Acquisitions, Divestiture and Goodwill

Skagen Designs, Ltd. Acquisition. On April 2, 2012, the Company acquired Skagen Designs, Ltd. and certain of its international affiliates ("Skagen Designs"). The purchase price was $231.7 million in cash and 150,000 shares of the Company's common stock valued at $19.9 million. In addition, subject to the purchase agreement, the sellers could receive up to 100,000 additional shares of the Company's common stock if the Company's net sales of SKAGEN branded products exceed certain thresholds over a defined period of time (the "Earnout"). The Company recorded the Earnout as a $9.9 million contingent consideration liability in accrued expenses—other in the Company's consolidated balance sheets as of the acquisition date. The Earnout criteria was not met and the contingent consideration liability was remeasured to zero in fiscal year 2012.

During the fourth quarter of fiscal year 2014, the Company's arbitration proceedings with Skagen Designs resulted in a $6.0 million reduction of the original purchase amount. The Company recognized the amount in other income (expense) - net in the Company's consolidated statements of income and comprehensive income for the fiscal year 2014.

Fossil Spain Acquisition. On August 10, 2012, the Company’s joint venture company, Fossil, S.L. (“Fossil Spain”), entered into a Framework Agreement (the “Framework Agreement”) with several related and unrelated parties, including General De Relojeria, S.A. (“General De Relojeria”), the Company’s joint venture partner. Pursuant to the Framework Agreement, Fossil Spain was granted the right to acquire the outstanding 50% of its shares owned by General De Relojeria upon the expiration of the joint venture agreement on December 31, 2015. As of January 1, 2013, pursuant to the Framework Agreement, the Company assumed control over the board of directors and the day-to-day management of Fossil Spain, and began consolidating Fossil Spain, instead of treating it as an equity method investment. The Company completed the acquisition of these shares in the second quarter of fiscal year 2016, at which time Fossil Spain became a wholly-owned subsidiary of the Company. During the second quarter of fiscal year 2016, the fixed and previously remaining variable components of the purchase price were settled in the amounts of 4.3 million euros (approximately $4.8 million as of the settlement date) and 3.5 million euros (approximately $3.9 million as of the settlement date), respectively.

Misfit, Inc. Acquisition. On December 22, 2015, the Company acquired Misfit, Inc. ("Misfit"), an innovator and distributor of wearable technology and stylish connected devices. Misfit was a U.S.-based, privately held company. The primary purpose of the acquisition was to acquire a scalable technology platform that can be integrated across the Company's multi-brand portfolio, a native wearable technology brand and a pipeline of innovative products. Misfit’s position in the wearable technology space combined with their software and hardware engineering teams enabled the Company to expand its addressable market with new distribution channels, products, brands and enterprise partnerships.

The purchase price was $215.4 million in cash, net of cash acquired and subject to working capital adjustments, and $1.7 million in replacement awards attributable to precombination service. At closing, $12.5 million of the cash payment was placed into an escrow fund for the Company for working capital adjustments and indemnification obligations of the seller incurred within 12 months from the closing date. The Company received $3.3 million from the escrow during fiscal year 2016 for claims incurred and as a working capital settlement and has recorded a receivable for additional claims incurred. To fund the cash purchase price, the Company utilized cash on hand and approximately $60 million of availability under its $1.05 billion revolving line of credit. The results of Misfit's operations have been included in the Company’s consolidated financial statements since December 22, 2015.

Assets acquired and liabilities assumed in the transaction were recorded at their acquisition date fair values, while transaction costs of $8.4 million associated with the acquisition were expensed as incurred during the fourth quarter of fiscal year 2015. Because the total purchase price exceeded the fair values of the tangible and intangible assets acquired, goodwill was recorded equal to the difference. The element of goodwill that is not separable into identifiable intangible assets represents expected synergies. The following table summarizes the allocation of the purchase price to the preliminary estimated fair value of the assets acquired and the liabilities assumed as of December 22, 2015, the effective date of the acquisition (in thousands):



Cash paid, net of cash acquired		$	215,370
Replacement awards attributable to precombination service		1,709
Working capital and other adjustments		(7,920		)
Total transaction consideration		$	209,159

Inventories		7,011
Prepaid expenses and other current assets		25
Property, plant and equipment and other long-term assets		1,237
Goodwill		162,234
Amortizing Intangibles:	Useful Lives
Trade name	6 yrs.	15,700
Customer lists	5 yrs.	10,800
Developed technology	7 yrs.	36,100
Noncompete agreements	3 yrs.	700
Current liabilities		(17,019		)
Long-term liabilities		(7,629		)
Total net assets acquired		$	209,159

Purchase accounting adjustments during fiscal year 2016 include a $7.9 million reduction to total transaction consideration, $5.9 million reduction to inventories, $5.4 million reduction to long-term liabilities, $4.1 million increase to current liabilities, $2.2 million decrease to goodwill, $1.2 million reduction to accounts receivable and a $47,000 increase to property, plant and equipment and other long-term assets. The goodwill recognized from the acquisition has an indefinite useful life and was included in the Company’s annual impairment testing.

Divestiture. On December 30, 2016, the Company completed the sale of its machine vision operations, a part of Misfit. In connection with the transaction, the Company received a cash payment of $3.5 million and recognized a corresponding pre-tax gain in other income (expense) - net, in the consolidated statements of income and comprehensive income. Additionally, another $3.5 million was placed into escrow and may be released to the Company upon the one and two year anniversary of the closing date, if certain conditions are met.

Goodwill. The changes in the carrying amount of goodwill were as follows (in thousands):



	Americas			Europe			Asia			Total
Balance at January 3, 2015	$	119,438		$	66,433		$	11,857		$	197,728
Acquisitions	164,405			4,487			—			168,892
Foreign currency changes	(245		)	(6,939		)	(42		)	(7,226		)
Balance at January 2, 2016	$	283,598		$	63,981		$	11,815		$	359,394
Segment allocation and acquisition adjustments (1)	(81,166		)	48,046			30,949			(2,171		)
Foreign currency changes	(245		)	(1,736		)	21			(1,960		)
Balance at December 31, 2016	$	202,187		$	110,291		$	42,785		$	355,263

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(1) All goodwill resulting from the Misfit acquisition was recorded in the Americas segment as of January 2, 2016, on a preliminary basis. This line item includes an allocation of the goodwill across reporting segments and also purchase accounting adjustments made during fiscal year 2016.