Good morning, Ladies and gentlemen, and thank you for standing by. Welcome to the Fossil, Third Quarter 2007 Earnings Conference Call. During today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. [Operator Instructions]. As a reminder this conference is being recorded, Tuesday, November 13, 2007.And at this time I’d like to turn the presentation over to Allison Malkin with ICR. Please go ahead.

Thank you. Before we begin, you should be aware that during this conference call certain discussions will contain forward-looking information. Actual results could differ materially from those that will be projected during these discussions. Fossil’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in our Form 10-K and 10-Q report, filed with the SEC. In addition Fossil undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If any non-GAAP financial measure is used on this call a presentation of the most directly comparable GAAP financial measure and a reconciliation of the non-GAAP financial measure to GAAP will be provided as supplemental financial information to this release under the earnings release section of the investor relations heading on Fossil’s website. Please note that this call is being webcast live on Fossil’s website. It will be available for replay on the website under the investor relation heading after the conclusion of the call. And now I’ll like to turn the call over to Fossil CEO Kosta Karsotis.

Thanks Allison. Good morning and thank you for joining us today. Also with us today on are Mike Barnes, President and COO and Mike Kovar our CFO. This morning we will give you an overview of our Q3 results of some additional insight into our operations and initiatives. At the conclusion of our prepared remarks, we will welcome your questions. Fossil performed very well in the third quarter as we continue to execute on our key growth strategies and margin expansion initiatives. While we have experienced moderate growth in the United States, we are continuing to reap the benefits of our global business platform as we experienced strong growth in Europe and other parts of the world. This allowed us to exceed our financial expectations. In addition to our solid financial performance this quarter we also continue to advance each of our key strategies including maximizing the potential of our brands internationally. Expanding our direct to consumer businesses and increasing Fossil brand worldwide. In total, third quarter net sales rose 19.6% to $359 million driven by our international, direct consumer and accessories businesses. On an adjusted basis, including cost associated with our equity granting practice review, diluted EPS for third quarter increased by 48% to $ 0.46 a share. During the third quarter we continued to broaden our product offerings through our launch of Fossil jewelry, cold weather accessories and our upscale premium priced Fossil 54 handbag collection. And in addition to this highlights I would like to point out a couple of areas of our business that continue to deliver solid performances. International sales rose 25% excluding currency impact and for the quarter more than 50% of the total company’s sales were done through overseas wholesale activities. European sales advanced 18% in local currencies with sales increases in all…

Thanks Mike. All right, I would like to once again summarize the results of our third quarter in comparison to the prior year quarter. Net sales increased 19.6% to $358.6 million compared to $299.7 million. Gross profit grew 26.2% to $187 million or 52.1% of net sales compared to $148.1 million or 49.4% of net sales. Operating income increased 47%, to $48.5 million inclusive of a $3 million of expenses related to our historical equity granting practices review, which I’ll refer to here on out on the graph review and that’s compared to $33 million in operating income last year. Net income rose 41.4% with $30.5 million, inclusive of $1.9 million of grant review related expenses compared to net income of $21.5 million. Diluted earnings per share increased 38. 7% to $0.43 inclusive of $0.3 per diluted share of grant review related expenses and this compares to $0.31 per diluted share last year and finally diluted weighted average common shares has increased 2.3% to $70.3 million compared to $68.7 million shares last year. The mix break down for the third quarter was as follows: 17.4% from domestic wholesales watch sales; 15.3% from domestic wholesale accessories sales; 17.3% from worldwide direct to consumer businesses, 33.6% from European wholesale sales and 16.4% from wholesale sales in other international locations. The 19.6% sales growth in the quarter consisted of the following increases and decreases by category in geographic regions. Domestic watch sales decreased approximately 1% to $62.6 million compared to $63.2 million in the prior year quarter. Other domestic sales, which include our leather, sunglasses and jewelry businesses, increased 12.3% to $54.8 million compared to $48.8 million in the prior year quarter. Sales generated from European based wholesale operations increased 28% to $120.6 million compared to $94.2 million in the prior year quarter.…

Thank you sir. Ladies and gentlemen at this time we will begin the question and answer session.[Operator Instructions]. One moment for the first question please. Our first question will come from the line of John Rouleau with Wachovia Securities. Please go ahead.

