Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 01, 2017 | Aug. 03, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Fossil Group, Inc. | |
Entity Central Index Key | 883,569 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 1, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-30 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 48,521,969 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Jul. 01, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 319,824 | $ 297,330 |
Accounts receivable - net of allowances of $57,097 and $79,707, respectively | 240,401 | 375,520 |
Inventories | 618,070 | 542,487 |
Prepaid expenses and other current assets | 126,488 | 131,953 |
Total current assets | 1,304,783 | 1,347,290 |
Property, plant and equipment - net of accumulated depreciation of $440,155 and $414,761, respectively | 255,778 | 273,851 |
Goodwill | 0 | 355,263 |
Intangible and other assets-net | 215,411 | 210,493 |
Total long-term assets | 471,189 | 839,607 |
Total assets | 1,775,972 | 2,186,897 |
Current liabilities: | ||
Accounts payable | 163,538 | 163,644 |
Short-term and current portion of long-term debt | 32,719 | 26,368 |
Accrued expenses: | ||
Compensation | 57,287 | 52,993 |
Royalties | 17,957 | 30,062 |
Co-op advertising | 17,536 | 29,111 |
Transaction taxes | 28,536 | 26,743 |
Other | 77,166 | 69,565 |
Income taxes payable | 19,361 | 16,099 |
Total current liabilities | 414,100 | 414,585 |
Long-term income taxes payable | 19,064 | 18,584 |
Deferred income tax liabilities | 507 | 55,877 |
Long-term debt | 613,580 | 609,961 |
Other long-term liabilities | 73,907 | 72,452 |
Total long-term liabilities | 707,058 | 756,874 |
Commitments and contingencies (Note 13) | ||
Stockholders’ equity: | ||
Common stock, 48,511 and 48,269 shares issued and outstanding at July 1, 2017 and December 31, 2016, respectively | 485 | 483 |
Additional paid-in capital | 227,778 | 213,352 |
Retained earnings | 494,927 | 887,825 |
Accumulated other comprehensive income (loss) | (80,161) | (95,424) |
Total Fossil Group, Inc. stockholders’ equity | 643,029 | 1,006,236 |
Noncontrolling interest | 11,785 | 9,202 |
Total stockholders’ equity | 654,814 | 1,015,438 |
Total liabilities and stockholders’ equity | $ 1,775,972 | $ 2,186,897 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jul. 01, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable - allowances | $ 57,097 | $ 79,707 |
Property, plant and equipment, accumulated depreciation | $ 440,155 | $ 414,761 |
Common stock, shares issued (in shares) | 48,511 | 48,269 |
Common stock, shares outstanding (in shares) | 48,511 | 48,269 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Income Statement [Abstract] | ||||
Net sales | $ 596,846 | $ 685,368 | $ 1,178,636 | $ 1,345,216 |
Cost of sales | 295,499 | 329,618 | 587,771 | 641,129 |
Gross profit | 301,347 | 355,750 | 590,865 | 704,087 |
Operating expenses: | ||||
Selling, general and administrative expenses | 314,210 | 340,300 | 622,707 | 674,233 |
Goodwill and trade name impairments | 407,128 | 0 | 407,128 | 0 |
Restructuring charges | 9,765 | 0 | 36,049 | 0 |
Total operating expenses | 731,103 | 340,300 | 1,065,884 | 674,233 |
Operating income (loss) | (429,756) | 15,450 | (475,019) | 29,854 |
Interest expense | 11,641 | 6,421 | 20,025 | 12,420 |
Other income (expense) - net | 2,002 | 2,542 | 7,640 | 4,812 |
Income (loss) before income taxes | (439,395) | 11,571 | (487,404) | 22,246 |
Provision for income taxes | (96,296) | 3,499 | (97,516) | 6,778 |
Net income (loss) | (343,099) | 8,072 | (389,888) | 15,468 |
Less: Net income attributable to noncontrolling interest | 1,613 | 2,051 | 3,010 | 3,654 |
Net income (loss) attributable to Fossil Group, Inc. | (344,712) | 6,021 | (392,898) | 11,814 |
Other comprehensive income (loss), net of taxes: | ||||
Currency translation adjustment | 16,461 | (9,500) | 26,856 | 7,721 |
Cash flow hedges - net change | (9,592) | 4,331 | (11,593) | (6,101) |
Pension plan activity | 0 | 0 | 0 | 1,714 |
Total other comprehensive income (loss) | 6,869 | (5,169) | 15,263 | 3,334 |
Total comprehensive income (loss) | (336,230) | 2,903 | (374,625) | 18,802 |
Less: Comprehensive income attributable to noncontrolling interest | 1,613 | 2,051 | 3,010 | 3,654 |
Comprehensive income (loss) attributable to Fossil Group, Inc. | $ (337,843) | $ 852 | $ (377,635) | $ 15,148 |
Earnings (loss) per share: | ||||
Basic (in dollars per share) | $ (7.11) | $ 0.13 | $ (8.12) | $ 0.25 |
Diluted (in dollars per share) | $ (7.11) | $ 0.12 | $ (8.12) | $ 0.24 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 48,484 | 48,119 | 48,399 | 48,125 |
Diluted (in shares) | 48,484 | 48,207 | 48,399 | 48,229 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 6 Months Ended | |
Jul. 01, 2017 | Jul. 02, 2016 | |
Operating Activities: | ||
Net income (loss) | $ (389,888) | $ 15,468 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation, amortization and accretion | 42,085 | 49,666 |
Stock-based compensation | 14,131 | 16,463 |
Decrease in allowance for returns-net of inventory in transit | (12,129) | (15,473) |
Loss on disposal of assets | 1,538 | 1,151 |
Fixed asset and other long-lived asset impairment losses | 2,722 | 0 |
Goodwill and trade name impairment losses | 407,128 | 0 |
Non-cash restructuring charges | 4,420 | 0 |
Increase (decrease) in allowance for doubtful accounts | 2,795 | (4,841) |
Deferred income taxes and other | (100,272) | (448) |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||
Accounts receivable | 166,647 | 139,765 |
Inventories | (64,483) | (41,107) |
Prepaid expenses and other current assets | (6,494) | (8,656) |
Accounts payable | (1,836) | (17,106) |
Accrued expenses | (28,259) | (54,285) |
Income taxes payable | (2,715) | (8,650) |
Net cash provided by operating activities | 35,390 | 71,947 |
Investing Activities: | ||
Additions to property, plant and equipment | (12,788) | (39,313) |
Decrease in intangible and other assets | 676 | 786 |
Misfit working capital settlement | 0 | 788 |
Proceeds from the sale of property, plant and equipment | 25 | 1,955 |
Net investment hedge settlement | 0 | 752 |
Net cash used in investing activities | (12,087) | (35,032) |
Financing Activities: | ||
Acquisition of common stock | (907) | (6,418) |
Distribution of noncontrolling interest earnings | (427) | (4,544) |
Debt borrowings | 766,048 | 424,800 |
Debt payments | (752,354) | (498,848) |
Payment for shares of Fossil, S.L. | 0 | (8,657) |
Debt issuance costs and other | (5,896) | 62 |
Net cash provided by (used in) financing activities | 6,464 | (93,605) |
Effect of exchange rate changes on cash and cash equivalents | (7,273) | (749) |
Net increase (decrease) in cash and cash equivalents | 22,494 | (57,439) |
Cash and cash equivalents: | ||
Beginning of period | 297,330 | 289,275 |
End of period | $ 319,824 | $ 231,836 |
FINANCIAL STATEMENT POLICIES
FINANCIAL STATEMENT POLICIES | 6 Months Ended |
Jul. 01, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
FINANCIAL STATEMENT POLICIES | 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 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 July 1, 2017 , and the results of operations for the thirteen-week periods ended July 1, 2017 (“ Second Quarter”) and July 2, 2016 (“Prior Year Quarter”), respectively, and the twenty-six week periods ended July 1, 2017 (“Year To Date Period”) and July 2, 2016 (“Prior Year YTD Period”). All adjustments are of a normal, recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended December 31, 2016 (the “ 2016 Form 10-K”). Operating results for the Second Quarter are not necessarily indicative of the results to be achieved for the full fiscal year. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the 2016 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. Hedging Instruments. The Company is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to mitigate but does not eliminate these exposures using derivative instruments including foreign exchange forward contracts (" forward contracts ") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, Canadian dollar, British pound, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of July 1, 2017 , the result would have been a net loss of approximately $5.8 million , net of taxes. This unrealized loss is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income (loss) and comprehensive income (loss). Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income (loss) and comprehensive income (loss). Also, the Company has entered into an interest rate swap agreement to effectively convert portions of its variable rate debt obligations to a fixed rate. Changes in the fair value of the interest rate swap is recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and is recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives. Operating Expenses. Operating expenses include selling, general and administrative expenses (“SG&A”), goodwill and trade name impairment and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure as well as store closure expenses. Earnings (Loss) Per Share (“EPS”). Basic EPS is based on the weighted average number of common shares outstanding during each period. Diluted EPS adjusts basic EPS for the effects of dilutive common stock equivalents outstanding during each period using the treasury stock method. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands, except per share data): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Numerator: Net income (loss) attributable to Fossil Group, Inc. $ (344,712 ) $ 6,021 $ (392,898 ) $ 11,814 Denominator: Basic EPS computation: Basic weighted average common shares outstanding 48,484 48,119 48,399 48,125 Basic EPS $ (7.11 ) $ 0.13 $ (8.12 ) $ 0.25 Diluted EPS computation: Basic weighted average common shares outstanding 48,484 48,119 48,399 48,125 Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units — 88 — 104 Diluted weighted average common shares outstanding 48,484 48,207 48,399 48,229 Diluted EPS $ (7.11 ) $ 0.12 $ (8.12 ) $ 0.24 At the end of the Second Quarter and Year To Date Period, approximately 4.7 million and 4.1 million weighted shares issuable under stock-based awards, respectively, were not included in the diluted EPS calculation because they were antidilutive. The total antidilutive weighted shares included approximately 1.2 million and 1.1 million weighted performance-based shares at the end of the Second Quarter and Year To Date Period, respectively. At the end of the Prior Year Quarter and Prior Year YTD Period, approximately 1.9 million and 1.7 million weighted shares issuable under stock-based awards, respectively, were not included in the diluted EPS calculation because they were antidilutive. Approximately 1.1 million weighted performance shares were not included in the diluted EPS calculation at the end of both the Prior Year Quarter and Prior Year YTD Period as the performance targets were not met. Recently Issued Accounting Standards In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2017-09. In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ("ASU 2017-08"). ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. The amendment requires the premium to be amortized to the earliest call date. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 requires the service cost component of pension expense to be included in operations in the same line item as other employee compensation costs and other components of pension expense to be presented separately outside of income from operations. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain cash receipts and cash payments should be presented and classified in the statement of cash flows with the objective of reducing existing diversity in practice with respect to these items. ASU 2016-15 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In March 2016, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840) . ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Many of the Company’s leases are considered operating leases and are not capitalized under ASC 840. Under ASC 842 the majority of these leases will qualify for capitalization and will result in the recognition of lease assets and lease liabilities once the new standard is adopted. The Company is in the process of reviewing lease contracts to determine the impact of adopting ASU 2016-02 but expects the standard to have a material impact on the Company's financial position. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB later amended ASU-2014-09 with the following: • ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date • ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) • ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing • ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients • ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers The Company has performed a preliminary review of our core revenue streams including reviewing key contracts and comparing current accounting policies and practices to the new standard to identify potential differences that could arise from the application of ASU 2014-09. Based on these efforts, the Company currently anticipates that the performance obligations underlying its core revenue streams (i.e., its retail and standard wholesale businesses), and the timing of recognition thereof, will remain substantially unchanged. Revenues for these businesses are generated through the sale of finished products, and will continue to be generally recognized at the point in time when merchandise is transferred to the customer and in an amount that considers the impacts of estimated allowances. The Company is still evaluating the impact of adoption on ancillary transactions as well as finalizing our review of customer contracts. The standard will require additional disclosures about the nature of revenue as well as the judgment involved in the timing of revenue recognition. While early adoption is permitted, the Company will adopt ASU 2014-09 in the first quarter of fiscal 2018 and is still selecting a method of adoption. Recently Adopted Accounting Standards In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The Company early adopted ASU 2017-04 effective June 15, 2017 in conjunction with the interim impairment test of goodwill for all reporting units and goodwill impairment was recorded according to the new standard. The Company believes the adoption of ASU 2017-04 did not change the amount of impairment charges recorded in the Second Quarter. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional information on our interim goodwill impairment test performed. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplified several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position. As a result of adoption, the Company now recognizes excess tax benefits or deficiencies associated with share-based compensation activity as an income tax expense or benefit in the period the shares vest or are settled. In addition, the Company now presents excess tax benefits from share-based compensation activity with other income tax cash flows as an operating activity on the statement of cash flows, which differs from the Company’s historical classification of excess tax benefits as a financing activity. The Company has elected to apply this change in cash flow presentation on a prospective basis. The standard also permits the Company to make a policy election for how it accounts for forfeitures, and the Company has elected to continue estimating forfeitures. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. The standard was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position. |
