Fossil Group, Inc. [FOSL] Filings

10-Q 1 fosl-20240629.htm 10-Q fosl-20240629

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: June 29, 2024


☐			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: 001-41040

__________________________________________________________________

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 July 30, 2024: 53,134,303

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED JUNE 29, 2024

INDEX


		Page
PART I
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
	Results of Operations	33
	Liquidity and Capital Resources	44
	Forward-Looking Statements	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
	SIGNATURES	50

Trademarks, service marks, trade names and copyrights

We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries. We also use FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, ZODIAC and MICHELE as trademarks on online e-commerce sites. This filing may also contain other trademarks, service marks, trade names and copyrights of ours or of other companies with whom we have, for example, licensing agreements to produce, market and distribute products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to or incorporated by reference into this report may be listed without the TM, SM, © and ® symbols, as applicable, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors, if any, to these trademarks, service marks, trade names and copyrights.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS


	June 29, 2024		December 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	104,906	$	117,197
Accounts receivable - net of allowances for doubtful accounts of $15,241 and $12,616, respectively	133,076		187,942
Inventories	202,128		252,834
Prepaid expenses and other current assets	102,299		152,717
Total current assets	542,409		710,690
Property, plant and equipment - net of accumulated depreciation of $368,016 and $384,688, respectively	47,216		57,244
Operating lease right-of-use assets	140,168		151,000

Intangible and other assets-net	55,889		59,096
Total long-term assets	243,273		267,340
Total assets	$	785,682	$	978,030
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	132,535	$	147,161
Short-term debt	2,556		480
Accrued expenses:
Current operating lease liabilities	39,689		43,565
Compensation	37,573		44,789
Royalties	7,572		15,880
Customer liabilities	24,782		37,584
Transaction taxes	6,673		10,412
Other	20,630		27,811
Income taxes payable	7,660		14,795
Total current liabilities	279,670		342,477
Long-term income taxes payable	19,491		20,409
Deferred income tax liabilities	686		698
Long-term debt	156,535		206,983
Long-term operating lease liabilities	125,360		137,644
Other long-term liabilities	16,864		18,081
Total long-term liabilities	318,936		383,815
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, 53,099 and 52,487 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively	531		525
Additional paid-in capital	313,581		311,709
Retained (deficit) earnings	(44,678)		18,403
Accumulated other comprehensive income (loss)	(79,788)		(76,405)
Total Fossil Group, Inc. stockholders’ equity	189,646		254,232
Noncontrolling interests	(2,570)		(2,494)
Total stockholders’ equity	187,076		251,738
Total liabilities and stockholders’ equity	$	785,682	$	978,030

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 June 29, 2024		For the 13 Weeks Ended July 1, 2023		For the 26 Weeks Ended June 29, 2024		For the 26 Weeks Ended July 1, 2023
Net sales	$	259,991	$	321,966	$	514,874	$	647,002
Cost of sales	123,140		165,299		244,531		329,618
Gross profit	136,851		156,667		270,343		317,384
Operating expenses:
Selling, general and administrative expenses	153,604		187,187		305,876		378,060

