UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________

FORM 10-Q

(Mark One)


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

For the quarterly period ended: ~~October~~April 1, ~~2022~~2023


☐			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: 001-41040

__________________________________________________________________

FOSSIL GROUP, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________________________

Delaware

75-2018505

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

901 S. Central Expressway,

Richardson,

Texas

75080

(Address of principal executive offices)

(Zip Code)

(972) 234-2525

(Registrant’s telephone number, including area code)

__________________________________________________________________

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

Title of each class

Ticker Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FOSL

The Nasdaq Stock Market LLC

7.00% Senior Notes due 2026

FOSLL

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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 filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of ~~November 2, 2022: 51,836,456~~May 3, 2023: 52,403,573

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED ~~OCTOBER~~APRIL 1, ~~2022~~2023

INDEX

Trademarks, service marks, trade names and copyrights

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

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS


		October 1, 2022		January 1, 2022			April 1, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	162,612	$	250,844	Cash and cash equivalents	$	127,111	$	198,726
Accounts receivable - net of allowances for doubtful accounts of $15,025 and $16,388, respectively		214,987		255,131
Accounts receivable - net of allowances for doubtful accounts of $14,297 and $14,647, respectively						Accounts receivable - net of allowances for doubtful accounts of $14,297 and $14,647, respectively	168,947		206,133
Inventories	Inventories	452,747		346,850		Inventories	336,503		376,028
Prepaid expenses and other current assets	Prepaid expenses and other current assets	184,964		169,930		Prepaid expenses and other current assets	171,926		164,413
Total current assets	Total current assets	1,015,310		1,022,755		Total current assets	804,487		945,300
Property, plant and equipment - net of accumulated depreciation of $418,090 and $436,663, respectively		77,379		89,767
Property, plant and equipment - net of accumulated depreciation of $416,175 and $415,172, respectively						Property, plant and equipment - net of accumulated depreciation of $416,175 and $415,172, respectively	78,478		79,882
Operating lease right-of-use assets	Operating lease right-of-use assets	156,448		177,597		Operating lease right-of-use assets	147,179		156,947

Intangible and other assets-net	Intangible and other assets-net	65,849		78,600		Intangible and other assets-net	55,851		55,999
Total long-term assets	Total long-term assets	299,676		345,964		Total long-term assets	281,508		292,828
Total assets	Total assets	$	1,314,986	$	1,368,719	Total assets	$	1,085,995	$	1,238,128
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	204,040	$	229,877	Accounts payable	$	120,124	$	191,141
Short-term and current portion of long-term debt		354		554
Short-term debt						Short-term debt	461		342
Accrued expenses:	Accrued expenses:					Accrued expenses:
Current operating lease liabilities	Current operating lease liabilities	48,238		58,721		Current operating lease liabilities	45,642		49,702
Compensation	Compensation	40,072		73,595		Compensation	40,755		44,259
Royalties	Royalties	21,380		38,714		Royalties	8,773		20,875
Customer liabilities	Customer liabilities	34,671		40,886		Customer liabilities	32,582		41,996
Transaction taxes	Transaction taxes	8,293		17,147		Transaction taxes	1,669		14,303
Other	Other	43,430		46,675		Other	42,967		40,424
Income taxes payable	Income taxes payable	28,249		29,478		Income taxes payable	12,166		22,878
Total current liabilities	Total current liabilities	428,727		535,647		Total current liabilities	305,139		425,920
Long-term income taxes payable	Long-term income taxes payable	24,069		20,452		Long-term income taxes payable	23,323		22,603
Deferred income tax liabilities	Deferred income tax liabilities	458		504		Deferred income tax liabilities	618		616
Long-term debt	Long-term debt	293,583		141,354		Long-term debt	234,579		216,132
Long-term operating lease liabilities	Long-term operating lease liabilities	151,928		174,520		Long-term operating lease liabilities	140,801		150,188
Other long-term liabilities	Other long-term liabilities	25,988		30,884		Other long-term liabilities	15,246		19,660
Total long-term liabilities	Total long-term liabilities	496,026		367,714		Total long-term liabilities	414,567		409,199
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)					Commitments and contingencies (Note 13)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, 51,827 and 52,146 shares issued and outstanding at October 1, 2022 and January 1, 2022, respectively		518		521
Common stock, 51,841 and 51,836 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively						Common stock, 51,841 and 51,836 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively	518		518
Additional paid-in capital	Additional paid-in capital	304,498		300,848		Additional paid-in capital	307,592		306,241
Retained earnings	Retained earnings	184,909		229,132		Retained earnings	134,229		175,491
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(96,876)		(67,275)		Accumulated other comprehensive income (loss)	(73,207)		(76,318)
Total Fossil Group, Inc. stockholders’ equity	Total Fossil Group, Inc. stockholders’ equity	393,049		463,226		Total Fossil Group, Inc. stockholders’ equity	369,132		405,932
Noncontrolling interests	Noncontrolling interests	(2,816)		2,132		Noncontrolling interests	(2,843)		(2,923)
Total stockholders’ equity	Total stockholders’ equity	390,233		465,358		Total stockholders’ equity	366,289		403,009
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,314,986	$	1,368,719	Total liabilities and stockholders’ equity	$	1,085,995	$	1,238,128

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

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

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA


		For the 13 Weeks Ended October 1, 2022		For the 13 Weeks Ended October 2, 2021		For the 39 Weeks Ended October 1, 2022		For the 39 Weeks Ended October 2, 2021			For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Net sales	Net sales	$	436,271	$	491,827	$	1,183,292	$	1,265,808	Net sales	$	325,036	$	375,853
Cost of sales	Cost of sales	216,651		232,305		588,010		601,857		Cost of sales	164,319		191,540
Gross profit	Gross profit	219,620		259,522		595,282		663,951		Gross profit	160,717		184,313
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses	196,530		205,718		591,521		593,522		Selling, general and administrative expenses	190,873		195,758

Other long-lived asset impairments	Other long-lived asset impairments	608		551		1,060		6,314		Other long-lived asset impairments	55		286
Restructuring charges		—		5,447		5,438		18,716
Restructuring expenses										Restructuring expenses	7,097		2,551
Total operating expenses	Total operating expenses	197,138		211,716		598,019		618,552		Total operating expenses	198,025		198,595
Operating income (loss)	Operating income (loss)	22,482		47,806		(2,737)		45,399		Operating income (loss)	(37,308)		(14,282)
Interest expense	Interest expense	5,127		6,422		13,445		20,284		Interest expense	5,004		3,997
Other income (expense) - net	Other income (expense) - net	(1,859)		(482)		(1,915)		882		Other income (expense) - net	2,733		1,618
Income (loss) before income taxes	Income (loss) before income taxes	15,496		40,902		(18,097)		25,997		Income (loss) before income taxes	(39,579)		(16,661)
Provision for income taxes	Provision for income taxes	9,214		8,978		15,904		19,177		Provision for income taxes	1,603		4,687
Net income (loss)	Net income (loss)	6,282		31,924		(34,001)		6,820		Net income (loss)	(41,182)		(21,348)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	433		504		738		1,032		Less: Net income (loss) attributable to noncontrolling interests	80		166
Net income (loss) attributable to Fossil Group, Inc.	Net income (loss) attributable to Fossil Group, Inc.	$	5,849	$	31,420	$	(34,739)	$	5,788	Net income (loss) attributable to Fossil Group, Inc.	$	(41,262)	$	(21,514)
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	$	(13,465)	$	(3,237)	$	(37,437)	$	(12,293)	Currency translation adjustment	$	5,897	$	(7,885)
Cash flow hedges - net change	Cash flow hedges - net change	3,668		2,085		7,836		3,607		Cash flow hedges - net change	(2,786)		1,098

Total other comprehensive income (loss)	Total other comprehensive income (loss)	(9,797)		(1,152)		(29,601)		(8,686)		Total other comprehensive income (loss)	3,111		(6,787)
Total comprehensive income (loss)	Total comprehensive income (loss)	(3,515)		30,772		(63,602)		(1,866)		Total comprehensive income (loss)	(38,071)		(28,135)
Less: Comprehensive income (loss) attributable to noncontrolling interests	Less: Comprehensive income (loss) attributable to noncontrolling interests	432		504		738		1,032		Less: Comprehensive income (loss) attributable to noncontrolling interests	80		166
Comprehensive income (loss) attributable to Fossil Group, Inc.	Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(3,947)	$	30,268	$	(64,340)	$	(2,898)	Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(38,151)	$	(28,301)
Earnings (loss) per share:	Earnings (loss) per share:									Earnings (loss) per share:
Basic	Basic	$	0.11	$	0.60	$	(0.67)	$	0.11	Basic	$	(0.80)	$	(0.41)
Diluted	Diluted	$	0.11	$	0.60	$	(0.67)	$	0.11	Diluted	$	(0.80)	$	(0.41)
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	51,825		52,141		51,843		51,900		Basic	51,840		51,999
Diluted	Diluted	52,052		52,766		51,843		52,738		Diluted	51,840		51,999

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

UNAUDITED

IN THOUSANDS


For the 13 Weeks Ended October 1, 2022
For the 13 Weeks Ended April 1, 2023																			For the 13 Weeks Ended April 1, 2023
		Common stock			Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity			Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Fossil Group, Inc.		Noncontrolling Interest		Total Stockholders' Equity
		Shares	Par value																	Shares	Par Value
Balance, July 2, 2022		51,807	$	518	$	304,775	$	—	$	179,060	$	(87,079)	$	397,274	$	(3,249)	$	394,025
Balance, December 31, 2022																			Balance, December 31, 2022	51,836	$	518	$	306,241	$	—	$	175,491	$	(76,318)	$	405,932	$	(2,923)	$	403,009
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	22	—		—		—		—		—		—		—		—		Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	7	—		—		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	Acquisition of common stock for employee tax withholding						(13)		—		—		(13)		—		(13)		Acquisition of common stock for employee tax withholding	—	—		—		(11)		—		—		(11)		—		(11)
Retirement of common stock	Retirement of common stock	(2)	—		(13)		13		—		—		—		—		—		Retirement of common stock	(2)	—		(11)		11		—		—		—		—		—

Stock-based compensation	Stock-based compensation	—	—		(264)		—		—		—		(264)		—		(264)		Stock-based compensation	—	—		1,362		—		—		—		1,362		—		1,362
Net income (loss)	Net income (loss)	—	—		—		—		5,849		—		5,849		433		6,282		Net income (loss)	—	—		—		—		(41,262)		—		(41,262)		80		(41,182)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		(9,797)		(9,797)		—		(9,797)		Other comprehensive income (loss)	—	—		—		—		—		3,111		3,111		—		3,111

Balance, October 1, 2022		51,827	$	518	$	304,498	$	—	$	184,909	$	(96,876)	$	393,049	$	(2,816)	$	390,233
Balance, April 1, 2023																			Balance, April 1, 2023	51,841	$	518	$	307,592	$	—	$	134,229	$	(73,207)	$	369,132	$	(2,843)	$	366,289


For the 13 Weeks Ended October 2, 2021
For the 13 Weeks Ended April 2, 2022																			For the 13 Weeks Ended April 2, 2022
		Common stock			Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity			Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Fossil Group, Inc.		Noncontrolling Interest		Total Stockholders' Equity
		Shares	Par value																	Shares	Par Value
Balance, July 3, 2021		52,127	$	521	$	295,704	$	—	$	178,066	$	(66,434)	$	407,857	$	1,470	$	409,327
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units		21	—		—		—		—		—		—		—		—
Balance, January 1, 2022																			Balance, January 1, 2022	52,146	$	521	$	300,848	$	—	$	229,132	$	(67,275)	$	463,226	$	2,132	$	465,358

Acquisition of common stock for employee tax withholding		—	—		—		(56)		—		—		(56)		—		(56)

Acquisition of common stock																			Acquisition of common stock	—	—		—		(10,000)		—		—		(10,000)		—		(10,000)
Retirement of common stock	Retirement of common stock	(5)	—		(56)		56		—		—		—		—		—		Retirement of common stock	(989)	(10)		(506)		10,000		(9,484)		—		—		—		—

Stock-based compensation	Stock-based compensation	—	—		2,857		—		—		—		2,857		—		2,857		Stock-based compensation	—	—		2,241		—		—		—		2,241		—		2,241
Net income (loss)	Net income (loss)	—	—		—		—		31,420		—		31,420		504		31,924		Net income (loss)	—	—		—		—		(21,514)		—		(21,514)		166		(21,348)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		(1,152)		(1,152)		—		(1,152)		Other comprehensive income (loss)	—	—		—		—		—		(6,787)		(6,787)		—		(6,787)

Balance, October 2, 2021		52,143	$	521	$	298,505	$	—	$	209,486	$	(67,586)	$	440,926	$	1,974	$	442,900
Balance, April 2, 2022																			Balance, April 2, 2022	51,157	$	511	$	302,583	$	—	$	198,134	$	(74,062)	$	427,166	$	2,298	$	429,464

For the 39 Weeks Ended October 1, 2022
Common stock Additional
paid-in
capital Treasury
stock Retained
earnings Accumulated
other
comprehensive
income
(loss) Stockholders'
equity
attributable
to Fossil
Group, Inc. Noncontrolling interest Total stockholders' equity
Shares Par
value
Balance, January 1, 2022 52,146 $ 521 $ 300,848 $ — $ 229,132 $ (67,275) $ 463,226 $ 2,132 $ 465,358
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units 896 9 (9) — — — — — —
Acquisition of common stock for employee tax withholding — — — (12,443) — — (12,443) — (12,443)
Retirement of common stock (1,215) (12) (2,947) 12,443 (9,484) — — — —
Stock-based compensation — — 6,606 — — — 6,606 — 6,606
Net income (loss) — — — — (34,739) — (34,739) 738 (34,001)
Other comprehensive income (loss) — — — — — (29,601) (29,601) (29,601)
Distribution of noncontrolling interest earnings — — — — — — — (5,686) (5,686)
Balance, October 1, 2022 51,827 $ 518 $ 304,498 $ — $ 184,909 $ (96,876) $ 393,049 $ (2,816) $ 390,233

For the 39 Weeks Ended October 2, 2021
Common stock Additional
paid-in
capital Treasury
stock Retained
earnings Accumulated
other
comprehensive
income
(loss) Stockholders'
equity
attributable
to Fossil
Group, Inc. Noncontrolling interest Total stockholders' equity
Shares Par
value
Balance, January 2, 2021 51,474 $ 515 $ 293,777 $ — $ 203,698 $ (58,900) $ 439,090 $ 942 $ 440,032
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units 857 8 (8) — — — — — —
Acquisition of common stock for employee tax withholding — — — (2,405) — — (2,405) — (2,405)
Retirement of common stock (188) (2) (2,403) 2,405 — — — — —
Stock-based compensation — — 7,139 — — — 7,139 — 7,139
Net income (loss) — — — — 5,788 — 5,788 1,032 6,820
Other comprehensive income (loss) — — — — — (8,686) (8,686) — (8,686)
Balance, October 2, 2021 52,143 $ 521 $ 298,505 $ — $ 209,486 $ (67,586) $ 440,926 $ 1,974 $ 442,900

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS


		For the 39 Weeks Ended October 1, 2022		For the 39 Weeks Ended October 2, 2021			For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income (loss)	Net income (loss)	$	(34,001)	$	6,820	Net income (loss)	$	(41,182)	$	(21,348)
Adjustments to reconcile net loss to net cash provided used in operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion	Depreciation, amortization and accretion	17,587		23,410		Depreciation, amortization and accretion	5,068		6,185
Non-cash lease expense	Non-cash lease expense	60,073		68,920		Non-cash lease expense	18,619		20,742
Stock-based compensation	Stock-based compensation	5,821		7,139		Stock-based compensation	1,362		2,241
Decrease in allowance for returns and markdowns	Decrease in allowance for returns and markdowns	(8,519)		(11,838)		Decrease in allowance for returns and markdowns	(6,320)		(3,975)
Gain on disposal of assets		(448)		(5,169)

Property, plant and equipment and other long-lived asset impairment losses	Property, plant and equipment and other long-lived asset impairment losses	1,060		6,322		Property, plant and equipment and other long-lived asset impairment losses	55		286

Non-cash restructuring charges	Non-cash restructuring charges	876		1,747		Non-cash restructuring charges	—		92
Bad debt expense	Bad debt expense	5,611		961		Bad debt expense	395		2,094

Other non-cash items	Other non-cash items	9,973		10,975		Other non-cash items	(1,427)		2,100

Contingent consideration remeasurement						Contingent consideration remeasurement	(347)		11

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	22,677		(25,571)		Accounts receivable	39,644		51,069
Inventories	Inventories	(137,244)		(111,673)		Inventories	41,959		(41,947)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(16,091)		31,732		Prepaid expenses and other current assets	(10,171)		(18,963)
Accounts payable	Accounts payable	(19,151)		70,156		Accounts payable	(71,548)		(30,097)
Accrued expenses	Accrued expenses	(56,944)		(30,007)		Accrued expenses	(29,846)		(57,853)
Income taxes	Income taxes	2,470		2,523		Income taxes	(9,761)		(927)
Operating lease liabilities	Operating lease liabilities	(68,533)		(83,443)		Operating lease liabilities	(22,362)		(24,755)
Net cash used in operating activities	Net cash used in operating activities	(214,783)		(36,996)		Net cash used in operating activities	(85,862)		(115,045)
Investing Activities:	Investing Activities:					Investing Activities:
Additions to property, plant and equipment		(8,717)		(6,739)
Decrease in intangible and other assets		993		6,903
Proceeds from the sale of property, plant and equipment and other		28		11,360
Additions to property, plant and equipment and other						Additions to property, plant and equipment and other	(2,610)		(2,526)
(Increase) decrease in intangible and other assets						(Increase) decrease in intangible and other assets	(109)		251

Net cash (used in) provided by investing activities		(7,696)		11,524

Net cash used in investing activities						Net cash used in investing activities	(2,719)		(2,275)
Financing Activities:	Financing Activities:					Financing Activities:
Acquisition of common stock						Acquisition of common stock	(11)		(10,000)

Acquisition of common stock		(12,444)		(2,405)
Distribution of noncontrolling interest earnings and other		(6,069)		(232)
Debt borrowings	Debt borrowings	261,983		85,182		Debt borrowings	40,136		46,167
Debt payments	Debt payments	(111,237)		(179,997)		Debt payments	(22,003)		(4,100)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.						Payment for shares of Fossil Accessories South Africa Pty. Ltd.	(1,660)		—

Net cash provided by (used in) financing activities		132,233		(97,452)
Net cash provided by financing activities						Net cash provided by financing activities	16,462		32,067
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(644)		(5,564)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	298		(3,502)
Net decrease in cash, cash equivalents, and restricted cash	Net decrease in cash, cash equivalents, and restricted cash	(90,890)		(128,488)		Net decrease in cash, cash equivalents, and restricted cash	(71,821)		(88,755)
Cash, cash equivalents, and restricted cash:	Cash, cash equivalents, and restricted cash:					Cash, cash equivalents, and restricted cash:
Beginning of period	Beginning of period	264,572		324,246		Beginning of period	204,075		264,572
End of period	End of period	$	173,682	$	195,758	End of period	$	132,254	$	175,817

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. FINANCIAL STATEMENT POLICIES

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

The information presented herein includes the thirteen-week period ended ~~October~~April 1, ~~2022~~2023 (“~~Third~~First Quarter”) as compared to the thirteen-week period ended ~~October~~April 2, ~~2021~~2022 (“Prior Year Quarter”~~), and the thirty-nine week period ended October 1, 2022 ("Year To Date Period") as compared to the thirty-nine week period ended October 2, 2021 ("Prior Year YTD Period"~~). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s financial position as of ~~October~~April 1, ~~2022,~~2023, and the results of operations for the ~~Third~~First Quarter ~~Prior Year Quarter, Year To Date Period~~ and Prior Year ~~YTD Period.~~Quarter. All adjustments are of a normal, recurring nature.

