Fourth Quarter Net Sales of $921 million;
Diluted EPS (Loss) of $(1.65)
Fossil Group, Inc. (NASDAQ:FOSL) (the “Company” or
“Fossil Group”) today reported its financial results for the fourth
quarter and fiscal year ended December 30, 2017. Fourth
quarter and fiscal year results include net sales near the high-end
of the Company's previously provided guidance. Reported
diluted earnings per share include the impacts from the Tax Cuts
and Jobs Act (the “Tax Act”) that was signed into law in December
2017. These impacts along with tax valuation allowances
recorded in the fourth quarter of fiscal 2017 were not contemplated
in the Company's guidance provided on November 7, 2017.
Diluted earnings per share, excluding these tax related charges,
were in line with guidance.
The Company reported net income (loss) for the
fourth quarter of fiscal 2017 of $(79.9) million compared to $49.7
million for the fourth quarter of fiscal 2016. Diluted
earnings (loss) per share were $(1.65), including tax charges of
$2.20 per diluted share due to the impacts from the Tax Act
combined with a valuation allowance and a restructuring charge of
$0.09 per diluted share, as compared to $1.03 for the fourth
quarter of fiscal 2016. Currencies, including both the
translation impact on operating earnings and the impact of foreign
currency hedging contracts, favorably affected the year-over-year
earnings (loss) per share comparison by $0.09.
For fiscal year 2017, the Company reported net
income (loss) of $(478.2) million compared to $78.9 million for
fiscal 2016. Diluted earnings (loss) per share were $(9.87),
compared to $1.63 for fiscal 2016. Diluted earnings (loss)
per share for fiscal 2017 of $(9.87) included non-cash intangible
asset impairment charges of $7.07 per diluted share, tax charges
resulting from the Tax Act and valuation allowance of $2.20 per
diluted share and a restructuring charge of $0.65 per diluted
share. Currencies, including both the translation impact on
operating earnings and the impact of foreign currency hedging
contracts, unfavorably affected the year-over-year earnings (loss)
per share comparison by $(0.01).
Kosta Kartsotis, Fossil Group, Chairman and CEO commented: “In
fiscal 2017, Fossil Group, embarked on a set of strategic
initiatives aimed at accelerating the evolution of the business to
position the Company for long term profitable growth. While sales
and earnings were challenged as expected, we generated progress
toward our objectives that include: driving growth in
wearables across our portfolio of powerful brands, leveraging our
scale to lower supply chain costs, increasing our digital
capabilities, and continuing the transformation of our business
through New World Fossil. To this end, fiscal 2017 saw us nearly
double wearables to over $300 million, representing 14% of total
watch sales. This success drove an increase in Fossil watch
sales for the second half of the year with positive comps in our
direct business during the important holiday quarter. With
wearable launches ahead of holiday, we significantly improved the
trajectory for Michael Kors watches and drove a double digit
increase in fourth quarter Armani watch sales. Overall, we
introduced a number of new hybrid and display smartwatches across
14 brands and believe the continuation of this effort, combined
with the innovation we are introducing across our traditional
styles, has us poised for stabilization and growth over time.
Also, positioning us well is the work we did across the supply
chain. By year end, wearable product costs were aligned with
our margin goal, setting the stage to increase gross margin in
2018. On the digital front, we greatly increased our reach,
helping to drive a 31% increase in e-commerce sales in the fourth
quarter, and our New World Fossil initiative led to $95 million
reduction in expenses for the year placing us right on track to
achieve our $200 million profit improvement goal. I am proud
of our team as their combined efforts, focus and passion led to
significant accomplishments toward each of our objectives, giving
us a stronger platform from which to continue our progress in
fiscal 2018."
"In the year ahead, we expect to be a smaller yet more
profitable company that is on a solid path for the future," Mr.
Kartsotis, continued. “Our priorities are focused on
delivering innovative wearable and traditional watch styles while
improving performance in the handbag and jewelry categories and
driving increases in digital sales. While we continue to
expect North America to be challenging given the dynamics of the
retail and consumer environment in the region, with our commitment
to drive out costs through our New World Fossil initiative and with
improved sourcing costs, we expect to deliver more profit to the
bottom line. The credit agreement completed last month
increases the financial flexibility we have to continue to invest
in support of our growth and achieve our ultimate goal of creating
greater value for all Fossil stakeholders.”
Operating ResultsCompared to
the fourth quarter of fiscal 2016, the impact of a weaker U.S.
dollar increased the Company’s fiscal 2017 reported net sales by
$29.9 million and operating income by $11.0 million. During
fiscal 2017, the impact of a weaker U.S. dollar increased the
Company’s reported net sales by $23.3 million and had a relatively
neutral impact on operating income. The discussion of the
Company’s net sales is presented on a GAAP basis and in constant
dollars and reflects regional performance based on sales in all
channels within the geographic location.
