael Kors1,211  1,276  3,281  3,443  
Total revenue$1,571  $1,438  $4,359  $3,894  
Income (loss) from operations:
Versace$(12) $—  $(6) $—  
Jimmy Choo9  15  10  28  
Michael Kors288  320  711  798  
Total segment income from operations285  335  715  826  
Less: Corporate expenses
(46) (20) (114) (65) 
Restructuring and other charges(15) (19) (37) (49) 
Impairment of long-lived assets(19) (6) (220) (17) 
Total income from operations$205  $290  $344  $695  
Depreciation and amortization expense for each segment are as follows (in millions):
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Depreciation and amortization:
Versace$17  $—  $46  $—  
Jimmy Choo9  8  26  25  
Michael Kors37  43  116  135  
Total depreciation and amortization$63  $51  $188  $160  
30
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Depreciation and amortization:       
MK Retail$33.7
 $40.1
 $98.8
 $114.6
MK Wholesale13.9
 15.1
 43.5
 46.3
MK Licensing0.6
 0.5
 1.8
 1.6
Michael Kors48.2
 55.7
 144.1
 162.5
Jimmy Choo5.8
 —
 5.8
 —
Total depreciation and amortization$54.0
 $55.7
 $149.9
 $162.5

During the three and nine months ended December 30, 2017, the Company recorded impairment charges relating to Michael Kors full-price retail operations of $2.6 million and $18.9 million, respectively, and restructuring and other charges of $28.0 million and $51.3 million, respectively. Please refer to Notes 8 and 11 for additional information. During the nine months ended December 31, 2016, the Company recorded fixed asset impairment charges of $5.4 million, $4.9 million of which were related to 10 Michael Kors full-price retail locations still in operation and $0.5 million of which related to U.S. wholesale locations.
Total revenue (as recognized based(based on country of origin), and long-lived assets by geographic location are as follows (in millions):
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Total revenue:
The Americas (1)
$909  $927  $2,440  $2,438  
EMEA422  334  1,191  925  
Asia240  177  728  531  
Total revenue$1,571  $1,438  $4,359  $3,894  
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Total revenue:       
The Americas (1)
$946.6
 $983.8
 $2,332.6
 $2,419.7
EMEA333.1
 256.7
 805.0
 728.7
Asia160.4
 112.3
 401.5
 280.5
Total revenue$1,440.1
 $1,352.8
 $3,539.1
 $3,428.9


 As of
 December 30,
2017		 April 1,
2017
Long-lived assets, excluding goodwill:   
The Americas (1)
$332.6
 $356.1
EMEA1,027.0
 197.7
Asia455.2
 455.8
Total Long-lived assets$1,814.8
 $1,009.6

(1)
Total revenue earned in the U.S. were $883.2 million and $2.164
(1)Total revenue earned in the U.S. were $845 million and $2.267 billion, respectively, for the three and nine months ended December 30, 2017 and $925.7 million and $2.261 billion for the three and nine months ended December 31, 2016. Long-lived assets located in the U.S. as of December 30, 2017 and April 1, 2017 were $286.4 million and $328.8 million, respectively.
17. Related Party Transactions
The Company’s Chief Creative Officer, Michael Kors, and the Company’s Chief Executive Officer, John Idol, and certain of the Company’s former shareholders, including Sportswear Holdings Limited, jointly owned Michael Kors Far East Holdings Limited, a BVI company, prior to the Company’s acquisition of MKHKL on May 31, 2016, which eliminated their ownership interests. On April 1, 2011, the Company entered into certain licensing agreements with certain subsidiaries of Michael Kors Far East Holdings Limited, including MKHKL, (the “Licensees”), which provided the Licensees with certain exclusive rights for use of the Company’s trademarks within China, Hong Kong, Macau and Taiwan, and to import, sell, advertise and promote certain of the Company’s products in these regions, as well as to own and operate stores bearing the Company’s tradenames. The agreements between the Company and the Licensees were scheduled to expire on March 31, 2041 and could be terminated by the Company at certain intervals if minimum sales benchmarks were not met. Royalties earned under these agreements were approximately $1.2 million during the two months ended May 31, 2016 preceding the acquisition. These royalties were driven by Licensee sales (of the Company’s goods) to their customers of approximately $28.9 million during the two months ended May 31, 2016 preceding the acquisition. In addition, the Company sold certain inventory items to the Licensees through its wholesale segment at terms consistent with those of similar licensees in the region. During the two-month period ended May 31, 2016 preceding the acquisition, amounts recognized as revenues in the Company’s consolidated statements of operations and comprehensive income related to these sales were approximately $7.9 million. Please refer to Note 3 for information relating to the Company’s acquisition of MKHKL on May 31, 2016.
A former executive officer of the Company (who is no longer a related party as of October 31, 2016) is married to a former employee of one of the Company’s suppliers of fixtures for its shop-in-shops, retail stores and showrooms. During the three and nine months ended December 31, 2016, purchases from this supplier reflected in the Company’s consolidated financial statements were $1.128, 2019 and $869 million and $1.7 million, respectively.
18. Non-cash Investing Activities
Significant non-cash investing activities during$2.274 billion, respectively, for the three and nine months ended December 29, 2018.

As of December 28, 2019 and March 30, 20172019, the Company's total assets were $8.325 billion and $6.650 billion, respectively. The increase in total assets was primarily due to the adoption of ASU 2016-02 in the first quarter of Fiscal 2020. As of December 28, 2019, the Company had operating lease right-of-use assets recorded on its consolidated balance sheets of $1.665 billion, of which $1.060 billion related to Michael Kors, $379 million related to Versace, and $226 million related to Jimmy Choo.

31 2016 included non-cash allocations

19. Subsequent Events
Acquisition of Alberto Gozzi S.r.L.
On December 16, 2019, the Company entered into a definitive agreement to acquire Italian atelier and shoe manufacturer Alberto Gozzi S.r.L. The transaction was completed in the Company's fourth quarter of Fiscal 2020.
Coronavirus
During the fourth quarter of Fiscal 2020, there has been an outbreak of coronavirus in China which the Company expects will materially impact its financial results. As of February 5, 2020, approximately 150 of the fair valuesCompany’s stores in Mainland China were closed. Additionally, most of the net assets acquired in connectionstores that remain open are operating with reduced hours and experiencing significantly reduced customer traffic. While this global health emergency is expected to be temporary, the Company’s acquisitionduration and intensity of the Jimmy Choo business on November 1, 2017disruption is uncertain, including potential broader impacts outside of China if travel and tourist traffic is further restricted and there is a resulting decline in Chinese tourist spending in other regions. Given the Greaterdynamic nature of these circumstances, the related financial impact for the fourth quarter could materially differ from our current expectations.
In addition, the Company sources finished goods inventory from manufacturers in China business on May 31, 2016, respectively. See Note 3 for additional information.the Michael Kors brand. As a result of potential factory closures, reduced workforces, scarcity of raw materials and potential disruption of transportation of goods produced in China, the Company may be unable to obtain inventory or samples sourced from this region, which may materially impact Fiscal 2021. Given the uncertainty regarding these circumstances, the related financial impact cannot be reasonably estimated at this time.
There were no other significant non-cash investing or financing activities during the fiscal periods presented.





ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of our Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this interim report. This discussion contains forward-lookingForward-looking statements that are based upon current expectations. We sometimes identify forward-looking statements with such words as “may,” “expect,” “anticipate,” “estimate,” “seek,” “intend,” “believe” or similar words concerning future events. The forward-looking statements contained herein, include, without limitation, statements concerning our ability to execute on our future growth strategies, our ability to achieve intended benefits from acquisitions, future revenue sources and concentration, gross profit margins, selling and marketing expenses, capital expenditures, general and administrative expenses, capital resources, new stores, retail fleet optimization plan and anticipated cost savings, additional financings or borrowings and additional lossesprospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri Holdings Limited (the “Company”) about future events, and are therefore subject to risks and uncertainties including, but not limited to, those discussed in this report thatwhich could cause actual results to differ materially from the future results contemplatedexpressed or implied by thesethe forward-looking statements. We also urge youAll statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “estimates”, “synergy”, “cost-saving”, “projects”, “goal”, “strategy”, “budget”, “forecast” or “might” or, words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include statements relating to carefully reviewfuture capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, share buybacks, dividend policy, losses and future prospects of the Company, business and management strategies and the expansion and growth of the Company’s operations, and benefits from any acquisition. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements. These risks, uncertainties and other factors include the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition; the risk of disruptions to the Company’s businesses; the negative effects of events on the market price of the Company’s ordinary shares and its operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the Company’s businesses; fluctuations in demand for the Company’s products; levels of indebtedness (including the indebtedness incurred in connection with acquisitions); future availability of credit; the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash; changes in consumer traffic and retail trends; loss of market share and industry competition; fluctuations in the capital markets; fluctuations in interest and exchange rates; the occurrence of unforeseen epidemics (including the outbreak of the coronavirus in China and its potential impact on our future financial results), disasters or catastrophes; political or economic instability in principal markets (including the continuing business disruption in Hong Kong); adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as those risks set forth underin Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended April 1, 2017,March 30, 2019, filed with the Securities and Exchange Commission on May 31, 2017, as supplemented by the risk factor set forth in our Form 10-Q for the quarterly period ended July 1, 2017, filed with the Securities and Exchange Commission on August 9, 2017.29, 2019.

Overview
Our Business
We areCapri Holdings Limited is a global fashion luxury group, consisting of industry-leading fashion luxuryiconic brands that are industry leaders in design, style and craftsmanship, led by a world-class management team and renowned designers. The Michael Kors brand was launched over 35 years ago by Michael Kors, whose vision has takenOur brands cover the Company from its beginnings as an Americanfull spectrum of fashion luxury sportswear house to a globalcategories including women’s and men’s accessories, footwear and apparel companyready-to-wear as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA.
Our Versace brand, which was acquired on December 31, 2018, has long been recognized as one of the world’s leading international fashion design houses and is synonymous with Italian glamour and style. Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship, over the past several decades the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings businesses. Versace’s design team is led by Donatella Versace, who has been the brand’s artistic director for over 20 years. Versace distributes its products through a globalworldwide distribution network, that has presencewhich includes boutiques in over 100 countriessome of the world’s most glamorous cities, its e-commerce site, as well as through company-operated retail storesthe most prestigious department and e-commerce sites, leading department stores, specialty stores and select licensing partners. Onworldwide.
33

Our Jimmy Choo brand, which was acquired on November 1, 2017, we completed the acquisition of Jimmy Choo Group Limited (formerly known as Jimmy Choo PLC) and its subsidiaries (collectively, “Jimmy Choo”). The combination of Michael Kors and Jimmy Choo brought together two iconic brands that are industry leaders in style and trend and created a global fashion luxury group with a diversified geographic and product portfolio, strengthening the Company's future revenue growth opportunities.
Michael Kors is a highly recognized luxury fashion brand in the Americas and Europe with accelerating brand awareness in other international markets. The Michael Kors brand features distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude. Michael Kors offers three primary collections: the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible luxury line and the Michael Kors Mens line. The Michael KorsCollection establishes the aesthetic authority of the entire brand and is carried by many of our retail stores, our e-commerce sites, as well as in the finest luxury department stores in the world. MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and apparel, and addresses the significant demand opportunity in accessible luxury goods. More recently, we have begun to grow our men’s business in recognition of the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s market. Taken together, our Michael Kors collections target a broad customer base while retaining our premium luxury image.
Since its inception, Jimmy Choo has offered a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessories brand,, whose core product offering is women'swomen’s luxury shoes, complemented by accessories, including handbags, small leather goods, scarves and belts, as well as a growing men'smen’s luxury shoeshoes and accessory business. In addition, certain productscategories, such as fragrances, sunglasses eyewear, fragrance and soft accessorieseyewear are produced under licensing agreements. Jimmy Choo'sChoo’s design team is led by Sandra Choi, who has been the Creative Director for the brand since its inception in 1996. Jimmy Choo products are unique, instinctively seductive and chic. The brand offers classic and timeless luxury products, as well as innovative products that are intended to set and lead fashion trends. The Jimmy Choo brand is represented through its global store network, its e-commerce sites, as well as through the most prestigious department and specialty stores worldwide.


PriorOur Michael Kors brand was launched over 35 years ago by Michael Kors, whose vision has taken the Company from its beginnings as an American luxury sportswear house to a global accessories, footwear and apparel company with a global distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites, leading department stores, specialty stores and select licensing partners. Michael Kors is a highly recognized luxury fashion brand in the third quarterAmericas and Europe with growing brand awareness in other international markets. Michael Kors features distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude. Michael Kors offers three primary collections: the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible luxury line and the Michael Kors Mens line. The Michael Kors Collection establishes the aesthetic authority of Fiscal 2018, we had three reportable segments forthe entire brand and is carried by many of our retail stores, our e-commerce sites, as well as in the finest luxury department stores in the world. MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and apparel, and addresses the significant demand opportunity in accessible luxury goods.We have also been developing our men’s business in recognition of the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s market. Taken together, our Michael Kors (“MK”) brand: Retail, Wholesale and Licensing. With the acquisition of Jimmy Choo, the Company began tocollections target a broad customer base while retaining our premium luxury image.
Segment Information
We operate in fourthree reportable segments, which are as follows:
Versace
MK Retail — includes salesWe generate revenue through the sale of Michael Kors products from 395 retail stores in the Americas (including concessions)Versace luxury ready-to-wear, accessories, footwear and 453 international retail stores (including concessions)home furnishings through directly operated Versace boutiques throughout EuropeNorth America (United States and Canada), EMEA (Europe, Middle East and Africa) and certain parts of Asia, as well as from Michael Korsthrough Versace outlet stores and e-commerce sites. In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of jeans, fragrances, watches, jewelry and eyewear.
Jimmy Choo
We generate revenue through the sale of Jimmy Choo luxury goods to end clients through directly operated Jimmy Choo retail and outlet stores throughout the Americas (United States, Canada and Latin America, excluding Brazil), EMEA and certain parts of Asia, through our e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo tradename in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through product licensing agreements, which allow third parties to use the United States (“U.S.”), Canada, Europe, China, JapanJimmy Choo brand name and South Korea astrademarks in connection with the manufacturing and sale of December 30, 2017.fragrances, sunglasses and eyewear.
34

