(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered | ||
☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||
Emerging growth company |
Page Number | ||
PART I – FINANCIAL INFORMATION (unaudited) | ||
ITEM 1. | Financial Statements: | |
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II – OTHER INFORMATION | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 4. | ||
ITEM 6. | ||
December 28, 2019 | June 29, 2019 | ||||||
(millions) | |||||||
(unaudited) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term investments | |||||||
Trade accounts receivable, less allowances of $3.8 and $4.4, respectively | |||||||
Inventories | |||||||
Prepaid expenses | |||||||
Income tax receivable | |||||||
Other current assets | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Operating lease right-of-use assets | — | ||||||
Goodwill | |||||||
Intangible assets | |||||||
Deferred income taxes | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued liabilities | |||||||
Current portion of operating lease liabilities | — | ||||||
Current debt | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Long-term operating lease liabilities | — | ||||||
Deferred income taxes | |||||||
Long-term income taxes payable | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
See Note 15 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 - 276.0 million and 286.8 million shares, respectively | |||||||
Additional paid-in-capital | |||||||
Retained earnings (accumulated deficit) | |||||||
Accumulated other comprehensive income (loss) | ( | ) | ( | ) | |||
Total stockholders' equity | |||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
(millions, except per share data) | (millions, except per share data) | |||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net sales | $ | $ | $ | $ | ||||||||||||
Cost of sales | ||||||||||||||||
Gross profit | ||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||
Operating income | ||||||||||||||||
Interest expense, net | ||||||||||||||||
Other expense (income) | ( | ) | ( | ) | ||||||||||||
Income before provision for income taxes | ||||||||||||||||
Provision for income taxes | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||
Shares used in computing net income per share: | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Cash dividends declared per common share | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
(millions) | (millions) | |||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Unrealized gains (losses) on cash flow hedging derivatives, net | ( | ) | ||||||||||||||
Unrealized gains (losses) on available-for-sale investments, net | ||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
Other | ( | ) | ||||||||||||||
Other comprehensive income (loss), net of tax | ( | ) | ( | ) | ( | ) | ||||||||||
Comprehensive income | $ | $ | $ | $ |
Six Months Ended | |||||||
December 28, 2019 | December 29, 2018 | ||||||
(millions) | |||||||
(unaudited) | |||||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | |||||||
Provision for bad debt | |||||||
Share-based compensation | |||||||
Organization-related and integration activities | |||||||
Impairment charges | |||||||
Changes to lease related balances, net | |||||||
Deferred income taxes | ( | ) | |||||
Other non-cash charges, net | ( | ) | |||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable | ( | ) | ( | ) | |||
Inventories | ( | ) | |||||
Accounts payable | |||||||
Accrued liabilities | |||||||
Other liabilities | ( | ) | |||||
Other assets | ( | ) | ( | ) | |||
Net cash provided by (used in) operating activities | |||||||
CASH FLOWS USED IN INVESTING ACTIVITIES | |||||||
Acquisitions, net of cash acquired | ( | ) | |||||
Purchases of investments | ( | ) | ( | ) | |||
Proceeds from maturities and sales of investments | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
CASH FLOWS USED IN FINANCING ACTIVITIES | |||||||
Dividend payments | ( | ) | ( | ) | |||
Repurchase of common stock | ( | ) | |||||
Proceeds from share-based awards | |||||||
Taxes paid to net settle share-based awards | ( | ) | ( | ) | |||
Payments of finance lease liabilities | ( | ) | ( | ) | |||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | |||||
Net decrease in cash and cash equivalents | ( | ) | ( | ) | |||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
Supplemental information: | |||||||
Cash paid for income taxes, net | $ | $ | |||||
Cash paid for interest | $ | $ | |||||
Noncash investing activity - property and equipment obligations | $ | $ |
June 29, 2019 | June 30, 2019 | |||||||||||
As Reported under ASC 840 | ASC 842 Adjustments | As Reported under ASC 842 | ||||||||||
(millions) | ||||||||||||
Current Assets: | ||||||||||||
Prepaid expenses(1) | $ | $ | ( | ) | $ | |||||||
Other current assets(1) | ( | ) | ||||||||||
Long-term Assets: | ||||||||||||
Operating lease right-of-use assets(1) | — | |||||||||||
Intangible assets(1) | ( | ) | ||||||||||
Deferred income tax assets(3) | ||||||||||||
Other assets(1) | ( | ) | ||||||||||
Current Liabilities: | ||||||||||||
Accrued liabilities(1)(3) | ( | ) | ||||||||||
Operating lease liabilities(2) | — | |||||||||||
Current debt | ( | ) | ||||||||||
Long-term Liabilities: | ||||||||||||
Long-term debt | ( | ) | ||||||||||
Operating lease liabilities(2) | — | |||||||||||
Deferred income tax liabilities(3) | ( | ) | ||||||||||
Other liabilities(1)(3) | ( | ) | ||||||||||
Stockholder's Equity: | ||||||||||||
Retained earnings (accumulated deficit)(3) | ( | ) |
(1) | Upon adoption, the Company recognized operating lease right-of-use ("ROU") assets on the Condensed Consolidated Balance Sheet. In conjunction with this recognition, the Company reclassified amounts to lease right-of-use assets including: prepaid rent from prepaid expenses; key money and lease right intangibles from current and long-term other assets; deferred rent, lease incentives, unfavorable lease right liability and other accrued rent from current and long-term other liabilities. In addition, upon adoption in the first quarter of fiscal 2020, the Company recognized initial ROU asset balances of $ |
(2) | Upon adoption, the Company recognized lease liabilities of $ |
(3) | Upon adoption, the Company recognized a cumulative adjustment of $ |
North America | Greater China(1) | Other Asia(2) | Other(3) | Total | |||||||||||||||
(millions) | |||||||||||||||||||
Three Months Ended December 28, 2019 | |||||||||||||||||||
Coach | $ | $ | $ | $ | $ | ||||||||||||||
Kate Spade | |||||||||||||||||||
Stuart Weitzman | |||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||
Three Months Ended December 29, 2018 | |||||||||||||||||||
Coach | $ | $ | $ | $ | $ | ||||||||||||||
Kate Spade | |||||||||||||||||||
Stuart Weitzman | |||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||
Six Months Ended December 28, 2019 | |||||||||||||||||||
Coach | $ | $ | $ | $ | $ | ||||||||||||||
Kate Spade | |||||||||||||||||||
Stuart Weitzman | |||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||
Six Months Ended December 29, 2018 | |||||||||||||||||||
Coach | $ | $ | $ | $ | $ | ||||||||||||||
Kate Spade | |||||||||||||||||||
Stuart Weitzman | |||||||||||||||||||
Total | $ | $ | $ | $ | $ |
(1) | Greater China includes mainland China, Hong Kong SAR, Macao SAR and Taiwan. |
(2) | Other Asia includes Japan, Australia, New Zealand, South Korea, Thailand and other countries within Asia. |
(3) | Other sales primarily represents sales in Europe, the Middle East and royalties related to licensing. |
Three Months Ended | Six Months Ended | |||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
(millions) | ||||||||||||||||
Purchase accounting adjustments(1) | $ | $ | $ | $ | ||||||||||||
Acquisition costs(2) | ||||||||||||||||
Inventory-related charges(3) | ( | ) | ||||||||||||||
Contractual payments(4) | ||||||||||||||||
Other(5) | ||||||||||||||||
Total | $ | $ | $ | $ |
(1) | Purchase accounting adjustments primarily relate to the short-term impact of the amortization of fair value adjustments. |
(2) | Acquisition costs were primarily related to deal fees associated with acquisitions. |
(3) | Inventory-related charges primarily relate to inventory reserves. |
(4) | Contractual payments primarily relate to contract termination charges for the three and six months ended December 29, 2018. |
(5) |
Coach | Kate Spade | Stuart Weitzman | Total | ||||||||||||
(millions) | |||||||||||||||
Balance at June 29, 2019 | $ | $ | $ | $ | |||||||||||
Foreign exchange impact | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Balance at December 28, 2019 | $ | $ | $ | $ |
December 28, 2019 | June 29, 2019 | ||||||||||||||||||||||
Gross Carrying Amount | Accum. Amort. | Net | Gross Carrying Amount | Accum. Amort. | Net | ||||||||||||||||||
(millions) | |||||||||||||||||||||||
Intangible assets subject to amortization: | |||||||||||||||||||||||
Customer relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Favorable lease rights(1) | ( | ) | |||||||||||||||||||||
Total intangible assets subject to amortization | ( | ) | ( | ) | |||||||||||||||||||
Intangible assets not subject to amortization: | |||||||||||||||||||||||
Trademarks and trade names | — | — | |||||||||||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
(1) | Refer to Note 3, "Recent Accounting Pronouncements," for further information. |
Amortization Expense | |||
(millions) | |||
Remainder of fiscal 2020 | $ | ||
Fiscal 2021 | |||
Fiscal 2022 | |||
Fiscal 2023 | |||
Fiscal 2024 | |||
Fiscal 2025 | |||
Fiscal 2026 and thereafter | |||
Total | $ |
Shares of Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||
