Welcome to Fossil Group's Fourth Quarter 2016 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow. As a reminder, this conference is being recorded. I'd like to turn the call over the Eric Cerny, Investor Relations.

Thank you, and good afternoon, everyone. Thank you for joining us, and welcome to Fossil Group's fourth quarter 2016 earnings conference call. I would 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 8-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 can find a reconciliation and other information regarding non-GAAP financial measures discussed on this call and our earnings release filed on Form 8-K and in the Investors section of our website. Please note you may listen to a live webcast or a replay of this call by visiting fossilgroup.com under the Investors section. Now, I'd like to turn the call over to the company's Chairman and CEO, Kosta Kartsotis.

Thanks, 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. The fourth quarter of 2016 was pivotal for the Fossil Group, as our wearable launches offset most of the continued softness in traditional fashion watches. Despite a difficult environment for much of the retail industry, our team remained laser-focused on our strategic priorities and advanced many of the initiatives that we believe will enable us to drive growth and improve our financial performance in the future. We grew our owned brands, FOSSIL and SKAGEN, with notable strength in wearables through the expansion of the Fossil Q assortment and the launch of SKAGEN Connected styles. We also saw a significant improvement in Michael Kors' watch sales with the launch of Michael Kors Access. And we drove growth in Asia and Europe and saw progress toward our New World Fossil initiative. Let's begin by revisiting the strategic priorities we laid out coming into the year. I'll take a moment to give an update on each, and then outline our priorities for 2017. The first one is, driving future growth through wearable technology. Second, a continued commitment to the growth of FOSSIL and SKAGEN. Third, evolving and leveraging our digital and omnichannel investments to better serve the customer. And finally, improving our profitability and growing our core watch business. So, first, on driving wearables. 2016 was a year that the Fossil Group demonstrated its ability to move very quickly to adjust to consumer demands. In one short year, we acquired Misfit, integrated their team into the organization, and leveraged their technology platform across our portfolio brands. We were able to…

Thanks, Kosta, and good afternoon, everyone. Before I get into our review of the fourth quarter, I want to elaborate on Kosta's thoughts about our major priorities for 2017 and how delivering on those will position the company for longer term success. In doing so, I want to draw your attention to the guidepost that should become evident to you as we execute against our goals to drive growth in wearables and improve our financial performance through New World Fossil over the coming year. To begin, I want to first review the recent changes in our model. Between 2014 and 2016, currency has eroded our sales by $250 million and our operating income by $150 million. In that same period, operating margins have declined by roughly 11 points, from 16% in 2014 to 2016's 5%, which excludes restructuring charges. Roughly four of those points reflect the negative impact of currency. Unfortunately, with the recent further strengthening of the U.S. dollar, these top line earnings and margin pressures will intensify in 2017. Beyond currency, nearly all of the remainder of the margin compression comes from a higher expense rate, roughly 6 points, given sales declines over that timeframe. Since 2014, our sales have declined at roughly a 3% rate and down 7% including the currency impact. During that same time, our expenses remained flat. However, within that expense base, there has been a significant shift to investing in our strategic priorities to drive growth, building brand awareness, enhancing marketing, building our omnichannel platform and, of course, wearables. Since 2014, these have added about $90 million to our expense base, the majority of which relates to wearables. And we have funded those investments by reducing infrastructure and underproductive store costs. These new investments, especially wearables, have not yet driven their ultimate returns;…

Our first question is from Oliver Chen of Cowen & Company. Your line is open. Oliver Chen - Cowen & Co. LLC: Hi. Thank you. Kosta, regarding the discussion around price points, can you just help us understand which part of the portfolio are you calibrating and what was the logic as you balance the market share opportunity. And I'm also concerned about inventory management, just because you have been engaged in the test, read and react strategy for many years and you're entering a new era where different products you launch on a different schedule with the pace of innovation and what's happening in wearables. So I'm a little bit concerned about your ability to manage in terms of the product release schedule and making sure you have the right product at the right place at the right time, and have the markdown cadence and a brand that works your way. And just as a follow-up, Dennis, what about the cash flow for next year? Should we be worried about deteriorating cash flow trends in terms of how we model the business? Thank you.