GOODWILL AND INTANGIBLE IMPAIRM
GOODWILL AND INTANGIBLE IMPAIRMENT CHARGES | 6 Months Ended |
Jul. 01, 2017 | |
Business Combinations [Abstract] | |
GOODWILL AND INTANGIBLES IMPAIRMENT CHARGES | GOODWILL AND INTANGIBLES IMPAIRMENT CHARGES The Company evaluates its goodwill and intangible assets for impairment on an annual basis, or as facts and circumstances warrant. At the end of the fiscal year 2016, the Company's market capitalization exceeded the carrying amount of its net assets by 23% . At the end of the first quarter of fiscal 2017, the Company experienced a decline in market capitalization and, as a result of the decline, the Company's market capitalization was 14% below the carrying amount of its net assets as of April 1, 2017. During the Second Quarter, the market capitalization continued to decline at which point the Company determined the decrease in stock price to be sustained and thus a strong indicator of impairment. Due to a change in key assumptions used in interim testing, including the decline in market capitalization and decline in sales projections, the Company believed that impairment of goodwill and trade names was probable as of June 15, 2017, and therefore performed interim tests for each reporting unit and trade name. Using a combination of discounted cash flow and guideline public company methodologies, the Company compared the fair value of each of its three reporting units with their fair value and concluded that goodwill was fully impaired. Accordingly, in the Second Quarter, the Company recognized a pre-tax impairment charge in operations of $202.3 million , $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively. The changes in the carrying amount of goodwill were as follows (in thousands): Americas Europe Asia Total Balance at December 31, 2016 $ 202,187 $ 110,291 $ 42,785 $ 355,263 Foreign currency changes 162 3,983 85 4,230 Impairment charges (202,349 ) (114,274 ) (42,870 ) $ (359,493 ) Balance at July 1, 2017 $ — $ — $ — $ — During the Second Quarter, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million , resulting in a pre-tax impairment charge of $28.3 million , the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8 million and the MICHELE trade name with a carrying amount of $18.5 million was written down to its implied fair value of $10.9 million , resulting in a pre-tax impairment charge of $7.6 million . The fair values of the Company's indefinite-lived SKAGEN and MICHELE trade names were estimated using the relief from royalty method. The fair value of the Company's definite-lived MISFIT trade name was estimated using a discounted cash flow methodology. A reduction in expected future cash flows negatively affected the valuation compared to previous valuation assumptions. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jul. 01, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consisted of the following (in thousands): July 1, 2017 December 31, 2016 Components and parts $ 67,307 $ 49,438 Work-in-process 16,719 12,345 Finished goods 534,044 480,704 Inventories $ 618,070 $ 542,487 |
WARRANTY LIABILITIES
WARRANTY LIABILITIES | 6 Months Ended |
Jul. 01, 2017 | |
Product Warranties Disclosures [Abstract] | |
WARRANTY LIABILITIES | 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 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Beginning balance $ 15,421 $ 13,669 Settlements in cash or kind (3,838 ) (4,795 ) Warranties issued and adjustments to preexisting warranties (1) 4,674 4,861 Ending balance $ 16,257 $ 13,735 _______________________________________________ (1) Changes in cost estimates related to preexisting warranties are aggregated with accruals for new standard warranties issued and foreign currency changes. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jul. 01, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 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 July 1, 2017 For the 13 Weeks Ended July 2, 2016 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Income tax (benefit) expense $ (96,296 ) $ 3,499 $ (97,516 ) $ 6,778 Effective tax rate 21.9 % 30.2 % 20.0 % 30.5 % The lower effective tax rate in the Second Quarter and the Year to Date Period as compared to the Prior Year Quarter and Prior Year YTD Period is primarily attributable to a low projected annual effective tax rate for the year, which is the result of the forecasted loss from the Company's U.S. operations which is tax-benefited at a higher tax rate than the tax rates used to calculate the tax expense on the profits from the Company's foreign operations. This positive impact was partially offset by the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes. In addition, the Company recorded tax expense resulting from the adoption of ASU 2016-09. See "Note 1-Financial Statement Policies" for additional disclosures about ASU 2016-09. As of July 1, 2017 , the total amount of unrecognized tax benefits, excluding interest and penalties, was $23.5 million , of which $20.5 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its 2010-2016 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty. The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be paid within twelve months of the condensed consolidated balance sheet date. As of July 1, 2017 , the Company had recorded $3.4 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 July 1, 2017 , the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheet was $2.9 million and $1.4 million , respectively. For the Second Quarter and Year To Date Period, the Company accrued income tax-related interest expense of $0.3 million and $0.5 million , respectively. An increase in long-term deferred tax assets is mostly attributable to the future tax amortization of the tax basis in goodwill and trade names which were impaired for GAAP purposes, as well as an increased amount of net operating loss carry forwards. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jul. 01, 2017 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Common Stock Repurchase Programs. Purchases of the Company’s common stock have been made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased 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. In the event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs have been conducted pursuant to Rule 10b-18 of the Exchange Act. At December 31, 2016 and July 1, 2017 , all treasury stock had been effectively retired. As of July 1, 2017 , the Company had $824.2 million of repurchase authorizations remaining under its combined repurchase programs. However, under the Company's credit agreement, the Company is restricted from making open market repurchases of its common stock. The following tables reflect the Company’s common stock repurchase activity for the periods indicated (in millions): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Fiscal Year Authorized Dollar Value Authorized Termination Date Number of Shares Repurchased Dollar Value Repurchased Number of Shares Repurchased Dollar Value Repurchased 2014 $ 1,000.0 December 2018 — $ — — $ 0.8 2010 $ 30.0 None — $ — — $ — For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Fiscal Year Authorized Dollar Value Authorized Termination Date Number of Shares Repurchased Dollar Value Repurchased Number of Shares Repurchased Dollar Value Repurchased 2014 $ 1,000.0 December 2018 — $ — 0.1 $ 5.2 2010 $ 30.0 None — $ — — $ — Controlling and Noncontrolling Interest. The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands): Fossil Group, Inc. Stockholders’ Equity Noncontrolling Interest Total Stockholders’ Equity Balance at December 31, 2016 $ 1,006,236 $ 9,202 $ 1,015,438 Net income (loss) (392,898 ) 3,010 (389,888 ) Currency translation adjustment 26,856 — 26,856 Cash flow hedges - net change (11,593 ) — (11,593 ) Distribution of noncontrolling interest earnings — (427 ) (427 ) Acquisition of common stock (907 ) — (907 ) Stock-based compensation expense 15,335 — 15,335 Balance at July 1, 2017 $ 643,029 $ 11,785 $ 654,814 Fossil Group, Inc. Stockholders’ Equity Noncontrolling Interest Total Stockholders’ Equity Balance at January 2, 2016 $ 921,388 $ 11,155 $ 932,543 Net income 11,814 3,654 15,468 Currency translation adjustment 7,721 — 7,721 Cash flow hedges - net change (6,101 ) — (6,101 ) Pension plan activity 1,714 — 1,714 Common stock issued upon exercise of stock options 57 — 57 Tax expense derived from stock-based compensation (1,389 ) — (1,389 ) Distribution of noncontrolling interest earnings — (4,544 ) (4,544 ) Acquisition of common stock (6,418 ) — (6,418 ) Stock-based compensation expense 16,463 — 16,463 Balance at July 2, 2016 $ 945,249 $ 10,265 $ 955,514 |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 6 Months Ended |
Jul. 01, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the Second Quarter: Stock Options and Stock Appreciation Rights Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (in Thousands) (in Years) (in Thousands) Outstanding at April 1, 2017 2,273 $ 50.77 6.0 $ 117 Granted — — Exercised — — — Forfeited or expired (37 ) 79.66 Outstanding at July 1, 2017 2,236 50.29 5.8 — Exercisable at July 1, 2017 871 $ 69.03 4.5 $ — The aggregate intrinsic value shown in the table above is before income taxes and is based on (i) the exercise price for outstanding and exercisable options/rights at July 1, 2017 and (ii) the fair market value of the Company’s common stock on the exercise date for options/rights that were exercised during the Second Quarter. Stock Options and Stock Appreciation Rights Outstanding and Exercisable. The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at July 1, 2017 : Cash Stock Appreciation Rights Outstanding Cash Stock Appreciation Rights Exercisable Range of Number of Weighted- Weighted- Number of Weighted- Average Exercise Price (in Thousands) (in Years) (in Thousands) $29.78 - $47.99 61 $ 36.73 6.5 11 $ 36.73 Total 61 $ 36.73 6.5 11 $ 36.73 Stock Options Outstanding Stock Options Exercisable Range of Exercise Prices Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Number of Shares Weighted- (in Thousands) (in Years) (in Thousands) $13.65 - $29.49 40 $ 14.40 1.5 40 $ 14.40 $29.78 - $47.99 81 36.92 1.7 81 36.92 $55.04 - $83.83 91 80.80 3.5 91 80.80 $95.91 - $131.46 130 127.97 4.4 130 127.97 Total 342 $ 80.35 3.2 342 $ 80.35 Stock Appreciation Rights Outstanding Stock Appreciation Rights Exercisable Range of Number of Weighted- Weighted- Number of Weighted- (in Thousands) (in Years) (in Thousands) $13.65 - $29.49 101 $ 29.49 7.0 — $ — $29.78 - $47.99 1,489 38.11 6.5 314 39.05 $55.04 - $83.83 134 78.96 4.8 97 79.73 $95.91 - $131.46 109 114.42 3.8 107 114.63 Total 1,833 $ 45.14 6.2 518 $ 62.26 Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity during the Second Quarter: Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units Number of Shares Weighted-Average Grant Date Fair Value Per Share (in Thousands) Nonvested at April 1, 2017 1,101 $ 37.16 Granted 1,816 16.50 Vested (53 ) 30.82 Forfeited (79 ) 24.30 Nonvested at July 1, 2017 2,785 $ 24.21 The total fair value of restricted stock and restricted stock units vested during the Second Quarter was approximately $0.7 million . Vesting of performance restricted stock units is based on achievement of sales growth and operating margin targets in relation to the performance of a certain identified peer group, particular sales growth in relation to a defined sales plan and achievement of succession plans for key talent. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 6 Months Ended |
Jul. 01, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables illustrate changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands): For the 13 Weeks Ended July 1, 2017 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (91,472 ) $ 8,390 $ (41 ) $ (3,907 ) $ (87,030 ) Other comprehensive income (loss) before reclassifications 16,461 (15,306 ) (2 ) — 1,153 Tax (expense) benefit — 6,371 1 — 6,372 Amounts reclassed from accumulated other comprehensive income (loss) — 1,367 (131 ) — 1,236 Tax (expense) benefit — (628 ) 48 — (580 ) Total other comprehensive income (loss) 16,461 (9,674 ) 82 — 6,869 Ending balance $ (75,011 ) $ (1,284 ) $ 41 $ (3,907 ) $ (80,161 ) For the 13 Weeks Ended July 2, 2016 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (64,486 ) $ (1,554 ) $ (1,457 ) $ (4,506 ) $ (72,003 ) Other comprehensive income (loss) before reclassifications (9,396 ) 8,738 (711 ) — (1,369 ) Tax (expense) benefit — (3,576 ) 259 — (3,317 ) Amounts reclassed from accumulated other comprehensive income (loss) 104 928 (450 ) — 582 Tax (expense) benefit — (263 ) 164 — (99 ) Total other comprehensive income (loss) (9,500 ) 4,497 (166 ) — (5,169 ) Ending balance $ (73,986 ) $ 2,943 $ (1,623 ) $ (4,506 ) $ (77,172 ) For the 26 Weeks Ended July 1, 2017 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (101,867 ) $ 10,693 $ (343 ) $ (3,907 ) $ (95,424 ) Other comprehensive income (loss) before reclassifications 26,856 (16,468 ) 225 — 10,613 Tax (expense) benefit — 8,660 (82 ) — 8,578 Amounts reclassed from accumulated other comprehensive income (loss) — 6,920 (379 ) — 6,541 Tax (expense) benefit — (2,751 ) 138 — (2,613 ) Total other comprehensive income (loss) 26,856 (11,977 ) 384 — — 15,263 Ending balance $ (75,011 ) $ (1,284 ) $ 41 $ (3,907 ) $ (80,161 ) For the 26 Weeks Ended July 2, 2016 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (81,707 ) $ 8,114 $ (693 ) $ (6,220 ) $ (80,506 ) Other comprehensive income (loss) before reclassifications 7,825 (1,259 ) (2,381 ) 2,010 6,195 Tax (expense) benefit — 1,039 868 (296 ) 1,611 Amounts reclassed from accumulated other comprehensive income (loss) 104 7,267 (918 ) — 6,453 Tax (expense) benefit — (2,316 ) 335 — (1,981 ) Total other comprehensive income (loss) 7,721 (5,171 ) (930 ) 1,714 3,334 Ending balance $ (73,986 ) $ 2,943 $ (1,623 ) $ (4,506 ) $ (77,172 ) See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Jul. 01, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | 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, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. Each reportable operating segment provides similar products and services. The Company evaluates the performance of its reportable segments based on net sales and operating income (loss). Net sales for geographic segments are based on the location of the selling entity. Operating income (loss) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Global strategic initiatives such as brand building and omni channel activities 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 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 July 1, 2017 For the 13 Weeks Ended July 2, 2016 Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Americas $ 288,804 $ (166,500 ) $ 345,187 $ 52,300 Europe 194,702 (86,805 ) 215,936 31,669 Asia 113,340 (35,658 ) 124,245 18,936 Corporate — (140,793 ) — (87,455 ) Consolidated $ 596,846 $ (429,756 ) $ 685,368 $ 15,450 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Americas $ 566,347 $ (140,819 ) $ 680,997 $ 111,896 Europe 390,382 (73,191 ) 425,937 60,180 Asia 221,907 (24,701 ) 238,282 36,865 Corporate (236,308 ) (179,087 ) Consolidated $ 1,178,636 $ (475,019 ) $ 1,345,216 $ 29,854 The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Net Sales Percentage of Total Net Sales Percentage of Total Watches $ 469,461 78.6 % $ 517,602 75.5 % Leathers 69,597 11.7 93,152 13.6 Jewelry 44,285 7.4 56,752 8.3 Other 13,503 2.3 17,862 2.6 Total $ 596,846 100.0 % $ 685,368 100.0 % For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Net Sales Percentage of Total Net Sales Percentage of Total Watches $ 919,231 78.0 % $ 1,014,085 75.4 % Leathers 142,286 12.1 185,657 13.8 Jewelry 92,171 7.8 111,472 8.3 Other 24,948 2.1 34,002 2.5 Total $ 1,178,636 100.0 % $ 1,345,216 100.0 % |
