Fossil Group, Inc.

Our cash and cash equivalents balance at the end of the Third Quarter was $79.2 million, including $69.1 million held by foreign subsidiaries, in comparison to cash and cash equivalents of $106.3 million at the end of the Prior Year Quarter and $123.6 million at the end of fiscal year 2024. Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, restructuring charges and capital expenditures.

At the end of the Third Quarter, we had net working capital of $168.3 million compared to net working capital of $258.3 million at the end of the Prior Year Quarter. At the end of the Third Quarter, we had $7.0 million of short-term borrowings and $169.1 million in long-term debt including unamortized issuance costs compared to $2.3 million of short-term borrowings and $173.4 million in long-term debt including unamortized issuance costs at the end of the Prior Year Quarter.

Operating Activities. Cash from operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities was $73.1 million in the Year To Date Period as compared to cash provided by operating activities of $16.2 million in the Prior Year YTD Period, primarily due to the receipt of $57.3 million of U.S. tax refunds in the Prior Year YTD Period and reductions in accounts payables in the Year To Date Period.

Investing Activities. Investing cash flows increased $17.7 million in the Year To Date Period compared to the Prior Year YTD Period, primarily related to the sale of our European distribution center in the second quarter of fiscal 2025.

Financing Activities. Financing cash flows primarily consist of borrowings and repayments of debt. The $31.8 million increase in financing cash flows year-over-year was primarily due to net borrowings during the Year To Date Period compared to net payments in the Prior Year YTD Period under the Revolving Facility.

Material Cash Requirements. We have various payment obligations as part of our ordinary course of business. Our material cash requirements include: (1) operating lease obligations (see Note—14 Leases within the Condensed Consolidated Financial Statements); (2) debt repayments (see Note 15—Debt Activity within the Condensed Consolidated Financial Statements); (3) non-cancellable purchase obligations; (4) minimum royalty payments; and (5) employee wages, benefits, and incentives. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions (see Note 5—Income Taxes within the Condensed Consolidated Financial Statements) and other matters.

For fiscal year 2025, we expect total capital expenditures to be approximately $5 million. Our capital expenditure budget is an estimate and is subject to change.

Sources of Liquidity. We believe cash flows from operations, combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our cash needs for at least the next twelve months. Although we believe we have adequate sources of liquidity, we are assessing our liquidity position and potential sources of supplemental liquidity in light of our operating performance, the timing of the expected benefits of our Turnaround Plan and other relevant considerations, including macroeconomic events, recessionary risks and tariffs. In the event our liquidity is insufficient, we may be required to limit our spending or sell assets. In addition, we may seek additional deleveraging or refinancing transactions, including entering into transactions to exchange debt for other debt securities (including additional secured debt), issuance of equity (including preferred stock and/or convertible securities), repurchase or redemption of outstanding indebtedness, or may otherwise seek transactions to reduce interest expense, extend debt maturities and improve our capital structure. Any of these transactions could impact our financial results, including additional expenses, charges and cancellation of indebtedness income. We cannot assure you whether any of such transactions will be consummated, whether we will achieve the benefits of any such transaction, or whether our cost of capital will increase, any of which could have a material adverse impact on our future liquidity.

The following table shows our sources of liquidity (in millions):

(1) On August 13, 2025, we entered into a New Revolving Credit Facility (as defined below)

Notes: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% senior notes due 2026 (the "Notes"), generating net proceeds of approximately $141.7 million. The Notes are our general unsecured obligations. The Notes bear interest at the rate of 7.00% per annum. Interest on the Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year. The Notes mature on November 30, 2026. We may redeem the Notes for cash in whole or in part at any time at our option at the following prices: (i) prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (ii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption. See "Notes Exchange" below for information regarding the restructuring of the Notes. On November 13, 2025, as a result of the Restructuring Plan, all $150.0 million aggregate principal amount of the Notes outstanding were cancelled.

Prior Revolving Facility: On September 26, 2019, we and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other of our subsidiaries from time to time party thereto designated as borrowers, and certain of our subsidiaries from time to time party thereto as guarantors, entered into a secured asset-based revolving credit agreement (as amended from time to time, the “Prior Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P. Morgan AG, as French collateral agent, JPMorgan Chase Bank, N.A., Citizens Bank, N.A. and Wells Fargo Bank, National Association as joint bookrunners and joint lead arrangers, and Citizens Bank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and each of the lenders from time to time party thereto (the "ABL Lenders").

ABL Credit Agreement: On August 13, 2025, we and certain of our subsidiaries identified therein as guarantors entered into the ABL Credit Agreement with the Lenders, the Administrative Agent and the Company as a borrower to refinance the Prior Revolving Credit Facility. Pursuant to the ABL Credit Agreement, the Lenders have provided new financing commitments to the Company under a new senior secured asset-based revolving credit facility (the “New Revolving Credit Facility”) in an aggregate principal amount of $150 million.

Contemporaneously with entering into the New Revolving Credit Facility, the proceeds of the New Revolving Credit Facility were used to pay off in full the $15.0 million outstanding under the Prior Revolving Facility. We recorded a loss of $1.7 million in other income (expense) - net during the Third Quarter for debt issuance costs and other fees associated with the Prior Revolving Facility.