Effective during fiscal year 2021, the Company made a change to the presentation of product net sales to include third-party smartwatch bands within the smartwatch product type. Third-party smartwatch bands were previously reported within the jewelry product type. The Company's historical disclosures have been recast to be consistent with its current presentation.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended ~~January 1,~~December 31, 2022 (the ~~“2021~~“2022 Form 10-K”). Operating results for the ~~Third~~First Quarter are not necessarily indicative of the results to be achieved for the full fiscal year.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. We base our estimates on the information available at the time and various other assumptions believed to be reasonable under the ~~circumstances, including estimates of the impact of the coronavirus (“COVID-19”) pandemic.~~circumstances. Actual results could differ from those ~~estimates, including the impact of the COVID-19 pandemic.~~estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the ~~2021~~2022 Form 10-K.

Business. The Company is a 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.

Operating Expenses. 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 the Company's retail stores, point-of-sale expenses, advertising expenses and art, and design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to ~~reorganize, refine~~reduce and optimize the Company’s infrastructure and store closures. See ~~Note~~"Note 16—~~Restructuring~~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.

109

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 October 1, 2022		For the 13 Weeks Ended October 2, 2021		For the 39 Weeks Ended October 1, 2022		For the 39 Weeks Ended October 2, 2021			For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Numerator:	Numerator:									Numerator:
Net income (loss) attributable to Fossil Group, Inc.	Net income (loss) attributable to Fossil Group, Inc.	$	5,849	$	31,420	$	(34,739)	$	5,788	Net income (loss) attributable to Fossil Group, Inc.	$	(41,262)	$	(21,514)
Denominator:	Denominator:									Denominator:
Basic EPS computation:	Basic EPS computation:									Basic EPS computation:
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	51,825		52,141		51,843		51,900		Basic weighted average common shares outstanding	51,840		51,999
Basic EPS	Basic EPS	$	0.11	$	0.60	$	(0.67)	$	0.11	Basic EPS	$	(0.80)	$	(0.41)
Diluted EPS computation:	Diluted EPS computation:									Diluted EPS computation:
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units		227		625		—		838

Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	52,052		52,766		51,843		52,738		Diluted weighted average common shares outstanding	51,840		51,999
Diluted EPS	Diluted EPS	$	0.11	$	0.60	$	(0.67)	$	0.11	Diluted EPS	$	(0.80)	$	(0.41)

At the end of the ~~Third~~First Quarter, ~~and Year To Date Period,~~ approximately 1.7 million and 2.2 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 12,900 and 26,100 weighted average performance-based shares at the end of the Third Quarter and Year To Date Period, respectively. Additionally, 73,500 weighted average performance-based shares were not included in the diluted EPS calculation at the end of the Third Quarter because performance targets were not met.

~~At the end of each of the Prior Year Quarter and Prior Year YTD Period, approximately 0.3~~2.0 million weighted average shares issuable under stock-based awards were not included in the diluted EPS calculation because they were antidilutive. The total antidilutive weighted average shares included ~~12,900~~0.3 million weighted average performance-based shares at the end of ~~each~~the First Quarter.

At the end of the Prior Year Quarter, ~~and Prior Year YTD Period. Additionally, 48,400 and 30,300~~approximately 2.1 million weighted average ~~performance-based~~ shares issuable under stock-based awards were not included in the diluted EPS calculation because they were antidilutive. The total antidilutive weighted average shares included 0.3 million weighted average performance-based shares at the end of the Prior Year ~~Quarter and Prior Year YTD Period, respectively, because performance targets were not met.~~Quarter.

Cash, Cash Equivalents and Restricted Cash. Restricted cash included in intangible and other-assets net was comprised primarily of ~~restricted cash balances for appealed tax assessments held in escrow and for~~ 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 ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 that are presented in the condensed consolidated statement of cash flows (in thousands):

October 1, 2022 October 2, 2021
Cash and cash equivalents $ 162,612 $ 181,782
Restricted cash included in prepaid expenses and other current assets 106 118
Restricted cash included in intangible and other assets-net 10,964 13,858
Cash, cash equivalents and restricted cash $ 173,682 $ 195,758


	April 1, 2023		April 2, 2022
Cash and cash equivalents	$	127,111	$	162,619
Restricted cash included in prepaid expenses and other current assets	107		117
Restricted cash included in intangible and other assets-net	5,036		13,081
Cash, cash equivalents and restricted cash	$	132,254	$	175,817

Recently ~~Issued~~Adopted Accounting Standards

In ~~November~~October 2021, the Financial Accounting Standards Board ~~("FASB")~~ issued Accounting Standards Update ~~("ASU") 2021-10,~~ ~~Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance~~ ("ASU 2021-10"). The new standard increases transparency of government assistance by focusing on the types of assistance given, an entity's accounting for the assistance, and the effect of the assistance on the entity's financial statements to allow for more comparable information for investors and other financial statement users. This standard is effective for financial statements issued for annual periods beginning after December 15, 2021, but early adoption is permitted. This standard will not have a material impact on the Company's consolidated financial statements or related disclosures.

~~In October 2021, FASB issued ASU~~ 2021-08, Business Combinations – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~("ASU 2021-08")~~. ~~The guidance is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice.~~ The guidance requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination ~~in accordance with Topic 606~~ as if they had originated the contracts, as opposed to at fair value on the acquisition date. The standard ~~will be~~is effective for business combinations ~~that occur~~ after January 1, 2023. ~~Early~~The adoption ~~is permitted. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. While the impact~~ of this ~~amendment is dependent on the nature of any future transactions, the Company currently does~~standard did not ~~expect this standard to~~ have ~~a material~~an impact on the Company's consolidated financial statements or related disclosures.

~~In March 2020, FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ("ASU 2020-04") and subsequent guidance that clarified the scope and application of its original guidance. ASU 2020-04 provides optional expedients and exceptions to the current guidance on contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company will adopt these standards when LIBOR is discontinued and does not expect it to have a material impact on its consolidated financial statements or related disclosures.

~~Recently Adopted Accounting Standards~~

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ ~~("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in~~ ~~Income Taxes (Topic 740)~~. It also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 at the beginning of fiscal year 2022, and it did not have a material effect on the Company's condensed consolidated financial statements.

2. REVENUE

Disaggregation of Revenue. Due to changes in the Company’s product types as discussed in Note 1 to the Condensed Consolidated Financial Statements, product results for the Prior Year Quarter and Prior Year YTD Period have been recast to present results on a comparable basis. The Company's revenue disaggregated by major product category and timing of revenue recognition was as follows (in thousands):

For the 13 Weeks Ended October 1, 2022
Americas Europe Asia Corporate Total
Product type
Watches:
Traditional watches $ 132,077 $ 102,142 $ 75,970 $ 9 $ 310,198
Smartwatches 14,578 10,401 8,327 — 33,306
Total watches $ 146,655 $ 112,543 $ 84,297 $ 9 $ 343,504
Leathers 27,262 5,683 8,150 — 41,095
Jewelry 8,353 22,955 6,560 — 37,868
Other 2,056 2,498 1,205 8,045 13,804
Consolidated $ 184,326 $ 143,679 $ 100,212 $ 8,054 $ 436,271
Timing of revenue recognition
Revenue recognized at a point in time $ 183,900 $ 143,453 $ 100,076 $ 800 $ 428,229
Revenue recognized over time 426 226 136 7,254 8,042
Consolidated $ 184,326 $ 143,679 $ 100,212 $ 8,054 $ 436,271

1210


		For the 13 Weeks Ended October 2, 2021											For the 13 Weeks Ended April 1, 2023
		Americas		Europe		Asia		Corporate		Total			Americas		Europe		Asia		Corporate		Total
Product type	Product type											Product type
Watches:	Watches:											Watches:
Traditional watches	Traditional watches	$	130,988	$	113,501	$	101,275	$	—	$	345,764	Traditional watches	$	91,357	$	71,803	$	62,266	$	—	$	225,426
Smartwatches	Smartwatches	25,205		16,344		12,528		8		54,085		Smartwatches	12,490		6,622		5,288		—		24,400
Total watches	Total watches	$	156,193	$	129,845	$	113,803	$	8	$	399,849	Total watches	$	103,847	$	78,425	$	67,554	$	—	$	249,826
Leathers	Leathers	23,389		7,231		5,770		—		36,390		Leathers	27,112		6,773		6,380		—		40,265
Jewelry	Jewelry	12,285		25,554		8,486		—		46,325		Jewelry	5,419		18,501		5,125		—		29,045
Other	Other	1,895		3,257		1,435		2,676		9,263		Other	1,553		1,974		1,077		1,296		5,900
Consolidated	Consolidated	$	193,762	$	165,887	$	129,494	$	2,684	$	491,827	Consolidated	$	137,931	$	105,673	$	80,136	$	1,296	$	325,036

Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	193,367	$	165,598	$	129,313	$	1,004	$	489,282	Revenue recognized at a point in time	$	137,467	$	105,484	$	80,026	$	1,021	$	323,998
Revenue recognized over time	Revenue recognized over time	395		289		181		1,680		2,545		Revenue recognized over time	464		189		110		275		1,038
Consolidated	Consolidated	$	193,762	$	165,887	$	129,494	$	2,684	$	491,827	Consolidated	$	137,931	$	105,673	$	80,136	$	1,296	$	325,036


		For the 39 Weeks Ended October 1, 2022											For the 13 Weeks Ended April 2, 2022
		Americas		Europe		Asia		Corporate		Total			Americas		Europe		Asia		Corporate		Total
Product type	Product type											Product type
Watches:	Watches:											Watches:
Traditional watches	Traditional watches	$	366,714	$	253,728	$	209,857	$	23	$	830,322	Traditional watches	$	115,902	$	81,149	$	64,363	$	13	$	261,427
Smartwatches	Smartwatches	47,228		33,347		24,134		—		104,709		Smartwatches	17,272		12,686		8,024		2		37,984
Total watches	Total watches	$	413,942	$	287,075	$	233,991	$	23	$	935,031	Total watches	$	133,174	$	93,835	$	72,387	$	15	$	299,411
Leathers	Leathers	69,091		18,372		23,763		—		111,226		Leathers	19,236		7,369		7,580		—		34,185
Jewelry	Jewelry	25,548		62,730		18,217		—		106,495		Jewelry	7,936		21,135		5,625		—		34,696
Other	Other	5,944		7,933		3,592		13,071		30,540		Other	1,581		2,212		1,176		2,592		7,561
Consolidated	Consolidated	$	514,525	$	376,110	$	279,563	$	13,094	$	1,183,292	Consolidated	$	161,927	$	124,551	$	86,768	$	2,607	$	375,853

Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	513,393	$	375,433	$	279,193	$	3,032	$	1,171,051	Revenue recognized at a point in time	$	161,594	$	124,300	$	86,608	$	1,164	$	373,666
Revenue recognized over time	Revenue recognized over time	1,132		677		370		10,062		12,241		Revenue recognized over time	333		251		160		1,443		2,187
Consolidated	Consolidated	$	514,525	$	376,110	$	279,563	$	13,094	$	1,183,292	Consolidated	$	161,927	$	124,551	$	86,768	$	2,607	$	375,853

For the 39 Weeks Ended October 2, 2021
Americas Europe Asia Corporate Total
Product type
Watches:
Traditional watches $ 349,024 $ 266,316 $ 262,416 $ 1,053 $ 878,809
Smartwatches 78,308 43,277 28,477 24 150,086
Total watches $ 427,332 $ 309,593 $ 290,893 $ 1,077 $ 1,028,895
Leathers 63,851 19,933 20,057 — 103,841
Jewelry 26,506 61,974 16,560 — 105,040
Other 5,294 8,019 4,115 10,604 28,032
Consolidated $ 522,983 $ 399,519 $ 331,625 $ 11,681 $ 1,265,808
Timing of revenue recognition
Revenue recognized at a point in time $ 521,702 $ 398,533 $ 331,180 $ 6,490 $ 1,257,905
Revenue recognized over time 1,281 986 445 5,191 7,903
Consolidated $ 522,983 $ 399,519 $ 331,625 $ 11,681 $ 1,265,808

Contract Balances. As of ~~October~~April 1, ~~2022,~~2023, the Company had no material contract assets on the Company's condensed consolidated balance sheets and no deferred contract costs. The Company had contract liabilities of (i) ~~$0.9~~$1.1 million and ~~$4.9~~$0.8 million as of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively, related to remaining performance obligations on licensing income, (ii) ~~$3.4~~$1.9 million and ~~$3.0~~$3.7 million as of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively, primarily related to remaining performance obligations on wearable technology products and (iii) ~~$2.8 million and $3.6~~$3.1 million as of ~~October~~both April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022 ~~respectively,~~ related to gift cards issued.

3. INVENTORIES

Inventories consisted of the following (in thousands):


		October 1, 2022		January 1, 2022			April 1, 2023		December 31, 2022
Components and parts	Components and parts	$	22,546	$	23,668	Components and parts	$	13,868	$	20,998
Work-in-process		4		2

Finished goods	Finished goods	430,197		323,180		Finished goods	322,635		355,030
Inventories	Inventories	$	452,747	$	346,850	Inventories	$	336,503	$	376,028

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 October 1, 2022		For the 39 Weeks Ended October 2, 2021			For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Beginning balance	Beginning balance	$	19,159	$	21,916	Beginning balance	$	13,623	$	19,159
Settlements in cash or kind	Settlements in cash or kind	(5,465)		(8,096)		Settlements in cash or kind	(2,282)		(2,905)
Warranties issued and adjustments to preexisting warranties (1)	Warranties issued and adjustments to preexisting warranties (1)	(148)		5,296		Warranties issued and adjustments to preexisting warranties (1)	1,528		1,652
Ending balance	Ending balance	$	13,546	$	19,116	Ending balance	$	12,869	$	17,906

(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 October 1, 2022			For the 13 Weeks Ended October 2, 2021			For the 39 Weeks Ended October 1, 2022			For the 39 Weeks Ended October 2, 2021				For the 13 Weeks Ended April 1, 2023			For the 13 Weeks Ended April 2, 2022
Income tax (benefit) expense	Income tax (benefit) expense	$	9,214		$	8,978		$	15,904		$	19,177		Income tax (benefit) expense	$	1,603		$	4,687
Effective tax rate	Effective tax rate	59.5		%	22.0		%	(87.9)		%	73.8		%	Effective tax rate	(4.1)		%	(28.1)		%

The effective tax rate in the ~~Third~~First Quarter was ~~unfavorable~~favorable as compared to the Prior Year Quarter due to ~~a higher level of~~reduced foreign ~~losses for which no tax benefit could be accrued.~~ taxes.The First Quarter and Prior Year Quarter tax ~~rate also benefited from favorable discrete items.~~ rates are negative because foreign income tax expense is accrued on certain foreign entities with positive taxable income when the consolidated results are a loss.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 tax return which absorbs ~~all of~~ the U.S. net operating ~~loss ("NOL").~~ loss.Foreign income taxes are also paid on this same foreign income, resulting in double taxation.

