UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________

FORM 10-Q

(Mark One)



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

For the quarterly period ended: ~~September 30, 2017~~July 4, 2020



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

For the transition period from to

Commission file number: 000-19848

__________________________________________________________________

FOSSIL GROUP, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________________________



Delaware			75-2018505
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

901 S. Central Expressway,	Richardson,	Texas	75080
(Address of principal executive offices)			(Zip Code)

~~(972)~~ (972) 234-2525

(Registrant’s telephone number, including area code)

__________________________________________________________________

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



Title of each class	Ticker Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	FOSL	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):



Large accelerated filero	☐		Accelerated filerx	☒

~~Non-accelerated filer~~ o		~~Smaller reporting company~~ o
~~(Do not check if a smaller reporting company)~~
Non-accelerated filer	☐		Smaller reporting company	☐
Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒

The number of shares of the registrant’s common stock outstanding as of ~~November 2, 2017: 48,527,898~~August 10, 2020: 51,299,163

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED ~~SEPTEMBER 30, 2017~~JULY 4, 2020

INDEX

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS


	September 30, 2017			December 31, 2016			July 4, 2020			December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	166,922		$	297,330		$	277,561		$	200,218
Accounts receivable - net of allowances of $70,081 and $79,707, respectively	310,895			375,520
Accounts receivable - net of allowances for doubtful accounts of $16,496 and $13,234, respectively							130,083			289,744
Inventories	682,986			542,487			375,906			452,278
Prepaid expenses and other current assets	125,533			131,953			98,123			117,218
Total current assets	1,286,336			1,347,290			881,673			1,059,458
Property, plant and equipment - net of accumulated depreciation of $453,894 and $414,761, respectively	243,448			273,851
Goodwill	—			355,263
Property, plant and equipment - net of accumulated depreciation of $467,478 and $464,913, respectively							133,334			151,500
Operating lease right-of-use assets							253,884			288,166
Intangible and other assets-net	220,588			210,493			182,438			105,608
Total long-term assets	464,036			839,607			569,656			545,274
Total assets	$	1,750,372		$	2,186,897		$	1,451,329		$	1,604,732
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	248,824		$	163,644		$	127,927		$	172,191
Short-term and current portion of long-term debt	40,209			26,368			25,166			26,228
Accrued expenses:
Current operating lease liabilities							67,755			68,838
Compensation	64,862			52,993			46,427			51,573
Royalties	26,897			30,062			33,818			28,427
Co-op advertising	17,772			29,111
Customer liabilities							62,509			80,803
Transaction taxes	40,482			26,743			15,988			25,683
Other	101,390			69,565			65,325			76,209
Income taxes payable	13,077			16,099			18,823			29,228
Total current liabilities	553,513			414,585			463,738			559,180
Long-term income taxes payable	22,951			18,584			33,041			31,284
Deferred income tax liabilities	500			55,877			2,103			2,097
Long-term debt	444,303			609,961			243,920			178,796
Long-term operating lease liabilities							270,056			288,689
Other long-term liabilities	76,107			72,452			41,908			40,845
Total long-term liabilities	543,861			756,874			591,028			541,711
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, 48,524 and 48,269 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	485			483
Common stock, 51,293 and 50,516 shares issued and outstanding at July 4, 2020 and December 28, 2019, respectively							513			505
Additional paid-in capital	235,990			213,352			288,641			283,371
Retained earnings	489,528			887,825			191,669			299,793
Accumulated other comprehensive income (loss)	(84,710		)	(95,424		)	(84,767		)	(80,615		)
Total Fossil Group, Inc. stockholders’ equity	641,293			1,006,236			396,056			503,054
Noncontrolling interest	11,705			9,202
Noncontrolling interests							507			787
Total stockholders’ equity	652,998			1,015,438			396,563			503,841
Total liabilities and stockholders’ equity	$	1,750,372		$	2,186,897		$	1,451,329		$	1,604,732

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

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

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA


	For the 13 Weeks Ended September 30, 2017			For the 13 Weeks Ended October 1, 2016		For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016			For the 13 Weeks Ended July 4, 2020			For the 13 Weeks Ended June 29, 2019			For the 27 Weeks Ended July 4, 2020			For the 26 Weeks Ended June 29, 2019
Net sales	$	688,722		$	737,990	$	1,867,358		$	2,083,206		$	259,009		$	501,393		$	649,727		$	966,661
Cost of sales	368,829			352,910		956,600			994,039			118,413			236,285			368,771			453,626
Gross profit	319,893			385,080		910,758			1,089,167			140,596			265,108			280,956			513,035
Operating expenses:
Selling, general and administrative expenses	314,623			339,432		937,330			1,013,664			166,869			256,110			429,731			513,794
Goodwill and trade name impairments	—			—		407,128			—
Trade name impairments												—			—			2,464			—
Restructuring charges	5,769			14,473		41,818			14,473			10,532			7,317			19,907			17,504
Total operating expenses	320,392			353,905		1,386,276			1,028,137			177,401			263,427			452,102			531,298
Operating income (loss)	(499		)	31,175		(475,518		)	61,030			(36,805		)	1,681			(171,146		)	(18,263		)
Interest expense	12,070			6,967		32,096			19,386			7,874			7,353			15,338			15,474
Other income (expense) - net	3,860			1,591		11,501			6,402			879			507			(6,411		)	26,417
Income (loss) before income taxes	(8,709		)	25,799		(496,113		)	48,046			(43,800		)	(5,165		)	(192,895		)	(7,320		)
Provision for income taxes	(3,230		)	6,451		(100,746		)	13,230			(20,840		)	1,444			(84,491		)	11,051
Net income (loss)	(5,479		)	19,348		(395,367		)	34,816			(22,960		)	(6,609		)	(108,404		)	(18,371		)
Less: Net income attributable to noncontrolling interest	(80		)	1,992		2,931			5,646
Less: Net income attributable to noncontrolling interests												(417		)	702			(280		)	1,182
Net income (loss) attributable to Fossil Group, Inc.	$	(5,399	)	$	17,356	$	(398,298	)	$	29,170		$	(22,543	)	$	(7,311	)	$	(108,124	)	$	(19,553	)
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	5,222		$	1,662	$	32,078		$	9,383		$	6,497		$	(304	)	$	(4,696	)	$	(2,794	)
Cash flow hedges - net change	(9,771		)	1,360		(21,364		)	(4,741		)	(5,698		)	(1,845		)	544			(2,854		)
Pension plan activity	—			—		—			1,714
Total other comprehensive income (loss)	(4,549		)	3,022		10,714			6,356			799			(2,149		)	(4,152		)	(5,648		)
Total comprehensive income (loss)	(10,028		)	22,370		(384,653		)	41,172			(22,161		)	(8,758		)	(112,556		)	(24,019		)
Less: Comprehensive income attributable to noncontrolling interest	(80		)	1,992		2,931			5,646
Less: Comprehensive income attributable to noncontrolling interests												(417		)	702			(280		)	1,182
Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(9,948	)	$	20,378	$	(387,584	)	$	35,526		$	(21,744	)	$	(9,460	)	$	(112,276	)	$	(25,201	)
Earnings (loss) per share:
Basic	$	(0.11	)	$	0.36	$	(8.22	)	$	0.61		$	(0.44	)	$	(0.15	)	$	(2.13	)	$	(0.39	)
Diluted	$	(0.11	)	$	0.36	$	(8.22	)	$	0.60		$	(0.44	)	$	(0.15	)	$	(2.13	)	$	(0.39	)
Weighted average common shares outstanding:
Basic	48,521			48,130		48,439			48,127			51,189			50,326			50,866			49,972
Diluted	48,521			48,291		48,439			48,286			51,189			50,326			50,866			49,972

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

UNAUDITED

IN THOUSANDS



For the 13 Weeks Ended July 4, 2020
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, April 4, 2020	50,583		$	506		$	286,297		$	—		$	214,212		$	(85,566	)	$	415,449		$	924		$	416,373
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	849		8			(8		)				—			—			—			—			—
Acquisition of common stock for employee tax withholding									(523		)	—			—			(523		)	—			(523		)
Retirement of common stock	(139	)	(1		)	(522		)	523			—			—			—			—			—
Stock-based compensation						2,874						—			—			2,874			—			2,874
Net income (loss)	—		—			—			—			(22,543		)	—			(22,543		)	(417		)	(22,960		)
Other comprehensive income (loss)	—		—			—			—			—			799			799			—			799
Balance, July 4, 2020	51,293		$	513		$	288,641		$	—		$	191,669		$	(84,767	)	$	396,056		$	507		$	396,563



For the 13 Weeks Ended June 29, 2019
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, March 30, 2019	49,772		$	498		$	273,434		$	—		$	339,916		$	(68,190	)	$	545,658		$	3,568		$	549,226
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	861		9			(9		)	—			—			—			—			—			—
Acquisition of common stock for employee tax withholding	—		—			—			(2,364		)	—			—			(2,364		)	—			(2,364		)
Retirement of common stock	(180	)	(2		)	(2,362		)	2,364			—			—			—			—			—
Stock-based compensation	—		—			5,325			—			—			—			5,325			—			5,325
Net income (loss)	—		—			—			—			(7,311		)	—			(7,311		)	702			(6,609		)
Other comprehensive income (loss)	—		—			—			—			—			(2,149		)	(2,149		)	—			(2,149		)
Distribution of noncontrolling interest earnings	—		—			—			—			—			—			—			(3,791		)	(3,791		)
Balance, June 29, 2019	50,453		$	505		$	276,388		$	—		$	332,605		$	(70,339	)	$	539,159		$	479		$	539,638




For the 27 Weeks Ended July 4, 2020
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, December 28, 2019	50,516		$	505		$	283,371		$	—		$	299,793		$	(80,615	)	$	503,054		$	787		$	503,841
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	940		9			(9		)	—			—			—			—			—			��
Acquisition of common stock for employee tax withholding	—		—			—			(699		)	—			—			(699		)	—			(699		)
Retirement of common stock	(163	)	(1		)	(698		)	699			—			—			—			—			—
Stock-based compensation	—		—			5,977			—			—			—			5,977			—			5,977
Net income (loss)	—		—			—			—			(108,124		)	—			(108,124		)	(280		)	(108,404		)
Other comprehensive income (loss)	—		—			—			—			—			(4,152		)	(4,152		)				(4,152		)
Balance, July 4, 2020	51,293		$	513		$	288,641		$	—		$	191,669		$	(84,767	)	$	396,056		$	507		$	396,563




For the 26 Weeks Ended June 29, 2019
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, December 29, 2018	49,518		$	495		$	268,113		$	—		$	381,626		$	(64,691	)	$	585,543		$	3,088		$	588,631
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	1,210		13			157			—			—			—			170			—			170
Acquisition of common stock for employee tax withholding	—		—			—			(3,879		)	—			—			(3,879		)	—			(3,879		)
Retirement of common stock	(275	)	(3		)	(3,876		)	3,879			—			—			—			—			—
Stock-based compensation	—		—			11,994			—			—			—			11,994			—			11,994
Net income (loss)	—		—			—			—			(19,553		)	—			(19,553		)	1,182			(18,371		)
Other comprehensive income (loss)	—		—			—			—			—			(5,648		)	(5,648		)	—			(5,648		)
Distribution of noncontrolling interest earnings and other	—		—			—			—			—			—			—			(3,791		)	(3,791		)
Adoption of Accounting Standards Update ("ASU") 2016-02	—		—			—			—			(29,468		)	—			(29,468		)	—			(29,468		)
Balance, June 29, 2019	50,453		$	505		$	276,388		$	—		$	332,605		$	(70,339	)	$	539,159		$	479		$	539,638

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Operating Activities:

Net income (loss) $ (395,367 ) $ 34,816
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, amortization and accretion 61,526
73,198
Stock-based compensation 22,384
23,894
Decrease in allowance for returns-net of inventory in transit (6,129 ) (14,955 )
Loss (gain) on disposal of assets 1,686
(9,866 )
Fixed asset and other long-lived asset impairment losses 2,726
2,213
Goodwill and trade name impairment losses 407,128
—
Non-cash restructuring charges 7,031
12,523
Increase (decrease) in allowance for doubtful accounts 4,161
(3,915 )
Deferred income taxes and other (111,177 ) (9,309 )
Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable 85,078
74,706
Inventories (116,002 ) (76,869 )
Prepaid expenses and other current assets (5,620 ) 17,640
Accounts payable 80,146
(16,887 )
Accrued expenses 20,863
(38,572 )
Income taxes payable 1,734
(9,257 )
Net cash provided by operating activities 60,168
59,360
Investing Activities:

Additions to property, plant and equipment (17,239 ) (53,524 )
Decrease in intangible and other assets 478
2,509
Misfit working capital settlement —
788
Proceeds from the sale of property, plant and equipment 533
44,584
Net investment hedge settlement —
752
Net cash used in investing activities (16,228 ) (4,891 )
Financing Activities:

Acquisition of common stock (947 ) (6,448 )
Distribution of noncontrolling interest earnings (428 ) (4,543 )
Debt borrowings 1,162,074
756,000
Debt payments (1,311,597 ) (839,629 )
Payment for shares of Fossil, S.L. —
(8,657 )
Debt issuance costs and other (5,579 ) (2,585 )
Net cash used in financing activities (156,477 ) (105,862 )
Effect of exchange rate changes on cash and cash equivalents (17,871 ) (1,930 )
Net decrease in cash and cash equivalents (130,408 ) (53,323 )
Cash and cash equivalents:

Beginning of period 297,330
289,275
End of period $ 166,922
$ 235,952



	For the 27 Weeks Ended July 4, 2020			For the 26 Weeks Ended June 29, 2019
Operating Activities:
Net Income (loss)	$	(108,404	)	$	(18,371	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	22,867			28,312
Non-cash lease expense	56,159			60,915
Stock-based compensation	5,977			9,627
Decrease in allowance for returns and markdowns	(11,364		)	(19,085		)
Property, plant and equipment and other long-lived asset impairment losses	20,335			2,560
Trade name impairment losses	2,464			—
Non-cash restructuring charges	1,409			4,621
Bad debt expense	5,456			273
Other non-cash items	(468		)	(2,369		)
Gain on asset divestitures	—			(23,134		)
Changes in operating assets and liabilities:
Accounts receivable	148,234			130,494
Inventories	69,763			(82,173		)
Prepaid expenses and other current assets	16,135			(4,197		)
Accounts payable	(44,262		)	10,637
Accrued expenses	(17,022		)	(74,773		)
Income taxes	(92,994		)	3,494
Operating lease liabilities	(62,654		)	(52,934		)
Net cash provided by (used in) operating activities	11,631			(26,103		)
Investing Activities:
Additions to property, plant and equipment	(5,648		)	(10,511		)
Increase in intangible and other assets	(1,256		)	(1,910		)
Proceeds from the sale of property, plant and equipment	76			1,235
Proceeds from asset divestitures	—			41,570
Net cash (used in) provided by investing activities	(6,828		)	30,384
Financing Activities:
Acquisition of common stock for employee tax withholdings	(699		)	(3,879		)
Distribution of noncontrolling interest earnings	—			(3,791		)
Debt borrowings	297,040			3,552
Debt payments	(227,741		)	(173,396		)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.	—			(1,045		)
Debt issuance costs and other	(10,000		)	124
Net cash provided by (used in) financing activities	58,600			(178,435		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	13,556			(2,242		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	76,959			(176,396		)
Cash, cash equivalents, and restricted cash:
Beginning of period	207,749			410,883
End of period	$	284,708		$	234,487

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. FINANCIAL STATEMENT POLICIES

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

The Company’s fiscal year periodically results in a 53-week year instead of a normal 52-week year. The current fiscal year ending January 2, 2021 is a 53-week year, with the additional week being included in the first quarter. Accordingly, the information presented herein includes the thirteen-week periods ended July 4, 2020 (“Second Quarter”) and June 29, 2019 (“Prior Year Quarter”) and the 27 weeks of operations for the year to date period ended July 4, 2020 (“Year To Date Period”) as compared to 26 weeks included in the prior year to date period ended June 29, 2019 (“Prior Year YTD Period”). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s financial position as of ~~September 30, 2017,~~July 4, 2020, and the results of operations for the ~~thirteen-week periods ended September 30, 2017 (“Third Quarter”) and October 1, 2016 (“~~Second Quarter, Prior Year ~~Quarter”), respectively, and the thirty-nine week periods ended September 30, 2017 (“~~Quarter, Year To Date ~~Period”)~~Period and ~~October 1, 2016 (“~~Prior Year YTD ~~Period”).~~Period. All adjustments are of a normal, recurring nature.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended December ~~31, 2016~~28, 2019 (the ~~“2016~~“2019 Form 10-K”). Operating results for the ~~Third~~Second Quarter are not necessarily indicative of the results to be achieved for the full fiscal year.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. We base our estimates on the information available at the time and various other assumptions believed to be reasonable under the circumstances, including estimates of the impact of the coronavirus (“COVID-19”) pandemic. Actual results could differ from those ~~estimates.~~estimates, including the impact of the COVID-19 pandemic. The Company has not made any changes in its significant accounting policies from those disclosed in the ~~2016~~2019 Form ~~10-K other than~~10-K. Certain prior period amounts have been reclassified to conform to the ~~adoption of ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ~~("ASU 2017-04").~~current period presentation.

Business. The Company isa global design, marketing and distribution company that specializes in consumer fashion accessories. Its principal offerings include an extensive line of men's and women's fashion watches and jewelry, handbags, small leather goods, belts and sunglasses. In the watch and jewelry product categories, the Company has a diverse portfolio of globally recognized owned and licensed brand names under which its products are marketed. The Company's products are distributed globally through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the Company does not maintain a physical presence. The Company's products are offered at varying price points to meet the needs of its customers, whether they are value-conscious or luxury oriented. Based on its extensive range of accessory products, brands, distribution channels and price points, the Company is able to target style-conscious consumers across a wide age spectrum on a global basis.

~~Hedging Instruments.~~Going Concern Assessment and Management's Plans. In March 2020, a novel strain of coronavirus was declared a global pandemic by the World Health Organization. The Company's business operations and financial performance for the Second Quarter and Year To Date Period were materially impacted by COVID-19. The COVID-19 pandemic has negatively affected the global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures of non-essential businesses and orders to “shelter-in-place.” The Company is ~~exposed~~focused on protecting the health and safety of its employees, customers and suppliers to ~~certain market risks relating~~minimize potential disruptions and supporting the community 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 hedgeaddress challenges posed by the ~~future payment~~global COVID-19 pandemic. At the end 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. Iffirst quarter of fiscal year 2020, the ~~Company was to settle its euro, Canadian dollar, British pound, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as~~majority of ~~September 30, 2017, the result would have been a net loss of approximately $12.1 million, net of taxes. This unrealized loss is recognized in other comprehensive income (loss), net of taxes on~~ the Company's ~~consolidated statements~~stores and many of ~~income (loss)~~its customers' stores were closed. During the Second Quarter, many regional and ~~comprehensive income (loss). Additionally, to~~local governments lifted or modified restrictions and orders and the ~~extent that any~~majority of ~~these contracts are not considered to be perfectly effective~~stores have re-opened although generally in ~~offsetting the change~~a limited capacity.

The Company's Term Credit Agreement (as defined 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)"Note 15–Debt Activity") contains certain affirmative and ~~comprehensive income (loss). Also, the~~negative covenants. The Company has entered into ~~an interest rate swap agreement~~a new amendment to ~~effectively convert portions~~its Term Credit Agreement to amend, among other things, certain of these financial covenants as a result of the impact of COVID-19. Refer to “Note 15–Debt Activity" for additional details on the Term Credit Agreement. The Company is currently in compliance with its covenants. However, due to the uncertainty related to the duration of COVID-19, the Company could experience material further decreases to revenues and

cash flows and may experience difficulty in remaining in compliance with financial covenants under the Term Credit Agreement, as amended.

