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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the Quarterly Period Ended December 30, 2023
or 
          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
Commission file number: 1-16153
Tapestry, Inc.
(Exact name of registrant as specified in its charter)
Maryland 52-2242751
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

10 Hudson Yards, New York, NY 10001
(Address of principal executive offices); (Zip Code) 
(212) 946-8400
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on which Registered
Common Stock, par value $.01 per shareTPRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer Accelerated filer  Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
On January 26, 2024, the Registrant had 229,366,154 outstanding shares of common stock, which is the Registrant’s only class of common stock.



TAPESTRY, INC.
INDEX
 



In this Form 10-Q, references to “we,” “our,” “us,” "Tapestry" and the “Company” refer to Tapestry, Inc., including consolidated subsidiaries. References to "Coach," "Kate Spade," "kate spade new york" or "Stuart Weitzman" refer only to the referenced brand.
SPECIAL NOTE ON FORWARD-LOOKING INFORMATION
This document, and the documents incorporated by reference in this document, our press releases and oral statements made from time to time by us or on our behalf, may contain certain "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are based on management's current expectations, that involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "may," "can," "continue," "project," "assumption," "should," "expect," "confidence," "goals," "trends," "anticipate," "intend," "estimate," "on track," "future," "well positioned to," "plan," "potential," "position," "believe," "seek," "see," "will," "would," "target," similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Such statements involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Tapestry, Inc. and its consolidated subsidiaries could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Tapestry, Inc. assumes no obligation to revise or update any such forward-looking statements for any reason, except as required by law.
Tapestry, Inc.’s actual results could differ materially from the results contemplated by these forward-looking statements and are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from current expectations due to a number of factors, including, but not limited to: (i) the impact of economic conditions, recession and inflationary measures; (ii) the impact of the coronavirus ("Covid-19") pandemic; (iii) our exposure to international risks, including currency fluctuations and changes in economic or political conditions in the markets where we sell or source our products; (iv) our ability to retain the value of our brands and to respond to changing fashion and retail trends in a timely manner, including our ability to execute on our e-commerce and digital strategies; (v) our ability to successfully implement the initiatives under our 2025 growth strategy; (vi) the effect of existing and new competition in the marketplace; (vii) our ability to control costs; (viii) the effect of seasonal and quarterly fluctuations on our sales or operating results; (ix) the risk of cyber security threats and privacy or data security breaches; (x) our ability to protect against infringement of our trademarks and other proprietary rights; (xi) the impact of tax and other legislation; (xii) the risks associated with potential changes to international trade agreements and the imposition of additional duties on importing our products; (xiii) our ability to achieve intended benefits, cost savings and synergies from acquisitions, including our proposed acquisition of Capri Holdings Limited ("Capri"); (xiv) satisfaction of the conditions precedent to consummation of the proposed acquisition of Capri, including the ability to secure regulatory approvals on the terms expected, at all or in a timely manner; (xv) the impact of pending and potential future legal proceedings; (xvi) the risks associated with climate change and other corporate responsibility issues and (xvii) such other risk factors as set forth in Part II, Item 1A. "Risk Factors" and elsewhere in this report and in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2023. These factors are not necessarily all of the factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.
 WHERE YOU CAN FIND MORE INFORMATION
Tapestry's quarterly financial results and other important information are available by calling the Investor Relations Department at (212) 629-2618.
Tapestry maintains its website at www.tapestry.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the SEC.


 





TAPESTRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

December 30,
2023
July 1,
2023
(millions)
(unaudited)
ASSETS  
Current Assets:  
Cash and cash equivalents$6,833.1 $726.1 
Short-term investments629.2 15.4 
Trade accounts receivable, less allowances for credit losses of $5.9 and $5.8, respectively
245.6 211.5 
Inventories824.9 919.5 
Income tax receivable241.6 231.1 
Prepaid expenses140.9 126.3 
Other current assets127.2 133.6 
Total current assets9,042.5 2,363.5 
Property and equipment, net539.2 564.5 
Operating lease right-of-use assets1,371.0 1,378.7 
Goodwill1,233.2 1,227.5 
Intangible assets1,356.9 1,360.1 
Deferred income taxes40.3 40.4 
Other assets232.3 182.1 
Total assets$13,815.4 $7,116.8 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current Liabilities:  
Accounts payable$462.9 $416.9 
Accrued liabilities654.1 547.1 
Current portion of operating lease liabilities305.6 297.5 
Current debt25.0 25.0 
Total current liabilities1,447.6 1,286.5 
Long-term debt7,714.4 1,635.8 
Long-term operating lease liabilities1,294.7 1,333.7 
Deferred income taxes307.6 240.0 
Long-term income taxes payable21.7 43.5 
Other liabilities369.6 299.5 
Total liabilities11,155.6 4,839.0 
See Note 14 on commitments and contingencies
Stockholders' Equity:  
Preferred stock: (authorized 25.0 million shares; $0.01 par value per share) none issued
  
Common stock: (authorized 1.0 billion shares; $0.01 par value per share) issued and outstanding - 229.4 million and 227.4 million shares, respectively
2.3 2.3 
Additional paid-in-capital3,695.8 3,682.2 
Retained earnings (accumulated deficit)(859.9)(1,216.8)
Accumulated other comprehensive income (loss)(178.4)(189.9)
Total stockholders' equity2,659.8 2,277.8 
Total liabilities and stockholders' equity$13,815.4 $7,116.8 
See accompanying Notes.
1


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months EndedSix Months Ended
December 30,
2023
December 31,
2022
December 30,
2023
December 31,
2022
(millions, except per share data)(millions, except per share data)
(unaudited)(unaudited)
Net sales$2,084.5 $2,025.4 $3,597.7 $3,531.9 
Cost of sales591.3 636.1 1,006.8 1,088.0 
Gross profit1,493.2 1,389.3 2,590.9 2,443.9 
Selling, general and administrative expenses1,045.6 971.1 1,890.1 1,771.4 
Operating income (loss)447.6 418.2 700.8 672.5 
Interest expense, net49.2 7.9 62.5 15.3 
Other expense (income)(4.7)(6.6)(3.3)4.1 
Income (loss) before provision for income taxes403.1 416.9 641.6 653.1 
Provision (benefit) for income taxes80.8 87.0 124.3 127.9 
Net income (loss)$322.3 $329.9 $517.3 $525.2 
Net income (loss) per share:    
Basic$1.41 $1.38 $2.26 $2.19 
Diluted$1.39 $1.36 $2.23 $2.14 
Shares used in computing net income (loss) per share:    
Basic229.3 239.3 228.7 240.3 
Diluted231.7 243.3 232.0 245.0 
 
See accompanying Notes.
 
