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 from April 6, 1997 to July 5, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-19848
FOSSIL, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2018505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2280 N. Greenville, Richardson, Texas 75082
(Address of principal executive offices)
(Zip Code)
(972) 234-2525
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports 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 ____
The number of shares of Registrant's common stock, outstanding as of
August 13, 1997: 13,453,238.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOSSIL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 5, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 10,954,366 $ 11,981,246
Accounts receivable - net 29,526,067 30,252,964
Inventories 51,707,828 49,782,555
Deferred income tax benefits 3,897,000 3,666,344
Prepaid expenses and other current assets 4,184,194 1,942,791
--------- ---------
Total current assets 100,269,455 97,625,900
Property, plant and equipment - net 19,224,777 16,718,976
Intangible and other assets 5,021,355 4,633,193
--------- ---------
$ 124,515,587 $ 118,978,069
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Notes payable $ 12,116,890 $ 10,506,144
Accounts payable 6,433,868 7,476,324
Accrued expenses:
Co-op advertising 7,126,691 7,857,196
Compensation 2,349,844 2,154,996
Other 5,100,337 7,931,693
Income taxes payable 3,995,102 1,838,656
--------- ---------
Total current liabilities 37,122,732 37,765,009
Long-term debt 4,250,000 4,350,000
Minority interests in subsidiaries 1,033,825 2,295,026
Stockholders' equity:
Common stock, shares issued and outstanding,
13,438,664 and 13,242,994, respectively 134,387 132,430
Additional paid-in capital 24,558,582 22,766,468
Retained earnings 58,923,596 52,315,069
Cumulative translation adjustment (1,507,535) (645,933)
----------- ---------
Total stockholders' equity 82,109,030 74,568,034
---------- ----------
$ 124,515,587 $ 118,978,069
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
FOSSIL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the 13 For the 3 For the 26 1/2 For the 6
Weeks Ended Months Ended Weeks Ended Months Ended
July 5, June 30, July 5, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 56,931,466 $ 45,238,236 $ 104,381,178 $ 88,147,304
Cost of sales 30,627,390 22,775,805 54,881,744 46,649,086
---------- ---------- ---------- ----------
Gross profit 26,304,076 22,462,431 49,499,434 41,498,218
Operating Expenses:
Selling and distribution 13,142,089 12,241,841 25,143,114 21,736,990
General and administrative 6,384,510 5,619,881 12,118,079 10,911,728
--------- --------- ---------- ----------
Total operating expenses 19,526,599 17,861,722 37,261,193 32,648,718
---------- ---------- ---------- ----------
Operating income 6,777,477 4,600,709 12,238,241 8,849,500
Interest expense (267,166) (264,412) (496,716) (440,422)
Other income (expense) - net (373,208) 128,245 (562,998) (42,572)
--------- ------- --------- --------
Income before income taxes 6,137,103 4,464,542 11,178,527 8,366,506
Provision for income taxes 2,503,000 1,880,000 4,570,000 3,442,000
--------- --------- --------- ---------
Net income $ 3,634,103 $ 2,584,542 $ 6,608,527 $ 4,924,506
============ ============= ============ =============
Earnings per share $ 0.26 $ 0.19 $ 0.48 $ 0.37
================ ================= ================ =================
Weighted average common and
common equivalent shares
outstanding 13,807,162 13,462,680 13,705,495 13,355,513
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
FOSSIL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
For the 26 1/2 For the 6
Weeks Ended Months Ended
July 5, June 30,
1997 1996
---- ----
Operating Activities:
<S> <C> <C>
Net income $ 6,608,527 $ 4,924,506
Noncash item affecting net income:
Minority interests in subsidiaries (178,664) 251,625
Depreciation and amortization 1,481,617 1,473,399
(Decrease) increase in allowance for doubtful accounts (291,184) 531,647
Decrease in allowance for returns -
net of related inventory in transit (143,350) (1,239,963)
Deferred income tax benefits (230,656) 56,808
Cumulative translation adjustment (861,602) (319,024)
Cash from (used in) changes in assets and liabilities:
Accounts receivable 1,495,544 (1,872,572)
Inventories (2,259,386) (3,187,390)
Prepaid expenses and other current assets (2,241,403) (147,610)
Accounts payable (1,042,456) 1,428,387
Accrued expenses (3,367,013) (1,821,207)
Income taxes payable 2,156,446 (2,127,566)
--------- -----------
Net cash from (used in) operations 1,126,420 (2,048,960)
Investing Activities:
Net assets acquired in business combination/consolidation,
net of cash received (1,315,703) 805,891
Additions to property, plant and equipment (3,867,849) (2,527,328)
(Increase) decrease in intangible and other assets 224,220 (452,468)
------- ---------
Net cash used in investing activities (4,959,332) (2,173,905)
Financing activities:
Issuance of common stock 1,794,071 73,958
(Decrease) increase in minority interests in subsidiaries (498,785) 2,294
Increase in notes payable 1,510,746 6,067,771
--------- ---------
Net cash from financing activities 2,806,032 6,144,023
--------- ---------
Net (decrease) increase in cash and cash equivalents (1,026,880) 1,921,158
Cash and cash equivalents:
Beginning of period 11,981,246 5,980,535
---------- ---------
End of period $ 10,954,366 $ 7,901,693
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
FOSSIL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENT POLICIES
Basis of Presentation. The condensed consolidated financial statements include
the accounts of Fossil, Inc., a Delaware corporation, and its majority-owned
subsidiaries (the "Company"). The condensed consolidated financial statements
reflect all adjustments which are, in the opinion of management, necessary to
present a fair statement of the Company's financial position as of July 5, 1997
and the results of operations for the thirteen and twenty-six and one-half week
periods ended July 5, 1997, respectively and the results of operations for the
three- and six-month periods ended June 30, 1996, respectively. All adjustments
are of a normal, recurring nature.