Michael Kors
MK Wholesale — includes wholesale salesWe generate revenue through the sale of Michael Kors products through 1,391four primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to the end consumer throughout the Americas, Europe and certain parts of Asia. Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and certain parts of Europe and Asia. We also sell Michael Kors products directly to department store doorsstores, primarily located across the Americas and 889Europe, to specialty store doorsstores and travel retail shops in the Americas, Europe and through 1,034 specialty store doorsAsia, and 217 department store doors internationally as of December 30, 2017. MK Wholesale also includes revenues from sales of products to Michael Korsour geographic licensees.
MK Licensing — includes royalties and other contributions earned on licensed products and use of the Company’s trademarks, and rights granted to third parties for the right to operate retail stores and/or sell the Company’s productslicensees in certain geographic regions.
Jimmy Choo — includes worldwide salesparts of Jimmy Choo products from 179 retail stores (including concessions)EMEA, Asia and jimmychoo.com, through 619 wholesale doors andBrazil. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and beauty, and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions.
Unallocated Expenses
In addition to the reportable segments discussed above, we have certain corporate costs that are not directly attributable to our brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, and information systems expenses, including Enterprise Resource Planning (“ERP”) system implementation costs. In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transaction and transition costs related to our recent acquisitions) and impairment costs. The segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages the business and assesses performance. All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis, which occurred in the fourth quarter of Fiscal 2019. The following table presents our total revenue and income from operations by segment for the three and nine months ended December 30, 2017.28, 2019 and December 29, 2018 (in millions):
 Three Months EndedNine Months Ended
 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Total revenue:
Versace$195  $—  $630  $—  
Jimmy Choo165  162  448  451  
Michael Kors1,211  1,276  3,281  3,443  
Total revenue$1,571  $1,438  $4,359  $3,894  
Income (loss) from operations:
Versace$(12) $—  $(6) $—  
Jimmy Choo9  15  10  28  
Michael Kors288  320  711  798  
Total segment income from operations285  335  715  826  
Less:Corporate expenses(46) (20) (114) (65) 
Restructuring and other charges(15) (19) (37) (49) 
Impairment of long-lived assets(19) (6) (220) (17) 
Total income from operations$205  $290  $344  $695  
35

The following table presents our global network of retail stores and wholesale doors by brand:
As of
December 28,
2019		December 29,
2018
Number of full price retail stores (including concessions):
Versace158  —  
Jimmy Choo176  168  
Michael Kors575  606  
909  774  
Number of outlet stores:
Versace50  —  
Jimmy Choo47  38  
Michael Kors271  264  
368  302  
Total number of retail stores1,277  1,076  
Total number of wholesale doors
Versace823  —  
Jimmy Choo558  592  
Michael Kors2,999  3,414  
4,380  4,006  
The following table presents our retail stores by geographic location:
As ofAs of
December 28, 2019December 29, 2018
VersaceJimmy ChooMichael KorsJimmy ChooMichael Kors
Store count by region:
The Americas30  44  387  44  401  
EMEA62  77  180  69  198  
Asia116  102  279  93  271  
208  223  846  206  870  
Key Consolidated Performance Indicators and Statistics
We use a number of key indicators of operating results to evaluate our Company’s performance, including the following (dollars in millions):
 Three Months EndedNine Months Ended
 December 28, 2019December 29, 2018December 28, 2019December 29, 2018
Total revenue$1,571  $1,438  $4,359  $3,894  
Gross profit as a percent of total revenue59.3 %60.7 %60.6 %61.3 %
Income from operations$205  $290  $344  $695  
Income from operations as a percent of total revenue13.0 %20.2 %7.9 %17.8 %
Seasonality
We experience certain effects of seasonality with respect to our business. We generally experience greater sales during our third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during our first fiscal quarter.
36

Certain Factors Affecting Financial Condition and Results of Operations
Establishing brand identity and enhancing global presence. We intend to grow our international presence through the formation of aour global fashion luxury group, bringing together industry-leading fashion luxury brands. As mentioned above, on November 1, 2017, we completedWe believe that our acquisitionrecent acquisitions of Versace and Jimmy Choo for a total transaction value of $1.447 billion (see Note 3 to the accompanying consolidated financial statements for additional information). Jimmy Choo has a rich history as a leading global luxury house, renowned for its glamorous and fashion-forward footwear, and is an excellent complement to the Michael Kors brand. We believe this combination further strengthenssignificantly strengthen our future growth opportunities, while also increasing both product and geographic diversification. However, there are risks associated with a new acquisitionacquisitions and the anticipated benefits of the acquisitionacquisitions on our financial results may not be in line with our expectations.
We intend to continue to increase our international presence and global brand recognition by growing our existing international operations through acquisitions, the formation of various joint ventures with international partners and continuing with our international licensing arrangements. We feel this is an efficient method for continued penetration into the global luxury goods market, especially for markets where we have yet to establish a substantial presence. In addition, our growth strategy includes assuming direct control of certain licensed international operations to better manage our growth opportunities in the related regions. On May 31, 2016, we acquired the previously licensed business in the Greater China region ("MKHKL"), which has operations in China, Hong Kong, Macau and Taiwan.
See Note 35 to the accompanying consolidated financial statements for additional information regarding our recent acquisitions.
Channel Shift and Demand for Our Accessories and Related Merchandise. Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences. Although the overall consumer spending for personal luxury products has recently increased, consumer shopping preferences have continued to shift from luxury products to luxury experiences. In addition, consumer shopping preferences have continued to shift from physical stores to on-line shopping. We currently expect that this trend will continue in the foreseeable future. During Fiscal 2017, we began to strategically reduce shipments of Michael Kors products to decrease promotional activity within our wholesale channel, which we believe is necessary to appropriately position the Michael Kors brand long-term. In addition, we have been strategically reducing promotional activity within our full-price retail stores. We continue to adjust our operating strategy to the changing business environment and on May 31, 2017, we announced that weenvironment. We have made significant progress toward our plan to close between 100 and 125150 of our Michael Kors full-price retail stores over the next two yearsat an expected total one-time cost of approximately $100 - $125 million, in order to improve the profitability of our Michael Kors retail store fleet (“Retail Fleet Optimization Plan”). Over this time period,As of December 28, 2019, we expectclosed a total of 129 stores at a cost of $100 million to incur approximately $100 - $125date and recorded restructuring charges of $6 million and $10 million during the nine months ended December 28, 2019 and December 29, 2018, respectively. We anticipate finalizing the remainder of one-time costs associated with thesethe planned store closures.closures under the Retail Fleet Optimization Plan by the end of Fiscal 2020. Collectively, we continue to anticipate ongoing annual savings of approximately $60 million as a result of the store closures and lower depreciation and amortization associated with the impairment charges recorded during Fiscal 2017 and Fiscal 2018. During the three months and nine months ended December 30, 2017, we closed 24 of our Michael Kors full-price retail stores under the Retail Fleet Optimization Plan, which resulted in restructuring charges of $2.4 million and $8.3 million, respectively, recorded within restructuring and other charges in our consolidated statements of operations and comprehensive income.once these initiatives are completed.


Foreign currency fluctuation. Our consolidated operations are impacted by the relationships between our reporting currency, the U.S. dollar, and those of our non-U.S. subsidiaries whose functional/local currency is other than the U.S. dollar. During the three months ended December 30, 2017, our results have been positively impacted by the strengthening ofdollar, particularly the Euro, the British Pound, the Canadian Dollar and the Chinese Renminbi, relative to the U.S. Dollar of 9%, 7%, 5% and 3%, respectively, partially offset by a decline in the value of the Japanese Yen, relative to the U.S. Dollar of 4%, as compared to the three months ended December 31, 2016. During the nine months ended December 30, 2017, our results have been positively impacted by the strengthening of the EuroKorean Won and the Canadian Dollar, relative to the U.S. Dollar of 4% and 2%, respectively, partially offset by the declines in value of the Japanese Yen of 5%, as compared to the nine months ended December 31, 2016.among others. We continue to expect significant volatility in the global foreign currency exchange rates, which may have a negative impact on the reported results of certain of our non-U.S. subsidiaries in the future, when translated to U.S. Dollars.
Disruptions in shipping and distribution. Our operations are subject to the impact of shipping disruptions as a result of changes or damage to our distribution infrastructure, as well as due to external factors. Any future disruptions in our shipping and distribution network could have a negative impact on our results of operations.
Costs of Manufacturing and Tariffs. Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products. This volatility applies primarily to costs driven by commodity prices, which can increase or decrease dramatically over a short period of time. These fluctuationsIn addition, our costs may be impacted by sanction tariffs imposed on our products due to changes in trade terms. On May 10, 2019, the U.S. increased the sanction tariffs rate from 10% to 25% on $200 billion of imports of select product categories (Tranche 3), which includes handbags and travel goods from China, and effective September 1, 2019, a 10% tariff on an additional $300 billion of goods from China, including ready-to-wear, footwear and men’s products, went into effect. If additional tariffs or trade restrictions are implemented by the U.S. or other countries, the cost of our products could increase which could adversely affect our business. In addition, commodity prices and tariffs may have a materialan impact on our sales,revenues, results of operations and cash flows to the extent they occur.flows. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as possible.possible and diversifying the countries where we produce. In addition, manufacturing labor costs are also subject to degrees of volatility based on local and global economic conditions. We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs to our products.
U.S. Tax Reform. On December 22, 2017, the United States ("U.S.") government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including, among other things, lowering U.S. statutory federal tax rate and implementing a territorial tax system. As we have a March 31 fiscal year-end, the lower tax rate will be phased in, resulting in a U.S. statutory federal tax rate of approximately 32% for the fiscal year ended March 31, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter. The Tax Act also adds many new provisions, including changes to bonus depreciation, limits on the deductions for executive compensation and interest expense, a tax on global intangible low-taxed income ("GILTI"), the base erosion anti-abuse tax ("BEAT") and a deduction for foreign derived intangible income ("FDII"). We are still evaluating the impact of these provisions of the Tax Act, which do not apply until 2019, and thus, have not adjusted any net deferred tax assets of our foreign subsidiaries for the new tax.
As part of the transition to the new territorial tax system, the Tax Act imposes a tax on the mandatory deemed repatriation of earnings of our foreign subsidiaries. In addition, the reduction of the U.S. statutory federal tax rate will cause us to re-measure our U.S. deferred tax assets and liabilities.  In accordance with Accounting Standards Codification ("ASC") 740, we recorded the effects of the tax law change during the three months ended December 30, 2017, which resulted in a provisional charge of $12.4 million, comprised of an estimated deemed repatriation tax charge of $0.3 million and an estimated deferred tax charge of $12.1 million due to the re-measurement of our net U.S. deferred tax assets. Conversely, we realized a $2.0 million net benefit for the three and nine month periods ended December 30, 2017 due to the corporate tax rate reductions. While the Tax Act has negatively impacted our results of operations for the three and nine months ended December 30, 2017 by approximately 370 basis points and 160 basis points, respectively, the lower corporate rate is expected to to result in a benefit to our effective tax rate for the next fiscal year of 300 to 400 basis points, which we plan to reinvest in our business.
37
In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 118 to provide guidance for companies that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, or any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. In addition, once we finalize certain tax positions when it files its 2017 U.S. tax return, we will be able to conclude whether any further adjustments are required to our deferred tax balances in the U.S., as well as to the total liability associated with the one-time mandatory tax. We believe that the analysis performed to date is sufficient to calculate a reasonable estimate of the impacts of the Tax Act.



Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those that are the most important to the portrayal of our financial condition and results of operations and financial condition and that require our most difficult, subjective and complex judgments to make estimates about the effect of matters that are inherently uncertain. In applying such policies, we must use certain assumptions that are based uponon our informed judgments, assessments of probability and best estimates. Estimates, by their nature, are subjective and are based uponon analysis of available information, including current and historical factors current circumstances and the experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis. During the first quarter of Fiscal 2020, we adopted the new accounting guidance related to lease accounting, as described in Note 2 and Note 4 to the accompanying consolidated financial statements. Under this guidance, our existing lease obligations, which relate to stores, corporate locations, warehouses and equipment, will be recorded as a lease liability and right-of-use asset for operating leases on our consolidated balance sheet. Accordingly, adoption of this standard significantly increased the Company’s total assets and total liabilities. Our critical accounting policies are disclosed in full in the MD&A section of our Annual Report on Form 10-K for the fiscal year ended April 1, 2017.March 30, 2019. There have been no significant changes in our critical accounting policies since April 1, 2017,March 30, 2019, other than described below.
Share-Based Compensation
We use the Black-Scholes valuation model to estimate the grant date fair value of its share option awards. Beginning in Fiscal 2018, we started using our own historical experience in determining the expected holding period and volatility of our time-based share option awards. In prior periods, we used the simplified method for determining the expected life of our options and average volatility rates of similar actively traded companies over the estimated holding period, due to insufficient historical option exercise experience as a public company.
Segment Information
We generate revenue through four business segments: MK Retail, MK Wholesale, MK Licensing and Jimmy Choo. The following table presents our total revenue and income from operations by segment for the three and nine months ended December 30, 2017 and December 31, 2016 (in millions):
  Three Months Ended Nine Months Ended
  December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Total revenue:       
MK Retail$846.3
 $836.7
 $2,111.2
 $1,996.8
MK Wholesale430.8
 473.1
 1,198.0
 1,319.7
MK Licensing48.3
 43.0
 115.2
 112.4
Michael Kors1,325.4
 1,352.8
 3,424.4
 3,428.9
Jimmy Choo114.7
 —
 114.7
 —
Total revenue$1,440.1
 $1,352.8
 $3,539.1
 $3,428.9
        
Income from operations:       
MK Retail$180.4
 $178.2
 $341.6
 $314.4
MK Wholesale100.5
 140.2
 263.6
 367.2
MK Licensing26.9
 23.5
 51.1
 50.9
Michael Kors307.8
 341.9
 656.3
 732.5
Jimmy Choo5.7
 —
 5.7
 —
Income from operations$313.5
 $341.9
 $662.0
 $732.5


MK Retail
We have four primary Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores, outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to the end consumer throughout the Americas (United States, Canada and Latin America, excluding Brazil), Europe and certain parts of Asia. In addition to these four retail formats, we operate concessions in a select number of department stores. Michael Kors “Collection” stores are located in highly prestigious shopping areas, while Michael Kors “Lifestyle” stores are located in well-populated commercial shopping locations and leading regional shopping centers. Michael Kors outlet stores, which are generally in outlet centers, extend our reach to additional consumer groups. Michael Kors e-commerce business includes our existing Michael Kors e-commerce sites in the U.S., Canada, Europe, China and Japan. During Fiscal 2018, we further expanded our e-commerce presence to 14 additional countries in Europe and South Korea, increasing our total e-commerce site presence to 25 Michael Kors e-commerce sites as of December 30, 2017.
The following table presents the change in our global network of Michael Kors retail stores and revenue for the MK Retail segment by geographic location for the three and nine months ended December 30, 2017 and December 31, 2016 (dollars in millions):
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Full price retail stores including concessions:       
Number of stores616
 606
 616
 606
(Decrease) increase during period(4) 23
 2
 114
Percentage increase vs. prior year1.7% 33.2% 1.7% 33.2%
Total gross square footage1,421,384
 1,393,457
 1,421,384
 1,393,457
Average square footage per store2,307
 2,299
 2,307
 2,299
        
