Fossil Group Earnings 2019-09-28

FOSL 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
TIF	11,951	6,316	3,136	4,385	2,748	561	942	12,202	63%	13.0	9%
CENT	1,564	2,065	1,031	1,842	703	101	214	1,800	38%	8.4	5%
SIG	858	5,966	4,261	6,382	2,335	-172	59	1,269	37%	21.6	-3%
FOSL	582	1,608	1,069	2,362	1,256	35	101	510	53%	5.1	2%
MOV	561	841	337	713	388	66	85	425	54%	5.0	8%
NHTC	87	136	57	131	102	12	12	-24	78%	-2.0	9%
EDUC	63	67	40	116	78	6	12	81	67%	6.6	9%
CTHR	43	51	5	32	15	2	3	30	46%	10.9	4%
DGSE	35	25	16	67	11	1	1	34	16%	23.3	4%
BGI	19	134	120	0	0	0	0	65			0%

Document

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: September 28, 2019



☐	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

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 October 31, 2019: 50,516,477

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED SEPTEMBER 28, 2019

INDEX

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS



	September 28, 2019			December 29, 2018
Assets
Current assets:
Cash and cash equivalents	$	147,482		$	403,373
Accounts receivable - net of allowances for doubtful accounts of $12,096 and $14,001, respectively	247,553			328,022
Inventories	570,331			377,622
Prepaid expenses and other current assets	126,350			149,552
Total current assets	1,091,716			1,258,569
Property, plant and equipment - net of accumulated depreciation of $468,237 and $453,319, respectively	155,058			183,203
Operating lease right-of-use assets	292,064			—
Intangible and other assets-net	101,805			133,426
Total long-term assets	548,927			316,629
Total assets	$	1,640,643		$	1,575,198
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	192,960		$	169,561
Short-term and current portion of long-term debt	21,865			126,427
Accrued expenses:
Current operating lease liabilities	68,483			—
Compensation	55,166			76,467
Royalties	24,283			30,582
Customer liabilities	56,112			71,252
Transaction taxes	16,532			32,438
Other	64,463			70,614
Income taxes payable	29,270			28,462
Total current liabilities	529,134			605,803
Long-term income taxes payable	32,346			28,110
Deferred income tax liabilities	2,517			2,439
Long-term debt	242,137			269,788
Long-term operating lease liabilities	288,626			—
Other long-term liabilities	36,011			80,427
Total long-term liabilities	601,637			380,764
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, 50,474 and 49,518 shares issued and outstanding at September 28, 2019 and December 29, 2018, respectively	505			495
Additional paid-in capital	280,789			268,113
Retained earnings	306,670			381,626
Accumulated other comprehensive income (loss)	(78,705		)	(64,691		)
Total Fossil Group, Inc. stockholders’ equity	509,259			585,543
Noncontrolling interests	613			3,088
Total stockholders’ equity	509,872			588,631
Total liabilities and stockholders’ equity	$	1,640,643		$	1,575,198

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

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

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA



	For the 13 Weeks Ended September 28, 2019			For the 13 Weeks Ended September 29, 2018			For the 39 Weeks Ended September 28, 2019			For the 39 Weeks Ended September 29, 2018
Net sales	$	539,488		$	608,827		$	1,506,149		$	1,754,566
Cost of sales	260,946			282,295			714,573			831,333
Gross profit	278,542			326,532			791,576			923,233
Operating expenses:
Selling, general and administrative expenses	264,103			297,804			777,896			879,694
Trade name impairments	16,613			—			16,613			6,212
Restructuring charges	6,979			6,075			24,483			41,942
Total operating expenses	287,695			303,879			818,992			927,848
Operating income (loss)	(9,153		)	22,653			(27,416		)	(4,615		)
Interest expense	7,422			9,899			22,897			31,658
Other income (expense) - net	(1,424		)	(2,895		)	24,995			(5,338		)
Income (loss) before income taxes	(17,999		)	9,859			(25,318		)	(41,611		)
Provision for income taxes	6,939			3,937			17,991			7,209
Net income (loss)	(24,938		)	5,922			(43,309		)	(48,820		)
Less: Net income attributable to noncontrolling interests	997			916			2,179			2,247
Net income (loss) attributable to Fossil Group, Inc.	$	(25,935	)	$	5,006		$	(45,488	)	$	(51,067	)
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	(10,790	)	$	(1,380	)	$	(13,584	)	$	(8,136	)
Cash flow hedges - net change	2,424			2,704			(430		)	15,897
Total other comprehensive income (loss)	(8,366		)	1,324			(14,014		)	7,761
Total comprehensive income (loss)	(33,304		)	7,246			(57,323		)	(41,059		)
Less: Comprehensive income attributable to noncontrolling interests	997			916			2,179			2,247
Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(34,301	)	$	6,330		$	(59,502	)	$	(43,306	)
Earnings (loss) per share:
Basic	$	(0.51	)	$	0.10		$	(0.91	)	$	(1.04	)
Diluted	$	(0.51	)	$	0.10		$	(0.91	)	$	(1.04	)
Weighted average common shares outstanding:
Basic	50,469			49,381			50,137			49,107
Diluted	50,469			50,659			50,137			49,107

