UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2012
Commission File Number: 001-35368
MICHAEL KORS HOLDINGS LIMITED
(Translation of registrant’s name into English)
c/o Michael Kors Limited
Unit 1001, 10/F, Miramar Tower
132 Nathan Road
Tsim Sha Tsui, Hong Kong
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F   x             Form 40-F   ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ¨

 

SIGNATURES
Pursuant to the requirements 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.

	 	MICHAEL KORS HOLDINGS LIMITED	
			
Date: August 14, 2012	 	By:	 	/s/ Joseph B. Parsons	
	 		 	Name:	 	Joseph B. Parsons	
	 		 	Title:	 	Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer	

Exhibit Index

Exhibit
No.	  	Description	
		
99.1	  	Consolidated Interim Financial Statements for the Three Months Ended June 30, 2012 and July 2, 2011.	
		
99.2	  	Management’s Discussion and Analysis for the Three Months Ended June 30, 2012 and July 2, 2011.	

Exhibit 99.1
MICHAEL KORS HOLDINGS LIMITED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
JUNE 30, 2012 AND JULY 2, 2011

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

 	  	June 30,
2012	 	 	March 31,
2012	 	
Assets	  				 				
Current assets	  				 				
Cash and cash equivalents	  	$	162,075	  	 	$	106,354	  	
Receivables, net	  	 	104,700	  	 	 	127,226	  	
Inventories	  	 	246,601	  	 	 	187,413	  	
Deferred tax assets	  	 	15,518	  	 	 	11,145	  	
Prepaid expenses and other current assets	  	 	40,298	  	 	 	31,925	  	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	569,192	  	 	 	464,063	  	
Property and equipment, net	  	 	180,317	  	 	 	170,755	  	
Intangible assets, net	  	 	13,684	  	 	 	14,146	  	
Goodwill	  	 	14,005	  	 	 	14,005	  	
Deferred tax assets	  	 	3,942	  	 	 	3,952	  	
Other assets	  	 	6,780	  	 	 	7,504	  	
	  	 	 	 	 	 	 	 	
Total assets	  	$	787,920	  	 	$	674,425	  	

Liabilities and Shareholders’ Equity	  				 				
Current liabilities	  				 				
Revolving line of credit	  	$	27,667	  	 	$	22,674	  	
Accounts payable	  	 	82,464	  	 	 	67,326	  	
Accrued payroll and payroll related expenses	  	 	17,270	  	 	 	33,710	  	
Accrued income taxes	  	 	40,342	  	 	 	8,199	  	
Accrued expenses and other current liabilities	  	 	28,505	  	 	 	33,097	  	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	196,248	  	 	 	165,006	  	
Deferred rent	  	 	46,137	  	 	 	43,292	  	
Deferred tax liabilities	  	 	6,816	  	 	 	6,300	  	
Other long-term liabilities	  	 	3,069	  	 	 	3,590	  	
	  	 	 	 	 	 	 	 	
Total liabilities	  	 	252,270	  	 	 	218,188	  	
Commitments and contingencies	  				 				
Shareholders’ equity	  				 				
Ordinary shares, no par value; 650,000,000 shares authorized, and 193,226,091 shares issued and outstanding at June 30, 2012, and 192,731,390 shares issued and outstanding at March 31, 2012	  	 	—  	  	 	 	—  	  	
Additional paid-in capital	  	 	242,367	  	 	 	228,321	  	
Accumulated other comprehensive loss	  	 	(4,013	) 	 	 	(735	) 	
Retained earnings	  	 	297,296	  	 	 	228,651	  	
	  	 	 	 	 	 	 	 	
Total shareholders’ equity	  	 	535,650	  	 	 	456,237	  	
	  	 	 	 	 	 	 	 	
Total liabilities and shareholders’ equity	  	$	787,920	  	 	$	674,425	  	
	  	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
2

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
(Unaudited)

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
			
Net sales	  	$	397,370	  	 	$	232,282	  	
Licensing revenue	  	 	17,495	  	 	 	10,844	  	
	  	 	 	 	 	 	 	 	
Total revenue	  	 	414,865	  	 	 	243,126	  	
Cost of goods sold	  	 	163,865	  	 	 	106,157	  	
	  	 	 	 	 	 	 	 	
Gross profit	  	 	251,000	  	 	 	136,969	  	
Selling, general and administrative expenses	  	 	126,002	  	 	 	83,492	  	
Depreciation and amortization	  	 	13,055	  	 	 	8,501	  	
	  	 	 	 	 	 	 	 	
Total operating expenses	  	 	139,057	  	 	 	91,993	  	
	  	 	 	 	 	 	 	 	
Income from operations	  	 	111,943	  	 	 	44,976	  	
Interest expense, net	  	 	435	  	 	 	671	  	
Foreign currency (gain) loss	  	 	(375	) 	 	 	1,507	  	
	  	 	 	 	 	 	 	 	
Income before provision for income taxes	  	 	111,883	  	 	 	42,798	  	
Provision for income taxes	  	 	43,238	  	 	 	18,683	  	
	  	 	 	 	 	 	 	 	
Net income	  	 	68,645	  	 	 	24,115	  	
Net income applicable to preference shareholders	  	 	—  	  	 	 	5,198	  	
	  	 	 	 	 	 	 	 	
Net income available for ordinary shareholders	  	$	68,645	  	 	$	18,917	  	

Weighted average ordinary shares outstanding:	  				 				
Basic	  	 	192,790,454	  	 	 	140,554,377	  	
Diluted	  	 	199,391,127	  	 	 	179,177,268	  	
			
Net income per ordinary share:	  				 				
Basic	  	$	0.36	  	 	$	0.13	  	
Diluted	  	$	0.34	  	 	$	0.13	  	
			
Statements of Comprehensive Income:	  				 				
Net income	  	$	68,645	  	 	$	24,115	  	
Foreign currency translation adjustments	  	 	(3,278	) 	 	 	1,979	  	
	  	 	 	 	 	 	 	 	
Comprehensive income	  	$	65,367	  	 	$	26,094	  	
	  	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
3

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands except share data)
(Unaudited)

 	  	 	 	  	 	 	  	Additional
Paid-in
Capital	 	  	Accumulated
Other
Comprehensive
Loss	 	 	Retained
Earnings	 	  	Total	 	
 	  	 
Ordinary Shares	 	  			  			 			  			
 	  	Shares	 	  	Amounts	 	  			  			 			  			
Balance at March 31, 2012	  	 	192,731,390	  	  	$	—  	  	  	$	228,321	  	  	$	(735	) 	 	$	228,651	  	  	$	456,237	  	
Net income	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	68,645	  	  	 	68,645	  	
Foreign currency translation adjustment	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(3,278	) 	 	 	—  	  	  	 	(3,278	) 	
	  				  				  				  				 				  	 	 	 	
Total comprehensive income	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	65,367	  	
Issuance of restricted shares	  	 	3,257	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	—  	  	
Exercise of employee share options	  	 	491,444	  	  	 	—  	  	  	 	2,561	  	  	 	—  	  	 	 	—  	  	  	 	2,561	  	
Equity compensation expense	  	 	—  	  	  	 	—  	  	  	 	4,982	  	  	 	—  	  	 	 	—  	  	  	 	4,982	  	
Tax benefits on exercise of share options	  	 	—  	  	  	 	—  	  	  	 	6,426	  	  	 	—  	  	 	 	—  	  	  	 	6,426	  	
Contributed capital- services provided by former parent	  	 	—  	  	  	 	—  	  	  	 	77	  	  	 	—  	  	 	 	—  	  	  	 	77	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Balance at June 30, 2012	  	 	193,226,091	  	  	$	—  	  	  	$	242,367	  	  	$	(4,013	) 	 	$	297,296	  	  	$	535,650	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
See accompanying notes to consolidated financial statements.
 
4

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Cash flows from operating activities	  				 				
Net income	  	$	68,645	  	 	$	24,115	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Depreciation and amortization	  	 	13,055	  	 	 	8,501	  	
Loss on disposal of fixed assets	  	 	148	  	 	 	—  	  	
Unrealized foreign exchange (gain) loss	  	 	(375	) 	 	 	1,507	  	
Amortization of deferred financing costs	  	 	176	  	 	 	94	  	
Amortization of deferred rent	  	 	1,207	  	 	 	1,227	  	
Deferred income taxes	  	 	(3,891	) 	 	 	(9	) 	
Equity compensation expense	  	 	4,982	  	 	 	—  	  	
Tax benefits on exercise of share options	  	 	(6,426	) 	 	 	—  	  	
Non-cash charges for services provided by former parent	  	 	77	  	 	 	—  	  	
Change in assets and liabilities:	  				 				
Receivables, net	  	 	21,725	  	 	 	32,381	  	
Inventories	  	 	(61,219	) 	 	 	(4,560	) 	
Prepaid expenses and other current assets	  	 	(8,911	) 	 	 	(305	) 	
Other assets	  	 	166	  	 	 	(842	) 	
Accounts payable	  	 	15,774	  	 	 	(2,061	) 	
Accrued expenses and other current liabilities	  	 	12,256	  	 	 	(15,490	) 	
Other long-term liabilities and deferred credits	  	 	1,193	  	 	 	1,367	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	58,582	  	 	 	45,925	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities	  				 				
Capital expenditures	  	 	(17,370	) 	 	 	(9,121	) 	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(17,370	) 	 	 	(9,121	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities	  				 				
Repayments of borrowings under revolving credit agreement	  	 	(3,226	) 	 	 	—  	  	
Borrowings under revolving credit agreement	  	 	9,803	  	 	 	—  	  	
Exercise of employee share options	  	 	2,561	  	 	 	—  	  	
Tax benefits on exercise of share options	  	 	6,426	  	 	 	—  	  	
Payment of deferred financing costs	  	 	(37	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Net cash provided by financing activities	  	 	15,527	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	  	 	(1,018	) 	 	 	329	  	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	 	55,721	  	 	 	37,133	  	
Beginning of period	  	 	106,354	  	 	 	21,065	  	
	  	 	 	 	 	 	 	 	
End of period	  	$	162,075	  	 	$	58,198	  	

Supplemental disclosures of cash flow information	  				 				
Cash paid for interest	  	$	95	  	 	$	128	  	
Cash paid for income taxes	  	$	16,418	  	 	$	20,728	  	
Supplemental disclosure of noncash investing and financing activities	  				 				
Accrued capital expenditures	  	$	13,455	  	 	$	3,488	  	
See accompanying notes to consolidated financial statements.
 