Hey good morning guys. Great quarter. Michael W. Barnes – President and Chief Operating Officer: Good morning.

So it seems like on the international side that there is really strong breadth across your sales growth. I mean is it… could you talk a little bit more about that is it really just pretty evenly split between the licensed watches, the Fossil watches, I guess Fossil handbags and then the jewelry both on the Armani and the Fossil side? Michael W. Barnes – President and Chief Operating Officer: John as you know our international business is quite a diverse business as it relates to the markets that we operate in as well as even becoming more diverse in the products that we offer. As Mike mentioned I think in his portion of the call, we saw double-digit increases in all major subsidiary markets during the third quarter and that would include both Europe and the Asia Pacific region. On a product and category basis, we are seeing strength across the board in both Fossil watches and licensed watches as well as both of our Armani and Fossil jewelry categories. I think Kosta mentioned that Fossil in Europe was up 21% for the quarter and again Europe is a little more penetrated than the Asia Pacific region where we saw 42% increase in Fossil and the licensed brands were having similar type of increases across the international market place as well. So I think we are well positioned, we have got a lot of strength behind all of our businesses in those regions and we are expecting that obviously to continue for the balance of the year. Michael W. Barnes – President and Chief Operating Officer: Also John I would mention that the world is a big place and there is a lot of undeveloped opportunities still out there. What we see is in some of our lesser penetrated markets or some of the smaller markets like even places like eastern Europe, we are seeing great sales gains. China is just starting to get off from its fourth quarter opening last year and we just opened our offices in India. So there is a lot of opportunity to further develop the international market and that will continue to be one of our main focuses going-forward.

Terrific and then kind of switching gears a little bit to the US wholesale environment particularly on the watch side. Kosta or Mike I mean. At some point should we expect to see some increases in Fossil watches here? You made two comments one that business was down a little bit but two that the sales were actually pretty good, the sales rates were actually pretty good. So is this more a function of the department stores bringing inventory levels down or how should we think about that? Michael W. Barnes – President and Chief Operating Officer: Well the fact is John our business has changed quite a bit and the facts were in the last quarter our Fossil domestic wholesale watch business only 20% of those is from the United States.

Right. Michael W. Barnes – President and Chief Operating Officer: So it’s a small number. Its also because of the wholesale nature of it. It doesn’t always track our sales, we have always said that..

Right. Michael W. Barnes – President and Chief Operating Officer: We are slightly down last quarter doesn’t mean our sales were down at retail. But that’s the indicator right now is probably our retail stores. I think we are. Our comp store in the U.S. were up 9.6% and our accessories were. That’s really a better measure of the brand because then wholesale shipments flow different every quarter. So I would look at that. And then the one thing I would say is obviously retail traffic looks to be somewhat of a headwind in the United States. But our repositioning and what we are doing with the brand is putting us in a position where we are going to have increases in the United States, brand’s going to get stronger, we are going to build more stores, we are sending more catalogues out, the internet’s going to grow. This repositioning we are only part way into it but it is going to put us in a position where we are going to grow the brand and I think pretty dramatically over the next several years in the United States.

Okay and then last question is the Fossil jewelry at wholesale and then the cold weather accessories I believe you ship that in wholesale as well. Any early read on some of the sales related to those two newer categories in wholesale? Michael W. Barnes – President and Chief Operating Officer: Well the jewelry I think we are at about 550 stores in the second quarter. Its doing very well. Its going to expand next year so its on a good track in the United States. Cold weather accessories is just hit and we have seen some strong results even though the weather is a little warmer in the United States. So that’s probably going to be a good business for us also even though it’s small.

Okay great. Keep it up. Thanks.

Thank you. Our next question will come from the line of Neely Tamminga with Piper Jaffray. Please go ahead.

