UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________

FORM 10-Q

(Mark One)



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September 30, 2017~~April 3, 2021



o ☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-19848

__________________________________________________________________

FOSSIL GROUP, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________________________

Delaware

75-2018505

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

901 S. Central Expressway, ~~Richardson, Texas~~

Richardson,

Texas

75080

(Address of principal executive offices)

(Zip Code)

(972) 234-2525

(Registrant’s telephone number, including area code)

__________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Ticker Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FOSL

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x ☒No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filero

☐

Accelerated filerx

☒

Non-accelerated filero

☐

Smaller reporting companyo

☐

~~(Do not check if a smaller reporting company)~~

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒

The number of shares of the registrant’s common stock outstanding as of ~~November 2, 2017: 48,527,898~~

May 6, 2021: 52,081,550

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED ~~SEPTEMBER 30, 2017~~APRIL 3, 2021

INDEX

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS


	September 30, 2017			December 31, 2016				April 3, 2021		January 2, 2021
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	166,922		$	297,330		Cash and cash equivalents	$	246,694	$	315,965
Accounts receivable - net of allowances of $70,081 and $79,707, respectively	310,895			375,520
Accounts receivable - net of allowances for doubtful accounts of $17,251 and $20,774, respectively							Accounts receivable - net of allowances for doubtful accounts of $17,251 and $20,774, respectively	175,507		229,847
Inventories	682,986			542,487			Inventories	322,495		295,296
Prepaid expenses and other current assets	125,533			131,953			Prepaid expenses and other current assets	202,414		149,367
Total current assets	1,286,336			1,347,290			Total current assets	947,110		990,475
Property, plant and equipment - net of accumulated depreciation of $453,894 and $414,761, respectively	243,448			273,851
Goodwill	—			355,263
Property, plant and equipment - net of accumulated depreciation of $453,231 and $467,174, respectively							Property, plant and equipment - net of accumulated depreciation of $453,231 and $467,174, respectively	104,851		114,026
Operating lease right-of-use assets							Operating lease right-of-use assets	211,918		226,815

Intangible and other assets-net	220,588			210,493			Intangible and other assets-net	85,234		147,189
Total long-term assets	464,036			839,607			Total long-term assets	402,003		488,030
Total assets	$	1,750,372		$	2,186,897		Total assets	$	1,349,113	$	1,478,505
Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable	$	248,824		$	163,644		Accounts payable	$	201,230	$	178,212
Short-term and current portion of long-term debt	40,209			26,368			Short-term and current portion of long-term debt	37,860		41,561
Accrued expenses:							Accrued expenses:
Current operating lease liabilities							Current operating lease liabilities	60,137		64,851
Compensation	64,862			52,993			Compensation	56,643		78,085
Royalties	26,897			30,062			Royalties	16,328		27,554
Co-op advertising	17,772			29,111
Customer liabilities							Customer liabilities	39,399		50,941
Transaction taxes	40,482			26,743			Transaction taxes	7,803		21,271
Other	101,390			69,565			Other	59,778		62,846
Income taxes payable	13,077			16,099			Income taxes payable	28,048		33,205
Total current liabilities	553,513			414,585			Total current liabilities	507,226		558,526
Long-term income taxes payable	22,951			18,584			Long-term income taxes payable	20,013		19,840
Deferred income tax liabilities	500			55,877			Deferred income tax liabilities	491		495
Long-term debt	444,303			609,961			Long-term debt	157,235		185,852
Long-term operating lease liabilities							Long-term operating lease liabilities	217,522		230,635
Other long-term liabilities	76,107			72,452			Other long-term liabilities	37,802		43,125
Total long-term liabilities	543,861			756,874			Total long-term liabilities	433,063		479,947
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)	0		0
Stockholders’ equity:							Stockholders’ equity:
Common stock, 48,524 and 48,269 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	485			483
Common stock, 51,526 and 51,474 shares issued and outstanding at April 3, 2021 and January 2, 2021, respectively							Common stock, 51,526 and 51,474 shares issued and outstanding at April 3, 2021 and January 2, 2021, respectively	515		515
Additional paid-in capital	235,990			213,352			Additional paid-in capital	295,287		293,777
Retained earnings	489,528			887,825			Retained earnings	179,258		203,698
Accumulated other comprehensive income (loss)	(84,710		)	(95,424		)	Accumulated other comprehensive income (loss)	(67,279)		(58,900)
Total Fossil Group, Inc. stockholders’ equity	641,293			1,006,236			Total Fossil Group, Inc. stockholders’ equity	407,781		439,090
Noncontrolling interest	11,705			9,202
Noncontrolling interests							Noncontrolling interests	1,043		942
Total stockholders’ equity	652,998			1,015,438			Total stockholders’ equity	408,824		440,032
Total liabilities and stockholders’ equity	$	1,750,372		$	2,186,897		Total liabilities and stockholders’ equity	$	1,349,113	$	1,478,505

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA


	For the 13 Weeks Ended September 30, 2017			For the 13 Weeks Ended October 1, 2016		For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016				For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Net sales	$	688,722		$	737,990	$	1,867,358		$	2,083,206		Net sales	$	363,042	$	390,718
Cost of sales	368,829			352,910		956,600			994,039			Cost of sales	180,453		250,358
Gross profit	319,893			385,080		910,758			1,089,167			Gross profit	182,589		140,360
Operating expenses:												Operating expenses:
Selling, general and administrative expenses	314,623			339,432		937,330			1,013,664			Selling, general and administrative expenses	187,324		245,719
Goodwill and trade name impairments	—			—		407,128			—
Trade name impairments												Trade name impairments	0		2,464
Other long-lived asset impairments												Other long-lived asset impairments	4,500		17,143
Restructuring charges	5,769			14,473		41,818			14,473			Restructuring charges	7,520		9,375
Total operating expenses	320,392			353,905		1,386,276			1,028,137			Total operating expenses	199,344		274,701
Operating income (loss)	(499		)	31,175		(475,518		)	61,030			Operating income (loss)	(16,755)		(134,341)
Interest expense	12,070			6,967		32,096			19,386			Interest expense	7,331		7,464
Other income (expense) - net	3,860			1,591		11,501			6,402			Other income (expense) - net	1,864		(7,290)
Income (loss) before income taxes	(8,709		)	25,799		(496,113		)	48,046			Income (loss) before income taxes	(22,222)		(149,095)
Provision for income taxes	(3,230		)	6,451		(100,746		)	13,230			Provision for income taxes	2,117		(63,651)
Net income (loss)	(5,479		)	19,348		(395,367		)	34,816			Net income (loss)	(24,339)		(85,444)
Less: Net income attributable to noncontrolling interest	(80		)	1,992		2,931			5,646
Less: Net income (loss) attributable to noncontrolling interests												Less: Net income (loss) attributable to noncontrolling interests	101		137
Net income (loss) attributable to Fossil Group, Inc.	$	(5,399	)	$	17,356	$	(398,298	)	$	29,170		Net income (loss) attributable to Fossil Group, Inc.	$	(24,440)	$	(85,581)
Other comprehensive income (loss), net of taxes:												Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	5,222		$	1,662	$	32,078		$	9,383		Currency translation adjustment	$	(10,121)	$	(11,193)
Cash flow hedges - net change	(9,771		)	1,360		(21,364		)	(4,741		)	Cash flow hedges - net change	1,742		6,242
Pension plan activity	—			—		—			1,714

Total other comprehensive income (loss)	(4,549		)	3,022		10,714			6,356			Total other comprehensive income (loss)	(8,379)		(4,951)
Total comprehensive income (loss)	(10,028		)	22,370		(384,653		)	41,172			Total comprehensive income (loss)	(32,718)		(90,395)
Less: Comprehensive income attributable to noncontrolling interest	(80		)	1,992		2,931			5,646
Less: Comprehensive income (loss) attributable to noncontrolling interests												Less: Comprehensive income (loss) attributable to noncontrolling interests	101		137
Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(9,948	)	$	20,378	$	(387,584	)	$	35,526		Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(32,819)	$	(90,532)
Earnings (loss) per share:												Earnings (loss) per share:
Basic	$	(0.11	)	$	0.36	$	(8.22	)	$	0.61		Basic	$	(0.47)	$	(1.69)
Diluted	$	(0.11	)	$	0.36	$	(8.22	)	$	0.60		Diluted	$	(0.47)	$	(1.69)
Weighted average common shares outstanding:												Weighted average common shares outstanding:
Basic	48,521			48,130		48,439			48,127			Basic	51,519		50,566
Diluted	48,521			48,291		48,439			48,286			Diluted	51,519		50,566

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

UNAUDITED

IN THOUSANDS


For the 13 Weeks Ended April 3, 2021
	Common stock			Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, January 2, 2021	51,474	$	515	$	293,777	$	0	$	203,698	$	(58,900)	$	439,090	$	942	$	440,032
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	77	0		0		—		—		—		—		—		0

Acquisition of common stock for employee tax withholding	—	—		—		(254)		—		—		(254)		—		(254)
Retirement of common stock	(25)	0		(254)		254		—		—		—		—		0


Stock-based compensation	—	—		1,764		—		—		—		1,764		—		1,764
Net income (loss)	—	—		—		—		(24,440)		—		(24,440)		101		(24,339)
Other comprehensive income (loss)	—	—		—		—		—		(8,379)		(8,379)		—		(8,379)




Balance, April 3, 2021	51,526	$	515	$	295,287	$	0	$	179,258	$	(67,279)	$	407,781	$	1,043	$	408,824


For the 14 Weeks Ended April 4, 2020
	Common stock			Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, December 28, 2019	50,516	$	505	$	283,371	$	0	$	299,793	$	(80,615)	$	503,054	$	787	$	503,841
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	91	1		(1)		—		—		—		0		—		0

Acquisition of common stock for employee tax withholding	—	—		—		(176)		—		—		(176)		—		(176)
Retirement of common stock	(24)	0		(176)		176		—		—		—		—		0


Stock-based compensation	—	—		3,103		—		—		—		3,103		—		3,103
Net income (loss)	—	—		—		—		(85,581)		—		(85,581)		137		(85,444)
Other comprehensive income (loss)	—	—		—		—		—		(4,951)		(4,951)		—		(4,951)





Balance, April 4, 2020	50,583	$	506	$	286,297	$	0	$	214,212	$	(85,566)	$	415,449	$	924	$	416,373

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Operating Activities:
Net Income (loss)	$	(24,339)	$	(85,444)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	8,933		12,187
Non-cash lease expense	23,980		29,061
Stock-based compensation	1,764		3,103
Decrease in allowance for returns and markdowns	(5,933)		(4,092)

Property, plant and equipment and other long-lived asset impairment losses	4,500		16,970
Trade name impairment losses	0		2,464
Non-cash restructuring charges	221		684
Bad debt (recoveries) expense	(1,632)		4,442

Other non-cash items	247		(532)


Changes in operating assets and liabilities:
Accounts receivable	53,961		117,967
Inventories	(32,612)		(3,701)
Prepaid expenses and other current assets	(9,237)		(10,443)
Accounts payable	24,717		(37,393)
Accrued expenses	(48,465)		(20,564)
Income taxes	(5,214)		(71,524)
Operating lease liabilities	(28,740)		(30,324)
Net cash used in operating activities	(37,849)		(77,139)
Investing Activities:
Additions to property, plant and equipment	(2,136)		(2,852)
Decrease (increase) in intangible and other assets	6,267		(387)
Proceeds from the sale of property, plant and equipment and other	10,925		76

Net cash provided by (used in) investing activities	15,056		(3,163)
Financing Activities:
Acquisition of common stock for employee tax withholdings	(254)		(176)

Debt borrowings	55,008		291,179
Debt payments	(88,932)		(170,570)

Debt issuance costs and other	0		(8,100)
Net cash (used in) provided by financing activities	(34,178)		112,333
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(6,550)		12,477
Net (decrease) increase in cash, cash equivalents, and restricted cash	(63,521)		44,508
Cash, cash equivalents, and restricted cash:
Beginning of period	324,246		207,749
End of period	$	260,725	$	252,257

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Operating Activities:

Net income (loss) $ (395,367 ) $ 34,816
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, amortization and accretion 61,526
73,198
Stock-based compensation 22,384
23,894
Decrease in allowance for returns-net of inventory in transit (6,129 ) (14,955 )
Loss (gain) on disposal of assets 1,686
(9,866 )
Fixed asset and other long-lived asset impairment losses 2,726
2,213
Goodwill and trade name impairment losses 407,128
—
Non-cash restructuring charges 7,031
12,523
Increase (decrease) in allowance for doubtful accounts 4,161
(3,915 )
Deferred income taxes and other (111,177 ) (9,309 )
Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable 85,078
74,706
Inventories (116,002 ) (76,869 )
Prepaid expenses and other current assets (5,620 ) 17,640
Accounts payable 80,146
(16,887 )
Accrued expenses 20,863
(38,572 )
Income taxes payable 1,734
(9,257 )
Net cash provided by operating activities 60,168
59,360
Investing Activities:

Additions to property, plant and equipment (17,239 ) (53,524 )
Decrease in intangible and other assets 478
2,509
Misfit working capital settlement —
788
Proceeds from the sale of property, plant and equipment 533
44,584
Net investment hedge settlement —
752
Net cash used in investing activities (16,228 ) (4,891 )
Financing Activities:

Acquisition of common stock (947 ) (6,448 )
Distribution of noncontrolling interest earnings (428 ) (4,543 )
Debt borrowings 1,162,074
756,000
Debt payments (1,311,597 ) (839,629 )
Payment for shares of Fossil, S.L. —
(8,657 )
Debt issuance costs and other (5,579 ) (2,585 )
Net cash used in financing activities (156,477 ) (105,862 )
Effect of exchange rate changes on cash and cash equivalents (17,871 ) (1,930 )
Net decrease in cash and cash equivalents (130,408 ) (53,323 )
Cash and cash equivalents:

Beginning of period 297,330
289,275
End of period $ 166,922
$ 235,952

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. FINANCIAL STATEMENT POLICIES

Basis of Presentation. The condensed consolidated financial statements include the accounts of Fossil Group, Inc., a Delaware corporation, and its wholly and majority-owned subsidiaries (the “Company”).

The Company’s fiscal year periodically results in a 53-week year instead of a normal 52-week year. The fiscal year ended January 2, 2021 was a 53-week year, with the additional week being included in the first quarter. Accordingly, the information presented herein includes the thirteen-week period ended April 3, 2021 (“First Quarter”) as compared to the fourteen-week period ended April 4, 2020 (“Prior Year Quarter”). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s financial position as of ~~September 30, 2017,~~April 3, 2021, and the results of operations for the ~~thirteen-week periods ended September 30, 2017 (“Third Quarter”)~~First Quarter and ~~October 1, 2016 (“~~Prior Year ~~Quarter”), respectively, and the thirty-nine week periods ended September 30, 2017 (“Year To Date Period”) and October 1, 2016 (“Prior Year YTD Period”).~~Quarter. All adjustments are of a normal, recurring nature.

Effective during fiscal year 2021, the Company made a change to the presentation of reportable segments to include all information technology costs within its Corporate cost area. The Company's historical segment disclosures have been recast to be consistent with its current presentation.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form ~~10-K~~10-K/A filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended ~~December 31, 2016~~January 2, 2021 (the ~~“2016~~“2020 Form ~~10-K”~~10-K/A”). Operating results for the ~~Third~~First Quarter are not necessarily indicative of the results to be achieved for the full fiscal year.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. We base our estimates on the information available at the time and various other assumptions believed to be reasonable under the circumstances, including estimates of the impact of the coronavirus (“COVID-19”) pandemic. Actual results could differ from those ~~estimates.~~estimates, including the impact of the COVID-19 pandemic. The Company has not made any changes in its significant accounting policies from those disclosed in the ~~2016~~2020 Form ~~10-K other than the adoption of ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ~~("ASU 2017-04").~~10-K/A.

Business. The Company isa global design, marketing and distribution company that specializes in consumer fashion accessories. Its principal offerings include an extensive line of men's and women's fashion watches and jewelry, handbags, small leather goods, belts and sunglasses. In the watch and jewelry product categories, the Company has a diverse portfolio of globally recognized owned and licensed brand names under which its products are marketed. The Company's products are distributed globally through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the Company does not maintain a physical presence. The Company's products are offered at varying price points to meet the needs of its customers, whether they are value-conscious or luxury oriented. Based on its extensive range of accessory products, brands, distribution channels and price points, the Company is able to target style-conscious consumers across a wide age spectrum on a global basis.

~~Hedging Instruments.~~ The Company is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to mitigate but does not eliminate these exposures using derivative instruments including foreign exchange forward contracts ("forward contracts") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, Canadian dollar, British pound, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of September 30, 2017, the result would have been a net loss of approximately $12.1 million, net of taxes. This unrealized loss is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income (loss) and comprehensive income (loss). Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income (loss) and comprehensive income (loss). Also, the Company has entered into an interest rate swap agreement to effectively convert portions of its variable rate debt obligations to a fixed rate. Changes in the fair value of the interest rate swap is recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and is recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments

are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

Operating Expenses. Operating expenses include selling, general and administrative expenses (“SG&A”), ~~goodwill and~~ trade name ~~impairment~~impairments, other long-lived asset impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure as well as store closure expenses.

Earnings (Loss) Per Share (“EPS”). Basic EPS is based on the weighted average number of common shares outstanding during each period. Diluted EPS adjusts basic EPS for the effects of dilutive common stock equivalents outstanding during each period using the treasury stock method.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands, except per share data):


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Numerator:
Net income (loss) attributable to Fossil Group, Inc.	$	(24,440)	$	(85,581)
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	51,519		50,566
Basic EPS	$	(0.47)	$	(1.69)
Diluted EPS computation:
Basic weighted average common shares outstanding	51,519		50,566

Diluted weighted average common shares outstanding	51,519		50,566
Diluted EPS	$	(0.47)	$	(1.69)

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Numerator:

Net income (loss) attributable to Fossil Group, Inc. $ (5,399 ) $ 17,356
$ (398,298 ) $ 29,170
Denominator:

Basic EPS computation:

Basic weighted average common shares outstanding 48,521
48,130
48,439
48,127
Basic EPS $ (0.11 ) $ 0.36
$ (8.22 ) $ 0.61
Diluted EPS computation:

Basic weighted average common shares outstanding 48,521
48,130
48,439
48,127
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units —
161
—
159
Diluted weighted average common shares outstanding 48,521
48,291
48,439
48,286
Diluted EPS $ (0.11 ) $ 0.36
$ (8.22 ) $ 0.60

At the end of the ~~Third~~First Quarter, ~~and Year To Date Period,~~ approximately ~~5.1 million and 4.4~~2.0 million weighted average shares issuable under stock-based awards ~~respectively,~~ were not included in the diluted EPS calculation because they were antidilutive. The total antidilutive weighted average shares included ~~approximately 1.2~~0.3 million weighted average performance-based shares at the end of ~~both~~ the ~~Third Quarter and Year To Date Period.~~First Quarter.

At the end of the Prior Year Quarter, ~~and Prior Year YTD Period, approximately 1.6~~2.6 million ~~and 1.5 million~~ weighted average shares issuable under stock-based awards ~~respectively,~~ were not included in the diluted EPS calculation because they were antidilutive. ~~Approximately 1.1~~The total antidilutive weighted average shares included 0.3 million weighted average performance-based shares ~~were not included in the diluted EPS calculation~~ at the end of ~~both~~ the Prior Year ~~Quarter~~Quarter.

