Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	Financial Statements and Financial Statement Schedules. Refer to “Index to Financial Statements” appearing herein.

(b)	Exhibits. Refer to the exhibit index which is included herein.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TAPESTRY, INC.

Date: August 15, 2019	By:	/s/ Victor Luis
		Name: Victor Luis Title: Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below on August 15, 2019.

Signature		Title
/s/ Victor Luis		Chief Executive Officer and Director
Victor Luis		(Principal Executive Officer)
/s/ Joanne C. Crevoiserat		Chief Financial Officer
Joanne C. Crevoiserat		(Principal Financial Officer)
/s/ Brian Satenstein		Corporate Controller
Brian Satenstein		(Principal Accounting Officer)
/s/ Jide Zeitlin		Chairman and Director
Jide Zeitlin
/s/ Darrell Cavens		Director
Darrell Cavens
/s/ David Denton		Director
David Denton
/s/ Anne Gates		Director
Anne Gates
/s/ Andrea Guerra		Director
Andrea Guerra
/s/ Susan Kropf		Director
Susan Kropf
/s/ Annabelle Yu Long		Director
Annabelle Yu Long
/s/ Ivan Menezes		Director
Ivan Menezes

TAPESTRY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

	Page Number
Reports of Independent Registered Public Accounting Firm	54
Consolidated Financial Statements:
Consolidated Balance Sheets	56
Consolidated Statements of Operations	57
Consolidated Statements of Comprehensive Income	58
Consolidated Statements of Stockholders’ Equity	59
Consolidated Statements of Cash Flows	60
Notes to Consolidated Financial Statements	61
Financial Statement Schedules:
Schedule II — Valuation and Qualifying Accounts	96
Quarterly Financial Data	97

All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Tapestry, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Tapestry, Inc. and subsidiaries (the "Company") as of June 29, 2019 and June 30, 2018, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended June 29, 2019, and the related notes and the financial statement Schedule II listed in the Index to the Consolidated Financial Statements (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 29, 2019 and June 30, 2018, and the results of its operations and its cash flows for each of the three years in the period ended June 29, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 15, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

New York, New York

August 15, 2019

We have served as the Company's auditor since 2002.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Tapestry, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Tapestry, Inc. and subsidiaries (the “Company”) as of June 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 29, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended June 29, 2019, of the Company and our report dated August 15, 2019, expressed an unqualified opinion on those financial statements and financial statement schedule.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

New York, New York

August 15, 2019

TAPESTRY, INC.

CONSOLIDATED BALANCE SHEETS

	June 29, 2019				June 30, 2018
	(millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	969.2			$	1,243.4
Short-term investments	264.6				6.6
Trade accounts receivable, less allowances of $4.4 and $1.5, respectively	298.1				314.1
Inventories	778.3				673.8
Income tax receivable	55.8				25.8
Prepaid expenses	99.8				82.6
Other current assets	91.0				86.3
Total current assets	2,556.8				2,432.6
Property and equipment, net	938.8				885.4
Long-term investments	0.1				—
Goodwill	1,516.2				1,484.3
Intangible assets	1,711.9				1,732.9
Deferred income taxes	19.4				24.3
Other assets	134.1				118.8
Total assets	$	6,877.3			$	6,678.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	243.6			$	264.3
Accrued liabilities	673.6				673.2
Current debt	0.8				0.7
Total current liabilities	918.0				938.2
Long-term debt	1,601.9				1,599.9
Deferred income taxes	234.1				206.2
Long-term income taxes payable	155.9				222.4
Other liabilities	454.0				467.0
Total liabilities	3,363.9				3,433.7
See Note 13 on commitments and contingencies
Stockholders’ Equity:
Preferred stock: (authorized 25.0 million shares; $0.01 par value) none issued	—				—
Common stock: (authorized 1.0 billion shares; $0.01 par value) issued and outstanding – 286.8 million and 288.0 million shares, respectively	2.9				2.9
Additional paid-in-capital	3,302.1				3,205.5
Retained earnings	291.6				119.0
Accumulated other comprehensive income (loss)	(83.2		)		(82.8		)
Total stockholders’ equity	3,513.4				3,244.6
Total liabilities and stockholders’ equity	$	6,877.3			$	6,678.3

See accompanying Notes.

TAPESTRY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Fiscal Year Ended
	June 29, 2019				June 30, 2018				July 1, 2017
	(millions, except per share data)
Net sales	$	6,027.1			$	5,880.0			$	4,488.3
Cost of sales	1,973.4				2,031.5				1,407.2
Gross profit	4,053.7				3,848.5				3,081.1
Selling, general and administrative expenses	3,239.6				3,177.7				2,293.7
Operating income	814.1				670.8				787.4
Interest expense, net	47.9				74.0				28.4
Income before provision for income taxes	766.2				596.8				759.0
Provision for income taxes	122.8				199.3				168.0
Net income	$	643.4			$	397.5			$	591.0
Net income per share:
Basic	$	2.22			$	1.39			$	2.11
Diluted	$	2.21			$	1.38			$	2.09
Shares used in computing net income per share:
Basic	289.4				285.4				280.6
Diluted	290.8				288.6				282.8
Cash dividends declared per common share	$	1.350			$	1.350			$	1.350

See accompanying Notes.

TAPESTRY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Fiscal Year Ended
	June 29, 2019				June 30, 2018				July 1, 2017
	(millions)
Net income	$	643.4			$	397.5			$	591.0
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on cash flow hedging derivatives, net	(5.9		)		(1.6		)		11.8
Unrealized gains (losses) on available-for-sale investments, net	(0.5		)		0.4				(0.7		)
Change in pension liability, net	0.6				1.5				1.1
Foreign currency translation adjustments	5.4				3.8				(26.2		)
Other comprehensive income (loss), net of tax	(0.4		)		4.1				(14.0		)
Comprehensive income	$	643.0			$	401.6			$	577.0

See accompanying Notes.

TAPESTRY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	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 July 2, 2016	278.5			$	2.8			$	2,857.1			$	(104.1	)		$	(72.9	)		$	2,682.9
Net income	—			—				—				591.0				—				591.0
Other comprehensive income (loss)	—			—				—				—				(14.0		)		(14.0		)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes	3.4			—				48.9				—				—				48.9
Share-based compensation	—			—				76.1				—				—				76.1
Excess tax effect from share-based compensation	—			—				(3.8		)		—				—				(3.8		)
Dividends declared ($1.350 per share)	—			—				—				(379.2		)		—				(379.2		)
Balance at July 1, 2017	281.9			2.8				2,978.3				107.7				(86.9		)		3,001.9
Net income	—			—				—				397.5				—				397.5
Other comprehensive income (loss)	—			—				—				—				4.1				4.1
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes	6.1			0.1				133.8				—				—				133.9
Share-based compensation	—			—				88.1				—				—				88.1
Additional paid-in-capital as part of purchase consideration	—			—				5.3				—				—				5.3
Dividends declared ($1.350 per share)	—			—				—				(386.2		)		—				(386.2		)
Balance at June 30, 2018	288.0			2.9				3,205.5				119.0				(82.8		)		3,244.6
Net income	—			—				—				643.4				—				643.4
Other comprehensive income (loss)	—			—				—				—				(0.4		)		(0.4		)
Shares issued, pursuant to stock-based compensation arrangements, net of shares withheld for taxes	2.2			—				8.6				—				—				8.6
Share-based compensation	—			—				88.0				—				—				88.0
Repurchase of common stock	(3.4	)		—				—				(100.0		)		—				(100.0		)
Dividends declared ($1.350 per share)	—			—				—				(391.0		)		—				(391.0		)
Cumulative adjustment from adoption of new accounting standards (see Note 2)												20.2								20.2
Balance at June 29, 2019	286.8			$	2.9			$	3,302.1			$	291.6			$	(83.2	)		$	3,513.4

See accompanying Notes.

TAPESTRY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Year Ended
	June 29, 2019				June 30, 2018				July 1, 2017
	(millions)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income	$	643.4			$	397.5			$	591.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	268.2				260.3				212.8
Provision for bad debt	7.1				1.3				1.7
Share-based compensation	84.8				81.3				73.6
Excess tax effect from share-based compensation	—				—				3.8
Integration and restructuring activities	32.5				134.9				8.5
Deferred income taxes	34.5				(50.9		)		78.0
Other non-cash charges, net	(5.5		)		3.1				(19.1		)
Changes in operating assets and liabilities:
Trade accounts receivable	25.7				(5.6		)		(29.4		)
Inventories	(104.7		)		30.4				(20.0		)
Other liabilities	(55.8		)		157.7				(53.4		)
Accounts payable	(39.8		)		(77.3		)		8.4
Accrued liabilities	(29.5		)		(16.9		)		(50.1		)
Other assets	(69.2		)		80.9				48.0
Net cash provided by operating activities	791.7				996.7				853.8
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES
Hudson Yards sale of investments, net of expenses	—				—				680.6
Sale of former headquarters, net of expenses	—				—				126.0
Acquisitions, net of cash acquired	(43.5		)		(2,375.8		)		—
Purchases of property and equipment	(274.2		)		(267.4		)		(283.1		)
Purchases of investments	(415.5		)		(3.8		)		(523.5		)
Proceeds from maturities and sales of investments	159.0				482.2				591.2
Acquisition of lease rights, net of proceeds	—				—				1.8
Net cash (used in) provided by investing activities	(574.2		)		(2,164.8		)		593.0
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES
Dividend payments	(390.7		)		(384.1		)		(378.0		)
Repurchase of common stock	(100.0		)		—				—
Proceeds from issuance of debt, net of discount	—				1,100.0				997.2
Debt issuance costs	—				—				(9.8		)
Repayment of debt	—				(1,100.0		)		(285.0		)
Proceeds from share-based awards	35.3				165.7				70.4
Taxes paid to net settle share-based awards	(27.0		)		(31.5		)		(21.5		)
Excess tax effect from share-based compensation	—				—				(3.8		)
Payment of deferred purchase price	(2.5		)		—				—
Net cash (used in) provided by financing activities	(484.9		)		(249.9		)		369.5
Effect of exchange rate changes on cash and cash equivalents	(6.8		)		(11.5		)		(2.4		)
(Decrease) increase in cash and cash equivalents	(274.2		)		(1,429.5		)		1,813.9
Cash and cash equivalents at beginning of year	1,243.4				2,672.9				859.0
Cash and cash equivalents at end of year	$	969.2			$	1,243.4			$	2,672.9
Supplemental information:
Cash paid for income taxes, net	$	183.8			$	16.4			$	159.1
Cash paid for interest	$	45.4			$	63.0			$	35.4
Non-cash investing activity – property and equipment obligations	$	48.3			$	30.1			$	39.7

See accompanying Notes.

TAPESTRY, INC.

Notes to Consolidated Financial Statements

1. 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.

2. SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company’s fiscal year ends on the Saturday closest to June 30. Unless otherwise stated, references to years in the financial statements relate to fiscal years. The fiscal years ended June 29, 2019 (“fiscal 2019”), June 30, 2018 (“fiscal 2018”) and July 1, 2017 (“fiscal 2017”) were 52-week periods. The fiscal year ending June 27, 2020 (“fiscal 2020”) will be a 52-week period.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the 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 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 recently enacted 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.

Principles of Consolidation

The 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.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash balances and highly liquid investments with a maturity of three months or less at the date of purchase.

Investments

Short-term investments consist primarily of high-credit quality U.S. and non-U.S. issued corporate debt securities, and U.S. Treasuries and government agency securities with original maturities greater than three months and with maturities within one year of balance sheet date, classified as available-for-sale. Long-term investments typically consist of high-credit quality U.S. and non-U.S. issued corporate debt securities, U.S. Treasuries and government agency securities, classified as available-for-sale, and recorded at fair value, with unrealized gains and losses recorded in other comprehensive income. Dividend and interest income are recognized when earned.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Additionally, GAAP requires the consolidation of all entities for which a Company has a controlling voting interest and all variable interest entities (“VIEs”) for which a Company is deemed to be the primary beneficiary. An entity is generally a VIE if it meets any of the following criteria: (i) the entity has insufficient equity to finance its activities without additional subordinated financial support from other parties, (ii) the equity investors cannot make significant decisions about the entity’s operations or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity or receive the expected returns of the entity and substantially all of the entity’s activities involve or are conducted on behalf of the investor with disproportionately few voting rights.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. The Company places its cash investments with high-credit quality financial institutions and generally invests primarily in corporate debt securities, money market instruments, U.S. government and agency debt securities, commercial paper and bank deposits placed with major banks and financial institutions. Accounts receivable is generally diversified due to the number of entities comprising the Company's customer base and their dispersion across many geographical regions. The Company believes no significant concentration of credit risk exists with respect to these investments and accounts receivable.

Inventories

The Company holds inventory that is sold through retail and wholesale distribution channels, including e-commerce sites. Substantially all of the Company's inventories are comprised of finished goods, and are reported at the lower of cost or net realizable value. Inventory costs include material, conversion costs, freight and duties and are primarily determined by the first-in, first-out method. The Company reserves for inventory, including slow-moving and aged inventory, based on current product demand, expected future demand and historical experience. A decrease in product demand due to changing customer tastes, buying patterns or increased competition could impact the Company's evaluation of its inventory and additional reserves might be required.

