Inter Parfums, Inc. (IPAR) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Inter Parfums, Fourth Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to, Russell Greenberg, Executive Vice President and CFO. Thank you, please go ahead. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Thank you, operator. Good morning, and welcome to our 2014 fourth quarter and year-end conference call. Following the financial review, Jean Madar, our Chairman and CEO, will provide a business overview, and then we will move on to your questions. Before proceeding further, I want to remind listeners that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors include, but are not limited to, the risks and uncertainties discussed under the headings Forward-Looking Statements and Risk Factors in our Annual Report on Form 10-K and the reports that we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update the information discussed. In addition, Regulation G codifications for the use of non-GAAP financial measures prescribes the conditions for the use of non-GAAP financial information in public disclosures. We believe that the presentation of the non-GAAP financial information included in this presentation is an important supplemental measure of operating performance to investors. The information required to be disclosed for the presentation of non-GAAP financial measures is disclosed in our 2014 Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission. This information is available on our website, at www.interparfumsinc.com. When we refer to our European-based operations, we are primarily talking about sales of prestige fragrances conducted through our 73% owned French subsidiary, Interparfums SA. When we discuss our United States operations, we are primarily referring to the sales of prestige and specialty retail fragrance products, as well as travel amenities, all conducted through our wholly-owned domestic subsidiaries. This should be the last conference call where I have to start with a brief history, but for new comers, here we go. In the 2012 fourth quarter, our Burberry license was terminated, and Burberry paid us a $240 million early termination fee. We also had entered into a transition agreement to operate certain aspects of the business during the first quarter of 2013, which resulted in unusually high 2013 first quarter sales, gross margin, operating margin and net margin. Then, in the 2013 second quarter, the sale to Burberry of all of our remaining Burberry inventory depressed gross margins for that period. So keep in mind that as I review year-over-year comparisons, also when I speak of ongoing brand sales, I am excluding Burberry brand sales from 2013. Starting in the second half of 2013 and for all of 2014, our net sales were exclusively ongoing brand sales. So now, moving on to fourth quarter results, net sales increased 18.6% to $125.1 million from $105.5 million. At comparable foreign currency exchange rates, net sales increased 25%. European-based operations generated net sales of $93.6 million, up 19.3% from $78.4 million. Sales by U.S.-based operations were $31.5 million, up 16.4% from $27.1 million. Gross margin was 59.4% of net sales, compared to 57.3% in 2013. SG&A expense, as a percentage of net sales, was 55.9%, as compared to 67.6%. Operating income increased to $4.4 million, as compared to an operating loss in 2013's fourth quarter of $10.8 million. Net income attributable to Inter Parfums, Inc. was $3.3 million, or $0.11 per diluted share, versus a net loss of $4.2 million or $0.13 per diluted share in 2013. We have reviewed sales drivers in our Q4 news releases, so I'll move on to other P&L points. Our gross profit margin was 59.4% of net sales, up from 57.3%, which, for our European-based sales, was primarily attributable to the strength of the U.S. dollar relative to the euro in the fourth quarter of 2014 as compared to that of the corresponding period of the prior year. For U.S.-based operations, there was a higher concentration of prestige brand product sales, which generate higher margins than specialty retail products. Selling, general and administrative expense, as a percentage of sales, was 55.9% for the 2014 period and that compares to 67.6% for the 2013 period. In 2014, 25% of net sales was attributable to promotion and advertising, while in last year's fourth quarter 34% was for promotion and advertising. As some of you will recall, we made a major investment in advertising promotion behind our largest brands in the fourth quarter of 2013 to support new product launches and maintain sales growth momentum. For the full year, net sales increased 15.3% to $499.3 million from 2013's ongoing brand sales of $433.1 million. In 2014, net income attributable to Inter Parfums was $29.4 million or $0.95 per diluted share. In the prior year, we had an exceptionally profitable first quarter, as I noted earlier, and that helped spur 2013's net income attributable to Inter Parfums, Inc., to $39.2 million or $1.27 per diluted share. In 2014, we generated cash flows from operating activities of $36.6 million further strengthening our already very solid financial position. In addition to no long-term debt, we closed the year with a working capital ratio of 4.7 to 1 with $383 million in working capital including $280 million in cash, cash equivalents and short-term investments. The strength of our balance sheet was one of the reasons why our board of directors authorized an 8% increase in the annual dividend to $0.52 per share. Our next quarterly cash dividend of $0.13 per share will be paid on April 