The following tables provide a summary of net
sales performance, on both a reported and constant currency basis,
for the fourth quarter of fiscal 2017 and fiscal year 2017 compared
to the fiscal 2016 fourth quarter and fiscal year 2016.
|
Fourth Quarter |
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
Growth (Decline) |
|
Amounts as Reported |
|
|
Amounts as Reported |
|
|
Dollars as Reported
(1) |
|
Constant Currency Dollars
(2) |
|
Percentage as Reported
(1) |
|
Percentage Constant Currency
(2) |
|
|
|
|
|
|
|
|
Americas |
$ |
442 |
|
|
|
$ |
483 |
|
|
|
$ |
(41 |
) |
|
$ |
(44 |
) |
|
(8 |
)% |
|
(9 |
)% |
Europe |
337 |
|
|
|
333 |
|
|
|
4 |
|
|
(20 |
) |
|
1 |
|
|
(6 |
) |
Asia |
142 |
|
|
|
143 |
|
|
|
(1 |
) |
|
(4 |
) |
|
(1 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
921 |
|
|
|
$ |
959 |
|
|
|
$ |
(38 |
) |
|
$ |
(68 |
) |
|
(4 |
)% |
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Watches |
$ |
728 |
|
|
|
$ |
749 |
|
|
|
$ |
(21 |
) |
|
$ |
(44 |
) |
|
(3 |
)% |
|
(6 |
)% |
Leathers |
108 |
|
|
|
115 |
|
|
|
(7 |
) |
|
(10 |
) |
|
(6 |
) |
|
(9 |
) |
Jewelry |
72 |
|
|
|
80 |
|
|
|
(8 |
) |
|
(12 |
) |
|
(10 |
) |
|
(14 |
) |
Other |
13 |
|
|
|
15 |
|
|
|
(2 |
) |
|
(2 |
) |
|
(13 |
) |
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
921 |
|
|
|
$ |
959 |
|
|
|
$ |
(38 |
) |
|
$ |
(68 |
) |
|
(4 |
)% |
|
(7 |
)% |
|
Fiscal Year |
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
Growth (Decline) |
|
Amounts as Reported |
|
|
Amounts as Reported |
|
|
Dollars as Reported
(1) |
|
Constant Currency Dollars
(2) |
|
Percentage as Reported
(1) |
|
Percentage Constant Currency
(2) |
|
|
|
|
|
|
|
|
Americas |
$ |
1,316 |
|
|
|
$ |
1,525 |
|
|
|
$ |
(209 |
) |
|
$ |
(211 |
) |
|
(14 |
)% |
|
(14 |
)% |
Europe |
974 |
|
|
|
1,002 |
|
|
|
(28 |
) |
|
(46 |
) |
|
(3 |
) |
|
(5 |
) |
Asia |
498 |
|
|
|
515 |
|
|
|
(17 |
) |
|
(20 |
) |
|
(3 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
2,788 |
|
|
|
$ |
3,042 |
|
|
|
$ |
(254 |
) |
|
$ |
(277 |
) |
|
(8 |
)% |
|
(9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Watches |
$ |
2,199 |
|
|
|
$ |
2,330 |
|
|
|
$ |
(131 |
) |
|
$ |
(149 |
) |
|
(6 |
)% |
|
(6 |
)% |
Leathers |
325 |
|
|
|
394 |
|
|
|
(69 |
) |
|
(71 |
) |
|
(18 |
) |
|
(18 |
) |
Jewelry |
212 |
|
|
|
251 |
|
|
|
(39 |
) |
|
(42 |
) |
|
(16 |
) |
|
(17 |
) |
Other |
52 |
|
|
|
67 |
|
|
|
(15 |
) |
|
(15 |
) |
|
(22 |
) |
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
2,788 |
|
|
|
$ |
3,042 |
|
|
|
$ |
(254 |
) |
|
$ |
(277 |
) |
|
(8 |
)% |
|
(9 |
)% |
(1) Reported GAAP amounts include impacts from
currency.(2) Eliminates the effect of the weaker
U.S. dollar in fiscal 2017 to give investors a better understanding
of the underlying trends within the business. See constant currency
financial information at the end of this release for more
information.
