UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________ 
FORM 10-Q

 
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: SeptemberMarch 30, 20172024
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
 
Commission file number: 000-19848001-41040
__________________________________________________________________ 
logo2a04.gif
FOSSIL GROUP, INC.
(Exact name of registrant as specified in its charter)
 __________________________________________________________________
Delaware75-2018505
Delaware75-2018505
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
901 S. Central Expressway, Richardson, TexasRichardson,Texas75080
(Address of principal executive offices)(Zip Code)
(972) 234-2525
(Registrant’s telephone number, including area code) 
__________________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareFOSLThe Nasdaq Stock Market LLC
7.00% Senior Notes due 2026FOSLLThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o




 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filero
Accelerated filerx
Non-accelerated filero
Smaller reporting companyo
(Do not check if a smaller reporting company)
Emerging growth companyo
 


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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

May 1, 2024: 52,933,239





FOSSIL GROUP, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBERMARCH 30, 20172024
INDEX
Page
































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, ZODIAC, 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.





PART I—FINANCIAL INFORMATION


Item 1. Financial Statements

FOSSIL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
IN THOUSANDS
September 30, 2017 December 31, 2016
March 30, 2024March 30, 2024December 30, 2023
Assets 
  
Assets  
Current assets: 
  
Current assets:  
Cash and cash equivalents$166,922
 $297,330
Accounts receivable - net of allowances of $70,081 and $79,707, respectively310,895
 375,520
Accounts receivable - net of allowances for doubtful accounts of $14,465 and $12,616, respectively
Inventories682,986
 542,487
Prepaid expenses and other current assets125,533
 131,953
Total current assets1,286,336
 1,347,290
Property, plant and equipment - net of accumulated depreciation of $453,894 and $414,761, respectively243,448
 273,851
Goodwill
 355,263
Property, plant and equipment - net of accumulated depreciation of $379,768 and $384,688, respectively
Operating lease right-of-use assets
Intangible and other assets-net
Intangible and other assets-net
Intangible and other assets-net220,588
 210,493
Total long-term assets464,036
 839,607
Total assets$1,750,372
 $2,186,897
Liabilities and Stockholders’ Equity 
  
Liabilities and Stockholders’ Equity  
Current liabilities: 
  
Current liabilities:  
Accounts payable$248,824
 $163,644
Short-term and current portion of long-term debt40,209
 26,368
Short-term debt
Accrued expenses: 
  
Accrued expenses:  
Current operating lease liabilities
Compensation64,862
 52,993
Royalties26,897
 30,062
Co-op advertising17,772
 29,111
Customer liabilities
Transaction taxes40,482
 26,743
Other101,390
 69,565
Income taxes payable13,077
 16,099
Total current liabilities553,513
 414,585
Long-term income taxes payable22,951
 18,584
Deferred income tax liabilities500
 55,877
Long-term debt444,303
 609,961
Long-term operating lease liabilities
Other long-term liabilities76,107
 72,452
Total long-term liabilities543,861
 756,874
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, respectively485
 483
Common stock, 52,492 and 52,487 shares issued and outstanding at March 30, 2024 and December 30, 2023 respectively
Additional paid-in capital235,990
 213,352
Retained earnings489,528
 887,825
Retained (deficit) earnings
Accumulated other comprehensive income (loss)(84,710) (95,424)
Total Fossil Group, Inc. stockholders’ equity641,293
 1,006,236
Noncontrolling interest11,705
 9,202
Noncontrolling interests
Total stockholders’ equity652,998
 1,015,438
Total liabilities and stockholders’ equity$1,750,372
 $2,186,897
 
See notes to the unaudited condensed consolidated financial statements.

5




FOSSIL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
UNAUDITED
IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
For the 13 Weeks Ended March 30, 2024
For the 13 Weeks Ended March 30, 2024
For the 13 Weeks Ended March 30, 2024
Net sales
Net sales
Net sales$688,722
 $737,990
 $1,867,358
 $2,083,206
Cost of sales368,829
 352,910
 956,600
 994,039
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profit319,893
 385,080
 910,758
 1,089,167
Operating expenses: 
  
  
  
Operating expenses:
Operating expenses:
Selling, general and administrative expenses314,623
 339,432
 937,330
 1,013,664
Goodwill and trade name impairments


 
 407,128
 
Restructuring charges5,769
 14,473
 41,818
 14,473
Selling, general and administrative expenses
Selling, general and administrative expenses
Other long-lived asset impairments
Other long-lived asset impairments
Other long-lived asset impairments
Restructuring expenses
Restructuring expenses
Restructuring expenses
Total operating expenses
Total operating expenses
Total operating expenses320,392
 353,905
 1,386,276
 1,028,137
Operating income (loss)(499) 31,175
 (475,518) 61,030
Operating income (loss)
Operating income (loss)
Interest expense
Interest expense
Interest expense12,070
 6,967
 32,096
 19,386
Other income (expense) - net3,860
 1,591
 11,501
 6,402
Other income (expense) - net
Other income (expense) - net
Income (loss) before income taxes(8,709) 25,799
 (496,113) 48,046
Provision for income taxes(3,230) 6,451
 (100,746) 13,230
Income (loss) before income taxes
Income (loss) before income taxes
Provision (benefit) for income taxes
Provision (benefit) for income taxes
Provision (benefit) for income taxes
Net income (loss)(5,479) 19,348
 (395,367) 34,816
Less: Net income attributable to noncontrolling interest(80) 1,992
 2,931
 5,646
Net income (loss)
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interests
Less: Net income (loss) attributable to noncontrolling interests
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Fossil Group, Inc.
Net income (loss) attributable to Fossil Group, Inc.
Net income (loss) attributable to Fossil Group, Inc.$(5,399) $17,356
 $(398,298) $29,170
Other comprehensive income (loss), net of taxes: 
  
  
  
Other comprehensive income (loss), net of taxes:
Other comprehensive income (loss), net of taxes:
Currency translation adjustment
Currency translation adjustment
Currency translation adjustment$5,222
 $1,662
 $32,078
 $9,383
Cash flow hedges - net change(9,771) 1,360
 (21,364) (4,741)
Cash flow hedges - net change
Cash flow hedges - net change
Pension plan activity
Pension plan activity
Pension plan activity
 
 
 1,714
Total other comprehensive income (loss)(4,549) 3,022
 10,714
 6,356
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total comprehensive income (loss)(10,028) 22,370
 (384,653) 41,172
Less: Comprehensive income attributable to noncontrolling interest(80) 1,992
 2,931
 5,646
Total comprehensive income (loss)
Total comprehensive income (loss)
Less: Comprehensive income (loss) attributable to noncontrolling interests
Less: Comprehensive income (loss) attributable to noncontrolling interests
Less: Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to Fossil Group, Inc.
Comprehensive income (loss) attributable to Fossil Group, Inc.
Comprehensive income (loss) attributable to Fossil Group, Inc.$(9,948) $20,378
 $(387,584) $35,526
Earnings (loss) per share: 
  
  
  
Earnings (loss) per share:
Earnings (loss) per share:
Basic
Basic
Basic$(0.11) $0.36
 $(8.22) $0.61
Diluted$(0.11) $0.36
 $(8.22) $0.60
Diluted
Diluted
Weighted average common shares outstanding:
Weighted average common shares outstanding:
Weighted average common shares outstanding: 
  
  
  
Basic48,521
 48,130
 48,439
 48,127
Basic
Basic
Diluted48,521
 48,291
 48,439
 48,286
Diluted
Diluted
 
See notes to the unaudited condensed consolidated financial statements.

6




FOSSIL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNAUDITED
IN THOUSANDS

For the 13 Weeks Ended March 30, 2024
 Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained (Deficit)
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Stockholders'
Equity
Attributable
to Fossil
Group, Inc.
Noncontrolling InterestTotal Stockholders' Equity
SharesPar
Value
Balance, December 30, 202352,487 $525 $311,709 $— $18,403 $(76,405)$254,232 $(2,494)$251,738 
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units— — — — — — — — 
Acquisition of common stock for employee tax withholding— — — (3)— — (3)— (3)
Retirement of common stock(2)— (3)— — — — — 
Stock-based compensation— — 1,011 — — — 1,011 — 1,011 
Net income (loss)— — — — (24,296)— (24,296)(18)(24,314)
Other comprehensive income (loss)— — — — — (1,859)(1,859)— (1,859)
Balance, March 30, 202452,492 $525 $312,717 $— $(5,893)$(78,264)$229,085 $(2,512)$226,573 

For the 13 Weeks Ended April 1, 2023
 Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Stockholders'
Equity
Attributable
to Fossil
Group, Inc.
Noncontrolling InterestTotal Stockholders' Equity
SharesPar
Value
Balance, December 31, 202251,836 $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— — — — — — — — 
Acquisition of common stock for employee tax withholding— — (11)— — (11)— (11)
Retirement of common stock(2)— (11)11 — — — — — 
Stock-based compensation— — 1,362 — — — 1,362 — 1,362 
Net income (loss)— — — — (41,262)— (41,262)80 (41,182)
Other comprehensive income (loss)— — — — — 3,111 3,111 — 3,111 
Balance, April 1, 202351,841 $518 $307,592 $— $134,229 $(73,207)$369,132 $(2,843)$366,289 

See notes to the unaudited condensed consolidated financial statements.

7




FOSSIL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
IN THOUSANDS
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Operating Activities:  
Net income (loss)$(24,314)$(41,182)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation, amortization and accretion4,475 5,068 
Non-cash lease expense16,771 18,619 
Stock-based compensation1,011 1,362 
Decrease in allowance for returns and markdowns(2,957)(6,320)
Property, plant and equipment and other long-lived asset impairment losses373 55 
Non-cash restructuring charges101 — 
Bad debt expense2,459 395 
Other non-cash items625 (1,427)
Contingent consideration remeasurement(154)(347)
Changes in operating assets and liabilities:  
Accounts receivable49,089 39,644 
Inventories25,015 41,959 
Prepaid expenses and other current assets(14,391)(10,171)
Accounts payable(3,270)(71,548)
Accrued expenses(25,543)(29,846)
Income taxes(8,731)(9,761)
Operating lease liabilities(19,937)(22,362)
Net cash provided by (used in) operating activities622 (85,862)
Investing Activities:  
Additions to property, plant and equipment and other(1,678)(2,610)
Decrease (increase) in intangible and other assets348 (109)
Net cash used in investing activities(1,330)(2,719)
Financing Activities:  
Acquisition of common stock(3)(11)
Debt borrowings13,815 40,136 
Debt payments(18,093)(22,003)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.(422)(1,660)
Net cash (used in) provided by financing activities(4,703)16,462 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash691 298 
Net decrease in cash, cash equivalents, and restricted cash(4,720)(71,821)
Cash, cash equivalents, and restricted cash:  
Beginning of period121,583 204,075 
End of period$116,863 $132,254 
 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 accretion61,526
 73,198
Stock-based compensation22,384
 23,894
Decrease in allowance for returns-net of inventory in transit(6,129) (14,955)
Loss (gain) on disposal of assets1,686
 (9,866)
Fixed asset and other long-lived asset impairment losses2,726
 2,213
Goodwill and trade name impairment losses407,128
 
Non-cash restructuring charges7,031
 12,523
Increase (decrease) in allowance for doubtful accounts4,161
 (3,915)
Deferred income taxes and other(111,177) (9,309)
Changes in operating assets and liabilities, net of effect of acquisitions: 
  
Accounts receivable85,078
 74,706
Inventories(116,002) (76,869)
Prepaid expenses and other current assets(5,620) 17,640
Accounts payable80,146
 (16,887)
Accrued expenses20,863
 (38,572)
Income taxes payable1,734
 (9,257)
Net cash provided by operating activities60,168
 59,360
Investing Activities: 
  
Additions to property, plant and equipment(17,239) (53,524)
Decrease in intangible and other assets478
 2,509
Misfit working capital settlement
 788
Proceeds from the sale of property, plant and equipment533
 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 borrowings1,162,074
 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 period297,330
 289,275
End of period$166,922
 $235,952

See notes to the unaudited condensed consolidated financial statements.

