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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________
FORM 10-Q
__________________________________________________________________
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: October 2, 2021
OR
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☐ |
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)
__________________________________________________________________
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Delaware |
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75-2018505 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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901 S. Central Expressway, |
Richardson, |
Texas |
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75080 |
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(Address of principal executive offices) |
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(Zip Code) |
(972) 234-2525
(Registrant’s telephone number, including area
code)
__________________________________________________________________
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Ticker Symbol |
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Name of each exchange on which registered |
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Common Stock, par value $0.01 per share |
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FOSL |
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The Nasdaq Stock Market LLC |
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7.00% Senior Notes due 2026 |
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FOSLL |
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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):
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Large accelerated filer |
☐ |
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Accelerated filer |
☒ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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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 4, 2021: 52,145,738
FOSSIL GROUP, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED OCTOBER 2, 2021
INDEX
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
FOSSIL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
IN THOUSANDS
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October 2, 2021 |
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January 2, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
181,782 |
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$ |
315,965 |
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Accounts receivable - net of allowances for doubtful accounts of
$16,447 and $20,774, respectively
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251,496 |
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229,847 |
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Inventories |
398,324 |
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295,296 |
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Prepaid expenses and other current assets |
155,848 |
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149,367 |
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Total current assets |
987,450 |
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990,475 |
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Property, plant and equipment - net of accumulated depreciation of
$453,178 and $467,174, respectively
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92,771 |
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114,026 |
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Operating lease right-of-use assets |
187,952 |
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226,815 |
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Intangible and other assets-net |
87,788 |
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147,189 |
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Total long-term assets |
368,511 |
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488,030 |
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Total assets |
$ |
1,355,961 |
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$ |
1,478,505 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ |
246,325 |
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$ |
178,212 |
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Short-term and current portion of long-term debt |
41,205 |
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41,561 |
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Accrued expenses: |
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Current operating lease liabilities |
57,361 |
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64,851 |
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Compensation |
59,385 |
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78,085 |
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Royalties |
31,429 |
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27,554 |
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Customer liabilities |
34,752 |
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50,941 |
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Transaction taxes |
15,903 |