Outlet stores:       
Number of stores232
 210
 232
 210
Increase during period9
 6
 19
 34
Percentage increase vs. prior year10.5% 25.0% 10.5% 25.0%
Total gross square footage943,895
 835,370
 943,895
 835,370
Average square footage per store4,069
 3,978
 4,069
 3,978
        
MK Retail revenue - the Americas$558.0
 $584.2
 $1,335.6
 $1,362.0
MK Retail revenue - Europe$168.0
 $150.9
 $444.3
 $401.2
MK Retail revenue - Asia$120.3
 $101.6
 $331.3
 $233.6
The following table presents our Michael Kors retail stores by geographic location:
 As of
 December 30,
2017		 December 31,
2016
Store count by region:   
The Americas395
 397
Europe202
 199
Asia251
 220
Total848
 816


MK Wholesale
We sell Michael Kors products directly to department stores primarily located across the Americas (excluding Brazil) and Europe to accommodate consumers who prefer to shop at major department stores. In addition, we sell to specialty stores for those consumers who enjoy the boutique experience afforded by such stores, as well as to travel retail shops in the Americas, Europe and Asia. We also have wholesale arrangements pursuant to which we sell Michael Kors products to our geographic licensees in certain parts of EMEA (Europe, Middle East and Africa) and Asia, as well as in Brazil. We continue to focus our sales efforts and drive sales in existing locations by enhancing presentation with our specialized fixtures that effectively communicate our brand and create a more personalized shopping experience for consumers. We tailor our assortments through wholesale product planning and allocation processes to better match the demands of our department store customers in each local market.
The following table presents the change in our global network of Michael Kors wholesale doors, as well as the corresponding revenue for our MK Wholesale segment by geographic location during the three month and nine month periods ended December 30, 2017 and December 31, 2016 (dollars in millions):
 Three Months Ended Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016
Number of full-price wholesale doors3,531
 3,698
 3,531
 3,698
(Decrease) increase during period(87) 36
 (76) (191)
        
MK Wholesale revenue - the Americas$338.2
 $372.9
 $905.8
 $987.6
MK Wholesale revenue - EMEA$81.2
 $89.5
 $250.7
 $285.2
MK Wholesale revenue - Asia$11.4
 $10.7
 $41.5
 $46.9
MK Licensing
We generate licensing revenue through product and geographic licensing arrangements. Our product license agreements allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of a variety of products, including watches, jewelry, fragrances and beauty, and eyewear. In Michael Kors product licensing arrangements, we take an active role in the design, marketing and distribution of products under the Michael Kors brand. Our geographic licensing arrangements allow third parties to use our Michael Kors tradenames in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions, such as Brazil, the Middle East, South Africa, Eastern Europe, certain parts of Asia and Australia. During Fiscal 2017, we acquired direct control of our licensed operations in the Greater China region on May 31, 2016. The results of the acquired business are now being reported as part of our MK Retail and MK Wholesale operations. During the second quarter of Fiscal 2017, the Company licensed the right to operate retail stores bearing the Michael Kors trademark to a third party in Brazil.
Jimmy Choo
The Jimmy Choo business was acquired and consolidated by the Company beginning on November 1, 2017. We generate revenue through the sale of Jimmy Choo luxury goods to end clients through directly operated Jimmy Choo stores throughout the Americas (United States, Canada and Latin America, excluding Brazil), EMEA and certain parts of Asia, through jimmychoo.com and through wholesale sales of luxury goods to distribution partners, multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through product license agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in connection with the manufacturing and sale of sunglasses, eyewear, fragrance and soft accessories, as well as through geographic licensing arrangements, which allow third parties to use the Jimmy Choo tradenames in connections with the retail and/or wholesale sales of our Jimmy Choo branded products in specific geographic regions.



The following table presents our global network of Jimmy Choo retail stores and wholesale doors as of December 30, 2017:
December 30,
2017
Store count:
Full price retail stores including concessions158
Outlet stores21
Total stores179
Number of full-price wholesale doors619
The following table presents Jimmy Choo revenue by geographic location, which has been included in the Company's results of operations from November 1, 2017 through December 30, 2017 (in millions):
 Revenue
The Americas$21.0
EMEA65.0
Asia28.7
Total$114.7
Key Performance Indicators and Statistics
We use a number of key indicators of operating results to evaluate our Company's performance, including the following (dollars in millions):
 Three Months Ended Nine Months Ended
 December 30, 2017 December 31, 2016 December 30, 2017 December 31, 2016
Total revenue$1,440.1
 $1,352.8
 $3,539.1
 $3,428.9
Decreases in comparable store net sales(3.2)% (6.9)% (3.5)% (6.6)%
Gross profit as a percent of total revenue61.4 % 59.6 % 60.7 % 59.5 %
Income from operations$313.5
 $341.9
 $662.0
 $732.5
Income from operations as a percent of total revenue21.8 % 25.3 % 18.7 % 21.4 %
above.
General Definitions for Operating Results
Total revenue consists of sales from comparable retail stores and e-commerce sites and non-comparable retail stores and e-commerce sites, net of returns and markdowns, as well as those made to our wholesale customers, net of returns, discounts, markdowns and allowances. Additionally, revenue includes royalties and other contributions earned on sales of licensed products by our licensees as well as contractual royalty rates for the use of our trademarks in certain geographic territories.
Comparable store net sales include sales from a retail store or an e-commerce site that has been operating for one full year after the end of the first month of its operation under our ownership. For stores that are closed, sales that were made in the final month of their operations (assuming closure prior to the fiscal month’s end), are excluded from the calculation of comparable store sales. Additionally, sales for stores that are either relocated, or expanded by a square footage of 25% or greater, in any given fiscal year, are also excluded from the calculation of comparable store sales at the time of their move or interruption, until such stores have been in their new location, or are operating under their new size/capacity, for at least one full year after the end of the first month of their relocation or expansion. All comparable store sales are presented on a 52-week basis. Comparable store sales are reported on a global basis, which represents management’s view of our Company as an expanding global business.


Constant currency effects are non-U.S. GAAP financial measures, which are provided to supplement our reported operating results to facilitate comparisons of our operating results and trends in our business, excluding the effects of foreign currency rate fluctuations. Because we are a global company, foreign currency exchange rates may have a significant effect on our reported results. We calculate constant currency measures and the related foreign currency impacts by translating the current-year’s reported amounts into comparable amounts using prior year’s foreign exchange rates for each currency. All constant currency performance measures discussed below should be considered a supplement to and not in lieu of our operating performance measures calculated in accordance with U.S. GAAP.
Cost of goods sold includes the cost of inventory sold and related duties and tariffs, freight-in on merchandise and foreign currency exchange gains/losses related to designated forward contracts for purchase commitments. All retail operating and occupancy costs are included in Selling, general and administrative expenses (see below), and, as a result, our cost of goods sold may not be comparable to that of other entities that have chosen to include some or all of those expenses as a component of their cost of goods sold.
Gross profit is total revenue minus cost of goods sold. As a result of retail operating and occupancy costs being excluded from our cost of goods sold, our gross profit may not be comparable to that of other entities that have chosen to include some or all of those expenses as a component of their gross profit.
Selling, general and administrative expenses consist of warehousing and distribution costs, rent for our distribution centers, payroll, store occupancy costs (such as rent, common area maintenance, store pre-opening, real estate taxes and utilities), information technology and systems costs, corporate payroll and related benefits, advertising and promotion expense and other general expenses.expenses, as well as sublease income. Selling, general and administrative expenses include charges that are not allocated to our reportable segments.
38

Depreciation and amortization includes depreciation and amortization of fixedproperty and equipment and definite-lived intangible assets.
Impairment of long-lived assets consists of charges to write-down fixedoperating lease right-of-use assets, property and equipment and finite-lived intangible assets to fair value. Impairment charges are not allocated to our reportable segments.
Restructuring and other charges includes store closure costs recorded in connection with the Retail Fleet Optimization Plan and other restructuring initiatives, as well as transaction and transition costs recorded in connection with our acquisitions of Versace and Jimmy Choo and MKHKL businesses (please refer to(see Note 35 and Note 810 to the accompanying consolidated financial statements for additional information). Restructuring and other charges are not allocated to our reportable segments.
Income from operations consists of gross profit minus total operating expenses.
Other (income) expense, net includes insurance settlements and proceeds received related to our anti-counterfeiting efforts and rental income from our owned distribution center in Europe.efforts. In future periods, it may include any other miscellaneous activities not directly related to our operations.
Interest expense, net represents interest and fees on our revolving credit facilities, senior notes, term loan facilities and letters of credit (see “Liquidity and Capital Resources” for further detail on our credit facilities), as well as amortization of deferred financing costs and original issue discount, offset by interest earned on highly liquid investments (investments purchased with an original maturity of three months or less, classified as cash equivalents) and interest on cross-currency swaps designated as net investment hedges (see Note 14 to the accompanying consolidated financial statements for additional information).
Foreign currency loss/(gain)/loss includes net gains or losses related to the mark-to-market (fair value) on our forward currency contracts not designated as accounting hedges, and unrealized income or loss from the re-measurement of monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.
Noncontrolling interests/Redeemable noncontrolling interest represents the portion of the equity ownership in the Michael Kors Latin American joint venture, MK (Panama) Holdings, S.A. and subsidiaries (“MK Panama”), as well as the portion of the equity ownershipnoncontrolling interests in the Jimmy Choo Middle East Joint Venture, JC Industry S.r.L ("JCI"), and JC Gulf Trading LLC, ("JC Gulf")as well as in J. Choo Russia J.V. Limited., which is not attributable to our Company. Duringas well as the three months ended July 1, 2017, we repurchased a portion of the non-controllingredeemable noncontrolling interest in MK Panama for approximately $0.5 million and have a 75% ownership interest in MK Panama. Additionally, on November 1, 2017 we acquired Jimmy Choo, which has controlling financial interests in JCI and JC Gulf.

Versace Australia PTY Limited.

39

Results of Operations
Comparison of the three months ended December 30, 201728, 2019 with the three months ended December 31, 201629, 2018
The following table details the results of our operations for the three months ended December 30, 201728, 2019 and for the three months ended December 31, 2016,29, 2018, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):
Three Months Ended $ Change % Change % of Total Revenue for
the Three Months Ended		 Three Months Ended$ Change% Change% of Total Revenue for
the Three Months Ended
December 30,
2017		 December 31,
2016		 December 30,
2017		 December 31,
2016		 December 28,
2019		December 29,
2018		December 28,
2019		December 29,
2018
Statements of Operations Data:           Statements of Operations Data:
Total revenue$1,440.1
 $1,352.8
 $87.3
 6.5 %    Total revenue$1,571  $1,438  $133  9.2 %
Cost of goods sold556.1
 547.1
 9.0
 1.6 % 38.6 % 40.4 %Cost of goods sold639  565  74  13.1 %40.7 %39.3 %
Gross profit884.0
 805.7
 78.3
 9.7 % 61.4 % 59.6 %Gross profit932  873  59  6.8 %59.3 %60.7 %
Selling, general and administrative expenses485.9
 407.6
 78.3
 19.2 % 33.7 % 30.1 %Selling, general and administrative expenses630  507  123  24.3 %40.1 %35.3 %
Depreciation and amortization54.0
 55.7
 (1.7) (3.1)% 3.7 % 4.1 %Depreciation and amortization63  51  12  23.5 %4.0 %3.5 %
Impairment of long-lived assets2.6
 0.5
 2.1
 NM
 0.2 % — %Impairment of long-lived assets19  6  13  NM  1.2 %0.4 %
Restructuring and other charges (1)
28.0
 —
 28.0
 NM
 1.9 % — %
Restructuring and other charges (1)
15  19  (4) (21.1)%1.0 %1.3 %
Total operating expenses570.5
 463.8
 106.7
 23.0 % 39.6 % 34.3 %Total operating expenses727  583  144  24.7 %46.3 %40.5 %
Income from operations313.5
 341.9
 (28.4) (8.3)% 21.8 % 25.3 %Income from operations205  290  (85) (29.3)%13.0 %20.2 %
Other income, net(0.1) (4.1) 4.0
 (97.6)% — % (0.3)%Other income, net(1) (2) 1  (50.0)%(0.1)%(0.1)%
Interest expense, net8.3
 3.4
 4.9
 144.1 % 0.6 % 0.3 %Interest expense, net3  7  (4) (57.1)%0.2 %0.5 %
Foreign currency loss27.0
 0.9
 26.1
 NM
 1.9 % 0.1 %
Foreign currency (gain) lossForeign currency (gain) loss(2) 43  (45) NM  (0.1)%3.0 %
Income before provision for income taxes278.3
 341.7
 (63.4) (18.6)% 19.3 % 25.3 %Income before provision for income taxes205  242  (37) (15.3)%13.0 %16.8 %
Provision for income taxes58.9
 70.4
 (11.5) (16.3)% 4.1 % 5.2 %
Net income attributable to MKHL$219.4
 $271.3
 $(51.9) (19.1)%    
(Benefit from) provision for income taxes(Benefit from) provision for income taxes(4) 42  (46) NM  (0.3)%2.9 %
Net incomeNet income209  200  9  4.5 %
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interestLess: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest(1) —  (1) NM  
Net income attributable to CapriNet income attributable to Capri$210  $200  $10  5.0 %
___________________
NM Not meaningful
(1)IncludesRestructuring and other charges includes store closure costs recorded in connection with the Retail Fleet Optimization Plan as well as transaction(as defined in Note 10) and transitionother restructuring initiatives, and costs recorded in connection with ourthe acquisitions of Gianni Versace S.r.l and Jimmy Choo and MKHKL businesses (see Note 3 and Note 8 to the accompanying consolidated financial statements).Group Limited.
Total Revenue
Total revenue increased $87.3$133 million, or 6.5%9.2%, to $1.440$1.571 billion for the three months ended December 30, 2017,28, 2019, compared to $1.353$1.438 billion for the three months ended December 31, 2016,29, 2018, which included net favorableunfavorable foreign currency effects of approximately $25.2$5 million, primarily related to the strengtheningweakening of the Euro the British Pound, the Canadian Dollar and the Chinese Renminbi, partially offset by the weakening of the Japanese Yen against the U.S. Dollar during the three months ended December 30, 201728, 2019 as compared to the same prior year period. On a constant currency basis, our total revenue increased $62.1$138 million, or 4.6%9.6%. Total revenue for the three months ended December 30, 201728, 2019 includes approximately $114.7$195 million of incremental revenue attributable to Jimmy Choo,Versace, which was acquired and consolidated into the Company’sour results of operations effective November 1, 2017. The increaseDecember 31, 2018, offset in revenue was also due to increasedpart by lower revenue from our Michael Kors retail business, of $9.6 million, partially offset by a decrease in Michael Kors Wholesale revenues of $42.3 million.as compared to the prior year.