The Company has taken certain actions, and plans to take further actions, to address the decrease in revenues and cash flow as a result of COVID-19 in order to maintain liquidity and in order to remain in compliance with financial covenants. The Company has implemented a number of cost saving measures, including store closures and spending reductions. Specifically, effective March 30, 2020, the Company implemented base salary reductions for a substantial number of the Company's global employees, including each of its ~~variable rate debt~~executive officers. Further, the cash fees for all non-employee directors serving on the Company's Board of Directors were deferred for the first quarter of fiscal year 2020 until the end of the year and the cash fees were reduced by 20% for the Second Quarter. The Company also implemented weekly work hour reductions (e.g., from 40 hours to 32 or 24 hours) and work-reduction furloughs for certain other employees, many of which continued until the beginning of August 2020. The Company has entered into agreements, or is in discussions with, most of its retail and corporate office landlords to modify rent payments, receive other concessions or otherwise reduce its operating costs for these locations. The Company has also extended the payment terms with a number of its vendors and suppliers globally and has agreements, or is in discussions with, licensors of certain third party trademarks to reduce its royalty obligations in fiscal 2020. In addition, the Company is reducing marketing and capital spending, eliminating all non-business critical spending and implementing additional restructuring activities under New World Fossil 2.0 as discussed in "Note 16–Restructuring."

The Company believes its cost reduction plans are probable of being successfully implemented, which will result in adequate cash flows to support its ongoing operations and to meet its covenant requirements for one year following the date these financial statements are issued. The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a ~~fixed rate. Changes~~going concern, which contemplates the realization of assets and the satisfaction of liabilities in the ~~fair value~~normal course 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 investmentsbusiness.

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~~impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, 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 4, 2020			For the 13 Weeks Ended June 29, 2019			For the 27 Weeks Ended July 4, 2020			For the 26 Weeks Ended June 29, 2019
Numerator:
Net income (loss) attributable to Fossil Group, Inc.	$	(22,543	)	$	(7,311	)	$	(108,124	)	$	(19,553	)
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	51,189			50,326			50,866			49,972
Basic EPS	$	(0.44	)	$	(0.15	)	$	(2.13	)	$	(0.39	)
Diluted EPS computation:
Basic weighted average common shares outstanding	51,189			50,326			50,866			49,972
Diluted weighted average common shares outstanding	51,189			50,326			50,866			49,972
Diluted EPS	$	(0.44	)	$	(0.15	)	$	(2.13	)	$	(0.39	)

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Numerator:

Net income (loss) attributable to Fossil Group, Inc. $ (5,399 ) $ 17,356
$ (398,298 ) $ 29,170
Denominator:

Basic EPS computation:

Basic weighted average common shares outstanding 48,521
48,130
48,439
48,127
Basic EPS $ (0.11 ) $ 0.36
$ (8.22 ) $ 0.61
Diluted EPS computation:

Basic weighted average common shares outstanding 48,521
48,130
48,439
48,127
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units —
161
—
159
Diluted weighted average common shares outstanding 48,521
48,291
48,439
48,286
Diluted EPS $ (0.11 ) $ 0.36
$ (8.22 ) $ 0.60

At the end of the ~~Third~~Second Quarter and Year To Date Period, ~~approximately 5.1~~2.5 million ~~and 4.4 million~~ weighted average shares issuable under stock-based awards, respectively, were not included in the diluted EPS calculation because they were antidilutive. The total antidilutive weighted average shares included ~~approximately 1.2~~0.3 million weighted average performance-based shares at the end of ~~both~~ the ~~Third~~Second Quarter and Year To Date ~~Period.~~Period, respectively.

At the end of the Prior Year Quarter and Prior Year YTD Period, ~~approximately 1.6~~3.4 million and ~~1.5~~3.9 million weighted average shares issuable under stock-based awards, respectively, were not included in the diluted EPS calculation because they were antidilutive. ~~Approximately 1.1~~The total antidilutive weighted average shares included 0.7 million and 0.9 million weighted average performance-based shares ~~were not included in the diluted EPS calculation~~ at the end of ~~both~~ the Prior Year Quarter and Prior Year YTD Period, respectively.

Cash, Cash Equivalents and Restricted Cash. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of July 4, 2020 and June 29, 2019 that are presented in the ~~performance targets were not met.~~condensed consolidated statement of cash flows (in thousands):



	July 4, 2020		June 29, 2019
Cash and cash equivalents	$	277,561	$	226,596
Restricted cash included in prepaid expenses and other current assets	30		30
Restricted cash included in intangible and other assets-net	7,117		7,861
Cash, cash equivalents and restricted cash	$	284,708	$	234,487

Recently Issued Accounting Standards

In ~~August 2017,~~December 2019, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU") 2017-12,~~ ~~Derivatives and Hedging~~ASU 2019-12, Income Taxes (Topic ~~815)~~740): ~~Targeted Improvements to~~Simplifying the Accounting for ~~Hedging Activities~~ ("Income Taxes ("ASU ~~2017-12"~~2019-12"). ASU ~~2017-12~~2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (Topic 740). It also clarifies and amends ~~and simplifies hedge accounting~~existing guidance ~~in order~~ to ~~enable entities to better portray the economics of their risk management activities.~~improve consistent application. The guidance is effective for fiscal years beginning after December 15, ~~2018, including~~

~~interim periods within those periods. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~ ("ASU 2017-09"). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2017-09.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard 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,2020, 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.years. The Company ~~is in the process of reviewing lease contracts to determine the impact of adopting ASU 2016-02, but expects the~~does not expect this standard to have a material impact on the Company's ~~financial position.~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB later amended ASU-2014-09 with the following:

•~~ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~

~~ASU 2016-08~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~

~~ASU 2016-10~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~

~~ASU 2016-12~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~

•~~ASU 2016-20~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~

~~ASU 2017-13~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)~~

The Company has performed a review of our revenue streams including reviewing key contracts and comparing current accounting policies and practices to the new standard to identify potential differences that could arise from the application of ASU 2014-09. The Company currently anticipates that the performance obligations underlying its core revenue streams (i.e., its retail and standard wholesale businesses) will remain substantially unchanged. Revenues for these businesses are generated through the sale of finished products, and will continue to be generally recognized at the point in time when merchandise is transferred to the customer and in an amount that considers the impacts of estimated allowances. The Company does anticipate some timing changes, including accelerated recognition of markdowns given to customers and a change in classification of certain customer considerations between gross profit and SG&A expenses. The Company does not believe these changes will have a material impact on the Company's financial position or results of operations. The Company is currently finalizing its review of customer contracts. The standard will require additional disclosures about the nature of revenue as well as the judgment involved in the timing of revenue recognition. The Company will adopt ASU 2014-09 in the first quarter of fiscal 2018 and will use the modified retrospective approach.

~~Recently Adopted Accounting Standards~~

In January 2017, the FASB issued ASU 2017-04. Under ASU 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The Company early adopted ASU 2017-04 effective June 15, 2017 in conjunction with the interim impairment test of goodwill for all reporting units and goodwill impairment was recorded according to the new standard. The Company believes the adoption of ASU 2017-04 did not change the amount of impairment charges recorded in the second quarter of fiscal 2017. See “Note 2—Goodwill and Intangibles Impairment Charges” for additional information on our interim goodwill impairment test performed.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). ASU 2016-09 simplified several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective for the Company beginning fiscal year 2017 and did not have a material impact on the Company’s 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.

Recently Adopted Accounting Standards

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,~~August 2018, the FASB issued ASU ~~2015-11,~~ ~~Inventory (Topic 330): Simplifying the Measurement of Inventory~~ (“2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) ("ASU ~~2015-11”~~2018-15"). ASU ~~2015-11 requires~~2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that ~~inventory be measured~~is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15 at the ~~lower of cost and net realizable value. The standard was effective for the Company~~ beginning ~~fiscal year 2017 and did not have a material impact on the Company’s consolidated results of operations or financial position.~~

~~2. GOODWILL AND INTANGIBLES IMPAIRMENT CHARGES~~

The Company evaluates its goodwill and intangible assets for impairment on an annual basis, or as facts and circumstances warrant. At the end of the fiscal year 2016, the Company's market capitalization exceeded the carrying amount of its net assets by 23%. At the end of the first quarter of fiscal ~~2017,~~year 2020, and it did not have a material effect on the Company's condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General(Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"). ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The Company ~~experienced a decline in market~~

~~capitalization and, as a result~~adopted ASU 2018-14 at the beginning 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~~first quarter of fiscal ~~2017,~~year 2020, and it did not have a material effect on the Company's ~~market capitalization continued~~condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to ~~decline, at which point~~ the ~~Company determined the decrease in stock price~~Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 (i) eliminates certain disclosure requirements related 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 hierarchy, (ii) adds new disclosure requirements related to the changes in unrealized gains and losses for recurring Level 3 fair value measurements and the range and weighted average of ~~each~~significant observable inputs used to develop Level 3 fair value measurements and (iii) modifies certain disclosure requirements related to measurement uncertainty for fair value measurements. The Company adopted ASU 2018-13 at the beginning of ~~its three reporting units with their carrying value and concluded that goodwill was fully impaired. Accordingly, in~~ the ~~second~~first quarter of fiscal ~~2017,~~year 2020, and it did not have a material effect on the Company's condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, including trade receivables. The estimate of expected credit losses will require the consideration of historical information, current information and reasonable and supportable forecasts. The Company ~~recognized~~adopted ASU 2016-13 at

the beginning of the first quarter of fiscal year 2020 on a ~~pre-tax impairment charge in operations~~prospective basis, and it did not have a material effect on the Company's condensed consolidated financial statements.

2. REVENUE

Disaggregation of ~~$202.3 million, $114.3 million~~Revenue. The Company's revenue disaggregated by major product category and ~~$42.9 million in the Americas, Europe and Asia segments, respectively.~~

~~The changes in the carrying amount~~timing of ~~goodwill were~~revenue recognition was as follows (in thousands):



	For the 13 Weeks Ended July 4, 2020
	Americas		Europe		Asia		Corporate		Total
Product type
Watches	$	84,474	$	62,188	$	62,832	$	5	$	209,499
Leathers	17,381		5,027		4,146				26,554
Jewelry	2,670		11,395		1,141				15,206
Other	1,224		935		1,129		4,462		7,750
Consolidated	$	105,749	$	79,545	$	69,248	$	4,467	$	259,009

Timing of revenue recognition
Revenue recognized at a point in time	$	105,156	$	79,218	$	69,085	$	2,364	$	255,823
Revenue recognized over time	593		327		163		2,103		3,186
Consolidated	$	105,749	$	79,545	$	69,248	$	4,467	$	259,009

Americas Europe Asia Total
Balance at December 31, 2016 $ 202,187
$ 110,291
$ 42,785
$ 355,263
Foreign currency changes 162
3,983
85
4,230
Impairment charges (202,349 ) (114,274 ) (42,870 ) $ (359,493 )
Balance at September 30, 2017 $ —
$ —
$ —
$ —



	For the 13 Weeks Ended June 29, 2019
	Americas		Europe		Asia		Corporate		Total
Product type
Watches	$	185,131	$	114,471	$	113,624	$	59	$	413,285
Leathers	33,637		9,229		9,764		—		52,630
Jewelry	1,642		18,425		719		—		20,786
Other	2,697		4,957		2,168		4,870		14,692
Consolidated	$	223,107	$	147,082	$	126,275	$	4,929	$	501,393

Timing of revenue recognition
Revenue recognized at a point in time	$	222,365	$	146,728	$	126,083	$	2,427	$	497,603
Revenue recognized over time	742		354		192		2,502		3,790
Consolidated	$	223,107	$	147,082	$	126,275	$	4,929	$	501,393

~~During~~



	For the 27 Weeks Ended July 4, 2020
	Americas		Europe		Asia		Corporate		Total
Product Type
Watches	$	203,748	$	160,086	$	155,575	$	16	$	519,425
Leathers	45,371		14,457		14,033				73,861
Jewelry	6,693		28,902		2,827				38,422
Other	2,854		4,350		3,000		7,815		18,019
Consolidated	$	258,666	$	207,795	$	175,435	$	7,831	$	649,727

Timing of revenue recognition
Revenue recognized at a point in time	$	257,442	$	207,138	$	175,073	$	3,855	$	643,508
Revenue recognized over time	1,224		657		362		3,976		6,219
Consolidated	$	258,666	$	207,795	$	175,435	$	7,831	$	649,727



	For the 26 Weeks Ended June 29, 2019
	Americas		Europe		Asia		Corporate		Total
Product Type
Watches	$	333,448	$	230,723	$	215,230	$	62	$	779,463
Leathers	64,389		20,586		21,559		—		106,534
Jewelry	10,818		39,175		1,953		—		51,946
Other	4,821		9,876		4,432		9,589		28,718
Consolidated	$	413,476	$	300,360	$	243,174	$	9,651	$	966,661

Timing of revenue recognition
Revenue recognized at a point in time	$	412,066	$	299,645	$	242,789	$	3,599	$	958,099
Revenue recognized over time	1,410		715		385		6,052		8,562
Consolidated	$	413,476	$	300,360	$	243,174	$	9,651	$	966,661

Contract Balances. As of July 4, 2020, the ~~second quarter~~Company had 0 material contract assets on the Company's condensed consolidated balance sheets and 0 deferred contract costs. The Company had contract liabilities of fiscal 2017, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million, resulting in a pre-tax impairment charge of $28.3 million; the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8(i) $11.9 million and ~~the MICHELE trade name with a carrying amount~~$13.4 million as of ~~$18.5~~July 4, 2020 and December 28, 2019, respectively, related to remaining performance obligations on licensing income, (ii) $4.6 million ~~was written down~~and $5.3 million as of July 4, 2020 and December 28, 2019, respectively, primarily related to ~~its implied fair value~~remaining performance obligations on wearable technology products and (iii) $4.1 million and $3.3 million as of ~~$10.9 million, resulting in a pre-tax impairment charge of $7.6 million. The fair values of the Company's indefinite-lived SKAGEN~~July 4, 2020 and MICHELE trade names were estimated using the relief from royalty method. The fair value of the Company's definite-lived MISFIT trade name was estimated using a discounted cash flow methodology. A reduction in expected future cash flows negatively affected the valuation comparedDecember 28, 2019, respectively, related to ~~previous valuation assumptions.~~gift cards issued.

3. INVENTORIES

Inventories consisted of the following (in thousands):



	July 4, 2020		December 28, 2019
Components and parts	$	27,759	$	35,626
Work-in-process	3,101		11,034
Finished goods	345,046		405,618
Inventories	$	375,906	$	452,278

September 30, 2017 December 31, 2016
Components and parts $ 60,258
$ 49,438
Work-in-process 9,471
12,345
Finished goods 613,257
480,704
Inventories $ 682,986
$ 542,487

4. WARRANTY LIABILITIES

The Company’s warranty liability is recorded in accrued expenses-other in the Company’s condensed consolidated balance sheets. Warranty liability activity consisted of the following (in thousands):


	For the 39 Weeks Ended September 30, 2017			For the 39 Weeks Ended October 1, 2016			For the 27 Weeks Ended July 4, 2020			For the 26 Weeks Ended June 29, 2019
Beginning balance	$	15,421		$	13,669		$	23,095		$	22,807
Settlements in cash or kind	(11,608		)	(7,338		)	(7,129		)	(7,749		)
Warranties issued and adjustments to preexisting warranties ⁽¹⁾	14,984			8,604			7,161			5,909
Ending balance	$	18,797		$	14,935		$	23,127		$	20,967

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

5. INCOME TAXES

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



	For the 13 Weeks Ended July 4, 2020			For the 13 Weeks Ended June 29, 2019			For the 27 Weeks Ended July 4, 2020			For the 26 Weeks Ended June 29, 2019
Income tax (benefit) expense	$	(20,840	)	$	1,444		$	(84,491	)	$	11,051
Effective tax rate	47.6		%	(28.0		)%	43.8		%	(151.0		)%

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016 For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Income tax (benefit) expense $ (3,230 ) $ 6,451
$ (100,746 ) $ 13,230
Effective tax rate 37.1 % 25.0 % 20.3 % 27.5 %
For the Second Quarter, the Company computed its effective tax rate using actual year-to-date information rather than a full year forecast to compute the annual effective tax rate, which is consistent with the method used in the Prior Year Quarter. Estimating a reliable or meaningful annual effective tax rate for fiscal year 2020 was not possible due to the range of potential impacts and resulting uncertainties related to the global COVID-19 pandemic. Accordingly, the Company concluded that computing its effective tax rate using actual year-to-date results is the best estimate of tax expense (benefit) for the Second Quarter and Year To Date Period.

The ~~higher~~ effective tax rate in the ~~Third~~Second Quarter was favorable as compared to the Prior Year Quarter ~~is attributable~~primarily due to changes enacted in the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. The CARES Act included many beneficial income tax provisions including utilization of net operating losses ("NOLs"), temporary changes to the limitation on interest deductions, and technical corrections to tax depreciation for qualified improvement property. The Tax Cuts and Jobs Act had eliminated the option for most taxpayers to carryback a ~~higher structural rate resulting from an increased forecasted loss from~~NOL after 2017. A NOL could only be carried forward and was limited to 80% of taxable income. The CARES Act now allows U.S. taxpayers to carryback a NOL arising in tax years 2018, 2019 and 2020 to prior years when the ~~Company's U.S. operations which is tax-benefited at a higher~~statutory tax rate ~~than~~was 35%. The Second Quarter tax benefit was primarily due to the ~~tax rates used to calculate the tax expense on the profits from the Company's foreign operations. There were also favorable discrete items occurring in the quarter. These positive impacts were~~U.S. NOL carryback provision, which was partially offset by ~~the increased tax expense resulting from all of the~~ foreign income taxes and ~~some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes.~~discrete items. The ~~lower~~ effective tax rate can vary from quarter to quarter due to changes in the Company's global mix of earnings, impacts of COVID-19, the resolution of income tax audits and changes in tax law.

The Prior Year Quarter effective tax rate was negative because income tax expense was accrued on certain foreign entities with positive taxable income and no benefit was recognized for losses in the U.S. and certain other foreign jurisdictions. Due to the Global Intangible Low-Taxed Income ("GILTI") provision of the Tax Cuts and Jobs Act, certain foreign income is included in U.S. taxable income effectively absorbing the U.S. NOLs, eliminating the availability of any future tax benefit or loss carryback prior to the NOL carryback provision in the CARES Act.

The Year toTo Date Period ~~as compared~~effective tax rate was favorable to the Prior Year YTD Period is primarily attributable to the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes and unfavorable discrete items that occurred in the Year to Date Period, mostly due to the ~~additional~~changes from the CARES Act allowing NOL carrybacks. The Prior Year YTD Period effective tax rate was negative because income tax expense ~~resulting from~~was accrued on certain foreign entities with positive taxable income and no benefit was recognized for losses in the ~~adoption of ASU 2016-09. See "Note 1-Financial Statement Policies" for additional disclosures about ASU 2016-09.~~U.S. and certain other foreign jurisdictions.