The Year To Date Period effective tax rate is negative due to the overall pre-tax loss whereas the Prior Year YTD Period effective tax rate was positive since the Prior Year YTD Period income was positive. Both effective rates are high since income tax was accrued on foreign entities with positive taxable income and no tax benefit can be realized on the U.S. NOL.

The effective tax rate can vary from quarter-to-quarter due to changes in the Company's global mix of earnings, the resolution of income tax audits and changes in tax law.

As of ~~October~~April 1, ~~2022,~~2023, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was ~~$28.9~~$24.5 million, of which ~~$23.9~~$24.5 million would favorably impact the effective tax rate in future periods, if recognized. In the second quarter of fiscal year 2022, the U.S. Internal Revenue Service opened an examination of the Company's 2019 federal income tax return to review the refund claim filed under provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which allowed carrybacks of NOLs for that year. The Company is subject to examinations in various state and foreign jurisdictions for its 2013-2021 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 settled within twelve months of the condensed consolidated balance sheet date. As of ~~October~~April 1, ~~2022,~~2023, the Company had recorded ~~$11.6~~$8.5 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At ~~October~~April 1, ~~2022,~~2023, the total amount of accrued income tax-related interest included in the condensed consolidated balance sheets

was ~~$9.4~~$9.7 million. There ~~was~~were no accrued tax-related penalties. For the ~~Third~~First Quarter, the Company accrued income ~~tax-related~~tax related interest expense of ~~$0.5~~$0.6 million.

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 ~~51,827,267~~51,841,146 and ~~52,145,738~~51,836,456 shares issued and outstanding at ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, with none issued or outstanding at ~~October~~April 1, ~~2022~~2023 or ~~January 1,~~December 31, 2022. Rights, preferences and other terms of preferred stock will be determined by the Board of Directors at the time of issuance.

Common Stock Repurchase Programs. Purchases of the Company’s common stock are made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased shares of common stock are recorded at cost and become authorized but unissued shares which may be issued in the future for general corporate or other purposes. The Company may terminate or limit its stock repurchase program at any time. In the event the repurchased shares are cancelled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital and retained earnings.

The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs are conducted pursuant to Rule 10b-18 of the Exchange Act.

~~During the first quarter~~As of fiscal year 2022, the Company effectively retired 1.0 million shares of common stock repurchased under its repurchase programs. The effective retirement of repurchased common stock decreased common stock by $10,000, additional paid-in capital by $0.5 million, retained earnings by $9.5 millionApril 1, 2023 and ~~treasury stock by $10.0 million.~~At

~~October 1, 2022 and January 1,~~December 31, 2022, all treasury stock had been effectively retired. As of ~~October~~April 1, ~~2022,~~2023, the Company had $20.0 million of repurchase authorizations remaining under its repurchase program.

The following table reflects the Company's common stock repurchase activity for the periods indicated (in millions):

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Fiscal Year
Authorized Dollar Value
Authorized Termination Date Number of
Shares
Repurchased Dollar Value
Repurchased Number of
Shares
Repurchased Dollar Value
Repurchased
2010 $ 30.0 None 1.0 $ 10.0 — $ —


				For the 13 Weeks Ended April 1, 2023			For the 13 Weeks Ended April 2, 2022
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased

2010	$	30.0	None	—	$	—	1.0	$	10.0

7. EMPLOYEE BENEFIT PLANS

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

Stock Appreciation Rights Shares Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value
(in Thousands) (in Years) (in Thousands)
Outstanding at July 2, 2022 199 $ 51.21 0.8 $ —
Granted — —
Exercised — — —
Forfeited or expired (98) 46.98
Outstanding at October 1, 2022 101 55.31 1.1 —
Exercisable at October 1, 2022 101 $ 55.31 1.1 $ —


Stock Appreciation Rights	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)			(in Years)	(in Thousands)
Outstanding at December 31, 2022	101	$	55.31	0.9	$	—


Forfeited or expired	(26)	80.22
Outstanding at April 1, 2023	75	46.55		0.9	—
Exercisable at April 1, 2023	75	$	46.55	0.9	$	—

The aggregate intrinsic value shown in the table above is based on the exercise price for outstanding and exercisable ~~options/~~rights at ~~October~~April 1, ~~2022.~~2023.

Stock Appreciation Rights Outstanding and Exercisable. The following ~~tables summarize~~table summarizes information with respect to ~~stock options and~~ stock appreciation rights outstanding and exercisable at ~~October~~April 1, ~~2022:~~2023:


Stock Appreciation Rights Outstanding	Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable			Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price		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)				(in Thousands)			(in Years)	(in Thousands)
$36.73 - $80.22		101	$	55.31	1.1	101	$	55.31
$36.73 - $55.09									$36.73 - $55.09	75	$	46.55	0.9	75	$	46.55

Total	Total	101	$	55.31	1.1	101	$	55.31	Total	75	$	46.55	0.9	75	$	46.55

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


Restricted Stock Units and Performance Restricted Stock Units	Restricted Stock Units and Performance Restricted Stock Units	Number of Shares	Weighted-Average Grant Date Fair Value Per Share		Restricted Stock Units and Performance Restricted Stock Units	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
		(in Thousands)				(in Thousands)
Nonvested at July 2, 2022		2,016	$	10.16
Nonvested at December 31, 2022					Nonvested at December 31, 2022	1,967	$	10.08
Granted	Granted	—	—		Granted	—	—
Vested	Vested	(23)	7.68		Vested	(7)	10.28
Forfeited	Forfeited	(26)	9.95		Forfeited	(90)	10.61
Nonvested at October 1, 2022		1,967	$	10.19
Nonvested at April 1, 2023					Nonvested at April 1, 2023	1,870	$	10.05

The total fair value of restricted stock units vested was ~~$131,002~~less than $0.1 million during the ~~Third~~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.

Long-Term Incentive Plans. On the date of the Company’s annual stockholders meeting, each non-employee director automatically receives a grant of restricted stock units ~~with a fair market value of approximately $130,000,~~ which vest 100% on the earlier of one year from the date of grant or the date of the Company's next annual stockholders meeting, provided such director is providing services to the Company or a subsidiary of the Company on that date. Beginning with the grant in fiscal year 2021, non-employee directors ~~could~~may elect to defer receipt of all or a portion of the restricted stock ~~units. As~~units settled in common stock of ~~October 1, 2022,~~ the Company ~~had 30,000 shares of restricted stock units that had vested but were deferred in connection with non-employee director compensation.~~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 each calendar year treated as if invested in units of common stock of the Company.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


		For the 13 Weeks Ended October 1, 2022						For the 13 Weeks Ended April 1, 2023
		Currency Translation Adjustments		Cash Flow Hedges				Currency Translation Adjustments					Cash Flow Hedges
				Forward Contracts		Pension Plan					Total		Currency Translation Adjustments		Forward Contracts		Pension Plan		Total
Beginning balance	Beginning balance	$	(99,573)	$	8,512	$	3,982		$	(87,079)		Beginning balance			$	2,397	$	11,966	$	(76,318)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(13,465)		7,950		—			(5,515)			Other comprehensive income (loss) before reclassifications	5,897		(3,126)		—		2,771
Tax (expense) benefit	Tax (expense) benefit	—		261		—			261			Tax (expense) benefit	—		444		—		444
Amounts reclassed from accumulated other comprehensive income (loss)	Amounts reclassed from accumulated other comprehensive income (loss)	—		4,310		—			4,310			Amounts reclassed from accumulated other comprehensive income (loss)	—		(175)		—		(175)
Tax (expense) benefit	Tax (expense) benefit	—		233		—			233			Tax (expense) benefit	—		279		—		279
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(13,465)		3,668		—			(9,797)			Total other comprehensive income (loss)	5,897		(2,786)		—		3,111
Ending balance	Ending balance	$	(113,038)	$	12,180	$	3,982		$	(96,876)		Ending balance	$	(84,784)	$	(389)	$	11,966	$	(73,207)


	For the 13 Weeks Ended April 2, 2022
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(75,601)	$	4,344	$	3,982	$	(67,275)
Other comprehensive income (loss) before reclassifications	(7,885)		2,358		—		(5,527)
Tax (expense) benefit	—		273		—		273
Amounts reclassed from accumulated other comprehensive income (loss)	—		1,453		—		1,453
Tax (expense) benefit	—		80		—		80
Total other comprehensive income (loss)	(7,885)		1,098		—		(6,787)
Ending balance	$	(83,486)	$	5,442	$	3,982	$	(74,062)

For the 13 Weeks Ended October 2, 2021
Currency
Translation
Adjustments Cash Flow Hedges
Forward
Contracts Pension
Plan Total
Beginning balance $ (70,234) $ 2,372 $ 1,428 $ (66,434)
Other comprehensive income (loss) before reclassifications (3,237) 3,320 — 83
Tax (expense) benefit — (29) — (29)
Amounts reclassed from accumulated other comprehensive income (loss) — 1,263 — 1,263
Tax (expense) benefit — (57) — (57)
Total other comprehensive income (loss) (3,237) 2,085 — (1,152)
Ending balance $ (73,471) $ 4,457 $ 1,428 $ (67,586)

For the 39 Weeks Ended October 1, 2022
Currency
Translation
Adjustments Cash Flow Hedges
Forward
Contracts Pension
Plan Total
Beginning balance $ (75,601) $ 4,344 $ 3,982 $ (67,275)
Other comprehensive income (loss) before reclassifications (37,437) 16,151 — (21,286)
Tax (expense) benefit — 790 — 790
Amounts reclassed from accumulated other comprehensive income — 8,512 — 8,512
Tax (expense) benefit — 593 — 593
Total other comprehensive income (loss) (37,437) 7,836 — (29,601)
Ending balance $ (113,038) $ 12,180 $ 3,982 $ (96,876)

For the 39 Weeks Ended October 2, 2021
Currency
Translation
Adjustments Cash Flow Hedges
Forward
Contracts Pension
Plan Total
Beginning balance $ (61,178) $ 850 $ 1,428 $ (58,900)
Other comprehensive income (loss) before reclassifications (12,293) 3,934 — (8,359)
Tax (expense) benefit — (247) — (247)
Amounts reclassed from accumulated other comprehensive income (loss) — 210 — 210
Tax (expense) benefit — (130) — (130)
Total other comprehensive income (loss) (12,293) 3,607 — (8,686)
Ending balance $ (73,471) $ 4,457 $ 1,428 $ (67,586)

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

9. SEGMENT INFORMATION

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

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The

Asia segment primarily includes sales to customers based in Australia, China (including Hong Kong, Macau and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea 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. Corporate includes peripheral revenue generating activities from factories and intellectual property and general corporate expenses, including

certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses that are not allocated to the various segments because they are managed at the corporate level 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 October 1, 2022				For the 13 Weeks Ended October 2, 2021					For the 13 Weeks Ended April 1, 2023				For the 13 Weeks Ended April 2, 2022
		Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)			Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Americas	Americas	$	184,326	$	33,403	$	193,762	$	46,589	Americas	$	137,931	$	12,555	$	161,927	$	23,910
Europe	Europe	143,679		31,076		165,887		40,549		Europe	105,673		6,969		124,551		19,568
Asia	Asia	100,212		17,515		129,494		23,996		Asia	80,136		7,200		86,768		8,941
Corporate	Corporate	8,054		(59,512)		2,684		(63,328)		Corporate	1,296		(64,032)		2,607		(66,701)
Consolidated	Consolidated	$	436,271	$	22,482	$	491,827	$	47,806	Consolidated	$	325,036	$	(37,308)	$	375,853	$	(14,282)

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)
Americas $ 514,525 $ 87,966 $ 522,983 $ 109,172
Europe 376,110 65,489 399,519 67,616
Asia 279,563 38,807 331,625 50,553
Corporate 13,094 (194,999) 11,681 (181,942)
Consolidated $ 1,183,292 $ (2,737) $ 1,265,808 $ 45,399

Due to changes in the Company’s product types as discussed in Note 1 to the Condensed Consolidated Financial Statements, product results for the Prior Year Quarter and Prior Year YTD Period have been recast to present results on a comparable basis. The following table reflects net sales for each class of similar products in the periods presented (in thousands, except percentage data):


	For the 13 Weeks Ended April 1, 2023				For the 13 Weeks Ended April 2, 2022
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches:
Traditional watches	$	225,426	69.4	%	$	261,427	69.6	%
Smartwatches	24,400		7.5		37,984		10.1
Total watches	$	249,826	76.9	%	$	299,411	79.7	%
Leathers	40,265		12.4		34,185		9.1
Jewelry	29,045		8.9		34,696		9.2
Other	5,900		1.8		7,561		2.0
Total	$	325,036	100.0	%	$	375,853	100.0	%

For the 13 Weeks Ended October 1, 2022 For the 13 Weeks Ended October 2, 2021
Net Sales Percentage of Total Net Sales Percentage of Total
Watches:
Traditional watches $ 310,198 71.1 % $ 345,764 70.3 %
Smartwatches 33,306 7.6 54,085 11.0
Total watches $ 343,504 78.7 % $ 399,849 81.3 %
Leathers 41,095 9.4 36,390 7.4
Jewelry 37,868 8.7 46,325 9.4
Other 13,804 3.2 9,263 1.9
Total $ 436,271 100.0 % $ 491,827 100.0 %

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Net Sales Percentage of Total Net Sales Percentage of Total
Watches:
Traditional watches $ 830,322 70.2 % $ 878,809 69.4 %
Smartwatches 104,709 8.8 150,086 11.9
Total watches $ 935,031 79.0 % $ 1,028,895 81.3 %
Leathers 111,226 9.4 103,841 8.2
Jewelry 106,495 9.0 105,040 8.3
Other 30,540 2.6 28,032 2.2
Total $ 1,183,292 100.0 % $ 1,265,808 100.0 %

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.

For a derivative instrument that is designated and qualifies as a cash flow hedge, 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.

2016

As of ~~October~~April 1, ~~2022,~~2023, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge future payments of inventory transactions (in millions):

Functional Currency

Contract Currency

Functional Currency

Contract Currency

Type

Amount

Type

Amount

Type

Amount

Type

Amount

Euro

105.1

U.S. dollar

113.6

Euro

65.8

U.S. dollar

70.5

Canadian dollar

44.7

U.S. dollar

34.9

Canadian dollar

35.4

U.S. dollar

26.7

Mexican peso

302.3

U.S. dollar

14.7

Mexican peso

144.4

U.S. dollar

7.0

British pound

7.9

U.S. dollar

10.0

British pound

5.5

U.S. dollar

6.8

Japanese yen

847.6

U.S. dollar

7.0

Japanese yen

851.9

U.S. dollar

6.6

Australian dollar

9.6

U.S. dollar

6.8

Australian dollar

4.5

U.S. dollar

3.1

U.S. dollar

13.4

Japanese yen

1,730.0

U.S. dollar

8.4

Japanese yen

1,090.0

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 ~~October~~April 1, ~~2022,~~2023, the Company ~~did not have any~~had non-designated forward ~~contracts.~~contracts of $0.9 million on 15.8 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 gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes are set forth below (in thousands):

For the 13 Weeks Ended October 1, 2022 For the 13 Weeks Ended October 2, 2021
Cash flow hedges:
Forward contracts $ 8,211 $ 3,292
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ 8,211 $ 3,292

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Cash flow hedges:
Forward contracts $ 16,941 $ 3,687
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ 16,941 $ 3,687


	For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Cash flow hedges:
Forward contracts	$	(2,682)	$	2,631

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(2,682)	$	2,631

The following tables disclose the 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 (in thousands):


Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	432	$	1,002
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(328)	$	531
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	25	$	(54)

Derivative Instruments Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location Effect of Derivative
Instruments For the 13 Weeks Ended October 1, 2022 For the 13 Weeks Ended October 2, 2021
Forward contracts designated as cash flow hedging instruments Cost of sales Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 3,158 $ 689
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 1,385 $ 518
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ (3) $ 61

Derivative Instruments Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location Effect of Derivative
Instruments For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Forward contracts designated as cash flow hedging instruments Cost of sales Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 6,198 $ 938
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 2,907 $ (858)
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 63 $ (12)

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


		Asset Derivatives						Liability Derivatives							Asset Derivatives						Liability Derivatives
		October 1, 2022			January 1, 2022			October 1, 2022			January 1, 2022				April 1, 2023			December 31, 2022			April 1, 2023			December 31, 2022
Derivative Instruments	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		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	Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	13,418	Prepaid expenses and other current assets	$	3,452	Accrued expenses-other	$	1,290	Accrued expenses-other	$	177	Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	1,298	Prepaid expenses and other current assets	$	2,783	Accrued expenses-other	$	3,127	Accrued expenses-other	$	2,659

Forward contracts not designated as cash flow hedging instruments														Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Accrued expenses-other	16		Accrued expenses-other	16

Forward contracts designated as cash flow hedging instruments	Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	1,171		Intangible and other assets-net	—		Other long-term liabilities	—		Other long-term liabilities	—		Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	—		Intangible and other assets-net	112		Other long-term liabilities	82		Other long-term liabilities	318

Total	Total		$	14,589		$	3,452		$	1,290		$	177	Total		$	1,298		$	2,895		$	3,225		$	2,993

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 October 1, 2022 For the 13 Weeks Ended October 2, 2021
Cost of Sales Other Income (Expense)-net Cost of Sales Other Income (Expense)-net
Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded $ 216,651 $ (1,859) $ 232,305 $ (482)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss) $ 3,158 $ 1,385 $ 689 $ 518
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income $ — $ (3) $ — $ 61


		Effect of Derivative Instruments									Effect of Derivative Instruments
		For the 39 Weeks Ended October 1, 2022				For the 39 Weeks Ended October 2, 2021					For the 13 Weeks Ended April 1, 2023				For the 13 Weeks Ended April 2, 2022
		Cost of Sales		Other Income (Expense)-net		Cost of Sales		Other Income (Expense)-net			Cost of Sales		Other Income (Expense)-net		Cost of Sales		Other Income (Expense)-net
Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded	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	$	588,010	$	(1,915)	$	601,857	$	882	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	$	164,319	$	2,733	$	191,540	$	1,618
Gain (loss) on cash flow hedging relationships:	Gain (loss) on cash flow hedging relationships:									Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:	Forward contracts designated as cash flow hedging instruments:									Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	Total gain (loss) reclassified from other comprehensive income (loss)	$	6,198	$	2,907	$	938	$	(858)	Total gain (loss) reclassified from other comprehensive income (loss)	$	432	$	(328)	$	1,002	$	531
Forward contracts not designated as hedging instruments:	Forward contracts not designated as hedging instruments:									Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	Total gain (loss) recognized in income	$	—	$	63	$	—	$	(12)	Total gain (loss) recognized in income	$	—	$	25	$	—	$	(54)

At the end of the ~~Third~~First Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through ~~March~~June 2024. As of ~~October~~April 1, ~~2022,~~2023, an estimated net gain of ~~$12.3~~$0.2 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates.

