-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V5ovVdPfrHSE7eFrgBOXU9VHYQALqn4tImumq6h0BhDYBewzwQs+vPAv20ln9D9P 8KHbou8PUKRuLG+bztaK/w== 0000891092-04-005461.txt : 20041109 0000891092-04-005461.hdr.sgml : 20041109 20041109123842 ACCESSION NUMBER: 0000891092-04-005461 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041109 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041109 DATE AS OF CHANGE: 20041109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOSSIL INC CENTRAL INDEX KEY: 0000883569 STANDARD INDUSTRIAL CLASSIFICATION: WATCHES, CLOCKS, CLOCKWORK OPERATED DEVICES/PARTS [3873] IRS NUMBER: 752018505 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19848 FILM NUMBER: 041128361 BUSINESS ADDRESS: STREET 1: 2280 NORTH GREENVILLE AVE CITY: RICHARDSON STATE: TX ZIP: 75082 BUSINESS PHONE: 9722342525 MAIL ADDRESS: STREET 1: 2280 N GREENVILLE CITY: RICHARDSON STATE: TX ZIP: 75082 8-K 1 e19655_8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (or Date of Earliest Event Reported): November 9, 2004 FOSSIL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-19848 75-2018505 - -------------------------------------------------------------------------------- (State or other jurisdiction of (Commission (IRS Employer incorporation or organization) File Number) Identification No.) 2280 N. Greenville Avenue Richardson, Texas 75082 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 234-2525. Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The information in this Current Report and the accompanying exhibit is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. On November 9, 2004, Fossil, Inc. issued a press release announcing financial results for the quarter ended October 2, 2004. A copy of this press release is attached hereto as Exhibit 99.1. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 99.1 Press Release, dated November 9, 2004, announcing financial results for the quarter ended October 2, 2004. 2 SIGNATURE 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. Dated: November 9, 2004 FOSSIL, INC. By: /s/ Mike L. Kovar ------------------------------- Name: Mike L. Kovar Title: Senior Vice President and Chief Financial Officer 3 EXHIBIT INDEX Exhibit No. Description 99.1 Press Release, dated November 9, 2004, announcing financial results for the quarter ended October 2, 2004 4 EX-99.1 2 e19655ex99_1.txt PRESS RELEASE Exhibit 99.1 Fossil, Inc. Reports Record Third Quarter Sales and Earnings -Third Quarter Diluted EPS Rises 34.8% to $0.31; -Introduces Fourth Quarter 2004 Earnings Guidance of $0.50 RICHARDSON, Texas, Nov. 9 /PRNewswire-FirstCall/ -- Fossil, Inc. (Nasdaq: FOSL) today reported third quarter net sales and earnings for the thirteen-week ("Third Quarter") and nine-month periods ended October 2, 2004. All share and price per share data has been adjusted to reflect a three-for- two stock split paid in the form of a stock dividend on April 8, 2004. Third Quarter Results: -- Net sales increased 22.5% to $236.1 million compared to $192.6 million in 2003; -- Gross profit grew 25.3% to $121.5 million, or 51.5% of net sales, compared to $97.0 million, or 50.3% of net sales, in the third quarter of 2003; -- Operating income rose 39.0% to $38.1 million, or 16.1% of net sales compared to $27.4 million, or 14.2% of net sales in the third quarter of 2003; -- Net income increased 39.1% to $23.4 million compared to $16.8 million in the third quarter of 2003; and -- Diluted earnings per share increased 34.8% to $0.31, on 74.8 million shares outstanding compared to $0.23, on 73.6 million shares outstanding in the third quarter of 2003. "We are pleased to report another record quarter," began Mike Kovar, Senior Vice President and Chief Financial Officer. "During the Third Quarter we experienced a 70 basis points improvement in operating expense leverage, a level we haven't seen in over two years due to significant investments we've been making in our brands, systems and people over that same time period. We believe the continuation of solid sales growth for the third consecutive quarter this year is a direct result of these investments and the strength of our brand portfolio. Additionally, on the operating expense side, we are beginning to anniversary certain expenses associated with our SAP system implementation and the expansion of our distribution infrastructure that commenced during the prior year quarter," he concluded. For the Nine Months Ended October 2, 2004: -- Net sales rose 22.9% to $641.6 million compared to $522.0 million in 2003; -- Gross profit grew 26.4% to $334.2 million, or 52.1% of net sales compared to $264.5 million, or 50.7% of net sales in 2003; -- Operating income increased 39.7% to $88.6 million, or 13.8% of net sales compared to $63.4 million, or 12.1% of net sales in 2003; -- Net income increased 41.1% to $55.5 million compared to $39.3 million in 2003; and -- Diluted