Thanks, Oliver. So, first of all, on the price of wearables. As we mentioned, most of what we saw last year was display watches. Obviously, average unit retail is much higher. What we learned is, first of all, Kors by far exceeded expectations at full-price. We weren't even testing prices on Kors, because we were chasing inventory and are still chasing inventory to a certain extent right now. So complete blowout at that price and what we perceived is a huge amount of demand out there, very significant for overall smartwatches, as well as hybrids. So what we're doing basically is, we're going into this and we have line of sight; and when quantities go up, our costs go down. So we also did a lot of testing on Fossil. And Fossil, one thing I would say is that if you look at the average retail of Kors of $250, the smartwatch was $350, so $100 more. And in the FOSSIL brand, it was almost double the average unit retail price. So we tested different price points and we found significant demand at certain prices that we feel like long-term will be able to drive significant sales. We also are planning on being very aggressive at the marketplace and putting very sharp prices on hybrids to get the quantities we need to drive the cost savings. So we also obviously want to get this on a lot of wrists, and we want to go word of mouth, go viral. We're also putting all of our marketing and advertising resources for the entire year on telling the story as big as we can. We want to have a big bang to create as much excitement as we possibly can. On the inventory side, interesting enough, if you look at – we…

And I'll just add, now that we understand sweet spot price points that drive real volume, we then translate that onto the supply side of our business. So we've got technology costs in components and manufacturing that were negotiated and really reflect the low volume we had prior to Q4 last year. We've also completed an extensive benchmarking study. So we understand where those costs will go as we get scale and are able to drive to increasing levels of automation with all our major component suppliers, and just also just generate the benefits of scale. So we hit those sweet spot price points, drive volume. We're now going and working with all of our suppliers across on the technology side of our business, deeply engage with them to figure out exactly how those pricing and cost contracts will work and how costs will flow. That will come significantly down as we flow volume in the next 12 months to 24 months.

An, Oliver, you asked about cash flows. Here's how we're thinking about our liquidity and cash flow. I'll start with where we ended 2016. We've got roughly $300 million of cash, mostly international, $640 million of debt. With our 3.25 EBITDA covenant, we have roughly $300 million of available debt capacity. Now, if we think about our operations against that covenant, the upper end of our range, our operations should be fairly similar to 2016. The significant changes that are driving EPS down are interests which are not a part of that covenant, and restructuring where we do have an add-back to our covenant. Currencies, which we gave you in the release, which that headwind is about $30 million, that would affect that calculation. So if you look at that impact through the filter of our EBITDA covenant, it suggests roughly about a $100 million change based on those assumptions on debt capacity. Now, look at cash flow. In 2016, we generated $210 million of operating cash flow. Again, the talk of our guidance assumes roughly neutral adjusted operating results. Our table in the release should help illustrate that. So in 2016, though taxes will be favorable, we talked about that just a moment ago, the currencies and restructurings will be headwinds. Think about interest. And we do anticipate being able to manage with tighter inventories, largely driven by running with fewer SKUs. So all-in, we could see some compression of operating cash flow, but still nicely positive. We're expecting CapEx around $70 million. So all-in, still driving overall positive cash flow for the year. So, again, that's probably mostly likely overseas. So what that profile might look like a year from now based on these assumptions would be growth in overseas cash, likely similar debt levels and some compression of debt capacity, but still significant capacity and liquidity.

Thank you. Our next question is from Omar Saad of Evercore ISI. Your line is open.

Hi, thanks. I wanted to dig into some of the helpful information you've given on wearables, primarily this kind of idea that there's a new customer coming in, a younger, more female, who hasn't worn watches in the past. Maybe help us understand in addition to that, dive in there, but also the traditional fashion watch customer, are they converting over to the more wearable products? And then, also help us understand what's going to be new – to the extent you can, what's going to be new in the wearables offering for the fall that you keep talking about? Thanks.