2


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
 Three Months EndedSix Months Ended
December 30,
2023
December 31,
2022
December 30,
2023
December 31,
2022
(millions)(millions)
(unaudited)(unaudited)
Net income (loss)$322.3 $329.9 $517.3 $525.2 
Other comprehensive income (loss), net of tax:    
Unrealized gains (losses) on cash flow hedging derivatives, net(41.0)(22.5)(9.7)(14.8)
Unrealized gains (losses) on available-for-sale investments, net   0.5 
Foreign currency translation adjustments17.9 (2.4)21.2 (32.6)
Other comprehensive income (loss), net of tax(23.1)(24.9)11.5 (46.9)
Comprehensive income (loss)$299.2 $305.0 $528.8 $478.3 
 
See accompanying Notes.

3


TAPESTRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended
December 30,
2023
December 31,
2022
(millions)
(unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES  
Net income (loss)$517.3 $525.2 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization85.8 88.6 
Provision for bad debt2.2 2.8 
Share-based compensation42.2 34.8 
Deferred income taxes79.5 32.1 
Changes to lease related balances, net(23.5)(16.5)
Other non-cash charges, net20.6 (23.1)
Changes in operating assets and liabilities:  
Trade accounts receivable(48.0)(19.5)
Inventories103.8 11.5 
Accounts payable56.3 (60.2)
Accrued liabilities 87.0 (60.6)
Other liabilities(29.8)(7.6)
Other assets8.4 (45.1)
Net cash provided by (used in) operating activities901.8 462.4 
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES  
Purchases of investments(611.3)(4.3)
Proceeds from maturities and sales of investments 151.8 
Purchases of property and equipment(43.7)(108.8)
Settlement of net investment hedge 41.9 
Net cash provided by (used in) investing activities(655.0)80.6 
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES  
Payment of dividends(160.4)(144.2)
Repurchase of common stock (300.0)
Proceeds from issuance of debt, net of discount6,089.5  
Payment of debt issuance costs(78.2) 
Proceeds from share-based awards3.3 13.8 
Repayment of debt(12.5)(18.8)
Taxes paid to net settle share-based awards(31.9)(55.0)
Payments of finance lease liabilities(0.6)(0.5)
Net cash provided by (used in) financing activities5,809.2 (504.7)
Effect of exchange rate changes on cash and cash equivalents51.0 2.1 
Net (decrease) increase in cash and cash equivalents6,107.0 40.4 
Cash and cash equivalents at beginning of period726.1 789.8 
Cash and cash equivalents at end of period6,833.1 830.2 
Supplemental information:
Cash paid for income taxes, net$93.0 $138.3 
Cash paid for interest$45.8 $38.9 
Non-cash investing activity - property and equipment obligations$19.0 $6.8 
See accompanying Notes.
4

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


1. NATURE OF OPERATIONS
Tapestry, Inc. (the "Company") is a leading New York-based house of iconic accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman. Each of our brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse. Individually, our brands are iconic. Together, we can stretch what’s possible.
The Coach segment includes global sales of primarily Coach brand products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors.
The Kate Spade segment includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors.
The Stuart Weitzman segment includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, sales to wholesale customers, through e-commerce sites and through independent third-party distributors.
2. BASIS OF PRESENTATION AND ORGANIZATION
Interim Financial Statements
These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, such condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the condensed consolidated financial position, results of operations, comprehensive income (loss) and cash flows of the Company for the interim periods presented. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") have been condensed or omitted from this report as is permitted by the SEC's rules and regulations. However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading. This report should be read in conjunction with the audited consolidated financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended July 1, 2023 ("fiscal 2023") and other filings filed with the SEC.
The results of operations, cash flows and comprehensive income for the six months ended December 30, 2023 are not necessarily indicative of results to be expected for the entire fiscal year, which will end on June 29, 2024 ("fiscal 2024").
Fiscal Periods
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30. Fiscal 2024 will be a 52-week period. Fiscal 2023, ended on July 1, 2023, was also a 52-week period. The second quarter of fiscal 2024 ended on December 30, 2023 and the second quarter of fiscal 2023 ended on December 31, 2022, both of which were 13-week periods.
Covid-19 Pandemic
The Covid-19 pandemic has resulted in varying degrees of business disruption for the Company since it began in fiscal 2020 and has impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities. Such disruptions continued during the first half of fiscal 2023, and the Company's results in Greater China were adversely impacted as a result of the Covid-19 pandemic. Starting in December 2022, certain government restrictions were lifted in the region and business trends improved. In the first half of fiscal 2024, the Covid-19 pandemic did not materially impact our business or operating results. We continue to monitor the latest developments regarding the Covid-19 pandemic and potential impacts on our business, operating results and outlook.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes thereto. Actual results could differ from estimates in amounts that may be material to the financial statements.
5

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Significant estimates inherent in the preparation of the condensed consolidated financial statements include reserves for the realizability of inventory; asset retirement obligations; customer returns, end-of-season markdowns and operational chargebacks; useful lives and impairments of long-lived tangible and intangible assets; accounting for income taxes and related uncertain tax positions; accounting for business combinations; the valuation of stock-based compensation awards and related expected forfeiture rates; reserves for restructuring; and reserves for litigation and other contingencies, amongst others.
Principles of Consolidation
These unaudited interim condensed consolidated financial statements include the accounts of the Company and all 100% owned and controlled subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
Share Repurchases
The Company accounts for stock repurchases by allocating the repurchase price to common stock and retained earnings. Under Maryland law, the Company's state of incorporation, there are no treasury shares. All repurchased shares are authorized but unissued shares and these shares may be issued in the future for general corporate and other purposes. The Company may terminate or limit the stock repurchase program at any time. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. Purchases of the Company's common stock are executed through open market purchases, including through purchase agreements under Rule 10b5-1. Effective January 1, 2023, the Company is subject to a 1% excise tax on net share repurchases as part of the Inflation Reduction Act of 2022, which is recorded in Retained earnings as part of Stockholders' Equity.
Supplier Finance Program
To improve our working capital efficiency, the Company makes available to certain suppliers a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating. The Company does not have the ability to refinance or modify payment terms to the global financial institution through the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. The Company’s payment obligations, including the amounts due and payment terms, which generally do not exceed 90 days, are not impacted by suppliers’ participation in the program. As of December 30, 2023 and July 1, 2023, $334.9 million and $305.4 million, respectively, was related to suppliers eligible to participate in the Company's SCF program and presented within Accounts payable on the Consolidated Balance Sheets.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-04, "Liabilities—Supplier Finance Programs (Subtopic 405-50)", which is intended to enhance the transparency of supplier finance programs. The ASU requires the buyer in a supplier finance program to disclose sufficient information about the program in order to allow a user of financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. The Company adopted ASU 2022-04 as of the beginning of fiscal 2024. The adoption of ASU 2022-04 did not have an impact on the Company's interim condensed consolidated financial statements other than the new disclosure requirements. Refer to Note 2, "Basis of Presentation and Organization", for additional information.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The amendments will be effective for the Company's annual reporting periods beginning in fiscal year 2025 and for interim periods beginning in fiscal year 2026, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.
In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company's annual periods beginning in fiscal year 2026, with early adoption permitted, and should be applied either
6

