Capri Holdings Ltd - 10-K filing on 2020-07-08

Taxes (Tables)

12 Months Ended

Mar. 28, 2020

Income Before Provision for Income Taxes

(Loss) income before provision for income taxes consisted of the following (in millions):


	Fiscal Years Ended
	March 28, 2020		March 30, 2019		March 31, 2018
U.S.	$	(28)	$	191	$	124
Non-U.S.	(187)		430		618
Total (loss) income before provision for income taxes	$	(215)	$	621	$	742

Provision for Income Taxes

The provision for income taxes was as follows (in millions):


	Fiscal Years Ended
	March 28, 2020			March 30, 2019			March 31, 2018
Current
U.S. Federal	$	4	(3)	$	82	⁽²⁾	$	48
U.S. State	19			24			16
Non-U.S.	60			44			77
Total current	83			150			141
Deferred
U.S. Federal	(22)			(34)		⁽²⁾	24		⁽¹⁾
U.S. State	(3)			(4)			1
Non-U.S.	(48)			(33)			(16)
Total deferred	(73)			(71)			9
Total provision for income taxes	$	10		$	79		$	150

⁽¹⁾Includes an $18 million provision related to the U.S. Tax Act one time revaluation of deferred tax assets.

⁽²⁾Includes a $25 million current tax provision and equal deferred tax benefit related to the U.S. Tax Act impact to business interest disallowance provisions.

⁽³⁾Includes a $35 million current tax benefit due to a release of income tax reserves in the U.S.

Significant Differences Between the Statutory Tax Rates and Company's Effective Tax Rate

The Company’s provision for income taxes for the years ended March 28, 2020, March 30, 2019 and March 31, 2018 was different from the amount computed by applying the statutory U.K. income tax rate to the underlying (loss) income from operations before income taxes as a result of the following:


	Fiscal Years Ended
	March 28, 2020			March 30, 2019			March 31, 2018
Provision for income taxes at the U.K. statutory tax rate	19.0	%		19.0	%		19.0	%
State and local income taxes, net of federal benefit	(1.9)	%		0.9	%		0.5	%
Effects of global financing arrangements	21.7	%	(4)	(8.1)	%		(15.6)	%
U.S. tax reform	—	%		—	%		2.0	%	⁽¹⁾
Differences in tax effects on foreign income	1.2	%		(1.8)	%	⁽²⁾	6.7	%
Liability for uncertain tax positions	5.7	%		1.3	%		6.6	%
Effect of changes in valuation allowances on deferred tax assets	(30.9)	%	(5)	2.8	%	⁽³⁾	0.3	%
Excess tax benefits related to stock-based compensation	(4.2)	%		(2.6)	%		(0.8)	%
Transaction costs	—	%		1.5	%		0.9	%
Withholding tax	(1.6)	%		0.6	%		1.2	%
Nondeductible goodwill impairment	(15.1)	%	(6)	—	%		—	%
Other	1.4	%		(0.9)	%		(0.6)	%
Effective tax rate	(4.7)	%		12.7	%		20.2	%

⁽¹⁾Includes an $18 million expense related to the re-measurement of certain net deferred tax assets in connection with U.S. Tax Act.

⁽²⁾Mainly attributable to the United States statutory federal income tax rate change from a blended rate for Fiscal 2018 of 31.54% to 21% in Fiscal 2019.

⁽³⁾Includes an $11 million provision related to a United Kingdom capital loss.

⁽⁴⁾Mainly attributable to pre-tax loss position in Fiscal 2020

⁽⁵⁾Mainly attributable to valuation allowances established on a portion of Non-US deferred tax assets

⁽⁶⁾Attributable to the Jimmy Choo brand intangible that was impaired in Fiscal 2020

Significant Components of Deferred Tax Assets (Liabilities)

Significant components of the Company’s deferred tax assets (liabilities) consist of the following (in millions):


	Fiscal Years Ended
	March 28, 2020		March 30, 2019
Deferred tax assets
Operating lease liabilities	521		—
Net operating loss carryforwards	109		61
Accrued Interest	40		41
Sales allowances	37		26
Inventories	34		22
Depreciation	33		18
Stock compensation	13		13
Payroll related accruals	3		2
Deferred rent	—		34
Other	—		31
	790		248
Valuation allowance	(134)		(40)
Total deferred tax assets	656		208

Deferred tax liabilities
Goodwill and intangibles	(481)		(534)
Operating lease right-of-use-assets	(401)		—
Other	(14)		—
Total deferred tax liabilities	(896)		(534)
Net deferred tax liabilities	$	(240)	$	(326)

Reconciliation of Beginning and Ending Amounts of Unrecognized Tax Benefits Excluding Accrued Interest

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding accrued interest, for Fiscal 2020, Fiscal 2019 and Fiscal 2018, are presented below (in millions):


	Fiscal Years Ended
	March 28, 2020			March 30, 2019			March 31, 2018
Unrecognized tax benefits beginning balance	$	192		$	101		$	27
Additions related to prior period tax positions	29			81		⁽¹⁾	30
Additions related to current period tax positions	4			21			45
Decreases in prior period positions due to lapses in statute of limitations	(3)			(1)			(1)
Decreases related to prior period tax positions	(99)		(2)	(3)			—
Decreases related to audit settlements	(24)		(3)	(7)			—
Unrecognized tax benefits ending balance	$	99		$	192		$	101

⁽¹⁾Primarily relates to the Versace acquisition.

⁽²⁾Primarily relates to releases of North American and European tax reserves

⁽³⁾Primarily relates to US audit effective settlement