earnings per share increased 38.9% to $0.75 compared to $0.54 in 2003. Also during the Third Quarter, the Company: -- Signed a licensing agreement with Marc Jacobs International for men's and women's watches; and -- Received board of directors' approval for the repurchase of up to 600,000 shares of common stock. Worldwide net sales rose 22.5% (19.2% excluding currency gains) during the Third Quarter compared to the prior year quarter. Net sales related to new initiatives, including MICHELE(R) and mass-market watches and the launch of MICHAEL MICHAEL KORS(R) contributed approximately $14 million to the overall sales increase. Worldwide net sales for the Third Quarter were also positively impacted by an approximate $4.7 million special market sale (the "Special Market Sale"). Total international wholesale sales rose 26.5% (19.2% excluding currency gains), driven by a 74.0% increase in other international sales as a result of sales volume growth across all brands, the newly acquired MICHELE watches and the Special Market Sale. Sales in Europe rose 9.7% (0.3% excluding currency gains), reflecting sales volume growth in licensed watches and jewelry, partially offset by a decline in FOSSIL watch sales. Third Quarter sales of the Company's domestic watch business increased 22.4% despite a 10.9% decrease in FOSSIL(R) watches. Domestic watch sales growth was primarily a result of approximately $7.9 million of sales related to the newly acquired MICHELE watches, double-digit sales increases in RELIC(R) watches, principally due to new customers and new designs, and the launch of MICHAEL MICHAEL KORS and mass market watches. Domestic sales of the Company's accessory and sunglass businesses rose 11.9% compared to the prior year quarter with particular strength in FOSSIL men's and women's accessories and FOSSIL eyewear. Company-owned retail store sales increased 25.1% during the Third Quarter compared to the prior year quarter with comparable store sales gains of 11.9%. Additionally, the Company experienced an 11% increase in the average number of stores opened during the Third Quarter. The Third Quarter represented the sixth consecutive quarter of double-digit comparable store sales increases for the Company's retail store segment. For the first nine months of fiscal year 2004, net sales increased 22.9% (18.9% excluding currency gains). Gross profit margin expanded by 120 basis points to 51.5% in the Third Quarter compared to 50.3% in the prior year quarter. The increase in gross profit margin is mainly attributable to foreign currency gains, primarily the Euro. This increase was partially offset by lower gross product margins associated with the Company's newly launched mass market business and the Special Market Sale. For the first nine months of 2004, gross profit margin increased by 140 basis points to 52.1% compared to 50.7% in the first nine months of the prior year. Operating expenses, as a percentage of net sales, decreased 70 basis points to 35.4% in the Third Quarter compared to 36.1% in the comparable prior year period. Operating expenses increased $13.9 million to $83.5 million in the Third Quarter compared to $69.6 million in the comparable prior year period. Additional expenses included in this year's Third Quarter were approximately $2 million related to the translation impact of stronger foreign currencies into U.S. dollars and $3 million of operating expenses associated with new initiatives, including MICHELE, mass market and MICHAEL MICHAEL KORS watches. Excluding the currency impact, new initiative expenses and sales volume increases, operating expense increases were primarily driven by increases in professional fees and payroll expenses. Increases in professional fees were primarily related to consulting cost associated with the Company's U.S.-based SAP system implemented in July 2003, accounting and legal fees incurred in connection with the Company's European reorganization project and audit and consulting costs related to the Company's Sarbanes-Oxley Section 404 compliance project. Advertising costs, as a percentage of net sales were 4.3% of net sales in the Third Quarter compared to 5.1% of net sales in the prior year quarter. The decline in advertising expenses as a percentage of net sales was primarily due to the anniversary of a one time advertising commitment associated with the launch of EMPORIO ARMANI(R) jewelry in the prior year quarter. For the first nine months of the year operating expenses, as a percentage of net sales were 38.3% compared to 38.5% in the comparable prior year period. Improved gross profit margins and a decline in operating expenses as a percentage of sales resulted in the Company's Third Quarter operating profit margin increasing to 16.1% of net sales compared to 14.2% of net sales in the prior year quarter. Operating income for the Third Quarter included approximately $6.0 