Gross Profit

The following table details revenues for our four business segments (dollars in millions):
 Three Months Ended   % Change % of Total Revenue for
the Three Months Ended
 December 30,
2017		 December 31,
2016		 $ Change As Reported Constant
Currency		 December 30,
2017		 December 31,
2016
Total revenue:             
MK Retail$846.3
 $836.7
 $9.6
 1.1 % (1.0)% 58.8% 61.8%
MK Wholesale430.8
 473.1
 (42.3) (8.9)% (10.5)% 29.9% 35.0%
MK Licensing48.3
 43.0
 5.3
 12.3 % 12.3 % 3.3% 3.2%
Michael Kors1,325.4
 1,352.8
 (27.4) (2.0)% (3.9)%    
Jimmy Choo114.7
 —
 114.7
 NM
 NM
 8.0% —%
Total revenue$1,440.1
 $1,352.8
 $87.3
 6.5 % 4.6 %    
MK Retail
Revenue from our Michael Kors retail storesGross profit increased $9.6$59 million, or 1.1%6.8%, to $846.3$932 million for the three months ended December 30, 2017,28, 2019, compared to $836.7$873 million for the three months ended December 31, 2016,29, 2018, which included net favorableunfavorable foreign currency effects of $17.8 million. On a constant currency basis, revenue from our Michael Kors retail stores decreased $8.2 million, or 1.0%. We operated 848 Michael Kors retail stores, including concessions, as of December 30, 2017, compared to 816 Michael Kors retail stores, including concessions, as of December 31, 2016.
During the three months ended December 30, 2017, our comparable store sales decreased $24.2 million, or 3.2%, which included net favorable foreign currency effects of approximately $15.6 million. Our comparable store sales benefited approximately 170 basis points from the inclusion of e-commerce sales in comparable store sales. On a constant currency basis, our comparable store sales decreased $39.8 million, or 5.2%. The decrease in our comparable store sales was attributable to lower sales from our women’s accessories and watches product categories, offset in part by higher sales from women's apparel, men’s product categories and women's footwear during the three months ended December 30, 2017, compared to the three months ended December 31, 2016.
Our non-comparable store sales increased $33.8 million during the three months ended December 30, 2017, which included net favorable foreign currency effects of $2.2 million. On a constant currency basis, our non-comparable store sales increased $31.6 million. The increase in non-comparable store sales was primarily attributable to operating an additional 32 stores since December 31, 2016.
MK Wholesale
Revenue from our Michael Kors wholesale customers decreased $42.3 million, or 8.9%, to $430.8 million for the three months ended December 30, 2017, compared to $473.1 million for the three months ended December 31, 2016, which included net favorable foreign currency effects of approximately $7.4 million. On a constant currency basis, our wholesale revenue decreased $49.7 million, or 10.5%. The decrease in our wholesale revenue was primarily attributable to our strategic reduction in shipments of Michael Kors products to decrease promotional activity within our wholesale channel, as previously described, which resulted in lower women's accessories and footwear sales, partially offset by higher sales from men's and women's apparel product lines during the three months ended December 30, 2017, compared to the three months ended December 31, 2016.
MK Licensing
Royalties earned on our Michael Kors licensing agreements increased $5.3 million, or 12.3%, to $48.3 million for the three months ended December 30, 2017, compared to $43.0 million for the three months ended December 31, 2016. This increase was primarily attributable to higher licensing revenues related to Michael Kors ACCESS watches and eyewear, partially offset by lower licensing revenues related to sales of connected jewelry, which has been discontinued.
Jimmy Choo
The Jimmy Choo business acquired on November 1, 2017 contributed approximately $114.7 million to our total revenue for the three months ended December 30, 2017.


Gross Profit
Gross profit increased $78.3 million, or 9.7%, to $884.0 million for the three months ended December 30, 2017, compared to $805.7 million for the three months ended December 31, 2016, which included net favorable foreign currency effects of $16.1$3 million. Gross profit as a percentage of total revenue increased 180decreased 140 basis points to 61.4%59.3% during the three months ended December 30, 2017,28, 2019, compared to 59.6%60.7% during the three months ended December 31, 2016, which29, 2018. The decrease in our gross profit margin was primarily attributable to an increase inlower gross profit margin from our retail segment of 310 basis points, primarily driven by lower cost of goods, decreased promotional activity and favorable geographic mix of sales. The increase in gross margin was partially offset by a decrease of 270 basis points in our wholesale segment gross margin,for Michael Kors primarily driven by increased allowances and unfavorable geographic mix, partially offset by lower costs of goodsmarkdowns during the three months ended December 30, 2017,28, 2019, as compared to the three months ended December 31, 2016.29, 2018, partially offset by the inclusion of Versace, which benefited our gross margin 130 basis points.
40

Total Operating Expenses
Total operating expenses increased $106.7$144 million, or 23.0%24.7%, to $570.5$727 million during the three months ended December 30, 2017,28, 2019, compared to $463.8$583 million for the three months ended December 31, 2016.29, 2018, which included incremental operating expenses of $146 million associated with the recently acquired Versace business. Our operating expenses included a net unfavorablefavorable foreign currency impact of approximately $12.7$5 million. Total operating expenses increased to 39.6%46.3% as a percentage of total revenue for the three months ended December 30, 2017,28, 2019, compared to 34.3%40.5% for the three months ended December 31, 2016.29, 2018. The components that comprise total operating expenses are explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $78.3$123 million, or 19.2%24.3%, to $485.9$630 million during the three months ended December 30, 2017,28, 2019, compared to $407.6$507 million for the three months ended December 31, 2016.29, 2018. The increase in selling, general and administrative expenses was primarily due to the following:
incremental costs of $52.7$130 million associated with our newlythe recently acquired Jimmy ChooVersace business, which has been consolidated in our operations beginning on November 1, 2017December 31, 2018.
Corporate unallocated expenses, which are included within selling, general and
an increase administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $26 million, or 130.0%, to $46 million during the three months ended December 28, 2019 as compared to $20 million for the three months ended December 29, 2018, primarily attributable to the inclusion of $16.0 millionERP system implementation costs in Michael Kors retail store and overhead costs, primarily comprised of increased occupancy costs of $6.6 million and increased advertising costs of $7.0 million.the current year.
Selling, general, and administrative expenses as a percentage of total revenue increased to 33.7%40.1% for the three months ended December 30, 2017,28, 2019, compared to 30.1%35.3% for the three months ended December 31, 2016,29, 2018, primarily due to the inclusion of expenses associated with the newly acquired Jimmy ChooVersace business, as a percentage of total revenue for the three months ended December 30, 2017, as compared to the three months ended December 31, 2016.
Depreciation and Amortization
Depreciationincreased retail store and amortization decreased $1.7 million, or 3.1%, to $54.0 million during the three months ended December 30, 2017, compared to $55.7 million for the three months ended December 31, 2016. The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to fixed asset impairment charges recorded in Fiscal 2017 and Fiscal 2018, partially offset by incremental depreciation and amortization expense of $5.8 million attributable to the newly acquired Jimmy Choo business. Depreciation and amortization decreased to 3.7%e-commerce related costs as a percentage of total revenue during the three months ended December 30, 2017,28, 2019, as compared to 4.1%the three months ended December 29, 2018.
Depreciation and Amortization
Depreciation and amortization increased $12 million, or 23.5%, to $63 million during the three months ended December 28, 2019, compared to $51 million for the three months ended December 31, 2016.29, 2018. The increase in depreciation and amortization expense was primarily attributable to incremental depreciation and amortization expense of $17 million attributable to our Versace business (including amortization of purchase accounting adjustments), partially offset by lower depreciation due to previously recorded property and equipment impairment charges. Depreciation and amortization increased to 4.0% as a percentage of total revenue during the three months ended December 28, 2019, compared to 3.5% for the three months ended December 29, 2018.
Impairment of Long-Lived Assets
During the three months ended December 30, 2017,28, 2019, we recognized long-lived asset impairment charges of $2.6$19 million, which wereprimarily related to underperformingproperty and equipment and operating lease right-of-use assets at our Michael Kors full-price retail store locations some of which will be closed as part of our previously announced Retail Fleet Optimization Plan (see Note 813 to the accompanying consolidated financial statements for additional information). During the three months ended December 31, 2016,29, 2018, we recognized fixedlong-lived asset impairment charges of approximately $0.5$6 million, which were primarily related to ourunderperforming Michael Kors wholesale locations.retail store locations, which related to closures as part of our Retail Fleet Optimization Plan.
Restructuring and Other Charges
During the three months ended December 30, 2017,28, 2019, we recognized restructuring and other charges of $28.0$15 million, which were comprisedincluded other costs of $22.2$8 million of transaction costs and $3.4 million of transition costs recordedprimarily in connection with the Jimmy Choo acquisition and restructuring charges of $2.4 million recorded in connection with the Retail Fleet Optimization PlanVersace (see Note 810 to the accompanying consolidated financial statements for additional information). and $5 million related to our Retail Fleet Optimization Plan.

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

41

Income from Operations
As a result of the foregoing, income from operations decreased $28.4 million, or 8.3%, to $313.5 million during the three months ended December 30, 2017, compared to $341.9 million for the three months ended December 31, 2016. Income from operations as a percentage of total revenue decreased to 21.8% during the three months ended December 30, 2017, compared to 25.3% for the three months ended December 31, 2016.
The following table details income from operations for our four business segments (dollars in millions):
 Three Months Ended     % of Total Revenue for
the Three Months Ended
 December 30,
2017		 December 31,
2016		 $ Change % Change December 30,
2017		 December 31,
2016
Income from operations:           
MK Retail$180.4
 $178.2
 $2.2
 1.2 % 21.3% 21.3%
MK Wholesale100.5
 140.2
 (39.7) (28.3)% 23.3% 29.6%
MK Licensing26.9
 23.5
 3.4
 14.5 % 55.7% 54.7%
Michael Kors307.8
 341.9
 (34.1) (10.0)% 23.2% 25.3%
Jimmy Choo5.7
 —
 5.7
 NM
 5.0% —%
Income from operations$313.5
 $341.9
 $(28.4) (8.3)% 21.8% 25.3%
MK Retail
Income from operations for our MK Retail segment increased $2.2 million, or 1.2%, to $180.4 million during the three months ended December 30, 2017, compared to $178.2 million for the three months ended December 31, 2016. Income from operations as a percentage of retail revenue remained flat at 21.3% in both periods, as the 310 basis point increase in gross profit margin, as previously discussed above, was completely offset by an increase in operating expenses, during the three months ended December 30, 2017, as compared to the three months ended December 31, 2016. The increase in operating expenses as a percentage of retail revenue was primarily attributable to increased retail store-related costs and restructuring and other charges, including transaction and transition costs related to the Jimmy Choo acquisition, partially offset by lower depreciation expenses during the three months ended December 30, 2017.
MK Wholesale
Income from operations for our MK Wholesale segment decreased $39.7 million, or 28.3%, to $100.5 million during the three months ended December 30, 2017, compared to $140.2 million for the three months ended December 31, 2016. Income from operations as a percentage of wholesale revenue decreased 630 basis points from 29.6% for the three months ended December 31, 2016 to 23.3% during the three months ended December 30, 2017, which was primarily attributable to a 360 basis point increase in operating expenses and a 270 basis point decrease in gross profit margin, as previously discussed above. The increase in operating expenses as a percentage of wholesale revenue was primarily attributable to increased corporate allocated expenses, including transaction and transition costs related to the Jimmy Choo acquisition and higher selling expenses.
MK Licensing
Income from operations for our MK Licensing segment increased $3.4 million, or 14.5%, to $26.9 million during the three months ended December 30, 2017, compared to $23.5 million for the three months ended December 31, 2016. Income from operations as a percentage of licensing revenue increased 100 basis points from 54.7% during the three months ended December 31, 2016 to 55.7% during the three months ended December 30, 2017, which was primarily due to lower advertising costs, partially offset by increased selling costs and allocated transaction and transition costs related to the Jimmy Choo acquisition as a percentage of licensing revenue during the three months ended December 30, 2017, as compared to the three months ended December 31, 2016.
Jimmy Choo
The Jimmy Choo business acquired on November 1, 2017 contributed approximately $5.7 million to our income from operations for the three months ended December 30, 2017 (after amortization of non-cash purchase accounting adjustments and transaction and transition related costs).


Other Income, net
During the three months ended December 31, 2016, other income of $4.1 million was primarily comprised of $3.8 million in insurance settlements related to the prior-year disruption to our former third party operated e-commerce fulfillment center.
Interest Expense, net
Interest expense, net increased $4.9 million to $8.3 million during the three months ended December 30, 2017, compared to $3.4 million for the three months ended December 31, 2016, primarily due to higher interest expense on long-term borrowings used to finance the acquisition of Jimmy Choo during the three months ended December 30, 2017 (see Note 9 for additional information).
Foreign Currency Loss
During the three month periods ended December 30, 2017, we recognized a net foreign currency loss of $27.0 million, which primarily included a $32.0 million loss related to a forward foreign currency exchange derivative contract to hedge the Jimmy Choo transaction price (please refer to Note 3 and Note 12 to the accompanying consolidated financial statements for additional information), partially offset by the remeasurement of intercompany loans with certain of our subsidiaries.
Provision for Income Taxes
We recognized $58.9 million of income tax expense during the three months ended December 30, 2017, compared to $70.4 million for the three months ended December 31, 2016. Our effective tax rate for the three months ended December 30, 2017, was 21.2%, compared to 20.6% for the three months ended December 31, 2016. The increase in our effective tax rate was primarily due to the impacts of the Tax Act enacted in the United States that were recorded during the three months ended December 30, 2017. This net increase is comprised of the write down of our deferred tax assets as a result of the Tax Act’s reduction in the base corporate tax rate from 35% to 21%, partially offset by the current tax benefit of the rate reduction on our annualized effective tax rate. Additionally this increase was offset due to the favorable effect of global financing activities. The global financing activities are related to our previously disclosed 2014 move of our principal executive office from Hong Kong to the United Kingdom ("U.K.") and decision to become a U.K. tax resident. In connection with this decision, we funded our international growth strategy through intercompany debt financing arrangements between our U.S., U.K. and Switzerland subsidiaries in December 2015. Accordingly, due to the difference in the statutory income tax rates between these jurisdictions, we realized a lower effective tax rate. The impact on our effective tax rate was higher in Fiscal 2018 than in Fiscal 2017 because the debt financing arrangement produced the same tax impact on reduced pre-tax income.
Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.
Net Income Attributable to MKHL
As a result of the foregoing, our net income attributable to MKHL decreased $51.9 million, or 19.1%, to $219.4 million during the three months ended December 30, 2017, compared to $271.3 million for the three months ended December 31, 2016.