Other long-lived asset impairments	577		161		950		216
Restructuring expenses	16,673		4,632		26,726		11,729
Total operating expenses	170,854		191,980		333,552		390,005
Operating income (loss)	(34,003)		(35,313)		(63,209)		(72,621)
Interest expense	4,082		5,345		9,194		10,350
Other income (expense) - net	1,450		7,172		5,338		9,906
Income (loss) before income taxes	(36,635)		(33,486)		(67,065)		(73,065)
Provision (benefit) for income taxes	2,208		(7,198)		(3,908)		(5,595)
Net income (loss)	(38,843)		(26,288)		(63,157)		(67,470)
Less: Net income (loss) attributable to noncontrolling interests	(58)		241		(76)		321
Net income (loss) attributable to Fossil Group, Inc.	$	(38,785)	$	(26,529)	$	(63,081)	$	(67,791)
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	(1,631)	$	(4,090)	$	(4,117)	$	1,807
Cash flow hedges - net change	107		(191)		753		(2,977)
Pension plan activity	—		—		(19)		—
Total other comprehensive income (loss)	(1,524)		(4,281)		(3,383)		(1,170)
Total comprehensive income (loss)	(40,367)		(30,569)		(66,540)		(68,640)
Less: Comprehensive income (loss) attributable to noncontrolling interests	(58)		241		(76)		321
Comprehensive income (loss) attributable to Fossil Group, Inc.	$	(40,309)	$	(30,810)	$	(66,464)	$	(68,961)
Earnings (loss) per share:
Basic	$	(0.73)	$	(0.51)	$	(1.20)	$	(1.30)
Diluted	$	(0.73)	$	(0.51)	$	(1.20)	$	(1.30)
Weighted average common shares outstanding:
Basic	52,927		52,349		52,709		52,095
Diluted	52,927		52,349		52,709		52,095

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 June 29, 2024
	Common stock			Additional paid-in capital		Treasury stock		Retained (deficit) earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, March 30, 2024	52,492	$	525	$	312,717	$	—	$	(5,893)	$	(78,264)	$	229,085	$	(2,512)	$	226,573
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	730	7		(7)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(108)		—		—		(108)		—		(108)
Retirement of common stock	(123)	(1)		(107)		108		—		—		—		—		—


Stock-based compensation	—	—		978		—		—		—		978		—		978
Net income (loss)	—	—		—		—		(38,785)		—		(38,785)		(58)		(38,843)
Other comprehensive income (loss)	—	—		—		—		—		(1,524)		(1,524)		—		(1,524)




Balance, June 29, 2024	53,099	$	531	$	313,581	$	—	$	(44,678)	$	(79,788)	$	189,646	$	(2,570)	$	187,076


For the 13 Weeks Ended July 1, 2023
	Common stock			Additional paid-in capital		Treasury stock		Retained (deficit) earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, April 1, 2023	51,841	$	518	$	307,592	$	—	$	134,229	$	(73,207)	$	369,132	$	(2,843)	$	366,289
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	762	8		(8)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(504)		—		—		(504)		—		(504)
Retirement of common stock	(157)	(2)		(502)		504		—		—		—		—		—


Stock-based compensation	—	—		1,686		—		—		—		1,686		—		1,686
Net income (loss)	—	—		—		—		(26,529)		—		(26,529)		241		(26,288)
Other comprehensive income (loss)	—	—		—		—		—		(4,281)		(4,281)		—		(4,281)



Balance, July 1, 2023	52,446	$	524	$	308,768	$	—	$	107,700	$	(77,488)	$	339,504	$	(2,602)	$	336,902



For the 26 Weeks Ended June 29, 2024
	Common stock			Additional paid-in capital		Treasury stock		Retained (deficit) earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, December 30, 2023	52,487	$	525	$	311,709	$	—	$	18,403	$	(76,405)	$	254,232	$	(2,494)	$	251,738
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	737	7		(7)		—		—		—		—		—		—

Acquisition of common stock for employee tax withholding	—	—		—		(111)		—		—		(111)		—		(111)
Retirement of common stock	(125)	(1)		(110)		111		—		—		—		—		—


Stock-based compensation	—	—		1,989		—		—		—		1,989		—		1,989
Net income (loss)	—	—		—		—		(63,081)		—		(63,081)		(76)		(63,157)
Other comprehensive income (loss)	—	—		—		—		—		(3,383)		(3,383)				(3,383)




Balance, June 29, 2024	53,099	$	531	$	313,581	$	—	$	(44,678)	$	(79,788)	$	189,646	$	(2,570)	$	187,076