(millions, except per share data) | ||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Dividends declared ($0.3375 per share) | — | — | — | ( | — | ( | ||||||||||||||||
Cumulative adjustment from adoption of new accounting standard (see Note 3) | — | — | — | — | ||||||||||||||||||
Balance at September 29, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Dividends declared ($0.3375 per share) | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Balance at December 29, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Shares of Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||
(millions, except per share data) | ||||||||||||||||||||||
Balance at June 29, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes | — | ( | ) | — | — | ( | ) | |||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||
Dividends declared ($0.3375 per share) | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Cumulative adjustment from adoption of new accounting standard | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Balance at September 28, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ||||||||||||||||||
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Additional paid-in-capital as part of purchase consideration | — | — | — | — | — | — | ||||||||||||||||
Dividends declared ($0.3375 per share) | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Balance at December 28, 2019 | $ | $ | $ | $ | ( | ) | $ |
Unrealized Gains (Losses) on Cash Flow Hedging Derivatives(1) | Unrealized Gains (Losses) on Available- for-Sale Investments | Cumulative Translation Adjustment | Other(2) | Total | |||||||||||||||
(millions) | |||||||||||||||||||
Balances at June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||||||
Less: amounts reclassified from accumulated other comprehensive income to earnings | |||||||||||||||||||
Net current-period other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||||||
Balances at December 29, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Balances at June 29, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||||||
Less: amounts reclassified from accumulated other comprehensive income to earnings | ( | ) | |||||||||||||||||
Net current-period other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | |||||||||||||
Balances at December 28, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
(1) | The ending balances of AOCI related to cash flow hedges are net of tax of $ |
(2) | Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balance at December 29, 2018 is net of tax of $ |
December 28, 2019 | Location Recorded on Balance Sheet | ||||
(millions) | |||||
Assets: | |||||
Operating leases | $ | Operating lease right-of-use assets | |||
Finance leases | Property and equipment, net | ||||
Total lease assets | $ | ||||
Liabilities: | |||||
Operating leases: | |||||
Current lease liabilities | $ | Current lease liabilities | |||
Long-term lease liabilities | Long-term lease liabilities | ||||
Total operating lease liabilities | $ | ||||
Finance leases: | |||||
Current lease liabilities | $ | Accrued liabilities | |||
Long-term lease liabilities | Other liabilities | ||||
Total finance lease liabilities | $ | ||||
Total lease liabilities | $ |
Three Months Ended | Six Month Ended | |||||||
December 28, 2019 | ||||||||
(millions) | ||||||||
Finance lease cost: | ||||||||
Amortization of right-of-use assets | $ | $ | ||||||
Interest on lease liabilities(1) | ||||||||
Total finance lease cost | ||||||||
Operating lease cost | ||||||||
Short-term lease cost | ||||||||
Variable lease cost | ||||||||
Operating lease right-of-use impairment | ||||||||
Less: sublease income | ( | ) | ( | ) | ||||
Total net lease cost | $ | $ |
(1) | Interest on lease liabilities is recorded within Interest expense, net on the Company's Condensed Consolidated Statement of Operations. |
Six Months Ended | ||||
December 28, 2019 | ||||
(millions) | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | |||
Operating cash flows from finance leases | ||||
Financing cash flows from finance leases | ||||
Non-cash transactions: | ||||
Right-of-use assets obtained in exchange for operating lease liabilities | ||||
Right-of-use assets obtained in exchange for finance lease liabilities |
December 28, 2019 | ||||||||||||
Operating Leases | Finance Leases | Total | ||||||||||
(millions) | ||||||||||||
Remainder of Fiscal 2020 | $ | $ | $ | |||||||||
Fiscal 2021 | ||||||||||||
Fiscal 2022 | ||||||||||||
Fiscal 2023 | ||||||||||||
Fiscal 2024 | ||||||||||||
Fiscal 2025 and thereafter | ||||||||||||
Total lease payments | ||||||||||||
Less: imputed interest | ||||||||||||
Total lease liabilities | $ | $ | $ |
December 28, 2019 | ||||
(millions) | ||||
Remainder of Fiscal 2020 | $ | |||
Fiscal 2021 | ||||
Fiscal 2022 | ||||
Fiscal 2023 | ||||
Fiscal 2024 | ||||
Fiscal 2025 and thereafter | ||||
Total sublease income | $ |
December 28, 2019 | |||
Weighted average remaining lease term (years): | |||
Operating leases | |||
Finance leases | |||
Weighted average discount rate: | |||
Operating leases | % | ||
Finance leases | % |
June 29, 2019 | ||||
(millions) | ||||
2020 | $ | |||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
Subsequent to 2024 | ||||
Total minimum future rental payments | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | ||||||||||||
(millions, except per share data) | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Weighted-average basic shares | |||||||||||||||
Dilutive securities: | |||||||||||||||
Effect of dilutive securities | |||||||||||||||
Weighted-average diluted shares | |||||||||||||||
Net income per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | ||||||||||||
(millions) | |||||||||||||||
Share-based compensation expense(1) | $ | $ | $ | $ | |||||||||||
Income tax benefit related to share-based compensation expense |
(1) | During the three and six months ended December 28, 2019, the Company incurred $ |
Number of Options Outstanding | ||
(millions) | ||
Outstanding at June 29, 2019 | ||
Granted | ||
Exercised | ||
Forfeited or expired | ( | ) |
Outstanding at December 28, 2019 |
December 28, 2019 | December 29, 2018 | ||||
Expected term (years) | |||||
Expected volatility | % | % | |||
Risk-free interest rate | % | % | |||
Dividend yield | % | % |
Number of Non-vested RSUs | ||
(millions) | ||
Non-vested at June 29, 2019 | ||
Granted | ||
Vested | ( | ) |
Forfeited | ( | ) |
Non-vested at December 28, 2019 |
Number of Non-vested PRSUs | ||
(millions) | ||
Non-vested at June 29, 2019 | ||
Granted | ||
Change due to performance condition achievement | ||
Vested | ( | ) |
Forfeited | ||
Non-vested at December 28, 2019 |
December 28, 2019 | June 29, 2019 | ||||||
(millions) | |||||||
Current debt: | |||||||
Capital lease obligations | $ | $ | |||||
Total current debt | $ | $ | |||||
Long-term debt: | |||||||
4.250% Senior Notes due 2025 | $ | $ | |||||
3.000% Senior Notes due 2022 | |||||||
4.125% Senior Notes due 2027 | |||||||
Note Payable | |||||||
Capital lease obligations(1) | |||||||
Total long-term debt | |||||||
Less: Unamortized discount and debt issuance costs on Senior Notes | ( | ) | ( | ) | |||
Total long-term debt, net | $ | $ |
(1) | Refer to Note 3, "Recent Accounting Pronouncements," for further information. |
Level 1 | Level 2 | ||||||||||||||
December 28, 2019 | June 29, 2019 | December 28, 2019 | June 29, 2019 | ||||||||||||
(millions) | |||||||||||||||
Assets: | |||||||||||||||
Cash equivalents(1) | $ | $ | $ | $ | |||||||||||
Short-term investments: | |||||||||||||||
Time deposits(2) | |||||||||||||||
Commercial paper(2) | |||||||||||||||
Government securities - U.S.(2) | |||||||||||||||
Corporate debt securities - U.S.(2) | |||||||||||||||
Corporate debt securities - non U.S.(2) | |||||||||||||||
Other | |||||||||||||||
Long-term investments: | |||||||||||||||
Other | |||||||||||||||
Derivative assets: | |||||||||||||||
Inventory-related instruments(3) | |||||||||||||||
Intercompany loan and payable hedges(3) | |||||||||||||||
Liabilities: | |||||||||||||||
Derivative liabilities: | |||||||||||||||
Inventory-related instruments(3) | |||||||||||||||
Intercompany loan and payable hedges(3) |
(1) | Cash equivalents consist of money market funds and time deposits with maturities of |
(2) | Short-term investments are recorded at fair value, which approximates their carrying value, and are primarily based upon quoted vendor or broker priced securities in active markets. |
(3) | The fair value of these hedges is primarily based on the forward curves of the specific indices upon which settlement is based and includes an adjustment for the counterparty’s or Company’s credit risk. |
December 28, 2019 | June 29, 2019 | ||||||||||||||||||||||
Short-term | Long-term | Total | Short-term | Long-term | Total | ||||||||||||||||||
(millions) | |||||||||||||||||||||||
Available-for-sale investments: | |||||||||||||||||||||||
Commercial paper(1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Government securities - U.S.(2) | |||||||||||||||||||||||
Corporate debt securities - U.S.(2) | |||||||||||||||||||||||
Corporate debt securities - non-U.S.(2) | |||||||||||||||||||||||
Available-for-sale investments, total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Other: | |||||||||||||||||||||||
Time deposits(1) | — | — | |||||||||||||||||||||
Other | |||||||||||||||||||||||
Total Investments | $ | $ | $ | $ | $ | $ |
(1) | These securities have original maturities greater than |
(2) | These securities as of December 28, 2019 have maturity dates between calendar years 2019 and 2020 and are recorded at fair value. |