Results of Operations
Comparison of the nine months ended December 30, 2017 with the ninemonths ended December 31, 2016
The following table details the results of our operations for the nine months ended December 30, 2017 and for the nine months ended December 31, 2016, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):
 Nine Months Ended $ Change % Change % of Total Revenue for
the Nine Months Ended
 December 30,
2017		 December 31,
2016		 December 30, 2017 December 31, 2016
Statements of Operations Data:           
Total revenue$3,539.1
 $3,428.9
 $110.2
 3.2 %    
Cost of goods sold1,389.6
 1,387.2
 2.4
 0.2 % 39.3 % 40.5 %
Gross profit2,149.5
 2,041.7
 107.8
 5.3 % 60.7 % 59.5 %
Selling, general and administrative expenses1,267.4
 1,130.0
 137.4
 12.2 % 35.8 % 33.0 %
Depreciation and amortization149.9
 162.5
 (12.6) (7.8)% 4.2 % 4.7 %
Impairment of long-lived assets18.9
 5.4
 13.5
 NM
 0.5 % 0.2 %
Restructuring and other charges (1)
51.3
 11.3
 40.0
 NM

1.4 % 0.3 %
Total operating expenses1,487.5
 1,309.2
 178.3
 13.6 % 42.0 % 38.2 %
Income from operations662.0
 732.5
 (70.5) (9.6)% 18.7 % 21.4 %
Other income, net(1.0) (4.7) 3.7
 (78.7)% — % (0.1)%
Interest expense, net10.2
 5.1
 5.1
 100.0 % 0.3 % 0.1 %
Foreign currency (gain) loss(14.7) 2.2
 (16.9) NM
 (0.4)% 0.1 %
Income before provision for income taxes667.5
 729.9
 (62.4) (8.5)% 18.9 % 21.3 %
Provision for income taxes119.9
 151.6
 (31.7) (20.9)% 3.4 % 4.4 %
Net income547.6
 578.3
 (30.7) (5.3)%    
Less: Net loss attributable to noncontrolling interest(0.2) (1.0) 0.8
 80.0 %    
Net income attributable to MKHL$547.8
 $579.3
 $(31.5) (5.4)%    
___________________
NM Not meaningful
(1) Includes store closure costs recorded in connection with the Retail Fleet Optimization Plan, as well as transaction and transition costs recorded in connection with our acquisitions of Jimmy Choo and MKHKL businesses (see Note 3 and Note 8 to the accompanying consolidated financial statements).
Total Revenue
Total revenue increased $110.2 million, or 3.2%, to $3.539 billion for the nine months ended December 30, 2017, compared to $3.429 billion for the nine months ended December 31, 2016, which included net favorable foreign currency effects of $26.4 million primarily related to the strengthening of the Euro and the Canadian Dollar, partially offset by the weakening of the the Japanese Yen against the U.S. Dollar during the nine months ended December 30, 2017, as compared to the same prior year period. On a constant currency basis, our total revenue increased $83.8 million, or 2.4%. Total revenue for the nine months ended December 30, 2017 includes approximately $114.7 million of incremental revenue attributable to Jimmy Choo, which was acquired on November 1, 2017 and consolidated into the Company’s results of operations effective November 1, 2017. The increase in total revenue was also due to increased revenue from our Michael Kors retail business of $114.4 million, which was offset by a decrease in Michael Kors Wholesale revenues of $121.7 million.


The following table details revenues for our four business segments (dollars in millions):
 Nine Months Ended   % Change % of Total Revenue for
the Nine Months Ended
 December 30,
2017		 December 31,
2016		 $ Change As Reported Constant
Currency		 December 30,
2017		 December 31,
2016
Total revenue:             
MK Retail$2,111.2
 $1,996.8
 $114.4
 5.7 % 5.0 % 59.7% 58.2%
MK Wholesale1,198.0
 1,319.7
 (121.7) (9.2)% (10.1)% 33.8% 38.5%
MK Licensing115.2
 112.4
 2.8
 2.5 % 2.5 % 3.3% 3.3%
Michael Kors3,424.4
 3,428.9
 (4.5) (0.1)% (0.9)%    
Jimmy Choo114.7
 —
 114.7
 NM
 NM
 3.2% —%
Total revenue$3,539.1
 $3,428.9
 $110.2
 3.2 % 2.4 %    
MK Retail
Revenue from our Michael Kors retail stores increased $114.4 million, or 5.7%, to $2.111 billion for the nine months ended December 30, 2017, compared to $1.997 billion for the nine months ended December 31, 2016, which included net favorable foreign currency effects of $14.3 million. On a constant currency basis, revenue from our retail stores increased $100.1 million, or 5.0%. We operated 848 Michael Kors retail stores, including concessions, as of December 30, 2017, compared to 816 Michael Kors retail stores, including concessions, as of December 31, 2016.
During the nine months ended December 30, 2017, our comparable store sales decreased $62.1 million, or 3.5%, which included net favorable foreign currency effects of $14.6 million. Our comparable store sales benefited approximately 250 basis points from the inclusion of e-commerce sales in comparable store sales. On a constant currency basis, our comparable store sales decreased $76.7 million, or 4.3%. The decrease in our comparable store sales was primarily attributable to lower sales from our women’s accessories, watches and jewelry product categories, offset in part by higher sales from men’s apparel and women's apparel and footwear during the nine months ended December 30, 2017, compared to the nine months ended December 31, 2016.
Our non-comparable store sales increased $176.5 million during the nine months ended December 30, 2017, which included net unfavorable foreign currency effects of $0.3 million. On a constant currency basis, non-comparable store sales increased $176.8 million. The increase in non-comparable store sales was primarily attributable to operating 32 additional stores since December 31, 2016. Our Greater China business acquired on May 31, 2016 contributed incremental revenues of approximately $42.0 million to non-comparable store sales for the nine months ended December 30, 2017.
MK Wholesale
Revenue from our Michael Kors wholesale customers decreased $121.7 million, or 9.2%, to $1.198 billion for the nine months ended December 30, 2017, compared to $1.320 billion for the nine months ended December 31, 2016, which included net favorable foreign currency effects of approximately $12.1 million. On a constant currency basis, our wholesale revenue decreased $133.8 million, or 10.1%. The decrease in our wholesale revenue was primarily attributable to our strategic reduction in shipments of Michael Kors products to decrease promotional activity within our wholesale channel, as previously described,which resulted in lower women’s accessories and footwear sales during the nine months ended December 30, 2017, as compared to the nine months ended December 31, 2016. Approximately $7.9 million of the decrease in wholesale revenue was due to the absence of the prior period wholesale sales to our former licensee in Greater China.
MK Licensing
Royalties earned on our Michael Kors licensing agreements increased $2.8 million, or 2.5%, to $115.2 million for the nine months ended December 30, 2017, compared to $112.4 million for the nine months ended December 31, 2016. This increase was primarily attributable to higher licensing royalties related to Michael Kors ACCESS watches and eyewear, partially offset by lower licensing revenues related to sales of fashion watches, the absence of licensing revenues from our previously licensed business in Greater China due to our acquisition of the related operations, and lower licensing revenues related to sales of fragrance, jewelry and connected jewelry (which has been discontinued).
Jimmy Choo
The Jimmy Choo business acquired on November 1, 2017 contributed approximately $114.7 million to our total revenue for the nine months ended December 30, 2017.


Gross Profit
Gross profit increased $107.8 million, or 5.3%, to $2.150 billion for the nine months ended December 30, 2017, compared to $2.042 billion for the nine months ended December 31, 2016, which included net favorable foreign currency effects of $16.7 million. Gross profit as a percentage of total revenue increased 120 basis points to 60.7% during the nine months ended December 30, 2017, compared to 59.5% during the nine months ended December 31, 2016. The increase in our gross profit margin was primarily attributable to a favorable channel mix due to a higher proportion of retail sales than in the prior fiscal year period and an increase in gross profit margin from our retail segment of 210 basis points, primarily driven by favorable geographic mix of sales and lower cost of goods. The increase in gross profit margin was partially offset by a decrease of 230 basis points in our wholesale segment gross margin, primarily driven by increased allowances and unfavorable geographic mix, partially offset by lower costs of goods during the nine months ended December 30, 2017, as compared to the nine months ended December 31, 2016.
Total Operating Expenses
Total operating expenses increased $178.3 million, or 13.6%, to $1.488 billion during the nine months ended December 30, 2017, compared to $1.309 billion for the nine months ended December 31, 2016. Our operating expenses included a net unfavorable foreign currency impact of approximately $12.7 million. Total operating expenses increased to 42.0% as a percentage of total revenue for the nine months ended December 30, 2017, compared to 38.2% for the nine months ended December 31, 2016. The components that comprise total operating expenses are explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $137.4 million, or 12.2%, to $1.267 billion during the nine months ended December 30, 2017, compared to $1.130 billion for the nine months ended December 31, 2016. The increase in selling, general and administrative expenses was primarily due to the following:
incremental costs of $52.7 million associated with our newly acquired Jimmy Choo business, which has been consolidated in our operations beginning on November 1, 2017;
an increase of $33.4 million in retail store and overhead costs (excluding newly acquired businesses), primarily comprised of increased occupancy costs of $16.8 million and increased advertising costs of $12.2 million;
incremental expenses of approximately $22.3 million due to the inclusion of the Greater China business acquired on May 31, 2016 for the full period during the nine months ended December 30, 2017; and
an increase of $13.1 million in corporate allocated and corporate occupancy expenses.
Selling, general and administrative expenses as a percentage of total revenue increased to 35.8% during the nine months ended December 30, 2017, compared to 33.0% for the nine months ended December 31, 2016, primarily due to expenses associated with the newly acquired Jimmy Choo business, as well as higher retail store related expenses as a percentage of total revenue during the nine months ended December 30, 2017, as compared to the nine months ended December 31, 2016.
Depreciation and Amortization
Depreciation and amortization decreased $12.6 million, or 7.8%, to $149.9 million during the nine months ended December 30, 2017, compared to $162.5 million for the nine months ended December 31, 2016. The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to fixed asset impairment charges recorded in Fiscal 2017 and Fiscal 2018. The depreciation and amortization expense for the nine months ended December 30, 2017 included incremental depreciation and amortization of $5.8 million related to the newly acquired Jimmy Choo business, as well as $5.7 million of incremental depreciation and amortization expenses due to the inclusion of the Greater China business for the full period during the nine months ended December 30, 2017, both including amortization of the respective purchase accounting adjustments. Depreciation and amortization decreased to 4.2% as a percentage of total revenue during the nine months ended December 30, 2017, compared to 4.7% for the nine months ended December 31, 2016.
Impairment of Long-Lived Assets
During the nine months ended December 30, 2017, we recognized long-lived asset impairment charges of $18.9 million, which were related to underperforming Michael Kors retail store locations, some of which will be closed as part of our previously announced Retail Fleet Optimization Plan (see Note 8 to the accompanying consolidated financial statements for additional information). During the nine months ended December 31, 2016, we recognized fixed asset impairment charges of approximately $5.4 million, $4.9 million of which were related to underperforming Michael Kors retail store locations and $0.5 million related to our Michael Kors wholesale locations.


Restructuring and Other Charges
During the nine months ended December 30, 2017, we recognized restructuring and other charges of $51.3 million, which were comprised of $39.6 million of transaction costs and $3.4 million of transition costs recorded in connection with the Jimmy Choo acquisition and restructuring charges of $8.3 million recorded in connection with the Retail Fleet Optimization Plan (see Note 8 to the accompanying consolidated financial statements for additional information). During the nine months ended December 31, 2016, we recorded $11.3 million of transaction costs related to the acquisition of the Greater China business.
Income from Operations
As a result of the foregoing, income from operations decreased $70.5$85 million, or 9.6%29.3%, to $662.0$205 million during three months ended ended December 28, 2019, compared to $290 million for the ninethree months ended December 30, 2017, compared to $732.5 million for the nine months ended December 31, 2016.29, 2018. Income from operations as a percentage of total revenue decreased to 18.7%13.0% during the ninethree months ended December 30, 2017,28, 2019, compared to 21.4%20.2% for the ninethree months ended December 31, 2016.
The following table details29, 2018. See Segment Information above for a reconciliation of our segment operating income from operations for our four business segments (dollars in millions):
 Nine Months Ended     % of Total Revenue for
the Nine Months Ended
 December 30,
2017		 December 31,
2016		 $ Change % Change December 30,
2017		 December 31,
2016
Income from operations:           
MK Retail$341.6
 $314.4
 $27.2
 8.7 % 16.2% 15.7%
MK Wholesale263.6
 367.2
 (103.6) (28.2)% 22.0% 27.8%
MK Licensing51.1
 50.9
 0.2
 0.4 % 44.4% 45.3%
Michael Kors656.3
 732.5
 (76.2) (10.4)% 19.2% 21.4%
Jimmy Choo5.7
 —
 5.7
 NM
 5.0% —%
Income from operations$662.0
 $732.5
 $(70.5) (9.6)% 18.7% 21.4%
MK Retail
Income from operations for our MK Retail segment increased $27.2 million, or 8.7%, to $341.6 million during the nine months ended December 30, 2017, compared to $314.4 million for the nine months ended December 31, 2016. Income from operations as a percentage of retail revenue increased 50 basis points from 15.7% for the nine months ended December 31, 2016 to 16.2% during the nine months ended December 30, 2017. The increase in retail income from operations as a percentage of net retail sales was primarily due to a 210 basis point increase in gross profit margin, as previously discussed, partially offset by increase intotal operating expenses as a percentage of retail revenue of approximately 170 basis points during the nine months ended December 30, 2017, as compared to the nine months ended December 31, 2016. The increase in operating expenses as a percentage of retail revenue was primarily due to increased fixed asset impairment charges, higher retail store related costs, restructuring charges and allocated transaction and transition costs in connection with the Jimmy Choo acquisition recorded during the nine months ended December 30, 2017, offset in part by lower depreciation expenses.
MK Wholesale
Income from operations for our MK Wholesale segment decreased $103.6 million, or 28.2%, to $263.6 million during the nine months ended December 30, 2017, compared to $367.2 million for the nine months ended December 31, 2016. Income from operations as a percentage of wholesale revenue decreased approximately 580 basis points from 27.8% during the nine months ended December 31, 2016 to 22.0% during the nine months ended December 30, 2017, which was primarily due to an increase in operating expenses as a percentage of wholesale revenue of approximately 350 basis points, as well as a 230 basis point decrease in our wholesale gross profit margin, as previously discussed. The increase in operating expenses as a percentage of wholesale sales was primarily attributable to increased corporate allocated expenses, including transaction and transition costs associated with the Jimmy Choo acquisition, as well as a deleverage in other operating expenses due to lower wholesale revenue.