Borrowings under the New Revolving Credit Facility will bear interest at a rate of 5.00% for term SOFR borrowings and 4.00% for base rate borrowings, payable monthly in arrears. The Lenders will receive an upfront commitment fee equal to 2.00% of the aggregate commitments under the New Revolving Credit Facility. The Company’s obligations under the New Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries, and those obligations and the guarantees are secured by substantially all of the assets of the Company and certain of its subsidiaries. The ABL Credit Agreement includes customary representations and warranties, covenants applicable to the Company and events of default. If an event of default under the ABL Credit Agreement occurs, the Lenders may, among other things, declare the outstanding obligations under the ABL Credit Agreement to be immediately due and payable.

The New Revolving Credit Facility has a maturity date of August 13, 2030, subject to a springing maturity date if on the date that is the 91st day prior to its scheduled maturity any material indebtedness as defined in the ABL Credit Agreement is outstanding.

Year To Date 2025 Activity: We had net borrowings of $5.1 million under the New Revolving Credit Facility and Prior Revolving Facility during the Year To Date Period at an average interest rate of 7.3%. As of October 4, 2025, we had $150.0 million outstanding under the Notes and $21.0 million outstanding under the New Revolving Credit Facility. We also had unamortized debt issuance costs of $1.9 million recorded in long-term debt and $17.6 million recorded in intangible and other assets-net on the condensed consolidated balance sheets. As of October 4, 2025, we had available borrowing capacity of $22.7 million under the New Revolving Credit Facility. At October 4, 2025, we were in compliance with all debt covenants related to our credit facilities.

During the Year To Date Period and in fiscal year 2024, Fossil India Private Ltd. entered into receivables buyout facilities that are used for working capital purposes (the "Fossil India facilities"). Indian Rupee borrowings, in U.S. dollars, under the Fossil India facilities were approximately $6.3 million as of October 4, 2025.

Notes Exchange: On August 13, 2025, we, Fossil (UK) Global Services Ltd. (“Fossil UK”), and certain direct and indirect subsidiaries of ours identified therein (collectively, the “Parties") entered into a Transaction Support Agreement (the "Transaction Support Agreement") with certain holders (the "Consenting Noteholders") representing ownership of approximately 59% of the aggregate principal of the Notes.

On November 13, 2025, we consummated the previously announced Exchange Offer with respect to our Notes and our concurrent Rights Offering pursuant to the Restructuring Plan. In connection with the consummation of the Transactions:

•Noteholders that participated in the Rights Offering and Exchange Offer (the “New Money Participants”) (i) provided an aggregate of $32,500,000 of incremental, new money financing in exchange for (x) $32,500,000 aggregate principal amount of 9.500% First-Out First Lien Secured Senior Notes due 2029 (the “First-Out Notes”) and (y) 954,070 shares of common stock, par value $0.01 (“Common Stock”), (ii) exchanged $120,229,725 aggregate principal amount of Notes on a dollar-for-dollar basis for $120,229,725 aggregate principal amount of First-Out Notes, and (iii) received $945,946 aggregate principal amount of First-Out Notes as a consent premium pursuant to the terms of the Transactions (the “Consent Premium”).

•Noteholders that did not participate in the Rights Offering (the “Non-New Money Participants”) (i) received $29,770,275 aggregate principal amount of 7.500% Second-Out Second Lien Secured Senior Notes due 2029 (the “Second-Out Notes”) on a dollar-for-dollar basis for $29,770,275 Notes held by such Non-New Money Participants, and (ii) received $53,858 aggregate principal amount of Second-Out Notes as a Consent Premium. Only Non-New Money Participants that tendered their Notes in the Exchange Offer and consented to the Restructuring Plan received the Consent Premium.

•Noteholders also received an aggregate total of approximately 3,000,000 warrants (the “Warrants”), entitling the holders thereof to purchase either (i) one share of Common Stock for each Warrant held, or (ii) one pre-funded warrant (each, a “Pre-Funded Warrant”) for each Warrant held, each such Pre-Funded Warrant entitling the holder thereof to purchase one share of Common Stock.

•As a result of the Restructuring Plan, all $150,000,000 aggregate principal amount of Notes outstanding have been cancelled.

The Consenting Noteholders participated in the Transactions on a private placement basis. In accordance with the terms of the Transaction Support Agreement, the Consenting Noteholders received $1,625,000 aggregate principal amount of First-Out Notes as a backstop premium as consideration for providing a backstop commitment for the Rights Offering.

ABL Amendment: On November 13, 2025, we entered into a First Amendment (the “ABL Amendment”) to the ABL Credit Agreement in order to effectuate certain conforming amendments to the ABL Credit Agreement to the terms of the First-Out Notes Indenture, as further described in the ABL Amendment.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. On an on-going basis, we evaluate our estimates and judgments, including those related to product returns, inventories, long-lived asset impairment, impairment of trade names, income taxes and warranty costs. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to the critical accounting policies and estimates disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024.