Cash, Cash Equivalents and ~~Prior Year YTD Period~~Restricted Cash. Restricted cash included in intangible and other-assets net was comprised primarily of restricted cash balances for pledged collateral to secure bank guarantees for the purpose of obtaining retail space. Restricted cash included in prepaid expenses and other current assets was comprised primarily of restricted cash balances for plan distributions related to the termination of the Company's deferred compensation plan. See Note 11—Fair Value Measurements, for more information regarding the Company's termination of its deferred compensation plan. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of April 3, 2021 and April 4, 2020 that are presented in the ~~performance targets were not met.~~condensed consolidated statement of cash flows (in thousands):


	April 3, 2021		April 4, 2020
Cash and cash equivalents	$	246,694	$	245,427
Restricted cash included in prepaid expenses and other current assets	6,567		26
Restricted cash included in intangible and other assets-net	7,464		6,804
Cash, cash equivalents and restricted cash	$	260,725	$	252,257

Recently Issued Accounting Standards

In ~~August 2017,~~March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2017-12,~~ ~~Derivatives~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") and ~~Hedging (Topic 815): Targeted Improvements~~subsequent guidance that clarified the scope and application of its original guidance. ASU 2020-04 provides optional expedients and exceptions to ~~Accounting for Hedging Activities~~the current guidance on contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("~~ASU 2017-12"~~LIBOR")~~. ASU 2017-12 amends and simplifies hedge accounting guidance in order~~ or another reference rate expected to ~~enable entities~~be discontinued due to ~~better portray the economics of their risk management activities.~~reference rate reform. The guidance iswas effective ~~for fiscal years beginning after~~upon issuance and generally can be applied to applicable contract modifications through December ~~15, 2018, including~~

~~interim periods within those periods. Early adoption is permitted.~~31, 2022. The Company will adopt these standards when LIBOR is ~~currently evaluating the impact of the standard on its consolidated financial statements~~discontinued and ~~related disclosures.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~ ("ASU 2017-09"). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2017-09.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard willdoes not ~~have a material impact on the Company’s consolidated results of operations or financial position.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~ (“ASU 2016-16”). ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain cash receipts and cash payments should be presented and classified in the statement of cash flows with the objective of reducing existing diversity in practice with respect to these items. ASU 2016-15 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

~~In March 2016, the FASB issued ASU 2016-04,~~ ~~Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products~~ (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842): Amendments to the FASB Accounting Standards Codification®~~ ~~(“ASU 2016-02”), which supersedes the existing guidance for lease accounting,~~ ~~Leases (Topic 840)~~. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Many of the Company’s leases are considered operating leases and are not capitalized under ASC 840. Under ASC 842 the majority of these leases will qualify for capitalization and will result in the recognition of lease assets and lease liabilities once the new standard is adopted. The Company is in the process of reviewing lease contracts to determine the impact of adopting ASU 2016-02, but expects the standardexpect them to have a material impact on ~~the Company's~~its consolidated financial ~~position.~~statements or related disclosures.

Recently Adopted Accounting Standards

In ~~May 2014,~~December 2019, the FASB issued ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~2019-12, Income Taxes (Topic ~~606)~~ (“740): Simplifying the Accounting for Income Taxes ("ASU ~~2014-09”~~2019-12"). ASU ~~2014-09 affects any entity that either enters into contracts with customers~~2019-12 simplifies the accounting for income taxes by removing certain exceptions to ~~transfer goods or services or enters into contracts for~~general principles in Income Taxes (Topic 740). It also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 at the ~~transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle~~beginning of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB later amended ASU-2014-09 with the following:

•~~ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~

~~ASU 2016-08~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~

~~ASU 2016-10~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations~~First Quarter, and ~~Licensing~~

~~ASU 2016-12~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~

•~~ASU 2016-20~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~

~~ASU 2017-13~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)~~

The Company has performed a review of our revenue streams including reviewing key contracts and comparing current accounting policies and practices to the new standard to identify potential differences that could arise from the application of ASU 2014-09. The Company currently anticipates that the performance obligations underlying its core revenue streams (i.e., its retail and standard wholesale businesses) will remain substantially unchanged. Revenues for these businesses are generated through the sale of finished products, and will continue to be generally recognized at the point in time when merchandise is transferred to the customer and in an amount that considers the impacts of estimated allowances. The Company does anticipate some timing changes, including accelerated recognition of markdowns given to customers and a change in classification of certain customer considerations between gross profit and SG&A expenses. The Company does not believe these changes will have a material impact on the Company's financial position or results of operations. The Company is currently finalizing its review of customer contracts. The standard will require additional disclosures about the nature of revenue as well as the judgment involved in the timing of revenue recognition. The Company will adopt ASU 2014-09 in the first quarter of fiscal 2018 and will use the modified retrospective approach.

~~Recently Adopted Accounting Standards~~

In January 2017, the FASB issued ASU 2017-04. Under ASU 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The Company early adopted ASU 2017-04 effective June 15, 2017 in conjunction with the interim impairment test of goodwill for all reporting units and goodwill impairment was recorded according to the new standard. The Company believes the adoption of ASU 2017-04 did not change the amount of impairment charges recorded in the second quarter of fiscal 2017. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional information on our interim goodwill impairment test performed.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). ASU 2016-09 simplified several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective for the Company beginning fiscal year 2017 andit did not have a material ~~impact~~effect on the ~~Company’s~~Company's condensed consolidated ~~results of operations or~~ financial position. As a result of adoption, the Company now recognizes excess tax benefits or deficiencies associated with share-based compensation activity as an income tax expense or benefit in the period the shares vest or are settled. In addition, the Company now presents excess tax benefits from share-based compensation activity with other income tax cash flows as an operating activity on the statement of cash flows, which differs from the Company’s historical classification of excess tax benefits as a financing activity. The Company has elected to apply this change in cash flow presentation on a prospective basis. The standard also permits the Company to make a policy election for how it accounts for forfeitures, and the Company has elected to continue estimating forfeitures.statements.

~~In July 2015, the FASB issued ASU 2015-11,~~ ~~Inventory (Topic 330): Simplifying the Measurement of Inventory~~ (“ASU 2015-11”). ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. The standard was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position.

2. ~~GOODWILL AND INTANGIBLES IMPAIRMENT CHARGES~~REVENUE

Disaggregation of Revenue. The ~~Company evaluates its goodwill~~Company's revenue disaggregated by major product category and ~~intangible assets for impairment on an annual basis, or as facts and circumstances warrant. At the end~~timing of the fiscal year 2016, the Company's market capitalization exceeded the carrying amount of its net assets by 23%. At the end of the first quarter of fiscal 2017, the Company experienced a decline in market

~~capitalization and, as a result of the decline, the Company's market capitalization~~revenue recognition was 14% below the carrying amount of its net assets as of April 1, 2017. During the second quarter of fiscal 2017, the Company's market capitalization continued to decline, at which point the Company determined the decrease in stock price to be sustained and thus a strong indicator of impairment. Due to a change in key assumptions used in interim testing, including the decline in market capitalization and decline in sales projections, the Company believed that impairment of goodwill and trade names was probable as of June 15, 2017, and therefore performed interim tests for each reporting unit and trade name. Using a combination of discounted cash flow and guideline public company methodologies, the Company compared the fair value of each of its three reporting units with their carrying value and concluded that goodwill was fully impaired. Accordingly, in the second quarter of fiscal 2017, the Company recognized a pre-tax impairment charge in operations of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively.

~~The changes in the carrying amount of goodwill were~~ as follows (in thousands):

Americas Europe Asia Total
Balance at December 31, 2016 $ 202,187
$ 110,291
$ 42,785
$ 355,263
Foreign currency changes 162
3,983
85
4,230
Impairment charges (202,349 ) (114,274 ) (42,870 ) $ (359,493 )
Balance at September 30, 2017 $ —
$ —
$ —
$ —


	For the 13 Weeks Ended April 3, 2021
	Americas		Europe		Asia		Corporate		Total
Product type
Watches	$	120,866	$	84,669	$	86,078	$	3	$	291,616
Leathers	19,629		6,305		8,170		0		34,104
Jewelry	10,657		16,276		2,936		0		29,869
Other	1,354		1,984		1,456		2,659		7,453
Consolidated	$	152,506	$	109,234	$	98,640	$	2,662	$	363,042

Timing of revenue recognition
Revenue recognized at a point in time	$	152,045	$	108,887	$	98,540	$	907	$	360,379
Revenue recognized over time	461		347		100		1,755		2,663
Consolidated	$	152,506	$	109,234	$	98,640	$	2,662	$	363,042

~~During~~


	For the 14 Weeks Ended April 4, 2020
	Americas		Europe		Asia		Corporate		Total
Product type
Watches	$	119,274	$	97,898	$	92,742	$	11	$	309,925
Leathers	27,989		9,431		9,887		0		47,307
Jewelry	4,024		17,507		1,686		0		23,217
Other	1,629		3,414		1,872		3,354		10,269
Consolidated	$	152,916	$	128,250	$	106,187	$	3,365	$	390,718

Timing of revenue recognition
Revenue recognized at a point in time	$	152,285	$	127,920	$	105,988	$	1,492	$	387,685
Revenue recognized over time	631		330		199		1,873		3,033
Consolidated	$	152,916	$	128,250	$	106,187	$	3,365	$	390,718

Contract Balances. As of April 3, 2021, the ~~second quarter~~Company had 0 material contract assets on the Company's condensed consolidated balance sheets and 0 deferred contract costs. The Company had contract liabilities of fiscal 2017, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million, resulting in a pre-tax impairment charge of $28.3 million; the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8(i) $9.7 million and ~~the MICHELE trade name with a carrying amount~~$9.9 million as of ~~$18.5~~April 3, 2021 and January 2, 2021, respectively, related to remaining performance obligations on licensing income, (ii) $4.1 million ~~was written down~~and $4.6 million as of April 3, 2021 and January 2, 2021, respectively, primarily related to ~~its implied fair value~~remaining performance obligations on wearable technology products and (iii) $4.0 million and $4.2 million as of ~~$10.9 million, resulting in a pre-tax impairment charge of $7.6 million. The fair values of the Company's indefinite-lived SKAGEN~~April 3, 2021 and MICHELE trade names were estimated using the relief from royalty method. The fair value of the Company's definite-lived MISFIT trade name was estimated using a discounted cash flow methodology. A reduction in expected future cash flows negatively affected the valuation comparedJanuary 2, 2021, respectively, related to ~~previous valuation assumptions.~~gift cards issued.

3. INVENTORIES

Inventories consisted of the following (in thousands):


	April 3, 2021		January 2, 2021
Components and parts	$	24,277	$	25,016
Work-in-process	8,211		7,913
Finished goods	290,007		262,367
Inventories	$	322,495	$	295,296

September 30, 2017 December 31, 2016
Components and parts $ 60,258
$ 49,438
Work-in-process 9,471
12,345
Finished goods 613,257
480,704
Inventories $ 682,986
$ 542,487

4. WARRANTY LIABILITIES

The Company’s warranty liability is recorded in accrued expenses-other in the Company’s condensed consolidated balance sheets. Warranty liability activity consisted of the following (in thousands):


	For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016				For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Beginning balance	$	15,421		$	13,669		Beginning balance	$	21,916	$	23,095
Settlements in cash or kind	(11,608		)	(7,338		)	Settlements in cash or kind	(2,725)		(3,666)
Warranties issued and adjustments to preexisting warranties ⁽¹⁾	14,984			8,604			Warranties issued and adjustments to preexisting warranties (1)	1,589		2,868
Ending balance	$	18,797		$	14,935		Ending balance	$	20,780	$	22,297

⁽¹⁾ Changes in cost estimates related to preexisting warranties are aggregated with accruals for new standard warranties issued and foreign currency changes.

5. INCOME TAXES

The Company’s income tax (benefit) expense and related effective rates were as follows (in thousands, except percentage data):


	For the 13 Weeks Ended September 30, 2017			For the 13 Weeks Ended October 1, 2016			For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016				For the 13 Weeks Ended April 3, 2021			For the 14 Weeks Ended April 4, 2020
Income tax (benefit) expense	$	(3,230	)	$	6,451		$	(100,746	)	$	13,230		Income tax (benefit) expense	$	2,117		$	(63,651)
Effective tax rate	37.1		%	25.0		%	20.3		%	27.5		%	Effective tax rate	(9.5)		%	42.7		%

The ~~higher~~ effective tax rate in the ~~Third~~First Quarter was unfavorable as compared to the Prior Year Quarter ~~is attributable to a higher structural rate resulting from an increased forecasted~~since no tax benefit was accrued on the U.S. net operating loss ~~from~~("NOL"), unlike in the ~~Company's U.S. operations which is tax-benefited at a higher tax rate than~~Prior Year Quarter. The Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act requires the inclusion of certain foreign income in the tax rates used to calculate the tax expense on the profits from the Company's foreign operations. There were also favorable discrete items occurring in the quarter. These positive impacts were partially offset by the increased tax expense resulting from all of the foreign and somereturn which will absorb most of the U.S. ~~goodwill impairment charge being permanently nondeductible~~NOL. Foreign income taxes are also paid on this same foreign income, resulting in double taxation. The remaining U.S. NOL is offset with a valuation allowance since there is no certainty of any future tax benefit. The First Quarter rate is negative because foreign income tax expense is accrued on certain foreign entities with positive taxable income when the consolidated operating results are a loss. The Prior Year Quarter tax rate benefited from the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. The CARES Act provided many beneficial income tax changes including a provision allowing net operating losses arising in tax years 2018, 2019 and 2020 to be carried back to prior years when the U.S. tax rate was 35%, which accounts for ~~tax purposes.~~ most of the Prior Year Quarter benefit.

The ~~lower~~ effective tax rate ~~for the Year~~can vary from quarter-to-quarter due to Date Period as compared to the Prior Year YTD Period is primarily attributable to the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes and unfavorable discrete items that occurredchanges in the ~~Year to Date Period, mostly due to~~Company's global mix of earnings, the ~~additional~~resolution of income tax ~~expense resulting from the adoption of ASU 2016-09. See "Note 1-Financial Statement Policies" for additional disclosures about ASU 2016-09.~~audits and changes in tax law.

As of ~~September 30, 2017,~~April 3, 2021, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was ~~$21.7~~$31.4 million, of which ~~$19.0~~$25.0 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its ~~2011-2016~~2012-2019 tax years, none of which the Company

believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be ~~paid~~settled within twelve months of the condensed consolidated balance sheet date. As of ~~September 30, 2017,~~April 3, 2021, the Company had recorded ~~$2.3~~$16.2 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At ~~September 30, 2017,~~April 3, 2021, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance ~~sheet~~sheets was ~~$2.8~~$7.1 million and ~~$1.3~~$0.8 million, respectively. ~~The~~For the First Quarter, the Company accrued income tax related interest expense ~~accrued in the Third Quarter was offset by reductions~~ of ~~interest expense associated with the derecognition of uncertain tax benefits. For the Year To Date Period, the Company accrued income tax-related interest expense $0.5~~$0.4 million.

An increase in long-term deferred tax assets is mostly attributable to the future tax amortization of the tax basis in goodwill and trade names which were impaired for GAAP purposes, as well as an increased amount of foreign tax credit carry forwards.

As of September 30, 2017, as a result of proposed U.S. Tax Reform and the planned refinancing of existing debt obligations, the Company is continuing to evaluate its current assertions with respect to certain undistributed earnings in various foreign jurisdictions. At present, the Company believes it can meet its future U.S. obligations through a combination of earnings not considered indefinitely reinvested, future current earnings of foreign subsidiaries, and distributions of earnings in jurisdictions within which no additional U.S. tax would be incurred as a result of excess foreign tax credits associated with such earnings. The Company will continue to monitor its indefinite reinvestment assertions with respect to all foreign jurisdictions as developments occur within proposed U.S. Tax Reform proposals and the planned refinancing of its existing debt obligations.

6. STOCKHOLDERS’ EQUITY

Common ~~Stock Repurchase Programs.~~ ~~Purchases of the Company’s common stock have been made from time to time pursuant to its repurchase programs, subject to market conditions~~ and ~~at prevailing market prices, through the open market. Repurchased~~Preferred Stock. The Company has 100,000,000 shares of common stock, ~~are recorded~~par value $0.01 per share, authorized, with 51,525,632 and 51,474,034 shares issued and outstanding at ~~cost~~April 3, 2021 and ~~become~~January 2, 2021, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, ~~but unissued shares which may~~with NaN issued or outstanding at April 3, 2021 or January 2, 2021. Rights, preferences and other terms of preferred stock will be ~~issued in~~determined by the ~~future for general corporate or other purposes. In~~Board of Directors at the ~~event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital~~time of issuance.

Common Stock Repurchase Programs. At April 3, 2021 and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs have been conducted pursuant to Rule 10b-18 of the Exchange Act.

~~At December 31, 2016 and September 30, 2017,~~January 2, 2021, all treasury stock had been effectively retired. As of ~~September 30, 2017,~~April 3, 2021, the Company had ~~$824.2~~$30.0 million of repurchase authorizations remaining under its ~~combined~~ repurchase ~~programs. However, under the Company's credit agreement, the~~program. The Company ~~is restricted from making open market repurchases of its common stock.~~

~~The following tables reflect the Company’s~~did 0t repurchase any common stock under its authorized stock repurchase ~~activity for~~plan during the ~~periods indicated (in millions):~~

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
Termination Date
Number of
Shares
Repurchased

Dollar Value
Repurchased

Number of
Shares
Repurchased

Dollar Value
Repurchased
2014 $ 1,000.0
December 2018 —
$ —
—
$ —
2010 $ 30.0
None —
$ —
—
$ —
First Quarter or Prior Year Quarter.

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
Termination Date
Number of
Shares
Repurchased

Dollar Value
Repurchased

Number of
Shares
Repurchased

Dollar Value
Repurchased
2014 $ 1,000.0
December 2018 —
$ —
0.1
$ 5.2
2010 $ 30.0
None —
$ —
—
$ —

~~Controlling and Noncontrolling Interest.~~ ~~The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands):~~

Fossil Group, Inc.
Stockholders’
Equity

Noncontrolling
Interest

Total
Stockholders’
Equity
Balance at December 31, 2016 $ 1,006,236
$ 9,202
$ 1,015,438
Net income (loss) (398,298 ) 2,931
(395,367 )
Currency translation adjustment 32,078
—
32,078
Cash flow hedges - net change (21,364 ) —
(21,364 )
Distribution of noncontrolling interest earnings —
(428 ) (428 )
Acquisition of common stock (947 ) —
(947 )
Stock-based compensation expense 23,588
—
23,588
Balance at September 30, 2017 $ 641,293
$ 11,705
$ 652,998

Fossil Group, Inc.
Stockholders’
Equity

Noncontrolling
Interest

Total
Stockholders’
Equity
Balance at January 2, 2016 $ 921,388
$ 11,155
$ 932,543
Net income 29,170
5,646
34,816
Currency translation adjustment 9,383
—
9,383
Cash flow hedges - net change (4,741 ) —
(4,741 )
Pension plan activity 1,714
—
1,714
Common stock issued upon exercise of stock options 57
—
57
Tax expense derived from stock-based compensation (1,756 ) —
(1,756 )
Distribution of noncontrolling interest earnings —
(4,543 ) (4,543 )
Acquisition of common stock (6,448 ) —
(6,448 )
Stock-based compensation expense 23,894
—
23,894
Balance at October 1, 2016 $ 972,661
$ 12,258
$ 984,919

7. EMPLOYEE BENEFIT PLANS

Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the ~~Third~~First Quarter:


Stock Options and Stock Appreciation Rights	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value		Stock Options and Stock Appreciation Rights	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)				(in Years)	(in Thousands)			(in Thousands)			(in Years)	(in Thousands)
Outstanding at July 1, 2017	2,236		$	50.29	5.8	$	—
Outstanding at January 2, 2021								Outstanding at January 2, 2021	383	$	75.05	1.9	$	0
Granted	—		—					Granted	0	0
Exercised	—		—			—		Exercised	0	0			0
Forfeited or expired	(27	)	63.35					Forfeited or expired	(97)	81.66
Outstanding at September 30, 2017	2,209		50.14		5.6	—
Exercisable at September 30, 2017	882		$	67.67	4.5	$	—
Outstanding at April 3, 2021								Outstanding at April 3, 2021	286	72.78		2.2	0
Exercisable at April 3, 2021								Exercisable at April 3, 2021	286	$	72.78	2.2	$	0

~~Aggregate~~The aggregate intrinsic value ~~is before income taxes and~~shown in the table above is based on ~~(i)~~ the exercise price for outstanding and exercisable options/rights at ~~September 30, 2017 and (ii) the fair market value of the Company’s common stock on the exercise date for options/rights that were exercised during the Third Quarter.~~April 3, 2021.