Property and Equipment, Net

Property and equipment, net is stated at cost less accumulated depreciation including the impact of long-lived asset impairment and disposals. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Buildings are depreciated over 40 years and building improvements are depreciated over ten to 40 years. Machinery and equipment are depreciated over lives of five to seven years, furniture and fixtures are depreciated over lives of three to ten years, and software and computer equipment is depreciated over lives of three to ten years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease terms. Maintenance and repair costs are charged to earnings as incurred while expenditures for major renewals and improvements are capitalized.

Valuation of Long-Lived Assets

Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the related asset group and its eventual disposition. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions. The Company recorded $7.4 million and $9.1 million of impairment charges in fiscal 2019 and fiscal 2018, respectively.

In determining future cash flows, the Company takes various factors into account, including the effects of macroeconomic trends such as consumer spending, in-store capital investments, promotional cadence, the level of advertising and changes in merchandising strategy. Since the determination of future cash flows is an estimate of future performance, there may be future impairments in the event that future cash flows do not meet expectations.

Business Combinations

In connection with an acquisition, the Company records all assets acquired and liabilities assumed of the acquired business at their acquisition date fair value, including the recognition of contingent consideration at fair value on the acquisition date. These fair value determinations require judgment and may involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items. Furthermore, the Company may utilize independent third-party valuation firms when necessary. Refer to Note 3, "Acquisitions," for detailed disclosures related to our acquisitions.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Goodwill and Other Intangible Assets

Upon acquisition, the Company estimates and records the fair value of purchased intangible assets, which primarily consists of brands, customer relationships, lease rights and order backlog. Goodwill and certain other intangible assets deemed to have indefinite useful lives, including brand intangible assets, are not amortized, but are assessed for impairment at least annually. Finite-lived intangible assets are amortized over their respective estimated useful lives and, along with other long-lived assets as noted above, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. Estimates of fair value for finite-lived and indefinite-lived intangible assets are primarily determined using discounted cash flows and the multi-period excess earnings method, respectively, with consideration of market comparisons. This approach uses significant estimates and assumptions, including projected future cash flows, discount rates and growth rates.

The Company generally performs its annual goodwill and indefinite-lived intangible assets impairment analysis using a quantitative approach. The quantitative goodwill impairment test identifies the existence of potential impairment by comparing the fair value of each reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to that excess. The impairment charge recognized is limited to the amount of goodwill allocated to that reporting unit.

Determination of the fair value of a reporting unit and intangible asset is based on management's assessment, considering independent third-party appraisals when necessary. Furthermore, this determination is judgmental in nature and often involves the use of significant estimates and assumptions, which may include projected future cash flows, discount rates, growth rates, and determination of appropriate market comparables and recent transactions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the amount of any such charge.

The Company performs its annual impairment assessment of goodwill as well as brand intangibles during the fourth quarter of each fiscal year. The Company determined that there was no impairment in fiscal 2019, fiscal 2018 or fiscal 2017.

Operating Leases

The Company’s leases for office space, retail locations and distribution facilities are primarily accounted for as operating leases. Certain of the Company's leases contain renewal options, rent escalation clauses, and/or landlord incentives. Renewal terms generally reflect market rates at the time of renewal. Rent expense for non-cancelable operating leases with scheduled rent increases and/or landlord incentives is recognized on a straight-line basis over the lease term, including any applicable rent holidays, beginning with the lease commencement date, or the date the Company takes control of the leased space, whichever is earlier. The excess of straight-line rent expense over scheduled payment amounts and landlord incentives is recorded as a deferred rent liability. As of the end of fiscal 2019 and fiscal 2018, deferred rent obligations of $288.9 million and $240.3 million, respectively, were classified primarily within other non-current liabilities in the Company's Consolidated Balance Sheets. Certain rentals are also contingent upon factors such as sales. Contingent rentals are recognized when the achievement of the target (i.e., sale levels) which triggers the related rent payment is considered probable and estimable.

Asset retirement obligations represent legal obligations associated with the retirement of a tangible long-lived asset. The Company’s asset retirement obligations are primarily associated with leasehold improvements in which the Company is contractually obligated to remove at the end of a lease to comply with the lease agreement. When such an obligation exists, the Company recognizes an asset retirement obligation at the inception of a lease at its estimated fair value. The asset retirement obligation is recorded in current liabilities or non-current liabilities (based on the expected timing of payment of the related costs) and is subsequently adjusted for any changes in estimates. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life. As of the end of fiscal 2019 and fiscal 2018, the Company had asset retirement obligations of $33.2 million and $25.8 million, respectively, primarily classified within other non-current liabilities in the Company's Consolidated Balance Sheets.

Revenue Recognition

Revenue is recognized when the Company satisfies its performance obligations by transferring control of promised products or services to its customers, which may be at a point of 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.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Retail store and concession shop-in-shop revenues are recognized 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.

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. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. 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.

Gift cards issued by the Company are recorded as a liability until they are redeemed, 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 accounts for sales taxes and other related taxes on a net basis, excluding such taxes from revenue.

Refer to Note 4, "Revenue," for additional information.

Cost of Sales

Cost of sales consists of inventory costs and other related costs such as reserves for inventory realizability and shrinkage, destruction costs, damages and replacements.

Selling, General and Administrative ("SG&A") Expenses

Selling expenses include store employee compensation, occupancy costs, depreciation, supply costs, wholesale and retail account administration compensation globally. These expenses are affected by the number of stores open during any fiscal period and store performance, as compensation and rent expenses can vary with sales. Advertising, marketing and design expenses include employee compensation, media space and production, advertising agency fees, new product design costs, public relations and market research expenses. Distribution and customer service expenses include warehousing, order fulfillment, shipping and handling, customer service, employee compensation and bag repair costs. SG&A expenses also include compensation costs for corporate functions including: executive, finance, human resources, legal and information systems departments, as well as corporate headquarters occupancy costs, consulting fees and software expenses.

Shipping and Handling

Shipping and handling costs incurred were $127.9 million, $101.5 million and $45.8 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively, and are included in SG&A expenses. The Company includes inbound product-related transportation costs from manufacturers within cost of sales. The balance of the Company's transportation-related costs related to its distribution network is included in SG&A expenses rather than in cost of sales.

Advertising

Advertising costs include expenses related to direct marketing activities, such as direct mail pieces, digital and other media and production costs. In fiscal 2019, fiscal 2018 and fiscal 2017, advertising expenses for the Company totaled $247.1 million, $228.4 million and $178.3 million, respectively, and are included in SG&A expenses. Advertising costs are generally expensed when the advertising first appears.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Share-Based Compensation

The Company recognizes the cost of equity awards to employees and the non-employee Directors based on the grant-date fair value of those awards. The grant-date fair values of share unit awards are based on the fair value of the Company's common stock on the date of grant. The grant-date fair value of stock option awards is determined using the Black-Scholes option pricing model and involves several assumptions, including the expected term of the option, expected volatility and dividend yield. The expected term of options represents the period of time that the options granted are expected to be outstanding and is based on historical experience. Expected volatility is based on historical volatility of the Company’s stock as well as the implied volatility from publicly traded options on the Company's stock. Dividend yield is based on the current expected annual dividend per share and the Company’s stock price. Changes in the assumptions used to determine the Black-Scholes value could result in significant changes in the Black-Scholes value.

For stock options and share unit awards, the Company recognizes share-based compensation net of estimated forfeitures and revises the estimates in subsequent periods if actual forfeitures differ from the estimates. The Company estimates the forfeiture rate based on historical experience as well as expected future behavior.

The Company grants performance-based share awards to key executives, the vesting of which is subject to the executive’s continuing employment and the Company's or individual's achievement of certain performance goals. On a quarterly basis, the Company assesses actual performance versus the predetermined performance goals, and adjusts the share-based compensation expense to reflect the relative performance achievement. Actual distributed shares are calculated upon conclusion of the service and performance periods, and include dividend equivalent shares. If the performance-based award incorporates a market condition, the grant-date fair value of such award is determined using a pricing model, such as a Monte Carlo Simulation.

Income Taxes

The Company’s effective tax rate is based on pre-tax income, statutory tax rates, tax laws and regulations, and tax planning strategies available in the various jurisdictions in which the Company operates. The Company classifies interest and penalties on uncertain tax positions in the provision for income taxes. The Company records net deferred tax assets to the extent it believes that it is more likely than not that these assets will be realized. In making such determination, the Company considers all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operation. The Company reduces deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some amount of deferred tax assets is not expected to be realized. The Company is not permanently reinvested with respect to earnings of a limited number of foreign entities and has recorded the tax consequences of remitting earnings from these entities. The Company is permanently reinvested with respect to all other earnings.

The Company recognizes the impact of tax positions in the financial statements if those positions will more likely than not be sustained on audit, based on the technical merits of the position. Although the Company believes that the estimates and assumptions used are reasonable and legally supportable, the final determination of tax audits could be different than that which is reflected in historical tax provisions and recorded assets and liabilities. Tax authorities periodically audit the Company’s income tax returns and the tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations. Significant management judgment is required in determining the effective tax rate, in evaluating tax positions and in determining the net realizable value of deferred tax assets.

Refer to Note 15, "Income Taxes," herein for further discussion on the Company's income taxes.

Derivative Instruments

The majority of the Company’s purchases and sales involving international parties, excluding international customer sales, are denominated in U.S. dollars, which limits the Company’s exposure to the transactional effects of foreign currency exchange rate fluctuations. However, the Company is exposed to foreign currency exchange risk related to its foreign operating subsidiaries’ U.S. dollar-denominated inventory transactions and various cross-currency intercompany loans. The Company uses derivative financial instruments to manage these risks. These derivative transactions are in accordance with the Company’s risk management policies. The Company does not enter into derivative transactions for speculative or trading purposes.

The Company records all derivative contracts at fair value on the Consolidated Balance Sheets. The fair values of foreign currency derivatives are based on the forward curves of the specific indices upon which settlement is based and include an adjustment for the Company’s credit risk. Judgment is required of management in developing estimates of fair value. The use of different market assumptions or methodologies could affect the estimated fair value.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

For derivative instruments that qualify for hedge accounting, the changes in the fair value of these instruments is either (i) offset against the changes in fair value of the hedged assets or liabilities through earnings or (ii) recognized as a component of accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows, respectively.

Each derivative instrument entered into by the Company that qualifies for hedge accounting is expected to be highly effective at reducing the risk associated with the exposure being hedged. For each derivative that is designated as a hedge, the Company documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, as well as how hedge effectiveness will be assessed over the term of the instrument. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed and documented by the Company on at least a quarterly basis.

If it is determined that a derivative instrument has not been highly effective, and will continue not to be highly effective in hedging the designated exposure, hedge accounting is discontinued and further gains (losses) are recognized in earnings within foreign currency gains (losses). Upon discontinuance of hedge accounting, the cumulative change in fair value of the derivative previously recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the original hedging strategy, unless the forecasted transaction is no longer probable of occurring, in which case the accumulated amount is immediately recognized in earnings within foreign currency gains (losses).

As a result of the use of derivative instruments, the Company may be exposed to the risk that the counterparties to such contacts will fail to meet their contractual obligations. To mitigate this counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings, among other factors.

The fair values of the Company’s derivative instruments are recorded on its Consolidated Balance Sheets on a gross basis. For cash flow reporting purposes, the Company classifies proceeds received or amounts paid upon the settlement of a derivative instrument in the same manner as the related item being hedged, primarily within cash from operating activities.

Hedging Portfolio

The Company enters into forward currency contracts primarily to reduce its risks related to exchange rate fluctuations on foreign currency denominated inventory transactions, as well as various cross-currency intercompany loans. To the extent its derivative contracts designated as cash flow hedges are highly effective in offsetting changes in the value of the hedged items, the related gains (losses) are initially deferred in AOCI and subsequently recognized in the Consolidated Statements of Operations as part of the cost of the inventory purchases being hedged within cost of sales, when the related inventory is sold to a third party. Current maturity dates range from July 2019 to June 2020. Forward foreign currency exchange contracts designated as fair value hedges and associated with intercompany and other contractual obligations are recognized within foreign currency gains (losses) generally in the period in which the related balances being hedged are revalued. Current maturity dates are in August 2019, and such contracts are typically renewed upon maturity if the related balance has not been settled.

Foreign Currency

The functional currency of the Company's foreign operations is generally the applicable local currency. Assets and liabilities are translated into U.S. dollars using the current exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the weighted-average exchange rates for the period. The resulting translation adjustments are included in the Consolidated Statements of Comprehensive Income as a component of other comprehensive income (loss) (“OCI”) and in the Consolidated Statements of Equity within AOCI.

The Company recognizes gains and losses on transactions that are denominated in a currency other than the respective entity's functional currency in earnings. Foreign currency transaction gains and losses also include amounts realized on the settlement of certain intercompany loans with foreign subsidiaries.

Share Repurchases

The Company accounts for stock repurchases by allocating the repurchase price to common stock and retained earnings. Under Maryland law, the Company's state of incorporation, there are no treasury shares. As a result, all repurchased shares are authorized but unissued shares. The Company may terminate or limit the stock repurchase program at any time. The total amount of common stock repurchase price allocated to retained earnings as of June 29, 2019 was $100.0 million.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Reclassifications

Certain reclassifications have been made to the prior period's financial information in order to conform to the current period's presentation. This includes the realignment of the Company's segment reporting structure, as further described in Note 17, "Segment Information."

