Ladies and gentlemen, thank you for standing by. Welcome to the Fossil 2007 fourth quarter 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. If you have a question please press the star followed by the one on your touchtone phone. If you’d like to withdraw your question please press the star followed by the two. If you’re using speaker equipment, you will need to lift the handset before making your selection. This conference is being recorded today, Tuesday February 19, 2008. I’d now like to turn the conference over to Alison Malkin of ICR, please go ahead.

Thank you, before we begin, you should be aware that during this conference call, certain discussion will contain forward looking information. Actual results may 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 10K and 10Q results 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 press 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 relations heading after the conclusion of the call. And now, I’d like to turn the call over to Fossil’s CEO, Kosta Kartsotis.

Thanks Alison. Good morning and thanks for joining us. With us today are Mike Barnes, President and COO and Mike Kovar, our CFO. This morning we’d like to take the opportunity to give you an overview of our fourth quarter and fiscal year results plus some additional insight into our operations and initiatives and outlook for 2008. At the conclusion of our prepared remarks, we welcome your questions. Let me begin with highlighting some of our achievements this past year. We ended fiscal 2007 with record sales and earnings, continuing our positive momentum from the first nine months of the year. We attribute our increased sales to the global growth of the Fossil brand, increased market share gains through our licensed brand portfolio, especially internationally and the expansion of our direct to consumer channel of distribution. In addition to sales growth, we placed significant emphasis on improving our product margins, [unintelligible] our infrastructure costs and closely controlling our inventory level. As a result of the success achieved across these multiple goals, we were able to deliver strong sales and earnings performance in 2007. Our fourth quarter results were no exception. Notably we achieved continued net sales growth in the upper teens, reaching $463 million, gross profit margins increasing 220 basis points to 53.6% of sales, operating margins expanding to 17.8% and diluted earnings per share rising 47% to $0.75 from $0.51 last year. Apart from achieving success across our broad based goals, we were pleased to see a number of our initiatives move in a positive direction, including the repositioning of the Fossil brand within the modern vintage spectrum and moving up from our targeted age demographic. We believe this repositioning is resonating favorably within our newly targeted demographic as well as other age groups to come in contact with…

Thanks Kosta, good morning everyone. I’m going to start with a review of our domestic businesses. Our domestic wholesale watch shipments increased by 11.9%. Specifically, growth in our licensed watch mass market Michele and Relic brands were notable successes. As we’ve discussed in the past, we believe the Federated May merger would result in additional penetration for our licensed brands and we’re finding that to be the case, as we’ve seen nice increases within those division and other customers as well. Sales of licensed watches rose by 27.4% driven by sales increases in Michael Kors, Burberry, Diesel and Armani. Our proprietary luxury brand, Michele, experienced an increase in wholesale shipments of 15% for the quarter across various customers inclusive of Nordstrom, where we remained their best selling fashion luxury watched. Adding to our Michele brand portfolio, we’re on track to launch Michele sunglasses in March, with a signature line priced from $200-$395 and a diamond collection line priced from $395-$1,195. Additionally, we’re revamping the Michele jewelry line, we’re targeting a 2008 Q4 launch of core product priced from $300-$800. Relic watches continued a very strong performance from the first nine months and posted a 17.8% increase during Q4 resulting in a 14% increase for the entire year. It’s exciting to see that new styles added during the last year are outperforming others in the category at both Penney’s and Kohl’s. In our last quarter we indicated we’ve seen some sales shift in our mass market business out of the third quarter and into the fourth quarter, helping us achieve a sales increase of 22.5% for the fourth quarter. In the full year we experienced an 8% year over year growth and we’re confident that we can continue to gain market share in this channel of distribution. Fossil watches reported flat…