5

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Basis of Presentation
Michael Kors Holdings Limited (“MKHL,” and together with its subsidiaries, the “Company”) was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002. The Company is a leading designer, marketer, distributor and retailer of branded women’s apparel and accessories and men’s apparel bearing the Michael Kors tradename and related trademarks “MICHAEL KORS,” “MICHAEL MICHAEL KORS,” “KORS MICHAEL KORS” and various other related trademarks and logos. The Company’s business consists of retail, wholesale and licensing segments. Retail operations consist of collection stores, lifestyle stores, including concessions and outlet stores located primarily in the United States, Canada, Europe and Japan. Wholesale revenues are principally derived from major department and specialty stores located throughout the United States, Canada and Europe. The Company licenses its trademarks on products such as fragrances, cosmetics, eyewear, leather goods, jewelry, watches, coats, footwear, men’s suits, swimwear, furs and ties.
For all periods presented, all ordinary share and per share amounts in these consolidated financial statements and the notes hereto have been adjusted retroactively to reflect the effects of a 3.8-to-1 share split, which was completed on November 30, 2011, as well as the effects of the July 2011 reorganization discussed in Note 2 below, as if such reorganization and share split had occurred at the beginning of the periods presented.
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements as of June 30, 2012, and for the three months ended June 30, 2012 and July 2, 2011, are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with GAAP. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March 31, 2012, as filed with the Securities and Exchange Commission on June 12, 2012, in the Company’s Annual Report on Form 20-F. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.
The Company utilizes a 52 to 53 week fiscal year ending on the Saturday closest to March 31. As such, the term “Fiscal Year” or “Fiscal” refers to the 52-week or 53-week period, ending on that day. The results for the three months ended June 30, 2012 and July 2, 2011, are based on a 13-week period.
2. Reorganization and Initial Public Offering
Prior to July 2011, the Company was owned 85% by SHL-Kors Limited, a BVI corporation, and 15% by Mr. Kors. SHL-Kors Limited was owned 100% by SHL Fashion Limited.
In July 2011, the Company underwent a corporate reorganization whereby the Company completed a merger with its former parent, SHL-Kors Limited, which merged with and into the Company, with the Company as the surviving corporation (the “First Merger”). Subsequent to the completion of the First Merger, SHL Fashion Limited, the former parent company of SHL-Kors Limited, merged with and into the Company (the “Second Merger”), with the Company as the surviving corporation. Upon completion of the Second Merger, the previous shareholders of SHL Fashion Limited (which include Sportswear Holdings Limited and the Company’s chief executive officer, John Idol), and Mr. Kors became direct shareholders in the Company. Immediately prior to the Second Merger, the Company issued 475,796 preference shares and 6,579,656 ordinary shares to SHL Fashion Limited in consideration for the extinguishment of the Company’s $101.7 million note payable to SHL Fashion Limited. This exchange was based on the fair value of the Company at the time of exchange. In the Second Merger, Mr. Kors and the shareholders of SHL Fashion received 147,134,033 newly issued ordinary shares and 10,639,716 newly issued convertible preference shares of the Company in proportion to their ownership interests held prior to the Second Merger. The Company considered this transaction to be the acquisition of the non-controlling interest in the Company held by Mr. Kors, and, accordingly, the Company accounted for this transaction as an equity transaction.
Following the reorganization, in a private placement in July 2011, a group of investors purchased (i) all 10,639,716 convertible preference shares issued in the reorganization from the previous SHL Fashion Limited shareholders and Mr. Kors for $490 million, and (ii) 217,137 newly issued convertible preference shares from the Company for $10.0 million, of which $9.5 million in proceeds, net of placement fees of $0.5 million, were received by the Company. As a result of the aforementioned transactions, the capital structure of the Company increased from 4,351 issued and outstanding ordinary shares to 147,134,033 issued and outstanding ordinary shares (650,000,000 authorized) and 10,856,853 authorized, issued and outstanding convertible preference shares.
In addition to the above, immediately prior to the reorganization, the redemption feature related to the contingently redeemable ordinary shares was eliminated, thereby, resulting in the reclassification of $6.7 million from temporary equity, which was classified as “contingently redeemable ordinary shares” in the Company’s consolidated balance sheets, to permanent equity as additional paid-in capital (see Note 12).
 
6

On December 20, 2011, the Company completed an initial public offering (“IPO”), which resulted in the sale of 54,280,000 shares at a price of $20 per share, all of which were sold by selling shareholders. The Company did not receive any of the proceeds related to the sale of these shares. On December 20, 2011, in connection with the consummation of the IPO, 10,856,853 convertible preference shares were converted into 41,256,025 ordinary shares at a ratio of 3.8-to-1 resulting in no preference shares issued and outstanding at March 31, 2012.
During March 2012, the Company completed a secondary offering of 25,000,000 ordinary shares at a price of $47.00 per share. Subsequent to this offering and in connection with it, the underwriters executed their overallotment option during April 2012, where an additional 3,500,000 shares were offered at $47.00 per share. Similar to the IPO the Company did not receive any of the proceeds related to the sale of these shares and incurred approximately $0.7 million in fees related to the secondary offering which were charged to selling, general and administrative expenses during the fourth quarter of Fiscal 2012. As a result of the secondary offering, Sportswear Holdings Limited ownership decreased to 25.0% of the Company’s ordinary shares whereby the Company ceased to be a “controlled company” under New York Stock Exchange listing rules.
3. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. The most significant assumptions and estimates involved in preparing the financial statements include allowances for customer deductions, sales returns, sales discounts and doubtful accounts, estimates of inventory recovery, the valuation of share-based compensation, valuation of deferred taxes and the estimated useful lives used for amortization and depreciation of intangible assets and property and equipment. Actual results could differ from those estimates.
Derivative Financial Instruments
The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company in its normal course of business enters into transactions with foreign suppliers and seeks to minimize risk related to these transactions. The Company records these derivative instruments on the consolidated balance sheets at fair value. Though the Company uses forward contracts to hedge its cash flows, the Company does not designate these instruments as hedges for hedge accounting purposes. Accordingly, changes in the fair value of these contracts, as of each balance sheet date and upon maturity, are recorded in cost of sales or operating expenses, within the Company’s consolidated statements of operations, as applicable to the transactions for which the forward exchange contracts were intended to hedge. During the quarter ended June 30, 2012, the net gain of $0.8 million, related to the change in fair value of these contracts, was recorded as a component of cost of sales. The following table details the fair value of these contracts as of June 30, 2012, and March 31, 2012 (in thousands):

 	  	June 30,
2012	 	 	March 31,
2012	 	
Prepaid expenses and other current assets	  	$	2,460	  	 	$	1,318	  	
Accrued expenses and other current liabilities	  	$	(605	) 	 	$	(276	) 	
The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In attempts to mitigate counterparty credit risk, the Company enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit exposure. The aforementioned forward contracts generally have a term of no more than 18 months. The period of these contracts is directly related to the foreign transaction they are intended to hedge. The notional amount of these contracts outstanding at June 30, 2012 was approximately $94.4 million.
Net Income Per Share
The Company reported earnings per share in conformity with the two-class method for calculating and presenting earnings per share for fiscal years prior to Fiscal 2013, due to the existence of both ordinary and convertible preference securities in those periods. Under the two-class method, basic net income per ordinary share is computed by dividing the net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Net income available to shareholders is determined by allocating undistributed earnings between holders of ordinary and convertible preference shares, based on the participation rights of the preference shares. Diluted net income per share is computed by dividing the net income available to both ordinary and preference shareholders by the weighted-average number of dilutive shares outstanding during the period.
The Company’s basic net income per share excludes the dilutive effect of stock options and unvested restricted shares. It is based upon the weighted average number of ordinary shares outstanding during the period divided into net income.
 