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.
4. REVENUE
The Company recognizes revenue primarily from sales of the products of its brands through retail and wholesale channels, including e-commerce sites. The Company also generates revenue from royalties related to licensing its trademarks, as well as sales in ancillary channels. In all cases, revenue is recognized upon the transfer of control of the promised products or services to the customer, which may be at a point in time or over time. Control is transferred when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized is the amount of consideration to which the Company expects to be entitled, including estimation of sale terms that may create variability in the consideration. Revenue subject to variability is constrained to an amount which will not result in a significant reversal in future periods when the contingency that creates variability is resolved.
The Company recognizes revenue in its retail stores, including concession shop-in-shops, at the point-of-sale when the customer obtains physical possession of the products. Digital revenue from sales of products ordered through the Company's e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers. Retail and digital revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience. Payment is due at the point of sale.
Gift cards issued by the Company are recorded as a liability until redeemed by the customer, at which point revenue is recognized. The Company also uses historical information to estimate the amount of gift card balances that will never be redeemed and recognizes that amount as revenue over time in proportion to actual customer redemptions if the Company does not have a legal obligation to remit unredeemed gift cards to any jurisdiction as unclaimed property.
Certain of the Company's retail operations use sales incentive programs, such as customer loyalty programs and the issuance of coupons. Loyalty programs provide the customer a material right to acquire additional products and give rise to the Company having a separate performance obligation. Additionally, certain products sold by the Company include an assurance warranty that is not considered a separate performance obligation. These programs are immaterial individually and in the aggregate.
The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases. Payment is generally due 30 to 90 days after shipment. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. Discounts are based on contract terms with the customer, while cooperative advertising allowances and other consideration may be based on contract terms or negotiated on a case-by-case basis. Returns and markdowns generally require approval from the Company and are estimated based on historical trends, current season results and inventory positions at the wholesale locations, current market and economic conditions as well as, in select cases, contractual terms. The Company's historical estimates of these variable amounts have not differed materially from actual results.
The Company recognizes licensing revenue over time during the contract period in which licensees are granted access to the Company's trademarks. These arrangements require licensees to pay a sales-based royalty and may include a contractually guaranteed minimum royalty amount. Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved. Payments from the customer are generally due quarterly in an amount based on the licensee's sales of goods bearing the licensed trademarks during the period, which may differ from the amount of revenue recorded during the period thereby generating a contract asset or liability. Contract assets and liabilities and contract costs related to the licensing arrangements are immaterial as the licensing business represents approximately 1% of total net sales in the six months ended December 30, 2023.
The Company has elected a practical expedient not to disclose the remaining performance obligations that are unsatisfied as of the end of the period related to contracts with an original duration of one year or less or variable consideration related to sales-based royalty arrangements. There are no other contracts with transaction price allocated to remaining performance obligations other than future minimum royalties as discussed above, which are not material.
Other practical expedients elected by the Company include (i) assuming no significant financing component exists for any contract with a duration of one year or less, (ii) accounting for shipping and handling as a fulfillment activity within SG&A expense regardless of the timing of the shipment in relation to the transfer of control and (iii) excluding sales and value added tax from the transaction price.
7

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Disaggregated Net Sales
The following table disaggregates the Company's net sales into geographies that depict how economic factors may impact the revenues and cash flows for the periods presented. Each geography presented includes net sales related to the Company's directly operated channels, global travel retail business and to wholesale customers, including distributors, in locations within the specified geographic area.
North America
Greater China(1)
Other Asia(2)
Other(3)
Total
(millions)
Three Months Ended December 30, 2023
Coach$1,016.9 $229.2 $209.7 $86.1 $1,541.9 
Kate Spade387.7 11.3 37.6 23.8 460.4 
Stuart Weitzman53.6 24.2 0.9 3.5 82.2 
Total$1,458.2 $264.7 $248.2 $113.4 $2,084.5 
Three Months Ended December 31, 2022
Coach$985.4 $196.0 $200.6 $67.7 $1,449.7 
Kate Spade418.5 9.8 37.4 24.6 490.3 
Stuart Weitzman56.8 20.1 0.3 8.2 85.4 
Total$1,460.7 $225.9 $238.3 $100.5 $2,025.4 
Six Months Ended December 30, 2023
Coach$1,703.4 $449.5 $384.9 $161.5 $2,699.3 
Kate Spade627.9 22.1 68.2 45.4 763.6 
Stuart Weitzman88.3 37.7 1.3 7.5 134.8 
Total$2,419.6 $509.3 $454.4 $214.4 $3,597.7 
Six Months Ended December 31, 2022
Coach$1,654.5 $405.8 $368.5 $140.2 $2,569.0 
Kate Spade673.1 20.8 69.0 49.3 812.2 
Stuart Weitzman99.0 35.2 0.5 16.0 150.7 
Total$2,426.6 $461.8 $438.0 $205.5 $3,531.9 
(1)    Greater China includes mainland China, Hong Kong SAR and Macao SAR, and Taiwan.
(2)    Other Asia includes Japan, Malaysia, Australia, New Zealand, Singapore, South Korea, and other countries within Asia.
(3)    Other sales primarily represents sales in Europe, the Middle East and royalties earned from the Company's licensing partners.
Deferred Revenue
Deferred revenue results from cash payments received or receivable from customers prior to the transfer of the promised goods or services, and is generally comprised of unredeemed gift cards, net of breakage which has been recognized. Additional deferred revenue may result from sales-based royalty payments received or receivable which exceed the revenue recognized during the contractual period. The balance of such amounts as of December 30, 2023 and July 1, 2023 was $43.9 million and $43.0 million, respectively, which were primarily recorded within Accrued liabilities on the Company's Condensed Consolidated Balance Sheets and are generally expected to be recognized as revenue within a year. For the six months ended December 30, 2023, net sales of $21.3 million were recognized from amounts recorded as deferred revenue as of July 1, 2023. For the six months ended December 31, 2022, net sales of $17.0 million were recognized from amounts recorded as deferred revenue as of July 2, 2022.
8