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21,271 |
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Other |
48,609 |
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62,846 |
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Income taxes payable |
34,412 |
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33,205 |
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Total current liabilities |
569,381 |
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558,526 |
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Long-term income taxes payable |
20,000 |
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19,840 |
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Deferred income tax liabilities |
487 |
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495 |
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Long-term debt |
97,426 |
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185,852 |
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Long-term operating lease liabilities |
184,304 |
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230,635 |
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Other long-term liabilities |
41,463 |
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43,125 |
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Total long-term liabilities |
343,680 |
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479,947 |
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Commitments and contingencies (Note 13) |
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Stockholders’ equity: |
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Common stock, 52,143 and 51,474 shares issued and outstanding at
October 2, 2021 and January 2, 2021, respectively
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521 |
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515 |
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Additional paid-in capital |
298,505 |
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293,777 |
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Retained earnings |
209,486 |
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203,698 |
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Accumulated other comprehensive income (loss) |
(67,586) |
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(58,900) |
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Total Fossil Group, Inc. stockholders’ equity |
440,926 |
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439,090 |
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Noncontrolling interests |
1,974 |
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942 |
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Total stockholders’ equity |
442,900 |
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440,032 |
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Total liabilities and stockholders’ equity |
$ |
1,355,961 |
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$ |
1,478,505 |
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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
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For the 13 Weeks Ended October 2, 2021 |
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For the 13 Weeks Ended October 3, 2020 |
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For the 39 Weeks Ended October 2, 2021 |
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For the 40 Weeks Ended October 3, 2020 |
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Net sales |
$ |
491,827 |
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$ |
435,492 |
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$ |
1,265,808 |
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$ |
1,085,218 |
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Cost of sales |
232,305 |
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205,726 |
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601,857 |
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574,496 |
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Gross profit |
259,522 |
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229,766 |
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663,951 |
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510,722 |
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Operating expenses: |
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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 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, July 3, 2021 |
52,127 |
|
|
$ |
521 |
|
|
$ |
295,704 |
|
|
$ |
— |
|
|
$ |
178,066 |
|
|
$ |
(66,434) |
|
|
$ |
407,857 |
|
|
$ |
1,470 |
|
|
$ |
409,327 |
|
|
Common stock issued upon exercise of stock options, stock
appreciation rights and restricted stock units |
21 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of common stock for employee tax
withholding |
— |
|
|
— |
|
|
— |
|
|
(56) |
|
|
— |
|
|
— |
|
|
(56) |
|
|
— |
|
|
(56) |
|
|
Retirement of common stock |
(5) |
|
|
— |
|
|
(56) |
|
|
56 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
— |
|
|
— |
|
|
2,857 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,857 |
|
|
— |
|
|
2,857 |
|
|
