SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Commission file number: ~~000-19848~~001-41040

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(Registrant’s telephone number, including area code)

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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

7.00% Senior Notes due 2026

FOSLL

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):

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~~

August 1, 2023: 52,464,539

Trademarks, service marks, trade names and copyrights

We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries. We also use FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, MISFIT, ZODIAC, KATCHIN and MICHELE as trademarks on online e-commerce sites. This filing may also contain other trademarks, service marks, trade names and copyrights of ours or of other companies with whom we have, for example, licensing agreements to produce, market and distribute products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to or incorporated by reference into this report may be listed without the TM, SM, © and ® symbols, as applicable, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors, if any, to these trademarks, service marks, trade names and copyrights.

Item 1. Financial Statements

See notes to the unaudited condensed consolidated financial statements.

Goodwill and trade name impairments

See notes to the unaudited condensed consolidated financial statements.


For the 13 Weeks Ended July 1, 2023
	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, April 1, 2023	51,841	$	518	$	307,592	$	—	$	134,229	$	(73,207)	$	369,132	$	(2,843)	$	366,289
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	762	8		(8)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(504)		—		—		(504)		—		(504)
Retirement of common stock	(157)	(2)		(502)		504		—		—		—		—		—


Stock-based compensation	—	—		1,686		—		—		—		1,686		—		1,686
Net income (loss)	—	—		—		—		(26,529)		—		(26,529)		241		(26,288)
Other comprehensive income (loss)	—	—		—		—		—		(4,281)		(4,281)		—		(4,281)




Balance, July 1, 2023	52,446	$	524	$	308,768	$	—	$	107,700	$	(77,488)	$	339,504	$	(2,602)	$	336,902


For the 13 Weeks Ended July 2, 2022
	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, April 2, 2022	51,157	$	511	$	302,583	$	—	$	198,134	$	(74,062)	$	427,166	$	2,298	$	429,464
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	873	9		(9)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(2,430)		—		—		(2,430)		—		(2,430)
Retirement of common stock	(223)	(2)		(2,428)		2,430		—		—		—		—		—


Stock-based compensation	—	—		4,629		—		—		—		4,629		—		4,629
Net income (loss)	—	—		—		—		(19,074)		—		(19,074)		139		(18,935)
Other comprehensive income (loss)	—	—		—		—		—		(13,017)		(13,017)		—		(13,017)

Distribution of noncontrolling interest earnings	—	—		—		—		—		—		—		(5,686)		(5,686)

Balance, July 2, 2022	51,807	$	518	$	304,775	$	—	$	179,060	$	(87,079)	$	397,274	$	(3,249)	$	394,025



For the 26 Weeks Ended July 1, 2023
	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 31, 2022	51,836	$	518	$	306,241	$	—	$	175,491	$	(76,318)	$	405,932	$	(2,923)	$	403,009
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	768	8		(8)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(516)		—		—		(516)		—		(516)
Retirement of common stock	(158)	(2)		(514)		516		—		—		—		—		—


Stock-based compensation	—	—		3,049		—		—		—		3,049		—		3,049
Net income (loss)	—	—		—		—		(67,791)		—		(67,791)		321		(67,470)
Other comprehensive income (loss)	—	—		—		—		—		(1,170)		(1,170)				(1,170)




Balance, July 1, 2023	52,446	$	524	$	308,768	$	—	$	107,700	$	(77,488)	$	339,504	$	(2,602)	$	336,902



For the 26 Weeks Ended July 2, 2022
	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 1, 2022	52,146	$	521	$	300,848	$	—	$	229,132	$	(67,275)	$	463,226	$	2,132	$	465,358
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	874	9		(9)		—		—		—		—		—		—

Acquisition of common stock	—	—		—		(12,430)		—		—		(12,430)		—		(12,430)
Retirement of common stock	(1,213)	(12)		(2,934)		12,430		(9,484)		—		—		—		—

Stock-based compensation	—	—		6,870		—		—		—		6,870		—		6,870
Net income (loss)	—	—		—		—		(40,588)		—		(40,588)		305		(40,283)
Other comprehensive income (loss)	—	—		—		—		—		(19,804)		(19,804)		—		(19,804)

Distribution of noncontrolling interest earnings	—	—		—		—		—		—		—		(5,686)		(5,686)

Balance, July 2, 2022	51,807	$	518	$	304,775	$	—	$	179,060	$	(87,079)	$	397,274	$	(3,249)	$	394,025

See notes to the unaudited condensed consolidated financial statements.

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.

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 information presented herein includes the thirteen-week period ended July 1, 2023 (“Second Quarter”) as compared to the thirteen-week period ended July 2, 2022 (“Prior Year Quarter”), and the twenty-six week period ended July 1, 2023 ("Year To Date Period") as compared to the twenty-six week period ended July 2, 2022 ("Prior Year YTD Period"). 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,~~July 1, 2023, and the results of operations for the ~~thirteen-week periods ended September 30, 2017 (“Third Quarter”) and October 1, 2016 (“~~Second Quarter, Prior Year ~~Quarter”), respectively, and the thirty-nine week periods ended September 30, 2017 (“~~Quarter, Year To Date ~~Period”)~~Period and ~~October 1, 2016 (“~~Prior Year YTD ~~Period”).~~Period. All adjustments are of a normal, recurring nature.

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 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~~2022 (the ~~“2016~~“2022 Form 10-K”). Operating results for the ~~Third~~Second 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. Actual results could differ from those estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the ~~2016~~2022 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.

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”~~&A"), ~~goodwill and trade name impairment~~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~~Company's retail stores, point-of-sale expenses, advertising expenses and art, and 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~~reduce and optimize the Company’s infrastructure ~~as well as~~and store ~~closure expenses.~~closures. See Note 16— Restructuring for additional information on the Company’s restructuring plan.

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 July 1, 2023		For the 13 Weeks Ended July 2, 2022		For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Numerator:
Net income (loss) attributable to Fossil Group, Inc.	$	(26,529)	$	(19,074)	$	(67,791)	$	(40,588)
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	52,349		51,707		52,095		51,853
Basic EPS	$	(0.51)	$	(0.37)	$	(1.30)	$	(0.78)
Diluted EPS computation:

Diluted weighted average common shares outstanding	52,349		51,707		52,095		51,853
Diluted EPS	$	(0.51)	$	(0.37)	$	(1.30)	$	(0.78)

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~~Second Quarter and Year To Date Period, approximately ~~5.1~~2.2 million and ~~4.4~~2.1 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~~0.4 million and 0.3 million weighted average performance-based shares at the end of ~~both~~ the ~~Third~~Second Quarter and Year To Date ~~Period.~~Period, respectively.

At the end of each of the Prior Year Quarter and Prior Year YTD Period, approximately ~~1.6~~2.3 million and ~~1.5~~2.2 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~~each of the Prior Year Quarter and Prior Year YTD ~~Period~~Period.

Cash, Cash Equivalents and Restricted Cash. Restricted cash included in intangible and other-assets net was comprised primarily of pledged collateral to secure bank guarantees for the purpose of obtaining retail space. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of July 1, 2023 and July 2, 2022 that are presented in the ~~performance targets were not met.~~condensed consolidated statement of cash flows (in thousands):


	July 1, 2023		July 2, 2022
Cash and cash equivalents	$	132,107	$	167,067
Restricted cash included in prepaid expenses and other current assets	107		110
Restricted cash included in intangible and other assets-net	4,722		12,178
Cash, cash equivalents and restricted cash	$	136,936	$	179,355

Recently ~~Issued~~Adopted Accounting Standards

In ~~August 2017,~~October 2021, the Financial Accounting Standards Board ~~("FASB")~~ issued Accounting Standards Update ~~("ASU") 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to~~2021-08, Business Combinations – Accounting for ~~Hedging Activities~~ ~~("ASU 2017-12"). ASU 2017-12 amends~~Contract Assets and ~~simplifies hedge accounting guidance in order to enable entities to better portray the economics of their risk management activities.~~Contract Liabilities from Contracts with Customers. The guidance requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination as if they had originated the contracts, as opposed to at fair value on the acquisition date. The standard is effective for ~~fiscal years beginning~~business combinations after ~~December 15, 2018, including~~

~~interim periods within those periods. Early~~January 1, 2023. The adoption ~~is permitted. The Company is currently evaluating the impact~~ of ~~the~~this standard ~~on its consolidated financial statements 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 willdid 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 standard to have a material impact on the Company's consolidated financial ~~position.~~statements or related disclosures.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer~~

Disaggregation of ~~nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).~~ Revenue. The ~~core principle of the guidance is that an entity should recognize~~Company's 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~~disaggregated by major product category 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 impairmentrecognition 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 and did not have a material impact on the Company’s 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.

~~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~~

The Company evaluates its goodwill and intangible assets for impairment on an annual basis, or as facts and circumstances warrant. At the end 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 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 July 1, 2023
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	108,875	$	59,411	$	65,889	$	1,927	$	236,102
Smartwatches	8,443		5,263		4,073		—		17,779
Total watches	$	117,318	$	64,674	$	69,962	$	1,927	$	253,881
Leathers	20,963		4,986		7,373		—		33,322
Jewelry	6,223		15,380		5,755		—		27,358
Other	2,147		3,239		1,033		986		7,405
Consolidated	$	146,651	$	88,279	$	84,123	$	2,913	$	321,966

Timing of revenue recognition
Revenue recognized at a point in time	$	146,496	$	88,084	$	84,009	$	2,638	$	321,227
Revenue recognized over time	155		195		114		275		739
Consolidated	$	146,651	$	88,279	$	84,123	$	2,913	$	321,966


	For the 13 Weeks Ended July 2, 2022
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	118,736	$	70,436	$	69,524	$	—	$	258,696
Smartwatches	15,377		10,261		7,783		—		33,421
Total watches	$	134,113	$	80,697	$	77,307	$	—	$	292,117
Leathers	22,593		5,320		8,034		—		35,947
Jewelry	9,260		18,639		6,031		—		33,930
Other	2,306		3,235		1,210		2,423		9,174
Consolidated	$	168,272	$	107,891	$	92,582	$	2,423	$	371,168

Timing of revenue recognition
Revenue recognized at a point in time	$	167,899	$	107,690	$	92,441	$	1,058	$	369,088
Revenue recognized over time	373		201		141		1,365		2,080
Consolidated	$	168,272	$	107,891	$	92,582	$	2,423	$	371,168


	For the 26 Weeks Ended July 1, 2023
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	200,231	$	131,215	$	128,155	$	1,927	$	461,528
Smartwatches	20,933		11,885		9,361		—		42,179
Total watches	$	221,164	$	143,100	$	137,516	$	1,927	$	503,707
Leathers	48,074		11,758		13,753		—		73,585
Jewelry	11,642		33,880		10,880		—		56,402
Other	3,703		5,214		2,110		2,281		13,308
Consolidated	$	284,583	$	193,952	$	164,259	$	4,208	$	647,002

Timing of revenue recognition
Revenue recognized at a point in time	$	284,259	$	193,568	$	164,036	$	3,658	$	645,521
Revenue recognized over time	324		384		223		550		1,481
Consolidated	$	284,583	$	193,952	$	164,259	$	4,208	$	647,002


	For the 26 Weeks Ended July 2, 2022
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	234,638	$	151,584	$	133,887	$	13	$	520,122
Smartwatches	32,649		22,947		15,808		2		71,406
Total watches	$	267,287	$	174,531	$	149,695	$	15	$	591,528
Leathers	41,829		12,689		15,614		—		70,132
Jewelry	17,195		39,775		11,656		—		68,626
Other	3,888		5,447		2,385		5,015		16,735
Consolidated	$	330,199	$	232,442	$	179,350	$	5,030	$	747,021

Timing of revenue recognition
Revenue recognized at a point in time	$	329,493	$	231,991	$	179,049	$	2,222	$	742,755
Revenue recognized over time	706		451		301		2,808		4,266
Consolidated	$	330,199	$	232,442	$	179,350	$	5,030	$	747,021

Contract Balances. As of July 1, 2023, the ~~second quarter~~Company had no material contract assets on the Company's condensed consolidated balance sheets and no 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) $0.7 million and ~~the MICHELE trade name with a carrying amount~~$0.8 million as of ~~$18.5~~July 1, 2023 and December 31, 2022, respectively, related to remaining performance obligations on licensing income, (ii) $1.8 million ~~was written down~~and $3.7 million as of July 1, 2023 and December 31, 2022, respectively, primarily related to ~~its implied fair value~~remaining performance obligations on wearable technology products and (iii) $2.6 million and $3.1 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~~July 1, 2023 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 comparedDecember 31, 2022, respectively, related to ~~previous valuation assumptions.~~gift cards issued.

Inventories consisted of the following (in thousands):


	July 1, 2023		December 31, 2022
Components and parts	$	18,633	$	20,998
Work-in-process	278		—
Finished goods	305,003		355,030
Inventories	$	323,914	$	376,028

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):

Warranties issued and adjustments to preexisting warranties ⁽¹⁾

Warranties issued and adjustments to preexisting warranties (1)

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

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


	For the 13 Weeks Ended July 1, 2023			For the 13 Weeks Ended July 2, 2022			For the 26 Weeks Ended July 1, 2023			For the 26 Weeks Ended July 2, 2022
Income tax (benefit) expense	$	(7,198)		$	2,003		$	(5,595)		$	6,690
Effective tax rate	21.5		%	(11.8)		%	7.7		%	(19.9)		%

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
Income tax (benefit) expense $ (3,230 ) $ 6,451
$ (100,746 ) $ 13,230
Effective tax rate 37.1 % 25.0 % 20.3 % 27.5 %

The ~~higher~~ effective tax rate in the ~~Third~~Second Quarter was favorable as compared to the Prior Year Quarter ~~is attributable~~due to ~~a higher structural rate resulting from an increased forecasted loss from the Company's U.S. operations which is tax-benefited at a higher~~reduced foreign income taxes and favorable discrete items. The overall tax rate ~~than~~is impacted by the Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act which 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 some ofreturn which absorbs the U.S. ~~goodwill impairment charge being permanently nondeductible for tax purposes.~~ net operating loss ("NOL").Foreign income taxes are also paid on this same foreign income, resulting in double taxation.