As of ~~September 30, 2017,~~July 4, 2020, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was ~~$21.7~~$35.7 million, of which ~~$19.0~~$29.9 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its ~~2011-2016~~2011-2018 tax years, none of which the Company

believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be ~~paid~~settled within twelve months of the condensed consolidated balance sheet date. As of ~~September 30, 2017,~~July 4, 2020, the Company had recorded ~~$2.3~~$11.2 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At ~~September 30, 2017,~~July 4, 2020, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance ~~sheet~~sheets was ~~$2.8~~$6.4 million and ~~$1.3~~$1.0 million, respectively. ~~The~~For the Second Quarter, the Company accrued income tax related interest expense ~~accrued in the Third Quarter was offset by reductions~~ of ~~interest expense associated with the derecognition of uncertain tax benefits. For the Year To Date Period, the Company accrued income tax-related interest expense $0.5~~$1.1 million.

An increase in long-term deferred tax assets is mostly attributable to the future tax amortization of the tax basis in goodwill and trade names which were impaired for GAAP purposes, as well as an increased amount of foreign tax credit carry forwards.

As of September 30, 2017, as a result of proposed U.S. Tax Reform and the planned refinancing of existing debt obligations, the Company is continuing to evaluate its current assertions with respect to certain undistributed earnings in various foreign jurisdictions. At present, the Company believes it can meet its future U.S. obligations through a combination of earnings not considered indefinitely reinvested, future current earnings of foreign subsidiaries, and distributions of earnings in jurisdictions within which no additional U.S. tax would be incurred as a result of excess foreign tax credits associated with such earnings. The Company will continue to monitor its indefinite reinvestment assertions with respect to all foreign jurisdictions as developments occur within proposed U.S. Tax Reform proposals and the planned refinancing of its existing debt obligations.

6. STOCKHOLDERS’ EQUITY

Common ~~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~~Preferred Stock. The Company has 100,000,000 shares of common stock, ~~are recorded~~par value $0.01 per share, authorized, with 51,292,617 and 50,516,477 shares issued and outstanding at ~~cost~~July 4, 2020 and ~~become~~December 28, 2019, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, ~~but unissued shares which may~~with NaN issued or outstanding at July 4, 2020 or December 28, 2019. Rights, preferences and other terms of preferred stock will be ~~issued in~~determined by the ~~future for general corporate or other purposes. In~~Board of Directors at the ~~event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital~~time of issuance.

Common Stock Repurchase Programs. At July 4, 2020 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 September 30, 2017,~~28, 2019, all treasury stock had been effectively retired. As of ~~September 30, 2017,~~July 4, 2020, the Company had ~~$824.2~~$30.0 million of repurchase authorizations remaining under its ~~combined~~ repurchase ~~programs. However, under the Company's credit agreement, the~~program. The Company ~~is restricted from making open market repurchases of its common stock.~~

~~The following tables reflect the Company’s~~did not repurchase any common stock under its authorized stock repurchase ~~activity for~~plans during the ~~periods indicated (in millions):~~

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
Termination Date
Number of
Shares
Repurchased

Dollar Value
Repurchased

Number of
Shares
Repurchased

Dollar Value
Repurchased
2014 $ 1,000.0
December 2018 —
$ —
—
$ —
2010 $ 30.0
None —
$ —
—
$ —
Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Fiscal Year
Authorized
Dollar Value
Authorized
Termination Date
Number of
Shares
Repurchased

Dollar Value
Repurchased

Number of
Shares
Repurchased

Dollar Value
Repurchased
2014 $ 1,000.0
December 2018 —
$ —
0.1
$ 5.2
2010 $ 30.0
None —
$ —
—
$ —

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

Fossil Group, Inc.
Stockholders’
Equity

Noncontrolling
Interest

Total
Stockholders’
Equity
Balance at December 31, 2016 $ 1,006,236
$ 9,202
$ 1,015,438
Net income (loss) (398,298 ) 2,931
(395,367 )
Currency translation adjustment 32,078
—
32,078
Cash flow hedges - net change (21,364 ) —
(21,364 )
Distribution of noncontrolling interest earnings —
(428 ) (428 )
Acquisition of common stock (947 ) —
(947 )
Stock-based compensation expense 23,588
—
23,588
Balance at September 30, 2017 $ 641,293
$ 11,705
$ 652,998

Fossil Group, Inc.
Stockholders’
Equity

Noncontrolling
Interest

Total
Stockholders’
Equity
Balance at January 2, 2016 $ 921,388
$ 11,155
$ 932,543
Net income 29,170
5,646
34,816
Currency translation adjustment 9,383
—
9,383
Cash flow hedges - net change (4,741 ) —
(4,741 )
Pension plan activity 1,714
—
1,714
Common stock issued upon exercise of stock options 57
—
57
Tax expense derived from stock-based compensation (1,756 ) —
(1,756 )
Distribution of noncontrolling interest earnings —
(4,543 ) (4,543 )
Acquisition of common stock (6,448 ) —
(6,448 )
Stock-based compensation expense 23,894
—
23,894
Balance at October 1, 2016 $ 972,661
$ 12,258
$ 984,919

7. EMPLOYEE BENEFIT PLANS

Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the ~~Third~~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 4, 2020	444		$	77.78	2.4	$	—
Granted	—		—
Exercised	—		—			—
Forfeited or expired	(16	)	74.09
Outstanding at July 4, 2020	428		77.92		2.2	—
Exercisable at July 4, 2020	428		$	77.92	2.2	$	—

Stock Options and Stock Appreciation Rights Shares
Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(in Thousands) (in Years) (in Thousands)
Outstanding at July 1, 2017 2,236
$ 50.29
5.8 $ —
Granted —
—

Exercised —
—
—
Forfeited or expired (27 ) 63.35

Outstanding at September 30, 2017 2,209
50.14
5.6 —
Exercisable at September 30, 2017 882
$ 67.67
4.5 $ —

~~Aggregate~~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 ~~September 30, 2017 and (ii) the fair market value of the Company’s common stock on the exercise date for options/rights that were exercised during the Third Quarter.~~July 4, 2020.

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

July 4, 2020:


Cash Stock Appreciation Rights Outstanding					Cash Stock Appreciation Rights Exercisable
Stock Options Outstanding								Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price			Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)				(in Thousands)			(in Years)	(in Thousands)
$29.78 - $47.99	61	$	36.73	6.2	11	$	36.73
$55.04 - $82.55									55	$	81.23	0.7	55	$	81.23
$83.83 - $125.75									4	83.83		0.1	4	83.83
$127.84 - $191.75									82	128.05		1.5	82	128.05
Total	61	$	36.73	6.2	11	$	36.73		141	$	108.50	1.2	141	$	108.50



Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$29.49 - $47.99	167	$	41.77	3.4	167	$	41.77
$55.04 - $82.55	59	77.98		2.4	59	77.98
$83.83 - $125.75	61	105.77		1.2	61	105.77
Total	287	$	62.87	2.7	287	$	62.87

Stock Options Outstanding Stock Options Exercisable
Range of
Exercise Prices

Number of
Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term

Number of
Shares
Weighted-
Average
Exercise
Price
(in Thousands) (in Years) (in Thousands)
$13.65 - $29.49 35
$ 14.12
1.4 35
$ 14.12
$29.78 - $47.99 79
37.00
1.5 79
37.00
$55.04 - $83.83 91
80.80
3.2 91
80.80
$95.91 - $131.46 129
127.97
4.1 129
127.97
Total 334
$ 81.69
3.0 334
$ 81.69

Stock Appreciation Rights Outstanding Stock Appreciation Rights Exercisable
Range of
Exercise Prices Number of
Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term Number of
Shares Weighted-
Average
Exercise
Price
(in Thousands) (in Years) (in Thousands)
$13.65 - $29.49 101
$ 29.49
6.8 34
$ 29.49
$29.78 - $47.99 1,485
38.07
6.2 310
38.91
$55.04 - $83.83 125
79.16
4.8 90
79.91
$95.91 - $131.46 103
114.46
3.7 103
114.46
Total 1,814
$ 44.78
6.0 537
$ 59.74

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



Restricted Stock Units and Performance Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
	(in Thousands)
Nonvested at April 4, 2020	2,072		$	15.34
Granted	1,078		3.74
Vested	(848	)	14.99
Forfeited	(325	)	11.90
Nonvested at July 4, 2020	1,977		$	9.70

Restricted Stock, Restricted Stock Units
and Performance Restricted Stock Units
Number of Shares
Weighted-Average
Grant Date Fair
Value Per Share
(in Thousands)
Nonvested at July 1, 2017 2,785
$ 24.21
Granted 254
9.98
Vested (17 ) 37.81
Forfeited (57 ) 23.86
Nonvested at September 30, 2017 2,965
$ 22.92

The total fair value of restricted stock ~~and restricted stock~~ units vested during the ~~Third~~Second Quarter was approximately ~~$0.2~~$3.1 million. Vesting of performance restricted stock units is based on achievement of operating margin growth and achievement of sales growth and operating margin targets in relation to the performance of a certain identified peer ~~group, particular sales growth in relation to a defined sales plan and achievement of succession plans for key talent.~~group.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


	For the 13 Weeks Ended September 30, 2017															For the 13 Weeks Ended July 4, 2020
	Currency Translation Adjustments			Cash Flow Hedges												Currency Translation Adjustments			Cash Flow Hedges
	Currency Translation Adjustments			Forward Contracts			Interest Rate Swaps			Pension Plan			Total			Currency Translation Adjustments			Forward Contracts			Pension Plan			Total
Beginning balance	$	(75,011	)	$	(1,284	)	$	41		$	(3,907	)	$	(80,161	)	$	(91,667	)	$	9,225		$	(3,124	)	$	(85,566	)
Other comprehensive income (loss) before reclassifications	5,222			(16,776		)	5			—			(11,549		)	6,497			(847		)	—			5,650
Tax (expense) benefit	—			2,853			(2		)	—			2,851			—			217			—			217
Amounts reclassed from accumulated other comprehensive income (loss)	—			(4,940		)	(25		)	—			(4,965		)	—			5,920			—			5,920
Tax (expense) benefit	—			807			9			—			816			—			(852		)	—			(852		)
Total other comprehensive income (loss)	5,222			(9,790		)	19			—			(4,549		)	6,497			(5,698		)	—			799
Ending balance	$	(69,789	)	$	(11,074	)	$	60		$	(3,907	)	$	(84,710	)	$	(85,170	)	$	3,527		$	(3,124	)	$	(84,767	)


	For the 13 Weeks Ended October 1, 2016															For the 13 Weeks Ended June 29, 2019
	Currency Translation Adjustments			Cash Flow Hedges												Currency Translation Adjustments			Cash Flow Hedges
	Currency Translation Adjustments			Forward Contracts			Interest Rate Swaps			Pension Plan			Total			Currency Translation Adjustments			Forward Contracts			Pension Plan		Total
Beginning balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)	$	(77,358	)	$	7,573		$	1,595	$	(68,190	)
Other comprehensive income (loss) before reclassifications	1,942			3,313			466			—			5,721			(304		)	492			—		188
Tax (expense) benefit	(280		)	(605		)	(170		)	—			(1,055		)	—			226			—		226
Amounts reclassed from accumulated other comprehensive income (loss)	—			2,621			(413		)	—			2,208			—			2,769			—		2,769
Tax (expense) benefit	—			(714		)	150			—			(564		)	—			(206		)	—		(206		)
Total other comprehensive income (loss)	1,662			801			559			—			3,022			(304		)	(1,845		)	—		(2,149		)
Ending balance	$	(72,324	)	$	3,744		$	(1,064	)	$	(4,506	)	$	(74,150	)	$	(77,662	)	$	5,728		$	1,595	$	(70,339	)



	For the 39 Weeks Ended September 30, 2017																For the 27 Weeks Ended July 4, 2020
	Currency Translation Adjustments			Cash Flow Hedges													Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps				Pension Plan			Total						Forward Contracts			Pension Plan			Total
Beginning balance	$	(101,867	)	$	10,693		$	(343	)		$	(3,907	)	$	(95,424	)	$	(80,474	)	$	2,983		$	(3,124	)	$	(80,615	)
Other comprehensive income (loss) before reclassifications	32,078			(33,243		)	230				—			(935		)	(4,696		)	7,178			—			2,482
Tax (expense) benefit	—			11,512			(84		)		—			11,428			—			(1,235		)	—			(1,235		)
Amounts reclassed from accumulated other comprehensive income (loss)	—			1,981			(404		)		—			1,577
Amounts reclassed from accumulated other comprehensive income																	—			6,281			—			6,281
Tax (expense) benefit	—			(1,945		)	147				—			(1,798		)	—			(882		)	—			(882		)
Total other comprehensive income (loss)	32,078			(21,767		)	403			—	—			10,714			(4,696		)	544			—			(4,152		)
Ending balance	$	(69,789	)	$	(11,074	)	$	60			$	(3,907	)	$	(84,710	)	$	(85,170	)	$	3,527		$	(3,124	)	$	(84,767	)




	For the 26 Weeks Ended June 29, 2019
	Currency Translation Adjustments			Cash Flow Hedges
	Currency Translation Adjustments			Forward Contracts			Pension Plan		Total
Beginning balance	$	(74,868	)	$	8,582		$	1,595	$	(64,691	)
Other comprehensive income (loss) before reclassifications	(2,794		)	2,202			—		(592		)
Tax (expense) benefit	—			(38		)	—		(38		)
Amounts reclassed from accumulated other comprehensive income (loss)	—			5,424			—		5,424
Tax (expense) benefit	—			(406		)	—		(406		)
Total other comprehensive income (loss)	(2,794		)	(2,854		)	—		(5,648		)
Ending balance	$	(77,662	)	$	5,728		$	1,595	$	(70,339	)

For the 39 Weeks Ended October 1, 2016

Currency
Translation
Adjustments
Cash Flow Hedges

Forward
Contracts

Interest
Rate Swaps

Pension
Plan
Total
Beginning balance $ (81,707 ) $ 8,114
$ (693 ) $ (6,220 ) $ (80,506 )
Other comprehensive income (loss) before reclassifications 9,767
2,055
(1,915 ) 2,010
11,917
Tax (expense) benefit (280 ) 433
698
(296 ) 555
Amounts reclassed from accumulated other comprehensive income (loss) 104
9,888
(1,331 ) —
8,661
Tax (expense) benefit —
(3,030 ) 485
—
(2,545 )
Total other comprehensive income (loss) 9,383
(4,370 ) (371 ) 1,714
6,356
Ending balance $ (72,324 ) $ 3,744
$ (1,064 ) $ (4,506 ) $ (74,150 )

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

9. SEGMENT INFORMATION

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

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, China (including Hong Kong, Macau and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea ~~Taiwan~~ and Thailand. Each reportable operating segment provides similar products and services.

The Company evaluates the performance of its reportable segments based on net sales and operating income (loss). Net sales for geographic segments are based on the location of the selling entity. Operating income (loss) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. ~~Global strategic initiatives such as brand building~~Corporate includes peripheral revenue generating activities from factories and ~~omni-channel activities~~intellectual property and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses that are not allocated to the various segments because they are managed at the corporate ~~level.~~level internally. The Company does not include intercompany transfers between segments for management reporting purposes.

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



	For the 13 Weeks Ended July 4, 2020					For the 13 Weeks Ended June 29, 2019
	Net Sales		Operating Income (Loss)			Net Sales		Operating Income (Loss)
Americas	$	105,749	$	4,781		$	223,107	$	29,540
Europe	79,545		(10,498		)	147,082		12,463
Asia	69,248		6,624			126,275		26,959
Corporate	4,467		(37,712		)	4,929		(67,281		)
Consolidated	$	259,009	$	(36,805	)	$	501,393	$	1,681


	For the 13 Weeks Ended September 30, 2017					For the 13 Weeks Ended October 1, 2016					For the 27 Weeks Ended July 4, 2020					For the 26 Weeks Ended June 29, 2019
	Net Sales		Operating Income (Loss)			Net Sales		Operating Income (Loss)			Net Sales		Operating Income (Loss)⁽¹⁾			Net Sales		Operating Income (Loss)
Americas	$	308,102	$	18,843		$	361,226	$	56,455		$	258,666	$	(32,353	)	$	413,476	$	40,458
Europe	247,184		39,332			243,139		49,013			207,795		(13,154		)	300,360		26,743
Asia	133,436		21,999			133,625		23,654			175,435		17,864			243,174		48,000
Corporate	—		(80,673		)	—		(97,947		)	7,831		(143,503		)	9,651		(133,464		)
Consolidated	$	688,722	$	(499	)	$	737,990	$	31,175		$	649,727	$	(171,146	)	$	966,661	$	(18,263	)

^{___________________________________________________________________________________________________________________}

⁽¹⁾Subsequent to the issuance of the Company's condensed consolidated financial statements for the 14 weeks ended April 4, 2020, the Company's management determined that Operating Loss for the Americas and Corporate segments for the 14 weeks ended April 4, 2020 was incorrectly presented as certain charges totaling $24.5 million were incorrectly attributed to the Americas segment rather than the Corporate segment. As a result, Operating Loss for the Americas and Corporate segments for the 27 week period ended July 4, 2020 has been corrected. The Company’s management evaluated the materiality of the disclosure misstatement from a quantitative and qualitative perspective and concluded the misstatement was not material to the 14 weeks ended April 4, 2020.

The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data):



	For the 27 Weeks Ended July 4, 2020				For the 26 Weeks Ended June 29, 2019
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	519,425	79.9	%	$	779,463	80.6	%
Leathers	73,861		11.4		106,534		11.0
Jewelry	38,422		5.9		51,946		5.4
Other	18,019		2.8		28,718		3.0
Total	$	649,727	100.0	%	$	966,661	100.0	%

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Net Sales Percentage of Total Net Sales Percentage of Total
Watches $ 1,471,144
78.8 % $ 1,581,233
75.9 %
Leathers 217,946
11.7
278,995
13.4
Jewelry 139,900
7.5
171,709
8.2
Other 38,368
2.0
51,269
2.5
Total $ 1,867,358
100.0 % $ 2,083,206
100.0 %

10. DERIVATIVES AND RISK MANAGEMENT

Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months. The Company enters into forward contracts, generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, the Company enters into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts.

These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency.

At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective. Hedge accounting is discontinued if it is determined that the derivative is not highly effective.

For a derivative instrument that is designated and qualifies as a cash flow hedge, ~~the effective portion of~~ the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income (loss) and comprehensive income (loss), and there were no components excluded from the assessment of hedge effectiveness for the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement. 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 sheets until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated.

Hedge accounting must be discontinued for a cash flow hedge of a forecasted transaction upon determining that it is no longer probable that the forecasted transaction will occur within the period originally specified at hedge inception. The cumulative hedge accounting gain or loss associated with the discontinued hedge would remain in accumulated other comprehensive income (loss), and would be reclassified into earnings when the forecasted transaction affects earnings, unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter. In that case, the entire amount recorded in accumulated other comprehensive income (loss) would immediately be reclassified into earnings. However, in rare cases, the existence of extenuating circumstances that are related to the nature of the forecasted transaction and are outside the control or influence of the Company may cause the forecasted transaction to be probable of occurring on a date that is beyond the additional two-month period of time, in which case the net derivative instrument gain or loss related to the discontinued cash flow hedge will continue to be reported in accumulated other comprehensive income (loss) until it is reclassified into earnings. The Company has identified some delays in the timing of forecasted inventory transactions and has applied the extenuating case exception since the delays are attributable to the COVID-19 pandemic. The Company determined that the delayed forecasted transactions are still probable of occurring after the additional two-month period, and therefore will retain the amounts associated with the discontinued cash flow hedge in accumulated other comprehensive income (loss) until the forecasted transaction affects earnings.

If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) 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.

