UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________

FORM 10-Q

(Mark One)


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

For the quarterly period ended: October ~~3, 2020~~2, 2021


☐			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) 234-2525

(Registrant’s telephone number, including area code)

__________________________________________________________________

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

Title of each class

Ticker Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FOSL

The Nasdaq Stock Market LLC

7.00% Senior Notes due 2026

FOSLL

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares of the registrant’s common stock outstanding as of November ~~5, 2020: 51,473,947~~4, 2021: 52,145,738

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED OCTOBER ~~3, 2020~~2, 2021

INDEX

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS


		October 3, 2020		December 28, 2019			October 2, 2021		January 2, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	323,560	$	200,218	Cash and cash equivalents	$	181,782	$	315,965
Accounts receivable - net of allowances for doubtful accounts of $19,604 and $13,234, respectively		189,801		289,744
Accounts receivable - net of allowances for doubtful accounts of $16,447 and $20,774, respectively						Accounts receivable - net of allowances for doubtful accounts of $16,447 and $20,774, respectively	251,496		229,847
Inventories	Inventories	359,516		452,278		Inventories	398,324		295,296
Prepaid expenses and other current assets	Prepaid expenses and other current assets	134,891		117,218		Prepaid expenses and other current assets	155,848		149,367
Total current assets	Total current assets	1,007,768		1,059,458		Total current assets	987,450		990,475
Property, plant and equipment - net of accumulated depreciation of $479,589 and $464,913, respectively		118,527		151,500
Property, plant and equipment - net of accumulated depreciation of $453,178 and $467,174, respectively						Property, plant and equipment - net of accumulated depreciation of $453,178 and $467,174, respectively	92,771		114,026
Operating lease right-of-use assets	Operating lease right-of-use assets	244,483		288,166		Operating lease right-of-use assets	187,952		226,815

Intangible and other assets-net	Intangible and other assets-net	151,541		105,608		Intangible and other assets-net	87,788		147,189
Total long-term assets	Total long-term assets	514,551		545,274		Total long-term assets	368,511		488,030
Total assets	Total assets	$	1,522,319	$	1,604,732	Total assets	$	1,355,961	$	1,478,505
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	213,120	$	172,191	Accounts payable	$	246,325	$	178,212
Short-term and current portion of long-term debt	Short-term and current portion of long-term debt	21,425		26,228		Short-term and current portion of long-term debt	41,205		41,561
Accrued expenses:	Accrued expenses:					Accrued expenses:
Current operating lease liabilities	Current operating lease liabilities	63,606		68,838		Current operating lease liabilities	57,361		64,851
Compensation	Compensation	59,582		51,573		Compensation	59,385		78,085
Royalties	Royalties	46,720		28,427		Royalties	31,429		27,554
Customer liabilities	Customer liabilities	40,975		80,803		Customer liabilities	34,752		50,941
Transaction taxes	Transaction taxes	18,466		25,683		Transaction taxes	15,903		21,271
Other	Other	63,531		76,209		Other	48,609		62,846
Income taxes payable	Income taxes payable	22,476		29,228		Income taxes payable	34,412		33,205
Total current liabilities	Total current liabilities	549,901		559,180		Total current liabilities	569,381		558,526
Long-term income taxes payable	Long-term income taxes payable	23,047		31,284		Long-term income taxes payable	20,000		19,840
Deferred income tax liabilities	Deferred income tax liabilities	2,152		2,097		Deferred income tax liabilities	487		495
Long-term debt	Long-term debt	217,862		178,796		Long-term debt	97,426		185,852
Long-term operating lease liabilities	Long-term operating lease liabilities	260,692		288,689		Long-term operating lease liabilities	184,304		230,635
Other long-term liabilities	Other long-term liabilities	45,114		40,845		Other long-term liabilities	41,463		43,125
Total long-term liabilities	Total long-term liabilities	548,867		541,711		Total long-term liabilities	343,680		479,947
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)					Commitments and contingencies (Note 13)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, 51,299 and 50,516 shares issued and outstanding at October 3, 2020 and December 28, 2019, respectively		513		505
Common stock, 52,143 and 51,474 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively						Common stock, 52,143 and 51,474 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively	521		515
Additional paid-in capital	Additional paid-in capital	291,802		283,371		Additional paid-in capital	298,505		293,777
Retained earnings	Retained earnings	207,656		299,793		Retained earnings	209,486		203,698
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(77,163)		(80,615)		Accumulated other comprehensive income (loss)	(67,586)		(58,900)
Total Fossil Group, Inc. stockholders’ equity	Total Fossil Group, Inc. stockholders’ equity	422,808		503,054		Total Fossil Group, Inc. stockholders’ equity	440,926		439,090
Noncontrolling interests	Noncontrolling interests	743		787		Noncontrolling interests	1,974		942
Total stockholders’ equity	Total stockholders’ equity	423,551		503,841		Total stockholders’ equity	442,900		440,032
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,522,319	$	1,604,732	Total liabilities and stockholders’ equity	$	1,355,961	$	1,478,505

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

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

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019 For the 40 Weeks Ended October 3, 2020 For the 39 Weeks Ended September 28, 2019
Net sales $ 435,492 $ 539,488 $ 1,085,218 $ 1,506,149
Cost of sales 205,726 260,946 574,496 714,573
Gross profit 229,766 278,542 510,722 791,576
Operating expenses:
Selling, general and administrative expenses 206,542 264,103 636,273 777,896
Trade name impairments 0 16,613 2,464 16,613
Restructuring charges 5,713 6,979 25,620 24,483
Total operating expenses 212,255 287,695 664,357 818,992
Operating income (loss) 17,511 (9,153) (153,635) (27,416)
Interest expense 8,047 7,422 23,385 22,897
Other income (expense) - net 0 (1,424) (6,411) 24,995
Income (loss) before income taxes 9,464 (17,999) (183,431) (25,318)
Provision for income taxes (6,759) 6,939 (91,250) 17,991
Net income (loss) 16,223 (24,938) (92,181) (43,309)
Less: Net income (loss) attributable to noncontrolling interests 236 997 (44) 2,179
Net income (loss) attributable to Fossil Group, Inc. $ 15,987 $ (25,935) $ (92,137) $ (45,488)
Other comprehensive income (loss), net of taxes:
Currency translation adjustment $ 11,240 $ (10,790) $ 6,544 $ (13,584)
Cash flow hedges - net change (3,636) 2,424 (3,092) (430)
Total other comprehensive income (loss) 7,604 (8,366) 3,452 (14,014)
Total comprehensive income (loss) 23,827 (33,304) (88,729) (57,323)
Less: Comprehensive income (loss) attributable to noncontrolling interests 236 997 (44) 2,179
Comprehensive income (loss) attributable to Fossil Group, Inc. $ 23,591 $ (34,301) $ (88,685) $ (59,502)
Earnings (loss) per share:
Basic $ 0.31 $ (0.51) $ (1.81) $ (0.91)
Diluted $ 0.31 $ (0.51) $ (1.81) $ (0.91)
Weighted average common shares outstanding:
Basic 51,299 50,469 51,007 50,137
Diluted 51,754 50,469 51,007 50,137


	For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020		For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Net sales	$	491,827	$	435,492	$	1,265,808	$	1,085,218
Cost of sales	232,305		205,726		601,857		574,496
Gross profit	259,522		229,766		663,951		510,722
Operating expenses:
Selling, general and administrative expenses	205,718		201,987		593,522		611,210
Trade name impairments	—		—		—		2,464
Other long-lived asset impairments	551		4,555		6,314		25,063
Restructuring charges	5,447		5,713		18,716		25,620
Total operating expenses	211,716		212,255		618,552		664,357
Operating income (loss)	47,806		17,511		45,399		(153,635)
Interest expense	6,422		8,047		20,284		23,385
Other income (expense) - net	(482)		—		882		(6,411)
Income (loss) before income taxes	40,902		9,464		25,997		(183,431)
Provision for income taxes	8,978		(6,759)		19,177		(91,250)
Net income (loss)	31,924		16,223		6,820		(92,181)
Less: Net income (loss) attributable to noncontrolling interests	504		236		1,032		(44)
Net income (loss) attributable to Fossil Group, Inc.	$	31,420	$	15,987	$	5,788	$	(92,137)
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	(3,237)	$	11,240	$	(12,293)	$	6,544
Cash flow hedges - net change	2,085		(3,636)		3,607		(3,092)

Total other comprehensive income (loss)	(1,152)		7,604		(8,686)		3,452
Total comprehensive income (loss)	30,772		23,827		(1,866)		(88,729)
Less: Comprehensive income (loss) attributable to noncontrolling interests	504		236		1,032		(44)
Comprehensive income (loss) attributable to Fossil Group, Inc.	$	30,268	$	23,591	$	(2,898)	$	(88,685)
Earnings (loss) per share:
Basic	$	0.60	$	0.31	$	0.11	$	(1.81)
Diluted	$	0.60	$	0.31	$	0.11	$	(1.81)
Weighted average common shares outstanding:
Basic	52,141		51,299		51,900		51,007
Diluted	52,766		51,754		52,738		51,007

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

UNAUDITED

IN THOUSANDS


For the 13 Weeks Ended October 3, 2020
For the 13 Weeks Ended October 2, 2021																			For the 13 Weeks Ended October 2, 2021
		Common stock			Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity			Common stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Fossil Group, Inc.		Noncontrolling Interest		Total Stockholders' Equity
		Shares	Par value																	Shares	Par Value
Balance, July 4, 2020		51,293	$	513	$	288,641	$	0	$	191,669	$	(84,767)	$	396,056	$	507	$	396,563
Balance, July 3, 2021																			Balance, July 3, 2021	52,127	$	521	$	295,704	$	—	$	178,066	$	(66,434)	$	407,857	$	1,470	$	409,327
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	9	0		0				—		—		—		—		0		Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	21	—		—		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	Acquisition of common stock for employee tax withholding						(13)		—		—		(13)		—		(13)		Acquisition of common stock for employee tax withholding	—	—		—		(56)		—		—		(56)		—		(56)
Retirement of common stock	Retirement of common stock	(3)	0		(13)		13		—		—		—		—		0		Retirement of common stock	(5)	—		(56)		56		—		—		—		—		—

Stock-based compensation	Stock-based compensation				3,174				—		—		3,174		—		3,174		Stock-based compensation	—	—		2,857		—		—		—		2,857		—		2,857
Net income (loss)	Net income (loss)	—	—		—		—		15,987		—		15,987		236		16,223		Net income (loss)	—	—		—		—		31,420		—		31,420		504		31,924
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		7,604		7,604		—		7,604		Other comprehensive income (loss)	—	—		—		—		—		(1,152)		(1,152)		—		(1,152)

Balance, October 3, 2020		51,299	$	513	$	291,802	$	0	$	207,656	$	(77,163)	$	422,808	$	743	$	423,551
Balance, October 2, 2021																			Balance, October 2, 2021	52,143	$	521	$	298,505	$	—	$	209,486	$	(67,586)	$	440,926	$	1,974	$	442,900


For the 13 Weeks Ended September 28, 2019
For the 13 Weeks Ended October 3, 2020																			For the 13 Weeks Ended October 3, 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			Common stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Fossil Group, Inc.		Noncontrolling Interest		Total Stockholders' Equity
		Shares	Par value																	Shares	Par Value
Balance, June 29, 2019		50,453	$	505	$	276,388	$	0	$	332,605	$	(70,339)	$	539,159	$	479	$	539,638
Balance, July 4, 2020																			Balance, July 4, 2020	51,293	$	513	$	288,641	$	—	$	191,669	$	(84,767)	$	396,056	$	507	$	396,563
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	29	0		0		—		—		—		0		—		0		Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	9	—		—		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	Acquisition of common stock for employee tax withholding	—	—		—		(97)		—		—		(97)		—		(97)		Acquisition of common stock for employee tax withholding	—	—		—		(13)		—		—		(13)		—		(13)
Retirement of common stock	Retirement of common stock	(8)	0		(97)		97		—		—		—		—		0		Retirement of common stock	(3)	—		(13)		13		—		—		—		—		—

Stock-based compensation	Stock-based compensation	—	—		4,267		—		—		—		4,267		—		4,267		Stock-based compensation	—	—		3,174		—		—		—		3,174		—		3,174
Net income (loss)	Net income (loss)	—	—		—		—		(25,935)		—		(25,935)		997		(24,938)		Net income (loss)	—	—		—		—		15,987		—		15,987		236		16,223
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		(8,366)		(8,366)		—		(8,366)		Other comprehensive income (loss)	—	—		—		—		—		7,604		7,604		—		7,604
Purchase of noncontrolling interest shares		—	—		231		—		—		—		231		(793)		(562)
Distribution of noncontrolling interest earnings		—	—		0		—		—		—		0		(70)		(70)

Balance, September 28, 2019		50,474	$	505	$	280,789	$	0	$	306,670	$	(78,705)	$	509,259	$	613	$	509,872

Balance, October 3, 2020																			Balance, October 3, 2020	51,299	$	513	$	291,802	$	—	$	207,656	$	(77,163)	$	422,808	$	743	$	423,551


For the 39 Weeks Ended October 2, 2021
	Common stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Fossil Group, Inc.		Noncontrolling Interest		Total Stockholders' Equity
	Shares	Par Value
Balance, January 2, 2021	51,474	$	515	$	293,777	$	—	$	203,698	$	(58,900)	$	439,090	$	942	$	440,032
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	857	8		(8)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(2,405)		—		—		(2,405)		—		(2,405)
Retirement of common stock	(188)	(2)		(2,403)		2,405		—		—		—		—		—


Stock-based compensation	—	—		7,139		—		—		—		7,139		—		7,139
Net income (loss)	—	—		—		—		5,788		—		5,788		1,032		6,820
Other comprehensive income (loss)	—	—		—		—		—		(8,686)		(8,686)		—		(8,686)




Balance, October 2, 2021	52,143	$	521	$	298,505	$	—	$	209,486	$	(67,586)	$	440,926	$	1,974	$	442,900

For the 40 Weeks Ended October 3, 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
Balance, December 28, 2019 50,516 $ 505 $ 283,371 $ 0 $ 299,793 $ (80,615) $ 503,054 $ 787 $ 503,841
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units 949 9 (9) — — — 0 — 0
Acquisition of common stock for employee tax withholding — — — (712) — — (712) — (712)
Retirement of common stock (166) (1) (711) 712 — — — — —
Stock-based compensation — — 9,151 — — — 9,151 — 9,151
Net income (loss) — — — — (92,137) — (92,137) (44) (92,181)
Other comprehensive income (loss) — — — — — 3,452 3,452 3,452
Balance, October 3, 2020 51,299 $ 513 $ 291,802 $ 0 $ 207,656 $ (77,163) $ 422,808 $ 743 $ 423,551


For the 40 Weeks Ended October 3, 2020																			For the 40 Weeks Ended October 3, 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
For the 39 Weeks Ended September 28, 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
Balance, December 29, 2018		49,518	$	495	$	268,113	$	0	$	381,626	$	(64,691)	$	585,543	$	3,088	$	588,631
Balance, December 28, 2019																			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	Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	1,240	13		157		—		—		—		170		—		170		Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	949	9		(9)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	Acquisition of common stock for employee tax withholding	—	—		—		(3,976)		—		—		(3,976)		—		(3,976)		Acquisition of common stock for employee tax withholding	—	—		—		(712)		—		—		(712)		—		(712)
Retirement of common stock	Retirement of common stock	(284)	(3)		(3,973)		3,976		—		—		—		—		—		Retirement of common stock	(166)	(1)		(711)		712		—		—		—		—		—

Stock-based compensation	Stock-based compensation	—	—		16,261		—		—		—		16,261		—		16,261		Stock-based compensation	—	—		9,151		—		—		—		9,151		—		9,151
Net income (loss)	Net income (loss)	—	—		—		—		(45,488)		—		(45,488)		2,179		(43,309)		Net income (loss)	—	—		—		—		(92,137)		—		(92,137)		(44)		(92,181)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		(14,014)		(14,014)		—		(14,014)		Other comprehensive income (loss)	—	—		—		—		—		3,452		3,452		—		3,452
Purchase of noncontrolling interest shares		—	—		231		—		—		—		231		(793)		(562)
Distribution of noncontrolling interest earnings		—	—		—		—		—		—		0		(3,861)		(3,861)

Adoption of Accounting Standards Update ("ASU") 2016-02		—	—		—		—		(29,468)		—		(29,468)		—		(29,468)

Balance, September 28, 2019		50,474	$	505	$	280,789	$	0	$	306,670	$	(78,705)	$	509,259	$	613	$	509,872

Balance, October 3, 2020																			Balance, October 3, 2020	51,299	$	513	$	291,802	$	—	$	207,656	$	(77,163)	$	422,808	$	743	$	423,551

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS


		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Operating Activities:	Operating Activities:					Operating Activities:
Net Income (loss)		$	(92,181)	$	(43,309)
Net income (loss)						Net income (loss)	$	6,820	$	(92,181)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:					Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	Depreciation, amortization and accretion	33,123		41,854		Depreciation, amortization and accretion	23,410		33,123
Non-cash lease expense	Non-cash lease expense	83,565		90,572		Non-cash lease expense	68,920		83,565
Stock-based compensation	Stock-based compensation	9,152		13,894		Stock-based compensation	7,139		9,152
Decrease in allowance for returns and markdowns	Decrease in allowance for returns and markdowns	(40,426)		(8,801)		Decrease in allowance for returns and markdowns	(11,838)		(40,426)
Gain on disposal of assets	Gain on disposal of assets	(1,456)		(2,857)		Gain on disposal of assets	(5,169)		(1,456)
Property, plant and equipment and other long-lived asset impairment losses	Property, plant and equipment and other long-lived asset impairment losses	24,890		3,957		Property, plant and equipment and other long-lived asset impairment losses	6,322		24,890
Trade name impairment losses	Trade name impairment losses	2,464		16,613		Trade name impairment losses	—		2,464
Non-cash restructuring charges	Non-cash restructuring charges	1,921		4,621		Non-cash restructuring charges	1,747		1,921
Bad debt expense	Bad debt expense	6,956		1,476		Bad debt expense	961		6,956
Loss on extinguishment of debt		0		3,044

Other non-cash items	Other non-cash items	3,982		574		Other non-cash items	10,975		3,982

Gain on asset divestitures		0		(23,134)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	101,934		79,642		Accounts receivable	(25,571)		101,934
Inventories	Inventories	94,389		(201,993)		Inventories	(111,673)		94,389
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(17,120)		(833)		Prepaid expenses and other current assets	31,732		(17,120)
Accounts payable	Accounts payable	40,767		20,576		Accounts payable	70,156		40,767
Accrued expenses	Accrued expenses	7,540		(48,754)		Accrued expenses	(30,007)		7,540
Income taxes	Income taxes	(66,919)		5,529		Income taxes	2,523		(66,919)
Operating lease liabilities	Operating lease liabilities	(96,722)		(90,904)		Operating lease liabilities	(83,443)		(96,722)
Net cash provided by (used in) operating activities		95,859		(138,233)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(36,996)		95,859
Investing Activities:	Investing Activities:					Investing Activities:
Additions to property, plant and equipment	Additions to property, plant and equipment	(7,097)		(14,054)		Additions to property, plant and equipment	(6,739)		(7,097)
Increase in intangible and other assets		(2,149)		(2,542)
Proceeds from the sale of property, plant and equipment		76		1,255
Proceeds from asset divestitures		0		41,570
Net cash (used in) provided by investing activities		(9,170)		26,229
Decrease (increase) in intangible and other assets						Decrease (increase) in intangible and other assets	6,903		(2,149)
Proceeds from the sale of property, plant and equipment and other						Proceeds from the sale of property, plant and equipment and other	11,360		76

Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	11,524		(9,170)
Financing Activities:	Financing Activities:					Financing Activities:
Acquisition of common stock for employee tax withholdings	Acquisition of common stock for employee tax withholdings	(712)		(3,976)		Acquisition of common stock for employee tax withholdings	(2,405)		(712)
Distribution of noncontrolling interest earnings		0		(4,423)

Debt borrowings	Debt borrowings	315,224		386,880		Debt borrowings	85,182		315,224
Debt payments	Debt payments	(278,845)		(512,144)		Debt payments	(179,997)		(278,845)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.		0		(1,045)

Debt issuance costs and other	Debt issuance costs and other	(10,000)		(7,444)		Debt issuance costs and other	(232)		(10,000)
Net cash provided by (used in) financing activities		25,667		(142,152)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(97,452)		25,667
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	10,981		(1,674)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(5,564)		10,981
Net increase (decrease) in cash, cash equivalents, and restricted cash		123,337		(255,830)
Net (decrease) increase in cash, cash equivalents, and restricted cash						Net (decrease) increase in cash, cash equivalents, and restricted cash	(128,488)		123,337
Cash, cash equivalents, and restricted cash:	Cash, cash equivalents, and restricted cash:					Cash, cash equivalents, and restricted cash:
Beginning of period	Beginning of period	207,749		410,883		Beginning of period	324,246		207,749
End of period	End of period	$	331,086	$	155,053	End of period	$	195,758	$	331,086

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~~ended January 2, 2021 iswas a 53-week year, with the additional week being included in the first quarter. ~~Accordingly, the~~The information presented herein includes the thirteen-week periods ended October 2, 2021 ("Third Quarter") and October 3, 2020 ~~(“Third Quarter”) and September 28, 2019 (“~~("Prior Year ~~Quarter”~~Quarter"), respectively, and the ~~40 weeks of operations for~~thirty-nine week period ended October 2, 2021 ("Year To Date Period") as compared to the ~~year to date~~forty week period ended October 3, 2020 ~~(“Year To Date Period”) as compared to 39 weeks included in the prior year to date period ended September 28, 2019 (“~~("Prior Year YTD ~~Period”~~Period"). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s financial position as of October ~~3, 2020,~~2, 2021, and the results of operations for the Third Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period. All adjustments are of a normal, recurring nature.