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,~~July 1, 2023, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was ~~$21.7~~$23.3 million, all of which ~~$19.0 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~~2013-2022 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,~~July 1, 2023, the Company had recorded ~~$2.3~~$8.5 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,~~

July 1, 2023, the total amount of accrued income tax-related interest ~~and penalties~~ included in the condensed consolidated balance ~~sheet~~sheets was ~~$2.8 million and $1.3 million, respectively. The income tax related interest expense~~$5.6 million. There was no 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 million.~~penalties.

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 and Preferred Stock. The Company has 100,000,000 shares of common stock, par value $0.01 per share, authorized, with 52,446,107 and 51,836,456 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, with none issued or outstanding at July 1, 2023 or December 31, 2022. Rights, preferences and other terms of preferred stock will be determined by the Board of Directors at the time of issuance.

Common Stock Repurchase Programs. Purchases of the Company’s common stock ~~have been~~are made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased shares of common stock are recorded at cost and become authorized but unissued shares which may be issued in the future for general corporate or other purposes. The Company may terminate or limit its stock repurchase program at any time. In the event the repurchased shares are ~~canceled,~~cancelled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs ~~have been~~are conducted pursuant to Rule 10b-18 of the Exchange Act.

At July 1, 2023 and December 31, ~~2016 and September 30, 2017,~~2022, all treasury stock had been effectively retired. As of ~~September 30, 2017,~~July 1, 2023, the Company had ~~$824.2~~$20.0 million of repurchase authorizations remaining under its ~~combined~~ repurchase ~~programs. However, under~~program.

The following table reflects the Company's ~~credit agreement, the Company is restricted from making open market repurchases of its common stock.~~

~~The following tables reflect the Company’s~~ common stock repurchase activity for 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 —
$ —
—
$ —

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 —
$ —
—
$ —


				For the 26 Weeks Ended July 1, 2023			For the 26 Weeks Ended July 2, 2022
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased

2010	$	30.0	None	—	$	—	1.0	$	10.0

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

7. EMPLOYEE BENEFIT PLANS

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

~~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.~~July 1, 2023.

~~Stock Options and~~ Stock Appreciation Rights Outstanding and Exercisable. The following ~~tables summarize~~table summarizes information with respect to ~~stock options and~~ stock appreciation rights outstanding and exercisable at ~~September 30, 2017:~~July 1, 2023:

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

~~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~~Second Quarter:

Restricted Stock, Restricted Stock Units

and Performance Restricted Stock Units

The total fair value of restricted stock ~~and restricted stock~~ units vested was $2.5 million during the ~~Third Quarter was approximately $0.2 million.~~Second Quarter. 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 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 July 1, 2023
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(84,784)	$	(389)	$	11,966	$	(73,207)
Other comprehensive income (loss) before reclassifications	(4,090)		(625)		—		(4,715)
Tax (expense) benefit	—		183		—		183
Amounts reclassed from accumulated other comprehensive income (loss)	—		(510)		—		(510)
Tax (expense) benefit	—		259		—		259
Total other comprehensive income (loss)	(4,090)		(191)		—		(4,281)
Ending balance	$	(88,874)	$	(580)	$	11,966	$	(77,488)



	For the 26 Weeks Ended July 1, 2023
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(90,681)	$	2,397	$	11,966	$	(76,318)
Other comprehensive income (loss) before reclassifications	1,807		(3,751)		—		(1,944)
Tax (expense) benefit	—		628		—		628
Amounts reclassed from accumulated other comprehensive income	—		(685)		—		(685)
Tax (expense) benefit	—		539		—		539
Total other comprehensive income (loss)	1,807		(2,977)		—		(1,170)
Ending balance	$	(88,874)	$	(580)	$	11,966	$	(77,488)



	For the 26 Weeks Ended July 2, 2022
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(75,601)	$	4,344	$	3,982	$	(67,275)
Other comprehensive income (loss) before reclassifications	(23,972)		8,201		—		(15,771)
Tax (expense) benefit	—		530		—		530
Amounts reclassed from accumulated other comprehensive income (loss)	—		4,203		—		4,203
Tax (expense) benefit	—		360		—		360
Total other comprehensive income (loss)	(23,972)		4,168		—		(19,804)
Ending balance	$	(99,573)	$	8,512	$	3,982	$	(87,079)

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

9. SEGMENT INFORMATION

The Company reports segment information based on the “management ~~approach”.~~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, China (including Hong Kong, Macau and Taiwan), 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.

Summary information by operating segment was as follows (in thousands):


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
	Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Americas	$	146,651	$	23,444	$	168,272	$	30,653
Europe	88,279		(688)		107,891		14,846
Asia	84,123		7,404		92,582		12,351
Corporate	2,913		(65,473)		2,423		(68,786)
Consolidated	$	321,966	$	(35,313)	$	371,168	$	(10,936)


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022
	Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Americas	$	284,583	$	36,000	$	330,199	$	54,563
Europe	193,952		6,282		232,442		34,414
Asia	164,259		14,604		179,350		21,291
Corporate	4,208		(129,507)		5,030		(135,487)
Consolidated	$	647,002	$	(72,621)	$	747,021	$	(25,219)

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~~table reflects net sales for each class of similar products in the periods presented (in thousands, except percentage data):


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches:
Traditional watches	$	236,102	73.4	%	$	258,696	69.7	%
Smartwatches	17,779		5.5		33,421		9.0
Total watches	$	253,881	78.9	%	$	292,117	78.7	%
Leathers	33,322		10.3		35,947		9.7
Jewelry	27,358		8.5		33,930		9.1
Other	7,405		2.3		9,174		2.5
Total	$	321,966	100.0	%	$	371,168	100.0	%


										For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022
	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
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	551,913	80.1	%	$	567,148	76.9	%
Watches:									Watches:
Traditional watches									Traditional watches	$	461,528	71.3	%	$	520,122	69.6	%
Smartwatches									Smartwatches	42,179		6.5		71,406		9.6
Total watches									Total watches	$	503,707	77.8	%	$	591,528	79.2	%
Leathers	75,660		11.0		93,338		12.6		Leathers	73,585		11.4		70,132		9.4
Jewelry	47,729		6.9		60,237		8.2		Jewelry	56,402		8.7		68,626		9.2
Other	13,420		2.0		17,267		2.3		Other	13,308		2.1		16,735		2.2
Total	$	688,722	100.0	%	$	737,990	100.0	%	Total	$	647,002	100.0	%	$	747,021	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,~~July 1, 2023, 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	48.8	U.S. dollar	52.0
Canadian dollar	24.7	U.S. dollar	18.6
British pound	4.2	U.S. dollar	5.1
Japanese yen	596.4	U.S. dollar	4.6
Mexican peso	49.5	U.S. dollar	2.4
Australian dollar	2.8	U.S. dollar	1.9
U.S. dollar	4.1	Japanese yen	530.0

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,~~July 1, 2023, the Company had non-designated forward contracts of ~~approximately $2.2~~$0.4 million on ~~28.3~~7.3 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 July 1, 2023		For the 13 Weeks Ended July 2, 2022
Cash flow hedges:
Forward contracts	$	(442)	$	6,100

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(442)	$	6,100


	For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Cash flow hedges:
Forward contracts	$	(3,123)	$	8,730

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(3,123)	$	8,730

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 July 1, 2023		For the 13 Weeks Ended July 2, 2022
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(451)	$	2,038
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	200	$	992
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	38	$	61

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 )


Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(19)	$	3,040
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(127)	$	1,523
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	63	$	7

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
	July 1, 2023			December 31, 2022			July 1, 2023			December 31, 2022
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	$	635	Prepaid expenses and other current assets	$	2,783	Accrued expenses-other	$	2,985	Accrued expenses-other	$	2,659
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	2		Prepaid expenses and other current assets	—		Accrued expenses-other	—		Accrued expenses-other	16



Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	—		Intangible and other assets-net	112		Other long-term liabilities	—		Other long-term liabilities	318

Total		$	637		$	2,895		$	2,985		$	2,993

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 July 1, 2023				For the 13 Weeks Ended July 2, 2022
	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	$	165,299	$	7,172	$	179,819	$	(1,674)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	$	(451)	$	200	$	2,038	$	992
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	$	—	$	38	$	—	$	61


	Effect of Derivative Instruments
	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022
	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	$	329,618	$	9,906	$	371,359	$	(56)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	$	(19)	$	(127)	$	3,040	$	1,523
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	$	—	$	63	$	—	$	7

At the end of the ~~Third~~Second Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June ~~2019.~~2024. As of ~~September 30, 2017, an estimated net~~July 1, 2023, a $2.1 million loss ~~of $9.2 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~~July 1, 2023 (in thousands):


	Fair Value at September 30, 2017									Fair Value at July 1, 2023
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:									Assets:
Forward contracts	$	—	$	3,230	$	—	$	3,230	Forward contracts	$	—	$	637	$	—	$	637
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	Total	$	—	$	637	$	—	$	637
Liabilities:									Liabilities:
Contingent consideration									Contingent consideration	$	—	$	—	$	595	$	595
Forward contracts	$	—	$	19,773	—		$	19,773	Forward contracts	—		2,985		—		2,985
Interest rate swap	—		15		—		15

Total	$	—	$	19,788	$	—	$	19,788	Total	$	—	$	2,985	$	595	$	3,580

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~~2022 (in thousands):


	Fair Value at December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	2,895	$	—	$	2,895



Total	$	—	$	2,895	$	—	$	2,895
Liabilities:
Contingent consideration	$	—	$	—	$	3,630	$	3,630
Forward contracts	—		2,993		—		2,993

Total	$	—	$	2,993	$	3,630	$	6,623

Fair Value at December 31, 2016
Level 1 Level 2 Level 3 Total
Assets:

Forward contracts $ —
$ 28,936
$ —
$ 28,936
Deferred compensation plan assets:

Investment in publicly traded mutual funds 2,385
—
—
2,385
Interest rate swap —
73
—
73
Total $ 2,385
$ 29,009
$ —
$ 31,394
Liabilities:

Forward contracts —
4,966
—
4,966
Interest rate swap —
613
—
613
Total $ —
$ 5,579
$ —
$ 5,579

The fair values of the Company’s deferred compensation plan assets are based on quoted prices. The deferred compensation plan assets are recorded in intangible and other assets-net in the Company’s condensed consolidated balance sheets. 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,~~July 1, 2023, debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of ~~$486.1~~$249.4 million and had a fair value of approximately ~~$480.6~~$201.1 million. The fair value of debt was ~~obtained from a third-party~~ based on observable market inputs.

~~The~~During the Year to Date Period, operating lease right-of-use ("ROU") assets with a carrying amount of $0.8 million were written down to a fair value of ~~goodwill~~$0.6 million, resulting in impairment charges of $0.2 million. During the Prior Year YTD Period, ROU assets with carrying amount of $1.0 million and ~~trade names are measured on~~property, plant and equipment-net with a ~~non-recurring basis~~carrying value of $0.2 million related to retail store leasehold improvements, fixturing and shop-in-shops were written down to a fair value of $0.6 million and $0.1 million, respectively, resulting in impairment charges of $0.5 million.

The fair values of operating lease ROU assets and fixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows ~~discounts rates~~ and ~~implied royalty~~discount rates.

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 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. 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 million related to retail store leasehold improvements and fixturing and related key money in the amount of $0.6 million were deemed not recoverable, resulting in an impairment charge of $6.6 million during the Year To Date Period.

~~The fair values of assets related to Company-owned retail stores were determined using Level 3 inputs.~~ Of the ~~$6.6~~$0.2 million impairment expense ~~$3.6~~in the Year to Date Period, $0.1 million ~~$1.4~~was recorded in other long-lived asset impairments in both the Americas and Europe segments. Of the $0.5 million impairment expense in the Prior Year Quarter, $0.3 million and ~~$0.5~~$0.2 million ~~were~~was recorded in ~~restructuring charges in the Americas, Europe and Asia segments, respectively, and $0.8 million and $0.3 million were recorded in SG&A~~other long-lived asset impairments in the Europe and Asia segments, respectively.

~~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):


		July 1, 2023				December 31, 2022
	Useful	Gross		Accumulated		Gross		Accumulated
	Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:
Trademarks	10 yrs.	$	3,924	$	3,288	$	3,728	$	3,243
Customer lists	5 - 10 yrs.	—		—		279		266
Patents	3 - 20 yrs.	886		552		867		537


Trade name	6 yrs.	4,502		2,814		4,502		2,439
Other	7 - 20 yrs.	341		216		342		195
Total intangibles-subject to amortization		9,653		6,870		9,718		6,680
Intangibles-not subject to amortization:
Trade names		8,888				8,876
Other assets:

Deposits		16,531				16,487

Deferred tax asset-net		17,275				17,262
Restricted cash		4,724				5,243





Debt issuance costs		2,807				3,124
Other		1,968				1,969
Total other assets		43,305				44,085
Total intangible and other assets		$	61,846	$	6,870	$	62,679	$	6,680
Total intangible and other assets-net				$	54,976			$	55,999

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~~$0.2 million and ~~$3.7~~$0.7 million for the ~~Third~~Second Quarter and the Prior Year Quarter, respectively, and ~~$10.4~~$0.5 million and ~~$11.2~~$1.3 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
2023 (remaining)	$	467
2024	$	919
2025	$	728
2026	$	137
2027	$	119
Thereafter	$	413

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 approximately 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 lease 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.