Thanks Mike and good morning to everyone. First I’d like to summarize Fossil’s fourth quarter results form this morning’s press release. Net sales increased 18.5% to $463.1 million compared to $390.8 million. Gross profit grew 23.7% to $248.4 million, [unintelligible] 53.6% of net sales compared to $200.8 million or 51.4% of net sales. Operating income increased 44% to $82.4 million or 17.8% of net sales compared to $57.2 million or 14.6% of net sales. Net income rose 51.4% to $53.1 million compared to net income of $35.1 million. Diluted weighted average common shares increased 2.3% to 70.6 million shares compared to 69 million shares. And all of this resulted in diluted earnings per share increasing 47.1% to $0.75 a share compared to $0.51 a share last year. Sales mix breakdown down for the fourth quarter in comparison to last year showed a shift towards a higher percentage of internationally based sales with an offsetting reduction in domestic and direct to consumer sales percentages. Specifically, the 2007 fourth quarter sales mix was as follows: 18.6% from domestic wholesale watch sales, 11.4% from other domestic wholesale businesses, 19.6% from worldwide direct to consumer businesses, 35.2% from European wholesale sales and 15.1% from wholesale sales and other international locations. The 18.5% sales growth for the quarter consisted of the following increases by category and geographic region. Domestic watch sales increased approximately 11.9% to $86.8 million compared to $77.6 million in the prior year quarter. Other domestic sales which primarily include our leather, sunglass and jewelry businesses increased 4.7% to $52.9 million compared to $50.5 million in the prior year quarter. Sales generated from European based wholesale operations increased 29.5% to $163 million compared with $125.9 million in the prior year quarter. Other international sales which consists of US export sales to distributors and…

As we begin 2008, we will continue to execute our successful strategies from 2007 while setting new priorities to further our growth and profitability. Our emphasis will be focused on continuing to drive global penetration of the Fossil brand, which represents the company’s largest business and the largest long term opportunity, expanding our direct to consumer initiative with a plan to opening of 85 stores and increasing even more our emphasis on international expansion given the size of the opportunity and the higher profitability of that business. We expect 2008 to represent another year of growth for Fossil and we remain confident in our ability to attain our long term goals of $2.5 billion of sales and operating margins of approximately 17% in 2012. We are now ready to turn the call over for questions.

Thank you sir, we will now begin the question and answer session. As a reminder if you have a question, please press the star followed by the one on your touchtone phone. If you’d like to withdraw that question please press the star followed by the two and also if you’re using speaker equipment today you will need to lift the handset before making your selection. Our first question is from the line of Brad Stephens with Morgan, Keegan, please go ahead. Brad Stephens – Morgan, Keegan: Hey, good morning guys, congrats on the good quarter. A couple of questions here, first of all, could you elaborate more on the production delays and how much you think maybe that impacted your, just some more color on that in general. Second of all, I know you’ve got a repo in place and it looks like you said you will complete it by the end of April but given cash balance and kind of your guidance for cash flow for next year, what do you expect to continue to do with the balance sheet? And then third, you mentioned a more conservative outlook for Q1 comps, how are you looking at the rest of your book at wholesale and retail, especially as it relates to the US?

Brad, this is Mike, I’ll take the first one regarding production delays. You know basically the usual suspects that we read about everyday out there regarding China and a lot of the production things going on over there, you know they’re talking about increased labor costs, tighter labor standards that the Chinese government has implemented, raw materials, et cetera, et cetera. You know the bottom line is that the production is just tighter for the industry. The good news is I think that our company with our strength and our management teams that we have in place over there that we’re better positioned than a lot of our smaller competitors to deal with it. Because at the end of the day, we’re all facing the exact same situation, the environment is the same for everybody and I think that the stronger are going to come out of it better. We are working to smooth out our production a little bit more this year, we know some of the problems we ran into in the peak season last year and we have already taken a lot of steps to improve on that and we will continue to do that throughout this year. So I would expect to see improvement on our production in 2008 peak season over 2007 peak season. Brad Stephens – Morgan, Keegan: Okay.

Brad as it relates to your question on the buyback and use of the balance sheet going forward. As you mentioned the buyback will be completed in April. You know we’re always looking opportunistically at utilizing our excess cash position. We expected to see continued growth in our cash building capability even though we’re projecting slightly higher cap expenses in 2008. But we do think this operating model, as many of you know, throws off a significant amount of cash. As it relates to our full year results, I think we feel like we have a lot of opportunity, specifically in the back half of the year as it relates to, as Mike talked about, getting our production back online to meet our peak season needs as well as we think we have a lot of opportunity in the fourth quarter as a result of performing at below our normal levels in our direct to consumer segment.