These interim financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in Form 10-K filed
by the Company pursuant to the Securities Exchange Act of 1934 for the year
ended December 31, 1996. Operating results for the thirteen and twenty-six and
one-half week periods ended July 5, 1997 ("Second Quarter" and "Half Year
Period", respectively), are not necessarily indicative of the results to be
achieved for the full year.
Beginning January 1, 1997, the Company changed its fiscal year to reflect the
retail-based calendar (containing 4-4-5 week calendar quarters). Due to this
change, the Company's first quarter ended April 5, 1997 contained an additional
one-half week for the transition period.
Business. The Company designs, develops, markets and distributes fashion watches
and other accessories, principally under the "FOSSIL", "FSL" and "RELIC" brands
names. The Company's products are sold primarily through department stores and
other major retailers, both domestically and internationally.
2. INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following:
July 5, December 31,
1997 1996
---- ----
<S> <C> <C>
Components and parts $ 2,688,817 $ 2,294,750
Work-in-process 981,146 657,125
Finished merchandise on hand 39,002,019 38,404,535
Merchandise at Company's stores 4,966,225 3,962,199
Merchandise in transit from estimated
customers' returns 4,069,621 4,463,946
--------- ---------
$51,707,828 $49,782,555
=========== ===========
</TABLE>
The Company periodically enters into forward contracts principally to hedge the
expected payment of intercompany inventory transactions with its non-U.S.
subsidiaries. Currency exchange gains or losses resulting from the translation
of the related accounts, along with the offsetting gains or losses from the
hedge, are deferred until the inventory is sold or the forward contract is
completed. On July 5, 1997, the Company had hedge contracts to sell 2.0 million
German Marks for approximately $1.2 million, expiring through August 1997 and
416.2 million Japanese Yen for approximately $3.6 million, expiring through
December 1997.
4
<PAGE>
FOSSIL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
3. ACQUISITIONS
Effective February 1, 1997, Fossil Europe B.V. acquired the remaining 40% of the
capital stock of Fossil Italia, S.R.L. from its minority stockholders in
exchange for the issuance of 128,109 shares of the Company's $0.01 par value
common stock ("Common Stock") valued at $1.2 million. The acquisition has been
accounted for as a purchase and, in connection therewith, the Company recorded
goodwill of approximately $300,000.
Effective April 1997, Fossil (East) Limited acquired the remaining 35% of
capital stock of Amazing Time, Ltd. from its minority stockholder in exchange
for approximately $380,000 in cash. The acquisition has been accounted for as a
purchase and, in connection therewith, the Company recorded goodwill of
approximately $210,000.
4. DEBT
Bank. In June 1997, the Company renewed its U.S. short-term revolver through
June 1998. At the time of the renewal, the Company increased the funds available
under the facility by $10,000,000 to $40,000,000, not subject to any borrowing
base calculation. The U.S. short-term revolver is collateralized by
substantially all the Company's assets and requires maintenance of specific
levels of net worth, net income, working capital and financial ratios.
5
<PAGE>
FOSSIL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the thirteen and twenty-six and one-half
week periods ended July 5, 1997 (the "Second Quarter" and "Half Year
Period", respectively), as compared to the three and six-month periods
ended June 30, 1996 (the "Prior Year Quarter" and "Prior Year Half Year
Period", respectively). Due to a change in the Company's fiscal year to
reflect the retail-based calendar (containing 4-4-5 week calendar
quarters), the Company's first quarter during 1997 contained an
additional one-half week for the transition period. This change had an
immaterial impact on comparability to the Prior Year Quarter and Prior
Year Half Year Period. This discussion should be read in conjunction
with the Condensed Consolidated Financial Statements and the related
Notes attached hereto.
General
Since the Company's organization in 1984, sales growth has been
principally attributable to increased sales of FOSSIL brand watches
both domestically and in a growing number of international markets.
Adding to the Company's sales growth has been the addition of FOSSIL
brand leather goods and sunglasses, the diversification into FOSSIL
outlet and retail stores and the introduction of other watch brands
(RELIC and FSL). Increased sales volume has also been generated through
leveraging the Company's infrastructure of sourcing, design and
developmental systems for the production of its products for corporate
gift programs as well as under the names of internationally recognized
specialty retailers, entertainment companies and theme restaurants. The
Company's products are marketed internationally, mainly through major
department stores and specialty retailers.
The Company maintains sales and distribution offices in the United
States, Germany, Italy, Japan, the United Kingdom, Spain, France and
Hong Kong. In addition to sales through the Company's offices, FOSSIL
also currently distributes its products to over 50 additional countries
through authorized distributors.
1997 Highlights
The Company acquired effective February 1997 the remaining 40% of the
capital stock of Fossil Italia, S.R.L. from its minority stockholders.