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 July 1, 2023		For the 13 Weeks Ended July 2, 2022		For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Operating lease cost(1)	SG&A	$	18,614	$	19,465	$	36,491	$	39,556



Short-term lease cost	SG&A	$	295	$	216	$	510	$	400
Variable lease cost	SG&A	$	5,534	$	7,703	$	11,653	$	14,651

(1) Includes sublease income, which was immaterial.

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


Leases	Condensed Consolidated Balance Sheets Location	July 1, 2023		December 31, 2022
Assets
Operating	Operating lease ROU assets	$	144,949	$	156,947


Liabilities
Current:
Operating	Current operating lease liabilities	$	45,041	$	49,702

Noncurrent:
Operating	Long-term operating lease liabilities	$	135,062	$	150,188

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

July 1, 2023

December 31, 2022

Weighted-average remaining lease term:

Operating leases

6.5 years

5.6 years

Weighted-average discount rate:

Operating leases

14.7

14.1

Future minimum lease payments by year as of July 1, 2023 were as follows (in thousands):


Fiscal Year	Operating Leases
2023 (remaining)	$	39,481
2024	57,158
2025	40,649
2026	30,712
2027	20,729
Thereafter	101,086

Total lease payments	$	289,815
Less: Interest	109,712
Total lease obligations	$	180,103

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


	For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	43,774	$	47,191



Leased assets obtained in exchange for new operating lease liabilities	18,570		20,506

As of July 1, 2023, 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,~~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"). On November 8, 2022, the Company entered into ~~the Second~~ Amendment No. 4 (the "Amendment") to the ~~Amended and Restated Credit Agreement (the “Second Amendment”).~~Revolving Facility. The ~~Second~~ Amendment, reduced the Company's revolving credit facility (the "Revolving Credit Facility") available under the Company’s existing credit amendment from $1.05 billion to $850.0 million. The Second Amendment also removed the incremental term loan that was available under the credit agreement,among other things, (i) extended the maturity date of the credit ~~agreement~~facility to ~~May 17, 2019 and removed~~November 8, 2027 (provided, that if the ~~Company’s ability~~Company has any indebtedness in an amount in excess of $35 million that matures prior to ~~make offers to the lenders to extend~~November 8, 2027, the maturity date of the ~~Term Loan or~~credit facility shall be the ~~Revolving Credit Facility. The Second Amendment also amended~~91st day prior to the ~~repayment schedule~~maturity date of such other indebtedness) and (ii) changed the calculation methodology of the borrowing base to include the value of certain of the Company’s intellectual property in such methodology and to provide for ~~the Term Loan and requires~~seasonal increases to certain advance rates.

In November 2021, the Company sold $150.0 million aggregate principal amount of 7.00% senior notes due 2026 (the “Notes”), generating net proceeds of approximately $141.7 million. The Notes were issued pursuant to ~~make monthly payments~~an indenture (the "Base Indenture") and a first supplemental indenture (the "First Supplemental Indenture" and, together with the Base Indenture, the "Indenture") with The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

The Notes are general unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness, and will rank senior in right of payment to the Company’s future subordinated indebtedness, if any. The Notes are effectively subordinated to all of the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and the Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries (excluding any amounts owed by such subsidiaries to the Company). The Notes bear interest at the rate of 7.00% per annum. Interest on the ~~last business day~~Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each ~~month beginning April~~year. The Notes mature on November 30, ~~2018.~~2026.

The Company may redeem the Notes for cash in whole or in part at any time at its option. Prior to November 30, 2023, the redemption price will be $25.00 per $25.00 principal amount of Notes, plus a "make-whole” premium consisting of the greater of (1) 1.0% of the principal amount of the Note and (2) the excess of (a) the present value at such redemption date of (i) the redemption price of the Note at November 30, 2023 plus (ii) all required interest payments due on the Note through November 30, 2023 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points discounted to the redemption date on a semi-annual basis (assuming a 360- day year consisting of twelve 30-day months), over (b) the principal amount of the Note, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. On and after ~~April 1, 2018,~~November 30, 2023, the Company may redeem the Notes (i) on or after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Notes, (ii) on or after November 30, 2024 and prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The Indenture contains customary events of default and cure provisions. If an event of default (other than an event of default of the type described in the following sentence) occurs and is continuing with respect to the Notes, the Trustee may, and at the direction of the registered holders of at least 25% in aggregate principal amount of the outstanding debt securities of the Notes shall, declare the principal amount plus accrued and unpaid interest, premium and additional amounts, if any, on the ~~Term Loan that is based upon the base rate will~~Notes to be due and payable ~~in arrears~~immediately. If an event of default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal amount plus accrued and unpaid interest, and premium, if any, on the ~~last business day of each calendar month,~~Notes will become immediately due and ~~interest~~payable without any action on the ~~Term Loan~~part of the Trustee or any holder of the Notes.

The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $125.0 million is ~~based upon~~available under a U.S. facility, an aggregate of $80.0 million is available under a European facility, $10.0 million is available under a Hong Kong facility, $5.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the ~~LIBOR rate will~~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 French facility includes a $1.0 million subfacility for swingline loans, and the 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 total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong facility, the French facility and the Canadian facility. Loans under the Revolving Facility may be ~~due~~made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal 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 ~~payable~~(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, plus (iv) the lesser of (x) 40% of the appraised net orderly liquidation value of eligible U.S. intellectual property and (y) $20.0 million, minus (v) 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. The above advance rates (other than the advance rates with respect to intellectual property) are seasonally increased by 5% (e.g. from 90% to 95%) during the period commencing on the date of delivery of the borrowing base certificate with respect to the second fiscal month of the Company and ending on the last day of the ~~applicable interest period; provided, that if such interest~~ period extends for over one month, then interest will be due and payable at 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 debtcovered by the Company following the repayment in full of the Term Loan, the Company will be required to repay the Revolving Credit Facility 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 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.

~~The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to~~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 Companycertificate delivered with respect to the fifth fiscal month of the Company.

The Revolving ~~Credit~~ Facility also includes a commitment fee, payable quarterly in arrears, of 0.250% or 0.375% determined by reference to ~~0.50% per annum.~~the average daily unused portion of the overall commitment under the Revolving Facility. The ~~Company~~ABL Borrowers will ~~incur~~pay the ABL Agent, on the account of the issuing ABL Lenders, an ~~additional~~issuance fee of ~~0.25% times~~0.125% for any issued Letters of Credit.

The ABL Borrowers have the ~~outstanding~~right to request an increase to the commitments under the Revolving Facility or any subfacility in an aggregate principal amount not to exceed $75.0 million in increments no less than $10.0 million, subject to certain terms and conditions as defined in the Revolving Facility.

The Revolving Facility is secured by guarantees by the Company and certain of its domestic subsidiaries. Additionally, the ~~total credit exposure~~Company and such subsidiaries have granted liens on all or substantially all of their assets in order to secure the obligations under the ~~credit agreement if~~Revolving Facility. In addition, the ~~Term Loan has not been repaid~~Swiss Borrower, the Hong Kong Borrower, the French Borrower, the German Borrower and the Canadian Borrower, and the other non-U.S. borrowers from time to time party to the Revolving Facility are

required to enter into security instruments with respect to all or substantially all of their assets that can be pledged under applicable local law, and certain of their respective subsidiaries may guarantee the respective non-U.S. obligations under the Revolving Facility.

The Revolving Facility contains customary affirmative and negative covenants and events of default, such as compliance with annual audited and quarterly unaudited financial statements disclosures. Upon an event of default, the ABL Agent will have the right to declare the revolving loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced, subject to cure periods and grace periods set forth in ~~full on or prior to March 31, 2018. Furthermore,~~ the ~~Second Amendment changed the consolidated total leverage ratio that~~Revolving Facility.

As of July 1, 2023, 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 payments of $6.3~~had $150.0 million and ~~$18.8~~$99.0 million outstanding under the ~~Term Loan during the Third Quarter~~Notes and ~~Year To Date Period,~~Revolving Facility, respectively. The Company ~~also made~~had net ~~payments~~borrowings of ~~$158.0~~$8.0 million and ~~$131.3~~$26.0 million under the Revolving ~~Credit~~ Facility during the ~~Third~~Second Quarter and Year To Date Period, respectively. Amounts available under the Revolving ~~Credit~~ Facility ~~are~~were reduced by any amounts outstanding under standby ~~letters~~Letters of ~~credit.~~Credit. As of ~~September 30, 2017,~~July 1, 2023, the Company had available borrowing capacity of ~~$270.5~~$72.5 million under the Revolving ~~Credit~~ Facility. ~~The~~As of July 1, 2023, the Company had unamortized debt issuance costs of $6.0 million recorded in long-term debt and $2.8 million recorded in intangible and other assets-net on 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.consolidated balance sheets. The Company incurred ~~approximately $2.2~~$2.6 million and ~~$6.3~~$5.2 million of interest expense related to the ~~Term Loan~~Notes during the Third Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap. The Company incurred approximately $8.1 million and $20.5 million of interest expense related to the Revolving Credit Facility during the ThirdSecond Quarter and Year To Date Period, respectively. The Company incurred ~~approximately $0.9~~$1.3 million and ~~$2.7~~$2.3 million of interest expense related to the Revolving Facility during the Second Quarter and Year To Date Period, respectively. The Company incurred $0.6 million and $1.2 million of interest expense related to the amortization of debt issuance costs during the ~~Third~~Second Quarter and Year To Date Period, respectively. At July 1, 2023, the Company was in compliance with all debt covenants related to its credit facilities.

~~15.~~16. RESTRUCTURING

In the first quarter of fiscal year 2023, the Company announced its Transform and Grow plan ("TAG") designed to reduce operating costs, improve operating margins, and advance the Company’s commitment to profitable growth. The Company ~~implemented~~has now expanded the scope and duration of TAG to focus on a ~~multi-year restructuring program that began~~more comprehensive review of its global business operations. The expansion of TAG will put greater emphasis on initiatives to exit or minimize certain product offerings, brands and distribution, and to strengthen gross margin and increase the level of operating expense efficiencies. TAG is estimated to generate approximately $300 million of annualized operating income benefits by the end of 2025. The previously announced TAG plan was expected to generate $100 million of annualized operating income benefits by the end of 2024. The Company estimates approximately $100 million to $120 million in total charges over the duration of TAG and estimates approximately $35 million of charges in fiscal year ~~2016 called New World Fossil ("NWF"). As part of NWF,~~2023. With these measures, the ~~Company targets to improve operating profit and support sales growth through a leaner infrastructure and an enhanced business model. The Company~~Company's goal is ~~working~~ to achieve ~~greater efficiencies from production~~adjusted gross margins in the low to ~~distribution through activities such as organizational changes, reducing its overall product assortment, optimizing its base cost structure~~mid 50% range and ~~consolidating facilities. The Company also intends to build a quicker and more responsive~~adjusted 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 million restructuring charges, approximately $27.8 million and $41.8 million were recorded during fiscal year 2016 and the Year To Date period, respectively. The Company estimates total fiscal year 2017 NWF restructuring chargesmargins of approximately ~~$45 million.~~10%.