As far as our comps are concerned. You know if you look at the United States we obviously are in somewhat of a different environment, not a lot of visibility so we’re planning our comps conservatively the first half of the year. We do feel as I mentioned earlier, we have a lot of opportunity in the back half and especially in the United States. But having said that, if we look at our business and our own stores outside the United States as well as our wholesale business, that the environment is much better over there. We’re pushing our international business very aggressively as we have all along but we’re making a lot of efforts to actually distort our efforts over there to push international business as fast as we possibly can. Brad Stephens – Morgan, Keegan: Alright guys best of luck.

Thank you, our next question comes from the line of Neely Tamminga with Piper Jaffray, please go ahead. Neely Tamminga – Piper Jaffray: Great, good morning, thanks. Just following up a little bit in terms of the comp comment that you made, I want to make sure I’m hearing you right. Are you indicating that there is improvement from the minus three or that you are in fact back into positive territory? And was that related to global or just US? And then I have just one or two if you could follow up.

What we’re saying basically is in 2008 we had an improvement. You know December was obviously a trend change for us in the United States and we’ve seen improvement in January and through the first part of February. We haven’t really given numbers, we don’t want to say specifically but there was improvement in the trend. Neely Tamminga – Piper Jaffray: And that’s both US as well as international Kosta?

Absolutely. Neely Tamminga – Piper Jaffray: Okay, cool and then, Kosta, since I have you here, in terms of the buyers and as we head into [unintelligible] department store, I mean I think obviously you guys are just, you’re in your own little improvement and resurgence relative to everybody else, just wondering how the buyers are feeling about the categories overall whether it’s handbags or the small leather goods and other accessories as well as watches and kind of how they feel about your brand relative to the category and then I just have one more question.

Well if we’re talking about the United States I mean obviously there’s a somewhat of a lack of visibility on the department store side. They do feel very positive about accessories especially and we feel like you know through this next several months the environment will improve and we do think we have a lot of opportunity in the back half of the year. But having said that, you know our bigger opportunity really is internationally and the mood internationally is much different, business is strong, we’re seeing good results, we’re seeing a very strong response at our recent trade show in Germany, the [interantha fair], with like the stores and the buyers are more positive over there so we’re pushing our international business as much as we can. Neely Tamminga – Piper Jaffray: Again I guess to that end Kosta, at what point do you take 54 more broadly internationally? Obviously it’s been just a great success here in the states with the 50 door test in Macy’s and I think you’ve had it in some of your own retail doors as well but just wondering when will that be more meaningful internationally and when you talk about expanding the door test, am I to think the trajectory goes from like 50-150 doors or is it a 50-60 or 75 doors? Just quantify that a little bit, that would be great.

Well actually, we have 54 in our own stores throughout the world and it’s done very well. We also will be doing the test in Japan later this year, there seemed to be a strong response to the brand over there and the 54 handbags in some of the department stores so we’ll be doing that. But in the United States, we’re planning on expanding 54 to 200 doors so it’s going to grow pretty significantly and it looks like there’s an opportunity for us in our price point and in this category. Neely Tamminga – Piper Jaffray: Excellent, good luck you guys.

The only thing I would mention, you know the Fossil brand and the repositioning of it is being accepted very well by department stores and we feel like you know over the next several years, especially with the combination at Macy’s that we feel like we’ve got an opportunity to grow the Fossil brand in the United States and department stores. Neely Tamminga – Piper Jaffray: Thanks you guys, good luck.

Thank you, once again ladies and gentlemen if there are any additional questions at this time please press the star followed by the one. As a reminder, if you’re using speaker equipment you will need to lift your handset before making your selection. And our next question is from the line of Barbara Wyckoff with Buckingham Research Group, please go ahead. Barbara Wyckoff – Buckingham Research Group: Hi everyone, can you hear me, congratulations. I have a few questions, where do you see the accessory business heading in 2008 in terms of trends and classification? Second, could you just elaborate a little more on what exactly happened in the ecommerce and when do you think it will be fixed? Third, what licenses are coming up for renewal in 08? Fourth could you talk a little bit more about or talk about Adidas. And then I didn’t see your annual comp for 07, what were the comps [unintelligible] full year 07?