In addition, certain prior year costs related to compensation of the supply chain function for Kate Spade have been reclassified to conform to the current year presentation. These costs amounted to $5.4 million for the fiscal year ended June 30, 2018 and have been reclassified from SG&A expenses to Cost of sales within the Company's Consolidated Statements of Operations.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," which provides a single, comprehensive revenue recognition model for all contracts with customers, and contains principles to determine the measurement of revenue and timing of when it is recognized. The model supersedes most existing revenue recognition guidance, and also requires enhanced revenue-related disclosures. The FASB has also issued several related ASUs which provide additional implementation guidance and clarify the requirements of the model.

The Company adopted ASU 2014-09 beginning in the first quarter of fiscal 2019 utilizing the modified retrospective approach. The cumulative effect of initially applying the new standard did not result in a change to opening Retained earnings. Prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Effects of adoption include balance sheet presentation changes including presentation of estimated returned products and refund liabilities on a gross basis, as well as an increase in deferred revenue related to current year licensing contract activity due to a change in the method of recognizing sales-based royalties. These balance sheet presentation changes resulted in an increase of $7.4 million to Other current assets, an increase of $2.3 million to Accrued liabilities and a decrease of $5.1 million to Accounts receivable as of June 29, 2019. Furthermore, the adoption changed the income statement classification of certain items, primarily related to cooperative advertising allowances and other consideration provided to wholesale customers. The following table compares the reported results in fiscal 2019 under the new standard to the amounts that would have been reported if the standard had not been adopted:

	As Reported				Impact of Adoption				Balances Excluding Adoption
	(millions)
Net sales	$	6,027.1			$	(2.2	)		$	6,029.3
Cost of sales	1,973.4				1.7				1,971.7
Gross profit	4,053.7				(3.9		)		4,057.6
Selling, general and administrative expenses	3,239.6				(3.9		)		3,243.5
Operating income	$	814.1			$	—			$	814.1

For further information regarding revenue from contracts with customers, refer to Note 4, "Revenue."

In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" ("ASU 2016-16"). This ASU requires recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to a third party. The Company adopted ASU 2016-16 beginning in the first quarter of fiscal 2019 utilizing the modified retrospective approach, which resulted in a cumulative adjustment of $20.2 million to its opening Retained earnings balance. Overall, the adoption of ASU 2016-16 did not have a material impact on the Company's consolidated financial statements.

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

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

currently in the process of evaluating the impact that adopting ASU 2018-13 will have on its 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 consolidated financial statements and notes thereto.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which is intended to increase transparency and comparability among companies that enter into leasing arrangements. This ASU requires recognition of lease assets and lease liabilities on the balance sheet for nearly all leases (other than short-term leases), as well as a retrospective recognition and measurement of existing impacted leases. The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2020. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, with targeted improvements to the guidance including an additional transition method for the new standard. As a result, the new standard may be applied with a retrospective approach to each prior reporting period with various optional practical expedients.

The Company will elect the package of practical expedients intended to ease transition whereby the Company need not assess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases and (3) initial direct costs for any existing leases. The Company also will elect the practical expedient to combine non-lease components and lease components. Furthermore, the Company has determined that it will apply the provisions of ASU 2018-11 with the initial application at the adoption date with a cumulative effect adjustment in the opening balance of Retained earnings in the first quarter of fiscal 2020. The Company expects the adoption of ASU 2016-02 will result in an initial increase to long-term assets and liabilities of approximately $2.2 billion to $2.4 billion, which will change over time as the Company's lease portfolio changes. In addition, the Company will recognize a cumulative-effect adjustment in retained earnings primarily related to deferred gains on headquarters real estate transactions, partially offset by impairment of certain right-of-use assets at the effective date. The standard also requires enhanced quantitative and qualitative lease-related disclosures. The timing and amount of lease expense in the consolidated statement of operations will not significantly change. This guidance is not expected to have a material impact on the Company's liquidity.

3. 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 substantially complete, however may be subject to change as additional information is obtained during the acquisition measurement period. The pro forma results are not presented for these acquisitions as they are immaterial.

Fiscal 2018 Acquisitions

Kate Spade & Company Acquisition

On July 11, 2017, the Company completed its acquisition of Kate Spade & Company for $18.50 per share in cash for a total of $2.40 billion. As a result, Kate Spade became a wholly owned subsidiary of the Company.

The aggregate cash paid in connection with the acquisition of Kate Spade was $2.39 billion (or $2.32 billion net of cash acquired). Consideration also includes $5.3 million as a result of the conversion of previously granted unvested equity awards

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

held by Kate Spade employees. The Company funded the acquisition through cash on-hand, as well as debt proceeds. Refer to Note 12, "Debt", for information regarding the Company's outstanding debt.

The Company accounted for the acquisition of Kate Spade under the acquisition method of accounting for business combinations. Accordingly, the cost was allocated to the underlying net assets based on their respective fair values. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill, which consists largely of the synergies expected from the acquisition.

The purchase price allocation for the assets acquired and liabilities assumed is substantially complete. The following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date:

Assets Acquired and Liabilities Assumed	Fair Value At Acquisition Date			Measurement Period Adjustments			Adjusted Fair Value
	(millions)
Cash and cash equivalents	$	71.8		$	—		$	71.8
Trade accounts receivable	62.8			—			62.8
Inventories(1)	310.1			—			310.1
Prepaid expenses and other current assets	33.9			(1.2		)	32.7
Property and equipment	175.5			—			175.5
Goodwill(2)(3)	916.1			(16.1		)	900.0
Brand intangible asset(4)	1,300.0			—			1,300.0
Other intangible assets(5)	119.2			—			119.2
Other assets	59.0			11.1			70.1
Total assets acquired	3,048.4			(6.2		)	3,042.2
Accounts payable and accrued liabilities	233.3						233.3
Deferred income taxes(6)	333.0			(7.3		)	325.7
Other liabilities(7)	84.8			1.1			85.9
Total liabilities assumed	651.1			(6.2		)	644.9
Total purchase price	2,397.3			—			2,397.3
Less: Cash acquired	(71.8		)	—			(71.8		)
Total purchase price, net of cash acquired	$	2,325.5		$	—		$	2,325.5

(1) Included a step-up adjustment of $67.5 million, which was amortized over 4 months.

(2) The majority of the goodwill balance is not deductible for tax purposes.

(3)	The Company assigned $324.0 million of goodwill associated with the Kate Spade acquisition to Coach brand reporting units based upon the analysis of expected synergies, including the allocation of corporate synergies to the brands. Refer to Note 14, "Goodwill and Other Intangible Assets," for further information.

(4)	The brand intangible asset, of which the majority is not deductible for tax purposes, was valued based on the multi-period excess earnings method.

(5) The components of other intangible assets included favorable lease rights of $72.2 million (amortized over the remainder of the underlying lease terms), customer relationships of $45.0 million (amortized over 15 years) and order backlog of $2.0 million (amortized over 6 months). Favorable lease rights were valued based on a comparison of market participant information and Company-specific lease terms. The customer relationship intangible asset was valued using the excess earnings method, which discounts the estimated after-tax cash flows associated with the existing base of customers as of the acquisition date,

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

factoring in expected attrition of the existing base. The order backlog intangible asset was valued using the excess earnings method, which discounts the estimated after-tax cash flows associated with open customer orders as of the acquisition date.

(6)

The Company acquired $200.1 million of net deferred tax assets related to Kate Spade historical federal and state net operating losses, net of a $39.3 million valuation allowance, which the Company expects to be able to utilize. The deferred tax adjustments resulting from the step-up in basis of acquired assets, most notably the brand intangible asset, resulted in an overall deferred tax liability. Refer to Note 15, "Income Taxes," for more information about changes to the Company's deferred tax position as a result of the enactment of the new tax legislation.

(7)	Includes an adjustment for unfavorable lease rights of $49.5 million (amortized over the remainder of the underlying lease terms).

The operational results of Kate Spade for the post-acquisition period from July 11, 2017 to June 29, 2019 are included in the Company’s accompanying Consolidated Statement of Operations for the year ended June 29, 2019. Refer to Note 17, "Segment Information," for the operating results of the Kate Spade business.

The following pro forma information has been prepared as if the Kate Spade acquisition and the related debt financing had occurred as of the beginning of fiscal 2017. These adjustments include the removal of certain historical amounts. The pro forma amounts reflect the combined historical operational results for Tapestry and Kate Spade, after giving effect to adjustments related to the impact of purchase accounting, transaction costs and financing. The pro forma financial information is not indicative of the operational results that would have been obtained had the transactions actually occurred as of that date, nor is it necessarily indicative of the Company’s future operational results. The following adjustments have been made:

(i)	Depreciation and amortization expenses related to the fair value adjustments to Kate Spade's property and equipment and intangible assets have been reflected in the year ended June 30, 2018. Short-term purchase accounting amortization has been excluded from the pro forma amounts due to the non-recurring nature.

(ii)	Transaction costs in the year ended June 30, 2018 have been excluded from the pro forma amounts due to their non-recurring nature.

(iii)	Interest expense of debt issued to finance the acquisition, including amortization of deferred financing fees, has been reflected in the year ended June 30, 2018. Historical interest expense for Kate Spade has been removed.

(iv)	The tax effects of the pro forma adjustments at an estimated statutory rate of 40.0%.

(v)	Earnings per share amounts are calculated using unrounded numbers and the Company's historical weighted average shares outstanding.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

	Fiscal Year Ended
	June 30, 2018				July 1, 2017
	(unaudited)
	(millions, except per share data)
Pro forma Net sales**(1)**	$	5,912.9			$	5,837.4
Pro forma Net income**(1)**	472.8				695.4
Pro forma Net income per share:
Basic	$	1.66			$	2.48
Diluted	$	1.64			$	2.46

(1)	The pro forma results for the year ended June 30, 2018 include revenue and operating income from the pre-combination period in fiscal 2018.

Distributor Acquisitions and Kate Spade Joint Ventures Operational Control

During the third quarter of fiscal 2018, the Company acquired designated assets of its Stuart Weitzman distributor in Northern China, entered into an agreement to obtain operational control of the Kate Spade Joint Ventures that operate in Greater China in which the Company has 50% interest, and acquired designated assets of its Coach distributor in Australia and New Zealand.

The aggregate purchase consideration for the three acquisitions was $153.7 million, of which $106.9 million will be paid in cash and the remaining is related to non-cash consideration. Of the cash consideration, $61.5 million (or $55.6 million net of cash acquired) was paid during fiscal 2018, $2.5 million was paid during fiscal 2019 and the remaining will be paid in the future. Of the total purchase consideration of $153.7 million, $50.0 million of net assets were recorded at their fair values, and 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 $103.7 million. Of this amount, $52.8 million, $49.3 million and $1.6 million were recorded to the Company's Kate Spade, Stuart Weitzman and Coach segments, respectively. During the fourth quarter of fiscal 2018, there were measurement period adjustments of $2.3 million and $0.5 million, related to the Kate Spade and Stuart Weitzman segments, respectively, which decreased Goodwill. Refer to Note 14, "Goodwill and Other Intangible Assets," for further information.

The results of the operations of each acquired entity have been included in the consolidated financial statements since the respective date of each acquisition. The purchase price allocation for these assets acquired and liabilities assumed is substantially complete, however may be subject to change as additional information is obtained during the acquisition measurement period. The pro forma results are not presented for these acquisitions as they are immaterial.

4. 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

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

and recognizes that amount as revenue over time in proportion to actual customer redemptions if the Company does not have a legal obligation to remit unredeemed gift cards to any jurisdiction as unclaimed property.

Certain of the Company's retail operations use sales incentive programs, such as customer loyalty programs and the issuance of coupons. Loyalty programs provide the customer a material right to acquire additional products and give rise to the Company having a separate performance obligation. Additionally, certain products sold by the Company include an assurance warranty that is not considered a separate performance obligation. These programs are immaterial individually and in the aggregate.

The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases. Payment is generally due 30 to 90 days after shipment. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. Discounts are based on contract terms with the customer, while cooperative advertising allowances and other consideration may be based on contract terms or negotiated on a case by case basis. Returns and markdowns generally require approval from the Company and are estimated based on historical trends, current season results and inventory positions at the wholesale locations, current market and economic conditions as well as, in select cases, contractual terms. The Company's historical estimates of these variable amounts have not differed materially from actual results.

The Company recognizes licensing revenue over time during the contract period in which licensees are granted access to the Company's trademarks. These arrangements require licensees to pay a sales-based royalty and may include a contractually guaranteed minimum royalty amount. Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved. Payments from the customer are generally due quarterly in an amount based on the licensee's sales of goods bearing the licensed trademarks during the period, which may differ from the amount of revenue recorded during the period thereby generating a contract asset or liability. Contract assets and liabilities and contract costs related to the licensing arrangements are immaterial as the licensing business represents approximately 1% of total net sales in the fiscal year ended June 29, 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.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Disaggregated Net Sales

The following table disaggregates the Company's net sales into geographies that depict how economic factors may impact the revenues and cash flows for the periods presented. Each geography presented includes net sales related to the Company's directly operated channels, global travel retail business and to wholesale customers, including distributors, in locations within the specified geographic area.