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.

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

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

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

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

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

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~October~~April 1, ~~2022~~2023 (in thousands):


		Fair Value at October 1, 2022									Fair Value at April 1, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Forward contracts	Forward contracts	$	—	$	14,589	$	—	$	14,589	Forward contracts	$	—	$	1,298	$	—	$	1,298

Total	Total	$	—	$	14,589	$	—	$	14,589	Total	$	—	$	1,298	$	—	$	1,298
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	—	$	—	$	2,063	$	2,063	Contingent consideration	$	—	$	—	$	1,332	$	1,332
Forward contracts	Forward contracts	—		1,290		—		1,290		Forward contracts	—		3,225		—		3,225

Total	Total	$	—	$	1,290	$	2,063	$	3,353	Total	$	—	$	3,225	$	1,332	$	4,557

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~January 1,~~December 31, 2022 (in thousands):


		Fair Value at January 1, 2022									Fair Value at December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Forward contracts	Forward contracts	$	—	$	3,452	$	—	$	3,452	Forward contracts	$	—	$	2,895	$	—	$	2,895

Total	Total	$	—	$	3,452	$	—	$	3,452	Total	$	—	$	2,895	$	—	$	2,895
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	—	$	—	$	1,840	$	1,840	Contingent consideration	$	—	$	—	$	3,630	$	3,630
Forward contracts	Forward contracts	—		177		—		177		Forward contracts	—		2,993		—		2,993

Total	Total	$	—	$	177	$	1,840	$	2,017	Total	$	—	$	2,993	$	3,630	$	6,623

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. See ~~Note~~"Note 10—Derivatives and Risk ~~Management,~~Management", for additional disclosures about the forward contracts.

As of ~~October~~April 1, ~~2022,~~2023, the fair value of the Company's debt excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of ~~$301.2~~$241.4 million and had a fair value of approximately ~~$236.6~~$192.9 million. The fair value of debt was based on observable market inputs.

During the ~~Year to Date Period,~~First Quarter, $0.1 million of impairment charges were recorded for operating lease right-of-use ("ROU") assets with a carrying amount of ~~$3.3 million and property, plant and equipment-net~~$0.1 million. During the Prior Year Quarter, ROU assets with a carrying ~~value~~amount of ~~$0.3~~$0.8 million ~~related to retail store leasehold improvements, fixturing and shop-in-shops~~ were written down to a fair value of ~~$2.3~~$0.5 million, ~~and $0.2 million, respectively,~~ resulting in impairment charges of ~~$1.1~~$0.3 million. During the Prior Year YTD Period, ROU assets with carrying amount of $14.0 million and property, plant and equipment-net with a carrying value of $2.5 million related to retail store leasehold improvements, fixturing and shop-in-shops were written down to a fair value of $7.4 million and $1.0 million, respectively, resulting in impairment charges of $8.1 million.

The fair values of operating lease ROU assets and fixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows and discount rates. ~~Of the $1.1~~The $0.1 million impairment expense in the ~~Year to Date Period, $0.6 million,~~First Quarter was recorded in other long-lived asset impairments in the Europe segment. Of the $0.3 million impairment expense in the Prior Year Quarter, $0.2 million and ~~$0.2~~$0.1 million was recorded in other long-lived asset impairments in the ~~Americas,~~Asia and Europe ~~and Asia~~ segments, respectively. Of the $8.1 million impairment expense in the Prior Year Quarter, $3.1 million, $2.2 million and $1.0 million was recorded in other long-lived asset impairments in the Americas, Europe and Asia segments, respectively, and $1.8 million was recorded in restructuring charges in the Europe segment.

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12. INTANGIBLE AND OTHER ASSETS

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


			October 1, 2022				January 1, 2022						April 1, 2023				December 31, 2022
		Useful	Gross		Accumulated		Gross		Accumulated			Useful	Gross		Accumulated		Gross		Accumulated
		Lives	Amount		Amortization		Amount		Amortization			Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:	Intangibles-subject to amortization:										Intangibles-subject to amortization:
Trademarks	Trademarks	10 yrs.	$	3,775	$	3,366	$	3,775	$	3,310	Trademarks	10 yrs.	$	3,846	$	3,262	$	3,728	$	3,243
Customer lists	Customer lists	5 - 10 yrs.	37,778		37,521		41,403		40,353		Customer lists	5 - 10 yrs.	398		391		279		266
Patents	Patents	3 - 20 yrs.	2,371		2,039		2,371		2,013		Patents	3 - 20 yrs.	867		545		867		537

Developed technology		7 yrs.	2,193		2,056		2,193		1,645

Trade name	Trade name	6 yrs.	4,502		2,251		4,502		1,688		Trade name	6 yrs.	4,502		2,626		4,502		2,439
Other	Other	7 - 20 yrs.	523		367		537		352		Other	7 - 20 yrs.	341		206		342		195
Total intangibles-subject to amortization	Total intangibles-subject to amortization		51,142		47,600		54,781		49,361		Total intangibles-subject to amortization		9,954		7,030		9,718		6,680
Intangibles-not subject to amortization:	Intangibles-not subject to amortization:										Intangibles-not subject to amortization:
Trade names	Trade names		8,850				8,881				Trade names		8,880				8,876
Other assets:	Other assets:										Other assets:

Deposits	Deposits		16,683				19,418				Deposits		16,727				16,487

Deferred tax asset-net	Deferred tax asset-net		19,806				24,552				Deferred tax asset-net		17,626				17,262
Restricted cash	Restricted cash		10,963				13,611				Restricted cash		5,036				5,243

Forward contracts			1,171				—
Investments			327				327

Debt issuance costs	Debt issuance costs		3,330				4,578				Debt issuance costs		2,966				3,124
Other	Other		1,177				1,813				Other		1,692				1,969
Total other assets	Total other assets		53,457				64,299				Total other assets		44,047				44,085
Total intangible and other assets	Total intangible and other assets		$	113,449	$	47,600	$	127,961	$	49,361	Total intangible and other assets		$	62,881	$	7,030	$	62,679	$	6,680
Total intangible and other assets-net	Total intangible and other assets-net				$	65,849			$	78,600	Total intangible and other assets-net				$	55,851			$	55,999

Amortization expense for intangible assets was approximately ~~$0.6~~$0.2 million and ~~$0.7~~$0.6 million for the ~~Third~~First Quarter and the Prior Year Quarter, ~~respectively, and $1.9 million and $2.7 million for the Year To Date Period and Prior Year YTD Period,~~ respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):


Fiscal Year	Fiscal Year	Amortization Expense		Fiscal Year	Amortization Expense
2022 (remaining)		$	610
2023		$	901
2023 (remaining)				2023 (remaining)	$	687
2024	2024	$	884	2024	$	905
2025	2025	$	693	2025	$	715
2026	2026	$	102	2026	$	123
2027				2027	$	105
Thereafter	Thereafter	$	352	Thereafter	$	389

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.

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14. LEASES

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

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

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


Lease Cost	Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended October 1, 2022		For the 13 Weeks Ended October 2, 2021		For the 39 Weeks Ended October 1, 2022		For the 39 Weeks Ended October 2, 2021		Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Operating lease cost~~(1)~~(2)	Operating lease cost~~(1)~~(2)	SG&A	$	18,445	$	21,356	$	58,001	$	66,450	Operating lease cost~~(1)~~(2)	SG&A	$	17,877	$	20,192

Short-term lease cost	Short-term lease cost	SG&A	$	170	$	153	$	570	$	472	Short-term lease cost	SG&A	$	215	$	184
Variable lease cost	Variable lease cost	SG&A	$	7,166	$	6,252	$	21,817	$	17,032	Variable lease cost	SG&A	$	6,120	$	6,948

(1) Includes sublease income, which was immaterial.

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

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


Leases	Leases	Condensed Consolidated Balance Sheets Location	October 1, 2022		January 1, 2022		Leases	Condensed Consolidated Balance Sheets Location	April 1, 2023		December 31, 2022
Assets	Assets						Assets
Operating	Operating	Operating lease ROU assets	$	156,448	$	177,597	Operating	Operating lease ROU assets	$	147,179	$	156,947

Liabilities	Liabilities						Liabilities
Current:	Current:						Current:
Operating	Operating	Current operating lease liabilities	$	48,238	$	58,721	Operating	Current operating lease liabilities	$	45,642	$	49,702

Noncurrent:	Noncurrent:						Noncurrent:
Operating	Operating	Long-term operating lease liabilities	$	151,928	$	174,520	Operating	Long-term operating lease liabilities	$	140,801	$	150,188

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

Lease Term and Discount Rate October 1, 2022 January 1, 2022
Weighted-average remaining lease term:
Operating leases 5.7 years 5.7 years
Weighted-average discount rate:
Operating leases 14.2 % 14.1 %

Lease Term and Discount Rate

April 1, 2023

December 31, 2022

Weighted-average remaining lease term:

Operating leases

5.7 years

5.6 years

Weighted-average discount rate:

Operating leases

14.2

14.1

2621

Future minimum lease payments by year as of ~~October~~April 1, ~~2022~~2023 were as follows (in thousands):


Fiscal Year	Fiscal Year	Operating Leases		Fiscal Year	Operating Leases
2022 (remaining)		$	21,708
2023		73,629
2023 (remaining)				2023 (remaining)	$	58,533
2024	2024	50,214		2024	55,266
2025	2025	35,551		2025	39,174
2026	2026	28,772		2026	31,076
2027				2027	22,408
Thereafter	Thereafter	94,674		Thereafter	79,989

Total lease payments	Total lease payments	$	304,548	Total lease payments	$	286,446
Less: Interest	Less: Interest	104,382		Less: Interest	100,003
Total lease obligations	Total lease obligations	$	200,166	Total lease obligations	$	186,443

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


		For the 39 Weeks Ended October 1, 2022		For the 39 Weeks Ended October 2, 2021			For the 13 Weeks Ended April 1, 2023		For the 13 Weeks Ended April 2, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	Operating cash flows from operating leases(1)	$	68,182	$	83,189	Operating cash flows from operating leases(1)	$	22,362	$	24,439

Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	22,775		11,319		Leased assets obtained in exchange for new operating lease liabilities	6,263		1,494

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

As of ~~October~~April 1, ~~2022,~~2023, the Company did not have any material operating or finance leases that have been signed but not commenced.

15. DEBT ACTIVITY

On September 26, 2019, the Company and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other subsidiaries of the Company from time to time party thereto designated as borrowers, and certain subsidiaries of the Company from time to time party thereto as guarantors, entered into a $275.0 million secured asset-based revolving credit agreement (the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders"). ~~The Revolving Facility was most recently amended on~~On November 8, ~~2022. In addition, on September 26, 2019,~~2022, the Company ~~as borrower,~~ entered into ~~a term~~Amendment No. 4 (the "Amendment") to the Revolving Facility. The Amendment, among other things, (i) extended the maturity date of the credit ~~agreement (the "Term Credit Agreement").~~facility to November 8, 2027 (provided, that if the Company has any indebtedness in an amount in excess of $35 million that matures prior to November 8, 2027, the maturity date of the credit facility shall be the 91st day prior to the maturity date of such other indebtedness) and (ii) changed the calculation methodology of the borrowing base to include the value of certain of the Company’s intellectual property in such methodology and to provide for seasonal increases to certain advance rates.

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

The Notes are general unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness, and will rank senior in right of payment to the Company’s future subordinated indebtedness, if any. The Notes are effectively subordinated to all of the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and the Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the

Company’s subsidiaries (excluding any amounts owed by such subsidiaries to the Company). The Notes bear interest at the rate of 7.00% per annum. Interest on the Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each ~~year, commencing on February 28, 2022.~~year. The Notes mature on November 30, 2026.

The Company may redeem the Notes for cash in whole or in part at any time at its option. Prior to November 30, 2023, the redemption price will be $25.00 per $25.00 principal amount of Notes, plus a "make-whole” premium consisting of the greater of (1) 1.0% of the principal amount of the Note and (2) the excess of (a) the present value at such redemption date of (i)

the redemption price of the Note at November 30, 2023 plus (ii) all required interest payments due on the Note through November 30, 2023 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points discounted to the redemption date on a semi-annual basis (assuming a 360- day year consisting of twelve 30-day months), over (b) the principal amount of the Note, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. On and after November 30, 2023, the Company may redeem the Notes (i) on or after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Notes, (ii) on or after November 30, 2024 and prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.

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

On November 8, 2021, the Company used the majority of the net proceeds from the Notes offering to repay the outstanding borrowings under the Term Credit Agreement. In connection with the repayment of the outstanding borrowings under the Term Credit Agreement, the Company incurred prepayment fees and accrued interest costs of $2.6 million and wrote off $7.1 million of debt issuance costs and $4.6 million of original issuance discount related to the Term Credit Agreement. The remaining net proceeds were used for general corporate purposes.

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 Revolving Facility expires and is due and payable on November 8, 2027 (provided, that if the Company has any indebtedness in an amount in excess of $35.0 million that matures prior to November 8, 2027, the maturity date of the Revolving Facility shall be the 91st day prior to the maturity date of such other indebtedness). 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 made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to:(a) with respect to the Company, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (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 period covered by the borrowing base certificate delivered with respect to the fifth fiscal month of the Company.

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

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

2823

The Revolving Facility is secured by guarantees by the Company and certain of its domestic subsidiaries. Additionally, the Company and such subsidiaries have granted liens on all or substantially all of their assets in order to secure the obligations under the Revolving Facility. In addition, the Swiss Borrower, the Hong Kong Borrower, the French Borrower, the German Borrower and the Canadian Borrower, and the other non-U.S. borrowers from time to time party to the Revolving Facility are required to enter into security instruments with respect to all or substantially all of their assets that can be pledged under applicable local law, and certain of their respective subsidiaries may guarantee the respective non-U.S. obligations under the Revolving Facility.

The Revolving Facility contains customary affirmative and negative covenants and events of default, such as compliance with annual audited and quarterly unaudited financial statements disclosures. Upon an event of default, the ABL Agent will have the right to declare the revolving loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced, subject to cure periods and grace periods set forth in the Revolving Facility.

As of ~~October~~April 1, ~~2022,~~2023, the Company had $150.0 million and ~~$151.0~~$91.0 million outstanding under the Notes and Revolving Facility, respectively. The Company had net borrowings of ~~$44.2 million and $151.0~~$18.0 million under the Revolving Facility during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. Amounts available under the Revolving Facility were reduced by any amounts outstanding under standby Letters of Credit. As of ~~October~~April 1, ~~2022,~~2023, the Company had available borrowing capacity of ~~$50.4~~$90.1 million under the Revolving Facility. As of April 1, 2023, the Company had unamortized debt issuance costs of $6.4 million recorded in long-term debt and $3.0 million recorded in intangible and other assets-net on the Company's consolidated balance sheets. The Company incurred approximately $2.6 million and ~~$7.9~~$1.0 million of interest expense related to the Notes and Revolving Facility, respectively, during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. The Company incurred approximately $0.9 million and $1.1 million of interest expense related to the Revolving Facility during the Third Quarter and Year To Date Period, respectively. The Company incurred approximately $0.9 million and $2.6$0.6 million of interest expense related to the amortization of debt issuance costs during the ~~Third Quarter and Year To Date Period, respectively.~~First Quarter. At ~~October~~April 1, ~~2022,~~2023, the Company was in compliance with all debt covenants related to its credit facilities.

16. RESTRUCTURING

In the First Quarter, the Company announced its Transform and Grow strategy ("TAG") designed to reduce operating costs, improve operating margins, and advance the Company’s commitment to profitable growth. Included in this strategy is a new restructuring plan, (the "TAG Plan"), that is intended to lower operating expenses and reduce working capital. TAG is expected to be implemented over a two year period and is intended to generate estimated annualized benefits of at least $100 million by the end of 2024. The TAG Plan includes a reduction of the Company’s current global workforce in 2023 by approximately eight percent, which includes employee reductions resulting from store closures. The TAG Plan will also include the exit of certain product offerings. The Company estimates approximately $25 million to $30 million in total charges associated with the TAG Plan, all expected to be incurred during fiscal 2023.