Fourth quarter fiscal 2017 worldwide net sales
decreased $38.4 million or 4% and $68.3 million in constant
currency (a 7% decline) compared to the fourth quarter of fiscal
2016. Watches declined across all geographies, with growth in
connected watches more than offset by a decline in traditional
watches on a constant currency basis. Leathers and jewelry also
declined across all geographies on a constant currency basis as
compared to last fiscal year. Geographically, sales declines
in the U.S. drove the decrease in the Americas. In Europe, on
a constant currency basis, sales across the Eurozone were down
modestly, while sales in distributor markets in Eastern Europe and
the Middle East declined significantly. In Asia, sales
increases in China and India were more than offset by declines in
most other countries with the greatest decrease in Japan. For
fiscal 2017, worldwide net sales decreased $254.2 million or 8% and
$277.5 million in constant currency (a 9% decline) compared to
fiscal 2016.
Global retail comps for the fourth quarter of
fiscal 2017 increased 2% compared to the fourth quarter of fiscal
2016, with positive comps in the watch category partially offset by
negative comps in the leathers and jewelry categories.
Positive comps in the Americas and Europe were partially offset by
a decline in Asia. For fiscal 2017, global retail comps
decreased 6% compared to fiscal 2016, with declines across all
regions.
During the fourth quarter of fiscal 2017, gross
margin decreased 230 basis points to 48.7%. The decrease in
gross margin was primarily driven by the impact of connected
products, due to both the increase in sales mix of connected
products, which carry lower overall margins, as well as additional
product valuation reserves totaling $18 million. These
declines were partially offset by benefits generated by the
Company's New World Fossil ("NWF") margin improvement
initiatives. Gross margins were also favorably impacted by
currency movements, mainly from a stronger Euro, and a shift in
sales mix toward higher margin international sales and higher
margin channels such as e-commerce. Additionally, lower
markdown rates within the wholesale channel and an improved trend
for direct channel margins, which declined much less than in prior
quarters due to more targeted promotions, favorably impacted gross
margins in the fourth quarter. For fiscal 2017, gross margins
decreased 320 basis points to 48.7%, primarily due to the impact of
connected products, including an increase in product valuation
reserves of approximately $40 million to support liquidation
pricing, and lower retail margins driven by increased promotional
activity in outlets and the e-commerce channel.
During the fourth quarter of fiscal 2017, the
Company’s operating expenses were $396.8 million, including $6.4
million of restructuring costs, primarily related to store
closings, as compared to $13.3 million of restructuring costs in
the prior fiscal year fourth quarter. Expenses were lower
compared to the fourth quarter of fiscal 2016 as a result of lower
store expenses given the significant number of stores closed since
the end of fiscal 2016, as well as corporate and regional overhead
cost reductions. Marketing was also lower in the fiscal 2017
fourth quarter due to reduced fixture spend and investments in
lower cost digital campaigns compared to more expensive television
advertising executed during the fiscal 2016 fourth quarter.
For fiscal 2017, operating expenses were $1,783.1 million,
including $407.1 million in non-cash intangible asset impairment
charges and $48.2 million of restructuring costs associated with
realigning and optimizing the organizational structure as well as
costs associated with store closures.
Operating income for the fourth quarter of
fiscal 2017 decreased to $51.3 million, driven by lower sales and
gross margin. For fiscal 2017, operating income (loss)
decreased to $(424.2) million, driven by non-cash intangible asset
impairment charges and higher restructuring charges combined with
lower sales and gross margin.
During the fourth quarter of fiscal 2017,
interest expense increased $3.6 million to $11.1 million and other
income decreased $5.4 million to $2.2 million primarily due to net
foreign currency contract losses compared to net gains in the prior
fiscal year fourth quarter. During fiscal 2017, interest
expense increased $16.3 million to $43.2 million and other income
decreased $0.3 million to $13.7 million.
On December 22, 2017, the U.S. government
enacted comprehensive tax legislation that significantly revised
the Internal Revenue Code of 1986, including a corporate income tax
rate reduction from 35% to 21%, under the Tax Act. The
newly enacted federal income tax law contains significant changes
in the taxation of foreign income earned by U.S. shareholders,
specifically adding new rules related to low-taxed foreign earnings
and allowing an exemption on foreign dividends paid after
2017. In anticipation of the tax exemption on foreign
dividends, the law imposes a one-time repatriation tax on
historical earnings generated offshore that have not been
previously taxed in the U.S. Foreign earnings held in
cash or liquid assets are taxed at 15.5% while earnings that have
been reinvested are taxed at 8%.
