Acquisitions

Fiscal 2017 Acquisition

On May 31, 2016, the Company acquired 100% of the stock of Michael Kors (HK) Limited and its subsidiaries, its licensees in the Greater China region, which includes China, Hong Kong, Macau and Taiwan. The Company believes that having direct control of this business will allow it to better manage opportunities and capitalize on the growth potential in the region. This acquisition was funded by a cash payment of $500.0 million, which may be subject to certain purchase price adjustments. The Company accounted for the acquisition as a business combination. The following table summarized the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in millions):



	May 31, 2016
Cash and cash equivalents	$	19.4
Accounts receivable	22.3
Inventory	36.1
Other current assets	5.5
Current assets	83.3
Property and equipment	46.6
Goodwill	96.5
Reacquired rights	400.4
Favorable lease assets	1.8
Customer relationships	0.7
Deferred tax assets	7.8
Other assets	6.6
Total assets acquired	$	643.7

Accounts payable	$	8.9
Short-term debt	5.8
Other current liabilities	27.8
Current liabilities	42.5
Unfavorable lease liabilities	4.8
Deferred tax liabilities	92.3
Other liabilities	4.1
Total liabilities assumed	$	143.7

Fair value of net assets acquired	$	500.0

Fair value of acquisition consideration	$	500.0

The purchase price was allocated to the underlying assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition, with the $96.5 million difference between the purchase price over the net identifiable tangible and intangible assets acquired allocated to goodwill, which is not deductible for tax purposes. As part of this acquisition, the Company reacquired the rights to use its trademarks and to import, sell, advertise and promote certain of its products in the licensed territories, which were previously granted to its licensees in the Greater China region. As such, the Company recognized reacquired rights as a separate intangible asset from goodwill, which will be amortized through March 31, 2041, the original expiration date of its license agreement in the Greater China region. In addition, the Company recognized customer relationship intangible assets associated with wholesale customers, which will be amortized over ten years. The favorable lease assets and unfavorable lease liabilities have been separately recorded in the Company's financial statements and are recognized as rent expense and a reduction in rent expense, respectively, over the remaining term of the related lease agreements.

MKHKL's results of operations have been included in our consolidated financial statements beginning on June 1, 2016. MKHKL contributed total revenue of $65.7 million and net loss of $5.3 million during the three months ended December 31, 2016, and total revenue of $137.7 million and net loss of $11.3 million for the period from the date of acquisition through December 31, 2016 (after amortization of non-cash valuation adjustments and integration costs).

The following table summarizes the unaudited pro-forma consolidated results of operations for the three and nine months ended December 31, 2016 and December 26, 2015 as if the acquisition had occurred on March 29, 2015, the beginning of Fiscal 2016 (in millions):



	Three Months Ended				Nine Months Ended
	December 31, 2016		December 26, 2015		December 31, 2016		December 26, 2015
Pro-forma total revenue	$	1,352.8	$	1,429.7	$	3,455.3	$	3,601.0
Pro-forma net income	271.0		289.3		584.0		652.3
Pro-forma net income per ordinary share attributable to MKHL:
Basic	$	1.66	$	1.59	3.48		3.45
Diluted	$	1.64	$	1.56	3.43		3.39

The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and MKHKL and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2016 and are not indicative of the future operating results of the combined company. The pro-forma consolidated results of operations reflect the elimination of intercompany transactions and include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired (reacquired rights and customer relationships), fair value adjustments relating to leases, fixed assets and inventory, and the related tax effects assuming that the business combination occurred on March 29, 2015. The pro-forma consolidated results of operations for the three months and nine months ended December 31, 2016 also reflect the elimination of transaction costs of approximately $11.3 million, which have been recorded within selling, general and administrative expenses in the Company's consolidated statements of operations and comprehensive income for the nine months ended December 31, 2016.

The Company is in the process of finalizing the purchase accounting adjustments related to MKHKL, which could result in measurement period adjustments in future periods.

Fiscal 2016 Acquisitions

On January 1, 2016, the Company acquired direct control of its previously licensed business in South Korea ("MK Korea") upon the related license expiration in exchange for cash consideration of approximately $3.6 million. The Company accounted for this acquisition as a business combination and began consolidating MK Korea into its operations beginning with the fourth quarter of Fiscal 2016.

During the second quarter of Fiscal 2016, the Company made contributions to its Latin American joint venture, MK (Panama) Holdings S.A. and subsidiaries ("MK Panama") totaling $18.5 million, consisting of cash consideration of $3.0 million and the elimination of liabilities owed to the Company of $15.5 million, which increased the Company's ownership interest to 75%. As a result of obtaining controlling interest in MK Panama, which was previously accounted for under the equity method of accounting, the Company began consolidating MK Panama into its operations during the second quarter of Fiscal 2016. The Company accounted for its acquisition of the controlling interest in MK Panama as a business combination.

During the second quarter of Fiscal 2017, the Company licensed the right to operate retail stores bearing the Michael Kors trademark to a third party in Brazil.

Please refer to Note 3 in the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2016 for detailed information relating to the Company's acquisitions of MK Korea and MK Panama businesses.