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
5. ACQUISITIONS
Capri Holdings Limited Merger Agreement
On August 10, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among the Company, Sunrise Merger Sub, Inc., a direct wholly owned subsidiary of Tapestry, and Capri Holdings Limited ("Capri"). Under the terms of the Merger Agreement, Tapestry has agreed to acquire any and all of Capri’s ordinary shares (other than (a) Capri’s ordinary Shares that are issued and outstanding immediately prior to the consummation of the acquisition that are owned or held in treasury by the Company or by Capri or any of its direct or indirect subsidiaries and (b) Capri’s ordinary shares that are issued and outstanding immediately prior to the consummation of the acquisition that are held by holders who have properly exercised dissenters’ rights in accordance with, and who have complied with, Section 179 of the BVI Business Companies Act, 2004 (as amended) of the British Virgin Islands) in cash at a purchase price of $57.00 per share, without interest, subject to any required tax withholding as provided in the Merger Agreement. The enterprise value is expected to be approximately $8.5 billion and the transaction is expected to close during calendar year 2024 (the "Capri Acquisition"). On October 25, 2023, at a special meeting of Capri's shareholders, Capri's shareholders approved the Merger Agreement and the transactions contemplated thereby.
The Company intends to finance the Capri Acquisition, inclusive of related fees and expenses, with the net proceeds of new senior unsecured notes, new term loans, cash on hand, cash on hand at Capri and anticipated future cash flow. During the quarter ended December 30, 2023, the Company issued $4.5 billion senior unsecured notes (the "Capri Acquisition USD Senior Notes") and €1.5 billion Euro-denominated senior unsecured notes (the "Capri Acquisition EUR Senior Notes" and, together with the Capri Acquisition USD Senior Notes, the "Capri Acquisition Senior Notes") which, in addition to the $1.4 billion of delayed draw unsecured term loan facilities (the "Capri Acquisition Term Loan Facilities") executed in the first quarter of fiscal 2024, completes the expected financing for the Capri Acquisition. Until the close of the transaction, the Company will maintain the proceeds from the issuance of the Capri Acquisition Senior Notes in Cash and cash equivalents and Short-term investments. Refer to Note 11, "Debt," for further information on our existing debt instruments related to the acquisition and Note 12, "Fair Value Measurements," and Notes 13, "Investments," for further detail on our cash equivalents and Short-term investments.
In conjunction with the Capri Acquisition, during the three and six months ended December 30, 2023, the Company incurred $72.4 million and $98.7 million, respectively, in pre-tax expenses primarily related to financing-related expenses and professional fees.
9

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill

The change in the carrying amount of the Company’s goodwill by segment is as follows:
 CoachKate Spade
Stuart Weitzman(1)
Total
(millions)
Balance at July 1, 2023$597.5 $630.0 $ $1,227.5 
Foreign exchange impact4.8 0.9  $5.7 
Balance at December 30, 2023$602.3 $630.9 $ $1,233.2 
(1)    Amount is net of accumulated goodwill impairment charges of $210.7 million as of December 30, 2023 and July 1, 2023.
Intangible Assets
Intangible assets consist of the following:
December 30, 2023July 1, 2023
Gross
Carrying
Amount
Accum.
Amort.
NetGross
Carrying
Amount
Accum.
Amort.
Net
(millions)
Intangible assets subject to amortization:
Customer relationships$100.3 $(53.2)$47.1 $100.3 $(50.0)$50.3 
Total intangible assets subject to amortization100.3 (53.2)47.1 100.3 (50.0)50.3 
Intangible assets not subject to amortization:
Trademarks and trade names1,309.8  1,309.8 1,309.8 — 1,309.8 
Total intangible assets$1,410.1 $(53.2)$1,356.9 $1,410.1 $(50.0)$1,360.1 
Amortization expense for the Company’s definite-lived intangible assets for the three and six months ended December 30, 2023 was $1.6 million and $3.2 million, respectively. Amortization expense for the Company’s definite-lived intangible assets for the three and six months ended December 31, 2022 was $1.6 million and $3.3 million, respectively.
As of December 30, 2023, the expected amortization expense for intangible assets is as follows:
 Amortization Expense
(millions)
Remainder of fiscal 2024$3.3 
Fiscal 20256.5 
Fiscal 20266.5 
Fiscal 20276.5 
Fiscal 20286.5 
Thereafter17.8 
Total$47.1 
The expected amortization expense above reflects remaining useful lives ranging from approximately 6.2 to 8.5 years for customer relationships.
10

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
7. STOCKHOLDERS' EQUITY
A reconciliation of stockholders' equity is presented below:
Shares of
Common
Stock
Common StockAdditional
Paid-in-
Capital
Retained Earnings / (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(millions, except per share data)
Balance at July 2, 2022241.2 $2.4 $3,620.2 $(1,166.2)$(170.9)$2,285.5 
Net income (loss)— — — 195.3 — 195.3 
Other comprehensive income (loss)— — — — (22.0)(22.0)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes2.7 — (45.8)— — (45.8)
Share-based compensation— — 15.1 — — 15.1 
Repurchase of common stock(3.0)— — (100.0)— (100.0)
Dividends declared ($0.30 per share)
— — — (72.7)— (72.7)
Balance at October 1, 2022240.9 $2.4 $3,589.5 $(1,143.6)$(192.9)$2,255.4 
Net income (loss)— — — 329.9 — 329.9 
Other comprehensive income (loss)— — — — (24.9)(24.9)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes0.5 — 4.6 — — 4.6 
Share-based compensation— — 19.7 — — 19.7 
Repurchase of common stock(5.4)$— $— $(200.0)$— (200.0)
Dividends declared ($0.30 per share)
— — — (71.5)— (71.5)
Balance at December 31, 2022236.0 $2.4 $3,613.8 $(1,085.2)$(217.8)$2,313.2 
Shares of
Common
Stock
Common StockAdditional
Paid-in-
Capital
Retained Earnings / (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(millions, except per share data)
Balance at July 1, 2023227.4 $2.3 $3,682.2 $(1,216.8)$(189.9)$2,277.8 
Net income (loss)   195.0  195.0 
Other comprehensive income (loss)    34.6 34.6 
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes1.8  (31.2)  (31.2)
Share-based compensation  19.7   19.7 
Repurchase of common stock, including excise tax      
Dividends declared ($0.35 per share)
   (80.2) (80.2)
Balance at September 30, 2023229.2 $2.3 $3,670.7 $(1,102.0)$(155.3)$2,415.7 
Net income (loss)   322.3  322.3 
Other comprehensive income (loss)    (23.1)(23.1)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes0.2  2.6   2.6 
Share-based compensation  22.5   22.5 
Repurchase of common stock, including excise tax      
Dividends declared ($0.35 per share)
   (80.2) (80.2)
Balance at December 30, 2023229.4 $2.3 $3,695.8 $(859.9)$(178.4)$2,659.8 
11

