10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________ 

FORM 10-Q

__________________________________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: July 2, 2016

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number: 000-19848

__________________________________________________________________ 

FOSSIL GROUP, INC.

(Exact name of registrant as specified in its charter)

 __________________________________________________________________

Delaware	75-2018505
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
901 S. Central Expressway, Richardson, Texas	75080
(Address of principal executive offices)	(Zip Code)

(972) 234-2525

(Registrant’s telephone number, including area code) 

__________________________________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant’s common stock outstanding as of August 5, 2016: 48,129,755

FOSSIL GROUP, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED JULY 2, 2016

INDEX

		Page
PART I
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income and Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flow	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
	Results of Operations	26
	Liquidity and Capital Resources	31
	Forward-Looking Statements	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II
Item 1.	Legal Proceedings	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6.	Exhibits	37
	SIGNATURES	39

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS

	July 2, 2016			January 2, 2016
Assets
Current assets:
Cash and cash equivalents	$	231,836		$	289,275
Accounts receivable - net of allowances of $60,219 and $84,558, respectively	257,053			370,761
Inventories	661,748			625,344
Prepaid expenses and other current assets	161,723			157,290
Total current assets	1,312,360			1,442,670
Property, plant and equipment - net of accumulated depreciation of $430,761 and $398,068, respectively	328,004			326,370
Goodwill	364,158			359,394
Intangible and other assets-net	222,016			227,227
Total long-term assets	914,178			912,991
Total assets	$	2,226,538		$	2,355,661
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	195,259		$	208,083
Short-term and current portion of long-term debt	26,302			23,159
Accrued expenses:
Compensation	53,288			61,496
Royalties	21,086			38,359
Co-op advertising	18,687			28,918
Transaction taxes	25,721			44,425
Other	71,109			76,592
Income taxes payable	249			8,497
Total current liabilities	411,701			489,529
Long-term income taxes payable	20,716			20,634
Deferred income tax liabilities	70,692			75,165
Long-term debt	708,664			785,076
Other long-term liabilities	59,251			52,714
Total long-term liabilities	859,323			933,589
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, 48,127 and 48,125 shares issued and outstanding at July 2, 2016 and January 2, 2016, respectively	481			481
Additional paid-in capital	201,169			187,456
Retained earnings	820,771			813,957
Accumulated other comprehensive income (loss)	(77,172		)	(80,506		)
Total Fossil Group, Inc. stockholders’ equity	945,249			921,388
Noncontrolling interest	10,265			11,155
Total stockholders’ equity	955,514			932,543
Total liabilities and stockholders’ equity	$	2,226,538		$	2,355,661

See notes to the condensed consolidated financial statements.

3

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015			For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Net sales	$	685,368		$	739,975		$	1,345,216		$	1,465,060
Cost of sales	329,618			330,510			641,129			654,870
Gross profit	355,750			409,465			704,087			810,190
Operating expenses:
Selling, general and administrative expenses	340,300			332,560			674,233			665,042
Restructuring charges	—			6,471			—			18,559
Total operating expenses	340,300			339,031			674,233			683,601
Operating income	15,450			70,434			29,854			126,589
Interest expense	6,421			5,014			12,420			9,193
Other income (expense) - net	2,542			14,294			4,812			21,479
Income before income taxes	11,571			79,714			22,246			138,875
Provision for income taxes	3,499			22,894			6,778			41,417
Net income	8,072			56,820			15,468			97,458
Less: Net income attributable to noncontrolling interest	2,051			2,172			3,654			4,740
Net income attributable to Fossil Group, Inc.	$	6,021		$	54,648		$	11,814		$	92,718
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	(9,500	)	$	5,559		$	7,721		$	(27,947	)
Cash flow hedges - net change	4,331			(246		)	(6,101		)	(185		)
Pension plan activity	—			—			1,714			—
Total other comprehensive income (loss)	(5,169		)	5,313			3,334			(28,132		)
Total comprehensive income	2,903			62,133			18,802			69,326
Less: Comprehensive income attributable to noncontrolling interest	2,051			2,172			3,654			4,740
Comprehensive income attributable to Fossil Group, Inc.	$	852		$	59,961		$	15,148		$	64,586
Earnings per share:
Basic	$	0.13		$	1.12		$	0.25		$	1.87
Diluted	$	0.12		$	1.12		$	0.24		$	1.87
Weighted average common shares outstanding:
Basic	48,119			48,634			48,125			49,464
Diluted	48,207			48,744			48,229			49,615

See notes to the condensed consolidated financial statements.

4

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Operating Activities:
Net income	$	15,468		$	97,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	49,666			43,650
Stock-based compensation	16,463			9,276
Decrease in allowance for returns-net of inventory in transit	(15,473		)	(8,438		)
Loss on disposal of assets	1,151			2,519
Impairment losses	—			6,602
Decrease in allowance for doubtful accounts	(4,841		)	(2,006		)
Excess tax benefits from stock-based compensation	(5		)	(170		)
Deferred income taxes and other	(443		)	6,804
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	139,765			183,993
Inventories	(41,107		)	(91,020		)
Prepaid expenses and other current assets	(8,656		)	(19,666		)
Accounts payable	(17,106		)	(1,040		)
Accrued expenses	(54,285		)	(50,563		)
Income taxes payable	(8,650		)	(14,898		)
Net cash provided by operating activities	71,947			162,501
Investing Activities:
Additions to property, plant and equipment	(39,313		)	(32,464		)
Decrease (increase) in intangible and other assets	786			(1,400		)
Skagen Designs arbitration settlement	—			5,968
Misfit working capital settlement	788			—
Proceeds from the sale of property, plant and equipment	1,955			—
Business acquisitions-net of cash acquired	—			(4,820		)
Net investment hedge settlement	752			—
Net cash used in investing activities	(35,032		)	(32,716		)
Financing Activities:
Acquisition of common stock	(6,418		)	(218,659		)
Distribution of noncontrolling interest earnings	(4,544		)	(5,056		)
Excess tax benefits from stock-based compensation	5			170
Debt borrowings	424,800			1,482,165
Debt payments	(498,848		)	(1,419,161		)
Proceeds from exercise of stock options	57			582
Payment for shares of Fossil, S.L.	(8,657		)	—
Net cash used in financing activities	(93,605		)	(159,959		)
Effect of exchange rate changes on cash and cash equivalents	(749		)	3,777
Net decrease in cash and cash equivalents	(57,439		)	(26,397		)
Cash and cash equivalents:
Beginning of period	289,275			276,261
End of period	$	231,836		$	249,864

See notes to the condensed consolidated financial statements.

5

FOSSIL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. FINANCIAL STATEMENT POLICIES

Basis of Presentation. 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 July 2, 2016, and the results of operations for the thirteen-week periods ended July 2, 2016 (“Second Quarter”) and July 4, 2015 (“Prior Year Quarter”), respectively, and the twenty-six week periods ended July 2, 2016 (“Year To Date Period”) and July 4, 2015 (“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 January 2, 2016 (the “2015 Form 10-K”). Operating results for the Second 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 2015 Form 10-K.

Business. The Company isa 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 and sunglasses. 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. The Company is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to manage these exposures using derivative instruments including foreign exchange forward contracts ("forward contracts") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, British pound, Canadian dollar, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of July 2, 2016, the result would have been a net gain of approximately $3.8 million, net of taxes. This unrealized gain is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income and comprehensive income. Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income and comprehensive income. Also, the Company has entered into interest rate swap agreements to effectively convert portions of its variable rate debt obligations to fixed rates. Changes in the fair value of the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and are recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative

6

purposes. See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

Operating expenses. Operating expenses include selling, general and administrative expenses (“SG&A”) and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation.Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure and store closures.

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 July 2, 2016		For the 13 Weeks Ended July 4, 2015		For the 26 Weeks Ended July 2, 2016		For the 26 Weeks Ended July 4, 2015
Numerator:
Net income attributable to Fossil Group, Inc.	$	6,021	$	54,648	$	11,814	$	92,718
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Basic EPS	$	0.13	$	1.12	$	0.25	$	1.87
Diluted EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	88		110		104		151
Diluted weighted average common shares outstanding	48,207		48,744		48,229		49,615
Diluted EPS	$	0.12	$	1.12	$	0.24	$	1.87

Approximately 1.9 million, 0.6 million, 1.7 million and 0.4 million weighted shares issuable under stock-based awards were not included in the diluted EPS calculation at the end of the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period, respectively, because they were antidilutive. Approximately 1.1 million weighted performance shares were not included in the diluted EPS calculation at the end of the Second Quarter and Year to Date Period as the performance targets were not met.

Recently Issued Accounting Standards. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for annual periods, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-09. 

In March 2016, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-04.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for

7

both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-02.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual periods beginning after December 15, 2016, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), deferring the effective date of ASU 2014-09. The new revenue standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and allows either a full retrospective adoption to all periods presented or a modified retrospective adoption approach with the cumulative effect of initial application of the revised guidance recognized at the date of initial application. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). ASU 2016-10clarifies the implementation guidance on identifying performance obligations. Early adoption is permitted for periods beginning after December 15, 2016. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2016-12 clarifies three aspects of Topic 606, including the objective of the collectability criterion, the measurement date for noncash consideration and the requirements for a completed contract. ASU 2016-12 also includes a practical expedient for contract modifications. Additionally, the amendments allow an entity to exclude all sales taxes collected from customers from the transaction price. The Company is evaluating the effect of adopting ASU 2014-09 and related ASUs.

Recently Adopted Accounting Standards. In accordance with U.S. GAAP, the following provisions, which had no material impact on the Company’s financial position, results of operations or cash flows, were adopted effective the first quarter of fiscal year 2016:

•ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis

• ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

2. ACQUISITIONS AND GOODWILL

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. The Company completed the acquisition of these shares in the Second Quarter, at which time Fossil Spain became a wholly-owned subsidiary of the Company. The fixed and previously remaining variable components of the purchase price were settled in the amounts of 4.3 million euros

8

(approximately $4.8 million) and 3.5 million euros (approximately $3.9 million), respectively. 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.

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 enables 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 $0.8 million from the escrow during the Second Quarter 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		(3,788		)
Total transaction consideration		$	213,291
Inventories		$	7,011
Prepaid expenses and other current assets		25
Property, plant and equipment and other long-term assets		1,190
Goodwill		168,021
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		(9,237		)
Total net assets acquired		$	213,291

The amounts shown above may change in the near term as management continues to assess the fair value of acquired assets and liabilities. A change in this valuation may also impact the income tax related accounts and goodwill. The goodwill recognized from the acquisition has an indefinite useful life and will be included in the Company’s annual impairment testing.

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

	Americas			Europe		Asia		Total
Balance at January 2, 2016	$	283,598		$	63,981	$	11,815	$	359,394
Segment allocation and acquisition adjustments (1)	(78,197		)	49,760		32,053		3,616
Currency	(100		)	1,223		25		1,148
Balance at July 2, 2016	$	205,301		$	114,964	$	43,893	$	364,158

__________________________________________________________________________________

(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 the Year To Date Period to accounts receivable, inventories, current and long-term liabilities and working capital and other adjustments made to the transaction consideration.

3. INVENTORIES

Inventories consisted of the following (in thousands):

	July 2, 2016		January 2, 2016
Components and parts	$	67,408	$	49,539
Work-in-process	10,762		12,213
Finished goods	583,578		563,592
Inventories	$	661,748	$	625,344

4. WARRANTY LIABILITIES

The Company’s warranty liability is recorded in accrued expenses-other in the Company’s condensed consolidated balance sheets. Warranty liability activity consisted of the following (in thousands):

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Beginning balance	$	13,669		$	13,500
Settlements in cash or kind	(4,795		)	(4,019		)
Warranties issued and adjustments to preexisting warranties (1)	4,861			4,038
Liabilities assumed in acquisition	—			44
Ending balance	$	13,735		$	13,563

_______________________________________________

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

5. INCOME TAXES

The Company’s income tax expense and related effective rates were as follows (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015			For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Income tax expense	$	3,499		$	22,894		$	6,778		$	41,417
Income tax rate	30.2		%	28.7		%	30.5		%	29.8		%

The higher effective tax rates in the Second Quarter and the Year To Date Period, as compared to the Prior Year Quarter and Prior Year YTD Period, respectively, was primarily attributable to the recognition of income tax benefits due to the settlement of audits in the Prior Year Quarter. The impact of this discrete benefit is partially offset by a lower projected

10

effective tax rate for 2016 as compared to 2015, largely due to the projected shift in earnings mix towards foreign income which is taxed at lower statutory rates.

As of July 2, 2016, the total amount of unrecognized tax benefits, excluding interest and penalties, was $22.6 million, of which $19.4 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its 2009-2015 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be paid within twelve months of the condensed consolidated balance sheet date. As of July 2, 2016, the Company had recorded $0.9 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At July 2, 2016, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheet was $2.6 million and $1.8 million, respectively. For the Second Quarter and Year To Date Period, the Company accrued income tax-related interest expense of $0.2 million and $0.4 million, respectively.

6. STOCKHOLDERS’ EQUITY

Common Stock Repurchase Programs. Purchases of the Company’s common stock are made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased shares of common stock are recorded at cost and become authorized but unissued shares which may be issued in the future for general corporate or other purposes. The Company may terminate or limit its stock repurchase program at any time. In the event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs are conducted pursuant to Rule 10b-18 of the Exchange Act.

During the Year to Date period, the Company effectively retired 0.1 million shares of common stock repurchased under its repurchase programs. The effective retirement of repurchased common stock decreased common stock by $1,100, additional paid-in capital by $0.2 million, retained earnings by $5.0 million and treasury stock by $5.2 million. At January 2, 2016 and July 2, 2016, all treasury stock had been effectively retired. As of July 2, 2016, the Company had $824.2 million of repurchase authorizations remaining under its combined repurchase programs.

The following tables reflect the Company’s common stock repurchase activity for the periods indicated (in millions):

				For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	0.8	1.3	$	102.5
2012	$	1,000.0	December 2016 (1)	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—

				For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	0.1	$	5.2	2.2	$	188.2
2012	$	1,000.0	December 2016 (1)	—	$	—	0.3	$	28.8
2010	$	30.0	None	—	$	—	—	$	—

__________________________________________________________________________________

(1) In the first quarter of fiscal year 2015, the Company completed this repurchase plan.

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Controlling and Noncontrolling Interest. The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands):

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 2, 2016	$	921,388		$	11,155		$	932,543
Net income	11,814			3,654			15,468
Currency translation adjustment	7,721			—			7,721
Cash flow hedges - net change	(6,101		)	—			(6,101		)
Pension plan activity	1,714			—			1,714
Common stock issued upon exercise of stock options	57			—			57
Tax expense derived from stock-based compensation	(1,389		)	—			(1,389		)
Distribution of noncontrolling interest earnings	—			(4,544		)	(4,544		)
Acquisition of common stock	(6,418		)	—			(6,418		)
Stock-based compensation expense	16,463			—			16,463
Balance at July 2, 2016	$	945,249		$	10,265		$	955,514

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 3, 2015	$	977,860		$	5,941		$	983,801
Net income	92,718			4,740			97,458
Currency translation adjustment	(27,947		)	—			(27,947		)
Cash flow hedges - net change	(185		)	—			(185		)
Common stock issued upon exercise of stock options	582			—			582
Tax expense derived from stock-based compensation	(699		)	—			(699		)
Distribution of noncontrolling interest earnings	—			(5,056		)	(5,056		)
Business acquisition	—			5,831			5,831
Acquisition of common stock	(218,659		)	—			(218,659		)
Stock-based compensation expense	9,276			—			9,276
Balance at July 4, 2015	$	832,946		$	11,456		$	844,402

7. EMPLOYEE BENEFIT PLANS

Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the Second Quarter:

Stock Options and Stock Appreciation Rights	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)				(in Years)	(in Thousands)
Outstanding at April 2, 2016	2,214		$	51.82	6.9	$	10,828
Granted	—
Exercised	—
Forfeited or expired	(8	)	117.13
Outstanding at July 2, 2016	2,206		51.59		6.7	791
Exercisable at July 2, 2016	538		$	84.14	4.4	$	791

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The aggregate intrinsic value shown in the table above is before income taxes and is based on (i) the exercise price for outstanding and exercisable options/rights at July 2, 2016 and (ii) the fair market value of the Company’s common stock on the exercise date for options/rights that were exercised during the Second Quarter.

Stock Options and Stock Appreciation Rights Outstanding and Exercisable. The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at July 2, 2016:

Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	41	$	14.40	2.7	41	$	14.40
$30.71 - $47.99	91	36.29		2.5	91	36.29
$55.04 - $83.83	92	80.80		4.8	92	80.80
$95.91 - $131.46	144	127.98		5.7	144	127.98
Total	368	$	80.95	4.3	368	$	80.95

Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	26	$	21.97	4.2	13	$	13.65
$30.71 - $47.99	1,560	38.27		7.5	9	38.40
$55.04 - $83.83	143	79.05		6.1	62	80.44
$95.91 - $131.46	109	114.42		5.0	86	115.32
Total	1,838	$	45.72	7.2	170	$	91.02

Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity during the Second Quarter:

Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
	(in Thousands)
Nonvested at April 2, 2016	1,063		$	47.98
Granted	494		27.60
Vested	(21	)	82.08
Forfeited	(12	)	41.27
Nonvested at July 2, 2016	1,524		$	40.95

The total fair value of restricted stock and restricted stock units vested during the Second Quarter was approximately $0.6 million. Vesting of performance restricted stock units is based on achievement of sales growth and operating margin targets in relation to the performance of a certain identified peer group, particular sales growth in relation to a defined sales plan and achievement of succession plans for key talent.

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8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables illustrate changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):

	For the 13 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(64,486	)	$	(1,554	)	$	(1,457	)	$	(4,506	)	$	(72,003	)
Other comprehensive income (loss) before reclassifications	(9,396		)	8,738			(711		)	—			(1,369		)
Tax (expense) benefit	—			(3,576		)	259			—			(3,317		)
Amounts reclassed from accumulated other comprehensive income	104			928			(450		)	—			582
Tax (expense) benefit	—			(263		)	164			—			(99		)
Total other comprehensive income (loss)	(9,500		)	4,497			(166		)	—			(5,169		)
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

	For the 13 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(60,747	)	$	19,315		$	(4,776	)	$	(3,647	)	$	(49,855	)
Other comprehensive income (loss) before reclassifications	5,559			2,701			10,460			—			18,720
Tax (expense) benefit	—			253			(3,812		)	—			(3,559		)
Amounts reclassed from accumulated other comprehensive income	—			10,555			4,604			—			15,159
Tax (expense) benefit	—			(3,634		)	(1,677		)	—			(5,311		)
Total other comprehensive income (loss)	5,559			(3,967		)	3,721			—			5,313
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

	For the 26 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(81,707	)	$	8,114		$	(693	)	$	(6,220	)	$	(80,506	)
Other comprehensive income (loss) before reclassifications	7,825			(1,259		)	(2,381		)	2,010			6,195
Tax (expense) benefit	—			1,039			868			(296		)	1,611
Amounts reclassed from accumulated other comprehensive income	104			7,267			(918		)	—			6,453
Tax (expense) benefit	—			(2,316		)	335			—			(1,981		)
Total other comprehensive income (loss)	7,721			(5,171		)	(930		)	1,714			3,334
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

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	For the 26 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swap			Pension Plan			Total
Beginning balance	$	(27,241	)	$	14,980		$	(502	)	$	(3,647	)	$	(16,410	)
Other comprehensive income (loss) before reclassifications	(27,947		)	21,462			3,054			—			(3,431		)
Tax (expense) benefit	—			(5,965		)	(1,113		)	—			(7,078		)
Amounts reclassed from accumulated other comprehensive income	—			22,993			3,923			—			26,916
Tax (expense) benefit	—			(7,864		)	(1,429		)	—			(9,293		)
Total other comprehensive income (loss)	(27,947		)	368			(553		)	—			(28,132		)
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

9. SEGMENT INFORMATION

The Company reports segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. Each reportable operating segment provides similar products and services.

The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are based on the location of the selling entity. Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Global strategic initiatives such as brand building and omni channel activities and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses are not allocated to the various segments because they are managed at the corporate level internally. The Company does not include intercompany transfers between segments for management reporting purposes.

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Summary information by operating segment was as follows (in thousands):

	For the 13 Weeks Ended July 2, 2016					For the 13 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	345,187	$	52,300		$	386,088	$	86,033
Europe	215,936		31,669			227,923		41,814
Asia	124,245		18,936			125,964		20,555
Corporate			(87,455		)			(77,968		)
Consolidated	$	685,368	$	15,450		$	739,975	$	70,434

	For the 26 Weeks Ended July 2, 2016					For the 26 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	680,997	$	111,896		$	752,684	$	162,533
Europe	425,937		60,180			462,179		79,152
Asia	238,282		36,865			250,197		41,051
Corporate			(179,087		)			(156,147		)
Consolidated	$	1,345,216	$	29,854		$	1,465,060	$	126,589

The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016				For the 13 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	517,602	75.5	%	$	575,804	77.8	%
Leathers	93,152		13.6		89,380		12.1
Jewelry	56,752		8.3		55,780		7.5
Other	17,862		2.6		19,011		2.6
Total	$	685,368	100.0	%	$	739,975	100.0	%

	For the 26 Weeks Ended July 2, 2016				For the 26 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	1,014,085	75.4	%	$	1,127,661	77.0	%
Leathers	185,657		13.8		182,306		12.4
Jewelry	111,472		8.3		118,767		8.1
Other	34,002		2.5		36,326		2.5
Total	$	1,345,216	100.0	%	$	1,465,060	100.0	%

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10. DERIVATIVES AND RISK MANAGEMENT

Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months. The Company enters into forward contracts, generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts.

These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency.

At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective.

For a derivative instrument that is designated and qualifies as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income and comprehensive income, and there were no components excluded from the assessment of hedge effectiveness for the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement.

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As of July 2, 2016, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge the future payments of inventory transactions (in millions):

Functional Currency		Contract Currency
Type	Amount	Type	Amount
Euro	255.1	U.S. dollar	288.3
British pound	52.9	U.S. dollar	79.0
Canadian dollar	80.5	U.S. dollar	61.0
Japanese yen	4,077.9	U.S. dollar	35.7
Mexican peso	335.4	U.S. dollar	18.3
Australian dollar	20.0	U.S. dollar	14.6
U.S. dollar	28.0	Japanese yen	3,013.0

The Company is also exposed to interest rate risk related to its outstanding debt. To manage the interest rate risk related to its $231.3 million U.S.-based term loan (as amended and restated on March 9, 2015, the "Term Loan”), the Company entered into an interest rate swap agreement on July 26, 2013 with a term of approximately five years. The objective of this hedge is to offset the variability of future payments associated with interest rates on the Term Loan. The interest rate swap agreement hedges the 1-month London Interbank Offer Rate ("LIBOR") based variable rate debt obligations under the Term Loan. Under the terms of the swap, the Company pays a fixed interest rate of 1.288% per annum to the swap counterparty plus the LIBOR rate applicable margin (which varies based upon the Company’s consolidated leverage ratio (the “Ratio”) from 1.25% if the Ratio is less than 1.00 to 1.00, to 2.00% if the Ratio is greater than or equal to 2.00 to 1.00). The notional amount amortizes over the remaining life of the Term Loan to coincide with repayments on the underlying loan. The Company receives interest from the swap counterparty at a variable rate based on 1-month LIBOR. This hedge is designated as a cash flow hedge.

Net Investment Hedges. The Company is also exposed to risk that adverse changes in foreign currency exchange rates could impact its net investment in foreign operations. During the first quarter of fiscal year 2016, the Company entered into a forward contract designated as a net investment hedge to reduce exposure to changes in currency exchange rates on 45.0 million euros of its total investment in a wholly-owned, euro-denominated foreign subsidiary. The hedge was settled during the Second Quarter resulting in a net gain of $0.5 million net of taxes that was recognized in the currency translation component of accumulated other comprehensive income (loss).

The effective portion of derivatives designated as net investment hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded in the cumulative translation adjustment component of other comprehensive income (loss) in the Company’s condensed consolidated statements of income and comprehensive income. The Company uses the hypothetical derivative method to assess the ineffectiveness of net investment hedges. Should any portion of a net investment hedge become ineffective, the ineffective portion will be reclassified to other income (expense)-net on the Company’s condensed consolidated statements of income and comprehensive income. Gains and losses reported in accumulated other comprehensive income (loss) will not be reclassified into earnings until the Company’s underlying investment is liquidated or dissolved.

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of July 2, 2016, the Company had non-designated forward contracts of approximately $1.4 million on 21.6 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives, not designated as hedging instruments, are recognized in earnings when they occur.

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The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period are set forth below (in thousands):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	5,162		$	2,954
Interest rate swaps	(452		)	6,648
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	4,710		$	9,602

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	(220	)	$	15,497
Interest rate swaps	(1,513		)	1,941
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(1,733	)	$	17,438

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The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period (in thousands):

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	665		$	6,921
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	74		$	(9	)
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(286	)	$	(404	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	4,951		$	15,129
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(157	)	$	80
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(583	)	$	(837	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

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The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands):

	Asset Derivatives						Liability Derivatives
	July 2, 2016			January 2, 2016			July 2, 2016			January 2, 2016
Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	10,709	Prepaid expenses and other current assets	$	13,184	Accrued expenses- other	$	6,109	Accrued expenses- other	$	477
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	167		Accrued expenses- other	49		Accrued expenses- other	71
Interest rate swap designated as a cash flow hedging instrument	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Accrued expenses- other	1,568		Accrued expenses- other	1,273
Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	2,845		Intangible and other assets-net	2,785		Other long-term liabilities	1,936		Other long-term liabilities	250
Interest rate swap designated as a cash flow hedging instrument	Intangible and other assets-net	—		Intangible and other assets-net	311		Other long-term liabilities	985		Other long-term liabilities	128
Total		$	13,554		$	16,447		$	10,647		$	2,199

At the end of the Second Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June 2018. As of July 2, 2016, an estimated net gain of $3.3 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates. See “Note 1—Financial Statement Policies” for additional disclosures on foreign currency hedging instruments.

11. 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.

Accounting Standards Codification ("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 July 2, 2016 (in thousands):

	Fair Value at July 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	13,554	$	—	$	13,554
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,398		—		—		2,398
Total	$	2,398	$	13,554	$	—	$	15,952
Liabilities:
Forward contracts	—		8,094		—		8,094
Interest rate swap	—		2,553		—		2,553
Total	$	—	$	10,647	$	—	$	10,647

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The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 (in thousands):

	Fair Value at January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	16,136	$	—	$	16,136
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,406		—		—		2,406
Interest rate swap	—		311		—		311
Total	$	2,406	$	16,447	$	—	$	18,853
Liabilities:
Contingent consideration	$	—	$	—	$	3,643	$	3,643
Forward contracts	—		798		—		798
Interest rate swap	—		1,401		—		1,401
Total	$	—	$	2,199	$	3,643	$	5,842

The fair values of the Company’s 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 condensed 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 fair values of the interest rate swap assets and liabilities are determined using valuation models based on market observable inputs, including forward curves, mid-market price and volatility levels. See “Note 10—Derivatives and Risk Management” for additional disclosures about the interest rate swaps and forward contracts.