Stock Options and Stock Appreciation Rights Outstanding and Exercisable. The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at ~~September 30, 2017:~~April 3, 2021:


Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)



$127.84 - $131.46	58	128.13		1.0	58	128.13
Total	58	$	128.13	1.0	58	$	128.13

Cash Stock Appreciation Rights Outstanding Cash Stock Appreciation Rights Exercisable
Range of
Exercise Prices Number of
Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Number of
Shares Weighted- Average Exercise Price
(in Thousands) (in Years) (in Thousands)
$29.78 - $47.99 61
$ 36.73
6.2 11
$ 36.73
Total 61
$ 36.73
6.2 11
$ 36.73

Stock Options Outstanding Stock Options Exercisable
Range of
Exercise Prices

Number of
Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term

Number of
Shares
Weighted-
Average
Exercise
Price
(in Thousands) (in Years) (in Thousands)
$13.65 - $29.49 35
$ 14.12
1.4 35
$ 14.12
$29.78 - $47.99 79
37.00
1.5 79
37.00
$55.04 - $83.83 91
80.80
3.2 91
80.80
$95.91 - $131.46 129
127.97
4.1 129
127.97
Total 334
$ 81.69
3.0 334
$ 81.69

Stock Appreciation Rights Outstanding Stock Appreciation Rights Exercisable
Range of
Exercise Prices Number of
Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Number of
Shares Weighted-
Average
Exercise
Price
(in Thousands) (in Years) (in Thousands)
$13.65 - $29.49 101
$ 29.49
6.8 34
$ 29.49
$29.78 - $47.99 1,485
38.07
6.2 310
38.91
$55.04 - $83.83 125
79.16
4.8 90
79.91
$95.91 - $131.46 103
114.46
3.7 103
114.46
Total 1,814
$ 44.78
6.0 537
$ 59.74


Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$29.49 - $47.99	146	$	40.92	3.0	146	$	40.92
$55.04 - $82.55	48	77.43		2.0	48	77.43
95.91 - $113.04	34	109.58		0.9	34	109.58

Total	228	$	58.70	2.5	228	$	58.70

~~Restricted Stock,~~ Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock ~~restricted stock units~~unit and performance restricted stock ~~units~~unit activity during the ~~Third~~First Quarter:


Restricted Stock Units and Performance Restricted Stock Units					Restricted Stock Units and Performance Restricted Stock Units	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
						(in Thousands)
Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
	(in Thousands)
Nonvested at July 1, 2017	2,785		$	24.21
Nonvested at January 2, 2021					Nonvested at January 2, 2021	1,736	$	7.90
Granted	254		9.98		Granted	0	0
Vested	(17	)	37.81		Vested	(77)	9.11
Forfeited	(57	)	23.86		Forfeited	(24)	8.69
Nonvested at September 30, 2017	2,965		$	22.92
Nonvested at April 3, 2021					Nonvested at April 3, 2021	1,635	$	7.83

The total fair value of restricted stock ~~and restricted stock~~ units vested during the ~~Third~~First Quarter was approximately ~~$0.2~~$0.8 million. Vesting of performance restricted stock units is based on achievement of operating margin growth and achievement of sales growth and operating margin targets in relation to the performance of a certain identified peer ~~group, particular sales growth~~group.

Long-Term Incentive Plans. On the date of the Company’s annual stockholders meeting, each non-employee director automatically receives a grant of restricted stock units with a fair market value of approximately $130,000, which vest 100% on the earlier of one year from the date of grant or the date of the Company's next annual stockholders meeting, provided such director is providing services to the Company or a subsidiary of the Company on that date. Beginning with the grant in ~~relation~~fiscal year 2021, non-employee directors may elect to defer receipt of all or a ~~defined sales plan and achievement~~portion of ~~succession plans~~the restricted stock units settled in common stock of the Company upon the vesting date. In addition, beginning in fiscal year 2021, non-employee directors may defer the cash portion of their annual fees. Each participant may also elect to have the cash portion of his or her annual fees for ~~key talent.~~each calendar year treated as if invested in units of common stock of the Company.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables ~~illustrate~~disclose changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):


	For the 13 Weeks Ended April 3, 2021
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(61,178)	$	850	$	1,428	$	(58,900)
Other comprehensive income (loss) before reclassifications	(10,121)		1,292		0		(8,829)
Tax (expense) benefit	0		(236)		0		(236)
Amounts reclassed from accumulated other comprehensive income (loss)	0		(650)		0		(650)
Tax (expense) benefit	0		(36)		0		(36)
Total other comprehensive income (loss)	(10,121)		1,742		0		(8,379)
Ending balance	$	(71,299)	$	2,592	$	1,428	$	(67,279)


	For the 13 Weeks Ended September 30, 2017																For the 14 Weeks Ended April 4, 2020
	Currency Translation Adjustments			Cash Flow Hedges													Currency Translation Adjustments		Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total						Forward Contracts		Pension Plan		Total
Beginning balance	$	(75,011	)	$	(1,284	)	$	41		$	(3,907	)	$	(80,161	)	Beginning balance	$	(80,474)	$	2,983	$	(3,124)	$	(80,615)
Other comprehensive income (loss) before reclassifications	5,222			(16,776		)	5			—			(11,549		)	Other comprehensive income (loss) before reclassifications	(11,193)		8,025		0		(3,168)
Tax (expense) benefit	—			2,853			(2		)	—			2,851			Tax (expense) benefit	0		(1,452)		0		(1,452)
Amounts reclassed from accumulated other comprehensive income (loss)	—			(4,940		)	(25		)	—			(4,965		)	Amounts reclassed from accumulated other comprehensive income (loss)	0		360		0		360
Tax (expense) benefit	—			807			9			—			816			Tax (expense) benefit	0		(29)		0		(29)
Total other comprehensive income (loss)	5,222			(9,790		)	19			—			(4,549		)	Total other comprehensive income (loss)	(11,193)		6,242		0		(4,951)
Ending balance	$	(69,789	)	$	(11,074	)	$	60		$	(3,907	)	$	(84,710	)	Ending balance	$	(91,667)	$	9,225	$	(3,124)	$	(85,566)

For the 13 Weeks Ended October 1, 2016

Currency
Translation
Adjustments
Cash Flow Hedges

Forward
Contracts

Interest
Rate Swaps

Pension
Plan
Total
Beginning balance $ (73,986 ) $ 2,943
$ (1,623 ) $ (4,506 ) $ (77,172 )
Other comprehensive income (loss) before reclassifications 1,942
3,313
466
—
5,721
Tax (expense) benefit (280 ) (605 ) (170 ) —
(1,055 )
Amounts reclassed from accumulated other comprehensive income (loss) —
2,621
(413 ) —
2,208
Tax (expense) benefit —
(714 ) 150
—
(564 )
Total other comprehensive income (loss) 1,662
801
559
—
3,022
Ending balance $ (72,324 ) $ 3,744
$ (1,064 ) $ (4,506 ) $ (74,150 )

For the 39 Weeks Ended September 30, 2017

Currency
Translation
Adjustments
Cash Flow Hedges

Forward
Contracts

Interest
Rate Swaps

Pension
Plan
Total
Beginning balance $ (101,867 ) $ 10,693
$ (343 ) $ (3,907 ) $ (95,424 )
Other comprehensive income (loss) before reclassifications 32,078
(33,243 ) 230
—
(935 )
Tax (expense) benefit —
11,512
(84 ) —
11,428
Amounts reclassed from accumulated other comprehensive income (loss) —
1,981
(404 ) —
1,577
Tax (expense) benefit —
(1,945 ) 147
—
(1,798 )
Total other comprehensive income (loss) 32,078
(21,767 ) 403
—
—
10,714
Ending balance $ (69,789 ) $ (11,074 ) $ 60
$ (3,907 ) $ (84,710 )

For the 39 Weeks Ended October 1, 2016

Currency
Translation
Adjustments
Cash Flow Hedges

Forward
Contracts

Interest
Rate Swaps

Pension
Plan
Total
Beginning balance $ (81,707 ) $ 8,114
$ (693 ) $ (6,220 ) $ (80,506 )
Other comprehensive income (loss) before reclassifications 9,767
2,055
(1,915 ) 2,010
11,917
Tax (expense) benefit (280 ) 433
698
(296 ) 555
Amounts reclassed from accumulated other comprehensive income (loss) 104
9,888
(1,331 ) —
8,661
Tax (expense) benefit —
(3,030 ) 485
—
(2,545 )
Total other comprehensive income (loss) 9,383
(4,370 ) (371 ) 1,714
6,356
Ending balance $ (72,324 ) $ 3,744
$ (1,064 ) $ (4,506 ) $ (74,150 )

See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

9. SEGMENT INFORMATION

The Company reports segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, Greater China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea ~~Taiwan~~ and Thailand. Each reportable operating segment provides similar products and services.

The Company evaluates the performance of its reportable segments based on net sales and operating income (loss). Net sales for geographic segments are based on the location of the selling entity. Operating income (loss) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. ~~Global strategic initiatives such as brand building~~Corporate includes peripheral revenue generating activities from factories and ~~omni-channel activities~~intellectual property and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to

executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses that are not allocated to the various segments because they are managed at the corporate ~~level.~~level internally. The Company does not include intercompany transfers between segments for management reporting purposes.

Due to changes in the Company’s reportable segments as discussed in Note 1 to the Condensed Consolidated Financial Statements, segment results for the Prior Year Quarter have been recast to present results on a comparable basis. These changes had no impact on the consolidated net sales or operating income (loss). Summary information by operating segment was as follows (in thousands):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
	Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)(1)
Americas	$	152,506	$	26,030	$	152,916	$	(37,116)
Europe	109,234		5,026		128,250		(1,205)
Asia	98,640		11,724		106,187		11,941
Corporate	2,662		(59,535)		3,365		(107,961)
Consolidated	$	363,042	$	(16,755)	$	390,718	$	(134,341)

(1 ) In addition to the recast disclosed above, subsequent to the issuance of the Company's condensed consolidated financial statements for the 14 weeks ended April 4, 2020, the Company's management determined that operating loss for the Americas and Corporate segments for the 14 weeks ended April 4, 2020 was incorrectly presented because $24.5 million of charges were incorrectly attributed to the Americas segment rather than the Corporate segment. As a result, operating loss for the Americas and Corporate segments for the 14 week period ended April 4, 2020 has been corrected. The Company’s management evaluated the materiality of the disclosure misstatement from a quantitative and qualitative perspective and concluded that the misstatement was not material to the 14 week period ended April 4, 2020.

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)
Americas $ 308,102
$ 18,843
$ 361,226
$ 56,455
Europe 247,184
39,332
243,139
49,013
Asia 133,436
21,999
133,625
23,654
Corporate —
(80,673 ) —
(97,947 )
Consolidated $ 688,722
$ (499 ) $ 737,990
$ 31,175

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)
Americas $ 874,449
$ (121,976 ) $ 1,042,223
$ 168,352
Europe 637,566
(33,859 ) 669,076
109,193
Asia 355,343
(2,702 ) 371,907
60,519
Corporate —
(316,981 ) —
(277,034 )
Consolidated $ 1,867,358
$ (475,518 ) $ 2,083,206
$ 61,030

The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	291,616	80.3	%	$	309,925	79.3	%
Leathers	34,104		9.4		47,307		12.1
Jewelry	29,869		8.2		23,217		6.0
Other	7,453		2.1		10,269		2.6
Total	$	363,042	100.0	%	$	390,718	100.0	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Net Sales Percentage of Total Net Sales Percentage of Total
Watches $ 551,913
80.1 % $ 567,148
76.9 %
Leathers 75,660
11.0
93,338
12.6
Jewelry 47,729
6.9
60,237
8.2
Other 13,420
2.0
17,267
2.3
Total $ 688,722
100.0 % $ 737,990
100.0 %

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Net Sales Percentage of Total Net Sales Percentage of Total
Watches $ 1,471,144
78.8 % $ 1,581,233
75.9 %
Leathers 217,946
11.7
278,995
13.4
Jewelry 139,900
7.5
171,709
8.2
Other 38,368
2.0
51,269
2.5
Total $ 1,867,358
100.0 % $ 2,083,206
100.0 %

10. DERIVATIVES AND RISK MANAGEMENT

Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months. The Company enters into forward contracts, generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts.

These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency.

At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective.

For a derivative instrument that is designated and qualifies as a cash flow hedge, ~~the effective portion of~~ the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income (loss) and comprehensive income (loss), and there were no components excluded from the assessment of hedge effectiveness for the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement.

As of ~~September 30, 2017,~~April 3, 2021, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge ~~the~~ future payments of inventory transactions (in millions):


Functional Currency		Contract Currency
Type	Amount	Type	Amount
Euro	46.1	U.S. dollar	56.2
Canadian dollar	12.6	U.S. dollar	9.8
Japanese yen	869.0	U.S. dollar	8.4
British pound	5.3	U.S. dollar	7.2
Mexican peso	73.0	U.S. dollar	3.6
Australian dollar	3.5	U.S. dollar	2.7
U.S. dollar	1.1	Japanese yen	120.0

Functional Currency Contract Currency
Type Amount Type Amount
Euro 253.4
U.S. dollar 291.0
Canadian dollar 95.0
U.S. dollar 73.2
British pound 43.5
U.S. dollar 58.1
Japanese yen 4,636.4
U.S. dollar 42.8
Mexican peso 378.6
U.S. dollar 20.3
Australian dollar 21.2
U.S. dollar 16.5
U.S. dollar 41.1
Japanese yen 4,470.0

The Company is also exposed to interest rate risk related to its outstanding debt. To manage the interest rate risk related to its U.S.-based term loan (as amended and restated, the "Term Loan") which had an outstanding balance of $168.3 million net of debt issuance costs as of September 30, 2017, the Company entered into an interest rate swap agreement on July 26, 2013 with a term of approximately five years. The objective of this hedge is to offset the variability of future payments associated with interest rates on the Term Loan. The interest rate swap agreement hedges the 1-month London Interbank Offer Rate ("LIBOR") based variable rate debt obligations under the Term Loan. Under the terms of the swap, the Company pays a fixed interest rate of 1.288% per annum to the swap counterparty plus the LIBOR rate applicable margin of 3.50%. See “Note 14—Debt Activity” for additional disclosures about the Company’s Term Loan. The notional amount amortizes through May 17, 2018 and coincides with repayments on the underlying loan. The Company receives interest from the swap counterparty at a variable rate based on 1-month LIBOR. This hedge is designated as a cash flow hedge.

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of ~~September 30, 2017,~~April 3, 2021, the Company had non-designated forward contracts of ~~approximately $2.2~~$0.4 million on ~~28.3~~5.9 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings when they occur.

The ~~effective portion of~~ gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes ~~during the Third Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period~~ are set forth below (in thousands):


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Cash flow hedges:
Forward contracts	$	1,056	$	6,573

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	1,056	$	6,573

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Cash flow hedges:

Forward contracts $ (13,923 ) $ 2,708
Interest rate swaps 3
296
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (13,920 ) $ 3,004

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Cash flow hedges:

Forward contracts $ (21,731 ) $ 2,488
Interest rate swaps 146
(1,217 )
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (21,585 ) $ 1,271

The following ~~table illustrates~~tables disclose the ~~effective portion of~~ gains and losses on derivative instruments recorded in accumulated other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings ~~during the Third Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period~~ (in thousands):


Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	681	$	2,647
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(1,367)	$	(2,316)
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(59)	$	205

Derivative Instruments
Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location

Effect of Derivative
Instruments
For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ (4,133 ) $ 1,907
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ (12 ) $ 75
Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ (16 ) $ (263 )

Derivative Instruments
Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location

Effect of Derivative
Instruments

For the 39 Weeks Ended
September 30, 2017

For the 39 Weeks Ended
October 1, 2016
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 36
$ 6,858
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 170
$ (222 )
Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ (257 ) $ (846 )

The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands):


	Asset Derivatives						Liability Derivatives
	April 3, 2021			January 2, 2021			April 3, 2021			January 2, 2021
Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	2,391	Prepaid expenses and other current assets	$	345	Accrued expenses-other	$	614	Accrued expenses-other	$	2,178
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	4		Prepaid expenses and other current assets	0		Accrued expenses-other	0		Accrued expenses-other	86



Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	253		Intangible and other assets-net	48		Other long-term liabilities	30		Other long-term liabilities	35

Total		$	2,648		$	393		$	644		$	2,299

Asset Derivatives Liability Derivatives
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Derivative Instruments
Condensed
Consolidated
Balance Sheets
Location

Fair
Value

Condensed
Consolidated
Balance Sheets
Location

Fair
Value

Condensed
Consolidated
Balance Sheets
Location

Fair
Value

Condensed
Consolidated
Balance Sheets
Location

Fair
Value
Forward contracts designated as cash flow hedging instruments Prepaid expenses and other current assets $ 2,710
Prepaid expenses and other current assets $ 23,288
Accrued expenses- other $ 15,215
Accrued expenses- other $ 4,696
Forward contracts not designated as cash flow hedging instruments Prepaid expenses and other current assets 72
Prepaid expenses and other current assets —
Accrued expenses- other 1
Accrued expenses- other 2
Interest rate swap designated as a cash flow hedging instrument Prepaid expenses and other current assets 109
Prepaid expenses and other current assets —
Accrued expenses- other 15
Accrued expenses- other 613
Forward contracts designated as cash flow hedging instruments Intangible and other assets-net 448
Intangible and other assets-net 5,648
Other long-term liabilities 4,557
Other long-term liabilities 268
Interest rate swap designated as a cash flow hedging instrument Intangible and other assets-net —
Intangible and other assets-net 73
Other long-term liabilities —
Other long-term liabilities —
Total $ 3,339
$ 29,009
$ 19,788
$ 5,579

The following tables summarize the effects of the Company's derivative instruments on earnings (in thousands):


	Effect of Derivative Instruments
	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
	Cost of Sales		Other Income (Expense)-net		Cost of Sales		Other Income (Expense)-net
Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded	$	180,453	$	1,864	$	250,358	$	(7,290)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	$	681	$	(1,367)	$	2,647	$	(2,316)
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	$	—	$	(59)	$	—	$	205

At the end of the ~~Third~~First Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June ~~2019.~~2022. As of ~~September 30, 2017,~~April 3, 2021, an estimated net ~~loss~~gain of ~~$9.2~~$1.6 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates. ~~See “Note 1—Financial Statement Policies” for additional disclosures on foreign currency hedging instruments.~~

11. FAIR VALUE MEASUREMENTS

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

~~Accounting Standards Codification ("ASC")~~ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

•Level 3 — Unobservable inputs based on the Company’s assumptions.

ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2017~~April 3, 2021 (in thousands):


	Fair Value at April 3, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	0	$	2,648	$	0	$	2,648




Total	$	0	$	2,648	$	0	$	2,648
Liabilities:
Contingent consideration	$	0	$	0	$	1,976	$	1,976
Forward contracts	0		644		0		644

Total	$	0	$	644	$	1,976	$	2,620

Fair Value at September 30, 2017
Level 1 Level 2 Level 3 Total
Assets:

Forward contracts $ —
$ 3,230
$ —
$ 3,230
Deferred compensation plan assets:

Investment in publicly traded mutual funds 2,605
—
—
2,605
Interest rate swap —
109
—
109
Total $ 2,605
$ 3,339
$ —
$ 5,944
Liabilities:

Forward contracts $ —
$ 19,773
—
$ 19,773
Interest rate swap —
15
—
15
Total $ —
$ 19,788
$ —
$ 19,788

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~December 31, 2016~~January 2, 2021 (in thousands):


	Fair Value at December 31, 2016									Fair Value at January 2, 2021
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:									Assets:
Forward contracts	$	—	$	28,936	$	—	$	28,936	Forward contracts	$	0	$	393	$	0	$	393
Deferred compensation plan assets:									Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,385		—		—		2,385		Investment in publicly traded mutual funds	6,257		0		0		6,257
Interest rate swap	—		73		—		73

Total	$	2,385	$	29,009	$	—	$	31,394	Total	$	6,257	$	393	$	0	$	6,650
Liabilities:									Liabilities:
Contingent consideration									Contingent consideration	$	0	$	0	$	1,924	$	1,924
Forward contracts	—		4,966		—		4,966		Forward contracts	0		2,299		0		2,299
Interest rate swap	—		613		—		613

Total	$	—	$	5,579	$	—	$	5,579	Total	$	0	$	2,299	$	1,924	$	4,223

The ~~fair values of the Company’s~~Company's deferred compensation plan ~~assets are based on quoted prices.~~was terminated during the First Quarter, with the final distributions taking place in the second quarter of fiscal year 2021. The deferred compensation plan assets ~~are~~at January 2, 2021 were recorded in intangible and other assets-net in the Company’s condensed consolidated balance ~~sheets.~~ sheets and the fair values were based on quoted prices.