15, 2015 to shareholders of record on March 31, 2015. Moving on to our 2015 guidance. As we reported yesterday, because of the continued strengthening of the U.S dollar versus the euro, we adjusted our 2015 sales guidance to approximately $470 million. In constant dollars, our 2015 sales guidance implies a 7% sales increase from 2014. As we also reported, our earnings are positively affected by a strong dollar because approximately 40% of net sales of our European operations are denominated in U.S. dollars, while almost all costs of our European operations are incurred in euro. We are therefore increasing our net income per share guidance range to $0.98 to $1 per diluted share from our previous guidance range of $0.95 to $0.98 per diluted share. Our guidance assumes that the dollar remains at current levels. Jean, please continue. Jean Madar - Chairman & Chief Executive Officer: Thank you, Russ. And good morning, everyone. Once again we appreciate your participation on today's conference call. As we said in the 10-K filed yesterday, I am sure you will find some items of special interest, but the one section that especially delights me is ongoing brand net sales to customers by region. In that section, you will see that all regions we sell achieved year-over-year growth, not just the three largest markets which are Western Europe, North America and Asia that we highlighted in the news release. I am talking about the other region, the Middle East, the Central and South America and even Eastern Europe. So, all these regions were up in 2014 and I hope that you are impressed as I am delighted. As we have reported, we have a number of launches in the work or planned for this year. This include a new fragrance of Oscar de la Renta called Extraordinary, that we will be launching next month at Macy's, Lord & Taylor, Belk and Dillard's and which is supported by national advertising in major U.S. magazines. Simultaneously, the new scent will roll out with emphasis in the Middle East, Southeast Asia, Canada, UK, Spain, Scandinavia. We have also a new scent for Dunhill, called Icon, Dunhill Icon which was recently launched at Harrods in London and has been doing very well. You may want to Google our Icon model Andrew Cooper and the fantastic photography that Annie Leibovitz did for the ad campaign, which will be seen in major men's magazine as well as billboard and outdoor campaigns in major airports worldwide. Icon is also debuting in duty-free locations in Continental Europe, Russia and Dubai. The distribution of Shanghai Tang Silk Road collection will begin in Hong Kong very shortly and broader distribution will ensue. As we have said before, we also have new fragrances for Me L'Eau, for Lanvin, for Jimmy Choo, for Van Cleef and for Anna Sui. If you have more questions later, I will answer in details on these launches. There are also quite a few limited edition scents, flankers and holiday programs, which will come to market this year. Our U.S. operation has become a larger piece of the Inter Parfums volume and that business has been evolving. One of the points we made on our last conference call was that prestige brands have become a more dominant part of our U.S. operation. Our newer names Oscar de la Renta, Agent Provocateur, Dunhill or Shanghai Tang prove that point. Having said that, the two newest additions to our portfolio, Abercrombie & Fitch and Hollister are well-known American specialty retail brands. On our last quarter, I said something like this. While we are looking to partner with specialty retail, the traditional model may make way for a new one depending upon the brand and its geographic reach, which is exactly what is happening. At least initially with these two brands, we'll be creating fragrance programs for international distribution rather than for the domestic stores. While this arrangement may be subject to change (14:30) for 2016 and again if you have more questions on Abercrombie distribution, I will answer later. In recent weeks, there was a breathtaking report regarding the new fragrances, launch of new fragrances and the report mentioned that 1,620 new fragrances were launched in 2014. 1,620 including 925 women's fragrance and 353 men's scents and 342 unisex fragrance. They represent new fragrances added to an already crowded universe of scents. I'm sure you will agree with me that without a good reason to exist, most of those fragrances will be gone within a few short years. So by identifying and concentrating in the most receptive markets and territories where our brands are known, we execute highly targeted launches that capture the essence of the brand in an effort to avoid this fate and allow our new fragrance launches the ability to withstand the test of time. Before moving on to your questions, I want to repeat some of the unique strengths of our company. We have an infrastructure able to support the significantly larger business. We have, also, a diversified and dynamic brand portfolio, and we have a global reach into 100 countries. Add to that an extremely strong balance sheet, as Russ mentioned before, with something like $280 million of cash, and an impressive track record of developing and commercializing successful new products that enhance the brands of our fragrance partners and expands their brand reach. All of this means that we are all prepared to grow our business through brand extensions as well as by expanding into new brands, through licensing, partnership, joint venture or, of course, acquisitions. So with that, operator, you can open the floor for questions. Thank you.