The Company has evaluated its short-term and long-term debt as of July 2, 2016 and January 2, 2016 and believes, based on the interest rates, related terms and maturities, that the fair values of such instruments approximated their carrying amounts. As of July 2, 2016 and January 2, 2016, the carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated their fair values due to the short-term maturities of these accounts.

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12. INTANGIBLE AND OTHER ASSETS

The following table summarizes intangible and other assets (in thousands):

		July 2, 2016				January 2, 2016
	Useful	Gross		Accumulated		Gross		Accumulated
	Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:
Trademarks	10 yrs.	$	4,310	$	3,321	$	4,175	$	3,195
Customer lists	5-10 yrs.	54,064		24,166		53,825		21,001
Patents	3-20 yrs.	2,302		2,082		2,273		2,064
Noncompete agreement	3-6 yrs.	2,524		1,409		2,515		1,134
Developed technology	7 yrs.	36,100		2,579		36,100		—
Trade name	6 yrs.	15,700		1,308		15,700		—
Other	7-20 yrs.	259		214		256		206
Total intangibles-subject to amortization		115,259		35,079		114,844		27,600
Intangibles-not subject to amortization:
Trade names		74,503				74,493
Other assets:
Key money deposits		28,612		20,349		29,357		19,805
Other deposits		22,303				21,684
Deferred compensation plan assets		2,398				2,406
Deferred tax asset-net		22,131				18,602
Restricted cash		525				512
Shop-in-shop		9,494		7,807		9,985		8,262
Interest rate swap		—				311
Forward contracts		2,845				2,785
Investments		2,397				2,396
Other		4,784				5,519
Total other assets		95,489		28,156		93,557		28,067
Total intangible and other assets		$	285,251	$	63,235	$	282,894	$	55,667
Total intangible and other assets-net				$	222,016			$	227,227

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the initial lease term, which ranges from approximately four to 18 years.

Amortization expense for intangible assets was approximately $3.8 million and $1.4 million for the Second Quarter and Prior Year Quarter, respectively, and $7.5 million and $2.5 million for the Year To Date Period and Prior Year YTD Period, respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):

Fiscal Year	Amortization Expense
2016 (remaining)	$	7,487
2017	$	14,721
2018	$	14,366
2019	$	14,037
2020	$	13,528
2021	$	9,703

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13. COMMITMENTS AND CONTINGENCIES

Litigation. The Company is occasionally subject to litigation or other legal proceedings in the normal course of its business. The Company does not believe that the outcome of any currently pending legal matters, individually or collectively, will have a material effect on the business or financial condition of the Company.

14. DEBT ACTIVITY

The Company made principal payments of $4.7 million and $9.4 million under its Term Loan during the Second Quarter and Year To Date Period, respectively. The Company also made net payments of $83.6 million and $64.0 million under its U.S. revolving line of credit (the "Revolving Credit Facility") during the Second Quarter and Year To Date Period, respectively. Borrowings were primarily used to fund capital expenditures, normal operating expenses and stock repurchases and were more than offset by payments on debt. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of July 2, 2016, the Company had available borrowing capacity of approximately $133.0 million under the Revolving Credit Facility, which was favorably impacted by a $215.5 million international cash balance. The Company incurred approximately $1.6 million and $3.2 million of interest expense related to the Term Loan during the Second Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap. The Company incurred approximately $4.2 million and $7.9 million of interest expense related to the Revolving Credit Facility during the Second Quarter and Year To Date Period, respectively.

15. SUBSEQUENT EVENT

Credit Agreement. On August 8, 2016, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the "First Amendment"). The First Amendment adds two new levels to the applicable margin pricing grid used to calculate the interest rate that is applicable to base rate loans and LIBOR rate loans under the Revolving Credit Facility and increases the applicable margin at each pricing level for LIBOR rate loans and base rate loans by 25 basis points. Additionally, the First Amendment provides for the net cash proceeds from certain debt issuances by the Company in excess of $25.0 million to be applied, first, to prepay the Term Loan and, for the excess, if any, to prepay the Revolving Credit Facility with a corresponding reduction in the revolving credit commitment by the amount of such excess proceeds. The First Amendment also changes the consolidated total leverage ratio that the Company must comply with for fiscal quarters ending on or after June 30, 2016 from 2.50:1.00 to 3.25:1.00.

In connection with the First Amendment, the Company and certain of its material domestic subsidiaries entered into a Collateral Agreement in favor of Wells Fargo Bank, National Association, as administrative agent, pursuant to which the Company and such subsidiaries granted liens on all or substantially all of their assets in order to secure the Company’s obligations under the Revolving Credit Facility and the other loan documents (the “Obligations”). Additionally, certain of the Company’s domestic subsidiaries entered into a guaranty agreement in favor of Wells Fargo Bank, National Association, as administrative agent, pursuant to which such subsidiaries guarantee the payment and performance of the Obligations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the financial condition and results of operations of Fossil Group, Inc. and its subsidiaries for the thirteen and twenty-six week periods ended July 2, 2016 (the “Second Quarter” and “Year To Date Period,” respectively) as compared to the thirteen and twenty-six week periods ended July 4, 2015 (the “Prior Year Quarter” and “Prior Year YTD Period,” respectively). This discussion should be read in conjunction with the condensed consolidated financial statements and the related notes thereto.

General

We are a global design, marketing and distribution company that specializes in consumer fashion accessories. Our principal offerings include an extensive line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts and sunglasses. In the watch and jewelry product categories, we have a diverse portfolio of globally recognized owned and licensed brand names under which our products are marketed. Our products are distributed globally through various distribution channels, including wholesale in countries where we have a physical presence, direct to the consumer through our retail stores and commercial websites and through third party distributors in countries where we do not maintain a physical presence. Our products are offered at varying price points to meet the needs of our customers, whether they are value conscious or luxury oriented. Based on our extensive range of accessory products, brands, distribution channels and price points, we are able to target style conscious consumers across a wide age spectrum on a global basis.

Domestically, we sell our products through a diversified distribution network that includes department stores, specialty retail locations, specialty watch and jewelry stores, Company-owned retail and outlet stores, mass market stores and through our FOSSIL^® website. Our wholesale customer base includes, among others, Amazon.com, Dillard’s, JCPenney, Kohl’s, Macy’s, Neiman Marcus, Nordstrom, Saks Fifth Avenue, Target and Wal-Mart. In the United States, our network of Company-owned stores included 97 retail stores located in premier retail sites and 141 outlet stores located in major outlet malls as of July 2, 2016. In addition, we offer an extensive collection of our FOSSIL brand products on our website, www.fossil.com, as well as proprietary and licensed watch and jewelry brands through other managed and affiliated websites.

Internationally, our products are sold to department stores, specialty retail stores and specialty watch and jewelry stores in approximately 150 countries worldwide through 23 Company-owned foreign sales subsidiaries and through a network of approximately 80 independent distributors. Internationally, our network of Company-owned stores included 245 retail stores and 132 outlet stores as of July 2, 2016. Our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks in certain international markets. In addition, we offer an extensive collection of our FOSSIL brand products on our websites in certain countries.

Our business is subject to economic cycles and retail industry conditions. Purchases of discretionary fashion accessories, such as our watches, handbags, sunglasses and other products, tend to decline during recessionary periods when disposable income is low and consumers are hesitant to use available credit. In addition, acts of terrorism, acts of war and military action both in the U.S. and abroad can have a significant effect on economic conditions and may negatively affect our ability to procure our products from manufacturers for sale to our customers. Any significant declines in general economic conditions, public safety concerns or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on consumer purchases of our products.

Our business is also subject to the risks inherent in global sourcing supply. Certain key components in our products come from limited sources of supply, which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products. Any interruption or delay in the supply of key components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales. Interruptions or delays in supply may be caused by a number of factors that are outside of our and our contract manufacturers’ control.

Future sales and earnings growth are also contingent upon our ability to anticipate and respond to changing fashion trends and consumer preferences in a timely manner while continuing to develop innovative products in the respective markets in which we compete. As is typical with new products, market acceptance of new designs and products that we may introduce is subject to uncertainty. In addition, we generally make decisions regarding product designs several months in advance of the time when consumer acceptance can be measured. We believe our historical sales growth is the result of our ability to design innovative watch products that not only differentiate us from our competition but also continue to provide a solid value proposition to consumers across all of our brands.

The majority of our products are sold at retail price points ranging from $85 to $600. We believe that the price/value relationship and the differentiation and innovation of our products, in comparison to those of our competitors, will allow us to maintain or grow our market share in those markets in which we compete. Historically, during recessionary periods, the strength of our balance sheet, our strong operating cash flow and the relative size of our business with our wholesale customers,

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in comparison to that of our competitors, have allowed us to weather recessionary periods for longer periods of time and generally resulted in market share gains to us.

Our international operations are subject to many risks, including foreign currency fluctuations and risks related to the global economy. Generally, a strengthening of the U.S. dollar against currencies of other countries in which we operate will reduce the translated amounts of sales and operating expenses of our subsidiaries, which results in a reduction of our consolidated operating income. We manage these currency risks by using derivative instruments. The primary risks managed by using derivative instruments are the future payments by non-U.S. dollar functional currency subsidiaries of intercompany inventory transactions denominated in U.S. dollars. We enter into foreign exchange forward contracts ("forward contracts") to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. We are also exposed to interest rate risk associated with our variable rate debt, which we manage with an interest rate swap.

For a more complete discussion of the risks facing our business, see “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

Results of Operations

Executive Summary. During the Second Quarter, net sales decreased7% (6% in constant currency), as compared to the Prior Year Quarter. As expected, Second Quarter net sales trailed the Prior Year Quarter; however, during the Second Quarter our sales trends, though still challenging, remained relatively stable. Within the Americas region the wholesale channel proved to be the largest driver of the sales decline in the Second Quarter as the U.S. department stores' business continued to appear soft. Additionally, we experienced a modest decline in sell-through in some markets within the Europe region as compared to the Prior Year Quarter. Although weakness in the traditional watch category continued during the Second Quarter, several areas of our business performed well. We believe these areas of the business are positive indicators that we have the appropriate long-term strategies in place and reinforce our commitment to investing in these strategies to drive future growth.

FOSSIL and SKAGEN^® brands both grew during the Second Quarter as compared to the Prior Year Quarter and our leathers assortment, particularly women's handbags, continued to drive positive results. Although our wearables products represent only a small portion of our total business, they continue to resonate with customers. As previously announced, we will be launching connected accessories across more of the brands in our portfolio later this year and are on track to deliver product beginning in the third quarter. The investments we have made in our omni-channel capabilities, including the re-launching of our branded websites, also continue to benefit the business. As consumer shopping patterns and preferences continue to evolve, as recently reflected in the weaker wholesale trends, we are continuing to invest in our digital and omni-channel capabilities and our Customer Relationship Management ("CRM") initiatives. We believe these investments will further enhance our interactions with customers and drive future growth.

FOSSIL branded products increased 1% (2% in constant currency) in the Second Quarter as compared to the Prior Year Quarter, including growth in Asia and Europe and continued strength in women's leathers, a category that is resonating with consumers as we continue to improve the assortment by adding new designs and features. Growth in our FOSSIL branded leathers category was partially offset by a decline in jewelry, while watches were flat (increased slightly in constant currency). During the Second Quarter, our SKAGEN branded products increased 8% (7% in constant currency) as compared to the Prior Year Quarter, representing growth across all major product categories led by watches. Increases in SKAGEN branded sales in Europe and Asia offset declines in the Americas. We believe our owned brands have continued to benefit from our CRM initiatives and our store experiences that drive customer engagement and create a deeper emotional connection to the brands.

Our multi-brand global watch portfolio decreased 10% (9% in constant currency) during the Second Quarter as compared to the Prior Year Quarter. The wholesale channel continued to be the most challenging as the traditional watch category continued to be pressured from the growing technology enabled accessories market and an overall weaker demand for traditional watches. While we continued to benefit from the addition of newer brands to the portfolio including KATE SPADE NEW YORK^® and TORY BURCH^®, both of which are now fully benefiting from our competitive and strategic advantages of design, product development and global distribution, the majority of the brands in the portfolio declined in the Second Quarter as compared to the Prior Year Quarter. While we are in the early stages of launching connected accessories, with the larger launch across more of our brands in the back half of the year, we continue to believe that our competitive and strategic advantages of creativity, scale, and our portfolio of brands, combined with our technology platform, put us in position to disrupt the watch market as the line blurs between traditional watches and connected accessories.

Global comparable store sales decreased 3% during the Second Quarter as positive comparable store sales in Asia were offset by declines in the Americas and Europe. Globally, our full price retail stores delivered positive comparable store sales with the Fossil Q continuing to sell well and drive traffic to our stores combined with our women's handbags also performing very well. Our outlet stores remain more challenging as our promotions have not offset the traffic headwinds.

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During the Second Quarter as compared to the Prior Year Quarter, gross profit decreased primarily driven by lower sales given the challenging retail environment and pressure on the traditional watch category. The gross margin rate also declined, largely as a result of increased off-price sales as we managed our inventory levels and increased promotional activity to drive our outlet business. Additionally, the gross margin rate included an unfavorable currency impact of approximately 90 basis points. Operating expenses for the Second Quarter were in line with the Prior Year Quarter, as the non-recurrence of prior year restructuring charges and a reduction in store expenses were offset by increased expenses associated with wearables and strategic omni-channel investments. Additionally, other income decreased as we had fewer gains on foreign currency contracts during the Second Quarter as compared to the Prior Year Quarter, along with the non-recurrence of an interest rate hedge settlement which benefited the Prior Year Quarter. During the Second Quarter, our financial performance, including the unfavorable impacts of currencies, resulted in earnings of $0.12 per diluted share.

Quarterly Periods Ended July 2, 2016 and July 4, 2015

Consolidated Net Sales. Net sales decreased$54.6 million or 7.4% (6% in constant currency), for the Second Quarter as compared to the Prior Year Quarter. Global watch sales decreased$58.2 million or 10.1% (9% in constant currency), while our leathers products increased$3.8 million or 4.3% (6% in constant currency) driven by increases in FOSSIL. During the Second Quarter, our jewelry business increased$1.0 million or 1.8% (2% in constant currency).

Net sales information by product category is summarized as follows (dollars in millions):

	For the 13 Weeks Ended July 2, 2016				For the 13 Weeks Ended July 4, 2015
									Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage
Watches	$	517.6	75.5	%	$	575.8	77.8	%	$	(58.2	)	(10.1	)%
Leathers	93.2		13.6		89.4		12.1		3.8			4.3
Jewelry	56.8		8.3		55.8		7.5		1.0			1.8
Other	17.8		2.6		19.0		2.6		(1.2		)	(6.3	)
Total	$	685.4	100.0	%	$	740.0	100.0	%	$	(54.6	)	(7.4	)%

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates. In general, our overall financial results are affected positively by a weaker U.S. dollar and are affected negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct our business. We present constant currency information because we believe that such information is useful to certain investors as a measure of our results of operations year-over-year without the effects of foreign currency fluctuations. To calculate net sales on a constant currency basis, net sales for the current year for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average rates during the prior year.

In the Second Quarter, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by approximately $6.8 million, including unfavorable impacts of $3.6 million, $2.2 million and $1.0 million in our Americas, Asia and Europe segments, respectively, when compared to the Prior Year Quarter.

The following table sets forth consolidated net sales by segment (dollars in millions):

	For the 13 Weeks Ended July 2, 2016				For the 13 Weeks Ended July 4, 2015				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage
Americas	$	345.2	50.4	%	$	386.1	52.2	%	$	(40.9	)	(10.6	)%
Europe	215.9		31.5		227.9		30.8		(12.0		)	(5.3	)
Asia	124.3		18.1		126.0		17.0		(1.7		)	(1.3	)
Total	$	685.4	100.0	%	$	740.0	100.0	%	$	(54.6	)	(7.4	)%

Americas Net Sales. Americas net sales decreased$40.9 million or 10.6% (10% in constant currency), driven by watches with jewelry and leathers also contributing to the decline during the Second Quarter in comparison to the Prior Year Quarter. During the Second Quarter, our multi-brand watch portfolio decreased $38.0 million or 12.8% (12% in constant currency),

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while our leathers business decreased $1.5 million or 2.6% (2% in constant currency) and our jewelry category decreased $0.8 million or 3.7% (3% in constant currency). During the Second Quarter, across brands both KATE SPADE NEW YORK and TORY BURCH delivered solid increases that were offset by declines in nearly all of the other brands in the portfolio. During the Second Quarter, though sales trends were relatively stable and generally consistent with the first quarter of fiscal year 2016, the wholesale channel proved to be the largest driver of the sales decline in the Americas region as the U.S. department stores' business continued to appear soft. Within the region, our full-price accessory stores performed relatively well driven by strong performances in women's handbags and wearables during the Second Quarter as compared to the Prior Year Quarter. Modest growth in our retail stores in Canada was offset by a decline in the U.S.

Europe Net Sales. Europe net sales decreased$12.0 million or 5.3% (5% in constant currency), led by a decline in watches and jewelry partially offset by an increase in leathers during the Second Quarter in comparison to the Prior Year Quarter. Our multi-brand watch portfolio decreased $12.8 million or 7.5% (7% in constant currency), while our jewelry category decreased $0.1 million or 0.4% (1% in constant currency) and our leathers business increased $2.0 million or 12.3% (13% in constant currency) in the Second Quarter. Within the region, growth in SKAGEN and FOSSIL was offset by a decline in nearly all of the brands in the licensed portfolio. By country, modest growth in France and Germany was offset by a decline in the United Kingdom and in our distributor markets, which include the Middle East and Russia, and we experienced a modest decline in sell-through in some markets. The retail channel delivered growth during the Second Quarter, including positive comparable store sales in our full-price stores, despite a slight decline in the overall comparable store performance for the region.

Asia Net Sales. Net sales in Asia decreased$1.7 million or 1.3% (flat in constant currency). The decrease was driven by watches, partially offset by modest growth in leathers and jewelry. Constant currency growth in India, Malaysia, Singapore, Australia and China was offset by declines in Japan, Macau and Hong Kong. During the Second Quarter as compared to the Prior Year Quarter, our watch category decreased $7.4 million or 6.9% (5% in constant currency), partially offset by increases in leathers of $3.3 million or 24.9% (29% in constant currency) and increases in jewelry of $1.9 million or 106.5% (109% in constant currency). Growth in FOSSIL and SKAGEN was offset by declines in nearly all of the other brands in the portfolio. Comparable store sales in the region increased modestly in both our owned full-price and outlet stores.

The following table sets forth the number of stores by concept on the dates indicated below:

	July 2, 2016				July 4, 2015
	Americas	Europe	Asia	Total	Americas	Europe	Asia	Total
Full price accessory	126	124	69	319	138	126	63	327
Outlets	155	73	45	273	145	66	42	253
Full priced multi-brand	—	7	16	23	1	5	22	28
Total stores	281	204	130	615	284	197	127	608

During the Second Quarter, we opened nine new stores and closed six stores.

A store is included in comparable store sales in the thirteenth month of operation. Stores that experience a gross square footage increase of 10% or more due to an expansion and/or relocation are removed from the comparable store sales base, but are included in total sales. These stores are returned to the comparable store sales base in the thirteenth month following the expansion and/or relocation. Comparable store sales also exclude the effects of foreign currency fluctuations.

Gross Profit. Gross profit of $355.8 million in the Second Quarter decreased13.1% in comparison to $409.5 million in the Prior Year Quarter as a result of decreased sales and changes in foreign currencies. Gross profit margin rate decreased340 basis points to 51.9% in the Second Quarter compared to 55.3% in the Prior Year Quarter. The gross profit margin rate decrease was largely driven by increased off-price sales to manage inventory levels and additional promotional activity to drive outlet sales. Additionally, the gross margin rate included an unfavorable currency impact of approximately 90 basis points.

Operating Expenses. Total operating expenses in the Second Quarter increased by $1.3 million or 0.4% to $340.3 million compared to $339.0 million in the Prior Year Quarter. The translation of foreign-denominated expenses during the Second Quarter decreased operating expenses by approximately $1.9 million as a result of the stronger U.S. dollar. The non-recurrence of $6.5 million in restructuring costs that occurred in the Prior Year Quarter and lower store expenses were more than offset by increases in expenses associated with wearables including $6.1 million of Misfit purchase accounting related costs and an increase in strategic omni-channel investments. As a percentage of net sales, operating expenses increased390 basis points to 49.7% in the Second Quarter as compared to 45.8% in the Prior Year Quarter given the impact of relatively flat expenses on lower sales.

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Consolidated Operating Income. Operating income decreased to $15.5 million in the Second Quarter as compared to $70.4 million in the Prior Year Quarter driven by lower sales and gross margin and an $8.1 million unfavorable impact from changes in foreign currencies. As a percentage of net sales, operating margin decreased to 2.3% in the Second Quarter compared to 9.5% in the Prior Year Quarter and included a negative impact of approximately 110 basis points due to changes in foreign currencies.

Sales and gross margins were negatively impacted by currencies in all regional segments during the Second Quarter as compared to the Prior Year Quarter. On a constant currency basis, sales and gross profit decreased across all geographies. Our gross profit margin was negatively impacted by increased promotional activity in our stores, primarily outlets in all regions, and increased off-price sales in the America's wholesale channel in order to manage inventory levels. In the Second Quarter, total operating expenses were relatively flat to the Prior Year Quarter, with increased expenses relating to wearables and Misfit purchase accounting in our corporate costs offset by the non-recurrence of restructuring charges incurred in the Prior Year Quarter and decreased store costs across all segments.

Operating income by segment is summarized as follows (dollars in millions):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015			Growth (Decline)					Operating Margin %
							Dollars			Percentage		2016		2015
Americas	$	52.3		$	86.0		$	(33.7	)	(39.2	)%	15.2	%	22.3	%
Europe	31.7			41.8			(10.1		)	(24.2	)	14.7		18.3
Asia	19.0			20.6			(1.6		)	(7.8	)	15.2		16.3
Corporate	(87.5		)	(78.0		)	(9.5		)	12.2
Total operating income	$	15.5		$	70.4		$	(54.9	)	(78.0	)%	2.3	%	9.5	%

Interest Expense. Interest expense increased by $1.4 million during the Second Quarter as a result of increased debt levels in comparison to the Prior Year Quarter.

Other Income (Expense)-Net. During the Second Quarter, other income (expense)-net decreased by $11.8 million to $2.5 million in comparison to the Prior Year Quarter. This change was primarily driven by lower net foreign currency gains resulting from mark-to-market hedging and other transactional activities as compared to the Prior Year Quarter and a $5.2 million gain related to an interest rate hedge settlement in the Prior Year Quarter.

Provision for Income Taxes. Income tax expense for the Second Quarter was $3.5 million, resulting in an effective income tax rate of 30.2%. For the Prior Year Quarter, income tax expense was $22.9 million, resulting in an effective income tax rate of 28.7%. The higher effective tax rate in the Second Quarter as compared to the Prior Year Quarter was primarily attributable to the recognition of income tax benefits due to the settlement of audits in the Prior Year Quarter. The impact of this discrete benefit is partially offset by a lower projected effective tax rate for 2016 as compared to 2015, largely due to the projected shift in earnings mix towards foreign income which is taxed at lower statutory rates.

Net Income Attributable to Fossil Group, Inc.Second Quarter net income attributable to Fossil Group, Inc. decreased to $6.0 million, or $0.12 per diluted share, in comparison to $54.6 million, or $1.12 per diluted share, in the Prior Year Quarter.Diluted earnings per share in the Second Quarter as compared to the Prior Year Quarter included a $0.19 per diluted share decrease driven by the translation impact of a stronger U.S. dollar and less net foreign currency gains resulting from mark-to-market hedging and other transactional activities. Diluted earnings per share was also unfavorably impacted by a $0.09 per diluted share decrease due to the amortization of acquired Misfit intangible assets and of related contingent equity grants. Partially offsetting these decreases was a $0.09 favorable impact to diluted earnings per share due to the non-recurrence of Prior Year Quarter restructuring charges.

Fiscal Year To Date Periods Ended July 2, 2016 and July 4, 2015

Consolidated Net Sales. Net sales decreased$119.9 million or 8.2% (7% in constant currency), for the Year To Date Period as compared to the Prior Year YTD Period. Global watch sales decreased$113.6 million or 10.1% (8% in constant currency). Our jewelry product category decreased$7.3 million or 6.1% (5% in constant currency), while our leathers category increased$3.3 million or 1.8% (4% in constant currency), during the Year To Date Period as compared to the Prior Year YTD Period. Global comparable store sales decreased 3.1% in our owned retail stores, with positive comparable store sales results in Europe and Asia more than offset by a decline in the Americas. From a product category perspective, comparable store sales declines in watches and jewelry were partially offset by a gain in leathers.

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Net sales information by product category is summarized as follows (dollars in millions):

	For the 26 Weeks Ended July 2, 2016				For the 26 Weeks Ended July 4, 2015				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage
Watches	$	1,014.1	75.4	%	$	1,127.7	77.0	%	$	(113.6	)	(10.1	)%
Leathers	185.6		13.8		182.3		12.4		3.3			1.8
Jewelry	111.5		8.3		118.8		8.1		(7.3		)	(6.1	)
Other	34.0		2.5		36.3		2.5		(2.3		)	(6.3	)
Total	$	1,345.2	100.0	%	$	1,465.1	100.0	%	$	(119.9	)	(8.2	)%

In the Year To Date Period, the translation of foreign-based net sales into U.S. dollars decreased reported net sales by approximately $23.2 million, including unfavorable impacts of $8.4 million, $7.6 million and $7.2 million, in our Americas, Asia, and Europe and segments, respectively.

The following table sets forth consolidated net sales by segment (dollars in millions):

	For the 26 Weeks Ended July 2, 2016				For the 26 Weeks Ended July 4, 2015				Growth (Decline)
	Net Sales		Percentage of Total		Net Sales		Percentage of Total		Dollars			Percentage
Americas	$	681.0	50.6	%	$	752.7	51.4	%	$	(71.7	)	(9.5	)%
Europe	425.9		31.7		462.2		31.5		(36.3		)	(7.9	)
Asia	238.3		17.7		250.2		17.1		(11.9		)	(4.8	)
Total	$	1,345.2	100.0	%	$	1,465.1	100.0	%	$	(119.9	)	(8.2	)%

Americas Net Sales. For the Year To Date Period, Americas net sales decreased$71.7 million or 9.5% (8% in constant currency), compared to the Prior Year YTD Period. Sales performance in the Year To Date Period was principally driven by sales declines in watches of $60.5 million or 10.6% (9% in constant currency). Our jewelry and leathers categories also declined $4.3 million or 9.3% (9% in constant currency) and $4.1 million or 3.4% (2% in constant currency), respectively. Comparable store sales decreased moderately in our owned retail stores during the Year To Date Period.