• | Coach - Includes global sales of Coach brand products to customers through Coach operated stores, including the Internet and concession shop-in-shops, sales to wholesale customers and through independent third party distributors. |
• | Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors. |
• | Stuart Weitzman - Includes global sales of Stuart Weitzman brand products to customers primarily through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors. |
Coach | Kate Spade | Stuart Weitzman | Corporate(1) | Total | |||||||||||||||
(millions) | |||||||||||||||||||
Three Months Ended December 28, 2019 | |||||||||||||||||||
Net sales | $ | $ | $ | $ | $ | ||||||||||||||
Gross profit | |||||||||||||||||||
Operating income (loss) | ( | ) | |||||||||||||||||
Income (loss) before provision for income taxes | ( | ) | |||||||||||||||||
Depreciation and amortization expense(2) | |||||||||||||||||||
Additions to long-lived assets(3) | |||||||||||||||||||
Three Months Ended December 29, 2018 | |||||||||||||||||||
Net sales | $ | $ | $ | $ | $ | ||||||||||||||
Gross profit | |||||||||||||||||||
Operating income (loss) | ( | ) | |||||||||||||||||
Income (loss) before provision for income taxes | ( | ) | |||||||||||||||||
Depreciation and amortization expense(2) | |||||||||||||||||||
Additions to long-lived assets(3) | |||||||||||||||||||
Six Months Ended December 28, 2019 | |||||||||||||||||||
Net sales | $ | $ | $ | $ | $ | ||||||||||||||
Gross profit | |||||||||||||||||||
Operating income (loss) | ( | ) | ( | ) | |||||||||||||||
Income (loss) before provision for income taxes | ( | ) | ( | ) | |||||||||||||||
Depreciation and amortization expense(2) | |||||||||||||||||||
Additions to long-lived assets(3) | |||||||||||||||||||
Six Months Ended December 29, 2018 | |||||||||||||||||||
Net sales | $ | $ | $ | $ | $ | ||||||||||||||
Gross profit | |||||||||||||||||||
Operating income (loss) | ( | ) | ( | ) | |||||||||||||||
Income (loss) before provision for income taxes | ( | ) | ( | ) | |||||||||||||||
Depreciation and amortization expense(2) | |||||||||||||||||||
Additions to long-lived assets(3) |
(1) | Corporate, which is not a reportable segment, represents certain costs that are not directly attributable to a brand. These costs primarily include administration and certain information systems expense. |
(2) | Depreciation and amortization expense includes $ |
(3) |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Coach - Includes global sales of Coach products to customers through Coach operated stores, including the Internet and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors. |
• | Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors. |
• | Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily to customers through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors. |
Three Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions, except per share data) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 1,816.0 | 100.0 | % | $ | 1,800.8 | 100.0 | % | $ | 15.2 | 0.8 | % | ||||||||
Gross profit | 1,209.7 | 66.6 | 1,203.5 | 66.8 | 6.2 | 0.5 | ||||||||||||||
SG&A expenses | 846.6 | 46.6 | 827.0 | 45.9 | 19.6 | 2.4 | ||||||||||||||
Operating income | 363.1 | 20.0 | 376.5 | 20.9 | (13.4 | ) | (3.6 | ) | ||||||||||||
Interest expense, net | 14.0 | 0.8 | 13.2 | 0.7 | 0.8 | 5.8 | ||||||||||||||
Other expense (income) | (5.9 | ) | (0.3 | ) | (4.2 | ) | (0.2 | ) | (1.7 | ) | (39.2 | ) | ||||||||
Provision for income taxes | 56.2 | 3.1 | 112.7 | 6.3 | (56.5 | ) | (50.1 | ) | ||||||||||||
Net income | 298.8 | 16.5 | 254.8 | 14.1 | 44.0 | 17.2 | ||||||||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 1.08 | $ | 0.88 | $ | 0.20 | 23.2 | % | ||||||||||||
Diluted | $ | 1.08 | $ | 0.88 | $ | 0.20 | 23.3 | % |
Three Months Ended December 28, 2019 | |||||||||||||||
GAAP Basis (As Reported) | ERP Implementation | Organization-related & Integration costs | Non-GAAP Basis (Excluding Items) | ||||||||||||
(millions, except per share data) | |||||||||||||||
Coach | 877.3 | — | — | 877.3 | |||||||||||
Kate Spade | 262.4 | — | — | 262.4 | |||||||||||
Stuart Weitzman | 70.0 | — | (1.5 | ) | 71.5 | ||||||||||
Gross profit(1) | $ | 1,209.7 | $ | — | $ | (1.5 | ) | $ | 1,211.2 | ||||||
Coach | 494.5 | — | (0.4 | ) | 494.9 | ||||||||||
Kate Spade | 194.5 | — | 0.7 | 193.8 | |||||||||||
Stuart Weitzman | 60.4 | — | 0.3 | 60.1 | |||||||||||
Corporate | 97.2 | 6.3 | 1.8 | 89.1 | |||||||||||
SG&A expenses | $ | 846.6 | $ | 6.3 | $ | 2.4 | $ | 837.9 | |||||||
Coach | 382.8 | — | 0.4 | 382.4 | |||||||||||
Kate Spade | 67.9 | — | (0.7 | ) | 68.6 | ||||||||||
Stuart Weitzman | 9.6 | — | (1.8 | ) | 11.4 | ||||||||||
Corporate | (97.2 | ) | (6.3 | ) | (1.8 | ) | (89.1 | ) | |||||||
Operating income (loss) | $ | 363.1 | $ | (6.3 | ) | $ | (3.9 | ) | $ | 373.3 | |||||
Provision for income taxes | 56.2 | (1.5 | ) | (4.0 | ) | 61.7 | |||||||||
Net income | $ | 298.8 | $ | (4.8 | ) | $ | 0.1 | $ | 303.5 | ||||||
Net income per diluted common share | $ | 1.08 | $ | (0.02 | ) | $ | — | $ | 1.10 |
• | ERP Implementation - Total charges represent technology implementation costs. Refer to the "Executive Overview" herein for further information. |
• | Organization-related and Integration costs - Total charges represent integration costs related to inventory and professional fees. Refer to the "Executive Overview" herein and Note 5, "Integration," for more information regarding integration costs. |
Three Months Ended December 29, 2018 | |||||||||||||||||||
GAAP Basis (As Reported) | ERP Implementation | Integration & Acquisition | Impact of Tax Legislation | Non-GAAP Basis (Excluding Items) | |||||||||||||||
(millions, except per share data) | |||||||||||||||||||
Cost of sales | |||||||||||||||||||
Coach | 860.1 | — | — | — | 860.1 | ||||||||||||||
Kate Spade | 272.4 | — | (2.5 | ) | — | 274.9 | |||||||||||||
Stuart Weitzman | 71.0 | — | (1.0 | ) | — | 72.0 | |||||||||||||
Gross profit(1) | $ | 1,203.5 | $ | — | $ | (3.5 | ) | $ | — | $ | 1,207.0 | ||||||||
SG&A expenses | |||||||||||||||||||
Coach | 485.7 | — | — | — | 485.7 | ||||||||||||||
Kate Spade | 184.1 | — | 3.7 | — | 180.4 | ||||||||||||||
Stuart Weitzman | 61.1 | — | 0.6 | — | 60.5 | ||||||||||||||
Corporate | 96.1 | 6.4 | 7.4 | — | 82.3 | ||||||||||||||
SG&A expenses | $ | 827.0 | $ | 6.4 | $ | 11.7 | $ | — | $ | 808.9 | |||||||||
Operating income (loss) | |||||||||||||||||||
Coach | 374.4 | — | — | — | 374.4 | ||||||||||||||
Kate Spade | 88.3 | — | (6.2 | ) | — | 94.5 | |||||||||||||
Stuart Weitzman | 9.9 | — | (1.6 | ) | — | 11.5 | |||||||||||||
Corporate | (96.1 | ) | (6.4 | ) | (7.4 | ) | — | (82.3 | ) | ||||||||||
Operating income (loss) | $ | 376.5 | $ | (6.4 | ) | $ | (15.2 | ) | $ | — | $ | 398.1 | |||||||
Provision for income taxes | 112.7 | (1.6 | ) | 1.1 | 34.1 | 79.1 | |||||||||||||
Net income | $ | 254.8 | $ | (4.8 | ) | $ | (16.3 | ) | $ | (34.1 | ) | $ | 310.0 | ||||||
Net income per diluted common share | $ | 0.88 | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.12 | ) | $ | 1.07 |
• | ERP Implementation - Total charges represent technology implementation costs. Refer to the "Executive Overview" herein for further information. |
• | Integration & Acquisition - Total charges represent integration and acquisition costs related to organizational costs as a result of integration, professional fees and limited life purchase accounting adjustments. |
• | Impact of Tax Legislation - Total charges primarily relate to the impact of the transition tax. |
Three Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 1,269.9 | 100.0 | % | $ | 1,248.6 | 100.0 | % | $ | 21.3 | 1.7 | % | ||||||||
Gross profit | 877.3 | 69.1 | 860.1 | 68.9 | 17.2 | 2.0 | ||||||||||||||
SG&A expenses | 494.5 | 38.9 | 485.7 | 38.9 | 8.8 | 1.8 | ||||||||||||||
Operating income (loss) | 382.8 | 30.1 | 374.4 | 30.0 | 8.4 | 2.3 |
Three Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 430.4 | 100.0 | % | $ | 428.4 | 100.0 | % | $ | 2.0 | 0.5 | % | ||||||||
Gross profit | 262.4 | 61.0 | 272.4 | 63.6 | (10.0 | ) | (3.7 | ) | ||||||||||||
SG&A expenses | 194.5 | 45.2 | 184.1 | 43.0 | 10.4 | 5.7 | ||||||||||||||
Operating income (loss) | 67.9 | 15.8 | 88.3 | 20.6 | (20.4 | ) | (23.1 | ) |
Three Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 115.7 | 100.0 | % | $ | 123.8 | 100.0 | % | $ | (8.1 | ) | (6.6 | )% | |||||||
Gross profit | 70.0 | 60.5 | 71.0 | 57.3 | (1.0 | ) | (1.4 | ) | ||||||||||||
SG&A expenses | 60.4 | 52.3 | 61.1 | 49.3 | (0.7 | ) | (0.9 | ) | ||||||||||||
Operating income (loss) | 9.6 | 8.2 | 9.9 | 8.0 | (0.3 | ) | (3.9 | ) |
Six Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions, except per share data) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 3,173.9 | 100.0 | % | $ | 3,182.0 | 100.0 | % | $ | (8.1 | ) | (0.3 | )% | |||||||
Gross profit | 2,124.2 | 66.9 | 2,138.6 | 67.2 | (14.4 | ) | (0.7 | ) | ||||||||||||
SG&A expenses | 1,709.5 | 53.9 | 1,599.8 | 50.3 | 109.7 | 6.9 | ||||||||||||||
Operating income | 414.7 | 13.1 | 538.8 | 16.9 | (124.1 | ) | (23.0 | ) | ||||||||||||
Interest expense, net | 26.3 | 0.8 | 26.3 | 0.8 | — | 0.1 | ||||||||||||||
Other expense (income) | 6.8 | 0.2 | 0.4 | NM | 6.4 | NM | ||||||||||||||
Provision for income taxes | 62.8 | 2.0 | 135.0 | 4.2 | (72.2 | ) | (53.5 | ) | ||||||||||||
Net income | 318.8 | 10.0 | 377.1 | 11.9 | (58.3 | ) | (15.5 | ) | ||||||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 1.14 | $ | 1.30 | $ | (0.16 | ) | (12.9 | )% | |||||||||||
Diluted | $ | 1.13 | $ | 1.29 | $ | (0.16 | ) | (12.6 | )% |
