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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-35368
 
cpri-20210925_g1.jpg
CAPRI HOLDINGS LTD
(Exact Name of Registrant as Specified in Its Charter)
British Virgin IslandsN/A
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
33 Kingsway
London, United Kingdom
WC2B 6UF
(Address of principal executive offices)
(Registrant’s telephone number, including area code: 44 207 632 8600)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Ordinary Shares, no par valueCPRINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
YesNo
As of October 27, 2021, Capri Holdings Limited had 150,458,760 ordinary shares outstanding.



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

2



PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
September 25,
2021
March 27,
2021
Assets
Current assets
Cash and cash equivalents$234 $232 
Receivables, net358 373 
Inventories, net866 736 
Prepaid expenses and other current assets214 205 
Total current assets1,672 1,546 
Property and equipment, net454 485 
Operating lease right-of-use assets1,425 1,504 
Intangible assets, net1,956 1,992 
Goodwill1,488 1,498 
Deferred tax assets284 278 
Other assets214 178 
Total assets$7,493 $7,481 
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable$491 $512 
Accrued payroll and payroll related expenses124 116 
Accrued income taxes128 126 
Short-term operating lease liabilities438 447 
Short-term debt40 123 
Accrued expenses and other current liabilities299 297 
Total current liabilities1,520 1,621 
Long-term operating lease liabilities1,549 1,657 
Deferred tax liabilities413 397 
Long-term debt1,104 1,219 
Other long-term liabilities307 430 
Total liabilities4,893 5,324 
Commitments and contingencies (Note 10)
Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized; 221,295,985 shares issued and 150,447,462 outstanding at September 25, 2021; 219,222,937 shares issued and 151,280,011 outstanding at March 27, 2021
  
Treasury shares, at cost (70,848,523 shares at September 25, 2021 and 67,942,926 shares at March 27, 2021)
(3,486)(3,326)
Additional paid-in capital1,225 1,158 
Accumulated other comprehensive income174 56 
Retained earnings4,689 4,270 
Total shareholders’ equity of Capri2,602 2,158 
Noncontrolling interest(2)(1)
Total shareholders’ equity2,600 2,157 
Total liabilities and shareholders’ equity$7,493 $7,481 

See accompanying notes to consolidated financial statements.
3


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In millions, except share and per share data)
(Unaudited)

 Three Months EndedSix Months Ended
 September 25,
2021
September 26,
2020
September 25,
2021
September 26,
2020
Total revenue$1,300 $1,110 $2,553 $1,561 
Cost of goods sold416 400 813 549 
Gross profit
884 710 1,740 1,012 
Selling, general and administrative expenses599 474 1,144 876 
Depreciation and amortization49 54 99 108 
Impairment of assets33 20 33 20 
Restructuring and other charges8 9 11 17 
Total operating expenses689 557 1,287 1,021 
Income (loss) from operations195 153 453 (9)
Other income, net(2) (2)(1)
Interest (income) expense, net(5)12 (4)29 
Foreign currency loss (gain)4  5 (3)
Income (loss) before (benefit) provision for income taxes198 141 454 (34)
(Benefit) provision for income taxes(2)20 35 25 
Net income (loss)200 121 419 (59)
Less: Net loss attributable to noncontrolling interest (1) (1)
Net income (loss) attributable to Capri$200 $122 $419 $(58)
Weighted average ordinary shares outstanding:
Basic151,859,760 150,492,275 151,604,916 150,024,293 
Diluted154,219,249 151,677,242 154,563,532 150,024,293 
Net income (loss) per ordinary share attributable to Capri:
Basic$1.31 $0.81 $2.76 $(0.39)
Diluted$1.30 $0.81 $2.71 $(0.39)
Statements of Comprehensive Income (Loss):
Net income (loss)$200 $121 $419 $(59)
Foreign currency translation adjustments23 56 113 53 
Net gain (loss) on derivatives4 (2)4 (3)
Comprehensive income (loss)227 175 536 (9)
Less: Net loss attributable to noncontrolling interest (1) (1)
Less: Foreign currency translation adjustments attributable to noncontrolling interest  (1) 
Comprehensive income (loss) attributable to Capri$227 $176 $537 $(8)