Europe Net Sales. For the Year To Date Period, Europe net sales decreased$36.3 million or 7.9% (6% in constant currency), compared to the Prior Year YTD Period. The sales performance was driven by a $35.3 million or 10.3% decrease in watches (9% in constant currency) and a $4.7 million or 6.8% decrease in jewelry (6% in constant currency) while our leathers business increased $4.1 million or 11.8% (15% in constant currency). Comparable store sales increased modestly in our owned retail stores during the Year To Date Period.

Asia Net Sales. For the Year To Date Period, Asia net sales decreased$11.9 million or 4.8% (2% in constant currency), compared to the Prior Year YTD Period. The sales performance was principally driven by a $17.8 million or 8.3% decrease in watches (5% in constant currency), partially offset by a $3.4 million or 12.7% increase in our leathers category (18% in constant currency) and a $1.7 million or 46.6% increase in jewelry (47% in constant currency). Comparable store sales in the region increased slightly in our owned retail stores.

Gross Profit. For the Year To Date Period, gross profit margin decreased300 basis points to 52.3% compared to 55.3% in the Prior Year YTD Period. The decreased gross profit margin was primarily driven by the same factors impacting the Second Quarter, including an unfavorable currency impact of approximately 130 basis points.

Operating Expenses. For the Year To Date Period, operating expenses as a percentage of net sales increased to 50.1% compared to 46.7% in the Prior Year YTD Period and included an $8.7 million favorable impact from the translation of foreign-based expenses into U.S. dollars. On a constant currency basis, operating expenses for the Year To Date Period decreased by $0.7 million primarily as a result of the non-recurrence of restructuring charges incurred in the Prior Year YTD Period and decreased store expenses offset by increased expenses associated with wearables and Misfit purchase accounting related costs.

Consolidated Operating Income. Operating income decreased by $96.7 million, or 76.4%, in the Year To Date Period as compared to the Prior Year YTD Period. As a percentage of net sales, operating margin decreased to 2.2% in the Year To Date Period as compared to 8.6% in the Prior Year YTD Period and was negatively impacted by approximately 150 basis points due to changes in foreign currencies.

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During the Year To Date Period, sales and gross margins were negatively impacted by currencies in all regional segments as compared to the Prior Year YTD Period. During the Year To Date Period, gross profit margin was negatively impacted by promotional activities to drive retail sales in all geographies and an increased mix of sales in the off-price channel to manage inventory levels in our Americas segment. These unfavorable impacts to gross profit margin were partially offset by a favorable impact from our pricing initiatives. During the Year To Date Period, operating expenses deleveraged in the Americas and Europe segments largely due to fixed expenses on lower sales.

During the Year To Date Period, the translation of foreign-based sales and expenses into U.S. dollars decreased operating income by approximately $20.8 million. Operating income by segment is summarized as follows (dollars in millions): 

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015			Growth (Decline)					Operating Margin %
							Dollars			Percentage		2016		2015
Americas	$	111.9		$	162.5		$	(50.6	)	(31.1	)%	16.4	%	21.6	%
Europe	60.2			79.1			(18.9		)	(23.9	)	14.1		17.1
Asia	36.9			41.1			(4.2		)	(10.2	)	15.5		16.4
Corporate	(179.1		)	(156.1		)	(23.0		)	14.7
Total operating income	$	29.9		$	126.6		$	(96.7	)	(76.4	)%	2.2	%	8.6	%

Interest Expense. Interest expense increased by $3.2 million during the Year To Date Period as a result of increased debt levels in comparison to the Prior Year YTD Period.

Other Income (Expense)-Net. During the Year To Date Period, other income (expense)-net decreased by $16.7 million to $4.8 million in comparison to the Prior Year YTD Period. This decrease was primarily driven by lower net foreign currency hedging gains in the Year To Date Period compared to the Prior Year YTD period, and the non-recurrence of a $5.2 million gain recorded in the Prior Year YTD Period related to an interest rate hedge settlement.

Provision for Income Taxes. Income tax expense for the Year To Date Period was $6.8 million, resulting in an effective income tax rate of 30.5%. For the Prior Year YTD Period, income tax expense was $41.4 million, resulting in an effective income tax rate of 29.8%. The higher effective tax rate in the Year To Date Period as compared to the Prior Year YTD Period was primarily attributable to the recognition of income tax benefits due to the settlement of audits in the Prior Year YTD Period. The impact of this discrete benefit is partially offset by a lower projected effective tax rate for 2016 as compared to 2015, largely due to the projected shift in earnings mix towards foreign income which is taxed at lower statutory rates.

Net Income Attributable to Fossil Group, Inc. Year To Date Period net income attributable to Fossil Group, Inc. decreased by 87.3% to $11.8 million, or $0.24 per diluted share, in comparison to $92.7 million, or $1.87 per diluted share, in the Prior Year YTD Period. Diluted earnings per share in the Year To Date Period as compared to the Prior Year YTD Period included a $0.45 per diluted share decrease related to the foreign currency translation impact of a stronger U.S. dollar and less net foreign currency gains resulting from mark-to-market hedging and other transactional activities. Diluted earnings per share was also unfavorably impacted by an $0.18 per diluted share decrease due to the amortization of acquired Misfit intangible assets and of related contingent equity grants. Partially offsetting these decreases was a $0.27 favorable impact to diluted earnings per share due to the non-recurrence of Prior Year YTD Period restructuring charges.

Liquidity and Capital Resources

Historically, our business operations have not required substantial cash during the first several months of our fiscal year. Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by the number of new stores we open, other capital expenditures and strategic investments such as acquisitions and stock repurchases. Our cash and cash equivalents balance at the end of the Second Quarter was $231.8 million, including $223.3 million held in banks outside the U.S., in comparison to cash and cash equivalents of $249.9 million at the end of the Prior Year Quarter and $289.3 million at the end of fiscal year 2015. We believe cash from operating activities as well as amounts available under our U.S. credit facilities are sufficient to meet our cash needs in the U.S. for the next 12 months.

For the Year to Date Period, we generated operating cash flow of $71.9 million. This operating cash flow combined with cash on hand was utilized to fund $74.0 million in net repayments on our credit facilities and $39.3 million of capital expenditures. Cash flows provided by operations consisted primarily of net income of $15.5 million adjusted by net non-cash expenses of $46.5 million and a net $10.0 million in funds provided by working capital items.

Accounts receivable, net of allowances, increased by 1.0% to $257.1 million at the end of the Second Quarter compared to $254.5 million at the end of the Prior Year Quarter. Days sales outstanding for our wholesale businesses for the Second

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Quarter was 46 days compared to 41 days in the Prior Year Quarter. The increase was primarily due to the timing and mix of sales in the Second Quarter as compared to the Prior Year Quarter.

Inventory at the end of the Second Quarter was $661.7 million, which represented a 1.1% decrease from the end of the Prior Year Quarter ending inventory balance of $669.3 million.

The following tables reflect our common stock repurchase activity under our repurchase programs for the periods indicated (in millions):

				For the 13 Weeks Ended  July 2, 2016			For the 13 Weeks Ended  July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	0.8	1.3	$	102.5
2012	$	1,000.0	December 2016 (1)	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—

				For the 26 Weeks Ended  July 2, 2016			For the 26 Weeks Ended  July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	0.1	$	5.2	2.2	$	188.2
2012	$	1,000.0	December 2016 (1)	—	$	—	0.3	$	28.8
2010	$	30.0	None	—	$	—	—	$	—

__________________________________________________________________________________

(1) In the first quarter of fiscal year 2015, the Company completed this repurchase plan.

We effectively retired 0.1 million shares of common stock repurchased under our repurchase plans during the Year to Date Period. We account for the retirements by allocating the repurchase price, which is based upon the equity contribution associated with historical issuances, to common stock, additional paid-in capital and retained earnings. The effective retirement of common stock repurchased during the Year to Date Period decreased common stock by approximately $1,100, additional paid-in capital by $0.2 million, retained earnings by $5.0 million and treasury stock by $5.2 million. We effectively retired 2.5 million shares of our common stock during the Prior Year YTD Period that was repurchased under our repurchase programs. The effective retirement of common stock repurchased during the Prior Year YTD Period decreased common stock by approximately $25,500, additional paid-in capital by $0.6 million, retained earnings by $216.4 million and treasury stock by $217.0 million. At January 2, 2016 and July 2, 2016, all treasury stock had been effectively retired. As of July 2, 2016, we had a total of $824.2 million of repurchase authorizations remaining under our combined repurchase programs.

At the end of the Second Quarter, we had working capital of $900.7 million compared to working capital of $984.4 million at the end of the Prior Year Quarter. Additionally, at the end of the Second Quarter, we had approximately $26.3 million of short-term borrowings and $708.7 million in long-term debt.

On March 9, 2015, we entered into an Amended and Restated Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for (i) revolving credit loans in the amount of $1.05 billion (the “Revolving Credit Facility”), with an up to $20.0 million subfacility for swingline loans (the “Swingline Loan”), and an up to $10.0 million subfacility for letters of credit, and (ii) a term loan in the amount of $231.3 million (the “Term Loan”). The Credit Agreement expires and is due and payable on May 17, 2018. The Credit Agreement amended and restated that certain credit agreement, dated as of May 17, 2013, as amended (the “Prior Agreement”).

Our obligations under the Credit Agreement are guaranteed by all of our direct and indirect material domestic subsidiaries and secured by a lien on all or substantially all of our assets and the assets of our direct and indirect material domestic subsidiaries, as well as the pledge of 65% of the total outstanding voting capital stock and 100% of the non-voting capital stock of our material first-tier foreign subsidiaries. The Credit Agreement refinanced the indebtedness under the Prior Agreement and may be used to finance the acquisition of capital assets, ongoing working capital and other general corporate purposes to the extent permitted under the Credit Agreement.

As of July 2, 2016, amounts outstanding under the Revolving Credit Facility and the Term Loan under the Credit Agreement bore interest, at our option, at (i) the base rate (defined as the highest of (a) the prime rate publicly announced by Wells Fargo, (b) the federal funds rate plus 0.5% and (c) London Interbank Offer Rate ("LIBOR") for an interest period of one

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month plus 1.0%) plus the base rate applicable margin (which varies, based upon our consolidated total leverage ratio, from 0.25%, if the consolidated total leverage ratio is less than 1.00 to 1.00, to 1.00%, if the consolidated total leverage ratio was greater than or equal to 2.00 to 1.00) or (ii) the LIBOR rate (defined as the quotient obtained by dividing (a) LIBOR by (b) 1.00 minus the Eurodollar reserve percentage) plus the LIBOR rate applicable margin (which varies, based upon the consolidated total leverage ratio, from 1.25%, if the consolidated total leverage ratio was less than 1.00 to 1.00, to 2.00%, if the consolidated total leverage ratio is greater than or equal to 2.00 to 1.00).

As of August 8, 2016, amounts outstanding under the Revolving Credit Facility and the Term Loan under the Credit Agreement bear interest, at our option, at (i) the base rate (defined as the highest of (a) the prime rate publicly announced by Wells Fargo, (b) the federal funds rate plus 0.5% and (c) London Interbank Offer Rate ("LIBOR") for an interest period of one month plus 1.0%) plus the base rate applicable margin (which varies, based upon our consolidated total leverage ratio, from 0.50%, if the consolidated total leverage ratio is less than 1.00 to 1.00, to 1.75%, if the consolidated total leverage ratio is greater than or equal to 3.00 to 1.00) or (ii) the LIBOR rate (defined as the quotient obtained by dividing (a) LIBOR by (b) 1.00 minus the Eurodollar reserve percentage) plus the LIBOR rate applicable margin (which varies, based upon the consolidated total leverage ratio, from 1.50%, if the consolidated total leverage ratio is less than 1.00 to 1.00, to 2.75%, if the consolidated total leverage ratio is greater than or equal to 3.00 to 1.00).

Amounts outstanding under the Swingline Loan under the Credit Agreement or upon any drawing under a letter of credit bear interest at the base rate plus the applicable margin. Interest based upon the base rate is payable quarterly in arrears. Interest based upon the LIBOR rate is payable on the last day of the applicable interest period.

Financial covenants in the Credit Agreement require us to maintain (i) a consolidated total leverage ratio no greater than 2.50 to 1.00 for any fiscal quarter ending on or prior to March 31, 2016 and 3.25 to 1.00 for any fiscal quarter ending on or after June 30, 2016, and (ii) a consolidated interest coverage ratio no less than 3.50 to 1.00.

During the Year to Date Period, we made principal payments of $9.4 million under the Term Loan. Additionally, we had net principal payments of $64.0 million under the Revolving Credit Facility at an average annual interest rate of 2.08%. As of July 2, 2016, we had $203.9 million and $525.0 million outstanding under the Term Loan and the Revolving Credit Facility, respectively. In addition, we had $1.1 million of outstanding standby letters of credit at July 2, 2016. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of July 2, 2016, we had $133.0 million in borrowing capacity under the Revolving Credit Facility, which was favorably impacted by a $215.5 million international cash balance. Borrowings under the Revolving Credit Facility were mainly used to fund capital expenditures, normal operating expenses and common stock repurchases. The August 8, 2016 amendment to our Revolving Credit Facility would have increased our July 2, 2016 borrowing capacity by $260.4 million, if it had been effective on that date. At July 2, 2016, we were in compliance with all debt covenants related to all our credit facilities.

For fiscal year 2016, we expect total capital expenditures to be approximately $70 million to $80 million. Of this amount, we expect approximately 65% will be for strategic growth, including investments in omni-channel, global concessions and technology, approximately 20% will be for retail store expansion and renovation and approximately 15% will be for technology and facilities maintenance. Our capital expenditure budget and allocation of it to the foregoing investments are estimates and are subject to change. We believe that cash flows from operations combined with existing cash on hand and amounts available under the Revolving Credit Facility will be sufficient to fund our working capital needs and planned capital expenditures for the next twelve months.

Contractual Obligations

As of July 2, 2016, there were no material changes to our contractual obligations set forth in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

Off Balance Sheet Arrangements

As of July 2, 2016, there were no material changes to our off balance sheet arrangements as set forth in commitments and contingencies in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us 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. On an on-going basis, we evaluate our estimates and judgments, including those related to product returns, bad debt, inventories, long-lived asset impairment, impairment of

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goodwill and trade names, income taxes, warranty costs, hedge accounting, litigation reserves and stock-based compensation. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes to the critical accounting policies disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

Forward-Looking Statements

The statements contained and incorporated by reference in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements regarding our expected financial position, results of operations, business and financing plans found in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The words “may,” “believes,” “expects,” “plans,” “intends,” “estimates,” “anticipates” and similar expressions identify forward-looking statements. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: the effect of worldwide economic conditions; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key components; acts of war or acts of terrorism; changes in foreign currency valuations in relation to the U.S. dollar; lower levels of consumer spending resulting from a general economic downturn or generally reduced shopping activity caused by public safety or consumer confidence concerns; the performance of our products within the prevailing retail environment; customer acceptance of both new designs and newly-introduced product lines; financial difficulties encountered by customers; the effects of vigorous competition in the markets in which we operate; the integration of the organizations and operations of any acquired businesses into our existing organization and operations; the termination or non-renewal of material licenses, foreign operations and manufacturing; changes in the costs of materials, labor and advertising; government regulation; our ability to secure and protect trademarks and other intellectual property rights; and the outcome of current and possible future litigation.

In addition to the factors listed above, our actual results may differ materially due to the other risks and uncertainties discussed in this Quarterly Report on Form 10-Q and the risks and uncertainties set forth in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016. Accordingly, readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rate Risk

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. Our most significant foreign currency risk relates to the euro and, to a lesser extent, the British pound, Canadian dollar, Japanese yen, Mexican peso and Australian dollar as compared to the U.S. dollar. Due to our vertical nature whereby a significant portion of goods are sourced from our owned entities, we face foreign currency risks related to the necessary current settlement of intercompany inventory transactions. We employ a variety of operating practices to manage these market risks relative to foreign currency exchange rate changes and, where deemed appropriate, utilize forward contracts. These operating practices include, among others, our ability to convert foreign currency into U.S. dollars at spot rates and to maintain U.S. dollar pricing relative to sales of our products to certain distributors located outside the U.S. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. The use of forward contracts allows us to offset exposure to rate fluctuations because the gains or losses incurred on the derivative instruments will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. We use derivative instruments only for risk management purposes and do not use them for speculation or for trading. There were no significant changes in how we managed foreign currency transactional exposure in the Second Quarter, and management does not anticipate any significant changes in such exposures or in the strategies we employ to manage such exposure in the near future.

We are exposed to risk that adverse changes in foreign currency exchange rates could impact our net investment in foreign operations. To manage this risk, during the first quarter of fiscal year 2016, we entered into a forward contract

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designated as a net investment hedge to reduce exposure to changes in currency exchange rates on 45.0 million euros of our total investment in a euro-denominated foreign subsidiary. The hedge was settled during the Second Quarter resulting in a net gain of $0.5 million net of taxes that was recognized in the currency translation component of accumulated other comprehensive income (loss).

The following table shows our outstanding forward contracts designated as cash flow hedges for inventory transactions (in millions) at July 2, 2016 and their expiration dates.

Functional Currency		Contract Currency
Type	Amount	Type	Amount	Expiration Date
Euro	255.1	U.S. dollar	288.3	May 2018
British pound	52.9	U.S. dollar	79.0	June 2018
Canadian dollar	80.5	U.S. dollar	61.0	June 2018
Japanese yen	4,077.9	U.S. dollar	35.7	June 2018
Mexican peso	335.4	U.S. dollar	18.3	March 2017
Australian dollar	20.0	U.S. dollar	14.6	March 2017
U.S. dollar	28.0	Japanese yen	3,013.0	November 2016

If we were to settle our euro, British pound, Canadian dollar, Japanese yen, Mexican peso, Australian dollar and U.S. dollar based forward contracts hedging inventory transactions as of July 2, 2016, the net result would have been a net gain of approximately $3.8 million, net of taxes. As of July 2, 2016, a 10% unfavorable change in the U.S. dollar strengthening against foreign currencies to which we have balance sheet transactional exposures would have decreased net pre-tax income by $12.1 million. The translation of the balance sheets of our foreign-based operations from their local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. As of July 2, 2016, a 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would have reduced consolidated stockholders' equity by approximately $64.9 million.

Interest Rate Risk

We are subject to interest rate volatility with regard to debt borrowings. Effective July 26, 2013, we entered into an interest rate swap agreement with a term of approximately five years to manage our exposure to interest rate fluctuations on our Term Loan. We will continue to evaluate our interest rate exposure and the use of interest rate swaps in future periods to mitigate our risk associated with adverse fluctuations in interest rates.

Based on our variable-rate debt outstanding as of July 2, 2016, excluding the $203.9 million outstanding under our Term Loan hedged with an interest rate swap agreement, a 100 basis point increase in interest rates would increase annual interest expense by approximately $5.3 million.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon this evaluation, our CEO and CFO have concluded that our Disclosure Controls were effective as of July 2, 2016.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the Second Quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no legal proceedings to which we are a party or to which our properties are subject, other than routine litigation incidental to our business, which is not material to our consolidated financial condition, results of operations or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows our common stock repurchases based on settlement date for the fiscal quarter:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (2)
April 3, 2016 - July 2, 2016	18,808	$	43.42	18,600	$	824,158,481
Total	18,808			18,600

_______________________________________________

(1) During the Second Quarter, 208 shares of repurchased common stock were acquired from grantees in connection with income tax withholding obligations arising from vesting of restricted stock grants. These shares were not part of our publicly announced program to repurchase shares of common stock.

(2) In November 2014, we announced a common stock repurchase program pursuant to which $1.0 billion could be used to repurchase outstanding shares of our common stock. This $1.0 billion repurchase program has a termination date of December 2018. In addition, we have a $30.0 million common stock repurchase program with no termination date.

36

Item 6. Exhibits

(a) Exhibits

Exhibit Number	Document Description
3.1	Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 25, 2010).
3.2	Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 28, 2013).
3.3	Fourth Amended and Restated Bylaws of Fossil Group, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on May 28, 2013).
3.4	Amendment No. 1 to Fourth Amended and Restated Bylaws of Fossil Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 20, 2014).
10.1(1)	Amendment to the Restricted Stock Unit Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan.
10.2(1)	Amendment to the Stock Appreciation Rights Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan.
10.3(1)	Amendment to the Restricted Stock Unit Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan for Performance Grants.
10.4(1)	Restricted Stock Unit Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan.
10.5(1)	Stock Appreciation Rights Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan.
10.6(1)	Restricted Stock Unit Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan for Performance Grants.
31.1(1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2(1)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1(2)	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS(1)	XBRL Instance Document.
101.SCH(1)	XBRL Taxonomy Extension Schema Document.
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document.

37

101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB(1)	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document.

_______________________________________________

(1) Filed herewith.

(2) Furnished herewith.

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

	FOSSIL GROUP, INC.
August 11, 2016	/S/ DENNIS R. SECOR
	Dennis R. Secor
	Executive Vice President, Chief Financial Officer and Treasurer (Principal financial and accounting officer duly authorized to sign on behalf of the Registrant)

39

EXHIBIT INDEX

Exhibit Number	Document Description
3.1	Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 25, 2010).
3.2	Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of Fossil, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 28, 2013).
3.3	Fourth Amended and Restated Bylaws of Fossil Group, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on May 28, 2013).
3.4	Amendment No. 1 to Fourth Amended and Restated Bylaws of Fossil Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 20, 2014).
10.1(1)	Amendment to the Restricted Stock Unit Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan.
10.2(1)	Amendment to the Stock Appreciation Rights Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan.
10.3(1)	Amendment to the Restricted Stock Unit Award Under the Fossil Group, Inc. 2008 Long-Term Incentive Plan for Performance Grants.
10.4(1)	Restricted Stock Unit Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan.
10.5(1)	Stock Appreciation Rights Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan.
10.6(1)	Restricted Stock Unit Award Under the Fossil Group, Inc. 2016 Long-Term Incentive Plan for Performance Grants.
31.1(1)	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2(1)	Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1(2)	Certification of Chief Executive Officer Pursuant to Section 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(2)	Certification of Chief Financial Officer Pursuant to Section 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS(1)	XBRL Instance Document.
101.SCH(1)	XBRL Taxonomy Extension Schema Document.
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document.
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document.

40

101.LAB(1)	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document.

 ______________________________________________

(1) Filed herewith.

(2) Furnished herewith.

41

EX-10.1

Exhibit 10.1

AMENDMENT TO RESTRICTED STOCK UNIT AWARDS

UNDER THE FOSSIL GROUP, INC. 2008 LONG-TERM INCENTIVE PLAN

This AMENDMENT TO THE RESTRICTED STOCK UNIT AWARDS (this “Amendment”), dated as of ___________, is made and entered into by Fossil Group, Inc., a Delaware corporation (the “Company”). Terms used in this Amendment with initial capital letters that are not otherwise defined herein shall have the meanings ascribed to such terms in the Fossil Group, Inc. 2008 Long-Term Incentive Plan (the “Plan”) and the Restricted Stock Unit Awards granted to ____________________(the “Participant”) on _____________________, 20___ (the “Awards”).

WITNESSETH:

WHEREAS, Section 15 of the Awards authorizes the amendment of the Awards by a writing executed by the Participant and the Company; and

WHEREAS, the Participant and the Company desire to amend the Awards to permit continued vesting of the Restricted Stock Units granted thereunder in accordance with the terms of that certain Executive Severance Agreement entered into by and between the Participant and the Company (the “Severance Agreement”) upon the Participant’s “Termination of Service” without “Cause” or for “Good Reason” (as each term is defined in the Severance Agreement).

NOW, THEREFORE, effective as of ____________ (the “Effective Date”) and pursuant to Section 15 of the Awards, in consideration of the mutual promises, conditions, and covenants contained herein and in the Awards and the Severance Agreement, and other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree to amend the Awards as follows:

1.Section 2 of the Awards is amended by deleting the second paragraph of said Section in its entirety and substituting in lieu thereof the following:

Notwithstanding the vesting conditions set forth in the Notice of Grant, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then for the eighteen (18) month period immediately following such Termination of Service (the “RSU Vesting Continuation Period”), the then-outstanding Restricted Stock Units shall continue to vest, and shall be electronically converted into shares of Common Stock on the Vesting Date such Restricted Stock Units would have otherwise vested had the Participant remained employed during such period, provided, however, if such Termination of Service occurs in connection with or following a Change in Control, the Restricted Stock Units shall become fully vested as of the Termination Date (as defined in the Severance Agreement).

2.Section 4 of the Awards is amended by deleting each instance of the term “Retirement Date” in Section 4 with the term “Termination of Service”.

3.Except as expressly amended by this Amendment, the Awards shall continue in full force and effect in accordance with the provisions thereof.

IN WITNESS WHEREOF, the Company and the Participant have executed, or caused to be executed, this Amendment to be effective as of the Effective Date.

FOSSIL GROUP, INC.

By:

Name:

Title:

PARTICIPANT

«Participant»

EX-10.2

Exhibit 10.2

AMENDMENT TO THE STOCK APPRECIATION RIGHTS AWARD

UNDER THE FOSSIL GROUP, INC. 2008 LONG-TERM INCENTIVE PLAN

This AMENDMENT TO THE STOCK APPRECIATION RIGHTS AWARD (this “Amendment”), dated as of ________________, 2016, is made and entered into by Fossil Group, Inc., a Delaware corporation (the “Company”). Terms used in this Amendment with initial capital letters that are not otherwise defined herein shall have the meanings ascribed to such terms in the Fossil Group, Inc. 2008 Long-Term Incentive Plan (the “Plan”) and the Stock Appreciation Rights Award granted to __________________(the“Participant”) on __________________, 20__ (the “Award”).

WITNESSETH:

WHEREAS, Section 16 of the Award authorizes the amendment of the Award by a writing executed by the Participant and the Company; and

WHEREAS, the Participant and the Company desire to amend the Award to permit continued vesting of the Stock Appreciation Rights granted thereunder in accordance with the terms of that certain Executive Severance Agreement entered into by and between the Participant and the Company (the “Severance Agreement”) upon the Participant’s “Termination of Service” without “Cause” or for “Good Reason” (as each term is defined in the Severance Agreement).

NOW, THEREFORE, effective as of ________________, 2016 (the “Effective Date”) and pursuant to Section 16 of the Award, in consideration of the mutual promises, conditions, and covenants contained herein and in the Award and the Severance Agreement, and other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree to amend the Award as follows:

1.Section 2 of the Award is amended by deleting said Section in its entirety and substituting in lieu thereof the following new Section 2:

2. SAR Exercise Period and Vesting. The SARs granted pursuant to this Award may be exercised by the Participant at any time prior to the Expiration Date set forth in the Notice of Grant (the “Exercise Period”), subject to the limitation that such SARs shall vest and become exercisable only if the Participant remains continuously employed by the Company or its Subsidiaries through each Vesting Date set forth in the Notice of Grant (it being understood that the right to exercise the SARs shall be cumulative, so that the Participant may exercise on or after any Vesting Date and during the remainder of the Exercise Period that number of SARs which the Participant was entitled to exercise but did not exercise during any preceding period or periods).