7

Diluted net income per share reflects the potential dilution that would occur if share option grants or any other dilutive equity instruments were exercised or converted into ordinary shares. These equity instruments are included as potential dilutive securities to the extent they are dilutive under the treasury stock method for the applicable periods.
For the purposes of basic and diluted net income per share, as a result of the reorganization and exchange during July 2011, weighted average shares outstanding for purposes of presenting net income per share on a comparative basis were retroactively restated for all periods presented to reflect the exchange of ordinary shares for the newly issued ordinary and convertible preference shares as described in Note 2, as if such reorganization and exchange had occurred at the beginning of the periods presented. In addition, as a result of the 3.8-to-1 share split, which was completed on November 30, 2011, weighted average shares outstanding were retroactively restated for all periods presented.
The components of the calculation of basic net income per ordinary share and diluted net income per ordinary share are as follows (in thousands except share and per share data):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	  	July 2,
2011	 	
Numerator:	  				  				
Net Income	  	$	68,645	  	  	$	24,115	  	
Net income applicable to preference shareholders	  	 	—  	  	  	 	5,198	  	
	  	 	 	 	  	 	 	 	
Net income available for ordinary shareholders	  	$	68,645	  	  	$	18,917	  	

Denominator:	  				  				
Basic weighted average ordinary shares	  	 	192,790,454	  	  	 	140,554,377	  	
Weighted average dilutive share equivalents:	  				  				
Share options and restricted shares/units	  	 	6,600,673	  	  	 	—  	  	
Convertible preference shares	  	 	—  	  	  	 	38,622,891	  	
	  	 	 	 	  	 	 	 	
Diluted weighted average ordinary shares	  	 	199,391,127	  	  	 	179,177,268	  	
			
Basic net income per ordinary share	  	$	0.36	  	  	$	0.13	  	
	  	 	 	 	  	 	 	 	
Diluted net income per ordinary share	  	$	0.34	  	  	$	0.13	  	
	  	 	 	 	  	 	 	 	
Share equivalents for the three months ended June 30, 2012 for 105,755 shares have been excluded from the above calculation as they were anti-dilutive, and approximately 1,044,000 shares related to performance based vesting options were excluded from the above calculation as their performance target vesting requirements for Fiscal 2013 were not determinable at June 30, 2012. Share options for three months ended July 2, 2011 have been excluded from the calculation of diluted earnings per share as they were not exercisable during this period, as the Company had not completed an IPO.
Recent Accounting Pronouncements —The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that have a material impact on results of operations, financial condition, or cash flows, based on current information.
 
8

4. Receivables, net
Receivables, net consist of (in thousands):

 	  	June 30,
2012	 	 	March 31,
2012	 	
Trade receivables:	  				 				
Credit risk assumed by factors	  	$	106,530	  	 	$	125,219	  	
Credit risk retained by Company	  	 	29,963	  	 	 	28,021	  	
Receivables due from licensees	  	 	7,301	  	 	 	6,026	  	
	  	 	 	 	 	 	 	 	
	  	 	143,794	  	 	 	159,266	  	
Less allowances (1):	  	 	(39,094	) 	 	 	(32,040	) 	
	  	 	 	 	 	 	 	 	
	  	$	104,700	  	 	$	127,226	  	

(1)	Allowances include doubtful accounts, which were $0.4 million and $0.4 million, at June 30, 2012 and March 31, 2012, respectively. See below for the complete list allowances included in net receivables.	
The Company has historically assigned a substantial portion of its trade receivables to factors in the United States and Europe whereby the factors assumed credit risk with respect to such receivables assigned. Under the factor agreements, factors bear the risk of loss from the financial inability of the customer to pay the trade receivable when due, up to such amounts as accepted by the factor; but not the risk of non-payment of such trade receivable for any other reason. The Company provides an allowance for such non-payment risk at the time of sale, which is recorded as an offset to revenue.
Receivables are presented net of allowances for sales returns, discounts, markdowns, operational chargebacks and doubtful accounts. Sales returns are determined based on an evaluation of current market conditions and historical returns experience. Discounts are based on open invoices where trade discounts have been extended to customers. Markdowns are based on retail sales performance, seasonal negotiations with customers, historical deduction trends and an evaluation of current market conditions. Operational chargebacks are based on deductions taken by customers, net of expected recoveries. Such provisions, and related recoveries, are reflected in net sales.
The allowance for doubtful accounts is determined through analysis of periodic aging of receivables for which credit risk is not assumed by the factors and assessments of collectability based on an evaluation of historic and anticipated trends, the financial conditions of the Company’s customers and the impact of general economic conditions. The past due status of a receivable is based on its contractual terms. Amounts deemed uncollectible are written off against the allowance when it is probable the amounts will not be recovered.
 
9

5. Property and Equipment
Property and equipment consist of (in thousands):

 	  	June 30,
2012	 	 	March 31,
2012	 	
			
Furniture and fixtures	  	$	61,722	  	 	$	58,009	  	
Equipment	  	 	14,874	  	 	 	10,871	  	
Computer equipment and software	  	 	23,547	  	 	 	20,280	  	
In-store shops	  	 	50,859	  	 	 	48,058	  	
Leasehold improvements	  	 	143,397	  	 	 	137,771	  	
	  	 	 	 	 	 	 	 	
	  	 	294,399	  	 	 	274,989	  	
Less: accumulated depreciation and amortization	  	 	(128,981	) 	 	 	(117,487	) 	
	  	 	 	 	 	 	 	 	
Subtotal	  	 	165,418	  	 	 	157,502	  	
Construction-in-progress	  	 	14,899	  	 	 	13,253	  	
	  	 	 	 	 	 	 	 	
	  	$	180,317	  	 	$	170,755	  	
	  	 	 	 	 	 	 	 	
Depreciation and amortization of property and equipment for the three months ended June 30, 2012 and July 2, 2011, was $12.7 million and $8.1 million, respectively.
6. Intangible Assets and Goodwill
The following table discloses the carrying values of intangible assets and goodwill (in thousands):

 	  	June 30, 2012	 	  	March 31, 2012	 	
 	  	Gross
Carrying
Amount	 	  	Accumulated
Amortization	 	  	Net	 	  	Gross
Carrying
Amount	 	  	Accumulated
Amortization	 	  	Net	 	
							
Trademarks	  	$	23,000	  	  	$	10,832	  	  	$	12,168	  	  	$	23,000	  	  	$	10,545	  	  	$	12,455	  	
Lease Rights	  	 	3,754	  	  	 	2,238	  	  	 	1,516	  	  	 	3,838	  	  	 	2,147	  	  	 	1,691	  	
Goodwill	  	 	14,005	  	  	 	—  	  	  	 	14,005	  	  	 	14,005	  	  	 	—  	  	  	 	14,005	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
	  	$	40,759	  	  	$	13,070	  	  	$	27,689	  	  	$	40,843	  	  	$	12,692	  	  	$	28,151	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The trademarks relate to the Company’s brand name and are amortized over twenty years. Lease rights are amortized over the respective terms of the underlying lease. Amortization expense was $0.4 million and $0.4 million, respectively, for each of the three months ended June 30, 2012 and July 2, 2011.
Goodwill is not amortized but will be tested for impairment in the last quarter of Fiscal 2013, or whenever impairment indicators exist. As of June 30, 2012, cumulative impairment related to goodwill totaled $5.4 million. There were no charges related to the impairment of goodwill in the periods presented.
 
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Estimated amortization expense for each of the next five years is as follows (in thousands):

Remainder of Fiscal 2013	  	$	1,082	  	
Fiscal 2014	  	 	1,393	  	
Fiscal 2015	  	 	1,393	  	
Fiscal 2016	  	 	1,386	  	
Fiscal 2017	  	 	1,386	  	
Thereafter	  	 	7,044	  	
	  	 	 	 	
	  	$	13,684	  	
	  	 	 	 	
7. Credit Facilities
The Company has a secured revolving credit facility as amended (the “Credit Facility”), which expires on September 15, 2015. The Credit Facility provides for up to $100.0 million of borrowings and a sub-limit for loans and letters of credit to the Company’s European subsidiaries of $35.0 million. The Credit Facility provides for aggregate credit available to the Company equal to the lesser of (i) $100.0 million or (ii) the sum of specified percentages of eligible receivables and eligible inventory, as defined, plus $30.0 million. Amounts outstanding under the Credit Facility are collateralized by substantially all the assets of the Company. The Credit Facility contains financial covenants that, among other things, require the Company to maintain a fixed charge coverage ratio, set limits on capital expenditures and indebtedness, and restrict the incurrence of additional liens and cash dividends.
Borrowings under the Credit Facility accrue interest at the rate per annum announced from time to time by the agent of 1.25% above the prevailing applicable prime rate, or at a per annum rate equal to 2.25% above the prevailing LIBOR rate. The weighted average interest rate for the Credit Facility was 2.94% during the first three months of Fiscal 2013 and 4.24% for the first three months of Fiscal 2012. The Credit Facility requires an annual facility fee of $0.1 million, and an annual commitment fee of 0.35% on the unused portion of the available credit under the Credit Facility.
As of June 30, 2012, the amount of borrowings outstanding on the Credit Facility was $27.7 million, and the amount available for future borrowings was $17.8 million. The largest amount borrowed during the three months ended June, 30, 2012, was $31.7 million. At June 30, 2012, there were documentary letters of credit outstanding of approximately $42.5 million and stand-by letters of credit outstanding of approximately $11.5 million.
8. Commitments and Contingencies
In the ordinary course of business, the Company is party to various legal proceedings and claims. Although the outcome of such items cannot be determined with certainty, the Company’s management does not believe that the outcome of all pending legal proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.
9. Fair Value of Financial Instruments
Financial assets and liabilities are measured at fair value using a valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date.
Level 2 – Valuations based on quoted inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The Company has historically entered into forward exchange contracts to hedge the foreign currency exposure of its firm commitments to purchase certain inventory from its manufacturers in Europe, as well as commitments for certain services. The forward contracts that are used in the program mature in eighteen months or less, consistent with the related purchase commitments. The Company attempts to hedge the majority of its total anticipated European purchase and service contracts. Gains and losses applicable to derivatives used for purchase commitments are recognized in cost of sales, and those applicable to other services are recognized in selling, general and administrative expenses. In determining the fair value of the Company’s foreign currency forward contracts, the Company’s only derivative instruments, observable inputs were available at June 30, 2012, and thus were relied upon for the valuation of the Company’s forward contracts.
 