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
The components of accumulated other comprehensive income (loss) ("AOCI"), as of the dates indicated, are as follows:
Unrealized Gains (Losses) on Cash
Flow
Hedging Derivatives(1)
Unrealized Gains
(Losses) on Available-
for-Sale Investments
Cumulative
Translation
Adjustment(2)
Total
(millions)
Balances at July 2, 2022$(2.3)$(0.5)$(168.1)$(170.9)
Other comprehensive income (loss) before reclassifications(16.7)0.5 (32.6)(48.8)
Less: amounts reclassified from accumulated other comprehensive income to earnings(1.9)  (1.9)
Net current-period other comprehensive income (loss)(14.8)0.5 (32.6)(46.9)
Balances at December 31, 2022$(17.1)$ $(200.7)$(217.8)
Balances at July 1, 2023$34.9 $ $(224.8)$(189.9)
Other comprehensive income (loss) before reclassifications(3.3) 21.2 17.9 
Less: amounts reclassified from accumulated other comprehensive income to earnings6.4   6.4 
Net current-period other comprehensive income (loss)(9.7) 21.2 11.5 
Balances at December 30, 2023$25.2 $ $(203.6)$(178.4)
(1)    The ending balances of AOCI related to cash flow hedges are net of tax of ($3.0) million and $0.3 million as of December 30, 2023 and December 31, 2022, respectively. The amounts reclassified from AOCI are net of tax of $2.4 million and $0.9 million as of December 30, 2023 and December 31, 2022, respectively.
(2)    The ending balances of AOCI related to foreign currency translation adjustments includes a loss of $49.4 million, net of tax of $11.4 million, and a loss of $66.0 million, net of tax of $0.1 million, as of December 30, 2023 and December 31, 2022, respectively, related to changes in the fair values of instruments designated as hedges of the Company's net investment in certain foreign operations.
8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The majority of the Company’s purchases of finished goods are denominated in U.S. dollars, which limits the Company’s exposure to the transactional effects of foreign currency exchange rate fluctuations. However, the Company is exposed to foreign currency exchange risk related to its sale of U.S. dollar inventory to foreign operating subsidiaries in local currency, as well as risk related to various cross-currency intercompany loans and payables, and translation risk. The Company is also exposed to foreign currency risk related to changes in the U.S. dollar value of its net investment in foreign subsidiaries and interest rate risk attributed to changes in the benchmark interest rates on the Company's debt obligations, including future issuances. The Company uses derivative financial instruments to manage these risks. These derivative transactions are in accordance with the Company’s risk management policies. The Company does not enter into derivative transactions for speculative or trading purposes.
The Company records all derivative contracts at fair value on the Condensed Consolidated Balance Sheets. The fair values of foreign currency derivatives and interest rate derivatives are based on the forward curves of the specific indices upon which settlement is based and include an adjustment for the counterparty's or Company’s credit risk. Judgment is required of management in developing estimates of fair value. The use of different market assumptions or methodologies could affect the estimated fair value.
For cash flow derivative instruments that qualify for hedge accounting, the changes in the fair value of these instruments are recognized as a component of Accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings. For derivative instruments that are designated as a net investment hedge, the changes in the fair value of the instruments are recognized as a component of AOCI, and upon discontinuation of the hedge remain in AOCI until the net investment is sold or liquidated.
12

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Each derivative instrument entered into by the Company that qualifies for hedge accounting is expected to be highly effective at reducing the risk associated with the exposure being hedged. For each derivative that is designated as a hedge, the Company documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, as well as how hedge effectiveness will be assessed over the term of the instrument. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed and documented by the Company on at least a quarterly basis.
If it is determined that a derivative instrument has not been highly effective and will continue not to be highly effective in hedging the designated exposure, hedge accounting is discontinued, and further gains (losses) are recognized in earnings within foreign currency gains (losses) or interest income (expense). Upon discontinuance of hedge accounting, the cumulative change in fair value of cash flow derivatives previously recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the original hedging strategy, unless the forecasted transaction is no longer probable of occurring, in which case the accumulated amount is immediately recognized in earnings within foreign currency gains (losses) or interest income (expense).
For foreign currency derivative instruments which are not designated as hedges, the changes in fair value of the instruments are recorded through earnings. These changes generally offset the revaluation of certain underlying assets and liabilities.
As a result of the use of derivative instruments, the Company may be exposed to the risk that the counterparties to such contacts will fail to meet their contractual obligations. To mitigate this counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings, among other factors.
The fair values of the Company’s derivative instruments are recorded on its Condensed Consolidated Balance Sheets on a gross basis. For cash flow reporting purposes, the Company classifies proceeds received or amounts paid upon the settlement of a derivative instrument in the same manner as the related item being hedged, primarily within cash from operating activities.
Hedging Portfolio
The Company enters into forward currency contracts primarily to reduce its risks related to exchange rate fluctuations on foreign currency denominated inventory transactions, as well as various cross-currency intercompany loans and payables. This primarily includes exposure to exchange rate fluctuations in the Japanese Yen, the Chinese Renminbi and the Euro. To the extent its derivative contracts designated as cash flow hedges are highly effective in offsetting changes in the value of the hedged items, the related gains (losses) are initially deferred in AOCI and subsequently recognized in the Consolidated Statements of Operations as part of the cost of the inventory purchases being hedged within Cost of sales, when the related inventory is sold to a third party. Current maturity dates range from January 2024 to September 2025. Forward foreign currency exchange contracts which are not designated as hedges of intercompany and other contractual obligations are recognized within Other expense (income) on the Company's Condensed Consolidated Statement of Operations. The maturity date of most instruments held as of December 30, 2023 are in February 2024, and such contracts are typically renewed upon maturity if the related balance has not been settled.
During fiscal 2024, the Company also entered into interest rate derivative contracts to reduce its risks related to changes in the benchmark interest rates on its debt obligations. Any premiums related to these instruments were excluded from the Company's measurement of hedge effectiveness, and were amortized over the period between the hedge execution and the contract maturity. The related gains (losses) were initially deferred in AOCI and are subsequently recognized in the Consolidated Statements of Operations as interest income (expense) in the same periods during which the hedged interest payments associated with the Company’s borrowings are recorded in earnings. As of December 30, 2023, there were no interest rate derivative contracts outstanding.
The Company also enters into cross-currency swaps to reduce its risks related to exchange rate fluctuations on net investments in foreign subsidiaries, including our net investment in Euro-denominated subsidiaries and Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the United States dollar and their local currencies. The related gains (losses) are deferred in AOCI until the net investment is sold or liquidated, and current maturity dates range from April 2025 to March 2032.
13