The following table shows a summary of TAG Plan charges (in thousands):


	For the 13 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 1, 2023
Cost of sales	$	2,911	$	8,174
Selling, general and administrative expenses	4,632		11,729
Consolidated	$	7,543	$	19,903

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


	For the 13 Weeks Ended July 1, 2023
	Liabilities						Liabilities
	April 1, 2023		Charges		Cash Payments		July 1, 2023
Professional services	$	20	$	967	$	89	$	898
Severance and employee-related benefits	4,500		3,666		3,353		4,813
Charges related to exits of certain product offerings	5,264		2,910		700		7,474
Total	$	9,784	$	7,543	$	4,142	$	13,185


												For the 26 Weeks Ended July 1, 2023
	For the 13 Weeks Ended September 30, 2017											Liabilities								Liabilities
	Liabilities								Liabilities			December 31, 2022		Charges		Cash Payments		Non-cash Items		July 1, 2023
	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
Professional services											Professional services	$	—	$	1,002	$	104	$	—	$	898
Severance and employee-related benefits	1,535		2,522		2,467		—		1,590		Severance and employee-related benefits	—		10,727		5,914		—		4,813
Charges related to exits of certain product offerings											Charges related to exits of certain product offerings	—		8,174		700		—		7,474
Total	$	6,544	$	5,769	$	6,752	$	2,611	$	2,950	Total	$	—	$	19,903	$	6,718	$	—	$	13,185

~~Restructuring~~TAG Plan restructuring charges by operating segment were as follows (in thousands):


	For the 13 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 1, 2023
Americas	$	1,535	$	4,493
Europe	3,386		7,342
Asia	1,686		5,953
Corporate	936		2,115
Consolidated	$	7,543	$	19,903

In fiscal year 2022, the Company completed its New World Fossil 2.0 (“NWF 2.0”) restructuring program it launched in 2019. 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 July 1, 2023
	Liabilities				Liabilities
	April 1, 2023		Cash Payments		July 1, 2023

Professional services	60		13		47
Severance and employee-related benefits	587		327		260
Total	$	647	$	340	$	307


	For the 13 Weeks Ended July 2, 2022
	Liabilities								Liabilities
	April 2, 2022		Charges		Cash Payments		Non-cash Items		July 2, 2022
Store closures	$	264	$	—	$	264	$	—	$	—
Professional services	357		—		227		—		130
Severance and employee-related benefits	4,528		2,887		3,014		785		3,616
Total	$	5,149	$	2,887	$	3,505	$	785	$	3,746


	For the 26 Weeks Ended July 1, 2023
	Liabilities				Liabilities
	December 31, 2022		Cash Payments		July 1, 2023

Professional services	74		27		47
Severance and employee-related benefits	2,821		2,561		260
Total	$	2,895	$	2,588	$	307

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 26 Weeks Ended July 2, 2022
	Liabilities								Liabilities
	January 1, 2022		Charges		Cash Payments		Non-cash Items		July 2, 2022
Store closures	$	300	$	405	$	613	$	92	$	—
Professional services	643		135		648		—		130
Severance and employee-related benefits	4,388		4,898		4,885		785		3,616
Total	$	5,331	$	5,438	$	6,146	$	877	$	3,746

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


	For the 13 Weeks Ended July 2, 2022		For the 26 Weeks Ended July 2, 2022
Americas	$	36	$	83
Europe	282		1,531
Asia	40		1,204
Corporate	2,529		2,620
Consolidated	$	2,887	$	5,438

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 ended ~~September 30, 2017~~July 1, 2023 (the ~~“Third~~“Second Quarter”) and ~~“Year To Date Period,” respectively) as compared to the thirteen and thirty-nine week periods ended October 1, 2016~~July 2, 2022 (the “Prior Year Quarter”), and ~~“Prior~~the twenty-six week periods ended July 1, 2023 (the "Year To Date Period") and July 2, 2022 (the "Prior Year YTD ~~Period,” respectively)~~Period"). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

~~General~~Overview

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,~~

Known or Anticipated Trends

Based on our recent operating results and current perspectives on our operating environment, we ~~sell~~anticipate the following trends will continue to impact our ~~products through a diversified distribution network that includes department stores, specialty retail locations, specialty watch~~operating results:

Economic Environment Impacting Consumer Spending Ability and ~~jewelry stores, Company-owned retail~~Preferences:We believe inflationary pressures, increasing interest rates and ~~outlet stores, mass market stores and through our FOSSIL~~^® ~~website. Our~~recessionary fears are impacting 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. In the United States, our network of Company-owned stores included 84 retail stores locatedbehavior, including cautiousness in ~~premier retail sites and 122 outlet stores located in major outlet malls as of September 30, 2017.~~placing advance orders for merchandise. In addition, we ~~offer an extensive collection~~expect continued pressure on consumer discretionary spending as the U.S. federal funds rate fluctuates and credit markets tighten. We expect inflation to continue in 2023 in many of our ~~FOSSIL brand products on~~major markets.

Inventory Levels: A slowing of consumer demand in our ~~website,~~ ~~www.fossil.com~~,core categories, in part due to macro economic factors such as ~~well as proprietary~~higher inflation, has resulted in excess inventory with many of our wholesale customers. With higher marketplace inventories and ~~licensed watch~~a rapidly changing economic environment, retailers are rationalizing their inventory needs. We continue to proactively manage our inventory purchases to mitigate our cash flow and ~~jewelry brands through other managed and affiliated websites.~~inventory risks.

~~Internationally, our products are sold to department stores, specialty retail stores and specialty watch and jewelry stores~~Russia-Ukraine Conflict:Our operations in ~~approximately 150 countries worldwide through 23 Company-owned foreign~~Russia consist of sales ~~subsidiaries and~~ through a ~~network~~third-party distributor. Sales to this distributor are currently on hold. Our sales in Russia are not material to our financial results. We have no other operations, including supply chain, in Russia or Ukraine. However, the continuation of ~~approximately 80 independent distributors. Internationally, our network~~the Russia-Ukraine military conflict and/or an escalation of ~~Company-owned stores included 216 retail stores~~the conflict beyond its current scope may weaken the global economy and ~~134 outlet stores as of September 30, 2017. Our products are also sold through licensed~~could result in additional inflationary pressures and franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer an extensive collection of our FOSSIL brand products on our websites in certain countries.supply chain constraints.

Supply Chain: 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. We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. 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~~

Among our foreign suppliers, China is the source of a ~~number of factors that are outside~~substantial majority of our imports. We expect fewer impacts from international transit times and ~~our contract manufacturers’ control.~~

Future sales and earnings growth are also contingent upon our ability to anticipate and respond to changing fashion trends and consumer preferences in a timely manner while continuing to develop innovative productstransportation costs in the ~~respective markets~~current fiscal year compared with the prior fiscal year. A material increase in the cost of our products or transportation without any offsetting price increases or a disruption in the flow of finished goods from China may significantly decrease our profits.

Data: We depend on information technology systems, the Internet and computer networks for a substantial portion of our retail and e-commerce businesses, including credit card transaction authorization and processing. We also receive and store personal information about our customers and employees, the protection of which is critical to us. In the normal course of our business, we ~~compete. As is typical with new products,~~collect, retain, and transmit certain sensitive and confidential customer information, including credit card information, over public networks. Despite the security measures we currently have in place, our ~~lines~~facilities and systems and those of ~~connected accessories, market acceptance~~our third party service providers have been, and will continue to be, vulnerable to theft of ~~new designs~~physical information, security breaches, hacking attempts, computer viruses and ~~products~~malware, ransomware, phishing, lost data and programming and/or

human errors. To date, none of these risks, intrusions, attacks or human error have resulted in any material liability to us. While we carry insurance policies that would provide liability coverage for certain of these matters, if we ~~may introduce is~~experience a significant security incident, we could be subject to ~~uncertainty.~~liability or other damages that exceed our insurance coverage. In addition, we ~~generally make decisions regarding~~cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

Business Strategies and Outlook: We are expanding our Transform and Grow Plan (“TAG”), to undertake a more comprehensive review of our business operations, in order to create a more profitable company and to enable investment in our growth strategies.

Our goal in expanding TAG is to put additional emphasis on initiatives to exit or minimize certain product ~~designs several months~~offerings, brands and distribution, and to strengthen gross margin and increase the level of operating expense efficiencies. The Company estimates it can generate approximately $300 million of annualized operating income benefits by the end of 2025. The previously announced TAG program was designed to generate annualized cost savings of approximately $100 million by the end of fiscal year 2024. In connection with TAG, the Company expects to incur charges of approximately $100 million to $120 million over the duration of TAG and estimates approximately $35 million of charges in ~~advance~~fiscal year 2023.

The “Transform” aspect of TAG focuses on optimizing our core categories, brands, geographies and channels. Through this more focused lens, we intend to restructure our operations to achieve improved gross margins, lower operating expenses and to reduce our working capital, primarily through lower inventory purchases in fiscal year 2023 and improved inventory efficiency through better assortment strategies and inventory management. Key focus areas under the ~~time when consumer acceptance can be measured.~~expansion of TAG include pricing and promotion, manufacturing and supply chain. With these measures, our goal is to achieve adjusted gross margins in the low to mid 50% range and adjusted operating margins of approximately 10%.

To execute the expanded TAG plan, we have established a Transformation Office and will partner with a leading strategic consulting firm. In addition to the program outlined above, the Transformation Office will focus on the “Growth” aspect of our TAG plan which consists of investing in three key growth pillars to drive sustained and profitable revenue growth. These growth pillars are: (1) revitalizing the Fossil Brand, (2) maximizing our licensed brand portfolio in watches and jewelry and (3) growing our premium watch offerings. We believe that these growth pillars are best enabled by our digital transformation, marketing capabilities and technology investments. As we ~~can drive long-term~~execute against our three core growth pillars, we have an opportunity to improve our operating fundamentals and right size our cost structure to be more closely aligned with brand building, innovation through design, fashion and new materials and introducing new technology and functionality into our accessories, while continuing to provide a solid value proposition to consumers across all of our brands.

~~Our international operations are subject to many risks, including foreign currency fluctuations and risks related to~~ the ~~global economy. Generally, a strengthening~~realities of the ~~U.S. dollar against currencies of other countries in which we operate will reduce the translated amounts of sales and operating expenses of our subsidiaries, which results in a reduction of our~~external environment.

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 intercompany 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.

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 for the fiscal year ended December 31, ~~2016~~2022.

Operating Segments

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 ~~"Part II, Item 1A. Risk Factors" of this Quarter Report on Form 10-Q.~~each reportable segment provides similar products and services.

~~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.Americas: 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 accelerationAmericas segment is comprised of sales ~~favorably impacted the Third Quarter sales growth rate by roughly three percentage points, and we expect this favorable impact will largely reverse~~from our operations in the ~~fourth quarter~~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 variety of ~~fiscal year 2017. While the overall business remains challenging~~physical points of sale, distributors 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.e-commerce channels. In the ~~MICHAEL KORS brand,~~direct to consumer channel, 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 towardshad 146 Company-owned stores as of the end of the ~~Third~~Second Quarter and ~~preliminary results have been favorable.~~an extensive collection of products available through our owned websites.

~~We plan~~Europe: The Europe segment is comprised of sales to ~~launch five more brands onto~~customers based in European countries, the ~~hybrid platform this year, including DKNY, MARC JACOBS, MICHELE, RELIC~~Middle East and ~~TORY BURCH. These new launches will bring us~~Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a ~~total~~variety of ~~14 brands in wearables~~physical points of sale, distributors, 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.

channels. In the ~~Third Quarter,~~direct to consumer channel, 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~~had 92 Company-owned stores 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~~end of the Second Quarter and an extensive collection of products available through our owned websites.

Asia: The Asia segment is comprised of sales to customers based in Australia, China (including Hong Kong, Macau and Taiwan), 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 ~~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~~sell our products through a variety of physical points of sale, distributors, 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.~~e-commerce channels. In the ~~Third~~direct to consumer channel, we had 77 Company-owned stores as of the end of the Second Quarter ~~we recorded a $23 million valuation charge to support~~and an extensive collection of products available through 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 outletsowned websites.

Key Measures of Financial Performance 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.Key Non-GAAP Financial Measures

Constant Currency Financial ~~Information~~

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”~~("GAAP"), our ~~discussions contain~~discussion contains 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 fiscal 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 constant currency financial information and the most directly comparable GAAP measure are included where applicable.

~~Quarterly Periods Ended September 30, 2017~~Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and ~~October 1, 2016~~

~~Consolidated Net Sales.~~ ~~Net sales decreased $49.3 million or 6.7% (8.0% in constant currency)~~Adjusted Earnings (Loss) per Share: Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are non-GAAP financial measures. We define Adjusted EBITDA as our income (loss) before income taxes, plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense and restructuring expense, minus interest income. We define Adjusted operating income (loss) as operating income (loss) before impairment expense and restructuring expense. We define Adjusted net income (loss) and Adjusted earnings (loss) per share as net income attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively, before impairment expense, and restructuring expense. We have included Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share herein because they are widely used by investors for ~~the Third Quarter as compared to the Prior Year Quarter. During the Third Quarter,~~valuation and for comparing our leathers products decreased $17.6 million or 18.9% (19.9% in constant currency) primarily as a result of the current product assortment not resonating well with consumers. Global watch sales decreased $15.3 million or 2.7% (4.1% in constant currency) driven by declines in traditional watches partially offset by increases in connected watches. Our jewelry business decreased $12.5 million or 20.8% (22.8% in constant currency).

~~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
Growth (Decline)
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 )%
Leathers 75.7
11.0
93.3
12.6
(17.6 ) (18.9 ) (19.9 )
Jewelry 47.7
6.9
60.2
8.2
(12.5 ) (20.8 ) (22.8 )
Other 13.4
2.0
17.3
2.3
(3.9 ) (22.5 ) (23.6 )
Total $ 688.7
100.0 % $ 738.0
100.0 % $ (49.3 ) (6.7 )% (8.0 )%

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

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

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 million or 14.7% (15.1% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. During the Third Quarter, watches decreased $32.1 million or 11.7% (12.1% in constant currency), while our leathers business decreased $12.7 million or 21.6% (22.1% in constant currency) and our jewelry category decreased $6.6 million or 29.5% (29.9% in constant currency). Sales declines in the U.S. and Canada were partially offset by growth in Mexico. During the Third Quarter, most brands in the portfolio declined while our EMPORIO ARMANI watch business increasedfinancial performance with the ~~introduction~~performance of ~~EMPORIO ARMANI Connected. Decreases in traditional watches were partially offset by increases in connected watches, with~~our competitors. We also use these non-GAAP financial measures to monitor and compare the ~~strongest~~financial performance ~~coming from FOSSIL connected watches. While both~~of our ~~wholesale~~operations. Our presentation of Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) 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~~Adjusted earnings (loss) per share may not be comparable ~~sales in our stores were partially offset by positive comparable sales in our e-commerce business.~~

~~The following table sets forth product~~to similarly titled measures other companies report. Adjusted EBITDA, Adjusted operating income (loss), Adjusted net ~~sales for the Americas segment on a reported~~income (loss) and ~~constant currency basis (dollars in millions):~~

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 million or 1.6% (decreased 2.1% in constant currency) during the Third Quarter in comparison to the Prior Year Quarter. Watches increased $11.6 million or 6.4% (2.5% 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 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 requiredAdjusted earnings (loss) per share are not intended to be ~~announced~~used as alternatives to ~~customers~~any measure of our performance 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 offset declines in leathers 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. accordance with GAAP.