11

The fair value of the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current liabilities in the consolidated balance sheets, depending on whether they represent assets or (liabilities) to the Company. Amounts recorded in the statement of operations relating to the changes in fair value of foreign currency contracts during the three months ended June 30, 2012, as a net gain, were approximately $0.8 million, most of which were included in cost of goods sold. All contracts are categorized in Level 2 of the fair value hierarchy as shown in the following table:

 	  	 	 	 	Fair value at June 30, 2012, using:	 	
(In thousands)	  	Total	 	 	Quoted prices in
active  markets for
identical assets
(Level 1)	 	  	Significant other
observable  inputs
(Level 2)	 	 	Significant
unobservable
inputs
(Level 3)	 	
Foreign currency forward contracts- U.S. Dollar	  	$	(605	) 	 	$	—  	  	  	$	(605	) 	 	$	—  	  	
Foreign currency forward contracts- Euro	  	 	2,460	  	 	 	—  	  	  	 	2,460	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total	  	$	1,855	  	 	$	—  	  	  	$	1,855	  	 	$	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
The Company’s cash and cash equivalents, accounts receivable and accounts payable, are recorded at carrying value, which approximates fair value. Borrowings under the Credit Facility are recorded at face value as the fair value of the Credit Facility is synonymous with its recorded value as it is a short-term debt facility due to its revolving nature.
10. Share-Based Compensation
The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation Committee. The Company has two equity plans, one adopted in Fiscal 2008, the Michael Kors (USA), Inc. Stock Option Plan (as amended and restated, the “2008 Plan”), and the other adopted in the third fiscal quarter of Fiscal 2012, the Michael Kors Holdings Limited Omnibus Incentive Plan (the “2012 Plan”). The 2008 Plan provided for the granting of share options only and was authorized to issue up to 23,980,823 ordinary shares. As of March 31, 2012, there are no shares available for the granting of equity awards under the 2008 Plan. The 2012 Plan allows for the granting of share options, restricted shares and restricted share units, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares. At June 30, 2012, there were 12,686,298 ordinary shares available for the granting of equity awards under the 2012 Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the 2012 Plan generally expire seven years from the date of the grant.
Share Options
Share options are generally exercisable at no less than the fair market value on the date of grant. The Company has issued two types of option grants, those that vest based on the attainment of a performance target and those that vest based on the passage of time. Performance based share options may vest based upon the attainment of one of two performance measures. One performance measure is an individual performance target, which is based upon certain performance targets unique to the individual grantee, and the other measure is a company-wide performance target, which is based on a cumulative minimum growth requirement in consolidated net equity. The individual performance target vests 20% of the total option grant each year the target is satisfied. The individual has ten years in which to achieve five individual performance vesting tranches. The company-wide performance target must be achieved over the ten-year term. Performance is measured at the end of the term, and any unvested options under the grant vest if the target is achieved. The Company-wide performance target is established at the time of the grant. The target metrics underlying individual performance vesting requirements are established for each recipient each year up until such time as the grant is fully vested. Options subject to time based vesting requirements become vested in four equal increments on each of the first, second, third and fourth anniversaries of the date on which such options were awarded.
 
12

The following table summarizes the share option activity during the three months ended June 30, 2012, and information about options outstanding at June 30, 2012:

 	  	Number of
Options	 	 	Weighted
Average
Exercise price	 	  	Weighted
Average
Remaining
Contractual
Life (years)	 	  	Aggregate
Intrinsic
Value
(in thousands)	 	
Outstanding at March 31, 2012	  	 	19,542,400	  	 	$	6.59	  	  				  				
Granted	  	 	7,631	  	 	$	38.37	  	  				  				
Exercised	  	 	(491,444	) 	 	$	5.21	  	  				  				
Canceled/forfeited	  	 	(221,066	) 	 	$	7.20	  	  				  				
	  	 	 	 	 				  				  				
Outstanding at June 30, 2012	  	 	18,837,521	  	 	$	6.63	  	  	 	7.60	  	  	$	663,241	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Vested or expected to vest at June 30, 2012	  	 	17,518,895	  	 	$	6.63	  	  	 	7.60	  	  				
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Vested and exercisable at June 30, 2012	  	 	9,735,293	  	 	$	3.31	  	  	 	6.75	  	  	$	375,056	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
The total intrinsic value of options exercised during the three months ended June 30, 2012 was $17.7 million. The cash received from options exercised during this period was $2.6 million. There were no options exercised during the first fiscal quarter of Fiscal 2012.
The weighted average grant date fair value for options granted during the three months ended June 30, 2012 was $16.26. There were no options granted during the three months ended July 2, 2011. The following table represents assumptions used to estimate the fair value of options:

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Expected dividend yield	  	 	0.0	% 	 	 	N/A	  	
Volatility factor	  	 	50.2	% 	 	 	N/A	  	
Weighted average risk-free interest rate	  	 	0.6	% 	 	 	N/A	  	
Expected life of option	  	 	4.75 years	  	 	 	N/A	  	
Restricted Shares
The Company grants restricted shares and restricted share units at the fair market value at the date of the grant. Expense for restricted share grants is calculated based on the intrinsic value of the grant, which is the difference between the cost to the recipient and the fair market value of the underlying share (grants are generally issued at no cost to the recipient). Expense is recognized ratably over the vesting period which is generally four years from the date of the grant. Similar to share options, restricted share grants vest in four equal increments on each of the first, second, third and fourth anniversaries of the date on which such grants were awarded. Restricted share units vest in full on the first anniversary of the date of the grant.
The following table summarizes restricted shares and restricted share units under the 2012 Plan as of June 30, 2012 and changes during the fiscal year then ended:

 	  	Number of Unvested
Restricted Shares/Units	 	  	Weighted
Average Grant
Date Fair Value	 	
Unvested at March 31, 2012	  	 	836,874	  	  	$	22.53	  	
Granted	  	 	3,257	  	  	$	38.38	  	
Vested	  	 	—  	  	  	$	—  	  	
Canceled/forfeited	  	 	—  	  	  	$	—  	  	
	  	 	 	 	  				
Unvested at June 30, 2012	  	 	840,131	  	  	$	22.52	  	
	  	 	 	 	  				
Compensation expense attributable to share-based compensation for the three months ended June 30, 2012 was approximately $5.0 million. There was no compensation expense recognized during the three months ended July 2, 2011, as the Company had not completed an IPO which was one of the vesting requirements for all equity grants. Had the completion of an IPO occurred as of the
 
13

beginning of the periods presented, compensation expense of $2.2 million would have been recognized for first quarter of Fiscal 2012. As of June 30, 2012, the remaining unrecognized share-based compensation expense for non-vested share options and restricted shares to be expensed in future periods is $56.4 million, and the related weighted-average period over which it is expected to be recognized is 4.76 years. There were 9,735,293 and 9,102,228 vested and non-vested outstanding options, respectively, at June 30, 2012. There were 823,331 unvested restricted grants and 16,800 unvested restricted share units at June 30, 2012. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate since the inception of stock option granting. The estimated value of future forfeitures for equity grants as of June 30, 2012 is approximately $4.2 million.
11. Segment Information
The Company operates its business through three operating segments—Retail, Wholesale and Licensing—which are based on its business activities and organization. The operating segments are segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by executive management in deciding how to allocate resources, as well as in assessing performance. The primary key performance indicators are net sales or revenue (in the case of Licensing) and operating income for each segment. The Company’s reportable segments represent channels of distribution that offer similar merchandise, customer experience and sales/marketing strategies. Sales of the Company’s products through Company owned stores for the Retail segment include “Collection,” “Lifestyle” including “concessions,” and outlet stores located throughout North America, Europe, and Japan. Products sold through the Retail segment include women’s apparel, accessories (which include handbags and small leather goods such as wallets), footwear and licensed products, such as watches, fragrances and eyewear. The Wholesale segment includes sales primarily to major department stores and specialty shops throughout North America and Europe. Products sold through the Wholesale segment include accessories (which include handbags and small leather goods such as wallets), footwear and women’s and men’s apparel. The Licensing segment includes royalties earned on licensed products and use of the Company’s trademarks, and rights granted to third parties for the right to sell the Company’s products in certain geographical regions such as Korea, the Philippines, Singapore, Malaysia, the Middle East, Turkey, China, Hong Kong, Macau and Taiwan. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. Corporate overhead expenses are allocated to the segments based upon specific usage or other allocation methods.
 
