Agreements with Shareholders and Related Party Transactions

3 Months Ended

Jun. 27, 2015

Agreements with Shareholders and Related Party Transactions

14. Agreements with Shareholders and Related Party Transactions

The Company’s Chief Creative Officer, Michael Kors, and the Company’s Chief Executive Officer, John Idol, have an ownership interest in Michael Kors Far East Holdings Limited, a BVI company. On April 1, 2011, 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 the licensees expire on March 31, 2041, and may be terminated by the Company at certain intervals if certain minimum sales benchmarks are not met. During the three months ended June 27, 2015 and June 28, 2014, there were approximately $1.7 million and $0.8 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 $38.3 million and $19.6 million for the three months ended June 27, 2015 and June 28, 2014, 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 three months ended June 27, 2015 and June 28, 2014, amounts recognized as net sales in the Company’s consolidated statements of operations and comprehensive income related to these sales were approximately $16.0 million and $6.2 million, respectively. As of June 27, 2015 and March 28, 2015, the Company’s total accounts receivable from this related party were $16.5 million and $6.5 million, respectively.