MK Licensing
Income from operations for our MK Licensing segment increased $0.2 million, or 0.4%, to $51.1 million during the nine months ended December 30, 2017, compared to $50.9 million for the nine months ended December 31, 2016. Income from operations as a percentage of licensing revenue decreased 90 basis points from 45.3% during the nine months ended December 31, 2016 to 44.4% during the nine months ended December 30, 2017. The decrease in licensing income from operations as a percentage of licensing revenue was attributable to increased operating expenses as a percentage of licensing revenue during the nine months ended December 30, 2017, as compared to the nine months ended December 31, 2016, primarily due to increased allocated transaction and transition expenses associated with the Jimmy Choo acquisition, partially offset by lower advertising costs as a percentage of licensing revenue.
Jimmy Choo
The Jimmy Choo business acquired on November 1, 2017 contributed approximately $5.7 million to our income from operations for the nine months ended December 30, 2017 (after amortization of non-cash purchase accounting adjustments and transaction and transition related costs).
Other Income, net
During the nine months ended December 31, 2016, other income of $4.7 million was primarily comprised of $3.8 million in insurance settlements related to the prior-year disruption to our former third party operated e-commerce fulfillment center, as well as $0.6 million of income related to our anti-counterfeiting efforts.income.
Interest Expense, net
Interest expense, net increased $5.1decreased $4 million to $10.2$3 million during the ninethree months ended December 30, 2017,28, 2019, compared to $5.1$7 million for the ninethree months ended December 31, 2016,29, 2018, primarily due to highera reduction to interest expense on long-term borrowingsrelated to the cross-currency swap used to financein the acquisition of Jimmy Choonet investment hedge during the ninethree months ended December 30, 201728, 2019, as compared to the three months ended December 29, 2018, largely offset by increased interest expense attributable to higher average borrowings outstanding in the current year (see Note 911 and Note 14 to the accompanying consolidated financial statements for additional information).
Foreign Currency (Gain) Loss
WeDuring the three months ended December 28, 2019, we recognized a net foreign currency gain of $14.7$2 million, during the nine months ended December 30, 2017, which primarily included a $4.7 million realized gain related to a forward foreign currency exchange derivative contract to hedge the transaction price (please refer to Note 3 and Note 12attributable to the accompanying consolidated financial statements for additional information), as well as net gains on revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, of the applicable reporting units, and the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.
The foreign currency loss of $2.2 million recorded during the nine months ended December 31, 2016 were primarily attributable to net losses on revaluation and settlement of certain of our accounts payable in currencies other than the functional currency of the applicable reporting units, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries. These losses were partially offset by favorable mark-to-market adjustments on our
During the three months ended December 29, 2018, we recognized a net foreign currency loss of $43 million, primarily attributable to a $47 million unrealized loss related to a forward foreign currency contracts not designated as accounting hedges.exchange derivative contract entered into to mitigate foreign currency exchange risk relating to the Versace acquisition.
(Benefit from) Provision for Income Taxes
We recognized $119.9$4 million of income tax benefit during the three months ended December 28, 2019, compared to $42 million of income tax expense duringfor the ninethree months ended December 30, 2017, compared with $151.6 million for the nine months ended December 31, 2016.29, 2018. Our effective tax rate for the ninethree months ended December 30, 2017,28, 2019, was 18.0%a benefit of 2.0%, compared to 20.8%a provision of 17.4% for the ninethree months ended December 31, 2016.29, 2018. The decrease in our effective tax rate was primarily duerelated to the favorable effectimpact of global financing activitiesrecognizing benefits from the resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, as well as the impact of the change in the geographic mix of earnings during the ninethree months ended December 30, 2017. The global financing activities are related28, 2019, compared to our previously disclosed 2014 move of our principal executive office from Hong Kong to the U.K. and decision to become a U.K. tax resident. In connection with this decision, we funded our international growth strategy through intercompany debt financing arrangements between our U.S., U.K. and Switzerland subsidiaries in December 2015. Accordingly, due to the difference in the statutory income tax rates between these jurisdictions, we realized a lower effective tax rate. The impact on our effective tax rate was higher in Fiscal 2018 than in Fiscal 2017 because the debt financing arrangement produced the same tax impact on a reduced pre-tax income. During the ninethree months ended December 30, 2017, our effective tax rate was increased by the impacts of the Tax Act, comprised of the write down of our deferred tax assets as a result of the Tax Act’s reduction in the base corporate tax rate from 35% to 21%,29, 2018. These decreases were partially offset by the currentunfavorable impact of tax benefit of the rate reductiondeficits recognized on our annualized effective tax rate.


shared-based compensation.
Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.
Net Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest
During the ninethree months ended December 30, 2017 and December 31, 2016,28, 2019, we recorded a net lossesloss attributable to the noncontrolling interest in our joint ventures of $0.2$1 million. This loss represents the share of income that is not attributable to the Company.
Net Income Attributable to Capri
As a result of the foregoing, our net income increased $10 million, or 5.0%, to $210 million during the three months ended December 28, 2019, compared to $200 million for the three months ended December 29, 2018.
42

Segment Information
Versace
Three Months Ended
(dollars in millions)December 28,
2019		December 29,
2018		$ Change
Revenues$195 $— NM 
Loss from operations(12)— NM 
Operating margin(6.2)%— %
___________________
NM Not meaningful
Revenues
The Versace business, acquired on December 31, 2018, contributed $195 million to our total revenue during the three months ended December 28, 2019.
Loss from Operations
During the three months ended December 28, 2019, we recorded a loss from operations of $12 million (after amortization of non-cash purchase accounting adjustments).
Jimmy Choo
 Three Months Ended % Change
(dollars in millions)December 28,
2019		December 29,
2018		$ ChangeAs 
Reported		Constant
Currency
Revenues$165  $162  $3  1.9 %1.9 %
Income from operations9  15  (6) (40.0)%
Operating margin5.5 %9.3 %
Revenues
Revenue from Jimmy Choo increased $3 million, or 1.9%, to $165 million during the three months ended December 28, 2019, compared to $162 million for the three months ended December 29, 2018.
Income from Operations
Income from operations for our Jimmy Choo segment decreased $6 million, or 40.0%, to $9 million during the three months ended December 28, 2019, compared to $15 million for the three months ended December 29, 2018. Income from operations as a percentage of Jimmy Choo revenue declined 380 basis points from 9.3% for the three months ended December 29, 2018, to 5.5% during the three months ended December 28, 2019, primarily due to manufacturing benefits recognized in the prior year, as well as increased expenses in the current year related to investments in new stores.
43

Michael Kors
 Three Months Ended % Change
(dollars in millions)December 28,
2019		December 29,
2018		$ ChangeAs 
Reported		Constant
Currency
Revenues$1,211  $1,276  $(65) (5.1)%(4.7)%
Income from operations288  320  (32) (10.0)%
Operating margin23.8 %25.1 %
Revenues
Michael Kors revenues decreased $65 million, or 5.1%, to $1.211 billion during the three months ended December 28, 2019, compared to $1.276 billion for the three months ended December 29, 2018, which included unfavorable foreign currency effects of $5 million. On a constant currency basis, revenue decreased $60 million, or 4.7%. The decrease in revenues was primarily due to lower sales of women's accessories and $1.0watches and a decrease in comparable store sales of $17 million. This decrease was partially offset by higher sales of women's footwear, men's accessories, and women's apparel.
Our comparable store sales benefited approximately 180 basis points from the inclusion of e-commerce sales.
Income from Operations
Income from operations for our Michael Kors segment decreased $32 million, respectively.or 10.0%, to $288 million during the three months ended December 28, 2019, compared to $320 million for the three months ended December 29, 2018. Income from operations as a percentage of Michael Kors revenue declined 130 basis points from 25.1% for the three months ended December 29, 2018, to 23.8% during the three months ended December 28, 2019, largely due to a decrease in gross profit margin, as previously discussed, partially offset by lower retail operating expenses.
44

Results of Operations
Comparison of the nine months ended December 28, 2019 with the ninemonths ended December 29, 2018
The following table details the results of our operations for the nine months ended December 28, 2019 and December 29, 2018, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):
 Nine Months Ended$ Change% Change% of Total Revenue for
the Nine Months Ended
 December 28,
2019		December 29,
2018		December 28, 2019December 29, 2018
Statements of Operations Data:
Total revenue$4,359  $3,894  $465  11.9 %
Cost of goods sold1,719  1,507  212  14.1 %39.4 %38.7 %
Gross profit2,640  2,387  253  10.6 %60.6 %61.3 %
Selling, general and administrative expenses1,851  1,466  385  26.3 %42.5 %37.6 %
Depreciation and amortization188  160  28  17.5 %4.3 %4.1 %
Impairment of long-lived assets220  17  203  NM  5.0 %0.4 %
Restructuring and other charges (1)
37  49  (12) (24.5)%0.8 %1.3 %
Total operating expenses2,296  1,692  604  35.7 %52.7 %43.5 %
Income from operations344  695  (351) (50.5)%7.9 %17.8 %
Other income, net(4) (4) —  — %(0.1)%(0.1)%
Interest expense, net19  21  (2) (9.5)%0.4 %0.5 %
Foreign currency loss4  79  (75) (94.9)%0.1 %2.0 %
Income before provision for income taxes325  599  (274) (45.7)%7.5 %15.4 %
(Benefit from) provision for income taxes
(2) 76  (78) (102.6)%— %2.0 %
Net income327  523  (196) (37.5)%
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest(1) (1) —  —  
Net income attributable to Capri$328  $524  $(196) (37.4)%
___________________
NM Not meaningful
(1)Restructuring and other charges includes store closure costs recorded in connection with the Retail Fleet Optimization Plan (as defined in Note 10) and other restructuring initiatives, and costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited.
Total Revenue
Total revenue increased $465 million, or 11.9%, to $4.359 billion for the nine months ended December 28, 2019, compared to $3.894 billion for the nine months ended December 29, 2018, which included net unfavorable foreign currency effects of approximately $41 million, primarily related to the weakening of the Euro, the Chinese Renminbi, the British Pound, and the Canadian Dollar against the U.S. Dollar during the nine months ended December 28, 2019 as compared to the same prior year period. On a constant currency basis, our total revenue increased $506 million, or 13.0%. Total revenue for the nine months ended December 28, 2019 includes approximately $630 million of incremental revenue attributable to Versace, which was acquired and consolidated into our results of operations effective December 31, 2018, offset in part by lower revenue from our Michael Kors business, as compared to the prior year.
45

Gross Profit
Gross profit increased $253 million, or 10.6%, to $2.640 billion for the nine months ended December 28, 2019, compared to $2.387 billion for the nine months ended December 29, 2018, which included net unfavorable foreign currency effects of $27 million. Gross profit as a percentage of total revenue decreased 70 basis points to 60.6% during the nine months ended December 28, 2019, compared to 61.3% during the nine months ended December 29, 2018. The decrease in our gross profit margin was primarily attributable to lower gross profit for Michael Kors primarily driven by increased markdowns during the nine months ended December 28, 2019, as compared to the nine months ended December 29, 2018, partially offset by the inclusion of Versace, which benefited our gross margin 100 basis points.
Total Operating Expenses
Total operating expenses increased $604 million, or 35.7%, to $2.296 billion during the nine months ended December 28, 2019, compared to $1.692 billion for the nine months ended December 29, 2018, which included incremental operating expenses of $427 million associated with the recently acquired Versace business. Our operating expenses included a net favorable foreign currency impact of approximately $37 million. Total operating expenses increased to 52.7% as a percentage of total revenue for the nine months ended December 28, 2019, compared to 43.5% for the nine months ended December 29, 2018. The components that comprise total operating expenses are explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increase $385 million, or 26.3%, to $1.851 billion during the nine months ended December 28, 2019, compared to $1.466 billion for the nine months ended December 29, 2018. The increase in selling, general and administrative expenses was primarily due to incremental costs of $381 million associated with the recently acquired Versace business, which has been consolidated in our operations beginning on December 31, 2018.
Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $49 million, or 75.4%, to $114 million during the nine months ended December 28, 2019 as compared to $65 million for the nine months ended December 29, 2018, primarily attributable to the inclusion of ERP system implementation costs in the current year.
Selling, general and administrative expenses as a percentage of total revenue increase to 42.5% during the nine months ended December 28, 2019, compared to 37.6% for the nine months ended December 29, 2018, primarily due to the inclusion of expenses associated with the Versace business and increased retail store and e-commerce related costs as a percentage of total revenue during the nine months ended December 28, 2019, as compared to the nine months ended December 29, 2018.
Depreciation and Amortization
Depreciation and amortization increased $28 million, or 17.5%, to $188 million during the nine months ended December 28, 2019, compared to $160 million for the nine months ended December 29, 2018. The increase in depreciation and amortization expense was primarily attributable to incremental depreciation and amortization expense of $46 million attributable to the Versace business (including amortization of purchase accounting adjustments), partially offset by lower depreciation due to previously recorded property and equipment impairment charges. Depreciation and amortization increased to 4.3% as a percentage of total revenue during the nine months ended December 28, 2019, compared to 4.1% for the nine months ended December 29, 2018.
Impairment of Long-Lived Assets
During the nine months ended December 28, 2019, we recognized long-lived asset impairment charges of $220 million, which primarily related to operating lease right-of-use assets as part of our quarterly impairment assessments (see Note 13 to the accompanying consolidated financial statements for additional information). During the nine months ended December 29, 2018, we recognized long-lived asset impairment charges of approximately $17 million, which were related to underperforming Michael Kors retail store locations, which related to closures as part of our Retail Fleet Optimization Plan.
Restructuring and Other Charges
During the nine months ended December 28, 2019, we recognized restructuring and other charges of $37 million, which included restructuring charges of $11 million, primarily related to Jimmy Choo lease-related charges and our Retail Fleet Optimization Plan, and other costs of $26 million. The other costs recorded during the nine months ended December 28, 2019 included $18 million related to the acquisition of Versace and $8 million in connection with the Jimmy Choo acquisition (see Note 10 to the accompanying consolidated financial statements for additional information).
46