8




FOSSIL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
 
1. FINANCIAL STATEMENT POLICIES
Basis of Presentation. The condensed consolidated financial statements include the accounts of Fossil Group, Inc., a Delaware corporation, and its wholly and majority-owned subsidiaries (the “Company”).
The information presented herein includes the thirteen-week period ended March 30, 2024 (“First Quarter”) as compared to the thirteen-week period ended April 1, 2023 (“Prior Year Quarter”). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s financial position as of SeptemberMarch 30, 2017,2024, and the results of operations for the thirteen-week periods ended September 30, 2017 (“Third Quarter”)First Quarter and October 1, 2016 (“Prior Year Quarter”), respectively, and the thirty-nine week periods ended September 30, 2017 (“Year To Date Period”) and October 1, 2016 (“Prior Year YTD Period”).Quarter. All adjustments are of a normal, recurring nature.
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, 201630, 2023, as amended (the “2016“2023 Form 10-K”). Operating results for the ThirdFirst 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 20162023 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 impairmentother 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’sCompany'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, refinereduce and optimize the Company’s infrastructure as well asand 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.
9



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 March 30, 2024For the 13 Weeks Ended April 1, 2023
Numerator:  
Net income (loss) attributable to Fossil Group, Inc.$(24,296)$(41,262)
Denominator: 
Basic EPS computation: 
Basic weighted average common shares outstanding52,491 51,840 
Basic EPS$(0.46)$(0.80)
Diluted EPS computation: 
Diluted weighted average common shares outstanding52,491 51,840 
Diluted EPS$(0.46)$(0.80)
 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 outstanding48,521
 48,130
 48,439
 48,127
Basic EPS$(0.11) $0.36
 $(8.22) $0.61
Diluted EPS computation:   
  
  
Basic weighted average common shares outstanding48,521
 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 outstanding48,521
 48,291
 48,439
 48,286
Diluted EPS$(0.11) $0.36
 $(8.22) $0.60

At the end of the ThirdFirst Quarter, and Year To Date Period, approximately 5.1 million and 4.41.9 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 1.20.3 million weighted average performance-based shares at the end of both the Third Quarter and Year To Date Period.First Quarter.
At the end of the Prior Year Quarter, and Prior Year YTD Period, approximately 1.6 million and 1.52.0 million weighted average shares issuable under stock-based awards respectively, were not included in the diluted EPS calculation because they were antidilutive. Approximately 1.1The total antidilutive weighted average shares included 0.3 million weighted average performance-based shares were not included in the diluted EPS calculation at the end of both the Prior Year QuarterQuarter.
Cash, Cash Equivalents and Prior Year YTD PeriodRestricted 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 March 30, 2024 and April 1, 2023 that are presented in the performance targets were not met.condensed consolidated statement of cash flows (in thousands):
March 30, 2024April 1, 2023
Cash and cash equivalents$112,889 $127,111 
Restricted cash included in prepaid expenses and other current assets78 107 
Restricted cash included in intangible and other assets-net3,896 5,036 
Cash, cash equivalents and restricted cash$116,863 $132,254 
Recently Issued and Adopted Accounting Standards
In August 2017,December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging, 2023-09, Income Taxes (Topic 815)740): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amendsIncome Tax Disclosures, to enhance the transparency and simplifies hedge accounting guidance in orderdecision usefulness of income tax disclosures through changes to enable entities to better portray the economics of their risk management activities. Therate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2018, including


interim periods within those periods. Early2024, with early adoption is permitted. The Company is currently evaluating the impact of the standardadopting this guidance on its consolidated financial statements and relatedstatement disclosures.
In May 2017,November 2023, the FASB issued ASU 2017-09, Compensation-Stock Compensation2023-07, Improvements to Reportable Segment Disclosures (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when280), to account for a changeimprove reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The amendments in this update will require public entities to disclose significant segment expenses that are regularly provided to the terms or conditionsCompany's chief operating decision maker and included within segment profit and loss, an amount and description 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. Theits composition for other segment items, and expanded interim disclosures. This 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 will 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,2023 and interim periods within thosefiscal years beginning after December 15, 2017. Early2024, with early adoption permitted. The Company is permitted. This standard will not have a materialevaluating the impact of adopting this guidance on the Company’s consolidated results of operations orits financial position.statement disclosures.
In March 2016,October 2023, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)2023-06, Disclosure Improvements - Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakageCodification Amendments in Response to the extent that it is probableSEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a significant reversalvariety 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 totopics in the FASB Accounting Standards Codification® (“ASU 2016-02”Codification (the "Codification"), which supersedeswith the existing guidanceintention of clarifying or improving them and to align the requirements in the Codification with the
10



regulations of the U.S. Securities and Exchange Commission (the "SEC”). The effective date for lease accounting, Leases (Topic 840)ASU 2016-02 requires lessees to recognize leases2023-06 varies and is determined for each individual disclosure based 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 effective 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. Manythe SEC's removal of the Company’s leases are considered operating leases and arerelated disclosure. ASU 2023-06 will 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 financial position.
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 of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB later amended ASU-2014-09 with the following:


ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations 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 Organization for Economic Cooperation and Development ("OECD") and over 140 countries have agreed to enact a two-pillar solution to reform the international tax rules to address the challenges arising from the globalization and digitalization of the economy."The Pillar Two Global Anti-Base Erosion (GloBE) Rules" provide a coordinated system to ensure that multinational enterprises with revenues above 750 million euro pay a minimum effective tax rate of 15% tax on the income arising in each of the jurisdictions in which they operate. Many aspects of Pillar Two will be effective for tax years beginning in January 2024, with certain remaining impacts to be effective in 2025. Each country must enact its own legislation to apply the Pillar Two rules. 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 unitdoes not expect Pillar Two to its carrying value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The Company early adopted ASU 2017-04 effective June 15, 2017 in conjunction with the interim impairment test of goodwill for all reporting units and goodwill impairment was recorded according to the new standard. The Company believes the adoption of ASU 2017-04 did not change the amount of impairment charges recorded in the second quarter of fiscal 2017. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional information on our interim goodwill impairment test performed.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplified several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidatedits financial results, of operationsincluding its annual estimated effective tax rate 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 electedliquidity for 2024, but will continue 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.monitor future developments.
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 CHARGESREVENUE
Disaggregation of Revenue. The Company evaluates its goodwillCompany's revenue disaggregated by major product category and intangible assets for impairment on an annual basis, or as facts and circumstances warrant. At the endtiming 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 capitalizationrevenue recognition was 14% below the carrying amount of its net assets as of April 1, 2017. During the second quarter of fiscal 2017, the Company's market capitalization continued to decline, at which point the Company determined the decrease in stock price to be sustained and thus a strong indicator of impairment. Due to a change in key assumptions used in interim testing, including the decline in market capitalization and decline in sales projections, the Company believed that impairment of goodwill and trade names was probable as of June 15, 2017, and therefore performed interim tests for each reporting unit and trade name. Using a combination of discounted cash flow and guideline public company methodologies, the Company compared the fair value of each of its three reporting units with their carrying value and concluded that goodwill was fully impaired. Accordingly, in the second quarter of fiscal 2017, the Company recognized a pre-tax impairment charge in operations of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively.
The changes in the carrying amount of goodwill were as follows (in thousands):
For the 13 Weeks Ended March 30, 2024
AmericasEuropeAsiaCorporateTotal
Product type
Watches:
     Traditional watches$78,706 $57,132 $50,723 $— $186,561 
     Smartwatches5,154 1,561 2,162 — 8,877 
Total watches$83,860 $58,693 $52,885 $— $195,438 
Leathers17,520 4,405 5,659 — 27,584 
Jewelry6,619 13,478 6,166 — 26,263 
Other2,018 2,144 828 609 5,599 
Consolidated$110,017 $78,720 $65,538 $609 $254,884 
Timing of revenue recognition
Revenue recognized at a point in time$109,909 $78,560 $65,425 $609 $254,503 
Revenue recognized over time108 160 113 — 381 
Consolidated$110,017 $78,720 $65,538 $609 $254,884 

For the 13 Weeks Ended April 1, 2023
AmericasEuropeAsiaCorporateTotal
Product type
Watches:
     Traditional watches$91,357 $71,803 $62,266 $— $225,426 
Smartwatches12,490 6,622 5,288 — 24,400 
Total watches$103,847 $78,425 $67,554 $— $249,826 
Leathers27,112 6,773 6,380 — 40,265 
Jewelry5,419 18,501 5,125 — 29,045 
Other1,553 1,974 1,077 1,296 5,900 
Consolidated$137,931 $105,673 $80,136 $1,296 $325,036 
Timing of revenue recognition
Revenue recognized at a point in time$137,467 $105,484 $80,026 $1,021 $323,998 
Revenue recognized over time464 189 110 275 1,038 
Consolidated$137,931 $105,673 $80,136 $1,296 $325,036 
11



 Americas Europe Asia Total
Balance at December 31, 2016$202,187
 $110,291
 $42,785
 $355,263
Foreign currency changes162
 3,983
 85
 4,230
Impairment charges(202,349) (114,274) (42,870) $(359,493)
Balance at September 30, 2017$
 $
 $
 $
During
Contract Balances. As of March 30, 2024, the second quarterCompany 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(i) $0.3 million as of $55.6 million was written downMarch 30, 2024 and no contract liabilities as of December 30, 2023 related 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 $11.8remaining performance obligations on licensing income, (ii) $1.5 million and the MICHELE trade name with a carrying amount$1.7 million as of $18.5March 30, 2024 and December 30, 2023, respectively, primarily related to remaining performance obligations on wearable technology products and (iii) $2.5 million was written downand $2.7 million as of March 30, 2024 and December 30, 2023, respectively, related to its implied fair value 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 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 compared to previous valuation assumptions.gift cards issued.