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


	For the 13 Weeks Ended April 1, 2023
Cost of sales	$	5,264
Selling, general and administrative expenses	7,097
Total	$	12,361

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


	For the 13 Weeks Ended April 1, 2023
	Liabilities						Liabilities
	December 31, 2022		Charges		Cash Payments		April 1, 2023

Professional services	—		36		16		20
Severance and employee-related benefits	—		7,061		2,561		4,500
Charges related to exits of certain product offerings	—		5,264		—		5,264
Total	$	—	$	12,361	$	2,577	$	9,784

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


	For the 13 Weeks Ended April 1, 2023
Americas	$	2,959
Europe	3,955
Asia	4,268
Corporate	1,179
Consolidated	$	12,361

In fiscal year ~~2019,~~2022, the Company ~~launched~~completed its New World Fossil 2.0 ~~- Transform to Grow Program~~ (“NWF 2.0”), which was focused on optimizing the Company’s operating structure to be more efficient, with faster decision-making and a more customer-centric focus. In addition to optimizing the way the Company goes to market, the Company pursued additional gross margin expansion opportunities. The Company has taken a zero-based budgeting approach to adjust its business model to enable more investment in digital capabilities and marketing, move closer to the consumer and react more quickly to the ever-evolving consumer shopping patterns. The Company also changed its overall business processes and resources, creating a more centrally directed operating model, reducing complexity and redundancy, and operating at a lower cost base. The NWF 2.0 restructuring program was expanded to address additional challenges posed by COVID-19, including a number of cost saving measures such as store closures. The Company estimates NWF 2.0 total charges of $6.0 million for fiscal year 2022, which will conclude this 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 October 1, 2022											For the 13 Weeks Ended April 1, 2023
		Liabilities								Liabilities			Liabilities				Liabilities
		July 2, 2022		Charges		Cash Payments		Non-cash Items		October 1, 2022			December 31, 2022		Cash Payments		April 1, 2023
Store closures		$	—	$	—	$	—	$	—	$	—

Professional services	Professional services	130		—		43		—		87		Professional services	$	74	$	14	$	60
Severance and employee-related benefits	Severance and employee-related benefits	3,616		—		885		—		2,731		Severance and employee-related benefits	2,821		2,234		587
Total	Total	$	3,746	$	—	$	928	$	—	$	2,818	Total	$	2,895	$	2,248	$	647


	For the 13 Weeks Ended April 2, 2022
	Liabilities								Liabilities
	January 2, 2021		Charges		Cash Payments		Non-cash Items		April 2, 2022
Store closures	$	300	$	405	$	349	$	92	$	264
Professional services	643		135		421		—		357
Severance and employee-related benefits	4,388		2,011		1,871		—		4,528
Total	$	5,331	$	2,551	$	2,641	$	92	$	5,149

For the 13 Weeks Ended October 2, 2021
Liabilities Liabilities
July 3, 2021 Charges Cash Payments Non-cash Items October 2, 2021
Store closures $ 19 $ 244 $ 201 $ 47 $ 15
Professional services 2,076 1,405 2,264 — 1,217
Severance and employee-related benefits 5,756 3,798 4,667 — 4,887
Total $ 7,851 $ 5,447 $ 7,132 $ 47 $ 6,119

For the 39 Weeks Ended October 1, 2022
Liabilities Liabilities
January 1, 2022 Charges Cash Payments Non-cash Items October 1, 2022
Store closures $ 300 $ 405 $ 613 $ 92 $ —
Professional services 643 135 691 — 87
Severance and employee-related benefits 4,388 4,898 5,770 785 2,731
Total $ 5,331 $ 5,438 $ 7,074 $ 877 $ 2,818

For the 39 Weeks Ended October 2, 2021
Liabilities Liabilities
January 2, 2021 Charges Cash Payments Non-cash Items October 2, 2021
Store closures $ 240 $ 1,913 $ 391 $ 1,747 $ 15
Professional services 2,280 4,812 5,875 — 1,217
Severance and employee-related benefits 7,741 11,991 14,845 — 4,887
Total $ 10,261 $ 18,716 $ 21,111 $ 1,747 $ 6,119

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

For the 13 Weeks Ended October 1, 2022 For the 13 Weeks Ended October 2, 2021 For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021
Americas $ — $ 737 $ 83 $ 2,116
Europe — 1,828 1,531 8,872
Asia — 1,484 1,204 3,289
Corporate — 1,398 2,620 4,439
Consolidated $ — $ 5,447 $ 5,438 $ 18,716


	For the 13 Weeks Ended April 2, 2022
Americas	$	47
Europe	1,250
Asia	1,163
Corporate	91
Consolidated	$	2,551

~~17. SUBSEQUENT EVENT~~

~~Credit Agreement~~. On November 8, 2022, the Company and its subsidiaries party to the Revolving Facility as borrowers and guarantors entered into Amendment No. 4 (the “Amendment”) to the Revolving Facility. The Amendment, among other things, (i) extended the maturity date of the Revolving Facility to November 8, 2027 (provided, that if the Company has any indebtedness in an amount in excess of $35.0 million that matures prior to November 8, 2027, the maturity date of the Revolving 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 the Company’s intellectual property in such methodology and to provide for seasonal increases to certain advance rates.

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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 week ~~periods~~period ended ~~October~~April 1, ~~2022~~2023 (the ~~“Third~~“First Quarter”) ~~and October~~as compared to the thirteen week period ended April 2, ~~2021~~2022 (the “Prior Year Quarter”~~), and the thirty-nine week periods ended October 1, 2022 (the "Year To Date Period") and October 2, 2021 (the "Prior Year YTD Period"~~). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

Overview

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

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

Known or Anticipated Trends

Based on our recent operating results and current perspectives on our operating environment, we anticipate the following trends will continue to impact our operating results:

Economic Environment Impacting Consumer Spending Ability and Preferences:We believe inflationary pressures, increasing interest rates and recessionary fears are impacting wholesale customer behavior, including cautiousness in placing advance orders for merchandise. In addition, we expect continued pressure on consumer discretionary spending as the U.S. federal funds rate fluctuates and credit markets tighten. We expect high rates of inflation to continue in 2023 in many of our major markets.

Foreign Currencies:At prevailing exchange rates, foreign currency translation would negatively impact our financial results in the first half and positively impact our financial results in the second half of fiscal year 2023, when compared with fiscal year 2022. However, foreign currency translation may continue to have a negative impact on our financial results throughout the year.

Inventory Levels: A slowing of consumer demand in our core categories, in part due to macro economic factors such as higher inflation, has resulted in excess inventory with many of our wholesale customers. With higher marketplace inventories and a rapidly changing economic environment, we expect retailers to rationalize their inventory needs. We continue to proactively manage our inventory purchases to mitigate our cash flow and inventory risks.

Russia-Ukraine Conflict:Our operations in Russia consist of sales through a third-party distributor. Sales to this distributor are currently on hold. Our sales in Russia are not material to our financial results. We have no other operations, including supply chain, in Russia or Ukraine. However, the continuation of the Russia-Ukraine military conflict and/or an escalation of the conflict beyond its current scope may weaken the global economy and could result in additional inflationary pressures and supply chain constraints.

COVID-19: ~~Our business operations~~The phase and ~~financial performance continue to be materially impacted by COVID-19. The~~pace of recovery from the COVID-19 pandemic has ~~negatively affected~~continued to vary across markets globally. In Asia, including mainland China particularly, markets emerged from COVID-19 restrictions more gradually and over a longer time, compared to the pace of recovery in the Americas and Europe. We expect the pressures the COVID-19 pandemic put on the global economies, ~~disrupted global~~ supply chains and financial markets ~~and led~~ to significant travel and transportation restrictions, including periodic mandatory closures of non-essential businesses and orders to shelter-in-place. The lockdowns and travel restrictions, particularly in China, have ~~had~~ a ~~significant adverse~~lesser impact on ~~our sales throughout~~fiscal year 2023, as compared to recent years, although the ~~Year To Date Period, and we expect that to continue. We remain focused on protecting~~extent of the ~~health and safety of our employees, customers and suppliers to minimize potential disruptions and supporting the community to address challenges posed by the global COVID-19 pandemic.~~

impact is uncertain.

Supply Chain: Our business is 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. Among our foreign suppliers, China is the source of a substantial majority of our imports. We have experienced, and expect to continue to experience, increased international transit times, particularly for our leathers products and packaging. A disruption in the flow of our imported merchandise from China may significantly decrease our profits.

~~Inflation: We have encountered inflation on our shipping costs for a majority of our products.~~ A material increase in the cost of our products or transportation without any offsetting price increases may significantly reduce our profits. ~~In addition, recent historic high rates~~Among our foreign suppliers, China is the source of ~~inflation, including increased fuel~~a substantial majority of our imports. We expect fewer impacts from international transit times and food prices, has led to a softening of consumer demand and increased promotional activity in our categories and may lead to further challenges to grow our sales. Ongoing inflation may also negatively impact our cost structure and labor costs in the future.

~~Foreign Currencies~~:The rapid strengthening of the U.S. dollar relative to major foreign currencies unfavorably impacted our net sales and profitability in the Year To Date Period, and we expect foreign currency translation will continue to negatively impact our financial results in fiscal year 2022 when compared with fiscal year 2021.

~~Inventory Levels~~: A slowing of consumer demand has resulted in excess inventory in the marketplace in fiscal year 2022. With higher marketplace inventories and a rapidly changing economic environment, retailers are rationalizing their inventory needs. Because we expect marketplace inventories to remain elevated, we are reducing future inventory purchases.

~~Russia-Ukraine Conflict~~:Our operations in Russia consist of sales through a third-party distributor. Sales to this distributor are currently on hold. Our sales in Russia are not material to our financial results. We have no other operations,transportation

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~~including supply chain,~~costs in ~~Russia or Ukraine. However,~~ the ~~continuation~~current fiscal year compared with the prior fiscal year. Additionally, a disruption in the flow of ~~the Russia-Ukraine military conflict and/or an escalation of the conflict beyond its current scope~~finished goods from China may ~~weaken the global economy and could result in additional inflationary pressures and supply chain constraints.~~significantly decrease our profits.

~~Data Security~~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 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 facilities and systems and those of our third party service providers have been, and will continue to be, vulnerable to theft of physical information, security breaches, hacking attempts, computer viruses and malware, ransomware, phishing, lost data and programming and/or human errors. To date, none of these risks, intrusions, attacks or human error have resulted in any material liability to us. While we carry insurance policies that would provide liability coverage for certain of these matters, if we experience a significant security incident, we could be subject to liability or other damages that exceed our insurance ~~coverage, and~~coverage. In addition, we cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

Business Strategies and Outlook: ~~Notwithstanding~~We remain cautious in our overall outlook for fiscal 2023, as we anticipate the ~~COVID-19 pandemic,~~challenging operating conditions which emerged in the prior year are likely to continue for some time.To align with these conditions, we recently announced our TAG designed to reduce operating expenses, improve operating margins and advance our path to profitable growth.

The “Transform” aspect of our TAG program focuses on optimizing our core categories, brands, geographies and channels. Through this more focused lens, we intend to restructure our operations to achieve lower operating expenses and to reduce our working capital, primarily through lower inventory purchases in fiscal year 2023. The reduction in operating expenses is intended to generate an estimated $100 million in annualized benefits by the end of 2024. This is partly achieved by a reduction in the Company’s global workforce in 2023 by 8%, which includes employees from planned store closures. We have implemented and plan to ~~execute the following strategies to enhance our brands, grow our revenue~~implement additional programs and improve profitability. The first strategic initiative is to increase brand excitement by crafting compelling stories that build upon brand equities for both owned and licensed brands across our product categories. Key to this strategy is our ongoing effort in innovation in our product categories and marketing capabilities, where we aim to build larger communities of brand loyalists. Our second strategic initiative is to increase digital engagement and online sales over the long-term. While digital sales have trended down year-over-year, we continue to invest in our owned e-commerce sites around the world and in third party marketplaces to enhance our direct to consumer engagement, which we believe can build long-term customer value. Our third strategic initiative is to optimize our operations. We initiated the New World Fossil – Transform to Grow ("NWF 2.0") initiative in 2019 aimed to further simplify our operations and to reallocate resources toward growth, and we achieved our $250 million run-rate savings goal in 2021. Although we are nearing completion of our NWF 2.0 program, we will continueinitiatives to optimize our operations and de-emphasize non-core parts of our business, which includes non-core brands in certain geographies and certain brands and offerings within our smartwatch category.

The “Growth” aspect of our TAG program focuses on investing in three key growth pillars with ~~further reductions~~three growth enablers to drive sustained and profitable revenue growth. These growth pillars are: (1) revitalize the Fossil Brand, (2) grow our ~~store footprint, expense reductions~~watches and ~~increased~~jewelry in our core portfolio brands and (3) to focus on ~~inventory management~~a more premium watch segment. We believe that these growth pillars are best enabled by: (1) our digital transformation, (2) marketing transformation and supply chain efficiency. Our fourth strategic initiative is to expand our opportunity in mainland China and India. In these countries, we are continuing to execute against a strategy centered around localized marketing and segmented assortments. Although the impact of COVID-19 is likely to disrupt our growth trajectory in the short to intermediate term, we continue to view mainland China and India as compelling long-term opportunities. With the current headwinds, including inflation and recessionary pressures, we will focus on managing our working capital and inventory levels. This will include selling down our current inventory and possibly reducing our open to buy in early 2023.(3) technology investments.

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 ~~January 1,~~December 31, 2022.

Operating Segments

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

Americas: The Americas segment is comprised of sales from our operations in the United States, Canada and Latin America. Sales are generated through diversified distribution channels that include wholesalers, distributors, and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors and e-commerce channels. In the direct to consumer channel, we had ~~153~~149 Company-owned stores as of the end of the ~~Third~~First Quarter and an extensive collection of products available through our owned websites.

Europe: The Europe segment is comprised of sales to customers based in European countries, the Middle East and Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel, we had ~~111~~99 Company-owned stores as of the end of the ~~Third~~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, China (including Hong Kong, Macau and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel,

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we had 8079 Company-owned stores as of the end of the ~~Third~~First Quarter and an extensive collection of products available through our owned websites.

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

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

As a result, in addition to presenting financial measures in accordance with accounting principles generally accepted in the United States of America ~~("GAAP")~~(GAAP), our discussion contains references to constant currency financial information, which is a non-GAAP financial measure. To calculate net sales on a constant currency basis, net sales for the current fiscal year for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average rates during the comparable period of the prior fiscal year. We present constant currency information to provide investors with a basis to evaluate how our underlying business performed excluding the effects of foreign currency exchange rate fluctuations. The constant currency financial information presented herein should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Reconciliations between constant currency financial information and the most directly comparable GAAP measure are included where applicable.

Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and 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 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 valuation and for comparing our financial performance with the performance of our competitors. We also use these non-GAAP financial measures to monitor and compare the financial performance of our operations. Our presentation of Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share may not be comparable to similarly titled measures other companies report. Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are not intended to be used as alternatives to any measure of our performance in accordance with GAAP.

Digital Sales: WeDue to shifting consumer traffic patterns and digital buying trends, we continue to accelerate our investments and capabilities in our global digital platform, and digital sales provide an important metric for our company. The digital space provides unique ways of engaging our customers. Digital sales include sales on our own e-commerce sites, global third party platforms, and wholesale dot com sites.

Comparable 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 ~~change~~increase of 10% or more due to an expansion and/or relocation are removed from the comparable store sales base, but are included in total sales. These stores are returned to the comparable store sales base in the thirteenth month following the expansion and/or relocation. Comparable retail sales also exclude the effects of foreign currency fluctuations.

Store Counts: ~~Store~~While macro economic factors have shifted sales away from traditional brick and mortar stores towards digital channels, store counts continue to provide a key metric for management. 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 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. Product returns ~~provision is~~

are accounted for as ~~a reduction~~reductions to revenue and cost of sales and ~~an increase~~increases 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, ~~and~~ inventory shrinkage and ~~damages.~~

damages and restructuring charges.

Gross 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 margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the following factors: (i) premiums charged in comparison to retail prices on products sold in the U.S.; (ii) the product sales mix in our international businesses, in comparison to our Americas business, is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods; and (iii) the watch sales mix in our Europe and Asia businesses, in comparison to our Americas business, are comprised more predominantly of higher priced licensed brands.

Operating Expenses include selling, general and administrative ("SG&A"), other long-lived asset impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of our retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize our Company’s infrastructure and store closures under our TAG and New World Fossil initiatives.