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 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		Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, June 29, 2019	50,453		$	505	$	276,388		$	—		$	332,605		$	(70,339	)	$	539,159		$	479		$	539,638
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	29		—		—			—			—			—			—			—			—
Acquisition of common stock for employee tax withholding	—		—		—			(97		)	—			—			(97		)	—			(97		)
Retirement of common stock	(8	)	—		(97		)	97			—			—			—			—			—
Stock-based compensation	—		—		4,267			—			—			—			4,267			—			4,267
Net income (loss)	—		—		—			—			(25,935		)	—			(25,935		)	997			(24,938		)
Other comprehensive income (loss)	—		—		—			—			—			(8,366		)	(8,366		)	—			(8,366		)
Purchase of noncontrolling interest shares	—		—		231			—			—			—			231			(793		)	(562		)
Distribution of noncontrolling interest earnings	—		—		—			—			—			—			—			(70		)	(70		)
Balance, September 28, 2019	50,474		505		280,789			—			306,670			(78,705		)	509,259			613			509,872



For the 13 Weeks Ended September 29, 2018
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings		Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest		Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings		Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest		Total stockholders' equity
Balance, June 30, 2018	49,339		$	493		$	257,269		$	—		$	327,038	$	(69,832	)	$	514,968		$	1,879	$	516,847
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	76		2			(1		)	—			—		—			1			—		1
Acquisition of common stock for employee tax withholding	—		—			—			(568		)	—		—			(568		)	—		(568		)
Retirement of common stock	(22	)	(1		)	(567		)	568			—		—			—			—		—
Stock-based compensation	—		—			5,987			—			—		—			5,987			—		5,987
Net income (loss)	—		—			—			—			5,006		—			5,006			916		5,922
Other comprehensive income (loss)	—		—			—			—			—		1,324			1,324			—		1,324
Distribution of noncontrolling interest earnings	—		—			67			—			—		—			67			1		68
Balance, September 29, 2018	49,393		$	494		$	262,755		$	—		$	332,044	$	(68,508	)	$	526,785		$	2,796	$	529,581



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			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, December 29, 2018	49,518		$	495		$	268,113		$	—		$	381,626		$	(64,691	)	$	585,543		$	3,088		$	588,631
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	1,240		13			157			—			—			—			170			—			170
Acquisition of common stock for employee tax withholding	—		—			—			(3,976		)	—			—			(3,976		)	—			(3,976		)
Retirement of common stock	(284	)	(3		)	(3,973		)	3,976			—			—			—			—			—
Stock-based compensation	—		—			16,261			—			—			—			16,261			—			16,261
Net income (loss)	—		—			—			—			(45,488		)	—			(45,488		)	2,179			(43,309		)
Other comprehensive income (loss)	—		—			—			—			—			(14,014		)	(14,014		)				(14,014		)
Purchase of noncontrolling interest shares	—		—			231			—			—			—			231			(793		)	(562		)
Distribution of noncontrolling interest earnings	—		—			—			—			—			—			—			(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			—			306,670			(78,705		)	509,259			613			509,872