The Company acquired effective April 1997 the remaining 35% of the
capital stock of Amazing Time, Ltd. from its minority stockholder.
During March FOSSIL brand neckwear was available through the Company's
first licensing agreement of the FOSSIL brand name.
The Company entered into a multi-year licensing agreement for the
design, production, and marketing of FOSSIL brand underwear and lounge wear
throughout the United States. The product should be available to the public
for the 1997 holiday season.
The Company announced in May that it had entered into a worldwide,
multi-year licensing agreement with Giorgio Armani for the rights to
design, produce and market a line of Emporio Armani watches.
6
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, (i) the percentages
of the Company's net sales represented by certain line items from the Company's
condensed consolidated statements of income and (ii) the percentage changes in
these line items between the current period and the comparable period of the
prior year.
<TABLE>
<CAPTION>
Percentage of Percentage of
Net Sales Net Sales
--------- --------
For the For the For the 26 For the
13 Weeks 3 Months 1/2 Weeks 6 Months
Ended Ended Ended Ended
July 5, June 30, Percentage July 5, June 30, Percentage
1997 1996 Change 1997 1996 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 25.8% 100.0% 100.0% 18.4%
Cost of sales 53.8 50.3 34.5 52.6 52.9 17.7
----- ----- ----- -----
Gross profit margin 46.2 49.7 17.1 47.4 47.1 19.3
Selling and
distribution expenses 23.1 27.1 7.4 24.1 24.6 15.7
General and
administrative expenses 11.2 12.4 13.6 11.6 12.4 11.1
---- ---- ---- ----
Operating income 11.9 10.2 47.3 11.7 10.1 38.3
Interest expense (0.5) (0.6) 1.0 (0.5) (0.5) 12.8
Other income
(expense)- net (0.6) 0.3 (391.0) (0.5) (0.1) 1,222.5
----- --- ----- -----
Income before income taxes 10.8 9.9 37.5 10.7 9.5 33.6
Income taxes 4.4 4.2 33.1 4.4 3.9 32.8
--- --- --- ---
Net income 6.4% 5.7% 40.6% 6.3% 5.6% 34.2%
==== ==== ==== ====
</TABLE>
7
<PAGE>
Net Sales. The following table sets forth certain components of the Company's
consolidated net sales and the percentage relationship of the components to
consolidated net sales for the periods indicated (in millions, except percentage
data):
<TABLE>
<CAPTION>
Amounts % of Total Amounts % of Total
------- ---------- ------- ----------
For the For the For the For the For the For the For the For the
13 Weeks 3 Months 13 Weeks 3 Months 26 1/2 6 26 1/2 6 Months
Ended Ended Ended Ended Weeks Months Weeks Ended
Ended Ended Ended
July 5, June 30, July 5, June 30, July 5, June 30, July 5, June 30,
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
International:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Europe $ 9.8 $ 10.9 17% 24% $ 20.4 $ 22.4 19% 25%
Other 11.6 3.3 21 7 16.4 7.4 16 8
---- --- -- - ---- --- -- -
Total 21.4 14.2 38 31 36.8 29.8 35 33
---- ---- -- -- ---- ---- -- --
International
Domestic:
Watch products 22.0 18.5 39 41 40.1 35.1 38 40
Other products 9.2 9.9 16 22 20.4 19.1 20 22
--- --- -- -- ---- ---- -- --
Total 31.2 28.4 55 63 60.5 54.2 58 62
Stores 4.3 2.6 7 6 7.1 4.1 7 5
--- --- - - --- --- - -
Total Domestic 35.5 31.0 62 69 67.6 58.3 65 67
---- ---- -- -- ---- ---- -- --
Total Net Sales $ 56.9 $ 45.2 100% 100% $104.4 $ 88.1 100% 100%
====== ====== === ==== ====== ====== === ===
</TABLE>
Sales volume increases during the Second Quarter were principally derived from a
significant sale of non-branded watches used for premium incentives, domestic
sales of FOSSIL branded watch and leather products and sales from additional
FOSSIL outlet and retail stores opened during the second half of 1996. The
Company, through its foreign subsidiaries, negotiated a sale valued at $5.9
million of non-branded premium incentive watches sold in Europe during the
Second Quarter. In addition, domestic sales of FOSSIL branded watches showed
strong sales gains due to the increase of metal bracelet watches in the
Company's product mix and the popularity of two FOSSIL watch lines (FOSSIL Blue
and FOSSIL Steel) introduced mainly after the second quarter of last year. Sales
gains in the Company's leather goods during the Second Quarter were more than
offset by sales declines in the Company's sunglass products. Beginning in late
1996, the number of sunglass suppliers selling into the Company's distribution
channels significantly increased while the retail prices the average sunglass
customer showed a willingness to pay declined. In reaction to these changes in
the sunglass market place and in an attempt to increase its market share, the
Company is in the process of both increasing its sunglass assortment at its
opening price points and introducing a premium quality line of sunglasses during
the third quarter of 1997. Internationally, sales of FOSSIL branded watches by
the Company's European-based companies also increased during the Second Quarter.
These increases however were more than offset by declines in sales of sunglass
products and a reduction in sales derived from the Company's operations in
France and the United Kingdom. Based on current market conditions, the Company
has significantly curtailed its operations in France and the United Kingdom. The
Company's sales increases for the Half Year Period were similar to that
experienced in the Second Quarter.
