WARRANTY RESERVE

6 Months Ended

Jun. 30, 2012

4. WARRANTY RESERVE

The Company’s warranty liabilities are primarily related to watch products. The Company’s FOSSIL^® watch products sold in the U.S. are covered by a limited warranty against defects in materials or workmanship for a period of 11 years from the date of purchase. RELIC^® watch products sold in the U.S. are covered by a comparable 12 year warranty, while other watches sold by the Company are covered by a comparable two year limited warranty. SKAGEN branded watches sold in the U.S. are covered by a lifetime warranty against defects due to faulty material or workmanship subject to normal conditions of use. Warranty liability activity consisted of the following (in thousands):


	For the 26 Weeks Ended
	June 30, 2012			July 2, 2011
Beginning balance	$	10,996		$	8,534
Settlements in cash or kind		(2,101	)		(2,059	)
Warranties issued and adjustments (1)		3,463			4,017
Liabilities assumed in acquisition		389			0

Ending balance	$	12,747		$	10,492

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