Certainly. And our first question comes from the line of Wendy Nicholson with Citi. Please go ahead with your questions.

Hi. Good morning. Jean Madar - Chairman & Chief Executive Officer: Hello, Wendy.

I have a couple questions. The first one is with regard to your outlook for 7% constant currency revenue growth in 2015, can you give us a sense for what you think the industry will grow at next year; in other words, how much faster than the industry you think you can grow? Jean Madar - Chairman & Chief Executive Officer: Well, Russ, you can try. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yeah. Historically, the industry itself – they say that they grow an average of somewhere right around 3% on a worldwide basis. And that 3% is probably in volume as opposed to in dollars. So in this business, Inter Parfums has historically consistently outpaced that of the overall industry. We are approaching 2015 with a little bit of conservatism (18:35), as we've mentioned in prior conference calls. Growth rates that we had seen historically in certain territories, like Eastern Europe and China, are not where they were, at least for our business, as they were in the past. So for us, the 7% is well below our compounded annual growth rate, but it is something that we believe is clearly makeable and doable from a constant currency standpoint for 2015.

And can you talk about your growth, specifically, in the U.S., because that does seem to be a market where there maybe seems to be a little bit better consumer spending environment. So if I compare – and I know apples-to-apples is very hard right now, but your growth in 2014 to 2015 in the U.S., would that be accelerating, decelerating, similar? Jean Madar - Chairman & Chief Executive Officer: I can try to give answer on that. I think – specifically, in the U.S., I think our growth – we will be able to maintain our growth, which is higher than in other countries. We have a lot of new fragrances launching in the U.S., meaningful, of course, Oscar de la Renta, as I mentioned, with Extraordinary. We think, also, that we will be able to introduce Dunhill Icon at Neiman Marcus towards the end of the year. I would like, also, to emphasize in general that Montblanc is performing extraordinarily well in the U.S market, because Legend is now in the top ten – has entered the top ten men's fragrance in the U.S market. So our growth in U.S. will be, I will say, higher than 7%.

Wonderful, and then my last question, Russ, if I understood it right, one of the reasons the gross margin in the fourth quarter was so strong was the mix shift to prestige doing a little bit better. Do you think that's – was that unique to the fourth quarter or will that carry through into 2015, and I'm really drilling down to try to get a little bit of guidance on the gross margin line for the year? Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Absolutely. But as I mentioned in the conference call prepared remarks, there were really two main reasons, one when you look at our European business, the strength of the dollar in the fourth quarter, clearly had a much more significant impact to the gross margin raise than the switch over in the United States to more prestige products versus specialty retail. But the specialty retail product is clearly – this is an area that the – has been in a little bit of a decline and most of the United States prestige – the business is moving more, as Jean said, to those prestige lines, like the Oscar de la Renta, Dunhill, Agent Provocateur et cetera.

Wonderful. Thank you, that's very helpful. Jean Madar - Chairman & Chief Executive Officer: Thank you. Thank you, Wendy.