The fair values of the Company’s forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. The fair values of the interest rate swap assets and liabilities are determined using valuation models based on market observable inputs, including forward curves, mid-market price and volatility levels. See ~~“Note~~Note 10—Derivatives and Risk ~~Management”~~Management, for additional disclosures about the ~~interest rate swaps and~~ forward contracts.

As of ~~September 30, 2017, debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of $486.1 million and a~~April 3, 2021, the fair value of ~~approximately $480.6 million.~~the Company's debt approximated its carrying amount. The fair value of debt was obtained ~~from a third-party based on~~using observable market inputs.

The fair value of ~~goodwill and~~ trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, ~~discounts~~discount rates and implied royalty rates. NaN trade name impairment was recorded during the First Quarter.

During the second quarter of fiscal 2017, the Company fully impaired its goodwill balance and recorded pre-tax impairment charges of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively.

~~During the second quarter of fiscal 2017, the SKAGEN trade name~~First Quarter, operating lease right-of-use ("ROU") assets with a carrying amount of ~~$55.6~~$6.0 million was written down to its implied fair value of $27.3 million, resulting in a pre-tax impairment charge of $28.3 million; the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8 million and ~~the MICHELE trade name with a carrying amount of $18.5 million was written down to its implied fair value of~~

$10.9 million, resulting in a pre-tax impairment charge of $7.6 million. Trade name impairment charges were recorded in the Corporate cost area. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional disclosures about goodwill and trade name impairment.

~~In accordance with the provisions of ASC 360,~~ ~~Property, Plant and Equipment~~, property, plant and equipment-net with a carrying amount of ~~$6.0~~$1.6 million related to retail store leasehold improvements, ~~and~~ fixturing and ~~related key money in the amount~~shop-in-shops were written down to a fair value of $2.3 million and $0.6 million, ~~were deemed not recoverable,~~respectively, resulting in an impairment ~~charge~~charges of ~~$6.6 million during the Year To Date Period.~~$4.7 million.

The fair values of operating lease ROU assets and fixed assets related to ~~Company-owned~~ retail stores were determined using Level 3 ~~inputs.~~inputs, including forecasted cash flows and discount rates. Of the ~~$6.6~~$4.7 million impairment expense, ~~$3.6~~$2.3 million, ~~$1.4~~$1.8 million, and ~~$0.5~~$0.4 million ~~were~~was recorded in ~~restructuring charges~~SG&A in the Americas, Europe and Asia segments, respectively, and ~~$0.8~~$0.2 million ~~and $0.3 million were~~was recorded in ~~SG&A~~restructuring charges in the Europe ~~and Asia segments, respectively.~~ segment.

~~During the second quarter of fiscal 2017, the Company recorded a pre-tax impairment charge of $1.6 million related to the write off of a cost method investment.~~

12. INTANGIBLE AND OTHER ASSETS

The following table summarizes intangible and other assets (in thousands):


		April 3, 2021				January 2, 2021
	Useful	Gross		Accumulated		Gross		Accumulated
	Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:
Trademarks	10 yrs.	$	3,775	$	3,241	$	3,775	$	3,198
Customer lists	5 - 10 yrs.	41,989		39,850		42,387		39,406
Patents	3 - 20 yrs.	2,371		1,982		2,371		1,973

Developed technology	7 yrs.	2,193		1,234		2,193		1,097
Trade name	6 yrs.	4,502		1,125		4,502		938
Other	7 - 20 yrs.	540		309		544		301
Total intangibles-subject to amortization		55,370		47,741		55,772		46,913
Intangibles-not subject to amortization:
Trade names		8,867				8,895
Other assets:

Deposits		19,425				19,762
Deferred compensation plan assets		0				6,257
Deferred tax asset-net		32,880				33,893
Restricted cash		7,465				8,159



Tax receivable		6,478				58,734

Investments		327				327
Other		2,163				2,303
Total other assets		68,738				129,435
Total intangible and other assets		$	132,975	$	47,741	$	194,102	$	46,913
Total intangible and other assets-net				$	85,234			$	147,189

September 30, 2017 December 31, 2016
Useful Gross Accumulated Gross Accumulated
Lives Amount Amortization Amount Amortization
Intangibles-subject to amortization:

Trademarks 10 yrs. $ 4,310
$ 3,621
$ 4,310
$ 3,443
Customer lists 5-10 yrs. 54,875
32,417
53,625
26,986
Patents 3-20 yrs. 2,325
2,124
2,325
2,099
Noncompete agreement 3-6 yrs. 2,548
2,102
2,505
1,662
Developed technology 7 yrs. 36,100
9,025
36,100
5,157
Trade name 6 yrs. —
—
15,700
2,617
Other 7-20 yrs. 265
236
253
215
Total intangibles-subject to amortization 100,423
49,525
114,818
42,179
Intangibles-not subject to amortization:

Trade names 38,645

74,485

Other assets:

Key money deposits 27,841
24,195
26,948
22,038
Other deposits 19,579

19,344

Deferred compensation plan assets 2,605

2,385

Deferred tax asset-net 98,374

23,061

Restricted cash 373

500

Shop-in-shop 10,161
9,816
8,807
8,019
Tax receivable 404
—

Forward contracts 448

5,648

Investments 500
2,078

Other 4,771

4,655

Total other assets 165,056
34,011
93,426
30,057
Total intangible and other assets $ 304,124
$ 83,536
$ 282,729
$ 72,236
Total intangible and other assets-net
$ 220,588

$ 210,493

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right

can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the initial lease term, which ranges from approximately four to 18 years.

Amortization expense for intangible assets was approximately ~~$3.0~~$1.2 million and ~~$3.7~~$1.9 million for the ~~Third~~First Quarter and the Prior Year Quarter, ~~respectively, and $10.4 million and $11.2 million for the Year To Date Period and Prior Year YTD Period,~~ respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):


Fiscal Year	Amortization Expense
2021 (remaining)	$	2,158
2022	$	2,504
2023	$	897
2024	$	884
2025	$	693
Thereafter	$	493

Fiscal Year
Amortization
Expense
2017 (remaining) $ 3,028
2018 $ 11,848
2019 $ 11,518
2020 $ 10,979
2021 $ 7,143
2022 $ 6,263

13. COMMITMENTS AND CONTINGENCIES

Litigation. The Company is occasionally subject to litigation or other legal proceedings in the normal course of its business. The Company does not believe that the outcome of any currently pending legal matters, individually or collectively, will have a material effect on the business or financial condition of the Company.

14. LEASES

The Company's leases consist primarily of retail space, offices, warehouses, distribution centers, equipment and vehicles. The Company determines if an agreement contains a lease at inception based on the Company's right to the economic benefits of the leased assets and its right to direct the use of the leased asset. ROU assets represent the Company's right to use an underlying asset, and ROU liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date adjusted for the lease term and lease country to determine the present value of the lease payments.

Some leases include one or more options to renew at the Company's discretion, with renewal terms that can extend the lease from one to ten additional years. The renewal options are not included in the measurement of ROU assets and ROU liabilities unless the Company is reasonably certain to exercise the optional renewal periods. Short-term leases are leases having a term of twelve months or less at inception. The Company does not record a related lease asset or liability for short-term leases. The Company has certain leases containing lease and non-lease components which are accounted for as a single lease component. The Company has certain leases agreements where lease payments are based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The variable portion of these lease payments is not included in the Company's lease liabilities. The Company's lease agreements do not contain any significant restrictions or covenants other than those that are customary in such arrangements.

As a result of the COVID-19 pandemic, the Company received lease concessions from landlords in the form of rent deferrals and rent forgiveness. The Company chose the policy election provided by the FASB in April 2020 to record rent concessions as if no modifications to lease contracts were made, and thus no changes to the ROU assets and ROU liabilities were recorded with respect to these concessions. This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. As of April 3, 2021, the Company had outstanding deferred rent payments of $3.1 million, and the Company received rent forgiveness of $1.1 million in the First Quarter.

The components of lease expense were as follows (in thousands):


Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Operating lease cost(1)(2)	SG&A	$	23,366	$	28,206
Finance lease cost:
Amortization of ROU assets	SG&A	$	122	$	101
Interest on lease liabilities	Interest expense	$	5	$	11
Short-term lease cost	SG&A	$	168	$	201
Variable lease cost	SG&A	$	5,407	$	7,694

(1) Includes sublease income, which was immaterial.

(2) Excludes the impact of deferred or abated rent amounts

The following table discloses supplemental balance sheet information for the Company’s leases (in thousands):


Leases	Condensed Consolidated Balance Sheets Location	April 3, 2021		January 2, 2021
Assets
Operating	Operating lease ROU assets	$	211,918	$	226,815
Finance	Property, plant and equipment - net of accumulated depreciation of $4,853 and $4,882, respectively	$	5,682	$	5,991

Liabilities
Current:
Operating	Current operating lease liabilities	$	60,137	$	64,851
Finance	Short-term and current portion of long-term debt	$	1,041	$	1,088
Noncurrent:
Operating	Long-term operating lease liabilities	$	217,522	$	230,635
Finance	Long-term debt	$	288	$	569

The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's leases:

Lease Term and Discount Rate

April 3, 2021

January 2, 2021

Weighted-average remaining lease term:

Operating leases

5.9 years

Finance leases

1.0 years

1.2 years

Weighted-average discount rate:

Operating leases

14.0

Finance leases

1.2

Future minimum lease payments by year as of April 3, 2021 were as follows (in thousands):


Fiscal Year	Operating Leases (1)		Finance Leases
2021 (remaining)	$	72,864	$	786
2022	86,488		545
2023	67,298		0
2024	46,875		0
2025	33,447		0
Thereafter	124,313		0

Total lease payments	$	431,285	$	1,331
Less: Interest	153,626		2
Total lease obligations	$	277,659	$	1,329

(1) Future minimum lease payments exclude the impact of deferred or abated rent amounts

Future minimum lease payments by year as of January 2, 2021 were as follows (in thousands):


Fiscal Year	Operating Leases		Finance Leases
2021	$	101,507	$	1,095
2022	85,753		569
2023	66,909		0
2024	46,656		0
2025	33,012		0
Thereafter	122,318		0
Total lease payments	$	456,155	$	1,664
Less: Interest	160,669		6
Finance lease obligations	$	295,486	$	1,658

Supplemental cash flow information related to leases was as follows (in thousands):


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	28,740	$	30,324
Operating cash flows from finance leases	5		11
Financing cash flows from finance leases	254		309

Leased assets obtained in exchange for new operating lease liabilities	4,931		18,284

(1) Cash flows for the 13 weeks ended April 3, 2021 exclude the impact of deferred or abated rent amounts

As of April 3, 2021, the Company did not have any material operating or finance leases that have been signed but not commenced.

15. DEBT ACTIVITY

On ~~March 10, 2017,~~February 20, 2020, the Company entered into Amendment No. 1 to that certain Term Credit Agreement, dated as of September 26, 2019, by and among the ~~Second~~Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the “Term Credit Agreement Lenders”) party thereto (as amended to date, the “Term Credit Agreement”). On May 12, 2020, the Company entered into Amendment No. 2 to the ~~Amended and Restated~~Term Credit Agreement to extend the deadline for delivery of the Company’s unaudited quarterly financial statements and related deliverables for the fiscal quarter ended April 4, 2020. On June 5, 2020, the Company entered into Amendment No. 3 (the ~~“Second~~“Third Amendment”) to the Term Credit Agreement to further modify certain terms of the Term Credit Agreement to address the financial impact of COVID-19.

Under the Term Credit Agreement: (i) amounts outstanding bear interest at (a) the adjusted LIBO rate plus 8.50% for Eurodollar loans, and (b) the alternate base rate plus 7.50% for alternate base rate loans; (ii) a quarterly amortization payment of $10.0 million is required; and (iii) a maximum total leverage ratio of (a) 2.25 to 1.00 is permitted as of the last day of each fiscal quarter ending April 3, 2021, July 3, 2021 and October 2, 2021, and (b) 1.50 to 1.00 as of the last day of each subsequent fiscal quarter. In connection with the Third Amendment, the quarterly test for maximum total leverage ratio was waived for the first three fiscal quarters of fiscal year 2021, and the Company is required to maintain specified minimum levels of EBITDA during such periods.

While the Third Amendment amended, among other things, certain of the financial covenants in the Term Credit Agreement to address the financial impact of COVID-19, any material further decreases to the Company’s revenues and cash flows, or the Company's inability to successfully achieve its cost reduction targets, could result in the Company not meeting one or more of the amended financial covenants under its Term Credit Agreement within the next twelve months.

On September 26, 2019, the Company and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers,

certain other subsidiaries of the Company from time to time party thereto designated as borrowers, and certain subsidiaries of the Company from time to time party thereto as guarantors, entered into a $275.0 million secured asset-based revolving credit agreement (the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders").

The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $275.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $160.0 million is available under a U.S. facility, an aggregate of $70.0 million is available under a European facility, $30.0 million is available under a Hong Kong facility, $10.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the borrowing base availability limitations described below. The Revolving Facility also includes an up to $45.0 million subfacility for the issuance of letters of credit (the “Letters of Credit”). The ~~Second Amendment reduced~~Revolving Facility expires and is due and payable on September 26, 2024, provided that, if on the ~~Company's revolving credit facility (the "Revolving Credit Facility") available~~date that is the 121st day prior to the final maturity date of any class or tranche of term loans under the ~~Company’s existing credit amendment from $1.05 billion to $850.0 million. The Second Amendment also removed the incremental~~Term Credit Agreement, any such term ~~loan that was available under the credit agreement, extended~~loans are outstanding on such date, then the maturity date of the ~~credit agreement to May 17, 2019 and removed~~Revolving Facility shall be such date. Unless the ~~Company’s ability to make offers to~~maturity of the ~~lenders to extend~~term loans is extended beyond the current maturity date of ~~the Term Loan or~~September 26, 2024, the Revolving ~~Credit Facility. The Second Amendment also amended the repayment schedule for the Term Loan~~Facility will expire and requires the Company to make monthly payments on the last business day of each month beginning April 30, 2018. On and after April 1, 2018, interest on the Term Loan that is based upon the base rate will be due and payable in arrears on the last business day of each calendar month, and interest on the Term Loan that is based upon the LIBOR rate will be due and payable on May 28, 2024. The French facility includes a $1.0 million subfacility for swingline loans, and the ~~last day~~European facility includes a $7.0 million subfacility for swingline loans. The Revolving Facility is subject to a line cap equal to the lesser of the ~~applicable interest period; provided, that if such interest period extends for over one month, then interest will be due~~total Revolving Credit Commitment and ~~payable at~~ the ~~end of each one month interval during such interest period. The Second Amendment also amended the mandatory prepayment provisions~~aggregate borrowing bases under the ~~credit agreement~~U.S. facility, the European facility, the Hong Kong facility, the French facility and ~~provides that to~~ the ~~extent there are excess proceeds remaining from the issuance of debt by the Company following the repayment in full of the Term Loan, the Company will be required to repay~~Canadian facility. Loans under the Revolving ~~Credit~~ Facility may be made in the amount of such excess proceeds, with a corresponding permanent reduction in the Revolving Credit Facility in the amount of up to $50.0 million. In accordance with the Second Amendment, dividends paid from foreign subsidiaries to U.S. ~~subsidiaries~~dollars, Canadian dollars, euros, Hong Kong dollars or ~~Fossil Group, Inc., must first be used to repay the Term Loan and then up to $50.0 million of the Revolving Credit Facility.~~pounds sterling.

The ~~Second Amendment amended the applicable margin used~~Revolving Facility is an asset-based facility, in which borrowing availability is subject to ~~calculate the interest rate that is applicable to~~a borrowing base rate loans and LIBOR rate loans under the Company’s credit agreement. As of September 30, 2017, the interest rate margin for base rate loans was 2.50% per annum and the interest rate margin for LIBOR rate loans was 3.50% per annum. On October 1, 2017, the applicable margin on the Term Loan automatically increased to 2.75% per annum for base rate loans and 3.75% per annum for LIBOR rate loans. If the Term Loan has not been repaid in full on or prior to March 31, 2018, then on such date, the applicable margin will automatically increase to 3.25% per annum for base rate loans and 4.25% per annum for LIBOR rate loans. The Second Amendment also changed the commitment fee payable by the Companyequal to:(a) with respect to the Company, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, plus (ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit card accounts receivable, minus (iv) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and (y) 65% of the lower of cost or market value of eligible foreign finished goods inventory of such non-U.S. borrower, plus (ii) 85% of the eligible foreign accounts receivable of such non-U.S. borrower, minus (iii) the aggregate amount of reserves, if any, established by the ABL Agent; and (c) with respect to the French Borrower, (i) 85% of eligible French accounts receivable minus (ii) the aggregate amount of reserves, if any, established by the ABL Agent. Not more than 60% of the aggregate borrowing base under the Revolving Facility may consist of the non-U.S. borrowing bases.

As of April 3, 2021, the Company had $138.4 million and $77.4 million outstanding under the Term Credit Agreement and Revolving Facility, ~~to 0.50% per annum.~~respectively. The Company will incur an additional fee of 0.25% times the outstanding principal amount of the total credit exposure under the credit agreement if the Term Loan has not been repaid in full on or prior to March 31, 2018. Furthermore, the Second Amendment changed the consolidated total leverage ratio that the Company must comply with from 3.25 to 1.00 to the ratios as set forth below:



~~Period~~		~~Maximum Ratio~~
~~July 2, 2017 through and including September 30, 2017~~		~~3.50 to 1.00~~
~~October 1, 2017 through and including March 31, 2018~~		~~3.25 to 1.00~~
~~April 1, 2018 through and including September 29, 2018~~		~~3.50 to 1.00~~
~~September 30, 2018 and thereafter~~		~~3.25 to 1.00~~

~~The Company made principal~~had net payments of ~~$6.3 million and $18.8~~$13.6 million under the Term ~~Loan~~Credit Agreement during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. The Company ~~also made~~had net payments of ~~$158.0 million and $131.3~~$20.0 million under the Revolving ~~Credit~~ Facility during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. Amounts available under the Revolving ~~Credit~~ Facility ~~are~~were reduced by any amounts outstanding under standby letters of credit. As of ~~September 30, 2017,~~April 3, 2021, the Company had available borrowing capacity of ~~$270.5~~$2.5 million under the Revolving ~~Credit~~ Facility. The Company's domestic subsidiary receives short-term loans from certain of its foreign subsidiaries at the end of each fiscal quarter which are used to reduce its external borrowings. These intercompany loans are repaid at the beginning of the following fiscal quarter. At the end of the Third Quarter, these intercompany loans totaled $411.8 million. The Company incurred approximately ~~$2.2 million and $6.3~~$3.8 million of interest expense related to the Term ~~Loan~~Credit Agreement during the ~~Third Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap.~~First Quarter. The Company incurred approximately ~~$8.1 million and $20.5~~$0.4 million of interest expense related to the Revolving ~~Credit~~ Facility during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. The Company incurred approximately ~~$0.9 million and~~ $2.7 million of interest expense related to the amortization of debt issuance costs and the original issue discount during the ~~Third Quarter~~First Quarter. At April 3, 2021, the Company was in compliance with all debt covenants related to its credit facilities.