Notwithstanding the foregoing, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then for the eighteen (18) month period immediately following such Termination of Service (the “SAR Vesting Continuation Period”), the then-outstanding SARs shall continue to vest as if the Participant had remained employed with the Company during such period; provided, however, if such Termination of Service occurs in connection with or following a Change in Control, the SARs shall become full vested as of the Termination Date (as defined in the Severance Agreement).

Notwithstanding the vesting conditions set forth herein, (i) the Committee may in its discretion at any time accelerate the vesting of SARs; and (ii) all of the SARs shall vest upon a Change in Control of the Company or upon the death of the Participant.

2.Section 4 of the Award is amended by deleting the last sentence of said Section and replacing it with the following new sentence:

Notwithstanding the forgoing, vested SARs, including each SAR that vests in connection with the Participant’s Termination of Service pursuant to Section 2 of this Award, shall remain exercisable until the earlier of (i) the Expiration Date and (ii) the date that is (A) in the case of any such Termination of Service prior to a Change in Control, eighteen (18) months following the Termination of Service or (B) in the case of any such Termination of Service in connection with or following a Change in Control, twenty-four (24) months following the Termination of Service.

3.Except as expressly amended by this Amendment, the Award shall continue in full force and effect in accordance with the provisions thereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company and the Participant have executed, or caused to be executed, this Amendment to be effective as of the Effective Date.

FOSSIL GROUP, INC.

By:

Name:

Title:

PARTICIPANT

Printed Name:

EX-10.3

Exhibit 10.3

AMENDMENT TO THE RESTRICTED STOCK UNIT AWARDS

UNDER THE FOSSIL GROUP, INC. 2008 LONG-TERM INCENTIVE PLAN

This AMENDMENT TO THE RESTRICTED STOCK UNIT AWARDS (this “Amendment”), dated as of _________, is made and entered into by Fossil Group, Inc., a Delaware corporation (the “Company”). Terms used in this Amendment with initial capital letters that are not otherwise defined herein shall have the meanings ascribed to such terms in the Fossil Group, Inc. 2008 Long-Term Incentive Plan (the “Plan”) and the Restricted Stock Unit Awards granted to _______________________ (the “Participant”) on ____________, 20___ (the “Award”).

WITNESSETH:

WHEREAS, Section 15 of the Award authorizes the amendment of the Awards by a writing executed by the Participant and the Company; and

WHEREAS, the Participant and the Company desire to amend the Awards to permit continued vesting of the Restricted Stock Units granted thereunder in accordance with the terms of that certain Executive Severance Agreement entered into by and between the Participant and the Company (the “Severance Agreement”) upon the Participant’s “Termination of Service” without “Cause” or for “Good Reason” (as each term is defined in the Severance Agreement).

NOW, THEREFORE, effective as of _____________ (the “Effective Date”) and pursuant to Section 15 of the Awards, in consideration of the mutual promises, conditions, and covenants contained herein and in the Award and the Severance Agreement, and other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree to amend the Awards as follows:

1.Section 2 of the Awards is amended by deleting the second paragraph of said Section in its entirety and substituting in lieu thereof the following:

Notwithstanding the vesting conditions set forth in the Notice of Grant, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then the then-outstanding Restricted Stock Units shall vest pro-rata on the date such award would vest on its terms, in an amount equal to (1) the ratio derived by dividing the sum of eighteen (18) months plus the number of whole calendar months from the respective Date of Grant through the Termination Date, by the total number of months from the Date of Grant through the date such award would vest on its terms, provided the ratio is no greater than one, multiplied by (2) the number of performance based restricted stock unit awards that would have vested and shall be electronically converted into shares of Common Stock on the Vesting Date, subject to and based upon the achievement of the performance goals and vesting schedule set forth in the Notice of Grant, to the same extent such Restricted Stock Units would have otherwise vested had the Participant remained employed during such period, , provided, however, if such Termination of Service occurs in connection with or following a Change in Control, then (A) if the Termination of Service occurs within the first half of the applicable performance period, then full acceleration of vesting at Target (as defined in the Severance Agreement) performance, and (B) if the Termination of Service occurs within the second half of the applicable performance period, then accelerated vesting of the award, based on actual performance if measurable, or at Target performance if the performance is not measurable.

2.Section 4 of the Awards is amended by replacing each instance of the term “Retirement Date” in Section 4 with the term “Termination of Service”.

3.Except as expressly amended by this Amendment, the Award shall continue in full force and effect in accordance with the provisions thereof.

IN WITNESS WHEREOF, the Company and the Participant have executed, or caused to be executed, this Amendment to be effective as of the Effective Date.

FOSSIL GROUP, INC.

By:

Name:

Title:

PARTICIPANT

«Participant»

EX-10.4

Exhibit 10.4

Restricted Stock Unit Award

under the Fossil Group, Inc. 2016 Long-Term Incentive Plan

This RESTRICTED STOCK UNIT AWARD(the “Award”), is entered into effect as of the date of the grant (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, Fossil Group, Inc., a Delaware corporation (the “Company”) has adopted the Fossil Group, Inc. 2016 Long-Term Incentive Plan (the “Long-Term Incentive Plan”), effective as of the Effective Date (as defined in the Long-Term Incentive Plan), with the objective of advancing the best interests of the Company, its Subsidiaries and its stockholders in order to attract, retain and motivate key employees with additional incentives through the award of Restricted Stock Units; and

WHEREAS, the Long-Term Incentive Plan provides that Eligible Participants of the Company or its Subsidiaries, as determined in the judgment of the Committee, may be granted an Award which may consist of grants of restricted units of common stock, par value $.01 per share (“Common Stock”), of the Company;

NOW, THEREFORE, the Participant identified in the Notice of Grant is hereby awarded Restricted Stock Units in accordance with the following terms:

1.Grant of Award; Restricted Stock Units. Subject to the terms and conditions set forth in the Long-Term Incentive Plan, this Award and in the Notice of Grant, the Company hereby grants to the Participant an award of those Restricted Stock Units specified in the Notice of Grant, subject to adjustment from time to time as provided in Articles 12, 13 and 14 of the Long-Term Incentive Plan. Each Restricted Stock Unit shall consist of the right to receive, upon the Vesting Date, a share of Common Stock for each vested Unit, which shall be electronically registered by the Company in the name of the Participant as promptly as practicable following the Vesting Date.

2.Vesting. If the Participant remains continuously employed by the Company or a Subsidiary through each Vesting Date set forth in the Notice of Grant, the Restricted Stock Units shall vest (it being understood that Units shall vest cumulatively) and the Company shall electronically register one share of Common Stock in the Participant’s name for each vested Unit.

Notwithstanding the vesting conditions set forth in the Notice of Grant, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then for the eighteen (18) month period immediately following such Termination of Service (the “RSU Vesting Continuation Period”), the then-outstanding Restricted Stock Units shall continue to vest, and shall be electronically converted into shares of Common Stock on the Vesting Date such Restricted Stock Units would have otherwise vested had the Participant remained employed during such period, provided, however, if such Termination of Service occurs in connection with or following a Change in Control, the Restricted Stock Units shall become fully vested as of the Termination Date (as defined in the Severance Agreement).

Notwithstanding the vesting conditions set forth in the Notice of Grant and this Section 2: (i) the Committee may in its discretion at any time accelerate the vesting of Restricted Stock Units or otherwise waive or amend any conditions of a grant of a Restricted Stock Units; and (ii) all of the Restricted Stock Units shall vest upon a Change in Control of the Company or upon the death of the Participant.

3.Termination in Event of Nonemployment. Except as provided in Section 2 of the Award, in the event that the Participant ceases to be employed by the Company or any of its Subsidiaries before a Vesting Date for any reason other than death, the unvested Restricted Stock Units granted pursuant to this Agreement shall be forfeited.

4.Stock Certificates. Except as provided in Section 2 of this Award, shares of Common Stock evidencing the conversion of Restricted Stock Units into shares of Common Stock shall be electronically registered in the Participant’s name as of (or as promptly as practicable after) each Vesting Date. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, the Participant requests delivery of the certificate or certificates by submitting a written request to the General Counsel requesting deliver of the certificates. Subject to Section 5 of this Award, the Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request. Upon registration (or issuance) of any shares hereunder, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with the Notice of Grant. Notwithstanding the foregoing, to the extent (i) the Participant is deemed as of his Termination of Service to be a “specified employee” under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”); and (ii) on the Termination of Service the Company is publicly traded (as defined in Section 409A of the Code), then, to the extent required by Section 409A of the Code, no Restricted Stock Unit shall vest, or be converted into shares of Common Stock, until the earlier of (x) the first day of the seventh month following the Participant’s Termination of Service or (y) the date of the Participant’s death following such Termination of Service. Upon the expiration of the applicable deferral period, any Restricted Stock Units which would have otherwise been vested and converted into shares of Common Stock during that period (whether in a single sum or in installments) shall be converted into shares of Common Stock and transferred to the Participant or the Participant’s beneficiary in one lump sum.

5.Tax Withholding Obligations. The Participant shall be required to deposit with the Company an amount of cash equal to the amount determined by the Company to be required with respect to any withholding taxes, FICA contributions, or the like under any federal, state, or local statute, ordinance, rule, or regulation in connection with the award or settlement of the Restricted Stock Units. Alternatively, the Company may, at its sole election, (i) withhold the required amounts from the Participant’s pay during the pay periods next following the date on which any such applicable tax liability otherwise arises, or (ii) withhold a number of shares of Common Stock otherwise deliverable having a Fair Market Value sufficient to satisfy the statutory minimum of all or part of the Participant’s estimated total federal, state, and local tax obligations associated with vesting or settlement of the Restricted Stock Units. The Company shall not deliver any of the shares of Common Stock until and unless the Participant has made the deposit required herein or proper provision for required withholding has been made.

6.Assignability. Until the Restricted Stock Units are vested as provided above, they may not be sold, transferred, pledged, assigned, or otherwise alienated other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by Code or Title I of the Employee Retirement Income Security Act of 1974, as amended. Any attempt to do so contrary to the provisions hereof shall be null and void. No assignment of the Restricted Stock Units herein granted shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such documents and evidence as the Company may deem necessary to establish the validity of the assignment and the acceptance by the assignee or assignees of the terms and conditions hereof.

7.No Stockholder Rights. The Participant shall have no rights as a stockholder of the Company with respect to the Restricted Stock Units unless and until certificates evidencing shares of Common Stock shall have been issued by the Company to the Participant. Until such time, the Participant shall not be entitled to dividends or distributions in respect of any shares or to vote such shares on any matter submitted to the stockholders of the Company. In addition, except as to adjustments that may from time to time be made by the Committee in accordance with the Long-Term Incentive Plan, no adjustment shall be made or required to be made in respect of dividends (ordinary or extraordinary, whether in cash, securities or any other property) or distributions paid or made by the Company or any other rights granted in respect of any shares for which the record date for such payment, distribution or grant is prior to the date upon which certificates evidencing such shares shall have been issued by the Company.

8.Administration. The Committee shall have the power to interpret the Long-Term Incentive Plan, the Notice of Grant and this Award, and to adopt such rules for the administration, interpretation, and application of the Long-Term Incentive Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participant, the Company, and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Long-Term Incentive Plan or this Award.

9.Restrictions and Related Representations. Upon the acquisition of any shares of Common Stock pursuant to the vesting of the Restricted Stock Units granted pursuant hereto, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with this Award. In addition, to the extent a certificate or certificates are issued representing any shares, the certificate or certificates will be stamped or otherwise imprinted with a legend in such form as the Company may require with respect to any applicable restrictions on sale or transfer, and the stock transfer records of the Company will reflect stop-transfer instructions, as appropriate, with respect to such shares.

10.Notices and Electronic Delivery. Unless otherwise provided herein, any notice or other communication hereunder shall be in writing and shall be given by registered or certified mail unless the Company, in its sole discretion, decides to deliver any documents relating to the Award or future awards that may be granted under the Long-Term Incentive Plan by electronic means or to request the Participant’s consent to participate in the Long-Term Incentive Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Long-Term Incentive Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. All notices by the Participant hereunder shall be directed to Fossil Group, Inc., Attention: Secretary, at the Company’s then current address unless the Company, in writing or electronically, directs the Participant otherwise. Any notice given by the Company to the Participant directed to him at his address on file with the Company shall be effective to bind any other person who shall acquire rights hereunder. The Participant shall be deemed to have familiarized himself with all matters contained herein and in the Long-Term Incentive Plan which may affect any of the Participant’s rights or privileges hereunder.

11.Scope of Certain Terms. Whenever the term “Participant” is used herein under circumstances applicable to any other person or persons to whom this Award may be assigned in accordance with the provisions of Paragraph 6 (Assignability) of this Agreement, it shall be deemed to include such person or persons. The term “Long-Term Incentive Plan” as used herein shall be deemed to include the Long-Term Incentive Plan and any subsequent amendments thereto, together with any administrative interpretations which have been adopted thereunder by the Committee pursuant to Section 3.3 of the Long-Term Incentive Plan. Unless otherwise indicated, defined terms herein shall have the meaning ascribed to them in the Long-Term Incentive Plan.

12.General Restrictions. This Award is subject to the requirement that, if at any time the Committee shall determine that (a) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law; (b) the consent or approval of any government regulatory body; or (c) an agreement by the recipient of an Award with respect to the disposition of shares of Common Stock, is necessary or desirable (in connection with any requirement or interpretation of any federal or state securities law, rule or regulation) as a condition of, or in connection with, the granting of such Award or the issuance, purchase or delivery of shares of Common Stock thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

13.Adjustments for Changes in Capitalization. The number of Restricted Stock Units covered by this Award shall be subject to adjustment in accordance with Articles 12-14 of the Long-Term Incentive Plan.

14.No Right of Employment. Neither the granting of the Restricted Stock Units, the exercise of any part hereof, nor any provision of the Long-Term Incentive Plan or this Award shall constitute or be evidence of any

understanding, express or implied, on the part of the Company or any Subsidiary to employ the Participant for any specified period.

15.Amendment. This Award may be amended only by a writing executed by the Company and the Participant which specifically states that it is amending this Award. Notwithstanding the foregoing, this Award may be amended solely by the Committee by a writing which specifically states that it is amending this Award, so long as a copy of such amendment is delivered to the Participant, and provided that no such amendment adversely affecting the rights of the Participant hereunder may be made without the Participant’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to the Participant, the provisions of the Restricted Stock Units or this Award in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in Applicable Laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to Restricted Stock Units which are then subject to restrictions as provided herein.

16.Precondition of Legality. Notwithstanding anything to the contrary contained herein, the Participant agrees that the Company will not be obligated to issue any shares pursuant to this Award, if the issuance of such shares would constitute a violation by the Participant or by the Company of any provision of any law or regulation of any governmental authority or any national securities exchange or transaction quotation system.

17.Incorporation of the Long-Term Incentive Plan. This Award is subject to the Long-Term Incentive Plan, a copy of which has been furnished to the Participant and for which the Participant acknowledges receipt. The terms and provisions of the Long-Term Incentive Plan are incorporated by reference herein. In the event of a conflict between any term or provision contained here in and a term or provision of the Long-Term Incentive Plan, the applicable terms and provisions of the Long-Term Incentive Plan shall govern and prevail.

18.Severability. If one or more of the provisions of this Award shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award to be construed so as to first the intent of this Award and the Long-Term Incentive Plan.

19.Construction. The Restricted Stock Units are being issued pursuant to Section 6.6 of the Long-Term Incentive Plan and are subject to the terms of the Long-Term Incentive Plan. A copy of the Long-Term Incentive Plan has been given to the Participant, and additional copies of the Long-Term Incentive Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Award violates or is inconsistent with an express provision of the Long-Term Incentive Plan, the Long-Term Incentive Plan provision shall govern and any inconsistent provision in this Award shall be of no force or effect.

20.Governing Law. The Restricted Stock Unit grant and the provisions of this Award are governed by, and subject to, the laws of the State of Delaware, as provided in the Long-Term Incentive Plan.

EX-10.5

Exhibit 10.5

STOCK APPRECIATION RIGHTS AWARD

under the Fossil Group, Inc. 2016 Long-Term Incentive Plan

This STOCK APPRECIATION RIGHTS AWARD (the “Award”), is entered into effect as of the date of the grant (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, Fossil Group, Inc., a Delaware corporation (the “Company”) has adopted the Fossil Group, Inc. 2016 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) effective as of the Effective Date (as defined in the Long‑Term Incentive Plan) with the objective of retaining key executives and other selected employees and of rewarding them for making major contributions to the success of the Company and its Subsidiaries; and

WHEREAS, the Long-Term Incentive Plan provides that an employee of the Company or its Subsidiaries may be granted a Stock Appreciation Right Award, which may consist of the right to receive a payment, in cash or shares of common stock, par value $.01 per share (“Common Stock”), of the Company, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the Stock Appreciation Right (“SAR”) is exercised over a specified strike price as set forth in the Award;

NOW, THEREFORE, the Participant identified in the Notice of Grant is hereby awarded Stock Appreciation Rights in accordance with the following terms:

1.Grant of Award; Stock Appreciation Rights. Subject to the terms and conditions set forth in the Long-Term Incentive Plan, this Award and in the Notice of Grant, the Company hereby grants to the Participant that number of SARs set forth in the Notice of Grant, consisting of the right to receive, upon exercise of each SAR, shares of Common Stock with a Fair Market Value equal to the excess of the Fair Market Value of each share of Common Stock on the date of exercise minus the Fair Market Value of each share of Common Stock on the date of this Award, subject to any adjustments that may be made pursuant to the terms of the Long-Term Incentive Plan (the “SAR Payment Value”).

2.SAR Exercise Period and Vesting. The SARs granted pursuant to this Award may be exercised by the Participant at any time prior to the Expiration Date set forth in the Notice of Grant (the “Exercise Period”), subject to the limitation that such SARs shall vest and become exercisable only if the Participant remains continuously employed by the Company or its Subsidiaries through each Vesting Date set forth in the Notice of Grant (it being understood that the right to exercise the SARs shall be cumulative, so that the Participant may exercise on or after any Vesting Date and during the remainder of the Exercise Period that number of SARs which the Participant was entitled to exercise but did not exercise during any preceding period or periods).

Notwithstanding the foregoing, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then for the eighteen (18) month period immediately following such Termination of Service (the “SAR Vesting Continuation Period”), the then-outstanding SARs shall continue to vest as if the Participant had remained employed with the Company during such period; provided, however, if such Termination of Service occurs in connection with or following a Change in Control, the SARs shall become full vested as of the Termination Date (as defined in the Severance Agreement) .

Notwithstanding the vesting conditions set forth herein, (i) the Committee may in its discretion at any time accelerate the vesting of SARs; and (ii) all of the SARs shall vest upon a Change in Control of the Company or upon the death of the Participant

3.Method of Exercise. The Participant (or his representative, guardian, devisee or heir, as applicable) may exercise any portion of this SAR that has become exercisable in accordance with the terms hereof as to all or any of the SARs by giving written notice of exercise to the Company, in form satisfactory to the Board, specifying the number of SARs to be exercised. The SAR Payment Value shall be paid to the Participant in shares of Common Stock This SAR may not be exercised for less than one (1) SAR or the number of whole SARs remaining under this Award, whichever is smaller. As promptly as practicable following the receipt of such written notification, the Company shall electronically register the number of shares of Common Stock having a Fair Market Value (as of the effective date of the Participant’s notice of exercise) equal to the SAR Payment Value with respect to those SARs which have been exercised. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, the Participant requests delivery of the certificate or certificates by submitting a written request to the General Counsel requesting deliver of the certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request. Upon registration (or issuance) of any shares hereunder, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with this Notice of Grant.

4.Termination in Event of Nonemployment. Except as provided in Section 2 of this Award, in the event that the Participant ceases to be employed by the Company or any of its Subsidiaries during the Exercise Period for any reason other than death, at a time which the SARs granted pursuant hereto are still in force and unexpired, the SARs granted pursuant to this Award shall terminate, except to the extent that they are vested on the date of termination of employment, and exercised on or prior to the date that is three (3) months following termination of employment (or, if earlier, on the expiration date of the SARs). Notwithstanding the forgoing, vested SARs, including each SAR that vests in connection with the Participant’s Termination of Service pursuant to Section 2 of this Award, shall remain exercisable until the earlier of (i) the Expiration Date and (ii) the date that is (A) in the case of any such Termination of Service prior to a Change in Control, eighteen (18) months following the Termination of Service or (B) in the case of any such Termination of Service in connection with or following a Change in Control, twenty-four (24) months following the Termination of Service.

5.Death.In the event that the Participant ceases to be employed by the Company or any of its Subsidiaries during the Exercise Period by reason of death at a time when the SARs granted pursuant hereto are still in force and unexpired, any unvested SARs shall be accelerated and 100% vested. Such acceleration shall be effective as of the date of death of the Participant. The Participant’s representatives, devises or heirs, as applicable, shall have a period of one (1) year following the date of death in which to exercise the SARs (or, if earlier, on the expiration date of the SARs).

6.Assignability. The SARs granted pursuant hereto shall not be assignable or transferable by the Participant other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by Code or Title I of the Employee Retirement Income Security Act of 1974, as amended. Any attempt to do so contrary to the provisions hereof shall be null and void. No assignment of the SARs herein granted shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such documents and evidence as the Company may deem necessary to establish the validity of the assignment and the acceptance by the assignee or assignees of the terms and conditions hereof.

7.No Stockholder Rights. The Participant shall have no rights as a stockholder of the Company with respect to the SARs unless and until certificates evidencing shares of Common Stock shall have been electronically registered in the Participant’s name, or if applicable, issued by the Company to the Participant. Until such time, the Participant shall not be entitled to dividends or distributions in respect of any shares or to vote such shares on any matter submitted to the stockholders of the Company. In addition, except as to adjustments that may from time to time be made by the Committee in accordance with the Long-Term Incentive Plan, no adjustment shall be made or required to be made in respect of dividends (ordinary or extraordinary, whether in cash, securities or any other property) or distributions paid or made by the Company or any other rights granted in respect of any shares for which the record date for such payment, distribution or grant is prior to the date upon which certificates evidencing such shares shall have been electronically registered by the Company in the Participant’s name, or, if applicable, issued by the Company.

8.Administration. The Committee shall have the power to interpret the Long-Term Incentive Plan, the Notice of Grant and this Award, and to adopt such rules for the administration, interpretation, and application of the Long-Term Incentive Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participant, the Company, and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Long-Term Incentive Plan or this Award.

9.Tax Withholding Obligations. The Participant shall be required to deposit with the Company an amount of cash equal to the amount determined by the Company to be required with respect to any withholding taxes, FICA contributions, or the like under any federal, state, or local statute, ordinance, rule, or regulation in connection with the issuance of shares of Common Stock for the SAR Payment Value. Alternatively, the Company may, at its sole election, (i) withhold the required amounts from the Participant’s pay during the pay periods next following the date on which any such applicable tax liability otherwise arises, or (ii) withhold a number of shares of Common Stock otherwise deliverable having a Fair Market Value sufficient to satisfy the statutory minimum of all or part of the Participant’s estimated total federal, state, and local tax obligations associated with payment of the SAR Payment Value. The Company shall not deliver any of the shares of Company Stock until and unless the Participant has made the deposit required herein or proper provision for required withholding has been made.

10.Restrictions and Related Representations. Upon the acquisition of any shares of Common Stock pursuant to the exercise of the SARs granted pursuant hereto, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with this Award. In addition, to the extent a certificate or certificates are issued representing any shares, the certificate or certificates will be stamped or otherwise imprinted with a legend in such form as the Company may require with respect to any applicable restrictions on sale or transfer, and the stock transfer records of the Company will reflect stop-transfer instructions, as appropriate, with respect to such shares.

11.Notices and Electronic Delivery. Unless otherwise provided herein, any notice or other communication hereunder shall be in writing and shall be given by registered or certified mail unless the Company, in its sole discretion, decides to deliver any documents relating to the Award or future awards that may be granted under the Long-Term Incentive Plan by electronic means or to request the Participant’s consent to participate in the Long-Term Incentive Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Long-Term Incentive Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. All notices of the exercise by the Participant of the SARs granted pursuant hereto shall be directed to Fossil Group, Inc., Attention: Secretary, at the Company’s then current address unless the Company, in writing or electronically, directs the Participant otherwise. Any notice given by the Company to the Participant directed to him at his address on file with the Company and shall be effective to bind any other person who shall acquire rights hereunder. The Company shall be under no obligation whatsoever to advise or notify the Participant of the existence, maturity or termination of any rights hereunder and the Participant shall be deemed to have familiarized himself with all matters contained herein and in the Long-Term Incentive Plan which may affect any of the Participant’s rights or privileges hereunder.

12.Scope of Certain Terms. Whenever the term “Participant” is used herein under circumstances applicable to any other person or persons to whom this Award may be assigned in accordance with the provisions of Paragraph 6 (Assignability) of this Agreement, it shall be deemed to include such person or persons. The term “Long-Term Incentive Plan” as used herein shall be deemed to include the Long-Term Incentive Plan and any subsequent amendments thereto, together with any administrative interpretations which have been adopted thereunder by the Committee pursuant to Section 3.3 of the Long-Term Incentive Plan. Unless otherwise indicated, defined terms herein shall have the meaning ascribed to them in the Long-Term Incentive Plan.

13.General Restrictions. This Award is subject to the requirement that, if at any time the Committee shall determine that (a) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law; (b) the consent or approval of any government regulatory

body; or (c) an agreement by the recipient of an Award with respect to the disposition of shares of Common Stock, is necessary or desirable (in connection with any requirement or interpretation of any federal or state securities law, rule or regulation) as a condition of, or in connection with, the granting of such Award or the issuance, purchase or delivery of shares of Common Stock thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

14.Adjustments for Changes in Capitalization. The number of SARs covered by this Award shall be subject to adjustment in accordance with Articles 12-14 of the Long-Term Incentive Plan.

15.No Right of Employment. Neither the granting of this SAR, the exercise of any part hereof, nor any provision of the Long-Term Incentive Plan or this Award shall constitute or be evidence of any understanding, express or implied, on the part of the Company or any Subsidiary to employ the Participant for any specified period.

16.Amendment. This Award may be amended only by a writing executed by the Company and the Participant which specifically states that it is amending this Award. Notwithstanding the foregoing, this Award may be amended solely by the Committee by a writing which specifically states that it is amending this Award, so long as a copy of such amendment is delivered to the Participant, and provided that no such amendment adversely affecting the rights of the Participant hereunder may be made without the Participant’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to the Participant, the provisions of the SARs or this Award in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in Applicable Laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to SARs which have not been exercised as provided herein.

