Good day and welcome to the Fossil Group's Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Eric Cerny, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, everyone. Thank you for joining us and welcome to Fossil Group's fourth quarter 2015 earnings conference call. I'd like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those that will be projected during this call. Fossil Group'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 reports filed with the SEC. In addition, the company assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please note that you may listen to a live webcast or replay of this call by visiting fossilgroup.com under the Investors section. Now, I would like to turn the call over to the company's Chairman and CEO, Kosta Kartsotis. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Thank you and good afternoon, everyone. I will begin with a few prepared remarks before turning the call over to Dennis Secor, our Chief Financial Officer. Following his prepared remarks, Greg McKelvey, our Chief Strategy and Digital Officer, will join us for the Q&A. We look back on 2015 as a year of both significant challenges and accomplishments. We anticipated economic, competitive and consumer headwinds, which all materialized and in some cases intensified, putting pressure on sales and earnings. Despite disappointing operating results, our team remained focus on our strategic priorities to strengthen our leadership position in our core business and to extend that leadership further through our investments in wearable technology. We set course to reposition the company with the necessary platform to accelerate sales and profitability in the…

Thanks, Kosta, and good afternoon, everyone. We are relatively pleased with our fourth quarter performance as the potential for intensifying headwinds that concerned us going into the holiday season, given our limited visibility, and a lot of market disruption, did not materialize to the extent we felt they might. Overall, fourth quarter net sales decreased 2% and on a reported basis declined 7% to $993 million. While sales did decline in the quarter, each of our three regions posted sequential improvements and Europe turned to constant dollar top line growth. Off-price sales were also higher than we anticipated. We are encouraged by the continued growth in Fossil and SKAGEN as well as the contribution from newer brands and categories which we intend to build on in 2016. For the quarter, we delivered diluted earnings per share of $1.46 compared to $3 last year. The EPS comparison to last year's results was negatively affected by several factors, including $0.28 from currencies, $0.14 due to last year's bonus accrual reversal, $0.13 due to a noncash impairment charge, $0.12 for Misfit transaction costs and $0.04 of restructuring charges. Compared to last year, the current quarter benefited $0.12 from a lower tax rate and another $0.09 due to the lower share base. Beyond the sequential improvement in each region, we were encouraged with the 3% constant dollar growth in the quarter for Fossil, led by growth in watches with leathers and jewelry increasing as well. Sales growth was strongest in Europe and Asia while the Americas experienced a very slight decline. Globally, the retail stores performed well across full price and outlets with improved conversion offsetting continued declines in traffic, yielding an overall comp increase of 1%. Of course, our launch of the Fossil Q assortment was very well received, particularly, the Founder, which…

Thank you. And our first question comes from Omar Saad with Evercore ISI.

Thanks. Good afternoon. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Good afternoon.

Can you maybe give us a little bit more detail and expand on the wearables strategy for 2016 and beyond? Kosta, especially if you can give us a little bit more detail around the timing and cadence of the Misfit integration and when you can expect to and how you can expect to integrate the Misfit technology into Fossil products across the different types of wearable products. And then, conversely, the cadence, maybe a little bit more detail on the cadence of how you can apply the Fossil branding, marketing distribution network to the Misfit products and brand. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Okay, Omar. Thanks. Well, first of all, recent research we've seen shows that the watch business actually declined last year by probably about 3%. But in addition to that, we saw the explosion of wearable technology last year and it's probably anywhere from $10 billion to $15 billion on top of the regular $65 billion that's in watches. So clearly, there's a huge amount of consumer interest to this, all the things we've been talking about. Millennials especially overspend on technology. It's a big macro interest on technology and health and fitness. So for us, what it means basically is there's two big things for us. Our number one objective is to gain share in the traditional watch business. We think the best way to do that is by adding technology. So our launch in the fourth quarter included three different categories. So they were hybrid watches which are smarter watches, analog watches that have additional functionality and sensors. And then we launched trackers and display watches. And we learned quite a lot. All those categories did extremely well. But the number one objective for us is to gain share in the traditional…

Thank you. Our next question comes from Ike Boruchow with Wells Fargo.