See accompanying notes to consolidated financial statements.
4


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data which is in thousands)
(Unaudited)
 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at June 26, 2021220,974 $ $1,201 (69,031)$(3,385)$147 $4,489 $2,452 $(2)$2,450 
Net income— — — — — — 200 200  200 
Other comprehensive income— — — — — 27 — 27  27 
Total comprehensive income— — — — — — — 227  227 
Vesting of restricted awards, net of forfeitures
199 — — — — — — — — — 
Exercise of employee share options
123 — 4 — — — — 4 — 4 
Share based compensation expense— — 20 — — — — 20 — 20 
Repurchase of ordinary shares— — — (1,818)(101)— — (101)— (101)
Balance at September 25, 2021221,296 $ $1,225 (70,849)$(3,486)$174 $4,689 $2,602 $(2)$2,600 
 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at March 27, 2021219,223 $ $1,158 (67,943)$(3,326)$56 $4,270 $2,158 $(1)$2,157 
Net income— — — — — — 419 419  419 
Other comprehensive income (loss)— — — — — 118 — 118 (1)117 
Total comprehensive income (loss)— — — — — — — 537 (1)536 
Vesting of restricted awards, net of forfeitures
1,790 — — — — — — — — — 
Exercise of employee share options
283 — 11 — — — — 11 — 11 
Share based compensation expense— — 56 — — — — 56 — 56 
Repurchase of ordinary shares— — — (2,906)(160)— — (160)— (160)
Balance at September 25, 2021221,296 $ $1,225 (70,849)$(3,486)$174 $4,689 $2,602 $(2)$2,600 



5



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


 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at June 27, 2020218,273 $ $1,109 (67,932)$(3,326)$71 $4,152 $2,006 $1 $2,007 
Net income (loss)— — — — — — 122 122 (1)121 
Other comprehensive income— — — — — 54 — 54  54 
Total comprehensive income (loss)— — — — — — — 176 (1)175 
Vesting of restricted awards, net of forfeitures
43 — — — — — — — — — 
Exercise of employee share options
247 — — — — — — — — — 
Share based compensation expense— — 17 — — — — 17 — 17 
Repurchase of ordinary shares— — — (10)— — — — —  
Balance at September 26, 2020218,563 $ $1,126 (67,942)$(3,326)$125 $4,274 $2,199 $ $2,199 


 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestsTotal Equity
 SharesAmountsSharesAmounts
Balance at March 28, 2020
217,320 $ $1,085 (67,894)$(3,325)$75 $4,332 $2,167 $1 $2,168 
Net loss— — — — — — (58)(58)(1)(59)
Other comprehensive income— — — — — 50 — 50  50 
Total comprehensive loss— — — — — — — (8)(1)(9)
Vesting of restricted awards, net of forfeitures
996 — — — — — — — — — 
Exercise of employee share options
247 — — — — — — — — — 
Share based compensation expense— — 41 — — — — 41 — 41 
Repurchase of ordinary shares— — — (48)(1)— — (1)— (1)
Balance at September 26, 2020218,563 $ $1,126 (67,942)$(3,326)$125 $4,274 $2,199 $ $2,199 




See accompanying notes to consolidated financial statements.
6


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 Six Months Ended
 September 25,
2021
September 26,
2020
Cash flows from operating activities
Net income (loss)$419 $(59)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization99 108 
Share based compensation expense56 41 
Deferred income taxes(27)15 
Impairment of assets33 22 
Changes to lease related balances, net(67)(58)
Tax (benefit) expense on exercise of share options(3)5 
Amortization of deferred financing costs3 2 
Foreign currency gains(7)(3)
Credit losses(1)(2)
Change in assets and liabilities:
Receivables, net15 (29)
Inventories, net(133)(73)
Prepaid expenses and other current assets(12)49 
Accounts payable(8)115 
Accrued expenses and other current liabilities20 3 
Other long-term assets and liabilities9 1 
Net cash provided by operating activities396 137 
Cash flows from investing activities
Capital expenditures(48)(59)
Cash paid for asset acquisitions (12)
Net cash used in investing activities(48)(71)
Cash flows from financing activities
Debt borrowings159 955 
Debt repayments(360)(1,371)
Debt issuance costs (4)
Repurchase of ordinary shares(160)(1)
Exercise of employee share options11  
Other financing activities 8  
Net cash used in financing activities(342)(421)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3)1 
Net increase (decrease) in cash, cash equivalents and restricted cash3 (354)
Beginning of period234 592 
End of period$237 $238 
Supplemental disclosures of cash flow information
Cash paid for interest$22 $28 
Net cash paid (received) for income taxes$28 $(44)
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures$16 $17 
See accompanying notes to consolidated financial statements.
7