Great. Good morning and my congratulations to a stellar global business. Okay a couple of things here.. just want to ask about Kosta from your perspective from a merchant’s perspective particularly jewelry I think is clearly going to be just a category choice here indicating that you have seen some pretty good reads on the initial stuff that you have in stores right now. Just wondering do you think that this is from your perspective something that has legs to it? I mean this jewelry cycle that we are going into it and I just have a related question to handbags after.

Well, I think, as you know did quite a bit of business globally and jewelry is a big opportunity for us for fats growth and it has been in the past one of our most efficient businesses, most profitable, not very much obsolescence on inventory. We are expanding that experience in the United States but we think it’s going to be good here. It’s so small at this point, we are just starting that it’s hard to say what the results are going to be long-term except to say that the positioning of the brand in the department stores of the United States is in a very strong position. There are some brands in the department stores that are leading that environment and watches brand is getting stronger in that environment. So we are very optimistic about the future and expansion and not just jewelry but all other accessory categories, leather goods and obviously watches as well in United States of departmental stores.

And then in terms of handbag… in terms of handbag, do you think that you are gaining shares from brands around you. Do you think it's a price point on trade down from other brands into your brands? I mean clearly the products does look better and I think its reigniting with the consumer, but just wondering all indications right now inside the handbag category right now doesn't seem to expanding. So do you think you are taking shares from others around you? Michael W. Barnes – President and Chief Operating Officer: You never say over the 19% growth of as we probably gaining market share and gain I think it gets back to positioning. We are not the most expensive guy in the department and not the less expensive but we as the brand get stronger and as our position and the repositioning of the brand get stronger. We feel we have a large opportunity and in our leather bags 54 of them were in there, kind of the leadership price point did extremely well in the small number of doors and it is going to expand. We also have an opportunity, I think kind of a moderate leather handbag on a long term there, it will give us a larger opportunity. And I think if you look at this repositioning we are doing, the catalogue. It has the impact I think of potentially putting us in a position where we can grow handbag even faster in the United States than around the world. We are also... we are doing a test in the fourth quarter of hand bag only catalogue and it’s been mailed to some of our customers, try to accelerate that and if you went to one our stores right now you will see that handbag catalogue in store, maximum handbags but I think long term we are in a position because the handbag business is so strong because our brand positioning, I think for a long term in a position where we can gain more space and more market share.

And just one more housing keeping item for Mike, in terms of the store openings for next year to 80 to 85 sided effects on a gross basis or net basis and then just kind of generally speaking what do you think on this happening with respect to sourcing cost coming out of China. Are prices going up? Are we kind of holding flat or just a full type falter, best in any sort of pricing increases? Michael W. Barnes – President and Chief Operating Officer: On the store side we think we are going to open between 80 and 85. There maybe a few closures than we probably… most would be five but 80 and 85 is the net number.

Your question on sourcing in China, is that we are seeing, we have seen some pressure on the cost of raw materials but the reality is that the cost of raw material such as stainless steel etcetera is not a big part of the cost of our products. There is some tightening of the labor market in China as well, that’s something we are keeping our eye on very closely and we are doing a lot of research just to how to guarantee the future of our sourcing in the future.

Thank you guys and good luck.

Thanks Neely.

Thank you. Our next question comes from the line of Elizabeth Montgomery with Cowen. Please go ahead. Elizabeth Montgomery – Cowen and Company: Hi, guys. Congratulations on the quarter. Michael W. Barnes – President and Chief Operating Officer: Thanks Liz. Elizabeth Montgomery – Cowen and Company: I guess, I had a couple of questions about the European business. Can you just review for us how big Germany is as a percentage of the whole, maybe give us an update about how are the brands growing in some of these newer markets like the U.K.? Michael W. Barnes – President and Chief Operating Officer: Well we don’t try and get that granular in that analysis, I have explained that Germany is our largest market in Europe primarily due to the fact that we own that business, in fact we went public back in 1993 so we have had an opportunity for many years of penetrating. The other specific thing about Germany is it is probably more penetrated in the FOSSIl brand in the market than we are in the U.S. so it’s a very strong market for us. Obviously all the other markets that we distribute through in Europe are significant opportunity for us for larger levels of growth just due to the fact that we are nowhere near the penetration levels that we are in Germany. I mean, overall in Europe, we are seeing strength across the board, there’s not just one or two markets, we are seeing it, in every market that we have a subsidiary company as well as the distributor market so the strength is definitely across the board and not in one or two places. Elizabeth Montgomery – Cowen and Company: Okay, that’s helpful and then I had a follow up on, I guess it was…