3. INVENTORIES
Inventories consisted of the following (in thousands):
March 30, 2024December 30, 2023
Components and parts$15,580 $18,931 
Finished goods208,557 233,903 
Inventories$224,137 $252,834 
 September 30, 2017 December 31, 2016
Components and parts$60,258
 $49,438
Work-in-process9,471
 12,345
Finished goods613,257
 480,704
Inventories$682,986
 $542,487


4. WARRANTY LIABILITIES
The Company’s warranty liability is recorded in accrued expenses-other in the Company’s condensed consolidated balance sheets. Warranty liability activity consisted of the following (in thousands):
For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Beginning balance$15,421
 $13,669
Settlements in cash or kind(11,608) (7,338)
Warranties issued and adjustments to preexisting warranties (1)
14,984
 8,604
Ending balance$18,797
 $14,935

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


5. INCOME TAXES
The Company’s income tax (benefit) expense and related effective rates were as follows (in thousands, except percentage data):
For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
For the 13 Weeks Ended March 30, 2024
For the 13 Weeks Ended March 30, 2024
For the 13 Weeks Ended March 30, 2024
Income tax (benefit) expense
Income tax (benefit) expense
Income tax (benefit) expense$(3,230) $6,451
 $(100,746) $13,230
Effective tax rate37.1% 25.0% 20.3% 27.5%
Effective tax rate
Effective tax rate
The higher effective tax rate in the ThirdFirst Quarter was favorable as compared to the Prior Year Quarter is attributabledue 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 tax rate than the tax rates used to calculate the tax expense on the profits from the Company's foreign operations. There were alsoCompany recognizing $9.6 million of favorable discrete items, occurringincluding the release of uncertain tax positions and additional
accrued interest income. The overall tax rate 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 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. Foreign income taxes are also paid on this same foreign income, resulting in double taxation. The lower effective tax rate for the Yearcan 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 toCompany's global mix of earnings, the additionalresolution 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 SeptemberMarch 30, 2017,2024, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was $21.7$17.3 million, all of which $19.0 million would favorably impact the effective tax rate in future periods, if recognized. The Company filed amended US income tax returns for 2014-2017 under the Coronavirus Aid, Relief and Economic Security Act (the “CARES
12



Act”) which included a provision for the carryback of U.S. NOLs. The IRS reviewed the Company’s 2019 and 2020 U.S. tax returns and resulting net operating losses, as well as the tax returns for 2014-2017, which were the carryback years. The Company received the income tax refund for the 2019 U.S tax NOL carryback in fiscal year 2021. On March 27, 2024, the Company was informed that its 2019, 2020, and NOL carryback claims were approved by the IRS and Joint Committee on Taxation. In April 2024, the Company received $57.3 million of tax refunds. The Company released corresponding uncertain tax positions of $8.8 million in the First Quarter. The Company reasonably expects that certain remaining uncertain tax positions will be resolved within the next twelve months, which if resolved favorably, would impact the tax rate by a benefit of approximately $14.5 million, including interest.
The Company is also subject to examinations in various state and foreign jurisdictions for its 2011-20162013-2022 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 paidsettled within twelve months of the condensed consolidated balance sheet date. As of SeptemberMarch 30, 2017,2024, the Company hadhas not recorded $2.3 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 SeptemberMarch 30, 2017,2024, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheetsheets was $2.8$2.6 million and $1.3of which $7.2 million respectively. The income tax relatedis accrued interest expense and $4.6 million is 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 Companyincome. There were no 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 52,491,710 and 52,487,020 shares issued and outstanding at March 30, 2024 and December 30, 2023, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, with none issued or outstanding at March 30, 2024 or December 30, 2023. 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 beenare 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 (deficit) earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs have beenare conducted pursuant to Rule 10b-18 of the Exchange Act.


AtAs of March 30, 2024 and December 31, 2016 and September 30, 2017,2023, all treasury stock had been effectively retired. As of SeptemberMarch 30, 2017,2024, the Company had $824.2$20.0 million of repurchase authorizations remaining under its combined repurchase programs. However, under the Company's credit agreement, theprogram. The Company is restricted from making open market repurchases of its common stock.
The following tables reflect the Company’sdid not repurchase any common stock under its authorized stock repurchase activity forplans during the periods indicated (in millions):
     For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
 Termination Date 
Number of
Shares
Repurchased
 
Dollar Value
Repurchased
 
Number of
Shares
Repurchased
 
Dollar Value
Repurchased
2014$1,000.0
 December 2018 
 $
 
 $
2010$30.0
 None 
 $
 
 $
First Quarter or Prior Year Quarter.
     For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
 Termination Date 
Number of
Shares
Repurchased
 
Dollar Value
Repurchased
 
Number of
Shares
Repurchased
 
Dollar Value
Repurchased
2014$1,000.0
 December 2018 
 $
 0.1
 $5.2
2010$30.0
 None 
 $
 
 $



Controlling and Noncontrolling Interest. The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands):
 
Fossil Group, Inc.
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
Stockholders’
Equity
Balance at December 31, 2016$1,006,236
 $9,202
 $1,015,438
Net income (loss)(398,298) 2,931
 (395,367)
Currency translation adjustment32,078
 
 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 expense23,588
 
 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 income29,170
 5,646
 34,816
Currency translation adjustment9,383
 
 9,383
Cash flow hedges - net change(4,741) 
 (4,741)
Pension plan activity1,714
 
 1,714
Common stock issued upon exercise of stock options57
 
 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 expense23,894
 
 23,894
Balance at October 1, 2016$972,661
 $12,258
 $984,919


7. EMPLOYEE BENEFIT PLANS
Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the ThirdFirst Quarter:
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 RightsSharesWeighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
 (in Thousands) (in Years)(in Thousands)
Outstanding at December 30, 202339 $47.99 0.2$— 
Forfeited or expired(39)47.99 
Outstanding at March 30, 2024— 0.0— 
Exercisable at March 30, 2024$— 0.0$— 
 
Aggregate intrinsic value is before income taxes and 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.
13


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

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, Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock restricted stock unitsunit and performance restricted stock unitsunit activity during the ThirdFirst Quarter:
Restricted Stock Units
and Performance Restricted Stock Units
Restricted Stock Units
and Performance Restricted Stock Units
Number of SharesWeighted-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 December 30, 2023
Granted 254
 9.98
Vested (17) 37.81
Forfeited (57) 23.86
Nonvested at September 30, 2017 2,965
 $22.92
Nonvested at March 30, 2024
 
The total fair value of restricted stock and restricted stock units vested was less than $0.1 million during the Third Quarter was approximately $0.2 million.First 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 growthgroup.
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 relationfiscal year 2021, non-employee directors may elect to defer receipt of all or a defined sales plan and achievementportion of succession plansthe 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.



14



8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

 For the 13 Weeks Ended March 30, 2024
 Currency
Translation
Adjustments
Cash Flow Hedges  
 Forward
Contracts
Pension
Plan
Total
Beginning balance$(83,906)$1,688 $5,813 $(76,405)
Other comprehensive income (loss) before reclassifications(2,486)674 (19)(1,831)
Tax (expense) benefit— 76 — 76 
Amounts reclassed from accumulated other comprehensive income (loss)— 30 — 30 
Tax (expense) benefit— 74 — 74 
Total other comprehensive income (loss)(2,486)646 (19)(1,859)
Ending balance$(86,392)$2,334 $5,794 $(78,264)

For the 13 Weeks Ended September 30, 2017For the 13 Weeks Ended April 1, 2023
Currency
Translation
Adjustments
 Cash Flow Hedges     Currency
Translation
Adjustments
Cash Flow Hedges 
 
Forward
Contracts
 
Interest
Rate Swaps
 
Pension
Plan
 Total Forward
Contracts
Pension
Plan
Total
Beginning balance$(75,011) $(1,284) $41
 $(3,907) $(80,161)
Other comprehensive income (loss) before reclassifications5,222
 (16,776) 5
 
 (11,549)
Tax (expense) benefit
 2,853
 (2) 
 2,851
Amounts reclassed from accumulated other comprehensive income (loss)
 (4,940) (25) 
 (4,965)
Tax (expense) benefit
 807
 9
 
 816
Total other comprehensive income (loss)5,222
 (9,790) 19
 
 (4,549)
Ending balance$(69,789) $(11,074) $60
 $(3,907) $(84,710)


 For the 13 Weeks Ended October 1, 2016
 
Currency
Translation
Adjustments
 Cash Flow Hedges    
  
Forward
Contracts
 
Interest
Rate Swaps
 
Pension
Plan
 Total
Beginning balance$(73,986) $2,943
 $(1,623) $(4,506) $(77,172)
Other comprehensive income (loss) before reclassifications1,942
 3,313
 466
 
 5,721
Tax (expense) benefit(280) (605) (170) 
 (1,055)
Amounts reclassed from accumulated other comprehensive income (loss)
 2,621
 (413) 
 2,208
Tax (expense) benefit
 (714) 150
 
 (564)
Total other comprehensive income (loss)1,662
 801
 559
 
 3,022
Ending balance$(72,324) $3,744
 $(1,064) $(4,506) $(74,150)


 For the 39 Weeks Ended September 30, 2017
 
Currency
Translation
Adjustments
 Cash Flow Hedges    
  
Forward
Contracts
 
Interest
Rate Swaps
 
Pension
Plan
 Total
Beginning balance$(101,867) $10,693
 $(343) $(3,907) $(95,424)
Other comprehensive income (loss) before reclassifications32,078
 (33,243) 230
 
 (935)
Tax (expense) benefit
 11,512
 (84) 
 11,428
Amounts reclassed from accumulated other comprehensive income (loss)
 1,981
 (404) 
 1,577
Tax (expense) benefit
 (1,945) 147
 
 (1,798)
Total other comprehensive income (loss)32,078
 (21,767) 403


 10,714
Ending balance$(69,789) $(11,074) $60
 $(3,907) $(84,710)




 For the 39 Weeks Ended October 1, 2016
 
Currency
Translation
Adjustments
 Cash Flow Hedges    
  
Forward
Contracts
 
Interest
Rate Swaps
 
Pension
Plan
 Total
Beginning balance$(81,707) $8,114
 $(693) $(6,220) $(80,506)
Other comprehensive income (loss) before reclassifications9,767
 2,055
 (1,915) 2,010
 11,917
Tax (expense) benefit(280) 433
 698
 (296) 555
Amounts reclassed from accumulated other comprehensive income (loss)104
 9,888
 (1,331) 
 8,661
Tax (expense) benefit
 (3,030) 485
 
 (2,545)
Total other comprehensive income (loss)9,383
 (4,370) (371) 1,714
 6,356
Ending balance$(72,324) $3,744
 $(1,064) $(4,506) $(74,150)

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


9. SEGMENT INFORMATION
The Company reports segment information based on the “management approach”.approach.” The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.
The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, greater China (including mainland China, 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 buildingCorporate includes peripheral revenue generating activities from factories and omni-channel activitiesintellectual property and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to
15



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 March 30, 2024For the 13 Weeks Ended April 1, 2023
 Net SalesOperating Income (Loss)Net SalesOperating Income (Loss)
Americas$110,017 $8,755 $137,931 $12,555 
Europe78,720 7,393 105,673 6,969 
Asia65,538 5,802 80,136 7,200 
Corporate609 (51,156)1,296 (64,032)
Consolidated$254,884 $(29,206)$325,036 $(37,308)
 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
Europe247,184
 39,332
 243,139
 49,013
Asia133,436
 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
Europe637,566
 (33,859) 669,076
 109,193
Asia355,343
 (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 reflecttable reflects net sales for each class of similar products in the periods presented (in thousands, except percentage data):

For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
 Net SalesPercentage of TotalNet SalesPercentage of Total
Watches:
    Traditional watches$186,561 73.2 %$225,426 69.4 %
    Smartwatches8,877 3.5 24,400 7.5 
Total watches$195,438 76.7 %$249,826 76.9 %
Leathers27,584 10.8 40,265 12.4 
Jewelry26,263 10.3 29,045 8.9 
Other5,599 2.2 5,900 1.8 
Total$254,884 100.0 %$325,036 100.0 %

