Agreements with Shareholders and Related Party Transactions

6 Months Ended

Sep. 27, 2014

Agreements with Shareholders and Related Party Transactions

13. Agreements with Shareholders and Related Party Transactions

The Company or its chief executive officer may arrange a plane owned by Sportswear Holdings Limited or its affiliates to be used for the Company’s directors and senior management for purposes of business travel on terms and conditions not less favorable to the Company than it would receive in an arm’s-length transaction with a third party. To the extent the Company’s chief executive officer enters into such an arrangement for business travel, the Company will reimburse him for the actual market price paid for the use of such plane. During the six months ended September 27, 2014, and September 28, 2013, the Company chartered this plane from Sportswear Holdings Limited for business purposes, the amounts of which were paid in cash and charged to operating expenses. Amounts charged to the Company in connection with these services were approximately $1.0 million and $0.8 million, for the six months ended September 27, 2014, and September 28, 2013, respectively.

The Company’s Chief Creative Officer, Michael Kors, and the Company’s Chief Executive Officer, John Idol, and certain of the Company’s former shareholders, including Sportswear Holdings Limited, jointly own Michael Kors Far East Holdings Limited, a BVI company. During Fiscal 2012, the Company entered into certain licensing agreements with certain subsidiaries of Michael Kors Far East Holdings Limited (the “Licensees”) which provide the Licensees with certain exclusive rights for use of the Company’s trademarks within China, Hong Kong, Macau and Taiwan, and to import, sell, advertise and promote certain of the Company’s products in these regions, as well as to own and operate stores which bear the Company’s tradenames. The agreements between the Company and subsidiaries of Michael Kors Far East Holdings Limited expire on March 31, 2041, and may be terminated by the Company at certain intervals if certain minimum sales benchmarks are not met. For the six months ended September 27, 2014 and September 28, 2013, there were approximately $1.9 million and $0.4 million, respectively, of royalties earned under these agreements. These royalties were driven by Licensee sales (of the Company’s goods) to their customers of approximately $42.0 million, and $9.5 million, for the six months ended September 27, 2014 and September 28, 2013, respectively. In addition, the Company sells certain inventory items to the Licensees through its wholesale segment at terms consistent with those of similar licensees in the region. During the six months ended September 27, 2014 and September 28, 2013, amounts recognized as net sales in the Company’s consolidated statements of operations and other comprehensive income, related to these sales, were approximately $12.4 million and $3.1 million, respectively.

The Company routinely purchases certain inventory from a manufacturer owned by one of its former directors. Amounts purchased during the six months ended September 27, 2014, and September 28, 2013, were $6.7 million and $3.4 million, respectively.