Comparable ~~retail sales were moderately negative during the Third Quarter, as positive comparable e-commerce sales were more than offset by negative comparative retail store sales amid declining traffic.~~

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

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 million or 0.1% (increased 0.4% in constant currency), driven by declines 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 to the Prior Year Quarter, our leathers category decreased $2.7 million or 19.0% (18.3% 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 EMPORIO ARMANI brands in particular, while traditional watches continued to decline. Comparable retail sales in the region decreased moderately largely driven by traffic declines.

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

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 %

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

September 30, 2017
October 1, 2016
Americas
Europe
Asia
Total
Americas
Europe
Asia
Total
Full price accessory 112

109

61

282

128

122

66

316
Outlets 136

74

46

256

156

73

46

275
Full priced multi-brand —

8

10

18

—

7

12

19
Total stores 248

191

117

556

284

202

124

610

~~During the Third Quarter, we closed 8 stores and did not open any new stores.~~

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

Store Counts: While macro economic factors have shifted sales away from traditional brick and mortar stores towards digital channels, store counts continue to provide a key metric for management. Both the size and quality of our store fleet have a direct impact on our sales and profitability. Over time, we have made progress right-sizing our fleet of stores by focusing on closing our least profitable stores.

Total Liquidity: We define total liquidity as cash and cash equivalents plus available borrowings on our revolving credit facility. We monitor and forecast total liquidity to ensure we can meet our financial obligations.

Components of Results of Operations

Revenues from sales of our products, including those that are subject to inventory consignment agreements, are recognized when control of the product is transferred to the customer and in an amount that reflects the consideration we expect to be entitled in exchange for the product. We accept limited returns from customers. We continually monitor returns and maintain a provision for estimated returns based upon historical experience and any specific issues identified. Our product returns provision is accounted for as a reduction to revenue and cost of sales and increases to customer liabilities and other current assets to the extent the returned product is expected to be resalable.

Cost of Sales includes raw material costs, assembly labor, assembly overhead including depreciation expense, assembly warehousing costs and shipping and handling costs related to the movement of finished goods from assembly locations to sales distribution centers and from sales distribution centers to customer locations. Additionally, cost of sales includes customs

duties, product packaging cost, royalty cost associated with sales of licensed products, the cost of molding and tooling, inventory shrinkage and damages and restructuring charges.

Gross ~~Profit.~~Profit and gross profit margin are influenced by our diversified business model that includes, but is not limited to: (i) product categories that we distribute; (ii) the multiple brands, including both owned and licensed, 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 attributes of this diversified business model produce varying ranges of gross profit margin. Generally, on a historical basis, our fashion branded traditional watch and jewelry offerings produce higher gross profit margins than our smartwatches and leather goods offerings. In addition, in 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. However, smartwatches carry relatively lower margins than our other major product categories. Gross profit ~~of $319.9 million~~margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the ~~Third Quarter decreased 16.9%~~following factors: (i) premiums charged in comparison to ~~$385.1 million~~retail prices on products sold in the ~~Prior Year Quarter driven by lower~~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.

Operating Expenses include selling, general and administrative ("SG&A"), 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 our 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 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 our Company’s infrastructure and store closures under our TAG and New World Fossil initiatives.

Results of Operations

Quarterly Periods Ended July 1, 2023 and July 2, 2022

Consolidated Net Sales. Net sales decreased margin rates. Gross profit margin rate decreased 580 basis points to 46.4% in the Third Quarter compared to 52.2% in the Prior Year Quarter. 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 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 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.

~~Operating Expenses.~~ ~~Total operating expenses in the Third Quarter decreased by $33.5~~$49.2 million, or ~~9.5% to $320.4 million compared to $353.9 million in~~13.3%, for the Prior Year Quarter. Third Quarter operating expenses included restructuring costs of $5.8 million under our NWF initiative, while the Prior Year Quarter included $14.5 million in restructuring costs as well as a $10 million benefit resulting from real estate gains.

In the Third Quarter, SG&A expenses were $24.8 million lower compared to the Prior Year Quarter primarily as a result of corporate and regional overhead reductions and 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. The translation of foreign-denominated expenses during the Third Quarter increased operating expenses by

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

~~Consolidated Operating Income (Loss).~~ Operating income (loss) decreased to a loss of $0.5 million in the Third Quarter as compared to income of $31.2 million in the Prior Year Quarter, primarily driven by both decreased sales and gross margin rate. As a percentage of net sales, operating margin (loss) was (0.1%) in the Third Quarter compared to 4.2% in the Prior Year Quarter. Operating margin rate in the Third Quarter included a negative impact of approximately 50 basis points due to changes in foreign currencies. During the ThirdSecond Quarter as compared to the Prior Year Quarter, ~~we faced continued retail pressure, most significantly in our traditional businesses~~with sales declines in all ~~segments. Additionally,~~three regions. Wholesale sales declined 18.5% (18.3% in constant currency) while direct to consumer sales decreased 4.9% (3.5% in constant currency). Decreased sales in the ~~gross margin rate was negatively impacted~~wholesale channel reflect lower purchases by ~~connected products,~~wholesale accounts due to ~~both lower connected margins as well as additional product valuation charges,~~tighter management of inventories and lower ~~retail margins due to increased promotional activity~~end-consumer demand. From a category perspective, traditional watch sales decreased 8.7% (8.0% in ~~outlets~~constant currency). Sales of smartwatches declined 46.7% (46.6% in constant currency) reflecting lower consumer demand across geographies and channels and our deemphasis of 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 Quartercategory as compared to the Prior Year Quarter. Jewelry declined 19.2% (same in constant currency) primarily due to declines in MICHAEL KORS jewelry. Leathers declined 7.2% (6.1% in constant currency). From a brand perspective, sales decreased throughout most of our brand portfolio, with the most predominant decline in MICHAEL KORS. FOSSIL branded sales decreased moderately, largely driven by declines in smartwatches and leathers while traditional watches increased 1% in constant currency. Global comparable retail sales increased 3% primarily due to increases in our owned e-commerce websites. We have reduced our store footprint by 34 stores (10%), since the end of the Prior Year Quarter.

~~Operating income (loss)~~

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


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	$	146.7	45.6	%	$	168.3	45.3	%	$	(21.6)	(12.8)	%	(13.1)	%
Europe	88.3		27.4		107.9		29.1		(19.6)		(18.2)		(19.2)
Asia	84.1		26.1		92.6		24.9		(8.5)		(9.2)		(4.9)
Corporate	2.9		0.9		2.4		0.7		0.5		20.8		20.8
Total	$	322.0	100.0	%	$	371.2	100.0	%	$	(49.2)	(13.3)	%	(12.6)	%

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 by $5.1 million during the Third Quarter as a result of higher interest rate spreads due to our amended credit facility.~~

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

~~Provision for Income Taxes~~. The income tax benefit for the Third Quarter was $3.2 million, resulting in an effective income tax rate of 37.1%. For the Prior Year Quarter, income tax expense was $6.5 million, resulting in an effective income tax rate of 25.0%. The higher effective tax rate in the Third Quarter as compared to the Prior Year Quarter was attributable to a higher structural rate resulting from an increased forecasted loss from the Company's U.S. operations which was tax-benefited at a higher tax rate than 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 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 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.~~ Third Quarter net income (loss) attributable to Fossil Group, Inc. decreased to $(5.4) million, or $(0.11) per diluted share, in comparison to $17.4 million, or $0.36 per diluted share, in the Prior Year Quarter. Diluted earnings (loss) per share in the Third Quarter included a restructuring charge of $0.08 as compared to a restructuring charge of $0.22 in the Prior Year Quarter. Excluding restructuring, the decline in 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 positively 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) 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.

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


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	236.1	73.4	%	$	258.7	69.7	%	$	(22.6)	(8.7)	%	(8.0)	%
Smartwatches	17.8		5.5		33.4		9.0		(15.6)		(46.7)		(46.6)
Total watches	$	253.9	78.9	%	$	292.1	78.7	%	$	(38.2)	(13.1)		(12.4)
Leathers	33.3		10.3		35.9		9.7		(2.6)		(7.2)		(6.1)
Jewelry	27.4		8.5		33.9		9.1		(6.5)		(19.2)		(19.2)
Other	7.4		2.3		9.3		2.5		(1.9)		(20.4)		(19.4)
Total	$	322.0	100.0	%	$	371.2	100.0	%	$	(49.2)	(13.3)	%	(12.6)	%

In the Second Quarter, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by $2.4 million, including an unfavorable impact of $4.0 million in our Asia segment and favorable impacts of $1.1 million and $0.5 million in our Europe and Americas segments, respectively, as compared to the Prior Year Quarter.

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


	July 2, 2022	Opened	Closed	July 1, 2023
Americas	157	0	11	146
Europe	113	1	22	92
Asia	79	3	5	77
Total stores	349	4	38	315

Americas Net Sales. Americas net sales decreased $21.6 million, or 12.8% (13.1% in constant currency), during the Second Quarter in comparison to the Prior Year Quarter. Sales decreases were largely in the MICHAEL KORS and FOSSIL brands. Sales decreased in our wholesale channel primarily reflecting lower purchases by wholesale accounts due to tighter inventory management and lower consumer demand, while our direct to consumer channel was flat. Comparable retail sales were slightly positive during the Second Quarter.

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 (dollars in millions):


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	108.9	74.2	%	$	118.7	70.5	%	$	(9.8)	(8.3)	%	(8.8)	%
Smartwatches	8.4		5.7		15.4		9.2		(7.0)		(45.5)		(45.5)
Total watches	$	117.3	79.9	%	$	134.1	79.7	%	$	(16.8)	(12.5)		(13.0)
Leathers	21.0		14.3		22.6		13.4		(1.6)		(7.1)		(6.2)
Jewelry	6.2		4.2		9.3		5.5		(3.1)		(33.3)		(32.3)
Other	2.2		1.6		2.3		1.4		(0.1)		(4.3)		(8.7)
Total	$	146.7	100.0	%	$	168.3	100.0	%	$	(21.6)	(12.8)	%	(13.1)	%

Europe Net Sales. Europe net sales decreased $19.6 million, or 18.2% (19.2% in constant currency), during the Second Quarter in comparison to the Prior Year Quarter. Our sales across much of the Eurozone decreased. From a brand perspective,

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 )%
sales decreased throughout most of our brand portfolio, with the largest decline in MICHAEL KORS. FOSSIL branded sales decreased moderately, largely driven by declines in smartwatches and jewelry while traditional watches increased 7% in constant currency. Sales declines in our wholesale channel were partially offset by e-commerce sales increases. Comparable retail sales increased moderately during the Second Quarter with growth in store sales and owned e-commerce 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 (dollars in millions)


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	59.4	67.3	%	$	70.4	65.2	%	$	(11.0)	(15.6)	%	(16.5)	%
Smartwatches	5.3		6.0		10.3		9.5		(5.0)		(48.5)		(49.5)
Total watches	$	64.7	73.3	%	$	80.7	74.7	%	$	(16.0)	(19.8)		(20.7)
Leathers	5.0		5.7		5.3		4.9		(0.3)		(5.7)		(7.5)
Jewelry	15.4		17.4		18.6		17.2		(3.2)		(17.2)		(18.8)
Other	3.2		3.6		3.3		3.2		(0.1)		(3.0)		(3.0)
Total	$	88.3	100.0	%	$	107.9	100.0	%	$	(19.6)	(18.2)	%	(19.2)	%

Asia Net Sales. Net sales in Asia decreased $8.5 million, or 9.2% (4.9% in constant currency), during the Second Quarter in comparison to the Prior Year Quarter. The sales decreases were across the Asia region, with the largest sales decreases in FOSSIL and EMPORIO ARMANI brands. FOSSIL branded sales decreased moderately, largely driven by declines in smartwatches while traditional watches increased 6% in constant currency. Comparable retail sales decreased moderately during the Second Quarter, driven by store sales declines, partially offset by increased owned e-commerce 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 Asia segment (dollars in millions):


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	65.9	78.4	%	$	69.5	75.1	%	$	(3.6)	(5.2)	%	(0.7)	%
Smartwatches	4.1		4.9		7.8		8.4		(3.7)		(47.4)		(44.9)
Total watches	$	70.0	83.3	%	$	77.3	83.5	%	$	(7.3)	(9.4)		(5.2)
Leathers	7.4		8.8		8.0		8.6		(0.6)		(7.5)		(5.0)
Jewelry	5.8		6.9		6.0		6.5		(0.2)		(3.3)		—
Other	0.9		1.0		1.3		1.4		(0.4)		(30.8)		(15.4)
Total	$	84.1	100.0	%	$	92.6	100.0	%	$	(8.5)	(9.2)	%	(4.9)	%

Gross Profit. Gross profit of $156.7 million in the Second Quarter decreased 18.1% in comparison to $191.3 million in the Prior Year Quarter. Our gross profit margin rate decreased to 48.7% in the Second Quarter compared to 51.6% in the Prior Year Quarter. The year-over-year decrease primarily reflects increased promotions, an unfavorable currency impact, net foreign currency hedging contract losses in the current year as compared to gains in the prior year and restructuring charges related to product offering exits. These costs were partially offset by decreased freight costs.