 For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
 Net Sales Percentage of Total Net Sales Percentage of Total
Watches$551,913
 80.1% $567,148
 76.9%
Leathers75,660
 11.0
 93,338
 12.6
Jewelry47,729
 6.9
 60,237
 8.2
Other13,420
 2.0
 17,267
 2.3
Total$688,722
 100.0% $737,990
 100.0%



 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
 Net Sales Percentage of Total Net Sales Percentage of Total
Watches$1,471,144
 78.8% $1,581,233
 75.9%
Leathers217,946
 11.7
 278,995
 13.4
Jewelry139,900
 7.5
 171,709
 8.2
Other38,368
 2.0
 51,269
 2.5
Total$1,867,358
 100.0% $2,083,206
 100.0%





10. DERIVATIVES AND RISK MANAGEMENT
Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months. The Company enters into forward contracts, generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts.
These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency.
At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective.
For a derivative instrument that is designated and qualifies as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income (loss) and comprehensive income (loss), and there were no components excluded from the assessment of hedge effectiveness for the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.
All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement.
16





As of SeptemberMarch 30, 2017,2024, 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 CurrencyContract Currency
TypeAmountTypeAmount
Euro29.8 U.S. dollar33.3 
Canadian dollar15.7 U.S. dollar11.8 
British pound2.6 U.S. dollar3.3 
Mexican peso39.6 U.S. dollar2.2 
Japanese yen236.1 U.S. dollar1.8 
Australian dollar1.8 U.S. dollar1.2 
U.S. dollar2.2 Japanese yen300.0 
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 SeptemberMarch 30, 2017,2024, the Company did not have any non-designated forward contracts outstanding. As of December 30, 2023, the Company had non-designated forward contracts of approximately $2.2$1.5 million on 28.327.1 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 March 30, 2024For the 13 Weeks Ended April 1, 2023
Cash flow hedges:  
Forward contracts$750 $(2,682)
Total gain (loss) recognized in other comprehensive income (loss), net of taxes$750 $(2,682)
 For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Cash flow hedges: 
  
Forward contracts$(13,923) $2,708
Interest rate swaps3
 296
Total gain (loss) recognized in other comprehensive income (loss), net of taxes$(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) $2,488
Interest rate swaps146
 (1,217)
Total gain (loss) recognized in other comprehensive income (loss), net of taxes$(21,585) $1,271

The following table illustratestables 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 InstrumentsCondensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location
Effect of Derivative
Instruments
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Forward contracts designated as cash flow hedging instrumentsCost of salesTotal gain (loss) reclassified from accumulated other comprehensive income (loss)$(71)$432 
Forward contracts designated as cash flow hedging instrumentsOther income (expense)-netTotal gain (loss) reclassified from accumulated other comprehensive income (loss)$175 $(328)
Forward contracts not designated as hedging instrumentsOther income (expense)-netTotal gain (loss) recognized in income$$25 
17



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


Derivative Instruments 
Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location
 
Effect of Derivative
Instruments
 
For the 39 Weeks Ended 
September 30, 2017
 
For the 39 Weeks Ended 
October 1, 2016
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $36
 $6,858
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $170
 $(222)
Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from accumulated other comprehensive income (loss) $(257) $(846)





The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands):
 Asset DerivativesLiability Derivatives
 March 30, 2024December 30, 2023March 30, 2024December 30, 2023
Derivative InstrumentsCondensed
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 instrumentsPrepaid expenses and other current assets$1,286 Prepaid expenses and other current assets$339 Accrued expenses-other$394 Accrued expenses-other$1,044 
Forward contracts not designated as cash flow hedging instrumentsPrepaid expenses and other current assets— Prepaid expenses and other current assets— Accrued expenses-other— Accrued expenses-other
Forward contracts designated as cash flow hedging instrumentsIntangible and other assets-net— Intangible and other assets-net20 Other long-term liabilities— Other long-term liabilities28 
Total $1,286  $359  $394  $1,079 
  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 March 30, 2024For the 13 Weeks Ended April 1, 2023
Cost of SalesOther Income (Expense)-netCost of SalesOther 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$121,392 $3,887 $164,319 $2,733 
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)$(71)$175 $432 $(328)
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income$— $$— $25 
At the end of the ThirdFirst Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June 2019.March 2025. As of SeptemberMarch 30, 2017,2024, an estimated net lossgain of $9.2$1.0 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.
18



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 SeptemberMarch 30, 20172024 (in thousands):
Fair Value at September 30, 2017 Fair Value at March 30, 2024
Level 1 Level 2 Level 3 Total Level 1Level 2Level 3Total
Assets: 
  
  
  
Assets:  
Forward contracts$
 $3,230
 $
 $3,230
Deferred compensation plan assets: 
  
  
  
Investment in publicly traded mutual funds2,605
 
 
 2,605
Interest rate swap
 109
 
 109
Total
Total
Total$2,605
 $3,339
 $
 $5,944
Liabilities: 
  
  
  
Liabilities:  
Forward contracts$
 $19,773
 
 $19,773
Interest rate swap
 15
 
 15
Forward contracts
Forward contracts
Total$
 $19,788
 $
 $19,788
Total
Total
The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 201630, 2023 (in thousands):
 Fair Value at December 30, 2023
 Level 1Level 2Level 3Total
Assets:    
Forward contracts$— $359 $— $359 
Total$— $359 $— $359 
Liabilities:    
Contingent consideration$— $— $586 $586 
Forward contracts— 1,079 — 1,079 
Total$— $1,079 $586 $1,665 
 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 funds2,385
 
 
 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 SeptemberMarch 30, 2017, debt,2024, the Company's Notes (as defined in Note 15— Debt Activity), excluding unamortized debt issuance costs, were recorded at cost and capital leases,had a carrying value of $150.0 million and a fair value of approximately $67.5 million. The fair value of the Company's Notes was based on Level 1 inputs. The Company's Revolving Facility (as defined in Note 15—Debt Activity) was recorded at cost and had a carrying value of $486.1$57.5 million and a fair value of approximately $480.6$44.6 million. The fair value of debtthe Company's Revolving Facility was obtained from a third-party based on observable marketLevel 2 inputs.
During the First Quarter, operating lease right-of-use ("ROU") assets with a carrying amount of $1.8 million and property, plant and equipment-net with a carrying value of $0.2 million were written down to a fair value of $1.5 million and $0.1 million, respectively, resulting in impairment charges of $0.4 million. During the Prior Year Quarter, $0.1 million of impairment charges were recorded for ROU assets with a carrying amount of $0.1 million.
The fair valuevalues of goodwilloperating lease ROU assets and trade names are measured on a non-recurring basisfixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows discounts rates and implied royaltydiscount 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$0.4 million impairment expense $3.6in the First Quarter, $0.2 million $1.4 million and $0.5 million werewas recorded in restructuring chargesother long-lived asset impairments in the Americas, EuropeAsia segment and Asia segments, respectively, and $0.8$0.2 million and $0.3 million werewas recorded in SG&Aother long-lived asset impairments in the Europe and Asia segments, respectively. segment. The $0.1 million impairment expense in the Prior Year Quarter, was recorded in other long-lived asset impairments in the Europe segment.
During the second quarter of fiscal 2017, the Company recorded a pre-tax impairment charge of $1.6 million related to the write off of a cost method investment.



19



12. INTANGIBLE AND OTHER ASSETS
 
The following table summarizes intangible and other assets (in thousands):
  March 30, 2024December 30, 2023
 UsefulGrossAccumulatedGrossAccumulated
LivesAmountAmortizationAmountAmortization
Intangibles-subject to amortization:     
Trademarks10 yrs.$3,978 $3,281 $3,978 $3,256 
Patents3 - 20 yrs.850 552 850 546 
Trade name6 yrs.4,502 3,376 4,502 3,189 
Other7 - 20 yrs.341 246 341 236 
Total intangibles-subject to amortization 9,671 7,455 9,671 7,227 
Intangibles-not subject to amortization:     
Trade names 8,886  8,919  
Other assets:     
Deposits 15,383  16,168  
Deferred tax asset-net 20,984  21,426  
Restricted cash 3,896  4,309  
Debt issuance costs2,331 2,490 
Other 3,286  3,340  
Total other assets 45,880 47,733 
Total intangible and other assets $64,437 $7,455 $66,323 $7,227 
Total intangible and other assets-net  $56,982  $59,096 
    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$0.2 million for the ThirdFirst Quarter and the Prior Year Quarter, respectively, and $10.4 million and $11.2 million for the Year To Date Period and Prior Year YTD Period, respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):
Fiscal YearAmortization
Expense
2024 (remaining)$729 
2025$720 
2026$136 
2027$116 
2028$107 
Thereafter$409 
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. 

20



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 CostCondensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Operating lease cost(1)
SG&A$16,309 $17,877 
Short-term lease costSG&A$286 $215 
Variable lease costSG&A$5,353 $6,120 

(1) Includes sublease income, which was immaterial.


The following table discloses supplemental balance sheet information for the Company’s leases (in thousands):
LeasesCondensed
Consolidated
Balance Sheets
Location
March 30, 2024December 30, 2023
Assets
OperatingOperating lease ROU assets$142,292 $151,000 
Liabilities
Current:
OperatingCurrent operating lease liabilities$40,257 $43,565 
Noncurrent:
OperatingLong-term operating lease liabilities$129,131 $137,644 

The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's leases:
Lease Term and Discount RateMarch 30, 2024December 30, 2023
Weighted-average remaining lease term:
Operating leases6.4 years6.4 years
Weighted-average discount rate:
Operating leases15.0 %14.9 %
21




Future minimum lease payments by year as of March 30, 2024 were as follows (in thousands):
Fiscal YearOperating Leases
2024 (remaining)$51,361 
202551,302 
202639,159 
202727,804 
202817,709 
Thereafter85,617 
Total lease payments$272,952 
Less: Interest103,564 
Total lease obligations$169,388 


Supplemental cash flow information related to leases was as follows (in thousands):
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$19,937 $22,362 
Leased assets obtained in exchange for new operating lease liabilities4,288 6,263 


As of March 30, 2024, 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 agreementfacility to May 17, 2019 and removedNovember 8, 2027 (provided, that if the Company’s abilityCompany has any indebtedness in an amount in excess of $35 million that matures prior to make offers to the lenders to extendNovember 8, 2027, the maturity date of the Term Loan orcredit facility shall be the Revolving Credit Facility. The Second Amendment also amended91st day prior to the repayment schedulematurity 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 requiresseasonal 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 paymentsan 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
22



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 dayNotes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each month beginning Aprilyear. 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. On and after April 1, 2018,November 30, 2023, the Company may redeem the Notes at the following prices: (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 willNotes to be due and payable in arrearsimmediately. 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 interestpayable without any action on the Term Loanpart 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 uponavailable 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 willborrowing 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 duemade 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 toborrowing 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 CompanyABL Borrowers will incurpay the ABL Agent, on the account of the issuing ABL Lenders, an additionalissuance fee of 0.25% times0.125% for any issued Letters of Credit.
The ABL Borrowers have the outstandingright 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 exposureCompany and such subsidiaries have granted liens on all or substantially all of their assets in order to secure the obligations under the credit agreement ifRevolving Facility. In addition, the Term Loan has not been repaidSwiss 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
23