Six Months Ended December 28, 2019 | |||||||||||||||||||
GAAP Basis (As Reported) | ERP Implementation | Organization-related & Integration costs | Impairment | Non-GAAP Basis (Excluding Items) | |||||||||||||||
(millions, except per share data) | |||||||||||||||||||
Cost of sales | |||||||||||||||||||
Coach | 1,554.9 | — | (0.1 | ) | — | 1,555.0 | |||||||||||||
Kate Spade | 453.9 | — | (1.2 | ) | — | 455.1 | |||||||||||||
Stuart Weitzman | 115.4 | — | (4.3 | ) | — | 119.7 | |||||||||||||
Gross profit(1) | $ | 2,124.2 | $ | — | $ | (5.6 | ) | $ | — | $ | 2,129.8 | ||||||||
SG&A expenses | |||||||||||||||||||
Coach | 972.6 | — | (0.1 | ) | 41.5 | 931.2 | |||||||||||||
Kate Spade | 393.2 | — | 0.8 | 25.2 | 367.2 | ||||||||||||||
Stuart Weitzman | 125.1 | — | (2.1 | ) | 8.9 | 118.3 | |||||||||||||
Corporate | 218.6 | 20.8 | 24.5 | — | 173.3 | ||||||||||||||
SG&A expenses | $ | 1,709.5 | $ | 20.8 | $ | 23.1 | $ | 75.6 | $ | 1,590.0 | |||||||||
Operating income (loss) | |||||||||||||||||||
Coach | 582.3 | — | — | (41.5 | ) | 623.8 | |||||||||||||
Kate Spade | 60.7 | — | (2.0 | ) | (25.2 | ) | 87.9 | ||||||||||||
Stuart Weitzman | (9.7 | ) | — | (2.2 | ) | (8.9 | ) | 1.4 | |||||||||||
Corporate | (218.6 | ) | (20.8 | ) | (24.5 | ) | — | (173.3 | ) | ||||||||||
Operating income (loss) | $ | 414.7 | $ | (20.8 | ) | $ | (28.7 | ) | $ | (75.6 | ) | $ | 539.8 | ||||||
Provision for income taxes | 62.8 | (5.0 | ) | (9.4 | ) | (12.1 | ) | 89.3 | |||||||||||
Net income | $ | 318.8 | $ | (15.8 | ) | $ | (19.3 | ) | $ | (63.5 | ) | $ | 417.4 | ||||||
Net income per diluted common share | $ | 1.13 | $ | (0.06 | ) | $ | (0.07 | ) | $ | (0.22 | ) | $ | 1.48 |
• | ERP Implementation - Total charges represent technology implementation costs. Refer to the "Executive Overview" herein for further information. |
• | Organization-related and Integration costs - Total charges represent organization-related costs as a result of the departure of the Company's CEO in September 2019 and integration costs related to inventory, professional fees and share-based compensation. Refer to the "Executive Overview" herein for information regarding CEO departure and Note 5, "Integration," for more information regarding integration costs. |
• | Impairment - Total charges are primarily due to impairment charges on property and equipment assets and lease ROU assets. Refer to the Note 13, "Fair Value Measurements," for further information. |
Six Months Ended December 29, 2018 | |||||||||||||||||||
GAAP Basis (As Reported) | ERP Implementation | Integration & Acquisition | Impact of Tax Legislation | Non-GAAP Basis (Excluding Items) | |||||||||||||||
(millions, except per share data) | |||||||||||||||||||
Cost of sales | |||||||||||||||||||
Coach | 1,539.8 | — | (2.0 | ) | — | 1,541.8 | |||||||||||||
Kate Spade | 480.1 | — | (1.1 | ) | — | 481.2 | |||||||||||||
Stuart Weitzman | 118.7 | — | (1.0 | ) | — | 119.7 | |||||||||||||
Gross profit(1) | $ | 2,138.6 | $ | — | $ | (4.1 | ) | $ | — | $ | 2,142.7 | ||||||||
SG&A expenses | |||||||||||||||||||
Coach | 930.3 | — | — | — | 930.3 | ||||||||||||||
Kate Spade | 347.1 | — | 7.1 | — | 340.0 | ||||||||||||||
Stuart Weitzman | 126.5 | — | 12.1 | — | 114.4 | ||||||||||||||
Corporate | 195.9 | 10.4 | 11.4 | — | 174.1 | ||||||||||||||
SG&A expenses | $ | 1,599.8 | $ | 10.4 | $ | 30.6 | $ | — | $ | 1,558.8 | |||||||||
Operating income (loss) | |||||||||||||||||||
Coach | 609.5 | — | (2.0 | ) | — | 611.5 | |||||||||||||
Kate Spade | 133.0 | — | (8.2 | ) | — | 141.2 | |||||||||||||
Stuart Weitzman | (7.8 | ) | — | (13.1 | ) | — | 5.3 | ||||||||||||
Corporate | (195.9 | ) | (10.4 | ) | (11.4 | ) | — | (174.1 | ) | ||||||||||
Operating income (loss) | $ | 538.8 | $ | (10.4 | ) | $ | (34.7 | ) | $ | — | $ | 583.9 | |||||||
Provision for income taxes | 135.0 | (2.6 | ) | (2.1 | ) | 34.1 | 105.6 | ||||||||||||
Net income | $ | 377.1 | $ | (7.8 | ) | $ | (32.6 | ) | $ | (34.1 | ) | $ | 451.6 | ||||||
Net income per diluted common share | $ | 1.29 | $ | (0.03 | ) | $ | (0.11 | ) | $ | (0.12 | ) | $ | 1.55 |
• | ERP Implementation - Total charges primarily relate to technology implementation costs. Refer to the "Executive Overview" herein for further information. |
• | Integration & Acquisitions Costs - Total charges represent integration and acquisition costs related to contract termination charges, organizational costs as a result of integration, professional fees and limited life purchase accounting adjustments. |
• | Impact of Tax Legislation - Total charges primarily relate to the net impact of the transition tax and re-measurement of deferred tax balances. |
Six Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 2,235.8 | 100.0 | % | $ | 2,209.3 | 100.0 | % | $ | 26.5 | 1.2 | % | ||||||||
Gross profit | 1,554.9 | 69.5 | 1,539.8 | 69.7 | 15.1 | 1.0 | ||||||||||||||
SG&A expenses | 972.6 | 43.5 | 930.3 | 42.1 | 42.3 | 4.5 | ||||||||||||||
Operating income (loss) | 582.3 | 26.0 | 609.5 | 27.6 | (27.2 | ) | (4.5 | ) |
Six Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 735.9 | 100.0 | % | $ | 753.8 | 100.0 | % | $ | (17.9 | ) | (2.4 | )% | |||||||
Gross profit | 453.9 | 61.7 | 480.1 | 63.7 | (26.2 | ) | (5.5 | ) | ||||||||||||
SG&A expenses | 393.2 | 53.4 | 347.1 | 46.0 | 46.1 | 13.3 | ||||||||||||||
Operating income (loss) | 60.7 | 8.2 | 133.0 | 17.7 | (72.3 | ) | (54.4 | ) |
Six Months Ended | ||||||||||||||||||||
December 28, 2019 | December 29, 2018 | Variance | ||||||||||||||||||
(millions) | ||||||||||||||||||||
Amount | % of net sales | Amount | % of net sales | Amount | % | |||||||||||||||
Net sales | $ | 202.2 | 100.0 | % | $ | 218.9 | 100.0 | % | $ | (16.7 | ) | (7.7 | )% | |||||||
Gross profit | 115.4 | 57.1 | 118.7 | 54.2 | (3.3 | ) | (2.7 | ) | ||||||||||||
SG&A expenses | 125.1 | 61.9 | 126.5 | 57.8 | (1.4 | ) | (1.1 | ) | ||||||||||||
Operating income (loss) | (9.7 | ) | (4.8 | ) | (7.8 | ) | (3.6 | ) | (1.9 | ) | (24.5 | ) |
Six Months Ended | ||||||||||||
December 28, 2019 | December 29, 2018 | Change | ||||||||||
(millions) | ||||||||||||
Net cash provided by (used in) operating activities | $ | 561.7 | $ | 599.3 | $ | (37.6 | ) | |||||
Net cash used in investing activities | (127.9 | ) | (405.5 | ) | 277.6 | |||||||
Net cash used in financing activities | (506.5 | ) | (188.1 | ) | (318.4 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 0.4 | (12.1 | ) | 12.5 | ||||||||
Net decrease in cash and cash equivalents | $ | (72.3 | ) | $ | (6.4 | ) | $ | (65.9 | ) |
• | Other liabilities were a use of cash of $12.6 million in the first six months of fiscal 2020 compared to a source of cash of $40.3 million in the first six months of fiscal 2019, primarily related to the timing of tax payments. |
• | Accounts receivable were a use of cash of $78.7 million in the first six months of fiscal 2020 compared to a use of cash of $34.2 million in the first six months of fiscal 2019, primarily driven by an increase in sales at Coach. |
• | Accrued liabilities were a source of cash of $63.3 million in the first six months of fiscal 2020 as compared to a source of cash of $95.5 million in the first six months of fiscal 2019, primarily driven by the timing of payments to vendors. |
• | Inventories were a source of cash of $19.5 million in the first six months of fiscal 2020 compared to a use of cash of $42.1 million in the first six months of fiscal 2019, primarily driven by a lower inventory on-hand due to higher sales at Coach and decreased inventory purchases for Kate Spade. |
• | Other assets were a use of cash of $27.7 million in the first six months of fiscal 2020 compared to a use of cash of $55.9 million in the first six months of fiscal 2019, primarily related to the timing of tax related payments. |
Sources of Liquidity | Outstanding Indebtedness | Total Available Liquidity(1) | |||||||||
(millions) | |||||||||||
Cash and cash equivalents(1) | $ | 896.9 | $ | — | $ | 896.9 | |||||
Short-term investments(1) | 269.8 | — | 269.8 | ||||||||
Revolving Credit Facility(2) | 900.0 | — | 900.0 | ||||||||
3.000% Senior Notes due 2022(3) | 400.0 | 400.0 | — | ||||||||
4.250% Senior Notes due 2025(3) | 600.0 | 600.0 | — | ||||||||
4.125% Senior Notes due 2027(3) | 600.0 | 600.0 | — | ||||||||
Total | $ | 3,666.7 | $ | 1,600.0 | $ | 2,066.7 |
(1) | As of December 28, 2019, approximately 49% of our cash and short-term investments were held outside the United States. The Company will likely repatriate some portion of available foreign cash in the foreseeable future, and has recorded deferred taxes on certain earnings of non-US subsidiaries that are deemed likely to be repatriated. |
(2) | In October 2019, the Company entered into a definitive credit agreement whereby Bank of America, N.A., as administrative agent, the other agents party thereto, and a syndicate of banks and financial institutions have made available to the Company a $900.0 million revolving credit facility, including sub-facilities for letters of credit, with a maturity date of October 24, 2024 (the "Revolving Credit Facility"). The Revolving Credit Facility refinanced and replaced the Company’s unsecured revolving facility dated May 30, 2017. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to, at the Borrowers’ option, either (a) an alternate base rate (which is a rate equal to the greatest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1% or (iii) the Adjusted LIBO Rate for a one month Interest Period on such day plus 1%) or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made plus, in each case, an applicable margin. The applicable margin will be determined by reference to a grid, defined in the Credit Agreement, based on the ratio of (a) consolidated debt plus operating lease liability to (b) consolidated EBITDAR. Additionally, the Company pays a commitment fee at a rate determined by the reference to the aforementioned pricing grid. The Company had no outstanding borrowings under the Revolving Credit Facility as of December 28, 2019. Refer to Note 12, "Debt" for further information on our existing debt instruments. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 6. | EXHIBITS |
