Edgar Filing: Fossil Group, Inc.

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 5, 2014

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 7, 2014: 52,908,759

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

IN THOUSANDS

	July 5, 2014		December 28, 2013

Assets
Current assets:
Cash and cash equivalents	$	272,642	$	320,479
Accounts receivable - net of allowances of $67,764 and $74,841, respectively	304,621		454,762
Inventories	664,185		570,719
Deferred income tax assets-net	46,529		46,986
Prepaid expenses and other current assets	122,048		86,516
Total current assets	1,410,025		1,479,462

Property, plant and equipment - net of accumulated depreciation of $345,802 and $314,787, respectively	359,917		355,666
Goodwill	206,365		206,954
Intangible and other assets-net	184,279		188,332
Total long-term assets	750,561		750,952
Total assets	$	2,160,586	$	2,230,414

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	176,983	$	165,433
Short-term debt	13,652		13,443
Accrued expenses:
Compensation	61,633		80,573
Royalties	39,123		65,117
Co-op advertising	15,543		25,599
Transaction taxes	25,229		35,134
Other	80,488		79,860
Income taxes payable	21,046		26,747
Total current liabilities	433,697		491,906

Long-term income taxes payable	17,750		15,720
Deferred income tax liabilities	97,437		98,168
Long-term debt	533,174		494,711
Other long-term liabilities	62,861		54,542
Total long-term liabilities	711,222		663,141
Commitments and contingencies (Note 13)

Stockholders’ equity:
Common stock, 53,193 and 54,708 shares issued and outstanding at July 5, 2014 and December 28, 2013, respectively	532		547
Additional paid-in capital	162,427		154,376
Retained earnings	812,824		877,063
Accumulated other comprehensive income	33,385		36,691
Total Fossil Group, Inc. stockholders’ equity	1,009,168		1,068,677
Noncontrolling interest	6,499		6,690
Total stockholders’ equity	1,015,667		1,075,367
Total liabilities and stockholders’ equity	$	2,160,586	$	2,230,414

See notes to the condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

UNAUDITED

IN THOUSANDS, EXCEPT PER SHARE DATA

	For the 13 Weeks Ended			For the 13 Weeks Ended			For the 27 Weeks Ended			For the 26 Weeks Ended
	July 5, 2014			June 29, 2013			July 5, 2014			June 29, 2013
Net sales	$	773,820		$	706,249		$	1,550,365		$	1,387,148
Cost of sales	329,218			297,348			662,542			599,776
Gross profit	444,602			408,901			887,823			787,372

Selling, general and administrative expenses	359,844			301,953			698,366			586,103

Operating income	84,758			106,948			189,457			201,269
Interest expense	3,887			1,749			7,593			2,979
Other income (expense)-net	(1,097		)	(961		)	(1,448		)	8,823

Income before income taxes	79,774			104,238			180,416			207,113
Provision for income taxes	24,875			33,829			56,355			62,723

Net income	54,899			70,409			124,061			144,390
Less: Net income attributable to noncontrolling interest	2,382			2,696			5,201			4,490
Net income attributable to Fossil Group, Inc.	$	52,517		$	67,713		$	118,860		$	139,900

Other comprehensive income (loss), net of taxes:
Currency translation adjustment	$	1,524		$	2,984		$	399		$	(16,853	)
Securities available for sale-net change	0			(12		)	0			(83		)
Derivative instruments-net change	(651		)	1,599			(412		)	4,990
Pension plan activity	(3,293		)	0			(3,293		)	0
Total other comprehensive income (loss)	(2,420		)	4,571			(3,306		)	(11,946		)

Total comprehensive income	52,479			74,980			120,755			132,444
Less: Comprehensive income attributable to noncontrolling interest	2,382			2,696			5,201			4,490
Comprehensive income attributable to Fossil Group, Inc.	$	50,097		$	72,284		$	115,554		$	127,954

Earnings per share:
Basic	$	0.98		$	1.16		$	2.21		$	2.37
Diluted	$	0.98		$	1.15		$	2.20		$	2.36
Weighted average common shares outstanding:
Basic	53,494			58,600			53,821			58,997
Diluted	53,678			58,890			54,028			59,335

See notes to the condensed consolidated financial statements.