As of ~~September 30, 2017,~~July 4, 2020, 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	76.3	U.S. dollar	87.4
Canadian dollar	27.2	U.S. dollar	20.7
British pound	9.3	U.S. dollar	12.1
Japanese yen	935.6	U.S. dollar	8.8
Mexican peso	52.7	U.S. dollar	2.7
Australian dollar	1.7	U.S. dollar	1.2
U.S. dollar	13.4	Japanese yen	1,425.0

Functional Currency Contract Currency
Type Amount Type Amount
Euro 253.4
U.S. dollar 291.0
Canadian dollar 95.0
U.S. dollar 73.2
British pound 43.5
U.S. dollar 58.1
Japanese yen 4,636.4
U.S. dollar 42.8
Mexican peso 378.6
U.S. dollar 20.3
Australian dollar 21.2
U.S. dollar 16.5
U.S. dollar 41.1
Japanese yen 4,470.0

The Company is also exposed to interest rate risk related to its outstanding debt. To manage the interest rate risk related to its U.S.-based term loan (as amended and restated, the "Term Loan") which had an outstanding balance of $168.3 million net of debt issuance costs as of September 30, 2017, the Company entered into an interest rate swap agreement on July 26, 2013 with a term of approximately five years. The objective of this hedge is to offset the variability of future payments associated with interest rates on the Term Loan. The interest rate swap agreement hedges the 1-month London Interbank Offer Rate ("LIBOR") based variable rate debt obligations under the Term Loan. Under the terms of the swap, the Company pays a fixed interest rate of 1.288% per annum to the swap counterparty plus the LIBOR rate applicable margin of 3.50%. See “Note 14—Debt Activity” for additional disclosures about the Company’s Term Loan. The notional amount amortizes through May 17, 2018 and coincides with repayments on the underlying loan. The Company receives interest from the swap counterparty at a variable rate based on 1-month LIBOR. This hedge is designated as a cash flow hedge.

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of ~~September 30, 2017,~~July 4, 2020, the Company had non-designated forward contracts of ~~approximately $2.2~~$0.1 million on ~~28.3~~1.5 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings when they occur.

The ~~effective portion of~~ gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the ~~Third~~Second Quarter and Prior Year Quarter ~~Year To Date Period and Prior Year YTD Period~~ are set forth below (in thousands):



	For the 13 Weeks Ended July 4, 2020			For the 13 Weeks Ended June 29, 2019
Cash flow hedges:
Forward contracts	$	(630	)	$	718
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(630	)	$	718



	For the 27 Weeks Ended July 4, 2020		For the 26 Weeks Ended June 29, 2019
Cash flow hedges:
Forward contracts	$	5,943	$	2,164
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	5,943	$	2,164

For the 13 Weeks Ended September 30, 2017 For the 13 Weeks Ended October 1, 2016
Cash flow hedges:

Forward contracts $ (13,923 ) $ 2,708
Interest rate swaps 3
296
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (13,920 ) $ 3,004

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Cash flow hedges:

Forward contracts $ (21,731 ) $ 2,488
Interest rate swaps 146
(1,217 )
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (21,585 ) $ 1,271

The following ~~table illustrates~~tables disclose the ~~effective portion of~~ gains and losses on derivative instruments recorded in accumulated other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the ~~Third~~Second Quarter and 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 September 30, 2017			For the 13 Weeks Ended October 1, 2016			Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 13 Weeks Ended July 4, 2020			For the 13 Weeks Ended June 29, 2019
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(4,133	)	$	1,907		Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	2,665		$	2,769
Forward contracts designated as cash flow hedging instruments									Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	2,403		$	(206	)
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(12	)	$	75		Other income (expense)-net	Total gain (loss) recognized in income	$	(113	)	$	(20	)
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(16	)	$	(263	)



Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 27 Weeks Ended July 4, 2020		For the 26 Weeks Ended June 29, 2019
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	5,311	$	4,790
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	88	$	228
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	92	$	(33	)

Derivative Instruments
Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location

Effect of Derivative
Instruments

For the 39 Weeks Ended
September 30, 2017

For the 39 Weeks Ended
October 1, 2016
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 36
$ 6,858
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ 170
$ (222 )
Interest rate swap designated as a cash flow hedging instrument Interest expense Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ (257 ) $ (846 )

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


	Asset Derivatives						Liability Derivatives						Asset Derivatives						Liability Derivatives
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			July 4, 2020			December 28, 2019			July 4, 2020			December 28, 2019
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		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	2,710	Prepaid expenses and other current assets	$	23,288	Accrued expenses- other	$	15,215	Accrued expenses- other	$	4,696	Prepaid expenses and other current assets	$	3,016	Prepaid expenses and other current assets	$	3,327	Accrued expenses-other	$	160	Accrued expenses-other	$	1,657
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	72		Prepaid expenses and other current assets	—		Accrued expenses- other	1		Accrued expenses- other	2		Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Accrued expenses-other	—		Accrued expenses-other	63
Interest rate swap designated as a cash flow hedging instrument	Prepaid expenses and other current assets	109		Prepaid expenses and other current assets	—		Accrued expenses- other	15		Accrued expenses- other	613
Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	448		Intangible and other assets-net	5,648		Other long-term liabilities	4,557		Other long-term liabilities	268		Intangible and other assets-net	—		Intangible and other assets-net	21		Other long-term liabilities	—		Other long-term liabilities	104
Interest rate swap designated as a cash flow hedging instrument	Intangible and other assets-net	—		Intangible and other assets-net	73		Other long-term liabilities	—		Other long-term liabilities	—
Total		$	3,339		$	29,009		$	19,788		$	5,579		$	3,016		$	3,348		$	160		$	1,824

The following tables summarize the effects of the Company's derivative instruments on earnings (in thousands):



	Effect of Derivative Instruments
	For the 27 Weeks Ended July 4, 2020					For the 26 Weeks Ended June 29, 2019
	Cost of Sales		Other Income (Expense)-net			Cost of Sales		Other Income (Expense)-net
Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded	$	368,771	$	(6,411	)	$	453,626	$	26,417
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	$	5,311	$	88		$	4,790	$	228

At the end of the ~~Third~~Second Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June ~~2019.~~2021. As of ~~September 30, 2017,~~July 4, 2020, an estimated net ~~loss~~gain of ~~$9.2~~$2.5 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates. ~~See “Note 1—Financial Statement Policies” for additional disclosures on foreign currency hedging instruments.~~

11. FAIR VALUE MEASUREMENTS

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

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

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

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

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

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

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2017~~July 4, 2020 (in thousands):



	Fair Value at July 4, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	3,016	$	—	$	3,016
Deferred compensation plan assets:
Investment in publicly traded mutual funds	5,220		—		—		5,220
Total	$	5,220	$	3,016	$	—	$	8,236
Liabilities:
Contingent consideration	$	—	$	—	$	1,441	$	1,441
Forward contracts	—		160		—		160
Total	$	—	$	160	$	1,441	$	1,601

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~~28, 2019 (in thousands):



	Fair Value at December 28, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	3,348	$	—	$	3,348
Deferred compensation plan assets:
Investment in publicly traded mutual funds	5,243		—		—		5,243
Total	$	5,243	$	3,348	$	—	$	8,591
Liabilities:
Contingent consideration	$	—	$	—	$	1,141	$	1,141
Forward contracts	—		1,824		—		1,824
Total	$	—	$	1,824	$	1,141	$	2,965

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 ~~September 30, 2017,~~July 4, 2020, debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of ~~$486.1~~$288.5 million and had a fair value of approximately ~~$480.6~~$270.5 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~~discount rates and implied royalty rates.

During the ~~second~~first quarter of fiscal ~~2017,~~year 2020, the ~~Company fully impaired its goodwill balance and recorded pre-tax impairment charges of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively.~~

~~During the second quarter of fiscal 2017, the SKAGEN~~MICHELE trade name with a carrying amount of ~~$55.6~~$10.9 million was written down to its implied fair value of ~~$27.3~~$8.4 million, resulting in a pre-tax impairment charge of ~~$28.3 million;~~$2.5 million in the ~~MISFIT~~Year To Date Period. The 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~~NaN trade name ~~impairment.~~impairment was recorded during the Second Quarter.

~~In accordance~~During the Year To Date Period, operating lease right-of-use assets with ~~the provisions~~a carrying amount of ~~ASC 360,~~ ~~Property, Plant~~$30.8 million and ~~Equipment~~, property, plant and equipment-net with a carrying amount of ~~$6.0~~$4.6 million related to retail store leasehold improvements, ~~and~~ fixturing and ~~related key money in the amount~~shop-in-shops were written down to a fair value of ~~$0.6~~$10.9 million ~~were deemed not recoverable,~~and $1.3 million, respectively, resulting in an impairment ~~charge~~charges of ~~$6.6 million during the Year To Date Period.~~$23.2 million.

The fair values of operating lease right-of-use assets and fixed assets related to ~~Company-owned~~ retail stores were determined using Level 3 ~~inputs.~~inputs, including forecasted cash flows and discount rates. Of the ~~$6.6~~$23.2 million impairment expense, ~~$3.6~~$16.0 million, ~~$1.4~~$4.0 million, and ~~$0.5~~$0.4 million ~~were~~was recorded in ~~restructuring charges~~SG&A in the Americas, Europe and Asia segments, respectively, and ~~$0.8~~$1.9 million, $0.7 million and ~~$0.3~~$0.2 million ~~were~~was recorded in ~~SG&A~~restructuring charges in the ~~Europe~~Americas, Asia and ~~Asia~~Europe segments, respectively.

The fair value of the ~~second quarter~~contingent consideration liability related to Fossil South Africa was determined using Level 3 inputs. The contingent consideration is based on Fossil South Africa's projected earnings and dividends. The present value of ~~fiscal 2017,~~ the contingent consideration liability was valued at $1.4 million as of July 4, 2020. The Company recorded ~~a pre-tax impairment charge~~$0.1 million of ~~$1.6~~the variable consideration in accrued expenses-other and $1.3 million ~~related to~~in other long-term liabilities in the ~~write off of a cost method investment.~~condensed consolidated balance sheets at July 4, 2020.

12. INTANGIBLE AND OTHER ASSETS

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

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right

can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the initial lease term, which ranges from approximately four to 18 years.

Amortization expense for intangible assets was approximately ~~$3.0 million and $3.7~~$1.7 million for both the ~~Third~~Second Quarter and Prior Year Quarter ~~respectively,~~ and ~~$10.4~~$3.6 million and ~~$11.2~~$3.4 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
2020 (remaining)	$	3,469
2021	$	3,268
2022	$	2,455
2023	$	881
2024	$	861
Thereafter	$	996

Fiscal Year
Amortization
Expense
2017 (remaining) $ 3,028
2018 $ 11,848
2019 $ 11,518
2020 $ 10,979
2021 $ 7,143
2022 $ 6,263

13. COMMITMENTS AND CONTINGENCIES

Litigation. The Company is occasionally subject to litigation or other legal proceedings in the normal course of its business. The Company does not believe that the outcome of any currently pending legal matters, individually or collectively, will have a material effect on the business or financial condition of the Company.

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

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

As a result of the COVID-19 pandemic, the Company received lease concessions from landlords in the form of rent deferrals and rent foregiveness in the Second Quarter. The Company chose the policy election provided by the FASB in April 2020 to record rent concessions as if no modifications to leases contracts were made, and thus no changes to the ROU assets and ROU liabilities were recorded in respect to these concessions. This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. As of July 4, 2020, the Company had outstanding deferred rent payments of $17.4 million, and the Company received rent foregiveness of $3.6 million in the Second Quarter.

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

Condensed Consolidated

Statements of Income (Loss)

Income (Loss) Location

Operating lease cost⁽¹⁾⁽²⁾

⁽¹⁾Includes sublease income, which was immaterial.

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

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

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



Lease Term and Discount Rate	July 4, 2020		December 28, 2019
Weighted-average remaining lease term:
Operating leases	6.1 years		6.1 years
Finance leases	1.7 years		2.3 years
Weighted-average discount rate:
Operating leases	14.0	%	13.9	%
Finance leases	1.2	%	1.2	%

Future minimum lease payments by year as of July 4, 2020 were as follows (in thousands):



Fiscal Year	Operating Leases ⁽¹⁾		Finance Leases
2020 (remaining)	$	58,270	$	577
2021	98,476		986
2022	85,490		493
2023	68,109		—
2024	49,442		—
2025	35,650		—
Thereafter	128,836		—
Total lease payments	$	524,273	$	2,056
Less: Interest	186,462		16
Total lease obligations	$	337,811	$	2,040

Future minimum lease payments by year as of December 28, 2019 were as follows (in thousands):



Fiscal Year	Operating Leases		Finance Leases
2020	$	116,778	$	1,042
2021	94,795		978
2022	81,536		488
2023	64,582		—
2024	45,846		—
Thereafter	153,255		—
Total lease payments	$	556,792	$	2,508
Less: Interest	199,265		30
Finance lease obligations	$	357,527	$	2,478

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

As of July 4, 2020, the Company did not have any material operating or finance leases that have been signed but not commenced.

On ~~March 10, 2017,~~February 20, 2020, the Company entered into an Amendment No. 1 (the “First Amendment”) to that certain Term Credit Agreement, dated as of September 26, 2019, by and among the ~~Second Amendment~~Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the “Term Credit Agreement Lenders”) party thereto (as amended to date, the “Term Credit Agreement”).

Pursuant to the Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment reduced the Company's revolving credit facility (the "Revolving Credit Facility") available under the Company’s existing credit amendment from $1.05 billion to $850.0 million. The Second Amendment also removed the incremental term loan that was available under the credit agreement, extended the maturity dateterms of the ~~credit agreement to May 17, 2019~~First Amendment, the Company, the administrative agent and ~~removed the Company’s ability to make offers to~~ the lenders party thereto agreed to ~~extend the maturity date~~modify certain terms of the Term ~~Loan or~~Credit Agreement to, among other things, (i) increase the ~~Revolving Credit Facility. The Second Amendment also amended~~interest rate applicable to the ~~repayment schedule for~~term loans under the Term ~~Loan~~Credit Agreement (a) in the case of Eurodollar loans, from the adjusted LIBO rate plus 6.50% to the adjusted LIBO rate plus 8.00%, and ~~requires~~(b) in the ~~Company to make monthly payments on the last business day~~case of ~~each month beginning April 30, 2018. On and after April 1, 2018, interest on the Term Loan that is based upon the~~alternate base rate ~~will be due and payable in arrears on~~loans, from the ~~last business day~~alternate base rate plus 5.50% to the alternate base rate plus 7.00%; (ii) increase the maximum total leverage ratio permitted from 1.50 to 1.00 as 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 each fiscal quarter to (a) 2.75 to 1.00 as of the last day of each fiscal quarter ending April 4, 2020, July 4, 2020, October 3, 2020 and January 2, 2021, (b) 2.25 to 1.00 as of the last day of each fiscal quarter ending April 3, 2021, July 3, 2021 and October 2, 2021, and (c) 1.50 to 1.00 as of the last day of each subsequent fiscal quarter; (iii) limit the amount of borrowings in aggregate principal amount at any time outstanding under that certain asset-based revolving credit agreement, dated as of September 26, 2019, by and among the Company and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other subsidiaries of the Company from time to time party thereto designated as borrowers, certain subsidiaries of the Company from time to time party thereto, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan AG, as French collateral agent (The "Revolving Facility"), to the lesser of the borrowing base thereunder and $200 million; (iv) extend the applicable ~~interest period; provided,~~periods for certain prepayment fees, so that if the Company voluntarily prepays the term loans prior to February 20, 2022, or if the Company incurs certain indebtedness which results in a mandatory prepayment under the Term Credit Agreement prior to February 20, 2022, the Company is required to pay a prepayment fee of 2.00% with respect to the principal amount prepaid prior to February 20, 2021 and 1.00% with respect to the principal amount prepaid between February 21, 2021 and February 20, 2022; and (v) require the Company to pay the foregoing prepayment fee

upon acceleration of the loans under the Term Credit Agreement. The First Amendment also modified the negative covenants and events of default in the Term Credit Agreement to reduce the Company’s flexibility with respect to certain matters. The Company incurred debt issue costs of $8.1 million in connection with the First Amendment.

On May 12, 2020, the Company entered into Amendment No. 2 to the Term Credit Agreement to extend the deadline for delivery of the Company’s unaudited quarterly financial statements and related deliverables for the fiscal quarter ended April 4, 2020 to the earlier of (i) July 6, 2020 and (ii) the date on which the Company was required to file with the SEC its quarterly report on Form 10-Q for the fiscal quarter ended April 4, 2020.

On June 5, 2020, the Company entered into Amendment No. 3 (the “Third Amendment”) to the Term Credit Agreement to modify certain terms of the Term Credit Agreement to, among other things, (i) increase the interest rate applicable to the term loans under the Term Credit Agreement (a) in the case of Eurodollar loans, from the adjusted LIBO rate plus 8.00% to the adjusted LIBO rate plus 8.50%, and (b) in the case of alternate base rate loans, from the alternate base rate plus 7.00% to the alternate base rate plus 7.50%; (ii) (a) require a $15.0 million principal prepayment at the time of the Third Amendment, (b) increase the quarterly amortization payment to be paid on September 30, 2020 to $8.0 million from $5.0 million, and (c) increase each quarterly amortization payment thereafter to $10.0 million; (iii) change provisions related to prepayment fees such ~~interest period extends for over one month, then interest~~that (a) prepayment fees will be ~~due~~waived for a period of 90 days following the date of the Third Amendment for prepayments in connection with certain refinancings of the term loans and ~~payable~~(b) prepayment fees will be 2% for a period of twelve months after such 90-day period, and 1% for next twelve-month period; (iv) reduce the minimum liquidity levels required to be maintained by the Company at the end of each ~~one~~fiscal month, ~~interval~~through and including November 2020, from $150.0 million to $125.0 million; (v) waive the quarterly test for maximum total leverage ratio for fiscal year 2020 and the first three fiscal quarters of fiscal year 2021, and 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 byperiod require the Company ~~following the repayment in full~~to maintain specified minimum levels of ~~the Term Loan, the Company will be required to repay the Revolving Credit Facility in~~EBITDA; and (vi) increase the amount of equity interests in certain “first tier” foreign subsidiaries that must be pledged as collateral securing the obligations under the Term Credit Agreement from 65% to 100% of such ~~excess proceeds, with a corresponding permanent reduction~~equity interests.

While the Third Amendment amended, among other things, certain of the financial covenants in the ~~Revolving~~Term Credit ~~Facility~~Agreement to address the financial impact of COVID-19, any material further decreases to the Company’s revenues and cash flows, or the Company's inability to successfully achieve its cost reduction targets, could result in the ~~amount~~Company not meeting one or more 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~~amended financial covenants under its Term Credit Agreement within the next twelve months. See “Note 1-Significant Accounting Policies" for additional information.