10.1†* | ||
31.1* | ||
32.1* | ||
101.INS* | XBRL Instance Document | |
Note: the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase |
* | Filed Herewith |
TAPESTRY, INC. | ||
(Registrant) | ||
By: | /s/ Brian Satenstein | |
Name: | Brian Satenstein | |
Title: | Corporate Controller | |
(Principal Accounting Officer) |
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1. | I have reviewed this Quarterly Report on Form 10-Q of Tapestry, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Jide Zeitlin | |
Name: | Jide Zeitlin | |
Title: | Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Tapestry, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Joanne C. Crevoiserat | |
Name: | Joanne C. Crevoiserat | |
Title: | Chief Financial Officer |
By: | /s/ Jide Zeitlin | |
Name: | Jide Zeitlin | |
Title: | Chief Executive Officer |
By: | /s/ Joanne C. Crevoiserat | |
Name: | Joanne C. Crevoiserat | |
Title: | Chief Financial Officer |
Goodwill and Other Intangible Assets (Change in Carrying Value of Goodwill) (Details) $ in Millions |
6 Months Ended |
---|---|
Dec. 28, 2019
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning Balance | $ 1,516.2 |
Foreign exchange impact | (4.9) |
Ending Balance | 1,511.3 |
Coach | |
Goodwill [Roll Forward] | |
Beginning Balance | 661.8 |
Foreign exchange impact | (3.5) |
Ending Balance | 658.3 |
Kate Spade | |
Goodwill [Roll Forward] | |
Beginning Balance | 640.4 |
Foreign exchange impact | (0.3) |
Ending Balance | 640.1 |
Stuart Weitzman | |
Goodwill [Roll Forward] | |
Beginning Balance | 214.0 |
Foreign exchange impact | (1.1) |
Ending Balance | $ 212.9 |
Share-based Compensation (Weighted-average Assumptions) (Details) - Stock Options |
6 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (years) | 5 years 1 month 6 days | 5 years |
Expected volatility | 37.60% | 30.30% |
Risk-free interest rate | 1.50% | 3.10% |
Dividend yield | 6.40% | 3.10% |
Recent Accounting Pronouncements (Tables) |
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The effects of the adoption on selected line items within the Company's Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:
(3) Upon adoption, the Company recognized a cumulative adjustment of $63.7 million, net of tax, decreasing the opening balance of Retained earnings, related to right-of-use asset impairment charges for certain of the Company’s stores where it was previously determined that the carrying value of assets was not recoverable. This adjustment was partially offset by ($14.8) million, net of tax, of increases to retained earnings to recognize deferred gains resulting from real estate transactions.
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Commitments and Contingencies |
6 Months Ended |
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Dec. 28, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Letters of Credit The Company had standby letters of credit, surety bonds and bank guarantees totaling $34.1 million and $34.5 million outstanding at December 28, 2019 and June 29, 2019, respectively. The agreements, which expire at various dates through calendar 2039, primarily collateralize the Company's obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing. The Company pays certain fees with respect to these instruments that are issued. Other The Company had other contractual cash obligations as of December 28, 2019 related to debt repayments. Refer to Note 12, "Debt," for further information. In the ordinary course of business, the Company is a party to several pending legal proceedings and claims. Although the outcome of such items cannot be determined with certainty, the Company's Chief Legal Officer and management are of the opinion that the final outcome will not have a material effect on the Company’s cash flow, results of operations or financial position.
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Stockholders' Equity (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Stockholders Equity | A reconciliation of stockholders' equity is presented below:
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Components of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss) ("AOCI"), as of the dates indicated, are as follows:
(2) Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balance at December 29, 2018 is net of tax of $0.6 million. There was no remaining balance at December 28, 2019.
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Share-based Compensation |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | 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:
Stock Options A summary of stock option activity during the six months ended December 28, 2019 is as follows:
The weighted-average grant-date fair value of options granted during the six months ended December 28, 2019 and December 29, 2018 was $3.83 and $9.77, 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:
Service-based Restricted Stock Unit Awards ("RSUs") A summary of service-based RSU activity during the six months ended December 28, 2019 is as follows:
The weighted-average grant-date fair value of share awards granted during the six months ended December 28, 2019 and December 29, 2018 was $21.45 and $50.85, respectively. Performance-based Restricted Stock Unit Awards ("PRSUs") A summary of PRSU activity during the six months ended December 28, 2019 is as follows:
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 28, 2019 and December 29, 2018 was $21.65 and $50.89, respectively.
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Goodwill and Other Intangible Assets |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The change in the carrying amount of the Company’s goodwill by segment is as follows:
Intangible Assets Intangible assets consist of the following:
As of December 28, 2019, the expected amortization expense for intangible assets is as follows:
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Recent Accounting Pronouncements (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 28, 2019 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 2,133.7 | $ 1,996.5 |
Operating lease liability | $ 2,231.0 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | 2,133.7 | |
Operating lease liability | 2,320.0 | |
Accounting Standards Update 2018-11 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cumulative adjustment from adoption of new accounting standard | 63.7 | |
Cumulative effect on retained earnings | $ (14.8) |
Leases (Tables) |
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Dec. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets And Liabilities, Lessee | The following table summarizes the ROU assets and lease liabilities recorded on the Company's Condensed Consolidated Balance Sheet as of December 28, 2019:
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Lease, Cost | The following table summarizes the composition of net lease costs, primarily recorded within SG&A expenses on the Company's Condensed Consolidated Statement of Operations for the three and six months ended December 28, 2019:
The following table summarizes certain cash flow information related to the Company's leases for the six months ended December 28, 2019:
The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates related to the Company's operating leases and finance leases recorded on the Condensed Consolidated Balance Sheet as of December 28, 2019:
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Lessee, Operating Lease, Liability, Maturity | The following table provides a maturity analysis of the Company's lease liabilities recorded on the Condensed Consolidated Balance Sheet as of December 28, 2019:
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Finance Lease, Liability, Maturity | The following table provides a maturity analysis of the Company's lease liabilities recorded on the Condensed Consolidated Balance Sheet as of December 28, 2019:
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Lessor, Operating Lease, Payments to be Received, Maturity | The future minimum fixed sublease receipts under non-cancelable operating lease agreements as of December 28, 2019 are as follows:
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Future Minimum Rental Payments for Operating Leases | As reported under the previous accounting standard, the following table provides a summary of future minimum rental payments under non-cancelable operating leases, as of June 29, 2019:
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Fair Value Measurements (Tables) |
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Dec. 28, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements of Assets and Liabilities | The following table shows the fair value measurements of the Company’s financial assets and liabilities at December 28, 2019 and June 29, 2019:
(3) The fair value of these hedges is primarily based on the forward curves of the specific indices upon which settlement is based and includes an adjustment for the counterparty’s or Company’s credit risk.