Income tax expenses were $120.6 million in the
fourth quarter of fiscal 2017 and included impacts from the Tax Act
as well as charges related to valuation allowances established on
the Company’s deferred tax assets. As a result, the Company’s
effective income tax rate in the fourth quarter of fiscal 2017 was
267.5% compared to 23.4% for the fourth quarter of fiscal 2016 and
(2.8)% for fiscal 2017, which also included the effect of
non-deductible intangible asset impairment charges recognized
during the second quarter of fiscal 2017, compared to 25.1% for
fiscal 2016. The impacts from the tax reform and the valuation
allowances resulted in combined charges of $106.7 million or $2.20
per share, and were not contemplated in our guidance range for the
fourth quarter provided on November 7, 2017.
During the fourth quarter of fiscal 2017, the
Company recognized a charge of $86.4 million related to the
one-time repatriation tax that was partially offset by the
release of $52.8 million in deferred tax liabilities for foreign
earnings not indefinitely reinvested resulting in a net charge of
$33.6 million. After applying foreign tax credit carry
forwards and the current year net operating tax loss, the actual
cash repatriation tax liability is $15.7 million payable over 8
years. Due to the reduction in the statutory U.S. tax rate
from 35% to 21% under the Tax Act, the Company recorded a charge of
$28.9 million reflecting the revaluation of its deferred tax
assets. The Company also recorded expense of $44.2 million for
valuation allowances against U.S. deferred tax assets in the fourth
quarter. Given recent operating losses, the Company has reserved
against all of the deferred tax assets in the U.S. and certain
international subsidiaries. The Company is pursuing an
aggressive series of actions to drive efficiencies throughout the
organization, stream-line operations, and enhance margins with a
focus on the customer and ultimately drive significant improvements
to profitability. As we generate taxable income in the
future, these deferred tax assets could be realized over time.
Accounting for the income tax effects of the Tax Act requires
significant judgments and estimates in the interpretation and
calculations of the provisions of the Tax Act. Due to the timing of
the enactment and the complexity involved in interpreting and
applying the provisions of the Tax Act, the Company has made
reasonable estimates of the effects and recorded provisional
amounts in its financial statements for fiscal 2017. As the Company
collects and prepares necessary data, and interprets any additional
guidance issued by the U.S. Treasury Department, the IRS or other
standard-setting bodies, the Company may make adjustments to the
provisional amounts. Those adjustments may materially impact the
provision for income taxes and the effective tax rate in the period
in which the adjustments are made. The accounting for the tax
effects of the enactment of the Tax Act will be completed in
2018.
The Company is also reviewing its income tax projections for
future periods in light of the changes imposed by the new tax
legislation, particularly the GILTI provisions that target
low-taxed foreign intangible earnings. Because of the complexity of
these new GILTI provisions, the Company is continuing to evaluate
this provision. The Company is not yet able to reasonably estimate
the effect of the GILTI provision of the Tax Act and has not made
any adjustments related to potential GILTI tax in its financial
projections. Therefore, the Company has provided a range of
fiscal 2018 income tax expense estimates excluding any impacts from
GILTI.
Other DevelopmentsOn January
29, 2018, the Company entered into a Second Amended and Restated
Credit Agreement (the "Second A&R Credit Agreement"). The
Second A&R Credit Agreement provides for (i) revolving credit
loans in the amount of $325 million, subject to a borrowing base,
with an up to $45.0 million subfacility for letters of credit, and
(ii) a term loan made to the Company in the amount of $425
million. The Second A&R Credit Agreement expires and is due and
payable on December 31, 2020.
GuidanceOver the next several years, Fossil
Group will continue to transform the Company’s business model to
address changes in consumer behaviors and their purchases of
traditional watches and connected devices, as well as jewelry and
leathers. During the Company’s ongoing transformation
project, it believes certain operating metrics are the most
appropriate performance measures. These metrics include net
sales, gross margin, operating expenses, operating margin, interest
expense and Adjusted EBITDA.
The Company is providing guidance on a GAAP basis. For
comparison purposes, the Company has also provided additional
information which quantifies the estimated impact on its operating
expenses and operating income for non-operational items impacting
operating results for fiscal 2018 and Q1 of fiscal 2018.