During the nine months ended December 29, 2018, we recognized restructuring and other charges of $49 million, which were primarily comprised of $35 million of other costs and restructuring charges of $14 million primarily recorded in connection with our Retail Fleet Optimization Plan. The other costs recorded during the nine months ended December 29, 2018 included $20 million in connection with the Jimmy Choo acquisition and $15 million in connection with the acquisition of Versace. Restructuring and other charges are not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).
Income from Operations
As a result of the foregoing, income from operations decreased $351 million or 50.5%, to $344 million during the nine months ended December 28, 2019, compared to $695 million for the nine months ended December 29, 2018. Income from operations as a percentage of total revenue decreased to 7.9% during the nine months ended December 28, 2019, compared to 17.8% for the nine months ended December 29, 2018 (see Segment Information above for a reconciliation of our segment operating income to total operating income).
Interest Expense,net
Interest expense, net decreased $2 million to $19 million during the nine months ended December 28, 2019, compared to $21 million for the nine months ended December 29, 2018, primarily due to a reduction to interest expense related to the cross-currency swap used in the net investment hedge during the nine months ended December 28, 2019, as compared to the nine months ended December 29, 2018, largely offset by increased interest expense attributable to higher average borrowings outstanding in the current year (see Note 11 and Note 14 to the accompanying consolidated financial statements for additional information).
Foreign Currency Loss
During the nine months ended December 28, 2019, we recognized a net foreign currency loss of $4 million, primarily attributable to the revaluation and settlement of certain of our accounts payable in currencies other than the functional currency, as well as the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.
During the nine months ended December 29, 2018, we recognized a net foreign currency loss of $79 million, primarily attributable to a $77 million realized loss related to forward foreign currency exchange derivative contracts to hedge the transaction price of the Versace acquisition.
(Benefit from) Provision for Income Taxes
We recognized $2 million of income tax benefit during the nine months ended December 28, 2019, compared to $76 million of income tax expense for the nine months ended December 29, 2018. Our effective tax rate for the nine months ended December 28, 2019, was a benefit of 0.6%, compared to a provision of 12.7% for the nine months ended December 29, 2018. The decrease in our effective tax rate was primarily related to the favorable impact of recognizing benefits from the resolution of uncertain tax positions and return to provision adjustments in the United States and Europe, as well as the impact of the change in the geographic mix of earnings during the nine months ended December 28, 2019 compared to the nine months ended December 29, 2018. These decreases were partially offset by the unfavorable impact of tax deficits recognized on shared-based compensation.
Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.
Net Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest
During the nine months ended December 28, 2019 and December 29, 2018, we recorded a net loss attributable to the noncontrolling interest in our joint ventures in each period of $1 million. These losses represent the share of income that is not attributable to the Company.
Net Income Attributable to MKHLCapri
As a result of the foregoing, our net income decreased $31.5$196 million, or 5.4%37.4%, to $547.8$328 million during the nine months ended December 30, 2017,28, 2019, compared to $579.3$524 million for the nine months ended December 29, 2018.
47

Segment Information
Versace
Nine Months Ended
(dollars in millions)December 28,
2019		December 29,
2018		$ Change
Revenues$630 $— NM 
Loss from operations(6)— NM 
Operating margin(1.0)%— %
___________________
NM Not meaningful
Revenues
The Versace business acquired on December 31, 2016.2018 contributed $630 million to our total revenue during the nine months ended December 28, 2019.
Loss from Operations
During the nine months ended December 28, 2019, we recorded a loss from operations of $6 million (after amortization of non-cash purchase accounting adjustments).
Jimmy Choo
 Nine Months Ended % Change
(dollars in millions)December 28,
2019		December 29,
2018		$ ChangeAs 
Reported		Constant
Currency
Revenues$448  $451  $(3) (0.7)%0.9 %
Income from operations10  28  (18) (64.3)%
Operating margin2.2 %6.2 %
Revenues
Revenue from Jimmy Choo decreased $3 million, or 0.7%, to $448 million during the nine months ended December 28, 2019, compared to $451 million for the nine months ended December 29, 2018, which included unfavorable foreign currency effects of $7 million. On a constant currency basis, revenue increased $4 million, or 0.9%.
Income from Operations
Income from operations for our Jimmy Choo segment decreased $18 million, or 64.3%, to $10 million during the nine months ended December 28, 2019, compared to $28 million for the nine months ended December 29, 2018. Income from operations as a percentage of Jimmy Choo revenue declined 400 basis points from 6.2% for the nine months ended December 29, 2018, to 2.2% during the nine months ended December 28, 2019, primarily due to an increase in operating expenses, including retail store expenses, advertising, marketing and corporate expenses, as well as investments in new stores.
48

Michael Kors
 Nine Months Ended % Change
(dollars in millions)December 28,
2019		December 29,
2018		$ ChangeAs 
Reported		Constant
Currency
Revenues$3,281  $3,443  $(162) (4.7)%(3.7)%
Income from operations711  798  (87) (10.9)%
Operating margin21.7 %23.2 %
Revenues
Michael Kors revenues decreased $162 million, or 4.7%, to $3.281 billion during the nine months ended December 28, 2019, compared to $3.443 billion for the nine months ended December 29, 2018, which included unfavorable foreign currency effects of $34 million. On a constant currency basis, revenue decreased $128 million, or 3.7%. The decrease in revenues was primarily due to lower sales of women’s accessories and watches and a decrease in comparable store sales of $32 million. This decrease was partially offset by higher sales of women's footwear, men's accessories and women's apparel.
Our comparable store sales benefited approximately 170 basis points from the inclusion of e-commerce sales.
Income from Operations

Income from operations for our Michael Kors segment decreased $87 million, or 10.9%, to $711 million during the nine months ended December 28, 2019, compared to $798 million for the nine months ended December 29, 2018. Income from operations as a percentage of Michael Kors revenue declined 150 basis points from 23.2% for the nine months ended December 29, 2018, to 21.7% during the nine months ended December 28, 2019, largely due to a decrease in gross profit margin, as previously discussed.

Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our credit facilities (see below discussion regarding “Revolving Credit Facilities”) and available cash and cash equivalents. Our primary use of this liquidity is to fund our ongoing cash requirements, including working capital requirements, acquisitions, debt repayments, investment in information systems infrastructure, global retail store construction, expansion and renovation, investment in information systems infrastructure, our distribution and corporate facilities, construction and renovation of shop-in-shops, share repurchases and other corporate activities. We believe that the cash generated from our operations, together with borrowings available under our revolving credit facility and available cash and cash equivalents, will be sufficient to meet our working capital needs for the next 12 months, including investments made and expenses incurred in connection with our store growth plans, shop-in-shop growth, investments in corporate and distribution facilities, continued systems development, e-commerce and marketing initiatives. We spent $83.8$164 million on capital expenditures during the nine months ended December 30, 2017, and expect to spend approximately $90 million on capital expenditures during the remainder of Fiscal 2018.28, 2019.
The following table sets forth key indicators of our liquidity and capital resources (in millions):
 As of
 December 28,
2019		March 30,
2019
Balance Sheet Data:
Cash and cash equivalents$237  $172  
Working capital$(524) $187  
Total assets$8,325  $6,650  
Short-term debt$1,031  $630  
Long-term debt$1,085  $1,936  

49

 As of
 December 30,
2017		 April 1,
2017
Balance Sheet Data:   
Cash and cash equivalents$317.1
 $227.7
Working capital722.5
 598.9
Total assets4,216.8
 2,409.6
Short-term debt0.1
 133.1
Long-term debt992.4
 —
Nine Months Ended
 December 28,
2019		December 29,
2018
Cash Flows Provided By (Used In):
Operating activities$752  $776  
Investing activities(133) (216) 
Financing activities(554) 1,472  
Effect of exchange rate changes—  (9) 
Net increase in cash and cash equivalents and restricted cash (1)
$65  $2,023  
_____________________________
 Nine Months Ended
 December 30,
2017		 December 31,
2016
Cash Flows Provided By (Used In):   
Operating activities$873.3
 $895.7
Investing activities(1,496.8) (633.9)
Financing activities701.0
 (584.6)
Effect of exchange rate changes10.3
 (9.3)
Net increase (decrease) in cash and cash equivalents and restricted cash$87.8
 $(332.1)


(1)The prior year balance includes restricted cash placed in escrow in connection with the acquisition of Versace.
Cash Provided by Operating Activities
CashNet cash provided by operating activities decreased $22.4$24 million to $873.3$752 million during the nine months ended December 30, 2017,28, 2019, as compared to $895.7$776 million for the nine months ended December 31, 2016, which was primarily due to a decrease related to changes in our working capital, as well29, 2018, as a result of a $44 million decrease in our net income after non-cash adjustments. Theadjustments, partially offset by a $21 million net decreasefavorable change related to our working capital was primarily attributable to lower accounts payable driven by the timing of payments and an unfavorable change in accounts receivable primarily due to a lower balance in the beginning of Fiscal 2018 than in prior year. These declines were largely offset by increases related to prepaid expenses and other currentoperating assets and accrued expenses and other current liabilities, primarily due to timing, as well a decrease in Michael Kors wholesale inventory due to our strategic reduction in shipments in this channel.liabilities.
Cash Used in Investing Activities
Net cash used in investing activities increased $862.9decreased $83 million to $1,496.8$133 million during the nine months ended December 30, 2017,28, 2019, as compared to net cash used of $633.9$216 million during the nine months ended December 31, 2016,29, 2018, which was primarily attributable to $1,414.5a $77 million of cash paid, net of cash acquired in connection with our acquisition of the Jimmy Choo business on November 1, 2017, as comparedrealized loss related to $480.6 million in cash paid, net of cash acquired, attributable to our acquisition of the previously licensed business in Greater Chinaan undesignated derivative contract during the nine months ended December 31, 2016. This29, 2018. The decrease in cash from investing activities wasalso included $32 million related to the settlement of a net investment hedge during the nine months ended December 28, 2019, partially offset by lowerhigher capital expenditures of $63.9$29 million compared to prior year.
Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $554 million during the nine months ended December 30, 2017, due28, 2019, compared to lower spending related to build-outs of new stores and shop-in-shops and lower corporate expenditures.
Cash Provided by (Used in) Financing Activities
Netnet cash provided by financing activities was $701.0 millionof $1.472 billion during the nine months ended December 30, 2017, as compared to net29, 2018. The increase of cash used in financing activities of $584.6 million during the nine months ended December 31, 2016. The increase in cash from financing activities was primarily due to increased net debt borrowings of $694.5 million, which$2.026 billion was primarily attributable to the Senior Notes and Term Loandecreased debt borrowings to finance the acquisition of Jimmy Choo,$2.123 billion, net of cashdebt repayments, as well aspartially offset by a $105 million decrease of $593.8 million in cash payments to repurchase our ordinary shares during the nine months ended December 30, 2017.compared to prior year.

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Debt Obligations
The following table presents a summary of our borrowing capacity and amounts outstanding as of December 28, 2019 and March 30, 2017 and April 1, 20172019 (dollars in million)millions):
As of
December 28,
2019		March 30,
2019
Senior Unsecured Revolving Credit Facility:
Revolving Credit Facility (excluding up to a $500 million accordion feature) (1)
Total Availability$1,000  $1,000  
Borrowings outstanding (2)
503  539  
Letter of credit outstanding16  17  
Remaining availability$481  $444  
Term Loan Facility ($1.6 billion)
Borrowings Outstanding, net of debt issuance costs (3)
$1,119  $1,570  
Remaining availability$—  $—  
4.000% Senior Notes
Borrowings Outstanding, net of debt issuance costs and discount amortization (3)
$446  $445  
Other Borrowings (3)
$3  $1  
Hong Kong Uncommitted Credit Facility:
Total availability (100 million Hong Kong Dollars)$13  $13  
Borrowings outstanding—  —  
Bank guarantees outstanding (12 million Hong Kong Dollars)1  2  
Remaining availability$12  $11  
China Uncommitted Credit Facility:
Borrowings outstanding$—  $—  
Total and remaining availability (100 million Chinese Yuan)$14  $14  
Japan Credit Facility:
Borrowings outstanding$—  $—  
Total and remaining availability (1.0 billion Japanese Yen)$9  $9  
Versace Uncommitted Credit Facility:
Total availability (20 million Euro)$22  $22  
Borrowings outstanding (10 million Euro) (2)
16  11  
Remaining availability$6  $11  
Versace Uncommitted Credit Facilities:
Total availability (32 million Euro)$36  $—  
Borrowings outstanding (26 million Euro) (2)
29  —  
Remaining availability$7  $—  
Total borrowings outstanding (1)
$2,116  $2,566  
Total remaining availability$529  $489  
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 As of
 December 30,
2017		 April 1,
2017
Senior Unsecured Revolving Credit Facility:   
Revolving Credit Facility (excluding up to a $500 million accordion feature) (1)
   
Total Availability$1,000.0
 $1,000.0
Borrowings outstanding (2)
—
 127.3
Letter of credit outstanding11.3
 10.6
Remaining availability$988.7
 $862.1
    
Term Loan Facility ($1.0 billion) (3)
   
Borrowings Outstanding, net of debt issuance costs (4)
$548.2
 $—
Remaining availability—
 —
    
4.000% Senior Notes   
       Borrowings Outstanding, net of debt issuance costs and discount amortization$444.2
��$—
    
Hong Kong Uncommitted Credit Facility:   
Total availability (100.0 million Hong Kong Dollars)$12.8
 $12.9
Borrowings outstanding (45.0 million Hong Kong Dollars) (2)
—
 5.8
Bank guarantees outstanding (11.8 million Hong Kong Dollars)1.5
 1.5
Remaining availability$11.3
 $5.6
    
Japan Credit Facility:   
Total and remaining availability (1.0 billion Japanese Yen)$8.9
 $—

_____________________________
(1)The Revolving2018 Credit Facility contains customary events of default and requires us to maintain a leverage ratio at the end of each fiscal quarter of no greater than 3.53.75 to 1, calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus 6.0 times the consolidated rent expense for the last four consecutive fiscal quarters, to Consolidated EBITDAR for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest expense, depreciation and amortization expense, consolidated rent expense and other non-cash charges, subject to certain deductions. The Revolving2018 Credit facilityFacility also includes other customary covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends. As of December 28, 2019 and March 30, 2017 and April 1, 2017,2019, we were in compliance with all covenants related to this agreement.our agreements then in effect governing our debt.
(2)Recorded as short-term debt in our consolidated balance sheetsheets as of April 1, 2017.December 28, 2019 and March 30, 2019.
(3) The $1.0 billion facility was fully utilized to finance a portion of the purchase price of our acquisition of Jimmy Choo on November 1, 2017, a portion of which was repaid during the three months ended December 30, 2017. See Note 3 for additional information.
(4)Recorded as long-term debt in our consolidated balance sheetsheets as of December 28, 2019 and March 30, 2017.
In January 2018, we repaid an additional $210.02019, except for the current portion of $483 million principal amount of borrowingsand $80 million, respectively, outstanding under the 2018 Term Loan Facility, onwhich was recorded within short-term debt at December 28, 2019 and March 30, 2019.
We believe that our 2018 Credit Facility is adequately diversified with no undue concentration in any one financial institution. As of December 28, 2019, there were 18 financial institutions participating in the facility, with none maintaining a pro-rata basis (seemaximum commitment percentage in excess of 10%. We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the 2018 Credit Facility.
See Note 9 for additional information).
Please refer to Note 9 to11 in the accompanying consolidated financial statements and Note 11 in our Fiscal 2019 Annual Report on Form 10-K for detailed information relating to our credit facilities and debt obligations.