Operating Expenses. Total operating expenses in the Second Quarter decreased by 5.1% to $192.0 million or 59.6% of net sales, in comparison to $202.3 million or 54.5% of net sales in the Prior Year Quarter. SG&A expenses were $187.2 million in the Second Quarter compared to $199.2 million in the Prior Year Quarter. As a percentage of net sales, SG&A expenses increased to 58.1% in the Second Quarter as compared to 53.7% in the Prior Year Quarter, largely driven by decreased sales. Restructuring expenses were $4.6 million in the Second Quarter, compared to $2.9 million in the Prior Year Quarter. We

incurred other long-lived asset impairment charges of $0.2 million in both the Second Quarter and Prior Year Quarter. The translation of foreign-denominated expenses during the Second Quarter decreased operating expenses by $0.8 million as a result of the stronger U.S. dollar.

Operating Income (loss). Operating loss in the Second Quarter was $35.3 million as compared to an operating loss of $10.9 million in the Prior Year Quarter. As a percentage of net sales, operating margin was (11.0)% in the Second Quarter compared to (2.9)% in the Prior Year Quarter. Operating margin rate in the Second Quarter included an unfavorable impact of 140 basis points due to changes in foreign currencies.

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


	For the 13 Weeks Ended July 1, 2023		For the 13 Weeks Ended July 2, 2022		Change				Operating Margin %
					Dollars		Percentage		2023		2022
Americas	$	23.4	$	30.7	$	(7.3)	(23.8)	%	16.0	%	18.2	%
Europe	(0.7)		14.8		(15.5)		(104.7)		(0.8)		13.8
Asia	7.4		12.4		(5.0)		(40.3)		8.8		13.3
Corporate	(65.4)		(68.8)		3.4		4.9
Total operating income	$	(35.3)	$	(10.9)	$	(24.4)	(223.9)	%	(11.0)	%	(2.9)	%

Interest Expense. Interest expense increased by $1.0 million during the Second Quarter compared to the Prior Year Quarter, primarily driven by an increased debt balance and increased interest rate.

Other Income (Expense)-Net. During the Second Quarter, other income (expense)-net was income of $7.2 million in comparison to expense of $1.7 million in the Prior Year Quarter, reflecting net currency gains in the Second Quarter as compared to net currency losses in the Prior Year Quarter.

Provision for Income Taxes. Income tax benefit for the Second Quarter was $7.2 million, resulting in an effective income tax rate of 21.5%. For the Prior Year Quarter, income tax expense was $2.0 million, resulting in an effective income tax rate of (11.8)%. The effective tax rate in the Second Quarter was favorable as compared to the Prior Year Quarter due to reduced foreign taxes and favorable discrete items. No tax benefit has been accrued on the Second Quarter U.S. tax losses and certain foreign tax losses due to the uncertainty of whether they can be used in the future. The Second Quarter’s effective tax rate is positive because an income tax benefit was accrued on certain foreign losses combined with the favorable discrete items.

Net Income (Loss) Attributable to Fossil Group, Inc. Second Quarter net income (loss) attributable to Fossil Group, Inc. was net loss of $26.5 million, or $0.51 per diluted share, in comparison to a net loss of $19.1 million, or $0.37 per diluted share, in the Prior Year Quarter. During the Second Quarter, currencies favorably affected loss per diluted share by approximately $0.03.

Adjusted Net Income (Loss).Adjusted net income (loss) for the Second Quarter was a net loss of $20.4 million with adjusted loss per diluted share of $0.40 compared to adjusted net loss of $16.6 million with adjusted loss per diluted share of $0.33 in the Prior Year Quarter.

Adjusted EBITDA. The following table reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, which is income (loss) before income taxes. Certain line items presented in the table below, when aggregated, may not foot due to rounding (dollars in millions).


	For the 13 Weeks Ended July 1, 2023				For the 13 Weeks Ended July 2, 2022
	Dollars		% of Net Sales		Dollars		% of Net Sales
Income (loss) before income taxes	$	(33.5)	(10.4)%		$	(16.9)	(4.6)	%
Plus:
Interest expense	5.3				4.3
Amortization and depreciation	4.8				5.8
Other long-lived asset impairments	0.2				0.2
Other non-cash charges	(0.5)				(0.2)
Stock-based compensation	1.6				3.8
Restructuring expense	4.6				2.9

Restructuring cost of sales	2.9				—
Less:
Interest income	0.8				0.2
Adjusted EBITDA	$	(15.4)	(4.8)	%	$	(0.3)	(0.1)	%

Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share. The following tables reconcile Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share to the most directly comparable GAAP financial measures, which are operating income (loss), net income (loss) attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively. Certain line items presented in the table below, when aggregated, may not foot due to rounding.


	For the 13 Weeks Ended July 1, 2023
($ in millions, except per share data):	As Reported			Restructuring Cost of Sales		Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	$	(35.3)		$	2.9	$	0.2	$	4.6	$	(27.6)
Operating margin (% of net sales)	(11.0)		%							(8.6)		%
Interest expense	$	(5.3)		$	—	$	—	$	—	$	(5.3)
Other income (expense) - net	7.2			—		—		—		7.2
Income (loss) before income taxes	(33.5)			2.9		0.2		4.6		(25.8)
Provision (benefit) for income taxes	(7.2)			0.6		—		1.0		(5.6)
Less: net income attributable to noncontrolling interest	(0.2		)	—		—		—		(0.2		)
Net income (loss) attributable to Fossil Group, Inc.	$	(26.5)		$	2.3	$	0.2	$	3.6	$	(20.4)
Diluted earnings (loss) per share	$	(0.51)		$	0.04	$	—	$	0.07	$	(0.40)


	For the 13 Weeks Ended July 2, 2022
($ in millions, except per share data):	As Reported			Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	$	(10.9)		$	0.2	$	2.9	$	(7.8)
Operating margin (% of net sales)	(2.9)		%					(2.1)		%
Interest expense	$	(4.3)		$	—	$	—	$	(4.3)
Other income (expense) - net	(1.7)			—		—		(1.7)
Income (loss) before income taxes	(16.9)			0.2		2.9		(13.8)
Provision for income taxes	2.0			—		0.6		2.6
Less: Net income attributable to noncontrolling interest	(0.2)			—		—		(0.2)
Net income (loss) attributable to Fossil Group, Inc.	$	(19.1)		$	0.2	$	2.3	$	(16.6)
Diluted earnings (loss) per share	$	(0.37)		$	—	$	0.04	$	(0.33)

Fiscal Year To Date Periods Ended July 1, 2023 and July 2, 2022

Consolidated Net Sales. Net sales decreased $100.0 million or 13.4% (11.7% in constant currency) for the Year To Date Period as compared to the Prior Year YTD Period. Sales declined in all three regions. Sales declined in wholesale and retail store channels, while owned e-commerce sales increased. Sales of smartwatches declined due to lower consumer demand across geographies and channels and our deemphasis of the category. Global comparable retail sales increased 8% with sales increases in our owned e-commerce websites and retail stores.

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


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	$	284.6	44.0	%	$	330.2	44.2	%	$	(45.6)	(13.8)	%	(13.8)	%
Europe	194.0		30.0		232.4		31.0		(38.4)		(16.5)		(14.8)
Asia	164.2		25.4		179.4		24.0		(15.2)		(8.5)		(3.3)
Corporate	4.2		0.6		5.0		0.8		(0.8)		(16.0)		(16.0)
Total	$	647.0	100.0	%	$	747.0	100.0	%	$	(100.0)	(13.4)	%	(11.7)	%

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


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	461.5	71.3	%	$	520.1	69.6	%	$	(58.6)	(11.3)	%	(9.5)	%
Smartwatches	42.2		6.5		71.4		9.6		(29.2)		(40.9)		(39.6)
Total watches	$	503.7	77.8	%	$	591.5	79.2	%	$	(87.8)	(14.8)		(13.2)
Leathers	73.6		11.4		70.1		9.4		3.5		5.0		6.9
Jewelry	56.4		8.7		68.6		9.2		(12.2)		(17.8)		(15.9)
Other	13.3		2.1		16.8		2.2		(3.5)		(20.8)		(19.1)
Total	$	647.0	100.0	%	$	747.0	100.0	%	$	(100.0)	(13.4)	%	(11.7)	%

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~~$12.9 million, including unfavorable impacts of ~~$5.5 million, $0.6~~$9.2 million and ~~$0.5~~$3.9 million in our ~~Europe, Americas~~Asia and ~~Asia~~Europe segments, respectively, and a favorable impact of $0.2 million in our Americas segment, compared to the Prior Year YTD Period.

~~The following table sets forth consolidated~~Americas Net Sales. Americas net sales ~~by segment (dollars~~decreased $45.6 million, or 13.8% (same in ~~millions):~~

~~Americas Net Sales.~~ ~~For~~constant currency), during the Year To Date Period ~~Americas net sales decreased $167.7 million or 16.1% (16.0%~~ in ~~constant currency), compared~~comparison to the Prior Year YTD Period. ~~During~~The sales declines were across brands, but most significantly in 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.MICHAEL KORS brand. Sales declined in ~~the U.S.~~our wholesale and ~~Canada~~store channels and were partially offset by e-commerce sales ~~increases in Mexico. During~~increases. Comparable retail sales were moderately positive 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.

Period.

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


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	200.2	70.4	%	$	234.6	71.0	%	$	(34.4)	(14.7)	%	(15.0)	%
Smartwatches	21.0		7.3		32.7		10.0		(11.7)		(35.8)		(35.9)
Total watches	$	221.2	77.7	%	$	267.3	81.0	%	$	(46.1)	(17.2)		(17.5)
Leathers	48.1		16.9		41.8		12.7		6.3		15.1		16.3
Jewelry	11.6		4.1		17.2		5.2		(5.6)		(32.6)		(32.0)
Other	3.7		1.3		3.9		1.1		(0.2)		(5.1)		(5.1)
Total	$	284.6	100.0	%	$	330.2	100.0	%	$	(45.6)	(13.8)	%	(13.8)	%

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~~ Europe net sales decreased $38.4 million, or 16.5% (14.8% in constant currency), during the Year To Date Period ~~Europe net sales decreased $31.5 million or 4.7% (3.9%~~ in ~~constant currency), compared~~comparison 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, mostSales decreased across much of the ~~brands~~Eurozone and in the ~~portfolio declined driven by decreases~~majority of our brands, with the largest declines in ~~traditional watches that were partially offset by increases~~MICHAEL KORS. Sales growth in ~~connected watches. Growth in Spain and Poland were~~our owned e-commerce was more than offset by declines in ~~most~~our other ~~markets with the greatest decline in our Middle East business. Both wholesale and retail channels decreased at similar rates.~~channels. Comparable retail sales ~~were~~in the region also increased 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.~~Period.

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


													For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022				Growth (Decline)
	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		Dollars		Percentage As Reported		Percentage Constant Currency
					Growth (Decline)
	Net Sales		Net Sales		Dollars			Percentage As Reported		Percentage Constant Currency
Watches	$	483.7	$	488.4	$	(4.7	)	(1.0	)%	(0.3	)%
Watches:												Watches:
Traditional watches												Traditional watches	$	131.2	67.7	%	$	151.6	65.2	%	$	(20.4)	(13.5)	%	(11.6)	%
Smartwatches												Smartwatches	11.9		6.1		22.9		9.9		(11.0)		(48.0)		(47.2)
Total watches												Total watches	$	143.1	73.8	%	$	174.5	75.1	%	$	(31.4)	(18.0)		(16.3)
Leathers	48.8		58.7		(9.9		)	(16.9	)	(15.7	)	Leathers	11.8		6.1		12.7		5.5		(0.9)		(7.1)		(4.7)
Jewelry	87.6		98.5		(10.9		)	(11.1	)	(9.8	)	Jewelry	33.9		17.5		39.8		17.1		(5.9)		(14.8)		(13.6)
Other	17.5		23.5		(6.0		)	(25.5	)	(25.1	)	Other	5.2		2.6		5.4		2.3		(0.2)		(3.7)		(1.9)
Total	$	637.6	$	669.1	$	(31.5	)	(4.7	)%	(3.9	)%	Total	$	194.0	100.0	%	$	232.4	100.0	%	$	(38.4)	(16.5)	%	(14.8)	%

Asia Net Sales. ~~For~~ Asia net sales decreased $15.2 million, or 8.5% (3.3% in constant currency), during the Year To Date Period ~~Asia net sales decreased $16.6 million or 4.5% (4.3%~~ in ~~constant currency),~~comparison to the Prior Year YTD Period. Net Sales declined across all channels and the majority of the region during the Year To Date Period as 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~~Period, with the most significant 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~~China. Sales declines were predominantly in EMPORIO ARMANI and ~~most other markets.~~FOSSIL brands. 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~~declined slightly for the Year To Date Period.

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


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches:
Traditional watches	$	128.1	78.0	%	$	133.9	74.6	%	$	(5.8)	(4.3)	%	1.0	%
Smartwatches	9.4		5.7		15.8		8.8		(6.4)		(40.5)		(36.1)
Total watches	$	137.5	83.7	%	$	149.7	83.4	%	$	(12.2)	(8.1)		(2.9)
Leathers	13.8		8.4		15.6		8.7		(1.8)		(11.5)		(8.3)
Jewelry	10.9		6.6		11.7		6.5		(0.8)		(6.8)		(0.9)
Other	2.0		1.3		2.4		1.4		(0.4)		(16.7)		(8.3)
Total	$	164.2	100.0	%	$	179.4	100.0	%	$	(15.2)	(8.5)	%	(3.3)	%

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~~ Gross profit of $317.4 million in the Year To Date Period ~~gross~~decreased $58.3 million, or 15.5%, in comparison to $375.7 million in the Prior Year YTD Period. Gross profit margin rate decreased ~~350 basis points~~ to ~~48.8%~~49.1% in the Year To Date Period compared to ~~52.3%~~50.3% in the Prior Year YTD Period. The ~~decreased~~ gross profit margin ~~was primarily driven~~rate declined largely due to an unfavorable currency impact, increased promotions and restructuring charges related to product offering exits. These costs were partially offset by ~~the same factors impacting the Third Quarter. Changes in foreign currency rates negatively impacted gross profit margin by approximately 60 basis points.~~timing of licensor minimum royalty costs, reduced freight costs and favorable region and product mix.