16. RESTRUCTURING

In fiscal year 2019, the Company launched New World Fossil 2.0 - Transform to Grow Program (“NWF 2.0”), which is focused on optimizing the Company’s operating structure to be more efficient, with faster decision-making and ~~Year To Date Period, respectively.~~

~~15. RESTRUCTURING~~

a more customer-centric focus. In addition to optimizing the way the Company goes to market, the Company pursued additional gross margin expansion opportunities. The Company ~~implemented~~has taken a ~~multi-year~~zero-based budgeting approach to adjust its business model to enable more investment in digital capabilities and marketing, move closer to the consumer and react more quickly to the ever-evolving consumer shopping patterns. The Company also changed its overall business processes and resources, creating a more centrally directed operating model, reducing complexity and redundancy, and operating at a lower cost base. The NWF 2.0 restructuring program ~~that began~~was expanded to address additional challenges posed by COVID-19, including a number of cost saving measures such as store closures. Total NWF 2.0 charges since inception in fiscal year ~~2016 called New World Fossil ("NWF"). As part~~2019 are $62.8 million, of NWF, the Company targets to improve operating profit and support sales growth through a leaner infrastructure and an enhanced business model. The Company is working to achieve greater efficiencies from production to distribution through activities such as organizational changes, reducing its overall product assortment, optimizing its base cost structure and consolidating facilities. The Company also intends to build a quicker and more responsive operating platform. The Company is reducing its retail footprint to reflect the evolving shopping habits of today's consumer, which ~~includes restructuring costs, such as store impairment, recorded lease obligations and termination fees and accelerated depreciation. Of the total estimated $150~~$7.5 million, ~~restructuring charges, approximately $27.8~~$36.5 million and ~~$41.8~~$18.8 million were recorded during the First Quarter, fiscal year ~~2016~~2020 and ~~the Year To Date period, respectively. The Company estimates total~~ fiscal year ~~2017 NWF restructuring charges of approximately $45 million.~~2019, respectively.

The following table shows a rollforward of the accrued liability related to the Company’s NWF 2.0 restructuring plan (in thousands):


	For the 13 Weeks Ended April 3, 2021
	Liabilities								Liabilities
	January 2, 2021		Charges		Cash Payments		Non-cash Items		April 3, 2021
Store closures	$	240	$	222	$	190	$	221	$	51
Professional services	2,280		586		2,325		0		541
Severance and employee-related benefits	7,741		6,712		5,901		0		8,552
Total	$	10,261	$	7,520	$	8,416	$	221	$	9,144

For the 13 Weeks Ended September 30, 2017
Liabilities Liabilities
July 1, 2017 Charges Cash Payments Non-cash Items September 30, 2017
Store closures $ 4,893
$ 2,482
$ 4,237
$ 2,320
$ 818
Professional services and other 116
765
48
291
542
Severance and employee-related benefits 1,535
2,522
2,467
—
1,590
Total $ 6,544
$ 5,769
$ 6,752
$ 2,611
$ 2,950


	For the 14 Weeks Ended April 4, 2020
	Liabilities								Liabilities
	December 28, 2019		Charges		Cash Payments		Non-cash Items		April 4, 2020
Store closures	$	22	$	732	$	42	$	684	$	28
Professional services	2,824		3,189		3,963		0		2,050
Severance and employee-related benefits	4,238		5,454		5,782		0		3,910
Total	$	7,084	$	9,375	$	9,787	$	684	$	5,988

For the 13 Weeks Ended October 1, 2016
Liabilities Liabilities
July 2, 2016 Charges Cash Payments Non-cash Items October 1, 2016
Store closures $ —
$ 12,523
$ —
$ 12,523
$ —
Professional services and other —
1,950
1,300
—
650
Severance and employee-related benefits —
—
—
—
—
Total $ —
$ 14,473
$ 1,300
$ 12,523
$ 650

For the 39 Weeks Ended September 30, 2017
Liabilities Liabilities
December 31, 2016 Charges Cash Payments Non-cash Items September 30, 2017
Store closures $ 4,546
$ 8,223
$ 6,415
$ 5,536
$ 818
Professional services and other 794
2,195
2,156
291
542
Severance and employee-related benefits —
31,400
28,606
1,204
1,590
Total $ 5,340
$ 41,818
$ 37,177
$ 7,031
$ 2,950

For the 39 Weeks Ended October 1, 2016
Liabilities Liabilities
January 2, 2016 Charges Cash Payments Non-cash Items October 1, 2016
Store closures $ —
$ 12,523
$ —
$ 12,523
$ —
Professional services and other —
1,950
1,300
—
650
Severance and employee-related benefits —
—
—
—
—
Total $ —
$ 14,473
$ 1,300
$ 12,523
$ 650

~~Restructuring~~ NWF 2.0 restructuring charges by operating segment were as follows (in thousands):


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020
Americas	$	672	$	1,136
Europe	5,263		766
Asia	275		1,623
Corporate	1,310		5,850
Consolidated	$	7,520	$	9,375

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Americas $ 2,771
$ 10,548
Europe 1,445
1,639
Asia 1,144
336
Corporate 409
1,950
Consolidated $ 5,769
$ 14,473

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Americas $ 10,567
$ 10,548
Europe 9,127
1,639
Asia 9,283
336
Corporate 12,841
1,950
Consolidated $ 41,818
$ 14,473

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the financial condition and results of operations of Fossil Group, Inc. and its subsidiaries for the thirteen ~~and thirty-nine~~ week ~~periods~~period ended ~~September 30, 2017~~April 3, 2021 (the ~~“Third~~“First Quarter” ~~and “Year To Date Period,” respectively)~~) as compared to the ~~thirteen and thirty-nine~~fourteen week ~~periods~~period ended ~~October 1, 2016~~April 4, 2020 (the “Prior Year Quarter” ~~and “Prior Year YTD Period,” respectively)~~). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

General

We are a global design, marketing and distribution company that specializes in consumer fashion accessories. Our principal offerings include an extensive line of ~~men’s~~men's and ~~women’s~~women's fashion watches and jewelry, handbags, small leather goods, belts, and sunglasses. In the watch and jewelry product categories, we have a diverse portfolio of globally recognized owned and licensed brand names under which our products are marketed.

Our products are distributed globally through various distribution channels including wholesale in countries where we have a physical presence, direct to the consumer through our retail stores and commercial websites and through ~~third party~~third-party distributors in countries where we do not maintain a physical presence. Our products are offered at varying price points to meet the needs of our customers, whether they are ~~value conscious~~value-conscious or luxury oriented. Based on our ~~extensive~~ range of accessory products, brands, distribution channels and price points, we are able to target ~~style conscious~~style-conscious consumers across a wide age spectrum on a global basis.

~~Domestically,~~The vast majority of our products are sourced internationally, with a substantial percentage of our watch and jewelry products assembled or manufactured by entities that are majority owned by us. This vertical integration of our business allows for better flow of communication, consistent quality, product design protection and improved supply chain speed, while still allowing us to utilize non-owned production facilities for their unique capabilities and to cover production needs over internal capabilities.

We operate our business in three segments which are divided into geographies. Net sales for each geographic segment are based on the location of the selling entity and each reportable segment provides similar products and services.

Americas: The Americas segment is comprised of sales from our operations in the United States, Canada and Latin America. Sales are generated through diversified distribution channels that include wholesalers, distributors, and direct to consumer. Within each channel, we sell our products through a ~~diversified distribution network that includes department stores, specialty retail locations, specialty watch~~variety of physical points of sale, distributors and ~~jewelry stores, Company-owned retail and outlet stores, mass market stores and through our FOSSIL~~^® ~~website. Our wholesale customer base includes, among others, Amazon, Best Buy, Dillard’s, JCPenney, Kohl’s, Macy’s, Neiman Marcus, Nordstrom, Saks Fifth Avenue, Target and Wal-Mart.~~e-commerce channels. In the ~~United States, our network of~~direct to consumer channel, we had 170 Company-owned stores ~~included 84 retail stores located in premier retail sites and 122 outlet stores located in major outlet malls~~ as of ~~September 30, 2017. In addition, we offer~~the end of the First Quarter and an extensive collection of products available through our ~~FOSSIL brand products on our website,~~ ~~www.fossil.com, as well as proprietary~~owned websites.

Europe: The Europe segment is comprised of sales to customers based in European countries, the Middle East and ~~licensed watch~~Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and ~~jewelry brands through other managed and affiliated websites.~~

~~Internationally,~~direct to consumer. Within each channel, we sell our products ~~are sold to department stores, specialty retail stores and specialty watch and jewelry stores in approximately 150 countries worldwide through 23 Company-owned foreign sales subsidiaries and~~ through a ~~network~~variety of ~~approximately 80 independent distributors. Internationally, our network~~physical points of ~~Company-owned stores included 216 retail stores~~sale, distributors, and ~~134 outlet~~e-commerce channels. In the direct to consumer channel, we had 137 Company-owned stores as of ~~September 30, 2017. Our products are also sold through licensed~~the end of the First Quarter and ~~franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer~~ an extensive collection of products available through our ~~FOSSIL brand~~owned websites.

Asia: The Asia segment is comprised of sales to customers based in Australia, Greater China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel, we had 88 Company-owned stores as of the end of the First Quarter and an extensive collection of products available through our owned websites.

Our consolidated gross profit margin is influenced by our diversified business model that includes, but is not limited to: (i) a significant number of product categories we distribute; (ii) the multiple brands we offer within several product categories; (iii) the geographical presence of our businesses; and (iv) the different distribution channels we sell to or through.

The components of this diversified business model produce varying ranges of gross profit margin. Generally, on a historical basis, our ~~websites~~fashion branded watch and jewelry offerings produce higher gross profit margins than our leather goods offerings. In addition, in ~~certain countries.~~most product categories that we offer, brands with higher retail price points generally produce higher gross profit margins compared to those of lower retail priced brands and connected products carry relatively lower margins than traditional products. Gross profit margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the following factors: (i) premiums charged in comparison to retail prices on products sold in the U.S.; (ii) the product sales mix in our international businesses, in comparison to our Americas business, is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods; and (iii) the

watch sales mix in our Europe and Asia businesses, in comparison to our Americas business, are comprised more predominantly of higher priced licensed brands.

Our business is subject to economic cycles and retail industry conditions. Purchases of discretionary fashion accessories, such as our watches, handbags, sunglasses and other products, tend to decline during recessionary periods when disposable income is low and consumers are hesitant to use available credit. In addition, acts of terrorism, acts of war and military action both in the U.S. and abroad can have a significant effect on economic conditions and may negatively affect our ability to procure our products from manufacturers for sale to our customers. Any significant declines in general economic conditions, public safety concerns or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on consumer purchases of our products.

~~Our business is also~~ subject to the risks inherent in global sourcing supply. Certain key components in our products come from limited sources of supply, which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products. Any interruption or delay in the supply of key components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales. Interruptions or delays in supply may be caused by a number of factors that are outside of our and our ~~contract manufacturers’~~contractor manufacturers' control.

~~Future sales~~Known or Anticipated Trends: Based on our recent operating results and ~~earnings growth are also contingent upon~~current perspectives on our ~~ability~~operating environment, we anticipate the following trends will continue to ~~anticipate~~impact our operating results:

COVID-19: Our business operations and ~~respond~~financial performance continue to ~~changing fashion trends~~be materially impacted by COVID-19. The COVID-19 pandemic has negatively affected the global economies, disrupted global supply chains and ~~consumer preferences in a timely manner while continuing~~financial markets, and led to ~~develop innovative products in~~significant travel and transportation restrictions, including mandatory closures of non-essential businesses and orders to “shelter-in-place.” We remain focused on protecting the ~~respective markets in which we compete. As is typical with new products, including~~health and safety of our ~~lines of connected accessories, market acceptance~~employees, customers and suppliers to minimize potential disruptions and supporting the community to address challenges posed by the global COVID-19 pandemic. Despite the introduction of new ~~designs and products that we may introduce is subject~~vaccines to ~~uncertainty. In addition, we generally make decisions regarding product designs several months in advance~~fight the virus, the time to administer vaccines on a global scale along with the emergence of new variants of the ~~time when~~virus continue to cast uncertainty on global consumer ~~acceptance can be measured.~~behavior. As a result, we expect continuing disruptions in consumer spending patterns and traffic in traditional brick and mortar shopping centers.

Business Strategies and Outlook: Notwithstanding the COVID-19 pandemic, we plan to execute the following strategies to enhance our brands, grow our revenue and improve profitability. We believe that these strategies remain highly relevant, and are important to our long-term success. The first strategic initiative is to increase brand excitement by crafting compelling stories that build upon brand equities for both owned and licensed brands across our product categories. Key to this strategy is our ongoing effort in innovation in our product categories and marketing capabilities, where we aim to build larger communities of brand loyalists. Our second strategic initiative is to increase digital engagement and online sales. We continue to invest in our owned e-commerce sites around the world and in third party marketplaces to enhance our direct to consumer engagement, which we believe can ~~drive long-term growth with brand building, innovation through design, fashion~~build long term customer value. The current operating environment created by the COVID-19 pandemic is further accelerating consumers' adoption of the digital channel for commerce and ~~new materials~~marketing. Our third strategic initiative is expanding our opportunity in mainland China and ~~introducing new technology and functionality into our accessories, while~~India. In these countries, we are continuing to ~~provide~~execute against a ~~solid value proposition~~strategy centered around localized marketing and segmented assortments. Although the impact of COVID-19 is likely to ~~consumers across all of~~disrupt our ~~brands.~~

growth trajectory in the short to intermediate term, we continue to view mainland China and India as compelling long-term opportunities. Our ~~international~~fourth strategic initiative is to optimize our operations. We initiated the New World Fossil – Transform to Grow (“NWF 2.0”) initiative in 2019 aimed to further simplify our operations ~~are subject~~and to ~~many risks, including foreign currency fluctuations~~re-allocate resources toward growth and ~~risks related~~to realize $200 million in run-rate savings over a multi-year period. In fiscal year 2020, due to the ~~global economy. Generally, a strengthening~~expected near term impact of COVID-19, we increased the ~~U.S. dollar against currencies of other countries~~program’s goal from $200 million to $250 million in ~~which~~run-rate savings. Under the program, the Company generated $50 million in expense savings in fiscal 2019 and $175 million in expense savings in 2020. In the First Quarter, the Company achieved $53 million in expense savings, successfully meeting the program's financial targets. In addition to the Company’s NWF 2.0 program, we ~~operate will reduce the translated amounts of sales~~expect to optimize our operations with further reductions to our store footprint and ~~operating expenses of our subsidiaries, which results in a reduction of our~~

consolidated operating income. We manage these currency risks by using derivative instruments. The primary risks managed by using derivative instruments are the future payments by non-U.S. dollar functional currency subsidiaries of intercompanyincreased focus on inventory transactions denominated in U.S. dollars. We enter into foreign exchange forward contracts ("forward contracts") to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. We are also exposed to interest rate risk associated with our variable rate debt, which we manage with an interest rate swap.management and supply chain efficiency.

For a more complete discussion of the risks facing our business, see “Part I, Item 1A. Risk Factors” of our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 31, 2016~~January 2, 2021 and "Part II, Item 1A. Risk Factors" of ~~this Quarter Report~~our subsequent Quarterly Reports on Form 10-Q.

~~Results of Operations~~

~~Executive Summary.~~ During the Third Quarter, net sales decreased 7% (8% in constant currency), as compared to the Prior Year Quarter, driven by declines in traditional watches, leathers and jewelry, and partially offset by continued growth in wearables. The Third Quarter was favorably impacted by customers accelerating certain deliveries from the fourth quarter of fiscal year 2017 into the Third Quarter, primarily to take advantage of pending price increases. We estimate that this acceleration of sales favorably impacted the Third Quarter sales growth rate by roughly three percentage points, and we expect this favorable impact will largely reverse in the fourth quarter of fiscal year 2017. While the overall business remains challenging and the retail environment remains in flux, we continue to bring innovative new products to the market and work towards operational efficiencies to ultimately enhance our profitability. We remain confident wearables can be one of the key catalysts that could eventually offset the sales declines we have seen in our traditional watch business for some time now. Wearables products accounted for approximately 10% of our net sales in the Third Quarter, compared to 7% and 9% in the first and second quarters of fiscal year 2017, respectively. Our third generation of connected devices, which are in the market now, add additional features through Android Wear 2.0, such as fitness and standalone applications. In addition, our latest generation wearables are thinner, and they have brighter screens and improved functionality. We are supporting these new products with our celebrity influencer campaigns to attract our wearable customers in the digital and social space.

During the Third Quarter, sales of FOSSIL branded products decreased 5% (7% in constant currency), as compared to the Prior Year Quarter. Effectively all of the decline in the FOSSIL branded sales was driven by weakness in our leathers and jewelry categories, partially offset by modest growth in watches led by wearables. Wearables positively impacted the FOSSIL watch category growth rate by approximately 11 percentage points in the Third Quarter. Sales of our SKAGEN branded products decreased 10% (12% in constant currency) as compared to the Prior Year Quarter, with growth in Asia more than offset by declines in the Americas and Europe. Growth in SKAGEN connected watches partially offset the decline in SKAGEN traditional watches.

Our multi-brand global watch portfolio decreased 3% (4% in constant currency) during the Third Quarter, as compared to the Prior Year Quarter, representing decreases in the majority of the brands in our portfolio. Growth in wearable products partially offset the declines in traditional watches. In the MICHAEL KORS brand, we launched next generation connected product in August and expanded the distribution channels later during the Third Quarter with positive results. EMPORIO ARMANI hybrid watches launched during the Third Quarter, driving positive sales growth overall for the brand. We launched DIESEL hybrid and display watches and EMPORIO ARMANI display watches on our wearable platform towards the end of the Third Quarter, and preliminary results have been favorable.

We plan to launch five more brands onto the hybrid platform this year, including DKNY, MARC JACOBS, MICHELE, RELIC and TORY BURCH. These new launches will bring us to a total of 14 brands in wearables and support our goal to at least double the wearables business in fiscal year 2017 from fiscal year 2016.

~~The following table presents as reported and constant currency net sales percentage change information for FOSSIL for the Third Quarter as compared to the Prior Year Quarter:~~

Growth Percentage

Brand As Reported Constant Currency
FOSSIL 5.2 % 7.0 %
SKAGEN 10.0 % 11.6 %

Global comparable retail sales (including e-commerce) decreased 6% during the Third Quarter, compared to a decrease of 1% in the Prior Year Quarter, due to continued declines in retail store traffic trends partially offset by consistent growth in e-commerce. During the Third Quarter, we continued to improve conversion through promotional activity, but we were not able overcome the negative traffic we experienced in all regions. During the Third Quarter, our comparable e-commerce sales increased 26% compared to the Prior Year Quarter, led by the Americas, but with increases in all regions.

We continue to make progress on our New World Fossil ("NWF") initiative. The goal of NWF continues to be to build a leaner, more nimble operating platform that can support improved profitability in the future while better serving our customers and competing in the new retail environment. When we launched NWF in fiscal year 2016, we set a target to drive $200 million of profit improvements in the near term, and we are well on our way to delivering that. During a challenging retail environment, we continue to make strong progress on transforming Fossil. This year we expect our NWF initiatives to drive underlying improvement in our product costs as well as significant reductions in our expense structure that we estimate will be over $100 million this year on a run rate basis. We recognize this transformation will take time, but we are making significant progress to evolve our key categories and streamline our business to position us for profitable growth over the long term.

In the Third Quarter, we managed our resources and capital tightly. We are also working to ensure that we have the proper capital structure needed to support our long-term financial objectives. Our goal continues to be to diversify our capital structure beyond just our existing bank partners with longer tenors to support our long term strategic objectives. We are taking the necessary steps to strengthen our financial position to further enable us to execute our strategies well into the future and position our business model for continued strong cash flow generation. During the past year, we have reduced our net debt by $170 million, reduced our net working capital by $230 million and generated positive cash flow from operations.

During the Third Quarter as compared to the Prior Year Quarter, gross profit decreased due to lower sales and a decreased margin rate. The decrease in gross margin rate was primarily driven by the impact of connected products due to both lower connected margins as well as additional valuation charges. Our strategy this year has been to invest in margin to drive significant volume in wearables and leverage that volume to drive future cost efficiencies. So far this year, we have tripled our connected sales volumes compared to the same periods as last year and are well ahead of the initial cost goals that we set for ourselves this year. However, we have not hit the aggressive sales goals that we set for ourselves this year in this new category and are consequently carrying greater levels of connected products that we will need to clear and have deferred some receipts into the first quarter of fiscal year 2018. In the Third Quarter, we recorded a $23 million valuation charge to support our efforts to clear this inventory, which negatively impacted our overall gross margins by 330 basis points. The gross margin rate was also negatively impacted by ongoing promotional activity in our outlets and the e-commerce channel and by an unfavorable currency impact of approximately 60 basis points. Higher sales volumes through off-price channels also modestly reduced gross margins in the Third Quarter. Product cost benefits generated from our NWF supply chain initiatives partially offset these headwinds. Total operating expenses for the Third Quarter decreased to $320 million including $6 million of restructuring costs associated with our NWF initiative. Other income increased as a result of increased net foreign currency gains during the Third Quarter as compared to the Prior Year Quarter. The tax benefit in the Third Quarter was favorably impacted by the increased effective tax rate in the Third Quarter as compared to the Prior Year Quarter. During the Third Quarter, our financial performance resulted in a loss of $0.11 per diluted share.