For the 26 Weeks Ended July 1, 2023
	Common stock			Additional paid-in capital		Treasury stock		Retained (deficit) earnings		Accumulated other comprehensive income (loss)		Stockholders' equity attributable to Fossil Group, Inc.		Noncontrolling interest		Total stockholders' equity
	Shares	Par value
Balance, December 31, 2022	51,836	$	518	$	306,241	$	—	$	175,491	$	(76,318)	$	405,932	$	(2,923)	$	403,009
Common stock issued upon exercise of stock options, stock appreciation rights and restricted stock units	768	8		(8)		—		—		—		—		—		—

Acquisition of common stock	—	—		—		(516)		—		—		(516)		—		(516)
Retirement of common stock	(158)	(2)		(514)		516		—		—		—		—		—

Stock-based compensation	—	—		3,049		—		—		—		3,049		—		3,049
Net income (loss)	—	—		—		—		(67,791)		—		(67,791)		321		(67,470)
Other comprehensive income (loss)	—	—		—		—		—		(1,170)		(1,170)		—		(1,170)



Balance, July 1, 2023	52,446	$	524	$	308,768	$	—	$	107,700	$	(77,488)	$	339,504	$	(2,602)	$	336,902

See notes to the unaudited condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS


	For the 26 Weeks Ended June 29, 2024		For the 26 Weeks Ended July 1, 2023
Operating Activities:
Net income (loss)	$	(63,157)	$	(67,470)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion	8,407		9,868
Non-cash lease expense	33,154		37,848
Stock-based compensation	1,625		3,049
Decrease in allowance for returns and markdowns	(8,867)		(11,017)

Property, plant and equipment and other long-lived asset impairment losses	950		215

Non-cash restructuring charges	501		—
Bad debt expense	4,404		(19)

Other non-cash items	753		(3,473)


Changes in operating assets and liabilities:
Accounts receivable	48,846		48,337
Inventories	45,825		52,814
Prepaid expenses and other current assets	50,514		(17,854)
Accounts payable	(12,543)		(49,890)
Accrued expenses	(24,330)		(23,960)
Income taxes	(8,278)		(17,722)
Operating lease liabilities	(38,818)		(43,774)
Net cash provided by (used in) operating activities	38,986		(83,048)
Investing Activities:
Additions to property, plant and equipment and other	(3,423)		(4,569)
Decrease (increase) in intangible and other assets	335		(176)


Net cash used in investing activities	(3,088)		(4,745)
Financing Activities:

Acquisition of common stock	(111)		(516)

Debt borrowings	33,781		75,142
Debt payments	(82,724)		(49,008)
Payment for shares of Fossil Accessories South Africa Pty. Ltd.	(422)		(2,316)

Net cash (used in) provided by financing activities	(49,476)		23,302
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	1,076		(2,648)
Net decrease in cash, cash equivalents, and restricted cash	(12,502)		(67,139)
Cash, cash equivalents, and restricted cash:
Beginning of period	121,583		204,075
End of period	$	109,081	$	136,936

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 information presented herein includes the thirteen-week period ended June 29, 2024 (“Second Quarter”) as compared to the thirteen-week period ended July 1, 2023 (“Prior Year Quarter”), and the twenty-six week period ended June 29, 2024 ("Year To Date Period") as compared to the twenty-six week period ended July 1, 2023 ("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 June 29, 2024, and the results of operations for the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period. All adjustments are of a normal, recurring nature.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended December 30, 2023, as amended (the “2023 Form 10-K”). Operating results for the Second Quarter are not necessarily indicative of the results to be achieved for the full fiscal year.

Effective during the third quarter of fiscal year 2023, the Company made a change to the presentation of its available borrowing capacity under its Revolving Facility (as defined in Note 15 - Debt Activity) to exclude available borrowings that would trigger a contingent covenant. The Company's historical disclosures have been recast to be consistent with its current presentation.

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. Actual results could differ from those estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the 2023 Form 10-K.