Net income (loss) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31,420 |
|
|
— |
|
|
31,420 |
|
|
504 |
|
|
31,924 |
|
|
Other comprehensive income (loss) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,152) |
|
|
(1,152) |
|
|
— |
|
|
(1,152) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 2, 2021 |
52,143 |
|
|
$ |
521 |
|
|
$ |
298,505 |
|
|
$ |
— |
|
|
$ |
209,486 |
|
|
$ |
(67,586) |
|
|
$ |
440,926 |
|
|
$ |
1,974 |
|
|
$ |
442,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Shares |
|
Par
Value |
|
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 |
9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of common stock for employee tax
withholding |
— |
|
|
— |
|
|
— |
|
|
(13) |
|
|
— |
|
|
— |
|
|
(13) |
|
|
— |
|
|
(13) |
|
|
Retirement of common stock |
(3) |
|
|
— |
|
|
(13) |
|
|
13 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
— |
|
|
— |
|
|
3,174 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,174 |
|
|
— |
|
|
3,174 |
|
|
Net income (loss) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
15,987 |
|
|
— |
|
|
15,987 |
|
|
236 |
|
|
16,223 |
|
|
Other comprehensive income (loss) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,604 |
|
|
7,604 |
|
|
— |
|
|
7,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
$ |
— |
|
|
$ |
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) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
$ |
— |
|
|
$ |
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 39 Weeks Ended October 2, 2021 |
|
For the 40 Weeks Ended October 3, 2020 |
|
|
Operating Activities: |
|
|
|
|
|
Net income (loss) |
$ |
6,820 |
|
|
$ |
(92,181) |
|
|
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
Depreciation, amortization and accretion |
23,410 |
|
|
33,123 |
|
|
|
Non-cash lease expense |
68,920 |
|
|
83,565 |
|
|
|
Stock-based compensation |
7,139 |
|
|
9,152 |
|
|
|
Decrease in allowance for returns and markdowns |
(11,838) |
|
|
(40,426) |
|
|
|
Gain on disposal of assets |
(5,169) |
|
|
(1,456) |
|
|
|
Property, plant and equipment and other long-lived asset impairment
losses |
6,322 |
|
|
24,890 |
|
|
|
Trade name impairment losses |
— |
|
|
2,464 |
|
|
|
Non-cash restructuring charges |
1,747 |
|
|
1,921 |
|
|
|
Bad debt expense |
961 |
|
|
6,956 |
|
|
|
|
|
|
|
|
Other non-cash items |
10,975 |
|
|
3,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
(25,571) |
|
|
101,934 |
|
|
|
Inventories |
(111,673) |
|
|
94,389 |
|
|
|
Prepaid expenses and other current assets |
31,732 |
|
|
(17,120) |
|
|
|
Accounts payable |
70,156 |
|
|
40,767 |
|
|
|
Accrued expenses |
(30,007) |
|
|
7,540 |
|
|
|
Income taxes |
2,523 |
|
|
(66,919) |
|
|
|
Operating lease liabilities |
(83,443) |
|
|
(96,722) |
|
|
|
Net cash (used in) provided by operating activities |
(36,996) |
|
|
95,859 |
|
|
|
Investing Activities: |
|
|
|
|
|
Additions to property, plant and equipment |
(6,739) |
|
|
(7,097) |
|
|
|
Decrease (increase) in intangible and other assets |
6,903 |
|
|
(2,149) |
|
|
|
Proceeds from the sale of property, plant and equipment and
other |
11,360 |
|
|
76 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
11,524 |
|
|
(9,170) |
|
|
|
Financing Activities: |
|
|
|
|
|
Acquisition of common stock for employee tax
withholdings |
(2,405) |
|
|
(712) |
|
|
|
|
|
|
|
|
Debt borrowings |
85,182 |
|
|
315,224 |
|
|
|
Debt payments |
(179,997) |
|
|
(278,845) |
|
|
|
|
|
|
|
|
Debt issuance costs and other |
(232) |
|
|
(10,000) |
|
|
|
Net cash (used in) provided by financing activities |
(97,452) |
|
|
25,667 |
|
|
|
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash |
(5,564) |
|
|
10,981 |
|
|
|
Net (decrease) increase in cash, cash equivalents, and restricted
cash |
(128,488) |
|
|
123,337 |
|
|
|
Cash, cash equivalents, and restricted cash: |
|
|
|
|
|
Beginning of period |
324,246 |
|
|
207,749 |
|
|
|
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 fiscal year ended
January 2, 2021 was a 53-week year, with the additional week
being included in the first quarter. The information presented
herein includes the thirteen-week periods ended October 2,
2021 ("Third Quarter") and October 3, 2020 ("Prior Year
Quarter"), respectively, and the thirty-nine week period ended
October 2, 2021 ("Year To Date Period") as compared to the
forty week period ended October 3, 2020 ("Prior Year YTD
Period"). The condensed consolidated financial statements reflect
all adjustments that are, in the opinion of management, necessary
to present a fair statement of the Company’s financial position as
of October 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/A filed by the Company pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), for the
fiscal year ended January 2, 2021 (the “2020
Form 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 2020
Form 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 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 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: |
|
|
|
|
|
|
|
|
Net income (loss) attributable to Fossil
Group, Inc. |
$ |
31,420 |
|
|
$ |
15,987 |
|
|
$ |
5,788 |
|
|
$ |
(92,137) |
|
|
Denominator: |
|
|
|
|
|
|
|
|
Basic EPS computation: |
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
52,141 |
|
|
51,299 |
|
|
51,900 |
|