Gross Profit. The decrease in gross profit margins during the Second Quarter was
principally a result of the low gross profit margin realized on the sale of the
non-branded premium watches sold in Europe. To a lesser extent, higher markdowns
taken in the leather and sunglass products and more aggressive pricing on
certain of the Company's FOSSIL branded watches had a negative effect on the
gross profit margins in the Second Quarter. Increased sales volumes through the
Company's retail and Japan-based operations and increased production of the
Company's watch
8
<PAGE>
products through its majority-owned assembly factories had a positive influence
on the Company's gross profit margins for the Second Quarter and Half Year
Period as compared to the prior year. Management believes that the Company's
gross profit margin for the balance of the year will increase above the Second
Quarter levels to approximately the 48% range.
Operating expenses. Selling, general and administrative expenses, as a
percentage of net sales, decreased for the Second Quarter and Half Year Period
to 34.3% and 35.7%, respectively, from 39.5% and 37.0% in the prior year
comparable periods. Operating expenses increased in the aggregate primarily due
to increased sales volumes and the operating costs from the Company's additional
outlet and retail stores opened during 1996. For the Second Quarter and Half
Year Period the Company had additional outlet or retail locations in operation
in comparison to comparable periods in the previous year of approximately nine
and twelve locations, respectively. The operating expense ratio derived from
FOSSIL outlet and retail locations is historically higher than the consolidated
average. The operating expense ratio for the Second Quarter and Half Year Period
were positively impacted by leveraging expenses against higher sales volumes.
Other income (expense) - net. The Company reported other expense for the Second
Quarter and Half Year Period of $0.37 million and $0.56 million, respectively,
as compared to other income of $0.13 million for the Prior Year Quarter and
other expense of $0.04 million for the Prior Year Half Year Period. The increase
in other expense during 1997 primarily reflects the minority interests in the
increased profits of the Company's majority-owned assembly factories. In
addition, during the Second Quarter the Company accrued $175,000 for costs to be
incurred in the curtailment of operations in the United Kingdom. To a lesser
extent, other expenses have increased in 1997 as a result of foreign currency
losses incurred at the Company's foreign subsidiaries as the United States
Dollar has significantly increased in value against the other foreign currencies
the Company deals with, mainly the German Mark and Italian Lira.
Liquidity and Capital Resources
Historically the Company has not required substantial financing during the first
several months of its fiscal year but has increased its debt needs starting in
the second quarter, while typically reaching its peak borrowing needs in the
September - November time frame. The additional financing needs have generally
been to finance the accumulation of inventory and the build-up in accounts
receivable. During 1997, the Company will additionally incur approximately $4.5
million in costs for the construction of a 138,000 sq. ft. warehouse facility
which has been built adjacent to its main headquarters. Currently, the building
costs are being funded through the Company's short-term credit facilities, but
management intends to secure long-term financing for this facility during
September 1997.
Management believes the Company's financial position as of July 5, 1997 remains
extremely strong with working capital of approximately $63 million and $11
million in cash. As of August 8, 1997, the Company had approximately $15 million
borrowed against its combined $48 million bank credit facilities. The current
bank borrowings are primarily related to financing the Company's expansion into
company-owned retail locations and internationally as well as financing its
facility costs in Texas. Management believes that cash flow from operations and
existing credit facilities as well as financing for the Company's 1997 building
project will be sufficient to satisfy its working capital expenditure
requirements for at least the next twelve months.
9
<PAGE>
Forward Looking Statements
The statements contained in this Quarterly Report on Form 10-Q, including, but
not limited to statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations that are not historical facts are
forward-looking statements and involve a number of uncertainties. The actual
results of the future events could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are general economic conditions, competition, government
regulation and possible future litigation, as well as the risks and
uncertainties set forth on the Company's Current Report on Form 8-K dated
March 31, 1997.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 22, 1997. At
such meeting, the stockholders elected directors of the Company and no other
matters were voted on at the meeting. A total of 12,796,211 shares were
represented at the meeting.
The tabulation of nominees is as follows:
<TABLE>
<CAPTION>
Director Nominee For Against Abstain Withheld
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Tom Kartsotis 12,757,449 38,762
Kosta Kartsotis 12,757,949 38,262
Michael W. Barnes 12,757,949 38,262
Jal S. Shroff 12,757,949 38,262
Donald J. Stone 12,757,949 38,262
Kenneth W. Anderson 12,757,949 38,262
Alan J. Gold 12,757,179 39,032
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Fifth Amendment to Second Amended and Restated
Loan Agreement dated June 1997, by and among Wells Fargo Bank
(Texas), National Association, a national banking association
formerly known as First Interstate Bank of Texas, N.A., Fossil
Partners, L.P., Fossil, Inc., Fossil Intermediate, Inc.,
Fossil Trust , Fossil New York, Inc., Fossil Stores I, Inc.
and Fossil Stores II, Inc. (without exhibits).
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period
covered by this Report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOSSIL, INC.