Effective during fiscal year 2021, the Company made a change to the presentation of reportable segments to include all information technology costs within its Corporate cost area. The Company's historical segment disclosures have been recast to be consistent with its current presentation.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form ~~10-K~~10-K/A filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended ~~December 28, 2019~~January 2, 2021 (the ~~“2019~~“2020 Form ~~10-K”~~10-K/A”). Operating results for the Third 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, 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 ~~2019~~2020 Form ~~10-K. Certain prior period amounts have been reclassified to conform to the current period presentation.~~10-K/A.

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

Operating Expenses. Operating expenses include selling, general and administrative expenses (“SG&A”), trade name impairments, other long-lived asset impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, 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 October 3, 2020		For the 13 Weeks Ended September 28, 2019		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020		For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Numerator:	Numerator:									Numerator:
Net income (loss) attributable to Fossil Group, Inc.	Net income (loss) attributable to Fossil Group, Inc.	$	15,987	$	(25,935)	$	(92,137)	$	(45,488)	Net income (loss) attributable to Fossil Group, Inc.	$	31,420	$	15,987	$	5,788	$	(92,137)
Denominator:	Denominator:									Denominator:
Basic EPS computation:	Basic EPS computation:									Basic EPS computation:
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	51,299		50,469		51,007		50,137		Basic weighted average common shares outstanding	52,141		51,299		51,900		51,007
Basic EPS	Basic EPS	$	0.31	$	(0.51)	$	(1.81)	$	(0.91)	Basic EPS	$	0.60	$	0.31	$	0.11	$	(1.81)
Diluted EPS computation:	Diluted EPS computation:									Diluted EPS computation:
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	51,299		50,469		51,007		50,137		Basic weighted average common shares outstanding	52,141		51,299		51,900		51,007
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	455		0		0		0		Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	625		455		838		—
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	51,754		50,469		51,007		50,137		Diluted weighted average common shares outstanding	52,766		51,754		52,738		51,007
Diluted EPS	Diluted EPS	$	0.31	$	(0.51)	$	(1.81)	$	(0.91)	Diluted EPS	$	0.60	$	0.31	$	0.11	$	(1.81)

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

At the end of the Prior Year Quarter and Prior Year YTD Period, approximately 1.1 million and 2.5 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 0.1 million and 0.3 million weighted average performance-based shares at the end of the ~~Third~~Prior Year Quarter and Prior Year ~~To Date~~YTD Period, respectively. Additionally, 0.1 million weighted average performance-based shares were not included in the diluted EPS calculation at the end of the Prior Year Third Quarter because ~~the~~ performance targets were not met.

At the end of the Prior Year Quarter and Prior Year YTD Period, 3.0 million and 3.6 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 0.4 million and 0.7 million weighted average performance-based shares at the end of the Prior Year Quarter and Prior Year YTD Period, respectively.

Cash, Cash Equivalents and Restricted Cash. Restricted cash was comprised primarily of restricted cash balances for tax assessment amounts included in escrow and pledged collateral to secure bank guarantees for the purpose of obtaining retail space. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of October 2, 2021 and October 3, 2020 ~~and September 28, 2019~~ that are presented in the condensed consolidated statement of cash flows (in thousands):


		October 3, 2020		September 28, 2019			October 2, 2021		October 3, 2020
Cash and cash equivalents	Cash and cash equivalents	$	323,560	$	147,482	Cash and cash equivalents	$	181,782	$	323,560
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	118		30		Restricted cash included in prepaid expenses and other current assets	118		118
Restricted cash included in intangible and other assets-net	Restricted cash included in intangible and other assets-net	7,408		7,541		Restricted cash included in intangible and other assets-net	13,858		7,408
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	331,086	$	155,053	Cash, cash equivalents and restricted cash	$	195,758	$	331,086

Recently Issued Accounting Standards

In ~~December 2019,~~March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") and subsequent guidance that clarified the scope and application of its original guidance. ASU 2020-04 provides optional expedients and exceptions to the current guidance on contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued and does not expect it to have a material impact on its condensed consolidated financial statements or related disclosures.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes(" ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (Topic 740). It also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not expect this standard to have a material impact on the Company's consolidated results of operations or financial position.

~~Recently Adopted Accounting Standards~~

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)~~ ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that 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~~2019-12 at the beginning of the first quarter of fiscal 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 adopted ASU 2018-14 at the beginning of the first quarter of fiscal 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 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~ ("ASU 2018-13"). ASU 2018-13 (i) eliminates certain disclosure requirements related to 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 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 the first quarter of fiscal 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 adopted ASU 2016-13 at the beginning of the first quarter of fiscal year 2020 on a prospective basis,2021, and it did not have a material effect on the Company's condensed consolidated financial statements.

2. REVENUE

Disaggregation of Revenue. The Company's revenue disaggregated by major product category and timing of revenue recognition was as follows (in thousands):


		For the 13 Weeks Ended October 3, 2020											For the 13 Weeks Ended October 2, 2021
		Americas		Europe		Asia		Corporate		Total			Americas		Europe		Asia		Corporate		Total
Product type	Product type											Product type
Watches	Watches	$	142,881	$	105,159	$	108,503	$	21	$	356,564	Watches	$	150,181	$	129,797	$	113,717	$	8	$	393,703
Leathers	Leathers	22,290		8,094		7,332		0		37,716		Leathers	23,389		7,231		5,770		—		36,390
Jewelry	Jewelry	8,013		18,560		2,310		0		28,883		Jewelry	18,297		25,602		8,572		—		52,471
Other	Other	1,902		3,479		1,603		5,345		12,329		Other	1,895		3,257		1,435		2,676		9,263
Consolidated	Consolidated	$	175,086	$	135,292	$	119,748	$	5,366	$	435,492	Consolidated	$	193,762	$	165,887	$	129,494	$	2,684	$	491,827

Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	174,539	$	134,976	$	119,585	$	3,263	$	432,363	Revenue recognized at a point in time	$	193,367	$	165,598	$	129,313	$	1,004	$	489,282
Revenue recognized over time	Revenue recognized over time	547		316		163		2,103		3,129		Revenue recognized over time	395		289		181		1,680		2,545
Consolidated	Consolidated	$	175,086	$	135,292	$	119,748	$	5,366	$	435,492	Consolidated	$	193,762	$	165,887	$	129,494	$	2,684	$	491,827


	For the 13 Weeks Ended October 3, 2020
	Americas		Europe		Asia		Corporate		Total
Product type
Watches	$	142,881	$	105,159	$	108,503	$	21	$	356,564
Leathers	22,290		8,094		7,332		—		37,716
Jewelry	8,013		18,560		2,310		—		28,883
Other	1,902		3,479		1,603		5,345		12,329
Consolidated	$	175,086	$	135,292	$	119,748	$	5,366	$	435,492

Timing of revenue recognition
Revenue recognized at a point in time	$	174,539	$	134,976	$	119,585	$	3,263	$	432,363
Revenue recognized over time	547		316		163		2,103		3,129
Consolidated	$	175,086	$	135,292	$	119,748	$	5,366	$	435,492


		For the 13 Weeks Ended September 28, 2019											For the 39 Weeks Ended October 2, 2021
		Americas		Europe		Asia		Corporate		Total			Americas		Europe		Asia		Corporate		Total
Product type	Product type											Product type
Watches	Watches	$	179,369	$	137,222	$	128,897	$	2	$	445,490	Watches	$	413,368	$	309,526	$	290,753	$	1,077	$	1,014,724
Leathers	Leathers	33,274		10,848		10,367		0		54,489		Leathers	63,851		19,933		20,057		—		103,841
Jewelry	Jewelry	4,852		21,530		1,802		0		28,184		Jewelry	40,470		62,041		16,700		—		119,211
Other	Other	2,539		4,268		2,183		2,335		11,325		Other	5,294		8,019		4,115		10,604		28,032
Consolidated	Consolidated	$	220,034	$	173,868	$	143,249	$	2,337	$	539,488	Consolidated	$	522,983	$	399,519	$	331,625	$	11,681	$	1,265,808

Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	219,379	$	173,508	$	143,069	$	79	$	536,035	Revenue recognized at a point in time	$	521,702	$	398,533	$	331,180	$	6,490	$	1,257,905
Revenue recognized over time	Revenue recognized over time	655		360		180		2,258		3,453		Revenue recognized over time	1,281		986		445		5,191		7,903
Consolidated	Consolidated	$	220,034	$	173,868	$	143,249	$	2,337	$	539,488	Consolidated	$	522,983	$	399,519	$	331,625	$	11,681	$	1,265,808

For the 40 Weeks Ended October 3, 2020
Americas Europe Asia Corporate Total
Product type
Watches $ 346,629 $ 265,245 $ 264,078 $ 37 $ 875,989
Leathers 67,661 22,551 21,365 0 111,577
Jewelry 14,706 47,462 5,137 0 67,305
Other 4,755 7,829 4,603 13,160 30,347
Consolidated $ 433,751 $ 343,087 $ 295,183 $ 13,197 $ 1,085,218
Timing of revenue recognition
Revenue recognized at a point in time $ 431,980 $ 342,113 $ 294,658 $ 7,118 $ 1,075,869
Revenue recognized over time 1,771 974 525 6,079 9,349
Consolidated $ 433,751 $ 343,087 $ 295,183 $ 13,197 $ 1,085,218


		For the 39 Weeks Ended September 28, 2019											For the 40 Weeks Ended October 3, 2020
		Americas		Europe		Asia		Corporate		Total			Americas		Europe		Asia		Corporate		Total
Product type	Product type											Product type
Watches	Watches	$	512,816	$	367,946	$	344,127	$	64	$	1,224,953	Watches	$	346,629	$	265,245	$	264,078	$	37	$	875,989
Leathers	Leathers	97,663		31,435		31,925		0		161,023		Leathers	67,661		22,551		21,365		—		111,577
Jewelry	Jewelry	15,669		60,705		3,757		0		80,131		Jewelry	14,706		47,462		5,137		—		67,305
Other	Other	7,362		14,141		6,615		11,924		40,042		Other	4,755		7,829		4,603		13,160		30,347
Consolidated	Consolidated	$	633,510	$	474,227	$	386,424	$	11,988	$	1,506,149	Consolidated	$	433,751	$	343,087	$	295,183	$	13,197	$	1,085,218

Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	631,445	$	473,152	$	385,859	$	3,678	$	1,494,134	Revenue recognized at a point in time	$	431,980	$	342,113	$	294,658	$	7,118	$	1,075,869
Revenue recognized over time	Revenue recognized over time	2,065		1,075		565		8,310		12,015		Revenue recognized over time	1,771		974		525		6,079		9,349
Consolidated	Consolidated	$	633,510	$	474,227	$	386,424	$	11,988	$	1,506,149	Consolidated	$	433,751	$	343,087	$	295,183	$	13,197	$	1,085,218

Contract Balances. As of October ~~3, 2020,~~2, 2021, the Company had 0no material contract assets on the Company's condensed consolidated balance sheets and 0no deferred contract costs. The Company had contract liabilities of (i) ~~$10.7~~$9.2 million and ~~$13.4~~$9.9 million as of October ~~3, 2020~~2, 2021 and ~~December 28, 2019,~~January 2, 2021, respectively, related to remaining performance obligations on licensing

income, (ii) ~~$4.2~~$3.0 million and ~~$5.3~~$4.6 million as of October ~~3, 2020~~2, 2021 and ~~December 28, 2019,~~January 2, 2021, respectively, primarily related to remaining performance obligations on wearable technology products and (iii) ~~$4.1~~$3.6 million and ~~$3.3~~$4.2 million as of October ~~3, 2020~~2, 2021 and ~~December 28, 2019,~~January 2, 2021, respectively, related to gift cards issued.

3. INVENTORIES

Inventories consisted of the following (in thousands):


		October 3, 2020		December 28, 2019			October 2, 2021		January 2, 2021
Components and parts	Components and parts	$	35,071	$	35,626	Components and parts	$	24,727	$	25,016
Work-in-process	Work-in-process	3,846		11,034		Work-in-process	18		7,913
Finished goods	Finished goods	320,599		405,618		Finished goods	373,579		262,367
Inventories	Inventories	$	359,516	$	452,278	Inventories	$	398,324	$	295,296

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 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Beginning balance	Beginning balance	$	23,095	$	22,807	Beginning balance	$	21,916	$	23,095
Settlements in cash or kind	Settlements in cash or kind	(10,386)		(12,957)		Settlements in cash or kind	(8,096)		(10,386)
Warranties issued and adjustments to preexisting warranties (1)	Warranties issued and adjustments to preexisting warranties (1)	9,361		11,336		Warranties issued and adjustments to preexisting warranties (1)	5,296		9,361
Ending balance	Ending balance	$	22,070	$	21,186	Ending balance	$	19,116	$	22,070

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

5. INCOME TAXES

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

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019 For the 40 Weeks Ended October 3, 2020 For the 39 Weeks Ended September 28, 2019
Income tax (benefit) expense $ (6,759) $ 6,939 $ (91,250) $ 17,991
Effective tax rate (71.4) % (38.6) % 49.7 % (71.1) %

For the Third 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 second quarter of fiscal year 2020. 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 Third Quarter and Year To Date Period.


	For the 13 Weeks Ended October 2, 2021			For the 13 Weeks Ended October 3, 2020			For the 39 Weeks Ended October 2, 2021			For the 40 Weeks Ended October 3, 2020
Income tax (benefit) expense	$	8,978		$	(6,759)		$	19,177		$	(91,250)
Effective tax rate	22.0		%	(71.4)		%	73.8		%	49.7		%

The effective tax rate in the Third Quarter was ~~favorable~~unfavorable as compared to the Prior Year Quarter ~~primarily due to changes enacted~~since no tax benefit was accrued on the U.S. net operating loss ("NOL"), unlike in the Prior Year Quarter. The Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act requires the inclusion of certain foreign income in the tax return which will absorb most of the U.S. NOL. Foreign income taxes are also paid on this same foreign income, resulting in double taxation. The remaining U.S. NOL is offset with a valuation allowance since there is no certainty of any future tax benefit. The Prior Year Quarter tax rate benefited from the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. The CARES Act ~~included~~provided many beneficial income tax ~~provisions~~changes including ~~utilization of~~a provision allowing 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 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 be carried back to prior years when the ~~statutory~~U.S. tax rate was 35%~~. The~~, which accounts for most of the Prior Year Quarter benefit.

~~Third Quarter~~The Year To Date Period effective tax ~~benefit~~rate was unfavorable to the Prior Year YTD Period due to the ~~U.S.~~changes from the CARES Act allowing NOL ~~carryback provision and~~carrybacks in the ~~release of tax reserves, which was partially offset by foreign income taxes.~~ Prior Year YTD Period.

The 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 To Date Period effective tax rate was favorable to the Prior Year YTD Period due to the changes from the CARES Act allowing NOL carrybacks. 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 other foreign jurisdictions.

As of October ~~3, 2020,~~2, 2021, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was ~~$34.9~~$29.4 million, of which ~~$28.9~~$24.3 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 ~~2011-2019~~2012-2020 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be settled within twelve months of the condensed consolidated balance sheet date. As of October ~~3, 2020,~~2, 2021, the Company had recorded ~~$15.4~~$14.1 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At October ~~3, 2020,~~2, 2021, the total amount of accrued income tax-related interest ~~and penalties~~ included in the condensed consolidated balance sheets was ~~$6.6~~$7.7 million and ~~$0.8 million, respectively.~~no penalties have been accrued. For the Third Quarter, the Company accrued income tax related interest ~~expense~~benefit of ~~$0.3~~$0.1 million.

6. STOCKHOLDERS’ EQUITY

Common and Preferred Stock. The Company has 100,000,000 shares of common stock, par value $0.01 per share, authorized, with ~~51,299,222~~52,143,431 and ~~50,516,477~~51,474,034 shares issued and outstanding at October ~~3, 2020~~2, 2021 and ~~December 28, 2019,~~January 2, 2021, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, with ~~NaN~~none issued or outstanding at October ~~3, 2020~~2, 2021 or ~~December 28, 2019.~~January 2, 2021. Rights, preferences and other terms of preferred stock will be determined by the Board of Directors at the time of issuance.

Common Stock Repurchase Programs. At October ~~3, 2020~~2, 2021 and ~~December 28, 2019,~~January 2, 2021, all treasury stock had been effectively retired. As of October ~~3, 2020,~~2, 2021, the Company had $30.0 million of repurchase authorizations remaining under its repurchase program. The Company did 0tnot repurchase any common stock under its authorized stock repurchase ~~plans~~plan during the Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

7. EMPLOYEE BENEFIT PLANS

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

Stock Options and Stock Appreciation Rights Shares Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value
(in Thousands) (in Years) (in Thousands)
Outstanding at July 4, 2020 428 $ 77.92 2.2 $ 0
Granted 0 0
Exercised 0 0 0
Forfeited or expired (14) 115.63
Outstanding at October 3, 2020 414 76.59 2.0 0
Exercisable at October 3, 2020 414 $ 76.59 2.0 $ 0


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 3, 2021	283	$	72.58	2.0	$	—


Forfeited or expired	(1)	127.84
Outstanding at October 2, 2021	282	72.34		1.7	—
Exercisable at October 2, 2021	282	$	72.34	1.7	$	—

The ~~aggregate intrinsic value~~exercise price exceeded the stock price for all stock options and stock appreciation rights shown in the table above, ~~is before income taxes and is based on the exercise price~~resulting in no aggregate intrinsic value for outstanding and exercisable options/rights at October ~~3, 2020.~~2, 2021.

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 October ~~3, 2020:~~2, 2021:


Stock Options Outstanding	Stock Options Outstanding					Stock Options Exercisable			Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price		Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
		(in Thousands)			(in Years)	(in Thousands)				(in Thousands)			(in Years)	(in Thousands)

$55.04- $82.55		55	$	81.23	0.4	55	$	81.23

$127.84 - $131.46		72	128.08		1.3	72	128.08
$101.37 - $131.46									$101.37 - $131.46	57	$	128.14	0.5	57	$	128.14
Total	Total	127	$	107.68	0.9	127	$	107.68	Total	57	$	128.14	0.5	57	$	128.14


Stock Appreciation Rights Outstanding	Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable			Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price		Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
		(in Thousands)			(in Years)	(in Thousands)				(in Thousands)			(in Years)	(in Thousands)
$29.49 - $47.99	$29.49 - $47.99	167	$	41.77	3.2	167	$	41.77	$29.49 - $47.99	146	$	40.92	2.5	146	$	40.92
$55.04 - $82.55	$55.04 - $82.55	59	77.98		2.1	59	77.98		$55.04 - $82.55	48	77.43		1.5	48	77.43
$83.83 - $113.04		61	105.77		0.9	61	105.77
$101.37 - $113.04									$101.37 - $113.04	31	110.68		0.5	31	110.68

Total	Total	287	$	62.87	2.5	287	$	62.87	Total	225	$	58.28	2.0	225	$	58.28

1514

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


Restricted Stock Units and Performance Restricted Stock Units	Restricted Stock Units and Performance Restricted Stock Units	Number of Shares	Weighted-Average Grant Date Fair Value Per Share		Restricted Stock Units and Performance Restricted Stock Units	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
		(in Thousands)				(in Thousands)
Nonvested at July 4, 2020		1,977	$	9.70
Nonvested at July 3, 2021					Nonvested at July 3, 2021	1,826	$	9.78
Granted	Granted	45	4.33		Granted	28	12.45
Vested	Vested	(9)	13.68		Vested	(21)	$	6.62
Forfeited	Forfeited	(54)	8.61		Forfeited	(41)	9.95
Nonvested at October 3, 2020		1,959	$	9.59
Nonvested at October 2, 2021					Nonvested at October 2, 2021	1,792	$	9.85

The total fair value of restricted stock units vested during the Third Quarter was approximately ~~$41,500.~~$0.3 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.