Constant Currency Financial Information

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. In general, our overall financial results are affected positively by a weaker U.S. dollar and are affected negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct our business.

As a result, in addition to presenting financial measures in accordance with accounting principles generally accepted in the United States of America (“GAAP”), our discussions contain references to constant currency financial information, which is a non-GAAP financial measure. To calculate net sales on a constant currency basis, net sales for the current year for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average rates during the comparable period of the prior fiscal year. We present constant currency information to provide investors with a basis to evaluate how our

underlying business performed, excluding the effects of foreign currency exchange rate fluctuations. The constant currency financial information presented herein should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. ~~Reconciliations between~~We provide constant currency financial information and the most directly comparable GAAP measure ~~are included~~ where applicable.

Results of Operations

Quarterly Periods Ended ~~September 30, 2017~~April 3, 2021 and ~~October 1, 2016~~April 4, 2020

Consolidated Net Sales. Net sales decreased ~~$49.3~~$27.7 million, or ~~6.7% (8.0%~~7.1% (10.3% in constant currency), for the ~~Third~~First Quarter as compared to the Prior Year ~~Quarter. During the Third~~ Quarter, ~~our leathers products decreased $17.6 million or 18.9% (19.9% in constant currency)~~ primarily as a result of COVID-19 pandemic-related traffic declines and our smaller store base. In the ~~current product assortment not resonating well with consumers. Global watch~~First Quarter, digital sales, ~~decreased $15.3 million or 2.7% (4.1%~~which include sales from our owned e-commerce channels, third party e-commerce platforms and wholesale dot com, were 41% of worldwide net sales and increased 46% (40% in constant currency) ~~driven by~~compared to the Prior Year Quarter. Global comparable retail sales decreased 14% primarily due to traffic declines and temporary closures in ~~traditional watches~~our owned stores, partially offset by ~~increases~~e-commerce growth in ~~connected watches. Our jewelry business decreased $12.5 million or 20.8% (22.8% in constant currency).~~our owned websites. We have reduced our store footprint by 52 stores since the end of the Prior Year Quarter.

Net sales information by product category is summarized as follows (dollars in millions):


	For the 13 Weeks Ended September 30, 2017				For the 13 Weeks Ended October 1, 2016													For the 13 Weeks Ended April 3, 2021									For the 14 Weeks Ended April 4, 2020
									Growth (Decline)																Growth (Decline)
	Net Sales		Percentage of Total			Net Sales		Percentage of Total			Dollars			Percentage As Reported		Percentage Constant Currency					Net Sales					Percentage of Total									Net Sales				Percentage of Total				Dollars				Percentage As Reported	Percentage Constant Currency
Watches	$	551.9	80.1	%	$	567.2	76.9	%		$	(15.3	)	(2.7	)%	(4.1	)%	Watches		$	291.6			80.3		%				$	309.9			79.3	%			$	(18.3)			(5.9)	%			(9.1)	%
Leathers	75.7		11.0		93.3		12.6			(17.6		)	(18.9	)	(19.9	)	Leathers	34.1				9.4						47.3				12.1				(13.2)				(27.9)				(30.2)
Jewelry	47.7		6.9		60.2		8.2			(12.5		)	(20.8	)	(22.8	)	Jewelry	29.9				8.2					23.2				6.0				6.7				28.9				22.4
Other	13.4		2.0		17.3		2.3			(3.9		)	(22.5	)	(23.6	)	Other	7.4				2.1					10.3				2.6				(2.9)				(28.2)				(30.1)
Total	$	688.7	100.0	%	$	738.0	100.0	%		$	(49.3	)	(6.7	)%	(8.0	)%	Total	$	363.0			100.0		%			$	390.7			100.0		%		$	(27.7)			(7.1)		%		(10.3)		%

In the ~~Third~~First Quarter, the translation of foreign-based net sales into U.S. dollars increased reported net sales by ~~approximately $10.1~~$12.6 million, including favorable impacts of ~~$9.2~~$7.5 million, $4.4 million and ~~$1.6~~$0.6 million in our Europe, Asia and Americas segments, respectively, ~~and an unfavorable impact of $0.7 million in our Asia segment when~~as compared to the Prior Year Quarter.

The following table sets forth consolidated net sales by segment (dollars in millions):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	$	152.5	42.0	%	$	152.9	39.1	%	$	(0.4)	(0.3)	%	(0.7)	%
Europe	109.2		30.1		128.2		32.8		(19.0)		(14.8)		(20.7)
Asia	98.6		27.2		106.2		27.2		(7.6)		(7.2)		(11.3)
Corporate	2.7		0.7		3.4		0.9		(0.7)		(20.6)		(23.5)
Total	$	363.0	100.0	%	$	390.7	100.0	%	$	(27.7)	(7.1)	%	(10.3)	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 Growth (Decline)
Net Sales
Percentage
of Total
Net Sales
Percentage
of Total
Dollars Percentage As Reported Percentage Constant Currency
Americas $ 308.1
44.7 % $ 361.2
48.9 % $ (53.1 ) (14.7 )% (15.1 )%
Europe 247.2
35.9
243.2
33.0
4.0
1.6
(2.1 )
Asia 133.4
19.4
133.6
18.1
(0.2 ) (0.1 ) 0.4
Total $ 688.7
100.0 % $ 738.0
100.0 % $ (49.3 ) (6.7 )% (8.0 )%

Americas Net Sales. Americas net sales decreased ~~$53.1~~$0.4 million, or ~~14.7% (15.1%~~0.3% (0.7% in constant currency), during the ~~Third~~First Quarter in comparison to the Prior Year Quarter. ~~During~~In the ~~Third Quarter, watches decreased $32.1 million or 11.7% (12.1%~~region, sales increased in ~~constant currency)~~the U.S., ~~while our leathers business decreased $12.7 million or 21.6% (22.1%~~and declined in ~~constant currency)~~Canada and ~~our jewelry category decreased $6.6 million or 29.5% (29.9% in constant currency).~~Mexico. Sales declines in our store channel, primarily due to permanent and temporary store closures, more than offset strong sales growth in e-commerce and slight sales growth in our wholesale channel. Comparable retail sales were modestly positive on a 13-week calendar basis during the ~~U.S. and Canada were~~First Quarter, driven by strong positive e-commerce comparable retail sales, partially offset by ~~growth in Mexico. During~~traffic declines due to the Third Quarter, most brands in the portfolio declined while our EMPORIO ARMANI watch business increased with the introduction of EMPORIO ARMANI Connected. Decreases in traditional watches were partially offset by increases in connected watches, with the strongest performance coming from FOSSIL connected watches. While both our wholesale and retail businesses declined in the Third Quarter, our retail business was relatively stronger. Comparable retail sales including e-commerce declined moderately in the region as negative comparable sales in our stores were partially offset by positive comparable sales in our e-commerce business.COVID-19 pandemic.

The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Americas segment ~~on a reported and constant currency basis~~ (dollars in millions):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	120.9	79.3	%	$	119.3	78.0	%	$	1.6	1.3	%	1.0	%
Leathers	19.6		12.9		28.0		18.3		(8.4)		(30.0)		(30.4)
Jewelry	10.7		7.0		4.0		2.6		6.7		167.5		165.0
Other	1.3		0.8		1.6		1.1	%	(0.3)		(18.8)		(18.8)
Total	$	152.5	100.0	%	$	152.9	100.0	%	$	(0.4)	(0.3)	%	(0.7)	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars
Percentage
As Reported

Percentage
Constant Currency
Watches $ 242.2
$ 274.3
$ (32.1 ) (11.7 )% (12.1 )%
Leathers 46.2
58.9
(12.7 ) (21.6 ) (22.1 )
Jewelry 15.8
22.4
(6.6 ) (29.5 ) (29.9 )
Other 3.9
5.6
(1.7 ) (30.4 ) (28.6 )
Total $ 308.1
$ 361.2
$ (53.1 ) (14.7 )% (15.1 )%

Europe Net Sales. Europe net sales ~~increased $4.0~~decreased $19.0 million, or ~~1.6% (decreased 2.1%~~14.8% (20.7% in constant currency), during the ~~Third~~First Quarter in comparison to the Prior Year Quarter. ~~Watches increased $11.6 million or 6.4% (2.5%~~Across the Eurozone, sales were down in ~~constant currency), jewelry declined $3.6 million or 10.6% (13.5% in constant currency) and our leathers business decreased $2.3 million or 11.4% (14.4% in constant currency) in~~most major markets primarily due to ongoing COVID-19 impacts, with the Third Quarter. Third Quarter sales in Europe benefited from early deliveries to certain wholesale customers who opted to take shipments planned for the fourth quarter of fiscal year 2017, given price adjustments, which were required to be announced to customers in advance. During the Third Quarter, sales growth was led by MICHAEL KORS watches, and we also experienced growth in EMPORIO ARMANI, ARMANI EXCHANGE, FOSSIL and DIESEL branded watches, as the watch category more than offsetgreatest declines in ~~leathers~~Germany, France and jewelry. The sales increases in watches were primarily driven from wearables and benefited from our third generation product launching towards the end of the Third Quarter. Within the region, modest growth in the U.K. ~~and Poland was more than offset by declines in the Middle East.~~ Comparable retail sales ~~were moderately negative~~declined in excess of 40% on a 13-week calendar percentage basis during the ~~Third~~First Quarter, ~~as positive comparable e-commerce sales were more than~~driven by temporary store closures and traffic declines due to the COVID-19 pandemic, partially offset by ~~negative comparative~~positive e-commerce comparable retail ~~store sales amid declining traffic.~~sales.

The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Europe segment ~~on a reported and constant currency basis~~ (dollars in millions):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	84.7	77.6	%	$	97.9	76.4	%	$	(13.2)	(13.5)	%	(19.3)	%
Leathers	6.3		5.8		9.4		7.3		(3.1)		(33.0)		(38.3)
Jewelry	16.3		14.9		17.5		13.7		(1.2)		(6.9)		(14.3)
Other	1.9		1.7		3.4		2.6	%	(1.5)		(44.1)		(44.1)
Total	$	109.2	100.0	%	$	128.2	100.0	%	$	(19.0)	(14.8)	%	(20.7)	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars
Percentage
As Reported
Percentage Constant Currency
Watches $ 192.3
$ 180.7
$ 11.6
6.4 % 2.5 %
Leathers 17.9
20.2
(2.3 ) (11.4 ) (14.4 )
Jewelry 30.5
34.1
(3.6 ) (10.6 ) (13.5 )
Other 6.5
8.2
(1.7 ) (20.7 ) (25.3 )
Total $ 247.2
$ 243.2
$ 4.0
1.6 % (2.1 )%

Asia Net Sales. Net sales in Asia decreased ~~$0.2~~$7.6 million, or ~~0.1% (increased 0.4%~~7.2% (11.3% in constant currency), ~~driven by declines~~during the First Quarter in ~~leathers and jewelry largely offset by growth in watches. Continued growth in India and China was offset by a decline in nearly all other countries. During the Third Quarter as compared~~comparison to the Prior Year Quarter. Sales declined in most brands during the First Quarter, ~~our leathers category decreased $2.7 million or 19.0% (18.3%~~most notably in constant currency), our jewelry category decreased $2.4 million or 63.2% (same in constant currency) while our watch category increased $5.2 million or 4.6% (5.2% in constant currency). The watch category was led by growth in wearables, FOSSIL and partially offset by sales increases in EMPORIO ARMANI ~~brands~~® and ARMANI EXCHANGE®. Sales decreased in ~~particular, while traditional watches continued to decline.~~all major markets across Asia, except for Greater China. Comparable retail sales declined in the ~~region decreased moderately largely~~mid-teens on a 13-week calendar percentage basis during the First Quarter, driven by traffic ~~declines.~~

declines due to the COVID-19 pandemic.

The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Asia segment ~~on a reported and constant currency basis~~ (dollars in millions):


	For the 13 Weeks Ended April 3, 2021				For the 14 Weeks Ended April 4, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	86.1	87.3	%	$	92.7	87.3	%	$	(6.6)	(7.1)	%	(11.2)	%
Leathers	8.2		8.3		9.9		9.3		(1.7)		(17.2)		(22.2)
Jewelry	2.9		2.9		1.7		1.6		1.2		70.6		64.7
Other	1.4		1.5		1.9		1.8		(0.5)		(26.3)		(26.3)
Total	$	98.6	100.0	%	$	106.2	100.0	%	$	(7.6)	(7.2)	%	(11.3)	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars
Percentage
As Reported
Percentage Constant Currency
Watches $ 117.3
$ 112.1
$ 5.2
4.6 % 5.2 %
Leathers 11.5
14.2
(2.7 ) (19.0 ) (18.3 )
Jewelry 1.4
3.8
(2.4 ) (63.2 ) (63.2 )
Other 3.2
3.5
(0.3 ) (8.6 ) (8.6 )
Total $ 133.4
$ 133.6
$ (0.2 ) (0.1 )% 0.4 %

Stores.The following table sets forth the number of stores by concept on the dates indicated below:


	September 30, 2017				October 1, 2016					April 3, 2021				April 4, 2020
	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total		Americas	Europe	Asia	Total	Americas	Europe	Asia	Total
Full price accessory	112	109	61	282	128	122	66	316	Full price accessory	71	59	54	184	82	78	57	217
Outlets	136	74	46	256	156	73	46	275	Outlets	99	75	31	205	114	74	35	223
Full priced multi-brand	—	8	10	18	—	7	12	19	Full priced multi-brand	—	3	3	6	—	4	3	7
Total stores	248	191	117	556	284	202	124	610	Total stores	170	137	88	395	196	156	95	447

During the ~~Third~~First Quarter, we closed 826 stores and ~~did not open any~~opened no new stores.

Both stores and our own e-commerce sites are included in comparable retail sales in the thirteenth month of operation. Stores that experience a gross square footage increase of 10% or more due to an expansion and/or relocation are removed from the comparable retail sales base, but are included in total sales. These stores are returned to the comparable retail sales base in the thirteenth month following the expansion and/or relocation. Comparable retail sales also exclude the effects of foreign currency fluctuations.

Gross Profit. Gross profit of ~~$319.9~~$182.6 million in the ~~Third~~First Quarter ~~decreased 16.9%~~increased 30.1% in comparison to ~~$385.1~~$140.4 million in the Prior Year Quarter, ~~driven~~as the decrease in sales was more than offset by ~~lower sales and decreased~~an improved gross profit margin ~~rates. Gross~~rate. Our gross profit margin rate ~~decreased 580 basis points~~increased to ~~46.4%~~50.3% in the ~~Third~~First Quarter compared to ~~52.2%~~35.9% in the Prior Year Quarter. The ~~decrease~~year-over-year increase primarily reflects reduced levels of inventory valuation adjustments for older generation connected products and minimum licensed product royalties, which were elevated in ~~gross margin rate was primarily driven by~~the Prior Year Quarter as a result of reduced sales due to the impact of ~~connected products due~~COVID-19. Also contributing to both lower connected margins as well as additional valuation charges. Our strategy this year has been to invest in margin to drive significant volume in wearables and leverage that volume to drive future cost efficiencies. So far this year, we have tripled our connected sales volumes and are well ahead of the initial cost goals that we set for ourselves this year. However, we have not hit the aggressive sales goals that we set for ourselves this year in this new category and are consequently carrying greater levels of connected products that we will need to clear and have deferred some receipts into the first quarter of fiscal 2018. In the Third Quarter, we recorded a $23 million valuation charge to support our efforts to clear this inventory, which negatively impacted our overallimproved gross ~~margins by 330 basis points. The gross~~profit margin rate ~~was also negatively impacted by ongoing promotional activity~~were favorable changes in ~~our outlets~~channel, product and ~~the e-commerce channel~~region mix, and ~~by an unfavorable~~favorable currency ~~impact~~impacts of approximately 60110 basis ~~points. Higher sales volumes through off-price channels also modestly reduced gross margins in the Third Quarter. Product cost benefits generated from our NWF supply chain initiatives~~points, partially offset ~~these headwinds.~~by higher freight costs.

Operating Expenses. Total operating expenses in the ~~Third~~First Quarter decreased by ~~$33.5~~$75.4 million, or ~~9.5%~~27.4%, to ~~$320.4~~$199.3 million compared to ~~$353.9~~$274.7 million in the Prior Year Quarter. ~~Third~~SG&A expenses in the First Quarter ~~operating~~decreased $58.4 million from the Prior Year Quarter due to lower compensation and marketing and a smaller store base. Operating expenses in the First Quarter included $7.5 million of restructuring costs, ~~of $5.8 million under our NWF initiative,~~primarily related to employee costs, while the Prior Year Quarter included ~~$14.5~~$9.4 million in restructuring ~~costs as well as a $10~~costs. Other long-lived asset impairments in the First Quarter were $4.5 million ~~benefit resulting from real estate gains.~~

~~In the Third Quarter, SG&A expenses were $24.8~~compared to $17.1 million ~~lower compared to~~in the Prior Year Quarter, primarily ~~as a result of corporate and regional overhead reductions and~~due to lower retail store expenses, given the significant number of stores we have closed since the Prior Year Quarter. Advertising royalties were also lower in the Third Quarter driven by the decline in sales of licensed products.impairment. The translation of foreign-denominated expenses during the ~~Third~~First Quarter increased operating expenses by

~~approximately $4.1~~ $6.7 million as a result of the weaker U.S. dollar. As a percentage of net sales, SG&A expenses decreased to ~~45.7%~~51.6% in the ~~Third~~First Quarter as compared to ~~46.0%~~62.9% in the Prior Year Quarter.

~~Consolidated~~ Operating Income (Loss). Operating ~~income (loss) decreased to a~~ loss ~~of $0.5 million~~ in the ~~Third~~First Quarter was $16.8 million as compared to ~~income~~an operating loss of ~~$31.2~~$134.3 million in the Prior Year ~~Quarter,~~Quarter. The improvement in operating loss was primarily driven by ~~both decreased sales~~cost reductions and improved gross profit margin rate. As a percentage of net sales, operating margin ~~(loss)~~ was ~~(0.1%)~~(4.6)% in the ~~Third~~First Quarter compared to ~~4.2%~~(34.4)% in the Prior Year Quarter. Operating margin rate in the ~~Third~~First Quarter included a ~~negative~~favorable impact of ~~approximately 50~~120 basis points due to changes in foreign currencies. During the Third Quarter as compared to the Prior Year Quarter, we faced continued retail pressure, most significantly in our traditional businesses in all segments. Additionally, the gross margin rate was negatively impacted by connected products, due to both lower connected margins as well as additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel in all segments. Decreased restructuring costs incurred under our NWF plan, as well as corporate and regional overhead reductions and lower retail store expenses favorably impacted operating income (loss) during the Third Quarter as compared to the Prior Year Quarter.