	North America				Greater China**(1)**				Other Asia**(2)**				Other**(3)**				Total
	(millions)
Fiscal 2019
Coach	$	2,401.6			$	779.8			$	836.0			$	253.5			$	4,270.9
Kate Spade	1,067.4				52.9				157.8				88.7				1,366.8
Stuart Weitzman	216.3				80.2				23.6				69.3				389.4
Total	$	3,685.3			$	912.9			$	1,017.4			$	411.5			$	6,027.1
Fiscal 2018
Coach	$	2,414.1			$	774.7			$	792.6			$	240.1			$	4,221.5
Kate Spade	1,030.6				25.7				137.3				91.1				1,284.7
Stuart Weitzman	239.9				36.7				17.4				79.8				373.8
Total	$	3,684.6			$	837.1			$	947.3			$	411.0			$	5,880.0
Fiscal 2017
Coach	$	2,373.5			$	656.8			$	850.9			$	233.5			$	4,114.7
Kate Spade	—				—				—				—				—
Stuart Weitzman	249.5				39.5				12.0				72.6				373.6
Total	$	2,623.0			$	696.3			$	862.9			$	306.1			$	4,488.3

(1)	Greater China includes mainland China, Hong Kong, Macau 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.

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 June 29, 2019 and June 30, 2018 was $27.5 million and $29.1 million, respectively, which were primarily recorded within Accrued liabilities on the Company's Consolidated Balance Sheets and are generally expected to be recognized as revenue within a year. For the fiscal year ended June 29, 2019, net sales of $18.6 million were recognized from amounts recorded as deferred revenue as of June 30, 2018.

5. INTEGRATION AND ACQUISITION COSTS

Fiscal 2019

During the fiscal year ended June 29, 2019, the Company incurred integration and acquisition-related costs of $94.4 million. The charges recorded in cost of sales for the fiscal year ended June 29, 2019 were $27.8 million. Of the amount recorded to cost of sales for the fiscal year ended June 29, 2019, $6.3 million was recorded within the Kate Spade segment, $19.6 million was recorded within the Stuart Weitzman segment and $1.9 million was recorded within the Coach segment. The charges recorded in SG&A expenses for the fiscal year ended June 29, 2019 were $66.6 million. Of the amount recorded to SG&A expenses for the

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

fiscal year ended June 29, 2019, $14.5 million was recorded in the Kate Spade segment, $30.0 million was recorded within Corporate, $15.0 million was recorded within the Stuart Weitzman segment and $7.1 million was recorded within the Coach segment. Of the total costs of $94.4 million, $32.5 million were non-cash charges related to inventory, organization-related costs and asset write-offs.

The Company currently estimates that it will incur approximately $20 - 30 million in pre-tax charges in fiscal 2020.

Fiscal 2018

As a result of these acquisitions, during the fiscal year ended June 30, 2018, the Company incurred integration and acquisition-related costs of $301.6 million. The charges recorded in cost of sales for the fiscal year ended June 30, 2018 were $116.4 million. Of the amount recorded to cost of sales for the fiscal year ended June 30, 2018, $106.5 million was recorded within the Kate Spade segment, $5.8 million was recorded within the Stuart Weitzman segment and $4.1 million was recorded within the Coach segment. The charges recorded in SG&A expenses for the fiscal year ended June 30, 2018 were $185.2 million. Of the amount recorded to SG&A expenses for the fiscal year ended June 30, 2018, $113.7 million was recorded in the Kate Spade segment, $63.2 million was recorded within Corporate, $7.8 million was recorded within the Stuart Weitzman segment and $0.5 million was recorded within the Coach segment. Of the total costs of $301.6 million, $133.1 million were non-cash charges related to purchase accounting adjustments, inventory, organization-related costs and asset write-offs.

Refer to Note 3, "Acquisitions," for more information.

A summary of the integration and acquisition charges is as follows:

		Fiscal Year Ended
		June 29, 2019				June 30, 2018
		(millions)
Purchase accounting adjustments(1)		$	10.1			$	82.8
Acquisition costs(2)		1.3				42.9
Inventory-related charges(3)		17.6				35.4
Contractual payments(4)		8.1				50.6
Organization-related costs(5)		25.8				39.8
Other(6)		31.5				50.1
Total		$	94.4			$	301.6

(1)	Purchase accounting adjustments primarily relate to the short-term impact of the amortization of fair value adjustments.

(2)	Acquisition costs primarily relate to deal fees associated with the acquisitions.

(3)	Inventory-related charges primarily relate to a one-time write-off of inventory for the fiscal year ended June 29, 2019. For the fiscal year ended June 30, 2018, these payments primarily relate to reserves for the future destruction of certain on-hand inventory and non-cancelable inventory purchase commitments related to raw materials.

(4)	Contractual payments primarily relate to contract termination charges for the fiscal year ended June 29, 2019. For the fiscal year ended June 30, 2018, these payments primarily relate to severance and related costs as a result of pre-existing agreements with certain Kate Spade executives which became effective upon the closing of the acquisition.

(5)	Organization-related costs primarily relate to severance charges.

(6)	Other primarily relates to professional fees, asset write-offs and inventory true-up.

6. RESTRUCTURING ACTIVITIES

Operational Efficiency Plan

On April 26, 2016, the Company announced a plan (the “Operational Efficiency Plan”) to enhance organizational efficiency, update core technology platforms and streamline its supply chain network. The Operational Efficiency Plan was adopted as a result of a strategic review of the Company’s corporate structure which focused on creating an agile and scalable business model.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

During fiscal year 2018, the Company incurred Operational Efficiency Plan related charges within SG&A expenses of $19.5 million, primarily due to technology infrastructure costs, organizational efficiency costs and to a lesser extent, network optimization costs. Total cumulative charges incurred under the Operational Efficiency Plan to date are $87.4 million. The plan was completed in fiscal 2018.

A summary of charges and related liabilities under the Company's Operational Efficiency Plan is as follows:

	Organizational Efficiency**(1)**				Technology Infrastructure**(2)**				Network Optimization**(3)**				Total
	(millions)
Liability as of July 2, 2016	$	22.2			$	—			$	3.2			$	25.4
Fiscal 2017 charges	15.6				8.0				0.4				24.0
Cash payments	(23.3		)		(7.7		)		(3.0		)		(34.0		)
Non-cash charges	(7.9		)		—				(0.6		)		(8.5		)
Liability as of July 1, 2017	$	6.6			$	0.3			$	—			$	6.9
Fiscal 2018 charges	0.6				18.9				—				19.5
Cash payments	(5.6		)		(17.6		)		—				(23.2		)
Non-cash charges	(0.8		)		(1.0		)		—				(1.8		)
Liability as of June 30, 2018	$	0.8			$	0.6			$	—			$	1.4

(1)	Organizational efficiency charges, recorded within SG&A expenses, primarily related to accelerated depreciation associated with the retirement of information technology systems, severance and related costs of corporate employees, as well as consulting fees related to process and organizational optimization.

(2)	Technology infrastructure costs, recorded within SG&A expenses, related to the initial costs of replacing and updating the Company's core technology platforms.

(3)	Network optimization costs, recorded within SG&A expenses, related to lease termination costs.

The balance as of June 30, 2018 are included within Accrued liabilities on the Company's Consolidated Balance Sheets. No liabilities remain as of June 29, 2019. The above charges were recorded as Corporate expenses within the Company's Consolidated Statements of Operations. Refer to Note 17, "Segment Information," for further information.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), as of the dates indicated, are as follows:

	Unrealized Gains (Losses) on Cash Flow Hedging Derivatives**(1)**				Unrealized Gains (Losses) on Available-for-Sale Investments				Cumulative Translation Adjustment				Other**(2)**				Total
	(millions)
Balances at July 1, 2017	$	3.0			$	(0.4	)		$	(89.1	)		$	(0.4	)		$	(86.9	)
Other comprehensive income (loss) before reclassifications	(1.2		)		0.5				3.8				—				3.1
Less: amounts reclassified from accumulated other comprehensive income (loss)	0.4				0.1				—				(1.5		)		(1.0		)
Net current-period other comprehensive income (loss)	(1.6		)		0.4				3.8				1.5				4.1
Balances at June 30, 2018	$	1.4			$	—			$	(85.3	)		$	1.1			$	(82.8	)
Other comprehensive income (loss) before reclassifications	(4.3		)		(0.4		)		5.4				—				0.7
Less: amounts reclassified from accumulated other comprehensive income (loss)	1.6				0.1				—				(0.6		)		1.1
Net current-period other comprehensive income (loss)	(5.9		)		(0.5		)		5.4				0.6				(0.4		)
Balances at June 29, 2019	$	(4.5	)		$	(0.5	)		$	(79.9	)		$	1.7			$	(83.2	)

(1)	The ending balances of AOCI related to cash flow hedges are net of tax of $(1.3) million and $(0.9) million as of June 29, 2019 and June 30, 2018, respectively. The amounts reclassified from AOCI are net of tax of $(1.0) million and $(1.1) million as of June 29, 2019 and June 30, 2018, respectively.

(2)	Other represents the accumulated loss on the Company's minimum pension liability adjustment. The balances at June 29, 2019 and June 30, 2018 are net of tax of $0.5 million and $0.6 million, respectively.

8. SHARE-BASED COMPENSATION

The Company maintains several share-based compensation plans which are more fully described below. The following table shows the total compensation cost charged against income for these plans and the related tax benefits recognized in the Consolidated Statements of Operations:

	June 29, 2019**(1)**				June 30, 2018(1)				July 1, 2017(1)
	(millions)
Share-based compensation expense	$	88.0			$	88.1			$	76.1
Income tax benefit related to share-based compensation expense	16.2				23.5				24.4

(1)

During the fiscal year ended June 29, 2019 and June 30, 2018, the Company incurred $3.2 million and $6.0 million of share-based compensation expense related to integration efforts, respectively. There were no share-based compensation expense under the Operational Efficiency Plan in fiscal year ended June 29, 2019. During the fiscal years ended June 30, 2018 and July 1, 2017, the Company incurred $0.8 million and $2.5 million of share-based compensation expense under the Company's Operational Efficiency Plan, respectively, primarily as a result of the accelerated vesting of certain awards. Refer to Note 5, "Integration and Acquisition Costs," and Note 6, "Restructuring Activities," for further information.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Stock-Based Plans

The Company maintains the Amended and Restated 2010 Stock Incentive Plan to award stock options and shares to certain members of management and the outside members of its Board of Directors (“Board”). The Company maintains the 2004 Stock Incentive Plan for awards granted prior to the establishment of the 2010 Stock Incentive Plan. These plans were approved by the Company's stockholders. The exercise price of each stock option equals 100% of the market price of the Company's stock on the date of grant and generally has a maximum term of 10 years. Stock options and service based share awards that are granted as part of the annual compensation process generally vest ratably over four years. Stock option and share awards are subject to forfeiture until completion of the vesting period, which ranges from one to four years. The Company issues new shares upon the exercise of stock options or vesting of share awards.

Stock Options

A summary of stock option activity during the fiscal year ended June 29, 2019 is as follows:

	Number of Options Outstanding			Weighted- Average Exercise Price per Option				Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
	(millions)									(millions)
Outstanding at June 30, 2018	12.5			$	42.94
Granted	1.5			50.91
Exercised	(0.9	)		35.41
Forfeited or expired	(0.7	)		46.55
Outstanding at June 29, 2019	12.4			44.24				6.0		$	0.1
Vested and expected to vest at June 29, 2019	12.2			44.23				5.9		0.1
Exercisable at June 29, 2019	7.8			44.50				4.7		0.1

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:

	June 29, 2019			June 30, 2018			July 1, 2017
Expected term (years)	5.1			5.1			4.4
Expected volatility	30.0	%		28.4	%		30.5	%
Risk-free interest rate	2.6	%		1.8	%		1.1	%
Dividend yield	3.9	%		3.3	%		3.4	%

The expected term of options represents the period of time that the options granted are expected to be outstanding and is based on historical experience. Expected volatility is based on historical volatility of the Company’s stock as well as the implied volatility from publicly traded options on the Company's stock. The risk free interest rate is based on the zero-coupon U.S. Treasury issue as of the date of the grant. Dividend yield is based on the current expected annual dividend per share and the Company’s stock price.

The weighted-average grant-date fair value of options granted during fiscal 2019, fiscal 2018 and fiscal 2017 was $6.74, $7.76 and $7.36, respectively. The total intrinsic value of options exercised during fiscal 2019, fiscal 2018 and fiscal 2017 was $10.2 million, $59.2 million and $15.4 million, respectively. The total cash received from option exercises was $30.7 million, $161.5 million and $68.2 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively, and the cash tax benefit realized for the tax deductions from these option exercises was $2.6 million, $11.4 million and $4.9 million, respectively.