GAAP GuidanceFor fiscal 2018, the
Company expects the following:
- Net sales in the range of (14)% to (6)%
- Gross margin in the range of 51% to 53%
- Operating expenses as a percent of net sales, including
restructuring charges, ranging from 49% to 51%
- Operating margin in the range of 0% to 4%
- Other income/(expense) of approximately $(10) million based on
prevailing currency rates
- Interest expense of approximately $50 million
- Income (loss) before income taxes in the range of $(60) million
to $40 million
For the first quarter of fiscal 2018, the Company
expects the following:
- Net sales in the range of (12)% to (6)%
- Gross margin in the range of 50% to 52%
- Operating expenses as a percent of net sales, including
restructuring charges, ranging from 58% to 61%
- Operating margin in the range of (11)% to (6)%
- Other income/(expense) of approximately $(2) million based on
prevailing currency rates
- Interest expense of approximately $12 million
- Income (loss) before income taxes in
the range of $(70) million to $(45) million
Adjusted EBITDA is non-GAAP financial measure and should not be
considered a substitute for, or superior to, guidance or financial
measures prepared in accordance with GAAP. The Company defines
Adjusted EBITDA as the sum of income (loss) before income taxes,
interest expense, amortization and depreciation and other non-cash
charges (such as impairment), stock-based compensation expenses,
and restructuring charges minus interest income. The Company
believes Adjusted EBITDA provides useful information to investors
about the Company's operating performance on a constant currency
basis for the periods presented without the impact of certain
items. The Company uses Adjusted EBITDA to evaluate its operating
performance period-over-period. The Company expects the following
non-operational items to impact results during fiscal 2018:
Non-operational and Non-GAAP ItemsFor
fiscal 2018, the Company expects the following:
- Restructuring charges of approximately $50 million
- Adjusted EBITDA of $150 million to $200 million
For the first quarter of fiscal 2018, the Company
expects the following:
- Restructuring charges of approximately $20 million
- Adjusted EBITDA of $(15) million to $10 million
Below is a reconciliation of forward-looking GAAP Income (Loss)
Before Income Taxes to Adjusted EBITDA for fiscal year 2017 and
2018 guidance based on the mid-point of the Company's guidance
range:
|
|
|
Guidance |
($ in
millions): |
Fiscal Year 2017 |
|
Fiscal Year 2018 |
|
First Quarter Fiscal 2018 |
Income (Loss) Before
Income Taxes |
$ |
(454 |
) |
|
$ |
(13 |
) |
|
$ |
(55 |
) |
Plus: |
|
|
|
|
|
Interest
Expense |
43 |
|
|
50 |
|
|
12 |
|
Amortization and Depreciation |
81 |
|
|
70 |
|
|
16 |
|
Impairment Expense |
411 |
|
|
— |
|
|
— |
|
Other
Non-cash Charges |
46 |
|
|
— |
|
|
— |
|
Stock-based Compensation |
31 |
|
|
26 |
|
|
6 |
|
Restructuring Expense |
48 |
|
|
50 |
|
|
20 |
|
Less: |
|
|
|
|
|
Interest
Income |
5 |
|
|
3 |
|
|
1 |
|
Adjusted EBITDA |
$ |
201 |
|
|
$ |
180 |
|
|
$ |
(2 |
) |
Note that due to relatively low levels of Income (Loss) Before
Income Taxes in the near term, as well as the combined impact of
the modified territorial tax program under the Tax Act and deferred
tax asset valuation reserve accounting, the Company’s effective tax
rate is expected to have unusual variations and occasionally an
inverse relationship to Income (Loss) Before Income Taxes.
Safe HarborCertain statements
contained herein that are not historical facts, including
multi-year profit improvement estimates, the success of our
connected accessories, future financial guidance as well as
estimated impacts from the Tax Act, foreign currency translation,
amortization expense, foreign tax credits, non-cash impairments and
restructuring charges, 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
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: changes
in economic trends and financial performance, changes in consumer
demands, tastes and fashion trends, lower levels of consumer
spending resulting from a general economic downturn, shifts in
market demand resulting in inventory risks, changes in foreign
currency exchange rates, risks related to the success of the
multi-year profit improvement initiative, risks related to our
connected accessories and the outcome of current and possible
future litigation, as well as the risks and uncertainties set forth
in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 filed with the Securities and Exchange
Commission (the “SEC”). These forward-looking statements are
based on our current expectations and beliefs concerning future
developments and their potential effect on us. While management
believes that these forward-looking statements are reasonable as
and when made, there can be no assurance that future developments
affecting us will be those that we anticipate. Readers of
this release should consider these factors in evaluating, and are
cautioned not to place undue reliance on, the forward-looking
statements contained herein. The Company assumes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as required by law.
About Fossil
Group, Inc.Fossil Group, Inc. is a global design,
marketing, distribution and innovation company specializing in
lifestyle accessories. Under a diverse portfolio of owned and
licensed brands, our offerings include fashion watches, jewelry,
handbags, small leather goods and wearables. We are committed
to delivering the best in design and innovation across our owned
brands, Fossil, Michele, Misfit, Relic, Skagen and Zodiac, and
licensed brands, Armani Exchange, Chaps, Diesel, DKNY, Emporio
Armani, Karl Lagerfeld, kate spade new york, Marc Jacobs, Michael
Kors and Tory Burch. We bring each brand story to life
through an extensive wholesale distribution network across
approximately 150 countries and over 500 retail locations.