14

The Company has allocated $12.1 million and $1.9 million of its recorded goodwill to its Wholesale and Licensing segments, respectively. The Company does not have identifiable assets separated by segment. The following table presents the key performance information of the Company’s reportable segments (in thousands):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	  	July 2,
2011	 	
			
Revenue:	  				  				
Net sales: Retail	  	$	215,004	  	  	$	122,344	  	
Wholesale	  	 	182,366	  	  	 	109,938	  	
Licensing	  	 	17,495	  	  	 	10,844	  	
	  	 	 	 	  	 	 	 	
Total revenue	  	$	414,865	  	  	$	243,126	  	

Income from operations:	  				  				
Retail	  	$	59,879	  	  	$	27,922	  	
Wholesale	  	 	40,718	  	  	 	10,868	  	
Licensing	  	 	11,346	  	  	 	6,186	  	
	  	 	 	 	  	 	 	 	
Income from operations	  	$	111,943	  	  	$	44,976	  	
	  	 	 	 	  	 	 	 	
Depreciation and amortization expense for each segment are as follows (in thousands):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	  	July 2,
2011	 	
Depreciation and amortization:	  				  				
Retail	  	$	9,213	  	  	$	5,601	  	
Wholesale	  	 	3,766	  	  	 	2,841	  	
Licensing	  	 	76	  	  	 	59	  	
	  	 	 	 	  	 	 	 	
Total depreciation and amortization	  	$	13,055	  	  	$	8,501	  	

15

Total revenue (as recognized based on country of origin), and long-lived assets by geographic location of the consolidated Company are as follows (in thousands):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	  	July 2,
2011	 	
Revenue:	  				  				
North America (U.S. and Canada)	  	$	377,149	  	  	$	225,768	  	
Europe	  	 	33,387	  	  	 	15,864	  	
Other regions	  	 	4,329	  	  	 	1,494	  	
	  	 	 	 	  	 	 	 	
Total revenue	  	$	414,865	  	  	$	243,126	  	

 	  	As of	 	
 	  	June 30,
2012	 	  	March 31,
2012	 	
Long-lived assets:	  				  				
North America (U.S. and Canada)	  	$	160,531	  	  	$	151,516	  	
Europe	  	 	27,499	  	  	 	27,857	  	
Other regions	  	 	5,971	  	  	 	5,528	  	
	  	 	 	 	  	 	 	 	
Total Long-lived assets:	  	$	194,001	  	  	$	184,901	  	
	  	 	 	 	  	 	 	 	
12. Agreements with Shareholders and Related Party Transactions
During July 2011, the note payable to the Company’s former parent, for $101.7 million, was exchanged for 475,796 preference shares and 6,579,662 ordinary shares, after taking into effect the impact of the share exchange that resulted from the reorganization discussed in Note 2. Accordingly, as of March 31, 2012, there are no outstanding balances related to the note.
From time to time, Sportswear Holdings Limited or its affiliates have provided a plane for purposes of business travel to the directors and senior management of the Company at no charge to the Company. During the three months ended June 30, 2012, $0.1 million, representing the estimated costs of these services, which are based on allocated or incremental cost, was charged to selling, general and administrative expenses as an offset to contributed capital (additional paid-in capital). 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. These reimbursed expenses will be charged to the Company’s operations but will not result in an increase to additional paid-in capital.
The Company’s Chief Creative Officer Michael Kors, John Idol, and certain of the Company’s current 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 exclusive rights for use of the Company’s trademarks within China, Hong Kong, Macau and Taiwan, and to import, sell, advertise and promote 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 Michael Kors Far East Holdings Limited expire on March 31, 2041, and may be terminated by the Company at certain intervals if certain minimum sale benchmarks are not met. As of June 30, 2012, there were no royalties earned under these agreements. The Company will not earn royalties under this agreement until the start of its fiscal 2014 year. The Company also provides the Licensees with certain services, including, but not limited to, supply chain and logistics support, and management information system support at the request of the Licensees, for which the Company charges a service fee based on allocated internal costs employed in delivering the services, and includes a contractually agreed upon markup. During the three months ended June 30, 2012, amounts charged to the Licensees for these services totaled $0.1 million, which is recorded in other selling, general and administrative expenses.
 
16

Exhibit 99.2
MICHAEL KORS HOLDINGS LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED
JUNE 30, 2012

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this interim report. This report contains forward-looking statements that are based upon current expectations. We sometimes identify forward-looking statements with such words as “may,” “expect,” “anticipate,” “estimate,” “seek,” “intend,” “believe” or similar words concerning future events. The forward-looking statements contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, capital expenditures, research and development expenses, general and administrative expenses, capital resources, new stores, additional financings or borrowings and additional losses and are subject to risks and uncertainties including, but not limited to, those discussed in this report that could cause actual results to differ materially from the results contemplated by these forward-looking statements. We also urge you to carefully review “Note Regarding Forward-looking Statements” and the risk factors set forth under “Risk Factors” in our Annual Report on Form 20-F filed on June 12, 2012 with the Securities and Exchange Commission.
Overview
Our Business
We are a rapidly growing global luxury lifestyle brand led by a world-class management team and a renowned, award-winning designer. Since launching his namesake brand 31 years ago, Michael Kors has featured distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude. Mr. Kors’ vision has taken the Company from its beginnings as an American luxury sportswear house to a global accessories, footwear and apparel company with a presence in 85 countries. As a highly recognized luxury lifestyle brand in North America with accelerating awareness in targeted international markets, we have experienced exceptional sales momentum and have a clear trajectory for significant future growth.
We operate our business in three segments—retail, wholesale and licensing—and we have a strategically controlled global distribution network focused on company-operated retail stores, leading department stores, specialty stores and select licensing partners. As of June 30, 2012, our retail segment included 204 North American retail stores, including concessions, and 49 international retail stores, including concessions, in Europe and Japan. As of June 30, 2012, our wholesale segment included wholesale sales through approximately 2,061 department store and specialty store doors in North America and wholesale sales through approximately 748 department store and specialty store doors internationally (department stores as they are referred to here are comprised of full-price department stores only). Our remaining revenue is generated through our licensing segment, through which we license to third parties certain production, sales and/or distribution rights. During the first three months of Fiscal 2013, our licensing segment accounted for approximately 4.2% of our total revenue and consisted primarily of royalties earned on licensed products and our geographic licenses.
We offer two primary collections: the Michael Kors luxury collection and the MICHAEL Michael Kors accessible luxury collection. The Michael Kors collection establishes the aesthetic authority of our entire brand and is carried in many of our retail stores as well as in the finest luxury department stores in the world. In 2004, we introduced the MICHAEL Michael Kors collection, which has a strong focus on accessories, in addition to offering footwear and apparel, and addresses the significant demand opportunity in accessible luxury goods. Taken together, our two collections target a broad customer base while retaining a premium luxury image.
As of August 10, 2012, we had 193,324,151 ordinary shares outstanding.
Certain Factors Affecting Financial Condition and Results of Operations
Costs of Manufacturing . Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products. This volatility applies primarily to costs driven by commodity prices, which can increase or decrease dramatically over a short period of time. These fluctuations may have a material impact on our sales, results of operations and cash flows to the extent they occur. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as possible. In addition, manufacturing labor costs are also subject to degrees of volatility based on local and global economic conditions. We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs to our products.
Demand for Our Accessories and Related Merchandise . Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences. Currently, demand for our products is predicted to grow. According to the Altagamma Studies*, demand for the worldwide luxury goods industry is predicted to grow from approximately $250.2 billion in 2011 to between $307.8 billion and $314.4 billion in 2014. We believe that we are well positioned to capitalize on the continued growth of the accessories product category, as it is one of our primary product category focuses.
 
1

*	Comprised of: the Luxury Goods Worldwide Market Monitor, Spring 2012 Update, Luxury Goods Worldwide Market Study, 2011, Luxury Goods Worldwide Market Study Spring 2011 Update, the Luxury Goods Worldwide Market Study, and the Altagamma 2006 Worldwide Markets Monitor (together, the “Altagamma Studies”). These studies were prepared by the Altagamma Foundation in cooperation with Bain & Company and can be obtained free of charge or at a nominal cost by contacting Bain & Company’s media contacts at cheryl.krauss@bain.com or frank.pinto@bain.com. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. The Altagamma Studies analyze the global luxury goods market, including the market and financial performance of more than 230 of the world’s leading luxury goods companies and brands. All figures derived from the Altagamma Studies are based on an exchange rate of $1.31 to €1.00.	
Segment Information
We generate revenue through three business segments: retail, wholesale and licensing. The following table presents our revenue and income from operations by segment for the three months ended June 30, 2012 and July 2, 2011 (in thousands):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	  	July 2,
2011	 	
			
Revenue:	  				  				
Net sales: Retail	  	$	215,004	  	  	$	122,344	  	
Wholesale	  	 	182,366	  	  	 	109,938	  	
Licensing	  	 	17,495	  	  	 	10,844	  	
	  	 	 	 	  	 	 	 	
Total revenue	  	$	414,865	  	  	$	243,126	  	

Income from operations:	  				  				
Retail	  	$	59,879	  	  	$	27,922	  	
Wholesale	  	 	40,718	  	  	 	10,868	  	
Licensing	  	 	11,346	  	  	 	6,186	  	
	  	 	 	 	  	 	 	 	
Income from operations	  	$	111,943	  	  	$	44,976	  	
	  	 	 	 	  	 	 	 	
Retail
From the beginning of Fiscal 2007, when we first undertook our major retail growth initiative, through June 30, 2012, we have leveraged our successful retail store formats by opening a total of 243 new stores. During this time period, we have grown our North American retail presence significantly, increasing our North American store count by 194 stores, as well as increasing our international store count by 49 stores.
 