DERIVATIVES AND RISK MANAGEMENT
DERIVATIVES AND RISK MANAGEMENT | 6 Months Ended |
Jul. 01, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND RISK MANAGEMENT | DERIVATIVES AND RISK MANAGEMENT Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months . The Company enters into forward contracts , generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts . These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency. At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective. For a derivative instrument that is designated and qualifies as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income (loss) and comprehensive income (loss), and there were no components excluded from the assessment of hedge effectiveness for the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement. As of July 1, 2017 , the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge the future payments of inventory transactions (in millions): Functional Currency Contract Currency Type Amount Type Amount Euro 258.2 U.S. dollar 291.4 Canadian dollar 95.0 U.S. dollar 72.3 British pound 44.8 U.S. dollar 60.8 Japanese yen 4,622.3 U.S. dollar 42.4 Mexican peso 366.6 U.S. dollar 19.2 Australian dollar 22.3 U.S. dollar 17.0 U.S. dollar 45.8 Japanese yen 4,930.0 The Company is also exposed to interest rate risk related to its outstanding debt. To manage the interest rate risk related to its U.S.-based term loan (as amended and restated, the "Term Loan") which had an outstanding balance of $173.3 million net of debt issuance costs as of July 1, 2017, the Company entered into an interest rate swap agreement on July 26, 2013 with a term of approximately five years . The objective of this hedge is to offset the variability of future payments associated with interest rates on the Term Loan. The interest rate swap agreement hedges the 1-month London Interbank Offer Rate ("LIBOR") based variable rate debt obligations under the Term Loan. Under the terms of the swap, the Company pays a fixed interest rate of 1.288% per annum to the swap counterparty plus the LIBOR rate applicable margin of 3.50% . See “Note 14—Debt Activity” for additional disclosures about the Company’s Term Loan. The notional amount amortizes through May 17, 2018 and coincides with repayments on the underlying loan. The Company receives interest from the swap counterparty at a variable rate based on 1-month LIBOR. This hedge is designated as a cash flow hedge. Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of July 1, 2017 , the Company had non-designated forward contracts of approximately $2.4 million on 31.7 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings when they occur. The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period are set forth below (in thousands): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Cash flow hedges: Forward contracts $ (8,935 ) $ 5,162 Interest rate swaps (1 ) (452 ) Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (8,936 ) $ 4,710 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Cash flow hedges: Forward contracts $ (7,808 ) $ (220 ) Interest rate swaps 143 (1,513 ) Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (7,665 ) $ (1,733 ) The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period (in thousands): Derivative Instruments Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location Effect of Derivative Instruments For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from other comprehensive income (loss) $ 739 $ 665 Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 50 $ 74 Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from other comprehensive income (loss) $ (83 ) $ (286 ) Derivative Instruments Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location Effect of Derivative Instruments For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from other comprehensive income (loss) $ 4,169 $ 4,951 Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 77 $ (157 ) Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from other comprehensive income (loss) $ (241 ) $ (583 ) The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands): Asset Derivatives Liability Derivatives July 1, 2017 December 31, 2016 July 1, 2017 December 31, 2016 Derivative Instruments Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Forward contracts designated as cash flow hedging instruments Prepaid expenses and other current assets $ 4,143 Prepaid expenses and other current assets $ 23,288 Accrued expenses- other $ 9,199 Accrued expenses- other $ 4,696 Forward contracts not designated as cash flow hedging instruments Prepaid expenses and other current assets — Prepaid expenses and other current assets — Accrued expenses- other 2 Accrued expenses- other 2 Interest rate swap designated as a cash flow hedging instrument Prepaid expenses and other current assets 123 Prepaid expenses and other current assets — Accrued expenses- other 59 Accrued expenses- other 613 Forward contracts designated as cash flow hedging instruments Intangible and other assets-net 268 Intangible and other assets-net 5,648 Other long-term liabilities 3,464 Other long-term liabilities 268 Interest rate swap designated as a cash flow hedging instrument Intangible and other assets-net — Intangible and other assets-net 73 Other long-term liabilities — Other long-term liabilities — Total $ 4,534 $ 29,009 $ 12,724 $ 5,579 At the end of the Second Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June 2019. As of July 1, 2017 , an estimated net loss of $3.7 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates. See “Note 1—Financial Statement Policies” for additional disclosures on foreign currency hedging instruments. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jul. 01, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting Standards Codification ("ASC") 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 July 1, 2017 (in thousands): Fair Value at July 1, 2017 Level 1 Level 2 Level 3 Total Assets: Forward contracts $ — $ 4,411 $ — $ 4,411 Deferred compensation plan assets: Investment in publicly traded mutual funds 2,560 — — 2,560 Interest rate swap — 123 — 123 Total $ 2,560 $ 4,534 $ — $ 7,094 Liabilities: Forward contracts $ — $ 12,665 — $ 12,665 Interest rate swap — 59 — 59 Total $ — $ 12,724 $ — $ 12,724 The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (in thousands): Fair Value at December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Forward contracts $ — $ 28,936 $ — $ 28,936 Deferred compensation plan assets: Investment in publicly traded mutual funds 2,385 — — 2,385 Interest rate swap — 73 — 73 Total $ 2,385 $ 29,009 $ — $ 31,394 Liabilities: Forward contracts — 4,966 — 4,966 Interest rate swap — 613 — 613 Total $ — $ 5,579 $ — $ 5,579 The fair values of the Company’s deferred compensation plan assets are based on quoted prices. The deferred compensation plan assets are recorded in intangible and other assets-net in the Company’s condensed consolidated balance sheets. The fair values of the Company’s forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. The fair values of the interest rate swap assets and liabilities are determined using valuation models based on market observable inputs, including forward curves, mid-market price and volatility levels. See “Note 10—Derivatives and Risk Management” for additional disclosures about the interest rate swaps and forward contracts . As of July 1, 2017 , debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of $649.0 million and a fair value of approximately $636.0 million . The fair value of debt was obtained from a third-party based on observable market inputs. The fair value of goodwill and trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, discounts rates and implied royalty rates. During the Second Quarter, the Company fully impaired its goodwill balance and recorded pre-tax impairment charges of $202.3 million , $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively. During the Second Quarter, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million , resulting in a pre-tax impairment charge of $28.3 million , the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8 million and the MICHELE trade name with a carrying amount of $18.5 million was written down to its implied fair value of $10.9 million , resulting in a pre-tax impairment charge of $7.6 million . Trade name impairment charges were recorded in the Corporate cost area. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional disclosures about goodwill and trade name impairment. In accordance with the provisions of ASC 360, Property, Plant and Equipment , property, plant and equipment-net with a carrying amount of $3.7 million related to retail store leasehold improvements and fixturing and related key money in the amount of $0.6 million were deemed not recoverable, resulting in an impairment charge of $4.3 million during the Year To Date Period. The fair values of assets related to Company-owned retail stores were determined using Level 3 inputs. Of the $4.3 million impairment expense, $1.4 million , $1.3 million , and $0.4 million were recorded in restructuring charges in the Europe, Americas and Asia segments, respectively, and $0.8 million and $0.4 million were recorded in SG&A in the Europe and Asia segments, respectively. During the Second Quarter, the Company recorded a pre-tax impairment charge of $1.6 million related to the write off of a cost method investment. |
INTANGIBLE AND OTHER ASSETS
INTANGIBLE AND OTHER ASSETS | 6 Months Ended |
Jul. 01, 2017 | |
INTANGIBLE AND OTHER ASSETS | |
INTANGIBLE AND OTHER ASSETS | INTANGIBLE AND OTHER ASSETS The following table summarizes intangible and other assets (in thousands): July 1, 2017 December 31, 2016 Useful Gross Accumulated Gross Accumulated Lives Amount Amortization Amount Amortization Intangibles-subject to amortization: Trademarks 10 yrs. $ 4,310 $ 3,562 $ 4,310 $ 3,443 Customer lists 5-10 yrs. 54,694 30,761 53,625 26,986 Patents 3-20 yrs. 2,325 2,116 2,325 2,099 Noncompete agreement 3-6 yrs. 2,535 1,956 2,505 1,662 Developed technology 7 yrs. 36,100 7,736 36,100 5,157 Trade name 6 yrs. — — 15,700 2,617 Other 7-20 yrs. 261 229 253 215 Total intangibles-subject to amortization 100,225 46,360 114,818 42,179 Intangibles-not subject to amortization: Trade names 38,651 74,485 Other assets: Key money deposits 27,325 23,472 26,948 22,038 Other deposits 19,322 19,344 Deferred compensation plan assets 2,560 2,385 Deferred tax asset-net 83,844 23,061 Restricted cash 362 500 Shop-in-shop 9,907 9,437 8,807 8,019 Interest rate swap — 73 Long term tax receivable 6,929 — Forward contracts 268 5,648 Investments 500 2,078 Other 4,787 4,582 Total other assets 155,804 32,909 93,426 30,057 Total intangible and other assets $ 294,680 $ 79,269 $ 282,729 $ 72,236 Total intangible and other assets-net $ 215,411 $ 210,493 Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the initial lease term, which ranges from approximately four to 18 years . Amortization expense for intangible assets was approximately $3.7 million and $3.8 million for the Second Quarter and Prior Year Quarter, respectively, and $7.4 million and $7.5 million for the Year To Date Period and Prior Year YTD Period, respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands): Fiscal Year Amortization Expense 2017 (remaining) $ 6,049 2018 $ 11,828 2019 $ 11,499 2020 $ 10,975 2021 $ 7,146 2022 $ 6,251 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jul. 01, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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. |
DEBT ACTIVITY
DEBT ACTIVITY | 6 Months Ended |
Jul. 01, 2017 | |
Debt Disclosure [Abstract] | |