Results of Operations

Quarterly Periods Ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022

Consolidated Net Sales. Net sales decreased ~~$55.5~~$50.9 million, or ~~11.3%~~13.5% (10.7% in constant currency), for the ~~Third~~First Quarter as compared to the Prior Year Quarter, with sales ~~declines~~decreases in all three ~~regions. Currency decreased sales by 6.1% compared to the Prior Year Quarter with the most notable impact in Europe. In constant currency,~~geographic segments. Wholesale sales declined ~~5.2% compared to the Prior Year Quarter with declines~~22.4% (20.1% in ~~Americas and Asia while Europe was flat. Net sales in mainland China, captured in our Asia segment, were down significantly. The sales declines in the three regions were partly~~constant currency), partially offset by ~~increases~~4.0% growth (7.8% in corporate revenue recognized over time, due to the timing of progress in completing performance obligations under a licensing agreement. From a channel perspective, declines in our wholesale channel offset growthconstant currency) in our direct to consumer channels. Within our direct to consumer channels, global comparable retail sales grew 15.2% primarily due to increased store sales in all three regions, while our owned e-commerce websites increased 3%. In the Third Quarter, digital sales, which include sales from our owned e-commerce channels, third party e-commerce platforms and wholesale dot com, were 37% of worldwide net sales and decreased 19.5% (12.0% in constant currency) compared to the Prior Year Quarter. From a category perspective, traditional watch sales decreased ~~10.3% (4.2%~~13.8% (11.0% in constant currency) ~~driven by~~. Net sales ~~declines~~ in ~~EMPORIO ARMANI in China. Sales of~~ smartwatches ~~declined 38.3%~~decreased 35.8% (33.5% in constant currency) ~~partly due to lapping the prior year's gen 6 launch and due to~~, reflecting lower consumer demand across geographies and ~~channels. Jewelry declined 18.1% (9.1%~~channels as compared to the prior year period. The leathers category grew 17.8% (20.6% in constant currency) ~~primarily due to~~driven by promotions, and jewelry sales decreased 16.4% (12.7% in constant currency) reflecting reduced wholesale replenishment during the First Quarter. From a brand perspective, sales decreased throughout most of our brand portfolio, with the most predominant declines in MICHAEL KORS ~~jewelry. Partially offsetting these declines was~~and EMPORIO ARMANI brands. FOSSIL branded sales declined slightly (increased slightly in constant currency) with growth in leathers ~~of 12.9% (17.4%~~and traditional watches largely offset by declines in ~~constant currency)~~smartwatches and jewelry. Global comparable retail sales increased 13% primarily due to ~~greater inventory availability as compared to~~increases in our owned e-commerce websites and stores. We have reduced our store footprint by 25 stores (7%), since the end of the Prior Year ~~Quarter and new designs that are resonating with customers.~~Quarter.

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


		For the 13 Weeks Ended October 1, 2022				For the 13 Weeks Ended October 2, 2021				Growth (Decline)							For the 13 Weeks Ended April 1, 2023				For the 13 Weeks Ended April 2, 2022				Growth (Decline)
		Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency			Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	Americas	$	184.3	42.2	%	$	193.7	39.4	%	$	(9.4)	(4.9)	%	(4.4)	%	Americas	$	137.9	42.4	%	$	161.9	43.1	%	$	(24.0)	(14.8)	%	(14.6)	%
Europe	Europe	143.7		32.9		165.9		33.7		(22.2)		(13.4)		0.1		Europe	105.7		32.5		124.6		33.1		(18.9)		(15.2)		(11.2)
Asia	Asia	100.2		23.0		129.5		26.3		(29.3)		(22.6)		(17.3)		Asia	80.1		24.6		86.8		23.1		(6.7)		(7.7)		(1.6)
Corporate	Corporate	8.1		1.9		2.7		0.6		5.4		200.0		200.0		Corporate	1.3		0.5		2.6		0.7		(1.3)		(50.0)		(50.0)
Total	Total	$	436.3	100.0	%	$	491.8	100.0	%	$	(55.5)	(11.3)	%	(5.2)	%	Total	$	325.0	100.0	%	$	375.9	100.0	%	$	(50.9)	(13.5)	%	(10.7)	%

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


		For the 13 Weeks Ended October 1, 2022				For the 13 Weeks Ended October 2, 2021															For the 13 Weeks Ended April 1, 2023							For the 13 Weeks Ended April 2, 2022
											Growth (Decline)															Growth (Decline)
		Net Sales		Percentage of Total				Net Sales			Percentage of Total			Dollars			Percentage As Reported			Percentage Constant Currency			Net Sales				Percentage of Total								Net Sales			Percentage of Total				Dollars				Percentage As Reported	Percentage Constant Currency
Watches:	Watches:																			Watches:
Traditional watches	Traditional watches	$	310.2	71.1	%	$	345.8		70.3	%		$	(35.6)		(10.3)	%		(4.2)	%	Traditional watches	$	225.4		69.4	%				$	261.4		69.6		%		$	(36.0)		(13.8)		%		(11.0)		%
Smartwatches	Smartwatches	33.3		7.6		54.0			11.0			(20.7)			(38.3)			(33.5)		Smartwatches	24.4			7.5				38.0			10.1				(13.6)			(35.8)				(33.5)
Total watches	Total watches	$	343.5	78.7	%	$	399.8		81.3	%		$	(56.3)		(14.1)			(8.2)		Total watches	$	249.8		76.9	%			$	299.4		79.7		%		$	(49.6)		(16.6)				(13.9)
Leathers	Leathers	41.1		9.4		36.4			7.4			4.7			12.9			17.4		Leathers	40.3			12.4				34.2			9.1				6.1			17.8				20.6
Jewelry	Jewelry	37.9		8.7		46.3			9.4			(8.4)			(18.1)			(9.1)		Jewelry	29.0			8.9				34.7			9.2				(5.7)			(16.4)				(12.7)
Other	Other	13.8		3.2		9.3			1.9			4.5			48.4			55.5		Other	5.9			1.8				7.6			2.0				(1.7)			(22.4)				(18.4)
Total	Total	$	436.3	100.0	%	$	491.8		100.0	%		$	(55.5)		(11.3)	%		(5.2)	%	Total	$	325.0		100.0	%			$	375.9		100.0		%		$	(50.9)		(13.5)		%		(10.7)		%

In the ~~Third~~First Quarter, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by ~~$30.1~~$10.6 million (2.8%), including unfavorable impacts of ~~$22.3~~$5.3 million, ~~$6.9~~$5.0 million and ~~$0.9~~$0.3 million in our Asia, Europe ~~Asia~~ and Americas segments, respectively, as compared to the Prior Year Quarter.

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


		October 2, 2021	Opened	Closed	October 3, 2022		April 2, 2022	Opened	Closed	April 1, 2023
Americas	Americas	163	0	10	153	Americas	159	0	10	149
Europe	Europe	128	0	17	111	Europe	115	0	16	99
Asia	Asia	83	5	8	80	Asia	78	5	4	79
Total stores	Total stores	374	5	35	344	Total stores	352	5	30	327

Americas Net Sales. Americas net sales decreased ~~$9.4~~$24.0 million, or ~~4.9% (4.4%~~14.8% (14.6% in constant currency), during the ~~Third~~First Quarter in comparison to the Prior Year Quarter. ~~In the region, sales~~Sales decreases were largely in the ~~U.S. were~~MICHAEL KORS brand and partially offset by sales increases in ~~Canada~~FOSSIL. The sales decreases were mainly in wholesale, and ~~Mexico. Sales decreased in our wholesale channel primarily reflecting lower consumer demand in smartwatches and were~~ partially offset by increases in our owned e-commerce and store ~~sales and owned e-commerce.~~channels. Comparable retail sales ~~were moderately positive~~increased significantly during the ~~Third~~First Quarter, primarily due to ~~increased store traffic.~~increases in our owned e-commerce websites and our stores.

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


		For the 13 Weeks Ended October 1, 2022					For the 13 Weeks Ended October 2, 2021														For the 13 Weeks Ended April 1, 2023					For the 13 Weeks Ended April 2, 2022
						Growth (Decline)										Growth (Decline)
				Net Sales							Percentage of Total			Net Sales			Percentage of Total			Dollars					Percentage As Reported			Percentage Constant Currency		Net Sales			Percentage of Total		Net Sales		Percentage of Total	Dollars	Percentage As Reported	Percentage Constant Currency
Watches:	Watches:																			Watches:
Traditional watches	Traditional watches	$	132.1	71.7	%		$	131.0	67.6	%		$	1.1		0.8	%		1.3	%	Traditional watches	$	91.4	66.3	%		$	115.9		71.6	%	$	(24.5)		(21.1)	%	(21.3)	%
Smartwatches	Smartwatches	14.6		7.9			25.2		13.0			(10.6)			(42.1)			(41.9)		Smartwatches	12.5		9.1			17.3			10.7		(4.8)			(27.7)		(27.7)
Total watches	Total watches	$	146.7	79.6	%		$	156.2	80.6	%		$	(9.5)		(6.1)			(5.7)		Total watches	$	103.9	75.4	%		$	133.2		82.3	%	$	(29.3)		(22.0)		(22.1)
Leathers	Leathers	27.3		14.8			23.4		12.1			3.9			16.7			17.3		Leathers	27.1		19.7			19.2			11.9		7.9			41.1		42.7
Jewelry	Jewelry	8.4		4.6			12.3		6.4			(3.9)			(31.7)			(31.7)		Jewelry	5.4		3.9			7.9			4.9		(2.5)			(31.6)		(30.4)
Other	Other	1.9		1.0			1.8		0.9			0.1			5.6			15.1		Other	1.5		1.0			1.6			0.9		(0.1)			(6.3)		14.3
Total	Total	$	184.3	100.0	%		$	193.7	100.0	%		$	(9.4)		(4.9)	%		(4.4)	%	Total	$	137.9	100.0	%		$	161.9		100.0	%	$	(24.0)		(14.8)	%	(14.6)	%

Europe Net Sales. Europe net sales decreased ~~$22.2~~$18.9 million, or ~~13.4% (increased 0.1%~~15.2% (11.2% in constant currency), during the ~~Third~~First Quarter in comparison to the Prior Year Quarter. ~~The weakening~~Our sales across much of ~~foreign currencies, predominantly~~ the ~~euro, against~~Eurozone decreased, with the ~~U.S. dollar significantly decreased our net sales in the Third Quarter. The~~ greatest decreases in Germany, France and the U.K. From a channel perspective, sales decreases in wholesale were ~~located~~partially offset by increases in ~~Germany.~~e-commerce and stores on a constant currency basis. Comparable retail sales increased moderately during the ~~Third~~First Quarter, ~~as growth in~~primarily due to increased store ~~sales was partially offset by decreased~~and owned e-commerce sales.

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


		For the 13 Weeks Ended October 1, 2022				For the 13 Weeks Ended October 2, 2021															For the 13 Weeks Ended April 1, 2023							For the 13 Weeks Ended April 2, 2022
											Growth (Decline)															Growth (Decline)
		Net Sales		Percentage of Total				Net Sales			Percentage of Total			Dollars			Percentage As Reported			Percentage Constant Currency			Net Sales				Percentage of Total								Net Sales			Percentage of Total				Dollars				Percentage As Reported	Percentage Constant Currency
Watches:	Watches:																			Watches:
Traditional watches	Traditional watches	$	102.1	71.1	%	$	113.5		68.4	%		$	(11.4)		(10.0)	%		3.7	%	Traditional watches	$	71.8		67.9	%				$	81.1		65.1		%		$	(9.3)		(11.5)		%		(7.3)		%
Smartwatches	Smartwatches	10.4		7.2		16.3			9.8			(5.9)			(36.2)			(25.4)		Smartwatches	6.6			6.2				12.7			10.2				(6.1)			(48.0)				(45.7)
Total watches	Total watches	$	112.5	78.3	%	$	129.8		78.2	%		$	(17.3)		(13.3)			0.1		Total watches	$	78.4		74.1	%			$	93.8		75.3		%		$	(15.4)		(16.4)				(12.5)
Leathers	Leathers	5.7		4.0		7.2			4.3			(1.5)			(20.8)			(7.9)		Leathers	6.8			6.4				7.4			5.9				(0.6)			(8.1)				(2.7)
Jewelry	Jewelry	23.0		16.0		25.6			15.4			(2.6)			(10.2)			3.9		Jewelry	18.5			17.5				21.1			16.9				(2.6)			(12.3)				(8.5)
Other	Other	2.5		1.7		3.3			2.1			(0.8)			(24.2)			(12.3)		Other	2.0			2.0				2.3			1.9				(0.3)			(13.0)				(8.7)
Total	Total	$	143.7	100.0	%	$	165.9		100.0	%		$	(22.2)		(13.4)	%		0.1	%	Total	$	105.7		100.0	%			$	124.6		100.0		%		$	(18.9)		(15.2)		%		(11.2)		%

Asia Net Sales. Net sales in Asia decreased ~~$29.3~~$6.7 million, or ~~22.6% (17.3%~~7.7% (1.6% in constant currency), during the ~~Third~~First Quarter in comparison to the Prior Year Quarter. The sales ~~decrease was~~decreases were largely driven by ~~greater~~mainland China and ~~predominately~~partially offset by sales increases in India. Sales decreased in the EMPORIO ARMANI ~~brand. COVID-19 policies~~brand and were partially offset by sales growth in mainland China, which include restrictions on travel abroad, continued to negatively affect sales across all channels and also impacted other key markets that have historically benefited from China tourism.the MICHAEL KORS brand. Comparable retail sales increased ~~significantly~~slightly during the ~~Third~~First Quarter, driven by ~~increased store sales in Malaysia and Australia as a result of traffic growth, partially offset by decreased owned e-commerce sales.~~our retail stores.

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


		For the 13 Weeks Ended October 1, 2022				For the 13 Weeks Ended October 2, 2021															For the 13 Weeks Ended April 1, 2023							For the 13 Weeks Ended April 2, 2022
											Growth (Decline)															Growth (Decline)
		Net Sales		Percentage of Total				Net Sales			Percentage of Total			Dollars			Percentage As Reported			Percentage Constant Currency			Net Sales				Percentage of Total								Net Sales			Percentage of Total				Dollars				Percentage As Reported	Percentage Constant Currency
Watches:	Watches:																			Watches:
Traditional watches	Traditional watches	$	76.0	75.8	%	$	101.3		78.2	%		$	(25.3)		(25.0)	%		(20.2)	%	Traditional watches	$	62.3		77.8	%				$	64.4		74.2		%		$	(2.1)		(3.3)		%		2.8		%
Smartwatches	Smartwatches	8.3		8.3		12.5			9.6			(4.2)			(33.6)			(26.6)		Smartwatches	5.3			6.6				8.0			9.2				(2.7)			(33.8)				(27.5)
Total watches	Total watches	$	84.3	84.1	%	$	113.8		87.8	%		$	(29.5)		(25.9)			(20.9)		Total watches	$	67.6		84.4	%			$	72.4		83.4		%		$	(4.8)		(6.6)				(0.6)
Leathers	Leathers	8.2		8.2		5.8			4.5			2.4			41.4			48.5		Leathers	6.4			8.0				7.6			8.8				(1.2)			(15.8)				(13.2)
Jewelry	Jewelry	6.6		6.6		8.5			6.6			(1.9)			(22.4)			(16.3)		Jewelry	5.1			6.4				5.6			6.5				(0.5)			(8.9)				(1.8)
Other	Other	1.1		1.1		1.4			1.1			(0.3)			(21.4)			(1.9)		Other	1.0			1.2				1.2			1.3				(0.2)			(16.7)				8.3
Total	Total	$	100.2	100.0	%	$	129.5		100.0	%		$	(29.3)		(22.6)	%		(17.3)	%	Total	$	80.1		100.0	%			$	86.8		100.0		%		$	(6.7)		(7.7)		%		(1.6)		%

Gross Profit. Gross profit of ~~$219.6~~$160.7 million in the ~~Third~~First Quarter decreased ~~15.4%~~12.8% in comparison to ~~$259.5~~$184.3 million in the Prior Year Quarter. Our gross profit margin rate ~~decreased~~increased to ~~50.3%~~49.4% in the ~~Third~~First Quarter compared to ~~52.8%~~49.0% in the Prior Year ~~Quarter. The year-over-year decrease~~Quarter, primarily ~~reflects increased freight~~reflecting timing of licensor minimum royalty costs and favorable product and region mix. These benefits were partially offset by an unfavorable currency impact, increased promotions and ~~increased promotions. These costs were partially offset by increases in revenue recognized over time, due~~a $5.3 million restructuring charge related to the ~~timing~~exit of ~~progress in completing performance obligations under a licensing agreement, increased net foreign currency hedging contract gains in the current year as compared to the prior year and favorable~~certain product ~~mix.~~offerings within our smartwatch category.

Operating Expenses. Total operating expenses in the ~~Third~~First Quarter decreased ~~by 6.9%~~slightly to ~~$197.1~~$198.0 million or ~~45.2%~~60.9% of net sales, in comparison to ~~$211.7~~$198.6 million or ~~43.0%~~52.8% of net sales in the Prior Year Quarter. SG&A expenses were $190.9 million in the First Quarter compared to $195.8 million in the Prior Year Quarter. As a percentage of net sales, SG&A expenses increased to ~~45.0%~~58.7% in the ~~Third~~First Quarter as compared to ~~41.8%~~52.1% in ~~the~~ Prior Year Quarter, ~~due to increased compensation costs which were partially offset~~mainly driven by ~~reduced store costs resulting from~~deleveraging on lower ~~store count. There were no restructuring~~sales. Operating expenses in the ~~Third~~First Quarter included $7.1 million of restructuring costs, primarily related to employee costs, while the Prior Year Quarter included ~~$5.4~~$2.6 million in restructuring costs. The translation of foreign-denominated expenses during the ~~Third~~First Quarter decreased operating expenses by ~~$10.6~~$5.1 million as a result of the stronger U.S. dollar.