Yeah. So basically, from our perspective, it's two businesses colliding. So you take the traditional watch business, our intent is to disrupt that business with technology, put connectivity across the board. And one of the advantages we're going to have this year is that the hybrid watches are going to get slimmer, we're going to have more brands and we're going to have really sharp price points. So we think it's an opportunity for us to gain share in the traditional watch business. It also will bring a younger customer in there. It is innovation in watches, which is always what drives the watch business. So we think that by accelerating that as much as possible that we're going to be able to change the direction of the traditional watch business. We also are going to be – with the wearables business, we're selling new channels there too. So these two markets colliding. You're seeing that traditional technology companies are selling smartwatches to department stores and jewelry stores, and we're selling to the CE channel. We are actually, with our larger addressable market and the benefit of fashion and our distribution and then all our other competitive advantages, we think we're in a really good position to continue to gain share in that business as it continues to grow.

Yeah. A couple of other points on product. I think it's fair to say that we're going to have a step-function improvement in product through innovation and the pipeline we've been developing over the last year plus. Kosta mentioned smaller and thinner watches, which is a much better fit for our female core customer, which is generally over 70% of our traditional watch sales, and also more Asia Pacific friendly sizes. With smartwatches, in particular, so display smartwatches, not only thinner and sleeker, but we've invested in a beautiful custom display that's a full-round, high-resolution, bright screen with thin bezel that you saw first at CES in Misfit Vapor; and that's going to go through the majority of our smartwatch line this year. We also have some other features like rotating crown. And then, you probably have seen some of the press around Android Wear 2.0, which we think is a massive upgrade for our customers, particularly those that are on iPhones.

So we're going to be injecting technology into the traditional watch business and injecting fashion into the wearables business. And we're perceiving very significant demand. There's huge consumer interest. All of our stores, partners, our licensed partners, et cetera, everyone is fully on board. And as we've been saying for some time is the number one trend right now in fashion is technology, and we're going to bring it to market.

I'd add one other point on Misfit Vapor, which we announced at CES, really represents a sport line for us as well. So we're going to have a fashion line, which is focused on the right functionality for the customer that wants a thinner profile watch. We're going to also have a module now and a product line that's focused on sport. So we'll start with Misfit Vapor, and then we'll add other brands. And we believe that the sport use cases, which are a significant part of the overall wearables business today, is something we're going to be able to tap into as well.

Thank you. Our next question is from Ed Yruma of KeyBanc Capital Markets. Your line is open. Edward J. Yruma - KeyBanc Capital Markets Inc./Pacific Crest Securities: Hi. Thanks very much for taking my questions. I guess, first, you indicated that there was still some inventory imbalance that you're unable to fulfill kind of the sales trend on the screen watches. Could you talk about when you're anticipating that to normalize? I guess, second, the 10 points of margin compression for wearables for 2017, is that you investing in price, functionality, I guess how do we think about how that investment takes place? And then, I guess finally, I think you indicated that Kors was largely flattish given the wearables strength. Is it your anticipation that Kors turns positive in 2017? Thank you.

Well, first of all, on the supply, when we first started shipping the new generation smartwatches, the third quarter last year, we started seeing strong sell-through. So at that point, we started forecasting larger numbers for this year. So we do have increasing flow for the first quarter. And then, we saw another step-up in sell-through in the fourth quarter, especially in December. So we placed orders for that. So those will be coming in second and third quarter. Our new generation smartwatches are landing in third quarter. And as Greg mentioned, they're just beautiful watches, beautiful screens, much improved, slimmer. We're expecting even stronger sell-throughs on there. So clearly we see, especially with Kors the demand and the sell-throughs we got on Access, there's a positive story here and we're moving as fast as we can to fulfill it.

Yeah. So I think we're on good shape in terms of inventory management. There were styles in our launches this last fall in Q4 that were 2.5x to 3x what our initial forecasts were. So you can't help but be in a situation of chasing demand, which is a good problem, but you have a lag to deal with. This year, we've got a year of experience in managing that and I think we'll be in pretty good shape. On the pricing strategy side, we gave a little bit of color on that in our response to Oliver. But what's really happening here is that our pricing and our margin strategy on wearables is this convergence of a few data points that tell us that we are on the cusp of a high-volume profitable wearables business, but we need to act quickly to get the volume and take advantage of it. We mentioned the sweet spot pricing, so we did testing particularly with Fossil around what is the sweet spot price that drives massive volume. We found we're still going to tinker with price and figure out how to evolve that strategy. But we think we found a sweet spot. And now, as we're turning to the supply side of the business, now that we know where, how much volume we can generate through demand, our work has now gone to what is the level of volume that we need to get to, to drive substantial reductions in cost, what I'd call minimum efficient scale. And we've developed that point of view in both the hybrid category and in smartwatches, and our job now is to go get it. So we're going to invest in price to go get volume and then leverage that volume to work with our supply partners on the technology side of our business to get to economies of scale and costing quickly.