DEBT ACTIVITY | DEBT ACTIVITY On March 10, 2017, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment reduced the revolving credit facility (the "Revolving Credit Facility") available under the Company’s existing credit amendment from $1.05 billion to $850.0 million . The Second Amendment also removed the incremental term loan that was available under the credit agreement, extended the maturity date of the credit agreement to May 17, 2019 and removed the Company’s ability to make offers to the lenders to extend the maturity date of the Term Loan or the Revolving Credit Facility. The Second Amendment also amended the repayment schedule for the Term Loan and requires the Company to make monthly payments on the last business day of each month beginning April 30, 2018. On and after April 1, 2018, interest on the Term Loan that is based upon the base rate will be due and payable in arrears on the last business day of each calendar month, and interest on the Term Loan that is based upon the LIBOR rate will be due and payable on the last day of the applicable interest period; provided, that if such interest period extends for over one month, then interest will be due and payable at the end of each one month interval during such interest period. The Second Amendment also amended the mandatory prepayment provisions under the credit agreement and provides that to the extent there are excess proceeds remaining from the issuance of debt by the Company following the repayment in full of the Term Loan, the Company will be required to repay the Revolving Credit Facility in the amount of such excess proceeds, with a corresponding permanent reduction in the Revolving Credit Facility in the amount of up to $50.0 million . In accordance with the Second Amendment, dividends paid from foreign subsidiaries to U.S. subsidiaries or Fossil Group, Inc., must first be used to repay the Term Loan and then up to $50.0 million of the Revolver. The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to base rate loans and LIBOR rate loans under the Company’s credit agreement and provides that the interest rate margin for base rate loans is 2.50% per annum and the interest rate margin for LIBOR rate loans is 3.50% per annum. If the Term Loan has not been repaid in full on or prior to October 1, 2017, then on such date, the applicable margin will automatically increase to 2.75% per annum for base rate loans and 3.75% per annum for LIBOR rate loans; if the Term Loan has not been repaid in full on or prior to March 31, 2018, then on such date, the applicable margin will automatically increase to 3.25% per annum for base rate loans and 4.25% per annum for LIBOR rate loans. The Second Amendment also changed the commitment fee payable by the Company with respect to the Revolving Credit Facility to 0.50% per annum. The Company will incur an additional fee of 0.25% times the outstanding principal amount of the total credit exposure under the credit agreement if the Term Loan has not been repaid in full on or prior to March 31, 2018. Furthermore, the Second Amendment changed the consolidated total leverage ratio that the Company must comply with from 3.25 to 1.00 to the ratios as set forth below: Period Maximum Ratio Second Amendment Effective Date through and including July 1, 2017 3.25 to 1.00 July 2, 2017 through and including September 30, 2017 3.50 to 1.00 October 1, 2017 through and including March 31, 2018 3.25 to 1.00 April 1, 2018 through and including September 29, 2018 3.50 to 1.00 September 30, 2018 and thereafter 3.25 to 1.00 The Company made principal payments of $6.3 million and $12.5 million under the Term Loan during the Second Quarter and Year To Date Period, respectively. The Company also made net borrowings of $35.7 million and $26.7 million under the Revolving Credit Facility during the Second Quarter and Year To Date Period, respectively. Borrowings were primarily used to fund normal operating expenses and capital expenditures. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of July 1, 2017 , the Company had available borrowing capacity of $79.1 million under the Revolving Credit Facility. The Company receives short-term loans from certain of its foreign subsidiaries at the end of each fiscal quarter which are used to reduce its external borrowings. These intercompany loans are repaid at the beginning of the following fiscal quarter. At the end of the Second Quarter, these intercompany loans totaled $254.8 million . The Company incurred approximately $2.3 million and $4.1 million of interest expense related to the Term Loan during the Second Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap. The Company incurred approximately $7.5 million and $12.4 million of interest expense related to the Revolving Credit Facility during the Second Quarter and Year To Date Period, respectively. The Company incurred approximately $1.1 million and $1.8 million of interest expense related to the amortization of debt issuance costs during the Second Quarter and Year To Date Period, respectively. |
RESTRUCTURING
RESTRUCTURING | 6 Months Ended |
Jul. 01, 2017 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING | RESTRUCTURING The Company implemented a multi-year restructuring program that began in fiscal year 2016 called New World Fossil ("NWF"). As part of NWF, the Company targets to improve operating profit and support sales growth through a leaner infrastructure and an enhanced business model. The Company is working to achieve greater efficiencies from production to distribution through activities such as organizational changes, reducing its overall product assortment, optimizing its base cost structure and consolidating facilities. The Company also intends to build a quicker and more responsive operating platform. The Company is reducing its retail footprint to reflect the evolving shopping habits of today's consumer, which includes restructuring costs, such as store impairment, recorded lease obligations and termination fees and accelerated depreciation. Of the total estimated $150 million restructuring charges, approximately $27.8 million and $36.0 million were recorded during fiscal year 2016 and the Year To Date period, respectively. The Company estimates total fiscal year 2017 NWF restructuring charges of $45 million . The following table shows a rollforward of the accrued liability related to the Company’s restructuring plan (in thousands): For the 13 Weeks Ended July 1, 2017 Liabilities Liabilities April 1, 2017 Charges Cash Payments Non-cash Items July 1, 2017 Store closures $ 5,501 $ 3,017 $ 1,060 $ 2,565 $ 4,893 Professional services 92 856 832 — 116 Severance and employee-related benefits 2,103 5,892 5,256 1,204 1,535 Total $ 7,696 $ 9,765 $ 7,148 $ 3,769 $ 6,544 For the 26 Weeks Ended July 1, 2017 Liabilities Liabilities December 31, 2016 Charges Cash Payments Non-cash Items July 1, 2017 Store closures $ 4,546 $ 5,741 $ 2,178 $ 3,216 $ 4,893 Professional services 794 1,430 2,108 — 116 Severance and employee-related benefits — 28,878 26,139 1,204 1,535 Total $ 5,340 $ 36,049 $ 30,425 $ 4,420 $ 6,544 Restructuring charges by operating segment were as follows (in thousands): For the 13 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 1, 2017 Americas $ 2,179 $ 7,796 Europe 2,160 7,682 Asia 3,353 8,139 Corporate 2,073 12,432 Consolidated $ 9,765 $ 36,049 |
FINANCIAL STATEMENT POLICIES (P
FINANCIAL STATEMENT POLICIES (Policies) | 6 Months Ended |
Jul. 01, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 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 July 1, 2017 , and the results of operations for the thirteen-week periods ended July 1, 2017 (“ Second Quarter”) and July 2, 2016 (“Prior Year Quarter”), respectively, and the twenty-six week periods ended July 1, 2017 (“Year To Date Period”) and July 2, 2016 (“Prior Year YTD Period”). All adjustments are of a normal, recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended December 31, 2016 (the “ 2016 Form 10-K”). Operating results for the Second Quarter are not necessarily indicative of the results to be achieved for the full fiscal year. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the 2016 Form 10-K. |
Business | 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. |
Hedging Instruments | Hedging Instruments. The Company is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to mitigate but does not eliminate these exposures using derivative instruments including foreign exchange forward contracts (" forward contracts ") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, Canadian dollar, British pound, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of July 1, 2017 , the result would have been a net loss of approximately $5.8 million , net of taxes. This unrealized loss is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income (loss) and comprehensive income (loss). Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income (loss) and comprehensive income (loss). Also, the Company has entered into an interest rate swap agreement to effectively convert portions of its variable rate debt obligations to a fixed rate. Changes in the fair value of the interest rate swap is recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and is recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. |
Operating Expenses | Operating Expenses. Operating expenses include selling, general and administrative expenses (“SG&A”), goodwill and trade name impairment and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure as well as store closure expenses. |
Earnings (Loss) Per Share (EPS) | 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. |
Recently Issued Accounting Standards and Recently Adopted Accounting Standards | Recently Issued Accounting Standards In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2017-09. In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ("ASU 2017-08"). ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. The amendment requires the premium to be amortized to the earliest call date. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 requires the service cost component of pension expense to be included in operations in the same line item as other employee compensation costs and other components of pension expense to be presented separately outside of income from operations. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain cash receipts and cash payments should be presented and classified in the statement of cash flows with the objective of reducing existing diversity in practice with respect to these items. ASU 2016-15 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In March 2016, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840) . ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Many of the Company’s leases are considered operating leases and are not capitalized under ASC 840. Under ASC 842 the majority of these leases will qualify for capitalization and will result in the recognition of lease assets and lease liabilities once the new standard is adopted. The Company is in the process of reviewing lease contracts to determine the impact of adopting ASU 2016-02 but expects the standard to have a material impact on the Company's financial position. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB later amended ASU-2014-09 with the following: • ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date • ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) • ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing • ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients • ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers The Company has performed a preliminary review of our core revenue streams including reviewing key contracts and comparing current accounting policies and practices to the new standard to identify potential differences that could arise from the application of ASU 2014-09. Based on these efforts, the Company currently anticipates that the performance obligations underlying its core revenue streams (i.e., its retail and standard wholesale businesses), and the timing of recognition thereof, will remain substantially unchanged. Revenues for these businesses are generated through the sale of finished products, and will continue to be generally recognized at the point in time when merchandise is transferred to the customer and in an amount that considers the impacts of estimated allowances. The Company is still evaluating the impact of adoption on ancillary transactions as well as finalizing our review of customer contracts. The standard will require additional disclosures about the nature of revenue as well as the judgment involved in the timing of revenue recognition. While early adoption is permitted, the Company will adopt ASU 2014-09 in the first quarter of fiscal 2018 and is still selecting a method of adoption. Recently Adopted Accounting Standards In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The Company early adopted ASU 2017-04 effective June 15, 2017 in conjunction with the interim impairment test of goodwill for all reporting units and goodwill impairment was recorded according to the new standard. The Company believes the adoption of ASU 2017-04 did not change the amount of impairment charges recorded in the Second Quarter. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional information on our interim goodwill impairment test performed. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplified several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position. As a result of adoption, the Company now recognizes excess tax benefits or deficiencies associated with share-based compensation activity as an income tax expense or benefit in the period the shares vest or are settled. In addition, the Company now presents excess tax benefits from share-based compensation activity with other income tax cash flows as an operating activity on the statement of cash flows, which differs from the Company’s historical classification of excess tax benefits as a financing activity. The Company has elected to apply this change in cash flow presentation on a prospective basis. The standard also permits the Company to make a policy election for how it accounts for forfeitures, and the Company has elected to continue estimating forfeitures. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. The standard was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position. |
Fair Value Measurements | The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting Standards Codification ("ASC") 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. |
FINANCIAL STATEMENT POLICIES (T
FINANCIAL STATEMENT POLICIES (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Numerators and denominators used in the computations of both basic and diluted EPS | The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands, except per share data): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Numerator: Net income (loss) attributable to Fossil Group, Inc. $ (344,712 ) $ 6,021 $ (392,898 ) $ 11,814 Denominator: Basic EPS computation: Basic weighted average common shares outstanding 48,484 48,119 48,399 48,125 Basic EPS $ (7.11 ) $ 0.13 $ (8.12 ) $ 0.25 Diluted EPS computation: Basic weighted average common shares outstanding 48,484 48,119 48,399 48,125 Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units — 88 — 104 Diluted weighted average common shares outstanding 48,484 48,207 48,399 48,229 Diluted EPS $ (7.11 ) $ 0.12 $ (8.12 ) $ 0.24 |
GOODWILL AND INTANGIBLE IMPAI23
GOODWILL AND INTANGIBLE IMPAIRMENT CHARGES (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Business Combinations [Abstract] | |
Schedule of changes in the carrying amount of goodwill | The changes in the carrying amount of goodwill were as follows (in thousands): Americas Europe Asia Total Balance at December 31, 2016 $ 202,187 $ 110,291 $ 42,785 $ 355,263 Foreign currency changes 162 3,983 85 4,230 Impairment charges (202,349 ) (114,274 ) (42,870 ) $ (359,493 ) Balance at July 1, 2017 $ — $ — $ — $ — |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | Inventories consisted of the following (in thousands): July 1, 2017 December 31, 2016 Components and parts $ 67,307 $ 49,438 Work-in-process 16,719 12,345 Finished goods 534,044 480,704 Inventories $ 618,070 $ 542,487 |
WARRANTY LIABILITIES (Tables)
WARRANTY LIABILITIES (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Product Warranties Disclosures [Abstract] | |