2

The following table presents the growth in our network of retail stores during the three months ended June 30, 2012 and July 2, 2011:

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Full price retail stores including concessions:	  				 				
Number of stores	  	 	168	  	 	 	119	  	
Increase during period	  	 	10	  	 	 	6	  	
Percentage increase vs. prior period	  	 	6.3	% 	 	 	5.3	% 	
Total gross square footage	  	 	343,884	  	 	 	237,235	  	
Average square footage per store	  	 	2,047	  	 	 	1,994	  	
			
Outlet stores:	  				 				
Number of stores	  	 	85	  	 	 	58	  	
Increase during period	  	 	6	  	 	 	5	  	
Percentage increase vs. prior period	  	 	7.6	% 	 	 	9.4	% 	
Total gross square footage	  	 	235,788	  	 	 	160,883	  	
Average square footage per store	  	 	2,774	  	 	 	2,774	  	
Wholesale
We sell our products directly to department stores across North America and Europe to accommodate consumers who prefer to shop at major department stores. In addition, we sell to specialty stores for those consumers who enjoy the boutique experience afforded by such stores. We continue to focus our sales efforts and drive sales in existing locations by enhancing presentation, primarily through the creation of more shop-in-shops with our proprietary fixtures that effectively communicate our brand and create a more personalized shopping experience for consumers. We tailor our assortments through wholesale product planning and allocation processes to better match the demands of our department store customers in each local market.
The following table presents the growth in our network of full-price wholesale doors, which include department store and specialty store doors, during the three months ended June 30, 2012 and July 2, 2011:

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Number of full-price wholesale doors	  	 	2,809	  	 	 	2,108	  	
Increase during period	  	 	132	  	 	 	76	  	
Percentage increase vs. prior period	  	 	4.9	% 	 	 	3.7	% 	
Licensing
We generate revenue through product and geographic licensing arrangements. Our product license agreements allow third parties to use our brand name and trademarks in connection with the manufacturing and sale of a variety of products, including watches, fragrances, eyewear and jewelry. In our product licensing arrangements, we take an active role in the design process, marketing and distribution of products under our brands. Our geographic licensing arrangements allow third parties to use our tradenames in connection with the retail and/or wholesale sales of our branded products in specific geographic regions.
 
3

Key Performance Indicators and Statistics
We use a number of key indicators of operating results to evaluate our performance, including the following (dollars in thousands):

 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Total revenue	  	$	414,865	  	 	$	243,126	  	
Gross profit as a percent of total revenue	  	 	60.5	% 	 	 	56.3	% 	
Income from operations	  	$	111,943	  	 	$	44,976	  	
Retail net sales- North America	  	$	192,110	  	 	$	112,926	  	
Retail net sales- Europe	  	$	18,565	  	 	$	7,924	  	
Retail net sales- Japan	  	$	4,329	  	 	$	1,494	  	
Increase in comparable store net sales- North America	  	 	38.4	% 	 	 	46.4	% 	
Increase in comparable store net sales- Europe	  	 	24.2	% 	 	 	10.2	% 	
Increase in comparable store net sales- Japan *	  	 	20.6	% 	 	 	n/a	  	
			
Wholesale net sales- North America	  	$	167,544	  	 	$	101,998	  	
Wholesale net sales- Europe	  	$	14,822	  	 	$	7,940	  	
 
*	Where n/a is used, stores in that region were not open for the requisite comparable period.	
General Definitions for Operating Results
Net sales consist of sales from comparable retail stores and non-comparable retail stores, net of returns and markdowns, as well as those made to our wholesale customers, net of returns, discounts, markdowns and allowances.
Comparable store sales include sales from a store that has been opened for one full year after the end of the first month of its operations. All comparable store sales are presented on a 52-week basis.
Licensing revenue consists of fees charged on sales of licensed products to our licensees as well as contractual royalty rates for the use of our trademarks in certain geographic territories.
Cost of goods sold includes the cost of inventory sold, freight-in on merchandise and foreign currency exchange gains/losses related to forward contracts for purchase commitments.
Gross profit is total revenue (net sales plus licensing revenue) minus cost of goods sold.
Selling, general and administrative expenses consist of warehousing and distribution costs, rent for our distribution centers, store payroll, store occupancy costs (such as rent, common area maintenance, real estate taxes and utilities), information technology and systems costs, corporate payroll and related benefits, advertising and promotion expense and other general expenses.
Depreciation and amortization includes depreciation and amortization of fixed and definite-lived intangible assets.
Impairment charges consist of charges to write-down both fixed and intangible assets to fair value.
Income from operations consists of gross profit minus total operating expenses.
Interest expense represents interest and fees on our revolving credit facility (“Credit Facility”) and amortization of deferred financing costs, offset by interest earned on highly liquid investments (investments purchased with an original maturity of three months or less, classified as cash equivalents).
Foreign currency gain represents unrealized income or loss from the re-measurement of monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.
 
4

Results of Operations
Comparison of the three months ended June 30, 2012 with the three months ended July 2, 2011
The following table details the results of our operations for the three months ended June 30, 2012 and for the three months ended July 2, 2011, and expresses the relationship of certain line items to total revenue as a percentage (dollars in thousands):

 	  	 	 	 	 	 	  	 	 	 	 	 	 	% of Total
Revenue for
the three
months ended
June 30, 2012	 	 	% of Total
Revenue for
the three
months ended
July 2, 2011	 	
 	  	Three Months Ended	 	  	 	 	 	 	 	 			 			
 	  	June 30,
2012	 	 	July 2,
2011	 	  	$ Change	 	 	% Change	 	 			 			
							
Statement of Operations Data:	  				 				  				 				 				 				
Net sales	  	$	397,370	  	 	$	232,282	  	  	$	165,088	  	 	 	71.1	% 	 				 				
Licensing revenue	  	 	17,495	  	 	 	10,844	  	  	 	6,651	  	 	 	61.3	% 	 				 				
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Total revenue	  	 	414,865	  	 	 	243,126	  	  	 	171,739	  	 	 	70.6	% 	 				 				
Cost of goods sold	  	 	163,865	  	 	 	106,157	  	  	 	57,708	  	 	 	54.4	% 	 	 	39.5	% 	 	 	43.7	% 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Gross profit	  	 	251,000	  	 	 	136,969	  	  	 	114,031	  	 	 	83.3	% 	 	 	60.5	% 	 	 	56.3	% 	
Selling, general and administrative expenses	  	 	126,002	  	 	 	83,492	  	  	 	42,510	  	 	 	50.9	% 	 	 	30.4	% 	 	 	34.3	% 	
Depreciation and amortization	  	 	13,055	  	 	 	8,501	  	  	 	4,554	  	 	 	53.6	% 	 	 	3.1	% 	 	 	3.5	% 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Total operating expenses	  	 	139,057	  	 	 	91,993	  	  	 	47,064	  	 	 	51.2	% 	 	 	33.5	% 	 	 	37.8	% 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Income from operations	  	 	111,943	  	 	 	44,976	  	  	 	66,967	  	 	 	148.9	% 	 	 	27.0	% 	 	 	18.5	% 	
Interest expense, net	  	 	435	  	 	 	671	  	  	 	(236	) 	 	 	-35.2	% 	 	 	0.1	% 	 	 	0.3	% 	
Foreign currency (gain) loss	  	 	(375	) 	 	 	1,507	  	  	 	(1,882	) 	 	 	-124.9	% 	 	 	-0.1	% 	 	 	0.6	% 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Income before provision for income taxes	  	 	111,883	  	 	 	42,798	  	  	 	69,085	  	 	 	161.4	% 	 	 	27.0	% 	 	 	17.6	% 	
Provision for income taxes	  	 	43,238	  	 	 	18,683	  	  	 	24,555	  	 	 	131.4	% 	 	 	10.4	% 	 	 	7.7	% 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Net income	  	$	68,645	  	 	$	24,115	  	  	$	44,530	  	 	 	184.7	% 	 				 				
	  	 	 	 	 	 	 	 	  	 	 	 	 				 				 				
Total Revenue
Total revenue increased $171.7 million, or 70.6%, to $414.9 million for the three months ended June 30, 2012, compared to $243.1 million for the three months ended July 2, 2011. The increase was the result of an increase in our comparable and non-comparable retail store sales and wholesale sales, as well as increases in our licensing revenue.
The following table details revenues for our three business segments (dollars in thousands):

 	  	 	 	  	 	 	  	$ Change	 	  	% Change	 	 	% of Total
Revenue for
the three
months ended
June 30, 2012	 	 	% of Total
Revenue for
the three
months ended
July 2, 2011	 	
 	  	Three Months Ended	 	  			  			 			 			
 	  	June 30,
2012	 	  	July 2,
2011	 	  			  			 			 			
Revenue:	  				  				  				  				 				 				
Net sales: Retail	  	$	215,004	  	  	$	122,344	  	  	$	92,660	  	  	 	75.7	% 	 	 	51.8	% 	 	 	50.3	% 	
Wholesale	  	 	182,366	  	  	 	109,938	  	  	 	72,428	  	  	 	65.9	% 	 	 	44.0	% 	 	 	45.2	% 	
Licensing	  	 	17,495	  	  	 	10,844	  	  	 	6,651	  	  	 	61.3	% 	 	 	4.2	% 	 	 	4.5	% 	
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				 				
Total revenue	  	$	414,865	  	  	$	243,126	  	  	$	171,739	  	  				 				 				
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				 				
Retail
Net sales from our retail stores increased $92.7 million, or 75.7%, to $215.0 million for the three months ended June 30, 2012, compared to $122.3 million for the three months ended July 2, 2011. We operated 253 retail stores, including concessions, as of June 30, 2012, compared to 177 retail stores, including concessions, as of July 2, 2011. During the three months ended June 30, 2012, our comparable store sales growth increased $44.5 million, or 37.3%, from the three months ended July 2, 2011. The growth in our comparable store sales was primarily due to an increase in sales of our accessories line during the three months ended June 30, 2012. In addition, our non-comparable store sales were $48.2 million during the three months ended June 30, 2012, which was primarily the result of opening 76 new stores since July 2, 2011.
 