Hi, good afternoon, everyone. Thanks for taking my question. I guess, Dennis, if we could just go back to some of the comments you made at the end of your prepared remarks, it sounds like you're still very upbeat about the long-term potential of the company and we know the headwinds that you're dealing with this year with FX and the Misfit acquisition and dilution. But some of the comments you made about, I think you said, the next three years, not really to expect much growth. I mean, I'm not – I'm just trying to understand, what exactly did you mean by that? Was it saying this kind of margin structure is where you're going to be for the next couple years and then you'll grow? Just anymore color there would be helpful.

Yeah. No, I think you must have misinterpreted what we were saying. So as we plan out over the next couple of years, if we start with the top line, we will be continuing to roll out more and more of our brands on to our platform. We are seeing traction that we are gaining with Fossil and SKAGEN and we are investing more in 2016. Misfit is an addition to our arsenal as we have other brands like Kate Spade New York, Chaps. So we feel that we have a whole lot of drivers for growth recognizing that there is always headwinds. So what we are saying is that we see a path now to be able to accelerate the growth as we move from 2016 into 2017 and past. So our goal as a company is to drive growth and use the investments that we have made over the last couple of years to do that. Now, we have in 2014 and 2015 – I'm sorry 2015 and 2016, we have investing in marketing and our strategic initiatives and that has put some pressure on our operating margins. What we're saying now on the back of that top line growth, we think our infrastructure is largely in place. So that is there to be significantly leveraged as we drive growth to the top line. In terms of the marketing investments, our goal, once we get past 2016, we'll still see in 2016 some compression of margins to support that. Again, some of that's driving growth that's being masked by other areas. But by the time we get to 2017 the goal would be to be growing our marketing investments roughly in line with the way the top line is moving. So, what that all means is that we…

Thank you. Our next question comes from Ed Yruma with KeyBanc Capital Markets.

Hi. Thanks so much for taking my question. Obviously, there's been lots of turmoil in the wholesale channel, particularly at multi-brand retailers. Is it your view that the order trends there have begun to stabilize? And I guess, in the medium-term, are there any other things you can do to reduce your reliance on this channel? Thanks.

We didn't hear the first part of – could you repeat the first part of your question?

Yeah. I'm just trying to understand. Obviously, wholesale has been difficult, particularly in multi-brand watch retailers. Do you think that the destocking has largely occurred at this stage, and I guess what can you do longer term to mitigate reliance on the wholesale channel? Thanks. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Well, the way we look at the watch business in the channel globally is that watch business is relatively soft; and from our perspective, because we have a fashion miss, we don't have enough technology. So, our mission is to put technology across the platform, and all of our customers are very interested in this, and we think that as we continue to show products and bring out new brands and new devices on the program, not only in traditional watches, but also in wearable technology in both fashion trackers and also display watches. We're going to get an additional amount of space and huge amount of interest. One of the things about this whole wearable technology thing is a lot of our stores we sell to haven't participated in the explosion of spending it on technology. So again the watch business is up $65 billion, the tech industry spending is trillions, consumers, especially millennials will overspend on technology by a longshot. So, the stores that we sell to, look at it as an opportunity for us to get some of that spending in their store, which could change the situation for them dramatically. So, they also recognize that the watch business in their store is – although, it's been soft, and that's mostly because of the fashion miss – but they still recognize it as one of the most productive departments in the store, one of the most regular priced businesses, one of the highest gross margin per square foot businesses, but it's not as hot or robust as it was; but it's still, in terms of productivity, one of the best businesses in the store. So, we have as you mentioned seen – as the business has declined, we have seen some destocking and we think that is going to probably continue through the first quarter and second quarter, until we get increasing amounts of wearable technology in the market. We're not projecting as you can tell from the first half of the year strong sales, but we do think that the wearable technology influx in the back half of the year will change the direction of that.