Schedule of warranty liability activity | Warranty liability activity consisted of the following (in thousands): For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Beginning balance $ 15,421 $ 13,669 Settlements in cash or kind (3,838 ) (4,795 ) Warranties issued and adjustments to preexisting warranties (1) 4,674 4,861 Ending balance $ 16,257 $ 13,735 _______________________________________________ (1) Changes in cost estimates related to preexisting warranties are aggregated with accruals for new standard warranties issued and foreign currency changes. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense and related effective rate | The Company’s income tax (benefit) expense and related effective rates were as follows (in thousands, except percentage data): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Income tax (benefit) expense $ (96,296 ) $ 3,499 $ (97,516 ) $ 6,778 Effective tax rate 21.9 % 30.2 % 20.0 % 30.5 % |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Stockholders' Equity Note [Abstract] | |
Schedule of common stock repurchase activity | The following tables reflect the Company’s common stock repurchase activity for the periods indicated (in millions): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Fiscal Year Authorized Dollar Value Authorized Termination Date Number of Shares Repurchased Dollar Value Repurchased Number of Shares Repurchased Dollar Value Repurchased 2014 $ 1,000.0 December 2018 — $ — — $ 0.8 2010 $ 30.0 None — $ — — $ — For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Fiscal Year Authorized Dollar Value Authorized Termination Date Number of Shares Repurchased Dollar Value Repurchased Number of Shares Repurchased Dollar Value Repurchased 2014 $ 1,000.0 December 2018 — $ — 0.1 $ 5.2 2010 $ 30.0 None — $ — — $ — |
Summary of changes in equity attributable to controlling and noncontrolling interest | The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands): Fossil Group, Inc. Stockholders’ Equity Noncontrolling Interest Total Stockholders’ Equity Balance at December 31, 2016 $ 1,006,236 $ 9,202 $ 1,015,438 Net income (loss) (392,898 ) 3,010 (389,888 ) Currency translation adjustment 26,856 — 26,856 Cash flow hedges - net change (11,593 ) — (11,593 ) Distribution of noncontrolling interest earnings — (427 ) (427 ) Acquisition of common stock (907 ) — (907 ) Stock-based compensation expense 15,335 — 15,335 Balance at July 1, 2017 $ 643,029 $ 11,785 $ 654,814 Fossil Group, Inc. Stockholders’ Equity Noncontrolling Interest Total Stockholders’ Equity Balance at January 2, 2016 $ 921,388 $ 11,155 $ 932,543 Net income 11,814 3,654 15,468 Currency translation adjustment 7,721 — 7,721 Cash flow hedges - net change (6,101 ) — (6,101 ) Pension plan activity 1,714 — 1,714 Common stock issued upon exercise of stock options 57 — 57 Tax expense derived from stock-based compensation (1,389 ) — (1,389 ) Distribution of noncontrolling interest earnings — (4,544 ) (4,544 ) Acquisition of common stock (6,418 ) — (6,418 ) Stock-based compensation expense 16,463 — 16,463 Balance at July 2, 2016 $ 945,249 $ 10,265 $ 955,514 |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of stock options and stock appreciation rights activity | The following table summarizes stock options and stock appreciation rights activity during the Second Quarter: Stock Options and Stock Appreciation Rights Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (in Thousands) (in Years) (in Thousands) Outstanding at April 1, 2017 2,273 $ 50.77 6.0 $ 117 Granted — — Exercised — — — Forfeited or expired (37 ) 79.66 Outstanding at July 1, 2017 2,236 50.29 5.8 — Exercisable at July 1, 2017 871 $ 69.03 4.5 $ — |
Summary of stock options and stock appreciation rights outstanding and exercisable | The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at July 1, 2017 : Cash Stock Appreciation Rights Outstanding Cash Stock Appreciation Rights Exercisable Range of Number of Weighted- Weighted- Number of Weighted- Average Exercise Price (in Thousands) (in Years) (in Thousands) $29.78 - $47.99 61 $ 36.73 6.5 11 $ 36.73 Total 61 $ 36.73 6.5 11 $ 36.73 Stock Options Outstanding Stock Options Exercisable Range of Exercise Prices Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Number of Shares Weighted- (in Thousands) (in Years) (in Thousands) $13.65 - $29.49 40 $ 14.40 1.5 40 $ 14.40 $29.78 - $47.99 81 36.92 1.7 81 36.92 $55.04 - $83.83 91 80.80 3.5 91 80.80 $95.91 - $131.46 130 127.97 4.4 130 127.97 Total 342 $ 80.35 3.2 342 $ 80.35 Stock Appreciation Rights Outstanding Stock Appreciation Rights Exercisable Range of Number of Weighted- Weighted- Number of Weighted- (in Thousands) (in Years) (in Thousands) $13.65 - $29.49 101 $ 29.49 7.0 — $ — $29.78 - $47.99 1,489 38.11 6.5 314 39.05 $55.04 - $83.83 134 78.96 4.8 97 79.73 $95.91 - $131.46 109 114.42 3.8 107 114.63 Total 1,833 $ 45.14 6.2 518 $ 62.26 |
Summary of restricted stock, restricted stock units and performance restricted stock units activity | The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity during the Second Quarter: Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units Number of Shares Weighted-Average Grant Date Fair Value Per Share (in Thousands) Nonvested at April 1, 2017 1,101 $ 37.16 Granted 1,816 16.50 Vested (53 ) 30.82 Forfeited (79 ) 24.30 Nonvested at July 1, 2017 2,785 $ 24.21 |
ACCUMULATED OTHER COMPREHENSI29
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes | The following tables illustrate changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands): For the 13 Weeks Ended July 1, 2017 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (91,472 ) $ 8,390 $ (41 ) $ (3,907 ) $ (87,030 ) Other comprehensive income (loss) before reclassifications 16,461 (15,306 ) (2 ) — 1,153 Tax (expense) benefit — 6,371 1 — 6,372 Amounts reclassed from accumulated other comprehensive income (loss) — 1,367 (131 ) — 1,236 Tax (expense) benefit — (628 ) 48 — (580 ) Total other comprehensive income (loss) 16,461 (9,674 ) 82 — 6,869 Ending balance $ (75,011 ) $ (1,284 ) $ 41 $ (3,907 ) $ (80,161 ) For the 13 Weeks Ended July 2, 2016 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (64,486 ) $ (1,554 ) $ (1,457 ) $ (4,506 ) $ (72,003 ) Other comprehensive income (loss) before reclassifications (9,396 ) 8,738 (711 ) — (1,369 ) Tax (expense) benefit — (3,576 ) 259 — (3,317 ) Amounts reclassed from accumulated other comprehensive income (loss) 104 928 (450 ) — 582 Tax (expense) benefit — (263 ) 164 — (99 ) Total other comprehensive income (loss) (9,500 ) 4,497 (166 ) — (5,169 ) Ending balance $ (73,986 ) $ 2,943 $ (1,623 ) $ (4,506 ) $ (77,172 ) For the 26 Weeks Ended July 1, 2017 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (101,867 ) $ 10,693 $ (343 ) $ (3,907 ) $ (95,424 ) Other comprehensive income (loss) before reclassifications 26,856 (16,468 ) 225 — 10,613 Tax (expense) benefit — 8,660 (82 ) — 8,578 Amounts reclassed from accumulated other comprehensive income (loss) — 6,920 (379 ) — 6,541 Tax (expense) benefit — (2,751 ) 138 — (2,613 ) Total other comprehensive income (loss) 26,856 (11,977 ) 384 — — 15,263 Ending balance $ (75,011 ) $ (1,284 ) $ 41 $ (3,907 ) $ (80,161 ) For the 26 Weeks Ended July 2, 2016 Currency Translation Adjustments Cash Flow Hedges Forward Contracts Interest Rate Swaps Pension Plan Total Beginning balance $ (81,707 ) $ 8,114 $ (693 ) $ (6,220 ) $ (80,506 ) Other comprehensive income (loss) before reclassifications 7,825 (1,259 ) (2,381 ) 2,010 6,195 Tax (expense) benefit — 1,039 868 (296 ) 1,611 Amounts reclassed from accumulated other comprehensive income (loss) 104 7,267 (918 ) — 6,453 Tax (expense) benefit — (2,316 ) 335 — (1,981 ) Total other comprehensive income (loss) 7,721 (5,171 ) (930 ) 1,714 3,334 Ending balance $ (73,986 ) $ 2,943 $ (1,623 ) $ (4,506 ) $ (77,172 ) |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Segment Reporting [Abstract] | |
Summary information by operating segment | Summary information by operating segment was as follows (in thousands): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Americas $ 288,804 $ (166,500 ) $ 345,187 $ 52,300 Europe 194,702 (86,805 ) 215,936 31,669 Asia 113,340 (35,658 ) 124,245 18,936 Corporate — (140,793 ) — (87,455 ) Consolidated $ 596,846 $ (429,756 ) $ 685,368 $ 15,450 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Americas $ 566,347 $ (140,819 ) $ 680,997 $ 111,896 Europe 390,382 (73,191 ) 425,937 60,180 Asia 221,907 (24,701 ) 238,282 36,865 Corporate (236,308 ) (179,087 ) Consolidated $ 1,178,636 $ (475,019 ) $ 1,345,216 $ 29,854 |
Schedule of net sales for each class of similar products | The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Net Sales Percentage of Total Net Sales Percentage of Total Watches $ 469,461 78.6 % $ 517,602 75.5 % Leathers 69,597 11.7 93,152 13.6 Jewelry 44,285 7.4 56,752 8.3 Other 13,503 2.3 17,862 2.6 Total $ 596,846 100.0 % $ 685,368 100.0 % For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Net Sales Percentage of Total Net Sales Percentage of Total Watches $ 919,231 78.0 % $ 1,014,085 75.4 % Leathers 142,286 12.1 185,657 13.8 Jewelry 92,171 7.8 111,472 8.3 Other 24,948 2.1 34,002 2.5 Total $ 1,178,636 100.0 % $ 1,345,216 100.0 % |
DERIVATIVES AND RISK MANAGEME31
DERIVATIVES AND RISK MANAGEMENT (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of outstanding forward contracts | As of July 1, 2017 , the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge the future payments of inventory transactions (in millions): Functional Currency Contract Currency Type Amount Type Amount Euro 258.2 U.S. dollar 291.4 Canadian dollar 95.0 U.S. dollar 72.3 British pound 44.8 U.S. dollar 60.8 Japanese yen 4,622.3 U.S. dollar 42.4 Mexican peso 366.6 U.S. dollar 19.2 Australian dollar 22.3 U.S. dollar 17.0 U.S. dollar 45.8 Japanese yen 4,930.0 |
Schedule of effective portion of gains and losses on derivative instruments recognized in other comprehensive income (loss), net of taxes | The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period are set forth below (in thousands): For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Cash flow hedges: Forward contracts $ (8,935 ) $ 5,162 Interest rate swaps (1 ) (452 ) Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (8,936 ) $ 4,710 For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Cash flow hedges: Forward contracts $ (7,808 ) $ (220 ) Interest rate swaps 143 (1,513 ) Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (7,665 ) $ (1,733 ) |
Schedule of effective portion of gains and losses on derivative instruments recognized in other comprehensive income (loss), net of taxes reclassified into earnings and derivatives not designated as hedging instruments recorded directly to earnings | The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period (in thousands): Derivative Instruments Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location Effect of Derivative Instruments For the 13 Weeks Ended July 1, 2017 For the 13 Weeks Ended July 2, 2016 Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from other comprehensive income (loss) $ 739 $ 665 Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 50 $ 74 Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from other comprehensive income (loss) $ (83 ) $ (286 ) Derivative Instruments Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location Effect of Derivative Instruments For the 26 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 2, 2016 Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from other comprehensive income (loss) $ 4,169 $ 4,951 Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 77 $ (157 ) Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from other comprehensive income (loss) $ (241 ) $ (583 ) |
Schedule of fair value amounts for derivative instruments as separate asset and liability values on a gross basis and their location on condensed consolidated balance sheets | The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands): Asset Derivatives Liability Derivatives July 1, 2017 December 31, 2016 July 1, 2017 December 31, 2016 Derivative Instruments Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Condensed Consolidated Balance Sheets Location Fair Value Forward contracts designated as cash flow hedging instruments Prepaid expenses and other current assets $ 4,143 Prepaid expenses and other current assets $ 23,288 Accrued expenses- other $ 9,199 Accrued expenses- other $ 4,696 Forward contracts not designated as cash flow hedging instruments Prepaid expenses and other current assets — Prepaid expenses and other current assets — Accrued expenses- other 2 Accrued expenses- other 2 Interest rate swap designated as a cash flow hedging instrument Prepaid expenses and other current assets 123 Prepaid expenses and other current assets — Accrued expenses- other 59 Accrued expenses- other 613 Forward contracts designated as cash flow hedging instruments Intangible and other assets-net 268 Intangible and other assets-net 5,648 Other long-term liabilities 3,464 Other long-term liabilities 268 Interest rate swap designated as a cash flow hedging instrument Intangible and other assets-net — Intangible and other assets-net 73 Other long-term liabilities — Other long-term liabilities — Total $ 4,534 $ 29,009 $ 12,724 $ 5,579 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis | The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of July 1, 2017 (in thousands): Fair Value at July 1, 2017 Level 1 Level 2 Level 3 Total Assets: Forward contracts $ — $ 4,411 $ — $ 4,411 Deferred compensation plan assets: Investment in publicly traded mutual funds 2,560 — — 2,560 Interest rate swap — 123 — 123 Total $ 2,560 $ 4,534 $ — $ 7,094 Liabilities: Forward contracts $ — $ 12,665 — $ 12,665 Interest rate swap — 59 — 59 Total $ — $ 12,724 $ — $ 12,724 The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (in thousands): Fair Value at December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Forward contracts $ — $ 28,936 $ — $ 28,936 Deferred compensation plan assets: Investment in publicly traded mutual funds 2,385 — — 2,385 Interest rate swap — 73 — 73 Total $ 2,385 $ 29,009 $ — $ 31,394 Liabilities: Forward contracts — 4,966 — 4,966 Interest rate swap — 613 — 613 Total $ — $ 5,579 $ — $ 5,579 |
INTANGIBLE AND OTHER ASSETS (Ta
INTANGIBLE AND OTHER ASSETS (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
INTANGIBLE AND OTHER ASSETS | |
Schedule of intangible and other assets-net | The following table summarizes intangible and other assets (in thousands): July 1, 2017 December 31, 2016 Useful Gross Accumulated Gross Accumulated Lives Amount Amortization Amount Amortization Intangibles-subject to amortization: Trademarks 10 yrs. $ 4,310 $ 3,562 $ 4,310 $ 3,443 Customer lists 5-10 yrs. 54,694 30,761 53,625 26,986 Patents 3-20 yrs. 2,325 2,116 2,325 2,099 Noncompete agreement 3-6 yrs. 2,535 1,956 2,505 1,662 Developed technology 7 yrs. 36,100 7,736 36,100 5,157 Trade name 6 yrs. — — 15,700 2,617 Other 7-20 yrs. 261 229 253 215 Total intangibles-subject to amortization 100,225 46,360 114,818 42,179 Intangibles-not subject to amortization: Trade names 38,651 74,485 Other assets: Key money deposits 27,325 23,472 26,948 22,038 Other deposits 19,322 19,344 Deferred compensation plan assets 2,560 2,385 Deferred tax asset-net 83,844 23,061 Restricted cash 362 500 Shop-in-shop 9,907 9,437 8,807 8,019 Interest rate swap — 73 Long term tax receivable 6,929 — Forward contracts 268 5,648 Investments 500 2,078 Other 4,787 4,582 Total other assets 155,804 32,909 93,426 30,057 Total intangible and other assets $ 294,680 $ 79,269 $ 282,729 $ 72,236 Total intangible and other assets-net $ 215,411 $ 210,493 |
