FOSSIL, INC. ANNOUNCES CHANGES TO PREVIOUSLY REPORTED FISCAL 2004 RESULTS
Company to Correct Accounting for Leases;
Company Reaches Agreement to Settle Supplier Claim;
Company Reaffirms Fiscal 2005 Guidance
RICHARDSON, Texas, March 16 /PRNewswire-FirstCall/ -- Fossil, Inc. (Nasdaq:
FOSL) announced today that as a result of recent clarifications issued by the
Securities and Exchange Commission, which provided guidance on long-standing,
generally accepted accounting principles related to operating leases, the
Company will be adjusting its previously reported results of operations for its
fourth quarter and year ended January 1, 2005, as previously disclosed in its
earnings release of February 22, 2005. These adjustments will be included in the
Company's 2004 Form 10-K Report to be filed on March 17, 2005.
The Company has reviewed its lease accounting practices and based on the
Company's review, and in consultation with its audit committee and its
independent Registered Public Accountants, Deloitte & Touche LLP, the Company
has concluded that it will change its lease accounting practices to conform with
this clarification and will adjust its reported earnings for its fourth quarter
and fiscal year ending January 1, 2005. These adjustments generally arise from
corrections to the Company's previous accounting practices relating to the
extension of its rental expense period to the lease possession date and rent
escalations in computing rent expense for operating leases primarily related to
its retail stores segment. Of the approximate $3.1 million non- cash pretax
expense to be recorded in the fourth quarter of 2004, less than $200,000 is
attributable to the current year and approximately $2.9 million is related to
prior periods. Prior years' financial results will not be restated due to the
immateriality of this issue to the results of operations, cash flows and
statement of financial position for the Company's current year or any individual
prior quarter or year. These adjustments will not affect historical or future
cash flows or timing of payments under the related leases.
Additionally, subsequent to the Company's fourth quarter and full year
earnings release on February 22, 2005, the Company has reached a tentative
settlement on a supplier's claim relating to the production of certain watches.
As a result of this tentative settlement, the Company can now reasonably
estimate this contingent liability that existed as of the Company's year ended
January 1, 2005. Therefore, the Company will record a pretax charge of $875,000
in the fourth quarter of 2004.
As a result of these items, net income and fully diluted earnings per share
information for the quarter and fiscal year ended January 1, 2005, as disclosed
in the Company's earnings release on February 22, 2005, will be adjusted as
follow:
Quarter Ended Year Ended
January 1, 2005 January 1, 2005
--------------------------- ---------------------------
(in 000's except for Previously Previously
per share amounts) Adjusted Disclosed* Adjusted Disclosed*
- ------------------------- ------------ ------------ ------------ ------------
Net income $ 35,072 $ 37,586 $ 90,569 $ 93,083
Fully diluted
earnings per
share $ 0.47 $ 0.50 $ 1.22 $ 1.25
* As reported in the Company's earnings press release on February 22,
2005.
The Company does not believe these adjustments will materially impact
earnings guidance that was communicated in its earnings release of February 22,
2005.
Certain statements contained herein that are not historical facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve a number of risks and uncertainties.
The actual results of the future events described in such forward-looking
statements could differ materially from those stated in such forward-looking
statements. Among the factors that could cause actual results to differ
materially are: general economic conditions, competition, acts of terrorism or
acts of war, government regulation, changes in foreign currency valuations in
relation to the United States Dollar and possible future litigation, as well as
the risks and uncertainties set forth on the Company's Current Report on Form
8-K dated September 14, 2004.
Fossil is a design, development, marketing and distribution company that
specializes in consumer products predicated on fashion and value. The Company's
principal offerings include an extensive line of fashion watches sold under the
Company's proprietary and licensed brands. The Company also offers complementary
lines of small leather goods, belts, handbags, sunglasses, jewelry and apparel.
The Company's products are sold in department stores and specialty retail stores
in over 90 countries around the world, in addition to the Company's e-commerce
website at http://www.fossil.com . Certain product, press release and SEC filing
information concerning the Company is available at the website.
SOURCE Fossil, Inc.
-0- 03/16/2005
/CONTACT: Mike Kovar, Chief Financial Officer of Fossil, Inc.,
+1-972-699-2229; or investor relations, Allison Malkin of Integrated Corporate
Relations, +1-203-682-8225, for Fossil, Inc./
/Web site: http://www.fossil.com /