Operating Expenses. For the Year To Date Period, total operating expenses decreased to $390.0 million compared to $400.9 million in the Prior Year YTD Period. SG&A expenses were $378.1 million in the Year To Date Period in comparison to $395.0 million in the Prior Year YTD Period. As a percentage of net sales, SG&A expenses increased to ~~$1.4 billion~~58.4% in the Year To Date Period as compared to ~~$1.0 billion~~52.9% 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.mainly driven by decreased sales. During the Year To Date Period, we incurred restructuring costs of ~~$41.8~~$11.7 million ~~under our NWF initiative compared with~~in comparison to restructuring costs of ~~$14.5~~$5.4 million in the Prior

Year YTD Period. We incurred other long-lived asset impairment charges of $0.2 million in the Year To Date Period compared to charges of $0.5 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~~$6.0 million when compared to the Prior Year YTD Period, 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~~was a loss of ~~$475.5~~$72.6 million in the Year To Date Period as compared to ~~income~~a loss of ~~$61.0~~$25.2 million in the Prior Year YTD Period. The operating loss in the Year To Date Period was primarily ~~driven by non-cash intangible impairment charges~~due to deleveraging of ~~$407.1 million and also by decreased sales and gross margin rate.~~expenses with the decline in net sales. As a percentage of net sales, operating margin was ~~(25.5)~~(11.2)% in the Year To Date Period as compared to ~~2.9%~~(3.4)% in the Prior Year YTD Period and was negatively impacted by approximately 70190 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 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022		Change				Operating Margin %
					Dollars		Percentage		2023		2022
Americas	$	36.0	$	54.6	$	(18.6)	(34.1)	%	12.6	%	16.5	%
Europe	6.3		34.4		(28.1)		(81.7)		3.2		14.8
Asia	14.6		21.3		(6.7)		(31.5)		8.9		11.9
Corporate	(129.5)		(135.5)		6.0		4.4
Total operating income (loss)	$	(72.6)	$	(25.2)	$	(47.4)	(188.1)	%	(11.2)	%	(3.4)	%

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~~$2.0 million during the Year To Date Period, ~~as a result of higher~~primarily driven by an increased debt balance and increased interest rate ~~spreads due~~compared to ~~our amended credit facility.~~the Prior Year YTD Period.

Other Income (Expense)-Net. During the Year To Date Period, other income (expense)-net ~~increased by $5.1 million to $11.5~~was a net income of $9.9 million in ~~comparison~~the Year to Date Period, primarily driven by net currency gains, and compared to net expense of $0.1 million in 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~~$5.6 million, resulting in an effective income tax rate of ~~20.3%~~7.7%. ~~For the~~The Prior Year YTD Period income tax expense was ~~$13.2~~$6.7 million resulting in an effective ~~income~~ tax rate of ~~27.5%~~(19.9)%. The ~~tax benefit in the~~ Year Toto Date Period effective tax rate 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~~favorable to the Prior Year YTD Period ~~combined with~~due to reduced foreign income taxes and discrete items. No tax benefit has been accrued on the ~~impact of unfavorable discrete items, mostly~~Year to Date Period U.S. tax losses and certain foreign tax losses 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 likelihooduncertainty of whether they ~~are more likely than not to~~can 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~~used in the ~~period such determination~~future.The Year to Date Period effective tax rate is ~~made. For those jurisdictions~~positive because an income tax benefit was accrued on certain foreign losses combined 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.~~favorable discrete items.

Net Income (Loss) Attributable to Fossil Group, Inc. For the Year To Date Period, we had a net ~~income (loss) attributable to Fossil Group, Inc. decreased to $(398.3)~~loss of $67.8 million, or ~~$(8.22)~~$1.30 per diluted share, in comparison to ~~$29.2~~loss of $40.6 million, or ~~$0.60~~$0.78 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 earningsloss per share in the Year To Date Period, as compared to the Prior Year YTD Period, ~~decreased $0.11~~was negatively impacted by $0.06 per diluted share due to the currency impact of a stronger U.S. dollar.

Adjusted Net Income (Loss).Adjusted net loss for the Year To Date Period was $51.9 million with adjusted loss per diluted share of $1.00 compared to adjusted net loss of $35.9 million with adjusted loss per diluted share of $0.69 in the Prior Year YTD Period.


	For the 26 Weeks Ended July 1, 2023				For the 26 Weeks Ended July 2, 2022
	Dollars		% of Net Sales		Dollars		% of Net Sales
Income (loss) before income taxes	$	(73.1)	(11.3)%		$	(33.6)	(4.5)	%
Plus:
Interest expense	10.4				8.3
Amortization and depreciation	9.9				11.9
Other long-lived asset impairments	0.2				0.5
Other non-cash charges	(0.7)				(0.3)
Stock-based compensation	3.0				6.1
Restructuring expense	11.7				5.4

Restructuring cost of sales	8.2				—
Less:
Interest income	1.4				0.3
Adjusted EBITDA	$	(31.8)	(4.9)	%	$	(2.0)	(0.3)	%


	For the 26 Weeks Ended July 1, 2023
($ in millions, except per share data):	As Reported			Restructuring Cost of Sales		Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	$	(72.6)		$	8.2	$	0.2	$	11.7	$	(52.5)
Operating margin (% of net sales)	(11.2)		%							(8.1)		%
Interest expense	$	(10.4)		$	—	$	—	$	—	$	(10.4)
Other income (expense) - net	9.9			—		—		—		9.9
Income (loss) before income taxes	(73.1)			8.2		0.2		11.7		(53.0)
Provision for income taxes	(5.6)			1.7		—		2.5		(1.4)
Less: net income attributable to noncontrolling interest	(0.3)			—		—		—		(0.3)
Net income (loss) attributable to Fossil Group, Inc.	$	(67.8)		$	6.5	$	0.2	$	9.2	$	(51.9)
Diluted earnings (loss) per share	$	(1.30)		$	0.12	$	—	$	0.18	$	(1.00)


	For the 26 Weeks Ended July 2, 2022
($ in millions, except per share data):	As Reported			Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	$	(25.2)		$	0.5	$	5.4	$	(19.3)
Operating margin (% of net sales)	(3.4)		%					(2.6)		%
Interest expense	$	(8.3)		$	—	$	—	$	(8.3)
Other income (expense) - net	(0.1)			—		—		(0.1)
Income (loss) before income taxes	(33.6)			0.5		5.4		(27.7)
Provision for income taxes	6.7			0.1		1.1		7.9
Less: Net income attributable to noncontrolling interest	(0.3)			—		—		(0.3)
Net income (loss) attributable to Fossil Group, Inc.	$	(40.6)		$	0.4	$	4.3	$	(35.9)
Diluted earnings (loss) per share	$	(0.78)		$	0.01	$	0.08	$	(0.69)

Liquidity and Capital Resources

Our cash and cash equivalents balance at the end of the ~~Third~~Second Quarter was ~~$166.9~~$132.1 million, including ~~$165.8~~$129.4 million held in banks outside the U.S., in comparison to cash and cash equivalents of ~~$236.0~~$167.1 million at the end of the Prior Year Quarter and ~~$297.3~~$198.7 million at the end of fiscal year ~~2016. Historically, our business operations have not required substantial cash during the first several months of our fiscal year.~~2022. 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, share repurchases and other capital expenditures and restructuring charges. We believe cash from operating activities as well as amounts available under our U.S. credit facilities are sufficient to meet our cash needs in the U.S. for the next 12 months.

For the Year To Date Period, we generated operating cash flow of $60.2 million. This operating cash flow combined with cash on hand was utilized to fund net debt payments of $149.5 million and $17.2 million of capital expenditures. Net losses of $395.4 million were offset by net non-cash items of $389.3 million and a net decrease in working capital items 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 million.

Accounts receivable, net of allowances, decreased by 3.2% to $310.9 million at the end of the Third Quarter compared to $321.3 million at the end of the Prior Year Quarter. Days sales outstanding for our wholesale businesses for the Third Quarter increased to 56 days compared to 53 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.

Inventory at the end of the Third Quarter was $683.0 million, which decreased by 2.4% 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 to clear the previous generation connected products over the next few quarters.

At the end of the ~~Third~~Second Quarter, we had net working capital of ~~$732.8~~$476.0 million compared to net working capital of ~~$965.5~~$543.5 million at the end of the Prior Year Quarter. At the end of the ~~Third~~Second Quarter, we had ~~approximately $40.2~~$0.4 million of short-term borrowings and ~~$444.3~~$243.0 million in long-term ~~debt.~~debt including unamortized issuance costs compared to $0.6 million of short-term borrowings and $248.9 million in long-term debt including unamortized issuance costs at the end of the Prior Year Quarter.

Operating Activities. Cash used in operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities of $83.0 million in the Year To Date Period decreased $82.7 million from the Prior Year YTD Period primarily due to cash of $52.0 million used by working capital items in the Year To Date Period as compared to cash of $184.8 million used by working capital items in the Prior Year YTD Period. The decrease in cash used for working capital items was primarily a result of proactively managing our inventory levels down.

Investing Activities. Investing cash flows primarily consist of capital expenditures and are offset by proceeds from the sale of property, plant and equipment.

Financing Activities. Financing cash flows primarily consist of borrowings and repayments of debt. The $64.9 million decrease in financing cash flows year-over-year was primarily due to less net borrowings during the Year To Date Period compared to the Prior Year YTD Period under the Revolving Facility.

Material Cash Requirements. We have various payment obligations as part of our ordinary course of business. Our material cash requirements include: (1) operating lease obligations (see Note—14 Leases within the Condensed Consolidated Financial Statements); (2) debt repayments (see Note 15—Debt Activity within the Condensed Consolidated Financial Statements); (3) non-cancellable purchase obligations; (4) minimum royalty payments; and (5) employee wages, benefits, and incentives. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions (see Note 5—Income Taxes within the Condensed Consolidated Financial Statements) and other matters.

For fiscal year 2023, we expect total capital expenditures to be approximately $15 million.

Sources of Liquidity. We believe cash flows from operations, combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our cash needs for the foreseeable future, not including the maturities of long term debt. 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, among other factors, could impact our business and liquidity. In the event our liquidity is insufficient, we may be required to limit our spending or sell assets or equity or debt securities.

The following table shows our sources of liquidity (in millions):


	July 1, 2023		July 2, 2022
Cash and cash equivalents	$	132.1	$	167.1
Revolver availability	72.5		53.8
Total liquidity	$	204.6	$	220.9

Notes: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% senior notes due 2026 (the "Notes"), generating net proceeds of approximately $141.7 million. The Notes are our general unsecured obligations. The Notes bear interest at the rate of 7.00% per annum. Interest on the Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year. The Notes mature on November 30, 2026. We may redeem the Notes for cash in whole or in part at any time at our option. Prior to November 30, 2023, the redemption price will be $25.00 per $25.00 principal amount of Notes, plus a “make-whole” premium plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. On ~~March 9, 2015,~~and after November 30, 2023, we may redeem the Notes (i) on or after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Notes, (ii) on or after November 30, 2024 and prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.

Revolving Facility: 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 secured asset-based revolving credit agreement (as amended from time to time, 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"). On November 8, 2022, we entered into ~~an Amended and Restated Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for (i) revolving credit loans~~Amendment No. 4 (the ~~“Revolving Credit Facility”~~"Amendment”), with an up to $20.0 million subfacility for swingline loans (the “Swingline Loan”), and an up to $10.0 million subfacility for letters of credit, and (ii) a term loan in the amount of $231.3 million (the “Term Loan”). The Credit Agreement amended and restated that certain credit agreement, dated as of May 17, 2013, as amended (the “Prior Agreement”).

~~On March 10, 2017, we entered into the Second Amendment~~ to the ~~Amended and Restated Credit Agreement (the “Second Amendment”).~~Revolving Facility. 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,among other things, (i) extended the maturity date of the ~~Credit Agreement~~credit facility to ~~May 17, 2019 and removed our ability~~November 8, 2027 (provided, that if we have any indebtedness in an amount in excess of $35 million that matures prior to ~~make offers to the lenders to extend~~November 8, 2027, the maturity date of the ~~Term Loan or~~credit facility shall be the 91st day prior to the maturity date of such other indebtedness) and (ii) changed the calculation methodology of the borrowing base to include the value of certain of our intellectual property in such methodology and to provide for seasonal increases to certain advance rates.

The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $125.0 million is available under a U.S. facility, an aggregate of $80.0 million is available under a European facility, $10.0 million is available under a Hong Kong facility, $5.0 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 French facility includes a $1.0 million subfacility for swingline loans, and the European facility includes a $7.0 million subfacility for swingline loans. The Revolving Facility is subject to a line cap (the "Line Cap") equal to the lesser of the total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong facility, the French facility and the Canadian facility. Loans under the Revolving ~~Credit Facility.~~ Facility may be made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

The ~~Second Amendment also amended~~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 ~~repayment schedule~~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, plus (iv) the lesser of (x) 40% of the appraised net orderly liquidation value of eligible U.S. intellectual property and (y) $20.0 million, minus (v) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the ~~Term Loan~~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 ~~requires us~~(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 ~~make monthly payments~~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.