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 tothe Revolving Facility.
As of March 31, 2018. Furthermore, the Second Amendment changed the consolidated total leverage ratio that30, 2024, the Company must comply with from 3.25 to 1.00 to the ratios as set forth below:


PeriodMaximum Ratio
July 2, 2017 through and including September 30, 20173.50 to 1.00
October 1, 2017 through and including March 31, 20183.25 to 1.00
April 1, 2018 through and including September 29, 20183.50 to 1.00
September 30, 2018 and thereafter3.25 to 1.00
The Company made principal payments of $6.3had $150.0 million and $18.8$57.5 million outstanding under the Term Loan during the Third QuarterNotes and Year To Date Period,Revolving Facility, respectively. The Company also madehad net payments of $158.0 million and $131.3$4.6 million under the Revolving Credit Facility during the Third Quarter and Year To Date Period, respectively.First Quarter. Amounts available under the Revolving Credit Facility arewere reduced by any amounts outstanding under standby lettersLetters of credit.Credit. As of SeptemberMarch 30, 2017,2024, the Company had available borrowing capacity of $270.5$9.9 million under the Revolving Credit Facility. TheAs of March 30, 2024, the Company had unamortized debt issuance costs of $4.6 million recorded in long-term debt and $2.3 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$1.0 million of interest expense related to the Term LoanNotes and Revolving Facility, respectively, during the Third Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap.First Quarter. The Company incurred approximately $8.1 million and $20.5 million of interest expense related to the Revolving Credit Facility during the Third Quarter and Year To Date Period, respectively. The Company incurred approximately $0.9 million and $2.7$0.6 million of interest expense related to the amortization of debt issuance costs during the Third QuarterFirst Quarter. At March 30, 2024, the Company was in compliance with all debt covenants related to its credit facilities.
16. RESTRUCTURING
In fiscal year 2023, the Company announced its Transform and Year To Date Period, respectively.

15. RESTRUCTURING
Grow strategy ("TAG") designed to reduce operating costs, improve operating margins, and advance the Company’s commitment to profitable growth. The Company implementedexpanded the scope and duration of TAG to focus on a multi-year restructuring program that began in fiscal year 2016 called New World Fossil ("NWF"). As partmore comprehensive review of NWF,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 Company targetslevel of operating expense efficiencies. TAG is estimated to improvegenerate approximately $300 million of annualized operating profit and support sales growth through a leaner infrastructure and an enhanced business model.benefits by the end of 2025. The Company is workingestimates approximately $100 million to achieve greater efficiencies from production$120 million in total charges over the duration of TAG and estimates approximately $25 million in remaining charges associated with the TAG Plan to distribution through activities such as organizational changes, reducing its overall product assortment, optimizing its base cost structure and consolidating facilities. The Company also intends to build a quicker and more responsive operating platform. The Company is reducing its retail footprint to reflect the evolving shopping habits of today's consumer, which includes restructuring costs, such as store impairment, recorded lease obligations and termination fees and accelerated depreciation. Of the total estimated $150 million restructuring charges, approximately $27.8 million and $41.8 million were recordedbe incurred during fiscal year 20162024. Aided by these measures, the Company's long-term goal is to achieve adjusted gross margins in the low to mid 50% range and the Year To Date period, respectively. The Company estimates total fiscal year 2017 NWF restructuring chargesadjusted operating margins of approximately $45 million.10%.

The following table shows a summary of TAG plan charges (in thousands):
For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Cost of sales$(241)$5,264 
Selling, general and administrative expenses10,053 7,097 
Total$9,812 $12,361 
The following table shows a rollforward of the accrued liability related to the Company’s restructuringTAG plan (in thousands):
For the 13 Weeks Ended March 30, 2024
LiabilitiesLiabilities
December 30, 2023ChargesCash PaymentsNon-cash ItemsMarch 30, 2024
Store closures$— $108 $$101 $
Professional services117 2,484 2,390 — 211 
Severance and employee-related benefits8,117 7,461 7,099 — 8,479 
Charges related to exits of certain product offerings3,821 (241)2,830 — 750 
Total$12,055 $9,812 $12,325 $101 $9,441 

24



For the 13 Weeks Ended April 1, 2023For the 13 Weeks Ended April 1, 2023
LiabilitiesLiabilitiesLiabilities
December 31, 2022December 31, 2022ChargesCash PaymentsNon-cash ItemsApril 1, 2023
For the 13 Weeks Ended September 30, 2017
Liabilities       Liabilities
July 1, 2017 Charges Cash Payments Non-cash Items September 30, 2017
Store closures$4,893
 $2,482
 $4,237
 $2,320
 $818
Professional services and other116
 765
 48
 291
 542
Professional services
Professional services
Professional services
Severance and employee-related benefits1,535
 2,522
 2,467
 
 1,590
Charges related to exits of certain product offerings
Total$6,544
 $5,769
 $6,752
 $2,611
 $2,950



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

 For the 39 Weeks Ended September 30, 2017
 Liabilities       Liabilities
 December 31, 2016 Charges Cash Payments Non-cash Items September 30, 2017
Store closures$4,546
 $8,223
 $6,415
 $5,536
 $818
Professional services and other794
 2,195
 2,156
 291
 542
Severance and employee-related benefits
 31,400
 28,606
 1,204
 1,590
Total$5,340
 $41,818
 $37,177
 $7,031
 $2,950

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

RestructuringTAG plan restructuring charges by operating segment were as follows (in thousands):

For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023
Americas$261 $2,959 
Europe3,483 3,955 
Asia1,140 4,268 
Corporate4,928 1,179 
Consolidated$9,812 $12,361 
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 April 1, 2023
LiabilitiesLiabilities
December 31, 2022Cash PaymentsApril 1, 2023
Professional services74 14 60 
Severance and employee-related benefits2,821 2,234 587 
Total$2,895 $2,248 $647 


25
 For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Americas$2,771
 $10,548
Europe1,445
 1,639
Asia1,144
 336
Corporate409
 1,950
Consolidated$5,769
 $14,473




 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Americas$10,567
 $10,548
Europe9,127
 1,639
Asia9,283
 336
Corporate12,841
 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 periodsperiod ended SeptemberMarch 30, 20172024 (the “Third“First Quarter” and “Year To Date Period,” respectively)) as compared to the thirteen and thirty-nine week periodsperiod ended OctoberApril 1, 20162023 (the “Prior Year Quarter” and “Prior Year YTD Period,” respectively)). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.
GeneralOverview
We are a global design, marketing and distribution company that specializes in consumer fashion accessories. Our principal offerings include an extensive line of men’smen's and women’swomen'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 partythird-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 consciousvalue-conscious or luxury oriented. Based on our extensive range of accessory products, brands, distribution channels and price points, we are able to target style consciousstyle-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 sellanticipate the following trends will continue to impact our products through a diversified distribution network thatoperating results:
Economic Environment Impacting Consumer Spending Ability and Preferences: Macroeconomic factors, including inflation and increased interest rates, impacted customer behavior in fiscal year 2023. In 2024, macroeconomic headwinds are expected to continue. This includes department stores, specialty retail locations, specialty watchpersistent inflation and jewelry stores, Company-owned retail and outlet stores, mass market stores and through our FOSSIL® website. Our wholesale customer base includes, among others, Amazon, Best Buy, Dillard’s, JCPenney, Kohl’s, Macy’s, Neiman Marcus, Nordstrom, Saks Fifth Avenue, Target and Wal-Mart. In the United States, our network of Company-owned stores included 84 retail stores locatedelevated short term interest rates in premier retail sites and 122 outlet stores locatedaddition to slowing economic conditions in major outlet malls as of September 30, 2017. In addition, we offer an extensive collectionmany of our FOSSIL brand productsmajor markets. While the impact of these macroeconomic factors are difficult to quantify, we expect these conditions to have a negative impact on our website, www.fossil.com, as well as proprietaryconsumer confidence and licensed watch and jewelry brands through other managed and affiliated websites.
Internationally, our products are sold to department stores, specialty retail stores and specialty watch and jewelry storesconsumer demand for discretionary goods in approximately 150 countries worldwide through 23 Company-owned foreign sales subsidiaries and through a network of approximately 80 independent distributors. Internationally, our network of Company-owned stores included 216 retail stores and 134 outlet stores as of September 30, 2017. Our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer an extensive collectionmany of our FOSSIL brand productsmajor markets.
Inventory Levels: Throughout 2023 and into 2024, slower consumer demand across a wide array of discretionary goods has translated in some cases to excess inventory levels in key accounts and overall cautious buying patterns across our wholesale customers. With the challenging global macro environment, we expect many customers to continue to manage to leaner inventory levels than the prior year across our key categories to reduce inventory carrying risk. We will also continue to proactively manage our inventory purchases to mitigate our cash flow and inventory risks.

World Conflicts: We continuously monitor the direct and indirect impacts from the military conflicts between Russia and Ukraine and in the Middle East. Our operations in Russia and Israel consist of sales through third-party distributors, and sales to these distributors are currently on hold. Our sales in Russia and Israel are not material to our websitesfinancial results. We have no other operations, including supply chain, in certain countries.Israel, Palestine, Russia or Ukraine. However, the continuation of the current military conflicts or an escalation of the conflicts beyond their current scope may continue to weaken the global economy, negatively impact consumer confidence, and could result in additional inflationary pressures and 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 outsidesubstantial majority of our 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 productsimports. A material increase in the respective marketscost of our products or transportation without any offsetting price increases or a disruption in the flow of finished goods from China may significantly increase our costs.

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 linesfacilities and systems and those of connected accessories, market acceptanceour third party service providers have been, and will continue to be, vulnerable to theft of new designsphysical information,
26



security breaches, hacking attempts, computer viruses and productsmalware, 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 isexperience a significant security incident, we could be subject to uncertainty.liability or other damages that exceed our insurance coverage. In addition, we generallycannot 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: Our goal is to drive shareholder value and make decisions regardinga positive impact on our people, planet and communities. We continue to operate in a very challenging business environment for our product designs several monthsofferings. In early 2023, we initiated our Transform and Grow plan (“TAG”), which was designed primarily to reduce operating expenses in order to improve operating margins and advance our path to profitable growth. This initial phase of TAG was designed to deliver $100 million in annualized cost savings by the end of fiscal year 2024.

In August 2023, as a result of a more comprehensive review of our business operations, we expanded the scope of TAG to include seven key workstreams. Our goal in expanding TAG was to put additional emphasis on initiatives aimed at restructuring or optimizing our operations, exit or minimize certain product offerings, brands and distribution channels, strengthen gross margins through improvements in our sourcing and improve our working capital efficiency. Additionally, the board of directors has established a Special Board Committee to provide primary board oversight of our Transformation Office and drive accountability, timeliness and results in TAG. Approximately half of the time when consumer acceptance canTAG workstreams are designed to structurally improve our gross margins. Our 300 basis point gross margin rate improvement in the First Quarter versus the Prior Year Quarter reflects our exit of the smartwatch category, lower freight costs and improved product margins in our core categories. Our TAG workstreams on product sourcing and supply chain are expected to generate incremental year-over-year gross margin improvement in the latter part of fiscal 2024. The remaining TAG workstreams are focused on removing costs from our expense structure with the goal of (i) re-calibrating our operating model for greater efficiency and lower fixed costs, (ii) driving savings in our procurement practices, and (iii) optimizing our direct channel operating costs. In the First Quarter, operating expenses declined 20% as compared to the Prior Year Quarter, reflecting savings across headcount, labor and services, which were initiated in fiscal 2023. We anticipate that our initiatives will continue to generate year-over-year operating expense savings in the remaining quarters of fiscal 2024.