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Leases - Sublease Income (Details) $ in Millions |
Dec. 28, 2019
USD ($)
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Leases [Abstract] | |
Remainder of Fiscal 2020 | $ 10.6 |
Fiscal 2021 | 21.1 |
Fiscal 2022 | 20.1 |
Fiscal 2023 | 16.0 |
Fiscal 2024 | 15.5 |
Fiscal 2025 and thereafter | 187.5 |
Total sublease income | $ 270.8 |
Leases - Right Of Use Assets and Lease Liability (Details) - USD ($) $ in Millions |
Dec. 28, 2019 |
Jun. 30, 2019 |
---|---|---|
ASSETS | ||
Operating lease right-of-use assets | $ 1,996.5 | $ 2,133.7 |
Finance leases | 3.6 | |
Total lease assets | 2,000.1 | |
Operating leases: | ||
Current portion of operating lease liabilities | 329.8 | 362.3 |
Long-term operating lease liabilities | 1,901.2 | $ 1,961.6 |
Total operating lease liabilities | 2,231.0 | |
Finance leases: | ||
Current lease liabilities | 0.8 | |
Long-term lease liabilities | 4.9 | |
Total finance lease liabilities | 5.7 | |
Total lease liabilities | $ 2,236.7 |
Earnings Per Share (Anti-Dilutive Impact on Diluted Earnings per Share) (Details) - shares shares in Millions |
6 Months Ended | |
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Dec. 28, 2019 |
Dec. 29, 2018 |
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Earnings Per Share [Abstract] | ||
Shares excluded from diluted share calculations (shares) | 13.1 | 7.8 |
Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Millions |
Dec. 28, 2019 |
Jun. 29, 2019 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Standby letters of credit and bank guarantees | $ 34.1 | $ 34.5 |
Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | 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:
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 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 28, 2019 and December 29, 2018, there were 13.1 million and 7.8 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.
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Acquisitions |
6 Months Ended |
---|---|
Dec. 28, 2019 | |
Business Combinations [Abstract] | |
Acquisitions | ACQUISITIONS Fiscal 2019 Acquisitions Distributor Acquisitions During the fiscal year ended June 29, 2019, the Company acquired designated assets of its Stuart Weitzman distributor in Southern China and Australia and of its Kate Spade distributor in Australia, Malaysia and Singapore. The aggregate purchase consideration for the acquisitions was $47.8 million, $44.0 million of which was cash consideration and the remaining is related to non-cash consideration. Of the $44.0 million of cash consideration, $43.5 million was paid during fiscal 2019 and the remaining will be paid in the future. Of the total purchase consideration of $47.8 million, $21.8 million of net assets were recorded at their fair values. The excess of the purchase consideration over the fair value of the net assets acquired was recorded as non-tax deductible goodwill in the amount of $26.0 million, of which $13.3 million was assigned to the Stuart Weitzman segment and $12.7 million was assigned to the Kate Spade segment. The purchase price allocation for these assets acquired and liabilities assumed is completed, however may be subject to change as additional information is obtained during the acquisition measurement period for the respective acquisitions. The pro forma results are not presented for these acquisitions as they are immaterial.
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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Dec. 28, 2019 |
Jun. 29, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Trade accounts receivable, allowances | $ 3.8 | $ 4.4 |
Preferred stock, authorized (shares) | 25,000,000 | 25,000,000 |
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, issued (shares) | 0 | 0 |
Common stock, authorized (shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, issued (shares) | 276,000,000 | 286,800,000 |
Common stock, outstanding (shares) | 276,000,000 | 286,800,000 |
Nature of Operations |
6 Months Ended |
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Dec. 28, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | NATURE OF OPERATIONS Tapestry, Inc. (the "Company") is a leading New York-based house of modern luxury accessories and lifestyle brands. Tapestry owns the Coach, Kate Spade and Stuart Weitzman brands. The Company’s primary product offerings, manufactured by third-party suppliers, include women’s and men’s bags, small leather goods, footwear, ready-to-wear including outerwear, watches, weekend and travel accessories, scarves, eyewear, fragrance, jewelry and other lifestyle products. The Coach segment includes global sales of Coach products to customers through Coach operated stores, including the Internet and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors. The Kate Spade segment includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors. The Stuart Weitzman segment includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors.
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Weighted-average Shares Outstanding and Calculation of Basic and Diluted Earnings Per Share | The following is a reconciliation of the weighted-average shares outstanding and calculation of basic and diluted earnings per share:
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Investments | The following table summarizes the Company’s U.S. dollar-denominated investments, recorded within the Company's Condensed Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019:
(2) These securities as of December 28, 2019 have maturity dates between calendar years 2019 and 2020 and are recorded at fair value.
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Revenue (Details) - USD ($) $ in Millions |
6 Months Ended | ||
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Dec. 28, 2019 |
Dec. 29, 2018 |
Jun. 29, 2019 |
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||
Deferred revenue, current | $ 32.7 | $ 27.5 | |
Deferred revenue, revenue recognized | $ 8.3 | $ 11.9 | |
Minimum | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||
Payment terms | 30 days | ||
Maximum | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||
Payment terms | 90 days | ||
Licensing business | Net sales | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||
Percentage of revenue | 1.00% |
Earnings per Share (Reconciliation of Weighted Average Shares Outstanding and Calculation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||||
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Dec. 28, 2019 |
Sep. 28, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Dec. 28, 2019 |
Dec. 29, 2018 |
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Earnings Per Share [Abstract] | ||||||
Net income | $ 298.8 | $ 20.0 | $ 254.8 | $ 122.3 | $ 318.8 | $ 377.1 |
Weighted-average basic shares (shares) | 276.0 | 289.9 | 280.8 | 289.3 | ||
Effect of dilutive securities (shares) | 0.7 | 1.1 | 1.0 | 2.1 | ||
Weighted-average diluted shares (shares) | 276.7 | 291.0 | 281.8 | 291.4 | ||
Net income per share: | ||||||
Basic (USD per share) | $ 1.08 | $ 0.88 | $ 1.14 | $ 1.30 | ||
Diluted (USD per share) | $ 1.08 | $ 0.88 | $ 1.13 | $ 1.29 |
Leases - Maturity 842 (Details) $ in Millions |
Dec. 28, 2019
USD ($)
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Operating Leases | |
Remainder of Fiscal 2020 | $ 193.6 |
Fiscal 2021 | 398.5 |
Fiscal 2022 | 357.7 |
Fiscal 2023 | 312.3 |
Fiscal 2024 | 263.9 |
Fiscal 2025 and thereafter | 1,156.2 |
Total lease payments | 2,682.2 |
Less: imputed interest | 451.2 |
Total operating lease liabilities | 2,231.0 |
Finance Leases | |
Remainder of Fiscal 2020 | 0.7 |
Fiscal 2021 | 1.4 |
Fiscal 2022 | 1.4 |
Fiscal 2023 | 1.4 |
Fiscal 2024 | 1.4 |
Fiscal 2025 and thereafter | 1.3 |
Total lease payments | 7.6 |
Less: imputed interest | 1.9 |
Total finance lease liabilities | 5.7 |
Total | |
Remainder of Fiscal 2020 | 194.3 |
Fiscal 2021 | 399.9 |
Fiscal 2022 | 359.1 |
Fiscal 2023 | 313.7 |
Fiscal 2024 | 265.3 |
Fiscal 2025 and thereafter | 1,157.5 |
Total lease payments | 2,689.8 |
Less: imputed interest | 453.1 |
Total lease liabilities | $ 2,236.7 |
Leases (Details) $ in Millions |
6 Months Ended |
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Dec. 28, 2019
USD ($)
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Lessee, Lease, Description [Line Items] | |
Lessor, operating lease, lease not yet commenced (approximately) | $ 25 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Lessee, operating lease, term of contract | 1 year |
Lessee, operating lease, renewal term or early termination option | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Lessee, operating lease, term of contract | 20 years |
Lessee, operating lease, renewal term or early termination option | 10 years |
Segment Information (Narrative) (Details) |
6 Months Ended |
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Dec. 28, 2019
segment
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Segment Reporting [Abstract] | |
Reportable segments | 3 |
Goodwill and Other Intangible Assets (Indefinite and Finite Lived Assets) (Details) - USD ($) $ in Millions |
Dec. 28, 2019 |
Jun. 30, 2019 |
Jun. 29, 2019 |
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Intangible assets subject to amortization: | |||
Gross Carrying Amount | $ 100.5 | $ 193.7 | |
Accumulated amortization | (27.5) | (58.6) | |
Total | 73.0 | 135.1 | |
Intangible assets not subject to amortization: | |||
Intangible assets, gross (excluding goodwill) | 1,677.3 | 1,770.5 | |
Intangible assets, net (excluding goodwill) | 1,649.8 | $ 1,653.4 | 1,711.9 |
Trademarks and trade names | |||
Intangible assets not subject to amortization: | |||
Indefinite-lived intangible assets (excluding goodwill) | 1,576.8 | 1,576.8 | |
Customer relationships | |||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | 100.5 | 100.6 | |
Accumulated amortization | (27.5) | (24.0) | |
Total | 73.0 | 76.6 | |
Favorable lease rights | |||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | 0.0 | 93.1 | |
Accumulated amortization | 0.0 | (34.6) | |
Total | $ 0.0 | $ 58.5 |
Debt (Summary of Debt) (Details) - USD ($) $ in Millions |
Dec. 28, 2019 |
Jun. 30, 2019 |
Jun. 29, 2019 |
Jun. 20, 2017 |
Mar. 02, 2015 |
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Current debt: | |||||
Current debt | $ 0.0 | $ 0.0 | $ 0.8 | ||
Long-term debt: | |||||
Long-term debt | 1,611.4 | 1,616.7 | |||
Less: Unamortized discount and debt issuance costs on Senior Notes | (13.4) | (14.8) | |||
Total long-term debt, net | 1,598.0 | $ 1,596.6 | 1,601.9 | ||
Senior Notes | 4.250% Senior Notes due 2025 | |||||
Long-term debt: | |||||
Long-term debt | $ 600.0 | 600.0 | |||
Interest rate, stated percentage | 4.25% | 4.25% | |||
Senior Notes | 3.000% Senior Notes due 2022 | |||||
Long-term debt: | |||||
Long-term debt | $ 400.0 | 400.0 | |||
Interest rate, stated percentage | 3.00% | 3.00% | |||
Senior Notes | 4.125% Senior Notes due 2027 | |||||
Long-term debt: | |||||
Long-term debt | $ 600.0 | 600.0 | |||
Interest rate, stated percentage | 4.125% | 4.125% | |||
Note Payable | |||||
Long-term debt: | |||||
Long-term debt | $ 11.4 | 11.4 | |||
Capital Lease Obligations | |||||
Current debt: | |||||
Current debt | 0.0 | 0.8 | |||
Long-term debt: | |||||
Long-term debt | $ 0.0 | $ 5.3 |
Share-based Compensation (Narrative) (Details) - $ / shares |
6 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
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Stock Options | ||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | ||
Weighted-average grant-date fair value of awards granted (USD per share) | $ 3.83 | $ 9.77 |
Service-based Restricted Stock Unit Awards (RSU) | ||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | ||
Weighted-average grant-date fair value of awards granted (USD per share) | 21.45 | 50.85 |
Performance-based Restricted Stock Unit Awards (PRSU) | ||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | ||
Weighted-average grant-date fair value of awards granted (USD per share) | $ 21.65 | $ 50.89 |
Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Change in Carrying Amount of Goodwill by Segment | The change in the carrying amount of the Company’s goodwill by segment is as follows:
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Schedule of Indefinite-Lived Intangible Assets | Intangible assets consist of the following:
(1) Refer to Note 3, "Recent Accounting Pronouncements," for further information.