|
51,007 |
|
|
Basic EPS |
$ |
0.60 |
|
|
$ |
0.31 |
|
|
$ |
0.11 |
|
|
$ |
(1.81) |
|
|
Diluted EPS computation: |
|
|
|
|
|
|
|
|
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 |
625 |
|
|
455 |
|
|
838 |
|
|
— |
|
|
Diluted weighted average common shares outstanding |
52,766 |
|
|
51,754 |
|
|
52,738 |
|
|
51,007 |
|
|
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 Prior Year Quarter and Prior Year 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 performance targets were not
met.
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 that are presented in
the condensed consolidated statement of cash flows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021 |
|
October 3, 2020 |
|
|
|
Cash and cash equivalents |
$ |
181,782 |
|
|
$ |
323,560 |
|
|
|
|
Restricted cash included in prepaid expenses and other current
assets |
118 |
|
|
118 |
|
|
|
|
Restricted cash included in intangible and other
assets-net |
13,858 |
|
|
7,408 |
|
|
|
|
Cash, cash equivalents and restricted cash |
$ |
195,758 |
|
|
$ |
331,086 |
|
|
|
Recently Issued Accounting Standards
In 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 Company adopted ASU 2019-12 at the
beginning of the first quarter of fiscal year 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 2, 2021 |
|
Americas |
|
Europe |
|
Asia |
|
Corporate |
|
Total |
|
Product type |
|
|
|
|
|
|
|
|
|
|
Watches |
$ |
150,181 |
|
|
$ |
129,797 |
|
|
$ |
113,717 |
|
|
$ |
8 |
|
|
$ |
393,703 |
|
|
Leathers |
23,389 |
|
|
7,231 |
|
|
5,770 |
|
|
— |
|
|
36,390 |
|
|
Jewelry |
18,297 |
|
|
25,602 |
|
|
8,572 |
|
|
— |
|
|
52,471 |
|
|
Other |
1,895 |
|
|
3,257 |
|
|
1,435 |
|
|
2,676 |
|
|
9,263 |
|
|
Consolidated |
$ |
193,762 |
|
|
$ |
165,887 |
|
|
$ |
129,494 |
|
|
$ |
2,684 |
|
|
$ |
491,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
|
|
|
|
|
|
|
|
|
|
Revenue recognized at a point in time |
$ |
193,367 |
|
|
$ |
165,598 |
|
|
$ |
129,313 |
|
|
$ |
1,004 |
|
|
$ |
489,282 |
|
|
Revenue recognized over time |
395 |
|
|
289 |
|
|
181 |
|
|
1,680 |
|
|
2,545 |
|
|
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 39 Weeks Ended October 2, 2021 |
|
Americas |
|
Europe |
|
Asia |
|
Corporate |
|
Total |
|
Product type |
|
|
|
|
|
|
|
|
|
|
Watches |
$ |
413,368 |
|
|
$ |
309,526 |
|
|
$ |
290,753 |
|
|
$ |
1,077 |
|
|
$ |
1,014,724 |
|
|
Leathers |
63,851 |
|
|
19,933 |
|
|
20,057 |
|
|
— |
|
|
103,841 |
|
|
Jewelry |
40,470 |
|
|
62,041 |
|
|
16,700 |
|
|
— |
|
|
119,211 |
|
|
Other |
5,294 |
|
|
8,019 |
|
|
4,115 |
|
|
10,604 |
|
|
28,032 |
|
|
Consolidated |
$ |
522,983 |
|
|
$ |
399,519 |
|
|
$ |
331,625 |
|
|
$ |
11,681 |
|
|
$ |
1,265,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
|
|
|
|
|
|
|
|
|
|
Revenue recognized at a point in time |
$ |
521,702 |
|
|
$ |
398,533 |
|
|
$ |
331,180 |
|
|
$ |
6,490 |
|
|
$ |
1,257,905 |
|
|
Revenue recognized over time |
1,281 |
|
|
986 |
|
|
445 |
|
|
5,191 |
|
|
7,903 |
|
|
Consolidated |
$ |
522,983 |
|
|
$ |
399,519 |
|
|
$ |
331,625 |
|
|
$ |
11,681 |
|
|
$ |
1,265,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
— |
|
|
111,577 |
|
|
Jewelry |
14,706 |
|
|
47,462 |
|
|
5,137 |
|
|
— |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
Contract Balances.
As of October 2, 2021, the Company had no material contract
assets on the Company's condensed consolidated balance sheets and
no deferred contract costs. The Company had contract liabilities of
(i) $9.2 million and $9.9 million as of October 2, 2021 and
January 2, 2021, respectively, related to remaining
performance obligations on licensing income, (ii) $3.0 million and
$4.6 million as of October 2, 2021 and January 2, 2021,
respectively, primarily related to remaining performance
obligations on wearable technology products and (iii) $3.6 million
and $4.2 million as of October 2, 2021 and
January 2, 2021, respectively, related to gift cards
issued.
3. INVENTORIES
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021 |
|
January 2, 2021 |
|
Components and parts |
$ |
24,727 |
|
|
$ |
25,016 |
|
|
Work-in-process |
18 |
|
|
7,913 |
|
|
Finished goods |
373,579 |
|
|
262,367 |
|
|
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 39 Weeks Ended October 2, 2021 |
|
For the 40 Weeks Ended October 3, 2020 |
|
Beginning balance |
$ |
21,916 |
|
|
$ |
23,095 |
|
|
Settlements in cash or kind |
(8,096) |
|
|
(10,386) |
|
|
Warranties issued and adjustments to preexisting warranties
(1)
|
5,296 |
|
|
9,361 |
|
|
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 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 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 Act (the "CARES Act"), which was signed into law on March
27, 2020. The CARES Act provided many beneficial income tax changes
including a provision allowing net operating losses arising in tax
years 2018, 2019 and 2020 to be carried back to prior years when
the U.S. tax rate was 35%, which accounts for most of the Prior
Year Quarter benefit.
The Year To Date Period effective tax rate was unfavorable to the
Prior Year YTD Period due to the changes from the CARES Act
allowing NOL carrybacks in the 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, the resolution of
income tax audits and changes in tax law.