Long-Term Incentive Plans. On the date of the Company’s annual stockholders meeting, each non-employee director automatically receives a grant of restricted stock units with a fair market value of approximately $130,000, which vest 100% on the earlier of one year from the date of grant or the date of the Company's next annual stockholders meeting, provided such director is providing services to the Company or a subsidiary of the Company on that date. Beginning with the grant in fiscal year 2021, non-employee directors may elect to defer receipt of all or a portion of the restricted stock units settled in common stock of the Company upon the vesting date. In addition, beginning in fiscal year 2021, non-employee directors may defer the cash portion of their annual fees. Each participant may also elect to have the cash portion of his or her annual fees for each calendar year treated as if invested in units of common stock of the Company.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


		For the 13 Weeks Ended October 3, 2020						For the 13 Weeks Ended October 2, 2021
		Currency Translation Adjustments		Cash Flow Hedges				Currency Translation Adjustments					Cash Flow Hedges
				Forward Contracts		Pension Plan					Total		Currency Translation Adjustments		Forward Contracts		Pension Plan		Total
Beginning balance	Beginning balance	$	(85,170)	$	3,527	$	(3,124)		$	(84,767)		Beginning balance			$	2,372	$	1,428	$	(66,434)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	11,240		(4,306)		0			6,934			Other comprehensive income (loss) before reclassifications	(3,237)		3,320		—		83
Tax (expense) benefit	Tax (expense) benefit	0		656		0			656			Tax (expense) benefit	—		(29)		—		(29)
Amounts reclassed from accumulated other comprehensive income (loss)	Amounts reclassed from accumulated other comprehensive income (loss)	0		26		0			26			Amounts reclassed from accumulated other comprehensive income (loss)	—		1,263		—		1,263
Tax (expense) benefit	Tax (expense) benefit	0		(40)		0			(40)			Tax (expense) benefit	—		(57)		—		(57)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	11,240		(3,636)		0			7,604			Total other comprehensive income (loss)	(3,237)		2,085		—		(1,152)
Ending balance	Ending balance	$	(73,930)	$	(109)	$	(3,124)		$	(77,163)		Ending balance	$	(73,471)	$	4,457	$	1,428	$	(67,586)

For the 13 Weeks Ended September 28, 2019
Currency
Translation
Adjustments Cash Flow Hedges
Forward
Contracts Pension
Plan Total
Beginning balance $ (77,662) $ 5,728 $ 1,595 $ (70,339)
Other comprehensive income (loss) before reclassifications (10,790) 7,058 0 (3,732)
Tax (expense) benefit 0 (996) 0 (996)
Amounts reclassed from accumulated other comprehensive income (loss) 0 3,948 0 3,948
Tax (expense) benefit 0 (310) 0 (310)
Total other comprehensive income (loss) (10,790) 2,424 0 (8,366)
Ending balance $ (88,452) $ 8,152 $ 1,595 $ (78,705)

For the 40 Weeks Ended October 3, 2020
Currency
Translation
Adjustments Cash Flow Hedges
Forward
Contracts Pension
Plan Total
Beginning balance $ (80,474) $ 2,983 $ (3,124) $ (80,615)
Other comprehensive income (loss) before reclassifications 6,544 2,872 0 9,416
Tax (expense) benefit 0 (578) 0 (578)
Amounts reclassed from accumulated other comprehensive income 0 6,307 0 6,307
Tax (expense) benefit 0 (921) 0 (921)
Total other comprehensive income (loss) 6,544 (3,092) 0 3,452
Ending balance $ (73,930) $ (109) $ (3,124) $ (77,163)

1715


		For the 39 Weeks Ended September 28, 2019						For the 13 Weeks Ended October 3, 2020
		Currency Translation Adjustments		Cash Flow Hedges				Currency Translation Adjustments					Cash Flow Hedges
				Forward Contracts		Pension Plan					Total		Currency Translation Adjustments		Forward Contracts		Pension Plan		Total
Beginning balance	Beginning balance	$	(74,868)	$	8,582	$	1,595		$	(64,691)		Beginning balance			$	3,527	$	(3,124)	$	(84,767)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(13,584)		9,260		0			(4,324)			Other comprehensive income (loss) before reclassifications	11,240		(4,306)		—		6,934
Tax (expense) benefit	Tax (expense) benefit	0		(1,034)		0			(1,034)			Tax (expense) benefit	—		656		—		656
Amounts reclassed from accumulated other comprehensive income (loss)	Amounts reclassed from accumulated other comprehensive income (loss)	0		9,372		0			9,372			Amounts reclassed from accumulated other comprehensive income (loss)	—		26		—		26
Tax (expense) benefit	Tax (expense) benefit	0		(716)		0			(716)			Tax (expense) benefit	—		(40)		—		(40)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(13,584)		(430)		0			(14,014)			Total other comprehensive income (loss)	11,240		(3,636)		—		7,604
Ending balance	Ending balance	$	(88,452)	$	8,152	$	1,595		$	(78,705)		Ending balance	$	(73,930)	$	(109)	$	(3,124)	$	(77,163)



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



	For the 40 Weeks Ended October 3, 2020
	Currency Translation Adjustments		Cash Flow Hedges
			Forward Contracts		Pension Plan		Total
Beginning balance	$	(80,474)	$	2,983	$	(3,124)	$	(80,615)
Other comprehensive income (loss) before reclassifications	6,544		2,872		—		9,416
Tax (expense) benefit	—		(578)		—		(578)
Amounts reclassed from accumulated other comprehensive income (loss)	—		6,307		—		6,307
Tax (expense) benefit	—		(921)		—		(921)
Total other comprehensive income (loss)	6,544		(3,092)		—		3,452
Ending balance	$	(73,930)	$	(109)	$	(3,124)	$	(77,163)

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, Greater China, ~~(including Hong Kong, Macau and Taiwan),~~ India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Each reportable operating segment provides similar products and services.

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

Due to changes in the Company’s reportable segments as discussed in Note 1 to the Condensed Consolidated Financial Statements, segment results for the Prior Year Quarter and Prior Year YTD Period have been recast to present results on a comparable basis. These changes had no impact on the consolidated net sales or operating income (loss). Summary information by operating segment was as follows (in thousands):

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)
Americas $ 175,086 $ 45,034 $ 220,034 $ 18,928
Europe 135,292 10,702 173,868 26,396
Asia 119,748 25,285 143,249 32,721
Corporate 5,366 (63,510) 2,337 (87,198)
Consolidated $ 435,492 $ 17,511 $ 539,488 $ (9,153)


		For the 40 Weeks Ended October 3, 2020				For the 39 Weeks Ended September 28, 2019					For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
		Net Sales		Operating Income (Loss)(1)		Net Sales		Operating Income (Loss)			Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Americas	Americas	$	433,751	$	12,681	$	633,510	$	59,385	Americas	$	193,762	$	46,589	$	175,086	$	45,051
Europe	Europe	343,087		(2,451)		474,227		53,139		Europe	165,887		40,549		135,292		12,344
Asia	Asia	295,183		43,149		386,424		80,722		Asia	129,494		23,996		119,748		25,724
Corporate	Corporate	13,197		(207,014)		11,988		(220,662)		Corporate	2,684		(63,328)		5,366		(65,608)
Consolidated	Consolidated	$	1,085,218	$	(153,635)	$	1,506,149	$	(27,416)	Consolidated	$	491,827	$	47,806	$	435,492	$	17,511


	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020
	Net Sales		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Americas	$	522,983	$	109,172	$	433,751	$	12,728
Europe	399,519		67,616		343,087		2,154
Asia	331,625		50,553		295,183		44,787
Corporate	11,681		(181,942)		13,197		(213,304)
Consolidated	$	1,265,808	$	45,399	$	1,085,218	$	(153,635)

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


		For the 13 Weeks Ended October 3, 2020				For the 13 Weeks Ended September 28, 2019					For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
		Net Sales		Percentage of Total		Net Sales		Percentage of Total			Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	Watches	$	356,564	81.9	%	$	445,490	82.6	%	Watches	$	393,703	80.0	%	$	356,564	81.9	%
Leathers	Leathers	37,716		8.7		54,489		10.1		Leathers	36,390		7.4		37,716		8.7
Jewelry	Jewelry	28,883		6.6		28,184		5.2		Jewelry	52,471		10.7		28,883		6.6
Other	Other	12,329		2.8		11,325		2.1		Other	9,263		1.9		12,329		2.8
Total	Total	$	435,492	100.0	%	$	539,488	100.0	%	Total	$	491,827	100.0	%	$	435,492	100.0	%

For the 40 Weeks Ended October 3, 2020 For the 39 Weeks Ended September 28, 2019
Net Sales Percentage of Total Net Sales Percentage of Total
Watches $ 875,989 80.7 % $ 1,224,953 81.3 %
Leathers 111,577 10.3 161,023 10.7
Jewelry 67,305 6.2 80,131 5.3
Other 30,347 2.8 40,042 2.7
Total $ 1,085,218 100.0 % $ 1,506,149 100.0 %


	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	1,014,724	80.2	%	$	875,989	80.7	%
Leathers	103,841		8.2		111,577		10.3
Jewelry	119,211		9.4		67,305		6.2
Other	28,032		2.2		30,347		2.8
Total	$	1,265,808	100.0	%	$	1,085,218	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 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.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. 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 Third Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

As of October ~~3, 2020,~~2, 2021, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge future payments of inventory transactions (in millions):

Functional Currency

Contract Currency

Functional Currency

Contract Currency

Type

Amount

Type

Amount

Type

Amount

Type

Amount

Euro

48.3

U.S. dollar

55.2

Euro

68.3

U.S. dollar

82.7

Canadian dollar

16.4

U.S. dollar

12.5

Canadian dollar

14.3

U.S. dollar

11.4

Japanese yen

1,047.1

U.S. dollar

9.7

British pound

5.8

U.S. dollar

7.5

British pound

5.6

U.S. dollar

7.7

Japanese yen

509.5

U.S. dollar

4.8

Australian dollar

5.6

U.S. dollar

4.2

Mexican peso

81.1

U.S. dollar

4.0

U.S. dollar

7.8

Japanese yen

825.0

U.S. dollar

8.4

Japanese yen

925.0

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of October ~~3, 2020,~~2, 2021, the Company had non-designated forward contracts of ~~$0.9~~$1.4 million on ~~15.1~~20.4 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings when they occur.

The gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes are set forth below (in thousands):

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Cash flow hedges:
Forward contracts $ (3,650) $ 6,062
Total gain (loss) recognized in other comprehensive income (loss), net of taxes $ (3,650) $ 6,062


		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020
Cash flow hedges:	Cash flow hedges:					Cash flow hedges:
Forward contracts	Forward contracts	$	2,293	$	8,226	Forward contracts	$	3,292	$	(3,650)

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	2,293	$	8,226	Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	3,292	$	(3,650)


	For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Cash flow hedges:
Forward contracts	$	3,687	$	2,293

Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	3,687	$	2,293

2119

The following tables disclose the gains and losses on derivative instruments recorded in accumulated other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings (in thousands):

Derivative Instruments Condensed Consolidated
Statements of Income (Loss)
and Comprehensive
Income (Loss) Location Effect of Derivative
Instruments For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Forward contracts designated as cash flow hedging instruments Cost of sales Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ (27) $ 2,518
Forward contracts designated as cash flow hedging instruments Other income (expense)-net Total gain (loss) reclassified from accumulated other comprehensive income (loss) $ 13 $ 1,120
Forward contracts not designated as hedging instruments Other income (expense)-net Total gain (loss) recognized in income $ (63) $ 27


Derivative Instruments	Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019		Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020
Forward contracts designated as cash flow hedging instruments	Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	5,285	$	7,309	Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	689	$	(27)
Forward contracts designated as cash flow hedging instruments	Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	101	$	1,347	Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	518	$	13
Forward contracts not designated as hedging instruments	Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	30	$	(6)	Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	61	$	(63)


Derivative Instruments	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	Effect of Derivative Instruments	For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Forward contracts designated as cash flow hedging instruments	Cost of sales	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	938	$	5,285
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from accumulated other comprehensive income (loss)	$	(858)	$	101
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(12)	$	30

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


		Asset Derivatives						Liability Derivatives							Asset Derivatives						Liability Derivatives
		October 3, 2020			December 28, 2019			October 3, 2020			December 28, 2019				October 2, 2021			January 2, 2021			October 2, 2021			January 2, 2021
Derivative Instruments	Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	329	Prepaid expenses and other current assets	$	3,327	Accrued expenses-other	$	1,571	Accrued expenses-other	$	1,657	Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	3,732	Prepaid expenses and other current assets	$	345	Accrued expenses-other	$	80	Accrued expenses-other	$	2,178
Forward contracts not designated as cash flow hedging instruments	Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	0		Prepaid expenses and other current assets	0		Accrued expenses-other	6		Accrued expenses-other	63		Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	35		Prepaid expenses and other current assets	—		Accrued expenses-other	—		Accrued expenses-other	86

Forward contracts designated as cash flow hedging instruments	Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	0		Intangible and other assets-net	21		Other long-term liabilities	0		Other long-term liabilities	104		Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	320		Intangible and other assets-net	48		Other long-term liabilities	—		Other long-term liabilities	35

Total	Total		$	329		$	3,348		$	1,577		$	1,824	Total		$	4,087		$	393		$	80		$	2,299

2220

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

Effect of Derivative Instruments
For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 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 $ 205,726 $ 0 $ 260,946 $ (1,424)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss) $ (27) $ 13 $ 2,518 $ 1,120
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income $ — $ (63) $ — $ 27


		Effect of Derivative Instruments									Effect of Derivative Instruments
		For the 40 Weeks Ended October 3, 2020				For the 39 Weeks Ended September 28, 2019					For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
		Cost of Sales		Other Income (Expense)-net		Cost of Sales		Other Income (Expense)-net			Cost of Sales		Other Income (Expense)-net		Cost of Sales		Other Income (Expense)-net
Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded	Total amounts of income and expense line items presented in the condensed consolidated statements of income (loss) and comprehensive income (loss) in which the effects of cash flow hedges are recorded	$	574,496	$	(6,411)	$	714,573	$	24,995	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	$	232,305	$	(482)	$	205,726	$	—
Gain (loss) on cash flow hedging relationships:	Gain (loss) on cash flow hedging relationships:									Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:	Forward contracts designated as cash flow hedging instruments:									Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	Total gain (loss) reclassified from other comprehensive income (loss)	$	5,285	$	101	$	7,309	$	1,347	Total gain (loss) reclassified from other comprehensive income (loss)	$	689	$	518	$	(27)	$	13
Forward contracts not designated as hedging instruments:	Forward contracts not designated as hedging instruments:									Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	Total gain (loss) recognized in income	$	—	$	30	$	—	$	(6)	Total gain (loss) recognized in income	$	—	$	61	$	—	$	(63)


	Effect of Derivative Instruments
	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020
	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	$	601,857	$	882	$	574,496	$	(6,411)
Gain (loss) on cash flow hedging relationships:
Forward contracts designated as cash flow hedging instruments:
Total gain (loss) reclassified from other comprehensive income (loss)	$	938	$	(858)	$	5,285	$	101
Forward contracts not designated as hedging instruments:
Total gain (loss) recognized in income	$	—	$	(12)	$	—	$	30

At the end of the Third Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through ~~June 2021.~~December 2022. As of October ~~3, 2020,~~2, 2021, an estimated net ~~loss~~gain of ~~$1.1~~$3.5 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates.

11. FAIR VALUE MEASUREMENTS

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

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

2321

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

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

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

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

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of October ~~3, 2020~~2, 2021 (in thousands):


		Fair Value at October 3, 2020									Fair Value at October 2, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Forward contracts	Forward contracts	$	0	$	329	$	0	$	329	Forward contracts	$	—	$	4,087	$	—	$	4,087
Deferred compensation plan assets:
Investment in publicly traded mutual funds		5,540		0		0		5,540

Total	Total	$	5,540	$	329	$	0	$	5,869	Total	$	—	$	4,087	$	—	$	4,087
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	0	$	0	$	1,517	$	1,517	Contingent consideration	$	—	$	—	$	2,110	$	2,110
Forward contracts	Forward contracts	0		1,577		0		1,577		Forward contracts	—		80		—		80

Total	Total	$	0	$	1,577	$	1,517	$	3,094	Total	$	—	$	80	$	2,110	$	2,190

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~December 28, 2019~~January 2, 2021 (in thousands):


		Fair Value at December 28, 2019									Fair Value at January 2, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Forward contracts	Forward contracts	$	0	$	3,348	$	0	$	3,348	Forward contracts	$	—	$	393	$	—	$	393
Deferred compensation plan assets:	Deferred compensation plan assets:									Deferred compensation plan assets:
Investment in publicly traded mutual funds	Investment in publicly traded mutual funds	5,243		0		0		5,243		Investment in publicly traded mutual funds	6,257		—		—		6,257

Total	Total	$	5,243	$	3,348	$	0	$	8,591	Total	$	6,257	$	393	$	—	$	6,650
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	0	$	0	$	1,141	$	1,141	Contingent consideration	$	—	$	—	$	1,924	$	1,924
Forward contracts	Forward contracts	0		1,824		0		1,824		Forward contracts	—		2,299		—		2,299

Total	Total	$	0	$	1,824	$	1,141	$	2,965	Total	$	—	$	2,299	$	1,924	$	4,223

The ~~fair values of the Company’s~~Company's deferred compensation plan ~~assets are based on quoted prices.~~was terminated during the first quarter of fiscal year 2021, with the final distributions taking place in the second quarter of fiscal year 2021. The deferred compensation plan assets ~~are~~at January 2, 2021 were recorded in intangible and other assets-net in the Company’s condensed consolidated balance ~~sheets.~~ sheets and the fair values were based on quoted prices.

The fair values of the Company’s forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. See ~~“Note~~"Note 10—Derivatives and Risk ~~Management”~~Management", for additional disclosures about the forward contracts.

As of October ~~3, 2020, debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of $257.0 million and had a~~2, 2021, the fair value of ~~approximately $245.0 million.~~the Company's debt approximated its carrying amount. The fair value of debt was ~~based on~~obtained using observable market inputs.

The fair value of trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, discount rates and implied royalty rates. ~~During the first quarter of fiscal year 2020, the MICHELE~~® trade name with a carrying amount of $10.9 million was written down to its implied fair value of $8.4 million, resulting in a pre-tax impairment charge of $2.5 million in the Year To Date Period. The trade name impairment charge was recorded in the Corporate cost area. NaNNo trade name impairment was recorded during the ~~Third Quarter.~~Year To Date Period.

During the Year To Date Period, operating lease right-of-use ("ROU") assets with a carrying amount of ~~$38.5~~$14.0 million and property, plant and equipment-net with a carrying amount of ~~$5.8~~$2.5 million related to retail store leasehold improvements

~~fixturing~~ and ~~shop-in-shops~~fixturing were written down to a fair value of ~~$14.5~~$7.4 million and ~~$1.6~~$1.0 million, respectively, resulting in impairment charges of ~~$28.2~~$8.1 million.

The fair values of operating lease ROU assets and fixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows and discount rates. Of the ~~$28.2~~$8.1 million impairment expense ~~$16.9~~in the Year To Date Period, $3.1 million, ~~$6.5~~$2.2 million, and $1.0 million ~~was~~were recorded in ~~SG&A~~other long-lived asset impairments in the Americas, Europe and Asia segments, respectively, and ~~$2.0 million, $1.1 million, and $0.7~~$1.8 million was recorded in restructuring charges in the ~~Americas,~~ Europe ~~and Asia segments, respectively.~~segment.

The fair value of the 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 the contingent consideration liability was valued at $1.5 million as of October 3, 2020. The Company recorded $0.1 million of the variable consideration in accrued expenses-other and $1.4 million in other long-term liabilities in the condensed consolidated balance sheets at October 3, 2020.