Operating ~~Income.~~Income (Loss). Operating ~~income~~loss in the ~~Third~~First Quarter was ~~$22.5~~$37.3 million as compared to an operating ~~income~~loss of ~~$47.8~~$14.3 million in the Prior Year Quarter. The increased operating loss was primarily driven by decreased sales and partially offset by a higher gross profit margin rate. As a percentage of net sales, operating margin was ~~5.2%~~(11.5)% in the ~~Third~~First Quarter compared to ~~9.7%~~(3.8)% in the Prior Year Quarter. Operating margin rate in the ~~Third~~First Quarter included an unfavorable impact of ~~190~~260 basis points due to changes in foreign currencies.

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


		For the 13 Weeks Ended October 1, 2022		For the 13 Weeks Ended October 2, 2021				Change								Operating Margin %							For the 13 Weeks Ended April 1, 2023				For the 13 Weeks Ended April 2, 2022		Change					Operating Margin %
						Dollars				Percentage				2022				2021							Dollars				Percentage		2023			2022
Americas	Americas	$	33.4			$	46.6			$	(13.2)			(28.3)	%			18.1	%			24.0			%	Americas	$	12.6	$	23.9	$	(11.3)		(47.3)	%	9.1	%	14.8	%
Europe	Europe	31.1		40.5				(9.4)				(23.2)				21.6				24.4		Europe	7.0				19.6		(12.6)		(64.3)			6.6		15.7
Asia	Asia	17.5		24.0				(6.5)				(27.1)				17.5				18.5		Asia	7.2				8.9		(1.7)		(19.1)			9.0		10.3
Corporate	Corporate	(59.5)		(63.3)				3.8				6.0										Corporate	(64.1)				(66.7)		2.6		3.9
Total operating income		$	22.5	$	47.8			$	(25.3)			(52.9)	%			5.2	%			9.7	%
Total operating income (loss)																						Total operating income (loss)	$	(37.3)			$	(14.3)	$	(23.0)	(160.8)		%	(11.5)	%	(3.8)	%

Interest Expense. Interest expense ~~decreased~~increased by ~~$1.3~~$1.0 million during the ~~Third~~First Quarter compared to the Prior Year Quarter, primarily driven by ~~reduced~~an increased debt ~~issuance costs amortization.~~balance.

Other Income (Expense)-Net. During the ~~Third~~First Quarter, other income (expense)-net was ~~expense~~income of ~~$1.9~~$2.7 million in comparison to ~~expense~~income of ~~$0.5~~$1.6 million in the Prior Year ~~Quarter, reflecting~~Quarter. This change was primarily driven by increased net foreign currency ~~losses~~gains in the ~~Third~~First Quarter as compared to the Prior Year Quarter.

Provision for Income Taxes. Income tax expense for the ~~Third~~First Quarter was ~~$9.2~~$1.6 million, resulting in an effective income tax rate of ~~59.5%~~(4.1)%. For the Prior Year Quarter, income tax expense was ~~$9.0~~$4.7 million, resulting in an effective income tax rate of ~~22.0%~~(28.1)%. The effective tax rate in the ~~Third~~First Quarter was ~~unfavorable~~favorable as compared to the Prior Year Quarter due to ~~a higher level of~~reduced foreign ~~losses for which no tax benefit can be accrued. The Prior Year Quarter’s effective tax rate also benefited from~~

3732

~~favorable discrete items.~~ taxes.No tax benefit has been accrued on the ~~Third~~First Quarter U.S. tax losses and certain foreign tax losses due to the uncertainty of whether they can be used in the future.

The First Quarter tax rate is negative because foreign income tax expense is accrued on certain foreign entities with positive taxable income when the consolidated operating results are a loss.

Net Income (Loss) Attributable to Fossil Group, Inc. ~~Third~~First Quarter net income (loss) attributable to Fossil Group, Inc. was a net ~~income~~loss of ~~$5.8~~$41.3 million, or ~~$0.11~~$0.80 per diluted share, in comparison to a net ~~income~~loss of ~~$31.4~~$21.5 million, or ~~$0.60~~$0.41 per diluted share, in the Prior Year Quarter. During the ~~Third~~First Quarter, currencies unfavorably affected ~~income per~~ diluted ~~share~~earnings (loss) by approximately ~~$0.14.~~

~~Adjusted Net Income (Loss).Adjusted net income (loss) for the Third Quarter was net income of $6.3 million with adjusted income per diluted share of $0.12~~$0.08, when compared to ~~adjusted net income of $36.2 million with adjusted income per diluted share of $0.69 in~~ the Prior Year Quarter.

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


		For the 13 Weeks Ended									For the 13 Weeks Ended
		October, 1 2022				October 2, 2021					April 1, 2023				April 2, 2022
		Dollars		% of Net Sales		Dollars		% of Net Sales			Dollars		% of Net Sales		Dollars		% of Net Sales
Income (loss) before income taxes	Income (loss) before income taxes	$	15.5	3.6%		$	40.9	8.3	%	Income (loss) before income taxes	$	(39.6)	(12.2)%		$	(16.7)	(4.4)	%
Plus:	Plus:									Plus:
Interest expense	Interest expense	5.1				6.4				Interest expense	5.0				4.0
Amortization and depreciation	Amortization and depreciation	5.6				7.0				Amortization and depreciation	5.1				6.2
Other long-lived asset impairments		0.6				0.6
Impairment expense										Impairment expense	0.1				0.3
Other non-cash charges	Other non-cash charges	(0.4)				(0.6)				Other non-cash charges	(0.2)				(0.2)
Stock-based compensation	Stock-based compensation	(0.3)				2.9				Stock-based compensation	1.4				2.2
Restructuring expense		—				5.4
Restructuring expenses										Restructuring expenses	7.1				2.6
Restructuring cost of sales										Restructuring cost of sales	5.3				—

Less:	Less:									Less:
Interest income	Interest income	0.1				0.1				Interest income	0.6				0.1
Adjusted EBITDA	Adjusted EBITDA	$	26.0	6.0	%	$	62.5	12.7	%	Adjusted EBITDA	$	(16.4)	(5.0)	%	$	(1.7)	(0.5)	%

3833

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


		For the 13 Weeks Ended October 1, 2022					For the 13 Weeks Ended April 1, 2023
($ in millions, except per share data):	($ in millions, except per share data):	As Reported			Other Long-Lived Asset Impairment			As Adjusted			($ in millions, except per share data):	As Reported			Restructuring Cost of Sales		Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	Operating income (loss)	$	22.5		$	0.6		$	23.1		Operating income (loss)	$	(37.3)		$	5.3	$	0.1	$	7.1	$	(24.8)
Operating margin (% of net sales)	Operating margin (% of net sales)	5.2		%				5.3		%	Operating margin (% of net sales)	(11.5)		%							(7.7)		%
Interest expense	Interest expense	$	(5.1)		$	—		$	(5.1)		Interest expense	5.0			—		—		—		5.0
Other income (expense) - net	Other income (expense) - net	(1.9)			—			(1.9)			Other income (expense) - net	2.7			—		—		—		2.7
Income (loss) before income taxes	Income (loss) before income taxes	15.5			0.6			16.1			Income (loss) before income taxes	(39.6)			5.3		0.1		7.1		(27.1)
Provision for income taxes	Provision for income taxes	9.2			0.1			9.3			Provision for income taxes	1.6			1.1		—		1.5		4.2
Less: net income attributable to noncontrolling interest	Less: net income attributable to noncontrolling interest	(0.4		)	—			(0.4		)	Less: net income attributable to noncontrolling interest	0.1			—		—		—		0.1
Net income (loss) attributable to Fossil Group, Inc.	Net income (loss) attributable to Fossil Group, Inc.	$	5.8		$	0.5		$	6.3		Net income (loss) attributable to Fossil Group, Inc.	$	(41.3)		4.2		$	—	$	5.6	(31.5)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.11		$	0.01		$	0.12		Diluted earnings (loss) per share	$	(0.80)		$	0.08	$	—	$	0.11	$	(0.61)


		For the 13 Weeks Ended October 2, 2021							For the 13 Weeks Ended April 2, 2022
($ in millions, except per share data):	($ in millions, except per share data):	As Reported			Other Long-Lived Asset Impairment		Restructuring Expenses			As Adjusted			($ in millions, except per share data):	As Reported			Other Long-Lived Asset Impairment		Restructuring Expenses		As Adjusted
Operating income (loss)	Operating income (loss)	$	47.8		$	0.6	$	5.4		$	53.8		Operating income (loss)	$	(14.3)		$	0.3	$	2.6	$	(11.4)
Operating margin (% of net sales)	Operating margin (% of net sales)	9.7		%						10.9		%	Operating margin (% of net sales)	(3.8)		%					(3.0)		%
Interest expense	Interest expense	$	(6.4)		$	—	$	—		$	(6.4)		Interest expense	(4.0)			—		—		(4.0)
Other income (expense) - net	Other income (expense) - net	(0.5)			—		—			(0.5)			Other income (expense) - net	1.6			—		—		1.6
Income (loss) before income taxes	Income (loss) before income taxes	40.9			0.6		5.4			46.9			Income (loss) before income taxes	(16.7)			0.3		2.6		(13.8)
Provision for income taxes	Provision for income taxes	9.0			0.1		1.1			10.2			Provision for income taxes	4.7			0.1		0.5		5.3
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest	(0.5)			—		—			(0.5)			Less: Net income attributable to noncontrolling interest	0.1			—		—		0.1
Net income (loss) attributable to Fossil Group, Inc.	Net income (loss) attributable to Fossil Group, Inc.	$	31.4		$	0.5	$	4.3		$	36.2		Net income (loss) attributable to Fossil Group, Inc.	$	(21.5)		$	0.2	$	2.0	$	(19.3)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.60		$	0.01	$	0.08		$	0.69		Diluted earnings (loss) per share	$	(0.41)		$	—	$	0.04	$	(0.37)

~~Fiscal Year To Date Periods Ended October 1, 2022 and October 2, 2021~~

~~Consolidated Net Sales.~~ Net sales decreased $82.5 million or 6.5% (2.1% in constant currency) for the Year To Date Period as compared to the Prior Year YTD Period. Sales declines were primarily driven by Asia, where declines in greater China more than offset sales growth in India as compared to the Prior Year YTD Period. Our net sales in China have been negatively affected by COVID-19 driven policies during the Year To Date Period and our most significant sales declines were in EMPORIO ARMANI traditional watches, as compared to the Prior Year YTD Period. Sales of smartwatches declined during the Year To Date Period partly due to lapping the prior year's gen 6 launch and due to lower consumer demand across geographies and channels. In the Year To Date Period, digital sales were 35% of worldwide net sales and decreased 21.1% (16.4% in constant currency) compared to the Prior Year YTD Period. Global comparable retail sales increased 14.5% primarily due to increased store traffic and were partially offset by sales declines in our owned e-commerce websites.

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

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Americas $ 514.5 43.5 % $ 523.0 41.3 % $ (8.5) (1.6) % (1.3) %
Europe 376.1 31.8 399.5 31.6 (23.4) (5.9) 4.5
Asia 279.6 23.6 331.6 26.2 (52.0) (15.7) (11.8)
Corporate 13.1 1.1 11.7 0.9 1.4 12.0 12.8
Total $ 1,183.3 100.0 % $ 1,265.8 100.0 % $ (82.5) (6.5) % (2.1) %

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

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches:
Traditional watches $ 830.3 70.2 % $ 878.8 69.4 % $ (48.5) (5.5) % (1.2) %
Smartwatches 104.7 8.8 150.1 11.9 (45.4) (30.2) (26.4)
Total watches $ 935.0 79.0 % $ 1,028.9 81.3 % $ (93.9) (9.1) (4.9)
Leathers 111.2 9.4 103.8 8.2 7.4 7.1 10.5
Jewelry 106.5 9.0 105.0 8.3 1.5 1.4 9.0
Other 30.6 2.6 28.1 2.2 2.5 8.9 13.9
Total $ 1,183.3 100.0 % $ 1,265.8 100.0 % $ (82.5) (6.5) % (2.1) %

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by $56.3 million, including unfavorable impacts of $41.5 million, $12.8 million and $1.9 million in our Europe, Asia and Americas segments, respectively, compared to the Prior Year YTD Period.

~~Americas Net Sales.~~ Americas net sales decreased $8.5 million, or 1.6% (1.3% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. The declines were largely in MICHAEL KORS and FOSSIL brands versus the Prior Year YTD Period. We saw growth in our retail store channel while our wholesale and e-commerce channels declined. Geographically, sales growth in Canada was more than offset by sales declines in the U.S., while Mexico was flat. Comparable retail sales were moderately positive during the Year To Date Period, primarily due to increased store traffic and were partially offset by sales declines in our owned e-commerce websites.

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches:
Traditional watches $ 366.7 71.3 % $ 349.0 66.7 % $ 17.7 5.1 % 5.4 %
Smartwatches 47.2 9.2 78.3 15.0 (31.1) (39.7) (39.5)
Total watches $ 413.9 80.5 % $ 427.3 81.7 % $ (13.4) (3.1) (2.8)
Leathers 69.1 13.4 63.9 12.2 5.2 8.1 8.7
Jewelry 25.5 5.0 26.5 5.1 (1.0) (3.8) (3.1)
Other 6.0 1.2 5.3 1.0 0.7 13.2 8.7
Total $ 514.5 100.1 % $ 523.0 100.0 % $ (8.5) (1.6) % (1.3) %

~~Europe Net Sales~~. Europe net sales decreased $23.4 million, or 5.9% (increase of 4.5% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. The declines were primarily in FOSSIL brand versus the Prior Year YTD Period. Strong retail stores growth was offset by declines in our e-commerce and wholesale channels as consumers returned to brick and mortar stores. Comparable retail sales in the region also increased strongly during the Year To Date Period.

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

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches:
Traditional watches $ 253.7 67.5 % $ 266.3 66.7 % $ (12.6) (4.7) % 5.6 %
Smartwatches 33.3 8.8 43.2 10.8 (9.9) (22.9) (13.8)
Total watches $ 287.0 76.3 % $ 309.5 77.5 % $ (22.5) (7.3) 2.9
Leathers 18.4 4.9 19.9 5.0 (1.5) (7.5) 2.6
Jewelry 62.7 16.7 62.0 15.5 0.7 1.1 12.6
Other 8.0 2.1 8.1 2.0 (0.1) (1.2) 10.5
Total $ 376.1 100.0 % $ 399.5 100.0 % $ (23.4) (5.9) % 4.5 %

~~Asia Net Sales.~~ Asia net sales decreased $52.0 million, or 15.7% (11.8% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. Sales declines were primarily driven by greater China as a result of COVID-19 policies and were partially offset by strong growth in India during the Year To Date Period as compared to the Prior Year YTD Period. Sales declines were predominantly in the EMPORIO ARMANI brand. For the Year To Date Period, comparable retail sales increased significantly driven by store traffic increases in Malaysia, India and Australia.

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

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches:
Traditional watches $ 209.9 75.1 % $ 262.4 79.1 % $ (52.5) (20.0) % (16.7) %
Smartwatches 24.1 8.6 28.5 8.6 (4.4) (15.4) (9.4)
Total watches $ 234.0 83.7 % $ 290.9 87.7 % $ (56.9) (19.6) (15.9)
Leathers 23.8 8.5 20.1 6.1 3.7 18.4 23.7
Jewelry 18.2 6.5 16.6 5.0 1.6 9.6 14.7
Other 3.6 1.3 4.0 1.2 (0.4) (10.0) (0.9)
Total $ 279.6 100.0 % $ 331.6 100.0 % $ (52.0) (15.7) % (11.8) %

~~Gross Profit.~~ Gross profit of $595.3 million in the Year To Date Period decreased $68.7 million, or 10.3%, in comparison to $664.0 million in the Prior Year YTD Period. Gross profit margin rate decreased to 50.3% in the Year To Date Period compared to 52.5% in the Prior Year YTD Period. The gross profit margin rate declined largely due to increased freight costs, an unfavorable currency impact and a non-recurrence of the prior year's tariff reductions. These costs were partially offset by increases in revenue recognized over time, due to the timing of progress in completing performance obligations under a licensing agreement, increased net foreign currency hedging contract gains in the current year as compared to the prior year and favorable product mix.

~~Operating Expenses.~~ For the Year To Date Period, total operating expenses decreased to $598.0 million compared to $618.6 million in the Prior Year YTD Period. As a percentage of net sales, SG&A expenses increased to 50.0% in the Year To

Date Period as compared to 46.9% in the Prior Year YTD Period mainly driven by increased compensation costs which were partially offset by reduced store costs resulting from lower store count. During the Year To Date Period, we incurred restructuring costs of $5.4 million in comparison to restructuring costs of $18.7 million in the Prior Year YTD Period. We incurred other long-lived asset impairment charges of $1.1 million in the Year To Date Period compared to charges of $6.3 million in the Prior Year YTD Period. The translation of foreign-denominated expenses during the Year To Date Period decreased operating expenses by $23.4 million as a result of the stronger U.S. dollar.

~~Operating Income (Loss).~~ Operating income (loss) was a loss of $2.7 million in the Year To Date Period as compared to income of $45.4 million in the Prior Year YTD Period. The operating loss in the Year To Date Period was primarily due to the decline in net sales and margin rate in the Year To Date Period. As a percentage of net sales, operating margin was (0.2)% in the Year To Date Period as compared to 3.6% in the Prior Year YTD Period and was negatively impacted by approximately 120 basis points due to changes in foreign currencies.