Certain press release and SEC filing information concerning the
Company is also available at www.fossilgroup.com.
Investor
Relations: |
Allison Malkin |
|
ICR, Inc. |
|
(203) 682-8225 |
Consolidated
Income Statement Data |
For the 13
Weeks Ended |
|
For the 13
Weeks Ended |
|
For the 52
Weeks Ended |
|
For the 52
Weeks Ended |
($ in millions,
except per share data): |
December 30, 2017 |
|
December 31, 2016 |
|
December 30, 2017 |
|
December 31, 2016 |
Net sales |
$ |
920.8 |
|
|
$ |
959.2 |
|
|
$ |
2,788.2 |
|
|
$ |
3,042.4 |
|
Cost of sales |
472.7 |
|
|
470.1 |
|
|
1,429.3 |
|
|
1,464.2 |
|
Gross
profit |
448.1 |
|
|
489.1 |
|
|
1,358.9 |
|
|
1,578.2 |
|
Gross margin |
48.7 |
% |
|
51.0 |
% |
|
48.7 |
% |
|
51.9 |
% |
Operating
expenses: |
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
390.4 |
|
|
409.6 |
|
|
1,734.9 |
|
|
1,423.2 |
|
Restructuring charges |
6.4 |
|
|
13.3 |
|
|
48.2 |
|
|
27.8 |
|
Total operating
expenses |
396.8 |
|
|
422.9 |
|
|
1,783.1 |
|
|
1,451.0 |
|
Total operating
expenses (% of net sales) |
43.1 |
% |
|
44.1 |
% |
|
64.0 |
% |
|
47.7 |
% |
Operating income
(loss) |
51.3 |
|
|
66.2 |
|
|
(424.2 |
) |
|
127.2 |
|
Operating margin |
5.6 |
% |
|
6.9 |
% |
|
(15.2 |
)% |
|
4.2 |
% |
Interest expense |
11.1 |
|
|
7.5 |
|
|
43.2 |
|
|
26.9 |
|
Other income (expense)
- net |
2.2 |
|
|
7.7 |
|
|
13.7 |
|
|
14.0 |
|
Income (loss) before
income taxes |
42.4 |
|
|
66.3 |
|
|
(453.8 |
) |
|
114.3 |
|
Provision for income
taxes |
120.6 |
|
|
15.5 |
|
|
19.8 |
|
|
28.7 |
|
Less: Net
income attributable to noncontrolling interest |
1.7 |
|
|
1.1 |
|
|
4.6 |
|
|
6.7 |
|
Net income attributable
to Fossil Group, Inc |
$ |
(79.9 |
) |
|
$ |
49.7 |
|
|
$ |
(478.2 |
) |
|
$ |
78.9 |
|
Earnings per
Share: |
|
|
|
|
|
|
|
Basic |
$ |
(1.65 |
) |
|
$ |
1.03 |
|
|
$ |
(9.87 |
) |
|
$ |
1.64 |
|
Diluted |
$ |
(1.65 |
) |
|
$ |
1.03 |
|
|
$ |
(9.87 |
) |
|
$ |
1.63 |
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
48.6 |
|
|
48.2 |
|
|
48.5 |
|
|
48.1 |
|
Diluted |
48.6 |
|
|
48.4 |
|
|
48.5 |
|
|
48.3 |
|
Consolidated Balance Sheet Data ($ in
millions): |
December 30, 2017 |
|
December 31, 2016 |
Assets: |
|
|
|
Cash
and cash equivalents |
$ |
231.2 |
|
|
$ |
297.3 |
|
Accounts receivable - net |
367.0 |
|
|
375.5 |
|
Inventories |
573.8 |
|
|
542.5 |
|
Other
current assets |
118.9 |
|
|
132.0 |
|
Total current assets |
$ |
1,290.9 |
|
|
$ |
1,347.3 |
|
Property, plant and equipment - net |
$ |
219.7 |
|
|
$ |
273.9 |
|
Goodwill |
0.0 |
|
|
355.3 |
|
Intangible and other assets - net |
147.7 |
|
|
210.5 |
|
Total long-term assets |
$ |
367.4 |
|
|
$ |
839.7 |
|
Total assets |
$ |
1,658.3 |
|
|
$ |
2,187.0 |
|
|
|
|
|
Liabilities and stockholders’ equity: |
|
|
|
Accounts payable, accrued expenses and other current