Our next question comes from the line of Stephanie Wissink with Piper Jaffray. Please go ahead with your questions. Maria C. Vizuete - Piper Jaffray & Co (Broker): Hi. Thanks for taking our question. This is actually Maria Vizuete on for Steph. We just had a couple of quick questions. Just going back to Wendy's prior question, can you discuss the underlying growth rates this year relative to last year? I think that underlying growth rate was about 16% last year, can you just maybe talk about the drivers between the two years? Thank you. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Well, the growth if we are talking about North America or United States, North America was actually up around 14% in 2014. The drivers themselves are the brands. We have consistently seen acceptance of our products into the major department stores here throughout the United States. Brands like Montblanc, which is growing at a 40% rate; brands like Jimmy Choo, which is growing at a little bit lesser 9% or 10% and some of the newer brands that are in our portfolio in 2014 such as Oscar de la Renta is clearly what's spurring that particular growth rate. Maria C. Vizuete - Piper Jaffray & Co (Broker): Got it. Thank you. Jean Madar - Chairman & Chief Executive Officer: I would like to – if I may... Maria C. Vizuete - Piper Jaffray & Co (Broker): Yeah, please. Jean Madar - Chairman & Chief Executive Officer: ... to give (23:35) Montblanc in 2014 has seen a great increase. I'm sure you remember the increase was over 30%. So, Montblanc became in 2014 the number one brand in Inter Parfums, the number two being Lanvin, number three being Jimmy Choo. But what is interesting for 2015 is that we're continuing launching new products under Montblanc, because we'll be rolling out the Emblem, which is the men's fragrance from Montblanc and we'll be launching a very important initiative with Lady Emblem, which is a women's fragrance under Montblanc. So, we are looking at growing in 2015 business that is already very high for Montblanc. And if you let me continue, I'll tell you also that Lanvin and Jimmy Choo, we'll see new launches in 2015. So, we think that as you know since the beginning of the year, we mentioned an increase of 7% of the share, which we think it's conservative because the world situation is quite unstable in certain regions like Russia, or the Middle East. So, we have to be prudent. But we have in our pipelines great products, so if the market responds well, we could do better than that. That's what I wanted to add. Maria C. Vizuete - Piper Jaffray & Co (Broker): That's very helpful. Thank you so much. And then just a quick question on – just on the advertising and promotion line for 2015, can you maybe just talk about maybe what your goal is there, and then what kinds of programs you might employ? Thank you. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Well, from a percentage of sales standpoint, 2014 came in at around 17%, 17.4% as compared to 2013 of 16.7%. Moving into 2015, I think that overall the percentages are going to be higher. Part of it is also a reflection of the exchange rates, i.e., the benefits that we see from the larger brands, the ones that are in our European portfolio, the percentage on advertising because of the way the dollar works, we will probably see a higher percentage of A&P spent on those particular brands. So the trend is going to be for little bit of a higher percentage in 2015, I can't pinpoint an exact amount at this point in time, but this goes into the business decisions that need to be made when you have currency fluctuations to the extent that we have, and that we've seen recently with respect to the U.S. dollar exchange rates. Jean, as far as how we spend the advertising, do you want to... Jean Madar - Chairman & Chief Executive Officer: Yeah. We spend the advertising, most of the increase will go to continue the momentum on the largest brand in the company, but we have also to – we will invest on the TV advertising for Dunhill, cable TV in certain markets, and also for Oscar de la Renta. So basically we are going to have a benefit from the appreciation of the dollar, part of this benefit is going to go into incremental bottom line, but part of it we want to use it to increase our media and advertising budget. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yes. Maria C. Vizuete - Piper Jaffray & Co (Broker): Thank you. And then just lastly, can you just help us think about maybe the strategy behind specialty retail partnerships. Obviously, there was prestige outperforming as a category that's been in decline, or a little bit underperforming relatively. Can you just help us think about that as a strategy longer term and what your thoughts are there? Thank you. Jean Madar - Chairman & Chief Executive Officer: I can try. We think that with the new signing of Abercrombie we've really the best of the best of specialty – what we call specialty retail business. But let's not forget that Abercrombie has signed an agreement with Inter Parfums in order to especially outside of the U.S. go out of their stores and sell to perfumeries and department stores. And we have the ability through our network to sell in all these countries and all the stores. Abercrombie is much more than a retailer, Abercrombie is a trademark, it's a brand, it's a desirable brand that went through some issues and some slowdown in the U.S. and also outside of the U.S. from a closing point of view, but the fragrance and the reputation that they have for their existing fragrances is intact and is very high. So I can tell you that, many, many markets are waiting impatient – are waiting for the new products that we're going to come up for Abercrombie and also for Hollister. We're looking at this launch will happen in first quarter or second quarter of next year. Maria C. Vizuete - Piper Jaffray & Co (Broker): Thank you so much, and best of luck. Jean Madar - Chairman & Chief Executive Officer: Thank you. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Thanks.