FOSSIL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

IN THOUSANDS

	For the 27 Weeks Ended			For the 26 Weeks Ended
	July 5, 2014			June 29, 2013
Operating Activities:
Net income	$	124,061		$	144,390
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	48,978			38,669
Stock-based compensation	9,637			6,968
Decrease in allowance for returns-net of inventory in transit	(3,685		)	(4,581		)
Loss (gain) on disposal of assets	423			(272		)
Impairment losses	5,501			0
Gain on equity method investment	0			(6,510		)
Decrease in allowance for doubtful accounts	(887		)	(6,568		)
Excess tax benefits from stock-based compensation	(950		)	(6,204		)
Deferred income taxes and other	(973		)	7,035

Changes in operating assets and liabilities:
Accounts receivable	158,595			123,256
Inventories	(95,426		)	(76,865		)
Prepaid expenses and other current assets	(36,280		)	(23,082		)
Accounts payable	9,377			(839		)
Accrued expenses	(60,033		)	(33,315		)
Income taxes payable	(2,842		)	(3,380		)
Net cash provided by operating activities	155,496			158,702

Investing Activities:
Additions to property, plant and equipment	(43,506		)	(42,959		)
Increase in intangible and other assets	(6,598		)	(5,122		)
Proceeds from the sale of property, plant, equipment and other	66			1,972
Net change in restricted cash	0			398
Business acquisitions-net of cash acquired	0			(14,896		)
Net investment hedge settlement	410			0
Net cash used in investing activities	(49,628		)	(60,607		)

Financing Activities:
Acquisition of common stock	(187,158		)	(231,870		)
Distribution of noncontrolling interest earnings and other	(5,392		)	(4,679		)
Excess tax benefits from stock-based compensation	950			6,204
Debt borrowings	401,800			676,500
Debt payments	(363,694		)	(411,748		)
Proceeds from exercise of stock options	1,508			4,534
Net cash (used in) provided by financing activities	(151,986		)	38,941

Effect of exchange rate changes on cash and cash equivalents	(1,719		)	(964		)

Net (decrease) increase in cash and cash equivalents	(47,837		)	136,072
Cash and cash equivalents:
Beginning of period	320,479			177,236
End of period	$	272,642		$	313,308

See notes to the condensed consolidated financial statements.

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 5, 2014, and the results of operations for the thirteen-week periods ended July 5, 2014 (“Second Quarter”) and June 29, 2013 (“Prior Year Quarter”), respectively, and the twenty-seven week period ended July 5, 2014 (“Year To Date Period”) and the twenty-six week period ended June 29, 2013 (“Prior Year YTD Period”). All adjustments are of a normal, recurring nature. The Company’s fiscal year periodically results in a 53-week year instead of a normal 52-week year. The current fiscal year ending January 3, 2015 is a 53-week year, with the additional week included in the first quarter of the fiscal year. Accordingly, the information presented herein includes twenty-seven weeks of operations for the Year To Date Period as compared to twenty-six weeks in the Prior Year YTD Period.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the fiscal year ended December 28, 2013 (the “2013 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 2013 Form 10-K.

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

Hedging Instruments. 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 currency forward contracts and an interest rate swap. The Company’s foreign subsidiaries periodically enter into foreign exchange forward contracts to hedge the future payment of intercompany inventory transactions denominated in U.S. dollars. If the Company was to settle its Euro, British Pound, Canadian Dollar, Japanese Yen, Australian Dollar, and Mexican Peso forward contracts as of July 5, 2014, the net result would have been a net loss of approximately $1.9 million, net of taxes. To help protect against adverse fluctuations in interest rates, the Company has entered into an interest rate swap agreement to effectively convert a portion of its variable rate debt obligations to a fixed rate. To reduce exposure to changes in currency exchange rates adversely affecting the Company’s investment in a Euro-denominated subsidiary, the Company entered into a forward contract designated as a net investment hedge that was settled during the Second Quarter. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

The Company applies the hedge accounting rules as required by Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). See “Note 10—Derivatives and Risk Management” for additional disclosures about the Company’s use of derivatives.