I’ll take the last one [marbering] on top of my head, our full year comps were 2.8%. Barbara Wyckoff – Buckingham Research Group: 2.8, thank you.

As far as the accessory categories, we feel like we have a big opportunity in leather goods in Japan really and handbags specifically. We do think we have a big opportunity internationally as you know, most of our leather goods business is done in the United States. So building additional stores outside is going to give us the impetus to grow our wholesale business oversees as well. So we think we’ve got a big long term opportunity for leather goods and it’s going to be driven mostly by handbags around the world. As far as our ecommerce situation, you know as we’ve mentioned, we just recently installed the most, probably the most powerful web platform in the world, it’s an IBM product. And the reason we did this IBM product was because it enabled us to scale globally our ecommerce. It can handle multiple currencies and multiple languages. We installed it in October and the system works it’s just that it changed a lot of our navigational issues and how customers shop and we really weren’t prepared to make all the changes and get our site back up to speed as quick as possible. The one other thing I should mention, as you know we get a significant amount of traffic on our website and only 1% of those people actually buy online. It actually is a bigger marketing vehicle than anything else and we think that impacted you know our comp sales in the United States both in our own stores and in the department stores as well. So we have made a number of improvements, we’ve added some additional people there, we’re being very aggressive with ecommerce in the United States. As we mentioned, we did install our first ecommerce site outside the United States in Germany and we’re going to install another one, at least one more this year in the UK. So we’re very positive on it being a big part of our direct to consumer business. The combination of website and store growth and potentially catalogues outside the United States we feel is the best most direct most measurable way of advertising and penetrating our brand globally and we’ll continue to do that.

I’ll take the license questions Barbara, this is Mike. As far as Adidas, basically 2007 was a pretty flat year for Adidas. We saw a lot of transition issues. You know it was a lot slower and more difficult to launch a brand that had been in the marketplace under a different licensee on a global basis than I anticipated quite frankly and so last year was kind of a transitional year. We do have a lot of opportunity I believe this year in 2008 to resume the growth of the brand and move away from the flat performance that we had last year. So we think that we’ve got some pretty good product position now. Since we launched it globally it was really like a giant global test and so it took us longer to figure out what was selling where and get back into it and get out of the things that weren’t selling. So I think that we have a much better feel for it this year. We have a lot of opportunity this year and we’ll just see how it goes and we’ll keep you updated from quarter to quarter. As far as licenses coming up for renewal, this year Armani is coming up for renewal. We had the most successful year we’ve ever had with Armani in 2007, just an unbelievable year, great growth as we’ve talked about, some of these largest businesses that we have and it is our biggest license are some of the biggest opportunities we have going forward and actually we’re very close to finalizing that renewal right now and it’s a great partnership and we’re really excited to have these guys as partners and we’re looking forward to this year and beyond with the brand. Barbara Wyckoff – Buckingham Research Group: Great thank you.

Thank you and we do have a follow up question from Neely Tamminga, please go ahead. Neely Tamminga – Piper Jaffray: Oh yeah, just one more question you guys on the inventory levels, I hope I didn’t miss this earlier but how are you guys doing in terms of the levels. I mean it seems like we’ve come far in two and a half, three years and seen really tight inventory levels on a dollar basis it seems, are you guys, kind of feel like you’re okay there or are there any particular deficiencies beyond the production delays?

No I think, you know we’re well [bedified] with the work we’ve been able to do in bringing our inventories back inline over the last two or three years and if you look at the rate of growth of inventories compared to sales over the full year this year, we’re in a much better position. The composition of those inventories are more current, there’s a lot less discontinued products than we had at this time last year which is obviously reflected in the much better margin performance in our outlet stores as well, so we think although we’ve done a good job in managing [to] levels that we expected to, it’s not something we’re going to discontinue, it’s still first and foremost in management’s mind to continue to drive inventory growth at a rate less than our expected sales growth. Neely Tamminga – Piper Jaffray: That’s all I had, thanks you guys, take care.

Thank you and we do have a follow up question from the line of Barbara Wyckoff, please go ahead. Barbara Wyckoff – Buckingham Research Group: Hi everyone, sorry, how much of the fourth quarter margin gain is due to the efforts of the margin maniacs program?