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Schedule of Finite-Lived Intangible Assets | Intangible assets consist of the following:
(1) Refer to Note 3, "Recent Accounting Pronouncements," for further information.
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Schedule of Expected Amortization Expense | As of December 28, 2019, the expected amortization expense for intangible assets is as follows:
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Basis of Presentation and Organization (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal Periods | Fiscal Periods The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30. Fiscal 2020 will be a 52-week period. Fiscal 2019 ended on June 29, 2019 and was also a 52-week period. The second quarter of fiscal 2020 ended on December 28, 2019 and the second quarter of fiscal 2019 ended on December 29, 2018, both of which were 13-week periods.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes thereto. Actual results could differ from estimates in amounts that may be material to the financial statements. Significant estimates inherent in the preparation of the condensed consolidated financial statements include reserves for the realizability of inventory; customer returns, end-of-season markdowns and operational chargebacks; useful lives and impairments of long-lived tangible and intangible assets; accounting for income taxes (including the impacts of tax legislation) and related uncertain tax positions; accounting for business combinations; the valuation of stock-based compensation awards and related expected forfeiture rates; reserves for restructuring; and reserves for litigation and other contingencies, amongst others.
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Share Repurchases | Share Repurchases The Company accounts for share repurchases by allocating the repurchase price to common stock and retained earnings. As a result, all repurchased shares are authorized but unissued shares. Under Maryland law, the Company's state of incorporation, there are no treasury shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. Purchases of the Company's common stock are executed through open market purchases, including through a purchase agreement under Rule 10b5-1. The Company may terminate or limit the share repurchase program at any time.
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Principles of Consolidation | 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.
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Reclassifications | Reclassifications Certain reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation. Beginning in fiscal 2020, the Company presented the impact of foreign currency gains and losses within Other expense (income) within its Condensed Consolidated Statements of Operations. Accordingly, foreign currency gains and losses that were reported within Selling, general and administrative expenses ("SG&A") in fiscal 2019 are now reflected within Other expense (income).
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Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements During the first quarter of fiscal 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02") and related ASUs. This ASU requires recognition of lease assets and lease liabilities on the balance sheet for all leases other than short-term leases. The Company elected the package of practical expedients intended to ease transition whereby the Company need not reassess as of the adoption date (1) whether contracts are or contain leases, (2) the lease classification for any existing leases and (3) initial direct costs for any existing leases. The Company also elected the practical expedient to combine non-lease components and lease components for real estate leases. The Company applied the provisions of ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements" ("ASU 2018-11"), allowing it to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating the comparative prior year periods. The effects of the adoption on selected line items within the Company's Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:
Recently Issued Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820)" ("ASU 2018-13"), which is intended to improve the effectiveness of fair value disclosures. The ASU removes or modifies certain disclosure requirements related to fair value information, as well as adds new disclosure requirements for Level 3 fair value measurements. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2018-13 will have on its condensed consolidated financial statements and notes thereto, however, does not expect a material impact resulting from this guidance. In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)" ("ASU 2018-15"), which is intended to clarify the accounting for implementation costs of cloud computing arrangements which are deemed to be a service contract rather than a software license. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2018-15 will have on its condensed consolidated financial statements and notes thereto. In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires companies to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. The requirement of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2016-13 will have on its condensed consolidated financial statements and notes thereto.
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Investments |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | INVESTMENTS The following table summarizes the Company’s U.S. dollar-denominated investments, recorded within the Company's Condensed Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019:
There were no material gross unrealized gains or losses on available-for-sale investments as of the periods ended December 28, 2019 and June 29, 2019.
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Debt (Tables) |
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Summary of the Components of Outstanding Debt | The following table summarizes the components of the Company’s outstanding debt:
(1) Refer to Note 3, "Recent Accounting Pronouncements," for further information.
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Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | STOCKHOLDERS' EQUITY A reconciliation of stockholders' equity is presented below:
The components of accumulated other comprehensive income (loss) ("AOCI"), as of the dates indicated, are as follows:
(2) Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balance at December 29, 2018 is net of tax of $0.6 million. There was no remaining balance at December 28, 2019.
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Revenue |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | REVENUE The Company recognizes revenue primarily from sales of the products of its brands through retail and wholesale channels, including the Internet. The Company also generates revenue from royalties related to licensing its trademarks, as well as sales in ancillary channels. In all cases, revenue is recognized upon the transfer of control of the promised products or services to the customer, which may be at a point in time or over time. Control is transferred when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized is the amount of consideration to which the Company expects to be entitled, including estimation of sale terms that may create variability in the consideration. Revenue subject to variability is constrained to an amount which will not result in a significant reversal in future periods when the contingency that creates variability is resolved. The Company recognizes revenue in its retail stores, including concession shop-in-shops, at the point-of-sale when the customer obtains physical possession of the products. Internet revenue from sales of products ordered through the Company's e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers. Retail and Internet revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience. Payment is due at the point of sale. Gift cards issued by the Company are recorded as a liability until redeemed by the customer, at which point revenue is recognized. The Company also uses historical information to estimate the amount of gift card balances that will never be redeemed and recognizes that amount as revenue over time in proportion to actual customer redemptions if the Company does not have a legal obligation to remit unredeemed gift cards to any jurisdiction as unclaimed property. The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases. Payment is generally due 30 to 90 days after shipment. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. Discounts are based on contract terms with the customer, while cooperative advertising allowances and other consideration may be based on contract terms or negotiated on a case-by-case basis. Returns and markdowns generally require approval from the Company and are estimated based on historical trends, current season results and inventory positions at the wholesale locations, current market and economic conditions as well as, in select cases, contractual terms. The Company's historical estimates of these variable amounts have not differed materially from actual results. 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 28, 2019. 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. 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.
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 primarily related to 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 28, 2019 and June 29, 2019 was $32.7 million and $27.5 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 28, 2019, net sales of $8.3 million were recognized from amounts recorded as deferred revenue as of June 29, 2019. For the six months ended December 29, 2018, net sales of $11.9 million were recognized from amounts recorded as deferred revenue as of June 30, 2018.
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Recent Accounting Pronouncements |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | RECENT ACCOUNTING PROUNOUNCEMENTS Recently Adopted Accounting Pronouncements During the first quarter of fiscal 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02") and related ASUs. This ASU requires recognition of lease assets and lease liabilities on the balance sheet for all leases other than short-term leases. The Company elected the package of practical expedients intended to ease transition whereby the Company need not reassess as of the adoption date (1) whether contracts are or contain leases, (2) the lease classification for any existing leases and (3) initial direct costs for any existing leases. The Company also elected the practical expedient to combine non-lease components and lease components for real estate leases. The Company applied the provisions of ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements" ("ASU 2018-11"), allowing it to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating the comparative prior year periods. The effects of the adoption on selected line items within the Company's Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:
Recently Issued Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820)" ("ASU 2018-13"), which is intended to improve the effectiveness of fair value disclosures. The ASU removes or modifies certain disclosure requirements related to fair value information, as well as adds new disclosure requirements for Level 3 fair value measurements. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2018-13 will have on its condensed consolidated financial statements and notes thereto, however, does not expect a material impact resulting from this guidance. In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)" ("ASU 2018-15"), which is intended to clarify the accounting for implementation costs of cloud computing arrangements which are deemed to be a service contract rather than a software license. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2018-15 will have on its condensed consolidated financial statements and notes thereto. In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires companies to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. The requirement of the new standard will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2021. Early adoption is permitted. The Company is currently in the process of evaluating the impact that adopting ASU 2016-13 will have on its condensed consolidated financial statements and notes thereto.