Earnings Per Share (“EPS”). Basic EPS is based on the weighted average number of common shares outstanding during each period. Diluted EPS adjusts basic EPS for the effects of dilutive common stock equivalents outstanding during each period using the treasury stock method.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands, except per share data):

	For the 13 Weeks Ended		For the 13 Weeks Ended		For the 27 Weeks Ended		For the 26 Weeks Ended
	July 5, 2014		June 29, 2013		July 5, 2014		June 29, 2013

Numerator:
Net income attributable to Fossil Group, Inc.	$	52,517	$	67,713	$	118,860	$	139,900

Denominator:
Basic EPS computation:
Basic weighted average common shares outstanding	53,494		58,600		53,821		58,997
Basic EPS	$	0.98	$	1.16	$	2.21	$	2.37

Diluted EPS computation:
Basic weighted average common shares outstanding	53,494		58,600		53,821		58,997
Stock options, stock appreciation rights and restricted stock units	184		290		207		338
Diluted weighted average common shares outstanding	53,678		58,890		54,028		59,335
Diluted EPS	$	0.98	$	1.15	$	2.20	$	2.36

Approximately 322,000, 295,000, 273,000 and 273,000 shares issuable under stock-based awards were not included in the diluted EPS calculation at the end of the Second Quarter, Year To Date Period, Prior Year Quarter, and Prior Year YTD Period, respectively, because they were antidilutive.

Recently Issued Accounting Standards. In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”). ASU 2014-12 requires that a performance target, that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. ASU 2014-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. The Company is evaluating the effect of adopting ASU 2014-12, but does not expect adoption will have a material impact on the Company’s consolidated results of operations or financial position.

In May 2014, 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. ASU 2014-09 provides alternative methods of retrospective adoption and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. The Company is evaluating the effect of adopting ASU 2014-09, but does not expect adoption will have a material impact on the Company’s consolidated results of operations or financial position.

In April 2014, FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). Under ASU 2014-08, only disposals of a component of an entity, or a group of components of an entity, that represent a strategic shift that has (or will have) a major effect on the entity’s results and operations would qualify as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations and disclosures of discontinued operations. ASU 2014-08 is effective prospectively for all disposals, or components classified as held for sale, for fiscal years, and interim periods within those years, beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been previously reported. The Company is evaluating the effect of adopting ASU 2014-08, but does not expect adoption will have a material impact on the Company’s consolidated results of operations or financial position.

Recently Adopted Accounting Standards. In July 2013, FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exist, an unrecognized tax benefit to be presented as a reduction to a deferred tax asset in the financial statements for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The guidance in ASU 2013-11 was effective for the Company beginning fiscal year 2014 and did not have a material impact on the Company’s consolidated results of operations or financial position.

In March 2013, FASB issued ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). ASU 2013-05 addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. The guidance in ASU 2013-05 was effective for the Company beginning fiscal year 2014 and did not have a material impact on the Company’s consolidated results of operations or financial position.

In December 2011, FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), to address certain comparability issues between financial statements prepared in accordance with GAAP and those prepared in accordance with International Financial Reporting Standards. In January 2013, FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (“ASU 2013-01”), which clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. ASU 2011-11 requires an entity to provide enhanced disclosures about certain financial instruments and derivatives, as defined in ASU 2013-01, to enable users to understand the effects of offsetting in the financial statements as well as the effects of master netting arrangements on an entity’s financial condition. The amendments in ASU 2011-11 and ASU 2013-01 became effective for the Company in fiscal year 2014 and did not have a material impact on the Company’s consolidated results of operations or financial position.

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. Upon the acquisition of these shares, Fossil Spain will become a wholly-owned subsidiary of the Company.

Effective 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. As a result of this change, the Company now controls Fossil Spain and began consolidating it in accordance with ASC 810, Consolidation, instead of treating it as an equity method investment.

In accordance with ASC 805, Business Combinations, the Company re-measured its preexisting investment in Fossil Spain to fair value as of January 1, 2013, resulting in a gain of $6.5 million, which was recorded in other income (expense)-net on the Company’s condensed consolidated statements of income and comprehensive income. The results of Fossil Spain’s operations have been included in the Company’s condensed consolidated financial statements since January 1, 2013. The Company recorded approximately $10.6 million of goodwill related to the acquisition.