The above advance rates (other than the advance rate with respect to intellectual property) are seasonally increased by 5% (e.g. from 90% to 95%) during the period commencing on the ~~last business day~~date of ~~each~~delivery of the borrowing base certificate with respect to the second fiscal month ~~beginning April 30, 2018. On~~of the Company 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 London Interbank Offer Rate ("LIBOR") will be due and payableending on the last day of the ~~applicable interest period; provided, that if such interest~~ period ~~extends for over one month, then interest will be due and payable at~~covered by 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 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.

~~The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to~~borrowing base rate loans 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 payablecertificate delivered with respect to the ~~Revolving Credit Facility to 0.50% per annum. We will incur an additional fee of 0.25% times the outstanding principal amount~~fifth fiscal month 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 we must comply with from 3.25 to 1.00 to the ratios as set forth below:Company.



~~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 under the Revolving Credit Facility and 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%.

~~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 payments of $18.8 million under the Term Loan. Additionally, we~~2023 Activity: We had net ~~principal payments~~borrowings of ~~$131.3~~$26.0 million under the Revolving ~~Credit~~ Facility during the Year To Date Period at an average ~~annual~~ interest rate of ~~4.27%~~6.5%. As of ~~September 30, 2017,~~July 1, 2023, we had ~~$175.0 million and $309.7~~$150.0 million outstanding under the ~~Term Loan~~Notes and $99.0 million outstanding under the Revolving ~~Credit Facility, respectively. As of September 30, 2017, we~~Facility. We also had unamortized debt issuance costs ~~which reduce~~of $6.0 million recorded in long-term debt and $2.8 million recorded in intangible and other assets-net on the ~~corresponding debt liability, of $6.7 million.~~condensed consolidated balance sheets. In addition, we had ~~$0.9~~$4.5 million of outstanding standby letters of credit at ~~September 30, 2017.~~July 1, 2023. Amounts available under the Revolving ~~Credit~~ Facility are reduced by any amounts outstanding under standby letters of credit. As of ~~September 30, 2017,~~July 1, 2023, we had available borrowing capacity of ~~$270.5~~$72.5 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,July 1, 2023, 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, 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 for the fiscal year ended December 31, 2016.

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 and estimates 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 for the fiscal year ended December 31, ~~2016.~~2022.

Forward-Looking Statements

The statements contained ~~and incorporated by reference~~ in this Quarterly Report on ~~Form 10-Q~~Form10-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~~"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations" and ~~“Item~~"Item 3. Quantitative and Qualitative Disclosures About Market Risk,”" constitute ~~“forward-looking statements”~~"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,” “plans,” “intends,” “estimates,” “anticipates” and~~"may," "believes," "will," "should," "seek," "forecast," "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: increased political uncertainty, the effect of worldwide economic conditions; the effect of a pandemic; risks related to the success of our TAG Plan; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key ~~components;~~components or products; 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 a general economic downturn or generally reduced shopping activity caused by public safety 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~~lines; changes in the ~~expanded launch~~mix of ~~connected accessories; financial difficulties encountered by customers;~~product sales; 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~~other contractual provisions and ~~operations;~~meeting debt service obligations; risks related to the success of ~~NWF;~~our business strategy; 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;~~labor; 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; loss of key personnel; 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 for the fiscal year ended December 31, ~~2016.~~2022. 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, 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~~Second 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~~July 1, 2023 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

48.8

U.S. dollar

52.0

May 2024

Canadian dollar

95.0

U.S. dollar

73.2

September 2019

Canadian dollar

24.7

U.S. dollar

18.6

June 2024

British pound

43.5

U.S. dollar

58.1

September 2019

British pound

4.2

U.S. dollar

5.1

June 2024

Japanese yen

4,636.4

U.S. dollar

42.8

September 2019

Japanese yen

596.4

U.S. dollar

4.6

June 2024

Mexican peso

378.6

U.S. dollar

20.3

June 2018

Mexican peso

49.5

U.S. dollar

2.4

September 2023

Australian dollar

21.2

U.S. dollar

16.5

June 2018

Australian dollar

2.8

U.S. dollar

1.9

December 2023

U.S. dollar

41.1

Japanese yen

4,470.0

November 2018

U.S. dollar

4.1

Japanese yen

530.0

November 2023

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, the net result~~July 1, 2023, there would have been a ~~net loss of approximately $12.1~~$2.1 million ~~net of taxes.~~loss. As of ~~September 30, 2017,~~July 1, 2023, 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~~$8.6 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,~~July 1, 2023, 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~~$29.9 million.

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,~~July 1, 2023, a 100 basis point increase in interest rates would increase annual interest expense by ~~approximately $3.1~~$1.0 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

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.~~July 1, 2023.

There were no changes in our internal control over financial reporting during the ~~Third~~Second 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~~matters 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 for the fiscal year ended December 31, 2022 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~~Second Quarter.

Item 5. Other Information

None of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s quarter ended July 1, 2023.

~~(3)~~Furnished herewith.

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.


	September 30, 2017			December 31, 2016				July 1, 2023		December 31, 2022
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	166,922		$	297,330		Cash and cash equivalents	$	132,107	$	198,726
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 $11,575 and $14,647, respectively							Accounts receivable - net of allowances for doubtful accounts of $11,575 and $14,647, respectively	162,700		206,133
Inventories	682,986			542,487			Inventories	323,914		376,028
Prepaid expenses and other current assets	125,533			131,953			Prepaid expenses and other current assets	178,836		164,413
Total current assets	1,286,336			1,347,290			Total current assets	797,557		945,300
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 $416,987 and $415,172, respectively							Property, plant and equipment - net of accumulated depreciation of $416,987 and $415,172, respectively	75,881		79,882
Operating lease right-of-use assets							Operating lease right-of-use assets	144,949		156,947

Intangible and other assets-net	220,588			210,493			Intangible and other assets-net	54,976		55,999
Total long-term assets	464,036			839,607			Total long-term assets	275,806		292,828
Total assets	$	1,750,372		$	2,186,897		Total assets	$	1,073,363	$	1,238,128
Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable	$	248,824		$	163,644		Accounts payable	$	139,842	$	191,141
Short-term and current portion of long-term debt	40,209			26,368
Short-term debt							Short-term debt	446		342
Accrued expenses:							Accrued expenses:
Current operating lease liabilities							Current operating lease liabilities	45,041		49,702
Compensation	64,862			52,993			Compensation	43,297		44,259
Royalties	26,897			30,062			Royalties	9,092		20,875
Co-op advertising	17,772			29,111
Customer liabilities							Customer liabilities	28,565		41,996
Transaction taxes	40,482			26,743			Transaction taxes	7,078		14,303
Other	101,390			69,565			Other	41,401		40,424
Income taxes payable	13,077			16,099			Income taxes payable	6,774		22,878
Total current liabilities	553,513			414,585			Total current liabilities	321,536		425,920
Long-term income taxes payable	22,951			18,584			Long-term income taxes payable	20,602		22,603
Deferred income tax liabilities	500			55,877			Deferred income tax liabilities	612		616
Long-term debt	444,303			609,961			Long-term debt	243,027		216,132
Long-term operating lease liabilities							Long-term operating lease liabilities	135,062		150,188
Other long-term liabilities	76,107			72,452			Other long-term liabilities	15,622		19,660
Total long-term liabilities	543,861			756,874			Total long-term liabilities	414,925		409,199
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)
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, 52,446 and 51,836 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively							Common stock, 52,446 and 51,836 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively	524		518
Additional paid-in capital	235,990			213,352			Additional paid-in capital	308,768		306,241
Retained earnings	489,528			887,825			Retained earnings	107,700		175,491
Accumulated other comprehensive income (loss)	(84,710		)	(95,424		)	Accumulated other comprehensive income (loss)	(77,488)		(76,318)
Total Fossil Group, Inc. stockholders’ equity	641,293			1,006,236			Total Fossil Group, Inc. stockholders’ equity	339,504		405,932
Noncontrolling interest	11,705			9,202
Noncontrolling interests							Noncontrolling interests	(2,602)		(2,923)
Total stockholders’ equity	652,998			1,015,438			Total stockholders’ equity	336,902		403,009
Total liabilities and stockholders’ equity	$	1,750,372		$	2,186,897		Total liabilities and stockholders’ equity	$	1,073,363	$	1,238,128


	For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Operating Activities:
Net income (loss)	$	(67,470)	$	(40,283)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion	9,868		11,947
Non-cash lease expense	37,848		40,976
Stock-based compensation	3,049		6,085
Decrease in allowance for returns and markdowns	(11,017)		(12,181)

Property, plant and equipment and other long-lived asset impairment losses	215		452

Non-cash restructuring charges	—		876
Bad debt (recovery) expense	(19)		3,917

Other non-cash items	(3,473)		7,250


Changes in operating assets and liabilities:
Accounts receivable	48,337		70,745
Inventories	52,814		(107,449)
Prepaid expenses and other current assets	(17,854)		(16,277)
Accounts payable	(49,890)		(17,339)
Accrued expenses	(23,960)		(62,676)
Income taxes	(17,722)		(3,979)
Operating lease liabilities	(43,774)		(47,843)
Net cash used in operating activities	(83,048)		(165,779)
Investing Activities:
Additions to property, plant and equipment and other	(4,569)		(4,462)
(Increase) decrease in intangible and other assets	(176)		637


Net cash used in investing activities	(4,745)		(3,825)
Financing Activities:

Acquisition of common stock	(516)		(12,431)
Distribution of noncontrolling interest earnings and other	—		(6,069)
Debt borrowings	75,142		177,906
Debt payments	(49,008)		(71,221)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.	(2,316)		—

Net cash provided by financing activities	23,302		88,185
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(2,648)		(3,798)
Net decrease in cash, cash equivalents, and restricted cash	(67,139)		(85,217)
Cash, cash equivalents, and restricted cash:
Beginning of period	204,075		264,572
End of period	$	136,936	$	179,355


	For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016				For the 26 Weeks Ended July 1, 2023		For the 26 Weeks Ended July 2, 2022
Beginning balance	$	15,421		$	13,669		Beginning balance	$	13,623	$	19,159
Settlements in cash or kind	(11,608		)	(7,338		)	Settlements in cash or kind	(3,766)		(4,613)
Warranties issued and adjustments to preexisting warranties ⁽¹⁾	14,984			8,604			Warranties issued and adjustments to preexisting warranties (1)	2,403		916
Ending balance	$	18,797		$	14,935		Ending balance	$	12,260	$	15,462



	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



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



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



		Page
PART I
Item 1.	Financial Statements	45
	Condensed Consolidated Balance Sheets	45
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	56
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash ~~Flow~~Flows	69
	Notes to Condensed Consolidated Financial Statements	710
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2831
	Results of Operations	2933
	Liquidity and Capital Resources	3844
	Forward-Looking Statements	4046
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4047
Item 4.	Controls and Procedures	4148
PART II
Item 1.	Legal Proceedings	4249
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4249
Item 5.	Other Information	49
Item 6.	Exhibits	4350
	SIGNATURES	4451



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)
Outstanding at July 1, 2017	2,236		$	50.29	5.8	$	—
Granted	—		—
Exercised	—		—			—
Forfeited or expired	(27	)	63.35
Outstanding at September 30, 2017	2,209		50.14		5.6	—
Exercisable at September 30, 2017	882		$	67.67	4.5	$	—


Stock Appreciation Rights	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)			(in Years)	(in Thousands)
Outstanding at April 1, 2023	75	$	46.55	0.9	$	—



Outstanding at July 1, 2023	75	46.55		0.6	—
Exercisable at July 1, 2023	75	$	46.55	0.6	$	—



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


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 April 1, 2023					Nonvested at April 1, 2023	1,870	$	10.05
Granted	254		9.98		Granted	1,367	3.04
Vested	(17	)	37.81		Vested	(791)	8.72
Forfeited	(57	)	23.86		Forfeited	(211)	9.96
Nonvested at September 30, 2017	2,965		$	22.92
Nonvested at July 1, 2023					Nonvested at July 1, 2023	2,235	$	6.25



	Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	28,936	$	—	$	28,936
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,385		—		—		2,385
Interest rate swap	—		73		—		73
Total	$	2,385	$	29,009	$	—	$	31,394
Liabilities:
Forward contracts	—		4,966		—		4,966
Interest rate swap	—		613		—		613
Total	$	—	$	5,579	$	—	$	5,579



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	%



	September 30, 2017				October 1, 2016
	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total
Full price accessory	112	109	61	282	128	122	66	316
Outlets	136	74	46	256	156	73	46	275
Full priced multi-brand	—	8	10	18	—	7	12	19
Total stores	248	191	117	556	284	202	124	610



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)~~31.1(1)		~~Restricted Stock Unit Award under the Fossil Group, Inc. 2016 Long-Term Incentive Plan~~

~~10.2(2)~~	Addendum to Executive Severance Agreement, by and between 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).

~~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).



			FOSSIL GROUP, INC.

~~November 9, 2017~~August 10, 2023			/S/ ~~JEFFREY N. BOYER~~SUNIL M. DOSHI
			~~Jeffrey N. Boyer~~Sunil M. Doshi
			Executive Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)