WARRANTY RESERVE

6 Months Ended

Jul. 05, 2014

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 certain other watches sold by the Company are covered by a comparable two year limited warranty. SKAGEN® branded watches are covered by a lifetime warranty against defects due to faulty material or workmanship, subject to normal conditions of use. The Company’s warranty liability is recorded using historical warranty repair expense and is recorded in accrued expenses-other in the condensed consolidated balance sheets. As changes in warranty costs are experienced, the warranty accrual is adjusted as necessary. Warranty liability activity consisted of the following (in thousands):

	For the 27 Weeks Ended			For the 26 Weeks Ended
	July 5, 2014			June 29, 2013
Beginning balance	$	15,658		$	13,383
Settlements in cash or kind	(5,576		)	(4,715		)
Warranties issued and adjustments to preexisting warranties (1)	5,925			4,906
Liabilities assumed in acquisition	0			340
Ending balance	$	16,007		$	13,914

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