12. INTANGIBLE AND OTHER ASSETS

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


			October 3, 2020				December 28, 2019						October 2, 2021				January 2, 2021
		Useful	Gross		Accumulated		Gross		Accumulated			Useful	Gross		Accumulated		Gross		Accumulated
		Lives	Amount		Amortization		Amount		Amortization			Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:	Intangibles-subject to amortization:										Intangibles-subject to amortization:
Trademarks	Trademarks	10 yrs.	$	3,731	$	3,147	$	3,612	$	2,993	Trademarks	10 yrs.	$	3,775	$	3,291	$	3,775	$	3,198
Customer lists	Customer lists	5 - 10 yrs.	52,306		48,099		52,517		44,013		Customer lists	5 - 10 yrs.	41,763		40,350		42,387		39,406
Patents	Patents	3 - 20 yrs.	2,363		1,964		2,308		1,937		Patents	3 - 20 yrs.	2,371		2,004		2,371		1,973

Developed technology	Developed technology	7 yrs.	2,193		959		2,193		548		Developed technology	7 yrs.	2,193		1,508		2,193		1,097
Trade name	Trade name	6 yrs.	4,502		750		4,502		188		Trade name	6 yrs.	4,502		1,501		4,502		938
Other	Other	7 - 20 yrs.	499		293		383		272		Other	7 - 20 yrs.	539		344		544		301
Total intangibles-subject to amortization	Total intangibles-subject to amortization		65,594		55,212		65,515		49,951		Total intangibles-subject to amortization		55,143		48,998		55,772		46,913
Intangibles-not subject to amortization:	Intangibles-not subject to amortization:										Intangibles-not subject to amortization:
Trade names	Trade names		8,877				11,315				Trade names		8,872				8,895
Other assets:	Other assets:										Other assets:

Deposits	Deposits		20,034				18,558				Deposits		18,791				19,762
Deferred compensation plan assets	Deferred compensation plan assets		5,540				5,243				Deferred compensation plan assets		—				6,257
Deferred tax asset-net	Deferred tax asset-net		38,822				38,275				Deferred tax asset-net		32,775				33,893
Restricted cash	Restricted cash		7,408				7,501				Restricted cash		13,858				8,159

Tax receivable	Tax receivable		57,666				6,507				Tax receivable		5,075				58,734

Investments	Investments		327				500				Investments		327				327
Other	Other		2,485				2,145				Other		1,945				2,303
Total other assets	Total other assets		132,282				78,729				Total other assets		72,771				129,435
Total intangible and other assets	Total intangible and other assets		$	206,753	$	55,212	$	155,559	$	49,951	Total intangible and other assets		$	136,786	$	48,998	$	194,102	$	46,913
Total intangible and other assets-net	Total intangible and other assets-net				$	151,541			$	105,608	Total intangible and other assets-net				$	87,788			$	147,189

Amortization expense for intangible assets was approximately ~~$1.8~~$0.7 million and ~~$1.7~~$1.8 million for the Third Quarter and the Prior Year Quarter, respectively, and ~~$5.4~~$2.7 million and ~~$5.1~~$5.4 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
2021 (remaining)	$	717
2022	$	2,495
2023	$	896
2024	$	884
2025	$	693
Thereafter	$	460

Fiscal Year Amortization
Expense
2020 (remaining) $ 1,772
2021 $ 3,315
2022 $ 2,465
2023 $ 904
2024 $ 884
Thereafter $ 1,042

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.

14. LEASES

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

Some leases include one or more options to renew at the Company's discretion, with renewal terms that can extend the lease from 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 forgiveness. The Company chose the policy election provided by the FASB in April 2020 to record rent concessions as if no modifications to ~~leases~~lease contracts were made, and thus no changes to the ROU assets and ROU liabilities were recorded inwith 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 October ~~3, 2020,~~2, 2021, the Company had outstanding deferred rent payments of ~~$8.8~~$0.8 million, and the Company received rent forgiveness of ~~$4.0~~$3.8 million ~~and $7.6 million in~~for the ~~Third Quarter and~~ Year Toto Date ~~Period, respectively.~~

Period.

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


Lease Cost	Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended October 3, 2020		For the 13 Weeks Ended September 28, 2019		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019		Lease Cost	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Location	For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020		For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Operating lease cost(1)(2)	Operating lease cost(1)(2)	SG&A	$	26,579	$	28,997	$	81,088	$	89,240	Operating lease cost(1)(2)	SG&A	$	21,356	$	26,579	$	66,450	$	81,088
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of ROU assets	Amortization of ROU assets	SG&A	$	134	$	114	$	370	$	354	Amortization of ROU assets	SG&A	$	105	$	134	$	338	$	370
Interest on lease liabilities	Interest on lease liabilities	Interest expense	$	2	$	9	$	19	$	29	Interest on lease liabilities	Interest expense	$	4	$	2	$	14	$	19
Short-term lease cost	Short-term lease cost	SG&A	$	78	$	206	$	418	$	1,019	Short-term lease cost	SG&A	$	153	$	78	$	472	$	418
Variable lease cost	Variable lease cost	SG&A	$	4,140	$	9,492	$	15,318	$	26,834	Variable lease cost	SG&A	$	6,252	$	4,140	$	17,032	$	15,318

(1)Includes sublease income, which was ~~immaterial.~~immaterial

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

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


Leases	Leases	Condensed Consolidated Balance Sheets Location	October 3, 2020		December 28, 2019		Leases	Condensed Consolidated Balance Sheets Location	October 2, 2021		January 2, 2021
Assets	Assets						Assets
Operating	Operating	Operating lease ROU assets	$	244,483	$	288,166	Operating	Operating lease ROU assets	$	187,952	$	226,815
Finance	Finance	Property, plant and equipment - net of accumulated depreciation of $4,616 and $4,015, respectively	$	5,928	$	5,918	Finance	Property, plant and equipment - net of accumulated depreciation of $4,995 and $4,882, respectively	$	5,383	$	5,991

Liabilities	Liabilities						Liabilities
Current:	Current:						Current:
Operating	Operating	Current operating lease liabilities	$	63,606	$	68,838	Operating	Current operating lease liabilities	$	57,361	$	64,851
Finance	Finance	Short-term and current portion of long-term debt	$	966	$	1,011	Finance	Short-term and current portion of long-term debt	$	778	$	1,088
Noncurrent:	Noncurrent:						Noncurrent:
Operating	Operating	Long-term operating lease liabilities	$	260,692	$	288,689	Operating	Long-term operating lease liabilities	$	184,304	$	230,635
Finance	Finance	Long-term debt	$	808	$	1,468	Finance	Long-term debt	$	28	$	569

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

Lease Term and Discount Rate

October 3, 2020

December 28, 2019

Lease Term and Discount Rate

October 2, 2021

January 2, 2021

Weighted-average remaining lease term:

Operating leases

6.3 years

6.1 years

Operating leases

5.7 years

5.9 years

Finance leases

1.5 years

2.3 years

Finance leases

0.5 years

1.2 years

Weighted-average discount rate:

Operating leases

14.0

13.9

Operating leases

14.1

14.0

Finance leases

1.2

Finance leases

1.2

Future minimum lease payments by year as of October ~~3, 2020~~2, 2021 were as follows (in thousands):


Fiscal Year	Fiscal Year	Operating Leases (1)		Finance Leases		Fiscal Year	Operating Leases (1)		Finance Leases
2020 (remaining)		$	29,494	$	242
2021		101,168		1,028
2021 (remaining)						2021 (remaining)	$	23,011	$	268
2022	2022	87,133		513		2022	87,959		543
2023	2023	69,416		0		2023	66,292		—
2024	2024	49,592		0		2024	44,513		—
2025	2025	36,381		0		2025	30,920		—
Thereafter	Thereafter	132,603		0		Thereafter	118,527		—

Total lease payments	Total lease payments	$	505,787	$	1,783	Total lease payments	$	371,222	$	811
Less: Interest	Less: Interest	181,489		9		Less: Interest	129,557		5
Total lease obligations	Total lease obligations	$	324,298	$	1,774	Total lease obligations	$	241,665	$	806

(1) Future minimum lease payments exclude the impact of deferred or abated rent amounts

Future minimum lease payments by year as of ~~December 28, 2019~~January 2, 2021 were as follows (in thousands):


Fiscal Year	Fiscal Year	Operating Leases		Finance Leases		Fiscal Year	Operating Leases		Finance Leases
2020		$	116,778	$	1,042
2021	2021	94,795		978		2021	$	101,507	$	1,095
2022	2022	81,536		488		2022	85,753		569
2023	2023	64,582		0		2023	66,909		—
2024	2024	45,846		0		2024	46,656		—
2025						2025	33,012		—
Thereafter	Thereafter	153,255		0		Thereafter	122,318		—
Total lease payments	Total lease payments	$	556,792	$	2,508	Total lease payments	$	456,155	$	1,664
Less: Interest	Less: Interest	199,265		30		Less: Interest	160,669		6
Finance lease obligations	Finance lease obligations	$	357,527	$	2,478	Finance lease obligations	$	295,486	$	1,658

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


		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	Operating cash flows from operating leases(1)	$	96,722	$	83,695	Operating cash flows from operating leases(1)	$	83,189	$	96,722
Operating cash flows from finance leases	Operating cash flows from finance leases	19		29		Operating cash flows from finance leases	14		19
Financing cash flows from finance leases	Financing cash flows from finance leases	840		693		Financing cash flows from finance leases	755		840

Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	30,151		25,854		Leased assets obtained in exchange for new operating lease liabilities	11,319		30,151

(1) Cash flows ~~for the 40 weeks ended October 3, 2020~~ exclude the impact of deferred or abated rent amounts

As of October ~~3, 2020,~~2, 2021, the Company did not have any material operating or finance leases that have been signed but not commenced.

15. DEBT ACTIVITY

On 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 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 terms of the First Amendment, the Company, the administrative agent and the lenders party thereto agreed 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 6.50% to the adjusted LIBO rate plus 8.00%, and (b) in the case of alternate base rate loans, from the 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 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 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 further modify certain terms of the Term Credit Agreement to ~~among other things, (i) increase~~address the ~~interest rate applicable to the term loans under~~financial impact of COVID-19.

Under the Term Credit ~~Agreement~~Agreement: (i) amounts outstanding bear interest at (a) ~~in the case of Eurodollar loans, from~~ the adjusted LIBO rate plus ~~8.00% to the adjusted LIBO rate plus~~ 8.50%, for Eurodollar loans, and (b) ~~in the case of alternate base rate loans, from~~ the alternate base rate plus ~~7.00% to the~~7.50% for alternate base rate ~~plus 7.50%;~~loans; (ii) ~~(a) require~~ a ~~$15.0 million principal prepayment at the time of the Third Amendment, (b) increase the~~ quarterly amortization payment of $10.0 million is required; and (iii) a maximum total leverage ratio of (a) 2.25 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 that (a) prepayment fees will be waived for a period of 90 days following the date1.00 is permitted as of the Third Amendment for prepayments in connection with certain refinancings of the term loans and (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 endlast day of each fiscal ~~month, through~~quarter ending April 3, 2021, July 3, 2021 and ~~including November 2020, from $150.0 million~~October 2, 2021, and (b) 1.50 to ~~$125.0 million; (v) waive~~1.00 as of the last day of each subsequent fiscal quarter. In connection with the Third Amendment, the quarterly test for maximum total leverage ratio was waived for ~~fiscal year 2020 and~~ the first three fiscal quarters of fiscal year 2021, and ~~during such period require~~ the Company is required to maintain specified minimum levels of 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% ofEBITDA during such ~~equity interests.~~periods.

While the Third Amendment amended, among other things, certain of the financial covenants in the Term Credit 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 Company not meeting one or more of the amended financial covenants under its Term Credit Agreement within the next twelve months. ~~See “Note 1-Significant Accounting Policies"~~

On September 26, 2019, the Company and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other subsidiaries of the Company from time to time party thereto designated as borrowers, and certain subsidiaries of

the Company from time to time party thereto as guarantors, entered into a secured asset-based revolving credit agreement (the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders").

The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $125.0 million is available under a U.S. facility, an aggregate of $70.0 million is available under a European facility, $20.0 million is available under a Hong Kong facility, $5.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the borrowing base availability limitations described below. The Revolving Facility also includes an up to $45.0 million subfacility for ~~additional information.~~the issuance of letters of credit (the “Letters of Credit”). The Revolving Facility expires and is due and payable on September 26, 2024, provided that, if on the date that is the 121st day prior to the final maturity date of any class or tranche of term loans under the Term Credit Agreement, any such term loans are outstanding on such date, then the maturity date of the Revolving Facility shall be such date. Unless the maturity of the term loans is extended beyond the current maturity date of September 26, 2024, the Revolving Facility will expire and be due and payable on May 28, 2024. The French facility includes a $1.0 million subfacility for swingline loans, and the European facility includes a $7.0 million subfacility for swingline loans. The Revolving Facility is subject to a line cap equal to the lesser of the total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong facility, the French facility and the Canadian facility. Loans under the Revolving Facility may be made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to:(a) with respect to the Company, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, plus (ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit card accounts receivable, minus (iv) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and (y) 65% of the lower of cost or market value of eligible foreign finished goods inventory of such non-U.S. borrower, plus (ii) 85% of the eligible foreign accounts receivable of such non-U.S. borrower, minus (iii) the aggregate amount of reserves, if any, established by the ABL Agent; and (c) with respect to the French Borrower, (i) 85% of eligible French accounts receivable minus (ii) the aggregate amount of reserves, if any, established by the ABL Agent. Not more than 60% of the aggregate borrowing base under the Revolving Facility may consist of the non-U.S. borrowing bases.

As of October ~~3, 2020,~~2, 2021, the Company had ~~$162.0~~$122.0 million and ~~$103.0~~$32.8 million outstanding under the Term Credit Agreement and Revolving Facility, respectively. The Company had net payments of ~~$8.0~~$6.7 million and ~~$38.0~~$30.0 million under the Term Credit Agreement during the Third Quarter and Year Toto Date Period, respectively. The Company had net payments of ~~$20.8~~$34.0 million and ~~net borrowings of $75.0~~$64.0 million under the Revolving Facility during the Third Quarter and Year Toto Date Period, respectively. Amounts available under the Revolving Facility were reduced by any amounts outstanding under standby letters of credit. As of October ~~3, 2020,~~2, 2021, the Company had available borrowing capacity of ~~$32.3~~$123.6 million under the Revolving Facility. The Company incurred approximately ~~$4.3~~$3.3 million and ~~$13.5~~$10.4 million of interest expense related to the Term Credit

Agreement during the Third Quarter and Year To Date Period, respectively. The Company incurred approximately ~~$0.4~~$0.1 million and ~~$1.4~~$0.8 million of interest expense related to the Revolving Facility during the Third Quarter and Year To Date Period, respectively. The Company incurred approximately ~~$3.0~~$2.4 million and $7.7 million of interest expense related to the amortization of debt issuance costs and the original issue discount during the Third Quarter and Year To Date Period, respectively. At October ~~3, 2020,~~2, 2021, the Company was in compliance with all debt covenants related to its credit facilities.

16. RESTRUCTURING

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

In fiscal year 2019, the Company launched New World Fossil 2.0 - Transform to Grow Program (“NWF 2.0”), which is focused on optimizing the Company’s operating structure to be more efficient, with faster decision-making and a more customer-centric focus. In addition to optimizing the way the Company goes to market, the Company ~~is also pursuing~~pursued additional gross margin expansion opportunities. The Company ~~is taking~~has taken a zero-based budgeting approach to adjust its business model to enable more investment in digital capabilities and marketing, move closer to the consumer and react more quickly to the ever-evolving consumer shopping patterns. The Company also ~~plans to change~~changed its overall business processes and resources, creating a more centrally directed operating model, reducing complexity and redundancy, and operating at a lower cost base.

The NWF 2.0 restructuring program was expanded to address additional challenges posed by COVID-19, including a number of cost saving measures such as store closures. Effective March 30, 2020, the Company implemented base salary reductions for a substantial number of its global employees, including each of its executive officers. Additionally, 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 fiscal year 2020. The Company has entered into agreements, or is in discussion 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 has entered into agreements with licensors of certain third party trademarks to reduce the Company’s royalty obligations in 2020. The Company estimates totalTotal NWF 2.0 charges ~~of $50 million to $70 million, with approximately $33 million of those charges~~since inception in fiscal year ~~2020.~~

2019 are $74.0 million, of which $18.7 million, $36.5 million and $18.8 million were recorded during the Year to Date Period, fiscal year 2020 and fiscal year 2019, respectively.

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


		For the 13 Weeks Ended October 3, 2020											For the 13 Weeks Ended October 2, 2021
		Liabilities								Liabilities			Liabilities								Liabilities
		July 4, 2020		Charges		Cash Payments		Non-cash Items		October 3, 2020			July 3, 2021		Charges		Cash Payments		Non-cash Items		October 2, 2021
Store closures	Store closures	$	583	$	731	$	802	$	512	$	0	Store closures	$	19	$	244	$	201	$	47	$	15
Professional services	Professional services	323		515		456		0		382		Professional services	2,076		1,405		2,264		—		1,217
Severance and employee-related benefits	Severance and employee-related benefits	6,348		4,467		6,427		0		4,388		Severance and employee-related benefits	5,756		3,798		4,667		—		4,887
Total	Total	$	7,254	$	5,713	$	7,685	$	512	$	4,770	Total	$	7,851	$	5,447	$	7,132	$	47	$	6,119


		For the 13 Weeks Ended September 28, 2019						For the 13 Weeks Ended October 3, 2020
		Liabilities							Liabilities			Liabilities								Liabilities
		June 29, 2019		Charges		Cash Payments			September 28, 2019			July 4, 2020		Charges		Cash Payments		Non-cash Items		October 3, 2020

Store closures											Store closures	$	583	$	731	$	802	$	512	$	—
Professional services	Professional services	$	730	$	2,411	$	962		$	2,179	Professional services	323		515		456		—		382
Severance and employee-related benefits	Severance and employee-related benefits	3,772		4,568		3,086			5,254		Severance and employee-related benefits	6,348		4,467		6,427		—		4,388
Total	Total	$	4,502	$	6,979	$	4,048		$	7,433	Total	$	7,254	$	5,713	$	7,685	$	512	$	4,770


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


	For the 40 Weeks Ended October 3, 2020
	Liabilities								Liabilities
	December 28, 2019		Charges		Cash Payments		Non-cash Items		October 3, 2020
Store closures	$	22	$	3,424	$	1,525	$	1,921	$	—
Professional services	$	2,824	$	5,177	$	7,619	—		$	382
Severance and employee-related benefits	4,238		17,019		16,869		—		4,388
Total	$	7,084	$	25,620	$	26,013	$	1,921	$	4,770

For the 40 Weeks Ended October 3, 2020
Liabilities Liabilities
December 28, 2019 Charges Cash Payments Non-cash Items October 3, 2020
Store closures $ 22 $ 3,424 $ 1,525 $ 1,921 $ 0
Professional services 2,824 5,177 7,619 0 382
Severance and employee-related benefits 4,238 17,019 16,869 0 4,388
Total $ 7,084 $ 25,620 $ 26,013 $ 1,921 $ 4,770

For the 39 Weeks Ended September 28, 2019
Liabilities Liabilities
December 29, 2018 Charges Cash Payments September 28, 2019
Professional services $ 0 $ 5,049 $ 2,870 $ 2,179
Severance and employee-related benefits 0 8,629 3,375 5,254
Total $ 0 $ 13,678 $ 6,245 $ 7,433

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


		For the 13 Weeks Ended October 3, 2020		For the 13 Weeks Ended September 28, 2019		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019			For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020		For the 39 Weeks Ended October 2, 2021		For the 40 Weeks Ended October 3, 2020
Americas	Americas	$	415	$	549	$	4,372	$	549	Americas	$	737	$	415	$	2,116	$	4,372
Europe	Europe	2,869		3,286		6,551		8,680		Europe	1,828		2,869		8,872		6,551
Asia	Asia	2,331		136		6,776		136		Asia	1,484		2,331		3,289		6,776
Corporate	Corporate	98		3,008		7,921		4,313		Corporate	1,398		98		4,439		7,921
Consolidated	Consolidated	$	5,713	$	6,979	$	25,620	$	13,678	Consolidated	$	5,447	$	5,713	$	18,716	$	25,620

17. SUBSEQUENT EVENT

On November 3, 2021, the Company entered into an underwriting agreement with B. Riley Securities, Inc., as representative of the several underwriters named therein, providing for the issuance and sale (the “Notes Offering”) of $140.0 million aggregate principal amount of the Company’s 7.00% Senior Notes due 2026 (the “Senior Notes”) plus up to an additional $10.0 million aggregate principal amount of Senior Notes pursuant to an option to purchase additional notes. The Senior Notes were offered pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-259352), which was declared effective by the Securities and Exchange Commission on September 30, 2021. On November 8, 2021, the Company consummated the issuance and sale of $150.0 million aggregate principal amount of the Senior Notes, including the full exercise of the underwriters’ option.