Schedule of estimated aggregate future amortization expense by fiscal year for intangible assets | Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands): Fiscal Year Amortization Expense 2017 (remaining) $ 6,049 2018 $ 11,828 2019 $ 11,499 2020 $ 10,975 2021 $ 7,146 2022 $ 6,251 |
Debt Activity (Tables)
Debt Activity (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Debt Disclosure [Abstract] | |
Summary of Consolidated Total Leverage Ratio Requirements | Furthermore, the Second Amendment changed the consolidated total leverage ratio that the Company must comply with from 3.25 to 1.00 to the ratios as set forth below: Period Maximum Ratio Second Amendment Effective Date through and including July 1, 2017 3.25 to 1.00 July 2, 2017 through and including September 30, 2017 3.50 to 1.00 October 1, 2017 through and including March 31, 2018 3.25 to 1.00 April 1, 2018 through and including September 29, 2018 3.50 to 1.00 September 30, 2018 and thereafter 3.25 to 1.00 |
RESTRUCTURING (Tables)
RESTRUCTURING (Tables) | 6 Months Ended |
Jul. 01, 2017 | |
Restructuring and Related Activities [Abstract] | |
Rollforward of liability incurred on restructuring plan | The following table shows a rollforward of the accrued liability related to the Company’s restructuring plan (in thousands): For the 13 Weeks Ended July 1, 2017 Liabilities Liabilities April 1, 2017 Charges Cash Payments Non-cash Items July 1, 2017 Store closures $ 5,501 $ 3,017 $ 1,060 $ 2,565 $ 4,893 Professional services 92 856 832 — 116 Severance and employee-related benefits 2,103 5,892 5,256 1,204 1,535 Total $ 7,696 $ 9,765 $ 7,148 $ 3,769 $ 6,544 For the 26 Weeks Ended July 1, 2017 Liabilities Liabilities December 31, 2016 Charges Cash Payments Non-cash Items July 1, 2017 Store closures $ 4,546 $ 5,741 $ 2,178 $ 3,216 $ 4,893 Professional services 794 1,430 2,108 — 116 Severance and employee-related benefits — 28,878 26,139 1,204 1,535 Total $ 5,340 $ 36,049 $ 30,425 $ 4,420 $ 6,544 |
Schedule of restructuring charges by operating segment | Restructuring charges by operating segment were as follows (in thousands): For the 13 Weeks Ended July 1, 2017 For the 26 Weeks Ended July 1, 2017 Americas $ 2,179 $ 7,796 Europe 2,160 7,682 Asia 3,353 8,139 Corporate 2,073 12,432 Consolidated $ 9,765 $ 36,049 |
FINANCIAL STATEMENT POLICIES (D
FINANCIAL STATEMENT POLICIES (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Hedging Instruments | ||||
Unrealized net gain on foreign currency forward contracts, if settled | $ 5,800 | |||
Numerator: | ||||
Net income (loss) attributable to Fossil Group, Inc. | $ (344,712) | $ 6,021 | $ (392,898) | $ 11,814 |
Denominator: | ||||
Basic weighted average common shares outstanding (in shares) | 48,484 | 48,119 | 48,399 | 48,125 |
Basic EPS (in dollars per share) | $ (7.11) | $ 0.13 | $ (8.12) | $ 0.25 |
Diluted EPS computation: | ||||
Basic weighted average common shares outstanding (in shares) | 48,484 | 48,119 | 48,399 | 48,125 |
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units (in shares) | 0 | 88 | 0 | 104 |
Diluted weighted average common shares outstanding (in shares) | 48,484 | 48,207 | 48,399 | 48,229 |
Diluted EPS (in dollars per share) | $ (7.11) | $ 0.12 | $ (8.12) | $ 0.24 |
Stock Compensation Plan | ||||
Other EPS Disclosures | ||||
Weighted shares issuable under stock-based awards not included in the diluted EPS calculation (in shares) | 4,700 | 1,900 | 4,100 | 1,700 |
Performance Shares | ||||
Other EPS Disclosures | ||||
Weighted shares issuable under stock-based awards not included in the diluted EPS calculation (in shares) | 1,200 | 1,100 | 1,100 | 1,100 |
GOODWILL AND INTANGIBLE IMPAI37
GOODWILL AND INTANGIBLE IMPAIRMENT CHARGES (Schedule of Changes in the Carrying Amount of Goodwill) (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jul. 01, 2017 | Apr. 01, 2017 | Dec. 31, 2016 | |
Goodwill [Roll Forward] | |||
Balance at beginning of year | $ 355,263 | ||
Foreign currency changes | (4,230) | ||
Impairment charges | (359,493) | ||
Balance at end of period | 0 | ||
Market capitalization to carrying amount of net assets ratio | (14.00%) | 23.00% | |
Americas | |||
Goodwill [Roll Forward] | |||
Balance at beginning of year | 202,187 | ||
Foreign currency changes | (162) | ||
Impairment charges | (202,349) | ||
Balance at end of period | 0 | ||
Europe | |||
Goodwill [Roll Forward] | |||
Balance at beginning of year | 110,291 | ||
Foreign currency changes | (3,983) | ||
Impairment charges | (114,274) | ||
Balance at end of period | 0 | ||
Asia | |||
Goodwill [Roll Forward] | |||
Balance at beginning of year | 42,785 | ||
Foreign currency changes | (85) | ||
Impairment charges | (42,870) | ||
Balance at end of period | 0 | ||
Trade Names, SKAGEN | |||
Goodwill [Roll Forward] | |||
Indefinite-lived intangible assets (excluding goodwill) | 55,600 | ||
Indefinite-lived intangible assets (excluding goodwill), fair value disclosure | 27,300 | ||
Indefinite-lived intangible asset impairment | 28,300 | ||
Trade Names, MISFIT | |||
Goodwill [Roll Forward] | |||
Finite-lived intangible assets, net | 11,800 | ||
Finite lived intangible asset impairment | 11,800 | ||
Trade Names, MICHELE | |||
Goodwill [Roll Forward] | |||
Indefinite-lived intangible assets (excluding goodwill) | 18,500 | ||
Indefinite-lived intangible assets (excluding goodwill), fair value disclosure | 10,900 | ||
Indefinite-lived intangible asset impairment | $ 7,600 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Jul. 01, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Components and parts | $ 67,307 | $ 49,438 |
Work-in-process | 16,719 | 12,345 |
Finished goods | 534,044 | 480,704 |
Inventories | $ 618,070 | $ 542,487 |
WARRANTY LIABILITIES (Details)
WARRANTY LIABILITIES (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jul. 01, 2017 | Jul. 02, 2016 | |
Warranty liability activity [Roll Forward] | ||
Beginning balance | $ 15,421 | $ 13,669 |
Settlements in cash or kind | (3,838) | (4,795) |
Warranties issued and adjustments to preexisting warranties | 4,674 | 4,861 |
Ending balance | $ 16,257 | $ 13,735 |
INCOME TAXES (Schedule of Incom
INCOME TAXES (Schedule of Income Tax Expense and Related Effective Rate) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Income tax (benefit) expense | $ (96,296) | $ 3,499 | $ (97,516) | $ 6,778 |
Effective tax rate | 21.90% | 30.20% | 20.00% | 30.50% |
INCOME TAXES (Narratives) (Deta
INCOME TAXES (Narratives) (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Jul. 01, 2017USD ($) | Jul. 01, 2017USD ($) | |
Income Tax Disclosure [Abstract] | ||
Unrecognized tax benefits | $ 23.5 | $ 23.5 |
Unrecognized tax benefits that would impact effective tax rate | 20.5 | 20.5 |
Unrecognized tax benefits, excluding interest and penalties, that are expected to be settled within the next 12 months | 3.4 | 3.4 |
Accrued income-tax related interest and penalties | 2.9 | 2.9 |
Accrued income tax penalties | 1.4 | 1.4 |
Income-tax related interest expense | $ 0.3 | $ 0.5 |
STOCKHOLDERS' EQUITY (Common St
STOCKHOLDERS' EQUITY (Common Stock Repurchase Programs) (Details) - USD ($) shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Common Stock Repurchase Programs | ||||
Authorizations remaining | $ 824,200,000 | $ 824,200,000 | ||
Repurchase program with termination date of December 2018 | ||||
Common Stock Repurchase Programs | ||||
Dollar Value Authorized | $ 1,000,000,000 | $ 1,000,000,000 | ||
Number of Shares Repurchased (in shares) | 0 | 0 | 0 | 0.1 |
Dollar Value Repurchased | $ 0 | $ 800,000 | $ 0 | $ 5,200,000 |
Share repurchase plan with no termination date | ||||
Common Stock Repurchase Programs | ||||
Dollar Value Authorized | $ 30,000,000 | $ 30,000,000 | ||
Number of Shares Repurchased (in shares) | 0 | 0 | 0 | 0 |
Dollar Value Repurchased | $ 0 | $ 0 | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY (Controlli
STOCKHOLDERS' EQUITY (Controlling and Noncontrolling Interest) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward] | ||||
Beginning balance | $ 1,015,438 | $ 932,543 | ||
Net income (loss) | $ (343,099) | $ 8,072 | (389,888) | 15,468 |
Currency translation adjustment | 26,856 | 7,721 | ||
Cash flow hedges - net change | (9,592) | 4,331 | (11,593) | (6,101) |
Distribution of noncontrolling interest earnings | (427) | (4,544) | ||
Acquisition of common stock | (907) | (6,418) | ||
Stock-based compensation expense | 15,335 | 16,463 | ||
Pension plan activity | 0 | 0 | 0 | 1,714 |
Common stock issued upon exercise of stock options | 57 | |||
Tax expense derived from stock-based compensation | (1,389) | |||
Ending balance | 654,814 | 955,514 | 654,814 | 955,514 |
Fossil Group, Inc. Stockholders’ Equity | ||||
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward] | ||||
Beginning balance | 1,006,236 | 921,388 | ||
Net income (loss) | (392,898) | 11,814 | ||
Currency translation adjustment | 26,856 | 7,721 | ||
Cash flow hedges - net change | (11,593) | (6,101) | ||
Distribution of noncontrolling interest earnings | 0 | 0 | ||
Acquisition of common stock | (907) | (6,418) | ||
Stock-based compensation expense | 15,335 | 16,463 | ||
Pension plan activity | 1,714 | |||
Common stock issued upon exercise of stock options | 57 | |||
Tax expense derived from stock-based compensation | (1,389) | |||
Ending balance | 643,029 | 945,249 | 643,029 | 945,249 |
Noncontrolling Interest | ||||
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward] | ||||
Beginning balance | 9,202 | 11,155 | ||
Net income (loss) | 3,010 | 3,654 | ||
Currency translation adjustment | 0 | 0 | ||
Cash flow hedges - net change | 0 | 0 | ||
Distribution of noncontrolling interest earnings | (427) | (4,544) | ||
Acquisition of common stock | 0 | 0 | ||
Stock-based compensation expense | 0 | 0 | ||
Pension plan activity | 0 | |||
Common stock issued upon exercise of stock options | 0 | |||
Tax expense derived from stock-based compensation | 0 | |||
Ending balance | $ 11,785 | $ 10,265 | $ 11,785 | $ 10,265 |
EMPLOYEE BENEFIT PLANS (Summary
EMPLOYEE BENEFIT PLANS (Summary of Stock Options and Stock Appreciation Rights Activity) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jul. 01, 2017 | Apr. 01, 2017 | |
Shares | ||
Outstanding at beginning of period (in shares) | 2,273 | |
Granted (in shares) | 0 | |
Exercised (in shares) | 0 | |
Forfeited or expired (in shares) | (37) | |
Outstanding at end of period (in shares) | 2,236 | 2,273 |
Exercisable at end of period (in shares) | 871 | |
Weighted- Average Exercise Price | ||
Outstanding at beginning of period (in dollars per share) | $ 50.77 | |
Granted (in dollars per share) | 0 | |
Exercised(in dollars per share) | 0 | |
Forfeited or expired (in dollars per share) | 79.66 | |
Outstanding at end of period (in dollars per share) | 50.29 | $ 50.77 |
Exercisable at end of period (in dollars per share) | $ 69.03 | |
Weighted- Average Remaining Contractual Term | ||
Outstanding (in years) | 5 years 9 months | 6 years |
Exercisable at end of period (in years) | 4 years 6 months | |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value outstanding | $ 0 | $ 117 |
Exercised | 0 | |
Exercisable at end of period | $ 0 |
EMPLOYEE BENEFIT PLANS (Summa45
EMPLOYEE BENEFIT PLANS (Summary of Stock Options and Stock Appreciation Rights Outstanding and Exercisable) (Details) shares in Thousands | 6 Months Ended |
Jul. 01, 2017$ / sharesshares | |
Cash Stock Appreciation Rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 61 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 36.73 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 6 years 6 months 12 days |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 11 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 36.73 |
Stock options | |
Stock-based compensation plans disclosures | |
Stock options outstanding, number of shares (in shares) | shares | 342 |
Stock options outstanding, weighted- average exercise price (in dollars per share) | $ 80.35 |
Stock options outstanding, weighted- average remaining contractual term | 3 years 2 months 24 days |
Stock options exercisable, number of shares (in shares) | shares | 342 |
Stock options exercisable, weighted- average exercise price (in dollars per share) | $ 80.35 |
Stock appreciation rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 1,833 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 45.14 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 6 years 2 months |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 518 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 62.26 |
$29.78 - $47.99 | Cash Stock Appreciation Rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, lower range (in dollars per share) | 29.78 |
Equity instruments other than options outstanding, upper range (in dollars per share) | $ 47.99 |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 61 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 36.73 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 6 years 6 months 12 days |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 11 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 36.73 |
$29.78 - $47.99 | Stock options | |
Stock-based compensation plans disclosures | |
Stock options outstanding, lower range (in dollars per share) | 29.78 |
Stock options outstanding, upper range (in dollars per share) | $ 47.99 |
Stock options outstanding, number of shares (in shares) | shares | 81 |
Stock options outstanding, weighted- average exercise price (in dollars per share) | $ 36.92 |
Stock options outstanding, weighted- average remaining contractual term | 1 year 8 months 18 days |
Stock options exercisable, number of shares (in shares) | shares | 81 |
Stock options exercisable, weighted- average exercise price (in dollars per share) | $ 36.92 |
$29.78 - $47.99 | Stock appreciation rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, lower range (in dollars per share) | 29.78 |
Equity instruments other than options outstanding, upper range (in dollars per share) | $ 47.99 |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 1,489 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 38.11 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 6 years 6 months |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 314 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 39.05 |
$13.65 - $29.49 | Stock options | |
Stock-based compensation plans disclosures | |
Stock options outstanding, lower range (in dollars per share) | 13.65 |
Stock options outstanding, upper range (in dollars per share) | $ 29.49 |
Stock options outstanding, number of shares (in shares) | shares | 40 |