17.Precondition of Legality. Notwithstanding anything to the contrary contained herein, the Participant agrees that he will not exercise the SARs granted pursuant hereto, and that the Company will not be obligated to issue any shares pursuant to this Award, if the exercise of the SARs or the issuance of such shares would constitute a violation by the Participant or by the Company of any provision of any law or regulation of any governmental authority or any national securities exchange or transaction quotation system.

18.Governing Law. This Award grant and the provisions of this Agreement are governed by, and subject to, the laws of the State of Delaware, as provided in the Long-Term Incentive Plan.

19.Incorporation of the Long-Term Incentive Plan. This Award is subject to the Long-Term Incentive Plan, a copy of which has been furnished to the Participant and for which the Participant acknowledges receipt. The terms and provisions of the Long-Term Incentive Plan are incorporated by reference herein. In the event of a conflict between any term or provision contained here in and a term or provision of the Long-Term Incentive Plan, the applicable terms and provisions of the Long-Term Incentive Plan shall govern and prevail.

20.Severability. If one or more of the provisions of this Award shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award to be construed so as to first the intent of this Award and the Long-Term Incentive Plan.

21.Construction. The SAR is being issued pursuant to Section 6.5 of the Long-Term Incentive Plan and are subject to the terms of the Long-Term Incentive Plan. A copy of the Long-Term Incentive Plan has been given to the Participant, and additional copies of the Long-Term Incentive Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Award violates or is inconsistent with an express provision of the Long-Term Incentive Plan, the Long-Term Incentive Plan provision shall govern and any inconsistent provision in this Award shall be of no force or effect.

EX-10.6

Exhibit 10.6

Restricted Stock Unit Award

under the Fossil Group, Inc. 2016 Long-Term Incentive Plan

This RESTRICTED STOCK UNIT AWARD (the “Award”), is entered into effect as of the date of the grant (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, Fossil Group, Inc., a Delaware corporation (the “Company”) has adopted the Fossil Group, Inc. 2016 Long-Term Incentive Plan (the “Long-Term Incentive Plan”), effective as of the Effective Date (as defined in the Long-Term Incentive Plan), with the objective of advancing the best interests of the Company, its Subsidiaries and its stockholders in order to attract, retain and motivate key employees with additional incentives through the award of Restricted Stock Units; and

WHEREAS, the Long-Term Incentive Plan provides that Eligible Participants of the Company or its Subsidiaries, as determined in the judgment of the Committee, may be granted an Award which may consist of grants of restricted units of common stock, par value $.01 per share (“Common Stock”), of the Company;

NOW, THEREFORE, the Participant identified in the Notice of Grant is hereby awarded Restricted Stock Units in accordance with the following terms:

1.Grant of Award; Restricted Stock Units. Subject to the terms and conditions set forth in the Long-Term Incentive Plan, this Award and in the Notice of Grant, the Company hereby grants to the Participant an award of those Restricted Stock Units specified in the Notice of Grant, subject to adjustment from time to time as provided in Articles 12, 13 and 14 of the Long-Term Incentive Plan. Each Restricted Stock Unit shall consist of the right to receive, upon the Vesting Date and subject to achievement of the performance goals set forth in the Notice of Grant, a share of Common Stock for each vested Unit, which shall be electronically registered by the Company in the name of the Participant as promptly as practicable following the Vesting Date.

2.Vesting. If the Participant remains continuously employed by the Company or a Subsidiary through each Vesting Date set forth in the Notice of Grant, the Restricted Stock Units shall vest (it being understood that Units shall vest cumulatively) based upon the achievement of the performance goals and vesting schedule as set forth in the Notice of Grant and the Company shall electronically register one share of Common Stock in the Participant’s name for each vested Unit. Any Restricted Stock Unit that does not vest on the Vesting Date shall be forfeited.

Notwithstanding the vesting conditions set forth in the Notice of Grant, in the event the Participant incurs a Termination of Service (as such term is defined in that certain Executive Severance Agreement by and between the Company and the Participant (the “Severance Agreement”)) without Cause (as defined in the Severance Agreement) or for Good Reason (as defined in the Severance Agreement) prior to a Change in Control, then the then-outstanding Restricted Stock Units shall vest pro-rata on the date such award would vest on its terms, in an amount equal to (1) the ratio derived by dividing the sum of eighteen (18) months plus the number of whole calendar months from the respective Date of Grant through the Termination Date, by the total number of months from the Date of Grant through the date such award would vest on its terms, provided the ratio is no greater than one, multiplied by (2) the number of performance based restricted stock unit awards that would have vested and shall be electronically converted into shares of Common Stock on the Vesting Date, subject to and based upon the achievement of the performance goals and vesting schedule set forth in the Notice of Grant, to the same extent such Restricted Stock Units would have otherwise vested had the Participant remained employed during such period, provided, however, if such Termination of Service occurs in connection with or following a Change in Control, then (A) if the Termination of Service occurs within the first half of the applicable performance period, then full acceleration of vesting at Target (as defined in the Severance Agreement) performance, and (B) if the Termination of Service occurs within the second half of the applicable performance period, then accelerated vesting of the award, based on actual performance if measurable, or at Target performance if the performance is not measurable.

Notwithstanding the vesting conditions set forth in the Notice of Grant and this Section 2: (i) the Committee may in its discretion at any time accelerate the vesting of Restricted Stock Units or otherwise waive or amend any conditions of a grant of a Restricted Stock Units; and (ii) all of the Restricted Stock Units shall vest upon a Change in Control of the Company or upon the death of the Participant.

3.Termination in Event of Nonemployment. Except as provided in Section 2 of the Award, in the event that the Participant ceases to be employed by the Company or any of its Subsidiaries before a Vesting Date for any reason other than death, the unvested Restricted Stock Units granted pursuant to this Agreement shall be forfeited.

4.Stock Certificates. Except as provided in Section 2 of this Award, shares of Common Stock evidencing the conversion of Restricted Stock Units into shares of Common Stock shall be electronically registered in the Participant’s name as of (or as promptly as practicable after) each Vesting Date. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, the Participant requests delivery of the certificate or certificates by submitting a written request to the General Counsel requesting deliver of the certificates. Subject to Section 5 of this Award, the Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request. Upon registration (or issuance) of any shares hereunder, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with the Notice of Grant. Notwithstanding the foregoing, to the extent (i) the Participant is deemed as of his Termination of Service to be a “specified employee” under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”); and (ii) on the Termination of Service the Company is publicly traded (as defined in Section 409A of the Code), then, to the extent required by Section 409A of the Code, no Restricted Stock Unit shall vest, or be converted into shares of Common Stock, until the earlier of (x) the first day of the seventh month following the Participant’s Termination of Service or (y) the date of the Participant’s death following such Termination of Service. Upon the expiration of the applicable deferral period, any Restricted Stock Units which would have otherwise been vested and converted into shares of Common Stock during that period (whether in a single sum or in installments) shall be converted into shares of Common Stock and transferred to the Participant or the Participant’s beneficiary in one lump sum.

5.Tax Withholding Obligations. The Participant shall be required to deposit with the Company an amount of cash equal to the amount determined by the Company to be required with respect to any withholding taxes, FICA contributions, or the like under any federal, state, or local statute, ordinance, rule, or regulation in connection with the award or settlement of the Restricted Stock Units. Alternatively, the Company may, at its sole election, (i) withhold the required amounts from the Participant’s pay during the pay periods next following the date on which any such applicable tax liability otherwise arises, or (ii) withhold a number of shares of Common Stock otherwise deliverable having a Fair Market Value sufficient to satisfy the statutory minimum of all or part of the Participant’s estimated total federal, state, and local tax obligations associated with vesting or settlement of the Restricted Stock Units. The Company shall not deliver any of the shares of Common Stock until and unless the Participant has made the deposit required herein or proper provision for required withholding has been made.

6.Assignability. Until the Restricted Stock Units are vested as provided above, they may not be sold, transferred, pledged, assigned, or otherwise alienated other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by Code or Title I of the Employee Retirement Income Security Act of 1974, as amended. Any attempt to do so contrary to the provisions hereof shall be null and void. No assignment of the Restricted Stock Units herein granted shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such documents and evidence as the Company may deem necessary to establish the validity of the assignment and the acceptance by the assignee or assignees of the terms and conditions hereof.

7.No Stockholder Rights. The Participant shall have no rights as a stockholder of the Company with respect to the Restricted Stock Units unless and until certificates evidencing shares of Common Stock shall have been issued by the Company to the Participant. Until such time, the Participant shall not be entitled to dividends or distributions in respect of any shares or to vote such shares on any matter submitted to the stockholders of the Company.

In addition, except as to adjustments that may from time to time be made by the Committee in accordance with the Long-Term Incentive Plan, no adjustment shall be made or required to be made in respect of dividends (ordinary or extraordinary, whether in cash, securities or any other property) or distributions paid or made by the Company or any other rights granted in respect of any shares for which the record date for such payment, distribution or grant is prior to the date upon which certificates evidencing such shares shall have been issued by the Company.

8.Administration. The Committee shall have the power to interpret the Long-Term Incentive Plan, the Notice of Grant and this Award, and to adopt such rules for the administration, interpretation, and application of the Long-Term Incentive Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participant, the Company, and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Long-Term Incentive Plan or this Award.

9.Restrictions and Related Representations. Upon the acquisition of any shares of Common Stock pursuant to the vesting of the Restricted Stock Units granted pursuant hereto, the Participant may be required to enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws, the Long-Term Incentive Plan or with this Award. In addition, to the extent a certificate or certificates are issued representing any shares, the certificate or certificates will be stamped or otherwise imprinted with a legend in such form as the Company may require with respect to any applicable restrictions on sale or transfer, and the stock transfer records of the Company will reflect stop-transfer instructions, as appropriate, with respect to such shares.

10.Notices and Electronic Delivery. Unless otherwise provided herein, any notice or other communication hereunder shall be in writing and shall be given by registered or certified mail unless the Company, in its sole discretion, decides to deliver any documents relating to the Award or future awards that may be granted under the Long-Term Incentive Plan by electronic means or to request the Participant’s consent to participate in the Long-Term Incentive Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Long-Term Incentive Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. All notices by the Participant hereunder shall be directed to Fossil Group, Inc., Attention: Secretary, at the Company’s then current address unless the Company, in writing or electronically, directs the Participant otherwise. Any notice given by the Company to the Participant directed to him at his address on file with the Company shall be effective to bind any other person who shall acquire rights hereunder. The Participant shall be deemed to have familiarized himself with all matters contained herein and in the Long-Term Incentive Plan which may affect any of the Participant’s rights or privileges hereunder.

11.Scope of Certain Terms. Whenever the term “Participant” is used herein under circumstances applicable to any other person or persons to whom this Award may be assigned in accordance with the provisions of Paragraph 6 (Assignability) of this Agreement, it shall be deemed to include such person or persons. The term “Long-Term Incentive Plan” as used herein shall be deemed to include the Long-Term Incentive Plan and any subsequent amendments thereto, together with any administrative interpretations which have been adopted thereunder by the Committee pursuant to Section 3.3 of the Long-Term Incentive Plan. Unless otherwise indicated, defined terms herein shall have the meaning ascribed to them in the Long-Term Incentive Plan.

12.General Restrictions. This Award is subject to the requirement that, if at any time the Committee shall determine that (a) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law; (b) the consent or approval of any government regulatory body; or (c) an agreement by the recipient of an Award with respect to the disposition of shares of Common Stock, is necessary or desirable (in connection with any requirement or interpretation of any federal or state securities law, rule or regulation) as a condition of, or in connection with, the granting of such Award or the issuance, purchase or delivery of shares of Common Stock thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

13.Adjustments for Changes in Capitalization. The number of Restricted Stock Units covered by this Award shall be subject to adjustment in accordance with Articles 12-14 of the Long-Term Incentive Plan.

14.No Right of Employment. Neither the granting of the Restricted Stock Units, the exercise of any part hereof, nor any provision of the Long-Term Incentive Plan or this Award shall constitute or be evidence of any understanding, express or implied, on the part of the Company or any Subsidiary to employ the Participant for any specified period.

15.Amendment. This Award may be amended only by a writing executed by the Company and the Participant which specifically states that it is amending this Award. Notwithstanding the foregoing, this Award may be amended solely by the Committee by a writing which specifically states that it is amending this Award, so long as a copy of such amendment is delivered to the Participant, and provided that no such amendment adversely affecting the rights of the Participant hereunder may be made without the Participant’s written consent. Without limiting the foregoing, the Committee reserves the right to change, by written notice to the Participant, the provisions of the Restricted Stock Units or this Award in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to Restricted Stock Units which are then subject to restrictions as provided herein.

16.Precondition of Legality. Notwithstanding anything to the contrary contained herein, the Participant agrees that the Company will not be obligated to issue any shares pursuant to this Award, if the issuance of such shares would constitute a violation by the Participant or by the Company of any provision of any law or regulation of any governmental authority or any national securities exchange or transaction quotation system.

17.Incorporation of the Long-Term Incentive Plan. This Award is subject to the Long-Term Incentive Plan, a copy of which has been furnished to the Participant and for which the Participant acknowledges receipt. The terms and provisions of the Long-Term Incentive Plan are incorporated by reference herein. In the event of a conflict between any term or provision contained here in and a term or provision of the Long-Term Incentive Plan, the applicable terms and provisions of the Long-Term Incentive Plan shall govern and prevail.

18.Severability. If one or more of the provisions of this Award shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award to be construed so as to first the intent of this Award and the Long-Term Incentive Plan.

19.Construction. The Restricted Stock Units are being issued pursuant to Section 6.6 of the Long-Term Incentive Plan and are subject to the terms of the Long-Term Incentive Plan. A copy of the Long-Term Incentive Plan has been given to the Participant, and additional copies of the Long-Term Incentive Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Award violates or is inconsistent with an express provision of the Long-Term Incentive Plan, the Long-Term Incentive Plan provision shall govern and any inconsistent provision in this Award shall be of no force or effect.

20.Governing Law. The Restricted Stock Unit grant and the provisions of this Award are governed by, and subject to, the laws of the State of Delaware, as provided in the Long-Term Incentive Plan.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kosta N. Kartsotis, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fossil Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2016	/s/ KOSTA N. KARTSOTIS
	Kosta N. Kartsotis
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Dennis R. Secor, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Fossil Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2016	/s/ Dennis R. Secor
	Dennis R. Secor
	Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Kosta N. Kartsotis, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the Quarterly Report of Fossil Group, Inc. on Form 10-Q for the quarter ended July 2, 2016, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fossil Group, Inc.

Dated: August 11, 2016	By:	/s/ Kosta N. Kartsotis
	Name:	Kosta N. Kartsotis
	Title:	Chief Executive Officer

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis R. Secor, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the Quarterly Report of Fossil Group, Inc. on Form 10-Q for the quarter ended July 2, 2016, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fossil Group, Inc.

Dated: August 11, 2016	By:	/s/ Dennis R. Secor
	Name:	Dennis R. Secor
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 02, 2016	Aug. 05, 2016
Document and Entity Information
Entity Registrant Name	Fossil Group, Inc.
Entity Central Index Key	0000883569
Document Type	10-Q
Document Period End Date	Jul. 02, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		48,129,755
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jul. 02, 2016	Jan. 02, 2016
Current assets:
Cash and cash equivalents	$ 231,836	$ 289,275
Accounts receivable - net of allowances of $60,219 and $84,558, respectively	257,053	370,761
Inventories	661,748	625,344
Prepaid expenses and other current assets	161,723	157,290
Total current assets	1,312,360	1,442,670
Property, plant and equipment - net of accumulated depreciation of $430,761 and $398,068, respectively	328,004	326,370
Goodwill	364,158	359,394
Intangible and other assets-net	222,016	227,227
Total long-term assets	914,178	912,991
Total assets	2,226,538	2,355,661
Current liabilities:
Accounts payable	195,259	208,083
Short-term and current portion of long-term debt	26,302	23,159
Accrued expenses:
Compensation	53,288	61,496
Royalties	21,086	38,359
Co-op advertising	18,687	28,918
Transaction taxes	25,721	44,425
Other	71,109	76,592
Income taxes payable	249	8,497
Total current liabilities	411,701	489,529
Long-term income taxes payable	20,716	20,634
Deferred income tax liabilities	70,692	75,165
Long-term debt	708,664	785,076
Other long-term liabilities	59,251	52,714
Total long-term liabilities	859,323	933,589
Commitments and contingencies
Stockholders’ equity:
Common stock, 48,127 and 48,125 shares issued and outstanding at July 2, 2016 and January 2, 2016, respectively	481	481
Additional paid-in capital	201,169	187,456
Retained earnings	820,771	813,957
Accumulated other comprehensive income (loss)	(77,172)	(80,506)
Total Fossil Group, Inc. stockholders’ equity	945,249	921,388
Noncontrolling interest	10,265	11,155
Total stockholders’ equity	955,514	932,543
Total liabilities and stockholders’ equity	$ 2,226,538	$ 2,355,661

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jul. 02, 2016	Jan. 02, 2016
Statement of Financial Position [Abstract]
Accounts receivable - allowances	$ 60,219	$ 84,558
Property, plant and equipment, accumulated depreciation	$ 430,761	$ 398,068
Common stock, shares issued (in shares)	48,127	48,125
Common stock, shares outstanding (in shares)	48,127	48,125

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Income Statement [Abstract]
Net sales	$ 685,368	$ 739,975	$ 1,345,216	$ 1,465,060
Cost of sales	329,618	330,510	641,129	654,870
Gross profit	355,750	409,465	704,087	810,190
Operating expenses:
Selling, general and administrative expenses	340,300	332,560	674,233	665,042
Restructuring charges	0	6,471	0	18,559
Total operating expenses	340,300	339,031	674,233	683,601
Operating income	15,450	70,434	29,854	126,589
Interest expense	6,421	5,014	12,420	9,193
Other income (expense) - net	2,542	14,294	4,812	21,479
Income before income taxes	11,571	79,714	22,246	138,875
Provision for income taxes	3,499	22,894	6,778	41,417
Net income	8,072	56,820	15,468	97,458
Less: Net income attributable to noncontrolling interest	2,051	2,172	3,654	4,740
Net income attributable to Fossil Group, Inc.	6,021	54,648	11,814	92,718
Other comprehensive income (loss), net of taxes:
Currency translation adjustment	(9,500)	5,559	7,721	(27,947)
Cash flow hedges - net change	4,331	(246)	(6,101)	(185)
Pension plan activity	0	0	1,714	0
Total other comprehensive income (loss)	(5,169)	5,313	3,334	(28,132)
Total comprehensive income	2,903	62,133	18,802	69,326
Less: Comprehensive income attributable to noncontrolling interest	2,051	2,172	3,654	4,740
Comprehensive income attributable to Fossil Group, Inc.	$ 852	$ 59,961	$ 15,148	$ 64,586
Earnings per share:
Basic (in dollars per share)	$ 0.13	$ 1.12	$ 0.25	$ 1.87
Diluted (in dollars per share)	$ 0.12	$ 1.12	$ 0.24	$ 1.87
Weighted average common shares outstanding:
Basic (in shares)	48,119	48,634	48,125	49,464
Diluted (in shares)	48,207	48,744	48,229	49,615

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Operating Activities:
Net income	$ 15,468	$ 97,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	49,666	43,650
Stock-based compensation	16,463	9,276
Decrease in allowance for returns-net of inventory in transit	(15,473)	(8,438)
Loss on disposal of assets	1,151	2,519
Impairment losses	0	6,602
Decrease in allowance for doubtful accounts	(4,841)	(2,006)
Excess tax benefits from stock-based compensation	(5)	(170)
Deferred income taxes and other	(443)	6,804
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	139,765	183,993
Inventories	(41,107)	(91,020)
Prepaid expenses and other current assets	(8,656)	(19,666)
Accounts payable	(17,106)	(1,040)
Accrued expenses	(54,285)	(50,563)
Income taxes payable	(8,650)	(14,898)
Net cash provided by operating activities	71,947	162,501
Investing Activities:
Additions to property, plant and equipment	(39,313)	(32,464)
Decrease (increase) in intangible and other assets	786	(1,400)
Skagen Designs arbitration settlement	0	5,968
Misfit working capital settlement	788	0
Proceeds from the sale of property, plant and equipment	1,955	0
Business acquisitions-net of cash acquired	0	(4,820)
Net investment hedge settlement	752	0
Net cash used in investing activities	(35,032)	(32,716)
Financing Activities:
Acquisition of common stock	(6,418)	(218,659)
Distribution of noncontrolling interest earnings	(4,544)	(5,056)
Excess tax benefits from stock-based compensation	5	170
Debt borrowings	424,800	1,482,165
Debt payments	(498,848)	(1,419,161)
Proceeds from exercise of stock options	57	582
Payment for shares of Fossil, S.L.	(8,657)	0
Net cash used in financing activities	(93,605)	(159,959)
Effect of exchange rate changes on cash and cash equivalents	(749)	3,777
Net decrease in cash and cash equivalents	(57,439)	(26,397)
Cash and cash equivalents:
Beginning of period	289,275	276,261
End of period	$ 231,836	$ 249,864

XML

FINANCIAL STATEMENT POLICIES

6 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

FINANCIAL STATEMENT POLICIES

FINANCIAL STATEMENT POLICIES

Basis of Presentation. 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 July 2, 2016, and the results of operations for the thirteen-week periods ended July 2, 2016 (“Second Quarter”) and July 4, 2015 (“Prior Year Quarter”), respectively, and the twenty-six week periods ended July 2, 2016 (“Year To Date Period”) and July 4, 2015 (“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 January 2, 2016 (the “2015 Form 10-K”). Operating results for the Second 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 2015 Form 10-K.

Business. The Company isa 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 and sunglasses. 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. The Company is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to manage these exposures using derivative instruments including foreign exchange forward contracts ("forward contracts") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, British pound, Canadian dollar, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of July 2, 2016, the result would have been a net gain of approximately $3.8 million, net of taxes. This unrealized gain is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income and comprehensive income. Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income and comprehensive income. Also, the Company has entered into interest rate swap agreements to effectively convert portions of its variable rate debt obligations to fixed rates. Changes in the fair value of the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and are recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

Operating expenses. Operating expenses include selling, general and administrative expenses (“SG&A”) and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation.Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure and store closures.

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 July 2, 2016		For the 13 Weeks Ended July 4, 2015		For the 26 Weeks Ended July 2, 2016		For the 26 Weeks Ended July 4, 2015
Numerator:
Net income attributable to Fossil Group, Inc.	$	6,021	$	54,648	$	11,814	$	92,718
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Basic EPS	$	0.13	$	1.12	$	0.25	$	1.87
Diluted EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	88		110		104		151
Diluted weighted average common shares outstanding	48,207		48,744		48,229		49,615
Diluted EPS	$	0.12	$	1.12	$	0.24	$	1.87

Approximately 1.9 million, 0.6 million, 1.7 million and 0.4 million weighted shares issuable under stock-based awards were not included in the diluted EPS calculation at the end of the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period, respectively, because they were antidilutive. Approximately 1.1 million weighted performance shares were not included in the diluted EPS calculation at the end of the Second Quarter and Year to Date Period as the performance targets were not met.

Recently Issued Accounting Standards. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for annual periods, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-09. 

In March 2016, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-04.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-02.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual periods beginning after December 15, 2016, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), deferring the effective date of ASU 2014-09. The new revenue standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and allows either a full retrospective adoption to all periods presented or a modified retrospective adoption approach with the cumulative effect of initial application of the revised guidance recognized at the date of initial application. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). ASU 2016-10clarifies the implementation guidance on identifying performance obligations. Early adoption is permitted for periods beginning after December 15, 2016. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2016-12 clarifies three aspects of Topic 606, including the objective of the collectability criterion, the measurement date for noncash consideration and the requirements for a completed contract. ASU 2016-12 also includes a practical expedient for contract modifications. Additionally, the amendments allow an entity to exclude all sales taxes collected from customers from the transaction price. The Company is evaluating the effect of adopting ASU 2014-09 and related ASUs.

Recently Adopted Accounting Standards. In accordance with U.S. GAAP, the following provisions, which had no material impact on the Company’s financial position, results of operations or cash flows, were adopted effective the first quarter of fiscal year 2016:

•ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis

• ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

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ACQUISITIONS AND GOODWILL

6 Months Ended

Jul. 02, 2016

Business Combinations [Abstract]

ACQUISITIONS AND GOODWILL

ACQUISITIONS AND GOODWILL

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. The Company completed the acquisition of these shares in the Second Quarter, at which time Fossil Spain became a wholly-owned subsidiary of the Company. 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) and 3.5 million euros (approximately $3.9 million), respectively. 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.

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 enables 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 $0.8 million from the escrow during the Second Quarter 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		(3,788		)
Total transaction consideration		$	213,291
Inventories		$	7,011
Prepaid expenses and other current assets		25
Property, plant and equipment and other long-term assets		1,190
Goodwill		168,021
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		(9,237		)
Total net assets acquired		$	213,291

The amounts shown above may change in the near term as management continues to assess the fair value of acquired assets and liabilities. A change in this valuation may also impact the income tax related accounts and goodwill. The goodwill recognized from the acquisition has an indefinite useful life and will be included in the Company’s annual impairment testing.

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

	Americas			Europe		Asia		Total
Balance at January 2, 2016	$	283,598		$	63,981	$	11,815	$	359,394
Segment allocation and acquisition adjustments (1)	(78,197		)	49,760		32,053		3,616
Currency	(100		)	1,223		25		1,148
Balance at July 2, 2016	$	205,301		$	114,964	$	43,893	$	364,158

__________________________________________________________________________________

(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 the Year To Date Period to accounts receivable, inventories, current and long-term liabilities and working capital and other adjustments made to the transaction consideration.

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INVENTORIES

6 Months Ended

Jul. 02, 2016

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories consisted of the following (in thousands):

	July 2, 2016		January 2, 2016
Components and parts	$	67,408	$	49,539
Work-in-process	10,762		12,213
Finished goods	583,578		563,592
Inventories	$	661,748	$	625,344

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WARRANTY LIABILITIES

6 Months Ended

Jul. 02, 2016

Product Warranties Disclosures [Abstract]

WARRANTY LIABILITIES

WARRANTY LIABILITIES

The Company’s warranty liability is recorded in accrued expenses-other in the Company’s condensed consolidated balance sheets. Warranty liability activity consisted of the following (in thousands):

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Beginning balance	$	13,669		$	13,500
Settlements in cash or kind	(4,795		)	(4,019		)
Warranties issued and adjustments to preexisting warranties (1)	4,861			4,038
Liabilities assumed in acquisition	—			44
Ending balance	$	13,735		$	13,563

_______________________________________________

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

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INCOME TAXES

6 Months Ended

Jul. 02, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company’s income tax expense and related effective rates were as follows (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015			For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Income tax expense	$	3,499		$	22,894		$	6,778		$	41,417
Income tax rate	30.2		%	28.7		%	30.5		%	29.8		%

The higher effective tax rates in the Second Quarter and the Year To Date Period, as compared to the Prior Year Quarter and Prior Year YTD Period, respectively, was primarily attributable to the recognition of income tax benefits due to the settlement of audits in the Prior Year Quarter. The impact of this discrete benefit is partially offset by a lower projected effective tax rate for 2016 as compared to 2015, largely due to the projected shift in earnings mix towards foreign income which is taxed at lower statutory rates.