Our next question comes from the line of Joe Altobello with Raymond James. Please go ahead with your questions. Joe N. Altobello - Raymond James & Associates, Inc.: Thank you. Good morning, guys. Jean Madar - Chairman & Chief Executive Officer: Hello, Joe. Joe N. Altobello - Raymond James & Associates, Inc.: Just want to start off – hi, yeah. Just want to start off with the Abercrombie and Hollister licenses, can you remind us – is there a sales impact in 2015, because I think you guys are taking over some existing distribution, first off? And then secondly, what is the opportunity to sell those fragrances in their own retail doors, because you sort of alluded to the opportunity but didn't sort of spell out what could happen there? Jean Madar - Chairman & Chief Executive Officer: Russ, do you want to answer? Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yes. For 2015, we will have a small amount of sales as we are doing a test in certain international markets with respect to Abercrombie's existing fragrance. But most of what we're really gearing for and in development for is new fragrances that will be launched worldwide in many, many territories around the world, to build an international distribution based upon the name recognition and – the brand name recognition of both Abercrombie & Fitch, as well as Hollister. Getting to the second part of your question, in our agreement with Abercrombie, in essence what we're hoping it's going to evolve into is we become the development arm of new product development for product that will not only be sold internationally, but also will be sold in their stores. They have the right to buy the product for their stores, if they want it. As times goes on, we really don't see why they would not; again, they have a major player in the fragrance business – of Inter Parfums as their development center. So, the goal is to develop product that will eventually be sold in their stores; although, unless they say they want it, we're not going to project sales for it or anything along those lines. But we are building for that particular purpose. Joe N. Altobello - Raymond James & Associates, Inc.: Okay. Thanks, Russ. And then, secondly, in terms of the market for new licenses, the Abercrombie and Hollister licenses, I think, were the only ones you guys added in the last 18 months or so. Is there a lot going on from that perspective? And how big of a license could you guys take on today? Could you guys take on a Burberry-sized license for example? Jean Madar - Chairman & Chief Executive Officer: I can answer on Burberry. Can we take a Burberry-sized license? I'm not sure you remember, but when we terminated our relationship with Burberry, we decided to keep our team intact. We didn't let go any substantial amount of people. So, we have all these sales and marketing person in the company. So, we definitely – and as I said before in two or three conference calls regarding the subject, Inter Parfums can manage much more business than what we have today with the same amount of people, with the same group that we have. So, I hope that in the next weeks or months, we'll be able to increase our portfolio of brands. Russ, do you want to comment? Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yeah, Joe, you're right. December is when we signed Abercrombie & Fitch and Hollister. And 2014 was a relatively quiet year from the standpoint of signings, but it doesn't mean we haven't been actively pursuing. We are currently looking at quite a few different opportunities. Exactly when something will be done we can't predict, but I can guarantee you that this is priority one for Inter Parfums. Joe N. Altobello - Raymond James & Associates, Inc.: Great. Thank you, guys. Jean Madar - Chairman & Chief Executive Officer: Thank you.

Thank you. (34:20). Jean Madar - Chairman & Chief Executive Officer: Anymore questions?