The purchase price for the shares has a fixed and variable component. The fixed portion is based on 50% of the net book value of Fossil Spain as of December 31, 2012. The fixed portion was measured at 5.2 million Euros (approximately $6.8 million at the purchase date). The Company recorded a contingent consideration liability of 5.9 million Euros (approximately $7.8 million at the purchase date) related to the variable portion of the purchase price as of January 1, 2013. The variable portion will be determined based on Fossil Spain’s aggregated results of operations with a minimum annual variable price of 2.0 million Euros (approximately $2.6 million at the purchase date) and a maximum annual variable price of 3.5 million Euros (approximately $4.6 million at the purchase date) for each of the calendar years 2013, 2014, and 2015. On December 19, 2013, Fossil Spain paid cash of 1.8 million Euros (approximately $2.5 million at year end 2013) to General De Relojeria which reduced the fixed portion of the purchase price. See “Note 11 — Fair Value Measurements” for additional information about the contingent consideration liability for Fossil Spain.

Of the total consideration for Fossil Spain, 2.2 million Euros (approximately $3.0 million) relating to the contingent consideration for calendar year 2013 was recorded in accrued expenses — other, and 9.0 million Euros (approximately $12.2 million) of the total consideration was recorded in other long-term liabilities in the condensed consolidated balance sheets at July 5, 2014.

Bentrani Watches, LLC Acquisition. On December 31, 2012, the Company purchased substantially all of the assets of Bentrani Watches, LLC (“Bentrani”). Bentrani was a distributor of watch products in 16 Latin American countries and was based in Miami, Florida. Bentrani was the Company’s largest third-party distributor and had partnered with the Company for ten years. The purchase price was $26.6 million, comprised of $19.3 million in cash and $7.3 million in forgiveness of a payable to the Company. The Company recorded approximately $8.9 million of goodwill related to the acquisition. The results of Bentrani’s operations have been included in the Company’s condensed consolidated financial statements since the acquisition date. On June 28, 2013, the Company also obtained control of Bentrani Chile SpA (“Bentrani Chile”), and the results of Bentrani Chile’s operations have been included in the Company’s condensed consolidated financial statements since that date. The terms of the Bentrani Chile acquisition were not significant.

Goodwill is the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The changes in the carrying amount of goodwill, which is not subject to amortization, were as follows (in thousands):

	North America Wholesale		Europe Wholesale			Asia Pacific Wholesale		Total
Balance at December 28, 2013	$	118,147	$	77,217		$	11,590	$	206,954
Foreign currency changes	15		(615		)	11		(589		)
Balance at July 5, 2014	$	118,162	$	76,602		$	11,601	$	206,365

3. INVENTORIES

Inventories consisted of the following (in thousands):

	July 5, 2014		December 28, 2013
Components and parts	$	60,740	$	56,275
Work-in-process	14,897		14,017
Finished goods	588,548		500,427
Inventories	$	664,185	$	570,719

4. WARRANTY RESERVE

The Company’s warranty liabilities are primarily related to watch products. The Company’s FOSSIL® watch products sold in the U.S. are covered by a limited warranty against defects in materials or workmanship for a period of 11 years from the date of purchase. RELIC® watch products sold in the U.S. are covered by a comparable 12 year warranty, while certain other watches sold by the Company are covered by a comparable two year limited warranty. SKAGEN® branded watches are covered by a lifetime warranty against defects due to faulty material or workmanship, subject to normal conditions of use. The Company’s warranty liability is recorded using historical warranty repair expense and is recorded in accrued expenses-other in the condensed consolidated balance sheets. As changes in warranty costs are experienced, the warranty accrual is adjusted as necessary. Warranty liability activity consisted of the following (in thousands):

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

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

5. INCOME TAXES

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

	For the 13 Weeks Ended			For the 13 Weeks Ended			For the 27 Weeks Ended			For the 26 Weeks Ended
	July 5, 2014			June 29, 2013			July 5, 2014			June 29, 2013
Income tax expense	$	24,875		$	33,829		$	56,355		$	62,723
Income tax rate	31.2		%	32.5		%	31.2		%	30.3		%

The lower effective tax rate in the Second Quarter, as compared to the Prior Year Quarter, was primarily attributable to a change in the Company’s geographical earnings mix. The higher effective tax rate for the Year To Date Period, as compared to the Prior Year YTD period, was due to the recognition of income tax benefits in the Prior Year YTD Period from the settlement of income tax audits.