As of July 2, 2016, the total amount of unrecognized tax benefits, excluding interest and penalties, was $22.6 million, of which $19.4 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its 2009-2015 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be paid within twelve months of the condensed consolidated balance sheet date. As of July 2, 2016, the Company had recorded $0.9 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At July 2, 2016, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheet was $2.6 million and $1.8 million, respectively. For the Second Quarter and Year To Date Period, the Company accrued income tax-related interest expense of $0.2 million and $0.4 million, respectively.

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STOCKHOLDERS' EQUITY

6 Months Ended

Jul. 02, 2016

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Common Stock Repurchase Programs. Purchases of the Company’s common stock are made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased shares of common stock are recorded at cost and become authorized but unissued shares which may be issued in the future for general corporate or other purposes. The Company may terminate or limit its stock repurchase program at any time. In the event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid-in capital and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs are conducted pursuant to Rule 10b-18 of the Exchange Act.

During the Year to Date period, the Company effectively retired 0.1 million shares of common stock repurchased under its repurchase programs. The effective retirement of repurchased common stock decreased common stock by $1,100, additional paid-in capital by $0.2 million, retained earnings by $5.0 million and treasury stock by $5.2 million. At January 2, 2016 and July 2, 2016, all treasury stock had been effectively retired. As of July 2, 2016, the Company had $824.2 million of repurchase authorizations remaining under its combined repurchase programs.

The following tables reflect the Company’s common stock repurchase activity for the periods indicated (in millions):

				For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	0.8	1.3	$	102.5
2012	$	1,000.0	December 2016 (1)	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—

				For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	0.1	$	5.2	2.2	$	188.2
2012	$	1,000.0	December 2016 (1)	—	$	—	0.3	$	28.8
2010	$	30.0	None	—	$	—	—	$	—

__________________________________________________________________________________

(1) In the first quarter of fiscal year 2015, the Company completed this repurchase plan.

Controlling and Noncontrolling Interest. The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands):

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 2, 2016	$	921,388		$	11,155		$	932,543
Net income	11,814			3,654			15,468
Currency translation adjustment	7,721			—			7,721
Cash flow hedges - net change	(6,101		)	—			(6,101		)
Pension plan activity	1,714			—			1,714
Common stock issued upon exercise of stock options	57			—			57
Tax expense derived from stock-based compensation	(1,389		)	—			(1,389		)
Distribution of noncontrolling interest earnings	—			(4,544		)	(4,544		)
Acquisition of common stock	(6,418		)	—			(6,418		)
Stock-based compensation expense	16,463			—			16,463
Balance at July 2, 2016	$	945,249		$	10,265		$	955,514

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 3, 2015	$	977,860		$	5,941		$	983,801
Net income	92,718			4,740			97,458
Currency translation adjustment	(27,947		)	—			(27,947		)
Cash flow hedges - net change	(185		)	—			(185		)
Common stock issued upon exercise of stock options	582			—			582
Tax expense derived from stock-based compensation	(699		)	—			(699		)
Distribution of noncontrolling interest earnings	—			(5,056		)	(5,056		)
Business acquisition	—			5,831			5,831
Acquisition of common stock	(218,659		)	—			(218,659		)
Stock-based compensation expense	9,276			—			9,276
Balance at July 4, 2015	$	832,946		$	11,456		$	844,402

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EMPLOYEE BENEFIT PLANS

6 Months Ended

Jul. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

Stock-Based Compensation Plans. The following table summarizes stock options and stock appreciation rights activity during the Second Quarter:

Stock Options and Stock Appreciation Rights	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)				(in Years)	(in Thousands)
Outstanding at April 2, 2016	2,214		$	51.82	6.9	$	10,828
Granted	—
Exercised	—
Forfeited or expired	(8	)	117.13
Outstanding at July 2, 2016	2,206		51.59		6.7	791
Exercisable at July 2, 2016	538		$	84.14	4.4	$	791

The aggregate intrinsic value shown in the table above is before income taxes and is based on (i) the exercise price for outstanding and exercisable options/rights at July 2, 2016 and (ii) the fair market value of the Company’s common stock on the exercise date for options/rights that were exercised during the Second Quarter.

Stock Options and Stock Appreciation Rights Outstanding and Exercisable. The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at July 2, 2016:

Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	41	$	14.40	2.7	41	$	14.40
$30.71 - $47.99	91	36.29		2.5	91	36.29
$55.04 - $83.83	92	80.80		4.8	92	80.80
$95.91 - $131.46	144	127.98		5.7	144	127.98
Total	368	$	80.95	4.3	368	$	80.95

Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	26	$	21.97	4.2	13	$	13.65
$30.71 - $47.99	1,560	38.27		7.5	9	38.40
$55.04 - $83.83	143	79.05		6.1	62	80.44
$95.91 - $131.46	109	114.42		5.0	86	115.32
Total	1,838	$	45.72	7.2	170	$	91.02

Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity during the Second Quarter:

Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
	(in Thousands)
Nonvested at April 2, 2016	1,063		$	47.98
Granted	494		27.60
Vested	(21	)	82.08
Forfeited	(12	)	41.27
Nonvested at July 2, 2016	1,524		$	40.95

The total fair value of restricted stock and restricted stock units vested during the Second Quarter was approximately $0.6 million. Vesting of performance restricted stock units is based on achievement of sales growth and operating margin targets in relation to the performance of a certain identified peer group, particular sales growth in relation to a defined sales plan and achievement of succession plans for key talent.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jul. 02, 2016

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables illustrate changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):

	For the 13 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(64,486	)	$	(1,554	)	$	(1,457	)	$	(4,506	)	$	(72,003	)
Other comprehensive income (loss) before reclassifications	(9,396		)	8,738			(711		)	—			(1,369		)
Tax (expense) benefit	—			(3,576		)	259			—			(3,317		)
Amounts reclassed from accumulated other comprehensive income	104			928			(450		)	—			582
Tax (expense) benefit	—			(263		)	164			—			(99		)
Total other comprehensive income (loss)	(9,500		)	4,497			(166		)	—			(5,169		)
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

	For the 13 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(60,747	)	$	19,315		$	(4,776	)	$	(3,647	)	$	(49,855	)
Other comprehensive income (loss) before reclassifications	5,559			2,701			10,460			—			18,720
Tax (expense) benefit	—			253			(3,812		)	—			(3,559		)
Amounts reclassed from accumulated other comprehensive income	—			10,555			4,604			—			15,159
Tax (expense) benefit	—			(3,634		)	(1,677		)	—			(5,311		)
Total other comprehensive income (loss)	5,559			(3,967		)	3,721			—			5,313
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

	For the 26 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(81,707	)	$	8,114		$	(693	)	$	(6,220	)	$	(80,506	)
Other comprehensive income (loss) before reclassifications	7,825			(1,259		)	(2,381		)	2,010			6,195
Tax (expense) benefit	—			1,039			868			(296		)	1,611
Amounts reclassed from accumulated other comprehensive income	104			7,267			(918		)	—			6,453
Tax (expense) benefit	—			(2,316		)	335			—			(1,981		)
Total other comprehensive income (loss)	7,721			(5,171		)	(930		)	1,714			3,334
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

	For the 26 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swap			Pension Plan			Total
Beginning balance	$	(27,241	)	$	14,980		$	(502	)	$	(3,647	)	$	(16,410	)
Other comprehensive income (loss) before reclassifications	(27,947		)	21,462			3,054			—			(3,431		)
Tax (expense) benefit	—			(5,965		)	(1,113		)	—			(7,078		)
Amounts reclassed from accumulated other comprehensive income	—			22,993			3,923			—			26,916
Tax (expense) benefit	—			(7,864		)	(1,429		)	—			(9,293		)
Total other comprehensive income (loss)	(27,947		)	368			(553		)	—			(28,132		)
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

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SEGMENT INFORMATION

6 Months Ended

Jul. 02, 2016

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

The Company reports segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. Each reportable operating segment provides similar products and services.

The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are based on the location of the selling entity. Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Global strategic initiatives such as brand building and omni channel activities and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses are not allocated to the various segments because they are managed at the corporate level internally. The Company does not include intercompany transfers between segments for management reporting purposes.

Summary information by operating segment was as follows (in thousands):

	For the 13 Weeks Ended July 2, 2016					For the 13 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	345,187	$	52,300		$	386,088	$	86,033
Europe	215,936		31,669			227,923		41,814
Asia	124,245		18,936			125,964		20,555
Corporate			(87,455		)			(77,968		)
Consolidated	$	685,368	$	15,450		$	739,975	$	70,434

	For the 26 Weeks Ended July 2, 2016					For the 26 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	680,997	$	111,896		$	752,684	$	162,533
Europe	425,937		60,180			462,179		79,152
Asia	238,282		36,865			250,197		41,051
Corporate			(179,087		)			(156,147		)
Consolidated	$	1,345,216	$	29,854		$	1,465,060	$	126,589

The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016				For the 13 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	517,602	75.5	%	$	575,804	77.8	%
Leathers	93,152		13.6		89,380		12.1
Jewelry	56,752		8.3		55,780		7.5
Other	17,862		2.6		19,011		2.6
Total	$	685,368	100.0	%	$	739,975	100.0	%

	For the 26 Weeks Ended July 2, 2016				For the 26 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	1,014,085	75.4	%	$	1,127,661	77.0	%
Leathers	185,657		13.8		182,306		12.4
Jewelry	111,472		8.3		118,767		8.1
Other	34,002		2.5		36,326		2.5
Total	$	1,345,216	100.0	%	$	1,465,060	100.0	%

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DERIVATIVES AND RISK MANAGEMENT

6 Months Ended

Jul. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND RISK MANAGEMENT

DERIVATIVES AND RISK MANAGEMENT

Cash Flow Hedges. The primary risks managed by using derivative instruments are the fluctuations in global currencies that will ultimately be used by non-U.S. dollar functional currency subsidiaries to settle future payments of intercompany inventory transactions denominated in U.S. dollars. Specifically, the Company projects future intercompany purchases by its non-U.S. dollar functional currency subsidiaries generally over a period of up to 24 months. The Company enters into forward contracts, generally for up to 85% of the forecasted purchases, to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts are designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts are expected to offset these fluctuations to the extent the cash flows are hedged by the forward contracts.

These forward contracts meet the criteria for hedge accounting, which requires that they represent foreign currency-denominated forecasted transactions in which (i) the operating unit that has the foreign currency exposure is a party to the hedging instrument and (ii) the hedged transaction is denominated in a currency other than the hedging unit’s functional currency.

At the inception of each forward contract designated as a cash flow hedge, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly throughout the life of the hedging relationship. If the critical terms (i.e., amounts, currencies and settlement dates) of the forward contract match the terms of the forecasted transaction, the Company concludes that the hedge is effective.

For a derivative instrument that is designated and qualifies as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, the Company’s hedges resulted in no ineffectiveness in the condensed consolidated statements of income and comprehensive income, and there were no components excluded from the assessment of hedge effectiveness for the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period.

All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets. Derivatives designated as cash flow hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded to accumulated other comprehensive income (loss) within the equity section of the Company’s condensed consolidated balance sheet until such derivative’s gains or losses become realized or the cash flow hedge relationship is terminated. If the cash flow hedge relationship is terminated, the derivative’s gains or losses that are recorded in accumulated other comprehensive income (loss) will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, the derivative’s gains or losses are immediately recognized in earnings. There were no gains or losses reclassified into earnings as a result of the discontinuance of cash flow hedges in the Second Quarter, Prior Year Quarter, Year To Date Period or Prior Year YTD Period. Hedge accounting is discontinued if it is determined that the derivative is not highly effective. The Company records all forward contract hedge assets and liabilities on a gross basis as they do not meet the balance sheet netting criteria because the Company does not have master netting agreements established with the derivative counterparties that would allow for net settlement.

As of July 2, 2016, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge the future payments of inventory transactions (in millions):

Functional Currency		Contract Currency
Type	Amount	Type	Amount
Euro	255.1	U.S. dollar	288.3
British pound	52.9	U.S. dollar	79.0
Canadian dollar	80.5	U.S. dollar	61.0
Japanese yen	4,077.9	U.S. dollar	35.7
Mexican peso	335.4	U.S. dollar	18.3
Australian dollar	20.0	U.S. dollar	14.6
U.S. dollar	28.0	Japanese yen	3,013.0

The Company is also exposed to interest rate risk related to its outstanding debt. To manage the interest rate risk related to its $231.3 million U.S.-based term loan (as amended and restated on March 9, 2015, the "Term Loan”), the Company entered into an interest rate swap agreement on July 26, 2013 with a term of approximately five years. The objective of this hedge is to offset the variability of future payments associated with interest rates on the Term Loan. The interest rate swap agreement hedges the 1-month London Interbank Offer Rate ("LIBOR") based variable rate debt obligations under the Term Loan. Under the terms of the swap, the Company pays a fixed interest rate of 1.288% per annum to the swap counterparty plus the LIBOR rate applicable margin (which varies based upon the Company’s consolidated leverage ratio (the “Ratio”) from 1.25% if the Ratio is less than 1.00 to 1.00, to 2.00% if the Ratio is greater than or equal to 2.00 to 1.00). The notional amount amortizes over the remaining life of the Term Loan to coincide with repayments on the underlying loan. The Company receives interest from the swap counterparty at a variable rate based on 1-month LIBOR. This hedge is designated as a cash flow hedge.

Net Investment Hedges. The Company is also exposed to risk that adverse changes in foreign currency exchange rates could impact its net investment in foreign operations. During the first quarter of fiscal year 2016, the Company entered into a forward contract designated as a net investment hedge to reduce exposure to changes in currency exchange rates on 45.0 million euros of its total investment in a wholly-owned, euro-denominated foreign subsidiary. The hedge was settled during the Second Quarter resulting in a net gain of $0.5 million net of taxes that was recognized in the currency translation component of accumulated other comprehensive income (loss).

The effective portion of derivatives designated as net investment hedges are recorded at fair value at each balance sheet date and the change in fair value is recorded in the cumulative translation adjustment component of other comprehensive income (loss) in the Company’s condensed consolidated statements of income and comprehensive income. The Company uses the hypothetical derivative method to assess the ineffectiveness of net investment hedges. Should any portion of a net investment hedge become ineffective, the ineffective portion will be reclassified to other income (expense)-net on the Company’s condensed consolidated statements of income and comprehensive income. Gains and losses reported in accumulated other comprehensive income (loss) will not be reclassified into earnings until the Company’s underlying investment is liquidated or dissolved.

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of July 2, 2016, the Company had non-designated forward contracts of approximately $1.4 million on 21.6 million rand associated with a South African rand-denominated foreign subsidiary. Changes in the fair value of derivatives, not designated as hedging instruments, are recognized in earnings when they occur.

The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period are set forth below (in thousands):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	5,162		$	2,954
Interest rate swaps	(452		)	6,648
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	4,710		$	9,602

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	(220	)	$	15,497
Interest rate swaps	(1,513		)	1,941
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(1,733	)	$	17,438

The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period (in thousands):

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	665		$	6,921
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	74		$	(9	)
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(286	)	$	(404	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	4,951		$	15,129
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(157	)	$	80
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(583	)	$	(837	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands):

	Asset Derivatives						Liability Derivatives
	July 2, 2016			January 2, 2016			July 2, 2016			January 2, 2016
Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	10,709	Prepaid expenses and other current assets	$	13,184	Accrued expenses- other	$	6,109	Accrued expenses- other	$	477
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	167		Accrued expenses- other	49		Accrued expenses- other	71
Interest rate swap designated as a cash flow hedging instrument	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Accrued expenses- other	1,568		Accrued expenses- other	1,273
Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	2,845		Intangible and other assets-net	2,785		Other long-term liabilities	1,936		Other long-term liabilities	250
Interest rate swap designated as a cash flow hedging instrument	Intangible and other assets-net	—		Intangible and other assets-net	311		Other long-term liabilities	985		Other long-term liabilities	128
Total		$	13,554		$	16,447		$	10,647		$	2,199

At the end of the Second Quarter, the Company had forward contracts designated as cash flow hedges with maturities extending through June 2018. As of July 2, 2016, an estimated net gain of $3.3 million is expected to be reclassified into earnings within the next twelve months at prevailing foreign currency exchange rates. See “Note 1—Financial Statement Policies” for additional disclosures on foreign currency hedging instruments.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jul. 02, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

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.

Accounting Standards Codification ("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 July 2, 2016 (in thousands):

	Fair Value at July 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	13,554	$	—	$	13,554
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,398		—		—		2,398
Total	$	2,398	$	13,554	$	—	$	15,952
Liabilities:
Forward contracts	—		8,094		—		8,094
Interest rate swap	—		2,553		—		2,553
Total	$	—	$	10,647	$	—	$	10,647

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 (in thousands):

	Fair Value at January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	16,136	$	—	$	16,136
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,406		—		—		2,406
Interest rate swap	—		311		—		311
Total	$	2,406	$	16,447	$	—	$	18,853
Liabilities:
Contingent consideration	$	—	$	—	$	3,643	$	3,643
Forward contracts	—		798		—		798
Interest rate swap	—		1,401		—		1,401
Total	$	—	$	2,199	$	3,643	$	5,842

The fair values of the Company’s 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 condensed 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 fair values of the interest rate swap assets and liabilities are determined using valuation models based on market observable inputs, including forward curves, mid-market price and volatility levels. See “Note 10—Derivatives and Risk Management” for additional disclosures about the interest rate swaps and forward contracts.

The Company has evaluated its short-term and long-term debt as of July 2, 2016 and January 2, 2016 and believes, based on the interest rates, related terms and maturities, that the fair values of such instruments approximated their carrying amounts. As of July 2, 2016 and January 2, 2016, the carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated their fair values due to the short-term maturities of these accounts.

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INTANGIBLE AND OTHER ASSETS

6 Months Ended

Jul. 02, 2016

INTANGIBLE AND OTHER ASSETS

INTANGIBLE AND OTHER ASSETS

INTANGIBLE AND OTHER ASSETS

The following table summarizes intangible and other assets (in thousands):

		July 2, 2016				January 2, 2016
	Useful	Gross		Accumulated		Gross		Accumulated
	Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:
Trademarks	10 yrs.	$	4,310	$	3,321	$	4,175	$	3,195
Customer lists	5-10 yrs.	54,064		24,166		53,825		21,001
Patents	3-20 yrs.	2,302		2,082		2,273		2,064
Noncompete agreement	3-6 yrs.	2,524		1,409		2,515		1,134
Developed technology	7 yrs.	36,100		2,579		36,100		—
Trade name	6 yrs.	15,700		1,308		15,700		—
Other	7-20 yrs.	259		214		256		206
Total intangibles-subject to amortization		115,259		35,079		114,844		27,600
Intangibles-not subject to amortization:
Trade names		74,503				74,493
Other assets:
Key money deposits		28,612		20,349		29,357		19,805
Other deposits		22,303				21,684
Deferred compensation plan assets		2,398				2,406
Deferred tax asset-net		22,131				18,602
Restricted cash		525				512
Shop-in-shop		9,494		7,807		9,985		8,262
Interest rate swap		—				311
Forward contracts		2,845				2,785
Investments		2,397				2,396
Other		4,784				5,519
Total other assets		95,489		28,156		93,557		28,067
Total intangible and other assets		$	285,251	$	63,235	$	282,894	$	55,667
Total intangible and other assets-net				$	222,016			$	227,227

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the initial lease term, which ranges from approximately four to 18 years.

Amortization expense for intangible assets was approximately $3.8 million and $1.4 million for the Second Quarter and Prior Year Quarter, respectively, and $7.5 million and $2.5 million for the Year To Date Period and Prior Year YTD Period, respectively. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):

Fiscal Year	Amortization Expense
2016 (remaining)	$	7,487
2017	$	14,721
2018	$	14,366
2019	$	14,037
2020	$	13,528
2021	$	9,703

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jul. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Litigation. The Company is occasionally subject to litigation or other legal proceedings in the normal course of its business. The Company does not believe that the outcome of any currently pending legal matters, individually or collectively, will have a material effect on the business or financial condition of the Company.

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DEBT ACTIVITY

6 Months Ended

Jul. 02, 2016

Debt Disclosure [Abstract]

DEBT ACTIVITY

DEBT ACTIVITY

The Company made principal payments of $4.7 million and $9.4 million under its Term Loan during the Second Quarter and Year To Date Period, respectively. The Company also made net payments of $83.6 million and $64.0 million under its U.S. revolving line of credit (the "Revolving Credit Facility") during the Second Quarter and Year To Date Period, respectively. Borrowings were primarily used to fund capital expenditures, normal operating expenses and stock repurchases and were more than offset by payments on debt. Amounts available under the Revolving Credit Facility are reduced by any amounts outstanding under standby letters of credit. As of July 2, 2016, the Company had available borrowing capacity of approximately $133.0 million under the Revolving Credit Facility, which was favorably impacted by a $215.5 million international cash balance. The Company incurred approximately $1.6 million and $3.2 million of interest expense related to the Term Loan during the Second Quarter and Year To Date Period, respectively, including the impact of the related interest rate swap. The Company incurred approximately $4.2 million and $7.9 million of interest expense related to the Revolving Credit Facility during the Second Quarter and Year To Date Period, respectively.

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SUBSEQUENT EVENT

6 Months Ended

Jul. 02, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENT

SUBSEQUENT EVENT

Credit Agreement. On August 8, 2016, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the "First Amendment"). The First Amendment adds two new levels to the applicable margin pricing grid used to calculate the interest rate that is applicable to base rate loans and LIBOR rate loans under the Revolving Credit Facility and increases the applicable margin at each pricing level for LIBOR rate loans and base rate loans by 25 basis points. Additionally, the First Amendment provides for the net cash proceeds from certain debt issuances by the Company in excess of $25.0 million to be applied, first, to prepay the Term Loan and, for the excess, if any, to prepay the Revolving Credit Facility with a corresponding reduction in the revolving credit commitment by the amount of such excess proceeds. The First Amendment also changes the consolidated total leverage ratio that the Company must comply with for fiscal quarters ending on or after June 30, 2016 from 2.50:1.00 to 3.25:1.00.

In connection with the First Amendment, the Company and certain of its material domestic subsidiaries entered into a Collateral Agreement in favor of Wells Fargo Bank, National Association, as administrative agent, pursuant to which the Company and such subsidiaries granted liens on all or substantially all of their assets in order to secure the Company’s obligations under the Revolving Credit Facility and the other loan documents (the “Obligations”). Additionally, certain of the Company’s domestic subsidiaries entered into a guaranty agreement in favor of Wells Fargo Bank, National Association, as administrative agent, pursuant to which such subsidiaries guarantee the payment and performance of the Obligations.

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FINANCIAL STATEMENT POLICIES (Policies)

6 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation. 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 July 2, 2016, and the results of operations for the thirteen-week periods ended July 2, 2016 (“Second Quarter”) and July 4, 2015 (“Prior Year Quarter”), respectively, and the twenty-six week periods ended July 2, 2016 (“Year To Date Period”) and July 4, 2015 (“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 January 2, 2016 (the “2015 Form 10-K”). Operating results for the Second 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 2015 Form 10-K.

Business

Business. The Company isa 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 and sunglasses. 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 is exposed to certain market risks relating to foreign exchange rates and interest rates. The Company actively monitors and attempts to manage these exposures using derivative instruments including foreign exchange forward contracts ("forward contracts") and interest rate swaps. The Company’s foreign subsidiaries periodically enter into forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. Additionally, during the first quarter of fiscal year 2016, the Company entered into forward contracts to manage fluctuations in Japanese yen exchange rates that will be used to settle future third-party inventory component purchases by a U.S. dollar functional currency subsidiary. If the Company was to settle its euro, British pound, Canadian dollar, Japanese yen, Mexican peso, Australian dollar and U.S dollar forward contracts as of July 2, 2016, the result would have been a net gain of approximately $3.8 million, net of taxes. This unrealized gain is recognized in other comprehensive income (loss), net of taxes on the Company's consolidated statements of income and comprehensive income. Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts would be recognized in other income (expense)-net on the Company's consolidated statements of income and comprehensive income. Also, the Company has entered into interest rate swap agreements to effectively convert portions of its variable rate debt obligations to fixed rates. Changes in the fair value of the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, and are recognized in interest expense in the period in which the payment is settled. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in foreign currency-denominated subsidiaries, the Company periodically enters into forward contracts designated as net investment hedges. Both realized and unrealized gains and losses from net investment hedges are recognized in the cumulative translation adjustment component of other comprehensive income (loss), and will be reclassified into earnings in the event the Company's underlying investments are liquidated or disposed. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

Operating expenses

Operating expenses. Operating expenses include selling, general and administrative expenses (“SG&A”) and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company’s retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and “back office” or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation.Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure and store closures.

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.

Recently Issued Accounting Standards and Recently Adopted Accounting Standards

Recently Issued Accounting Standards. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for annual periods, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-09. 

In March 2016, the FASB issued ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. ASU 2016-04 is effective for annual periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-04.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is still evaluating the effect of adopting ASU 2016-02.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual periods beginning after December 15, 2016, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. This standard will not have a material impact on the Company’s consolidated results of operations or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), deferring the effective date of ASU 2014-09. The new revenue standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and allows either a full retrospective adoption to all periods presented or a modified retrospective adoption approach with the cumulative effect of initial application of the revised guidance recognized at the date of initial application. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). ASU 2016-10clarifies the implementation guidance on identifying performance obligations. Early adoption is permitted for periods beginning after December 15, 2016. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2016-12 clarifies three aspects of Topic 606, including the objective of the collectability criterion, the measurement date for noncash consideration and the requirements for a completed contract. ASU 2016-12 also includes a practical expedient for contract modifications. Additionally, the amendments allow an entity to exclude all sales taxes collected from customers from the transaction price. The Company is evaluating the effect of adopting ASU 2014-09 and related ASUs.