At June 29, 2019, $22.2 million of total unrecognized compensation cost related to non-vested stock option awards is expected to be recognized over a weighted-average period of 1.4 years.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Service-based Restricted Stock Unit Awards (“RSUs”)

A summary of service-based RSU activity during the year ended June 29, 2019 is as follows:

	Number of Non-vested RSUs			Weighted- Average Grant- Date Fair Value per RSU
	(millions)
Non-vested at June 30, 2018	3.5			$	40.26
Granted	1.8			49.13
Vested	(1.6	)		38.76
Forfeited	(0.4	)		46.23
Non-vested at June 29, 2019	3.3			45.49

At June 29, 2019, $81.5 million of total unrecognized compensation cost related to non-vested share awards is expected to be recognized over a weighted-average period of 1.4 years.

The weighted-average grant-date fair value of share awards granted during fiscal 2019, fiscal 2018 and fiscal 2017 was $49.13, $41.75 and $39.57, respectively. The total fair value of shares vested during fiscal 2019, fiscal 2018 and fiscal 2017 was $75.0 million, $83.4 million and $68.9 million, respectively.

Performance-based Restricted Stock Unit Awards (“PRSU”)

The Company grants PRSUs to key executives, the vesting of which is subject to the executive’s continuing employment and the Company's achievement of certain performance goals. A summary of PRSU activity during the fiscal year ended June 29, 2019 is as follows:

	Number of Non-vested PRSUs			Weighted- Average Grant- Date Fair Value per PRSU
	(millions)
Non-vested at June 30, 2018	0.9			$	38.27
Granted	0.3			49.78
Change due to performance condition achievement	(0.1	)		23.65
Vested	(0.2	)		31.46
Forfeited	—			45.95
Non-vested at June 29, 2019	0.9			44.41

At June 29, 2019, $14.2 million of total unrecognized compensation cost related to non-vested share awards is expected to be recognized over a weighted-average period of 1.0 year.

The weighted-average grant-date fair value per share of PRSU awards granted during fiscal 2019, fiscal 2018 and fiscal 2017 was $49.78, $43.80 and $39.61, respectively. The total fair value of awards that vested during fiscal 2019, fiscal 2018 and fiscal 2017 was $9.7 million, $11.4 million and $0.9 million, respectively.

During the fiscal years ended June 29, 2019 and June 30, 2018, the Company granted 0.3 million shares (with a fair value of $12.3 million) and 0.4 million shares (with a fair value of $16.0 million) of common stock to executives, respectively. The shares are subject to a three-year cliff vesting, subject to the employee's continuing employment and the Company's achievement of the performance goals established at the beginning of the performance period. The fair value of the PRSU's is based on the price of the Company's common stock on the date of grant.

In fiscal 2019, fiscal 2018 and fiscal 2017, the cash tax benefit realized for the tax deductions from all RSUs (service and performance-based) was $16.6 million, $17.9 million and $19.0 million, respectively.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Employee Stock Purchase Plan

Under the 2001 Employee Stock Purchase Plan, eligible employees are permitted to purchase a limited number of Company common shares at 85% of market value. Under this plan, the Company sold 0.2 million, 0.1 million and 0.1 million shares to employees in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. Compensation expense is calculated for the fair value of employees’ purchase rights using the Black-Scholes model and the following weighted-average assumptions:

	Fiscal Year Ended
	June 29, 2019			June 30, 2018			July 1, 2017
Expected term (years)	0.5			0.5			0.5
Expected volatility	27.7	%		26.9	%		24.7	%
Risk-free interest rate	2.3	%		1.3	%		0.6	%
Dividend yield	3.3	%		3.1	%		3.6	%

The weighted-average fair value of the purchase rights granted during fiscal 2019, fiscal 2018 and fiscal 2017 was $9.15, $9.62 and $8.08, respectively. The Company issues new shares for employee stock purchases.

9. INVESTMENTS

The following table summarizes the Company’s primarily U.S. dollar-denominated investments, recorded within the Consolidated Balance Sheets as of June 29, 2019 and June 30, 2018:

	June 29, 2019												June 30, 2018
	Short-term				Long-term				Total				Short-term				Long-term				Total
	(millions)
Available-for-sale investments:
Commercial paper(1)	$	17.9			$	—			$	17.9			$	—			$	—			$	—
Government securities – U.S.(2)	102.6				—				102.6				—				—				—
Corporate debt securities – U.S.(2)	95.8				—				95.8				—				—				—
Corporate debt securities – non-U.S.(2)	37.3				—				37.3				—				—				—
Available-for-sale investments, total	$	253.6			$	—			$	253.6			$	—			$	—			$	—
Other:
Time deposits(1)	0.6				—				0.6				0.6				—				0.6
Other	10.4				0.1				10.5				6.0				—				6.0
Total Investments	$	264.6			$	0.1			$	264.7			$	6.6			$	—			$	6.6

(1)	These securities have original maturities greater than three months and are recorded at fair value.

(2)	These securities as of June 29, 2019 have maturity dates between calendar years 2019 and 2020 and are recorded at fair value.

There were no material gross unrealized gains or losses on available-for-sale investments as of the periods ended June 29, 2019 and June 30, 2018.

10. LEASES

The Company leases retail, distribution and office facilities. The lease agreements, which expire at various dates through fiscal 2037, are subject, in most cases, to renewal options and provide for the payment of taxes, insurance and maintenance. Certain leases contain escalation clauses resulting from the pass-through of increases in operating costs, property taxes and the effect on costs from changes in consumer price indices. Certain store-related rent expense is also contingent upon sales.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Rent expense for the Company's operating leases consisted of the following:

	Fiscal Year Ended
	June 29, 2019				June 30, 2018				July 1, 2017
	(millions)
Minimum rent(1)	$	387.6			$	359.8			$	295.1
Contingent rent	185.7				164.7				129.4
Total rent expense	$	573.3			$	524.5			$	424.5

(1)	$0.2 million of lease termination charges due to restructuring-related closures were included in fiscal 2017.

Future minimum rental payments under non-cancelable operating leases, as of June 29, 2019, are as follows:

Fiscal Year		Amount
		(millions)
2020		$	399.0
2021		341.5
2022		308.2
2023		270.4
2024		226.5
Subsequent to 2024		1,065.7
Total minimum future rental payments		$	2,611.3

During the first quarter of fiscal 2017, the Company announced the lease of its new global headquarters. Refer to Note 21, "Headquarters Transactions," for further information.

11. FAIR VALUE MEASUREMENTS

The Company categorizes its assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. The three levels of the hierarchy are defined as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability. The Company does not have any Level 3 investments.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

The following table shows the fair value measurements of the Company’s financial assets and liabilities at June 29, 2019 and June 30, 2018:

	Level 1								Level 2
	June 29, 2019				June 30, 2018				June 29, 2019				June 30, 2018
	(millions)
Assets:
Cash equivalents(1)	$	454.3			$	592.5			$	0.4			$	0.4
Short-term investments:
Time deposits(2)	—				—				0.6				0.6
Commercial paper(2)	—				—				17.9				—
Government securities - U.S.(2)	102.6				—				—				—
Corporate debt securities - U.S.(2)	—				—				95.8				—
Corporate debt securities - non U.S.(2)	—				—				37.3				—
Other	—				—				10.4				6.0
Long-term investments:
Other	—				—				0.1				—
Derivative Assets:
Inventory-related instruments(3)	—				—				1.1				5.6
Intercompany loan hedges(3)	—				—				—				0.3
Liabilities:
Derivative liabilities:
Inventory-related instruments(3)	$	—			$	—			$	4.9			$	2.3
Intercompany loan hedges(3)	—				—				0.1				0.1

(1)	Cash equivalents consist of money market funds and time deposits with maturities of three months or less at the date of purchase. Due to their short term maturity, management believes that their carrying value approximates fair value.

(2)	Short-term available-for-sale 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.

Refer to Note 12, "Debt," for the fair value of the Company's outstanding debt instruments.

Non-Financial Assets and Liabilities

The Company’s non-financial instruments, which primarily consist of goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written-down to and recorded at fair value, considering market participant assumptions. Refer to Note 3, "Acquisitions," for further discussion of the approaches used in valuing acquired assets and assumed liabilities.

The company recorded $7.4 million of impairment charges in fiscal 2019 to reduce the carrying amount of certain store assets (primarily leasehold improvements at selected retail store locations) to their fair values of $1.1 million as of June 29, 2019. The Company recorded $9.1 million of impairment charges in fiscal 2018 to reduce the carrying amount of certain store assets (primarily leasehold improvements at selected retail store locations) to their fair values of $1.2 million as of June 30, 2018. The fair values of these assets were determined based on Level 3 measurements. Inputs to these fair value measurements included estimates of the amount and the timing of the stores' net future discounted cash flows based on historical experience, current trends, and market conditions.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

12. DEBT

The following table summarizes the components of the Company’s outstanding debt:

	June 29, 2018				June 30, 2018
	(millions)
Current Debt:
Capital Lease Obligations	$	0.8			$	0.7
Total Current Debt	$	0.8			$	0.7
Long-Term Debt:
4.250% Senior Notes due 2025	600.0				600.0
3.000% Senior Notes due 2022	400.0				400.0
4.125% Senior Notes due 2027	600.0				600.0
Note Payable	11.4				11.4
Capital Lease Obligations	5.3				6.0
Total Long-Term Debt	1,616.7				1,617.4
Less: Unamortized Discount and Debt Issuance Costs on Senior Notes	(14.8		)		(17.5		)
Total Long-Term Debt, net	$	1,601.9			$	1,599.9

During fiscal 2019, 2018 and 2017 the Company recognized interest expense related to the outstanding debt of $66.9 million, $86.3 million and $26.8 million, respectively.

Revolving Credit Facility

On May 30, 2017, 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 May 30, 2022 (the “Revolving Credit Facility”). 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 June 29, 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 600% of consolidated lease expense 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

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

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 month 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 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, 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 Level 2 measurements within the fair value hierarchy. At June 30, 2018, the fair value of the 2025, 2022 and 2027 Senior Notes was approximately $592.5 million, $389.0 million and $574.1 million, respectively.

Note Payable

As a result of taking operational control of the Kate Spade Joint Ventures, the Company has an outstanding Note Payable of $11.4 million as of June 29, 2019 to the other partner of the Kate Spade Joint Ventures to be payable in fiscal 2021.

Capital Lease Obligations

As a result of the Company's sale-leaseback agreement for its office building in North Bergen, NJ, the Company has total capital lease obligations of $0.8 million recorded within Current debt and $5.3 million recorded within Long-Term debt on the Consolidated Balance Sheets as of June 29, 2019. The remaining lease obligations will be amortized through May 1, 2025.

Debt Maturities

As of June 29, 2019, the Company's aggregate debt, excluding capital lease obligations, is approximately $1.61 billion, of which $11.4 million is due in fiscal 2021, $400.0 million is due in fiscal 2023 and $1.20 billion is due subsequent to fiscal 2023.

13. COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company had standby letters of credit, surety bonds and bank guarantees totaling $34.5 million and $35.1 million outstanding at June 29, 2019 and June 30, 2018, 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 letters of credit that are issued.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Tax Legislation

The Tax Legislation requires the Company to pay a one-time tax, or Transition Tax, on previously unremitted earnings of certain non-U.S. subsidiaries. The Company expects to pay approximately $155.9 million related to the Transition Tax. Refer to Note 15, "Income Taxes," for more information related to the impact of the Tax Legislation.

Other

The Company had other contractual cash obligations as of June 29, 2019, including $404.2 million related to inventory purchase obligations, $16.2 million related to capital expenditure purchase obligations, $93.6 million of other purchase obligations, $1.61 billion of debt repayments, $6.1 million of capital lease obligations and $407.8 million of interest payments on the outstanding debt. Refer to Note 10, "Leases," for a summary of the Company's future minimum rental payments under non-cancelable leases.

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 management believes that the final outcome will not have a material effect on the Company's cash flow, results of operations or financial position.

14. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The change in the carrying amount of the Company’s goodwill by segment is as follows:

	Coach				Kate Spade				Stuart Weitzman				Total
	(millions)
Balance at July 1, 2017	$	324.5			$	—			$	156.0			$	480.5
Acquisition of goodwill(1)	1.6				968.9				49.3				1,019.8
Allocation of goodwill(2)	324.0				(324.0		)		—				—
Measurement period adjustment(1)	—				(18.4		)		(0.5		)		(18.9		)
Foreign exchange impact	4.7				0.5				(2.3		)		2.9
Balance at June 30, 2018	654.8				627.0				202.5				1,484.3
Acquisition of goodwill**(1)**	—				12.7				13.3				26.0
Foreign exchange impact	7.0				0.7				(1.8		)		5.9
Balance at June 29, 2019	$	661.8			$	640.4			$	214.0			$	1,516.2

(1)	Refer to Note 3, "Acquisitions," for further information.