Date: August 18, 1997 /s/ Randy S. Kercho
-------------------
Randy S. Kercho
Executive Vice President and
Chief Financial Officer
(Principal financial officer
duly authorized to sign on behalf of
Registrant)
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
10.1 Fifth Amendment to Second Amended and Restated Loan Agreement
dated June 1997, by and among Wells Fargo Bank (Texas),
National Association, a national banking association formerly
known as First Interstate Bank of Texas, N.A., Fossil
Partners, L.P., Fossil, Inc., Fossil Intermediate, Inc.,
Fossil Trust , Fossil New York, Inc., Fossil Stores I, Inc.
and Fossil Stores II, Inc. (without exhibits).
27 Financial Data Schedule
FIFTH AMENDMENT TO SECOND
AMENDED AND RESTATED LOAN AGREEMENT
THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT (this
"Amendment") is made and entered into this __ day of June, 1997, by and among
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, a national banking association
formerly known as First Interstate Bank of Texas, N.A. (the "Bank"), Fossil
Partners, L.P. (the "Borrower"), Fossil, Inc. (the "Company"), Fossil
Intermediate, Inc. ("Fossil Intermediate"), Fossil Trust ("Fossil Trust"),
Fossil New York, Inc. ("Fossil New York"), Fossil Stores I, Inc. ("Fossil I")
and Fossil Stores II, Inc. ("Fossil II").
RECITALS
A. The Bank, the Borrower, the Company, Fossil Intermediate, Fossil Trust,
Fossil New York and Fossil I are parties to that certain Second Amended and
Restated Loan Agreement, dated effective April 30, 1995, as amended by (i) that
certain First Amendment to Second Amended and Restated Loan Agreement, dated
effective March 27, 1996, by and among the Bank, the Borrower, the Company,
Fossil Intermediate, Fossil Trust, Fossil New York and Fossil I, (ii) that
certain Second Amendment to Second Amended and Restated Loan Agreement, dated
effective May 3, 1996, by and among the Bank, the Borrower, the Company, Fossil
Intermediate, Fossil Trust, Fossil New York, Fossil I and Fossil II, (iii) that
certain Third Amendment to Second Amended and Restated Loan Agreement, dated
effective September 11, 1996, by and among the Bank, the Borrower, the Company,
Fossil Intermediate, Fossil Trust, Fossil New York, Fossil I and Fossil II and
(iv) that certain Fourth Amendment to Second Amended and Restated Loan
Agreement, dated effective April 2, 1997, by and among the Bank, the Borrower,
the Company, Fossil Intermediate, Fossil Trust, Fossil New York, Fossil I and
Fossil II (as amended, the "Loan Agreement");
B. The Bank, the Borrower, the Company, Fossil Intermediate, Fossil Trust,
Fossil New York, Fossil I and Fossil II desire to amend the Loan Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
Definitions
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
<PAGE>
ARTICLE II
Amendment
2.01 Amendment to Section 1. Effective as of the date hereof, Section 1
of the Loan Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"1. The Line of Credit. Subject to, and upon the terms,
conditions, covenants and agreements contained herein, the Bank agrees
to loan the Borrower, at any time, and from time to time prior to the
maturity of the Borrower's promissory note executed in conjunction with
this Agreement such amounts as the Borrower may request up to, but not
exceeding, an aggregate principal sum at any time outstanding equal to
$40,000,000.00 (the 'Total Commitment'); within such limits and during
such period, the Borrower may borrow, repay, and re-borrow hereunder
(the 'Line of Credit'). All loans under the Line of Credit shall be
evidenced by the Borrower's Eighth Amended and Restated Master
Revolving Credit Note (the 'Revolving Note'), substantially in form and
substance satisfactory to the Bank, payable to the order of the Bank,
and bearing interest upon the terms provided therein (but in no event
to exceed the maximum non-usurious interest rate permitted by law). The
principal of and interest on the Revolving Note shall be due and
payable as set forth on the face of the Revolving Note. Notation by the
Bank on its records shall constitute prima facie evidence of the amount
and date of any payment or borrowing thereunder.
(a) Renewals and Extensions. All renewals,
extensions, modifications and rearrangements of the Revolving
Note, if any, shall be deemed to be made pursuant to this
Agreement, and accordingly, shall be subject to the terms and
provisions hereof, and the Borrower shall be deemed to have
ratified, as of such renewal, extension, modification or
rearrangement date, all of the representations, covenants and
agreements herein set forth.
(b) Letters of Credit. Advances under the Line of
Credit may also be made to fund Documentary or Stand-by
Letters of Credit (as hereinafter defined) that are issued
under the Revolving Note and are drawn upon, provided, the
Bank may, in its own discretion, advance funds under the Line
of Credit to fund such Documentary or Stand-by Letters of
Credit (as hereinafter defined) when the Borrower does not
reimburse the Bank for such funding. All such advances shall
be added to the principal amount of the Revolving Note."