Thank you. Our next question comes from Oliver Chen with Cowen and Company. Cecile Origenes - Cowen & Co. LLC: Hi. This is Cecile Origenes for Oliver Chen. Thanks for taking my question. My question is actually on Kors. Could you just maybe comment on what your outlook is maybe for the first half? When do you think trends could start to stabilize? And then, maybe can you just point to some examples of newness that you're driving in the watch collection, and perhaps in jewelry and men's? Thank you. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Well, for the full-year if you look at the Kors complex of watches and jewelry combined, the business was actually minus 6% for the year in constant currency. In reported, it's minus 11%, which shows the impact on the currency on that business. But, what we're doing right now is we're probably going to have more newness than we've ever had in Kors flowing right now. We've already tested some of it and it has a different look to it. We think it's going to be very strong. In addition to that, there'll be wearables launch later this year that will be very significant. The Kors business is a leader in the global watch business and huge amount of interest and awareness and we think that it's going to be a big play in terms of wearables. The other thing to keep in mind is that although the business has come down some, it's still one of the most productive in the industry and definitely in our portfolio it is, and we're continuing to open shops. So we have, at the beginning of this year, we have about 332 watch or jewelry shops. Some of those are watch and jewelry shops, but 332 shops. We're going to build an additional 82 this year. Also keep in mind that we're still in the early stages of both men's watches and the jewelry industry, the jewelry business for Kors. We are going to be adding an additional layer of jewelry for the Kors boutiques, which is a higher level of jewelry. Some of its silver or gold-plated, really to raise the average unit retail. I think it could have the potential of making that business larger over the long-term, especially in Europe and Asia and these shop-in-shops and in the Kors boutiques themselves. It's a pretty significant opportunity. And also keep in mind, in Kors, we're just getting started in Asia, as a total. I mean, it's still relatively new. We're seeing traction there. So, long-term, we think the business will continue to grow.

Thank you. Our next question comes from Simeon Siegel with Nomura Securities.

Thanks. Good afternoon, guys. Kosta or Greg, do you have any data or thoughts on the retention or abandonment rate for the wearables yet? Are you seeing any difference in return rates for wearables versus the traditional watches? And then just, Dennis, just to clarify, I think you're projecting a negative 140-basis point impact to revs from currency this year. Just looking at the spot rates, I would have thought that would have been flatter for the full-year, so I could be missing something simple there. But I just wanted to confirm that. Thanks. Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer: Yeah. This is Greg. I'll answer on the abandonment rate. I would say, we're probably in line with trackers probably in return rates relative to the category and abandonment. But, I would say across all three categories, we are not seeing anything other than data that tells us this is going to continue to be a high growth category for us. So, consumer interest and awareness is incredibly high. Those that are returning, often they are looking for better functionality. So, things like non-charging. So, they just don't like the habit of frequency of charging and we're solving that with our non-charging product that work on battery watches. And then some, especially, I would say, outside of our products and other competitors, they are just missing a style and a branding element to the product that again we're solving for. So, we think incremental functionality, better style, better branding, all of which we are significantly improving as we're already engineering our second-generation and third-generation of product. We expect a high rate of adoption and lower abandonment than the category has seen.

On currencies. I assume when you're talking about the spot rate, you were likely talking – I'm guessing you're talking about the euro. So, the euro actually has been fairly stable, but what we saw at the end of the fourth quarter is the U.S. dollar strengthening against a number of other currencies, a lot of Asian currencies, Canadian dollar, Mexican peso, South African rand. So while you're right, if we were only impacted by the euro, you're assumptions would likely be correct, but it's the larger portfolio of currencies that we operate with.

Thank you. And our next question comes from Betty Chen with Mizuho Securities.

Oh, thank you. Good afternoon. I was also curious, in terms of the Q buyers, can you give us any sense of – were they traditional watch wearers upgrading to a wearable technology, or are they completely new to the watch category? If you have that data. And then can you just remind us, with the wearables margins being slightly lower, at what point can we see that margin start to become more comparable to your fashion watch business? Is that something we could see some improvement by 2017, or really looking beyond that? Thanks. Kosta N. Kartsotis - Chairman & Chief Executive Officer: On the watches that are hybrids. What we're seeing basically is through all our launch of Q, we got more PR, more press, more page views, more impressions than anything we've ever done. So, the awareness is very high. We know it's driving traffic to our stores and website, so it's probably a combination of both. We're getting new customers because there's a lot of awareness and interest in wearable technology. And this is a unique product and it's kind of the entry level into what's going to be much larger. And we're also getting some customers who are in the store looking at watches and they go, oh, this looks great. It's got technology in it. So, again the issue is not about cannibalization for us. This business is going to be much, much larger, because it's so much interest in both watches that have technology and also in wearable technology that I think it's going to far offset any cannibalization. We're going to make the watch category more relevant, especially for millennials. Again, largely millennials grew up with smartphones, they haven't necessarily worn a watch before. So to them it's a whole new thing. And then we're going to – in wearable technology, we're going to have a much larger addressable market. So we think that, both the combination of those two things is going to really offset any cannibalization going forward. But I think both traditional watch business will get much larger and we'll gain share and then we'll have an entrée into the wearable technology business.