Stock options outstanding, weighted- average exercise price (in dollars per share) | $ 14.40 |
Stock options outstanding, weighted- average remaining contractual term | 1 year 5 months 25 days |
Stock options exercisable, number of shares (in shares) | shares | 40 |
Stock options exercisable, weighted- average exercise price (in dollars per share) | $ 14.40 |
$13.65 - $29.49 | Stock appreciation rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, lower range (in dollars per share) | 13.65 |
Equity instruments other than options outstanding, upper range (in dollars per share) | $ 29.49 |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 101 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 29.49 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 7 years |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 0 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 0 |
$55.04 - $83.83 | Stock options | |
Stock-based compensation plans disclosures | |
Stock options outstanding, lower range (in dollars per share) | 55.04 |
Stock options outstanding, upper range (in dollars per share) | $ 83.83 |
Stock options outstanding, number of shares (in shares) | shares | 91 |
Stock options outstanding, weighted- average exercise price (in dollars per share) | $ 80.80 |
Stock options outstanding, weighted- average remaining contractual term | 3 years 6 months |
Stock options exercisable, number of shares (in shares) | shares | 91 |
Stock options exercisable, weighted- average exercise price (in dollars per share) | $ 80.80 |
$55.04 - $83.83 | Stock appreciation rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, lower range (in dollars per share) | 55.04 |
Equity instruments other than options outstanding, upper range (in dollars per share) | $ 83.83 |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 134 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 78.96 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 4 years 9 months |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 97 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 79.73 |
$95.91 - $131.46 | Stock options | |
Stock-based compensation plans disclosures | |
Stock options outstanding, lower range (in dollars per share) | 95.91 |
Stock options outstanding, upper range (in dollars per share) | $ 131.46 |
Stock options outstanding, number of shares (in shares) | shares | 130 |
Stock options outstanding, weighted- average exercise price (in dollars per share) | $ 127.97 |
Stock options outstanding, weighted- average remaining contractual term | 4 years 5 months |
Stock options exercisable, number of shares (in shares) | shares | 130 |
Stock options exercisable, weighted- average exercise price (in dollars per share) | $ 127.97 |
$95.91 - $131.46 | Stock appreciation rights | |
Stock-based compensation plans disclosures | |
Equity instruments other than options outstanding, lower range (in dollars per share) | 95.91 |
Equity instruments other than options outstanding, upper range (in dollars per share) | $ 131.46 |
Equity instruments other than options outstanding, number of shares (in shares) | shares | 109 |
Equity instruments other than options outstanding, weighted- average exercise price (in dollars per share) | $ 114.42 |
Equity instruments other than options outstanding, weighted- average remaining contractual term | 3 years 9 months |
Equity instruments other than options exercisable, number of shares (in shares) | shares | 107 |
Equity instruments other than options exercisable, weighted- average exercise price (in dollars per share) | $ 114.63 |
EMPLOYEE BENEFIT PLANS (Summa46
EMPLOYEE BENEFIT PLANS (Summary of Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units Activity) (Details) - Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended |
Jul. 01, 2017USD ($)$ / sharesshares | |
Number of Shares | |
Nonvested at beginning of period (in shares) | shares | 1,101 |
Granted (in shares) | shares | 1,816 |
Vested (in shares) | shares | (53) |
Forfeited (in shares) | shares | (79) |
Nonvested at end of period (in shares) | shares | 2,785 |
Weighted-Average Grant Date Fair Value Per Share | |
Nonvested at beginning of period (in dollars per share) | $ / shares | $ 37.16 |
Granted (in dollars per share) | $ / shares | 16.50 |
Vested (in dollars per share) | $ / shares | 30.82 |
Forfeited (in dollars per share) | $ / shares | 24.30 |
Nonvested at end of period (in dollars per share) | $ / shares | $ 24.21 |
Fair value of restricted stock and restricted stock units vested | $ | $ 0.7 |
ACCUMULATED OTHER COMPREHENSI47
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | $ 1,015,438 | $ 932,543 | ||
Total other comprehensive income (loss) | $ 6,869 | $ (5,169) | 15,263 | 3,334 |
Ending balance | 654,814 | 955,514 | 654,814 | 955,514 |
Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | (91,472) | (64,486) | (101,867) | (81,707) |
Other comprehensive income (loss) before reclassifications | 16,461 | (9,396) | 26,856 | 7,825 |
Tax (expense) benefit | 0 | 0 | 0 | 0 |
Amounts reclassed from accumulated other comprehensive income | 0 | 104 | 0 | 104 |
Tax (expense) benefit | 0 | 0 | 0 | 0 |
Total other comprehensive income (loss) | 16,461 | (9,500) | 26,856 | 7,721 |
Ending balance | (75,011) | (73,986) | (75,011) | (73,986) |
Cash Flow Hedges | Forward Contracts | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | 8,390 | (1,554) | 10,693 | 8,114 |
Other comprehensive income (loss) before reclassifications | (15,306) | 8,738 | (16,468) | (1,259) |
Tax (expense) benefit | 6,371 | (3,576) | 8,660 | 1,039 |
Amounts reclassed from accumulated other comprehensive income | 1,367 | 928 | 6,920 | 7,267 |
Tax (expense) benefit | (628) | (263) | (2,751) | (2,316) |
Total other comprehensive income (loss) | (9,674) | 4,497 | (11,977) | (5,171) |
Ending balance | (1,284) | 2,943 | (1,284) | 2,943 |
Cash Flow Hedges | Interest Rate Swaps | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | (41) | (1,457) | (343) | (693) |
Other comprehensive income (loss) before reclassifications | (2) | (711) | 225 | (2,381) |
Tax (expense) benefit | 1 | 259 | (82) | 868 |
Amounts reclassed from accumulated other comprehensive income | (131) | (450) | (379) | (918) |
Tax (expense) benefit | 48 | 164 | 138 | 335 |
Total other comprehensive income (loss) | 82 | (166) | 384 | (930) |
Ending balance | 41 | (1,623) | 41 | (1,623) |
Pension Plan | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | (3,907) | (4,506) | (3,907) | (6,220) |
Other comprehensive income (loss) before reclassifications | 0 | 0 | 0 | 2,010 |
Tax (expense) benefit | 0 | 0 | 0 | (296) |
Amounts reclassed from accumulated other comprehensive income | 0 | 0 | 0 | 0 |
Tax (expense) benefit | 0 | 0 | 0 | 0 |
Total other comprehensive income (loss) | 0 | 0 | 0 | 1,714 |
Ending balance | (3,907) | (4,506) | (3,907) | (4,506) |
Total | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Beginning balance | (87,030) | (72,003) | (95,424) | (80,506) |
Other comprehensive income (loss) before reclassifications | 1,153 | (1,369) | 10,613 | 6,195 |
Tax (expense) benefit | 6,372 | (3,317) | 8,578 | 1,611 |
Amounts reclassed from accumulated other comprehensive income | 1,236 | 582 | 6,541 | 6,453 |
Tax (expense) benefit | (580) | (99) | (2,613) | (1,981) |
Total other comprehensive income (loss) | 6,869 | (5,169) | 15,263 | 3,334 |
Ending balance | $ (80,161) | $ (77,172) | $ (80,161) | $ (77,172) |
SEGMENT INFORMATION (Summary In
SEGMENT INFORMATION (Summary Information by Operating Segment) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Summary information by operating segment | ||||
Net Sales | $ 596,846 | $ 685,368 | $ 1,178,636 | $ 1,345,216 |
Operating Income (Loss) | (429,756) | 15,450 | (475,019) | 29,854 |
Operating segments | Americas | ||||
Summary information by operating segment | ||||
Net Sales | 288,804 | 345,187 | 566,347 | 680,997 |
Operating Income (Loss) | (166,500) | 52,300 | (140,819) | 111,896 |
Operating segments | Europe | ||||
Summary information by operating segment | ||||
Net Sales | 194,702 | 215,936 | 390,382 | 425,937 |
Operating Income (Loss) | (86,805) | 31,669 | (73,191) | 60,180 |
Operating segments | Asia | ||||
Summary information by operating segment | ||||
Net Sales | 113,340 | 124,245 | 221,907 | 238,282 |
Operating Income (Loss) | (35,658) | 18,936 | (24,701) | 36,865 |
Corporate | ||||
Summary information by operating segment | ||||
Operating Income (Loss) | $ (140,793) | $ (87,455) | $ (236,308) | $ (179,087) |
SEGMENT INFORMATION (Schedule o
SEGMENT INFORMATION (Schedule of Net Sales for Each Class of Similar Products) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Net sales for each class of similar products | ||||
Net sales | $ 596,846 | $ 685,368 | $ 1,178,636 | $ 1,345,216 |
Percentage of Total | 100.00% | 100.00% | 100.00% | 100.00% |
Watches | ||||
Net sales for each class of similar products | ||||
Net sales | $ 469,461 | $ 517,602 | $ 919,231 | $ 1,014,085 |
Percentage of Total | 78.60% | 75.50% | 78.00% | 75.40% |
Leathers | ||||
Net sales for each class of similar products | ||||
Net sales | $ 69,597 | $ 93,152 | $ 142,286 | $ 185,657 |
Percentage of Total | 11.70% | 13.60% | 12.10% | 13.80% |
Jewelry | ||||
Net sales for each class of similar products | ||||
Net sales | $ 44,285 | $ 56,752 | $ 92,171 | $ 111,472 |
Percentage of Total | 7.40% | 8.30% | 7.80% | 8.30% |
Other | ||||
Net sales for each class of similar products | ||||
Net sales | $ 13,503 | $ 17,862 | $ 24,948 | $ 34,002 |
Percentage of Total | 2.30% | 2.60% | 2.10% | 2.50% |
DERIVATIVES AND RISK MANAGEME50
DERIVATIVES AND RISK MANAGEMENT (Cash Flow Hedges) (Details) $ in Thousands, € in Millions, ¥ in Millions, £ in Millions, MXN in Millions, CAD in Millions, AUD in Millions | Jul. 26, 2013 | Jul. 01, 2017USD ($) | Jul. 02, 2016USD ($) | Jul. 01, 2017USD ($) | Jul. 02, 2016USD ($) | Jul. 01, 2017JPY (¥) | Jul. 01, 2017AUD | Jul. 01, 2017CAD | Jul. 01, 2017EUR (€) | Jul. 01, 2017MXN | Jul. 01, 2017GBP (£) |
Derivative [Line Items] | |||||||||||
Foreign currency cash flow hedge maximum length of projection term | 24 months | ||||||||||
Forecasted purchases to manage fluctuations (up to) (as a percent) | 85.00% | 85.00% | 85.00% | 85.00% | 85.00% | 85.00% | 85.00% | 85.00% | |||
Hedges resulted in ineffectiveness | $ 0 | $ 0 | $ 0 | $ 0 | |||||||
Gain (loss) reclassified into earnings | (344,712) | 6,021 | (392,898) | 11,814 | |||||||
U.S. term loan | |||||||||||
Derivative [Line Items] | |||||||||||
Line of credit outstanding | 173,300 | 173,300 | |||||||||
Designated as cash flow hedges | Forward Contracts | Euro | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 291,400 | 291,400 | € 258.2 | ||||||||
Designated as cash flow hedges | Forward Contracts | Canadian dollar | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 72,300 | 72,300 | CAD 95 | ||||||||
Designated as cash flow hedges | Forward Contracts | British pound | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 60,800 | 60,800 | £ 44.8 | ||||||||
Designated as cash flow hedges | Forward Contracts | Japanese yen | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 42,400 | 42,400 | ¥ 4,622.3 | ||||||||
Designated as cash flow hedges | Forward Contracts | Mexican peso | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 19,200 | 19,200 | MXN 366.6 | ||||||||
Designated as cash flow hedges | Forward Contracts | Australian dollar | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | 17,000 | 17,000 | AUD 22.3 | ||||||||
Designated as cash flow hedges | Forward Contracts | U.S. dollar | |||||||||||
Derivative [Line Items] | |||||||||||
Notional amount | $ 45,800 | $ 45,800 | ¥ 4,930 | ||||||||
Designated as cash flow hedges | Interest Rate Swaps | |||||||||||
Derivative [Line Items] | |||||||||||
Derivative, term of contract | 5 years | ||||||||||
Fixed interest rate (as a percent) | 1.288% | 1.288% | 1.288% | 1.288% | 1.288% | 1.288% | 1.288% | 1.288% | |||
Applicable margin based on the Company's consolidated leverage ratio (as a percent) | 3.50% | ||||||||||
Amount Reclassified from AOCI | Cash Flow Hedges | |||||||||||
Derivative [Line Items] | |||||||||||
Gain (loss) reclassified into earnings | $ 0 | $ 0 | $ 0 | $ 0 |
DERIVATIVES AND RISK MANAGEME51
DERIVATIVES AND RISK MANAGEMENT (Non-designated Hedges) (Details) - Jul. 01, 2017 - Forward Contracts - Forward contracts not designated as hedging instruments ZAR in Millions, $ in Millions | USD ($) | ZAR |
Derivative [Line Items] | ||
Fair value of designated forward contracts | $ | $ 2.4 | |
Hedged amount | ZAR | ZAR 31.7 |
DERIVATIVES AND RISK MANAGEME52
DERIVATIVES AND RISK MANAGEMENT (Derivative Instruments Recognized in Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Derivative [Line Items] | ||||
Total gain (loss) recognized in other comprehensive income (loss), net of taxes | $ (8,936) | $ 4,710 | $ (7,665) | $ (1,733) |
Cash flow hedges | Forward Contracts | ||||
Derivative [Line Items] | ||||
Total gain (loss) recognized in other comprehensive income (loss), net of taxes | (8,935) | 5,162 | (7,808) | (220) |
Cash flow hedges | Interest Rate Swaps | ||||
Derivative [Line Items] | ||||
Total gain (loss) recognized in other comprehensive income (loss), net of taxes | $ (1) | $ (452) | $ 143 | $ (1,513) |
DERIVATIVES AND RISK MANAGEME53
DERIVATIVES AND RISK MANAGEMENT (Derivative Instruments Designated and Qualifying as Cash Flow Hedges) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | ||||
Effective portion of gains and losses on derivative instruments | ||||
Total gain (loss) reclassified from other comprehensive income (loss) | $ 739 | $ 665 | $ 4,169 | $ 4,951 |
Forward Contracts | Forward contracts not designated as hedging instruments | ||||
Effective portion of gains and losses on derivative instruments | ||||
Total gain (loss) recognized in income | 50 | 74 | 77 | (157) |
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | ||||
Effective portion of gains and losses on derivative instruments | ||||
Total gain (loss) reclassified from other comprehensive income (loss) | $ (83) | $ (286) | $ (241) | $ (583) |
DERIVATIVES AND RISK MANAGEME54
DERIVATIVES AND RISK MANAGEMENT (Fair Value Amounts for Derivative Instruments) (Details) - USD ($) $ in Thousands | Jul. 01, 2017 | Dec. 31, 2016 |
Fair value of derivative instruments | ||
Asset derivatives, fair value | $ 4,534 | $ 29,009 |
Liability derivatives, fair value | 12,724 | 5,579 |
Net loss expected to be reclassified into earnings within the next twelve months | 3,700 | |
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Prepaid expenses and other current assets | ||
Fair value of derivative instruments | ||
Asset derivatives, fair value | 4,143 | 23,288 |
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Intangible and other assets-net | ||
Fair value of derivative instruments | ||
Asset derivatives, fair value | 268 | 5,648 |
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Accrued expenses- other | ||