Thank you. Our next question is from Erinn Murphy of Piper Jaffray. Your line is open. Erinn E. Murphy - Piper Jaffray & Co.: Great. Thanks. Good afternoon. A couple from me. I guess, first, just going back to the fourth quarter watch stabilization that you called out. Can you just speak to what you saw as the quarter progressed from a sell-through perspective of traditional watches? I know wearables made up, I think you said, 11%. And then secondly, could you just, I'm sorry, walk through the disconnect of Q1 sales run rate versus where you ended Q4? Are you making an assumption that Michael Kors rolls over in Q1. I know you said store closures are about 130 basis points impact to the top line, but there's a pretty broad range in there? So just trying to understand that. And then, finally, on the stores that you're closing, I think you said 40 was the number for the full year that you just closed. What are the characteristics of those stores that you're closing, what regions are they in, are they four-wall negative? Just anything to help us understand how we should be modeling that from an EBIT perspective? Thanks.

On traditional watches in the fourth quarter, the traditional watches continue to be soft. But what we said earlier, on the brands that have wearables, so mostly Fossil and Kors, we were able to offset most of the decline with wearable sales. So that's where we are on that.

Yeah. On the first quarter, there's really three things that I'd ask you to focus on. The first is the store closures. That's obviously creating a headwind in the top line. The second is that, just given where our inventory position is, we were down now 13%. A year ago, our inventories were up 5% coming out of the fourth quarter a year ago. So we're expecting that in this first quarter sales we will have less off-price sales because of these much stronger and cleaner inventory position. And then, the third issue is remember last year in the first quarter. So we actually delivered our sales in the first quarter, but that's a quarter in which we saw a fairly significant and worldwide downturn in traditional watches. So we think that what we effectively did there was build channel inventories through the first quarter. We're now up against that fairly relatively strong sell-in, perhaps versus what the sell-throughs would've suggested. So we're up against that. In terms of store closures, we'll be continuing to close stores throughout the year. We'll probably close a similar number in 2017 to what we did in 2016. But the profile is there – they cut across all regions. The biggest is in the Americas, but there also all concepts are affected effectively, we were targeting those stores that are underperforming in terms of their financial metrics and/or those stores that are no longer of strategic value to us.

Thank you. Our next question is from Simeon Siegel of Nomura/Instinet. Your line is open. Simeon A. Siegel - Nomura/Instinet: Great. Thanks. Good afternoon. Dennis, just to follow-up on the store closures, how large would you like your ultimate store fleet to be. And I guess how much of low-teens margin opportunity is driven by these closures?

Yeah. We've been on this journey for the last several years, where brick-and-mortar stores are becoming less important to the model. We've been investing in omnichannel, which is driving significant growth. We expect that to continue. So we're taking a fairly large number of stores out of the system this year and last year. And then, we'll kind of wait and see. I mean, some stores we won't close, perhaps some stores we'll just let run through expiration and not renew those. But we certainly see stores will remain an important part of our business model, but just that's shifting as the consumer shopping pattern is shifting. In terms of just the impact to the long-term operating model, and if I look at the key drivers that I called out, growth, New World Fossil, connected margins, the stores are stores that are dragging down current earnings. But if I prioritize those, I would say the impact on earnings would be the least impact – stores would be the least impactful on those earnings.

If you look at our stores over the last couple of years, we've changed them quite a lot. The entire visual merchandise in the store is different. It's much more experiential. And I would encourage you to see our store on Fifth Avenue. It was remodeled last year (01:00:28). And what we're doing in there now is a lot of embossing on leather goods, engraving on watches. A lot of our sales in the stores are now actually done over the Internet. So if a customer comes in, we work with them over an iPad and they convert on our website. We also have on our website all of that embossing, engraving and also the ability to build your own watch the way you want. So it's changed quite a lot, and we're interested in how the stores evolved and how it dovetails into our marketing, social media, CRM program. So as we close some of these stores, we're using some tools to try to identify those customers and communicate and engage with them in different ways. We're also interested in going forward to how, maybe, we have a smaller store. That's totally more customization and more experiential and really maybe drives people to our website and just communicates the brand and where we're going.