Under the expanded plan, the Company increased the estimated economic benefits from the original $100 million in annualized cost savings target to be measured.achieved by the end of fiscal 2024 to $300 million in annualized operating income benefits to be achieved by the end of fiscal 2025. Under the expanded program, we accelerated organizational restructuring, exited the smartwatch category, closed 45 underperforming stores in 2023 and expect to close approximately 50 underperforming stores in fiscal 2024. We believe that we can drive long-term growth 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 consumershave also reduced sku complexity across all ofcategories in our brands.
Our international operations are subjectassortment. Additionally, in 2024, we have begun to many risks, including foreign currency fluctuationsimplement key elements from our sourcing initiatives under TAG and risks relatedexpect to realize benefits in the global economy. Generally, a strengtheningsecond half of the U.S. dollaryear.

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 $25 million of charges for the remainder of fiscal year 2024.

In March 2024, the Company announced it would undertake a strategic review of its current business model and capital structure. This includes a broader set of efforts to optimize its business model and further reduce structural costs, monetize various assets, and could include additional debt and equity financing options.
As we execute against currenciesthe entire scope of other countries in whichTAG, we operate will reduce the translated amountshave an opportunity to improve our operating fundamentals, right size our cost structure, and return to sales growth. Aided by these measures, our long-term goal is to achieve adjusted gross margins above 50% and adjusted operating margins of sales and operating expenses of our subsidiaries, which results in a reduction of ourapproximately 10%.


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, 201630, 2023.
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 reversefrom our operations in the fourth quarterUnited 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 challengingphysical 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 135 Company-owned stores as of the end of the ThirdFirst Quarter and preliminary results have been favorable.an extensive collection of products available through our owned websites.
We planEurope: The Europe segment is comprised of sales to launch five more brands ontocustomers based in European countries, the hybrid platform this year, including DKNY, MARC JACOBS, MICHELE, RELICMiddle East and TORY BURCH. These new launches will bring usAfrica. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to a total of 14 brands in wearables and support our goal to at least double the wearables business in fiscal year 2017 from fiscal year 2016.
The following table presents as reported and constant currency net sales percentage change information for FOSSIL for the Third Quarter as compared to the Prior Year Quarter:
27



  Growth Percentage
 
 BrandAs Reported Constant Currency
 FOSSIL5.2% 7.0%
 SKAGEN10.0% 11.6%


Global comparable retail sales (including e-commerce) decreased 6% during the Third Quarter, compared toconsumer. Within each channel, we sell our products through a decreasevariety 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 comparablephysical points of sale, distributors, and 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 Quarterhad 73 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 goalsend of the First 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, greater China (including mainland China, 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 categorysell 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 Thirddirect to consumer channel, we had 69 Company-owned stores as of the end of the First Quarter we recorded a $23 million valuation charge to supportand 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 containdiscussion 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, 2017Adjusted 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%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, restructuring expense and unamortized debt issuance costs included in constant currency)loss on extinguishment of debt 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 (loss) attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively, before impairment expense, restructuring expense and unamortized debt issuance costs included in loss on extinguishment of debt. 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)%
Leathers75.7
 11.0
 93.3
 12.6
 (17.6) (18.9) (19.9)
Jewelry47.7
 6.9
 60.2
 8.2
 (12.5) (20.8) (22.8)
Other13.4
 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)%
Europe247.2
 35.9
 243.2
 33.0
 4.0
 1.6
 (2.1)
Asia133.4
 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 introductionperformance of EMPORIO ARMANI Connected. Decreases in traditional watches were partially offset by increases in connected watches, withour competitors. We also use these non-GAAP financial measures to monitor and compare the strongestfinancial performance coming from FOSSIL connected watches. While bothof our wholesaleoperations. 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 negativeAdjusted 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 productto similarly titled measures other companies report. Adjusted EBITDA, Adjusted operating income (loss), Adjusted net sales for the Americas segment on a reportedincome (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)%
Leathers46.2
 58.9
 (12.7) (21.6) (22.1)
Jewelry15.8
 22.4
 (6.6) (29.5) (29.9)
Other3.9
 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 announcedused as alternatives to customersany 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 %
Leathers17.9
 20.2
 (2.3) (11.4) (14.4)
Jewelry30.5
 34.1
 (3.6) (10.6) (13.5)
Other6.5
 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 %
Leathers11.5
 14.2
 (2.7) (19.0) (18.3)
Jewelry1.4
 3.8
 (2.4) (63.2) (63.2)
Other3.2
 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 accessory112

109

61

282

128

122

66

316
Outlets136

74

46

256

156

73

46

275
Full priced multi-brand

8

10

18



7

12

19
Total stores248

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 of 10% or more due to an expansion and/or relocation are removed from the comparable retailstore sales base, but are included in total sales. These stores are returned to the comparable retailstore 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 macroeconomic factors have shifted sales away from traditional brick and mortar stores towards digital channels, store counts continue to provide a key metric for management. Over time, we have made progress right-sizing our fleet of stores, focusing on closing our least profitable stores, and the size and quality of our store fleet have a direct impact on our sales and profitability.
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
28



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 are accounted for as reductions to revenue and cost of sales and an increase to customer liabilities and other current assets to the extent the returned product is 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 millionmargins 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 millionretail prices on products sold in the Prior Year Quarter driven by lowerU.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 initiative.

Results of Operations
Quarterly Periods Ended March 30, 2024 and April 1, 2023
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$70.1 million, or 9.5% to $320.4 million compared to $353.9 million21.6% (21.5% in constant currency), 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 ThirdFirst Quarter as compared to the Prior Year Quarter, we faced continued retail pressure, most significantly in our traditional businesseswith sales decreases in all segments. Additionally, the gross margin ratethree regions. The sales decrease was largely driven by overall category, consumer and channel softness. Our exit of smartwatches and store closures as part of our TAG initiatives negatively impacted sales in the First Quarter by connected products, due to both lower connected margins as well as additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel in all segments. Decreased restructuring costs incurred under our NWF plan, as well as corporate and regional overhead reductions and lower retail store expenses favorably impacted operating income (loss) during the Third Quarter$20.7 million as compared to the Prior Year Quarter.
Operating income (loss) Wholesale sales declined 21.3% (same in constant currency), reflecting lower purchases by segment 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) Operating Margin %
   Dollars Percentage 2017 2016
Americas$18.9
 $56.4
 $(37.5) (66.5)% 6.1 % 15.6%
Europe39.3
 49.0
 (9.7) (19.8) 15.9
 20.2
Asia22.0
 23.7
 (1.7) (7.2) 16.5
 17.7
Corporate(80.7) (97.9) 17.2
 (17.6)    
Total operating income (loss)$(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 spreadswholesale accounts due to tighter management of inventories and lower end-consumer demand. Direct to consumer sales declined by 22.0% (21.7% in constant currency), due to a smaller store base and declines in our amended credit facility.
Other Income (Expense)-Net. Duringcomparable retail sales. We have reduced our store footprint by 50 stores (15%), since the Third Quarter, other income (expense)-net increased by $2.3 million to $3.9 million in comparison toend of the Prior Year Quarter. This change was primarily driven by more favorable foreign currency activity comparedGlobal comparable retail sales decreased 14% due to decreases in both stores and our owned e-commerce websites. From a category perspective, traditional watch sales decreased 17.3% (same in constant currency). Net sales in smartwatches decreased 63.5% (63.6% in constant currency), as we exited the Prior Year Quarter.
Provision for Income Taxes.category. The income tax benefit for the Third Quarter was $3.2 million, resultingleathers category decreased 31.5% (31.3% 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 rateconstant currency) as we were less promotional in the ThirdFirst 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. Netjewelry sales decreased $215.8 million or 10.4% (10.0%9.3% (9.0% in constant currency), for the Year To Date Period as compared to the Prior Year YTD Period. Global watch. From a brand perspective, sales decreased $110.1 million or 7.0% (6.7% in constant currency) driven bythroughout most of our brand portfolio, with the most predominant declines in traditional watches partially offsetFOSSIL, EMPORIO ARMANI and MICHAEL KORS brands.

29



The following table sets forth consolidated net sales by increasessegment (dollars 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.millions):
 For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023Growth (Decline)
 Net SalesPercentage
of Total
Net SalesPercentage
of Total
DollarsPercentage As ReportedPercentage Constant Currency
Americas$110.0 43.2 %$137.9 42.4 %$(27.9)(20.2)%(20.8)%
Europe78.7 30.9 105.7 32.5 (27.0)(25.5)(26.5)
Asia65.6 25.7 80.1 24.6 (14.5)(18.1)(15.5)
Corporate0.6 0.2 1.3 0.5 (0.7)(53.8)(53.8)
Total$254.9 100.0 %$325.0 100.0 %$(70.1)(21.6)%(21.5)%
Net sales information by product category is summarized as follows (dollars in millions):
For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline)
Net Sales 
Percentage
of Total
 Net Sales 
Percentage
of Total
 Dollars Percentage As Reported Percentage Constant Currency
Watches$1,471.1
 78.8% $1,581.2
 75.9% $(110.1) (7.0)% (6.7)%
Growth (Decline)
Net SalesNet SalesPercentage
of Total
Net SalesPercentage
of Total
DollarsPercentage As ReportedPercentage Constant Currency
Watches:
Traditional watches
Traditional watches
Traditional watches$186.5 73.2 %$225.4 69.4 %$(38.9)(17.3)%(17.3)%
Smartwatches
Total watches
Leathers218.0
 11.7
 279.0
 13.4
 (61.0) (21.9) (21.6)
Jewelry139.9
 7.5
 171.7
 8.2
 (31.8) (18.5) (17.8)
Other38.4
 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)%Total$254.9 100.0 100.0 %$325.0 100.0 100.0 %$(70.1)(21.6)(21.6)%(21.5)%
In the Year To Date Period,First Quarter, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by approximately $6.6$0.3 million including unfavorable impacts of $5.5 million, $0.6 million and $0.5 million in our Europe, Americas and Asia segments, respectively,(0.1%) as compared to the Prior Year YTD Period.Quarter, including unfavorable impacts of $2.2 million in Asia partially offset by favorable impacts of $1.0 million and $0.9 million in our Europe and Americas segments, respectively.
Stores.The following table sets forth consolidated net sales by segment (dollars in millions):the number of stores on the dates indicated below:
April 1, 2023OpenedClosedMarch 30, 2024
Americas149216135
Europe9922873
Asia7901069
Total stores327454277
 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline)
 Net Sales 
Percentage
of Total
 Net Sales 
Percentage
of Total
 Dollars Percentage As Reported Percentage Constant Currency
Americas$874.5
 46.9% $1,042.2
 50.0% $(167.7) (16.1)% (16.0)%
Europe637.6
 34.1
 669.1
 32.1
 (31.5) (4.7) (3.9)
Asia355.3
 19.0
 371.9
 17.9
 (16.6) (4.5) (4.3)
Total$1,867.4
 100.0% $2,083.2
 100.0% $(215.8) (10.4)% (10.0)%

Americas Net Sales. For the Year To Date Period, Americas net sales decreased $167.7$27.9 million, or 16.1% (16.0%20.2% (20.8% in constant currency), comparedduring the First Quarter in comparison to the Prior Year YTD Period. DuringQuarter. Sales decreases were largely 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.FOSSIL brand. Sales declined in the U.S. and Canada and were partially offset by sales increases in Mexico. During the Year To Date Period, nearly all brands in the portfolio declined driven by decreases in traditional watches that were partially offset by increases in connected watches, with the strongest performance coming from MICHAEL KORS ACCESS and FOSSIL connected watches. Both wholesale and retail sales declined at similar rates.major channels. Comparable retail sales declined moderately indecreased sharply during the regionFirst Quarter, with negative comparable store sales partially offset by moderate increases in comparable salesdeclines in our e-commerce business.stores and owned e-commerce.