Recently Adopted Accounting Standards. In accordance with U.S. GAAP, the following provisions, which had no material impact on the Company’s financial position, results of operations or cash flows, were adopted effective the first quarter of fiscal year 2016:

•ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis

• ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

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FINANCIAL STATEMENT POLICIES (Tables)

6 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Numerators and denominators used in the computations of both basic and diluted EPS

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 July 2, 2016		For the 13 Weeks Ended July 4, 2015		For the 26 Weeks Ended July 2, 2016		For the 26 Weeks Ended July 4, 2015
Numerator:
Net income attributable to Fossil Group, Inc.	$	6,021	$	54,648	$	11,814	$	92,718
Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Basic EPS	$	0.13	$	1.12	$	0.25	$	1.87
Diluted EPS computation:
Basic weighted average common shares outstanding	48,119		48,634		48,125		49,464
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units	88		110		104		151
Diluted weighted average common shares outstanding	48,207		48,744		48,229		49,615
Diluted EPS	$	0.12	$	1.12	$	0.24	$	1.87

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ACQUISITIONS AND GOODWILL (Tables)

6 Months Ended

Jul. 02, 2016

Business Combinations [Abstract]

Schedule of business acquisitions, by acquisition

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		(3,788		)
Total transaction consideration		$	213,291
Inventories		$	7,011
Prepaid expenses and other current assets		25
Property, plant and equipment and other long-term assets		1,190
Goodwill		168,021
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		(9,237		)
Total net assets acquired		$	213,291

Schedule of changes in the carrying amount of goodwill

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

	Americas			Europe		Asia		Total
Balance at January 2, 2016	$	283,598		$	63,981	$	11,815	$	359,394
Segment allocation and acquisition adjustments (1)	(78,197		)	49,760		32,053		3,616
Currency	(100		)	1,223		25		1,148
Balance at July 2, 2016	$	205,301		$	114,964	$	43,893	$	364,158

__________________________________________________________________________________

(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 the Year To Date Period to accounts receivable, inventories, current and long-term liabilities and working capital and other adjustments made to the transaction consideration.

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INVENTORIES (Tables)

6 Months Ended

Jul. 02, 2016

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consisted of the following (in thousands):

	July 2, 2016		January 2, 2016
Components and parts	$	67,408	$	49,539
Work-in-process	10,762		12,213
Finished goods	583,578		563,592
Inventories	$	661,748	$	625,344

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WARRANTY LIABILITIES (Tables)

6 Months Ended

Jul. 02, 2016

Product Warranties Disclosures [Abstract]

Schedule of warranty liability activity

Warranty liability activity consisted of the following (in thousands):

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Beginning balance	$	13,669		$	13,500
Settlements in cash or kind	(4,795		)	(4,019		)
Warranties issued and adjustments to preexisting warranties (1)	4,861			4,038
Liabilities assumed in acquisition	—			44
Ending balance	$	13,735		$	13,563

_______________________________________________

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

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INCOME TAXES (Tables)

6 Months Ended

Jul. 02, 2016

Income Tax Disclosure [Abstract]

Schedule of income tax expense and related effective rate

The Company’s income tax expense and related effective rates were as follows (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015			For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Income tax expense	$	3,499		$	22,894		$	6,778		$	41,417
Income tax rate	30.2		%	28.7		%	30.5		%	29.8		%

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STOCKHOLDERS' EQUITY (Tables)

6 Months Ended

Jul. 02, 2016

Stockholders' Equity Note [Abstract]

Schedule of common stock repurchase activity

The following tables reflect the Company’s common stock repurchase activity for the periods indicated (in millions):

				For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	—	$	0.8	1.3	$	102.5
2012	$	1,000.0	December 2016 (1)	—	$	—	—	$	—
2010	$	30.0	None	—	$	—	—	$	—

				For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2014	$	1,000.0	December 2018	0.1	$	5.2	2.2	$	188.2
2012	$	1,000.0	December 2016 (1)	—	$	—	0.3	$	28.8
2010	$	30.0	None	—	$	—	—	$	—

__________________________________________________________________________________

(1) In the first quarter of fiscal year 2015, the Company completed this repurchase plan.

Summary of changes in equity attributable to controlling and noncontrolling interest

The following tables summarize the changes in equity attributable to controlling and noncontrolling interest (in thousands):

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 2, 2016	$	921,388		$	11,155		$	932,543
Net income	11,814			3,654			15,468
Currency translation adjustment	7,721			—			7,721
Cash flow hedges - net change	(6,101		)	—			(6,101		)
Pension plan activity	1,714			—			1,714
Common stock issued upon exercise of stock options	57			—			57
Tax expense derived from stock-based compensation	(1,389		)	—			(1,389		)
Distribution of noncontrolling interest earnings	—			(4,544		)	(4,544		)
Acquisition of common stock	(6,418		)	—			(6,418		)
Stock-based compensation expense	16,463			—			16,463
Balance at July 2, 2016	$	945,249		$	10,265		$	955,514

	Fossil Group, Inc. Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
Balance at January 3, 2015	$	977,860		$	5,941		$	983,801
Net income	92,718			4,740			97,458
Currency translation adjustment	(27,947		)	—			(27,947		)
Cash flow hedges - net change	(185		)	—			(185		)
Common stock issued upon exercise of stock options	582			—			582
Tax expense derived from stock-based compensation	(699		)	—			(699		)
Distribution of noncontrolling interest earnings	—			(5,056		)	(5,056		)
Business acquisition	—			5,831			5,831
Acquisition of common stock	(218,659		)	—			(218,659		)
Stock-based compensation expense	9,276			—			9,276
Balance at July 4, 2015	$	832,946		$	11,456		$	844,402

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EMPLOYEE BENEFIT PLANS (Tables)

6 Months Ended

Jul. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock options and stock appreciation rights activity

The following table summarizes stock options and stock appreciation rights activity during the Second Quarter:

Stock Options and Stock Appreciation Rights	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in Thousands)				(in Years)	(in Thousands)
Outstanding at April 2, 2016	2,214		$	51.82	6.9	$	10,828
Granted	—
Exercised	—
Forfeited or expired	(8	)	117.13
Outstanding at July 2, 2016	2,206		51.59		6.7	791
Exercisable at July 2, 2016	538		$	84.14	4.4	$	791

Summary of stock options and stock appreciation rights outstanding and exercisable

The following tables summarize information with respect to stock options and stock appreciation rights outstanding and exercisable at July 2, 2016:

Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	41	$	14.40	2.7	41	$	14.40
$30.71 - $47.99	91	36.29		2.5	91	36.29
$55.04 - $83.83	92	80.80		4.8	92	80.80
$95.91 - $131.46	144	127.98		5.7	144	127.98
Total	368	$	80.95	4.3	368	$	80.95

Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number of Shares	Weighted- Average Exercise Price
	(in Thousands)			(in Years)	(in Thousands)
$13.65 - $29.78	26	$	21.97	4.2	13	$	13.65
$30.71 - $47.99	1,560	38.27		7.5	9	38.40
$55.04 - $83.83	143	79.05		6.1	62	80.44
$95.91 - $131.46	109	114.42		5.0	86	115.32
Total	1,838	$	45.72	7.2	170	$	91.02

Summary of restricted stock, restricted stock units and performance restricted stock units activity

The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity during the Second Quarter:

Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
	(in Thousands)
Nonvested at April 2, 2016	1,063		$	47.98
Granted	494		27.60
Vested	(21	)	82.08
Forfeited	(12	)	41.27
Nonvested at July 2, 2016	1,524		$	40.95

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jul. 02, 2016

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes

The following tables illustrate changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):

	For the 13 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(64,486	)	$	(1,554	)	$	(1,457	)	$	(4,506	)	$	(72,003	)
Other comprehensive income (loss) before reclassifications	(9,396		)	8,738			(711		)	—			(1,369		)
Tax (expense) benefit	—			(3,576		)	259			—			(3,317		)
Amounts reclassed from accumulated other comprehensive income	104			928			(450		)	—			582
Tax (expense) benefit	—			(263		)	164			—			(99		)
Total other comprehensive income (loss)	(9,500		)	4,497			(166		)	—			(5,169		)
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

	For the 13 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(60,747	)	$	19,315		$	(4,776	)	$	(3,647	)	$	(49,855	)
Other comprehensive income (loss) before reclassifications	5,559			2,701			10,460			—			18,720
Tax (expense) benefit	—			253			(3,812		)	—			(3,559		)
Amounts reclassed from accumulated other comprehensive income	—			10,555			4,604			—			15,159
Tax (expense) benefit	—			(3,634		)	(1,677		)	—			(5,311		)
Total other comprehensive income (loss)	5,559			(3,967		)	3,721			—			5,313
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

	For the 26 Weeks Ended July 2, 2016
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swaps			Pension Plan			Total
Beginning balance	$	(81,707	)	$	8,114		$	(693	)	$	(6,220	)	$	(80,506	)
Other comprehensive income (loss) before reclassifications	7,825			(1,259		)	(2,381		)	2,010			6,195
Tax (expense) benefit	—			1,039			868			(296		)	1,611
Amounts reclassed from accumulated other comprehensive income	104			7,267			(918		)	—			6,453
Tax (expense) benefit	—			(2,316		)	335			—			(1,981		)
Total other comprehensive income (loss)	7,721			(5,171		)	(930		)	1,714			3,334
Ending balance	$	(73,986	)	$	2,943		$	(1,623	)	$	(4,506	)	$	(77,172	)

	For the 26 Weeks Ended July 4, 2015
	Currency Translation Adjustments			Cash Flow Hedges
				Forward Contracts			Interest Rate Swap			Pension Plan			Total
Beginning balance	$	(27,241	)	$	14,980		$	(502	)	$	(3,647	)	$	(16,410	)
Other comprehensive income (loss) before reclassifications	(27,947		)	21,462			3,054			—			(3,431		)
Tax (expense) benefit	—			(5,965		)	(1,113		)	—			(7,078		)
Amounts reclassed from accumulated other comprehensive income	—			22,993			3,923			—			26,916
Tax (expense) benefit	—			(7,864		)	(1,429		)	—			(9,293		)
Total other comprehensive income (loss)	(27,947		)	368			(553		)	—			(28,132		)
Ending balance	$	(55,188	)	$	15,348		$	(1,055	)	$	(3,647	)	$	(44,542	)

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SEGMENT INFORMATION (Tables)

6 Months Ended

Jul. 02, 2016

Segment Reporting [Abstract]

Summary information by operating segment

Summary information by operating segment was as follows (in thousands):

	For the 13 Weeks Ended July 2, 2016					For the 13 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	345,187	$	52,300		$	386,088	$	86,033
Europe	215,936		31,669			227,923		41,814
Asia	124,245		18,936			125,964		20,555
Corporate			(87,455		)			(77,968		)
Consolidated	$	685,368	$	15,450		$	739,975	$	70,434

	For the 26 Weeks Ended July 2, 2016					For the 26 Weeks Ended July 4, 2015
	Net Sales		Operating Income			Net Sales		Operating Income
Americas	$	680,997	$	111,896		$	752,684	$	162,533
Europe	425,937		60,180			462,179		79,152
Asia	238,282		36,865			250,197		41,051
Corporate			(179,087		)			(156,147		)
Consolidated	$	1,345,216	$	29,854		$	1,465,060	$	126,589

Schedule of net sales for each class of similar products

The following tables reflect net sales for each class of similar products in the periods presented (in thousands, except percentage data):

	For the 13 Weeks Ended July 2, 2016				For the 13 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	517,602	75.5	%	$	575,804	77.8	%
Leathers	93,152		13.6		89,380		12.1
Jewelry	56,752		8.3		55,780		7.5
Other	17,862		2.6		19,011		2.6
Total	$	685,368	100.0	%	$	739,975	100.0	%

	For the 26 Weeks Ended July 2, 2016				For the 26 Weeks Ended July 4, 2015
	Net Sales		Percentage of Total		Net Sales		Percentage of Total
Watches	$	1,014,085	75.4	%	$	1,127,661	77.0	%
Leathers	185,657		13.8		182,306		12.4
Jewelry	111,472		8.3		118,767		8.1
Other	34,002		2.5		36,326		2.5
Total	$	1,345,216	100.0	%	$	1,465,060	100.0	%

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DERIVATIVES AND RISK MANAGEMENT (Tables)

6 Months Ended

Jul. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of outstanding forward contracts

As of July 2, 2016, the Company had the following outstanding forward contracts designated as cash flow hedges that were entered into to hedge the future payments of inventory transactions (in millions):

Functional Currency		Contract Currency
Type	Amount	Type	Amount
Euro	255.1	U.S. dollar	288.3
British pound	52.9	U.S. dollar	79.0
Canadian dollar	80.5	U.S. dollar	61.0
Japanese yen	4,077.9	U.S. dollar	35.7
Mexican peso	335.4	U.S. dollar	18.3
Australian dollar	20.0	U.S. dollar	14.6
U.S. dollar	28.0	Japanese yen	3,013.0

Schedule of effective portion of gains and losses on derivative instruments recognized in other comprehensive income (loss), net of taxes

The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period are set forth below (in thousands):

	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	5,162		$	2,954
Interest rate swaps	(452		)	6,648
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	4,710		$	9,602

	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Cash flow hedges:
Forward contracts	$	(220	)	$	15,497
Interest rate swaps	(1,513		)	1,941
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$	(1,733	)	$	17,438

Schedule of effective portion of gains and losses on derivative instruments recognized in other comprehensive income (loss), net of taxes reclassified into earnings and derivatives not designated as hedging instruments recorded directly to earnings

The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during the Second Quarter, Prior Year Quarter, Year To Date Period and Prior Year YTD Period (in thousands):

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 13 Weeks Ended July 2, 2016			For the 13 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	665		$	6,921
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	74		$	(9	)
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(286	)	$	(404	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

Derivative Instruments	Condensed Consolidated Statements of Income and Comprehensive Income Location	Effect of Derivative Instruments	For the 26 Weeks Ended July 2, 2016			For the 26 Weeks Ended July 4, 2015
Forward contracts designated as cash flow hedging instruments	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	4,951		$	15,129
Forward contracts not designated as hedging instruments	Other income (expense)-net	Total gain (loss) recognized in income	$	(157	)	$	80
Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total gain (loss) reclassified from other comprehensive income (loss)	$	(583	)	$	(837	)
Interest rate swap designated as a cash flow hedging instrument	Other income (expense)-net	Total gain (loss) reclassified from other comprehensive income (loss)	$	—		$	3,331

Schedule of fair value amounts for derivative instruments as separate asset and liability values on a gross basis and their location on condensed consolidated balance sheets

The following table discloses the fair value amounts for the Company’s derivative instruments as separate asset and liability values, presents the fair value of derivative instruments on a gross basis, and identifies the line items in the condensed consolidated balance sheets in which the fair value amounts for these categories of derivative instruments are included (in thousands):

	Asset Derivatives						Liability Derivatives
	July 2, 2016			January 2, 2016			July 2, 2016			January 2, 2016
Derivative Instruments	Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value		Condensed Consolidated Balance Sheets Location	Fair Value
Forward contracts designated as cash flow hedging instruments	Prepaid expenses and other current assets	$	10,709	Prepaid expenses and other current assets	$	13,184	Accrued expenses- other	$	6,109	Accrued expenses- other	$	477
Forward contracts not designated as cash flow hedging instruments	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	167		Accrued expenses- other	49		Accrued expenses- other	71
Interest rate swap designated as a cash flow hedging instrument	Prepaid expenses and other current assets	—		Prepaid expenses and other current assets	—		Accrued expenses- other	1,568		Accrued expenses- other	1,273
Forward contracts designated as cash flow hedging instruments	Intangible and other assets-net	2,845		Intangible and other assets-net	2,785		Other long-term liabilities	1,936		Other long-term liabilities	250
Interest rate swap designated as a cash flow hedging instrument	Intangible and other assets-net	—		Intangible and other assets-net	311		Other long-term liabilities	985		Other long-term liabilities	128
Total		$	13,554		$	16,447		$	10,647		$	2,199

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jul. 02, 2016

Fair Value Disclosures [Abstract]

Schedule of the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of July 2, 2016 (in thousands):

	Fair Value at July 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	13,554	$	—	$	13,554
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,398		—		—		2,398
Total	$	2,398	$	13,554	$	—	$	15,952
Liabilities:
Forward contracts	—		8,094		—		8,094
Interest rate swap	—		2,553		—		2,553
Total	$	—	$	10,647	$	—	$	10,647

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 (in thousands):

	Fair Value at January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	16,136	$	—	$	16,136
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,406		—		—		2,406
Interest rate swap	—		311		—		311
Total	$	2,406	$	16,447	$	—	$	18,853
Liabilities:
Contingent consideration	$	—	$	—	$	3,643	$	3,643
Forward contracts	—		798		—		798
Interest rate swap	—		1,401		—		1,401
Total	$	—	$	2,199	$	3,643	$	5,842

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INTANGIBLE AND OTHER ASSETS (Tables)

6 Months Ended

Jul. 02, 2016

INTANGIBLE AND OTHER ASSETS

Schedule of intangible and other assets-net

The following table summarizes intangible and other assets (in thousands):

		July 2, 2016				January 2, 2016
	Useful	Gross		Accumulated		Gross		Accumulated
	Lives	Amount		Amortization		Amount		Amortization
Intangibles-subject to amortization:
Trademarks	10 yrs.	$	4,310	$	3,321	$	4,175	$	3,195
Customer lists	5-10 yrs.	54,064		24,166		53,825		21,001
Patents	3-20 yrs.	2,302		2,082		2,273		2,064
Noncompete agreement	3-6 yrs.	2,524		1,409		2,515		1,134
Developed technology	7 yrs.	36,100		2,579		36,100		—
Trade name	6 yrs.	15,700		1,308		15,700		—
Other	7-20 yrs.	259		214		256		206
Total intangibles-subject to amortization		115,259		35,079		114,844		27,600
Intangibles-not subject to amortization:
Trade names		74,503				74,493
Other assets:
Key money deposits		28,612		20,349		29,357		19,805
Other deposits		22,303				21,684
Deferred compensation plan assets		2,398				2,406
Deferred tax asset-net		22,131				18,602
Restricted cash		525				512
Shop-in-shop		9,494		7,807		9,985		8,262
Interest rate swap		—				311
Forward contracts		2,845				2,785
Investments		2,397				2,396
Other		4,784				5,519
Total other assets		95,489		28,156		93,557		28,067
Total intangible and other assets		$	285,251	$	63,235	$	282,894	$	55,667
Total intangible and other assets-net				$	222,016			$	227,227

Schedule of estimated aggregate future amortization expense by fiscal year for intangible assets

Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):

Fiscal Year	Amortization Expense
2016 (remaining)	$	7,487
2017	$	14,721
2018	$	14,366
2019	$	14,037
2020	$	13,528
2021	$	9,703

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FINANCIAL STATEMENT POLICIES (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Hedging Instruments
Unrealized net gain on foreign currency forward contracts, if settled			$ 3,800
Numerator:
Net income attributable to Fossil Group, Inc.	$ 6,021	$ 54,648	$ 11,814	$ 92,718
Denominator:
Basic weighted average common shares outstanding (in shares)	48,119	48,634	48,125	49,464
Basic EPS (in dollars per share)	$ 0.13	$ 1.12	$ 0.25	$ 1.87
Diluted EPS computation:
Basic weighted average common shares outstanding (in shares)	48,119	48,634	48,125	49,464
Effect of stock options, stock appreciation rights, restricted stock units and performance restricted stock units (in shares)	88	110	104	151
Diluted weighted average common shares outstanding (in shares)	48,207	48,744	48,229	49,615
Diluted EPS (in dollars per share)	$ 0.12	$ 1.12	$ 0.24	$ 1.87
Other EPS Disclosures
Weighted shares issuable under stock-based awards not included in the diluted EPS calculation (in shares)	1,900	600	1,700	400
Performance Shares [Member]
Other EPS Disclosures
Weighted shares issuable under stock-based awards not included in the diluted EPS calculation (in shares)	1,100		1,100

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ACQUISITIONS AND GOODWILL (Narratives) (Details) € in Millions			3 Months Ended		6 Months Ended
	Dec. 22, 2015 USD ($)	Aug. 10, 2012	Jul. 02, 2016 USD ($)	Jan. 02, 2016 USD ($)	Jul. 02, 2016 USD ($)	Jul. 04, 2015 USD ($)	Jul. 02, 2016 EUR (€)	Jul. 02, 2016 USD ($)
Business Acquisition [Line Items]
Cash paid, net of cash acquired					$ 0	$ 4,820,000
Revolving Credit Facility
Business Acquisition [Line Items]
Maximum borrowing capacity								$ 1,050,000,000.00
Misfit Inc.
Business Acquisition [Line Items]
Cash paid, net of cash acquired	$ 215,370,000
Replacement awards attributable to precombination service	1,709,000
Portion of cash payment placed into escrow	12,500,000
Amount received from escrow			$ 800,000
Liabilities incurred	$ 60,000,000
Acquisition related expenses for legal, accounting and valuation services				$ 8,400,000
Fossil Spain S L | General De Relojeria S A
Business Acquisition [Line Items]
Voting interest that may be acquired upon expiration of joint venture agreement		50.00%
Fixed purchase price							€ 4.3	4,800,000
Variable purchase price							€ 3.5	$ 3,900,000

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ACQUISITIONS AND GOODWILL (Misfit, Inc. Acquisition) (Details) - USD ($) $ in Thousands		6 Months Ended
	Dec. 22, 2015	Jul. 02, 2016	Jul. 04, 2015	Jan. 02, 2016
Business Acquisition [Line Items]
Cash paid, net of cash acquired		$ 0	$ 4,820
Goodwill		$ 364,158		$ 359,394
Trade name
Business Acquisition [Line Items]
Useful Lives		6 years
Developed technology
Business Acquisition [Line Items]
Useful Lives		7 years
Misfit Inc.
Business Acquisition [Line Items]
Cash paid, net of cash acquired	$ 215,370
Replacement awards attributable to precombination service	1,709
Working capital and other adjustments	(3,788)
Total transaction consideration	213,291
Inventories	7,011
Prepaid expenses and other current assets	25
Property, plant and equipment and other long-term assets	1,190
Goodwill	168,021
Current liabilities	(17,019)
Long-term liabilities	(9,237)
Total net assets acquired	213,291
Misfit Inc. | Trade name
Business Acquisition [Line Items]
Intangible assets	$ 15,700
Useful Lives	6 years
Misfit Inc. | Customer lists
Business Acquisition [Line Items]
Intangible assets	$ 10,800
Useful Lives	5 years
Misfit Inc. | Developed technology
Business Acquisition [Line Items]
Intangible assets	$ 36,100
Useful Lives	7 years
Misfit Inc. | Noncompete agreement
Business Acquisition [Line Items]
Intangible assets	$ 700
Useful Lives	3 years

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ACQUISITIONS AND GOODWILL (Schedule of Changes in the Carrying Amount of Goodwill) (Details) $ in Thousands	6 Months Ended
	Jul. 02, 2016 USD ($)
Goodwill [Roll Forward]
Balance at beginning of year	$ 359,394
Segment allocation and acquisition adjustment	3,616
Currency	1,148
Balance at end of period	364,158
Americas
Goodwill [Roll Forward]
Balance at beginning of year	283,598
Segment allocation and acquisition adjustment	(78,197)
Currency	(100)
Balance at end of period	205,301
Europe
Goodwill [Roll Forward]
Balance at beginning of year	63,981
Segment allocation and acquisition adjustment	49,760
Currency	1,223
Balance at end of period	114,964
Asia
Goodwill [Roll Forward]
Balance at beginning of year	11,815
Segment allocation and acquisition adjustment	32,053
Currency	25
Balance at end of period	$ 43,893

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INVENTORIES (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Jan. 02, 2016
Inventory Disclosure [Abstract]
Components and parts	$ 67,408	$ 49,539
Work-in-process	10,762	12,213
Finished goods	583,578	563,592
Inventories	$ 661,748	$ 625,344

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WARRANTY LIABILITIES (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Warranty liability activity [Roll Forward]
Beginning balance	$ 13,669	$ 13,500
Settlements in cash or kind	(4,795)	(4,019)
Warranties issued and adjustments to preexisting warranties	4,861	4,038
Liabilities assumed in acquisition	0	44
Ending balance	$ 13,735	$ 13,563

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INCOME TAXES (Schedule of Income Tax Expense and Related Effective Rate) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,499	$ 22,894	$ 6,778	$ 41,417
Income tax rate (as percent)	30.20%	28.70%	30.50%	29.80%

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INCOME TAXES (Narratives) (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jul. 02, 2016 USD ($)	Jul. 02, 2016 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 22.6	$ 22.6
Unrecognized tax benefits that would impact effective tax rate	19.4	19.4
Unrecognized tax benefits excluding interest and penalties	0.9	0.9
Total amount of accrued income tax-related interest	2.6	2.6
Penalties accrued	1.8	1.8
Accrued income tax-related interest expense	$ 0.2	$ 0.4

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STOCKHOLDERS' EQUITY (Common Stock Repurchase Programs) (Details) - USD ($) shares in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Common Stock Repurchase Programs
Authorizations remaining	$ 824,200,000		$ 824,200,000
Repurchase program with termination date of December 2018
Common Stock Repurchase Programs
Dollar Value Authorized	$ 1,000,000,000		$ 1,000,000,000
Number of Shares Repurchased (in shares)	0.0	1.3	0.1	2.2
Dollar Value Repurchased	$ 800,000	$ 102,500,000	$ 5,200,000	$ 188,200,000
Repurchase program with termination date of December 2016
Common Stock Repurchase Programs
Dollar Value Authorized	$ 1,000,000,000		$ 1,000,000,000
Number of Shares Repurchased (in shares)	0.0	0.0	0.0	0.3
Dollar Value Repurchased	$ 0	$ 0	$ 0	$ 28,800,000
Share repurchase plan with no termination date
Common Stock Repurchase Programs
Dollar Value Authorized	$ 30,000,000		$ 30,000,000
Number of Shares Repurchased (in shares)	0.0	0.0	0.0	0.0
Dollar Value Repurchased	$ 0	$ 0	$ 0	$ 0
Common stock | Stock repurchase plans
Common Stock Repurchase Programs
Treasury stock effectively retired (in shares)			0.1
Treasury stock effectively retired			$ 1,100
Additional paid-in capital | Stock repurchase plans
Common Stock Repurchase Programs
Treasury stock effectively retired			200,000
Retained earnings | Stock repurchase plans
Common Stock Repurchase Programs
Treasury stock effectively retired			5,000,000
Treasury stock | Stock repurchase plans
Common Stock Repurchase Programs
Treasury stock effectively retired			$ 5,200,000