Share Repurchase Program
The following table presents our treasury share repurchases during the nine months ended December 30, 201728, 2019 and December 31, 201629, 2018 (dollars in millions):
Nine Months Ended
 December 28,
2019		December 29,
2018
Cost of shares repurchased under share repurchase program$100  $200  
(1)
Fair value of shares withheld to cover tax obligations for vested restricted share awards2  7  
Total cost of treasury shares repurchased$102  $207  
Shares repurchased under share repurchase program2,711,807  3,718,237  
Shares withheld to cover tax withholding obligations63,958  107,712  
2,775,765  3,825,949  
 Nine Months Ended
 December 30,
2017		 December 31,
2016
Cost of shares repurchased under share repurchase program$157.8
 $750.0
Cost of shares withheld to cover tax withholding obligations3.2
 4.8
Total cost of treasury shares repurchased$161.0
 $754.8
    
Shares repurchased under share repurchase program4,543,500
 15,114,538
Shares withheld to cover tax withholding obligations92,536
 100,552
 4,636,036
 15,215,090
_____________________________
(1)The share-repurchase program expired on May 25, 2019.
On August 1, 2019, our Board of Directors authorized a new $500 million share repurchase program, which expires August 1, 2021. As of December 30, 2017,28, 2019, the remaining availability under our $1.0 billionthe Company's share repurchase program was $842.2$400 million. Share repurchases aremay be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under our insider trading policy, and our business priorities. Share repurchases are subject to market conditions and our business priorities.other relevant factors. This program may be suspended or discontinued at any time.
Please refer toSee Note 1315 to the accompanying consolidated financial statements for additional information.
Contractual Obligations and Commercial Commitments
Please refer to Note 10 to the accompanying interim consolidated financial statements for our future minimum lease payments as of December 30, 2017 under the terms of our noncancelable operating lease agreements.
Please refer to the “Contractual Obligations and Commercial Commitments” disclosure within the “Liquidity and Capital Resources” section of our Fiscal 20172019 Form 10-K for a detailed disclosure of our other contractual obligations and commitments as of April 1, 2017.March 30, 2019, as well as Note 4 to the accompanying consolidated financial statements for future lease obligations as of December 28, 2019.
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Off-Balance Sheet Arrangements
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. Our off-balance sheet commitments relating to our outstanding letters of credit were $15.7$23 million at December 30, 2017,28, 2019, including $4.4$6 million in letters of credit issued outside of the 20172018 Credit Facility. In addition, as of December 30, 2017,28, 2019, bank guarantees of approximately $1.5$19 million were supported by the Hong KongVersace Credit Facility. We do not have any other off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Recent Accounting Pronouncements
Please refer toSee Note 2 to the accompanying interim consolidated financial statements for recently issued accounting standards, which may have an impact on our financial statements and/or disclosures upon adoption.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks during the normal course of our business, such as risk arising from fluctuations in foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to manage these risks, we employ certain strategies to mitigate the effect of these fluctuations. We enter into foreign currency forward contracts to manage our foreign currency exposure to the fluctuations of certain foreign currencies. The use of these instruments primarily helps to manage our exposure to our foreign purchase commitments and better control our product costs. We do not use derivatives for trading or speculative purposes.
Foreign Currency Exchange Risk
Forward Foreign Currency Exchange Contracts
We are exposed to risks on certain purchase commitments to foreign suppliers based on the value of our purchasing subsidiariessubsidiaries’ local currency relative to the currency requirement of the supplier on the date of the commitment. As such, we enter into forward currency exchange contracts that generally mature in 12 months or less and are consistent with the related purchase commitments.commitments, to manage our exposure to the changes in the value of the Euro and the Canadian Dollar. These contracts are recorded at fair value in our consolidated balance sheets as either an asset or liability, and are derivative contracts to hedge cash flow risks. Certain of these contracts are designated as hedges for hedge accounting purposes, while certain of these contracts, currently a relatively small portion, are not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of the majority of these contracts at the balance sheet date are recorded in our equity as a component of accumulated other comprehensive income (loss), and upon maturity (settlement) are recorded in, or reclassified into, our cost of goods soldsales or operating expenses, in our consolidated statement of operations and comprehensive income, as applicable to the transactions for which the forward currency exchange contracts were established. For those contracts which are designated as hedges for accounting purposes, any portion of those contracts deemed ineffective would be charged to earnings, in the period the ineffectiveness was determined.
We perform a sensitivity analysis on our forward currency contracts, both designated and not designated as hedges for accounting purposes, to determine the effects of fluctuations in foreign currency exchange rates. For this sensitivity analysis, we assume a hypothetical change in U.S. dollarDollar against foreign exchange rates. Based on all designated foreign currency exchange contracts relating to purchases of inventory outstanding as of December 30, 2017,28, 2019, a 10% appreciation or devaluation of the U.S. dollarDollar compared to the level of foreign currency exchange rates for currencies under contract as of December 30, 2017,28, 2019, would result in a net increase orand decrease, respectively, of $17.0approximately $17 million in the fair value of these contracts.
Net Investment Hedges
We are exposed to adverse foreign currency exchange rate movements related to interest from our net investment hedges. As of December 28, 2019, the net investment hedges have aggregate notional amounts of $3.190 billion to hedge our net investments in Euro-denominated subsidiaries, and $44 million to hedge our net investments in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S. Dollar and these currencies. Under the terms of these contracts, which mature between January 2022 and June 2026, we will exchange the semi-annual fixed rate payments made under our Senior Notes for fixed rate payments of 0% to 1.674% in Euros and 0.89% in Japanese Yen. Based on all net investment hedges outstanding as of December 28, 2019, a 10% appreciation or devaluation of the U.S. Dollar compared to the level of foreign currency exchange rates under contract as of December 28, 2019, would result in a potential net cash increase or decrease upon settlement of approximately $329 million in the fair value of these contracts, which have staggered maturities of 3 to 7 years.
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Interest Rate Risk
We are exposed to interest rate risk in relation to borrowings outstanding under our 2018 Term Loan Facility, our 20172018 Credit Facility, our Hong Kong Credit Facility, and our Japan Credit Facility and our Versace Credit Facility. Our 2018 Term Loan Facility carries interest at a rate that is based on LIBOR. Our 20172018 Credit Facility carries interest rates that are tied to LIBOR and the prime rate, among other institutional lending rates (depending on the particular origination of borrowing), as further described in Note 911 to the accompanying consolidated financial statements. Our Hong Kong Credit Facility carries interest at a rate that is tied to the Hong Kong Interbank Offered Rate. Our China Credit Facility carries interest at a rate that is tied to the People’s Bank of China’s Benchmark lending rate. Our Japan Credit Facility carries interest at a rate posted by the Mitsubishi UFJ Financial Group. Our Versace Credit Facility carries interest at a rate set by the bank on the date of borrowing that is tied to the European Central Bank. Therefore, our statements of operations and comprehensive income and cash flows are exposed to changes in those interest rates. At December 30, 2017,28, 2019, we had $548.2$503 million in short-term borrowings outstanding under our 2018 Credit Facility and $1.119 billion, net of debt issuance costs, outstanding under our 2018 Term Loan Facility and no$45 million outstanding under our Versace Credit Facilities. At March 30, 2019, we had $539 million in short-term borrowings outstanding under our 20172018 Credit Facility, $1.570 billion, net of debt issuance costs, outstanding under our Hong Kong Credit2018 Term Loan Facility and $11 million outstanding under our JapanVersace Credit Facility. These balances are not indicative of future balances that may be outstanding under our revolving credit facilities that may be subject to fluctuations in interest rates. Any increases in the applicable interest rate(s) would cause an increase to the interest expense relative to any outstanding balance at that date.
Credit Risk
We have outstanding $450.0$450 million aggregate principal amount of Senior Notes due in 2024. The Senior Notes bear interest at a fixed rate equal to 4.000% per year, payable semi-annually. Our Senior Notes interest rate payable may be subject to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency), downgrades (or downgrades and subsequentlysubsequent upgrades) the credit rating assigned to the Senior Notes.


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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)) as of December 30, 2017.28, 2019. This evaluation was performed based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), the 2013 Framework. Based on this assessment, our CEO and CFO concluded that our disclosure controls and procedures as of December 30, 201728, 2019 are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
In the first quarter of Fiscal 2020, we implemented additional internal controls in connection with our adoption of ASU 2016-02, Leases (Topic 842), none of which materially affected our internal control over financial reporting. There have beenwere no other changes in our internal control over financial reporting during the threenine months ended December 30, 201728, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Acquisition of Jimmy Choo
On November 1, 2017, we acquired Jimmy Choo (please refer to Note 3 to the accompanying consolidated financial statements for additional information). We are in the process of evaluating the internal controls of the acquired business and integrating it into our existing operations.


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PART II — OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
We are involved in various routine legal proceedings incident to the ordinary course of our business. We believe that the outcome of all pending legal proceedings in the aggregate will not have a material adverse effect on our business, results of operations and financial condition.

ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 1, 2017,March 30, 2019, as amended and supplemented by the risk factor set forth in our Form 10-Q for the quarterly period ended July 1, 2017,below, which could materially and adversely affect our business, financial condition or future results. These risks are not the only risks that we face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.
The following is an amended and restated version of a Risk Factor included in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended March 30, 2019:
We face risks associated with operating globally and our strategy to continue to expand internationally.

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

•political or civil unrest, including protests and other civil disruption, such as the continuing business disruption in Hong Kong, which has negatively affected our business and is expected to continue to cause disruptions to our business for the foreseeable future;
•unforeseen public health crises, such as pandemic and epidemic diseases, including the recent outbreak of coronavirus in China which could result in closed offices, retail stores and factories, reduced workforces, scarcity of raw materials, embargoing of goods produced in areas infected by the virus, and reduced consumer traffic and spending within China and outside of China if the virus continues to spread, and could materially adversely affect our business and financial condition;
•economic instability and unsettled regional and global conflicts, which may negatively affect consumer spending by foreign tourists and local consumers in the various regions where we operate;
•laws, regulations and policies of foreign governments;
•potential negative consequences from changes in taxation policies;
•natural disasters or other extreme weather events, including those attributed to climate change; and
•acts of terrorism, military actions or other conditions over which we have no control.

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

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

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of Equity Securities
On May 25, 2017, theThe Company’s share repurchases are made under its $500 million share repurchase program, which was approved by its Board of Directors authorized a new $1.0 billion share repurchase program.on August 1, 2019. The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the vesting of their restricted share awards.
The following table provides information of the Company’s ordinary shares repurchased during the three months ended December 30, 2017:28, 2019:
Total Number
of Shares
Purchased		Average Price
Paid per Share		Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs		Approximated Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
September 29 – October 26—  $—  —  $500  
October 27 – November 23958,783  $36.53  958,048  $465  
November 24 – December 281,753,759  $37.06  1,753,759  $400  
2,712,542  2,711,807  
 
Total Number
of Shares
Purchased
 
Average Price
Paid per Share
 
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
 
Maximum Number (or
Approximated Dollar Value)
of Shares (or Units) That
May Yet Be Purchased
Under the Plans or Programs (in millions)
October 1-October 28813
 $48.17
 —
 $842.2
October 29-November 25601
 $48.48
 —
 $842.2
November 26-December 30—
 $—
 —
 $842.2
 1,414
 

 —
 

ITEM 6. EXHIBITS
a. Exhibits
Please refer to the accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.


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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 on February 13, 2018.
5, 2020.
CAPRI HOLDINGS LIMITED
MICHAEL KORS HOLDINGS LIMITED
By:
By:/s/ John D. Idol
Name:John D. Idol
Title:Chairman & Chief Executive Officer
By:/s/ Thomas J. Edwards, Jr.
Name:Thomas J. Edwards, Jr.
Title:Executive Vice President, Chief Financial Officer and Chief Operating Officer and Treasurer




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INDEX TO EXHIBITS
Exhibit No.Description
4.110.1

Indenture, dated as of October 20, 2017, by and among Michael Kors (USA), Inc., Michael KorsCapri Holdings Limited the subsidiary guarantors party thereto and U.S. Bank National Association, as trusteeDeferred Compensation Plan (included as Exhibit 4.110.1 to the Company'sCompany’s Current Report on Form 8-K (File No. 001-35368), filed on October 20, 2017November 14, 2019 and incorporated herein by reference).
10.131.1

First Amendment, dated as of October 4, 2017, to the Second Amended and Restated Credit Agreement dated as of August 22, 2017 among Michael Kors Holdings Limited, Michael Kors (USA), Inc., the foreign subsidiary borrowers party thereto, the guarantors party thereto, the financial institutions party thereto as lenders and issuing banks and JPMorgan Chase Bank, N.A., as administrative agent (included as Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-35368), filed on October 5, 2017 and incorporated herein by reference).
31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1
The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended December 30, 2017,28, 2019, formatted in Inline eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statements of Shareholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.



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