Yeah. As it relates to margins, so what we did say for this year is with tech margins are below our company average margins, although we have a number of initiatives that we are executing on that should help offset those in the back-half of the year. Most of that impact is going to be second-half loaded, because that's where we'd expect to see greater and greater volumes. As we move past 2016, our expectation overall is through technology improving cost, ultimately coming down and the benefit of our scale that we can see over time. We can see improved margins from where they are right now. Whether that's a 2017 impact or beyond, we'll talk more about details in 2017 when we get there. We still have a lot to learn here. But, we do believe that there should be opportunities over time.

Thank you. Our next question comes from Rick Patel with Stephens.

Hi, thank you. This is Shreya Jawalkar filling in for Rick. Can you talk about the outlook in China? Obviously, it's a tough market out there. But is there anything you can do from a merchandising, marketing or pricing perspective to weather that storm? Thank you. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Yeah. Obviously, the China market is very difficult. We not only have stores there and operations in China, but also it's affecting Macau and Hong Kong as well. So, having said that, we still are operating over there. We have a great team, they're on a great strategy, we're continuing to be active in the market in setting up distribution, et cetera. The fact remains that still there's going to be hundreds of millions of people that join the middle-class at some point. So, we're continuing to move forward and do the best we can. And we do think that the entrée of wearable technology into the market could be a catalyst. I mean, they obviously are very interested in technology. There's been some activities over there that give us indication that we could probably distribute wearable technology on a pretty broad basis through e-commerce, et cetera. So, we're studying that; but again, long-term it's still going to be a big catalyst for growth for us.

Thank you. Our next question comes from Erinn Murphy with Piper Jaffray. Erinn E. Murphy - Piper Jaffray & Co (Broker): Great. Thanks. Good afternoon. I was hoping you could elaborate a little bit more on the business that you did in the off-price during the fourth quarter. It sounds like you did more than you intended. How much of that drives the improved top-line results in the fourth quarter? And then, is this a channel that you envision having to rely on a little bit more as we round out 2016?

Yeah, I mean, we ended up liquidating more through off-price partners largely, because throughout the year inventories were higher as we were seeing demand that was falling. And 2015 overall was not a successful year for us on the top line. So, we did use – it wasn't a dramatic amount of additional fourth-quarter off-price, but we did sell a little more off-price than we had planned going into the quarter.

Thank you. Our next question comes from Lindsay Drucker Mann with Goldman Sachs. Lindsay Drucker Mann - Goldman Sachs & Co.: Thanks. Good evening, guys. I just wanted to ask, in addition on the wearables piece, as you think about the rollout in 4Q for the brands where you do expect to add technology, can you give us a bit of a sense on how many of the units that you'll be selling into department stores or your own retailers, how many you expect you'll be able to add technology to? So, how much this will really affect the assortment? And then secondly, as you think about price points for the display watches in the sort of high $200s, low $300s, is that about where we should be thinking price points will be across the portfolio, or will you tier by brand to more or less premium? Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer: This is Greg. So, I'd highlight, again as it relates to assortment the 100 SKUs that I talked about, across a significant expansion of both owned and licensed brands. You'll see announcements as we go through Basel and then ultimately fashion week in our normal announcement timeframes, where our licensed brands will highlight their individual strategies and all come into full focus for you. But again, pretty significant expansion when you start thinking about 100-plus SKUs. As it relates to price point, I'd point you to a couple things. Fossil Q is a pretty good baseline for how you should think about price point, relativity when you start to think about Fossil versus Michael Kors, or other licensed brands. On a percentage basis, you should start to see us tier up in a similar way that we tier in our traditional watch category. The other thing I'd say is, as you look at our pricing strategy for the innovation we're bringing to market in the spring here, you're seeing us bring out new styles at a premium to even our fall and holiday launches. So, even on the same technology base, we're bringing style and innovation in color way and materials that are allowing us to extract a greater premium, even for the Fossil line. Lindsay Drucker Mann - Goldman Sachs & Co.: And those 100 SKUs, could you put into context like a comparison of how many SKUs you might totally sell?

One of the things that is going to be an advantage in wearables and tech watches is that it typically, in that industry it's very small number of SKUs that do huge quantities and we're already starting to see that. As I mentioned, our display watch in the month of December was our number one unit seller. So, we're going to benefit, I think, from us being able to have fewer SKUs in the market that sell a significant quantity and that's obviously a very good thing for our company. Now, as we mentioned before, we have something like 2,700 SKUs in our total watch business, all brands that yield a couple billion dollars. I think with where technology – what we've seen already before and what we're starting to see now is that we're actually going to reduce our SKU count, which is obviously a good thing.

