FOSSIL GROUP, INC. Item 2.02 Results of Operations and Financial
Condition.
In connection with the Notes Offering (described in Item 8.01 below),Fossil Group, Inc. (the "Company", "we" or "us") is providing the following preliminary estimated unaudited financial information.
Preliminary Estimated Unaudited Financial Results
Our financial results as of and for the three months endedOctober 2, 2021 are not yet complete. The forward-looking information presented below reflects our preliminary estimated unaudited results based solely on information available to us as of the date of this Current Report on Form 8-K. We have provided ranges for certain items rather than specific amounts since our financial closing procedures are not yet complete as of and for the three months endedOctober 2, 2021 . Actual results are not expected to be publicly available until we file our consolidated financial statements and related notes as of for the three months endedOctober 2, 2021 with theSecurities and Exchange Commission ("SEC"). These preliminary estimates do not present a comprehensive statement of our consolidated results for the three months endedOctober 2, 2021 and should not be used as a substitute for interim financial statements prepared in accordance with generally accepted accounting principles inthe United States ("GAAP"). You should not place undue reliance on these estimates. This preliminary estimated unaudited financial information has been prepared by and is the responsibility of our management. Our independent registered public accounting firm,Deloitte & Touche, LLP , has not audited, reviewed, compiled nor performed any procedures with respect to the preliminary estimated unaudited financial results and therefore does not express an opinion or any other form of assurance with respect to these preliminary estimates. We currently expect that our final results of operations and other data will be consistent with the estimates set forth in this Current Report on Form 8-K, however such estimates are preliminary and our actual results of operations and other data could differ materially from these preliminary estimates due to the completion of our financial closing procedures, final adjustments, review procedures to be performed by our management and audit committee and other developments that may arise between now and the time our unaudited interim consolidated financial statements as of and for the three months endedOctober 2, 2021 are issued.
We expect our results to include:
•Net sales within the range of$490 to$494 million for the three months endedOctober 2, 2021 , an increase of approximately 13% versus$435 million for the three months endedOctober 3, 2020 and within the range of$1,792 to$1,796 million for the twelve months endedOctober 2, 2021 (the "LTM period"); •Income before income taxes within the range of$38 million and$43 million for the three months endedOctober 2, 2021 , an increase of approximately 322% to 378% versus$9 million for the three months endedOctober 3, 2020 and within the range of$34 million and$39 million for the LTM period; and •Adjusted EBITDA within the range of$59 million and$64 million for the three months endedOctober 2, 2021 , an increase of approximately 37% to 49% versus$43 million for the three months endedOctober 3, 2020 and within the range of$147 and$152 million for the LTM period. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as our income (loss) before the impact of income tax expense (benefit), plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, and restructuring expense minus interest income. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as alternatives to any performance measures derived in accordance with GAAP. We present Adjusted EBITDA and Adjusted EBITDA Margin because management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. The following table presents a reconciliation of income before income taxes, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, and the calculation of Adjusted EBITDA Margin for the three months endedOctober 3, 2020 , as well as a reconciliation of our preliminary estimated income before income taxes range to our preliminary estimated Adjusted EBITDA range and the corresponding calculations of Adjusted EBITDA margin for the three months endedOctober 2, 2021 . The historical financial information for the three months endedOctober 3, 2020 has been derived from the unaudited consolidated financial statements and the accompanying notes included in our Quarterly Report on Form 10-Q for the period endedOctober 3, 2020 . --------------------------------------------------------------------------------
For the Three Months Ended
October 2, 2021 October 3, 2020(1)
Estimated Actual
($ in millions): Low High
Income before income taxes $ 38 $ 43 $ 9
Plus:
Interest expense 6 6 8
Amortization and depreciation 7 7 10
Impairment expense 1 1 5
Other non-cash charges (1) (1) 2
Stock-based compensation 3 3 3
Restructuring expense 5 5 6
Less:
Interest income - - -
Adjusted EBITDA $ 59 $ 64 $ 43
Net sales $ 490 $ 494 $ 435
Adjusted EBITDA Margin 12 % 13 % 10 %
(1) Prior period amounts have been adjusted to conform to the current period presentation.
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The following table presents a reconciliation of our preliminary estimated
income before income taxes range to our preliminary estimated Adjusted EBITDA
range and the corresponding calculations of Adjusted EBITDA margin for the LTM
period.
LTM Period Ended October 2, 2021
Estimated
($ in millions): Low High
Income before income taxes $ 34 $ 39
Plus:
Interest expense 29 29
Amortization and depreciation 33 33
Impairment expense 13 13
Other non-cash charges - -
Stock-based compensation 9 9
Restructuring expense 30 30
Less:
Interest income 1 1
Adjusted EBITDA $ 147 $ 152
Net sales $ 1,792 $ 1,796
Adjusted EBITDA Margin 8 % 8 %
The following table presents preliminary estimated total liquidity, consisting
of cash and cash equivalents and availability under our revolving credit
facility as of October 2, 2021 . The historical total liquidity as of July 3,
2021 has been derived from the unaudited consolidated financial statements and
the accompanying notes included in our Quarterly Report on Form 10-Q for the
period ended July 3, 2021 . As of October 2, 2021 , we had $33 million of
outstanding borrowings under our revolving credit facility.
As of October 2, 2021 As of July 3, 2021
($ in millions): Estimated Actual
Cash and cash equivalents $ 182 $ 252
Revolving credit facility availability $ 123 $ 42
Liquidity $ 305 $ 294
Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995. All
statements, other than historical facts, that address activities that the
Company assumes, plans, expects, believes, intends or anticipates (and other
similar expressions) will, should or may occur in the future are forward-looking
statements. The forward-looking statements are based on management's current
. . .
Item 8.01 Other Events.
Notes Offering
On November 1 2021, we issued a press release announcing that we had commenced
an underwritten registered public offering (the "Notes Offering") of $125
million aggregate principal amount of senior notes due 2026 (the "Notes"),
subject to market and certain other conditions. The Company expects to use the
net proceeds of the Notes Offering to repay outstanding borrowings under the
Company's Term Credit Agreement. The offering of the Notes is being made
pursuant to the Company's shelf registration statement on Form S-3, which was
declared effective by the SEC on September 30, 2021 , including a base
prospectus, and a preliminary prospectus supplement related to the offering
previously filed with the SEC . A copy of the press release is attached hereto as
Exhibit 99.1.
This Current Report on Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the Notes in any
state or jurisdiction in which such offer, sale or solicitation would be
unlawful prior to registration or qualification under the securities laws of any
such state or jurisdiction.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Document Description
99.1 Press Release, dated November 1, 2021 .
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
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