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STOCKHOLDERS' EQUITY (Controlling and Noncontrolling Interest) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward]
Beginning balance			$ 932,543	$ 983,801
Net income	$ 8,072	$ 56,820	15,468	97,458
Currency translation adjustment			7,721	(27,947)
Cash flow hedges - net change	4,331	(246)	(6,101)	(185)
Pension plan activity	0	0	1,714	0
Common stock issued upon exercise of stock options			57	582
Tax expense derived from stock-based compensation			(1,389)	(699)
Distribution of noncontrolling interest earnings			(4,544)	(5,056)
Business acquisition				5,831
Acquisition of common stock			(6,418)	(218,659)
Stock-based compensation expense			16,463	9,276
Ending balance	955,514	844,402	955,514	844,402
Fossil Group, Inc. Stockholders’ Equity
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward]
Beginning balance			921,388	977,860
Net income			11,814	92,718
Currency translation adjustment			7,721	(27,947)
Cash flow hedges - net change			(6,101)	(185)
Pension plan activity			1,714
Common stock issued upon exercise of stock options			57	582
Tax expense derived from stock-based compensation			(1,389)	(699)
Distribution of noncontrolling interest earnings			0	0
Business acquisition				0
Acquisition of common stock			(6,418)	(218,659)
Stock-based compensation expense			16,463	9,276
Ending balance	945,249	832,946	945,249	832,946
Noncontrolling Interest
Stockholders' Equity Attributable to Controlling and Noncontrolling Interest [Roll Forward]
Beginning balance			11,155	5,941
Net income			3,654	4,740
Currency translation adjustment			0	0
Cash flow hedges - net change			0	0
Pension plan activity			0
Common stock issued upon exercise of stock options			0	0
Tax expense derived from stock-based compensation			0	0
Distribution of noncontrolling interest earnings			(4,544)	(5,056)
Business acquisition				5,831
Acquisition of common stock			0	0
Stock-based compensation expense			0	0
Ending balance	$ 10,265	$ 11,456	$ 10,265	$ 11,456

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EMPLOYEE BENEFIT PLANS (Summary of Stock Options and Stock Appreciation Rights Activity) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Apr. 02, 2016	Jul. 02, 2016
Shares
Outstanding at beginning of period (in shares)	2,214
Granted (in shares)	0
Exercised (in shares)	0
Forfeited or expired (in shares)	(8)
Outstanding at end of period (in shares)	2,206	2,214	2,206
Exercisable at end of period (in shares)	538		538
Weighted- Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 51.82
Forfeited or expired (in dollars per share)	117.13
Outstanding at end of period (in dollars per share)	51.59	$ 51.82	$ 51.59
Exercisable at end of period (in dollars per share)	$ 84.14		$ 84.14
Weighted- Average Remaining Contractual Term
Outstanding (in years)		6 years 10 months 24 days	6 years 8 months 12 days
Exercisable at end of period (in years)			4 years 4 months 24 days
Aggregate Intrinsic Value
Aggregate intrinsic value outstanding	$ 791	$ 10,828	$ 791
Exercisable at end of period	$ 791		$ 791

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EMPLOYEE BENEFIT PLANS (Summary of Stock Options and Stock Appreciation Rights Outstanding and Exercisable) (Details) shares in Thousands	6 Months Ended
	Jul. 02, 2016 $ / shares shares
Stock options
Stock-based compensation plans disclosures
Stock Options Outstanding, Number Of Shares (in shares) | shares	368
Stock Options Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 80.95
Stock Options Outstanding, Weighted- Average Remaining Contractual Term	4 years 3 months 18 days
Stock Options Exercisable, Number Of Shares (in shares) | shares	368
Stock Options Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 80.95
Stock appreciation rights
Stock-based compensation plans disclosures
Stock Appreciation Rights Outstanding, Number Of Shares (in shares) | shares	1,838
Stock Appreciation Rights Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 45.72
Stock Appreciation Rights Outstanding, Weighted- Average Remaining Contractual Term	7 years 2 months 12 days
Stock Appreciation Rights Exercisable, Number Of Shares (in shares) | shares	170
Stock Appreciation Rights Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 91.02
$13.65 - $29.78 | Stock options
Stock-based compensation plans disclosures
Stock Options Outstanding, lower range (in dollars per share)	13.65
Stock Options Outstanding, upper range (in dollars per share)	$ 29.78
Stock Options Outstanding, Number Of Shares (in shares) | shares	41
Stock Options Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 14.40
Stock Options Outstanding, Weighted- Average Remaining Contractual Term	2 years 8 months 12 days
Stock Options Exercisable, Number Of Shares (in shares) | shares	41
Stock Options Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 14.40
$13.65 - $29.78 | Stock appreciation rights
Stock-based compensation plans disclosures
Stock Appreciation Rights Outstanding, lower range (in dollars per share)	13.65
Stock Appreciation Rights Outstanding, upper range (in dollars per share)	$ 29.78
Stock Appreciation Rights Outstanding, Number Of Shares (in shares) | shares	26
Stock Appreciation Rights Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 21.97
Stock Appreciation Rights Outstanding, Weighted- Average Remaining Contractual Term	4 years 2 months 12 days
Stock Appreciation Rights Exercisable, Number Of Shares (in shares) | shares	13
Stock Appreciation Rights Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 13.65
$30.71 - $47.99 | Stock options
Stock-based compensation plans disclosures
Stock Options Outstanding, lower range (in dollars per share)	30.71
Stock Options Outstanding, upper range (in dollars per share)	$ 47.99
Stock Options Outstanding, Number Of Shares (in shares) | shares	91
Stock Options Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 36.29
Stock Options Outstanding, Weighted- Average Remaining Contractual Term	2 years 6 months
Stock Options Exercisable, Number Of Shares (in shares) | shares	91
Stock Options Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 36.29
$30.71 - $47.99 | Stock appreciation rights
Stock-based compensation plans disclosures
Stock Appreciation Rights Outstanding, lower range (in dollars per share)	30.71
Stock Appreciation Rights Outstanding, upper range (in dollars per share)	$ 47.99
Stock Appreciation Rights Outstanding, Number Of Shares (in shares) | shares	1,560
Stock Appreciation Rights Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 38.27
Stock Appreciation Rights Outstanding, Weighted- Average Remaining Contractual Term	7 years 6 months
Stock Appreciation Rights Exercisable, Number Of Shares (in shares) | shares	9
Stock Appreciation Rights Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 38.40
$55.04 - $83.83 | Stock options
Stock-based compensation plans disclosures
Stock Options Outstanding, lower range (in dollars per share)	55.04
Stock Options Outstanding, upper range (in dollars per share)	$ 83.83
Stock Options Outstanding, Number Of Shares (in shares) | shares	92
Stock Options Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 80.80
Stock Options Outstanding, Weighted- Average Remaining Contractual Term	4 years 9 months 18 days
Stock Options Exercisable, Number Of Shares (in shares) | shares	92
Stock Options Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 80.80
$55.04 - $83.83 | Stock appreciation rights
Stock-based compensation plans disclosures
Stock Appreciation Rights Outstanding, lower range (in dollars per share)	55.04
Stock Appreciation Rights Outstanding, upper range (in dollars per share)	$ 83.83
Stock Appreciation Rights Outstanding, Number Of Shares (in shares) | shares	143
Stock Appreciation Rights Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 79.05
Stock Appreciation Rights Outstanding, Weighted- Average Remaining Contractual Term	6 years 1 month 6 days
Stock Appreciation Rights Exercisable, Number Of Shares (in shares) | shares	62
Stock Appreciation Rights Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 80.44
$95.91 - $131.46 | Stock options
Stock-based compensation plans disclosures
Stock Options Outstanding, lower range (in dollars per share)	95.91
Stock Options Outstanding, upper range (in dollars per share)	$ 131.46
Stock Options Outstanding, Number Of Shares (in shares) | shares	144
Stock Options Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 127.98
Stock Options Outstanding, Weighted- Average Remaining Contractual Term	5 years 8 months 12 days
Stock Options Exercisable, Number Of Shares (in shares) | shares	144
Stock Options Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 127.98
$95.91 - $131.46 | Stock appreciation rights
Stock-based compensation plans disclosures
Stock Appreciation Rights Outstanding, lower range (in dollars per share)	95.91
Stock Appreciation Rights Outstanding, upper range (in dollars per share)	$ 131.46
Stock Appreciation Rights Outstanding, Number Of Shares (in shares) | shares	109
Stock Appreciation Rights Outstanding, Weighted- Average Exercise Price (in dollars per share)	$ 114.42
Stock Appreciation Rights Outstanding, Weighted- Average Remaining Contractual Term	5 years
Stock Appreciation Rights Exercisable, Number Of Shares (in shares) | shares	86
Stock Appreciation Rights Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 115.32

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EMPLOYEE BENEFIT PLANS (Summary of Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units Activity) (Details) - Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended
	Jul. 02, 2016 USD ($) $ / shares shares
Number of Shares
Nonvested at beginning of period (in shares) | shares	1,063
Granted (in shares) | shares	494
Vested (in shares) | shares	(21)
Forfeited (in shares) | shares	(12)
Nonvested at end of period (in shares) | shares	1,524
Weighted-Average Grant Date Fair Value Per Share
Nonvested at beginning of period (in dollars per share) | $ / shares	$ 47.98
Granted (in dollars per share) | $ / shares	27.60
Vested (in dollars per share) | $ / shares	82.08
Forfeited (in dollars per share) | $ / shares	41.27
Nonvested at end of period (in dollars per share) | $ / shares	$ 40.95
Fair value of restricted stock and restricted stock units vested | $	$ 0.6

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance			$ 932,543	$ 983,801
Total other comprehensive income (loss)	$ (5,169)	$ 5,313	3,334	(28,132)
Ending balance	955,514	844,402	955,514	844,402
Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance	(64,486)	(60,747)	(81,707)	(27,241)
Other comprehensive income (loss) before reclassifications	(9,396)	5,559	7,825	(27,947)
Tax (expense) benefit	0	0	0	0
Amounts reclassed from accumulated other comprehensive income	104	0	104	0
Tax (expense) benefit	0	0	0	0
Total other comprehensive income (loss)	(9,500)	5,559	7,721	(27,947)
Ending balance	(73,986)	(55,188)	(73,986)	(55,188)
Cash Flow Hedges | Forward Contracts
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance	(1,554)	19,315	8,114	14,980
Other comprehensive income (loss) before reclassifications	8,738	2,701	(1,259)	21,462
Tax (expense) benefit	(3,576)	253	1,039	(5,965)
Amounts reclassed from accumulated other comprehensive income	928	10,555	7,267	22,993
Tax (expense) benefit	(263)	(3,634)	(2,316)	(7,864)
Total other comprehensive income (loss)	4,497	(3,967)	(5,171)	368
Ending balance	2,943	15,348	2,943	15,348
Cash Flow Hedges | Interest Rate Swaps
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance	(1,457)	(4,776)	(693)	(502)
Other comprehensive income (loss) before reclassifications	(711)	10,460	(2,381)	3,054
Tax (expense) benefit	259	(3,812)	868	(1,113)
Amounts reclassed from accumulated other comprehensive income	(450)	4,604	(918)	3,923
Tax (expense) benefit	164	(1,677)	335	(1,429)
Total other comprehensive income (loss)	(166)	3,721	(930)	(553)
Ending balance	(1,623)	(1,055)	(1,623)	(1,055)
Pension Plan
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance	(4,506)	(3,647)	(6,220)	(3,647)
Other comprehensive income (loss) before reclassifications	0	0	2,010	0
Tax (expense) benefit	0	0	(296)	0
Amounts reclassed from accumulated other comprehensive income	0	0	0	0
Tax (expense) benefit	0	0	0	0
Total other comprehensive income (loss)	0	0	1,714	0
Ending balance	(4,506)	(3,647)	(4,506)	(3,647)
Total
Accumulated Other Comprehensive Income (Loss), Net of Tax
Beginning balance	(72,003)	(49,855)	(80,506)	(16,410)
Other comprehensive income (loss) before reclassifications	(1,369)	18,720	6,195	(3,431)
Tax (expense) benefit	(3,317)	(3,559)	1,611	(7,078)
Amounts reclassed from accumulated other comprehensive income	582	15,159	6,453	26,916
Tax (expense) benefit	(99)	(5,311)	(1,981)	(9,293)
Total other comprehensive income (loss)	(5,169)	5,313	3,334	(28,132)
Ending balance	$ (77,172)	$ (44,542)	$ (77,172)	$ (44,542)

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SEGMENT INFORMATION (Summary Information by Operating Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Summary information by operating segment
Net Sales	$ 685,368	$ 739,975	$ 1,345,216	$ 1,465,060
Operating Income	15,450	70,434	29,854	126,589
Operating segments | Americas
Summary information by operating segment
Net Sales	345,187	386,088	680,997	752,684
Operating Income	52,300	86,033	111,896	162,533
Operating segments | Europe
Summary information by operating segment
Net Sales	215,936	227,923	425,937	462,179
Operating Income	31,669	41,814	60,180	79,152
Operating segments | Asia
Summary information by operating segment
Net Sales	124,245	125,964	238,282	250,197
Operating Income	18,936	20,555	36,865	41,051
Corporate
Summary information by operating segment
Operating Income	$ (87,455)	$ (77,968)	$ (179,087)	$ (156,147)

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SEGMENT INFORMATION (Schedule of Net Sales for Each Class of Similar Products) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Net sales for each class of similar products
Net sales	$ 685,368	$ 739,975	$ 1,345,216	$ 1,465,060
Percentage of Total	100.00%	100.00%	100.00%	100.00%
Watches
Net sales for each class of similar products
Net sales	$ 517,602	$ 575,804	$ 1,014,085	$ 1,127,661
Percentage of Total	75.50%	77.80%	75.40%	77.00%
Leathers
Net sales for each class of similar products
Net sales	$ 93,152	$ 89,380	$ 185,657	$ 182,306
Percentage of Total	13.60%	12.10%	13.80%	12.40%
Jewelry
Net sales for each class of similar products
Net sales	$ 56,752	$ 55,780	$ 111,472	$ 118,767
Percentage of Total	8.30%	7.50%	8.30%	8.10%
Other
Net sales for each class of similar products
Net sales	$ 17,862	$ 19,011	$ 34,002	$ 36,326
Percentage of Total	2.60%	2.60%	2.50%	2.50%

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DERIVATIVES AND RISK MANAGEMENT (Cash Flow Hedges) (Details) € in Millions, ¥ in Millions, £ in Millions, MXN in Millions, CAD in Millions, AUD in Millions		3 Months Ended		6 Months Ended
	Jul. 26, 2013	Jul. 02, 2016 USD ($)	Jul. 04, 2015 USD ($)	Jul. 02, 2016 USD ($)	Jul. 04, 2015 USD ($)	Jul. 02, 2016 EUR (€)	Jul. 02, 2016 USD ($)	Jul. 02, 2016 GBP (£)	Jul. 02, 2016 AUD	Jul. 02, 2016 MXN	Jul. 02, 2016 CAD	Jul. 02, 2016 JPY (¥)	Mar. 09, 2015 USD ($)
Derivative [Line Items]
Foreign currency cash flow hedge maximum length of projection term				24 months
Forecasted purchases to manage fluctuations (up to) (as a percent)						85.00%	85.00%	85.00%	85.00%	85.00%	85.00%	85.00%
Hedges resulted in ineffectiveness		$ 0	$ 0	$ 0	$ 0
Gain (loss) reclassified into earnings		6,021,000	54,648,000	$ 11,814,000	92,718,000
U.S. term loan
Derivative [Line Items]
Maximum borrowing capacity													$ 231,300,000
Designated as cash flow hedges | Forward Contracts | Euro
Derivative [Line Items]
Notional amount						€ 255.1	$ 288,300,000
Designated as cash flow hedges | Forward Contracts | British pound
Derivative [Line Items]
Notional amount							79,000,000	£ 52.9
Designated as cash flow hedges | Forward Contracts | Canadian dollar
Derivative [Line Items]
Notional amount							61,000,000				CAD 80.5
Designated as cash flow hedges | Forward Contracts | Japanese yen
Derivative [Line Items]
Notional amount							35,700,000					¥ 4,077.9
Designated as cash flow hedges | Forward Contracts | Mexican peso
Derivative [Line Items]
Notional amount							18,300,000			MXN 335.4
Designated as cash flow hedges | Forward Contracts | Australian dollar
Derivative [Line Items]
Notional amount							14,600,000		AUD 20.0
Designated as cash flow hedges | Forward Contracts | U.S. dollar
Derivative [Line Items]
Notional amount							$ 28,000,000					¥ 3,013.0
Designated as cash flow hedges | Interest Rate Swaps
Derivative [Line Items]
Derivative, term of contract	5 years
Fixed interest rate (as a percent)						1.288%	1.288%	1.288%	1.288%	1.288%	1.288%	1.288%
Designated as cash flow hedges | Interest Rate Swaps | Consolidated leverage ratio (the Ratio) less than 1.00 to 1.00
Derivative [Line Items]
Applicable margin based on the Company's consolidated leverage ratio (as a percent)				1.25%
Consolidated leverage ratio used to calculate variable rate of debt (as a percent)						1	1	1	1	1	1	1
Designated as cash flow hedges | Interest Rate Swaps | Consolidated leverage ratio (the Ratio) greater than 2.00 to 1.00
Derivative [Line Items]
Applicable margin based on the Company's consolidated leverage ratio (as a percent)				2.00%
Consolidated leverage ratio used to calculate variable rate of debt (as a percent)						2	2	2	2	2	2	2
Amount Reclassified from AOCI | Cash Flow Hedges
Derivative [Line Items]
Gain (loss) reclassified into earnings		$ 0	$ 0	$ 0	$ 0

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DERIVATIVES AND RISK MANAGEMENT (Net Investment Hedges) (Details) - Forward Contracts € in Millions, $ in Millions	6 Months Ended
	Jul. 02, 2016 USD ($)	Apr. 02, 2016 EUR (€)
Currency Translation Adjustments
Derivative [Line Items]
Gain (loss) on derivative used in net investment hedge, net of tax | $	$ 0.5
Net investment hedges
Derivative [Line Items]
Hedged amount | €		€ 45.0

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DERIVATIVES AND RISK MANAGEMENT (Non-designated Hedges) (Details) - Jul. 02, 2016 - Forward Contracts - Forward contracts not designated as hedging instruments ZAR in Millions, $ in Millions	USD ($)	ZAR
Derivative [Line Items]
Fair value of designated forward contracts | $	$ 1.4
Hedged amount | ZAR		ZAR 21.6

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DERIVATIVES AND RISK MANAGEMENT (Derivative Instruments Recognized in Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Derivative [Line Items]
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$ 4,710	$ 9,602	$ (1,733)	$ 17,438
Cash flow hedges | Forward Contracts
Derivative [Line Items]
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	5,162	2,954	(220)	15,497
Cash flow hedges | Interest Rate Swaps
Derivative [Line Items]
Total gain (loss) recognized in other comprehensive income (loss), net of taxes	$ (452)	$ 6,648	$ (1,513)	$ 1,941

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DERIVATIVES AND RISK MANAGEMENT (Derivative Instruments Designated and Qualifying as Cash Flow Hedges) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges
Effective portion of gains and losses on derivative instruments
Total gain (loss) reclassified from other comprehensive income (loss)	$ 665	$ 6,921	$ 4,951	$ 15,129
Forward Contracts | Forward contracts not designated as hedging instruments
Effective portion of gains and losses on derivative instruments
Total gain (loss) recognized in income	74	(9)	(157)	80
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges
Effective portion of gains and losses on derivative instruments
Total gain (loss) reclassified from other comprehensive income (loss)	(286)	(404)	(583)	(837)
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Amount Reclassified from AOCI
Effective portion of gains and losses on derivative instruments
Total gain (loss) reclassified from other comprehensive income (loss)	$ 0	$ 3,331	$ 0	$ 3,331

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DERIVATIVES AND RISK MANAGEMENT (Fair Value Amounts for Derivative Instruments) (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Jan. 02, 2016
Fair value of derivative instruments
Asset Derivatives, Fair Value	$ 13,554	$ 16,447
Liability Derivatives, Fair Value	10,647	2,199
Net gain expected to be reclassified into earnings within the next twelve months	3,300
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Prepaid expenses and other current assets
Fair value of derivative instruments
Asset Derivatives, Fair Value	10,709	13,184
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Intangible and other assets-net
Fair value of derivative instruments
Asset Derivatives, Fair Value	2,845	2,785
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Accrued expenses- other
Fair value of derivative instruments
Liability Derivatives, Fair Value	6,109	477
Forward Contracts | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Other long-term liabilities
Fair value of derivative instruments
Liability Derivatives, Fair Value	1,936	250
Forward Contracts | Forward contracts not designated as hedging instruments | Prepaid expenses and other current assets
Fair value of derivative instruments
Asset Derivatives, Fair Value	0	167
Forward Contracts | Forward contracts not designated as hedging instruments | Accrued expenses- other
Fair value of derivative instruments
Liability Derivatives, Fair Value	49	71
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Prepaid expenses and other current assets
Fair value of derivative instruments
Asset Derivatives, Fair Value	0	0
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Intangible and other assets-net
Fair value of derivative instruments
Asset Derivatives, Fair Value	0	311
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Accrued expenses- other
Fair value of derivative instruments
Liability Derivatives, Fair Value	1,568	1,273
Interest Rate Swaps | Forward contracts designated as cash flow hedging instruments | Cash flow hedges | Other long-term liabilities
Fair value of derivative instruments
Liability Derivatives, Fair Value	$ 985	$ 128

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FAIR VALUE MEASUREMENTS (Fair Value Hierarchy of Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value Measurement, Recurring Basis - USD ($) $ in Thousands	Jul. 02, 2016	Jan. 02, 2016
Total
Assets:
Forward contracts	$ 13,554	$ 16,136
Investment in publicly traded mutual funds	2,398	2,406
Interest rate swap		311
Total	15,952	18,853
Liabilities:
Contingent consideration		3,643
Forward contracts	8,094	798
Interest rate swap	2,553	1,401
Total	10,647	5,842
Level 1
Assets:
Forward contracts	0	0
Investment in publicly traded mutual funds	2,398	2,406
Interest rate swap		0
Total	2,398	2,406
Liabilities:
Contingent consideration		0
Forward contracts	0	0
Interest rate swap	0	0
Total	0	0
Level 2
Assets:
Forward contracts	13,554	16,136
Investment in publicly traded mutual funds	0	0
Interest rate swap		311
Total	13,554	16,447
Liabilities:
Contingent consideration		0
Forward contracts	8,094	798
Interest rate swap	2,553	1,401
Total	10,647	2,199
Level 3
Assets:
Forward contracts	0	0
Investment in publicly traded mutual funds	0	0
Interest rate swap		0
Total	0	0
Liabilities:
Contingent consideration		3,643
Forward contracts	0	0
Interest rate swap	0	0
Total	$ 0	$ 3,643

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INTANGIBLE AND OTHER ASSETS (Intangible and Other Assets) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2016	Jan. 02, 2016
Intangibles-subject to amortization:
Gross Amount	$ 115,259	$ 114,844
Accumulated Amortization	35,079	27,600
Intangibles-not subject to amortization:
Gross Amount	74,503	74,493
Other assets:
Gross Amount	95,489	93,557
Accumulated Amortization	28,156	28,067
Gross Amount	285,251	282,894
Accumulated Amortization	63,235	55,667
Total intangible and other assets-net	222,016	227,227
Key money deposits
Other assets:
Gross Amount	28,612	29,357
Accumulated Amortization	$ 20,349	19,805
Key money deposits | Minimum
Other assets:
Amortization period based on initial lease term	4 years
Key money deposits | Maximum
Other assets:
Amortization period based on initial lease term	18 years
Other deposits
Other assets:
Gross Amount	$ 22,303	21,684
Deferred compensation plan assets
Other assets:
Gross Amount	2,398	2,406
Deferred tax asset-net
Other assets:
Gross Amount	22,131	18,602
Restricted cash
Other assets:
Gross Amount	525	512
Shop-in-shop
Other assets:
Gross Amount	9,494	9,985
Accumulated Amortization	7,807	8,262
Interest Rate Swaps
Other assets:
Gross Amount	0	311
Forward contracts
Other assets:
Gross Amount	2,845	2,785
Investments
Other assets:
Gross Amount	2,397	2,396
Other
Other assets:
Gross Amount	$ 4,784	5,519
Trademarks
Intangibles-subject to amortization:
Useful Lives	10 years
Gross Amount	$ 4,310	4,175
Accumulated Amortization	3,321	3,195
Customer lists
Intangibles-subject to amortization:
Gross Amount	54,064	53,825
Accumulated Amortization	$ 24,166	21,001
Customer lists | Minimum
Intangibles-subject to amortization:
Useful Lives	5 years
Customer lists | Maximum
Intangibles-subject to amortization:
Useful Lives	10 years
Patents
Intangibles-subject to amortization:
Gross Amount	$ 2,302	2,273
Accumulated Amortization	$ 2,082	2,064
Patents | Minimum
Intangibles-subject to amortization:
Useful Lives	3 years
Patents | Maximum
Intangibles-subject to amortization:
Useful Lives	20 years
Noncompete agreement
Intangibles-subject to amortization:
Gross Amount	$ 2,524	2,515
Accumulated Amortization	$ 1,409	1,134
Noncompete agreement | Minimum
Intangibles-subject to amortization:
Useful Lives	3 years
Noncompete agreement | Maximum
Intangibles-subject to amortization:
Useful Lives	6 years
Developed technology
Intangibles-subject to amortization:
Useful Lives	7 years
Gross Amount	$ 36,100	36,100
Accumulated Amortization	$ 2,579	0
Trade name
Intangibles-subject to amortization:
Useful Lives	6 years
Gross Amount	$ 15,700	15,700
Accumulated Amortization	1,308	0
Other
Intangibles-subject to amortization:
Gross Amount	259	256
Accumulated Amortization	$ 214	$ 206
Other | Minimum
Intangibles-subject to amortization:
Useful Lives	7 years
Other | Maximum
Intangibles-subject to amortization:
Useful Lives	20 years

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INTANGIBLE AND OTHER ASSETS (Amortization Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
INTANGIBLE AND OTHER ASSETS
Amortization expense for intangible assets	$ 3,800	$ 1,400	$ 7,500	$ 2,500
Estimated aggregate future amortization expense by fiscal year
2016 (remaining)	7,487		7,487
2017	14,721		14,721
2018	14,366		14,366
2019	14,037		14,037
2020	13,528		13,528
2021	$ 9,703		$ 9,703

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DEBT ACTIVITY (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 02, 2016	Jul. 02, 2016	Jan. 02, 2016	Jul. 04, 2015	Jan. 03, 2015
Debt Instrument [Line Items]
International cash balance	$ 231,836	$ 231,836	$ 289,275	$ 249,864	$ 276,261
U.S. term loan
Debt Instrument [Line Items]
Repayment of borrowings	4,700	9,400
Interest paid	1,600	3,200
U.S. revolving line of credit
Debt Instrument [Line Items]
Total borrowings	83,600	64,000
Available borrowing capacity	133,000	133,000
International cash balance	215,500	215,500
Interest expense incurred	$ 4,200	$ 7,900

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SUBSEQUENT EVENT (Details)		6 Months Ended
	Aug. 08, 2016 USD ($)	Jul. 02, 2016
First Amendment
Subsequent Event [Line Items]
Consolidated leverage ratio prior to amendment		2.50
Subsequent Event | Base Rate [Member]
Subsequent Event [Line Items]
Basis spread	25.00%
Subsequent Event | First Amendment
Subsequent Event [Line Items]
Prepayments of debt threshold (in excess)	$ 25,000,000
Consolidated leverage ratio prior to amendment	3.25
Subsequent Event | First Amendment | London Interbank Offered Rate (LIBOR) [Member]
Subsequent Event [Line Items]
Basis spread	25.00%