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

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 40thirty-nine week periods ended October 2, 2021 (the "Third Quarter" and "Year To Date Period") as compared to the thirteen and forty week periods ended October 3, 2020 (the ~~“Third Quarter” and "Year To Date Period," respectively) as compared to the thirteen and 39 week periods ended September 28, 2019 (the “Prior~~"Prior Year ~~Quarter”~~Quarter" and "Prior Year YTD ~~Period," respectively)~~Period"). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

General

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~~men's and ~~women’s~~women's fashion watches and jewelry, handbags, small leather goods, belts, and sunglasses. In the watch and jewelry product categories, we have a diverse portfolio of globally recognized owned and licensed brand names under which our products are marketed.

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

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

~~Domestically,~~Americas: The Americas segment is comprised of sales from our operations in the United States, Canada and Latin America. Sales are generated through diversified distribution channels that include wholesalers, distributors, and direct to consumer. Within each channel, we sell our products through a ~~diversified distribution network that includes department stores, specialty retail locations, specialty watch~~variety of physical points of sale, distributors and ~~jewelry stores, Company-owned retail and outlet stores, mass market stores and through our FOSSIL~~® ~~website and third-party websites. Our wholesale customer base includes, among others, Amazon, Best Buy, Dillard’s, Kohl’s, Macy’s, Nordstrom, Saks Fifth Avenue, Target and Wal-Mart.~~e-commerce channels. In the ~~United States, our network of~~direct to consumer channel, we had 163 Company-owned stores ~~included 53 retail stores located in premier retail sites and 99 outlet stores located in major outlet malls~~ as of ~~October 3, 2020. In addition, we offer~~the end of the Third Quarter and an extensive collection of products available through our ~~FOSSIL branded products on our website,~~ ~~www.fossil.com, as well as proprietary and licensed watch and jewelry brands through other managed and affiliated~~owned websites.

~~Internationally,~~Europe: The Europe segment is comprised of sales to customers based in European countries, the Middle East and Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products ~~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~~variety of ~~approximately 80 independent distributors. Internationally, our network~~physical points of ~~Company-owned stores included 158 retail stores~~sale, distributors, and ~~121 outlet~~e-commerce channels. In the direct to consumer channel, we had 128 Company-owned stores as of ~~October 3, 2020. Our products are also sold through licensed~~the end of the Third Quarter and ~~franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer~~ an extensive collection of products available through our ~~FOSSIL~~owned websites.

Asia: The Asia segment is comprised of sales to customers based in Australia, Greater China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel, we had 83 Company-owned stores as of the end of the Third Quarter and an extensive collection of products available through our owned websites.

Our consolidated gross profit margin is influenced by our diversified business model that includes, but is not limited to: (i) product categories that we distribute; (ii) the multiple brands, including both owned and licensed, we offer within several product categories; (iii) the geographical presence of our businesses; and (iv) the different distribution channels we sell to or through.

The attributes of this diversified business model produce varying ranges of gross profit margin. Generally, on a historical basis, our fashion branded watch and jewelry offerings produce higher gross profit margins than our leather goods offerings. In addition, in most product categories that we offer, brands with higher retail price points generally produce higher gross profit margins compared to those of lower retail priced brands, and connected products carry relatively lower margins than traditional products. Gross profit margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the following factors: (i) premiums charged in comparison to retail prices on products sold in the U.S.; (ii) the product sales mix in our ~~websites~~international businesses, in ~~certain countries.~~comparison to our Americas business, is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods; and (iii) the watch sales mix in our Europe and Asia businesses, in comparison to our Americas business, are comprised more predominantly of higher priced licensed brands.

Our business is subject to economic cycles, retail industry 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.

~~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’~~contractor 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:~~ COVID-19:~~Based on our recent operating results and current perspectives on our operating environment, we anticipate the following trends will continue to impact our operating results:~~

~~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 Third Quarter and Year To Date Period were~~continue to be 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~~remain 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~~The total impact of the ~~first quarter of fiscal year 2020,~~pandemic on our business is uncertain and depends in part on future developments including the ~~impact~~duration and spread of COVID-19, ~~resulted~~the availability and acceptance of vaccines and continuing actions taken by governmental authorities to control the outbreak and mitigate its impact, including effects of any vaccine mandates, restrictions on movement and commercial activities and further stimulus and unemployment benefits.

Supply Chain: We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. Among our foreign suppliers, China is the ~~closure~~source of ~~the~~a substantial majority of our ~~stores~~imports. We have experienced, and ~~many of~~expect to continue to experience, increased international transit times, particularly for our ~~wholesale partners' stores. During the second quarter of fiscal year 2020, many regional~~leathers products and ~~local governments lifted or modified restrictions~~packaging, and ~~orders. During the Third Quarter, while the~~increased shipping costs for a majority of our ~~stores and wholesale partners’ stores remained open, we continued to experience significant declines~~products.A disruption in traffic that negatively impacted sales. The ability for these stores to remain open is dependent on a number of factors, including, but not limited to, re-implementation of government restrictions or other safety protocols. 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. Since the COVID-19 pandemic began, declines in retail traffic have been partially offset by growth in our e-commerce channels. We expect these trends to continue, as consumers continue to focus on online shopping options.

~~We have implemented cost savings actions, reduced spending, and plan to take further actions to address the decrease in revenue and cash~~ flow and other impacts on our business as a result of COVID-19 in order to maintain liquidity and to remain in compliance with financial covenants. For the Year To Date Period, selling, general and administrative expenses (“SG&A”) decreased $141.6 million compared to the Prior Year YTD Period. Examples of some of the actions we have taken 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,~~imported merchandise from China or a material increase in the ~~cash fees for all non-employee directors serving on~~cost of those goods or transportation without any offsetting price increases may significantly decrease our ~~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 of fiscal year 2020.~~profits.

~~Employee Actions:~~Data Security: ~~During~~We depend on information technology systems, the ~~second quarter of fiscal year 2020, we implemented weekly work hour reductions (e.g., from 40 hours to 32 or 24 hours)~~Internet and ~~work-reduction furloughs for certain other employees. We also have implemented base salary reductions~~computer networks for a substantial number of our employees globally and reduced corporate staff levels. In the Third Quarter, we reinstated normal work week schedules. We closed all of our corporate offices at various times in 2020. We believe our employees have generally been successful in transitioning to a virtual working environment. Currently, most of our offices have reopened in some capacity, and we are following government regulations and have health and safety guidelines in place.

~~Office and Retail Location Expenses:~~ ~~We have entered into agreements, or are in discussions with, many~~portion of our retail and ~~corporate office landlords~~e-commerce businesses, including credit card transaction authorization and processing. We also receive and store personal information about our customers and employees, the protection of which is critical to ~~modify rent payments, receive other concessions or otherwise reduce~~us. In the normal course of our ~~operating costs for these locations. Refer to "Note 14-Leases" for more information.~~

~~Marketing~~business, we collect, retain, and ~~Other Expenses:~~ Wetransmit certain sensitive and confidential customer information, including credit card information, over public networks. Despite the security measures we currently have ~~reduced marketing~~in place, our facilities and ~~other operating expenses, like time~~systems and ~~expense~~those of our third party service providers have been, and ~~services.~~

~~Capital Expenditures:~~ ~~Capital expenditures for 2020 are expected~~will continue to be, ~~approximately $9 million, compared~~vulnerable to ~~original expectations~~theft of ~~approximately $25 million. This reduction reflects the deferral~~ physical information, security breaches, hacking attempts, computer viruses and malware, ransomware, phishing, lost data and programming and/or ~~cancellation~~human errors. To date, none of ~~certain planned investments.~~

~~Other Liquidity Improvements:~~ these risks, intrusions, attacks or human error have resulted in any material liability to us.~~We have also extended the payment terms with a number of our vendors and suppliers globally and reduced our inventory purchases to improve working capital.~~

~~Our Term Credit Agreement (as defined in "Note 15-Debt Activity") contains certain affirmative and negative covenants. In June 2020,~~While we ~~entered into Amendment No. 3 to our Term Credit Agreement to amend, among other things,~~carry insurance policies that would provide liability coverage for certain of these ~~financial covenants~~matters, if we experience a significant security incident, we could be subject to liability or other damages that exceed our insurance coverage, and we cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as ~~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 covenants and management believes its business plans will result in adequate cash flows to support our ongoing operations and meet our covenant requirements for one year following the date these financial statements are issued.

any future claim.

Business Strategies and Outlook: Notwithstanding the COVID-19 pandemic, we plan to execute the following strategies to enhance our brands, grow our revenue and improve profitability. ~~These strategies remain highly relevant, and we believe they will be important to our long-term success.~~ The first strategic initiative is ~~delivering~~to increase brand excitement by crafting compelling ~~storytelling and innovation to~~stories that build upon brand equities for both owned and licensed brands across our product categories. Key to this strategy is our ongoing effort in innovation in our product categories and marketing capabilities, where we aim to build larger communities of brand loyalists. Our second strategic initiative is ~~commercial transformation, where we are investing~~to increase digital engagement and online sales. We continue to invest in our owned e-commerce sites around the world and ~~digital marketing capabilities while reducing~~in third party marketplaces to enhance our ~~reliance on traditional brick and mortar stores. The current operating environment created by the COVID-19 pandemic is further accelerating this shift.~~direct to consumer engagement, which we believe can build long-term customer value. Our third strategic initiative is ~~expanding~~to expand our opportunity in mainland China and India. In these countries, we are continuing to execute against a strategy centered around localized marketing and segmented assortments. Although the impact of COVID-19 is likely to disrupt our growth trajectory in the short to intermediate term, we continue to view mainland China and India as compelling long-term opportunities. Our fourth strategic initiative is to ~~capture greater efficiency in~~optimize our ~~processes and right-sizing our cost structure. After completing~~operations. We initiated the New World Fossil ~~(“NWF 1.0”) program of $100 million in cost savings in 2019, we announced a $200 million New World Fossil~~– Transform to Grow (“NWF 2.0”) ~~program starting~~initiative in ~~fiscal year 2019.~~2019 aimed to further simplify our operations and to re-allocate resources toward growth, and we completed our $250 million in run-rate savings goal in 2021. In ~~2019, the~~addition to our NWF 2.0 program, ~~achieved $50~~we expect to optimize our operations with further reductions to our store footprint and increased focus on inventory management and supply chain efficiency.

Notes Offering: On November 3, 2021, we entered into an underwriting agreement with B. Riley Securities, Inc., as representative of the several underwriters named therein, providing for the issuance and sale (the “Notes Offering”) of $140.0 million aggregate principal amount of our 7.00% Senior Notes due 2026 (the “Senior Notes”) plus up to an additional $10.0 million aggregate principal amount of Senior Notes pursuant to an option to purchase additional notes. The Senior Notes were offered pursuant to our shelf registration statement on Form S-3 (Registration No. 333-259352), which was declared effective by the Securities and Exchange Commission on September 30, 2021.

On November 8, 2021, we used the majority of the net proceeds from the Notes Offering to repay all of the outstanding borrowings under the Term Credit Agreement (as defined below). In connection with the repayment of the outstanding borrowings under the Term Credit Agreement, we incurred prepayment fees and accrued interest costs of $2.6 million and wrote off $7.1 million of ~~savings. Due~~debt issuance costs and $4.6 million of original issuance discount related to the ~~expected near term impact of COVID-19, we increased the program’s goal to $250 million, with $100 million in savings targeted~~Term Credit Agreement. The remaining net proceeds will be used for ~~2020.~~general corporate purposes.

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~~10-K/A for the fiscal year ended ~~December 28, 2019~~January 2, 2021 and "Part II, Item 1A. Risk Factors" of ~~our subsequent Quarterly Reports~~this Quarter Report on Form 10-Q.

~~Results of Operations~~

~~Executive Summary.~~ Since the 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 the operating environment has remained challenged, we have focused on maximizing sales opportunities while reducing operating costs. During the Third Quarter, sales growth in the Company’s e-commerce channels partially offset sales declines in traditional wholesale and brick and mortar retail stores. Operating expense reductions and gross margin rate improvement more than offset revenue declines, resulting in operating income improvements during the Third Quarter compared to the Prior Year Quarter.

Constant Currency Financial Information

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

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

~~Quarterly Periods Ended October 3, 2020 and September 28, 2019~~

~~Consolidated Net Sales.~~ Net sales decreased $104.0 million, or 19.3% (20.1% in constant currency), for the Third Quarter as compared to the Prior Year Quarter, primarily as a result of COVID-19 pandemic-related traffic declines, in both our owned stores and our wholesale customers. Global comparable retail sales decreased 29% primarily due to traffic declines in our owned stores, partially offset by e-commerce growth. While the majority of our stores have re-opened, we still experienced significant traffic declines, which were partially offset by improved conversions. The sales declines in our store channel were partially offset by strong growth in 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 23 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):~~

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 356.6 81.9 % $ 445.5 82.6 % $ (88.9) (20.0) % (20.7) %
Leathers 37.7 8.7 54.5 10.1 (16.8) (30.8) (31.4)
Jewelry 28.9 6.6 28.2 5.2 0.7 2.5 (0.7)
Other 12.3 2.8 11.3 2.1 1.0 8.8 8.0
Total $ 435.5 100.0 % $ 539.5 100.0 % $ (104.0) (19.3) % (20.1) %

In the Third Quarter, the translation of foreign-based net sales into U.S. dollars increased reported net sales by $4.4 million, including favorable impacts of $5.4 million and $0.2 million in our Europe and Asia segments, respectively, and an unfavorable impact of $1.3 million in our Americas segment, as compared to the Prior Year Quarter.

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

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Americas $ 175.1 40.2 % $ 220.0 40.8 % $ (44.9) (20.4) % (19.7) %
Europe 135.3 31.1 173.9 32.2 (38.6) (22.2) (25.3)
Asia 119.7 27.5 143.3 26.6 (23.6) (16.5) (16.6)
Corporate 5.4 1.2 2.3 0.4 3.1 134.8 117.4
Total $ 435.5 100.0 % $ 539.5 100.0 % $ (104.0) (19.3) % (20.1) %

~~Americas Net Sales.~~ Americas net sales decreased $44.9 million, or 20.4% (19.7% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. In the region, sales declined in the U.S., Canada and Mexico. Strong sales growth in e-commerce partially offset the declines in other channels.Comparable Retail Sales ~~declined in most brands, most notably in FOSSIL and MICHAEL KORS~~®. Comparable retail sales declined in the mid-twenties on a percentage basis during the Third Quarter, driven by traffic declines due to the COVID-19 pandemic, partially offset by strong positive e-commerce comparable retail 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 Americas segment (dollars in millions):

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 142.9 81.6 % $ 179.4 81.5 % $ (36.5) (20.3) % (19.7) %
Leathers 22.3 12.7 33.3 15.1 (11.0) (33.0) (32.7)
Jewelry 8.0 4.6 4.9 2.2 3.1 63.3 63.3
Other 1.9 1.1 2.4 1.2 % (0.5) (20.8) (16.7)
Total $ 175.1 100.0 % $ 220.0 100.0 % $ (44.9) (20.4) % (19.7) %

~~Europe Net Sales~~. Europe net sales decreased $38.6 million, or 22.2% (25.3% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. Across the Eurozone, sales were down in all major markets with the greatest declines in Germany and the U.K. Sales decreased in all major brands, most notably in FOSSIL and MICHAEL KORS. Comparable retail sales declined in the low-thirties on a percentage basis during the Third Quarter, driven by traffic declines due to the COVID-19 pandemic, partially offset by positive e-commerce comparable retail sales.

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

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 105.2 77.8 % $ 137.2 78.9 % $ (32.0) (23.3) % (26.3) %
Leathers 8.1 6.0 10.8 6.2 (2.7) (25.0) (27.8)
Jewelry 18.6 13.7 21.5 12.4 (2.9) (13.5) (17.7)
Other 3.4 2.5 4.4 2.5 % (1.0) (22.7) (25.0)
Total $ 135.3 100.0 % $ 173.9 100.0 % $ (38.6) (22.2) % (25.3) %

~~Asia Net Sales.~~ Net sales in Asia decreased $23.6 million, or 16.5% (16.6% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. Sales declined in most brands during the Third Quarter, most notably in FOSSIL and MICHAEL KORS and partially offset by sales increases in EMPORIO ARMANI®. Sales decreased in all major markets across Asia, except for mainland China, where sales growth was driven by e-commerce channels. Our wholesale and retail channels were negatively impacted by partial shutdowns and travel restrictions during secondary waves of the COVID-19 pandemic as well as reduced traffic in markets that remained open. Comparable retail sales declined in the low-thirties on a percentage basis during the Third Quarter, driven by traffic declines due to the COVID-19 pandemic.

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

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019
Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 108.5 90.6 % $ 128.9 90.0 % $ (20.4) (15.8) % (16.0) %
Leathers 7.3 6.1 10.4 7.3 (3.1) (29.8) (29.8)
Jewelry 2.3 1.9 1.8 1.3 0.5 27.8 27.8
Other 1.6 1.4 2.2 1.4 (0.6) (27.3) (27.3)
Total $ 119.7 100.0 % $ 143.3 100.0 % $ (23.6) (16.5) % (16.6) %

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

October 3, 2020 September 28, 2019
Americas Europe Asia Total Americas Europe Asia Total
Full price accessory 77 74 54 205 87 86 53 226
Outlets 112 76 32 220 115 72 35 222
Full priced multi-brand — 3 3 6 — 4 2 6
Total stores 189 153 89 431 202 162 90 454

~~During the Third Quarter, we closed nine stores and opened four new stores.~~

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~~2021 were calculated on a ~~40-to-40~~39-to-39 week basis to ~~normalize~~

normalize the 40-week Prior Year ~~To Date~~YTD Period with the 39-week ~~Prior~~ Year ~~YTD~~To Date Period. Comparable retail sales also exclude the effects of foreign currency fluctuations.

Results of Operations

Quarterly Periods Ended October 2, 2021 and October 3, 2020

~~Gross Profit.~~Consolidated Net Sales. ~~Gross profit of $229.8~~Net sales increased $56.3 million, or 12.9% (11.2% in constant currency), for the Third Quarter ~~decreased 17.5% in comparison to $278.5 million in the Prior Year Quarter,~~ as ~~a result of decreased sales. Gross profit margin rate increased to 52.8% in the Third Quarter~~ compared to 51.6% in the Prior Year Quarter, primarily reflecting a higher mix of e-commerce sales, favorable region and product mix and favorable pricing on sell-through of older generation connected products, partially offset by heightened promotional activity and an unfavorable currency impact of approximately 120 basis points.

~~Operating Expenses.~~ ~~Total operating expenses in the Third Quarter decreased by $75.4 million, or 26.2%, to $212.3 million compared to $287.7 million in~~ the Prior Year Quarter. ~~Operating expenses in~~In the Third Quarter, ~~included $5.7 million~~digital sales, which include sales from our owned e-commerce channels, third-party e-commerce platforms and wholesale dot com, were 40% of ~~restructuring costs, primarily related to employee costs, professional services and store closures, while the Prior Year Quarter included $7.0 million~~worldwide net sales. Digital sales increased 29% (28% in restructuring costs. SG&A expenses in the Third Quarter decreased $57.6 million from the Prior Year Quarter due to lower compensation, marketing and discretionary costs. The translation of foreign-denominated expenses during the Third Quarter increased operating expenses by $2.5 million as a result of the weaker U.S. dollar. As a percentage of net sales, SG&A expenses decreased to 47.4%constant currency) in the Third Quarter as compared to ~~49.0% in~~ the Prior Year Quarter.

~~Operating Income (Loss).~~ ~~Operating income was $17.5~~ Global comparable retail sales decreased 1% primarily due to sales declines in our owned e-commerce business partially offset by sales growth in retail stores. We have reduced our store footprint by 57 stores since the end of the Prior Year Quarter. During the Third Quarter, we closed 13 stores and opened 1 new store. The translation of foreign-based net sales into U.S. dollars increased reported net sales by $7.5 million, including favorable impacts of $3.5 million, $2.4 million and $1.6 million in our Asia, Europe and Americas segments, respectively, in the Third Quarter as compared to ~~an operating loss of $9.2 million in~~ the Prior Year Quarter.

The ~~improvement in operating income was primarily driven by cost reductions and an improved gross profit margin rate, and partially offset by COVID-19 impacts on sales. As a percentage of~~following table sets forth consolidated net sales operating margin was 4.0% in the Third Quarter compared to (1.7)% in the Prior Year Quarter. Operating margin rate in the Third Quarter included an unfavorable impact of 130 basis points due to changes in foreign currencies.