30




The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Americas segment on a reported and constant currency basis (dollars in millions):
 For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023  
 Growth (Decline)
Net SalesPercentage
of Total
Net SalesPercentage
of Total
DollarsPercentage As ReportedPercentage Constant Currency
Watches:
     Traditional watches$78.7 71.5 %$91.4 66.3 %$(12.7)(13.9)%(14.8)%
     Smartwatches5.2 4.7 12.5 9.1 (7.3)(58.4)(59.2)
Total watches$83.9 76.2 %$103.9 75.4 %$(20.0)(19.2)(20.0)
Leathers17.5 15.9 27.1 19.7 (9.6)(35.4)(35.4)
Jewelry6.6 6.0 5.4 3.9 1.2 22.2 22.2 
Other2.0 1.9 1.5 1.0 0.5 33.3 31.3 
Total$110.0 100.0 %$137.9 100.0 %$(27.9)(20.2)%(20.8)%
 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)%
Leathers134.5
 176.0
 (41.5) (23.6) (23.6)
Jewelry47.2
 64.0
 (16.8) (26.3) (26.6)
Other11.7
 18.1
 (6.4) (35.4) (34.8)
Total$874.5
 $1,042.2
 $(167.7) (16.1)% (16.0)%


Europe Net Sales. For the Year To Date Period, Europe net sales decreased $31.5$27.0 million, or 4.7% (3.9%25.5% (26.5% in constant currency), comparedduring the First Quarter in 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, mostQuarter. Our sales decreased across much of the brandsEurozone and in the portfolio declined driven by decreases in traditional watches that were partially offset by increases in connected watches. Growth in Spain and Poland were offset by declines in most other markets with the greatest decline in our Middle East business. Both wholesale and retail channels decreased at similar rates.all major channels. Comparable retail sales weredecreased moderately negative during the Year To Date PeriodFirst Quarter, with negative comparable sales in the leathers and jewelry categories while comparable salesdeclines in our watch category were flat.stores and owned e-commerce.

The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Europe segment on a reported and constant currency basis (dollars in millions):
 For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023  
 Growth (Decline)
Net SalesPercentage
of Total
Net SalesPercentage
of Total
DollarsPercentage As ReportedPercentage Constant Currency
Watches:
    Traditional watches$57.1 72.6 %$71.8 67.9 %$(14.7)(20.5)%(21.3)%
    Smartwatches1.6 2.0 6.6 6.2 (5.0)(75.8)(77.3)
Total watches$58.7 74.6 %$78.4 74.1 %$(19.7)(25.1)(26.0)
Leathers4.4 5.6 6.8 6.4 (2.4)(35.3)(36.8)
Jewelry13.5 17.2 18.5 17.5 (5.0)(27.0)(28.1)
Other2.1 2.6 2.0 2.0 0.1 5.0 (5.0)
Total$78.7 100.0 %$105.7 100.0 %$(27.0)(25.5)%(26.5)%
 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016      
Growth (Decline)
 Net Sales Net Sales Dollars Percentage As Reported Percentage Constant Currency
Watches$483.7
 $488.4
 $(4.7) (1.0)% (0.3)%
Leathers48.8
 58.7
 (9.9) (16.9) (15.7)
Jewelry87.6
 98.5
 (10.9) (11.1) (9.8)
Other17.5
 23.5
 (6.0) (25.5) (25.1)
Total$637.6
 $669.1
 $(31.5) (4.7)% (3.9)%


Asia Net Sales. For the Year To Date Period, Net sales in Asia net sales decreased $16.6$14.5 million, or 4.5% (4.3%18.1% (15.5% in constant currency), comparedduring the First Quarter in comparison 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)Quarter. The sales decreases were largely driven by mainland China and watch sales decreased $2.2 million or 0.7% (0.6% in constant currency). Growth in India and China waspartially offset by declinessales increases in Japan, Australia and most other markets.India. The largest sales decreases were in the EMPORIO ARMANI brand. Comparable retail sales in the region decreased moderately with negative comparable sales induring the leathersFirst Quarter, driven by our retail stores and jewelry categories partially offset by positive comparableour owned e-commerce sales in our watch category for the Year To Date Period.increases.

31




The following table sets forth product net sales and the changes in product net sales on both a reported and constant-currency basis from period to period for the Asia segment on a reported and constant currency basis (dollars in millions):
 For the 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023  
 Growth (Decline)
Net SalesPercentage
of Total
Net SalesPercentage
of Total
DollarsPercentage As ReportedPercentage Constant Currency
Watches:
    Traditional watches$50.7 77.3 %$62.3 77.8 %$(11.6)(18.6)%(16.4)%
    Smartwatches2.2 3.4 5.3 6.6 (3.1)(58.5)(58.5)
Total watches$52.9 80.7 %$67.6 84.4 %$(14.7)(21.7)(19.7)
Leathers5.7 8.7 6.4 8.0 (0.7)(10.9)(7.8)
Jewelry6.2 9.5 5.1 6.4 1.1 21.6 27.5
Other0.8 1.1 1.0 1.2 (0.2)(20.0)(10.0)
Total$65.6 100.0 %$80.1 100.0 %$(14.5)(18.1)%(15.5)%

 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)%
Leathers34.6
 44.3
 (9.7) (21.9) (21.7)
Jewelry5.1
 9.2
 (4.1) (44.6) (44.6)
Other9.1
 9.7
 (0.6) (6.2) (4.1)
Total$355.3
 $371.9
 $(16.6) (4.5)% (4.3)%

Gross Profit. For the Year To Date Period, gross Gross profit margin decreased 350 basis points to 48.8% compared to 52.3%of $133.5 million in the Prior Year YTD Period. TheFirst Quarter decreased gross profit margin was primarily driven by the same factors impacting the Third Quarter. Changes16.9% in foreign currency rates negatively impacted gross profit margin by approximately 60 basis points.
Operating Expenses. For the Year To Date Period, total operating expenses increasedcomparison to $1.4 billion compared to $1.0 billion in the Prior Year YTD Period, primarily due to intangible impairment charges recorded in the second quarter of fiscal 2017. During the second quarter of fiscal year 2017, interim impairment tests were performed on goodwill and trade names due to the sustained declines in our market capitalization and sales trends, resulting in impairment expenses of $359.5 million for goodwill and $47.6 million for trade names. For additional information, please refer to "Note 2 - Goodwill and Intangibles Impairment Charges" to the condensed consolidated financial statements. During the Year To Date Period, we incurred restructuring costs of $41.8 million under our NWF initiative compared with restructuring costs of $14.5$160.7 million in the Prior Year YTD Period.Quarter. Our gross profit margin rate increased to 52.4% in the First Quarter compared to 49.4% in the Prior Year Quarter. The year-over-year increase primarily reflects exiting the smartwatch category as part of our TAG plan, decreased freight costs, improved product margins in our core categories and favorable currency impacts.
Operating Expenses. Total operating expenses in the First Quarter decreased to $162.7 million or 63.8% of net sales, in comparison to $198.0 million or 60.9% of net sales in the Prior Year Quarter. SG&A expenses were lower$152.3 million in the First Quarter compared to $190.9 million in the Prior Year YTD Period due to lower infrastructure and store costs driven by NWF and reduced marketing expenses. The translation of foreign-denominated expenses during the Year To Date Period decreased operating expenses by approximately $3.4 million as a result of the stronger U.S. dollar.Quarter. As a percentage of net sales, SG&A expenses increased to 50.2%59.7% in the Year To Date PeriodFirst Quarter as compared to 48.7%58.7% in Prior Year Quarter, driven by lower sales. Operating expenses in the First Quarter included $10.1 million of restructuring costs, primarily related to employee costs, while the Prior Year YTD Period.Quarter included $7.1 million in restructuring costs.
Consolidated Operating Income (Loss).Operating income (loss) decreased to a loss of $475.5 million in the Year To Date PeriodFirst Quarter was $29.2 million as compared to incomean operating loss of $61.0$37.3 million in the Prior Year YTD Period,Quarter. The decreased operating loss was primarily driven by non-cash intangible impairment charges of $407.1 milliona higher gross profit margin rate and alsolower SG&A expenses, partially offset by decreased sales and gross margin rate.sales. As a percentage of net sales, operating margin was (25.5)(11.5)% in the Year To Date Period as compared to 2.9% inboth the First Quarter and the Prior Year YTD Period and was negatively impacted by approximately 70Quarter. Operating margin rate in the First Quarter included an favorable impact of 50 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 13 Weeks Ended March 30, 2024For the 13 Weeks Ended April 1, 2023ChangeOperating Margin %
 DollarsPercentage20242023
Americas$8.8 $12.6 $(3.8)(30.2)%8.0 %9.1 %
Europe7.4 7.0 0.4 5.7 9.4 6.6 
Asia5.8 7.2 (1.4)(19.4)8.9 9.0 
Corporate(51.2)(64.1)12.9 20.1 
Total operating income (loss)$(29.2)$(37.3)$8.1 21.7 %(11.5)%(11.5)%
 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016 Growth (Decline) Operating Margin %
   Dollars Percentage 2017 2016
Americas$(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$0.1 million during the Year To Date Period as a result of higher interest rate spreads due to our amended credit facility.