As of July 4, 2020, the Company had $170.0 million and $123.8 million outstanding under the Term ~~Loan~~Credit Agreement and ~~then up to $50.0 million of the~~ Revolving ~~Credit Facility.~~

The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to base rate loans and LIBOR rate loans under the Company’s credit agreement. As of September 30, 2017, the interest rate margin for base rate loans was 2.50% per annum and the interest rate margin for LIBOR rate loans was 3.50% per annum. On October 1, 2017, the applicable margin on the Term Loan automatically increased to 2.75% per annum for base rate loans and 3.75% per annum for LIBOR rate loans. If the Term Loan has not been repaid in full on or prior to March 31, 2018, then on such date, the applicable margin will automatically increase to 3.25% per annum for base rate loans and 4.25% per annum for LIBOR rate loans. The Second Amendment also changed the commitment fee payable by the Company with respect to the Revolving Credit Facility, ~~to 0.50% per annum.~~respectively. 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:

~~The Company made principal~~had net payments of ~~$6.3~~$20.0 million and ~~$18.8~~$30.0 million under the Term ~~Loan~~Credit Agreement during the ~~Third~~Second Quarter and Year To Date Period, respectively. The Company ~~also made~~had net payments of ~~$158.0~~$35.1 million and ~~$131.3~~net borrowings of $95.8 million under the Revolving Credit Facility during the ~~Third~~Second Quarter and Year To Date Period, respectively. Amounts available under the Revolving Credit Facility ~~are~~were reduced by any amounts outstanding under standby letters of credit. As of ~~September 30, 2017,~~July 4, 2020, the Company had available borrowing capacity of ~~$270.5~~$32.5 million under the Revolving Credit Facility. The Company's domestic subsidiary receives short-term loans from certain of its foreign subsidiaries at the end of each fiscal quarter which are used to reduce its external borrowings. These intercompany loans are repaid at the beginning of the following fiscal quarter. At the end of the Third Quarter, these intercompany loans totaled $411.8 million. The Company incurred approximately ~~$2.2~~$4.5 million and ~~$6.3~~$9.2 million of interest expense related to the Term ~~Loan~~Credit Agreement during the ~~Third~~Second Quarter and Year To Date Period, ~~respectively, including the impact of the related interest rate swap.~~respectively. The Company incurred approximately ~~$8.1~~$0.6 million and ~~$20.5~~$1.0 million of interest expense related to the Revolving Credit Facility during the ~~Third~~Second Quarter and Year To Date Period, respectively. The Company incurred approximately ~~$0.9~~$2.6 million and ~~$2.7~~$4.7 million of interest expense related to the amortization of debt issuance costs and the original issue discount during the ~~Third~~Second Quarter and Year To Date Period, respectively.

~~15.~~16. RESTRUCTURING

The Company implemented a multi-year restructuring program that began in fiscal year 2016 called New World Fossil ("~~NWF"~~NWF 1.0")~~. As part of~~ and concluded in fiscal year 2019. The remaining liability under NWF 1.0 is no longer material.

In fiscal year 2019, the Company ~~targets~~launched New World Fossil 2.0 - Transform to ~~improve~~Grow Program (“NWF 2.0”), which is focused on optimizing the Company’s operating ~~profit~~structure to be more efficient, with faster decision-making and ~~support sales growth through~~ a ~~leaner infrastructure and an enhanced business model.~~more customer-centric focus. In addition to optimizing the way the Company goes to market, the Company is also pursuing additional gross margin expansion opportunities. The Company is ~~working~~taking a zero-based budgeting approach to ~~achieve greater efficiencies from production~~adjust its business model to ~~distribution through activities such as organizational changes, reducing its overall product assortment, optimizing its base cost structure~~enable more investment in digital capabilities and ~~consolidating facilities.~~marketing, move closer to the consumer and react more quickly to the ever-evolving consumer shopping patterns. The Company also ~~intends~~plans to ~~build~~change overall business processes and resources, creating a ~~quicker~~more centrally directed operating model, reducing complexity and ~~more responsive~~redundancy, and operating platform. The Company is reducing its retail footprint to reflect the evolving shopping habits of today's consumer, which includes restructuring costs, such as store impairment, recorded lease obligations and termination fees and accelerated depreciation. Of the total estimated $150 million restructuring charges, approximately $27.8 million and $41.8 million were recorded during fiscal year 2016 and the Year To Date period, respectively. The Company estimates total fiscal year 2017 NWF restructuring charges of approximately $45 million.at a lower cost base.

The following table shows a rollforward of the accrued liability related to the Company’s NWF 2.0 restructuring plan (in thousands):

~~Restructuring~~



	For the 26 Weeks Ended June 29, 2019
	Liabilities						Liabilities
	December 29, 2018		Charges		Cash Payments		June 29, 2019
Professional services and other	$	—	$	2,638	$	1,908	$	730
Severance and employee-related benefits	—		4,061		289		3,772
Total	$	—	$	6,699	$	2,197	$	4,502

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



	For the 13 Weeks Ended July 4, 2020		For the 13 Weeks Ended June 29, 2019		For the 27 Weeks Ended July 4, 2020		For the 26 Weeks Ended June 29, 2019
Americas	$	2,821	$	—	$	3,957	$	—
Europe	2,916		4,554		3,682		5,394
Asia	2,822		—		4,445		—
Corporate	1,973		1,305		7,823		1,305
Consolidated	$	10,532	$	5,859	$	19,907	$	6,699

Additionally, the NWF 2.0 restructuring program is being expanded to address additional challenges posed by COVID-19. The program will include a number of cost saving measures including previously announced store closures. In addition, effective March 30, 2020, the Company implemented base salary reductions for a substantial number of its global employees, including each of its executive officers. Further, the cash fees for all non-employee directors serving on the Company’s Board of Directors were deferred for the first quarter of 2020 until the end of 2020 and the cash fees were reduced by 20% for the Second Quarter of 2020. The Company also implemented weekly work hour reductions (e.g., from 40 hours to 32 or 24 hours) and has implemented work-reduction furloughs for certain other employees. The Company has entered into discussions with most of its retail and corporate office landlords to modify its rent payments, receive other concessions or otherwise reduce its operating costs for these locations. The Company has also extended the payment terms with a number of its vendors and suppliers globally and is in discussions with licensors of certain third party trademarks to reduce the Company’s royalty obligations in 2020. The Company estimates total NWF 2.0 charges of $50 million to $70 million, with approximately $25 million of those charges in fiscal year 2020.

For the 39 Weeks Ended September 30, 2017 For the 39 Weeks Ended October 1, 2016
Americas $ 10,567
$ 10,548
Europe 9,127
1,639
Asia 9,283
336
Corporate 12,841
1,950
Consolidated $ 41,818
$ 14,473

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the financial condition and results of operations of Fossil Group, Inc. and its subsidiaries for the thirteen and ~~thirty-nine~~twenty-seven week periods ended ~~September 30, 2017~~July 4, 2020 (the ~~“Third~~“Second Quarter” and ~~“Year~~"Year To Date Period,”" respectively) as compared to the thirteen and ~~thirty-nine~~twenty-six week periods ended ~~October 1, 2016~~June 29, 2019 (the “Prior Year Quarter” and ~~“Prior~~"Prior Year YTD Period,”" respectively). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

We are a global design, marketing and distribution company that specializes in consumer fashion accessories. Our principal offerings include an extensive line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts and sunglasses. In the watch and jewelry product categories, we have a diverse portfolio of globally recognized owned and licensed brand names under which our products are marketed. Our products are distributed globally through various distribution channels, including wholesale in countries where we have a physical presence, direct to the consumer through our retail stores and commercial websites and through ~~third party~~third-party distributors in countries where we do not maintain a physical presence. Our products are offered at varying price points to meet the needs of our customers, whether they are value conscious or luxury oriented. Based on our extensive range of accessory products, brands, distribution channels and price points, we are able to target style conscious consumers across a wide age spectrum on a global basis.

Domestically, we sell our products through a diversified distribution network that includes department stores, specialty retail locations, specialty watch and jewelry stores, Company-owned retail and outlet stores, mass market stores and through our FOSSIL^® ~~website.~~ website and third-party websites. Our wholesale customer base includes, among others, Amazon, Best Buy, Dillard’s, ~~JCPenney,~~ Kohl’s, Macy’s, ~~Neiman Marcus,~~ Nordstrom, Saks Fifth Avenue, Target and Wal-Mart. In the United States, our network of Company-owned stores included 8455 retail stores located in premier retail sites and ~~122~~101 outlet stores located in major outlet malls as of ~~September 30, 2017.~~July 4, 2020. In addition, we offer an extensive collection of our FOSSIL brand products on our website, www.fossil.com, as well as proprietary and licensed watch and jewelry brands through other managed and affiliated websites.

Internationally, our products are sold to department stores, specialty retail stores and specialty watch and jewelry stores in approximately 150 countries worldwide through 23 Company-owned foreign sales subsidiaries and through a network of approximately 80 independent distributors. Internationally, our network of Company-owned stores included ~~216~~155 retail stores and ~~134~~119 outlet stores as of ~~September 30, 2017.~~July 4, 2020. Our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer an extensive collection of our FOSSIL brand products on our websites in certain countries.

Our business is subject to economic cycles, ~~and~~ retail industry ~~conditions.~~conditions and the impact of tariffs on our products. Purchases of discretionary fashion accessories, such as our watches, handbags, sunglasses and other products, tend to decline during recessionary periods when disposable income is low and consumers are hesitant to use available credit. In addition, acts of terrorism, acts of war and military action both in the U.S. and abroad can have a significant effect on economic conditions and may negatively affect our ability to procure our products from manufacturers for sale to our customers. Any significant declines in general economic conditions, public safety concerns or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on consumer purchases of our products.

Our business is also subject to the risks inherent in global sourcing supply. Certain key components in our products come from limited sources of supply, which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products. Any interruption or delay in the supply of key components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales. Interruptions or delays in supply may be caused by a number of factors that are outside of our and our contract manufacturers’ control.

Future sales and earnings growth are also contingent upon our ability to anticipate and respond to changing fashion trends and consumer preferences in a timely manner while continuing to develop innovative products in the respective markets in which we compete. As is typical with new products, including our lines of connected accessories, market acceptance of new designs and products that we may introduce is subject to uncertainty. In addition, we generally make decisions regarding product designs several months in advance of the time when consumer acceptance can be measured. We believe that we can drive long-term growth with brand building, innovation through design, fashion and new materials and introducing new technology and functionality into our accessories, while continuing to provide a solid value proposition to consumers across all of our brands.

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

consolidated operating income. We manage these currency risks by using derivative instruments. The primary risks managed by using derivative instruments are the future payments by non-U.S. dollar functional currency subsidiaries of intercompany

inventory transactions denominated in U.S. dollars. We enter into foreign exchange forward contracts ("forward contracts") to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases.

Known or Anticipated Trends: Based on our recent operating results and current perspectives on our operating environment, we anticipate certain trends will continue to impact our operating results:

In March 2020, a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization. Our business operations and financial performance for the Second Quarter and Year To Date Period were materially impacted by COVID-19. The COVID-19 pandemic has negatively affected the global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures of non-essential businesses and orders to “shelter-in-place.” We are focused on protecting the health and safety of our employees, customers and suppliers to minimize potential disruptions and supporting the community to address challenges posed by the global COVID-19 pandemic. At the end of the first quarter of fiscal year 2020 ("First Quarter"), the impact of COVID-19 resulted in the closure of the majority of our stores and many of our wholesale partners' stores. During the Second Quarter, many regional and local governments lifted or modified restrictions and orders. By the end of the Second Quarter, the majority of our stores have re-opened; however, these stores have been impacted by a decrease in retail traffic and reduced hours at many locations. By the date of this filing, an additional number of our stores have reopened in some capacity. The reopening of our remaining stores and our wholesale partners’ stores, which remain closed, is dependent on a number of factors, including, but not limited to, the lifting of any government restrictions and implementation of safety protocols. While we believe the closed stores will open over stages during the next several months, we cannot reasonably estimate the impact such closures will have on our retail and wholesale sales and overall results. We expect revenue declines to continue in our retail and wholesale channels as consumers react to, or otherwise practice, “social distancing” and other safety measures. We experienced a larger decline in revenues in the Second Quarter than in the First Quarter, as a significant number of our retail and wholesale partners’ stores were closed for the majority of the period. For our stores that have reopened, we are seeing trends in traffic down significantly, and those effects are being partially offset by improved conversions.

Since the COVID-19 pandemic began, we have seen strong growth trends in our direct and wholesale e-commerce channels. We expect these trends to continue, as consumers continue to focus on online shopping options.

We have taken certain cost saving and other actions, and plan to take further actions, to address the decrease in revenues and cash flow and other impacts on our business as a result of COVID-19 in order to maintain liquidity and in order to remain in compliance with financial covenants. Examples of some of these actions include the following:

Board of Director and Executive Compensation: We implemented base salary reductions for each of our executive officers for an indefinite time period. Further, the cash fees for all non-employee directors serving on our Board of Directors were deferred for the First Quarter until the end of the year, and the cash fees were reduced by 20% for the Second Quarter.

Other Employee Actions: We have implemented base salary reductions for a substantial number of our employees globally. We also ~~exposed~~implemented weekly work hour reductions (e.g., from 40 hours to ~~interest rate risk associated~~32 or 24 hours) and have implemented work-reduction furloughs for certain other employees. We closed all of our corporate offices at various times in 2020. Many of our offices in Asia and Europe have reopened in some capacity with health and safety guidelines in place. Our offices in the U.S. remain closed with plans to reopen in some capacity in September 2020. We believe our employees have generally been successful in transitioning to a virtual working environment.

Office and Retail Location Expenses: We have entered into agreements, or are in discussions with, most of our retail and corporate office landlords to modify rent payments, receive other concessions or otherwise reduce our operating costs for these locations.

Other Expense Reductions: We have also extended the payment terms with a number of our vendors and suppliers globally and have agreements, or are in discussions with, licensors of certain third party trademarks to reduce our royalty obligations in fiscal year 2020. In addition, we plan to reduce marketing and capital spending and eliminate all non-business critical spending for the balance of 2020.

2020 Operating Expenses: Selling, general and administrative expenses (“SG&A”) for 2020 is expected to be several million dollars lower than 2019 and our original plan for 2020. Our NWF 2.0 initiative is being expanded to include additional expense reduction programs which are partly dependent on the length and depth of the COVID-19 pandemic impact. Expense reductions are expected to be primarily driven by additional store closings and rent concessions, reduced compensation levels, lower marketing investment, and fewer discretionary expenses.

Capital Expenditures: Capital expenditures for 2020 are expected to be approximately $9 million, compared to original guidance of approximately $25 million. This reduction reflects the deferral or cancellation of certain planned investments.

Management believes our cost reduction plans are probable of being successfully implemented, which will result in adequate cash flows to support our ongoing operations and to meet our covenant requirements for one year following the date these financial statements are issued.

Our Term Credit Agreement (as defined in "Note 15-Debt Activity") contains certain affirmative and negative covenants. In June 2020, we entered into Amendment No. 3 to our Term Credit Agreement to amend, among other things, certain of these financial covenants as a result of the impact of COVID-19 on our business. Refer to “Note 15-Debt Activity" for additional details on the Term Credit Agreement. We are currently in compliance with our ~~variable rate debt,~~covenants and are forecasting to remain in compliance for the year following the date that these financial statements are issued. Due to the uncertainty related to the duration of COVID-19, we could experience material further decreases to revenues and cash flows and may experience difficulty in remaining in compliance with financial covenants under the Term Credit Agreement, as amended.

Business Strategies and Outlook: Notwithstanding the COVID-19 pandemic, we plan to execute on the following strategies to enhance our brands, grow our revenue and achieve profitability. These strategies remain highly relevant and we believe they will be important to our long-term success. The first strategic initiative is delivering compelling storytelling and innovation to build upon brand equities for both owned and licensed brands. Our second strategic initiative is commercial transformation, which we ~~manage with~~are accelerating due to the current operating environment created by the COVID-19 pandemic. We have deployed substantial resources toward increasing our digital commerce and marketing capabilities in recent years, and that is helping us serve our customers during this time of heightened e-commerce demand. We have invested in a robust set of tools that can support a larger direct to consumer business in the future. Our third strategic initiative is expanding our opportunity in China and India. In these countries, we are continuing to execute against a strategy centered around localized marketing and segmented assortments. Although the impact of COVID-19 is likely to disrupt our growth trajectory in the short to intermediate term, we continue to view China and India as compelling long-term opportunities. Our fourth strategic initiative is to capture greater efficiency in our processes and right-sizing our cost structure. Our NWF 2.0 initiative is a primary example of this strategy. In 2019, we reduced our operating expenses by nearly $50 million through our NWF 2.0 program. Given the current environment and our perspective on the future state of business, we are expanding our NWF 2.0 program to capture an ~~interest rate swap.~~incremental $50 million in benefits in years 2020 and 2021, which brings the total savings derived from NWF 1.0 and NWF 2.0 from $200 million to $300 million.

Since the outbreak of the COVID-19 pandemic, we have taken quick and strong actions to accelerate aspects of our strategy to generate current year savings, preserve liquidity and improve financial flexibility during the COVID-19 pandemic. Examples of some of these actions include:

•Board of director and executive compensation reductions and deferrals

•Other employee actions, like reduced hours

•Office and retail location expense reductions

•Other expense reductions

•Capital expenditure deferral and cancellations

For a more complete discussion of the risks facing our business, see “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December ~~31, 2016~~28, 2019, "Part II, Item 1A. Risk Factors" of our Quarter Report on Form 10-Q for the First Quarter and "Part II, Item 1A. Risk Factors" of this Quarter Report on Form 10-Q.

Results of Operations

Executive Summary. ~~During~~ Since the ~~Third~~onset of the COVID-19 pandemic, we have acted to protect our employees, partners and communities worldwide, adapted to rapidly changing circumstances, mitigated business disruption and strengthened our financial position. While significant disruption has been caused by the COVID-19 pandemic, during the Second Quarter, ~~net~~investments in our digital channels, one of our strategic imperatives, supported sales ~~decreased 7% (8%~~growth as sales grew strongly through digital channels and partially offset declines in our stores and wholesale channels. As regions in the world lifted stay at home orders during the Second Quarter, we also saw an improvement in sales in our retail stores and through our wholesale partners. By the end of the Second Quarter, 407 of our global stores had re-opened. Overall sales for the Second Quarter were $259 million, down 48% (47% in constant currency), compared with the Prior Year Quarter. Gross margins were 54.3% for the Second Quarter as compared towith 52.9% for the Prior Year Quarter, ~~driven by declines in traditional watches, leathers~~as disciplined inventory management practices helped us focus on selling through on hand inventory and ~~jewelry, and partially offset by continued growth in wearables. The Third Quarter was favorably impacted by customers accelerating certain deliveries~~total inventories ended at $376 million, down sequentially from the ~~fourth quarter of fiscal year 2017 into the Third~~First Quarter primarily to take advantage of pending price increases. We estimate that this acceleration of sales favorably impacted the Third Quarter sales growth rate by roughly three percentage points, and we expect this favorable impact will largely reverse in the fourth quarter of fiscal year 2017. While the overall business remains challenging and the retail environment remains in flux, we continue to bring innovative new products to the market and work towards operational efficiencies to ultimately enhance our profitability. We remain confident wearables can be onecomparable period of the ~~key catalysts that could eventually offset the sales declines we have seen in~~prior fiscal year. We accelerated and executed cost-savings measures under our traditional watch business for some time now. Wearables products accounted for approximately 10% of our net sales in the Third Quarter, compared to 7% and 9% in the first and second quarters of fiscal year 2017, respectively. Our third generation of connected devices, which are in the market now, add additional features through Android WearNWF 2.0 such as fitness and standalone applications. In addition, our latest generation wearables are thinner, and they have brighter screens and improved functionality. We are supporting these new products with our celebrity influencer campaigns to attract our wearable customers in the digital and social space.

During the Third Quarter, sales of FOSSIL branded products decreased 5% (7% in constant currency), as compared to the Prior Year Quarter. Effectively all of the decline in the FOSSIL branded sales was driven by weakness in our leathers and jewelry categories, partially offset by modest growth in watches led by wearables. Wearables positively impacted the FOSSIL watch category growth rate by approximately 11 percentage points in the Third Quarter. Sales of our SKAGEN branded products decreased 10% (12% in constant currency) as compared to the Prior Year Quarter, with growth in Asia more than offset by declines in the Americas and Europe. Growth in SKAGEN connected watches partially offset the decline in SKAGEN traditional watches.