As of July 5, 2014, the total amount of unrecognized tax benefits, excluding interest and penalties, was $16.7 million, of which $11.2 million would favorably impact the effective tax rate in future periods, if recognized. During the first quarter of fiscal 2014, the U.S. Internal Revenue Service began its examination of the Company’s 2010-2012 federal income tax returns. The Company is subject to examinations in various state and foreign jurisdictions for its 2007-2013 tax years, none of which the Company believes are significant individually or in the aggregate. Audit outcomes and timing of 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 5, 2014, the Company had recorded $0.9 million of unrecognized tax benefits, excluding interest and penalties, for positions that could 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, respectively. The total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheets at July 5, 2014 was $1.6 million and $0.4 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 cancelled, 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 Securities Exchange Act of 1934.

During the Year To Date Period, the Company effectively retired 1.6 million shares of common stock repurchased under its repurchase programs. The effective retirement of repurchased common stock decreased common stock by approximately $16,300, additional paid-in capital by $1.5 million, retained earnings by $183.1 million and treasury stock by $184.6 million. At December 28, 2013 and July 5, 2014, all treasury stock had been effectively retired. As of July 5, 2014, the Company had $309.1 million of repurchase authorizations remaining under its combined repurchase plans.

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

				For the 13 Weeks Ended July 5, 2014			For the 13 Weeks Ended June 29, 2013
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2012	$	1,000.0	December 2016	0.6	$	67.3	1.7	$	169.2
2010	$	30.0	None	0.0	$	0.0	0.0	$	0.0

				For the 27 Weeks Ended July 5, 2014			For the 26 Weeks Ended June 29, 2013
Fiscal Year Authorized	Dollar Value Authorized		Termination Date	Number of Shares Repurchased	Dollar Value Repurchased		Number of Shares Repurchased	Dollar Value Repurchased
2012	$	1,000.0	December 2016	1.6	$	184.6	1.8	$	187.2
2010	$	30.0	None	0.0	$	0.0	0.0	$	0.0
2010	$	750.0	December 2013(1)	0.0	$	0.0	0.4	$	38.6

(1) In the first quarter of fiscal year 2013, 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.						Total
	Stockholders’			Noncontrolling			Stockholders’
	Equity			Interest			Equity
Balance at December 28, 2013	$	1,068,677		$	6,690		$	1,075,367
Net income	118,860			5,201			124,061
Currency translation adjustment	399			0			399
Derivative instruments - net change	(412		)	0			(412		)
Common stock issued upon exercise of stock options and stock appreciation rights	1,508			0			1,508
Tax benefit derived from stock-based compensation	950			0			950
Distribution of noncontrolling interest earnings and other	0			(5,392		)	(5,392		)
Pension plan activity	(3,293		)	0			(3,293		)
Acquisition of common stock	(187,158		)	0			(187,158		)
Stock-based compensation expense	9,637			0			9,637
Balance at July 5, 2014	$	1,009,168		$	6,499		$	1,015,667

	Fossil Group, Inc.						Total
	Stockholders’			Noncontrolling			Stockholders’
	Equity			Interest			Equity
Balance at December 29, 2012	$	1,233,535		$	6,929		$	1,240,464
Net income	139,900			4,490			144,390
Currency translation adjustments	(16,853		)	0			(16,853		)
Unrealized loss on securities available for sale	(83		)	0			(83		)
Derivative instruments - net change	4,990			0			4,990
Common stock issued upon exercise of stock options and stock appreciation rights	4,534			0			4,534
Tax benefit derived from stock-based compensation	6,204			0			6,204
Distribution of noncontrolling interest earnings	0			(4,679		)	(4,679		)
Acquisition of common stock	(231,870		)	0			(231,870		)
Stock-based compensation expense	6,968			0			6,968
Balance at June 29, 2013	$	1,147,325		$	6,740		$	1,154,065

7. EMPLOYEE BENEFIT PLANS

Stock-Based Compensation Plans. The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”), using the Black-Scholes option pricing model to determine the fair value of stock options and stock appreciation rights at the date of grant. The Company’s grants under its current stock-based compensation plans generally include: (i) stock options, restricted stock and restricted stock units for its international employees, (ii) restricted stock units for its non-employee directors and (iii) stock appreciation rights, restricted stock and restricted stock units for its U.S.-based employees.