Thank you. Our next question will come from Barbara Wyckoff with Buckingham Research group. Please go ahead. Barbara Wyckoff – Buckingham Research Group: Hi, everyone, great job. I have two questions. Outside of China and India what countries in the region are logical next steps for sort of big growth either by acquisition of subsidiary or joint venture you mentioned Eastern Europe, Middle East, what about South America and if you could kind of comment on duty trend. And then I have question, a second question.

Well as far as the growth internationally we have really expanded our subsidiaries over the last five years, throughout Asia. South America is the market that we're paying a lot of attention to, particularly we just bought the, our Mexico subsidiary in last year. And then, we have focused on our distributors, South America particularly in Brazil, which is a very large market force there. So that’s probably going to remain to be a third party distribution business for us but it is something that we are getting more involved with and we are getting focused on it and we are working a lot more in conjunction with our distribution partners in South America than we ever have in the past. The same thing for Asia. I would say there is a big opportunity for us to continue to grow our businesses in Asia. We just opened China last year in the fourth quarter and India this year. Just recently actually. So that’s going to be a huge focus for us. We continue to work with our distribution partners, we have great distribution businesses that we don’t own in places like Korea, we did opened our own office in Korea within the past year to focus on some of those businesses but we still have a third party distributor as well, places like Taiwan, etc. are also opportunities. Europe has a big opportunity force I think possibly in some of the ex-eastern bloc type countries, we are seeing big increases in the economies in places like Poland, Czech Republic, Hungary. Those could be opportunities for us in the future, we are going to stay opportunistic if we see an opportunity to either, open our own offices or work with somebody on a joint venture basis, we’re going to look at that very closely. Meanwhile we are going to continue to develop our third party distributors who are doing an excellent job for us. Many of these people have been with us for a number of years and they continue to grow the businesses at a rapid pace.

Thank you, last question. Could you please update us on status of Adidas? What’s going on with that?

Adidas is pretty much the same as we discussed last time and that is, we launched it last year and it was the biggest launch we ever did, which was global. We kind of read the results of it this year were seen where the consumers voting on what type of products, the digital, the analogs, the different looks and we are adjusting to that and so this year is really kind of a flat year for us and Adidas. We are doing those reads, we're making adjustments for the future and we think the next year is the best opportunity for us to begin growth of the brand again.

Okay. Thanks, keep it up.

Thank you.

Thank you our next question comes from the line of Robert Samuels with JP. Morgan. Please go ahead.

Yes. Good morning guys. Just one question. Was curious about how we should think about SG&A growth as we move into next year. I guess as retail continues to become a larger piece of the business?

Hey Rob this is Mike. I’ll take that one. If you recall in the analysts day presentation, a few weeks ago. We talked about in the five-year plan the expectation for SG&A leverage was minimal. I think we talked about 30 to 40 basis points into the future. Primarily due to the fact that retail is expected to grow at a much faster pace than our wholesale operations and as we've said then, the retail component of SG&A is more significant as a percentage of sales then in that of our wholesale businesses and obviously the margin component of our retail business is as much more significant as well. So we expect to see next year and next year will be really the first year that, I think it becomes somewhat pronounced. Is probably SG&A leverage slightly improving as our wholesale businesses continue to leverage investments we've made over the last few years. But the investment in our retail organization to build out the construction in our group to be able to manage 85 door openings. To broaden our field management and to bring on some additional system needs will probably pull the SG&A leverage down slightly.

Great. Thanks very much.

Thank you, sir.

[Operator Instructions]. Our next question will come from the line of Cliff Greenberg with Baron Capital. Please go ahead.

Yes. Hi guys. Congratulations.

Thank you.