million in additional income as a result of the effects of stronger foreign currencies. For the first nine months of the year, operating profit margin increased to 13.8% of net sales from 12.1% of net sales in the prior year period. Other expense totaled approximately $900,000 in the Third Quarter compared to other expense of approximately $200,000 in the prior year quarter. The increase in other expense is primarily related to an increase in minority interest expense. For the first nine months of the year, other expense was approximately $400,000 compared to other income of approximately $100,000 in the prior year period. The Company's effective income tax rate decreased to approximately 37.1% during the Third Quarter and year-to-date period compared to approximately 38.0% in the prior year comparable periods. The Company's balance sheet remains strong, including $103.6 million in cash and no long-term debt at quarter end. Inventory at October 2, 2004 was $208.1 million, a 49.5% increase over the prior year quarter inventory of $139.2 million. Also, at quarter end, accounts receivable increased approximately 24.5% to $143.2 million compared to $115.0 million at the end of the prior year quarter. Days sales outstanding increased by one day to 55 days for the Third Quarter compared to 54 days in the prior year period. Working capital rose to $328 million, an increase of $47 million over working capital of $281 million at October 4, 2003. The Company currently expects fourth quarter 2004 diluted earnings per share of approximately $0.50, which reflects current First Call Consensus estimates, and represents 28% growth compared to diluted earnings per share of $0.39 in the fourth quarter of 2003. As such, the Company estimates full year fiscal 2004 diluted earnings per share of approximately $1.25, which represents growth of 34% from diluted earnings per share of $0.93 in fiscal 2003. Management estimates sales increases in the 20% range for the fourth quarter. Certain statements contained herein that are not historical facts 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: general economic conditions, competition, acts of terrorism or acts of war, government regulation, changes in foreign currency valuations in relation to the United States Dollar and possible future litigation, as well as the risks and uncertainties set forth on the Company's Current Report on Form 8-K dated September 14, 2004. Fossil is a design, development, marketing and distribution company that specializes in consumer products predicated on fashion and value. The company's principal offerings include an extensive line of fashion watches sold under the company's proprietary and licensed brands. The Company also offers complementary lines of small leather goods, belts, handbags, sunglasses, jewelry and apparel. The company's products are sold in department stores and specialty retail stores in over 90 countries around the world, in addition to the company's e-commerce website at http://www.fossil.com . Certain product, press release and SEC filing information concerning the Company is available at the Company's website. All share and per share data presented below has been adjusted to reflect the three-for-two stock split distributed to stockholders on April 8, 2004. Consolidated Income Statement Data (in 000's): For the 13 For the 13 For the 39 For the 39 Weeks Ended Weeks Ended Weeks Ended Weeks Ended October 2, October 4, October 2, October 4, 2004 2003 2004 2003 Net sales $236,043 $192,616 $641,560 $521,976 Cost of sales 114,497 95,640 307,373 257,516 Gross profit 121,546 96,976 334,187 264,460 Selling expenses 60,932 52,084 179,217 154,363 Administrative exp. 22,538 17,508 66,380 46,693 Operating income 38,076 27,384 88,590 63,404 Interest expense 4 18 14 26 Other (exp.) inc.- net (898) (183) (410) 96 Tax provision 13,802 10,383 32,669 24,142 Net income $23,372 $16,800 $55,497 $39,332 Basic earnings per share $0.33 $0.24 $0.79 $0.56 Diluted earnings per share $0.31 $0.23 $0.75 $0.54 Weighted average shares Outstanding: Basic 70,889 69,959 70,525 69,799 Diluted 74,772 73,640 74,365 73,056 Consolidated Balance Sheet Data (in 000's): October 2, October 4, 2004 2003 Working capital $327,806 $281,206 Cash, cash equivalents and short-term investments 103,640 106,830 Accounts receivable 143,158 115,022 Inventories 208,054 139,179 Total assets 690,506 531,114 Notes payable - current 2,714 7,335 Deferred taxes and other long-term liabilities 27,533 35,007 Stockholders' equity 487,546 380,438 SOURCE Fossil, Inc. -0- 11/09/2004 /CONTACT: Mike Kovar, Chief Financial Officer of Fossil, Inc., +1-972-699-2229; or investor relations, Allison Malkin of Integrated Corporate Relations, +1-203-682-8200, for Fossil, Inc./ /Web site: http://www.fossil.com / (FOSL) CO: Fossil, Inc. ST: Texas IN: HOU REA FAS SU: ERN ERP -----END PRIVACY-ENHANCED MESSAGE-----