2.02 Amendment to Section 2. Effective as of the date hereof, Section 2
of the Loan Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"2. Documentary and Stand-by Letters of Credit. Subject to the
conditions herein, the Bank shall (a) from time to time, at the request
of the
<PAGE>
Borrower, issue documentary or stand-by letters of credit to
Borrower's vendors for the acquisition of inventory for the Borrower
(the 'Inventory Acquisition Letters of Credit') and (b) issue a
stand-by letter of credit in an aggregate amount up to
(Y)540,000,000.00 in favor of any Japanese domestic bank for the
account of the Borrower (the 'JDB Letter of Credit')(the Inventory
Acquisition Letters of Credit and the JDB Letter of Credit are
hereinafter collectively referred to as the 'Documentary or Stand-by
Letters of Credit'). The fees for issuance of all Inventory Acquisition
Letters of Credit shall be in accordance with the Bank's schedule of
fees for issuance of letters of credit existing as of the time of
issuance. No fees shall be charged directly by Bank to Borrower in
connection with the issuance of the JDB Letter of Credit. Immediately
upon issuance, such Documentary and Stand-by Letters of Credit shall be
considered in computing the amount of funds available to the Borrower,
as provided in Section 6 herein. The Bank shall not be obligated: (x)
to issue Documentary or Stand-by Letters of Credit if the issuance of
same would cause the Outstanding Revolving Credit to exceed the Total
Commitment; (y) to issue such Letters of Credit with an expiration date
more than one hundred eighty (180) days after the maturity date of the
Revolving Note; and (z) to extend the expiration date of such Letters
of Credit to a date more than one hundred eighty (180) days after the
maturity date of the Revolving Note."
2.03 Amendment to Section 3. Effective as of the date hereof, Section 3
of the Loan Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"3. Foreign Currency Exchange Contracts. Subject to the
conditions contained herein, the Bank may, in its discretion, from time
to time at the request of the Borrower, issue foreign currency exchange
contracts to Borrower for use by Borrower in the ordinary course of its
business. Immediately upon issuance, such foreign currency exchange
contracts shall be considered in computing the amount of funds
available to the Borrower, as provided in Section 6 hereof. The Bank
shall not be obligated: (a) to issue any such foreign currency exchange
contract if the issuance of the same would cause the Outstanding
Revolving Credit to exceed the Total Commitment, (b) to issue any
foreign currency exchange contract with a settlement date after the
maturity date of the Revolving Note, or (c) to issue any such foreign
currency exchange contract if (i) the Bank's futures contract risk
under such contract and all other contracts then outstanding would
exceed $15,000,000.00 or (ii) the Bank's delivery risk under such
contract and all other contracts then outstanding would exceed
$3,000,000.00."
2.04 Amendment to Section 6(a). Effective as of the date hereof,
Section 6(a) of the Loan Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(a) Revolving Note. The aggregate principal amount at any
time outstanding under the Revolving Note, plus, one hundred twenty
percent (120%) of the face amount of the JDB Letter of Credit
(calculated by reference to the amount of United States of America
dollars into which Bank determines it could,
<PAGE>
in accordance with its practice from time to time in the interbank
foreign exchange market, convert such amount of Yen at its spot rate
of exchange in effect at approximately 8:00 a.m. (Dallas, Texas time)
on the date of determination), plus the face amount of all outstanding
Documentary and Stand-by Letters of Credit (other than the JDB Letter
of Credit) issued for the account of the Borrower, plus twenty percent
(20%) of the aggregate amount of all foreign currency exchange
contracts issued by the Bank for the account of the Borrower (said sum
being herein referred to as the 'Outstanding Revolving Credit') shall
not at any time exceed the Total Commitment."
2.05 Amendment to Section 6(c). Effective as of the date hereof,
Section 6(c) of the Loan Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(c) Total Commitment Compliance. In the event the Outstanding
Revolving Credit at any time exceeds the Total Commitment then, upon
notice from the Bank, the Borrower shall immediately make such payments
to the Bank necessary to reduce the Outstanding Revolving Credit to an
amount such that the Outstanding Revolving Credit is less than or equal
to the Total Commitment."
2.06 Amendment to Section 7. Effective as of the date hereof, Section 7
of the Loan Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"7. [INTENTIONALLY DELETED]"
2.07 Amendment to Section 15(d). Effective as of the date hereof,
Section 15(d) of the Loan Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(d) INTENTIONALLY DELETED."
2.08 Amendment to Section 16(a). Effective as of the date hereof,
Section 16(a) of the Loan Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(a) Debt. Create, incur, assume or suffer to exist any debt
for borrowed money, whether by way of loan, or the issuance or sale of
bonds, debentures, notes or securities, including deferred debt for the
purchase price of assets, except (i) the loans described herein, (ii)
revolving credit loans in an aggregate principal amount of up to
(Y)540,000,000.00 from any Japanese domestic bank; provided, that the
only security for such revolving credit loans shall be the JDB Letter
of Credit, (iii) an additional term loan from the Bank to Borrower in
an aggregate principal amount of up to $4,500,000.00 (if and when such
term loan is approved by the Bank); provided, that (A) such term loan
is made on terms and conditions satisfactory to the Bank in its sole
discretion, and (B) Borrower executes such loan documents as the Bank
deems necessary in connection with such term loan, including, without
limitation, a Commercial/Real Estate Note and Deed of Trust
substantially in the form of Exhibit D and Exhibit E, respectfully,
<PAGE>
attached hereto, (iv) loans from one or more Guarantors to the Borrower
or another Guarantor, so long as the indebtedness in respect of such
loans is unsecured and fully subordinated to the indebtedness owing to
the Bank pursuant to a written subordination agreement in form and
substance satisfactory to the Bank, and (v) current accounts payable
and other current obligations (other than for borrowed money) arising
out of transactions in the ordinary course of business."