5

Wholesale
Net sales to our wholesale customers increased $72.4 million, or 65.9%, to $182.4 million for the three months ended June 30, 2012, compared to $109.9 million for the three months ended July 2, 2011. The increase in our wholesale net sales occurred primarily as a result of increased sales of our accessories line during the three months ended June 30, 2012, as we continue to enhance our presence in department and specialty stores by converting more doors to shop-in-shops, and in continuing our expansion of our European operations. Net sales from our European operations increased approximately 86.6% during the three months ended June 30, 2012 compared to the three months ended July 2, 2011, due largely to an increase in full-price doors to 748 from 373 in the same period last year.
Licensing
Revenues earned on our licensing agreements increased $6.7 million, or 61.3%, to $17.5 million for the three months ended June 30, 2012, compared to $10.8 million for the three months ended July 2, 2011. The increase in licensing revenue was primarily due to royalties earned on licensing agreements related to sales of watches.
Gross Profit
Gross profit increased $114.0 million, or 83.3%, to $251.0 million during the three months ended June 30, 2012, compared to $137.0 million for the three months ended July 2, 2011. Gross profit as a percentage of total revenue increased to 60.5% during the three months ended June 30, 2012, compared to 56.3% during the three months ended July 2, 2011. The increase in profit margin resulted from increases in gross profit margin from our retail and wholesale segments of approximately 300 and 520 basis points, respectively. The increase in profit margin on our retail segment resulted primarily from decreases in in-store markdowns and discounts given during the quarter ended June 30, 2012 as compared to the quarter ended July 2, 2011. The increase in profit margin on our wholesale segment largely resulted from a decrease in discounts and allowances given on our accessories product line during the quarter ended June 30, 2012 as compared to the quarter ended July 2, 2011.
Total Operating Expenses
Total operating expenses increased $47.1 million, or 51.2%, to $139.1 million during the three months ended June 30, 2012, compared to $92.0 million for the three months ended July 2, 2011. Total operating expenses decreased to 33.5% as a percentage of total revenue for the three months ended June 30, 2012, compared to 37.8% for the three months ended July 2, 2011. The components that comprise total operating expenses are explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $42.5 million, or 50.9%, to $126.0 million during the three months ended June 30, 2012, compared to $83.5 million for the three months ended July 2, 2011. The increase was primarily due to increases in our retail occupancy and salary costs of $24.8 million, and increases in corporate employee-related costs of $12.3 million. The increase in our retail occupancy and payroll costs was due to operating 253 retail stores versus 177 retail stores in the prior period. The increase in our corporate employee-related costs was due primarily to an increase in our corporate staff to accommodate our North American and international growth, as well as to compensation expense related to equity grants of approximately $5.0 million. There was no equity compensation expense recognized during the quarter ended July 2, 2011, as an initial public offering had not yet occurred, which was a vesting requirement for those grants outstanding at that time. Selling, general and administrative expenses as a percentage of total revenue decreased to 30.4% during the three months ended June 30, 2012, compared to 34.3% for the three months ended July 2, 2011. The decrease as a percentage of total revenue was primarily due to achieving economies of scale during the three months ended June 30, 2012, as compared to the three months ended July 2, 2011, as our revenue is increasing at a greater rate relative to our fixed costs.
Depreciation and Amortization
Depreciation and amortization increased $4.6 million, or 53.6%, to $13.1 million during the three months ended June 30, 2012, compared to $8.5 million for the three months ended July 2, 2011. Increases in depreciation and amortization were primarily due to an increase in the build-out of our new retail locations, new shop-in-shop locations and investments made in our information systems infrastructure to accommodate our growth. Depreciation and amortization decreased to 3.1% as a percentage of total revenue during the three months ended June 30, 2012, compared to 3.5% for the three months ended July 2, 2011.
 
6

Income from Operations
As a result of the foregoing, income from operations increased $67.0 million, or 148.9%, to $111.9 million during the three months ended June 30, 2012, compared to $45.0 million for the three months ended July 2, 2011. Income from operations as a percentage of total revenue increased to 27.0% during the three months ended June 30, 2012, compared to 18.5% for the three months ended July 2, 2011.
The following table details income from operations for our three business segments (dollars in thousands):

 	  	 	 	  	 	 	  	$ Change	 	  	% Change	 	 	% Net Sales/
Revenue for
the three
months ended
June 30, 2012	 	 	% Net Sales/
Revenue for
the three
months ended
July 2, 2011	 	
 	  	Three Months Ended	 	  			  			 			 			
 	  	June 30,
2012	 	  	July 2,
2011	 	  			  			 			 			
Income from operations:	  				  				  				  				 				 				
Retail	  	$	59,879	  	  	$	27,922	  	  	$	31,957	  	  	 	114.5	% 	 	 	27.9	% 	 	 	22.8	% 	
Wholesale	  	 	40,718	  	  	 	10,868	  	  	 	29,850	  	  	 	274.7	% 	 	 	22.3	% 	 	 	9.9	% 	
Licensing	  	 	11,346	  	  	 	6,186	  	  	 	5,160	  	  	 	83.4	% 	 	 	64.9	% 	 	 	57.0	% 	
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				 				
Income from operations	  	$	111,943	  	  	$	44,976	  	  	$	66,967	  	  	 	148.9	% 	 				 				
	  	 	 	 	  	 	 	 	  	 	 	 	  				 				 				
Retail
Income from operations for our retail segment increased $32.0 million, or 114.5%, to $59.9 million during the three months ended June 30, 2012, compared to $27.9 million for the three months ended July 2, 2011. Income from operations as a percentage of net retail sales for the retail segment increased approximately 5.1% as a percentage of net retail sales to 27.9% during the three months ended June 30, 2012. The increase in retail income from operations as a percentage of net sales was due primarily to the increase in gross profit margin during the three months ended June 30, 2012, as compared to the three months ended July 2, 2011, as described in the gross profit discussion above. In addition, net sales increased at a greater rate relative to fixed costs during the quarter ended June 30, 2012, as compared to the quarter ended July 2, 2011, resulting in a 2.0% decrease in operating expenses as a percentage of net sales.
Wholesale
Income from operations for our wholesale segment increased $29.9 million, or 274.7%, to $40.7 million during the three months ended June 30, 2012, compared to $10.9 million for the three months ended July 2, 2011. Income from operations as a percentage of net sales for the wholesale segment increased 12.4% as a percentage of net wholesale sales to 22.3% during the three months ended June 30, 2012. This increase as a percentage of net sales was primarily the result of the increase in gross profit margin, as described in the gross profit discussion above, as well as a decrease in wholesale operating expenses as a percentage of net wholesale sales of approximately 7.2% during the three months ended June 30, 2012, as compared to the three months ended July 2, 2011, as the increase in net sales more than compensated for the increase in fixed expenses.
Licensing
Income from operations for our licensing segment increased $5.2 million, or 83.4%, to $11.3 million during the three months ended June 30, 2012, compared to $6.2 million for the three months ended July 2, 2011. Income from operations as a percentage of licensing revenue for the licensing segment increased 7.9% as a percentage of licensing revenue to 64.9% during the three months ended June 30, 2012. This increase was primarily the result of the aforementioned increase in sales of licensed products, while our operating expenses remained relatively fixed as compared to the prior comparable period.
Interest Expense
Interest expense decreased $0.2 million, or 35.2%, to $0.4 million during the three months ended June 30, 2012, compared to $0.7 million for the three months ended July 2, 2011. The decrease in interest expense was attributable primarily to a decrease in interest rates experienced during the quarter ended June 30, 2012, as compared to the quarter ended July 2, 2011.
Foreign Currency (Gain) Loss
Foreign currency gain during the three months ended June 30, 2012 was $0.4 million as compared to foreign currency loss of $1.5 million during the three months ended July 2, 2011. The gain during the three months ended June 30, 2012 was primarily due to the strengthening of the Japanese Yen relative to the U.S. dollar, which impacted the re-measurement of Yen-denominated intercompany loans with certain of our subsidiaries.
 
7

Provision for Income Taxes
We recognized $43.2 million of income tax expense during the three months ended June 30, 2012, compared with $18.7 million for the three months ended July 2, 2011. Our effective tax rate for the three months ended June 30, 2012, was 38.6%, compared to 43.7% for the three months ended July 2, 2011. The decrease in our effective tax rate was primarily due to a greater portion of our income being recognized in jurisdictions with lower statutory income tax rates during the three months ended June 30, 2012, as compared to July 2, 2011, as well as an increase in earnings related to certain of our non-U.S. subsidiaries, which are not expected to be profitable for Fiscal 2013. These decreases to our effective tax rate were offset in part by certain discrete items primarily related to adjustments for certain international tax credits and deductions impacting our U.S. federal and state tax provision, which collectively increased the effective tax rate for the three months ended June 30, 2012, by approximately 1.7%.
Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes, tax rates in foreign jurisdictions, and certain other nondeductible expenses (such as fees related to a public offering) and income earned in certain non-U.S. entities with significant net operating loss carryforwards. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.
Net Income
As a result of the foregoing, our net income increased $44.5 million, or 184.7%, to $68.6 million during the three months ended June 30, 2012, compared to $24.1 million for the three months ended July 2, 2011.
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our Credit Facility and available cash and cash equivalents. Our primary use of this liquidity is to fund our ongoing cash requirements, including working capital requirements, global retail store expansion and renovation, construction and renovation of shop-in-shops, investment in information systems infrastructure and expansion of our distribution and corporate facilities. We believe that the cash generated from our operations, together with borrowings available under our Credit Facility and available cash and cash equivalents, will be sufficient to meet our working capital needs for the next 12 months, including investments made and expenses incurred in connection with our store growth plans, systems development and store improvements. We spent approximately $17.4 million on capital expenditures during the first three months of Fiscal 2013 and expect to spend $150 million to $170 million on capital expenditures during Fiscal 2013. The majority of these expected expenditures relate to new retail store openings planned for the year, with the remainder being used for investments in connection with developing new shop-in-shops, build-out of our new warehouse, corporate offices and enhancing our information systems infrastructure.
The following table sets forth key indicators of our liquidity and capital resources (in thousands):