Yes, we have one more. Our next question comes from the line of Linda Bolton Weiser with B. Riley. Please go ahead with your questions. Linda Bolton Weiser - B. Riley & Co. LLC: Hi, guys. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Hey, Linda. Jean Madar - Chairman & Chief Executive Officer: Hi, Linda. Linda Bolton Weiser - B. Riley & Co. LLC: Hi. So can I ask you about – I mean, you alluded to the major launches in your brands that will be occurring in 2015. Just in case I missed what you said, can you just give us the rundown of which of the major launches are in the first half versus second half of the year, and then maybe comment on the cadence of the sales growth through the year, because you had – I mean, you had easier kind of comparisons in the first half – in the first half you have easier comparisons and it gets a little harder. So should we put higher growth in the first half or just even, or higher in the second half? You know, I'm just trying to get a little insight on that? Thank you. Jean Madar - Chairman & Chief Executive Officer: We hate to give breakdown by quarter, especially because more and more we give some exclusivity to certain retailers in certain market for a month or two or three, and then we rollout. But as I said, the Montblanc Emblem for women will happen in the second half and it's an important launch. On Lanvin, there is in spring, we launch Eclat d'Arpège for men. That's an important launch also. In summer, we're going to have another fragrance for Lanvin. For Jimmy Choo, we'll continue to rollout Jimmy Choo for men, who has been very successful in the U.S., in the UK, almost everywhere, and we'll have an important new fragrance towards the end of the year. So it's quite balanced. Let me remember, Oscar de la Renta. Yeah, I am sorry, yes, Russ. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: I was just going to give, we have a few other launches, Oscar de la Renta which is going to start with spring. Jean Madar - Chairman & Chief Executive Officer: Yes. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Dunhill. With the Icon, Dunhill, which just already started in first quarter of 2015. Jean Madar - Chairman & Chief Executive Officer: So in 2015, you have activities in every quarter – in each and every quarter, I guess. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yeah. Linda Bolton Weiser - B. Riley & Co. LLC: Okay. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: But as Jean said, it's very important is it really does build out over time from the standpoint of many of these launches that we'll have an exclusive period in particular retailers in certain countries for short period of time until it really rolls out as the year goes on. Linda Bolton Weiser - B. Riley & Co. LLC: Okay. Sounds good. And then, can I just ask you about the currency, the euro impact, I just want to make sure I totally understand. I understand, how in a weakening euro environment, your bottom-line impact is much less negative than the impact on the top line. But would you rather from the bottom line earnings perspective, have a flat euro or do you prefer a declining euro? Did you understand what I'm asking like... Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: I understand exactly what you're asking, but your assumptions are wrong. From a bottom line standpoint, when the euro is declining in value or the dollar is strengthening, it actually creates more profit. But the key is, is that there are many other things that are happening simultaneously. And this occurs because of the fact that Inter Parfums SA sells through – 40% of their sales are sold to customers in dollars, all right. But all of their costs are in euro. So there is a huge gross margin impact. However, what mitigates that is it becomes very expensive for their customers to buy the product, number one, all right, so – there you have to take that into consideration. And number two because of the margin impact, there is a tendency to increase your spending, which is exactly what I said, when I answered the question earlier as to what I think is going to happen to A&P or advertising and promotion as we move into 2015. And then there is a balance that of course ends up in the bottom line. So, no, we don't really want to see the dollar getting extremely strong, it creates a problem for overall business. We would love to see it at a consistent rate. But in this particular environment, we've watched it go from I guess in September from almost $1.40, $1.35 to euro to at the end of the year, where it was right about (39:24) $1.20, and now it's at – (39:26) it's like $1.05 or $1.06, but that does create more profit for us with respect to those sales that our European subsidiary does in U.S. dollars. Linda Bolton Weiser - B. Riley & Co. LLC: Yeah. Okay. I understand. Jean Madar - Chairman & Chief Executive Officer: I agree. I agree with you, Russ. Linda Bolton Weiser - B. Riley & Co. LLC: Thanks. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: And if you need more explanation like we can always talk offline, and I can walk you through the scenario. Linda Bolton Weiser - B. Riley & Co. LLC: No, I understand. And then finally I think that your royalty rate was a little bit higher, I think, maybe this is explained in your 10-K, but I didn't quite catch it. Can you explain the royalty rate being – I think it was 7.9% in the quarter, seems a little high and going forward is 6.5% good or is 7.0% a better ratio or? Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Yeah. As we explained in the quarter, we report there is an accrual there, similar to what happened in the third quarter. In 2014, there was an accrual of little bit of a contingency that might be due to a former licensee – licensor, I should say. If you ex that out, the royalty rate is around 6.7%. Jean Madar - Chairman & Chief Executive Officer: So the number we should use for next year? Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: The number should be right around the 6.7% – well maybe a little bit less, right around that number, that's where we are on an absolute comparative basis. Jean Madar - Chairman & Chief Executive Officer: Okay. Linda Bolton Weiser - B. Riley & Co. LLC: Okay. Thanks a lot, guys. Jean Madar - Chairman & Chief Executive Officer: Thank you. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Thank you, Linda.

And this concludes today's question-and-answer session. I'd like to turn the floor back to management for closing remarks. Russell Greenberg - CFO, Director, CAO, EVP & Head-Investor Relations: Thank you. Before signing off, I just want to mention real quickly that I will be presenting next week at the Sidoti Small Cap Equity Conference on March 16 in New York. I hope to see some of you there. I'll also be presenting in mid May at the B. Riley Consumer Conference in Los Angeles. And in late May at the Citibank Consumer Conference here in New York. In June, I'll be participating in the Raymond James Boston Spring Investors Conference, and the Piper Jaffray Consumer Conference, which is here in New York. I hope to see some of you at those events. Thank you for your participation on this conference call, whether you are live or listening via webcast. And if you have additional questions, I am available by phone. Thank you and have a great day.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.