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Basis of Presentation
Capri Holdings Limited ("Capri", and together with its subsidiaries, the "Company") was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002. The Company is a holding company that owns brands that are leading designers, marketers, distributors and retailers of branded women’s and men’s accessories, footwear and ready-to-wear bearing the Versace, Jimmy Choo and Michael Kors tradenames and related trademarks and logos. The Company operates in three reportable segments: Versace, Jimmy Choo and Michael Kors. See Note 16 for additional information.
The interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The interim consolidated financial statements as of September 25, 2021 and for the three and six months ended September 25, 2021 and September 26, 2020 are unaudited. The Company consolidates the results of its Versace business on a one-month lag, as consistent with prior periods. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March 27, 2021, as filed with the Securities and Exchange Commission on May 26, 2021, in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.

The Company utilizes a 52- to 53-week fiscal year and the term “Fiscal Year” or “Fiscal” refers to that 52- or 53-week period. The results for the three and six months ended September 25, 2021 and September 26, 2020 are based on 13-week and 26-week periods, respectively. The Company’s Fiscal Year 2022 is a 53-week period ending April 2, 2022.

2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. The most significant assumptions and estimates involved in preparing the financial statements include allowances for customer deductions, sales returns, sales discounts and credit losses, estimates of inventory net realizable value, the valuation of share-based compensation, the valuation of deferred taxes and the valuation of goodwill, intangible assets, operating lease right-of-use assets and property and equipment, along with the estimated useful lives assigned to these assets. Actual results could differ from those estimates.
Seasonality
The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences greater sales during its third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during its first fiscal quarter.
COVID-19 Related Government Assistance and Subsidies
As there is no definitive guidance under U.S. GAAP, the Company has applied the guidance under International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). The Company has elected to follow the income approach under IAS 20 and recognize these funds as a reduction to the related expense in the Company’s consolidated statements of operations and comprehensive income (loss). The Company recognized $3 million and $9 million for the three months ended September 25, 2021 and September 26, 2020, respectively, and $7 million
8


and $23 million for the six months ended September 25, 2021 and September 26, 2020, respectively, related to government assistance and subsidies.
Cash, Cash Equivalents and Restricted Cash
All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Included in the Company’s cash and cash equivalents as of September 25, 2021 and March 27, 2021 are credit card receivables of $24 million and $25 million, respectively, which generally settle within two to three business days.
A reconciliation of cash, cash equivalents and restricted cash as of September 25, 2021 and March 27, 2021 from the consolidated balance sheets to the consolidated statements of cash flows is as follows (in millions):
 September 25,
2021
March 27,
2021
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$234 $232 
Restricted cash included within prepaid expenses and other current assets3 2 
Total cash, cash equivalents and restricted cash shown in the consolidated statements of
cash flows
$237 $234 
Inventories, net
Inventories primarily consist of finished goods with the exception of raw materials and work in process inventory. The combined total of raw materials and work in process inventory, net, recorded on the Company’s consolidated balance sheets was $30 million and $28 million as of September 25, 2021 and March 27, 2021, respectively.
The net realizable value of the Company’s inventory as of September 25, 2021 and March 27, 2021 includes the adverse impacts associated with the COVID-19 pandemic.
Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to these transactions. The Company employs these contracts to hedge the Company’s cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation.
The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including a description of the hedged item and the hedging instrument and the risk being hedged. The changes in the fair value for contracts designated as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income until the hedged item affects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the gains or losses deferred in accumulated other comprehensive income are recognized within cost of goods sold. The Company uses regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which compares the change in the fair value of the derivative instrument to the change in the related hedged item. If the hedge is no longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings. For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency loss (gain) in the Company’s consolidated statements of operations and comprehensive income (loss). The Company classifies cash flows relating to its forward foreign currency exchange contracts related to purchase of inventory consistently with the classification of the hedged item within cash flows from operating activities.
The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit
9