Other Income (Expense)-Net. During the Year To Date Period, other income (expense)-net increased by $5.1 million to $11.5 million in comparison to the Prior Year YTD Period. This change was largely driven by favorable foreign currency activityFirst Quarter compared to the Prior Year YTD Period.Quarter.
Other Income (Expense)-Net. During the First Quarter, other income (expense)-net was income of $3.9 million in comparison to income of $2.7 million in the Prior Year Quarter. This change was primarily driven by increased interest income and increased net foreign currency gains in the First Quarter as compared to the Prior Year Quarter.
Provision for Income Taxes. Income tax benefit for the Year To Date PeriodFirst Quarter was $100.7$6.1 million, resulting in an effective income tax rate of 20.3%20.1%. For the Prior Year YTD Period,Quarter, income tax expense was $13.2$1.6 million, resulting in an effective income tax rate of 27.5%(4.1)%. The effective tax benefitrate in the Year To Date PeriodFirst Quarter 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 purposesfavorable as compared to the Prior Year YTD Period combined with the impact of unfavorable discrete items, mostlyQuarter due to the additionalCompany recognizing $9.6 million of favorable discrete items. No tax expense resulting frombenefit has been accrued on the adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718): ImprovementsFirst Quarter U.S. tax losses and certain foreign tax losses due 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 tocan 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 expenseused 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.future.
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Net Income (Loss) Attributable to Fossil Group, Inc. Year To Date Period First Quarter net income (loss) attributable to Fossil Group, Inc. decreased to $(398.3)was a net loss of $24.3 million, or $(8.22)$0.46 per diluted share, in comparison to $29.2a net loss of $41.3 million, or $0.60$0.80 per diluted share, in the Prior Year YTD Period, primarily due to a $(6.51) perQuarter. During the First Quarter, currencies favorably affected 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 asapproximately $0.03, when compared to the Prior Year YTD Period. DilutedQuarter.
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
March 30, 2024April 1, 2023
Dollars% of Net SalesDollars% of Net Sales
Income (loss) before income taxes$(30.4)(11.9)%$(39.6)(12.2)%
Plus:
Interest expense5.1 5.0 
Amortization and depreciation4.5 5.1 
Impairment expense0.4 0.1 
Other non-cash charges(0.1)(0.2)
Stock-based compensation1.0 1.4 
Restructuring expenses10.1 7.1 
Restructuring cost of sales(0.2)5.3 
Less:
Interest income1.1 0.6 
Adjusted EBITDA$(10.7)(4.2)%$(16.4)(5.0)%

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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 Year To Date Period as compared to the Prior Year YTD Period decreased $0.11table below, when aggregated, may not foot due to the currency impact of a stronger U.S. dollar.rounding.

For the 13 Weeks Ended March 30, 2024
($ in millions, except per share data):As ReportedRestructuring Cost of SalesOther Long-Lived Asset ImpairmentRestructuring ExpensesAs Adjusted
Operating income (loss)$(29.2)$(0.2)$0.4 $10.1 $(18.9)
Operating margin (% of net sales)(11.5)%(7.5)%
Interest expense5.1 — — — 5.1 
Other income (expense) - net3.9 — — — 3.9 
Income (loss) before income taxes(30.4)(0.2)0.4 10.1 (20.1)
Provision (benefit) for income taxes(6.1)— 0.1 2.1 (3.9)
Less: net income attributable to noncontrolling interest— — — — — 
Net income (loss) attributable to Fossil Group, Inc.$(24.3)$(0.2)$0.3 $8.0 $(16.2)
Diluted earnings (loss) per share$(0.46)$— $0.01 $0.15 $(0.30)

For the 13 Weeks Ended April 1, 2023
($ in millions, except per share data):As ReportedRestructuring Cost of SalesOther Long-Lived Asset ImpairmentRestructuring ExpensesAs Adjusted
Operating income (loss)$(37.3)$5.3 $0.1 $7.1 $(24.8)
Operating margin (% of net sales)(11.5)%(7.7)%
Interest expense5.0 — — — 5.0 
Other income (expense) - net2.7 — — — 2.7 
Income (loss) before income taxes(39.6)5.3 0.1 7.1 (27.1)
Provision for income taxes1.6 1.1 — 1.5 4.2 
Less: Net income attributable to noncontrolling interest0.1 — — — 0.1 
Net income (loss) attributable to Fossil Group, Inc.$(41.3)$4.2 $— $5.6 $(31.5)
Diluted earnings (loss) per share$(0.80)$0.08 $— $0.11 $(0.61)


Liquidity and Capital Resources
Our cash and cash equivalents balance at the end of the ThirdFirst Quarter was $166.9$112.9 million, including $165.8$93.2 million held in banks outside the U.S.,by foreign subsidiaries, in comparison to cash and cash equivalents of $236.0$127.1 million at the end of the Prior Year Quarter and $297.3$117.2 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.2023. 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 strategic investments such as acquisitions, otherdebt repayments, restructuring charges and 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 ThirdFirst Quarter, we had net working capital of $732.8$341.8 million compared to net working capital of $965.5$499.3 million at the end of the Prior Year Quarter. At the end of the ThirdFirst Quarter, we had approximately $40.2$0.5 million of short-term borrowings and $444.3$202.9 million in long-term debt.debt including unamortized issuance costs compared to $0.5 million of short-term borrowings and $234.6 million in long-term debt including unamortized issuance costs at the end of the Prior Year Quarter.
Operating Activities. Cash provided by (used in) operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities. Operating cash flows improved by $86.5 million in the First Quarter as compared to the Prior Year Quarter primarily due to cash of $2.2 million provided by working capital items in the First Quarter as compared to cash used of $62.1 million in the Prior Year Quarter.
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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. Financing cash flows decreased in the First Quarter primarily due to $4.3 million of net debt payments during the First Quarter as compared to $18.1 million of net borrowings in the Prior Year Quarter 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 Consolidated Financial Statements); (2) debt repayments (see "Note 15—Debt Activity" within the 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 Consolidated Financial Statements) and other matters.
For fiscal year 2024, we expect total capital expenditures to be approximately $10 million to $15 million. Our capital expenditure budget is an estimate and is subject to change.
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 at least the next twelve months. Although we believe we have adequate sources of liquidity, we are assessing our liquidity position and potential sources of supplemental liquidity in light of our operating performance, the timing of the expected benefits of our TAG plan and other relevant considerations. In the event our liquidity is insufficient, we may be required to limit our spending or sell assets. In addition, we may seek additional deleveraging or refinancing transactions, including entering into transactions to exchange debt for other debt securities (including additional secured debt), issuance of equity (including preferred stock and convertible securities), repurchase or redemption of outstanding indebtedness, or may otherwise seek transactions to reduce interest expense, extend debt maturities and improve our capital structure. Any of these transactions could impact our financial results, including additional expenses, charges and cancellation of indebtedness income. We cannot assure you whether any of such transactions will be consummated, whether we will achieve the benefits of any such transaction, or whether our cost of capital will increase, any of which could have an impact on our future liquidity.
The following table shows our sources of liquidity (in millions):
March 30, 2024April 1, 2023
Cash and cash equivalents$112.9 $127.1 
Revolver availability9.9 $90.1 
Total liquidity$122.8 $217.2 

Subsequent to the balance sheet date, we received U.S. tax refunds of $57.3 million in April 2024.
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 at the following prices: (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 March 9, 2015,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,
35



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 loansAmendment 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 Agreementcredit facility to May 17, 2019 and removed our abilityNovember 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 extendNovember 8, 2027, the maturity date of the Term Loan orcredit 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 amendedRevolving 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 schedulesum 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 LoanFrench 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 paymentsthe 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 daydate of eachdelivery of the borrowing base certificate with respect to the second fiscal month beginning April 30, 2018. Onof 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 atcovered 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 toborrowing 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 amountfifth fiscal month of the total credit exposureCompany.
First Quarter Activity: We had net payments of $4.6 million under the Credit Agreement ifRevolving Facility during 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:
PeriodMaximum Ratio
July 2, 2017 through and including September 30, 20173.50 to 1.00
October 1, 2017 through and including March 31, 20183.25 to 1.00
April 1, 2018 through and including September 29, 20183.50 to 1.00
September 30, 2018 and thereafter3.25 to 1.00
First Quarter at an average interest rate of 6.1%. As of SeptemberMarch 30, 2017, amounts2024, we had $150.0 million outstanding under the Notes and $57.5 million 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 had net principal payments of $131.3 million under the Revolving Credit Facility during the Year To Date Period at an average annual interest rate of 4.27%. As of September 30, 2017, we had $175.0 million and $309.7 million outstanding under the Term Loan and the Revolving Credit Facility, respectively. As of September 30, 2017, weFacility. We also had unamortized debt issuance costs which reduceof $4.6 million recorded in long-term debt and $2.3 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$5.4 million of outstanding standby letters of credit at SeptemberMarch 30, 2017.2024. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of SeptemberMarch 30, 2017,2024, we had available borrowing capacity of $270.5$9.9 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 SeptemberMarch 30, 2017,2024, 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, thereThere 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, 2016.30, 2023.

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Forward-Looking Statements
The statements contained and incorporated by reference in this Quarterly Report on Form 10-QForm10-Q that are not historical facts, including, but not limited to, statements regarding our expected financial position, results of operations, liquidity, business, TAG plan, strategic review and financing plans found in this “Item"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk,”Operations," 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 pandemic; risks related to the success of our restructuring program; the impact of any activist shareholders; the failure to meet the continued listing requirements of Nasdaq; 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; a data security or privacy breach or information systems disruptions; changes in foreign currency valuations in relation to the U.S. dollar; lower levels of consumer spending resulting from inflation, 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 tolines; changes in the expanded launchmix 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 organizationscompliance with debt covenants and operations of any acquired businesses into our existing organizationother 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 or failure to attract and retain key employees 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 thisour Quarterly ReportReports 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, 2016.30, 2023. 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 RiskNot applicable.
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 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 and their expiration dates.
Functional Currency Contract Currency  
Type Amount Type Amount Expiring Through
Euro 253.4
 U.S. dollar 291.0
 August 2019
Canadian dollar 95.0
 U.S. dollar 73.2
 September 2019
British pound 43.5
 U.S. dollar 58.1
 September 2019
Japanese yen 4,636.4
 U.S. dollar 42.8
 September 2019
Mexican peso 378.6
 U.S. dollar 20.3
 June 2018
Australian dollar 21.2
 U.S. dollar 16.5
 June 2018
U.S. dollar 41.1
 Japanese yen 4,470.0
 November 2018
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 as of September 30, 2017, the net result would have been a net loss of approximately $12.1 million, net of taxes. As of September 30, 2017, 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 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, 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 million.
Interest Rate Risk
We are subject to interest rate volatility with regard to debt borrowings. Effective July 26, 2013, we entered into an interest rate swap agreement with a term of approximately five years to manage our exposure to interest rate fluctuations on our Term Loan. We will continue to evaluate our interest rate exposure and the use of interest rate swaps in future periods to mitigate our risk associated with adverse fluctuations in interest rates.
Based on our variable-rate debt outstanding as of September 30, 2017, a 100 basis point increase in interest rates would increase annual interest expense by approximately $3.1 million. This amount excludes the $168.3 million outstanding, net of debt issuance costs, under our Term Loan hedged with an interest rate swap agreement.

Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Interim 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 SeptemberMarch 30, 2017.2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the ThirdFirst Quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





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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 litigationmatters incidental to our business whichthat 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 30, 2023 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 programsprogram during the ThirdFirst 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 March 30, 2024.

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Item 6. Exhibits
(a)Exhibits
Exhibit
Number
Document Description
Exhibit
Number
3.1
Document Description
3.1
3.2
3.3
10.1(1)(2)10.1
10.2(2)
10.2
31.1(1)
31.2(1)
32.1(3)32.1(2)
32.2(3)32.2(2)
101.INS(1)101.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema Document.
101.DEF(1)101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.CAL(1)101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB(1)101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE(1)101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1)Filed herewith.
(2) Management contract or compensatory plan or arrangement.
(3)Furnished herewith.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
FOSSIL GROUP, INC.
NovemberMay 9, 20172024/S/ JEFFREY N. BOYERSUNIL M. DOSHI
Jeffrey N. BoyerSunil M. Doshi
Executive Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)

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