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
The following tables provide information related to the Company's derivative instruments recorded on the Company's Condensed Consolidated Balance Sheets as of December 30, 2023 and July 1, 2023:
Notional ValueDerivative AssetsDerivative Liabilities
Fair ValueFair Value
December 30, 2023July 1, 2023Consolidated Balance Sheet ClassificationDecember 30, 2023July 1, 2023Consolidated Balance Sheet ClassificationDecember 30, 2023July 1, 2023
(millions)
Designated hedge instruments:
FC - Inventory purchases(1)
$833.2 $842.3 Other Current Assets$28.1 $38.6 Accrued Liabilities$3.8 $0.1 
CCS - Net investment hedges(2)
1,200.0 1,200.0 Other Assets71.8 13.1 Other Liabilities154.6 90.5 
Total designated hedge instruments$2,033.2 $2,042.3 $99.9 $51.7 $158.4 $90.6 
Undesignated hedging instruments:
FC - Intercompany liabilities and loans(3)
241.1 272.3 Other Current Assets0.6 0.4 Accrued Liabilities 0.2 
Total Hedges$2,274.3 $2,314.6 $100.5 $52.1 $158.4 $90.8 
(1)Represents forward foreign currency exchange contracts ("FC") designated as derivative instruments in cash flow hedging relationships.
(2)Represents cross currency swap contracts ("CCS") designated as derivative instruments in net investment hedging relationships.
(3)Represents forward foreign currency exchange contracts ("FC") not designated as hedges.
14

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

The following tables provides the pretax impact of gains and losses from the Company's designated derivative instruments on its Condensed Consolidated Financial Statements as of December 30, 2023 and December 31, 2022:
Amount of Gain (Loss) Recognized in OCI on Derivatives
Six Months Ended
December 30, 2023December 31, 2022
(millions)
Cash flow hedges:
Inventory purchases(1)
$4.8 $(17.0)
Interest rates(2)
(10.4) 
Total cash flow hedges$(5.6)$(17.0)
Other:
Net investment hedges(3)
(5.9)(69.9)
Total other$(5.9)$(69.9)
Total hedges$(11.5)$(86.9)

Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Statement of Operations
Classification
Six Months Ended
December 30, 2023December 31, 2022
(millions)
Cash flow hedges:
Inventory purchases(1)
Cost of Sales$12.6 $(2.8)
Interest rates(2)
Other income (expense)(8.6) 
Total hedges$4.0 $(2.8)

(1)Represents forward foreign currency exchange contracts ("FC") designated as derivative instruments in cash flow hedging relationships.
(2)Represents forward interest rate contracts ("IC") designated as derivative instruments in cash flow hedging relationships.
(3)Represents cross currency swap contracts ("CCS") designated as derivative instruments in net investment hedging relationships, for which the difference between changes in fair value and periodic amortization of excluded components is recorded within AOCI.
The Company expects that $26.1 million of net derivative gain related to inventory purchases and interest rates included in Accumulated other comprehensive income at December 30, 2023 will be reclassified into earnings within the next 12 months. This amount will vary due to fluctuations in foreign currency exchange rates and benchmark interest rates.
The Company assesses the cross-currency swaps used as net investment hedges under the spot method. This results in the cross-currency basis spread being excluded from the assessment of hedge effectiveness and recorded as incurred as a reduction in interest expense in the Company’s consolidated statements of operations. Accordingly, the Company recorded net interest income of $14.3 million and $13.8 million during the six months ended December 30, 2023 and December 31, 2022, respectively.
15

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
9. EARNINGS PER SHARE
Basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted net income per share is calculated similarly but includes potential dilution from the exercise of stock options and restricted stock units and any other potentially dilutive instruments, only in the periods in which such effects are dilutive under the treasury stock method.
The following is a reconciliation of the weighted-average shares outstanding and calculation of basic and diluted earnings per share:
 Three Months EndedSix Months Ended
December 30,
2023
December 31,
2022
December 30,
2023
December 31,
2022
(millions, except per share data)
Net income (loss)$322.3 $329.9 $517.3 $525.2 
Weighted-average basic shares 229.3 239.3 228.7 240.3 
Dilutive securities:    
Effect of dilutive securities2.4 4.0 3.3 4.7 
Weighted-average diluted shares231.7 243.3 232.0 245.0 
Net income (loss) per share:    
Basic$1.41 $1.38 $2.26 $2.19 
Diluted$1.39 $1.36 $2.23 $2.14 
Earnings per share amounts have been calculated based on unrounded numbers. Options to purchase shares of the Company's common stock at an exercise price greater than the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income (loss) per common share. In addition, the Company has outstanding restricted stock unit awards that are issuable only upon the achievement of certain performance goals. Performance-based restricted stock unit awards are included in the computation of diluted shares only to the extent that the underlying performance conditions and any applicable market condition modifiers (i) are satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive under the treasury stock method. As of December 30, 2023 and December 31, 2022, there were 5.5 million and 6.1 million, respectively, of additional shares issuable upon exercise of anti-dilutive options and contingent vesting of performance-based restricted stock unit awards, which were excluded from the diluted share calculations.
16

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
10. SHARE-BASED COMPENSATION
The following table shows the share-based compensation expense and the related tax benefits recognized in the Company's Condensed Consolidated Statements of Operations for the periods indicated:
 Three Months EndedSix Months Ended
December 30,
2023
December 31,
2022
December 30,
2023
December 31,
2022
(millions)
Share-based compensation expense$22.5 $19.7 $42.2 $34.8 
Income tax benefit related to share-based compensation expense
4.2 3.7 7.9 6.7 
Stock Options
A summary of stock option activity during the six months ended December 30, 2023 is as follows:
 Number of
Options
Outstanding
(millions)
Outstanding at July 1, 20238.7 
Granted1.3 
Exercised(0.1)
Forfeited or expired(0.8)
Outstanding at December 30, 20239.1 
The weighted-average grant-date fair value of options granted during the six months ended December 30, 2023 and December 31, 2022 was $10.30 and $12.03, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model and the following weighted-average assumptions:
December 30,
2023
December 31,
2022
Expected term (years)5.04.9
Expected volatility44.8 %48.6 %
Risk-free interest rate4.5 %3.3 %
Dividend yield4.2 %3.4 %
Service-based Restricted Stock Unit Awards ("RSUs")
A summary of service-based RSU activity during the six months ended December 30, 2023 is as follows:
 Number of
Non-vested RSUs
(millions)
Non-vested at July 1, 20235.9 
Granted2.3 
Vested(2.7)
Forfeited(0.2)
Non-vested at December 30, 20235.3 
The weighted-average grant-date fair value of share awards granted during the six months ended December 30, 2023 and December 31, 2022 was $33.66 and $35.21, respectively.
17