As of October 2, 2021, the Company's total amount of
unrecognized tax benefits, excluding interest and penalties, was
$29.4 million, of which $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 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 2, 2021, the Company had recorded
$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 2, 2021, the total
amount of accrued income tax-related interest included in the
condensed consolidated balance sheets was $7.7 million and no
penalties have been accrued. For the Third Quarter, the Company
accrued income tax related interest benefit of $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 52,143,431 and 51,474,034 shares issued
and outstanding at October 2, 2021 and January 2, 2021,
respectively. The Company has 1,000,000 shares of preferred stock,
par value $0.01 per share, authorized, with none issued or
outstanding at October 2, 2021 or 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 2, 2021 and January 2, 2021, all treasury
stock had been effectively retired. As of October 2, 2021, the
Company had $30.0 million of repurchase authorizations remaining
under its repurchase program. The Company did not repurchase any
common stock under its authorized stock repurchase 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 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 exercise price exceeded the stock price for all stock options
and stock appreciation rights shown in the table above, resulting
in no aggregate intrinsic value for outstanding and exercisable
options/rights at October 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 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options Outstanding |
|
Stock Options Exercisable |
Range of
Exercise Prices |
|
Number of
Shares |
|
Weighted-
Average
Exercise
Price |
|
Weighted-
Average
Remaining
Contractual
Term |
|
Number of
Shares |
|
Weighted-
Average
Exercise
Price |
|
|
|
(in Thousands) |
|
|
|
(in Years) |
|
(in Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$101.37 - $131.46
|
|
57 |
|
|
$ |
128.14 |
|
|
0.5 |
|
57 |
|
|
$ |
128.14 |
|
|
Total |
|
57 |
|
|
$ |
128.14 |
|
|
0.5 |
|
57 |
|
|
$ |
128.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Rights Outstanding |
|
Stock Appreciation Rights Exercisable |
Range of
Exercise Prices |
|
Number of
Shares |
|
Weighted-
Average
Exercise
Price |
|
Weighted-
Average
Remaining
Contractual
Term |
|
Number of
Shares |
|
Weighted-
Average
Exercise
Price |
|
|
|
(in Thousands) |
|
|
|
(in Years) |
|
(in Thousands) |
|
|
|
$29.49 - $47.99
|
|
146 |
|
|
$ |
40.92 |
|
|
2.5 |
|
146 |
|
|
$ |
40.92 |
|
|
$55.04 - $82.55
|
|
48 |
|
|
77.43 |
|
|
1.5 |
|
48 |
|
|
77.43 |
|
|
$101.37 - $113.04
|
|
31 |
|
|
110.68 |
|
|
0.5 |
|
31 |
|
|
110.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
225 |
|
|
$ |
58.28 |
|
|
2.0 |
|
225 |
|
|
$ |
58.28 |
|
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 |
|
Number of Shares |
|
Weighted-Average
Grant Date Fair
Value Per Share |
|
|
|
(in Thousands) |
|
|
|
Nonvested at July 3, 2021 |
|
1,826 |
|
|
$ |
9.78 |
|
|
Granted |
|
28 |
|
|
12.45 |
|
Vested |
|
(21) |
|
|
$ |
6.62 |
|
|
Forfeited |
|
(41) |
|
|
9.95 |
|
|
Nonvested at October 2, 2021 |
|
1,792 |
|
|
$ |
9.85 |
|
The total fair value of restricted stock units vested during the
Third Quarter was approximately $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 2, 2021 |
|
|
Currency
Translation
Adjustments |
|
Cash Flow Hedges |
|
|
|
|
|
|
|
Forward
Contracts |
|
|
|
Pension
Plan |
|
Total |
|
Beginning balance |
$ |
(70,234) |
|
|
$ |
2,372 |
|
|
|
|
$ |
1,428 |
|
|
$ |
(66,434) |
|
|
Other comprehensive income (loss) before
reclassifications |
(3,237) |
|
|
3,320 |
|
|
|
|
— |
|
|
83 |
|
|
Tax (expense) benefit |
— |
|
|
(29) |
|
|
|
|
— |
|
|
(29) |
|
|
Amounts reclassed from accumulated other comprehensive income
(loss) |
— |
|
|
1,263 |
|
|
|
|
— |
|
|
1,263 |
|
|
Tax (expense) benefit |
— |
|
|
(57) |
|
|
|
|
— |
|
|
(57) |
|
|
Total other comprehensive income (loss) |
(3,237) |
|
|
2,085 |
|
|
|
|
— |
|
|
(1,152) |
|
|
Ending balance |
$ |
(73,471) |
|
|
$ |
4,457 |
|
|
|
|
$ |
1,428 |
|
|
$ |
(67,586) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 13 Weeks Ended October 3, 2020 |
|
|
Currency
Translation
Adjustments |
|
Cash Flow Hedges |
|
|
|
|
|
|
|