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

For the 13 Weeks Ended October 3, 2020 For the 13 Weeks Ended September 28, 2019 Change Operating Margin %
Dollars Percentage 2020 2019
Americas $ 45.0 $ 18.9 $ 26.1 138.1 % 25.7 % 8.6 %
Europe 10.7 26.4 (15.7) (59.5) 7.9 15.2
Asia 25.3 32.7 (7.4) (22.6) 21.1 22.8
Corporate (63.5) (87.2) 23.7 (27.2)
Total operating income (loss) $ 17.5 $ (9.2) $ 26.7 (290.2) % 4.0 % (1.7) %

~~Interest Expense.~~ Interest expense increased by $0.6 million during the Third Quarter compared to the Prior Year Quarter, driven by increased debt issuance cost amortization as a result of our September 26, 2019 debt agreement and subsequent amendments.

~~Other Income (Expense)-Net.~~ During the Third Quarter, other income (expense)-net was zero in comparison to an expense of $1.4 million in the Prior Year Quarter. The expense in the Prior Year Quarter was primarily driven by a $3.0 million loss on extinguishment of debt partially offset by net transactional currency gains.

~~Provision for Income Taxes~~. Income tax benefit for the Third Quarter was $6.8 million, resulting in an effective income tax rate of (71.4)%. For the Prior Year Quarter, income tax expense was $6.9 million, resulting in an effective income tax rate of (38.6)%. The effective tax rate in the Third Quarter differed from the Prior Year Quarter primarily due to changes enacted in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was signed into law on March 27, 2020. The CARES Act allows U.S. taxpayers to carry back a net operating loss (“NOL”) arising in tax years 2018, 2019 and 2020 to prior years when the tax rate was 35%. The Company recognized a U.S. tax benefit from its fiscal year 2019 tax losses, which will be carried back to offset taxable income reported in prior years. The Company will receive a refund of 2014 and 2015 taxes.

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 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.

~~Net Income (Loss) Attributable to Fossil Group, Inc.~~ Third Quarter net income attributable to Fossil Group, Inc. was $16.0 million, or $0.31 per diluted share, in comparison to a net loss of $25.9 million, or $0.51 per diluted share, in the Prior Year Quarter. Diluted earnings per share in the Third Quarter included restructuring charges of $0.09 per diluted share. Diluted earnings (loss) per share in the Prior Year Quarter included non-cash intangible asset impairment charges of $0.25 per diluted


	For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	$	193.7	39.4	%	$	175.1	40.2	%	$	18.6	10.6	%	9.7	%
Europe	165.9		33.7		135.3		31.1		30.6		22.6		20.8
Asia	129.5		26.3		119.7		27.5		9.8		8.2		5.3
Corporate	2.7		0.6		5.4		1.2		(2.7)		(50.0)		(50.0)
Total	$	491.8	100.0	%	$	435.5	100.0	%	$	56.3	12.9	%	11.2	%

3732

~~share and restructuring charges of $0.11 per diluted share. Currency fluctuations unfavorably impacted diluted earnings per share by $0.09 during the Third Quarter.~~

~~Fiscal Year To Date Periods Ended October 3, 2020 and September 28, 2019~~

~~Consolidated Net Sales.~~ Net sales decreased $420.9 million or 27.9% (27.5% in constant currency) for the Year To Date Period as compared to the Prior Year YTD Period. We experienced sales 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 of fiscal year 2020, 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, various restrictions have remained in place and some regions have reinstated previous restrictions due to secondary waves of the COVID-19 pandemic. As a result, traffic remained down in the Year To Date Period compared to the Prior Year YTD Period. Comparable retail sales declined in the mid-twenties on a percentage basis during the Year To Date Period, driven by temporary store closures and traffic declines due to the COVID-19 pandemic, but were partially offset by strong positive e-commerce comparable retail sales.

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

For the 40 Weeks Ended October 3, 2020 For the 39 Weeks Ended September 28, 2019 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 876.0 80.7 % $ 1,225.0 81.3 % $ (349.0) (28.5) % (28.0) %
Leathers 111.6 10.3 161.0 10.7 (49.4) (30.7) (30.4)
Jewelry 67.3 6.2 80.1 5.3 (12.8) (16.0) (16.4)
Other 30.3 2.8 40.0 2.7 (9.7) (24.3) (24.3)
Total $ 1,085.2 100.0 % $ 1,506.1 100.0 % $ (420.9) (27.9) % (27.5) %

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by $6.0 million, including unfavorable impacts of $4.8 million and $2.2 million in in our Asia and Americas segments, respectively, and a favorable impact of $0.9 million in our Europe segment, compared to the Prior Year YTD Period.


	For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	393.7	80.0	%	$	356.6	81.9	%	$	37.1	10.4	%	8.7	%
Leathers	36.4		7.4		37.7		8.7		(1.3)		(3.4)		(4.5)
Jewelry	52.5		10.7		28.9		6.6		23.6		81.7		78.9
Other	9.2		1.9		12.3		2.8		(3.1)		(25.2)		(26.0)
Total	$	491.8	100.0	%	$	435.5	100.0	%	$	56.3	12.9	%	11.2	%

The following table sets forth ~~consolidated net sales by segment (dollars in millions):~~the number of stores on the dates indicated below:


		For the 40 Weeks Ended October 3, 2020				For the 39 Weeks Ended September 28, 2019				Growth (Decline)
		Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency			October 3, 2020	Opened	Closed	October 2, 2021
Americas	Americas	$	433.8	40.0	%	$	633.5	42.1	%	$	(199.7)	(31.5)	%	(31.1)	%	Americas	189	1	27	163
Europe	Europe	343.1		31.5		474.2		31.5		(131.1)		(27.6)		(27.8)		Europe	153	1	26	128
Asia	Asia	295.2		27.2		386.4		25.7		(91.2)		(23.6)		(22.4)		Asia	89	0	6	83
Corporate		13.1		1.3		12.0		0.7		1.1		9.2		8.4
Total		$	1,085.2	100.0	%	$	1,506.1	100.0	%	$	(420.9)	(27.9)	%	(27.5)	%
Total stores																Total stores	431	2	59	374

Americas Net Sales. Americas net sales ~~decreased $199.7~~increased $18.6 million, or ~~31.5% (31.1%~~10.6% (9.7% in constant currency), during the ~~Year To Date Period~~Third Quarter in comparison to the Prior Year ~~YTD Period. During~~Quarter. In the ~~Year To Date Period,~~region, sales increased in the U.S. and declined in ~~most brands~~Mexico and Canada. Sales increased in our ~~watch portfolio, with the largest decreases~~wholesale, third party e-commerce and retail stores channels, which more than offset a sales decrease in ~~FOSSIL and MICHAEL KORS. Geographically, sales declined in the U.S., Canada and Mexico. Strong~~our owned e-commerce ~~sales growth partially offset retail store and wholesale sales declines.~~business. Comparable retail sales ~~in the region decreased in the mid-twenties on a percentage basis~~increased moderately during the ~~Year To Date Period,~~Third Quarter, driven by ~~temporary store closures and~~ traffic ~~declines due~~increases in our retail stores compared to the ~~COVID-19 pandemic, but were partially offset by strong positive e-commerce comparable retail sales.~~Prior Year Quarter.


	For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	150.2	77.6	%	$	142.9	81.6	%	$	7.3	5.1	%	4.1	%
Leathers	23.4		12.1		22.3		12.7		1.1		4.9		4.0
Jewelry	18.3		9.4		8.0		4.6		10.3		128.8		127.5
Other	1.8		0.9		1.9		1.1	%	(0.1)		(5.3)		0.0
Total	$	193.7	100.0	%	$	175.1	100.0	%	$	18.6	10.6	%	9.7	%

For the 40 Weeks Ended October 3, 2020 For the 39 Weeks Ended September 28, 2019 Growth (Decline)
Net Sales Percentage
of Total Net Sales Percentage
of Total Dollars Percentage As Reported Percentage Constant Currency
Watches $ 346.6 79.9 % $ 512.8 80.9 % $ (166.2) (32.4) % (32.0) %
Leathers 67.7 15.6 97.7 15.4 (30.0) (30.7) (30.5)
Jewelry 14.7 3.4 15.7 2.5 (1.0) (6.4) (7.6)
Other 4.8 1.1 7.3 1.2 (2.5) (34.2) (32.9)
Total $ 433.8 100.0 % 1 $ 633.5 100.0 % $ (199.7) (31.5) % (31.1) %

Europe Net Sales. Europe net sales ~~decreased $131.1~~increased $30.6 million, or ~~27.6% (27.8%~~22.6% (20.8% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. Across Europe sales increased in most major markets, with the largest increases in Germany and the UK. Wholesale and e-commerce channel sales increased strongly while our retail store channel sales declined moderately. Despite an increase in foot traffic in the Third Quarter as compared to the Prior Year Quarter, comparable retail sales declined slightly.

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


	For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	129.8	78.2	%	$	105.2	77.8	%	$	24.6	23.4	%	21.6	%
Leathers	7.2		4.3		8.1		6.0		(0.9)		(11.1)		(12.3)
Jewelry	25.6		15.4		18.6		13.7		7.0		37.6		36.0
Other	3.3		2.1		3.4		2.5	%	(0.1)		(2.9)		(5.9)
Total	$	165.9	100.0	%	$	135.3	100.0	%	$	30.6	22.6	%	20.8	%

Asia Net Sales. Net sales in Asia increased $9.8 million, or 8.2% (5.3% in constant currency), during the Third Quarter in comparison to the Prior Year Quarter. Sales increased in our wholesale and e-commerce channels, which more than offset a sales decrease in our retail stores channel. Sales increased in multiple brands during the Third Quarter, most notably in FOSSIL®. Strong sales growth in India more than offset a slight decline in Mainland China and some significant declines in other markets. Comparable retail sales decreased during the Third Quarter, with a significant decline in retail stores and a slight decline in our owned e-commerce compared to the Prior Year Quarter.

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


	For the 13 Weeks Ended October 2, 2021				For the 13 Weeks Ended October 3, 2020
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	113.7	87.8	%	$	108.5	90.6	%	$	5.2	4.8	%	2.1	%
Leathers	5.8		4.5		7.3		6.1		(1.5)		(20.5)		(21.9)
Jewelry	8.6		6.6		2.3		1.9		6.3		273.9		256.5
Other	1.4		1.1		1.6		1.4		(0.2)		(12.5)		(18.8)
Total	$	129.5	100.0	%	$	119.7	100.0	%	$	9.8	8.2	%	5.3	%

Gross Profit. Gross profit of $259.5 million in the Third Quarter increased 13.0% in comparison to $229.8 million in the Prior Year Quarter, driven by the increase in sales. Our gross profit margin rate was 52.8% in the both the Third Quarter and Prior Year Quarter. The year-over-year change in gross profit primarily reflects a favorable currency impact, improved channel mix and reduced minimum licensor royalty costs offset by unfavorable product mix and region mix.

Operating Expenses. Total operating expenses in the Third Quarter were $211.7 million, or 43.0% of sales, compared to $212.3 million, or 48.7% of sales, in the Prior Year Quarter. SG&A expenses were $205.7 million in the Third Quarter compared to $202.0 million in the Prior Year Quarter, reflecting higher marketing costs largely offset by decreased compensation and store costs. As a percentage of net sales, SG&A expenses decreased to 41.8% in the Third Quarter as compared to 46.4% in the Prior Year Quarter. Restructuring costs in the Third Quarter were $5.4 million, primarily related to employee costs, professional services and store closures, while restructuring costs in the Prior Year Quarter were $5.7 million. Other long-lived asset impairments in the Third Quarter were $0.6 million compared to $4.6 million in the Prior Year Quarter, due to lower retail store impairment. The translation of foreign-denominated expenses during the Third Quarter increased operating expenses by $2.1 million as a result of the weaker U.S. dollar.

Operating Income (Loss). Operating income in the Third Quarter was $47.8 million as compared to operating income of $17.5 million in the Prior Year Quarter. The improvement in operating income was primarily driven by increased sales in the

Third Quarter compared to the Prior Year Quarter. As a percentage of net sales, operating margin was 9.7% in the Third Quarter compared to 4.0% in the Prior Year Quarter. Operating margin in the Third Quarter included a favorable impact of 210 basis points due to changes in foreign currencies.

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


	For the 13 Weeks Ended October 2, 2021		For the 13 Weeks Ended October 3, 2020		Change				Operating Margin
					Dollars		Percentage		2021		2020
Americas	$	46.6	$	45.1	$	1.5	3.3	%	24.0	%	25.7	%
Europe	40.5		12.3		28.2		229.3		24.4		9.1
Asia	24.0		25.7		(1.7)		(6.6)		18.5		21.5
Corporate	(63.3)		(65.6)		2.3		3.5
Total operating income (loss)	$	47.8	$	17.5	$	30.3	173.1	%	9.7	%	4.0	%

Interest Expense. Interest expense decreased by $1.6 million during the Third Quarter compared to the Prior Year Quarter, primarily driven by a lower debt balance.

Other Income (Expense)-Net. During the Third Quarter, other income (expense)-net was an expense of $0.5 million in comparison to zero in the Prior Year Quarter. The year-over-year change was primarily driven by net transactional currency losses in the Third Quarter.

Provision for Income Taxes. Income tax expense for the Third Quarter was $9.0 million, resulting in an effective income tax rate of 22.0%. For the Prior Year Quarter, income tax benefit was $6.8 million, resulting in an effective income tax rate of (71.4)%. The effective tax rate in the Third Quarter was unfavorable as compared to the Prior Year Quarter since no tax benefit was accrued on the U.S. net operating loss ("NOL"), unlike in the Prior Year Quarter. The Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act requires the inclusion of certain foreign income in the tax return which will absorb most of the U.S. NOL. Foreign income taxes are also paid on this same foreign income, resulting in double taxation. The remaining U.S. NOL is offset with a valuation allowance since there is no certainty of any future tax benefit. The Prior Year Quarter tax rate benefited from the enactment of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was in effect in the Prior Year Quarter but expired in 2021. The CARES Act allowed U.S. taxpayers to carry back NOLs arising in tax years 2018, 2019 and 2020 to prior years when the tax rate was 35%. In the Prior Year Quarter, we recognized a U.S. tax benefit from fiscal year 2019 and 2020 tax losses, which were carried back to offset taxable income reported in prior years. No tax benefit has been accrued on the Third Quarter U.S. tax losses and certain foreign tax losses due to the uncertainty of whether they can be used in the future.

Net Income (Loss) Attributable to Fossil Group, Inc. Third Quarter net income (loss) attributable to Fossil Group, Inc. was income of $31.4 million, or $0.60 per diluted share, in comparison to net income of $16.0 million, or $0.31 per diluted share, in the Prior Year Quarter. Diluted earnings (loss) per share in the Third Quarter included restructuring charges of $0.08 per diluted share. Diluted earnings (loss) per share in the Prior Year Quarter included restructuring charges of $0.09 per diluted share. Currency fluctuations favorably impacted diluted earnings per share by $0.15 during the Third Quarter.

Fiscal Year To Date Periods Ended October 2, 2021 and October 3, 2020

Consolidated Net Sales. Net sales increased $180.6 million or 16.6% (13.0% in constant currency) for the Year To Date Period as compared to the Prior Year YTD Period. We experienced sales increases in all three geographic segments and in the watches and jewelry product categories, while leathers decreased. In the Year To Date Period, digital sales, which include sales from our owned e-commerce channels, third party e-commerce platforms and wholesale dot com, were 41% of worldwide net sales. Digital sales increased 31% (26% in constant currency) in the Year To Date Period, compared to the Prior Year YTD Period. Comparable retail sales decreased 1.6% on a 39-week calendar basis during the Year To Date Period primarily due to traffic declines related to the COVID-19 pandemic.

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


	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Americas	$	523.0	41.3	%	$	433.8	40.0	%	$	89.2	20.6	%	19.3	%
Europe	399.5		31.6		343.1		31.6		56.4		16.4		10.7
Asia	331.6		26.2		295.2		27.2		36.4		12.3		7.6
Corporate	11.7		0.9		13.1		1.2		(1.4)		(10.7)		(11.5)
Total	$	1,265.8	100.0	%	$	1,085.2	100.0	%	$	180.6	16.6	%	13.0	%

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars increased reported net sales by $39.2 million, including favorable impacts of $19.6 million, $14.0 million and $5.5 million in our Europe, Asia and Americas segments, respectively, compared to the Prior Year YTD Period.

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


	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	1,014.7	80.2	%	$	876.0	80.7	%	$	138.7	15.8	%	12.2	%
Leathers	103.8		8.2		111.6		10.3		(7.8)		(7.0)		(9.5)
Jewelry	119.2		9.4		67.3		6.2		51.9		77.1		70.9
Other	28.1		2.2		30.3		2.8		(2.2)		(7.3)		(9.9)
Total	$	1,265.8	100.0	%	$	1,085.2	100.0	%	$	180.6	16.6	%	13.0	%

Americas Net Sales. Americas net sales increased $89.2 million, or 20.6% (19.3% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. During the Year To Date Period, sales increased in most brands in our watch portfolio, with the largest increases in MICHAEL KORS® and FOSSIL. Geographically, sales increased in the U.S. and Mexico and declined in Canada. Comparable retail sales in the region increased moderately on a 39-week calendar basis during the Year To Date Period, driven by improved conversion and increased traffic compared to the Prior Year YTD Period.

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


	For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	$	413.4	79.1	%	$	346.6	79.9	%	$	66.8	19.3	%	18.0	%
Leathers	63.9		12.2		67.7		15.6		(3.8)		(5.6)		(6.6)
Jewelry	40.5		7.7		14.7		3.4		25.8		175.5		172.1
Other	5.2		1.0		4.8		1.1		0.4		8.3		10.4
Total	$	523.0	100.0	%	$	433.8	100.0	%	$	89.2	20.6	%	19.3	%

Europe Net Sales. Europe net sales increased $56.4 million, or 16.4% (10.7% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. During the Year To Date Period, most of the brands in the portfolio ~~declined,~~increased, with the largest sales ~~decreases~~increases in MICHAEL KORS, FOSSIL and ~~MICHAEL KORS,~~EMPORIO ARMANI, driven mainly by ~~temporary store closures~~increases in 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 and the U.K. Strong e-commerce sales growth partially offset declines in our retail store and wholesale channels.digital sales. Comparable retail sales in the region decreased ~~in the mid-twenties~~significantly on a ~~percentage~~39-week calendar basis during the Year To Date Period, driven by ~~temporary store closures and~~ traffic declines due to the COVID-19 ~~pandemic, but were partially offset by strong positive e-commerce comparable retail sales.~~pandemic.


		For the 40 Weeks Ended October 3, 2020				For the 39 Weeks Ended September 28, 2019				Growth (Decline)							For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020				Growth (Decline)
		Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency			Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	Watches	$	265.2	77.3	%	$	367.9	77.6	%	$	(102.7)	(27.9)	%	(28.1)	%	Watches	$	309.5	77.5	%	$	265.2	77.3	%	$	44.3	16.7	%	11.0	%
Leathers	Leathers	22.6		6.6		31.4		6.6		(8.8)		(28.0)		(28.0)		Leathers	19.9		5.0		22.6		6.6		(2.7)		(11.9)		(17.3)
Jewelry	Jewelry	47.5		13.8		60.7		12.8		(13.2)		(21.7)		(22.2)		Jewelry	62.0		15.5		47.5		13.8		14.5		30.5		24.2
Other	Other	7.8		2.3		14.2		3.0		(6.4)		(45.1)		(45.8)		Other	8.1		2.0		7.8		2.3		0.3		3.8		(1.3)
Total	Total	$	343.1	100.0	%	$	474.2	100.0	%	$	(131.1)	(27.6)	%	(27.8)	%	Total	$	399.5	100.0	%	$	343.1	100.0	%	$	56.4	16.4	%	10.7	%

Asia Net Sales. Asia net sales ~~decreased $91.2~~increased $36.4 million, or ~~23.6% (22.4%~~12.3% (7.6% in constant currency), during the Year To Date Period in comparison to the Prior Year YTD Period. ~~Sales of most brands declined in~~During the Year To Date Period, ~~as compared to~~sales increased in multiple brands, with the ~~Prior Year YTD Period, most notably~~largest sales increases in EMPORIO ARMANI, ARMANI EXCHANGE® and FOSSIL. ~~Strong e-commerce~~The majority of the region's sales ~~growth partially offset retail store and wholesale sales declines. Within the region, we continued to have strong sales growth in~~increase came from mainland China and India, while ~~all other major markets~~sales in South Korea declined. For the Year To Date Period, comparable retail sales ~~decreased in the mid-thirties~~declined moderately on a ~~percentage~~39-week calendar basis, driven by ~~temporary store closures~~traffic declines due to the COVID-19 ~~pandemic, but were partially offset by strong positive e-commerce comparable retail sales.~~pandemic.