(2)	The Company assigned a portion of goodwill associated with the Kate Spade acquisition to Coach brand reporting units based upon the analysis of expected synergies, including the allocation of corporate synergies to the brands.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Intangible Assets

Intangible assets consist of the following:

	Fiscal Year Ended**(1)**
	June 29, 2019												June 30, 2018
	Gross Carrying Amount				Accum. Amort.				Net				Gross Carrying Amount				Accum. Amort.				Net
	(millions)
Intangible assets subject to amortization:
Customer relationships	$	100.6			$	(24.0	)		$	76.6			$	100.5			$	(17.3	)		$	83.2
Order backlog	—				—				—				2.0				(2.0		)		—
Favorable lease rights	93.1				(34.6		)		58.5				97.3				(24.4		)		72.9
Total intangible assets subject to amortization	193.7				(58.6		)		135.1				199.8				(43.7		)		156.1
Intangible assets not subject to amortization:
Brand intangible assets	1,576.8				—				1,576.8				1,576.8				—				1,576.8
Total intangible assets	$	1,770.5			$	(58.6	)		$	1,711.9			$	1,776.6			$	(43.7	)		$	1,732.9

(1)	Refer to Note 3, "Acquisitions," for further information.

As of June 29, 2019, the expected amortization expense for intangible assets is as follows:

	Amortization Expense
	(millions)
Fiscal 2020	$	19.8
Fiscal 2021	18.3
Fiscal 2022	16.4
Fiscal 2023	15.3
Fiscal 2024	13.3
Thereafter	52.0
Total	$	135.1

The expected future amortization expense above reflects remaining useful lives ranging from approximately 10.8 years to 13.0 years for customer relationships and the remaining lease terms ranging from approximately seven months to 15.8 years for favorable lease rights.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

15. INCOME TAXES

The provisions for income taxes, computed by applying the U.S. statutory rate to income before taxes, as reconciled to the actual provisions were:

	Fiscal Year Ended
	June 29, 2019							June 30, 2018							July 1, 2017
	Amount				Percentage			Amount				Percentage			Amount				Percentage
	(millions)
Income before provision for income taxes:
United States(1)	$	335.5			43.8	%		$	161.2			27.0	%		$	365.5			48.2	%
Foreign	430.7				56.2			435.6				73.0			393.5				51.8
Total income before provision for income taxes	$	766.2			100.0	%		$	596.8			100.0	%		$	759.0			100.0	%
Tax expense at U.S. statutory rate	$	160.9			21.0	%		$	167.0			28.0	%		$	265.7			35.0	%
State taxes, net of federal benefit	(1.3		)		(0.2	)		2.4				0.4			15.1				2.0
Effects of foreign operations	(18.0		)		(2.4	)		(55.6		)		(9.3	)		(86.7		)		(11.4	)
Transition tax on deferred foreign earnings	7.5				1.0			266.0				44.6			—				—
Re-measurement of deferred taxes	(6.2		)		(0.8	)		(87.8		)		(14.7	)		—				—
Effects of tax credits and acquisition reorganization	(23.2		)		(3.0	)		(36.2		)		(6.1	)		(12.3		)		(1.6	)
Change in state valuation allowance	4.4				0.6			(40.7		)		(6.8	)		—				—
Other, net	(1.3		)		(0.2	)		(15.8		)		(2.7	)		(13.8		)		(1.9	)
Taxes at effective worldwide rates	$	122.8			16.0	%		$	199.3			33.4	%		$	168.0			22.1	%

(1)	For the fiscal years ended June 29, 2019, June 30, 2018 and July 1, 2017, the United States jurisdiction includes foreign pre-tax earnings allocated to the Company from its interest in a foreign partnership.

Current and deferred tax provision (benefit) was:

	Fiscal Year Ended
	June 29, 2019								June 30, 2018								July 1, 2017
	Current				Deferred				Current				Deferred				Current				Deferred
	(millions)
Federal	$	(16.9	)		$	62.7			$	181.1			$	(1.9	)		$	42.9			$	56.4
Foreign	76.7				(3.2		)		79.1				(11.2		)		39.7				7.4
State	28.5				(25.0		)		(10.0		)		(37.8		)		7.4				14.2
Total current and deferred tax provision (benefit)	$	88.3			$	34.5			$	250.2			$	(50.9	)		$	90.0			$	78.0

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

The components of deferred tax assets and liabilities were:

	June 29, 2019				June 30, 2018
	(millions)
Share-based compensation	$	32.2			$	27.1
Reserves not deductible until paid	41.1				39.2
Deferred rent	30.9				22.5
Employee benefits	22.6				19.0
Foreign investments	4.9				—
Net operating loss	100.6				395.2
Other	8.1				9.5
Inventory	24.2				18.9
Capital loss carryforward	—				56.8
Gross deferred tax assets	264.6				588.2
Valuation allowance	32.9				305.9
Deferred tax assets after valuation allowance	$	231.7			$	282.3
Goodwill	83.7				84.3
Other intangibles	320.2				347.9
Property and equipment	41.3				25.8
Foreign investments	—				5.7
Prepaid expenses	1.2				0.5
Gross deferred tax liabilities	446.4				464.2
Net deferred tax (liabilities) assets	$	(214.7	)		$	(181.9	)
Consolidated Balance Sheets Classification
Deferred income taxes – noncurrent asset	19.4				24.3
Deferred income taxes – noncurrent liability	(234.1		)		(206.2		)
Net deferred tax (liabilities) assets	$	(214.7	)		$	(181.9	)

In fiscal 2018, the Company recorded a net deferred tax liability of $325.7 million as part of the opening balance sheet recorded in purchase accounting for fiscal 2018 acquisitions. Given that this balance was recorded as part of purchase accounting, it had no impact on total deferred tax expense recorded during fiscal 2018.

Significant judgment is required in determining the worldwide provision for income taxes, and there are many transactions for which the ultimate tax outcome is uncertain. It is the Company’s policy to establish provisions for taxes that may become payable in future years, including those due to an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure associated with uncertain tax positions. The provisions are analyzed at least quarterly and adjusted as appropriate based on new information or circumstances in accordance with the requirements of ASC 740.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:

	June 29, 2019				June 30, 2018				July 1, 2017
	(millions)
Balance at beginning of fiscal year	$	75.3			$	94.1			$	138.6
Gross increase due to tax positions related to prior periods	21.8				3.8				2.7
Gross decrease due to tax positions related to prior periods	(0.8		)		(4.0		)		(2.7		)
Gross increase due to tax positions related to current period	10.7				6.4				8.1
Decrease due to lapse of statutes of limitations	(20.1		)		(23.9		)		(39.5		)
Decrease due to settlements with taxing authorities	(1.1		)		(25.1		)		(13.1		)
Increase due to current year acquisitions	—				24.0				—
Balance at end of fiscal year	$	85.8			$	75.3			$	94.1

Of the $85.8 million ending gross unrecognized tax benefit balance as of June 29, 2019, $58.1 million relates to items which, if recognized, would impact the effective tax rate. Of the $75.3 million ending gross unrecognized tax benefit balance as of June 30, 2018, $57.0 million relates to items which, if recognized, would impact the effective tax rate. Of the $94.1 million ending gross unrecognized tax benefit balance as of July 1, 2017, $83.6 million relates to items which, if recognized, would impact the effective tax rate. As of June 29, 2019, June 30, 2018 and July 1, 2017, gross interest and penalties payable was $12.6 million, $12.9 million and $24.1 million, respectively, which are included in Other liabilities on the Company's Consolidated Balance Sheet. During fiscal 2019 and fiscal 2018, the Company recognized gross interest and penalty income of $0.2 million and $10.8 million, respectively, and gross interest and penalty expense of $2.8 million during fiscal 2017.

The Company files income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Tax examinations are currently in progress in select foreign and state jurisdictions that are extending the years open under the statutes of limitation. Fiscal years 2016 to present are open to examination in the U.S. federal jurisdiction, fiscal 2010 to present in select state jurisdictions and fiscal 2012 to present in select foreign jurisdictions. The Company is currently under audit in the U.S. for fiscal 2017. The Company anticipates that one or more of these audits may be finalized and certain statutes of limitation may expire in the foreseeable future. However, based on the status of these examinations, and the average time typically incurred in finalizing audits with the relevant tax authorities, the Company cannot reasonably estimate the impact these audits may have in the next 12 months, if any, to previously recorded uncertain tax positions. The Company accrues for certain known and reasonably anticipated income tax obligations after assessing the likely outcome based on the weight of available evidence. Although the Company believes that the estimates and assumptions used are reasonable and legally supportable, the final determination of tax audits could be different than that which is reflected in historical income tax provisions and recorded assets and liabilities. With respect to all jurisdictions, the Company has made adequate provision for all income tax uncertainties.

As of June 29, 2019, the Company had the following tax loss carryforwards available: U.S. federal loss carryforwards of $127.7 million, state tax loss carryforwards of $717.2 million and tax loss carryforwards of various foreign jurisdictions of $116.0 million. As of June 30, 2018, the Company had the following tax loss carryforwards available: U.S. federal loss carryforwards of $448.4 million, state tax loss carryforwards of approximately $831 million and tax loss carryforwards of various foreign jurisdictions of $921.9 million. The federal and state net operating loss carryforwards generally start to expire in 2031 and 2019, respectively. The majority of the foreign net operating loss can be carried forward indefinitely. Deferred tax assets, including the deferred tax assets recognized on these net operating losses, have been reduced by a valuation allowance of $32.9 million as of June 29, 2019 and $305.9 million as of June 30, 2018. During fiscal 2019, the Company wrote off certain net operating losses and corresponding full valuation allowances that were determined to have a remote likelihood of being utilized.

The Company is not permanently reinvested with respect to the earnings of a limited number of foreign entities and has recorded the tax consequences of remitting earnings from these entities. The Company is permanently reinvested with respect to all other earnings. The total estimated amount of unremitted earnings of foreign subsidiaries as of June 29, 2019 and June 30, 2018 was $2.04 billion and $3.09 billion, respectively. Before the Tax Legislation, the Company considered the earnings of its non-U.S. subsidiaries to be indefinitely reinvested, and accordingly, recorded no deferred income taxes on these earnings. The Tax Legislation imposed a one-time Transition Tax on the deemed repatriated earnings, thereby removing the potential federal income tax consequences of repatriating these earnings to the U.S. However actual remittance from non-U.S. subsidiaries may result in additional foreign withholding taxes, U.S. state taxes and taxes related to foreign currency gains or losses. The Company intends to distribute $650 million of earnings that were previously subject to U.S. Federal Tax and has recorded a deferred tax liability of

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

$2.3 million during fiscal 2019 for U.S. state taxes related to the future distribution. Based on the Company's current analysis, the amount of the unrecognized deferred tax liability related to unremitted earnings is estimate to be between $5 million and $7 million.

Tax Legislation

On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”) was enacted. The Tax Legislation significantly revises the U.S. tax code by (i) lowering the U.S federal statutory income tax rate from 35% to 21%, (ii) implementing a territorial tax system, (iii) imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries ("Transition Tax"), (iv) requiring current inclusion of global intangible low taxed income (“GILTI”) of certain earnings of controlled foreign corporations in U.S. federal taxable income, (v) creating the base erosion anti-abuse tax (“BEAT”) provision, (vi) implementing bonus depreciation that will allow for full expensing of qualified property, (vii) enacting a beneficial rate to be applied against Foreign Derived Intangible Income ("FDII") and (viii) limiting deductibility of interest and executive compensation expense, among other changes.

In December 2017, the SEC Staff issued Staff Accounting Bulletin ("SAB") 118 to provide guidance to registrants in accounting for income taxes under the Tax Legislation. In accordance with SAB 118, the Company made reasonable estimates and recorded provisional amounts for the Tax Legislation during fiscal 2018. Under the transitional provisions of SAB 118, the Company had a one-year measurement period to complete the accounting for the initial tax effects of the Tax Legislation, which was completed during fiscal 2019.

The following table represents amounts recorded to provision for income taxes in the year ended June 29, 2019 for items related to the Tax Legislation:

	Fiscal Year Ended
	June 29, 2019				June 30, 2018
	(millions)
Impact of Change in U.S. Federal Statutory Rate on Pre-Tax Income	$	(32.6	)		$	(10.9	)
Discrete Impacts of Tax Legislation:
Transition Tax - Federal and State	6.9				266.0
Re-measurement of deferred taxes (federal and state)	(6.2		)		(87.8		)
Global intangible low-taxed income	33.1				—
Foreign derived intangible income	(12.6		)		—
Total Impact of Tax Legislation	$	(11.4	)		$	167.3

The Company has elected to pay the Transition Tax in installments. As shown in the table below, the remaining Transition Tax payable is $155.9 million and is payable between fiscal 2021 and fiscal 2025. The $155.9 million Transition Tax payable is reduced from the fiscal 2018 Transition Tax liability of $266.0 million due to payments made during fiscal 2019, as well as the application of net operating losses to reduce the Transition Tax payable.

	Transition Tax Payments
	(millions)
Fiscal 2020	$	—
Fiscal 2021	11.9
Fiscal 2022	16.9
Fiscal 2023	31.8
Fiscal 2024	42.4
Fiscal 2025	52.9
Total	$	155.9

Under GILTI, a portion of the Company’s foreign earnings will be subject to U.S. taxation, offset by available foreign tax credits subject to limitations. For companies subject to GILTI, the FASB has indicated that companies are allowed to record a deferred tax liability related to the outside basis difference in the fiscal year of enactment or record the tax associated with GILTI as a period cost in the period the earnings are included on the U.S. tax return. The Company has chosen to record the future tax

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

associated with GILTI as a period cost, and accordingly, the Company has recorded no additional deferred tax liability in fiscal 2018.