liabilities |
$ |
507.0 |
|
|
$ |
388.2 |
|
Short-term debt |
2.1 |
|
|
26.4 |
|
Total current liabilities |
$ |
509.1 |
|
|
$ |
414.6 |
|
Long-term debt |
$ |
443.9 |
|
|
$ |
610.0 |
|
Other
long-term liabilities |
124.4 |
|
|
147.0 |
|
Total long-term liabilities |
$ |
568.3 |
|
|
$ |
757.0 |
|
Stockholders’ equity |
$ |
580.9 |
|
|
$ |
1,015.4 |
|
Total liabilities and stockholders’ equity |
$ |
1,658.3 |
|
|
$ |
2,187.0 |
|
|
For the 13
Weeks Ended |
|
For the 52
Weeks Ended |
Business
Segment Net Sales ($ in millions): |
December 30, 2017 |
|
December 31, 2016 |
|
December 30, 2017 |
|
December 31, 2016 |
Segment: |
|
|
|
|
|
|
|
Americas |
$ |
441.7 |
|
|
$ |
482.7 |
|
|
$ |
1,316.2 |
|
|
$ |
1,524.9 |
|
Europe |
336.6 |
|
|
333.0 |
|
|
974.2 |
|
|
1,002.1 |
|
Asia |
142.5 |
|
|
143.5 |
|
|
497.8 |
|
|
515.4 |
|
Total
net sales |
$ |
920.8 |
|
|
$ |
959.2 |
|
|
$ |
2,788.2 |
|
|
$ |
3,042.4 |
|
Product Category Information
|
For the 13
Weeks Ended |
|
For the 52
Weeks Ended |
Product Sales ($ in millions): |
December 30,
2017 |
|
December 31,
2016 |
|
December 30,
2017 |
|
December 31,
2016 |
Watches |
$ |
727.9 |
|
|
$ |
749.0 |
|
|
$ |
2,199.0 |
|
|
$ |
2,330.3 |
|
Leathers |
107.6 |
|
|
114.8 |
|
|
325.5 |
|
|
393.8 |
|
Jewelry |
71.8 |
|
|
79.7 |
|
|
211.7 |
|
|
251.4 |
|
Other |
13.5 |
|
|
15.7 |
|
|
52.0 |
|
|
66.9 |
|
Total net sales |
$ |
920.8 |
|
|
$ |
959.2 |
|
|
$ |
2,788.2 |
|
|
$ |
3,042.4 |
|
Store Count Information
|
|
December 30, 2017 |
|
December 31, 2016 |
|
|
Americas |
|
Europe |
|
Asia |
|
Total |
|
Americas |
|
Europe |
|
Asia |
|
Total |
Accessory stores |
|
108 |
|
106 |
|
59 |
|
273 |
|
122 |
|
119 |
|
63 |
|
304 |
Outlets |
|
136 |
|
74 |
|
46 |
|
256 |
|
143 |
|
73 |
|
45 |
|
261 |
Full priced
multi-brand |
|
0 |
|
8 |
|
7 |
|
15 |
|
0 |
|
8 |
|
12 |
|
20 |
Total stores |
|
244 |
|
188 |
|
112 |
|
544 |
|
265 |
|
200 |
|
120 |
|
585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Financial InformationThe
following table presents the Company’s business segment and product
net sales on a constant currency basis which are non-GAAP financial
measures. To calculate net sales on a constant currency
basis, net sales for the current fiscal year period for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average rates during the comparable period
of the prior fiscal year. The Company presents constant
currency information to provide investors with a basis to evaluate
how its underlying business performed excluding the effects of
foreign currency exchange rate fluctuations. The constant
currency financial information presented herein should not be
considered a substitute for, or superior to, the measures of
financial performance prepared in accordance with GAAP.