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Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT The following table summarizes the components of the Company’s outstanding debt:
During the three and six months ended December 28, 2019, the Company recognized interest expense related to its debt of $16.7 million and $33.5 million, respectively. During the three and six months ended December 29, 2018, the Company recognized interest expense related to its debt of $16.6 million and $33.4 million, respectively. Revolving Credit Facility On October 24, 2019, the Company entered into a definitive credit agreement whereby Bank of America, N.A., as administrative agent, the other agents party thereto, and a syndicate of banks and financial institutions have made available to the Company a $900.0 million revolving credit facility, including sub-facilities for letters of credit, with a maturity date of October 24, 2024 (the “Revolving Credit Facility”). The Revolving Credit Facility refinanced and replaced the Company’s unsecured revolving facility dated May 30, 2017. The Revolving Credit 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 back-up). Letters of credit and swing line loans may be issued under the Revolving Credit Facility as described below. There were no outstanding borrowings on the Revolving Credit Facility as of December 28, 2019. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to, at the Borrowers’ option, either (a) an alternate base rate (which is a rate equal to the greatest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1% or (iii) the Adjusted LIBO Rate for a one month Interest Period on such day plus 1%) or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made plus, in each case, an applicable margin. The applicable margin will be determined by reference to a grid, as defined in the Credit Agreement, based on the ratio of (a) consolidated debt plus operating lease liability to (b) consolidated EBITDAR. Additionally, the Company pays a commitment fee at a rate determined by the reference to the aforementioned pricing grid. 4.250% Senior Notes due 2025 On March 2, 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 “2025 Senior Notes”). Interest is payable semi-annually on April 1 and October 1 beginning October 1, 2015. Prior to January 1, 2025 (90 days prior to the scheduled maturity date), the Company may redeem the 2025 Senior Notes in whole or in part, at its option at any time or from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2025 Senior Notes to be redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon that would have been payable in respect of the 2025 Senior Notes calculated as if the maturity date of the 2025 Senior Notes was January 1, 2025 (not including any portion of payments of interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis at the Adjusted Treasury Rate (as defined in the indenture for the 2025 Senior Notes) plus 35 basis points, plus, in the case of each of (1) and (2), accrued and unpaid interest to the redemption date. On and after January 1, 2025 (90 days prior to the scheduled maturity date), the Company may redeem the 2025 Senior Notes in whole or in part, at its option at any time or from time to time, at a redemption price equal to 100% of the principal amount of the 2025 Senior Notes to be redeemed, plus accrued and unpaid interest to the redemption date. 3.000% Senior Notes due 2022 On June 20, 2017, the Company issued $400.0 million aggregate principal amount of 3.000% senior unsecured notes due July 15, 2022 at 99.505% of par (the "2022 Senior Notes"). Interest is payable semi-annually on January 15 and July 15 beginning January 15, 2018. Prior to June 15, 2022 (one month prior to the scheduled maturity date), the Company may redeem the 2022 Senior Notes in whole or in part, at its option at any time or from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2022 Senior Notes to be redeemed or (2) as determined by a Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest thereon that would have been payable in respect of the 2022 Senior Notes calculated as if the maturity date of the 2022 Senior Notes was June 15, 2022 (not including any portion of payments of interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined in the Prospectus Supplement) plus 25 basis points, plus, in the case of each of (1) and (2), accrued and unpaid interest to the redemption date. 4.125% Senior Notes due 2027 On June 20, 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 "2027 Senior Notes"). Interest is payable semi-annually on January 15 and July 15 beginning January 15, 2018. Prior to April 15, 2027 (the date that is three months prior to the scheduled maturity date), the Company may redeem the 2027 Senior Notes in whole or in part, at its option at any time or from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2027 Senior Notes to be redeemed or (2) as determined by a Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest thereon that would have been payable in respect of the 2027 Senior Notes calculated as if the maturity date of the 2027 Senior Notes was April 15, 2027 (not including any portion of payments of interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined in the Prospectus Supplement) plus 30 basis points, plus, in the case of each of (1) and (2), accrued and unpaid interest to the redemption date. At December 28, 2019, the fair value of the 2025, 2022 and 2027 Senior Notes was approximately $634.0 million, $405.8 million, and $615.5 million, respectively, based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy. At June 29, 2019, the fair value of the 2025, 2022 and 2027 Senior Notes was approximately $629.6 million, $398.6 million and $605.5 million, respectively. Note Payable As a result of taking operational control of the Kate Spade Joint Ventures in China, the Company has an outstanding Note Payable of $11.4 million as of December 28, 2019 and June 29, 2019, to the other partner of the Kate Spade Joint Ventures, to be paid in fiscal 2021.
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Dec. 28, 2019 |
Dec. 29, 2018 |
Dec. 28, 2019 |
Dec. 29, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 298.8 | $ 254.8 | $ 318.8 | $ 377.1 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized gains (losses) on cash flow hedging derivatives, net | 2.6 | (3.2) | 5.3 | 1.3 |
Unrealized gains (losses) on available-for-sale investments, net | 0.0 | 0.1 | 0.0 | 0.1 |
Foreign currency translation adjustments | 8.4 | (0.3) | (5.4) | (10.1) |
Other | 0.0 | 0.0 | (1.7) | 0.0 |
Other comprehensive income (loss), net of tax | 11.0 | (3.4) | (1.8) | (8.7) |
Comprehensive income | $ 309.8 | $ 251.4 | $ 317.0 | $ 368.4 |
Investments (Narrative) (Details) - USD ($) |
6 Months Ended | |
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Dec. 28, 2019 |
Jun. 29, 2019 |
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Investments, Debt and Equity Securities [Abstract] | ||
Maturity of time deposit (greater then) | 3 months | |
Available-for-sale investments, gross unrealized gain (loss) | $ 0 | $ 0 |
Leases - Weighted Averages (Details) |
Dec. 28, 2019 |
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Weighted average remaining lease term (years): | |
Operating leases | 8 years 9 months 21 days |
Finance leases | 5 years 5 months 1 day |
Weighted average discount rate: | |
Operating leases | 3.60% |
Finance leases | 11.30% |
Leases - Costs (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Dec. 28, 2019 |
Dec. 28, 2019 |
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Leases [Abstract] | ||
Amortization of right-of-use assets | $ 0.2 | $ 0.4 |
Interest on lease liabilities | 0.1 | 0.3 |
Total finance lease cost | 0.3 | 0.7 |
Operating lease cost | 105.5 | 217.3 |
Short-term lease cost | 1.9 | 3.6 |
Variable lease cost | 61.1 | 112.1 |
Operating lease right-of-use impairment | 0.0 | 35.8 |
Less: sublease income | (5.3) | (10.7) |
Total net lease cost | $ 163.5 | $ 358.8 |
Share-based Compensation (Summary of Non-vested Service-Based Restricted Stock Unit Activity) (Details) - Service-based Restricted Stock Unit Awards (RSU) shares in Millions |
6 Months Ended |
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Dec. 28, 2019
shares
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Number of Non-vested RSUs | |
Beginning balance (shares) | 3.3 |
Granted (shares) | 3.8 |
Vested (shares) | (1.3) |
Forfeited (shares) | (0.3) |
Ending balance (shares) | 5.5 |
Share-based Compensation (Total Compensation Cost and Related Tax Benefits) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
Dec. 28, 2019 |
Dec. 29, 2018 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense(1) | $ 16.8 | $ 21.5 | $ 43.6 | $ 43.9 |
Income tax benefit related to share-based compensation expense | 3.5 | 4.0 | 8.9 | 8.2 |
Integration | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense(1) | $ 0.1 | $ 0.4 | $ 9.8 | $ 0.8 |
Acquisitions (Narrative) (Details) - Distributor Acquisitions $ in Millions |
12 Months Ended |
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Jun. 29, 2019
USD ($)
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Business Acquisition [Line Items] | |
Purchase price | $ 47.8 |
Payments to acquire business, gross | 44.0 |
Business combination, consideration transferred, cash | 43.5 |
Assets acquired | 21.8 |
Goodwill, not expected tax deductible amount | 26.0 |
Stuart Weitzman | |
Business Acquisition [Line Items] | |
Goodwill, not expected tax deductible amount | 13.3 |
Kate Spade | |
Business Acquisition [Line Items] | |
Goodwill, not expected tax deductible amount | $ 12.7 |
Goodwill and Other Intangible Assets (Narrative) (Details) - Customer relationships |
6 Months Ended |
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Dec. 28, 2019 | |
Minimum | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible asset, useful life | 10 years 3 months 18 days |
Maximum | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible asset, useful life | 12 years 6 months |
Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | 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.
(3) Other sales primarily represents sales in Europe, the Middle East and royalties related to licensing.
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Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION The Company has three reportable segments:
In deciding how to allocate resources and assess performance, the Company's chief operating decision maker regularly evaluates the sales and operating income of these segments. Operating income is the gross margin of the segment less direct expenses of the segment. The following table summarizes segment performance for the three and six months ended December 28, 2019 and December 29, 2018:
(3) Additions to long-lived assets for the reportable segments primarily includes store assets as well as assets that support a specific brand. Corporate additions include all other assets which include a combination of Corporate assets, as well as assets that may support all segments. As such, depreciation expense for these assets may be subsequently allocated to a reportable segment.
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