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

For the 39 Weeks Ended October 1, 2022 For the 39 Weeks Ended October 2, 2021 Change Operating Margin %
Dollars Percentage 2022 2021
Americas $ 88.0 $ 109.2 $ (21.2) (19.4) % 17.1 % 20.9 %
Europe 65.5 67.6 (2.1) (3.1) 17.4 16.9
Asia 38.8 50.6 (11.8) (23.3) 13.9 15.2
Corporate (195.0) (182.0) (13.0) (7.1)
Total operating income (loss) $ (2.7) $ 45.4 $ (48.1) (105.9) % (0.2) % 3.6 %

~~Interest Expense.~~ ~~Interest expense decreased by $6.8 million during the Year To Date Period, primarily driven by reduced debt issuance costs amortization.~~

~~Other Income (Expense)-Net.~~ ~~During the Year To Date Period, other income (expense)-net was a net expense of $1.9 million in the Year to Date Period compared to net income of $0.9 million in the Prior Year YTD Period.~~

~~Provision for Income Taxes~~. Income tax expense for the Year To Date Period was $15.9 million, resulting in an effective income tax rate of (87.9)%. The Prior Year YTD Period income tax expense was $19.2 million resulting in an effective tax rate of 73.8%. The Year to Date Period effective tax rate was unfavorable to the Prior Year YTD Period due to a higher level of foreign losses for which no tax benefit could be accrued. ~~No tax benefit has been accrued on the Year to Date Period U.S. tax losses and certain foreign tax losses due to the uncertainty of whether they can be used in the future.The Year to Date Period effective tax rate is negative because income tax expense was accrued on foreign entities with positive taxable income while the consolidated results were a loss.~~

~~Net Income (Loss) Attributable to Fossil Group, Inc.~~ For the Year To Date Period, we had a net loss of $34.7 million, or $0.67 per diluted share, in comparison to income of $5.8 million, or $0.11 per diluted share, in the Prior Year YTD Period. Diluted loss per share in the Year To Date Period, as compared to the Prior Year YTD Period, was negatively impacted by $0.20 per diluted share due to the currency impact of a stronger U.S. dollar.

~~Adjusted Net Income (Loss).~~Adjusted net loss for the Year To Date Period was $29.5 million with adjusted loss per diluted share of $0.57 compared to adjusted net income of $25.6 million with adjusted income per diluted share of $0.48 in the Prior Year YTD Period.

~~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 39 Weeks Ended
October 1, 2022 October 2, 2021
Dollars % of Net Sales Dollars % of Net Sales
Income (loss) before income taxes $ (18.1) (1.5)% $ 26.0 2.1 %
Plus:
Interest expense 13.4 20.3
Amortization and depreciation 17.6 23.4
Other long-lived asset impairments 1.1 6.3
Other non-cash charges (1.6) (1.3)
Stock-based compensation 5.8 7.2
Restructuring expense 5.4 18.7
Less:
Interest income (0.4) 0.3
Adjusted EBITDA $ 24.0 2.0 % $ 100.3 7.9 %

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

For the 39 Weeks Ended October 1, 2022
($ in millions, except per share data): As Reported Other Long-Lived Asset Impairment Restructuring Expenses As Adjusted
Operating income (loss) $ (2.7) $ 1.1 $ 5.4 $ 3.8
Operating margin (% of net sales) (0.2) % 0.3 %
Interest expense $ (13.4) $ — $ — $ (13.4)
Other income (expense) - net (1.9) — — (1.9)
Income (loss) before income taxes (18.1) 1.1 5.4 (11.6)
Provision for income taxes 15.9 0.2 1.1 17.2
Less: net income attributable to noncontrolling interest (0.7) — — (0.7)
Net income (loss) attributable to Fossil Group, Inc. $ (34.7) $ 0.9 $ 4.3 $ (29.5)
Diluted earnings (loss) per share $ (0.67) $ 0.02 $ 0.08 $ (0.57)

For the 39 Weeks Ended October 2, 2021
($ in millions, except per share data): As Reported Other Long-Lived Asset Impairment Restructuring Expenses As Adjusted
Operating income (loss) $ 45.4 $ 6.3 $ 18.7 $ 70.4
Operating margin (% of net sales) 3.6 % 5.6 %
Interest expense $ (20.3) $ — $ — $ (20.3)
Other income (expense) - net 0.9 — — 0.9
Income (loss) before income taxes 26.0 6.3 18.7 51.0
Provision for income taxes 19.2 1.3 3.9 24.4
Less: Net income attributable to noncontrolling interest (1.0) — — (1.0)
Net income (loss) attributable to Fossil Group, Inc. $ 5.8 $ 5.0 $ 14.8 $ 25.6
Diluted earnings (loss) per share $ 0.11 $ 0.09 $ 0.28 $ 0.48

Liquidity and Capital Resources

Our cash and cash equivalents balance at the end of the ~~Third~~First Quarter was ~~$162.6~~$127.1 million, including ~~$153.6~~$124.9 million held ~~in banks outside the U.S.,~~by foreign subsidiaries, in comparison to cash and cash equivalents of ~~$181.8~~$162.6 million at the end of the Prior Year Quarter and ~~$250.8~~$198.7 million at the end of fiscal year ~~2021. Historically, our business operations have not required substantial cash during the first several months of our fiscal year.~~2022. Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, restructuring charges, strategic investments such as acquisitions, share repurchases and other capital expenditures.

At the end of the ~~Third~~First Quarter, we had net working capital of ~~$586.6~~$499.3 million compared to net working capital of ~~$418.1~~$504.5 million at the end of the Prior Year Quarter. ~~The increase in working capital was largely due to an increase in inventory, a reduction in accounts payable as we normalized vendor payment terms in the current year, and decreased accrued expenses.~~ At the end of the ~~Third~~First Quarter, we had ~~$0.4~~$0.5 million of short-term borrowings and ~~$293.6~~$234.6 million in long-term debt including unamortized issuance ~~costs.~~costs compared to $0.6 million of short-term borrowings and $183.9 million in long-term debt including unamortized issuance costs at the end of the Prior Year Quarter.

Operating Activities. Cash used in operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities in the First Quarter decreased as compared to the Prior Year ~~To Date Period increased~~Quarter and was primarily due to cash of ~~$272.8~~$62.1 million used by working capital items, ~~and~~ a net loss of ~~$34.0~~$41.2 million, partially offset by net non-cash items of ~~$92.0~~$17.4 million.

Investing Activities. Investing cash flows primarily consist of capital expenditures and are offset by proceeds from the sale of property, plant and equipment. ~~The investing cash flows were higher in the Prior Year YTD Period, due to the sale of property, plant and equipment, when compared to the Year To Date Period.~~

Financing Activities. Financing cash flows primarily consist of borrowings and repayments of debt. The ~~increase~~$15.6 million decrease in financing cash flows was primarily due to less net borrowings during the ~~Year To Date Period~~First Quarter as compared ~~with net repayments during~~to the Prior Year ~~YTD Period~~Quarter under the Revolving Facility. ~~We also repurchased $10.0 million of common stock during the Year To Date Period under our $30.0 million stock repurchase program.~~

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

For fiscal year ~~2022,~~2023, we expect total capital expenditures to be approximately $15 ~~million~~million. Our capital expenditure budget is an estimate and is subject to ~~$20 million.~~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 the foreseeable future, not including the maturities of long-term debt. Although we believe we have adequate sources of liquidity in the short-term and long-term, the success of our operations, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic, among other factors, could impact our business and liquidity. In the event our liquidity is insufficient, we may be required to limit our spending or sell assets or equity or debt securities.

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


		October 1, 2022		October 2, 2021			April 1, 2023		April 2, 2022
Cash and cash equivalents	Cash and cash equivalents	$	162.6	$	181.8	Cash and cash equivalents	$	127.1	$	162.6
Revolver availability	Revolver availability	50.4		123.6		Revolver availability	90.1		98.5
Total liquidity	Total liquidity	$	213.0	$	305.4	Total liquidity	$	217.2	$	261.1

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. On November 8, 2021, we used the majority of the net proceeds from the Notes offering to repay the $122.0 million of outstanding borrowings under the Term Credit Agreement (as defined below). The remaining net proceeds were used for general corporate purposes.

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

~~Term Credit Agreement:~~ On September 26, 2019, we, as borrower, entered into a term credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (as amended to date, the “Term Credit Agreement”). On November 8, 2021, we used the majority of the net proceeds from the Notes offering to repay all of the outstanding borrowings under the Term Credit Agreement. In connection with the repayment of the outstanding borrowings under the Term Credit Agreement, we incurred prepayment fees and accrued interest costs of $2.6 million and wrote off $7.1 million of debt issuance costs and $4.6 million of original issuance discount related to the Term Credit Agreement.

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

Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders"). On November 8, 2022, we entered into Amendment No. 4 (the "Amendment”) to the Revolving Facility. The ~~Revolving Facility expires and is due and payable on~~Amendment, among other things, (i) extended the maturity date of the credit facility to November 8, 2027 ~~provided~~(provided, that if onwe have any indebtedness in an amount in excess of $35 million that matures prior to November 8, 2027, the maturity date ~~that is~~of the credit facility shall be the 91st day prior to the ~~final~~ maturity date of ~~any indebtedness in excess of $35.0 million,~~ such other ~~indebtedness is outstanding on~~indebtedness) and (ii) changed the calculation methodology of the borrowing base to include the value of certain of our intellectual property in such ~~date, then the maturity date~~methodology and to provide for ~~the Revolving Facility shall be such earlier date.~~

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 ~~$70.0~~$80.0 million is available under a European facility, ~~$20.0~~$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 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 made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to:(a) with respect to us, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, ~~plus(ii)~~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 rate 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 period covered by the borrowing base certificate delivered with respect to the fifth fiscal month of the Company.

~~Year To Date 2022~~First Quarter Activity: We had net borrowings of ~~$151.0~~$18.0 million under the Revolving Facility during the ~~Year To Date Period~~First Quarter at an average interest rate of ~~2.6%~~6.3%. As of ~~October~~April 1, ~~2022,~~2023, we had $150.0 million outstanding under the Notes and

~~$151.0~~ $91.0 million outstanding under the Revolving Facility. We also had unamortized debt issuance costs of ~~$7.3~~$6.4 million recorded in long-term debt and ~~$3.3~~$3.0 million recorded in intangible and other ~~assets-net.~~assets-net on the condensed consolidated balance sheets. In addition, we had ~~$4.2~~$4.4 million of outstanding standby ~~Letters~~letters of ~~Credit~~credit at ~~October~~April 1, ~~2022.~~2023. Amounts available under the Revolving Facility are reduced by any amounts outstanding under standby ~~Letters~~letters of ~~Credit.~~credit. As of ~~October~~April 1, ~~2022,~~2023, we had available borrowing capacity of ~~$50.4~~$90.1 million under the Revolving Facility. At ~~October~~April 1, ~~2022,~~2023, we were in compliance with all debt covenants related to our credit facilities.

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, inventories, long-lived asset impairment, impairment of trade names, income taxes and ~~income taxes.~~warranty 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.

There have been no changes to the critical accounting policies and estimates disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2022.

Forward-Looking Statements

The statements contained in this Quarterly Report on Form10-Q that are not historical facts, including, but not limited to, statements regarding our expected financial position, results of operations, business and financing plans found in this ~~Item~~"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations" and ~~Item~~"Item 3. Quantitative and Qualitative Disclosures About Market Risk," constitute ~~forward-looking statements~~"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The words "may,”" "believes,”" "will,”" "should,”" "seek,”" "forecast,”" "outlook,”" "estimate,”" "continue,”" "anticipate,”" "intend,”" "could,”" "would,”" "project,”" "predict,”" "potential,”" "plan,~~” "expect”~~" "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, ~~and the Ukraine crisis;~~ the effect of worldwide economic conditions; the effect of the COVID-19 pandemic; risks related to the ~~impact~~success of ~~inflation; results of tax examinations;~~the multi-year profit improvement initiative; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key components or products; acts of war or acts of terrorism; loss of key facilities; data breach or information systems disruptions; changes in foreign currency valuations in relation to the U.S. dollar; lower levels of consumer spending resulting from a general economic downturn or generally reduced shopping activity caused by public safety or consumer confidence concerns; the performance of our products within the prevailing retail environment; customer acceptance of both new designs and newly-introduced product lines; changes in the mix of product sales; the effects of vigorous competition in the markets in which we operate; compliance with debt covenants and other contractual provisions and meeting debt service ~~obligations;~~obligation; risks related to the success of our business strategy; the termination or non-renewal of material licenses; risks related to foreign operations and manufacturing; changes in the costs of materials and labor; government 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~~personnel; and the outcome of current and possible future litigation.

In addition to the factors listed above, our actual results may differ materially due to the other risks and uncertainties discussed in our Quarterly Reports on Form 10-Q and the risks and uncertainties set forth in our Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2022. Accordingly, readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rate Risk

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

The following table shows our outstanding forward contracts designated as cash flow hedges for inventory transactions (in millions) at ~~October~~April 1, ~~2022~~2023 and their expiration dates.

Functional Currency

Contract Currency

Functional Currency

Contract Currency

Type

Amount

Type

Amount

Expiring Through

Type

Amount

Type

Amount

Expiring Through

Euro

105.1

U.S. dollar

113.6

February 2024

Euro

65.8

U.S. dollar

70.5

May 2024

Canadian dollar

44.7

U.S. dollar

34.9

March 2024

Canadian dollar

35.4

U.S. dollar

26.7

June 2024

Mexican peso

302.3

U.S. dollar

14.7

June 2023

Mexican peso

144.4

U.S. dollar

7.0

September 2023

British pound

7.9

U.S. dollar

10.0

March 2024

British pound

5.5

U.S. dollar

6.8

June 2024

Japanese yen

847.6

U.S. dollar

7.0

March 2024

Japanese yen

851.9

U.S. dollar

6.6

June 2024

Australian dollar

9.6

U.S. dollar

6.8

September 2023

Australian dollar

4.5

U.S. dollar

3.1

December 2023

U.S. dollar

13.4

Japanese yen

1,730.0

August 2023

U.S. dollar

8.4

Japanese yen

1,090.0

November 2023

If we were to settle our forward contracts listed in the table above as of ~~October~~April 1, ~~2022, the result~~2023, no gain or loss would have ~~been a net gain of $13.5 million.~~resulted. As of ~~October~~April 1, ~~2022,~~2023, a 10% unfavorable change in the U.S. dollar strengthening against foreign currencies to which we have balance sheet transactional exposures would have decreased net pre-tax income by ~~$17.3~~$5.6 million. The translation of the balance sheets of our foreign-based operations from their local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. As of ~~October~~April 1, ~~2022,~~2023, a 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would have reduced consolidated stockholders' equity by approximately ~~$40.3~~$28.0 million.

Interest Rate Risk

We are subject to interest rate volatility with regard to debt borrowings. Based on our variable-rate debt outstanding as of ~~October~~April 1, ~~2022,~~2023, a 100 basis point increase in interest rates would increase annual interest expense by ~~$1.5~~approximately $0.9 million.

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 of the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon this evaluation, our CEO and CFO have concluded that our Disclosure Controls were effective as of ~~October~~April 1, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

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

4838

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 matters incidental to our business that is not material to our consolidated financial condition, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2022 and in other documents we file with the Securities and Exchange Commission, in evaluating the Company and its business.

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

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

Item 5. Other Information

None.

4939

Item 6. Exhibits

(a) Exhibits


Exhibit Number						Document Description

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

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

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

~~10.1~~						Amendment No. 4, dated as of November 8, 2022, among Fossil Group, Inc., Fossil Partners, L.P., Fossil Intermediate, Inc., Fossil Stores I, Inc., Fossil Trust, Fossil Group GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited, Fossil Canada Inc., Fossil France SAS, Fossil Stores France SAS, FAST Europe SARL, and JPMorgan Chase Bank, N.A., as administrative agent, and the other agents and lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 10, 2022).

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

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

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

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

101.INS						XBRL Instance 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						Inline XBRL Taxonomy Extension Schema Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

(1) Filed herewith.

(2) Furnished herewith.

5040

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			FOSSIL GROUP, INC.

~~November 10, 2022~~May 11, 2023			/S/ SUNIL M. DOSHI
			Sunil M. Doshi
			Executive Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)

5141


		Page
PART I
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	98
	Notes to Condensed Consolidated Financial Statements	109
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3126
	Results of Operations	3328
	Liquidity and Capital Resources	4434
	Forward-Looking Statements	4637
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4737
Item 4.	Controls and Procedures	4738
PART II
Item 1.	Legal Proceedings	4939
Item 1A.	Risk Factors	4939
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4939
Item 5.	Other Information	4939
Item 6.	Exhibits	5040
	SIGNATURES	5141


	For the 39 Weeks Ended
	October 1, 2022				October 2, 2021
	Dollars		% of Net Sales		Dollars		% of Net Sales
Income (loss) before income taxes	$	(18.1)	(1.5)%		$	26.0	2.1	%
Plus:
Interest expense	13.4				20.3
Amortization and depreciation	17.6				23.4
Other long-lived asset impairments	1.1				6.3
Other non-cash charges	(1.6)				(1.3)
Stock-based compensation	5.8				7.2
Restructuring expense	5.4				18.7

Less:
Interest income	(0.4)				0.3
Adjusted EBITDA	$	24.0	2.0	%	$	100.3	7.9	%