16. DEFINED CONTRIBUTION PLAN

The Company maintains the Tapestry, Inc. 401(k) Savings Plan, which is a defined contribution plan. Employees who meet certain eligibility requirements and are not part of a collective bargaining agreement may participate in this program. The annual expense incurred by the Company for this defined contribution plan was $12.8 million, $12.3 million and $9.1 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.

17. SEGMENT INFORMATION

The Company has three reportable segments:

•	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 through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors.

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. Beginning in fiscal 2019, the Company changed its expense reporting to more closely align with the organizational structure and management of the business. Accordingly, certain SG&A expenses that were previously reported in fiscal 2017 and fiscal 2018 within our reportable segments are now reflected in Corporate expense. The costs primarily relate to employee costs within shared functional groups.

The following table summarizes segment performance for fiscal 2019, fiscal 2018 and fiscal 2017:

	Coach**(1)**				Kate Spade**(1)**				Stuart Weitzman**(1)**				Corporate**(2)**				Total
	(millions)
Fiscal 2019
Net sales	$	4,270.9			$	1,366.8			$	389.4			$	—			$	6,027.1
Gross profit	2,996.4				863.6				193.7				—				4,053.7
Operating income (loss)	1,148.4				165.7				(51.2		)		(448.8		)		814.1
Income (loss) before provision for income taxes	1,148.4				165.7				(51.2		)		(496.7		)		766.2
Depreciation and amortization expense**(3)**	137.2				63.5				19.4				50.3				270.4
Total assets	1,945.9				2,596.1				749.4				1,585.9				6,877.3
Additions to long-lived assets**(4)**	85.0				74.2				12.3				102.7				274.2

Fiscal 2018
Net sales	$	4,221.5			$	1,284.7			$	373.8			$	—			$	5,880.0
Gross profit	2,931.5				705.7				211.3				—				3,848.5
Operating income (loss)	1,117.2				(22.7		)		(0.3		)		(423.4		)		670.8
Income (loss) before provision for income taxes	1,117.2				(22.7		)		(0.3		)		(497.4		)		596.8
Depreciation and amortization expense(3)	139.5				67.2				20.8				43.8				271.3
Total assets	2,256.8				2,626.3				746.4				1,048.8				6,678.3
Additions to long-lived assets(4)	134.4				34.4				7.8				90.8				267.4

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Fiscal 2017
Net sales	$	4,114.7			$	—			$	373.6			$	—			$	4,488.3
Gross profit	2,855.0				—				226.1				—				3,081.1
Operating income (loss)	1,072.4				—				15.4				(300.4		)		787.4
Income (loss) before provision for income taxes	1,072.4				—				15.4				(328.8		)		759.0
Depreciation and amortization expense(3)	149.9				—				18.9				50.1				218.9
Total assets	1,937.1				—				628.4				3,266.1				5,831.6
Additions to long-lived assets(4)	170.5				—				20.2				92.4				283.1

(1)

During fiscal 2019, the Company acquired certain distributors for the Stuart Weitzman and Kate Spade brands. During the first quarter of fiscal 2018, the Company acquired Kate Spade & Company. During the third quarter of fiscal 2018, the Company acquired certain distributors for the Coach and Stuart Weitzman brands and obtained operational control of the Kate Spade Joint Ventures. The operating results of the respective entity have been consolidated commencing on the date of each transaction.

(2) Corporate, which is not a reportable segment, represents certain costs that are not directly attributable to a brand. These costs primarily represent administrative and information systems expense. Furthermore, certain integration and acquisition costs as well as costs under the Company's Operational Efficiency Plan and Transformation Plan as described in Note 6, "Restructuring Activities," are included within Corporate.

(3)

Depreciation and amortization expense includes $2.2 million of Integration & Acquisition costs for the fiscal year ended June 29, 2019. There were no costs incurred related to the Operational Efficiency Plan for the fiscal year ended June 29, 2019 and June 30, 2018. Depreciation and amortization expenses includes $6.1 million of Operational Efficiency Plan charges for the fiscal year ended July 1, 2017. These charges are recorded within Corporate. Depreciation and amortization expense for the segments includes an allocation of expense related to assets which support multiple segments.

(4)	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 includes 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.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

The following table shows net sales for each product category represented:

	Fiscal Year Ended
	June 29, 2019							June 30, 2018							July 1, 2017
	Amount				% of total net sales			Amount				% of total net sales			Amount				% of total net sales
	(millions)
Coach
Women's Handbags	$	2,261.3			38	%		$	2,298.2			39	%		$	2,308.0			52	%
Men's	862.0				14			844.6				14			808.0				18
Women's Accessories	766.5				13			747.1				13			721.0				16
Other Products	381.1				6			331.6				6			277.7				6
Total Coach	$	4,270.9			71	%		$	4,221.5			72	%		$	4,114.7			92	%
Kate Spade(1)
Women's Handbags	$	763.7			13	%		$	703.4			12	%		$	—			—	%
Other Products	315.2				5			311.6				5			—				—
Women's Accessories	287.9				5			269.7				5			—				—
Total Kate Spade	$	1,366.8			23	%		$	1,284.7			22	%		$	—			—	%
Stuart Weitzman(2)	$	389.4			6	%		$	373.8			6	%		$	373.6			8	%
Total Net sales	$	6,027.1			100	%		$	5,880.0			100	%		$	4,488.3			100	%

(1)	On July 11, 2017, the Company completed its acquisition of Kate Spade. The operating results of the Kate Spade brand have been consolidated in the Company's operating results commencing on July 11, 2017.

(2)	The significant majority of sales for the Stuart Weitzman brand is attributable to women's footwear.

Geographic Area Information

Geographic revenue information is based on the location of our customer sale. Geographic long-lived asset information is based on the physical location of the assets at the end of each fiscal year and includes property and equipment, net and other assets.

	United States				Japan				Greater China**(2)**				Other**(3)**				Total
	(millions)
Fiscal 2019
Net sales(1)	$	3,395.0			$	711.9			$	912.9			$	1,007.3			$	6,027.1
Long-lived assets	708.9				90.2				114.2				159.6				1,072.9
Fiscal 2018
Net sales(1)	$	3,457.4			$	695.7			$	837.1			$	889.8			$	5,880.0
Long-lived assets	663.3				60.6				98.4				181.9				1,004.2
Fiscal 2017
Net sales(1)	$	2,432.5			$	572.8			$	696.3			$	786.7			$	4,488.3
Long-lived assets	497.7				58.3				93.2				162.2				811.4

(1)	Includes net sales from our global travel retail business in locations within the specified geographic area.

(2)	Greater China includes mainland China, Hong Kong, Macau and Taiwan.

(3)	Other includes sales in Europe, Canada, South Korea, Malaysia, Singapore, Australia and New Zealand and royalties related to licensing.

18. 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.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

The following is a reconciliation of the weighted-average shares outstanding and calculation of basic and diluted earnings per share:

	Fiscal Year Ended
	June 29, 2019				June 30, 2018				July 1, 2017
	(millions, except per share data)
Net income	$	643.4			$	397.5			$	591.0
Weighted-average basic shares	289.4				285.4				280.6
Dilutive securities:
Effect of dilutive securities	1.4				3.2				2.2
Weighted-average diluted shares	290.8				288.6				282.8
Net income per share:
Basic	$	2.22			$	1.39			$	2.11
Diluted	$	2.21			$	1.38			$	2.09

At June 29, 2019, options to purchase 12.3 million shares of common stock were outstanding but not included in the computation of diluted earnings per share, as these options’ exercise prices, ranging from $31.46 to $78.46, were greater than the average market price of the common shares.

At June 30, 2018, options to purchase 3.4 million shares of common stock were outstanding but not included in the computation of diluted earnings per share, as these options’ exercise prices, ranging from $48.08 to $78.46, were greater than the average market price of the common shares.

At July 1, 2017, options to purchase 4.5 million shares of common stock were outstanding but not included in the computation of diluted earnings per share, as these options’ exercise prices, ranging from $45.13 to $78.46, were greater than the average market price of the common shares.

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 June 29, 2019, June 30, 2018 and July 1, 2017, there were approximately 12.6 million, 4.2 million, and 5.6 million, respectively, of 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.

19. RELATED PARTIES

The Stuart Weitzman brand owns approximately 50% of a factory and one of its former employees, who left the Company during fiscal 2017, maintains a partial ownership interest of less than 50% in a factory, both of which are located in Spain, which are involved in the production of Stuart Weitzman inventory. Payments to these two factories represented $16.8 million and $17.1 million in fiscal 2019 and fiscal 2018, respectively. Amounts payable to these factories were not material at June 29, 2019 or June 30, 2018.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

20. SUPPLEMENTAL BALANCE SHEET INFORMATION

The components of certain balance sheet accounts are as follows:

	June 29, 2019				June 30, 2018
	(millions)
Property and equipment
Land and building	$	21.8			$	19.0
Machinery and equipment	51.0				56.0
Software and computer equipment	541.8				409.1
Furniture and fixtures	413.2				322.5
Leasehold improvements	1,006.3				891.0
Construction in progress	105.2				142.2
Less: accumulated depreciation	(1,200.5		)		(954.4		)
Total property and equipment, net	$	938.8			$	885.4
Accrued liabilities
Payroll and employee benefits	$	63.6			$	174.3
Accrued rent	67.3				53.9
Dividends payable	96.8				97.2
Operating expenses	445.9				347.8
Total accrued liabilities	$	673.6			$	673.2
Other liabilities
Deferred lease obligation	$	221.6			$	200.7
Gross unrecognized tax benefit	85.8				75.3
Other	146.6				191.0
Total other liabilities	$	454.0			$	467.0

21. HEADQUARTERS TRANSACTIONS

Sale of Interest and Lease Transaction of Hudson Yards

During the first quarter of fiscal 2017, the Company sold its investments in 10 Hudson Yards, in New York City, and announced the lease of its new global headquarters. The Company sold its equity investment in the Hudson Yards joint venture as well as net fixed assets related to the design and build-out of the space. The Company received a purchase price of approximately $707 million (net of approximately $77 million due to the developer of Hudson Yards) before transaction costs of approximately $26 million, resulting in a gain of $28.8 million, which was initially amortized through SG&A expenses over the lease term of 20 years. As a result of the adoption of ASU No. 2016-02, as discussed in Note 2, the unamortized balance of the gain will be recorded to equity at the start of fiscal 2020.

The Company has simultaneously entered into a 20-year lease, accounted for as an operating lease, for the headquarters space in the building, comprised of approximately 694,000 square feet. Under the lease, the Company has the right to expand its premises to portions of the 24th and 25th floors of the building and has a right of first offer with respect to available space on the 26th floor of the building. The total commitment related to this lease was approximately $1.05 billion. Minimum lease payments of $45.1 million are due each year from fiscal 2018 through fiscal 2021, and $825.5 million total due for years subsequent to 2021. In addition to its fixed rent obligations, the Company is obligated to pay its percentage share for customary escalations for operating expenses attributable to the building and the Hudson Yards development, taxes and tax related payments. The Company is not obligated to pay any amount of contingent rent.

TAPESTRY, INC.

Notes to Consolidated Financial Statements (Continued)

Sale of Former Headquarters

During the second quarter of fiscal 2017, the Company completed the sale of its former headquarters on West 34th Street. Net cash proceeds of $126.0 million were generated and the sale did not result in a material gain or loss.

Sublease Agreement

During the first quarter of fiscal 2018, the Company entered into a Sublease (the "Sublease"), as sublandlord, with The Guardian Life Insurance Company of America, a New York mutual insurance company ("Guardian"), as subtenant, pursuant to which the Company has agreed to sublease to Guardian three floors of the Company's leased space at 10 Hudson Yards, New York, NY, consisting of approximately 148,813 square feet of office space. The term of the Sublease expires on June 29, 2036 (the "Expiration Date").

Guardian has agreed to pay monthly base rent to the Company of approximately $0.8 million from March 1, 2019 through June 30, 2019 and monthly base rent ranging from approximately $1.1 million to $1.3 million depending on the period from July 1, 2019 through the Expiration Date. In addition to monthly base rent, Guardian has agreed to pay to the Company Guardian’s proportionate share of increases in payments in lieu of taxes and taxes over the tax year commencing July 1, 2019, as well as Guardian’s proportionate share of increases in operating expenses over the operating year commencing January 1, 2019. Subject to certain customary conditions set forth in the Sublease, the Company has agreed to reimburse Guardian for certain subtenant improvements in an amount equal to $80.00 per rentable square foot, or approximately $11.9 million in the aggregate, subject to a deduction equal to $10.00 per rentable square foot, or approximately $1.5 million in the aggregate, for work previously performed by or on behalf of the Company.

TAPESTRY, INC.