2.09 Amendment to Section 17(b). Effective as of the date hereof,
Section 17(b) of the Loan Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(b) Net Worth. Maintain minimum net worth of not less than
(1) $72,000,000 during the period beginning the date
hereof and ending December 31, 1997; and
(2) beginning January 1, 1998, and during each
subsequent fiscal year of the Company, the amount of the
minimum net worth required under this Agreement during the
immediately preceding fiscal year of the Company plus seventy
percent (70%) of the Company's net income after taxes, on a
consolidated basis, during such preceding fiscal year (with
net income after taxes being determined in accordance with
generally accepted accounting principles and no reductions
being made to the minimum net worth for any fiscal year during
which the Company's net income after taxes, on a consolidated
basis, is a negative number)."
2.10 Addition of New Section 17(d). Effective as of the date hereof,
the Loan Agreement is hereby amended by adding a new Section 17(d) thereto,
which shall read in its entirety as follows:
"(d) Minimum Net Income. Achieve net income of not less than
$1,000,000.00 for each fiscal quarter of the Company, commencing with
the fiscal quarter ending September 30, 1997 (with net income to be
determined in accordance with generally accepted accounting
principles)."
2.11 Amendment to Section 26. Effective as of the date hereof, Section
26 of the Loan Agreement is hereby amended by deleting therefrom the reference
to the dollar amount "$30,000,000" and substituting therefor the dollar amount
"50,000,000".
ARTICLE III
Conditions Precedent
3.01 Conditions to Effectiveness. The effectiveness of this Amendment
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by the Bank:
<PAGE>
(a) The Bank shall have received the following documents, each
in form and substance satisfactory to the Bank and its counsel:
(i) This Amendment, duly executed by
the Borrower, the Company, Fossil Intermediate, Fossil Trust,
Fossil New York, Fossil I and Fossil II;
(ii) A Revolving Note in the form of
Exhibit A to this Amendment, duly executed by Borrower;
(iii) The Letter Agreement (herein so
called) in the form of Exhibit B to this Amendment, duly
executed by The Hongkong and Shanghai Banking Corporation
Limited ("HSBC Japan"); and
(iv) A company general certificate
(hereinafter referred to as the "Company General Certificate")
for the Company, certified by its Secretary or Assistant
Secretary, acknowledging (A) that its Board of Directors has
met and has adopted, approved, consented to and ratified
resolutions which authorize the execution, delivery and
performance of this Amendment, the Revolving Note and all
other Loan Documents to which it is or is to be a party, and
(B) the names of the officers authorized to sign this
Amendment, the Revolving Note and each of the other Loan
Documents to which it is or is to be a party (including the
certificates contemplated herein) together with specimen
signatures of such officers. The Company General Certificate
shall conform to the Company General Certificate which is
attached hereto as Exhibit C and incorporated herein for all
purposes;
(b) There shall have been no material adverse change in
the financial condition of the Borrower or any Guarantor;
(c) There shall be no material adverse litigation, either
pending or threatened, against the Borrower or any Guarantor that could
reasonably be expected to have a material adverse effect on the
Borrower or such Guarantor;
(d) The representations and warranties contained herein and in
the Loan Agreement and the other Loan Documents, as each is amended
hereby, shall be true and correct as of the date hereof, as if made on
the date hereof;
(e) No default or Event of Default shall have occurred and be
continuing, unless such default or Event of Default has been
specifically waived in writing by the Bank;
<PAGE>
(f) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to the Bank and its legal counsel; and
(g) The Bank shall have received from HSBC Japan all fees and
other amounts required to be paid by HSBC Japan to Bank pursuant to the
terms of the Letter Agreement; and
(h) The Bank shall have received from the Company or the
Borrower, as appropriate, all other fees and expenses required to paid
pursuant to the Loan Agreement.
ARTICLE IV
No Waiver
4.01 Nothing contained herein shall be construed as a waiver by the
Bank of any covenant or provision of the Loan Agreement, the other Loan
Documents, this Amendment, or of any other contract or instrument between the
Borrower or the Guarantors and the Bank, and the failure of the Bank at any time
or times hereafter to require strict performance by the Borrower or any
Guarantor of any provision thereof shall not waive, affect or diminish any right
of the Bank to thereafter demand strict compliance therewith. The Bank hereby
reserves all rights granted under the Loan Agreement, the other Loan Documents,
this Amendment and any other contract or instrument between the Borrower, the
Guarantors and the Bank.
ARTICLE V
Ratifications, Representations and Warranties
5.01 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Loan Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. The parties hereto agree that the Loan
Agreement and the other Loan Documents, as amended hereby, shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
5.02 Representations and Warranties. The Borrower, the Company, Fossil
Intermediate, Fossil Trust, Fossil New York, Fossil I and Fossil II hereby
represent and warrant to the Bank that (a) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed
and/or delivered in connection herewith have been duly authorized by all
requisite corporate, partnership or trust proceedings, as appropriate, and will
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the Agreement of Limited Partnership, Articles of
Incorporation, By-Laws or Trust Agreement, as applicable, of the Borrower or any
Guarantor, or of any mortgage, indenture, contract, agreement or other
instrument, or any judgment, order or decree, binding upon the Borrower or any
Guarantor; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and the other Loan Documents are true and correct
on and as of the date hereof and on
<PAGE>
and as of the date of execution hereof as though made on and as of each such
date; (c) no default or Event of Default under the Loan Agreement, as amended
hereby, has occurred and is continuing, unless such default or Event of Default
has been specifically waived in writing by the Bank; and (d) the Borrower and
the Guarantors are in full compliance with all covenants and agreements
contained in the Loan Agreement and the other Loan Documents, as amended hereby.