Operating income (loss) by segment is summarized as follows (dollars in millions):


	For the 13 Weeks Ended April 3, 2021		For the 14 Weeks Ended April 4, 2020		Change				Operating Margin %
					Dollars		Percentage		2021		2020
Americas	$	26.0	$	(37.1)	$	63.1	170.1	%	17.1	%	(24.3)	%
Europe	5.0		(1.2)		6.2		516.7		4.6		(0.9)
Asia	11.7		11.9		(0.2)		(1.7)		11.9		11.2
Corporate	(59.5)		(107.9)		48.4		44.9
Total operating income (loss)	$	(16.8)	$	(134.3)	$	117.5	87.5	%	(4.6)	%	(34.4)	%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 Growth (Decline) Operating Margin %
Dollars Percentage 2017 2016
Americas $ 18.9
$ 56.4
$ (37.5 ) (66.5 )% 6.1 % 15.6 %
Europe 39.3
49.0
(9.7 ) (19.8 ) 15.9
20.2
Asia 22.0
23.7
(1.7 ) (7.2 ) 16.5
17.7
Corporate (80.7 ) (97.9 ) 17.2
(17.6 )
Total operating income (loss) $ (0.5 ) $ 31.2
$ (31.7 ) (101.6 )% (0.1 )% 4.2 %

Interest Expense. Interest expense ~~increased~~decreased by ~~$5.1~~$0.1 million during the ~~Third~~First Quarter ascompared to the Prior Year Quarter, primarily driven by a ~~result of higher interest rate spreads due to our amended credit facility.~~lower debt balance.

Other Income (Expense)-Net. During the ~~Third~~First Quarter, other income (expense)-net ~~increased by $2.3 million to $3.9~~was income of $1.9 million in comparison to an expense of $7.3 million in the Prior Year Quarter. ~~This change~~The income in the First Quarter was primarily driven by ~~more favorable foreign~~net transactional currency ~~activity~~gains in the First Quarter compared towith net transactional currency losses in the Prior Year Quarter.

Provision for Income Taxes. ~~The income~~ Income tax ~~benefit~~expense for the ~~Third~~First Quarter was ~~$3.2~~$2.1 million, resulting in an effective income tax rate of ~~37.1%~~(9.5)%. For the Prior Year Quarter, income tax ~~expense~~benefit was ~~$6.5~~$63.7 million, resulting in an effective income tax rate of ~~25.0%~~42.7%. The ~~higher~~ effective tax rate in the ~~Third~~First Quarter ~~as compared~~was unfavorable to the Prior Year Quarter ~~was attributable~~primarily due to ~~a higher structural rate resulting from an increased forecasted loss from~~tax law changes in the ~~Company's U.S. operations~~Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was ~~tax-benefited at~~enacted in the Prior Year Quarter. The CARES Act allowed U.S. taxpayers to carry back a ~~higher~~net operating loss arising in tax years 2018, 2019 and 2020 to prior years when the tax rate ~~than~~was 35%. In the Prior Year Quarter, the Company recognized a U.S. tax ~~rates used~~benefit from its fiscal year 2019 and 2020 tax losses, which were carried back to ~~calculate the~~offset taxable income reported in prior years. No tax ~~expense~~benefit has been accrued on the ~~profits from~~First Quarter U.S. tax losses and certain foreign tax losses due to the Company's foreign operations. There were also favorable discrete items occurring in the quarter. These positive impacts were partially offset by the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes.

Additionally, income taxes are provided for under the asset and liability method for temporary differences in the recognition of assets and liabilities recognized for income tax and GAAP purposes. Deferred tax assets are periodically assessed for the likelihooduncertainty of whether they ~~are more likely than not to~~can be ~~realized. We have previously established a valuation allowance~~used in ~~those jurisdictions where we believe recovery~~the future. The First Quarter tax rate is ~~not more likely than not, which generally increases~~negative because foreign income tax expense inis accrued on certain foreign entities with positive taxable income when the ~~period such determination is made. For those jurisdictions with deferred tax assets not currently subject to~~consolidated operating results are a ~~valuation allowance, including the U.S., we have determined that the realization of deferred tax assets continues to be more likely than not.~~loss.

Net Income (Loss) Attributable to Fossil Group, Inc. ~~Third~~ First Quarter net income (loss) attributable to Fossil Group, Inc. ~~decreased to $(5.4)~~was a net loss of $24.4 million, or ~~$(0.11)~~$0.47 per diluted share, in comparison to ~~$17.4~~a net loss of $85.6 million, or ~~$0.36~~$1.69 per diluted share, in the Prior Year Quarter. Diluted earnings (loss) per share in the ~~Third~~First Quarter included a restructuring ~~charge~~charges of ~~$0.08 as compared to a restructuring charge of $0.22 in the Prior Year Quarter. Excluding restructuring, the decline in~~$0.12 per diluted share. Diluted earnings (loss) per share in the ~~Third Quarter as compared to the~~ Prior Year Quarter was driven by lower sales and gross margins, mainly due to connected mix, and higher interest expenses, partially offset by lower operating expenses and taxes. The tax benefit in the Third Quarter was positivelyincluded restructuring charges of $0.15 per diluted share. Currency fluctuations favorably impacted ~~by the increased effective tax rate in the Third Quarter as compared to the Prior Year Quarter. The translation impact of a stronger U.S. dollar decreased~~ diluted earnings per share by ~~approximately $0.02 year-over-year.~~

~~Fiscal Year To Date Periods Ended September 30, 2017 and October 1, 2016~~

~~Consolidated Net Sales.~~ Net sales decreased $215.8 million or 10.4% (10.0% in constant currency), for the Year To Date Period as compared to the Prior Year YTD Period. Global watch sales decreased $110.1 million or 7.0% (6.7% in constant currency) driven by declines in traditional watches partially offset by increases in connected watches. Our leathers category decreased $61.0 million or 21.9% (21.6% in constant currency) primarily as a result of the current product assortment not resonating well with consumers, and our jewelry product category decreased $31.8 million or 18.5% (17.8% in constant currency)$0.18 during the Year To Date Period as compared to the Prior Year YTD Period. Global comparable retail sales decreased 9% for the Year To Date Period representing declines in all product categories and all store concepts partially offset by strong e-commerce comparable sales growth.First Quarter.

~~Net sales information by product category is summarized as follows (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline)
Net Sales
Percentage
of Total
Net Sales
Percentage
of Total
Dollars Percentage As Reported Percentage Constant Currency
Watches $ 1,471.1
78.8 % $ 1,581.2
75.9 % $ (110.1 ) (7.0 )% (6.7 )%
Leathers 218.0
11.7
279.0
13.4
(61.0 ) (21.9 ) (21.6 )
Jewelry 139.9
7.5
171.7
8.2
(31.8 ) (18.5 ) (17.8 )
Other 38.4
2.0
51.3
2.5
(12.9 ) (25.1 ) (24.8 )
Total $ 1,867.4
100.0 % $ 2,083.2
100.0 % $ (215.8 ) (10.4 )% (10.0 )%

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by approximately $6.6 million, including unfavorable impacts of $5.5 million, $0.6 million and $0.5 million in our Europe, Americas and Asia segments, respectively, compared to the Prior Year YTD Period.

~~The following table sets forth consolidated net sales by segment (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline)
Net Sales
Percentage
of Total
Net Sales
Percentage
of Total
Dollars Percentage As Reported Percentage Constant Currency
Americas $ 874.5
46.9 % $ 1,042.2
50.0 % $ (167.7 ) (16.1 )% (16.0 )%
Europe 637.6
34.1
669.1
32.1
(31.5 ) (4.7 ) (3.9 )
Asia 355.3
19.0
371.9
17.9
(16.6 ) (4.5 ) (4.3 )
Total $ 1,867.4
100.0 % $ 2,083.2
100.0 % $ (215.8 ) (10.4 )% (10.0 )%

~~Americas Net Sales.~~ For the Year To Date Period, Americas net sales decreased $167.7 million or 16.1% (16.0% in constant currency), compared to the Prior Year YTD Period. During the Year To Date Period, watches decreased $103.0 million or 13.1% (13.0% in constant currency). Our leathers and jewelry categories declined $41.5 million or 23.6% (23.6% in constant currency) and $16.8 million or 26.3% (26.6% in constant currency), respectively. Sales declined in the U.S. and Canada and were partially offset by sales increases in Mexico. During the Year To Date Period, nearly all brands in the portfolio declined driven by decreases in traditional watches that were partially offset by increases in connected watches, with the strongest performance coming from MICHAEL KORS ACCESS and FOSSIL connected watches. Both wholesale and retail sales declined at similar rates. Comparable retail sales declined moderately in the region with negative comparable store sales partially offset by moderate increases in comparable sales in our e-commerce business.

~~The following table sets forth product net sales for the Americas segment on a reported and constant currency basis (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars Percentage As Reported Percentage Constant Currency
Watches $ 681.1
$ 784.1
$ (103.0 ) (13.1 )% (13.0 )%
Leathers 134.5
176.0
(41.5 ) (23.6 ) (23.6 )
Jewelry 47.2
64.0
(16.8 ) (26.3 ) (26.6 )
Other 11.7
18.1
(6.4 ) (35.4 ) (34.8 )
Total $ 874.5
$ 1,042.2
$ (167.7 ) (16.1 )% (16.0 )%

~~Europe Net Sales~~. For the Year To Date Period, Europe net sales decreased $31.5 million or 4.7% (3.9% in constant currency), compared to the Prior Year YTD Period. Watches declined $4.7 million or 1.0% (0.3% in constant currency) and our leathers and jewelry categories declined $9.9 million or 16.9% (15.7% in constant currency) and $10.9 million or 11.1% (9.8% in constant currency), respectively. During the Year To Date Period, most of the brands in the portfolio declined driven by decreases in traditional watches that were partially offset by increases in connected watches. Growth in Spain and Poland were offset by declines in most other markets with the greatest decline in our Middle East business. Both wholesale and retail channels decreased at similar rates. Comparable retail sales were moderately negative during the Year To Date Period with negative comparable sales in the leathers and jewelry categories while comparable sales in our watch category were flat.

~~The following table sets forth product net sales for the Europe segment on a reported and constant currency basis (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars Percentage As Reported Percentage Constant Currency
Watches $ 483.7
$ 488.4
$ (4.7 ) (1.0 )% (0.3 )%
Leathers 48.8
58.7
(9.9 ) (16.9 ) (15.7 )
Jewelry 87.6
98.5
(10.9 ) (11.1 ) (9.8 )
Other 17.5
23.5
(6.0 ) (25.5 ) (25.1 )
Total $ 637.6
$ 669.1
$ (31.5 ) (4.7 )% (3.9 )%

~~Asia Net Sales.~~ For the Year To Date Period, Asia net sales decreased $16.6 million or 4.5% (4.3% in constant currency), compared to the Prior Year YTD Period. Leathers declined $9.7 million or 21.9% (21.7% in constant currency), jewelry declined $4.1 million or 44.6% (44.6% in constant currency) and watch sales decreased $2.2 million or 0.7% (0.6% in constant currency). Growth in India and China was offset by declines in Japan, Australia and most other markets. Comparable retail sales in the region decreased moderately with negative comparable sales in the leathers and jewelry categories partially offset by positive comparable sales in our watch category for the Year To Date Period.

~~The following table sets forth product net sales for the Asia segment on a reported and constant currency basis (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Growth (Decline)
Net Sales Net Sales Dollars Percentage As Reported Percentage Constant Currency
Watches $ 306.5
$ 308.7
$ (2.2 ) (0.7 )% (0.6 )%
Leathers 34.6
44.3
(9.7 ) (21.9 ) (21.7 )
Jewelry 5.1
9.2
(4.1 ) (44.6 ) (44.6 )
Other 9.1
9.7
(0.6 ) (6.2 ) (4.1 )
Total $ 355.3
$ 371.9
$ (16.6 ) (4.5 )% (4.3 )%

~~Gross Profit.~~ For the Year To Date Period, gross profit margin decreased 350 basis points to 48.8% compared to 52.3% in the Prior Year YTD Period. The decreased gross profit margin was primarily driven by the same factors impacting the Third Quarter. Changes in foreign currency rates negatively impacted gross profit margin by approximately 60 basis points.

~~Operating Expenses.~~ For the Year To Date Period, total operating expenses increased to $1.4 billion compared to $1.0 billion in the Prior Year YTD Period, primarily due to intangible impairment charges recorded in the second quarter of fiscal 2017. During the second quarter of fiscal year 2017, interim impairment tests were performed on goodwill and trade names due to the sustained declines in our market capitalization and sales trends, resulting in impairment expenses of $359.5 million for goodwill and $47.6 million for trade names. For additional information, please refer to "Note 2 - Goodwill and Intangibles Impairment Charges" to the condensed consolidated financial statements. During the Year To Date Period, we incurred restructuring costs of $41.8 million under our NWF initiative compared with restructuring costs of $14.5 million in the Prior Year YTD Period. SG&A expenses were lower compared to the Prior Year YTD Period due to lower infrastructure and store costs driven by NWF and reduced marketing expenses. The translation of foreign-denominated expenses during the Year To Date Period decreased operating expenses by approximately $3.4 million as a result of the stronger U.S. dollar. As a percentage of net sales, SG&A expenses increased to 50.2% in the Year To Date Period as compared to 48.7% in the Prior Year YTD Period.

~~Consolidated Operating Income (Loss).~~ Operating income (loss) decreased to a loss of $475.5 million in the Year To Date Period as compared to income of $61.0 million in the Prior Year YTD Period, primarily driven by non-cash intangible impairment charges of $407.1 million and also by decreased sales and gross margin rate. As a percentage of net sales, operating margin was (25.5)% in the Year To Date Period as compared to 2.9% in the Prior Year YTD Period and was negatively impacted by approximately 70 basis points due to changes in foreign currencies. During the Year To Date Period as compared to the Prior Year YTD Period, we faced continued retail pressure, most significantly in our traditional businesses in all segments. Additionally, the gross margin rate was negatively impacted by connected products, due to both lower connected margins as well as additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel in all segments. Operating expenses increased significantly, primarily due to non-cash impairment charges recorded on our goodwill in the Americas, Europe and Asia segments and trade names in corporate. Increased restructuring charges were more than offset by savings in our infrastructure, store costs and marketing expenses.

~~Operating income (loss) by segment is summarized as follows (dollars in millions):~~

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline) Operating Margin %
Dollars Percentage 2017 2016
Americas $ (122.0 ) $ 168.3
$ (290.3 ) (172.5 )% (13.9 )% 16.2 %
Europe (33.8 ) 109.2
(143.0 ) (131.0 ) (5.3 ) 16.3
Asia (2.7 ) 60.5
(63.2 ) (104.5 ) (0.8 ) 16.3
Corporate (317.0 ) (277.0 ) (40.0 ) 14.4

Total operating income (loss) $ (475.5 ) $ 61.0
$ (536.5 ) (879.5 )% (25.5 )% 2.9 %

~~Interest Expense.~~ ~~Interest expense increased by $12.7 million during the Year To Date Period as a result of higher interest rate spreads due to our amended credit facility.~~

~~Other Income (Expense)-Net.~~ During the Year To Date Period, other income (expense)-net increased by $5.1 million to $11.5 million in comparison to the Prior Year YTD Period. This change was largely driven by favorable foreign currency activity compared to the Prior Year YTD Period.

~~Provision for Income Taxes~~. Income tax benefit for the Year To Date Period was $100.7 million, resulting in an effective income tax rate of 20.3%. For the Prior Year YTD Period, income tax expense was $13.2 million, resulting in an effective income tax rate of 27.5%. The tax benefit in the Year To Date Period was negatively impacted by the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes as compared to the Prior Year YTD Period combined with the impact of unfavorable discrete items, mostly due to the additional tax expense resulting from the adoption of ASU 2016-09, ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~.

Additionally, income taxes are provided for under the asset and liability method for temporary differences in the recognition of assets and liabilities recognized for income tax and GAAP purposes. Deferred tax assets are periodically assessed for the likelihood of whether they are more likely than not to be realized. We have previously established a valuation allowance in those jurisdictions where we believe recovery is not more likely than not, which generally increases tax expense in the period such determination is made. For those jurisdictions with deferred tax assets not currently subject to a valuation allowance, including the U.S., we have determined that the realization of deferred tax assets continues to be more likely than not.

~~Net Income (Loss) Attributable to Fossil Group, Inc.~~ Year To Date Period net income (loss) attributable to Fossil Group, Inc. decreased to $(398.3) million, or $(8.22) per diluted share, in comparison to $29.2 million, or $0.60 per diluted share, in the Prior Year YTD Period, primarily due to a $(6.51) per diluted share impact of intangible impairment charges recorded during the Year To Date Period. Diluted earnings (loss) per share was negatively impacted by restructuring charges of $0.56 in the Year To Date Period and $0.22 in the Prior Year YTD Period. The tax benefit in the Year To Date Period was negatively impacted by the decreased effective tax rate in the Year To Date Period as compared to the Prior Year YTD Period. Diluted earnings per share in the Year To Date Period as compared to the Prior Year YTD Period decreased $0.11 due to the currency impact of a stronger U.S. dollar.

Liquidity and Capital Resources

Our cash and cash equivalents balance at the end of the ~~Third~~First Quarter was ~~$166.9~~$246.7 million, including ~~$165.8~~$212.4 million held in banks outside the U.S., in comparison to cash and cash equivalents of ~~$236.0~~$245.4 million at the end of the Prior Year Quarter and ~~$297.3~~$316.0 million at the end of fiscal year ~~2016.~~2020. Historically, our business operations have not required substantial cash during the first several months of our fiscal year. Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, restructuring charges, strategic investments such as acquisitions and other capital ~~expenditures and restructuring charges.~~expenditures. We believe cash flows from ~~operating activities as well as~~operations, including our current and planned cost savings measures, combined with existing cash on hand and amounts available under our ~~U.S.~~ credit facilities ~~are~~will be sufficient to ~~meet~~fund our cash needs ~~in the U.S.~~ for the next 12twelve months. Although we believe we have adequate sources of liquidity in the short-term and long-term, the success of our operations, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic, among other factors, could impact our business and liquidity.

For the ~~Year To Date Period,~~First Quarter, we ~~generated~~had an operating cash flow deficit of ~~$60.2~~$37.8 million. ~~This operating cash flow combined with cash on hand was utilized to fund~~A net ~~debt payments~~loss of ~~$149.5~~$24.3 million and ~~$17.2~~a decrease in working capital items of $45.6 million ~~of capital expenditures. Net losses of $395.4 million were~~was partially offset by net non-cash items of ~~$389.3~~$32.1 million. During the First Quarter, we had net debt payments of $33.9 million and ~~a net decrease in working~~ capital ~~items~~expenditures of $66.2 million. Non-cash items primarily consisted of goodwill and trade name impairment charges of $407.1 million. The net decrease in working capital items primarily consisted of a decrease in accounts receivable of $85.1 million and an increase in accounts payable of $80.1 million, partially offset by a net increase in inventory of $116.0$2.1 million.

Accounts receivable, net of allowances, ~~decreased~~increased by ~~3.2%~~14.4% to ~~$310.9~~$175.5 million at the end of the ~~Third~~First Quarter compared to ~~$321.3~~$153.4 million at the end of the Prior Year Quarter. Days sales outstanding for our wholesale businesses for the ~~Third~~First Quarter increased to 5660 days compared to 5355 days in the Prior Year ~~Quarter primarily due to shifts in customer mix and timing of payments.~~

Accounts payable at the end of the Third Quarter was $248.8 million, which increased by 28.5% from the end of the Prior Year Quarter ending accounts payable balance of $193.6 million. The increase in accounts payable in the Third Quarter was largely due to our effective working capital management and timing of payments, some of which will have an offsetting effect in the fourth quarter of fiscal 2017.Quarter.

Inventory at the end of the ~~Third~~First Quarter was ~~$683.0~~$322.5 million, which decreased by ~~2.4%~~26.7% from the end of the Prior Year Quarter ending inventory balance of ~~$699.6 million. We have reduced our traditional watch inventories significantly and we are working~~$439.7 million, mainly due to ~~clear the previous generation connected products over the next few quarters.~~proactive management of inventory balances.

At the end of the ~~Third~~First Quarter, we had net working capital of ~~$732.8~~$439.9 million compared to net working capital of ~~$965.5~~$503.9 million at the end of the Prior Year Quarter. At the end of the ~~Third~~First Quarter, we had ~~approximately $40.2~~$37.9 million of short-term borrowings and ~~$444.3~~$157.2 million in long-term debt.

For fiscal year 2021, we expect total capital expenditures to be approximately $20 million. Our capital expenditure budget is an estimate, and while it is subject to change, it is also limited by the terms of the Term Credit Agreement (as defined below).