|
Net Sales |
|
Net Sales |
For the 13 Weeks Ended |
|
For the 52 Weeks Ended |
December 30, 2017 |
|
December 30, 2017 |
($ in millions) |
As Reported |
|
Impact of Foreign Currency Exchange
Rates |
|
Constant Currency |
|
As Reported |
|
Impact of Foreign Currency Exchange
Rates |
|
Constant Currency |
Segment: |
|
|
|
|
|
|
|
|
|
|
|
Americas |
$ |
441.7 |
|
|
$ |
2.6 |
|
|
$ |
439.1 |
|
|
$ |
1,316.2 |
|
|
$ |
2.0 |
|
|
1,314.2 |
|
Europe |
336.6 |
|
|
24.2 |
|
|
312.4 |
|
|
974.2 |
|
|
18.8 |
|
|
955.4 |
|
Asia |
142.5 |
|
|
3.1 |
|
|
139.4 |
|
|
497.8 |
|
|
2.5 |
|
|
495.3 |
|
Total net sales |
$ |
920.8 |
|
|
$ |
29.9 |
|
|
$ |
890.9 |
|
|
$ |
2,788.2 |
|
|
$ |
23.3 |
|
|
$ |
2,764.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Categories: |
|
|
|
|
|
|
|
|
|
|
|
Watches |
$ |
727.9 |
|
|
$ |
22.9 |
|
|
$ |
705.0 |
|
|
$ |
2,199.0 |
|
|
$ |
18.3 |
|
|
$ |
2,180.7 |
|
Leathers |
107.6 |
|
|
3.1 |
|
|
104.5 |
|
|
325.5 |
|
|
2.4 |
|
|
323.1 |
|
Jewelry |
71.8 |
|
|
3.6 |
|
|
68.2 |
|
|
211.7 |
|
|
2.4 |
|
|
209.3 |
|
Other |
13.5 |
|
|
0.3 |
|
|
13.2 |
|
|
52.0 |
|
|
0.2 |
|
|
51.8 |
|
Total net sales |
$ |
920.8 |
|
|
$ |
29.9 |
|
|
$ |
890.9 |
|
|
$ |
2,788.2 |
|
|
$ |
23.3 |
|
|
$ |
2,764.9 |
|
Items Impacting Comparison of Fiscal 2017 Operations to
Fiscal 2016 Operations
The following table quantifies the estimated
impact on the Company's operating income (loss), net income (loss)
and diluted earnings (loss) per share related to
non-operating charges for non-cash intangible asset impairments,
unfavorable impacts from the Tax Act and valuation allowance and
restructuring charges for fiscal 2017 as compared to fiscal
2016. Numbers may not add due to rounding.
The Company believes that the fiscal 2016 and
2017 operating income (loss), net income (loss) and diluted
earnings (loss) per share measures are useful to investors in
comparing the Company's projected financial performance
year-over-year without the impact of intangible asset impairment
and tax charges related to the Tax Act and valuation allowance in
2017 and restructuring charges in both fiscal 2016 and 2017.
The Company uses the fiscal 2016 and 2017 non-GAAP operating income
(loss), net income (loss) and diluted earnings (loss) per share
measures to evaluate its operating performance
year-over-year. The non-GAAP financial measures presented
herein should not be considered a substitute for, or superior to,
guidance or financial measures prepared in accordance with
GAAP. The tables below are in millions of dollars, except for
per share information.
|
Fiscal Year 2017 |
|
Fiscal Year 2016 |
|
Reported |
|
Intangible Impairment |
|
Tax Act and Valuation Allowance |
|
Restructuring Charges |
|
Adjusted (Non-GAAP) |
|
Reported |
|
Restructuring Charges |
|
Adjusted (Non-GAAP) |
Net Sales |
$ |
2,788 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,788 |
|
|
$ |
3,042 |
|
|
$ |
— |
|
|
$ |
3,042 |
|
Operating Income
(loss) |
(424 |
) |
|
407 |
|
|
— |
|
|
48 |
|
|
31 |
|
|
127 |
|
|
28 |
|
|
155 |
|
Net Income |
(478 |
) |
|
343 |
|
|
107 |
|
|
31 |
|
|
3 |
|
|
79 |
|
|
18 |
|
|
97 |
|
EPS (Diluted) |
$ |
(9.87 |
) |
|
$ |
7.07 |
|
|
$ |
2.20 |
|
|
$ |
0.65 |
|
|
$ |
0.05 |
|
|
$ |
1.63 |
|
|
$ |
0.37 |
|
|
$ |
2.00 |
|
|
Fourth Fiscal Quarter 2017 |
|
Fourth Fiscal Quarter 2016 |
|
Reported |
|
Tax Act and Valuation
Allowance |
|
Restructuring Charges |
|
Adjusted (Non-GAAP) |
|
Reported |
|
Restructuring Charges |
|
Adjusted (Non-GAAP) |
Net Sales |
$ |
921 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
921 |
|
|
$ |
959 |
|
|
$ |
— |
|
|
$ |
959 |
|
Operating Income
(loss) |
51 |
|
|
— |
|
|
6 |
|
|
57 |
|
|
66 |
|
|
13 |
|
|
79 |
|
Net Income |
(80 |
) |
|
107 |
|
|
4 |
|
|
31 |
|
|
50 |
|
|
9 |
|
|
59 |
|
EPS (Diluted) |
$ |
(1.65 |
) |
|
$ |
2.20 |
|
|
$ |
0.09 |
|
|
$ |
0.64 |
|
|
$ |
1.03 |
|
|
$ |
0.18 |
|
|
$ |
1.21 |
|
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