Thank you. Our next question is from Anna Andreeva of Oppenheimer. Your line is open. Anna Andreeva - Oppenheimer & Co., Inc.: Great. Thanks so much. Good afternoon, guys. I guess two questions for us, to Dennis. I think you mentioned you guys already realized 40% of that $200 million of SG&A rationalization. I guess what drove that reduction and what kind of SG&A dollar decline should we expect for 1Q and for the full year? And then, secondly, to Kosta. As you think about your wholesale exposure, any opportunity to exit any of the department store doors out there? And just any view on brand composition in the portfolio? Do you guys see any benefit to maybe downsizing, given likely some cannibalization across the brands? Thanks.

Yeah. So I'll start with what we've been working through New World Fossil now for roughly six months, and a lot of the activities that we've already essentially executed on will flow through the P&L in 2017. We did have an action in the company that affected the global organization. That reduced our overall head count. Those are tough decisions, but the right thing to do for the long-term. So that will benefit the P&L throughout the year. We've closed some stores. We've also gotten some quick wins through contract negotiations, better leveraging our volumes, reducing indirect spending. So the way we're viewing that is that, that accumulates to approaching 40% of that overall $200 million goal, which as the P&L rolls through 2017 we should see those benefits rolling through. And that's fundamentally going to offset the investment that we're making in connected margins. So, again, if you step back and you look at our adjusted guidance, the implication is that our normalized operations are roughly flat, which is us investing in those margins and using New World Fossil benefits that we've been able to execute that would hit 2017 to offset those.

On the stores side, over the last several years we have actually closed a number of smaller stores, whether they're small department stores or smaller specialty stores. Some of those stores have self-elected to close and, et cetera. But generally the impact of that was negligible on us because those stores were not very productive. And typically, if you move the inventory to a larger door, you get better sales anyway. So we don't see that. Some of that will be ongoing. It's not an impact. We are, as we mentioned, adding a lot of additional distribution for especially wearables. So CE channel, CE websites globally. So I think that's going to penetrate even more this year. So we're very interested to see how that plays out. And on the brand side, I would say especially now with our new capabilities of technology, I think we've put ourselves in a position where we'll be adding additional brands over the next couple of years. We're being very aggressive in the marketplace with our brands. We're pushing wearables as a differentiator as fast as we possibly can. We think we're going to gain share, and it gives additional space. So we think we're in position to add additional brands to take a larger share of the watch business and the wearables business.

Thank you. Our next question is from Scott Krasik of Buckingham Research. Your line is open.

Hi. Thanks very much. So just wanted to be clear on how you're looking at the guidance, Dennis. If we take out for the interest expense and the FX, it seems like your adjusted guidance is $0.51 to $1.21. Is that right and is that what we should be using for 2017? And then, secondly, I'm just wondering if you expect a much larger percentage of your revenues than normal to come in fourth quarter as well. And early discussions with your retailers, how are they planning to invest in the wearables category? I know some of them did it in a pretty big way in holiday 2016? Thanks.

I didn't quite follow your math on the front end. I think the best way to understand how we're thinking about the adjusted guidance is to just refer to the chart that we have in the press release that eliminates the impact of restructuring from both periods, eliminates the incremental interest expense – not total interest, but incremental interest expense that we expect were going to occur, last year's gains, and then the impact of currency so that you get both years on a relatively like-for-like basis. In terms of the sales trends, and we said this on the prepared remarks, we should see an increasing sales trend rate over as we move through the quarters. Obviously, the first quarter is going to be tough for some of the reasons we talked about, but largely it's going to be driven by bringing more and more wearables onto the platform. The majority of our wearables rollout this year will be second half. So you're going to see some more of the weighting in the back half of the year, but we think wearables can be the offset. And I would just, again, remind everybody that sequencing is important here. So you've got headwinds, you've got tailwinds. We certainly believe that connected can be the tailwind to ultimately offset those headwinds. Predicting them exactly when they're going to happen is always a challenge that we face still operating in a business with limited visibility.