Thank you. Our next question comes from Dorothy Lakner with Topeka Capital Markets.

Thanks. And good afternoon, everyone. Kosta N. Kartsotis - Chairman & Chief Executive Officer: Hello.

Just following up on the wearables segment again, I just wondered, you've said 100 SKUs. You've talked about that being across multiple brands. I wonder if you could just, and you've talked obviously about the Kors entry. I wonder if you could give us some idea of timetable. Is this all going to occur in the second half? And how many brands will actually you be able to bring to market in 2016? Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer: Yeah. So, you're going to see us drive significant amount of growth in the Misfit brand and in Fossil Q across our global selling organization in the first half of the year. And then you're going to see the significant expansion in the number of brands and SKUs across all three of the product platforms we highlight in wearables in the back half, so that's the – you should see a back half focus when you really start to get to the number of brands and SKUs that we're talking about, fall and holiday.

Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group.

Good afternoon, everyone. As you think about the Michael Kors line and also the Burberry line, which is lapsing, when does smart watch technology get infused there? And also on Burberry, how much revenue does that business take away and are you looking for new multi-brand licenses to license? And just lastly, Swiss watches, given the fact that you've invested in Swiss watch production, is smart watches manufactured in Switzerland and how should we think of that going forward? Thank you. Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer: Well, first of all on the Michael Kors wearable technology launch that's going to be in the either third quarter or fourth quarter. We're working on the timing right now. So, as I mentioned before, it'll be a pretty large launch. There'll be a lot of awareness around it and we think it'll be very successful and gain a lot of traction. Burberry, our relatively small business, small single-digit percent of our business, not growing necessarily. So, we're putting those resources on other brands. We do have Kate Spade and Chaps are both new, Tory Burch is just getting started. Fossil and SKAGEN are doing very well. And our number one thing is continuing to make Fossil, our largest business, a fast grower. And we've made a lot of progress with that, but the increased amount that we've spent on demand creation, we're having a lot of great things happen with the Fossil brand that we think can continue to grow at a strong rate. And having said that, we'll also continue to look for other big brands that could be significant in our portfolio. One other thing I would mention is that we do have with our largest licenses Kors, Emporio Armani and Diesel, we in the last couple years have signed 10-year licenses with them. So, those will all continue. On your question about Swiss, one of the things that we've been working on is ramping up our capability for design in our Swiss design center. And they are actually doing a lot of design for us. In our entire portfolio whether the watches are made in China or Switzerland. And they're actually working on wearable technology as well and doing some great stuff over there. Incredible design talent in that office there, so we'll continue to use that. We don't expect at this point that we would have any Swiss-made wearable technology. That definitely is something that we're looking at because as we said before, there's no reason why eventually every watch we made shouldn't have some type of functionality, a chip in there, sensors, notifications, et cetera. So, that's something we're looking at as well.

Thank you. Our next question comes from Laurent Vasilescu with Macquarie. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Good afternoon. Thanks for taking my question. I think last quarter, Misfit was guided to generate $30 million in 2015. Can you tell us how Misfit did for the year and what your expectations are for 2016? And should we assume wearables overall will contribute a mid-single-digit percentage of total revenues for 2016? And then any color on how that percentage should shake out for the first half versus the back half would be great.

Yeah. We didn't specifically guide to either Misfit or overall tech-infused revenues. But the way we're looking at it, we did share on our last call, Misfit was about a $30 million business last year. That's the base. Keep in mind, too, that was a base selling all the product. So, we now have the Shine 2. We have the Ray. Our goal this year, as we were talking about earlier, is to drive that through our existing distribution, drive it through new channels. So, that's already ongoing, as is Fossil Q, that's going to be part of our offering all year long. Later in the year is where we bring more brands on to the platform and drive that. So, you'll see generally technology-infused products will be heavier in the back half of the year than the front half of the year, but we have products in the market all throughout the year.

That concludes today's question-and-answer session. At this time, I would like to turn the conference back to management for additional or closing remarks.

Thank you, everyone, for your participation on the call. We look forward to talking to everybody after the first quarter in May. Thank you very much.

Thank you. This does conclude today's presentation. We thank you for your participation.