Forward
Contracts |
|
|
|
Pension
Plan |
|
Total |
|
Beginning balance |
$ |
(85,170) |
|
|
$ |
3,527 |
|
|
|
|
$ |
(3,124) |
|
|
$ |
(84,767) |
|
|
Other comprehensive income (loss) before
reclassifications |
11,240 |
|
|
(4,306) |
|
|
|
|
— |
|
|
6,934 |
|
|
Tax (expense) benefit |
— |
|
|
656 |
|
|
|
|
— |
|
|
656 |
|
|
Amounts reclassed from accumulated other comprehensive income
(loss) |
— |
|
|
26 |
|
|
|
|
— |
|
|
26 |
|
|
Tax (expense) benefit |
— |
|
|
(40) |
|
|
|
|
— |
|
|
(40) |
|
|
Total other comprehensive income (loss) |
11,240 |
|
|
(3,636) |
|
|
|
|
— |
|
|
7,604 |
|
|
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, 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 2, 2021 |
|
For the 13 Weeks Ended October 3, 2020 |
|
|
Net Sales |
|
Operating Income (Loss) |
|
Net Sales |
|
Operating Income (Loss) |
|
Americas |
$ |
193,762 |
|
|
$ |
46,589 |
|
|
$ |
175,086 |
|
|
$ |
45,051 |
|
|
Europe |
165,887 |
|
|
40,549 |
|
|
135,292 |
|
|
12,344 |
|
|
Asia |
129,494 |
|
|
23,996 |
|
|
119,748 |
|
|
25,724 |
|
|
Corporate |
2,684 |
|
|
(63,328) |
|
|
5,366 |
|
|
(65,608) |
|
|
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 2, 2021 |
|
For the 13 Weeks Ended October 3, 2020 |
|
|
Net Sales |
|
Percentage of Total |
|
Net Sales |
|
Percentage of Total |
|
Watches |
$ |
393,703 |
|
|
80.0 |
% |
|
$ |
356,564 |
|
|
81.9 |
% |
|
Leathers |
36,390 |
|
|
7.4 |
|
|
37,716 |
|
|
8.7 |
|
|
Jewelry |
52,471 |
|
|
10.7 |
|
|
28,883 |
|
|
6.6 |
|
|
Other |
9,263 |
|
|
1.9 |
|
|
12,329 |
|
|
2.8 |
|
|
Total |
$ |
491,827 |
|
|
100.0 |
% |
|
$ |
435,492 |
|
|
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.
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.
As of October 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 |
|
Type |
|
Amount |
|
Type |
|
Amount |
|
Euro |
|
68.3 |
|
|
U.S. dollar |
|
82.7 |
|
|
Canadian dollar |
|
14.3 |
|
|
U.S. dollar |
|
11.4 |
|
|
Japanese yen |
|
1,047.1 |
|
|
U.S. dollar |
|
9.7 |
|
|
British pound |
|
5.6 |
|
|
U.S. dollar |
|
7.7 |
|
|
Australian dollar |
|
5.6 |
|
|
U.S. dollar |
|
4.2 |
|
|
Mexican peso |
|
81.1 |
|
|
U.S. dollar |
|
4.0 |
|
|
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 2, 2021, the Company had
non-designated forward contracts of $1.4 million on 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 2, 2021 |
|
For the 13 Weeks Ended October 3, 2020 |
|
Cash flow hedges: |
|
|
|
|
Forward contracts |
$ |
3,292 |
|
|
$ |
(3,650) |
|
|
|
|
|
|
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 |
|
|
|
|
|
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 2, 2021 |
|
For the 13 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) |
|
$ |
689 |
|
|
$ |
(27) |
|
|
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 |
|
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 |
|
|
|
October 2, 2021 |
|
January 2, 2021 |
|
October 2, 2021 |
|
January 2, 2021 |
|
Derivative Instruments |
|
Condensed
Consolidated
Balance Sheets
Location |
|
Fair
Value |
|
Condensed
Consolidated
Balance Sheets
Location |
|
Fair
Value |
|
Condensed
Consolidated
Balance Sheets
Location |
|
Fair
Value |
|
Condensed
Consolidated
Balance Sheets
Location |
|
Fair
Value |
|
Forward contracts designated as cash flow hedging
instruments |
|
Prepaid expenses and other current assets |
|
$ |
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 |
|
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 |
|
Intangible and other assets-net |
|
320 |
|
|
Intangible and other assets-net |
|
48 |
|
|
Other long-term liabilities |
|
— |
|
|
Other long-term liabilities |
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
4,087 |
|
|
|
|
$ |
393 |
|
|
|
|
$ |
80 |
|
|
|
|
$ |
2,299 |
|
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 2, 2021 |
|
For the 13 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 |
|
$ |
232,305 |
|
|
$ |
(482) |
|
|
$ |
205,726 |
|
|
$ |
— |
|
|
Gain (loss) on cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
Forward contracts designated as cash flow hedging
instruments:
|
|
|
|
|
|
|
|
|
|
Total gain (loss) reclassified from other comprehensive income
(loss)
|
|
$ |
689 |
|
|
$ |
518 |
|
|
$ |
(27) |
|
|
$ |
13 |
|
|
Forward contracts not designated as hedging
instruments: |
|
|
|
|
|
|
|
|
|
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 |
|
|