On ~~March 9, 2015,~~February 20, 2020, we entered into ~~an Amended and Restated~~Amendment No. 1 to that certain Term Credit Agreement, dated as of September 26, 2019, by and among us, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the “Term Credit Agreement Lenders”) party thereto (as amended to date, the ~~“Credit~~“Term Credit Agreement”). ~~The~~On May 12, 2020, we entered into Amendment No. 2 to the Term Credit Agreement ~~provides~~to extend the deadline for delivery of our unaudited quarterly financial statements and related deliverables for the fiscal quarter ended April 4, 2020. On June 5, 2020, we entered into Amendment No. 3 (the “Third Amendment”) to the Term Credit Agreement to further modify certain terms of the Term Credit Agreement to address the financial impact of COVID-19.

fiscal quarter ending April 3, 2021, July 3, 2021 and October 2, 2021, and (b) 1.50 to 1.00 as of the last day of each subsequent fiscal quarter. In connection with the Third Amendment, the quarterly test for maximum total leverage ratio was waived for the first three fiscal quarters of fiscal year 2021, and we are required to maintain specified minimum levels of EBITDA during such periods.

While the Third Amendment amended, among other things, certain of the financial covenants in the Term Credit Agreement to address the financial impact of COVID-19, any material further decreases to our revenues and cash flows, or the our inability to successfully achieve our cost reduction targets, could result in us not meeting one or more of the amended financial covenants under our Term Credit Agreement within the next twelve months.

On September 26, 2019, we and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other of our subsidiaries from time to time party thereto designated as borrowers, and certain of our subsidiaries from time to time party thereto as guarantors, entered into a $275.0 million secured asset-based revolving credit agreement (the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders").

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to:(a) with respect to us, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, plus(ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit ~~and (ii) a term loan in~~card accounts receivable, minus (iv) the aggregate amount of ~~$231.3 million (the “Term Loan”). The Credit Agreement amended and restated that certain credit agreement, dated as~~reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of ~~May 17, 2013, as amended (the “Prior Agreement”).~~

~~On March 10, 2017, we entered into~~(i) the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment reduced the Revolving Credit Facility under the Credit Agreement from $1.05 billion to $850.0 million. The Second Amendment also removed the incremental term loan that was available under the Credit Agreement, extended the maturity datelesser of (x) 90% of the ~~Credit Agreement to May 17, 2019~~appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and ~~removed our ability to make offers to the lenders to extend the maturity date~~(y) 65% of the ~~Term Loan~~lower of cost or ~~the Revolving Credit Facility. The Second Amendment also amended the repayment schedule for the Term Loan and requires us to make monthly payments on the last business day~~market value of ~~each month beginning April 30, 2018. On and after April 1, 2018, interest on the Term Loan that is based upon the base rate will be due and payable in arrears on the last business day~~eligible foreign finished goods inventory of ~~each calendar month, and interest on the Term Loan that is based upon the London Interbank Offer Rate ("LIBOR") will be due and payable on the last day~~such non-U.S. borrower, plus (ii) 85% of the ~~applicable interest period; provided, that if~~eligible foreign accounts receivable of such ~~interest period extends for over one month, then interest will be due and payable at~~non-U.S. borrower, minus (iii) the end of each one month interval during such interest period. The Second Amendment also amended the mandatory prepayment provisions under the Credit Agreement and provides that to the extent there are excess proceeds remaining from the issuance of debt following the repayment in full of the Term Loan, we are required to repay the Revolving Credit Facility in theaggregate amount of ~~such excess proceeds, with a corresponding permanent reduction in~~reserves, if any, established by the ~~Revolving Credit Facility in the amount of up to $50.0 million.~~

~~The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to base rate loans~~ABL Agent; and LIBOR rate loans and provides that the interest rate margin for base rate loans is 2.50% per annum and the interest rate margin for LIBOR rate loans is 3.50% per annum. On October 1, 2017, the applicable margin on the Term Loan automatically increased to 2.75% per annum for base rate loans and 3.75% per annum for LIBOR rate loans. If the Term Loan has not been repaid in full on or prior to March 31, 2018, then on such date, the applicable margin will automatically increase to 3.25% per annum for base rate loans and 4.25% per annum for LIBOR rate loans. The Second Amendment also changed the commitment fee payable(c) with respect to the ~~Revolving Credit Facility to 0.50% per annum. We will incur an additional fee~~French Borrower, (i) 85% of ~~0.25% times~~eligible French accounts receivable minus (ii) the ~~outstanding principal~~aggregate amount of reserves, if any, established by the ~~total credit exposure under~~ABL Agent. Not more than 60% of the Credit Agreement if the Term Loan has not been repaid in full on or prior to March 31, 2018. Furthermore, the Second Amendment changed the consolidated total leverage ratio that we must comply with from 3.25 to 1.00 to the ratios as set forth below:



~~Period~~		~~Maximum Ratio~~
~~July 2, 2017 through and including September 30, 2017~~		~~3.50 to 1.00~~
~~October 1, 2017 through and including March 31, 2018~~		~~3.25 to 1.00~~
~~April 1, 2018 through and including September 29, 2018~~		~~3.50 to 1.00~~
~~September 30, 2018 and thereafter~~		~~3.25 to 1.00~~

~~As of September 30, 2017, amounts outstanding~~aggregate borrowing base under the Revolving ~~Credit~~ Facility ~~and~~may consist of the Term Loan under the Credit Agreement bear interest, at our option, at (i) the base rate plus 2.50% or (ii) the LIBOR rate (defined as the quotient obtained by dividing (a) LIBOR by (b) 1.00 minus the Eurodollar reserve percentage) plus 3.50%.non-U.S. borrowing bases.

~~Amounts outstanding under the Swingline Loan under the Credit Agreement or upon any drawing under a letter of credit bear interest at the base rate plus the applicable margin.~~

~~During the Year To Date Period, we made principal~~We had net payments of ~~$18.8~~$13.6 million during the First Quarter under the Term ~~Loan. Additionally, we~~Credit Agreement at an average interest rate of 10.0%. We had net ~~principal~~ payments of ~~$131.3~~$20.0 million under the Revolving ~~Credit~~ Facility during the ~~Year To Date Period~~First Quarter at an average ~~annual~~ interest rate of ~~4.27%~~1.7%. As of ~~September 30, 2017,~~April 3, 2021, we had ~~$175.0 million and $309.7~~$138.4 million outstanding under the Term ~~Loan~~Credit Agreement and $77.4 million outstanding under the Revolving ~~Credit Facility, respectively. As of September 30, 2017, we~~Facility. We also had unamortized debt issuance costs of $15.8 million and an unamortized original issue discount of $6.5 million, which ~~reduce~~reduces the corresponding debt ~~liability, of $6.7 million.~~liability. In addition, we had ~~$0.9~~$3.4 million of outstanding standby ~~letters~~Letters of ~~credit~~Credit at ~~September 30, 2017.~~April 3, 2021. Amounts available under the Revolving ~~Credit~~ Facility are reduced by any amounts outstanding under standby letters of credit. As of ~~September 30, 2017,~~April 3, 2021, we had available borrowing capacity of ~~$270.5~~$2.5 million under the Revolving ~~Credit~~ Facility. Our domestic subsidiary receives short-term loans from certain of our foreign subsidiaries at the end of each fiscal quarter which are used to reduce our external borrowings. These intercompany loans are repaid at the beginning

~~of the following fiscal quarter.~~ At the end of the Third Quarter, these intercompany loans totaled $411.8 million. Borrowings under the Revolving Credit Facility were mainly used to fund normal operating expenses and capital expenditures. At September 30, 2017,April 3, 2021, we were in compliance with all debt covenants related to ~~all~~ our credit facilities. ~~We continue to focus on diversifying our capital structure beyond just our existing bank partners with longer tenors to support our long-term strategic objectives.~~

As part of our NWF initiative, we have adopted a disciplined approach to capital management. During the Year To Date Period, we took actions that will reduce costs and better position the organization to support our growth driving initiatives while focusing fewer resources on areas of the business that are not as high of a priority currently. For fiscal year 2017, we expect total capital expenditures to be approximately $30 million. Of this amount, we expect approximately 55% will be for strategic growth, including investments in omni-channel, global concessions and technology, approximately 20% will be for retail store expansion and renovation and approximately 25% will be for technology and facilities maintenance. Our capital expenditure budget and allocation of it to the foregoing investments are estimates and are subject to change. We believe that cash flows from operations combined with existing cash on hand and amounts available under the Revolving Credit Facility will be sufficient to fund our working capital needs and planned capital expenditures for the next twelve months. We will continue to be focused on efforts to minimize our cash needs and improve our working capital efficiency.

Off Balance Sheet Arrangements

As of ~~September 30, 2017,~~April 3, 2021, there were no material changes to our off balance sheet arrangements as set forth in commitments and contingencies in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 31, 2016.~~January 2, 2021.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. On an on-going basis, we evaluate our estimates and judgments, including those related to product returns, ~~bad debt,~~ inventories, long-lived asset impairment, impairment of ~~goodwill and~~ trade names, income taxes and warranty ~~costs, hedge accounting, litigation reserves and stock-based compensation.~~costs. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

At the end of the fiscal year 2016, our market capitalization exceeded the carrying amount of our net assets by 23%. At the end of the first quarter of fiscal 2017, we experienced a decline in our market capitalization and, as a result of the decline, our market capitalization was 14% below the carrying amount of our net assets as of April 1, 2017. During the second quarter of fiscal 2017, the market capitalization continued to decline at which point we determined the decrease in stock price to be sustained and thus a strong indicator of impairment. Interim testing was performed as of June 15, 2017 for each reporting unit and trade name. Due to a change in key assumptions used in interim testing, including the decline in market capitalization and decline in sales projections, impairment was indicated for goodwill and trade names. Goodwill was fully impaired resulting in pre-tax impairment charges during the second quarter of fiscal 2017 of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively. Also during the second quarter of fiscal 2017, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million, resulting in a pre-tax impairment charge of $28.3 million; the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8 million and the MICHELE trade name with a carrying amount of $18.5 million was written down to its implied fair value of $10.9 million, resulting in a pre-tax impairment charge of $7.6 million.

~~Other than noted above and in "Note 1—Financial Statement Policies" to the condensed consolidated financial statements, there~~There have been no changes to the critical accounting policies disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 31, 2016.~~January 2, 2021.

Forward-Looking Statements

The statements contained ~~and incorporated by reference~~ in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements regarding our expected financial position, results of operations, business and financing plans found in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The words “may,” “believes,” ~~“expects,~~“will,” ~~“plans,~~“should,” ~~“intends,~~“seek,” ~~“estimates,~~“forecast,” ~~“anticipates” and~~“outlook,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “predict,” “potential,” “plan,” “expect” or the negative or plural of these words or similar expressions identify forward-looking statements. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: the effect of worldwide economic conditions; the impact of COVID-19; the length and severity of COVID-19; the pace of recovery following COVID-19 and the availability, widespread distribution and use of effective vaccines; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key components; acts of war or acts of terrorism; loss of key facilities; data breach or information systems disruptions; changes in foreign currency valuations in relation to the U.S. dollar; lower levels of consumer spending resulting from COVID-19, a general economic downturn or generally reduced shopping activity caused by public safety (including COVID-19) or consumer confidence concerns; the performance of our products within the prevailing retail environment; customer acceptance of both new designs and newly-introduced product lines, including risks related to the expanded launch of connected accessories; changes in the mix of product sales; our ability to maintain proper inventory levels; financial difficulties encountered by ~~customers;~~customers and related bankruptcy and collection issues; the effects of vigorous competition in the markets in which we operate; ~~the integration of the organizations~~compliance with debt covenants and ~~operations of any acquired businesses into our existing organization and operations;~~other contractual provisions; risks related to the success of ~~NWF;~~our business strategy and restructuring programs; the termination or non-renewal of material ~~licenses,~~licenses; risks related to foreign operations and manufacturing; changes in the costs of materials, labor and advertising; government ~~regulation;~~regulation and tariffs; our ability to secure and protect trademarks and other intellectual property rights; levels of traffic to and management of our retail stores; and the outcome of current and possible future litigation.

In addition to the factors listed above, our actual results may differ materially due to the other risks and uncertainties discussed in ~~this~~our Quarterly ~~Report~~Reports on Form 10-Q and the risks and uncertainties set forth in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 31, 2016.~~January 2, 2021. Accordingly, readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rate Risk

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. Our most significant foreign currency risk relates to the euro and, to a lesser extent, the Canadian dollar, Japanese yen, British pound, ~~Japanese yen,~~ Mexican peso and Australian dollar as compared to the U.S. dollar. Due to our vertical nature whereby a significant portion of goods are sourced from our owned entities, we face foreign currency risks related to the necessary current settlement of intercompany inventory transactions. We employ a variety of operating practices to manage these market risks relative to foreign currency exchange rate changes and, where deemed appropriate, utilize forward contracts. These operating practices include, among others, our ability to convert foreign currency into U.S. dollars at spot rates and to maintain U.S. dollar pricing relative to sales of our products to certain distributors located outside the U.S. Additionally, we enter into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. The use of forward contracts allows us to offset exposure to rate fluctuations because the gains or losses incurred on the derivative instruments will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. We use derivative instruments only for risk management purposes and do not use them for speculation or for trading. There were no significant changes in how we managed foreign currency transactional exposure in the ~~Third~~First Quarter, and management does not anticipate any significant changes in such exposures or in the strategies we employ to manage such exposure in the near future.

The following table shows our outstanding forward contracts designated as cash flow hedges for inventory transactions (in millions) at ~~September 30, 2017~~April 3, 2021 and their expiration dates.

Functional Currency

Contract Currency

Functional Currency

Contract Currency

Type

Amount

Type

Amount

Expiring Through

Type

Amount

Type

Amount

Expiring Through

Euro

253.4

U.S. dollar

291.0

August 2019

Euro

46.1

U.S. dollar

56.2

May 2022

Canadian dollar

95.0

U.S. dollar

73.2

September 2019

Canadian dollar

12.6

U.S. dollar

9.8

June 2022

Japanese yen

869.0

U.S. dollar

8.4

June 2022

British pound

43.5

U.S. dollar

58.1

September 2019

British pound

5.3

U.S. dollar

7.2

June 2022

Japanese yen

4,636.4

U.S. dollar

42.8

September 2019

Mexican peso

378.6

U.S. dollar

20.3

June 2018

Mexican peso

73.0

U.S. dollar

3.6

September 2021

Australian dollar

21.2

U.S. dollar

16.5

June 2018

Australian dollar

3.5

U.S. dollar

2.7

September 2021

U.S. dollar

41.1

Japanese yen

4,470.0

November 2018

U.S. dollar

1.1

Japanese yen

120.0

June 2021

If we were to settle our ~~euro, Canadian dollar, British pound, Japanese yen, Mexican peso, Australian dollar and U.S. dollar based~~ forward contracts ~~hedging inventory transactions~~listed in the table above as of ~~September 30, 2017,~~April 3, 2021, the ~~net~~ result would have been a net ~~loss~~gain of ~~approximately $12.1 million, net of taxes.~~$1.8 million. As of ~~September 30, 2017,~~April 3, 2021, a 10% unfavorable change in the U.S. dollar strengthening against foreign currencies to which we have balance sheet transactional exposures would have decreased net pre-tax income by ~~$27.0~~$17.0 million. The translation of the balance sheets of our foreign-based operations from their local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. As of ~~September 30, 2017,~~April 3, 2021, a 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would have reduced consolidated stockholders' equity by approximately ~~$66.0~~$41.7 million.

Interest Rate Risk

We are subject to interest rate volatility with regard to debt borrowings. Effective July 26, 2013, we entered into an interest rate swap agreement with a term of approximately five years to manage our exposure to interest rate fluctuations on our Term Loan. We will continue to evaluate our interest rate exposure and the use of interest rate swaps in future periods to mitigate our risk associated with adverse fluctuations in interest rates.

Based on our variable-rate debt outstanding as of ~~September 30, 2017,~~April 3, 2021, a 100 basis point increase in interest rates would increase annual interest expense by ~~approximately $3.1~~$2.2 million. ~~This amount excludes the $168.3 million outstanding, net of debt issuance costs, under our Term Loan hedged with an interest rate swap agreement.~~

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 ~~as amended (the “Exchange Act”),~~ as of the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon this evaluation, our CEO and CFO have concluded that our Disclosure Controls were effective as of ~~September 30, 2017.~~April 3, 2021.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~Third~~First Quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no legal proceedings to which we are a party or to which our properties are subject, other than routine litigation incidental to our business ~~which~~that is not material to our consolidated financial condition, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K/A for the fiscal year ended January 2, 2021 and in other documents we file with the Securities and Exchange Commission, in evaluating the Company and its business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no shares of common stock repurchased under ~~any of~~ our repurchase ~~programs~~program during the ~~Third~~First Quarter.

Item 5. Other Information

None.

Item 6. Exhibits

(a)Exhibits



Exhibit Number						Document Description

3.1						Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 25, 2010).

3.2						Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 28, 2013).

3.3						Fifth Amended and Restated Bylaws of Fossil Group, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on April 3, 2017).

10.1(1)~~(2)~~(3)						Performance Restricted Stock Unit Award ~~under~~Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan

~~10.2(2)~~10.2(1)(3)						~~Addendum to Executive Severance Agreement, by and between~~Restricted Stock Unit Award Under the Fossil Group, Inc. ~~and Dennis R. Secor, dated as of August 31, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 5, 2017).~~2016 Long-Term Incentive Plan

~~31.1(1)~~10.3(1)(3)						Restricted Stock Unit Award for Outside Directors Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan

31.1(1)						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2(1)						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

~~32.1(3)~~32.1(2)						Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2(3)~~32.2(2)						Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS(1)~~101.INS						XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH(1)~~101.SCH						Inline XBRL Taxonomy Extension Schema Document.

~~101.DEF(1)~~101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

~~101.CAL(1)~~101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

~~101.LAB(1)~~101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

~~101.PRE(1)~~101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1)Filed herewith.

(2)Furnished herewith.

(3)Management contract or compensatory plan or arrangement.

~~(3)Furnished herewith.~~

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.



			FOSSIL GROUP, INC.

~~November 9, 2017~~May 13, 2021			/S/ ~~JEFFREY N. BOYER~~SUNIL M. DOSHI
			~~Jeffrey N. Boyer~~Sunil M. Doshi
			~~Executive~~Senior Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)

4438



		Page
PART I
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash ~~Flow~~Flows	67
	Notes to Condensed Consolidated Financial Statements	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2826
	Results of Operations	2927
	Liquidity and Capital Resources	3831
	Forward-Looking Statements	4033
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4034
Item 4.	Controls and Procedures	4134
PART II
Item 1.	Legal Proceedings	4236
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4236
Item 5.	Other Information	36
Item 6.	Exhibits	4337
	SIGNATURES	4438



				For the 13 Weeks Ended September 30, 2017			For the 13 Weeks Ended October 1, 2016
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—



	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at December 31, 2016	$	1,006,236		$	9,202		$	1,015,438
Net income (loss)	(398,298		)	2,931			(395,367		)
Currency translation adjustment	32,078			—			32,078
Cash flow hedges - net change	(21,364		)	—			(21,364		)
Distribution of noncontrolling interest earnings	—			(428		)	(428		)
Acquisition of common stock	(947		)	—			(947		)
Stock-based compensation expense	23,588			—			23,588
Balance at September 30, 2017	$	641,293		$	11,705		$	652,998



Cash Stock Appreciation Rights Outstanding					Cash Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$29.78 - $47.99	61	$	36.73	6.2	11	$	36.73
Total	61	$	36.73	6.2	11	$	36.73



	Fair Value at September 30, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	3,230	$	—	$	3,230
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,605		—		—		2,605
Interest rate swap	—		109		—		109
Total	$	2,605	$	3,339	$	—	$	5,944
Liabilities:
Forward contracts	$	—	$	19,773	—		$	19,773
Interest rate swap	—		15		—		15
Total	$	—	$	19,788	$	—	$	19,788



Fiscal Year	Amortization Expense
2017 (remaining)	$	3,028
2018	$	11,848
2019	$	11,518
2020	$	10,979
2021	$	7,143
2022	$	6,263



	Growth Percentage
	Growth Percentage
Brand	As Reported		Constant Currency
FOSSIL	5.2	%	7.0	%
SKAGEN	10.0	%	11.6	%