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Fair Value Measurements
 12 Months Ended
Dec. 28, 2013
Fair Value Measurements  
Fair Value Measurements

10. Fair Value Measurements

        The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

        ASC 820, Fair Value Measurement and Disclosures ("ASC 820"), establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

  • •
    Level 1—Quoted prices in active markets for identical assets or liabilities.

    •
    Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

    •
    Level 3—Unobservable inputs based on the Company's assumptions.

        ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

        The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 28, 2013 (in thousands):

 
   Fair Value at December 28, 2013  
 
   Level 1   Level 2   Level 3   Total  

Assets:

                          

Forward contracts

   $ 0   $ 3,508   $ 0   $ 3,508  

Deferred compensation plan assets:

                          

Investment in publicly traded mutual funds

     2,360     0     0     2,360  

Interest rate swaps

     0     4,307     0     4,307  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 2,360   $ 7,815   $ 0   $ 10,175  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities:

                          

Contingent consideration

   $ 0   $ 0   $ 8,084     8,084  

Forward contracts

     0     8,214     0     8,214  

Interest rate swaps

     0     4,476     0     4,476  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 0   $ 12,690   $ 8,084   $ 20,774  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 29, 2012 (in thousands):

 
   Fair Value at December 29, 2012  
 
   Level 1   Level 2   Level 3   Total  

Assets:

                          

Securities available for sale:

                          

Investment in publicly traded equity securities

   $ 127   $ 0   $ 0   $ 127  

Forward contracts

     0     2,576     0     2,576  

Deferred compensation plan assets:

                          

Investment in publicly traded mutual funds

     3,188     0     0     3,188  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 3,315   $ 2,576   $ 0   $ 5,891  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities:

                          

Forward contracts

   $ 0   $ 5,142   $ 0   $ 5,142  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 0   $ 5,142   $ 0   $ 5,142  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The fair values of the Company's securities available for sale and deferred compensation plan assets are based on quoted prices. The deferred compensation plan assets are recorded in intangible and other assets—net in the Company's consolidated balance sheets. The fair values of the Company's forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates.

        The Company estimates the fair value of its debt using Level 2 inputs, such as interest rates, related terms and maturities. The fair value of the Company's debt approximated its carrying amount as of December 28, 2013 and December 29, 2012. As of December 28, 2013 and December 29, 2012, the carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated their values due to the short-term maturities of these accounts.

        The fair value of the contingent consideration liability related to Fossil Spain was determined using Level 3 inputs. See Note 2—Acquisitions, Divestiture and Goodwill for additional disclosure about the acquisition. The contingent consideration is based on Fossil Spain's forecasted earnings during the three year period from January 1, 2013 to December 31, 2015. The contingent consideration for calendar years 2013 and 2014 will be paid each year, generally within thirty days of calculation of the amount. The contingent consideration for calendar year 2015 will be paid upon the execution of the purchase agreement in 2016. The fair value of the contingent consideration was determined using present value techniques with forecasted future cash flows for Fossil Spain as the significant unobservable input. Future revenue growth based on management's projections for calendar years 2014 and 2015 ranges from 3% to 10%. Operating expenses are projected to be approximately 28% of revenues for calendar years 2014 and 2015. A discount rate of 19% was used to calculate the present value of the contingent consideration. An increase in future cash flows may result in a higher estimated fair value of the contingent consideration liability. Alternatively, a decrease in future cash flows may result in a lower estimated fair value of the contingent consideration liability. Future changes in the estimated fair value of the contingent consideration liability, if any, will be reflected in earnings.

        The fair values of the interest rate swap asset and liability are determined using valuation models based on market observable inputs, including forward curves, mid-market price, foreign exchange spot or forward rates, and volatility levels. See Note 9—Derivatives and Risk Management for additional disclosures about the interest rate swap.

        The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a nonrecurring basis as of December 28, 2013 (in thousands):

 
    
   Fair Value
Measurements Using		    
  
 
   For the Fiscal
Year Ended
December 28, 2013		   Total
Impairment
Charge		  
 
   Level 1   Level 2   Level 3  

Assets:

                                

Specific Company-owned stores

   $ 668   $ 0   $ 0   $ 668   $ (5,750 )

        The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a nonrecurring basis as of December 29, 2012 (in thousands):

 
    
   Fair Value
Measurements Using		    
  
 
   For the Fiscal
Year Ended
December 29, 2012		   Total
Impairment
Charge		  
 
   Level 1   Level 2   Level 3  

Assets:

                                

Specific Company-owned stores

   $ 67   $ 0   $ 0   $ 67   $ (1,231 )

        In addition to the tables above, the Company made nonrecurring valuations of contingent consideration in connection with business acquisitions in fiscal years 2013 and 2012. See Note 2—Acquisitions, Divestiture and Goodwill for more information.

        In accordance with the provisions of ASC 360, Property, Plant and Equipment, property, plant and equipment—net with a carrying amount of $6.4 million related to Company-owned retail store leasehold improvements and fixturing was written down to a fair value of $0.7 million, resulting in an impairment charge of $5.8 million for fiscal year 2013.

        In fiscal year 2012, property, plant and equipment—net with a carrying amount of $1.2 million related to Company-owned retail store leasehold improvements, fixturing, computer software and computer hardware was written down to a fair value of $0.1 million, resulting in an impairment charge of $1.2 million for fiscal year 2012.

        The fair values of assets related to the Company-owned retail stores were determined using Level 3 inputs. If undiscounted cash flows estimated to be generated through the operation of Company-owned retail stores are less than the carrying value of the underlying assets, the assets are impaired. If it is determined that the assets are impaired, the fair value of the assets is calculated using future estimated discounted cash flows, and then an impairment loss is recorded for the amount the asset's book value exceeds its fair value. Impairment expenses related to Company-owned retail stores are recorded in SG&A within the Direct to consumer segment.