exposure. The aforementioned forward contracts generally have a term of no more than 12 months. The period of these contracts is directly related to the foreign transaction they are intended to hedge.
Net Investment Hedges
The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between its U.S. Dollars and these foreign currencies. The Company has elected the spot method of designating these contracts under ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”, and has designated these contracts as net investment hedges. The net gain or loss on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest (income) expense, net, in the Company’s consolidated statements of operations and comprehensive income (loss). Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net investment is sold, diluted or liquidated.
Interest Rate Swap Agreements
The Company also uses interest rate swap agreements to hedge the variability of its cash flows resulting from floating interest rates on the Company’s borrowings. When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive income and are reclassified into interest (income) expense, net, in the same period during which the hedged transactions affect earnings.
Leases

The Company leases retail stores, office space and warehouse space under operating lease agreements that expire at various dates through September 2043. The Company’s leases generally have terms of up to 10 years, generally require a fixed annual rent and may require the payment of additional rent if store sales exceed a negotiated amount. Although most of the Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through August 2025. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its restructuring activities, as discussed in Note 8. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. The Company determines the sublease term based on the date it provides possession to the subtenant through the expiration date of the sublease.

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

Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term.

The Company’s leases generally provide for payments of non-lease components, such as common area maintenance, real estate taxes and other costs associated with the leased property. The Company accounts for lease and non-lease components of its real estate leases together as a single lease component and, as such, includes fixed payments of non-lease components in the measurement of the operating lease right-of-use assets and lease liabilities for its real estate leases. Variable lease payments, such as percentage rentals based on 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.
10


The following table presents the Company’s supplemental cash flow information related to leases (in millions):
Six Months Ended
September 25, 2021September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases (1)
$257 $191 
(1)Operating cash flows used in operating leases for the six months ended September 25, 2021 and September 26, 2020 excluded $5 million and $60 million, respectively, of rent payments that have been deferred due to the COVID-19 pandemic.
During the three and six months ended September 25, 2021, the Company recorded sublease income of $2 million and $4 million, respectively, and $1 million and $3 million, respectively, for the three and six months ended September 26, 2020, within restructuring and other charges for stores relating to our restructuring plan and selling, general and administrative expenses for all other locations. During the three and six months ended September 25, 2021, the Company recorded $3 million and $10 million, respectively, and $9 million and $24 million for the three and six months ended September 26, 2020, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract, and these concessions are recorded as a reduction to variable lease expense within selling, general and administrative expenses.
Net Income (Loss) per Share
The Company’s basic net income (loss) per ordinary share is calculated by dividing net income by the weighted average number of ordinary shares outstanding during the period. Diluted net income (loss) per ordinary share reflects the potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted shares and restricted share units ("RSUs"), were exercised or converted into ordinary shares. These potentially dilutive securities are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods. Performance-based RSUs are included as diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and to the extent they are dilutive under the treasury stock method.
The components of the calculation of basic net income (loss) per ordinary share and diluted net income (loss) per ordinary share are as follows (in millions, except share and per share data):
 Three Months EndedSix Months Ended
September 25,
2021
September 26,
2020
September 25,
2021
September 26,
2020
Numerator:
Net income (loss) attributable to Capri$200 $122 $419 $(58)
Denominator:
Basic weighted average shares151,859,760 150,492,275 151,604,916 150,024,293 
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units
2,359,489 1,184,967 2,958,616  
Diluted weighted average shares154,219,249 151,677,242 154,563,532 150,024,293 
Basic net income (loss) per share (1)
$1.31 $0.81 $2.76 $(0.39)
Diluted net income (loss) per share (1)
$1.30 $0.81 $2.71 $(0.39)
(1)Basic and diluted net income (loss) per share are calculated using unrounded numbers.
During the three and six months ended September 25, 2021, share equivalents of 415,331 shares and 513,088 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect. Share equivalents of 3,961,838 shares and 4,675,372 shares have been excluded from the above calculations for the three and six months ended September 26, 2020, respectively. Diluted net loss per share attributable to Capri for the six months ended September 26, 2020 excluded all
11