Give us a little more color on where you opened accessory stories in the third quarter and were you hoping to in the fourth quarter and how they’re doing so far? Just whatever color you can give, it seems like the roll out is going very well.

Well we're opening a number of stores around the worlds quite honestly. In Europe and U.S. We just opened a store in Hawaii, and there’s one opening in Las Vegas this week. So it’s a pretty busy time for us and what we've said before is that obviously the European stores as we mentioned before have actually outperformed stores in the other parts of world but we're seeing very strong experience every where we open stores. In Austria its very strong we started last year and every store we opened there has been very strong. We are now getting very good experience out of the stores we opened in Hong Kong last year They started off very slowly, now they are very strong. So Asia looks like a big opportunity. We're opening a store in Beijing right next to the Olympic stadium next year, which we think is going to be a good store for us. But just about everywhere in the world, it’s really interesting when we put this accessory assortment in the store format and our new repositioning. Customers come in and buy from us and the stores do very well. So we're very bullish on the retail long-term.

And Kosta, are you opening up different footprints in indifferent locations or, and what’s the mix between accessories and watches or other in the stores moment?

Well, stores in United States are, I think we’re targeting 1500 square feet. Outside the United States stores are smaller, especially in Europe, typically slightly less than half the business is watches and if you look at the store in the new footprint, it looks like an accessory store. One of things we’re trying to do is grow the accessories business. The leather goods business is part of it because it’s much larger business totally than watches is and there’s a big potential for us to grow. For example, if handbag currently is 15% of our retail business it has the potential to be 30% or so. So it should add comps long-term as we get more and more traction in leather goods.

Okay. Good luck. Thank you.

Thank you. Sir.

Our next question is of follow-up from John Rouleau with Wachovia. Please go ahead with your question, sir.

Hey guys, couple of more, as far as gross margin is concerned, you obviously benefited from the mix shift in the Europe but I am wondering you got this big margin initiative in place, I know that was due to kick-in in the second half phenomenally, I guess I think in the fourth quarter wondering what kind of margins we are getting out of some of your newer watch styles. I think that was an area you were targeting from a cost prospective or perhaps a productivity prospective. Wondering if you could just talk around that a little bit.

Yes, generally speaking John the watch margins on the new products that we’re landing or have landed over the last three to six months are significantly higher than a lot of the old course styles that we had in the assortment. As we mentioned on the call in Q2 we expected some improvement in margins from the margin initiatives we have going on, we thought that would be limited in Q3 simply because of the timing of when we got started on that initiative this year. But we do expect a more robust impact in the fourth quarter, as we should see fourth quarter of our efforts in that area flow through the income statement.

Terrific and then just a follow up. The new stores obviously performing extremely well given that in any more thoughts on perhaps remodeling a few stores next year or some sort of remodeling program.

Yes. We do actually have a program in place to remodel, existing stores as those leases come up. We remodeled some last year, we did some this year and I think the strategy is over the next three years; the rest of them will be redone and redesigned.

Terrific. Thanks guys.

Thank you. Sir.

At this time there are no additional questions in queue and I’ll like to turn the conference back to you for any closing remarks.

Thanks Andrews. Should you want to replay this conference call, it is been recorded and will be available today from 10:00 AM Central time until 12:00 midnight you can call 303-590-30 and again the call will be available from 10 today till midnight tomorrow 12:00 midnight. You can call 303 590 3000 again the call will be available from 10:00 today through midnight tomorrow, by dialing 303 590 3000 and the reservation number to enter is 1109 7115 followed by the “ # “ sign. The conference call has also been recorded by Street Events and can be accessed through Street Events website at www.streetevents.com or directly through our website at, www.fossil.com, by clicking on Investor Relations on the home page and then on web cast. Finally should you have any questions that did not get addressed today, please give Kosta, Mike Barnes, or myself a call. Thanks again for joining us. Our next scheduled conference call will be in February for the release of our 2007 fourth quarter and full year operating results.

Thank you, sir. Ladies and gentlemen at this time we will conclude today’s teleconference. We thank you for your participation on the program. You may now disconnect. And please have a pleasant day.