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Performance-based Restricted Stock Unit Awards ("PRSUs")
A summary of PRSU activity during the six months ended December 30, 2023 is as follows:
 Number of
Non-vested PRSUs
(millions)
Non-vested at July 1, 20230.7 
Granted0.4 
Change due to performance condition achievement0.1 
Vested 
Forfeited 
Non-vested at December 30, 20231.2 
The PRSU awards included in the non-vested amount are based on certain Company-specific financial metrics. The effect of the change due to performance condition on the non-vested amount is recognized at the conclusion of the performance period, which may differ from the date on which the award vests.
The weighted-average grant-date fair value per share of PRSU awards granted during the six months ended December 30, 2023 and December 31, 2022 was $33.59 and $35.31, respectively.
18

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
11. DEBT
The following table summarizes the components of the Company’s outstanding debt:
December 30,
2023
July 1,
2023
(millions)
Current debt:
Term Loan due 2027$25.0 $25.0 
Total current debt$25.0 $25.0 
Long-term debt:
Term Loan due 2027$431.3 $443.8 
USD Senior Notes:
4.250% Senior Notes due 2025
303.4 303.4 
7.050% Senior Notes due 2025
500.0  
7.000% Senior Notes due 2026
750.0  
4.125% Senior Notes due 2027
396.6 396.6 
7.350% Senior Notes due 2028
1,000.0  
7.700% Senior Notes due 2030
1,000.0  
3.050% Senior Notes due 2032
500.0 500.0 
7.850% Senior Notes due 2033
1,250.0  
EUR Senior Notes:
5.350% EUR Senior Notes due 2025(1)
552.1  
5.375% EUR Senior Notes due 2027(1)
552.1  
5.875% EUR Senior Notes due 2031(1)
552.1  
Total long-term debt7,787.6 1,643.8 
Less: Unamortized discount and debt issuance costs on Senior Notes(73.2)(8.0)
Total long-term debt, net$7,714.4 $1,635.8 
(1)The carrying amounts of the Capri Acquisition EUR Senior Notes (as defined below) include the impact of changes in the exchange rate of the United States Dollar against the Euro.
During the three and six months ended December 30, 2023, the Company recognized interest expense related to its debt of $88.6 million and $110.9 million, respectively, which is inclusive of $25.9 million and $28.5 million, respectively, related to Bridge Facility (as defined below) financing fees. During the three and six months ended December 31, 2022, the Company recognized interest expense related to its debt of $18.1 million and $34.4 million, respectively.
Capri Holdings Limited Merger Agreement
On August 10, 2023, the Company entered into a Merger Agreement. The Company intends to finance the Capri Acquisition, inclusive of related fees and expenses, with the net proceeds of new senior unsecured notes, new term loans, cash on hand, cash on hand at Capri and anticipated future cash flow. During the quarter ended December 30, 2023, the Company issued $4.5 billion Capri Acquisition USD Senior Notes and €1.5 billion Capri Acquisition EUR Senior Notes which, in addition to the $1.4 billion of delayed draw Capri Acquisition Term Loan Facilities executed in the first quarter of fiscal 2024, completes the expected financing for the Capri Acquisition. Refer to Note 5, "Acquisitions" for further information.
19

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Bridge Facility
In connection with our entry into the Merger Agreement, the Company entered into a commitment letter, dated as of August 10, 2023, with Bank of America, N.A., Morgan Stanley Senior Funding, Inc. and the other commitment parties party thereto, to provide a 364-day senior unsecured bridge loan facility in an aggregate principal amount of up to $8.0 billion (the "Bridge Facility") to fund the purchase price of the Capri Acquisition and to pay related fees and expenses. Upon entering into the Capri Acquisition Term Loan Agreement (as defined below) and, as a result of the commitments thereunder with respect to the Capri Acquisition Term Loan Facilities (as defined below), the Bridge Facility commitments were reduced to $6.6 billion. In November 2023, the Bridge Facility was terminated upon the issuance of approximately $6.1 billion of the Capri Acquisition Senior Notes by the Company. Refer to the "Capri Acquisition USD Senior Notes" and "Capri Acquisition EUR Senior Notes" paragraphs below.
Capri Acquisition Term Loan Facilities
On August 30, 2023, the Company entered into a definitive credit agreement (such agreement, the "Capri Acquisition Term Loan Credit Agreement") whereby Bank of America, N.A, as administrative agent, and the other agents party thereto, and a syndicate of banks and financial institutions have committed to lend the Company, subject to the satisfaction or waiver of the conditions set forth in the Term Loan Agreement, a $1.05 billion unsecured term loan facility maturing three years after the term loans thereunder are borrowed (the “Three-Year Term Loan Facility”) and a $350 million term loan facility maturing five years after the term loans thereunder are borrowed (the “Five-Year Term Loan Facility”; and collectively with the Three-Year Term Loan Facility, the “Capri Acquisition Term Loan Facilities”). The Company plans to use borrowings under the Capri Acquisition Term Loan Facilities to pay a portion of the consideration for the Capri Acquisition and to pay related fees and expenses.
Borrowings under the Capri Acquisition Term Loan Facilities bear interest at a rate per annum equal to, at the Company’s option, either (a) an alternate base rate or (b) a rate based on the forward-looking Secured Overnight Financing Rate ("SOFR") term rate administered by CME Group Benchmark Administration Limited (or any successor administrator) plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a grid based on the ratio of (a) consolidated debt (with certain customary deductions for unrestricted cash and permitted investments) to (b) consolidated EBITDAR. The applicable margin will initially be (x) in the case of the Three-Year Term Loan Facility, 0.250% for base rate loans and 1.250% for SOFR loans and (y) in the case of the Five-Year Term Loan Facility, 0.375% for base rate loans and 1.375% for SOFR loans. Additionally, the Company will pay a ticking fee of 0.15% on the average daily amount of the unused commitments of the Capri Acquisition Term Loan Facilities. There were no outstanding borrowings on the Capri Acquisition Term Loan Facilities as of December 30, 2023.
$2.0 Billion Revolving Credit Facility
On August 30, 2023, pursuant to that certain Amendment No. 1 to Credit Agreement (the "Amendment"), the Company amended its Existing Credit Agreement (as defined below), originally dated as of May 11, 2022, among the Company, as borrower, certain of our subsidiaries, as guarantors, Bank of America, N.A., as administrative agent, and the financial institutions parties thereto as lenders (the "Existing Credit Agreement", and as amended by the Amendment, the "Amended Credit Agreement"). Under the Amended Credit Agreement, a syndicate of financial institutions and other lenders provided increases to the aggregate commitments to the revolving facility under the Existing Credit Agreement from $1.25 billion to $2.0 billion (the “Revolving Facility”). The Revolving Facility will mature on May 11, 2027.
Borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the Company’s option, (i) for borrowings in U.S. Dollars, either (a) an alternate base rate or (b) a rate based on the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited (or any successor administrator satisfactory to the administrative agent), (ii) for borrowings in Euros, the Euro Interbank Offered Rate, (iii) for borrowings in Pounds Sterling, the Sterling Overnight Index Average Reference Rate and (iv) for borrowings in Japanese Yen, the Tokyo Interbank Offer Rate, plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt to (b) consolidated EBITDAR. Additionally, the Company will pay facility fees, calculated at a rate per annum determined in accordance with the Pricing Grid, on the full amount of the Revolving Facility, payable quarterly in arrears, and certain fees with respect to letters of credit that are issued. The Revolving Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends, and other general corporate purposes of the Company and its subsidiaries (which may include commercial paper backup). Additionally, up to $250 million of the Revolving Facility will be available on a funds certain basis to fund the purchase price of the Capri Acquisition and to pay related fees and expenses. There were no outstanding borrowings on the Revolving Facility as of December 30, 2023.
20