Fair value of derivative instruments | ||
Liability derivatives, fair value | 9,199 | 4,696 |
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Other long-term liabilities | ||
Fair value of derivative instruments | ||
Liability derivatives, fair value | 3,464 | 268 |
Forward Contracts | Forward contracts not designated as hedging instruments | Prepaid expenses and other current assets | ||
Fair value of derivative instruments | ||
Asset derivatives, fair value | 0 | 0 |
Forward Contracts | Forward contracts not designated as hedging instruments | Accrued expenses- other | ||
Fair value of derivative instruments | ||
Liability derivatives, fair value | 2 | 2 |
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Prepaid expenses and other current assets | ||
Fair value of derivative instruments | ||
Asset derivatives, fair value | 123 | 0 |
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Intangible and other assets-net | ||
Fair value of derivative instruments | ||
Asset derivatives, fair value | 0 | 73 |
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Accrued expenses- other | ||
Fair value of derivative instruments | ||
Liability derivatives, fair value | 59 | 613 |
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Other long-term liabilities | ||
Fair value of derivative instruments | ||
Liability derivatives, fair value | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Fair V
FAIR VALUE MEASUREMENTS (Fair Value Hierarchy of Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value Measurement, Recurring Basis - USD ($) $ in Thousands | Jul. 01, 2017 | Dec. 31, 2016 |
Estimate of Fair Value Measurement | ||
Assets: | ||
Forward contracts | $ 4,411 | $ 28,936 |
Investment in publicly traded mutual funds | 2,560 | 2,385 |
Interest rate swap | 123 | 73 |
Total | 7,094 | 31,394 |
Liabilities: | ||
Forward contracts | 12,665 | 4,966 |
Interest rate swap | 59 | 613 |
Total | 12,724 | 5,579 |
Level 1 | ||
Assets: | ||
Forward contracts | 0 | 0 |
Investment in publicly traded mutual funds | 2,560 | 2,385 |
Interest rate swap | 0 | 0 |
Total | 2,560 | 2,385 |
Liabilities: | ||
Forward contracts | 0 | 0 |
Interest rate swap | 0 | 0 |
Total | 0 | 0 |
Level 2 | ||
Assets: | ||
Forward contracts | 4,411 | 28,936 |
Investment in publicly traded mutual funds | 0 | 0 |
Interest rate swap | 123 | 73 |
Total | 4,534 | 29,009 |
Liabilities: | ||
Forward contracts | 12,665 | 4,966 |
Interest rate swap | 59 | 613 |
Total | 12,724 | 5,579 |
Level 3 | ||
Assets: | ||
Forward contracts | 0 | 0 |
Investment in publicly traded mutual funds | 0 | 0 |
Interest rate swap | 0 | 0 |
Total | 0 | 0 |
Liabilities: | ||
Forward contracts | 0 | 0 |
Interest rate swap | 0 | 0 |
Total | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Narrat
FAIR VALUE MEASUREMENTS (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 01, 2017 | Jul. 02, 2016 | Dec. 31, 2016 | |
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Goodwill impairment charges | $ (359,493) | |||
Property, plant and equipment - net | $ 255,778 | 255,778 | $ 273,851 | |
Impairment of property, plant, and equipment | 2,722 | $ 0 | ||
Cost-method investments, other than temporary impairment | 1,600 | |||
Specific Company Owned Stores | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Property, plant and equipment - net | 3,700 | 3,700 | ||
Key amount not recoverable | 600 | |||
Impairment of property, plant, and equipment | 4,300 | |||
Europe | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Goodwill impairment charges | (114,274) | |||
Americas | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Goodwill impairment charges | (202,349) | |||
Asia | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Goodwill impairment charges | (42,870) | |||
Selling, General and Administrative | Europe | Specific Company Owned Stores | Level 3 | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Impairment of property, plant, and equipment | 800 | |||
Selling, General and Administrative | Asia | Specific Company Owned Stores | Level 3 | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Impairment of property, plant, and equipment | 400 | |||
Restructuring Charges | Europe | Specific Company Owned Stores | Level 3 | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Impairment of property, plant, and equipment | 1,400 | |||
Restructuring Charges | Americas | Specific Company Owned Stores | Level 3 | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Impairment of property, plant, and equipment | 1,300 | |||
Restructuring Charges | Asia | Specific Company Owned Stores | Level 3 | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Impairment of property, plant, and equipment | 400 | |||
Carrying Value | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Debt, fair value | 649,000 | 649,000 | ||
Estimate of Fair Value Measurement | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Debt, fair value | 636,000 | 636,000 | ||
Trade Names, MISFIT | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Finite-lived intangible assets, net | 11,800 | 11,800 | ||
Finite lived intangible asset impairment | 11,800 | |||
Trade Names, SKAGEN | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Indefinite-lived intangible assets (excluding goodwill) | 55,600 | 55,600 | ||
Indefinite-lived intangible assets (excluding goodwill), fair value disclosure | 27,300 | 27,300 | ||
Indefinite-lived intangible asset impairment | 28,300 | |||
Trade Names, MICHELE | ||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | ||||
Indefinite-lived intangible assets (excluding goodwill) | 18,500 | 18,500 | ||
Indefinite-lived intangible assets (excluding goodwill), fair value disclosure | $ 10,900 | 10,900 | ||
Indefinite-lived intangible asset impairment | $ 7,600 |
INTANGIBLE AND OTHER ASSETS (In
INTANGIBLE AND OTHER ASSETS (Intangible and Other Assets) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jul. 01, 2017 | Dec. 31, 2016 | |
Intangibles-subject to amortization: | ||
Gross Amount | $ 100,225 | $ 114,818 |
Accumulated Amortization | 46,360 | 42,179 |
Intangibles-not subject to amortization: | ||
Gross Amount | 38,651 | 74,485 |
Other assets: | ||
Gross Amount | 155,804 | 93,426 |
Accumulated Amortization | 32,909 | 30,057 |
Gross Amount | 294,680 | 282,729 |
Accumulated Amortization | 79,269 | 72,236 |
Total intangible and other assets-net | 215,411 | 210,493 |
Key money deposits | ||
Other assets: | ||
Gross Amount | 27,325 | 26,948 |
Accumulated Amortization | $ 23,472 | 22,038 |
Key money deposits | Minimum | ||
Other assets: | ||
Amortization period based on initial lease term | 4 years | |
Key money deposits | Maximum | ||
Other assets: | ||
Amortization period based on initial lease term | 18 years | |
Other deposits | ||
Other assets: | ||
Gross Amount | $ 19,322 | 19,344 |
Deferred compensation plan assets | ||
Other assets: | ||
Gross Amount | 2,560 | 2,385 |
Deferred tax asset-net | ||
Other assets: | ||
Gross Amount | 83,844 | 23,061 |
Restricted cash | ||
Other assets: | ||
Gross Amount | 362 | 500 |
Shop-in-shop | ||
Other assets: | ||
Gross Amount | 9,907 | 8,807 |
Accumulated Amortization | 9,437 | 8,019 |
Interest rate swap | ||
Other assets: | ||
Gross Amount | 0 | 73 |
Long term tax receivable | ||
Other assets: | ||
Gross Amount | 6,929 | 0 |
Forward contracts | ||
Other assets: | ||
Gross Amount | 268 | 5,648 |
Investments | ||
Other assets: | ||
Gross Amount | 500 | 2,078 |
Other | ||
Other assets: | ||
Gross Amount | $ 4,787 | 4,582 |
Trademarks | ||
Intangibles-subject to amortization: | ||
Useful Lives | 10 years | |
Gross Amount | $ 4,310 | 4,310 |
Accumulated Amortization | 3,562 | 3,443 |
Customer lists | ||
Intangibles-subject to amortization: | ||
Gross Amount | 54,694 | 53,625 |
Accumulated Amortization | $ 30,761 | 26,986 |
Customer lists | Minimum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 5 years | |
Customer lists | Maximum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 10 years | |
Patents | ||
Intangibles-subject to amortization: | ||
Gross Amount | $ 2,325 | 2,325 |
Accumulated Amortization | $ 2,116 | 2,099 |
Patents | Minimum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 3 years | |
Patents | Maximum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 20 years | |
Noncompete agreement | ||
Intangibles-subject to amortization: | ||
Gross Amount | $ 2,535 | 2,505 |
Accumulated Amortization | $ 1,956 | 1,662 |
Noncompete agreement | Minimum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 3 years | |
Noncompete agreement | Maximum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 6 years | |
Developed technology | ||
Intangibles-subject to amortization: | ||
Useful Lives | 7 years | |
Gross Amount | $ 36,100 | 36,100 |
Accumulated Amortization | $ 7,736 | 5,157 |
Trade name | ||
Intangibles-subject to amortization: | ||
Useful Lives | 6 years | |
Gross Amount | $ 0 | 15,700 |
Accumulated Amortization | 0 | 2,617 |
Other | ||
Intangibles-subject to amortization: | ||
Gross Amount | 261 | 253 |
Accumulated Amortization | $ 229 | $ 215 |
Other | Minimum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 7 years | |
Other | Maximum | ||
Intangibles-subject to amortization: | ||
Useful Lives | 20 years |
INTANGIBLE AND OTHER ASSETS (Am
INTANGIBLE AND OTHER ASSETS (Amortization Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
INTANGIBLE AND OTHER ASSETS | ||||
Amortization expense for intangible assets | $ 3,700 | $ 3,800 | $ 7,400 | $ 7,500 |
Estimated aggregate future amortization expense by fiscal year | ||||
2017 (remaining) | 6,049 | 6,049 | ||
2,018 | 11,828 | 11,828 | ||
2,019 | 11,499 | 11,499 | ||
2,020 | 10,975 | 10,975 | ||
2,021 | 7,146 | 7,146 | ||
2,022 | $ 6,251 | $ 6,251 |
DEBT ACTIVITY (Details)
DEBT ACTIVITY (Details) | Mar. 10, 2017USD ($) | Jul. 01, 2017USD ($) | Jul. 02, 2016USD ($) | Jul. 01, 2017USD ($) | Jul. 02, 2016USD ($) | Dec. 31, 2016USD ($) | Jan. 02, 2016USD ($) | Mar. 09, 2015USD ($) |
Debt Instrument [Line Items] | ||||||||
International cash balance | $ 319,824,000 | $ 231,836,000 | $ 319,824,000 | $ 231,836,000 | $ 297,330,000 | $ 289,275,000 | ||
Interest paid | 11,641,000 | $ 6,421,000 | 20,025,000 | $ 12,420,000 | ||||
Interest expense relate to amortization of debt issuance costs | 1,100,000 | $ 1,800,000 | ||||||
First Credit Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 1,050,000,000 | |||||||
Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 850,000,000 | |||||||
Reduction in revolving credit capacity | 50,000,000 | |||||||
Line of credit, capacity of dividends earnings applied to repayment of loan | $ 50,000,000 | |||||||
Line of credit facility, commitment fee amount | 0.50% | |||||||
Line of credit facility, credit exposure fee, percent | 0.0025 | |||||||
Consolidated leverage ratio | 3.25 | |||||||
U.S. term loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayment of borrowings | 6,300,000 | $ 12,500,000 | ||||||
Interest paid | 2,300,000 | 4,100,000 | ||||||
U.S. revolving line of credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of lines of credit | 35,700,000 | 26,700,000 | ||||||
Available borrowing capacity | 79,100,000 | 79,100,000 | ||||||
International cash balance | 254,800,000 | 254,800,000 | ||||||
Interest expense incurred | $ 7,500,000 | $ 12,400,000 | ||||||
Debt Covenant Period One | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Consolidated leverage ratio | 3.25 | |||||||
Debt Covenant Period One | London Interbank Offered Rate (LIBOR) | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 3.50% | |||||||
Debt Covenant Period One | Base Rate | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 2.50% | |||||||
Debt Covenant Period Two | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Consolidated leverage ratio | 3.50 | |||||||
Debt Covenant Period Two | London Interbank Offered Rate (LIBOR) | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 3.75% | |||||||
Debt Covenant Period Two | Base Rate | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 2.75% | |||||||
Debt Covenant Period Three | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Consolidated leverage ratio | 3.25 | |||||||
Debt Covenant Period Three | London Interbank Offered Rate (LIBOR) | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 4.25% | |||||||
Debt Covenant Period Three | Base Rate | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Derivative, basis spread on variable rate | 3.25% | |||||||
Debt Covenant Period Four | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Consolidated leverage ratio | 3.50 | |||||||
Debt Covenant Period Five | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Consolidated leverage ratio | 3.25 |
RESTRUCTURING - Narrative (Deta
RESTRUCTURING - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | Dec. 31, 2016 | |
Restructuring Cost and Reserve [Line Items] | |||||
Restructuring charges | $ 9,765 | $ 0 | $ 36,049 | $ 0 | |
New World Fossil | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Total expected costs to be incurred | 150,000 | 150,000 | |||
Restructuring charges | 36,000 | $ 27,800 | |||
Restructuring, expected remaining costs | $ 45,000 | $ 45,000 |
RESTRUCTURING - Liability Incur
RESTRUCTURING - Liability Incurred for Restructuring Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Restructuring Reserve [Roll Forward] | ||||
Beginning balance | $ 7,696 | $ 5,340 | ||
Restructuring charges | 9,765 | $ 0 | 36,049 | $ 0 |
Cash Payments | 7,148 | 30,425 | ||
Non-cash Items | 3,769 | 4,420 | ||
Ending balance | 6,544 | 6,544 | ||
Store closures | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning balance | 5,501 | 4,546 | ||
Restructuring charges | 3,017 | 5,741 | ||
Cash Payments | 1,060 | 2,178 | ||
Non-cash Items | 2,565 | 3,216 | ||
Ending balance | 4,893 | 4,893 | ||
Professional services | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning balance | 92 | 794 | ||
Restructuring charges | 856 | 1,430 | ||
Cash Payments | 832 | 2,108 | ||
Non-cash Items | 0 | 0 | ||
Ending balance | 116 | 116 | ||
Severance and employee-related benefits | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning balance | 2,103 | 0 | ||
Restructuring charges | 5,892 | 28,878 | ||
Cash Payments | 5,256 | 26,139 | ||
Non-cash Items | 1,204 | 1,204 | ||
Ending balance | $ 1,535 | $ 1,535 |
RESTRUCTURING - Restructuring C
RESTRUCTURING - Restructuring Charges by Operating Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2017 | Jul. 02, 2016 | Jul. 01, 2017 | Jul. 02, 2016 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 9,765 | $ 0 | $ 36,049 | $ 0 |
Operating segments | Americas | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 2,179 | 7,796 | ||
Operating segments | Europe | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 2,160 | 7,682 | ||
Operating segments | Asia | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 3,353 | 8,139 | ||
Corporate | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 2,073 | $ 12,432 |