Fossil Group, Inc.

Our cash and cash equivalents balance at the end of the First Quarter was $81.4 million, including $63.4 million held by foreign subsidiaries, in comparison to cash and cash equivalents of $78.3 million at the end of the Prior Year Quarter and $95.8 million at the end of fiscal year 2025. 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 First Quarter, we had net working capital of $182.5 million compared to net working capital of $219.9 million at the end of the Prior Year Quarter. At the end of the First Quarter, we had $2.3 million of short-term borrowings and $193.0 million in long-term debt including unamortized issuance costs compared to $12.3 million of short-term borrowings and $167.2 million in long-term debt including unamortized issuance costs at the end of the Prior Year Quarter.

Operating Activities. Cash used in operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities decreased by $38.6 million in the First Quarter as compared to the Prior Year Quarter. This improvement was primarily driven by a $17.2 million reduction in net loss and a $23.0 million decrease in cash outflows related to working capital.

Investing Activities. Investing cash flows primarily consist of capital expenditures and partially offset by decreases in other assets.

Financing Activities. Financing cash flows primarily consist of borrowings and repayments of debt. Financing cash flows increased in the First Quarter primarily due to $15.4 million of net debt borrowings during the First Quarter as compared to $14.2 million of net debt borrowings in the Prior Year Quarter.

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 Consolidated Financial Statements); (2) debt repayments (see "Note 15—Debt Activity" within the 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 Consolidated Financial Statements) and other matters.

For fiscal year 2026, we expect total capital expenditures to be approximately $9.0 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 continue to assess 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.

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

Prior Notes: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% senior notes due 2026 (the "Prior Notes"), generating net proceeds of approximately $141.7 million. The Prior Notes were our general unsecured obligations. The Prior Notes bore interest at the rate of 7.00% per annum. See "Notes Exchange" below for information regarding the restructuring of the Prior Notes. On November 13, 2025, as a result of the Restructuring Plan, all $150.0 million aggregate principal amount of the Prior Notes were cancelled.

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 approximately 59% of the aggregate principal of the Prior Notes.

On November 13, 2025, we consummated the previously announced offer to exchange (the “Exchange Offer”) with respect to the Prior Notes and the concurrent rights offering (the “Rights Offering”) pursuant to a restructuring plan under Part 26A of the UK Companies Act 2006 (as amended) (the “Restructuring Plan” and together with the Exchange Offer and the Rights Offering, the “Transactions”). 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 $32.5 million of incremental, new money financing in exchange for (x) $32.5 million 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 $120.2 million aggregate principal amount of Prior Notes on a dollar-for-dollar basis for $120.2 million aggregate principal amount of First-Out Notes, and (iii) received $0.9 million 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 $29.8 million 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 $29.8 million aggregate principal amount of Prior 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 Prior 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. The Warrants were exercisable at any time prior to 5:00 p.m., New York City time, on December 15, 2025. The number of Warrants exercised as of January 3, 2026 was 2.6 million with the remainder of the 3.0 million Warrants forfeited.

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 $1.6 million aggregate principal amount of First-Out Notes as a backstop premium as consideration for providing a backstop commitment for the Rights Offering.

Prior Revolving Facility: On September 26, 2019, we and certain subsidiaries entered into a secured asset-based revolving credit agreement (as amended from time to time, the “Prior Revolving Facility”) with various lenders party thereto.

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

Contemporaneously with entering into the Revolving Credit Facility, the proceeds of the Revolving Credit Facility were used to pay off in full the $15.0 million outstanding under the Prior Revolving Facility.

Borrowings under the Revolving Credit Facility bear interest at a rate of 5.00% plus the Adjusted Term SOFR Rate (as defined in the Credit Agreement) for term SOFR borrowings and 4.00% plus the Alternate Base Rate (as defined in the Credit Agreement) for base rate borrowings, payable monthly in arrears. The Lenders received an upfront commitment fee equal to 2.00% of the aggregate commitments under the Revolving Credit Facility. The Company’s obligations under the Revolving Credit Facility are guaranteed by the guarantors, and those obligations and the guarantees are secured by substantially all of the assets of the Company and the guarantors. The Credit Agreement includes customary representations and warranties, covenants and events of default, in each case, applicable to the Company. The Credit Agreement also requires that Availability (as defined in the Credit Agreement) may at no time be less than the greater of 10% of the Line Cap (as defined in the Credit Agreement) and $12.5 million. If an event of default under the Credit Agreement occurs, the Required Lenders (as defined in the Credit Agreement) may, among other things, terminate the commitments and declare the outstanding obligations under the Credit Agreement to be immediately due and payable.

The maximum amount that we are permitted to borrow at any time under the Revolving Credit Facility is limited by a borrowing base that is recalculated monthly or, in some circumstances, more frequently. The borrowing base is a function of, among other things, our eligible accounts receivable, inventory and certain intellectual property. The Credit Agreement provides the administrative agent with considerable discretion to impose reserves and to determine that certain assets are not eligible for inclusion in our borrowing base.

The Revolving Credit Facility has a stated maturity date of August 13, 2030, but includes a springing maturity feature (the “Springing Maturity Feature”) that will cause the stated maturity date to spring ahead to the date that is 91 days prior to the maturity date of material indebtedness (defined as $15.0 million or more of indebtedness) if such material indebtedness remains outstanding on such 91st day.

The maturity date of the First-Out Notes is January 1, 2029. If more than $15.0 million of First-Out Notes and other indebtedness (other than under the Credit Agreement) is outstanding on October 2, 2028, the maturity date of the Revolving Credit Facility will be October 2, 2028. The maturity date of the Second-Out Notes is June 30, 2029. If more than $15.0 million of Second-Out Notes and other indebtedness (other than under the Credit Agreement) is outstanding on March 31, 2029, the maturity date of the Revolving Credit Facility will be March 31, 2029.

First Quarter Activity: We had net borrowings of $17.0 million under the Revolving Facility during the First Quarter at an average interest rate of 9.0%. As of April 4, 2026, we had $185.1 million outstanding under the Notes and $33.0 million outstanding under the Revolving Credit Facility. We also had unamortized debt issuance costs of $16.9 million and original issue discount of $8.2 million recorded in long-term debt and $21.0 million recorded in intangible and other assets-net on the condensed consolidated balance sheets. As of April 4, 2026, we had available borrowing capacity of $28.1 million under the Revolving Credit Facility. At April 4, 2026, we were in compliance with all debt covenants related to our credit facilities.

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 $2.4 million as of April 4, 2026.

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 January 3, 2026.