For the 39 Weeks Ended September 29, 2018
	Common stock					Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
	Shares		Par value			Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Stockholders' equity attributable to Fossil Group, Inc.			Noncontrolling interest			Total stockholders' equity
Balance, December 30, 2017	48,643		$	486		$	242,263		$	—		$	409,653		$	(76,269	)	$	576,133		$	4,814		$	580,947
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	911		10			176			—			—			—			186			—			186
Acquisition of common stock for employee tax withholding	—		—			—			(2,493		)	—			—			(2,493		)	—			(2,493		)
Retirement of common stock	(161	)	(2		)	(2,491		)	2,493			—			—			—			—			—
Stock-based compensation	—		—			22,698			—			—			—			22,698			—			22,698
Net income (loss)	—		—			—			—			(51,067		)	—			(51,067		)	2,247			(48,820		)
Other comprehensive income (loss)	—		—			—			—			—			7,761			7,761			—			7,761
Distribution of noncontrolling interest earnings and other	—		—			109			—			—			—			109			(4,265		)	(4,156		)
Adoption of ASU 2014-09	—		—			—			—			(26,542		)	—			(26,542		)	—			(26,542		)
Balance, September 29, 2018	49,393		$	494		$	262,755		$	—		$	332,044		$	(68,508	)	$	526,785		$	2,796		$	529,581

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	50	$582

10-Q	2019-11-07	Quarter: 2019-09-28
10-Q	2019-08-08	Quarter: 2019-06-29
10-Q	2019-05-09	Quarter: 2019-03-30
10-K	2019-02-21	Annual: 2018-12-29
10-Q	2018-11-08	Quarter: 2018-09-29
10-Q	2018-08-09	Quarter: 2018-06-30
10-Q	2018-05-10	Quarter: 2018-03-31
10-K	2018-03-02	Annual: 2017-12-30
10-Q	2017-11-09	Quarter: 2017-09-30
10-Q	2017-08-10	Quarter: 2017-07-01
10-Q	2017-05-11	Quarter: 2017-04-01
10-K	2017-03-01	Annual: 2016-12-31
10-Q	2016-11-10	Quarter: 2016-10-01
10-Q	2016-08-11	Quarter: 2016-07-02
10-Q	2016-05-12	Quarter: 2016-04-02
10-K	2016-02-29	Annual: 2016-01-02
10-Q	2015-11-12	Quarter: 2015-10-03
10-Q	2015-08-13	Quarter: 2015-07-04
10-Q	2015-05-07	Quarter: 2015-04-04
10-K	2015-02-20	Annual: 2015-01-03
10-Q	2014-11-13	Quarter: 2014-10-04
10-Q	2014-08-13	Quarter: 2014-07-05
10-Q	2014-05-15	Quarter: 2014-04-05
10-K	2014-02-26	Annual: 2013-12-28
10-Q	2013-11-07	Quarter: 2013-09-28
10-Q	2013-08-08	Quarter: 2013-06-29
10-Q	2013-05-09	Quarter: 2013-03-30
10-K	2013-02-27	Annual: 2012-12-29
10-Q	2012-11-08	Quarter: 2012-09-29
10-Q	2012-08-09	Quarter: 2012-06-30
10-Q	2012-05-10	Quarter: 2012-03-31
10-K	2012-02-29	Annual: 2011-12-31
10-Q	2011-11-10	Quarter: 2011-10-01
10-Q	2011-08-11	Quarter: 2011-07-02
10-Q	2011-05-12	Quarter: 2011-04-02
10-K	2011-03-02	Annual: 2011-01-01
10-Q	2010-11-12	Quarter: 2010-10-02
10-Q	2010-08-12	Quarter: 2010-07-03
10-Q	2010-05-13	Quarter: 2010-04-03
10-K	2010-03-03	Annual: 2010-01-02

8-K	2019-12-27	Officers, Exhibits
8-K	2019-11-06	Earnings, Exhibits
8-K	2019-10-15	Officers, Exhibits
8-K	2019-09-26	Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K	2019-09-19	Regulation FD, Exhibits
8-K	2019-08-07	Earnings, Exhibits
8-K	2019-05-22	Shareholder Vote, Other Events
8-K	2019-05-08	Earnings, Exhibits
8-K	2019-02-22	Officers
8-K	2019-02-13	Earnings, Exhibits
8-K	2018-11-07	Earnings, Exhibits
8-K	2018-09-27	Regulation FD, Exhibits
8-K	2018-08-07	Earnings, Exhibits
8-K	2018-05-23	Shareholder Vote, Other Events
8-K	2018-05-08	Earnings, Exhibits
8-K	2018-02-13	Earnings, Exhibits
8-K	2018-01-29	Enter Agreement, Off-BS Arrangement, Exhibits

EX-31.1	fosl-q39282019xex311.htm
EX-31.2	fosl-q39282019xex312.htm
EX-32.1	fosl-q39282019xex321.htm
EX-32.2	fosl-q39282019xex322.htm



		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	34
	Results of Operations	35
	Liquidity and Capital Resources	43
	Forward-Looking Statements	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
	SIGNATURES	53