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 ("SG&A"), 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, and design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and 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 reduce and optimize the Company’s infrastructure and store closures. See Note 16— Restructuring for additional information on the Company’s restructuring plan.

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 June 29, 2024		For the 13 Weeks Ended July 1, 2023		For the 26 Weeks Ended June 29, 2024		For the 26 Weeks Ended July 1, 2023
Numerator:
Net income (loss) attributable to Fossil Group, Inc.	$	(38,785)	$	(26,529)	$	(63,081)	$	(67,791)
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	52,927		52,349		52,709		52,095
Basic EPS	$	(0.73)	$	(0.51)	$	(1.20)	$	(1.30)
Diluted EPS computation:

Diluted weighted average common shares outstanding	52,927		52,349		52,709		52,095
Diluted EPS	$	(0.73)	$	(0.51)	$	(1.20)	$	(1.30)

At the end of the Second Quarter and Year To Date Period, approximately 1.6 million and 1.7 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 0.2 million and 0.2 million weighted average performance-based shares at the end of the Second Quarter and Year To Date Period, respectively.

At the end of the Prior Year Quarter and Prior Year YTD Period, approximately 2.2 million and 2.1 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 0.3 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 included in intangible and other-assets net was comprised primarily of 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 June 29, 2024 and July 1, 2023 that are presented in the condensed consolidated statement of cash flows (in thousands):


	June 29, 2024		July 1, 2023
Cash and cash equivalents	$	104,906	$	132,107
Restricted cash included in prepaid expenses and other current assets	625		107
Restricted cash included in intangible and other assets-net	3,550		4,722
Cash, cash equivalents and restricted cash	$	109,081	$	136,936

Recently Issued and Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU"), 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this guidance on its financial statement disclosures.

In November 2023, FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The amendments in this update will require public entities to disclose significant segment expenses that are regularly provided to the Company's chief operating decision maker and included within segment profit and loss, an amount and description of its composition for other segment items, and expanded interim disclosures. This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this guidance on its financial statement disclosures.

In October 2023, FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of topics in the FASB Accounting Standards Codification (the "Codification"), with the intention of clarifying or improving them and to align the requirements in the Codification with the regulations of the U.S. Securities and Exchange Commission (the "SEC"). The effective date for ASU 2023-06 varies and is determined for each individual disclosure based on the effective date of the SEC's removal of the related disclosure. ASU 2023-06 will not have an impact on the Company's financial position or results of operations.

The Organization for Economic Cooperation and Development ("OECD") and over 140 countries have agreed to enact a two-pillar solution to reform the international tax rules to address the challenges arising from the globalization and digitalization of the economy. "The Pillar Two Global Anti-Base Erosion (GloBE) Rules" provide a coordinated system to ensure that multinational enterprises with revenues above 750 million euro pay a minimum effective tax rate of 15% tax on the income arising in each of the jurisdictions in which they operate. Many aspects of Pillar Two will be effective for tax years beginning in January 2024, with certain remaining impacts to be effective in 2025. Each country must enact its own legislation to apply the Pillar Two rules. The Company does not expect Pillar Two to have a material impact on its financial results, including its annual estimated effective tax rate or liquidity for 2024, but will continue to monitor future developments.

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 June 29, 2024
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	87,945	$	55,624	$	50,519	$	—	$	194,088
Smartwatches	5,526		538		2,328		—		8,392
Total watches	93,471		56,162		52,847		—		202,480
Leathers	18,151		3,738		5,277		—		27,166
Jewelry	5,526		12,211		6,462		—		24,199
Other	2,436		2,741		613		356		6,146
Consolidated	$	119,584	$	74,852	$	65,199	$	356	$	259,991

Timing of revenue recognition
Revenue recognized at a point in time	$	119,484	$	74,703	$	65,087	$	356	$	259,630
Revenue recognized over time	100		149		112		—		361
Consolidated	$	119,584	$	74,852	$	65,199	$	356	$	259,991