Schedule II — Valuation and Qualifying Accounts

For the Fiscal Years Ended June 29, 2019**,** June 30, 2018 and July 1, 2017

	Balance at Beginning of Year				Additions Charged to Costs and Expenses				Other Adjustments**(1)**				Write-offs/ Allowances Taken				Balance at End of Year
	(millions)
Fiscal 2019
Allowance for bad debts	$	1.5			$	7.1			$	—			$	(4.2	)		$	4.4
Allowance for returns	11.5				20.3				2.8				(24.0		)		10.6
Allowance for markdowns	16.7				54.9				2.3				(56.1		)		17.8
Valuation allowance	305.9				21.9				—				(294.9		)		32.9
Total	$	335.6			$	104.2			$	5.1			$	(379.2	)		$	65.7
Fiscal 2018
Allowance for bad debts	$	1.9			$	1.3			$	—			$	(1.7	)		$	1.5
Allowance for returns	4.4				12.9				5.0				(10.8		)		11.5
Allowance for markdowns	9.4				51.4				9.1				(53.2		)		16.7
Valuation allowance	196.1				20.7				129.8				(40.7		)		305.9
Total	$	211.8			$	86.3			$	143.9			$	(106.4	)		$	335.6
Fiscal 2017
Allowance for bad debts	$	2.2			$	1.7			$	—			$	(2.0	)		$	1.9
Allowance for returns	6.0				10.3				—				(11.9		)		4.4
Allowance for markdowns	15.2				36.9				—				(42.7		)		9.4
Valuation allowance	173.4				22.7				—				—				196.1
Total	$	196.8			$	71.6			$	—			$	(56.6	)		$	211.8

(1)	During the year ended June 29, 2019, other adjustments of $5.1 million represent the adjustment to the allowance for returns as a result of the adoption of ASU 2014-09, "Revenue from Contracts with Customers." During the fiscal year ended June 30, 2018, other adjustments of $143.9 million represent additions as a result of acquisitions.

TAPESTRY, INC.

Quarterly Financial Data

(unaudited)

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
	(millions, except per share data)
Fiscal 2019**(1)**
Net sales	$	1,381.2			$	1,800.8			$	1,331.4			$	1,513.7
Gross profit	935.1				1,203.5				915.9				999.2
Net income	122.3				254.8				117.4				148.9
Net income per common share:
Basic	$	0.42			$	0.88			$	0.40			$	0.51
Diluted	$	0.42			$	0.88			$	0.40			$	0.51
Fiscal 2018**(1)**
Net sales	$	1,288.9			$	1,785.0			$	1,322.4			$	1,483.7
Gross profit	762.9				1,176.2				907.6				1,001.8
Net income	(17.7		)		63.2				140.3				211.7
Net income per common share:
Basic	$	(0.06	)		$	0.22			$	0.49			$	0.74
Diluted	$	(0.06	)		$	0.22			$	0.48			$	0.73
Fiscal 2017**(1)**
Net sales	$	1,037.6			$	1,321.7			$	995.2			$	1,133.8
Gross profit	714.7				906.2				705.7				754.5
Net income	117.4				199.7				122.2				151.7
Net income per common share:
Basic	$	0.42			$	0.71			$	0.44			$	0.54
Diluted	$	0.42			$	0.71			$	0.43			$	0.53

(1)	The sum of the quarterly earnings per share may not equal the full-year amount, as the computations of the weighted-average number of common basic and diluted shares outstanding for each quarter and the full year are performed independently.

EXHIBITS TO FORM 10-K

(a)	Exhibit Table (numbered in accordance with Item 601 of Regulation S-K)

Exhibit		Description
2.1		Agreement and Plan of Merger, dated as of May 7, 2017, by and among Coach, Inc., Kate Spade & Company and Chelsea Merger Sub, Inc., which is incorporated by reference from Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended April 1, 2017
3.1		Amended and Restated Bylaws of Tapestry, Inc., effective as of October 31, 2017, which is incorporated herein by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 31, 2017
3.2		Articles of Incorporation, dated June 1, 2000, which is incorporated herein by reference from Exhibit 3.1 of to the Registrant's Registration Statement on Form S-1 filed on June 16, 2000
3.3		Articles Supplementary of Coach, Inc., dated May 3, 2001, which is incorporated herein by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on May 9, 2001
3.4		Articles of Amendment of Coach, Inc., dated May 3, 2001, which is incorporated herein by reference from Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on May 9, 2001
3.5		Articles of Amendment of Coach, Inc., dated May 3, 2002, which is incorporated by reference from Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 29, 2002
3.6		Articles of Amendment of Coach, Inc., dated February 1, 2005, which is incorporated by reference from Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on February 2, 2005
3.7		Articles of Amendment to Charter of Tapestry, Inc., effective as of October 31, 2017, which is incorporated by reference from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on October 31, 2017
4.1		Specimen Certificate for Common Stock of Tapestry, Inc. which is incorporated by reference from Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2018, filed on August 16, 2018
4.2		Indenture, dated as of March 2, 2015, between Coach, Inc. and U.S. Bank National Association, as trustee, which is incorporated herein by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 2, 2015
4.3		First Supplemental Indenture, dated as of March 2, 2015, relating to the 4.250% senior unsecured notes due 2025, between Coach, Inc. and U.S. Bank National Association, as trustee, which is incorporated herein by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 2, 2015
4.4		Form of 4.250% senior unsecured notes due 2025 (included in the First Supplemental Indenture), which is incorporated herein by reference from Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on March 2, 2015
4.5		Second Supplemental Indenture, dated as of June 20, 2017, relating to the 3.000% senior unsecured notes due 2022, between Coach, Inc. and U.S. Bank National Association, as trustee, which is incorporated by reference from Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on June 20, 2017
4.6		Third Supplemental Indenture, dated as of June 20, 2017, relating to the 4.125% senior unsecured notes due 2027, between Coach, Inc. and U.S. Bank National Association, as trustee, which is incorporated by reference from Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on June 20, 2017
4.7		Form of 3.000% senior unsecured notes due 2022 (included in the Second Supplemental Indenture), which is incorporated by reference from Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on June 20, 2017
4.8		Form of 4.125% senior unsecured notes due 2027 (included in the Third Supplemental Indenture), which is incorporated by reference from Exhibit 4.4 to the Registrant's Current Report on Form 8-K, filed on June 20, 2017
10.1		Purchase Agreement among Stuart Weitzman Topco LLC, Stuart Weitzman Intermediate LLC and Coach, Inc., dated January 5, 2015, which is incorporated by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 27, 2014
10.2		Letter Agreement between Stuart Weitzman and Coach, Inc., dated January 5, 2015, which is incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 27, 2014
10.3†		Coach, Inc. Non-Qualified Deferred Compensation Plan for Outside Directors, which is incorporated by reference from Exhibit 10.14 to The Registrant’s Annual Report on Form 10-K for the fiscal year ended June 28, 2003
10.4†		Amended and Restated Tapestry, Inc. 2001 Employee Stock Purchase Plan, which is incorporated by reference to Appendix C to the Registrant's Definitive Proxy Statement for the 2016 Annual Meeting of Stockholders filed on September 30, 2016
10.5†		Coach, Inc. 2004 Stock Incentive Plan, which is incorporated by reference from Appendix A to the Registrant’s Definitive Proxy Statement for the 2004 Annual Meeting of Stockholders, filed on September 29, 2004

Exhibit		Description
10.6†		Coach, Inc. 2010 Stock Incentive Plan, which is incorporated by reference from Appendix A to the Registrant’s Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, filed on September 24, 2010
10.7†		Amendment to the Coach, Inc. 2010 Stock Incentive Plan, which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 22, 2014
10.8†		Coach, Inc. Amended and Restated 2010 Stock Incentive Plan, which is incorporated herein by reference from Appendix B to the Registrant’s Definitive Proxy Statement for the 2014 Annual Meeting of Stockholders, filed on September 26, 2014
10.9†		Coach, Inc. Amended and Restated 2010 Stock Incentive Plan (Amended and Restated as of September 18, 2015), which is incorporated herein by reference from Appendix B to the Registrant’s Definitive Proxy Statement for the 2015 Annual Meeting of Stockholders, filed on September 25, 2015
10.10*†		Coach Inc. Executive Deferred Compensation Plan, effective as of January 1, 2016
10.11†		Coach, Inc. Amended and Restated 2010 Stock Incentive Plan (Amended and Restated as of September 23, 2016), which is incorporated herein by reference from Appendix B to the Registrant's Definitive Proxy Statement for the 2016 Annual Meeting of the Stockholders, filed on September 30, 2016
10.12†		Coach, Inc. Amended and Restated 2010 Stock Incentive Plan (Amended and Restated as of September 20, 2017), which is incorporated herein by reference from Appendix B to the Registrant's Definitive Proxy Statement for the 2017 Annual Meeting of the Stockholders, filed on September 29, 2017
10.13†		Tapestry Inc. 2018 Stock Incentive Plan, which is incorporated herein by reference from Appendix B to the Registrant's Definitive Proxy Statement for the 2018 Annual Meeting of Stockholders, filed on September 28, 2018
10.14*†		Form of Stock Option Grant Notice and Agreement under the Tapestry, Inc. 2018 Stock Incentive Plan
10.15*†		Form of Restricted Stock Unit Award Grant Notice and Agreement under the Tapestry, Inc. 2018 Stock Incentive Plan
10.16*†		Form of Performance Restricted Stock Unit Agreement Grant Notice and Agreement under the Tapestry, Inc. 2018 Stock Incentive Plan
10.17†		Form of Stock Option Grant Notice and Agreement for Outside Directors under the Tapestry, Inc. 2018 Stock Incentive Plan, which is incorporated by reference from Exhibit 10.3 to the Registrant's Quarterly Report on Form-Q for the period ended December 29, 2018
10.18†		Form of Restricted Stock Unit Grant Notice and Agreement for Outside Directors under the Tapestry, Inc. 2018 Stock Incentive Plan, which is incorporated by reference from Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the period ended December 29, 2018
10.19†		Coach, Inc. 2013 Performance-Based Annual Incentive Plan, which is incorporated herein by reference from Appendix B to the Registrant’s Definitive Proxy Statement for the 2013 Annual Meeting of Stockholders, filed on September 27, 2013
10.20†		Tapestry, Inc. 2018 Performance-Based Annual Incentive Plan, which is incorporated herein by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on August 10, 2018
10.21†		Letter Agreement, dated February 13, 2013, between Coach, Inc. and Victor Luis, which is incorporated herein by reference from Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 29, 2013
10.22†		Employment Offer Letter, dated January 26, 2015, between Coach, Inc. and Ian Bickley, which is incorporated by reference from Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2015
10.23†		Letter Agreement, dated June 22, 2015, between Coach, Inc. and Sarah Dunn, which is incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on June 22, 2015
10.24†		Letter Agreement, dated June 22, 2015, between Coach, Inc. and Todd Kahn, which is incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on June 22, 2015
10.25†		Letter Agreement, dated August 22, 2016, between Coach, Inc. and Victor Luis, which is incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on August 26, 2016
10.26†		Letter Agreement, dated August 22, 2016, between Coach, Inc. and Ian Bickley, which is incorporated by reference from Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on August 26, 2016
10.27		Redemption Agreement and Amendment to Limited Liability Company Agreement, dated as of August 1, 2016, by and between Legacy Yards LLC, Coach Legacy Yards LLC and Podium Fund Tower C SPV LLC, which is incorporated by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 2016
10.28		Lease Agreement, dated as of August 1, 2016, by and between Coach, Inc. and Legacy Yards Tenant LP, which is incorporated by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 2016

Exhibit		Description
10.29		Amended and Restated Development Agreement, dated as of August 1, 2016, by and between ERY Developer LLC and Coach Legacy Yards LLC, which is incorporated by reference from Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 2016
10.30		Termination and Release of the Coach Guaranty, dated as of August 1, 2016, by and between Podium Fund Tower C SPV LLC and ERY Developer LLC, which is incorporated by reference from Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 2016
10.31†		Employment Offer Letter, dated December 12, 2016, between Coach, Inc. and Kevin Wills, which is incorporated by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 2016
10.32†		Employment Offer Letter, dated March 27, 2017, between Coach, Inc. and Joshua Schulman, which is incorporated by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended April 1, 2017
10.33		Credit Agreement, dated as of May 30, 2017, by and among Coach, Inc., Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. and HSBC Bank USA, National Association, as Co-Syndication Agents, and the other lenders party thereto, which is incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on May 31, 2017
10.34		Sublease, dated as of September 13, 2017 between Coach, Inc. and The Guardian Life Insurance Company of America, a New York mutual insurance company, which is incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on September 14, 2017.
10.35*†		Letter Agreement, dated March 8, 2018, between the Registrant and Anna Bakst
10.36†		Separation and Release Agreement dated December 6, 2018, between Tapestry and Kevin Wills, which is incorporated by reference from Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the period ended December 29, 2018
10.37*†		Letter Agreement, dated May 8, 2019 between the Registrant and Thomas Glaser
10.38*†		Tapestry, Inc. Severance Pay Plan for Vice Presidents and Above, Amended and Restated effective May 9, 2019
10.39*†		Letter Agreement, dated June 17, 2019 between the Registrant and Joanne Crevoiserat
10.40*†		Tapestry, Inc. Special Severance Plan, effective August 12, 2019
18		Letter re: change in accounting principle, which is incorporated herein by reference from Exhibit 18 to the Registrant’s Quarterly Report on Form 10-Q for the period ended October 2, 2010
21.1*		List of Subsidiaries of Tapestry, Inc.
23.1*		Consent of Deloitte & Touche LLP
31.1*		Rule 13(a)-14(a)/15(d)-14(a) Certifications
32.1*		Section 1350 Certifications
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 Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

*	Filed herewith

†	Management contract or compensatory plan or arrangement.