You know Barbara as we’re a pretty diverse business across the world and many different product categories, it’s not a number that you can specifically put your finger on but based on the analysis we’ve done and basically looking at the margins based upon landed costs against wholesale prices, we think we saw at least 50 basis points of improvement stemming from that team and we think there’s more out there to gain. As we alluded to on the call, it’s really only affected us during the fourth quarter this year, those initiatives started early in 2007 and obviously with existing inventory and orders already in the pipeline, you can’t change the cost structure and we feel like it’ll be something that will continue to benefit us you know for the first nine months of 2008 until such time that we anniversary that initiative in the fourth quarter. Barbara Wyckoff – Buckingham Research Group: Okay, thanks.

Thank you, our next question is from the line of Bill Baldwin with Baldwin Anthony Securities, please go ahead. Bill Baldwin – Baldwin Anthony Securities: Yeah, thank you, good morning. Mike just wanted to see what specifics and color you could offer when you talked about impact of inventory shrinkage in the quarter, could you offer a little insight as to what you’re talking about there?

Yeah it was primarily associated with our retail stores and I would say a big part of it was due to the fact that we did implement a new retail SAP system during the year and I would say we just weren’t buttoned up as well as we should have been in understanding the processes involved in moving inventories into our various concepts in our full priced stores our outlet stores, et cetera. That’s something that we think we have under control at this point in time and don’t expect it to trip us up in the future. Bill Baldwin – Baldwin Anthony Securities: Another question, you got a pretty aggressive retail store opening program for 2008, can you kind of refresh our memory on what you’re doing to assure that those stores are going to be staffed with you know properly experienced store managers and so forth. Do you have an ongoing training program that you’re hiring people well in advance of when these stores open so that they’re prepared to hit the ground running when the stores open?

Good question Bill, in fact part of our [myth] I think last year was you know we’ve been ramping up this retail organization pretty quickly with you know, added a lot of very experienced people. We did last year have a couple of our biggest territories actually, you know both foreign and New York were without district managers and we since have hired some very experienced people. We’re in the process of doing more. We’ve got some really good training programs in place. I think part of the miss we had last year was just us going through this transformation and not getting ramped up as much as we’d like to and we made a lot of improvements especially in the last several months. [Unintelligible] experienced additional people and we just had a big district manager meeting here in the last week where you know we got some great programs in place. We’ve got a lot of new district managers, area managers, regional managers and a lot of it is just putting ourselves in a position to this and we feel like we’re very prepared. Keep in mind that about half these stores that are opening are outside the United States so we’re in the process of increasing infrastructure, both in Europe and in Asia and we also are testing a new POS program that will enable us to scale this business faster. So the whole mission is to build a world class specialty retail operation with best practices, best people, best systems and we feel like we’ve made a lot of improvements and we’re on our way to doing that so we feel pretty comfortable with the program we’ve got in place. Bill Baldwin – Baldwin Anthony Securities: Okay, lastly, when do you think your new POS system will be up and running in the retail stores here in 2008?

Bill we’re going to do a demo on several stores and that’s currently planned for later this year. Obviously we want to make sure we have that in place before we get into the height of the season and then based upon the results of how the demo works we’ll identify how aggressive we want to be with rolling that out to all the stores. Bill Baldwin – Baldwin Anthony Securities: Okay, thank you and good success.

Thank you and at this time there are no additional questions, I’ll turn it back to management for any closing remarks.

Thanks, should you want to replay this conference call it has been recorded and will be available from 10 am central time today until 12 midnight central time tomorrow by calling 303-590-3000 and entering reservation number 11106529. Again the number is 303-590-3000 reservation number 11106529. And remember to follow that reservation number with the pound sign. The conference call has also been recorded by street events and may be accessed through street event’s website at www.streetevents.com or directly through our website at fossil.com by clicking on investor relations. Finally should you have any questions that did not get addressed today please give Mike Barnes or myself a call. Thanks again for joining us today, our next scheduled conference call will be in May for the release of our 2008 first quarter operating results.

Ladies and gentlemen, this concludes the Fossil 2007 fourth quarter earnings conference call. We thank you for your participation, you may now disconnect.