	For the 13 Weeks Ended July 1, 2023
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	108,875	$	59,411	$	65,889	$	1,927	$	236,102
Smartwatches	8,443		5,263		4,073		—		17,779
Total watches	$	117,318	$	64,674	$	69,962	$	1,927	$	253,881
Leathers	20,963		4,986		7,373		—		33,322
Jewelry	6,223		15,380		5,755		—		27,358
Other	2,147		3,239		1,033		986		7,405
Consolidated	$	146,651	$	88,279	$	84,123	$	2,913	$	321,966

Timing of revenue recognition
Revenue recognized at a point in time	$	146,496	$	88,084	$	84,009	$	2,638	$	321,227
Revenue recognized over time	155		195		114		275		739
Consolidated	$	146,651	$	88,279	$	84,123	$	2,913	$	321,966


	For the 26 Weeks Ended June 29, 2024
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	166,650	$	112,757	$	101,242	$	—	$	380,649
Smartwatches	10,680		2,099		4,490		—		17,269
Total watches	$	177,330	$	114,856	$	105,732	$	—	$	397,918
Leathers	35,670		8,143		10,936		—		54,749
Jewelry	12,146		25,689		12,628		—		50,463
Other	4,455		4,884		1,440		965		11,744
Consolidated	$	229,601	$	153,572	$	130,736	$	965	$	514,874

Timing of revenue recognition
Revenue recognized at a point in time	$	229,393	$	153,263	$	130,511	$	965	$	514,132
Revenue recognized over time	208		309		225		—		742
Consolidated	$	229,601	$	153,572	$	130,736	$	965	$	514,874


	For the 26 Weeks Ended July 1, 2023
	Americas		Europe		Asia		Corporate		Total
Product type
Watches:
Traditional watches	$	200,231	$	131,215	$	128,155	$	1,927	$	461,528
Smartwatches	20,933		11,885		9,361		—		42,179
Total watches	$	221,164	$	143,100	$	137,516	$	1,927	$	503,707
Leathers	48,074		11,758		13,753		—		73,585
Jewelry	11,642		33,880		10,880		—		56,402
Other	3,703		5,214		2,110		2,281		13,308
Consolidated	$	284,583	$	193,952	$	164,259	$	4,208	$	647,002

Timing of revenue recognition
Revenue recognized at a point in time	$	284,259	$	193,568	$	164,036	$	3,658	$	645,521
Revenue recognized over time	324		384		223		550		1,481
Consolidated	$	284,583	$	193,952	$	164,259	$	4,208	$	647,002

Contract Balances. As of June 29, 2024, the Company had no material contract assets on the Company's condensed consolidated balance sheets and no deferred contract costs. The Company had (i) no contract liabilities as of June 29, 2024 and December 30, 2023, respectively, related to remaining performance obligations on licensing income, (ii) $1.2 million and $1.7 million as of June 29, 2024 and December 30, 2023, respectively, primarily related to remaining performance obligations on wearable technology products and (iii) $2.2 million and $2.7 million as of June 29, 2024 and December 30, 2023, respectively, related to gift cards issued.

3. INVENTORIES

Inventories consisted of the following (in thousands):


	June 29, 2024		December 30, 2023
Components and parts	$	17,817	$	18,931
Work-in-process	261		—
Finished goods	184,050		233,903
Inventories	$	202,128	$	252,834

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 26 Weeks Ended June 29, 2024		For the 26 Weeks Ended July 1, 2023
Beginning balance	$	10,122	$	13,623
Settlements in cash or kind	(2,390)		(3,766)
Warranties issued and adjustments to preexisting warranties (1)	35		2,403
Ending balance	$	7,767	$	12,260

_______________________________________________

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

Fossil Group, Inc. [FOSL] Filings

Fossil Group, Inc. [FOSLL] Filings