~~Our multi-brand global watch portfolio decreased 3% (4% in constant currency)~~program during the ~~Third~~Second Quarter as compared to the Prior Year Quarter, representing decreases in the majority of the brands in our portfolio. Growth in wearable products partially offset the declines in traditional watches. In the MICHAEL KORS brand, we launched next generation connected product in August and expanded the distribution channels later during the Third Quarter with positive results. EMPORIO ARMANI hybrid watches launched during the Third Quarter, driving positive sales growth overall for the brand. We launched DIESEL hybrid and display watches and EMPORIO ARMANI display watches on our wearable platform towards the end of the Third Quarter, and preliminary results have been favorable.

We plan to launch five more brands onto the hybrid platform this year, including DKNY, MARC JACOBS, MICHELE, RELIC and TORY BURCH. These new launches will bring us to a total of 14 brands in wearables and support our goal to at least double the wearables business in fiscal year 2017 from fiscal year 2016.

~~The following table presents as reported and constant currency net sales percentage change information for FOSSIL for the Third Quarter as compared to the Prior Year Quarter:~~

Global comparable retail sales (including e-commerce) decreased 6% during the Third Quarter, compared to a decrease of 1% in the Prior Year Quarter, due to continued declines in retail store traffic trends partially offset by consistent growth in e-commerce. During the Third Quarter, we continued to improve conversion through promotional activity, but we were not able overcome the negative traffic we experienced in all regions. During the Third Quarter, our comparable e-commerce sales increased 26% compared to the Prior Year Quarter, led by the Americas, but with increases in all regions.

We continue to make progress on our New World Fossil ("NWF") initiative. The goal of NWF continues to be to build a leaner, more nimble operating platform that can support improved profitability in the future while better serving our customers and competing in the new retail environment. When we launched NWF in fiscal year 2016, we set a target to drive $200 million of profit improvements in the near term, and we are well on our way to delivering that. During a challenging retail environment, we continue to make strong progress on transforming Fossil. This year we expect our NWF initiatives to drive underlying improvement in our product costs as well as significanttransitioned certain temporary reductions in our ~~expense structure that we estimate will be over $100 million this year~~corporate staff to permanent

reductions. We also made progress on ~~a run rate basis. We recognize this transformation will take time, but we are making significant progress to evolve~~improving our liquidity through ongoing discussions with key ~~categories~~suppliers, licensors and ~~streamline our business to position us for profitable growth over the long term.~~

In the Third Quarter, we managed our resources and capital tightly. We are also working to ensure that we have the proper capital structure needed to support our long-term financial objectives. Our goal continues to be to diversify our capital structure beyond just our existing bank partners with longer tenors to support our long term strategic objectives. We are taking the necessary steps to strengthen our financial position to further enable us to execute our strategies well into the future and position our business model for continued strong cash flow generation. During the past year, we have reduced our net debt by $170 million, reduced our net working capital by $230 million and generated positive cash flow from operations.

During the Third Quarter as compared to the Prior Year Quarter, gross profit decreased due to lower sales and a decreased margin rate. The decrease in gross margin rate was primarily driven by the impact of connected products due to both lower connected margins as well as additional valuation charges. Our strategy this year has been to invest in margin to drive significant volume in wearables and leverage that volume to drive future cost efficiencies. So far this year, we have tripled our connected sales volumes compared to the same periods as last year and are well ahead of the initial cost goals that we set for ourselves this year. However, we have not hit the aggressive sales goals that we set for ourselves this year in this new category and are consequently carrying greater levels of connected products that we will need to clear and have deferred some receipts into the first quarter of fiscal year 2018. In the Third Quarter, we recorded a $23 million valuation charge to support our efforts to clear this inventory, which negatively impacted our overall gross margins by 330 basis points. The gross margin rate was also negatively impacted by ongoing promotional activity in our outlets and the e-commerce channel and by an unfavorable currency impact of approximately 60 basis points. Higher sales volumes through off-price channels also modestly reduced gross margins in the Third Quarter. Product cost benefits generated from our NWF supply chain initiatives partially offset these headwinds. Total operating expenses for the Third Quarter decreased to $320 million including $6 million of restructuring costs associated with our NWF initiative. Other income increased as a result of increased net foreign currency gains during the Third Quarter as compared to the Prior Year Quarter. The tax benefit in the Third Quarter was favorably impacted by the increased effective tax rate in the Third Quarter as compared to the Prior Year Quarter. During the Third Quarter, our financial performance resulted in a loss of $0.11 per diluted share.landlords.

Quarterly Periods Ended ~~September 30, 2017~~July 4, 2020 and ~~October 1, 2016~~June 29, 2019

Consolidated Net Sales. Net sales decreased ~~$49.3~~$242.4 million or ~~6.7% (8.0%~~48.3% (47.4% in constant currency), for the ~~Third~~Second Quarter as compared to the Prior Year ~~Quarter. During the Third~~ Quarter, ~~our leathers products decreased $17.6 million or 18.9% (19.9% in constant currency)~~ primarily as a result of the ~~current product assortment not resonating well with consumers. Global~~ongoing COVID-19 pandemic. During the Second Quarter, watch sales decreased ~~$15.3~~$203.8 million or ~~2.7% (4.1%~~49.3% (48.4% in constant currency), our leathers products decreased $26.0 million or 49.4% (48.9% in constant currency) and our jewelry business decreased $5.6 million or 26.9% (26.0% in constant currency). As we progressed through the Second Quarter, sales trends improved as a result of an easing of COVID-19 related restrictions in many markets, enabling some return of traffic in our retail stores and wholesale customer locations. Our direct business decreased significantly during the Second Quarter, largely driven by temporary store and concession closures due to COVID-19 and permanent store closures since the end of the Prior Year Quarter in connection with our NWF program. Global comparable retail sales decreased 36%, which includes both our stores and our own e-commerce channels and the impacts of COVID-19 closures in both channels. While many stores re-opened during the Second Quarter, we still experienced significant traffic declines, ~~in traditional watches~~which were partially offset by ~~increases~~improved conversions. The sales declines in ~~connected watches. Our jewelry business decreased $12.5 million or 20.8% (22.8%~~our store channel were partially offset by strong growth in ~~constant currency).~~e-commerce, both in our owned websites and in third party marketplace sites recorded in our wholesale channel. We will continue focusing on sales in the digital channel, as customers continue to shift to digital and we are generating greater return on our investments in digital infrastructure. We have reduced our store footprint by 20 stores since the end of the Prior Year Quarter and expect to reduce it further during the remainder of fiscal year 2020.

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

In the ~~Third~~Second Quarter, the translation of foreign-based net sales into U.S. dollars ~~increased~~decreased reported net sales by ~~approximately $10.1~~$4.4 million, including ~~favorable~~unfavorable impacts of ~~$9.2~~$1.4 million, $2.3 million and ~~$1.6~~$0.7 million in our Europe, Asia and Americas segments, respectively, ~~and an unfavorable impact of $0.7 million in our Asia segment~~ when compared to the Prior Year Quarter.

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

Americas Net Sales. Americas net sales decreased ~~$53.1~~$117.3 million or ~~14.7% (15.1%~~52.6% (52.3% in constant currency), during the ~~Third~~Second Quarter in comparison to the Prior Year Quarter. During the ~~Third~~Second Quarter, watches decreased ~~$32.1~~$100.6 million or ~~11.7% (12.1%~~54.3% (54.0% in constant currency), ~~while~~ our leathers business decreased ~~$12.7~~$16.2 million or ~~21.6% (22.1%~~48.2% (47.9% in constant currency), and our jewelry category ~~decreased $6.6~~increased $1.1 million or ~~29.5% (29.9%~~68.8% (68.8% in constant currency). ~~Sales~~In the region, sales declined in the U.S., Mexico and Canada. Strong sales growth in e-commerce partially offset the declines in other channels. Sales declined in most brands, most notably in FOSSIL and MICHAEL KORS^®. Comparable retail sales declined in the ~~U.S. and Canada were~~mid-thirties on a percentage basis during the Second Quarter, driven by temporary store closures due to the COVID-19 pandemic, partially offset by growth in Mexico. During the Third Quarter, most brands in the portfolio declined while our EMPORIO ARMANI watch business increased with the introduction of EMPORIO ARMANI Connected. Decreases in traditional watches were partially offset by increases in connected watches, with the strongest performance coming from FOSSIL connected watches. While both our wholesale andstrong positive e-commerce comparable retail businesses declined in the Third Quarter, our retail business was relatively stronger. Comparable retail sales including e-commerce declined moderately in the region as negative comparable sales in our stores were partially offset by positive comparable sales in our e-commerce business.

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

Europe Net Sales. Europe net sales ~~increased $4.0~~decreased $67.6 million or ~~1.6% (decreased 2.1%~~46.0% (45.0% in constant currency) during the ~~Third~~Second Quarter in comparison to the Prior Year Quarter. ~~Watches increased $11.6~~During the Second Quarter, watches decreased $52.3 million or ~~6.4% (2.5%~~45.7% (44.7% in constant currency), jewelry declined ~~$3.6~~$7.0 million or ~~10.6% (13.5%~~38.0% (37.5% in constant currency) and our leathers business ~~decreased $2.3~~declined $4.2 million or ~~11.4% (14.4%~~45.7% (44.6% in constant currency). Across the Eurozone, sales were down in all major markets with the ~~Third Quarter. Third Quarter sales~~greatest declines in ~~Europe benefited from early deliveries to certain wholesale customers who opted to take shipments planned for~~Germany, the ~~fourth quarter of fiscal year 2017, given price adjustments, which were required to be announced to customers~~U.K., Italy and France. Sales decreased in ~~advance. During the Third Quarter, sales growth was led by~~all major brands, most notably in FOSSIL, MICHAEL KORS ~~watches,~~ and ~~we also experienced growth in~~ EMPORIO ARMANI ARMANI EXCHANGE, FOSSIL and DIESEL branded watches, as the watch category more than offset declines in leathers and jewelry. The sales increases in watches were primarily driven from wearables and benefited from our third generation product launching towards the end of the Third Quarter. Within the region, modest growth in the U.K. and Poland was more than offset by declines in the Middle East.^®. Comparable retail sales ~~were moderately negative~~declined in the mid-twenties on a percentage basis during the ~~Third~~Second Quarter, ~~as positive comparable e-commerce sales were more than~~driven by temporary store closures due to the COVID-19 pandemic, partially offset by ~~negative comparative~~strong positive e-commerce comparable retail ~~store sales amid declining traffic.~~sales.

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

Asia Net Sales. Net sales in Asia decreased ~~$0.2~~$57.1 million or ~~0.1% (increased 0.4%~~45.2% (43.4% in constant currency)~~, driven by declines~~ during the Second Quarter in ~~leathers and jewelry largely offset by growth in watches. Continued growth in India and China was offset by a decline in nearly all other countries. During the Third Quarter as compared~~comparison to the Prior Year Quarter. During the Second Quarter, ~~our leathers category~~watches decreased ~~$2.7~~$50.8 million or ~~19.0% (18.3%~~44.7% (42.9% in constant currency), our ~~jewelry category~~leathers business decreased ~~$2.4~~$5.7 million or ~~63.2% (same~~58.2% (56.1% in constant currency) ~~while~~and our ~~watch~~jewelry category increased ~~$5.2~~$0.4 million or ~~4.6% (5.2%~~57.1% (71.4% in constant currency). ~~The watch category was led by growth~~Sales declined in ~~wearables,~~most brands during the Second Quarter, most notably in FOSSIL, ~~and~~ EMPORIO ARMANI, ~~brands~~MICHAEL KORS and DIESEL^®. Sales decreased in ~~particular, while traditional watches continued~~all major markets across Asia, except for mainland China, where sales growth was driven by e-commerce channels. Throughout the region our wholesale and retail channels were negatively impacted by shutdowns and traffic declines due to ~~decline.~~the COVID-19 pandemic. Comparable retail sales declined in the ~~region decreased moderately largely~~mid-fifties on a percentage basis during the Second Quarter, driven by ~~traffic declines.~~

temporary store closures due to the COVID-19 pandemic. Compared to our other segments, our comparable stores sales in Asia declined less, but also experienced relatively less offsetting e-commerce growth.

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

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

During the ~~Third~~Second Quarter, we closed 815 stores and ~~did not open any~~opened 4 new ~~stores.~~stores in connection with our NWF program.

Both stores and our own e-commerce sites are included in comparable retail sales in the thirteenth month of operation. Stores that experience a gross square footage increase of 10% or more due to an expansion and/or relocation are removed from the comparable retail sales base, but are included in total sales. These stores are returned to the comparable retail sales base in the thirteenth month following the expansion and/or relocation. Comparable retail sales are calculated on a comparable calendar period. Therefore, the percentage change in comparable sales for 2020 were calculated on a 27-to-27 week basis to normalize the 27-week Year To Date Period with the 26-week Prior Year YTD Period. Comparable retail sales also exclude the effects of foreign currency fluctuations.

Gross Profit. Gross profit of ~~$319.9~~$140.6 million in the ~~Third~~Second Quarter decreased ~~16.9%~~47.0% in comparison to ~~$385.1~~$265.1 million in the Prior Year Quarter, ~~driven by lower sales and~~as a result of decreased ~~margin rates.~~sales. Gross profit margin rate ~~decreased 580 basis points~~increased to ~~46.4%~~54.3% in the ~~Third~~Second Quarter compared to ~~52.2%~~52.9% in the Prior Year ~~Quarter. The decrease in~~Quarter, primarily reflecting a higher mix of e-commerce sales and reduced minimum licensor royalty costs, partially offset by heightened promotional activity and increased freight and duty costs. Currency favorably impacted the gross profit margin rate was primarily driven by the impact of connected products due to both lower connected margins as well as additional valuation charges. Our strategy this year has been to invest in margin to drive significant volume in wearables and leverage that volume to drive future cost efficiencies. So far this year, we have tripled our connected sales volumes and are well ahead of the initial cost goals that we set for ourselves this year. However, we have not hit the aggressive sales goals that we set for ourselves this year in this new category and are consequently carrying greater levels of connected products that we will need to clear and have deferred some receipts into the first quarter of fiscal 2018. In the Third Quarter, we recorded a $23 million valuation charge to support our efforts to clear this inventory, which negatively impacted our overall gross margins by 330 basis points. The gross margin rate was also negatively impacted by ongoing promotional activity in our outlets and the e-commerce channel and by an unfavorable currency impact of approximately 60 basis points. Higher sales volumes through off-price channels also modestly reduced gross margins in the ~~Third Quarter. Product cost benefits generated from our NWF supply chain initiatives partially offset these headwinds.~~Second Quarter by approximately 50 basis points.

Operating Expenses. Total operating expenses in the ~~Third~~Second Quarter decreased by ~~$33.5~~$86.0 million, or ~~9.5%~~32.7%, to ~~$320.4~~$177.4 million compared to ~~$353.9~~$263.4 million in the Prior Year Quarter. ~~Third~~Operating expenses in the Second Quarter ~~operating expenses~~ included $10.5 million of restructuring costs, ~~of $5.8 million under our NWF initiative,~~primarily related to employee costs, store closures and professional services, while the Prior Year Quarter included ~~$14.5~~$7.3 million in restructuring ~~costs as well as a $10 million benefit resulting from real estate gains.~~

~~In the Third Quarter,~~costs. SG&A expenses ~~were $24.8~~in the Second Quarter decreased $89.2 million ~~lower compared to~~from the Prior Year Quarter ~~primarily as a result of corporate~~due to lower compensation, marketing and regional overhead reductions and lower retail store expenses, given the significant number of stores we have closed since the Prior Year Quarter. Advertising royalties were also lower in the Third Quarter driven by the decline in sales of licensed products.discretionary costs. The translation of foreign-denominated expenses during the ~~Third~~Second Quarter ~~increased~~decreased operating expenses by

~~approximately $4.1~~ $2.4 million as a result of the ~~weaker~~stronger U.S. dollar. As a percentage of net sales, SG&A expenses ~~decreased~~increased to ~~45.7%~~64.4% in the ~~Third~~Second Quarter as compared to ~~46.0%~~51.1% in the Prior Year Quarter.

Operating Income (Loss). Operating income (loss) ~~decreased to~~was a loss of ~~$0.5~~$36.8 million in the ~~Third~~Second Quarter as compared to income of ~~$31.2~~$1.7 million in the Prior Year Quarter. During the Second Quarter, the operating loss was primarily driven by ~~both decreased sales and gross margin rate.~~COVID-19 impacts on sales. As a percentage of net sales, operating margin (loss) was ~~(0.1%)~~(14.2)% in the ~~Third~~Second Quarter compared to ~~4.2%~~0.3% in the Prior Year Quarter. Operating margin rate in the ~~Third~~Second Quarter included a ~~negative~~favorable impact of ~~approximately 50~~20 basis points due to changes in foreign currencies. During the Third Quarter as compared to the Prior Year Quarter, we faced continued retail pressure, most significantly in our traditional businesses in all segments. Additionally, the gross margin rate was negatively impacted by connected products, due to both lower connected margins as well as additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel in all segments. Decreased restructuring costs incurred under our NWF plan, as well as corporate and regional overhead reductions and lower retail store expenses favorably impacted operating income (loss) during the Third Quarter as compared to the Prior Year Quarter.

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

Interest Expense. Interest expense increased by ~~$5.1~~$0.5 million during the ~~Third~~Second Quarter compared to the Prior Year Quarter as a result of ~~higher~~a larger borrowing base and a partial offset by a decreased interest ~~rate spreads due to our amended credit facility.~~rate.

Other Income (Expense)-Net. During the ~~Third~~Second Quarter, other income (expense)-net ~~increased by $2.3 million~~changed favorably to ~~$3.9~~income of $0.9 million in comparison to income of $0.5 million in the Prior Year ~~Quarter. This change was~~Quarter, primarily driven by ~~more favorable foreign~~net transactional currency ~~activity~~gains, compared to net transactional currency losses in the Prior Year ~~Quarter.~~Quarter and partially offset by decreased interest income mainly due to declining interest rates.

Provision for Income Taxes. ~~The income~~ Income tax benefit for the ~~Third~~Second Quarter was ~~$3.2~~$20.8 million, resulting in an effective income tax rate of ~~37.1%~~47.6%. For the Prior Year Quarter, income tax expense was ~~$6.5~~$1.4 million, resulting in an effective income tax rate of ~~25.0%~~(28.0)%. The ~~higher~~ effective tax rate in the ~~Third~~Second Quarter ~~as compared to~~differed from the Prior Year Quarter ~~was attributable~~primarily due to ~~a higher structural rate resulting from an increased forecasted loss from~~changes enacted in the ~~Company's U.S. operations~~Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was ~~tax-benefited at~~signed into law on March 27, 2020. The CARES Act allows U.S. taxpayers to carry back a ~~higher~~net operating loss (“NOL”) arising in tax years 2018, 2019 and 2020 to prior years when the tax rate ~~than the~~was 35%. The Company recognized a U.S. tax ~~rates used~~benefit from its fiscal year 2019 and Second Quarter tax losses, which will be carried back to ~~calculate the~~offset taxable income reported in prior years. The Company will receive a refund of 2015 taxes as well as a portion of 2014 taxes.

