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FINANCIAL STATEMENT POLICIES (Policies) | 9 Months Ended
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Sep. 28, 2013
FINANCIAL STATEMENT POLICIES |
Basis of Presentation | Basis of Presentation. On May 22, 2013, the company changed its corporate name from “Fossil, Inc.” to “Fossil Group, Inc.” 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 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 September 28, 2013, and the results of operations for the thirteen week periods ended September 28, 2013 (“Third Quarter”) and September 29, 2012 (“Prior Year Quarter”), and the thirty-nine week periods ended September 28, 2013 (“Year To Date Period”) and September 29, 2012 (“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 29, 2012 (the “2012 Form 10-K”). Operating results for the Third Quarter and Year to Date Period 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. Actual results could differ from those estimates. The Company has not made any changes in its significant accounting policies from those disclosed in the 2012 Form 10-K.
Business | 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, sunglasses, soft accessories and clothing. 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.
Hedging Instruments | Hedging Instruments. The Company’s derivative instruments consist of foreign exchange forward contracts and an interest rate swap. The Company’s foreign subsidiaries periodically enter into foreign exchange forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. If the Company’s foreign subsidiaries were to settle their contracts designated as cash flow hedges that were denominated in Euros, British Pounds, Canadian Dollars, Japanese Yen, Mexican Pesos, and Australian Dollars, the net result would have been a loss of approximately $3.3 million, net of taxes, as of September 28, 2013. Also, the Company has entered into an interest rate swap agreement to effectively convert a portion of variable rate debt obligations from a floating rate to a fixed rate. The Company applies the hedge accounting rules as required by Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). See “Note 8—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.
Earnings Per Share ("EPS") | 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 |  | For the 39 Weeks Ended |
|  | September 28, 2013 |  | September 29, 2012 |  | September 28, 2013 |  | September 29, 2012 |
Numerator: |  |  |  |  |  |  |  |  |
Net income attributable to Fossil Group, Inc. |  | $ | 89,734 |  | $ | 76,791 |  | $ | 229,633 |  | $ | 192,269 |
Denominator: |  |  |  |  |  |  |  |  |
Basic EPS computation: |  |  |  |  |  |  |  |  |
Basic weighted average common shares outstanding |  | 56,458 |  | 60,573 |  | 58,150 |  | 61,342 |
Basic EPS |  | $ | 1.59 |  | $ | 1.27 |  | $ | 3.95 |  | $ | 3.13 |
Diluted EPS computation: |  |  |  |  |  |  |  |  |
Basic weighted average common shares outstanding |  | 56,458 |  | 60,573 |  | 58,150 |  | 61,342 |
Stock options, stock appreciation rights and restricted stock units |  | 246 |  | 382 |  | 283 |  | 462 |
Diluted weighted average common shares outstanding |  | 56,704 |  | 60,955 |  | 58,433 |  | 61,804 |
Diluted EPS |  | $ | 1.58 |  | $ | 1.26 |  | $ | 3.93 |  | $ | 3.11 |
Approximately 227,000, 252,000, 370,000 and 215,000 shares issuable under stock-based awards were not included in the diluted EPS calculation at the end of the Third Quarter, Year To Date Period, Prior Year Quarter and Prior Year YTD Period, respectively, because they were antidilutive.
Restricted Cash | Restricted Cash. A s of September 28, 2013 and December 29, 2012, the Company had short-term restricted cash balances of $41,000 and $0.3 million, respectively, and long-term restricted cash balances of $0.7 million and $1.0 million, respectively, primarily pledged as collateral to secure bank guarantees for the purpose of obtaining retail space. Short-term restricted cash is reported in prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets as a component of current assets. Long-term restricted cash is reported in intangible and other assets-net in the Company’s condensed consolidated balance sheets as a component of long-term assets.

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