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


		For the 40 Weeks Ended October 3, 2020				For the 39 Weeks Ended September 28, 2019				Growth (Decline)							For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020				Growth (Decline)
		Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency			Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars		Percentage As Reported		Percentage Constant Currency
Watches	Watches	$	264.1	89.5	%	$	344.1	89.1	%	$	(80.0)	(23.2)	%	(22.0)	%	Watches	$	290.8	87.7	%	$	264.1	89.5	%	$	26.7	10.1	%	5.6	%
Leathers	Leathers	21.4		7.2		31.9		8.3		(10.5)		(32.9)		(32.0)		Leathers	20.1		6.1		21.4		7.2		(1.3)		(6.1)		(10.3)
Jewelry	Jewelry	5.1		1.7		3.8		1.0		1.3		34.2		36.8		Jewelry	16.7		5.0		5.1		1.7		11.6		227.5		207.8
Other	Other	4.6		1.6		6.6		1.6		(2.0)		(30.3)		(30.3)		Other	4.0		1.2		4.6		1.6		(0.6)		(13.0)		(15.2)
Total	Total	$	295.2	100.0	%	$	386.4	100.0	%	$	(91.2)	(23.6)	%	(22.4)	%	Total	$	331.6	100.0	%	$	295.2	100.0	%	$	36.4	12.3	%	7.6	%

Gross Profit. Gross profit of ~~$510.7~~$664.0 million in the Year To Date Period ~~decreased $280.9~~increased $153.2 million, or ~~35.5%~~30.0%, in comparison to ~~$791.6~~$510.7 million in the Prior Year YTD Period primarily due to the ~~decline~~increase in net sales. Gross profit margin rate ~~decreased~~increased to ~~47.1%~~52.5% in the Year To Date Period compared to ~~52.6%~~47.1% in the Prior Year YTD Period. The gross profit margin rate ~~contracted~~increased primarily due to ~~increased~~decreased liquidation and inventory valuation adjustments of older generation connected products, ~~primarily in~~which most heavily impacted the first quarter of fiscal year ~~2020, and was partially offset by a higher mix of e-commerce sales and favorable region and product mix. Currency unfavorably impacted~~2020. Additionally, the gross profit margin rate was favorably impacted by ~~approximately 30 basis points.~~currency changes, reduced levels of minimum licensed product royalties and reduced tariffs, partially offset by unfavorable region mix and product mix.

Operating Expenses. For the Year To Date Period, total operating expenses decreased to $618.6 million, or 48.9% of sales, compared to $664.4 million, ~~compared to $819.0 million~~or 61.2% of sales, in the Prior Year YTD Period. SG&A expenses were ~~lower~~$593.5 million in the Year To Date Period compared to $611.2 million in the Prior Year YTD Period, mainly due to corporate and regional infrastructure reductions and lower store costs as a result of store ~~closures.~~closures and were partially offset by increased marketing costs. As a percentage of net sales, SG&A expenses decreased to 46.9% in the Year To Date Period as compared to 56.3% in the Prior Year YTD Period, mainly driven by the contraction of sales in the Prior Year YTD Period due to the COVID-19 pandemic. During the Year To Date Period, we incurred restructuring costs of ~~$25.6~~$18.7 million in comparison to restructuring costs of ~~$24.5~~$25.6 million in the Prior Year YTD Period. We incurred $6.3 million of other long-lived asset impairments and no non-cash intangible asset impairment charges ~~of $2.5 million~~ in the Year To Date Period compared to charges of ~~$16.6~~$25.1 million and $2.5 million, respectively, in the Prior Year YTD Period. The translation of foreign-denominated expenses during the Year To Date Period ~~decreased~~increased operating expenses by ~~$3.1~~$16.7 million as a result of the ~~stronger~~weaker U.S. dollar. ~~As a percentage of net sales, SG&A expenses increased to 58.6% in the Year To Date Period as compared to 51.6% in the Prior Year YTD Period.~~

Operating Income (Loss). Operating income ~~(loss)~~ was ~~a loss of $153.6~~$45.4 million in the Year To Date Period as compared to a loss of ~~$27.4~~$153.6 million in the Prior Year YTD ~~Period,~~Period. The improvement in operating income (loss) primarily ~~resulting~~resulted from the ~~$420.9~~$180.6 million ~~decline~~increase in net sales due to the effects of the COVID-19 pandemic in the Prior Year YTD Period, improved margin rate and reduced operating expenses in the Year To Date Period compared to the Prior Year YTD Period 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 $141.6 million driven by corporate and regional infrastructure reductions and lower store costs due to store closures both as part of our long term operating strategy and as a response to the global COVID-19 pandemic.Period. As a percentage of net sales, operating margin was ~~(14.2)%~~3.6% in the Year To Date Period as compared to ~~(1.8)~~(14.2)% in the Prior Year YTD Period and was ~~negatively~~positively impacted by approximately 40190 basis points due to changes in foreign currencies.

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


		For the 40 Weeks Ended October 3, 2020		For the 39 Weeks Ended September 28, 2019				Change								Operating Margin %							For the 39 Weeks Ended October 2, 2021				For the 40 Weeks Ended October 3, 2020		Change					Operating Margin
						Dollars				Percentage				2020				2019							Dollars				Percentage		2021			2020
Americas	Americas	$	12.7			$	59.4			$	(46.7)			(78.6)	%			2.9	%			9.4			%	Americas	$	109.2	$	12.7	$	96.5		759.8	%	20.9	%	2.9	%
Europe	Europe	(2.5)		53.1				(55.6)				(104.7)				(0.7)				11.2		Europe	67.6				2.2		65.4		2,972.7			16.9		0.6
Asia	Asia	43.1		80.7				(37.6)				(46.6)				14.6				20.9		Asia	50.6				44.8		5.8		12.9			15.2		15.2
Corporate	Corporate	(206.9)		(220.6)				13.7				(6.2)										Corporate	(182.0)				(213.3)		31.3		14.7
Total operating income (loss)	Total operating income (loss)	$	(153.6)	$	(27.4)			$	(126.2)			460.6	%			(14.2)	%			(1.8)	%	Total operating income (loss)	$	45.4			$	(153.6)	$	199.0	129.6		%	3.6	%	(14.2)	%

Interest Expense. Interest expense ~~increased~~decreased by ~~$0.5~~$3.1 million during the Year To Date Period primarily driven by ~~increased~~a lower debt ~~issuance cost amortization as a result of our September 26, 2019 debt agreement and subsequent amendments.~~balance.

Other Income (Expense)-Net. During the Year To Date Period, other income (expense)-net was ~~a net~~income of $0.9 million compared to expense of $6.4 ~~million in the Year to Date Period compared to net income of $25.0~~ million in the Prior Year YTD Period. This change was primarily driven by ~~a $21.6 million gain on the sale of intellectual property in the Prior Year YTD Period, and~~reduced 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~~expense for the Year To Date Period was $19.2 million, resulting in an effective income tax rate of 73.8%. The Prior Year YTD Period income tax benefit was $91.3 million resulting in an effective ~~income~~ tax rate of 49.7%. The effective tax rate in the Year To Date Period 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~~To Date Period ~~income tax expense was $18.0 million resulting in an effective tax rate of (71.1)%. The~~ effective tax rate was ~~negative~~higher as compared to the Prior Year YTD Period because income tax expense was accrued on certain foreign entities with positive taxable income ~~and~~whereas no income tax benefit was recognized for ~~losses in the~~ U.S. and certain foreign ~~jurisdictions.~~entity losses.

Net Income (Loss) Attributable to Fossil Group, Inc. For the Year To Date Period, ~~we had~~net income was $5.8 million, or $0.11 per diluted share, in comparison to a ~~net~~ loss of $92.1 million, or $1.81 per diluted share, in ~~comparison~~the Prior Year YTD Period. The year-over-year improvement was mainly driven by increased sales due to ~~a loss~~the effects of ~~$45.5 million, or $0.91 per diluted share,~~the COVID-19 pandemic in the Prior Year YTD ~~Period. A reduction in~~Period, improved margin rate and reduced operating expenses ~~during~~in the Year To Date Period, ~~partially offset the decline in gross margin. The Company also benefited from a $21.6 million gain on the sale of intellectual property in~~compared to the Prior Year YTD Period. ~~Diluted~~Currency fluctuations favorably impacted diluted earnings per share by $0.44 in the Year To Date Period, as compared to the Prior Year YTD ~~Period, decreased $0.19 per diluted share due to the currency impact of a stronger U.S. dollar.~~Period.

Liquidity and Capital Resources

Our cash and cash equivalents balance at the end of the Third Quarter was ~~$323.6~~$181.8 million, including ~~$296.3~~$167.9 million held in banks outside the U.S., in comparison to cash and cash equivalents of ~~$147.5~~$323.6 million at the end of the Prior Year Quarter and ~~$200.2~~$316.0 million at the end of fiscal year ~~2019.~~2020. 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. We believe cash flows from operations, including our current and planned cost savings measures, combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our cash needs for the next twelve 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 made permanent cost reductions under our NWF 2.0 program. We believe our cost reduction actions will result in adequate cash flows to support our ongoing operations.

For the Year To Date Period, we ~~generated~~had an operating cash flow deficit of ~~$95.9~~$37.0 million. ANet income of $6.8 million and favorable net ~~loss~~non-cash items of ~~$92.2~~$102.5 million ~~was~~were more than offset by an increase in working capital items of ~~$63.9 million and net non-cash items of $124.2~~$146.3 million. WeDuring the Year To Date Period, we had net debt ~~borrowings~~payments of ~~$36.4~~$94.8 million and capital expenditures of ~~$7.1~~$6.7 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 light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

Accounts receivable, net of allowances, ~~decreased~~increased by ~~23.3%~~32.5% to ~~$189.8~~$251.5 million at the end of the Third Quarter compared to ~~$247.6~~$189.8 million at the end of the Prior Year Quarter, mainly driven by ~~reduced~~the increase in sales. Days sales outstanding for our wholesale businesses for the Third Quarter ~~decreased~~increased to 5460 days compared to 5954 days in the Prior Year Quarter.

Inventory at the end of the Third Quarter was ~~$359.5~~$398.3 million, which ~~decreased~~increased by ~~37.0%~~10.8% from the end of the Prior Year Quarter ending inventory balance of $570.3 million, largely reflecting accelerated inventory reduction actions, particularly of older generation connected product, and proactive management of inbound receipts to align with reduced consumer demand.$359.5 million.

At the end of the Third Quarter, we had net working capital of ~~$457.9~~$418.1 million compared to net working capital of ~~$562.6~~$457.9 million at the end of the Prior Year Quarter. At the end of the Third Quarter, we had ~~$21.4~~$41.2 million of short-term borrowings and ~~$217.9~~$97.4 million in long-term debt.

For fiscal year ~~2020,~~2021, we expect total capital expenditures to be approximately $9 million in order to maintain liquidity and remain in compliance with financial covenants. Of this amount, we expect approximately 60% will be for retail store renovations and enhancements, approximately 30% will be for technology and facilities maintenance, and approximately 10% for strategic growth, including investments in global concessions and technology.$15 million. Our capital expenditure budget is an estimate and ~~allocation to the foregoing investments are estimates and are~~is subject to change. ~~We believe that cash flows~~

Senior Notes: On November 8, 2021, we sold $150.0 million aggregate principal amount of our Senior Notes, generating net proceeds of approximately $141.7 million. On November 8, 2021, we used the majority of the net proceeds from ~~operations combined~~the Notes Offering to repay all of the outstanding borrowings under the Term Credit Agreement. In connection with ~~existing cash on hand~~the repayment of the outstanding borrowings under the Term Credit Agreement, we incurred prepayment fees and ~~amounts available under our credit facilities~~accrued interest costs of $2.6 million. The remaining net proceeds will be ~~sufficient to fund our working capital needs and planned capital expenditures~~used for ~~the next twelve months.~~general corporate purposes.

The Senior Notes are our general unsecured obligations. The Senior Notes bear interest at the rate of 7.00% per annum. Interest on the Senior Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year, commencing on February 28, 2022. The Senior Notes will mature on November 30, 2026. We may redeem the Senior Notes for cash in whole or in part at any time at our option. Prior to November 30, 2023, the redemption price will be $25.00 per $25.00 principal amount of Senior Notes, plus a “make-whole” premium plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. On and after November 30, 2023 we may redeem the Senior Notes (i) on or after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Senior Notes, (ii) on or after November 30, 2024 and prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Senior Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Senior Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.

Term Credit Agreement: On February 20, 2020, we entered into Amendment No. 1 to that certain Term Credit Agreement, dated as of September 26, 2019, by and among us, 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”). On May 12, 2020, we entered into Amendment No. 2 to the Term Credit Agreement to extend the deadline for delivery of our unaudited quarterly financial statements and related deliverables for the fiscal quarter ended April 4, 2020. On June 5, 2020, we entered into Amendment No. 3 (the “Third Amendment”) to the Term Credit Agreement to further modify certain terms of the Term Credit Agreement to address the financial impact of COVID-19. On November 8, 2021, we used the majority of the net proceeds from the Notes Offering to repay all of the outstanding borrowings under the Term Credit Agreement. In connection with the repayment of the outstanding borrowings under the Term Credit Agreement, we incurred prepayment fees and accrued interest costs of $2.6 million and wrote off $7.1 million of debt issuance costs and $4.6 million of original issuance discount related to the Term Credit Agreement.

Revolving Facility: On September 26, 2019, we and Fossil Partners L.P. ~~(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 ana secured asset-based revolving credit agreement ~~(as amended, the~~(the “Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the ~~“ABL Agent”~~"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”~~"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 Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed ~~$275.0~~$225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to ~~$160.0~~$125.0 million is available under a U.S. facility, an aggregate of $70.0 million is available under a European facility, ~~$30.0~~$20.0 million is available under a Hong Kong facility, ~~$10.0~~$5.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the borrowing base availability limitations described below. The Revolving Facility also includes an up to $45.0 million subfacility for the issuance of letters of credit (the “Letters of Credit”). The ~~Revolving Facility expires and is due and payable on September 26, 2024. The~~ French facility includes a $1.0 million subfacility for swingline loans, and the European facility includes a $7.0 million subfacility for swingline loans. The Revolving Facility is subject to a line cap ~~(the “Line Cap”)~~ equal to the lesser of the total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong facility, the French facility and the Canadian facility. Loans under the Revolving Facility may be made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling.

On March 24, 2020, (i) the U.S. Borrowers provided notice to the ABL Agent for an alternate base rate borrowing of $71.0 million under the Revolving Facility effective March 25, 2020, (ii) the Hong Kong Borrower provided notice to the ABL Agent for a Eurodollar borrowing of $10.0 million under the Revolving Facility effective March 30, 2020 and (iii) the European Borrowers provided notice to the ABL Agent for a Eurodollar borrowing of €19.0 million under the Revolving Facility effective March 30, 2020. We increased our borrowings under the Revolving Facility as a precautionary measure to increase our cash position, provide liquidity for a sustained period and to preserve financial flexibility in light of then current uncertainty in the global markets resulting from the COVID-19 outbreak.

The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to:(a) with respect to us, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value ~~percentage~~ of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, ~~plus (ii)~~plus(ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit card accounts receivable, minus (iv) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and (y) 65% of the lower of cost or market value of eligible foreign finished goods inventory of such non-U.S. borrower, plus (ii) 85% of the eligible foreign accounts receivable of such non-U.S. borrower, minus (iii) the aggregate amount of reserves, if any, established by the ABL Agent; and (c) with respect to the French Borrower, (i) 85% of eligible French accounts receivable minus (ii) the aggregate amount of reserves, if any, established by the ABL Agent. Not more than 60% of the aggregate borrowing base under the Revolving Facility may consist of the non-U.S. borrowing bases.

Eurodollar loans under the U.S. facility will bear interest at the adjusted LIBO rate plus the applicable rate, and Eurodollar loans under the Canadian facility, European facility, French facility and Hong Kong facility will bear interest at the LIBO rate plus the applicable rate. Base rate loans under the U.S. facility will bear interest at the alternate base rate plus the applicable rate. Under the Canadian facility, Canadian prime rate loans will bear interest at the Canadian prime rate plus the applicable rate, and Canadian dollar loans will bear interest at the CDOR rate plus the applicable rate. Under the Hong Kong facility, Hong Kong dollar loans will bear interest at the HIBOR rate plus the applicable rate. Each swingline loan shall bear interest at the overnight LIBO rate plus the applicable rate for overnight LIBO rate loans. The applicable rate varies from 1.25% to 1.75% for adjusted LIBO, CDOR and HIBOR rate loans and from 0.25% to 0.75% for alternate base rate and Canadian prime rate loans depending on our average daily excess availability under the Revolving Facility for the most recently ended fiscal quarter, which is an amount equal to (x)(1) the lesser of the total revolving commitments then in effect and (2) the aggregate borrowing base, minus (y) the total credit exposure of all ABL Lenders at such time.

4240

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

The ABL Borrowers 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 less than 1.00 to 1.00 on 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 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 $12.0 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 October 3, 2020. The Term Credit Agreement amortizes in quarterly installments of $10,000,000 each quarter 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 proceeds of certain asset sales and 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 restrict consolidated capital expenditures of the Company to $10,000,00 for the fiscal year ending January 2, 2021, $20,000,000 for the fiscal year ending January 1, 2022, and $25,000,000 for the fiscal year ending 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.

We had net payments of ~~$38.0~~$30.0 million during the Year To Date Period under the Term Credit Agreement at an average interest rate of ~~9.6%~~10.0%. We had net ~~borrowings~~payments of ~~$75.0~~$64.0 million under the Revolving Facility during the Year To Date Period at an average interest rate of 1.8%. As of October 3, 2020, we had $162.0 million outstanding under the Term Credit Agreement and $103.0 million outstanding under the Revolving Facility. We also had unamortized debt issuance costs of $19.5 million, which reduces the corresponding debt liability. In addition, we had $2.7 million of outstanding standby Letters of Credit at October 3, 2020. Amounts available under the Revolving Facility are reduced by any amounts outstanding under standby letters of credit. As of October ~~3, 2020,~~2, 2021, we had available borrowing capacity of ~~$32.3~~$123.6 million under the Revolving Facility. At October ~~3, 2020,~~2, 2021, we were in compliance with all debt covenants related to ~~all~~ our credit facilities. On November 8, 2021, we issued $150.0 million of Senior Notes, repaid the outstanding borrowings under the Term Credit Agreement, incurred prepayment fees and accrued interest costs of $2.6 million and wrote off $7.1 million of debt issuance costs and $4.6 million of original issuance discount related to the Term Credit Agreement.

Off Balance Sheet Arrangements

As of October ~~3, 2020,~~2, 2021, there were no material changes to our off balance sheet arrangements as set forth in commitments and contingencies in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 28, 2019.~~January 2, 2021.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. On an on-going basis, we evaluate our estimates and judgments, including those related to product returns, inventories, long-lived asset impairment, impairment of trade names, income taxes and warranty costs. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to the critical accounting policies disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 28, 2019.~~January 2, 2021.

Forward-Looking Statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements regarding our expected financial position, results of operations, business and financing plans found in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The words “may,” “believes,” ~~“expects,~~“will,” ~~“plans,~~“should,” ~~“intends,~~“seek,” ~~“estimates,~~“forecast,” ~~“anticipates” and~~“outlook,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “predict,” “potential,” “plan,” “expect” or the negative or plural of these words or similar expressions identify forward-looking statements. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: the effect of worldwide economic conditions; the impact of COVID-19; the length and severity of COVID-19; the pace of recovery following ~~COVID-19;~~COVID-19 and the availability, widespread distribution and use of effective vaccines; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key components; acts of war or acts of terrorism; loss of key facilities; data breach or information systems disruptions; changes in foreign currency valuations in relation to the U.S. dollar; lower levels of consumer spending resulting from COVID-19, a general economic downturn or generally reduced shopping activity caused by public safety (including COVID-19) or consumer confidence concerns; the performance of our products within the prevailing retail environment; customer acceptance of both new designs and newly-introduced product lines, including risks related to the expanded launch of connected accessories; changes in the mix of product sales; our ability to maintain proper inventory levels; financial difficulties encountered by customers and related bankruptcy and collection issues; the effects of vigorous competition in the markets in which we operate; compliance with debt covenants and other contractual provisions; risks related to the success of our business strategy and restructuring programs; the termination or non-renewal of material ~~licenses,~~licenses; risks related to foreign operations and manufacturing; changes in the costs of materials, labor and advertising; government regulation and tariffs; our ability to secure and protect trademarks and other intellectual property rights; levels of traffic to and management of our retail stores; and the outcome of current and possible future litigation.