The Prior Year Quarter effective tax rate was negative because income tax expense was accrued on ~~the profits from the Company's~~certain foreign ~~operations. There were also favorable discrete items occurring~~entities with positive taxable income and no benefit was recognized for losses in the ~~quarter. These positive impacts were partially offset by~~U.S. and certain foreign jurisdictions. Due to the ~~increased tax expense resulting from all~~Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act, certain foreign ~~and some of~~income is included in U.S. taxable income effectively absorbing the U.S. ~~goodwill impairment charge being permanently nondeductible for~~NOLs, eliminating the availability of any future tax ~~purposes.~~

~~Additionally, income taxes are provided for under~~benefit or loss carryback prior to the ~~asset and liability method for temporary differences~~NOL carryback provision in the recognition of assets and liabilities recognized for income tax and GAAP purposes. Deferred tax assets are periodically assessed for the likelihood of whether they are more likely than not to be realized. We have previously established a valuation allowance in those jurisdictions where we believe recovery is not more likely than not, which generally increases tax expense in the period such determination is made. For those jurisdictions with deferred tax assets not currently subject to a valuation allowance, including the U.S., we have determined that the realization of deferred tax assets continues to be more likely than not.CARES Act.

Net Income (Loss) Attributable to Fossil Group, Inc. ~~Third~~ Second Quarter net income (loss) attributable to Fossil Group, Inc. ~~decreased to $(5.4)~~was a loss of $22.5 million, or ~~$(0.11)~~$0.44 per diluted share, in comparison to ~~$17.4~~a net loss of $7.3 million, or ~~$0.36~~$0.15 per diluted share, in the Prior Year Quarter. Diluted earnings (loss) per share in the ~~Third~~Second Quarter included a restructuring ~~charge~~charges of ~~$0.08 as compared to a restructuring charge of $0.22 in the Prior Year Quarter. Excluding restructuring, the decline in~~$0.16 per diluted share. Diluted earnings (loss) per share in the ~~Third Quarter as compared to the~~ Prior Year Quarter was driven by lower sales and gross margins, mainly due to connected mix, and higher interest expenses, partially offset by lower operating expenses and taxes. The tax benefit in the Third Quarter was positivelyincluded restructuring charges of $0.11 per diluted share. Currency fluctuations favorably impacted ~~by the increased effective tax rate in the Third Quarter as compared to the Prior Year Quarter. The translation impact of a stronger U.S. dollar decreased~~ diluted earnings per share by ~~approximately $0.02 year-over-year.~~$0.05 during the Second Quarter.

Fiscal Year To Date Periods Ended ~~September 30, 2017~~July 4, 2020 and ~~October 1, 2016~~June 29, 2019

Consolidated Net Sales. Net sales decreased ~~$215.8~~$317.0 million or ~~10.4% (10.0%~~32.8% (31.7% in constant currency), for the Year To Date Period as compared to the Prior Year YTD Period. Global watch sales decreased $110.1 million or 7.0% (6.7% in constant currency) driven by declines in traditional watches partially offset by increases in connected watches. Our leathers category decreased $61.0 million or 21.9% (21.6% in constant currency) primarily as a result of the current product assortment not resonating well with consumers, and our jewelry product category decreased $31.8 million or 18.5% (17.8% in constant currency) duringDuring the Year To Date Period, watches decreased $260.1 million or 33.4% (32.2% in constant currency), our leathers business decreased $32.6 million or 30.6% (29.9% in constant currency) and our jewelry category decreased $13.5 million or 26.0% (24.9% in constant currency) as compared to the Prior Year YTD Period. ~~Global comparable retail~~We experienced sales ~~decreased 9% for~~declines in all three geographic segments and major product categories. In the beginning of the first quarter of fiscal year 2020, sales results were positively impacted by increased off-price and liquidation sales of connected inventory. Due to the ongoing COVID-19 pandemic, sales began to slow in February in Asia and in March in the Americas and Europe as a result of store closures in our direct to consumer and wholesale channels. At various times throughout the Second Quarter, certain restrictions due to the COVID-19 pandemic were lifted or eased, allowing stores in our direct to consumer and wholesale channels to re-open. However, certain restrictions are still in place and traffic remains down in the Year To Date Period ~~representing declines~~compared to the Prior Year YTD Period. Comparable retail sales declined in ~~all product categories and all~~the low-twenties on a percentage basis during the Year To Date Period, driven by temporary store ~~concepts~~closures due to the COVID-19 pandemic, but were partially offset by strong positive e-commerce comparable ~~sales growth.~~retail sales.

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

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by ~~approximately $6.6~~$10.5 million, including unfavorable impacts of ~~$5.5~~$5.1 million, ~~$0.6~~$4.5 million, and ~~$0.5~~$0.9 million in our Asia, Europe ~~Americas~~ and ~~Asia~~Americas segments, respectively, compared to the Prior Year YTD Period.

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

Americas Net Sales. ~~For~~ Americas net sales decreased $154.8 million or 37.4% (37.2% in constant currency) during the Year To Date Period ~~Americas net sales decreased $167.7 million or 16.1% (16.0%~~ in ~~constant currency), compared~~comparison to the Prior Year YTD Period. During the Year To Date Period, watches decreased ~~$103.0~~$129.7 million or ~~13.1% (13.0%~~38.9% (38.6% in constant currency)~~. Our~~, our leathers ~~and jewelry categories declined $41.5~~business decreased $19.0 million or ~~23.6% (23.6%~~29.5% (29.3% in constant currency) and ~~$16.8~~our jewelry category declined $4.1 million or ~~26.3% (26.6%~~38.0% (39.8% in constant currency)~~, respectively. Sales declined in the U.S. and Canada and were partially offset by sales increases in Mexico.~~. During the Year To Date Period, ~~nearly all~~sales declined in most brands in our watch portfolio, with the ~~portfolio~~largest decreases in FOSSIL and MICHAEL KORS. Geographically, sales declined in the U.S., Mexico and Canada. Strong e-commerce sales growth partially offset retail store and wholesale sales decline. Comparable retail sales in the region decreased in the low-twenties on a percentage basis during the Year To Date Period, driven by ~~decreases in traditional watches that~~temporary store closures due to the COVID-19 pandemic, but were partially offset by ~~increases in connected watches, with the strongest performance coming from MICHAEL KORS ACCESS and FOSSIL connected watches. Both wholesale and~~strong positive e-commerce comparable retail sales declined at similar rates. Comparable retail sales declined moderately in the region with negative comparable store sales partially offset by moderate increases in comparable sales in our e-commerce business.sales.

Europe Net Sales. ~~For~~ Europe net sales decreased $92.5 million or 30.8% (29.3% in constant currency) during the Year To Date Period ~~Europe net sales decreased $31.5 million or 4.7% (3.9%~~ in ~~constant currency), compared~~comparison to the Prior Year YTD Period. ~~Watches declined $4.7~~During the Year To Date Period, watches decreased $70.6 million or ~~1.0% (0.3%~~30.6% (29.1% in constant currency), our jewelry category declined $10.3 million or 26.3% (24.7% in constant currency), and our leathers ~~and jewelry categories declined $9.9~~business decreased $6.1 million or ~~16.9% (15.7%~~29.6% (28.2% in constant currency) ~~and $10.9 million or 11.1% (9.8% in constant currency), respectively.~~. During the Year To Date Period, most of the brands in the portfolio declined, driven mainly by ~~decreases~~temporary store closures in ~~traditional watches that~~our direct to consumer and wholesale channel due to the COVID-19 pandemic and reduced traffic as stores re-opened. Sales were down in all markets, most notably in Germany, the U.K. and Italy. Strong e-commerce sales growth partially offset ~~by increases in connected watches. Growth in Spain and Poland were offset by~~ declines in ~~most other markets with the greatest decline in~~ our ~~Middle East business. Both~~retail store and wholesale ~~and retail channels decreased at similar rates.~~channels. Comparable retail sales ~~were moderately negative~~in the region decreased in the low twenties on a percentage basis during the Year To Date Period, ~~with negative~~driven by temporary store closures due to the COVID-19 pandemic, but were partially offset by strong positive e-commerce comparable ~~sales in the leathers and jewelry categories while comparable sales in our watch category were flat.~~retail sales.

Asia Net Sales. Asia net sales decreased $67.8 million or 27.9% (25.8% in constant currency) during the Year To Date Period in comparison to the Prior Year YTD Period. During the Year To Date Period, watches decreased $59.6 million or 27.7% (25.6% in constant currency), our leathers business decreased $7.6 million or 35.2% (33.3% in constant currency) and our jewelry category increased $0.8 million or 40.0% (45.0% in constant currency). Sales of most brands declined in the Year To Date Period as compared to the Prior Year YTD Period, most notably in FOSSIL. Strong e-commerce sales growth partially offset retail store and wholesale sales declines. Within the region, we continued to have strong sales growth in mainland China, while all other major markets declined. For the Year To Date Period, ~~Asia net~~comparable retail sales decreased ~~$16.6 million or 4.5% (4.3%~~ in ~~constant currency), compared~~the mid-thirties on a percentage basis driven by temporary store closures due to the Prior Year YTD Period. Leathers declined $9.7 million or 21.9% (21.7% in constant currency), jewelry declined $4.1 million or 44.6% (44.6% in constant currency) and watch sales decreased $2.2 million or 0.7% (0.6% in constant currency). Growth in India and China was offset by declines in Japan, Australia and most other markets. Comparable retail sales in the region decreased moderately with negative comparable sales in the leathers and jewelry categoriesCOVID-19 pandemic, but were partially offset by strong positive e-commerce comparable ~~sales in our watch category for the Year To Date Period.~~retail sales.

Gross Profit. ~~For~~ Gross profit of $281.0 million in the Year To Date Period ~~gross~~decreased $232.1 million or 45.2% in comparison to $513.0 million in the Prior Year YTD Period primarily due to the decline in net sales. Gross profit margin rate decreased ~~350 basis points~~ to ~~48.8%~~43.2% in the Year To Date Period compared to ~~52.3%~~53.1% in the Prior Year YTD Period. The ~~decreased~~ gross profit margin rate contracted primarily due to increased liquidation and inventory valuation adjustments of older generation connected products, primarily in the first quarter, and was ~~primarily driven~~partially offset by a higher mix of e-commerce sales and favorable region and product mix. Currency favorably impacted the ~~same factors impacting the Third Quarter. Changes in foreign currency rates negatively impacted~~ gross profit margin rate by approximately 6010 basis points.

Operating Expenses. For the Year To Date Period, total operating expenses ~~increased~~decreased to ~~$1.4 billion~~$452.1 million compared to $1.0 billion in the Prior Year YTD Period, primarily due to intangible impairment charges recorded in the second quarter of fiscal 2017. During the second quarter of fiscal year 2017, interim impairment tests were performed on goodwill and trade names due to the sustained declines in our market capitalization and sales trends, resulting in impairment expenses of $359.5 million for goodwill and $47.6 million for trade names. For additional information, please refer to "Note 2 - Goodwill and Intangibles Impairment Charges" to the condensed consolidated financial statements. During the Year To Date Period, we incurred restructuring costs of $41.8 million under our NWF initiative compared with restructuring costs of $14.5$531.3 million in the Prior Year YTD Period. SG&A expenses were lower compared to the Prior Year YTD Period mainly due to ~~lower~~corporate and regional infrastructure reductions and lower store costs ~~driven by NWF and reduced marketing expenses.~~as a result of store closures. During the Year To Date Period, we incurred restructuring costs of $19.9 million in comparison to restructuring costs of $17.5 million in the Prior Year YTD Period. We incurred non-cash intangible asset impairment charges of $2.5 million in the Year To Date Period. The translation of foreign-denominated expenses during the Year To Date Period decreased operating expenses by ~~approximately $3.4~~$5.5 million as a result of the stronger U.S. dollar. As a percentage of net sales, SG&A expenses increased to ~~50.2%~~66.1% in the Year To Date Period as compared to ~~48.7%~~53.2% in the Prior Year YTD Period.

~~Consolidated~~ Operating Income (Loss). Operating income (loss) ~~decreased to~~was a loss of ~~$475.5~~$171.1 million in the Year To Date Period as compared to ~~income~~a loss of ~~$61.0~~$18.3 million in the Prior Year YTD Period. The $317.0 million decline in net sales from the Year To Date Period compared with the Prior Year YTD Period was predominately due to the COVID-19 pandemic. The gross margin rate primarily decreased due to increased liquidation and inventory valuation adjustments of older generation connected products and was partially offset by a higher mix of e-commerce sales and favorable region and product mix. Within operating expenses, SG&A expenses decreased $84.1 million driven by ~~non-cash intangible impairment charges~~corporate and regional infrastructure reductions and lower store costs due to store closures both as part of ~~$407.1 million~~our long term operating strategy and ~~also by decreased sales and gross margin rate.~~as a response to the global COVID-19 pandemic. As a percentage of net sales, operating margin was ~~(25.5)~~(26.3)% in the Year To Date Period as compared to ~~2.9%~~(1.9)% in the Prior Year YTD Period and was negatively impacted by approximately 7010 basis points due to changes in foreign currencies. During the Year To Date Period as compared to the Prior Year YTD Period, we faced continued retail pressure, most significantly in our traditional businesses in all segments. Additionally, the gross margin rate was negatively impacted by connected products, due to both lower connected margins as well as additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel in all segments. Operating expenses increased significantly, primarily due to non-cash impairment charges recorded on our goodwill in the Americas, Europe and Asia segments and trade names in corporate. Increased restructuring charges were more than offset by savings in our infrastructure, store costs and marketing expenses.

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

For the 27 Weeks Ended July 4, 2020⁽¹⁾

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⁽¹⁾Subsequent to the issuance of our condensed consolidated financial statements for the 14 weeks ended April 4, 2020, we determined that Operating Loss for the Americas and Corporate segments for the 14 weeks ended April 4, 2020 was incorrectly presented as certain charges totaling $24.5 million were incorrectly attributed to the Americas segment rather than the Corporate segment. As a result, Operating Loss for the Americas and Corporate segments for the 27 week period ended July 4, 2020 has been corrected. We evaluated the materiality of the disclosure misstatement from a quantitative and qualitative perspective and concluded the misstatement was not material to the 14 weeks ended April 4, 2020.

Interest Expense. Interest expense ~~increased~~decreased by ~~$12.7~~$0.1 million during the Year To Date Period as a result of ~~higher~~a decreased interest rate ~~spreads due to our amended credit facility.~~and was mostly offset by a larger borrowing base.

Other Income (Expense)-Net. During the Year To Date Period, other income (expense)-net ~~increased by $5.1 million to $11.5~~was a net expense of $6.4 million in ~~comparison~~the Year to Date Period compared to net income of $26.4 million in the Prior Year YTD Period. This change was ~~largely~~primarily driven by ~~favorable foreign currency activity compared to~~a $21.6 million gain on the sale of intellectual property in the Prior Year YTD Period, and net foreign currency losses during the Year To Date Period as compared to net gains in the Prior Year YTD Period.

Provision for Income Taxes. Income tax benefit for the Year To Date Period was ~~$100.7~~$84.5 million, resulting in an effective income tax rate of ~~20.3%. For the Prior Year YTD Period, income tax expense was $13.2 million, resulting in an effective income tax rate of 27.5%~~43.8%. The tax benefit in the Year To Date Period was negatively impacted by the increased tax expense resulting from all of the foreign and some of the U.S. goodwill impairment charge being permanently nondeductible for tax purposes as compared to the Prior Year YTD Period combined with the impact of unfavorable discrete items, mostly due to the additional tax expense resulting from the adoption of ASU 2016-09, ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~.

Additionally, income taxes are provided for under the asset and liability method for temporary differences in the recognition of assets and liabilities recognized for income tax and GAAP purposes. Deferred tax assets are periodically assessed for the likelihood of whether they are more likely than not to be realized. We have previously established a valuation allowance in those jurisdictions where we believe recovery is not more likely than not, which generally increases tax expense in the period such determination is made. For those jurisdictions with deferred tax assets not currently subject to a valuation allowance, including the U.S., we have determined that the realization of deferred tax assets continues to be more likely than not.

~~Net Income (Loss) Attributable to Fossil Group, Inc.~~ Year To Date Period net income (loss) attributable to Fossil Group, Inc. decreased to $(398.3) million, or $(8.22) per diluted share, in comparison to $29.2 million, or $0.60 per diluted share, in the Prior Year YTD Period, primarily due to a $(6.51) per diluted share impact of intangible impairment charges recorded during the Year To Date Period. Diluted earnings (loss) per share was negatively impacted by restructuring charges of $0.56 in the Year To Date Period and $0.22 in the Prior Year YTD Period. The tax benefit in the Year To Date Period was negatively impacted by the decreased effective tax rate in the Year To Date Period ~~as compared~~differed from the Prior Year YTD Period primarily due to changes enacted in the CARES Act allowing a U.S. NOL carryback.

The Prior Year YTD Period effective tax rate was negative because income tax expense was accrued on certain foreign entities with positive taxable income and no benefit was recognized for losses in the U.S. and certain foreign jurisdictions.

Net Income (Loss) Attributable to Fossil Group, Inc. For the Year To Date Period, we had a net loss of $108.1 million, or $2.13 per diluted share, in comparison to a loss of $19.6 million, or $0.39 per diluted share, in the Prior Year YTD Period. A reduction in operating expenses partially offset the decline in gross margin. The Company also benefited from a $21.6 million gain on the sale of intellectual property in the Prior Year YTD Period. Diluted earnings per share in the Year To Date Period, as compared to the Prior Year YTD Period, decreased ~~$0.11~~$0.09 per diluted share due to the currency impact of a stronger U.S. dollar.

Liquidity and Capital Resources

Our cash and cash equivalents balance at the end of the ~~Third~~Second Quarter was ~~$166.9~~$277.6 million, including ~~$165.8~~$211.2 million held in banks outside the U.S., in comparison to cash and cash equivalents of ~~$236.0~~$226.6 million at the end of the Prior Year Quarter and ~~$297.3~~$200.2 million at the end of fiscal year ~~2016.~~2019. Historically, our business operations have not required substantial cash during the first several months of our fiscal year. Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, restructuring charges, strategic investments such as acquisitions and other capital ~~expenditures and restructuring charges.~~expenditures. We believe cash flows from ~~operating activities as well as~~operations, including our current and planned cost savings measures, combined with existing cash on hand and amounts available under our ~~U.S.~~ credit facilities ~~are~~will be sufficient to ~~meet~~fund our cash needs ~~in the U.S.~~ for the next 12twelve months. Although we believe we have adequate sources of liquidity in the short-term and long-term, the success of our operations, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic, among other factors, could impact our business and liquidity.

We have taken various actions to mitigate the impact of the current economic crisis on our financial position, with a focus on financial liquidity enhancements, cost reduction measures, capital preservation and inventory management. In addition to these temporary savings, we plan to address permanent cost reductions under our NWF 2.0 program. We believe our cost reduction plans, if successfully executed, will result in adequate cash flows to support our ongoing operations.

For the ~~Year To Date Period,~~Second Quarter, we generated operating cash flow of ~~$60.2~~$11.6 million. ~~This operating cash flow combined with cash on hand~~A net loss of $108.4 million was ~~utilized to fund net debt payments of $149.5 million and $17.2 million of capital expenditures. Net losses of $395.4 million were~~more than offset by ~~net non-cash items of $389.3 million and a net decrease~~an increase in working capital items of $66.2 million. Non-cash items primarily consisted of goodwill and trade name impairment charges of $407.1 million. The net decrease in working capital items primarily consisted of a decrease in accounts receivable of $85.1$17.2 million and annet non-cash items of $102.8 million. We had net debt borrowings of $69.3 million and capital expenditures of $5.6 million. We increased our borrowings under the Revolving Facility (as defined below) as a precautionary measure to increase our cash position, provide liquidity for a sustained period and to preserve financial flexibility in ~~accounts payable~~light of ~~$80.1 million, partially offset by a net increase~~current uncertainty in ~~inventory of $116.0 million.~~the global markets resulting from the COVID-19 pandemic.