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

					Weighted-
					Average
			Weighted-		Remaining	Aggregate
			Average		Contractual	Intrinsic
Stock Options and Stock Appreciation Rights	Shares		Exercise Price		Term (Years)	Value
	in thousands					in thousands
Outstanding at April 5, 2014	738		$	81.38	6.2	$	28,427
Granted	2		106.89
Exercised	(16	)	51.13			839
Forfeited or expired	(8	)	117.23
Outstanding at July 5, 2014	716		81.66		5.9	23,041
Exercisable at July 5, 2014	524		$	69.43	5.4	$	22,606

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 5, 2014 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 table summarizes information with respect to stock options and stock appreciation rights outstanding and exercisable at July 5, 2014:

Stock Options Outstanding					Stock Options Exercisable
				Weighted-
		Weighted-		Average		Weighted-
		Average		Remaining		Average
Range of	Number of	Exercise		Contractual	Number of	Exercise
Exercise Prices	Shares	Price		Term (Years)	Shares	Price
	in thousands				in thousands
$13.65 - $21.51	73	$	15.39	4.0	73	$	15.39
$21.55 - $34.59	59	29.41		2.6	59	29.41
$35.78 - $67.10	72	39.89		5.0	72	39.89
$69.53 - $106.07	105	80.89		6.8	101	80.77
$106.08 - $131.46	172	128.09		7.6	115	128.09
Total	481	$	75.21	5.9	420	$	67.99

Stock Appreciation Rights Outstanding					Stock Appreciation Rights Exercisable
				Weighted-
		Weighted-		Average		Weighted-
		Average		Remaining		Average
Range of	Number of	Exercise		Contractual	Number of	Exercise
Exercise Prices	Shares	Price		Term (Years)	Shares	Price
	in thousands				in thousands
$13.65 - $21.51	19	$	13.65	2.7	19	$	13.65
$21.55 - $34.59	6	30.71		1.7	6	30.71
$35.78 - $67.10	16	42.68		4.1	14	39.87
$69.53 - $106.07	44	85.96		5.4	30	83.76
$106.08 - $131.46	150	115.96		6.9	35	123.48
Total	235	$	94.88	6.0	104	$	75.27

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

Restricted Stock and Restricted Stock Units	Number of Shares		Weighted-Average Grant Date Fair Value
	in thousands

Nonvested at April 5, 2014	263		$	110.60
Granted	17		102.80
Vested	(14	)	107.67
Forfeited	(7	)	109.24
Nonvested at July 5, 2014	259		$	110.26

The total fair value of restricted stock and restricted stock units vested during the Second Quarter was approximately $1.4 million.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

	For the 13 Weeks Ended July 5, 2014
	Currency Translation Adjustments		Forward Contracts			Interest Rate Swap			Net Investment Hedges			Pension Plan			Total
Beginning balance	$	37,027	$	(1,941	)	$	(179	)	$	162		$	736		$	35,805
Other comprehensive income (loss) before reclassifications	1,524		(1,834		)	(912		)	155			(2,946		)	(4,013		)

Tax (expense) benefit	0		195			333			(60		)	(347		)	121

Amounts reclassed from accumulated other comprehensive income	0		(1,570		)	(691		)	0			0			(2,261		)

Tax (expense) benefit	0		537			252			0			0			789

Total other comprehensive income (loss)	1,524		(606		)	(140		)	95			(3,293		)	(2,420		)

Ending balance	$	38,551	$	(2,547	)	$	(319	)	$	257		$	(2,557	)	$	33,385

	For the 13 Weeks Ended June 29, 2013
	Currency Translation Adjustments		Securities Available for Sale			Forward Contracts			Total
Beginning balance	$	10,344	$	(546	)	$	2,445		$	12,243
Other comprehensive income (loss) before reclassifications	2,984		(12		)	2,774			5,746

Tax (expense) benefit	0		0			(332		)	(332		)

Amounts reclassed from accumulated other comprehensive income	0		0			1,348			1,348

Tax (expense) benefit	0		0			(505		)	(505		)

Total other comprehensive income (loss)	2,984		(12		)	1,599			4,571

Ending balance	$	13,328	$	(558	)	$	4,044		$	16,814

	For the 27 Weeks Ended July 5, 2014
	Currency Translation Adjustments		Forward Contracts			Interest Rate Swap			Net Investment Hedges			Pension Plan			Total
Beginning balance	$	38,152	$	(2,091	)	$	(106	)	$	0		$	736		$	36,691
Other comprehensive income (loss) before reclassifications	399		(2,100		)	(1,760		)	410			(2,946		)	(5,997		)