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Capri Acquisition USD Senior Notes
On November 27, 2023, the Company issued $4.5 billion aggregate principal amount of senior unsecured notes, consisting of $500.0 million aggregate principal amount of 7.050% senior unsecured notes due November 27, 2025 at 99.890% of par (the “7.050% Senior Notes due 2025”), $750.0 million aggregate principal amount of 7.000% senior unsecured notes due November 27, 2026 at 99.803% of par (the “7.000% Senior Notes due 2026”), $1.0 billion aggregate principal amount of 7.350% senior unsecured notes due November 27, 2028 at 99.724% (the “7.350% Senior Notes due 2028”), $1.0 billion aggregate principal amount of 7.700% Senior Notes due November 27, 2030 at 99.712% of par (the “7.700% Senior Notes due 2030”) and $1.25 billion aggregate principal amount of our 7.850% Senior Notes due November 27, 2033 at 99.475% (the “7.850% Senior Notes due 2033" and, together with the 7.050% Senior Notes due 2025, the 7.000% Senior Notes due 2026, the 7.350% Senior Notes due 2028 and the 7.700% Senior Notes due 2030, the “Capri Acquisition USD Senior Notes”). The Company will pay interest semi-annually on the Capri Acquisition USD Senior Notes on May 27 and November 27 of each year, commencing on May 27, 2024.
If (i) the Capri Acquisition has not been completed by February 10, 2025 (or such later date mutually agreed between the Company and Capri) (such date, the “special mandatory redemption end date”), (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition USD Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.
Capri Acquisition EUR Senior Notes
On November 27, 2023, the Company issued €1.5 billion aggregate principal amount of senior unsecured notes, consisting of €500.0 million aggregate principal amount of 5.350% senior unsecured notes due November 27, 2025 at 99.878% of par (the “5.350% EUR Senior Notes due 2025”), €500.0 million aggregate principal amount of 5.375% senior unsecured notes due November 27, 2027 at 99.723% of par (the 5.375% EUR Senior Notes due 2027”) and €500.0 million aggregate principal amount of our 5.875% senior unsecured notes due November 27, 2031 at 99.248% of par (the “5.875% EUR Senior Notes due 2031" and, together with the 5.350% EUR Senior Notes due 2025 and the 5.375% EUR Senior Notes due 2027, the “Capri Acquisition EUR Senior Notes” and, together with the Capri Acquisition USD Senior Notes, the "Capri Acquisition Senior Notes"). The Company will pay interest annually on the Capri Acquisition EUR Senior Notes on November 27 of each year, commencing on November 27, 2024. As of December 30, 2023, the carrying amount for each of the Capri Acquisition EUR Senior Notes was $552.1 million.
If (i) the Capri Acquisition has not been completed by the special mandatory redemption end date, (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition EUR Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.
2027 Term Loan
On May 11, 2022, pursuant to the Existing Credit Agreement, the Company entered into an unsecured $500.0 million Term Loan (the “Term Loan due 2027”) which matures on May 11, 2027. The Term Loan due 2027 amortizes in an amount equal to 5.000% per annum, with payments made quarterly. As of December 30, 2023, $25.0 million of the Term Loan due 2027 is included in Current debt on the Consolidated Balance Sheets. Borrowings under the Term Loan due 2027 bear interest at a rate per annum equal to, at the Company’s option, either (i) an alternate base rate or (ii) a term secured overnight financing rate plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a pricing grid based on the ratio (a) consolidated debt to (b) consolidated EBITDAR.
2025, 2027, 2032 Senior Notes
In March 2015, the Company issued $600.0 million aggregate principal amount of 4.250% senior unsecured notes due April 1, 2025 at 99.445% of par (the "4.250% Senior Notes due 2025"). In June 2017, the Company issued $600.0 million aggregate principal amount of 4.125% senior unsecured notes due July 15, 2027 at 99.858% of par (the 4.125% Senior Notes due 2027"). In December 2021, the Company completed a cash tender offer for $296.6 million and $203.4 million of the outstanding aggregate principal amount under its 4.250% Senior Notes due 2025 and 4.125% Senior Notes due 2027, respectively. In addition, in December 2021, the Company issued $500.0 million aggregate principal amount of 3.050% senior unsecured notes due March 15, 2032 at 99.705% of par (the "3.050% Senior Notes due 2032").
21

TAPESTRY, INC.
 
Notes to Condensed Consolidated Financial Statements (continued)
Debt Covenants
Under the terms of our debt facilities, we must comply with certain restrictions limiting the Company’s ability to among other things: (i) incur certain indebtedness, (ii) create certain liens, (iii) enter into certain sale and leaseback transactions, (iv) make certain investments or payments and (v) merge, or consolidate or transfer, sell or lease all or substantially all of the Company’s assets.
Under the Amended Credit Agreement, we are required to comply on a quarterly basis with a maximum net leverage ratio of 4.00:1.00. After giving effect to the Capri Acquisition, the Company will be required under the Amended Credit Agreement and the Capri Acquisition Term Loan Agreement to comply on a quarterly basis with a maximum net leverage ratio of (i) from and including the closing date of the Capri Acquisition to but excluding June 28, 2025, 4.75 to 1.00, (ii) from and including June 28, 2025 to but excluding June 27, 2026, 4.50 to 1.00, and (iii) from and including June 27, 2026 and thereafter, 4.00 to 1.00. As of December 30, 2023, we were in compliance with these restrictions and covenants, have met such financial ratios and have met all debt payment obligations.
Fair Value Considerations
The following table shows the estimated fair values of the senior unsecured notes at December 30, 2023 and July 1, 2023 based on external pricing data, including available quoted market prices of the instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy:
December 30,
2023
July 1,
2023
(millions)
USD Senior Notes:
4.250% Senior Notes due 2025
299.7 295.1 
7.050% Senior Notes due 2025
511.8  
7.000% Senior Notes due 2026
777.9  
4.125% Senior Notes due 2027
378.5 371.7 
7.350% Senior Notes due 2028
1,049.8  
7.700% Senior Notes due 2030
1,055.1  
3.050% Senior Notes due 2032
407.5 399.5