Accounts receivable, net of allowances, decreased by ~~3.2%~~36.3% to ~~$310.9~~$130.1 million at the end of the ~~Third~~Second Quarter compared to ~~$321.3~~$204.2 million at the end of the Prior Year ~~Quarter.~~Quarter driven by reduced sales. Days sales outstanding for our wholesale businesses for the ~~Third~~Second Quarter increased to 5672 days compared to 5350 days in the Prior Year Quarter, primarily ~~due to shifts in customer mix~~driven by the COVID-19 pandemic related closures and ~~timing of payments.~~

~~Accounts payable at~~ the end of the Third Quarter was $248.8 million, which increased by 28.5% from the end of the Prior Year Quarter ending accounts payable balance of $193.6 million. The increase in accounts payable in the Third Quarter was largely due to our effective working capital management and timing of payments, some of which will have an offsetting effect in the fourth quarter of fiscal 2017.related negative impact on collections.

Inventory at the end of the ~~Third~~Second Quarter was ~~$683.0~~$375.9 million, which decreased by ~~2.4%~~18.3% from the end of the Prior Year Quarter ending inventory balance of ~~$699.6 million. We have reduced our traditional watch inventories significantly and we are working to clear the previous~~$460.3 million, largely reflecting accelerated inventory reduction actions, particularly of older generation connected ~~products over the next few quarters.~~product, and proactive management of inbound receipts to align with reduced consumer demand.

At the end of the ~~Third~~Second Quarter, we had net working capital of ~~$732.8~~$417.9 million compared to net working capital of ~~$965.5~~$488.0 million at the end of the Prior Year Quarter. At the end of the ~~Third~~Second Quarter, we had ~~approximately $40.2~~$25.2 million of short-term borrowings and ~~$444.3~~$243.9 million in long-term debt.

On March 9, 2015, we entered into an Amended and Restated Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for (i) revolving credit loans (the “Revolving Credit Facility”), with an up to $20.0 million subfacility for swingline loans (the “Swingline Loan”), and an up to $10.0 million subfacility for letters of credit, and (ii) a term loan in the amount of $231.3 million (the “Term Loan”). The Credit Agreement amended and restated that certain credit agreement, dated as of May 17, 2013, as amended (the “Prior Agreement”).

On March 10, 2017, we entered into the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). The Second Amendment reduced the Revolving Credit Facility under the Credit Agreement from $1.05 billion to $850.0 million. The Second Amendment also removed the incremental term loan that was available under the Credit Agreement, extended the maturity date of the Credit Agreement to May 17, 2019 and removed our 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 us 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 London Interbank Offer Rate ("LIBOR") 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 following the repayment in full of the Term Loan, we are required to repay the Revolving Credit Facility in the amount of such excess proceeds, with a corresponding permanent reduction in the Revolving Credit Facility in the amount of up to $50.0 million.

The Second Amendment amended the applicable margin used to calculate the interest rate that is applicable to base rate loans and LIBOR rate loans and provides that the interest rate margin for base rate loans is 2.50% per annum and the interest rate margin for LIBOR rate loans is 3.50% per annum. On October 1, 2017, the applicable margin on the Term Loan automatically increased to 2.75% per annum for base rate loans and 3.75% per annum for LIBOR rate loans. If the Term Loan has not been repaid in full on or prior to March 31, 2018, then on such date, the applicable margin will automatically increase to 3.25% per annum for base rate loans and 4.25% per annum for LIBOR rate loans. The Second Amendment also changed the commitment fee payable with respect to the Revolving Credit Facility to 0.50% per annum. We will incur an additional fee of 0.25% times the outstanding principal amount of the total credit exposure under the Credit Agreement if the Term Loan has not been repaid in full on or prior to March 31, 2018. Furthermore, the Second Amendment changed the consolidated total leverage ratio that we must comply with from 3.25 to 1.00 to the ratios as set forth below:

As of September 30, 2017, amounts outstanding under the Revolving Credit Facility and the Term Loan under the Credit Agreement bear interest, at our option, at (i) the base rate plus 2.50% or (ii) the LIBOR rate (defined as the quotient obtained by dividing (a) LIBOR by (b) 1.00 minus the Eurodollar reserve percentage) plus 3.50%.

~~Amounts outstanding under the Swingline Loan under the Credit Agreement or upon any drawing under a letter of credit bear interest at the base rate plus the applicable margin.~~

During the Year To Date Period, we made principal payments of $18.8 million under the Term Loan. Additionally, we had net principal payments of $131.3 million under the Revolving Credit Facility during the Year To Date Period at an average annual interest rate of 4.27%. As of September 30, 2017, we had $175.0 million and $309.7 million outstanding under the Term Loan and the Revolving Credit Facility, respectively. As of September 30, 2017, we also had unamortized debt issuance costs, which reduce the corresponding debt liability, of $6.7 million. In addition, we had $0.9 million of outstanding standby letters of credit at September 30, 2017. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of September 30, 2017, we had available borrowing capacity of $270.5 million under the Revolving Credit Facility. Our domestic subsidiary receives short-term loans from certain of our foreign subsidiaries at the end of each fiscal quarter which are used to reduce our external borrowings. These intercompany loans are repaid at the beginning

of the following fiscal quarter. At the end of the Third Quarter, these intercompany loans totaled $411.8 million. Borrowings under the Revolving Credit Facility were mainly used to fund normal operating expenses and capital expenditures. At September 30, 2017, we were in compliance with all debt covenants related to all our credit facilities. We continue to focus on diversifying our capital structure beyond just our existing bank partners with longer tenors to support our long-term strategic objectives.

As part of our NWF initiative, we have adopted a disciplined approach to capital management. During the Year To Date Period, we took actions that will reduce costs and better position the organization to support our growth driving initiatives while focusing fewer resources on areas of the business that are not as high of a priority currently. For fiscal year ~~2017,~~2020, we expect total capital expenditures to be approximately ~~$30 million.~~$9 million in order to maintain liquidity and in order to remain in compliance with financial covenants. Of this amount, we expect approximately ~~55%~~50% will be for retail store renovations and enhancements, approximately 40% will be for technology and facilities maintenance, and approximately 10% for strategic growth, including investments in ~~omni-channel,~~ global concessions and ~~technology, approximately 20% will be for retail store expansion and renovation and approximately 25% will be for technology and facilities maintenance.~~technology. Our capital expenditure budget and allocation ~~of it~~ to the foregoing investments are estimates and are subject to change. We believe that cash flows from operations combined with existing cash on hand and amounts available under ~~the Revolving Credit Facility~~our credit facilities will be sufficient to fund our working capital needs and planned capital expenditures for the next twelve months.

On September 26, 2019, we and Fossil Partners, L.P. (together with the Company, the “U.S. Borrowers”), as the U.S. borrowers, and Fossil Group Europe GmbH (the “Swiss Borrower”), Fossil Asia Pacific Limited (the “Hong Kong Borrower”), Fossil (Europe) GmbH (the “German Borrower”), Fossil (UK) Limited (the “UK Borrower” and the UK Borrower, together with the Swiss Borrower and the German Borrower, the “European Borrowers”) and Fossil Canada Inc. (the “Canadian Borrower”), as the non-U.S. borrowers, certain other of our subsidiaries from time to time party thereto designated as borrowers (including Fossil France SA, the “French Borrower”, and the French Borrower, together with the U.S. Borrowers, the European Borrowers, the Hong Kong Borrower and the Canadian Borrower, the “ABL Borrowers”), and certain of our subsidiaries from time to time party thereto as guarantors, entered into an asset-based revolving credit agreement (as amended, the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the “ABL Agent”), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the “ABL Lenders”). In addition, we, as borrower, entered into a term credit agreement (as amended to date, the “Term Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (the “Term Agent”), JPMorgan Chase Bank, N.A., Citizens Bank, National Association and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers and the lenders party thereto (the “Term Loan Lenders”).

The ABL Borrowers are permitted to voluntarily prepay the revolving loans, in whole or in part, without premium or penalty. The ABL Borrowers may reduce the commitments at any time, in whole or in part, without premium or penalty, in a minimum aggregate principal amount of not less than $5.0 million or increments of $1.0 million in excess thereof. If the total amount of outstanding revolving loans and Letters of Credit exceeds the total commitment under the Revolving Facility, the ABL Borrowers must prepay the revolving loans in an amount equal to such excess.

During any periods (each, a “Covenant Period”) while availability under the Revolving Facility is less than the greater of (x) 15% of the Line Cap and (y) $30,000,000, we will be subject to a financial covenant which requires us to not permit the fixed charge coverage ratio to be ~~focused~~less than 1.00 to 1.00 on ~~efforts~~the first day of such Covenant Period or the last day of each fiscal quarter during such Covenant Period.

The ABL Borrowers have the right to ~~minimize~~request an increase to the commitments under the Revolving Facility or any subfacility in an aggregate principal amount not to exceed $75.0 million in increments no less than $10.0 million, subject to certain terms and conditions as defined in the Revolving Facility, including that the Term Credit Agreement has been amended, restated or otherwise modified to permit any additional commitments.

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

The Term Credit Agreement provides for term loans to us in the aggregate principal amount of $200 million. Proceeds from the Term Credit Agreement were reduced by a $12 million original issue discount, which is presented as a reduction of the Term Credit Agreement on our condensed consolidated balance sheet and will be amortized to interest expense over the life of the term loan. The term loans under the Term Credit Agreement bore interest at (a) the adjusted LIBO rate plus 8.50% for Eurodollar loans or (b) the alternate base rate plus 7.50% for alternate base rate loans as of July 4, 2020. The Term Credit Agreement amortized in quarterly installments in an aggregate amount equal (x) to 2.50% of its original principal amount until March 31, 2020 and, thereafter, (y) $5,000,000 on June 30, 2020, $8,000,000 on September 30, 2020, and $10,000,000 in each quarter thereafter until June 30, 2024. The Term Credit Agreement expires and is due and payable on September 26, 2024, subject to possible extensions.

We are permitted to voluntarily prepay the term loans, in whole or in part, without premium or penalty, and are required to prepay the term loans with the net cash ~~needs~~proceeds of certain asset sales and ~~improve our working~~other dispositions, insurance and condemnation events, debt and equity issuances, and are also subject to an annual excess cash flow sweep. If we prepay the term loans (x) with the proceeds of any other financing, (y) to remove a non-consenting lender, or (z) upon the acceleration of the term loans or the term loans otherwise becoming due prior to their maturity date, each during the period from June 5, 2020 to September 4, 2022, we are required to pay a prepayment fee of 2.00% with respect to the principal amount prepaid prior to September 4, 2021 and 1.00% with respect to the principal amount prepaid between September 4, 2021 and September 4, 2022. Notwithstanding the above, we are not required to pay the prepayment fee for prepayments made prior to September 4, 2020 in connection with the issuance of financings that are not in connection with a change in control of the Company.

In connection with the amendment entered into on June 5, 2020, we were granted relief from compliance with the maximum total leverage ratio covenant until the third fiscal quarter of fiscal year 2021, after which the maximum total leverage ratio permitted under the covenant will be 1.50 to 1.00. Solely during such relief period, we will be subject to a covenant to maintain a consolidated EBITDA of negative $75,000,000 for the fiscal quarter ending April 3, 2021, negative $65,000,000 for the two fiscal quarter period ending July 3, 2021, and negative $30,000,000 for the three fiscal quarter period ending October 2, 2021. The amendment also added an additional covenant to restricted consolidated capital ~~efficiency.~~expenditures of the Company to $10,000,00 for the fiscal year ended January 2, 2021, $20,000,000 for the fiscal year ended January 1, 2022, and $25,000,000 for the fiscal year ended December 31, 2022 and thereafter. The Term Credit Agreement also limits the amount of principal amount incurred under the Revolving Facility to the lesser of the borrowing base or $200.0 million. A payment default under the Revolving Facility triggers a cross default under the Term Credit Agreement.

The Term Credit Agreement is secured by guarantees by us and certain of our domestic subsidiaries. Additionally,we and such subsidiaries have granted liens on all or substantially all of their assets in order to secure the obligations under the Term Credit Agreement.

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

The obligations under the Revolving Facility and the Term Credit Agreement are governed by a customary intercreditor agreement (the “Intercreditor Agreement”). The Intercreditor Agreement specifies that (i) the Term Credit Agreement is secured by (a) a perfected first priority security interest in U.S. fixed assets and (b) a perfected second priority security interest in the U.S. liquid assets and accounts receivable, and (ii) the Revolving Facility is secured by (a) a perfected first priority security interest in the U.S. liquid assets and accounts receivable and (b) a perfected second priority security interest in U.S. fixed assets.



		Page
PART I
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of ~~Cash Flow~~Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	79
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2832
	Results of Operations	2934
	Liquidity and Capital Resources	3842
	Forward-Looking Statements	4046
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4046
Item 4.	Controls and Procedures	4147
PART II
Item 1.	Legal Proceedings	4248
Item 2.1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4248
Item 6.5.	~~Exhibits~~Other Information	4348
Item 6.	Exhibits	49
	SIGNATURES	4450



				For the 13 Weeks Ended September 30, 2017			For the 13 Weeks Ended October 1, 2016
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—



	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at December 31, 2016	$	1,006,236		$	9,202		$	1,015,438
Net income (loss)	(398,298		)	2,931			(395,367		)
Currency translation adjustment	32,078			—			32,078
Cash flow hedges - net change	(21,364		)	—			(21,364		)
Distribution of noncontrolling interest earnings	—			(428		)	(428		)
Acquisition of common stock	(947		)	—			(947		)
Stock-based compensation expense	23,588			—			23,588
Balance at September 30, 2017	$	641,293		$	11,705		$	652,998



	Fair Value at September 30, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	3,230	$	—	$	3,230
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,605		—		—		2,605
Interest rate swap	—		109		—		109
Total	$	2,605	$	3,339	$	—	$	5,944
Liabilities:
Forward contracts	$	—	$	19,773	—		$	19,773
Interest rate swap	—		15		—		15
Total	$	—	$	19,788	$	—	$	19,788



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



Fiscal Year	Amortization Expense
2017 (remaining)	$	3,028
2018	$	11,848
2019	$	11,518
2020	$	10,979
2021	$	7,143
2022	$	6,263



Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended July 4, 2020		For the 13 Weeks Ended June 29, 2019		For the 27 Weeks Ended July 4, 2020		For the 26 Weeks Ended June 29, 2019
Operating lease cost⁽¹⁾⁽²⁾	SG&A	$	26,303	$	29,385	$	54,509	$	60,244
Finance lease cost:
Amortization of ROU assets	SG&A	$	135	$	114	$	236	$	240
Interest on lease liabilities	Interest expense	$	7	$	11	$	18	$	20
Short-term lease cost	SG&A	$	138	$	429	$	339	$	813
Variable lease cost	SG&A	$	3,485	$	8,549	$	11,178	$	17,341



Leases	Condensed Consolidated Balance Sheets Location	July 4, 2020		December 28, 2019
Assets
Operating	Operating lease ROU assets	$	253,884	$	288,166
Finance	Property, plant and equipment - net of accumulated depreciation of $4,284 and $4,015, respectively	$	5,767	$	5,918

Liabilities
Current:
Operating	Current operating lease liabilities	$	67,755	$	68,838
Finance	Short-term and current portion of long-term debt	$	1,017	$	1,011
Noncurrent:
Operating	Long-term operating lease liabilities	$	270,056	$	288,689
Finance	Long-term debt	$	1,023	$	1,468



	For the 27 Weeks Ended July 4, 2020		For the 26 Weeks Ended June 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases⁽¹⁾	$	62,654	$	52,934
Operating cash flows from finance leases	18		20
Financing cash flows from finance leases	482		478
Leased assets obtained in exchange for new operating lease liabilities	19,177		16,939



~~Period~~		~~Maximum Ratio~~
~~July 2, 2017 through and including September 30, 2017~~		~~3.50 to 1.00~~
~~October 1, 2017 through and including March 31, 2018~~		~~3.25 to 1.00~~
~~April 1, 2018 through and including September 29, 2018~~		~~3.50 to 1.00~~
~~September 30, 2018 and thereafter~~		~~3.25 to 1.00~~



	Growth Percentage
	Growth Percentage
Brand	As Reported		Constant Currency
FOSSIL	5.2	%	7.0	%
SKAGEN	10.0	%	11.6	%


	For the 13 Weeks Ended September 30, 2017				For the 13 Weeks Ended October 1, 2016				Growth (Decline)							For the 13 Weeks Ended July 4, 2020				For the 13 Weeks Ended June 29, 2019				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage As Reported		Percentage Constant Currency		Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage As Reported		Percentage Constant Currency
Americas	$	308.1	44.7	%	$	361.2	48.9	%	$	(53.1	)	(14.7	)%	(15.1	)%	$	105.8	40.8	%	$	223.1	44.5	%	$	(117.3	)	(52.6	)%	(52.3	)%
Europe	247.2		35.9		243.2		33.0		4.0			1.6		(2.1	)	79.5		30.7		147.1		29.4		(67.6		)	(46.0	)	(45.0	)
Asia	133.4		19.4		133.6		18.1		(0.2		)	(0.1	)	0.4		69.2		26.7		126.3		25.2		(57.1		)	(45.2	)	(43.4	)
Corporate																4.5		1.8		4.9		0.9		(0.4		)	(8.2	)	(8.2	)
Total	$	688.7	100.0	%	$	738.0	100.0	%	$	(49.3	)	(6.7	)%	(8.0	)%	$	259.0	100.0	%	$	501.4	100.0	%	$	(242.4	)	(48.3	)%	(47.4	)%


	September 30, 2017				October 1, 2016				July 4, 2020				June 29, 2019
	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total
Full price accessory	112	109	61	282	128	122	66	316	80	76	54	210	87	88	51	226
Outlets	136	74	46	256	156	73	46	275	114	74	32	220	115	73	35	223
Full priced multi-brand	—	8	10	18	—	7	12	19	—	3	3	6	—	4	3	7
Total stores	248	191	117	556	284	202	124	610	194	153	89	436	202	165	89	456



Exhibit Number		Document Description

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

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

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

~~10.1(1)(2)~~10.1		~~Restricted Stock Unit Award under~~Amendment No. 2 to the Credit Agreement, dated as of April 24, 2020, by and among Fossil Group, Inc. ~~2016 Long-Term Incentive Plan~~

~~10.2(2)~~		~~Addendum to Executive Severance Agreement, by and between~~, Fossil Partners, L.P., Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited, Fossil Canada Inc., Fossil France S.A., the lenders party thereto and ~~Dennis R. Secor, dated~~JPMorgan Chase Bank, N.A., as ~~of August 31, 2017~~administrative agent (incorporated by reference to Exhibit 10.1 toof the Company's Current Report on Form 8-K filed on ~~September~~April 27, 2020).

10.2		Amendment No. 2 to the Term Credit Agreement, dated as of May 12, 2020, by and among Fossil Group, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on May 12, 2020).

10.3		Amendment No. 3 to Term Credit Agreement, dated as of June 5, ~~2017)~~2020, by and among Fossil Group, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on June 5, 2020).

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

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

32.1(3)		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2(3)		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS(1)~~101.INS		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH(1)~~101.SCH		Inline XBRL Taxonomy Extension Schema Document.

~~101.DEF(1)~~101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

~~101.CAL(1)~~101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

~~101.LAB(1)~~101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

~~101.PRE(1)~~101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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



	FOSSIL GROUP, INC.

~~November 9, 2017~~August 13, 2020	/S/ JEFFREY N. BOYER
	Jeffrey N. Boyer
	~~Executive Vice President,~~Chief Operating Officer, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)