Tax (expense) benefit	0		113			643			(153		)	(347		)	256

Amounts reclassed from accumulated other comprehensive income	0		(2,399		)	(1,424		)	0			0			(3,823		)

Tax (expense) benefit	0		868			520			0			0			1,388

Total other comprehensive income (loss)	399		(456		)	(213		)	257			(3,293		)	(3,306		)

Ending balance	$	38,551	$	(2,547	)	$	(319	)	$	257		$	(2,557	)	$	33,385

	For the 26 Weeks Ended June 29, 2013
	Currency Translation Adjustments			Securities Available for Sale			Forward Contracts			Total
Beginning balance	$	30,181		$	(475	)	$	(946	)	$	28,760
Other comprehensive income (loss) before reclassifications	(16,853		)	(83		)	9,594			(7,342		)

Tax (expense) benefit	0			0			(3,806		)	(3,806		)

Amounts reclassed from accumulated other comprehensive income	0			0			1,390			1,390

Tax (expense) benefit	0			0			(592		)	(592		)

Total other comprehensive income (loss)	(16,853		)	(83		)	4,990			(11,946		)

Ending balance	$	13,328		$	(558	)	$	4,044		$	16,814

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

9. SEGMENT INFORMATION

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments are comprised of North America wholesale, Europe wholesale, Asia Pacific wholesale and Direct to consumer. The North America wholesale, Europe wholesale and Asia Pacific wholesale reportable segments do not include activities related to the Direct to consumer segment. The North America wholesale segment primarily includes sales to wholesale or distributor customers based in Canada, Mexico, the United States and countries in South America. The Europe wholesale segment primarily includes sales to wholesale or distributor customers based in European countries, the Middle East and Africa. The Asia Pacific wholesale segment primarily includes sales to wholesale or distributor customers based in Australia, China (including the Company’s assembly and procurement operations), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Direct to consumer segment includes Company-owned retail stores, e-commerce activities and catalog costs. 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 generally based on the location of the customers. Operating income for each segment includes net sales to third-parties, related cost of sales and operating expenses directly attributable to the segment. General corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management and amounts related to intercompany eliminations are not allocated to the various segments. Intercompany sales of products between segments are referred to as intersegment items. Intercompany profit attributable to the Company’s factory operations is included in the Asia Pacific wholesale and Europe wholesale segments in accordance with the geographic location of the factories. These intercompany factory profits are eliminated in consolidation.

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

	For the 13 Weeks Ended						For the 13 Weeks Ended
	July 5, 2014						June 29, 2013
	Net Sales			Operating Income			Net Sales			Operating Income

North America wholesale:
External customers	$	265,223		$	50,912		$	260,692		$	66,321
Intersegment	42,778						49,016
Europe wholesale:
External customers	202,377			43,762			170,759			36,451
Intersegment	50,392						38,713
Asia Pacific wholesale:
External customers	105,731			31,508			96,187			30,473
Intersegment	252,137						252,894
Direct to consumer	200,489			9,746			178,611			16,105
Intersegment items	(345,307		)				(340,623		)
Corporate				(51,170		)				(42,402		)
Consolidated	$	773,820		$	84,758		$	706,249		$	106,948

	For the 27 Weeks Ended						For the 26 Weeks Ended
	July 5, 2014						June 29, 2013
	Net Sales			Operating Income			Net Sales			Operating Income

North America wholesale:
External customers	$	538,019		$	103,791		$	515,858		$	126,729
Intersegment	90,969						94,962
Europe wholesale:
External customers	408,041			95,722			344,663			74,998
Intersegment	99,590						79,401
Asia Pacific wholesale:
External customers	209,291			62,628			182,963			58,023
Intersegment	496,284						455,090
Direct to consumer	395,014			26,032			343,664			23,217
Intersegment items	(686,843		)				(629,453		)
Corporate				(98,716		)				(81,698		)
Consolidated	$	1,550,365		$	189,457		$	1,387,148		$	201,269

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 5, 2014				For the 13 Weeks Ended June 29, 2013
	Net Sales		Percentage of Total		Net Sales		Percentage of Total

Watches	$	611,208	79.0	%	$	547,225	77.5	%
Leathers	87,325		11.3		91,748		13.0
Jewelry	56,183		7.2		47,042		6.7
Other	19,104		2.5		20,234		2.8
Total	$	773,820	100.0	%	$	706,249	100.0	%