ARTICLE VI
Miscellaneous Provisions
6.01 Survival of Representations and Warranties. All representations
and warranties made in the Loan Agreement or any other Loan Documents,
including, without limitation, any document furnished in connection with this
Amendment, shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by the Bank or any closing shall
affect the representations and warranties or the right of the Bank to rely upon
them.
6.02 Reference to Loan Agreement. Each of the Loan Agreement and the
other Loan Documents, and any and all other agreements, documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Loan Agreement, as amended hereby, are hereby amended so
that any reference in the Loan Agreement and such other Loan Documents to the
Loan Agreement shall mean a reference to the Loan Agreement, as amended hereby.
6.03 Expenses of the Bank. As provided in the Loan Agreement, the
Borrower agrees to pay on demand all reasonable costs and expenses incurred by
the Bank in connection with the preparation, negotiation, and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of the Bank's legal counsel, and all costs and
expenses incurred by the Bank in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Documents, including, without, limitation, the costs and fees of the Bank's
legal counsel.
6.04 Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 Successors and Assigns. This Amendment is binding upon and shall
inure to the benefit of the Borrower, the Guarantors and the Bank and their
respective successors and assigns.
6.06 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
<PAGE>
6.07 Effect of Waiver. No consent or waiver, express or implied, by the
Bank to or for any breach of or deviation from any covenant or condition by the
Borrower or any Guarantor shall be deemed a consent to or waiver of any other
breach of the same or any other covenant, condition or duty.
6.08 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENT
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.
6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE
LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE BORROWER,
THE GUARANTORS AND THE BANK.
6.11 Release. THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "INDEBTEDNESS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES
OF ANY KIND OR NATURE FROM THE BANK. THE BORROWER AND THE GUARANTORS HEREBY
VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE THE BANK, ITS
PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS,
FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS,
EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT
LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
AMENDMENT IS EXECUTED, WHICH THE BORROWER OR THE GUARANTORS MAY NOW OR HEREAFTER
HAVE AGAINST THE BANK, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING
<PAGE>
FROM ANY LOANS OR EXTENSIONS OF CREDIT FROM THE BANK TO THE BORROWER UNDER THE
LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST
IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND
REMEDIES UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR
AND EXECUTION OF THIS AMENDMENT.
6.12 Agreement for Binding Arbitration. Each party to this Amendment
hereby acknowledges that it has agreed to be bound by the terms and provisions
of the Bank's current Arbitration Program, which is incorporated by reference
herein and is acknowledged as received by the parties pursuant to which any and
all disputes shall be resolved by mandatory binding arbitration upon the request
of any party.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
"BANK"
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
By:_____________________________________________
Jeffrey S.A. Cook, Vice President
"BORROWER"
FOSSIL PARTNERS, L.P.
By: Fossil, Inc., its general partner
By:_____________________________________________
Randy S. Kercho, Executive Vice President and
Chief Financial Officer
"GUARANTORS"
FOSSIL, INC.
By:_____________________________________________
Randy S. Kercho, Executive Vice President and
Chief Financial Officer
FOSSIL INTERMEDIATE, INC.
By:_____________________________________________
Kosta N. Kartsotis, President
<PAGE>
FOSSIL TRUST
By:_____________________________________________
Randy S. Kercho, Trustee
FOSSIL NEW YORK, INC.
By:_____________________________________________
Kosta N. Kartsotis, Chief Executive Officer
FOSSIL STORES I, INC.
By:_____________________________________________
Randy S. Kercho, Treasurer
FOSSIL STORES II, INC.
By:_____________________________________________
Randy S. Kercho, Treasurer
Exhibits:
A - Form of Revolving Note
B - Form of Letter Agreement
C - Form of Company General Certificate
D - Form of Commercial/Real Estate Note
E - Form of Deed of Trust
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Part I Item Financial Statements of Fossil, Inc. and subsidiaries as of and
for the twenty-seven and one-half weeks ended July 5, 1997 filed on form 10-Q.
</LEGEND>
<CIK> 0000883569
<NAME> FOSSIL, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Jan-03-1998
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jul-05-1997
<EXCHANGE-RATE> 1
<CASH> 10,954,366
<SECURITIES> 0
<RECEIVABLES> 33,527,028
<ALLOWANCES> 4,000,961
<INVENTORY> 51,707,828
<CURRENT-ASSETS> 100,269,455
<PP&E> 28,257,005
<DEPRECIATION> 9,032,228
<TOTAL-ASSETS> 124,515,587
<CURRENT-LIABILITIES> 37,122,732
<BONDS> 0
0
0
<COMMON> 134,387
<OTHER-SE> 81,974,643
<TOTAL-LIABILITY-AND-EQUITY> 124,515,587
<SALES> 104,381,178
<TOTAL-REVENUES> 104,381,178
<CGS> 54,881,744
<TOTAL-COSTS> 92,142,937
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (291,184)
<INTEREST-EXPENSE> 496,716
<INCOME-PRETAX> 11,178,527
<INCOME-TAX> 4,570,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 6,608,527
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0
</TABLE>