Agreements with Shareholders and Related Party Transactions

6 Months Ended

Sep. 26, 2015

Related Party Transactions [Abstract]

Agreements with Shareholders and Related Party Transactions

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. Royalties earned under these agreements were approximately $1.6 million and $3.3 million, respectively, during the three months and six months ended September 26, 2015, and $1.1 million and $1.9 million, respectively, during the the three months and six months ended September 27, 2014. These royalties were driven by Licensee sales (of the Company’s goods) to their customers of approximately $36.6 million and $74.9 million, respectively, during the three months and six months ended September 26, 2015, and $22.4 million and $42.0 million, respectively, during the the three months and six months ended September 27, 2014. 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 and six months ended September 26, 2015, amounts recognized as net sales in the Company’s consolidated statements of operations and comprehensive income related to these sales were approximately $14.0 million and $30.0 million, respectively, and were $6.2 million and $12.4 million, respectively, during the three months and six months ended September 27, 2014. As of September 26, 2015 and March 28, 2015, the Company’s total accounts receivable from this related party were $12.3 million and $6.5 million, respectively.

Upon consolidation of MK Panama during the second quarter of Fiscal 2016, the Company’s balance sheet reflects a $2.0 million long-term loan between EBISA, the Company’s partner in the MK Panama joint venture, and Rosales Development Corp.  There is a family relationship between EBISA and Rosales Development Corp. The loan was initiated on November 25, 2014 and bears interest at an annual rate of interest of 5.0%.