	For the 27 Weeks Ended July 5, 2014				For the 26 Weeks Ended June 29, 2013
	Net Sales		Percentage of Total		Net Sales		Percentage of Total

Watches	$	1,212,596	78.2	%	$	1,060,242	76.4	%
Leathers	187,047		12.1		194,536		14.0
Jewelry	112,701		7.3		89,356		6.5
Other	38,021		2.4		43,014		3.1
Total	$	1,550,365	100.0	%	$	1,387,148	100.0	%

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 18 months. The Company enters into foreign currency forward contracts (“forward contracts”) generally for up to 65% of the forecasted purchases to manage fluctuations in global currencies that will ultimately be used to settle such U.S. dollar denominated inventory purchases. 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 intercompany 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 eligibility, which requires that they represent foreign-currency-denominated forecasted intra-entity 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 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 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 5, 2014, the Company had the following outstanding forward contracts that were entered into to hedge the future payments of intercompany inventory transactions (in millions):

Functional Currency		Contract Currency
Type	Amount	Type	Amount
Euro	181.7	U.S. Dollar	247.0
British Pound	28.2	U.S. Dollar	46.0
Canadian Dollar	33.8	U.S. Dollar	31.3
Japanese Yen	2,370.0	U.S. Dollar	23.7
Australian Dollar	14.8	U.S. Dollar	13.5
Mexican Peso	171.0	U.S. Dollar	12.9

The Company is also exposed to interest rate risk related to its $250 million U.S.-based term loan (“Term Loan”). To manage the interest rate risk related to this 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. The notional amount will amortize over the remaining life of the Term Loan to coincide with the amortization of the underlying loan. The Company will receive 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 Hedge. The Company is also exposed to risk that adverse changes in foreign currency exchange rates could impact its net investment in foreign operations. To manage this risk, during the first quarter of fiscal year 2014, the Company entered into a forward contract designated as a net investment hedge to reduce exposure to changes in currency exchange rates on €25.0 million of its total investment in a wholly-owned Euro-denominated foreign subsidiary. The hedge was settled in the Second Quarter. 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 as a 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 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 non-inventory intercompany transactions and to which the Company does not elect hedge treatment. All of the Company’s outstanding forward contracts were designated as hedging instruments as of July 5, 2014 and December 28, 2013. 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 derivative instruments that was 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 is set forth below (in thousands):

Derivative Contracts Under ASC 815	For the 13 Weeks Ended July 5, 2014			For the 13 Weeks Ended June 29, 2013
Cash flow hedges:
Foreign exchange forward contracts	$	(1,639	)	$	2,442
Interest rate swap	(579		)	0
Net investment hedge	95			0
Total (loss) gain recognized in other comprehensive income (loss), net of taxes	$	(2,123	)	$	2,442

	For the 27 Weeks			For the 26 Weeks
Derivative Contracts Under ASC 815	Ended July 5, 2014			Ended June 29, 2013

Cash flow hedges:
Foreign exchange forward contracts	$	(1,987	)	$	5,788
Interest rate swap	(1,117		)	0
Net investment hedge	257			0
Total (loss) gain recognized in other comprehensive income (loss), net of taxes	$	(2,847	)	$	5,788

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):

	Condensed
	Consolidated
	Statements of Income
	and Comprehensive		For the 13 Weeks			For the 13 Weeks
Derivative Contracts	Income		Ended			Ended
Under ASC 815	Location		July 5, 2014			June 29, 2013

Foreign exchange contracts designated as cash flow hedging instruments	Other income (expense)-net	Total (loss) gain reclassified from other comprehensive income (loss)	$	(1,033	)	$	843

Foreign exchange contracts not designated as hedging instruments	Other income (expense)-net	Total loss recognized in income	$	0		$	(74	)

Interest rate swap designated as a cash flow hedging instrument	Interest expense	Total loss reclassified from other comprehensive income (loss)	$	(439	)	$	0

	Condensed
	Consolidated
	Statements of Income
	and Comprehensive		For the 27 Weeks			For the 26 Weeks
Derivative Contracts	Income		Ended			Ended
Under ASC 815	Location		July 5, 2014			June 29, 2013

Foreign exchange contracts designated as cash flow hedging instruments	Other income (expense)-net	Total (loss) gain reclassified from other comprehensive income (loss)	$	(1,531	)	$	798