 	  	As o f	 	
 	  	June 30,
2012	 	  	March 31,
2012	 	
Balance Sheet Data:	  				  				
Cash and cash equivalents	  	$	162,075	  	  	$	106,354	  	
Working capital	  	$	372,944	  	  	$	299,057	  	
Total assets	  	$	787,920	  	  	$	674,425	  	
Revolving line of credit	  	$	27,667	  	  	$	22,674	  	
 
8

									
 	  	Three Months Ended	 	
 	  	June 30,
2012	 	 	July 2,
2011	 	
Cash Flows Provided By (Used In):	  				 				
Operating activities	  	$	58,582	  	 	$	45,925	  	
Investing activities	  	 	(17,370	) 	 	 	(9,121	) 	
Financing activities	  	 	15,527	  	 	 	—  	  	
Effect of exchange rate changes	  	 	(1,018	) 	 	 	329	  	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	$	55,721	  	 	$	37,133	  	
	  	 	 	 	 	 	 	 	
Cash Provided by Operating Activities
Cash provided by operating activities increased $12.7 million to $58.6 million during the three months ended June 30, 2012, as compared to $45.9 million for the three months ended July 2, 2011. The increase in cash flows from operating activities is primarily due to an increase in our net income, offset, in part, by a decrease in changes to our accounts receivable and an increase in cash outflows on our inventory during the three months ended June 30, 2012 as compared to the three months ended July 2, 2011. The decrease in the change to our accounts receivable was largely the result of a delay in shipments during the fourth fiscal quarter of 2012, as a result of disruptions in our west coast distribution facilities due to our warehouse consolidation, which shipped during the quarter ended June 30, 2012, and consequently had no impact to the ending Fiscal 2012 trade accounts receivable balance. The increase in cash outflows on our inventory occurred primarily to accommodate the increase to our net sales for the three months ended June 30, 2012, as well as in anticipation for our inventory needs for the following fiscal 2013 quarter (second fiscal quarter), based on our growing sales and expected increase in shop-in-shop conversions, which typically require significantly greater inventory levels than that of a non-shop wholesale door.
Cash Used in Investing Activities
Net cash used in investing activities increased $8.2 million to $17.4 million during the three months ended June 30, 2012, as compared to $9.1 million during the three months ended July 2, 2011. The increase in cash used in investing activities is primarily the result of the build-out of our new retail stores, which were constructed during the three months ended June 30, 2012, and shop-in-shops we installed during the three months ended June 30, 2012. In addition, we undertook certain technology initiatives during the quarter ending June 30, 2012, related to distribution system enhancements and various other improvements to our infrastructure.
Cash Provided by Financing Activities
Net cash provided by financing activities was $15.5 million in the three months ended June 30, 2012. There were no cash flows related to financing activities during the three months ended July 2, 2011. The cash flows from financing activities during the quarter ended June 30, 2012, were primarily comprised of net borrowings on our Credit Facility of $6.6 million, and proceeds from the exercise of employee share options of approximately $2.6 million.
Revolving Credit Facility
On September 15, 2011, we completed an amendment to our Credit Facility, which was originally entered into during Fiscal 2007. Pursuant to such amendment, the Credit Facility provides for up to $100.0 million of borrowings, and expires on September 15, 2015. The agreement also provides for loans and letters of credit to our European subsidiaries of up to $35.0 million. All other terms and conditions under the Credit Facility remained consistent with the original agreement. The Credit Facility provides for aggregate credit available equal to the lesser of (i) $100.0 million, or (ii) the sum of specified percentages of eligible receivables and eligible inventory, as defined, plus $30.0 million. Amounts outstanding under the Credit Facility are collateralized by substantially all of our assets. The Credit Facility contains financial covenants limiting our capital expenditures to $110.0 million for any one fiscal year plus additional amounts as permitted, and a minimum fixed charge coverage ratio of 2.0 to 1.0 (with the ratio being EBITDA plus consolidated rent expense to the sum of fixed charges plus consolidated rent expense), restrict and limit additional indebtedness, and restrict the incurrence of additional liens and cash dividends. As of the three months ended June 30, 2012, we were in compliance with all of our covenants covered under the agreement.
Borrowings under the Credit Facility accrue interest at the rate per annum announced from time to time by the agent of 1.25% above the prevailing applicable prime rate, or at a per annum rate equal to 2.25% above the prevailing LIBOR rate. The weighted average interest rate for the revolving credit facility was 2.94% during the three months ended June 30, 2012. The Credit Facility requires an annual facility fee of $0.1 million, and an annual commitment fee of 0.35% on the unused portion of the available credit under the Credit Facility, payable quarterly.
 
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As of June 30, 2012, the amount outstanding under the Credit Facility was $27.7 million, and the amount available for future borrowings was $17.8 million. The largest amount borrowed during the three months ended June 30, 2012 was $31.7 million. At June 30, 2012, there were documentary letters of credit outstanding of approximately $42.5 million, and stand-by letters of credit of $11.5 million.
Contractual Obligations and Commercial Commitments
As of June 30, 2012, our lease commitments and contractual obligations were as follows (in thousands):

Fiscal year ending	  	Remainder
of Fiscal
2013	 	  	Fiscal
2014-2015	 	  	Fiscal
2016-2017	 	  	Fiscal
2018 and
Thereafter	 	  	Total	 	
Operating leases	  	$	53,607	  	  	$	145,958	  	  	$	134,208	  	  	 	257,491	  	  	$	591,264	  	
Credit Facility	  	 	—  	  	  	 	—  	  	  	 	27,667	  	  	 	—  	  	  	 	27,667	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
	  	$	53,607	  	  	$	145,958	  	  	$	161,875	  	  	$	257,491	  	  	$	618,931	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Operating lease obligations represent the minimum lease rental payments under non-cancelable operating leases for our real estate locations globally. In addition to the above amounts, we are typically required to pay real estate taxes, contingent rent based on sales volume and other occupancy costs relating to our leased properties for our retail stores.
Credit Facility represents the balance as of June 30, 2012, which although it has a maturity date of September 15, 2015, is classified as a current liability on our consolidated balance sheets due to its revolving nature. In addition, interest on the Credit Facility is excluded from the above table as the amount due in future periods is unknown based on its revolving nature.
Excluded from the above commitments is $2.2 million of long-term liabilities related to uncertain tax positions, due to the uncertainty of the time and nature of resolution.
The above table also excludes amounts included in current liabilities in our consolidated balance sheet as of June 30, 2012, as these items will be paid within one year, and non-current liabilities that have no cash outflows associated with them (e.g., deferred taxes).
We do not have any long-term purchase obligations that represent firm commitments at June 30, 2012.
Research and Development, Patents and Licenses, etc.
We do not conduct research and development activities.
Off-Balance Sheet Arrangements
We have not created, and are not affiliated with, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Recent Accounting Pronouncements
We have considered all new accounting pronouncements and have concluded that there are no new pronouncements that have a material impact on our results of operations, financial condition or cash flows based on current information.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks during the normal course of our business, such as risk arising from fluctuations in foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to manage these risks, we employ certain strategies to mitigate the effect of these fluctuations. Currently we enter into foreign currency forward contracts to manage our foreign currency exposure to the fluctuations of certain foreign currencies. The use of these instruments helps to manage our exposure to our foreign purchase commitments and better control our product costs. Other than these purchase commitments, we do not use these foreign exchange contracts for any other purposes. In addition, we do not use derivatives for speculative purposes.
Foreign Currency Exchange Risk
We are exposed to risks on certain purchase commitments to foreign suppliers based on the value of the functional currency relative to the local currency of the supplier on the date of the commitment. As such, we enter into forward currency contracts that
 
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generally mature in 18 months or less and are consistent with the related purchase commitments. These contracts are recorded at fair value in our consolidated balance sheets as either an asset or liability. Although these are derivative contracts to hedge cash flow risks, we do not designate these contracts as hedges for accounting purposes. Accordingly, the changes in the fair value of these contracts at the balance sheet date and upon maturity (settlement) are recorded in our cost of sales or operating expenses, in our consolidated statement of operations, as applicable to the transactions for which the forward exchange contracts were established.
We perform a sensitivity analysis to determine the effects of fluctuations in foreign currency exchange rates. For this sensitivity analysis, we assume a hypothetical change in U.S. dollar against foreign exchange rates. Based on all foreign currency exchange contracts outstanding as of June 30, 2012, a 10% devaluation of the U.S. dollar compared to the level of foreign currency exchange rates for currencies under contract as of June 30, 2012 would result in a decrease of approximately $6.9 million of net unrealized foreign currency loss. Conversely, a 10% appreciation of the U.S. dollar would result in an increase approximately of $6.9 million of net unrealized gains.
Interest Rate Risk
We are exposed to interest rate risk in relation to our Credit Facility, the balance of which was $27.7 million at June 30, 2012. Our Credit Facility carries interest rates that are tied to LIBOR and the prime rate, and therefore our statements of operations and cash flows are exposed to changes in interest rates. A one percentage point increase in either the prime rate or LIBOR would cause an increase to the interest expense on our Credit Facility of approximately $0.3 million. The balance of our Credit Facility at June 30, 2012 is not indicative of future balances that may be subject to fluctuations in interest rates.
 
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