And just to clarify, because it's hard for investors to exclude higher interest expense if that's going to continue and then also currency. So just the GAAP EPS plus the restructuring charges sound to me like $0.51 to $1.21?

I'm not doing your math here. So maybe we can talk offline, but I don't know if your math is right. I can tell you the way we're thinking about it. It's not to imply that that's the right number. It's really to help one compare year-over-year. That's what we're trying to accomplish with that.

Thank you. Our next question is from Ike Boruchow of Wells Fargo. Your line is open.

Hey, everyone. Thanks for taking my question. Just really simply, just can you tell us maybe the high-end or the low-end of the guide, Dennis? What's included in your guidance in regards to wearable revenue and wearable EBIT? I'm not sure, are you planning to make money on the wearable business this year. And if the answer is no, is there like a certain revenue point where you need to start to scale that business?

Yeah, we didn't – but we didn't specifically quantify that, but we are expecting given that we're investing in the margins this year to drive significant improvement and acceleration of the business. And we told you that our goal was to get perhaps another 3 points of share of the overall connected wrist device market. We did handicap that in the range, so that the lower end of the range assumes that we don't fully execute on the plan. There's a lot of moving parts and we're flying 1,000 miles an hour here. And we didn't comment yet on whether the full connected business is profitable.

Okay. But...

Thank you. Our next question is from Betty Chen of Mizuho Securities. Your line is open.

Thank you. Thanks for taking our question. I guess kind of following on what Ike was saying. It sounds like the team has done some comprehensive analysis already of sort of the balance between volume and costing. I guess, where do we need to be for that costing to come down so that the margins will retrace the 10 points being invested this year? Is it roughly a double of what we saw in 2016 or something higher than that? Any sort of help around that would be really helpful? And then, the other is, just want to understand the idea around the New World Fossil. Dennis, you're saying that you've already achieved 40% of that $200 million in EBIT in operating profit improvement, and that's already embedded into the 2017 guide, or is that something that's going to be recognized in 2018? I just want to make sure we understood that. Thanks.

First part of that question around volume. I'd point to a couple of things. On the supply side of the business, part of the answer is just volume-based pricing and getting our volume reflected in our contract with our supply base. But more than half of the opportunity is actually getting to volume that allows us to get our supply base to deliver dedicated manufacturing lines with a high degree of automation, because several of the components are specific to smartwatches and hybrid smartwatches and sometimes even unique to just us. So we've got to get to that volume. What I'd say is our goal is to get to aggregate the amount of volume that would meet our, what I'd call, our minimum efficient scale by the end of the year or early next year. And then, the next question is how do the economics and costs flow. But this is not a multi-year thing. This is aggregate the volume now, work with our suppliers to make it a win-win cost model, or find different suppliers, right? And that's a lot of work to get there, but I'm spending nearly 100% of my time making that happen.

And with respect to the New World Fossil, so what we're trying to communicate is that through the actions we've already taken, the contract renegotiations that we've had, facilities that we may have closed, the better pricing that we're getting because we're doing a better job consolidating our volumes, all of that effort should roll – and the stores that we've also closed – all of that effort should roll throughout – into the benefit of 2017 P&L based on the work that we've already done. And that's roughly 40% of our overall goal.

Thank you. Our next question is from Dana Telsey of Telsey Advisory Group. Your line is open.

Good afternoon, everyone. As you think about the wholesale business and whether its department stores, whether it's selling to the off-price channel, what's happening on the order patterns, what's happening on the promotions and the margins and what you're seeing in that channel. And what percentage of the business do you expect that channel to account for going forward? Thank you.

Well, I think the one thing we're seeing that wholesale is that we have some very desirable product selling pretty quickly. It's bringing a new customer, average unit retail is higher. So I think we're in good shape in terms of that. As we mentioned, we're going to have – because our inventories are leaner and we expect them to be on an ongoing basis leaner – that we would have a less off-price sales, and over time I think we can get our margins up for that.

Thank you. At this time, I'd like to turn the call back to Mr. Secor for any closing remarks.

So thank you all for joining us today, and we look forward to speaking to you again on our next call which should be In May. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.