potentially dilutive securities because there was a net loss attributable to Capri for the period and, as such, the inclusion of these securities would have been anti-dilutive.
See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for a complete disclosure of the Company’s significant accounting policies.
Recently Issued Accounting Pronouncements
The Company has considered all new accounting pronouncements and, other than the recent pronouncement discussed below, has concluded that there are no new pronouncements that may have a material impact on the Company’s results of operations, financial condition or cash flows based on current information.
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and in January 2021, issued ASU 2021-01, "Reference Rate Reform: Scope". Both of these updates aim to ease the potential burden in accounting for reference rate reform. These updates provide optional expedients and exceptions, if certain criteria are met, for applying accounting principles generally accepted in the United States to contract modifications, hedging relationships and other transactions affected by the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The amendments were effective upon issuance and allow companies to adopt the amendments on a prospective basis through December 31, 2022. The Company has not applied the ASUs to any contract modifications or new hedging relationships in the current year.

3. Revenue Recognition
The Company accounts for contracts with its customers when there is approval and commitment from both parties, the rights of the parties and payment terms have been identified, the contract has commercial substance and collectibility of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services.
The Company sells its products through three primary channels of distribution: retail, wholesale and licensing. Within the retail and wholesale channels, substantially all of the Company’s revenues consist of sales of products that represent a single performance obligation, where control transfers at a point in time to the customer. For licensing arrangements, royalty and advertising revenue is recognized over time based on access provided to the Company’s trademarks.
Retail
The Company generates sales through directly operated stores and e-commerce sites throughout the Americas (U.S., Canada and Latin America), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (including Australia).
Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability upon issuance. Revenue is recognized when the gift card is redeemed or upon “breakage” for the estimated portion of gift cards that are not expected to be redeemed. “Breakage” revenue is calculated under the proportional redemption methodology, which considers the historical patterns of redemption in jurisdictions where the Company is not required to remit the value of the unredeemed gift cards as unclaimed property. The contract liability related to gift cards, net of estimated “breakage”, of $12 million and $12 million as of September 25, 2021 and March 27, 2021, respectively, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.
Loyalty Program. The Company offers a loyalty program, which allows its Michael Kors U.S. customers to earn points on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage” for points that are not expected to be redeemed.
12


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 and certain parts of Asia.
The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the licensees. Generally, the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, certain guaranteed minimums for Versace are multi-year based.
As of September 25, 2021, contractually guaranteed minimum fees from the Company’s license agreements expected to be recognized as revenue during future periods were as follows (in millions):
Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2022$15 
Fiscal 202329 
Fiscal 202427 
Fiscal 202523 
Fiscal 202624 
Fiscal 2027 and thereafter75 
 Total
$193 
Sales Returns
The refund liability recorded as of September 25, 2021 and March 27, 2021 was $48 million and $46 million, respectively, and the related asset for the right to recover returned product as of September 25, 2021 and March 27, 2021 was $15 million and $14 million, respectively.
Contract Balances
Total contract liabilities were $17 million and $18 million as of September 25, 2021 and March 27, 2021, respectively. For the three and six months ended September 25, 2021, the Company recognized $2 million and $8 million, respectively, in revenue which related to contract liabilities that existed at March 27, 2021. For the three and six months ended September 26, 2020, the Company recognized $2 million and $5 million, respectively, in revenue which related to contract liabilities that existed at March 28, 2020. There were no material contract assets recorded as of September 25, 2021 and March 27, 2021.
There were no changes in historical variable consideration estimates that were materially different from actual results.
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Disaggregation of Revenue
The following table presents the Company’s segment revenue disaggregated by geographic location (in millions):
 Three Months EndedSix Months Ended
 September 25,
2021
September 26,
2020
September 25,
2021
September 26,
2020
Versace revenue - the Americas$107 $60 $194 $75 
Versace revenue - EMEA118 80 205 107 
Versace revenue - Asia57 55 123 106