In addition to the factors listed above, our actual results may differ materially due to the other risks and uncertainties discussed in our Quarterly Reports on Form 10-Q and the risks and uncertainties set forth in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended ~~December 28, 2019.~~January 2, 2021. Accordingly, readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rate Risk

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

The following table shows our outstanding forward contracts designated as cash flow hedges for inventory transactions (in millions) at October ~~3, 2020~~2, 2021 and their expiration dates.

Functional Currency

Contract Currency

Functional Currency

Contract Currency

Type

Amount

Type

Amount

Expiring Through

Type

Amount

Type

Amount

Expiring Through

Euro

48.3

U.S. dollar

55.2

June 2021

Euro

68.3

U.S. dollar

82.7

November 2022

Canadian dollar

16.4

U.S. dollar

12.5

June 2021

Canadian dollar

14.3

U.S. dollar

11.4

December 2022

Japanese yen

1,047.1

U.S. dollar

9.7

December 2022

British pound

5.8

U.S. dollar

7.5

June 2021

British pound

5.6

U.S. dollar

7.7

December 2022

Japanese yen

509.5

U.S. dollar

4.8

June 2021

Australian dollar

5.6

U.S. dollar

4.2

June 2022

Mexican peso

81.1

U.S. dollar

4.0

March 2022

U.S. dollar

7.8

Japanese yen

825.0

June 2021

U.S. dollar

8.4

Japanese yen

925.0

May 2022

If we were to settle our ~~euro, Canadian dollar, British pound, Japanese yen, and U.S. dollar based~~ forward contracts ~~hedging inventory transactions~~listed in the table above as of October ~~3, 2020,~~2, 2021, the result would have been a net ~~loss~~gain of ~~$1.1~~$3.9 million. As of October ~~3, 2020,~~2, 2021, a 10% unfavorable change in the U.S. dollar strengthening against foreign currencies to which we have balance sheet transactional exposures would have decreased net pre-tax income by ~~$19.8~~$25.0 million. The translation of the balance sheets of our foreign-based operations from their local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. As of October ~~3, 2020,~~2, 2021, a 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would have reduced consolidated stockholders' equity by approximately ~~$47.4~~$55.2 million.

Interest Rate Risk

We are subject to interest rate volatility with regard to debt borrowings. Based on our variable-rate debt outstanding as of October ~~3, 2020,~~2, 2021, a 100 basis point increase in interest rates would increase annual interest expense by ~~$2.7~~$1.8 million.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon this evaluation, our CEO and CFO have concluded that our Disclosure Controls were effective as of October ~~3, 2020.~~2, 2021.

Changes in Internal Control over Financial Reporting

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

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no legal proceedings to which we are a party or to which our properties are subject, other than routine litigation incidental to our business that is not material to our consolidated financial condition, results of operations or cash flows.

Item 1A. Risk Factors

~~In addition to~~This section supplements and updates certain of the ~~other~~ information ~~set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in~~found under Part I, Item1A. "Risk Factors” of our Annual Report on ~~Form 10-K~~Form10-K/A for the fiscal year ended ~~December 28, 2019,~~January 2, 2021 filed with the Securities and Exchange Commission on April 5, 2021 (the "2020 Form10-K/A”), and is based on the information currently known to us and recent developments since the date of the 2020 Form10-K/A filing. The matters discussed below should be read in conjunction with the risk factors set forth in the 2020 Form10-K/A.

However, the risks and uncertainties that we face are not limited to those described below and those set forth in the 2020 Form10-K/A. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock, particularly in light of the fast-changing nature of the COVID-19 pandemic, containment measures and the related impacts to economic and operating conditions.

COVID-19 Pandemic Risks

The COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on our business, operations, liquidity, financial condition and results of operations.

The COVID-19 pandemic has continued to cause global uncertainty and disruption throughout the geographic regions in which we run our business and where our suppliers, third-party manufacturers, retail stores, wholesale customers and consumers are located. The total impact of the pandemic on us will depend on developments outside of our control, including, among other factors, the duration, spread, severity and impact of the outbreak, availability of effective vaccines and vaccination rates, continuing and new actions that may be taken by governmental authorities to contain the outbreak or mitigate its impact, including effects of vaccine mandates, restrictions on movement and commercial activities and further stimulus and unemployment benefits, the economic or other impacts on our wholesale customers, the impact on our supply chain, manufacturing delays and the uncertainty with respect to the accessibility of additional liquidity or to the capital markets.

Even after the COVID-19 outbreak has subsided, we could experience materially adverse impacts to our business as a result of an economic recession or depression that may occur. In addition, any continued erosion in consumer sentiment or the effect of high unemployment on our consumer base would likely impact the financial condition of our customers and vendors, which may result in a decrease in discretionary consumer spending and lower store traffic and sales, and an increase in bankruptcies or insolvencies with respect to our suppliers or wholesale customers.

The duration of the COVID-19 impact is uncertain. In the event of a prolonged material economic downturn, including circumstances that require further or continued store closures or that result in further or continued reduction in store traffic, we may not be able to comply with the financial covenants in our debt agreements, which could negatively impact our borrowing ability, negatively impact our liquidity position and may increase our risk of insolvency.

In addition, the effects of COVID-19 could affect our ability to successfully operate in many ways, including, but not limited to, the following factors:

•the impact of the pandemic on the economies and financial markets of the countries and regions in which we operate, including a potential global recession, a decline in consumer confidence and spending, or a further increase in unemployment levels, has resulted, and could continue to result, in consumers having less disposable income and, in turn, decreased sales of our ~~subsequent Quarterly Reports on Form 10-Q,~~products;

•“shelter in place” and other similar mandated or suggested isolation protocols, which have disrupted, and could continue to disrupt, our retail locations and wholesale customers’ stores, as a result of store closures or reduced operating hours and decreased retail traffic;

•the acceleration in a shift in our core customer’s behaviors, expectations and shopping trends, which could ~~materially affect~~result in lost sales and market share if we are not able to successfully increase the pace of our strategic initiatives development, particularly our digital strategic initiatives, and if our current digital shopping offerings do not continue to compete effectively;

•the failure of, or delay by, our wholesale customers or third-party distributors to whom we extend credit to pay invoices, particularly our major wholesale accounts and third-party distributors that are significantly impacted by COVID-19;

•COVID-19 and remote-work oriented phishing and similar cybersecurity attack attempts;

•operating challenges with a fully or part time remote workforce and the effectiveness of health and safety measures;

•retaining and attracting employees, particularly at our retail stores, as a result of a decrease in the number of potential employees in the workforce;

•the risk that even after the pandemic has initially subsided, fear of a COVID-19 re-occurrence could cause consumers to avoid public places where our stores and those of our wholesale customers are located, such as malls and outlets; and

•we may be required to revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of long-lived assets and deferred tax assets, which could have a material adverse effect on our financial position and results of operations.

Our supply chain may be disrupted by changes in U.S. trade policy with China or as a result of the COVID-19 pandemic.

We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. Among our foreign suppliers, China is the source of a substantial majority of our imports. We have experienced, and expect to continue to experience, increased international transit times, particularly for our leathers products and packaging, and increased shipping costs for a majority of our products. A disruption in the flow of our imported merchandise from China or a material increase in the cost of those goods or transportation without any offsetting price increases may significantly decrease our profits.

New U.S. tariffs or other actions against China, including actions related to the COVID-19 pandemic, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise. This would have a material adverse impact on our business and results of operations.

The extent to which the COVID-19 pandemic ultimately impacts our business, financial performance and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, availability of effective vaccines and vaccination rates, effects of vaccine mandates and how quickly and to what extent normal economic and operating conditions can resume.

Legal, Compliance and Reputational risks

A data security or privacy breach could damage our reputation, harm our customer relationships, expose us to litigation or government actions, and result in a material adverse effect to our business, financial condition and results of operations.

We depend on information technology systems, the Internet and computer networks for a substantial portion of our retail and e-commerce businesses, including credit card transaction authorization and processing. We also receive and store personal information about our customers and employees, the protection of which is critical to us. In the normal course of our business, we collect, retain, and transmit certain sensitive and confidential customer information, including credit card information, over public networks. Our customers have a high expectation that we will adequately protect their personal information. In addition, personal information is highly regulated at the international, federal and state level.

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

Any electronic or physical security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential or personally identifiable information, including penetration of our network security or those of our third party service providers, could disrupt our business, severely damage our reputation and our customer relationships, expose us to litigation and liability, subject us to governmental investigations, fines and enforcement actions, result in negative media coverage and distraction to management and result in a material adverse effect to our business, financial condition, and results of operations. In addition, as a result of security breaches at a number of prominent retailers and other companies, the media

and public scrutiny of information security and privacy has become more intense and the regulatory environment related thereto has become more uncertain. As a result, we may incur significant costs in complying with new and existing state, federal, and foreign laws regarding protection of, and unauthorized disclosure of, personal information. A successful ransomware attack on our systems could make them inaccessible for a period of time pending the payment of a ransom to unlock the systems or our ability to otherwise restore our access to our systems.

We are subject to laws and regulations in the U.S. and the many countries in which we operate. Violations of laws and regulations, or changes to existing laws or regulations, could have a material adverse effect on our financial condition or results of operations.

Our operations are subject to domestic and international laws and regulations in a number of areas, including, but not limited to, labor, advertising, consumer protection, real estate, product safety, e-commerce, promotions, intellectual property, tax, import and export, anti-corruption, anti-bribery, foreign exchange controls and cash repatriation, data privacy, anti-competition, environmental, health and safety. Compliance with these numerous laws and regulations is complicated, time consuming and expensive, and the laws and regulations may be inconsistent from jurisdiction to jurisdiction, further increasing the difficulty and cost to comply with them. New laws and regulations, or changes to existing laws and regulations, could individually or in the aggregate make our products more costly to produce, delay the introduction of new products in one or more regions, cause us to change or limit our business practices, or affect our financial condition and results of operations. We have implemented policies and procedures designed to ensure compliance with the numerous laws and regulations affecting our business, but there can be no assurance that our employees, contractors, or agents will not violate such laws, regulations or our policies related thereto. Any such violations could have a material adverse effect on our financial condition or operating results.

Tariffs or other restrictions placed on imports from China and any retaliatory trade measures taken by China could materially harm our revenue and results of operations.

Beginning in July 2018, certain of our products have been subject to additional ad valorem duties imposed by the U.S. government on products of China under Section 301 of the Trade Act of 1974. These tariffs, imposed via four successive “Lists” were the result of an April 2018 determination by the Office of the U.S. Trade Representative that China’s acts, practices, and policies with respect to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.

In particular, certain of our packaging and handbag products have been subject to an additional 25% ad valorem tariff, based on the first sale export price as imported into the U.S., since July 2018 (“List 1”). Certain of our handbag and wallet products were subject to an additional 10% ad valorem tariff, based on the first sale export price as imported into the U.S., beginning in September 2018, a rate that was then raised to 25% ad valorem from June 2019 to present (“List 3”). Finally, smart watches, certain jewelry products, and several of our traditional watch products were subject to an additional 15% ad valorem tariff, based on the first sale export price as imported into the U.S., beginning in September 2019, a rate that was lowered to 7.5% ad valorem from February 2020 to present (“List 4A”).

Biden Administration officials have publically stated that, while these tariffs are under review, they are likely to remain in place for the foreseeable future. However, we have joined litigation before the U.S. Court of International Trade challenging the legality of the Section 301 List 3 and List 4A tariffs and seeking refunds of duties paid on imports that were subject to those tariffs. That litigation is ongoing with a decision possible in early 2022 at the earliest. As a result, it is difficult to accurately estimate the impact on our business from these tariff actions or similar actions. However, assuming no further offsets from price increases, sourcing changes, or other changes to trade policy and regulatory rulings, all of which are currently under review, the estimated gross profit exposure from the Section 301 tariffs is approximately $1.1 million in the fourth quarter of fiscal year 2021.

If the tariffs continue or increase, we may be required to raise our prices, which may result in the loss of customers and harm our operating performance. Alternatively, we may seek to shift production outside of China or otherwise change our sourcing strategy for these products, resulting in significant costs and disruption to our operations. Even if the U.S. further modifies these tariffs, it is always possible that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results. ~~There~~

The loss of our intellectual property rights may harm our business.

Our trademarks, patents and other intellectual property rights are important to our success and competitive position. We are devoted to the establishment and protection of our trademarks, patents and other intellectual property rights in those countries where we believe it is important to our ability to sell our products. However, we cannot be certain that the actions we have taken will result in enforceable rights, will be adequate to protect our products in every country where we may want to sell

our products, will be adequate to prevent imitation of our products by others or will be adequate to prevent others from seeking to prevent sales of our products as a violation of the trademarks, patents or other intellectual property rights of others. Additionally, we rely on the patent, trademark and other intellectual property laws of the U.S. and other countries to protect our proprietary rights. Even if we are successful in obtaining appropriate trademark, patent and other intellectual property rights, we may be unable to prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our proprietary rights as fully as in the U.S. Because we sell our products internationally and are dependent on foreign manufacturing in China, we are significantly dependent on foreign countries to protect our intellectual property rights. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm our business. Further, if it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly and we may not prevail. The failure to obtain or maintain trademark, patent or other intellectual property rights could materially harm our business.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling certain of our products.

We cannot be certain that our products do not and will not infringe upon the intellectual property rights of others. The wearable technology space is rapidly developing with new innovation, which will likely result in a significant number of domestic and international patent filings for new technology. As a result, wearable technology companies may be subject to an increasing number of claims that their products infringe the intellectual property rights of competitors or non-practicing entities. As we increase our wearable technology and other product offerings, we have been, are and may in the future be subject to legal proceedings, including claims of alleged infringement of the intellectual property rights of third parties by us and our customers in connection with their marketing and sale of our products. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our personnel. Moreover, should we be found liable for infringement, we may be required to enter into agreements (if available on acceptable terms or at all) or to pay damages and cease making or selling certain products. Moreover, we may need to redesign or rename some of our products to avoid future infringement liability. Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling certain of our products.

If an independent manufacturer or license partner of ours fails to use acceptable labor practices or otherwise comply with laws or suffers reputation harm, our business could suffer.

While we have a code of conduct for our manufacturing partners, we have no control over the ultimate actions or labor practices of our independent manufacturers. The violation of labor or other laws by one of our independent manufacturers, or by one of our license partners, or the divergence of an independent manufacturer's or license partner's labor practices from those generally accepted as ethical in the U.S. or other countries in which the violation or divergence occurred, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation. In addition, certain of our license agreements are with named globally recognized fashion designers. Should one of these fashion designers, or any or our licensor companies, conduct themselves inappropriately or make controversial statements, the underlying brand, and consequently our business under that brand, could suffer. Any of these, in turn, could have a material adverse effect on our financial condition and results of operations. As a result, should one of our independent manufacturers or licensors be found in violation of state or international laws or receive negative publicity, we could suffer financial or other unforeseen consequences.

Risks Relating to Our Common Stock

Our shares of common stock have recently experienced extreme volatility in market prices and trading volume and purchasers of our common stock could incur substantial losses due to similar volatility in the future.

The extreme volatility of the market prices and trading volume that our shares of common stock have recently experienced, and may continue to experience, could cause purchasers of our common stock to incur substantial losses. For example, from January 1, 2021 to the date hereof, the market price of our common stock has fluctuated from an intra-day low on the NASDAQ Global Select Market of $8.43 per share on January 4, 2021 to an intra-day high of $28.60 per share on January 27, 2021. For comparison, during the month of December 2020, prior to the recent onset of extreme volatility, the market price of our common stock on the NASDAQ Global Select Market fluctuated from intra-day low of $8.38 per share on December 29, 2020 to an intra-day high of $13.61 per share on December 14, 2020. Significant fluctuations in the market price of our common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums. The market volatility and trading patterns we have experienced create several risks for investors, including the following:

•the market price of our common stock may experience rapid and substantial increases or decreases unrelated to our operating performance, financial condition or business prospects, or macro or industry fundamentals;

•factors in the public trading market for our common stock may include the sentiment of retail investors (including as may be expressed on financial trading and other social media sites and online forums), the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and any related hedging and other trading factors;

•our market capitalization, as implied by various trading prices, has reflected valuations that diverge significantly from those seen prior to recent volatility and that are significantly higher than our market capitalization immediately prior to such recent volatility, which began on or about January 25, 2021, and to the extent these valuations reflect trading dynamics unrelated to our financial performance or business prospects, purchasers of our common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations of the Company;

•to the extent volatility in our common stock is caused by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our common stock as traders with a short position make market purchases to avoid or to mitigate potential losses, investors may purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated; and

•if the market price of our common stock declines, investors may be unable to resell their shares of common stock at or above the price at which they acquired them.

We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future, in which case investors could incur substantial losses.

We may continue to incur rapid and substantial increases or decreases in our stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us. Accordingly, the market price of our common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business.

Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including:

•the ongoing impacts and developments relating to the COVID-19 pandemic;

•actual or anticipated variations in our annual or quarterly results of operations, including our earnings estimates and whether we meet market expectations with regard to our earnings;

•our current inability to pay dividends or other distributions;

•publication of research reports by analysts or others about us or the specialty retail industry, which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis;

•changes ~~from~~in market valuations of similar companies;

•market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders;

•additions or departures of key personnel;

•actions by institutional or significant stockholders;

•short interest in our stock and the market response to such short interest;

•a dramatic increase in the number of individual holders of our stock and their participation in social media platforms targeted at speculative investing;

•speculation in the press or investment community about our company or industry;

•strategic actions by us or our competitors, such as acquisitions or other investments;

•legislative, administrative, regulatory or other actions affecting our business, our industry, including positions taken by the Internal Revenue Service (“IRS”);

•investigations, proceedings, or litigation that involve or affect us;

•the occurrence of any of the other risk factors ~~disclosed~~included or incorporated by reference in ~~such Annual Report~~this prospectus; and ~~such Quarterly Report. The risks described~~

•general market and economic conditions.

A “short squeeze” due to a sudden increase in ~~such Annual Report~~demand of our common stock that largely exceeds supply may lead to additional price volatility.

Investors may purchase shares of our common stock to hedge existing exposure or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and ~~subsequent Quarterly Reports~~short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase on the open market, investors with short

exposure may have to pay a premium to repurchase shares of our common stock for delivery to lenders of our common stock. Those repurchases may in turn, dramatically increase the price of our common stock until additional shares of our common stock are ~~not~~available for trading or borrowing. This is often referred to as a “short squeeze.” A proportion of our common stock has been and may continue to be traded by short sellers which may increase the ~~only risks facing~~likelihood that our ~~company.~~common stock will be the target of a short squeeze. A short squeeze could lead to volatile price movements in shares of our common stock that are unrelated or disproportionate to our operating performance or prospectus and, once investors purchase the shares of our common stock necessary to cover their short positions, the price of our common stock may rapidly decline. Investors that purchase shares of our common stock during a short squeeze may lose a significant portion of their investment.

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

There were no shares of common stock repurchased under our repurchase program during the Third ~~Quarter or Year To Date Period.~~Quarter.

Item 5. Other Information

None.

4749

Item 6. Exhibits

(a) Exhibits


Exhibit Number						Document Description

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

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

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

4.1						Senior Indenture, dated as of November 8, 2021, by and between Fossil Group, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 8, 2021).

4.2						First Supplemental Indenture, dated as of November 8, 2021, by and between Fossil Group, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on November 8, 2021).

4.3						Form of 7.00% Senior Notes due 2026 (included in Exhibit 4.2).

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

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

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

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

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

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

(1) Filed herewith.

(2) Furnished herewith.

4850

SIGNATURES

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


			FOSSIL GROUP, INC.

November 12, ~~2020~~2021			/S/ ~~JEFFREY N. BOYER~~SUNIL M. DOSHI
			~~Jeffrey N. Boyer~~Sunil M. Doshi
			~~Chief Operating Officer,~~Senior Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)

4951


		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 Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3230
	Results of Operations	3432
	Liquidity and Capital Resources	4139
	Forward-Looking Statements	4541
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4542
Item 4.	Controls and Procedures	4642
PART II
Item 1.	Legal Proceedings	4744
Item 1A.	Risk Factors	4744
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4749
Item 5.	Other Information	4749
Item 6.	Exhibits	4850
	SIGNATURES	4951