Movado Group Inc (MOV) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Movado Group's second quarter earnings conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session and instructions will follow at that time. [OPERATOR INSTRUCTIONS] As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in whole or in part without permission from the Company.

I would now like to introduce Ms. Suzanne Rosenberg of the Movado Group.

Please go ahead.

Thank you.

Good morning, everyone, and thank you for joining us today.

With me on the call is Efraim Grinberg, President and Chief Executive Officer, Rick Cote, Chief Operating Officer, and Gene Karpovich, Chief Financial Officer.

Before we begin I would like to note that this conference call contains forward-looking statements which are made in pursuance of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Factors which could cause actual results to be materially different from any future results expressed or implied are discussed in our filings with the Securities and Exchange Commission.

Such forward-looking statements include statements regarding Movado's performance for the remainder of fiscal 2007 and beyond.

We currently expect to update estimates.

However, the failure to update this information should not be taken as Movado's acceptance of these estimates on a continuing basis.

Movado Group may also choose to discontinue presenting future estimates at any time.

Let me now outline the order of speakers and topics for today's conference call.

Efraim will begin with the highlights of our second quarter results, Gene will then review the financial details, and Rick will provide you with an update on our operating initiatives along with our financial outlook.

We would then be glad to answer any questions you might have.

I would now like to turn the call over to Efraim.

Thank you, Suzanne.

Good morning and welcome.

We're very pleased with our performance for the first half of this year.

On top of the robust growth experienced in the first quarter, we saw continued momentum in the second quarter, not only on the top line, but also with solid expansion in our gross margin and our operating margin results.

In our luxury category, Ebel continues to gain in prominence around the world.

On top of a strong first quarter dominated by the market introduction of the new Brasilia collection, Ebel delivered a high single-digit sales increase in the second quarter reflecting strong demand.

We continue to put Ebel front and center in the eyes and minds of the consumer with a comprehensive and consistent marketing campaign.

Featuring Giselle, this marketing campaign has not only supported the introduction of Brasilia, but has also positively impacted sell-through of Ebel's other collections, including Ebel Classic and Beluga.

Looking ahead to the third quarter, we'll launch an exciting new collection aimed at the Ebel male consumer.

Featuring bold aesthetics and sophisticated technical features, the 1911 BTR collection is entirely mechanical and powered by Ebel's proprietary movements.

We continue to develop our plan for the rebirth of the Concord brand in the luxury watch category.

In addition to hiring a new brand President, we have made the strategic decision to shift the leadership of Concord from our headquarters here in Paramus to our offices in Switzerland.

We believe these actions will go a long way towards supporting the development of our brand strategy as we transform Concord into a solid, more profitable contributor to our Company for the long-term.

In the meantime, we have rationalized Concord's expense structure and continue to work closely with our retail partners to maintain these very important relationships.

We look forward to sharing more details with you about Concord's strategy towards the end of our fiscal year.

Our accessible luxury category, comprised of Movado and ESQ, is a pillar of strength for our Company and comprises approximately 44% of our total business.

During the second quarter this category continued to deliver a strong sales performance, posting high single-digit increases over last year.

Movado experienced solid sell-through trends at retail, driven by the success of new products such as the Ono watch collection.

This fall, we will delight the Movado customer with a compelling assortment of new products including [Sephiro] for men, new styles of Fiero, the reintroductions of the SE and Visio collections, and our best selling, Esperanza, now in a chronograph.

Of course, we will strongly support Movado in the marketplace with new executions of our advertising campaign, featuring Mia Maestro, Kerry Washington, and Wynton Marsalis.

As you may have seen by now, during the second quarter we successfully launched a very exciting new sports collection by Movado, Series 800.

This fall momentum will continue to build for this collection as we support Series 800 with a new campaign, "The Art of Performance."

The campaign features two superstars who personify excellence and who will bring tremendous leadership and energy to Series 800, Tom Brady and Derek Jeter.

Already, we are introducing this collection to its consumers via their lifestyle with the introduction of TV commercials on ESPN.

We will continue to bring Series 800 to life through a comprehensive, multimedia campaign featuring print ads and targeted sports publications, continued cable TV advertising, and a bold new Web site which launched in July.

During the quarter our Movado boutiques posted a strong 9.3% comparable store sales gain.

Sales of our proprietary Movado jewelry continue to be driven by diamond fashion, including our very successful Ono collection.

We also saw great improvement in our boutiques gross margin driven by product mix and sourcing efficiencies in new product introductions.

During the quarter, we opened one new boutique in Atlantic City and over the second half of this year we plan to open three additional boutiques, Century City in Los Angeles, North Park in Dallas, and in San Francisco Center.

These locations will bring the total number of stores to 31 at year-end.

As we move towards converting this business from an investment into a profitable operation in fiscal 2008, we remain focused on improving conversion rates and increasing our average sale through a combination of strong new product introductions, along with increased national advertising to further complement our targeted local advertising and direct mail campaigns.

ESQ experienced strong double-digit increases in the quarter and first six months.

We have made tremendous inroads since embarking on an accelerated growth initiative for this brand two years ago.

During the second quarter we experienced strong productivity levels in existing doors and layered new incremental distribution with chain jewelers and department stores along with independent jewelers as we continue to take advantage of the gap in the entry level Swiss watch category.

We have raised the bar in design in this segment with leadership products such as our best-selling Venture collection.

This fall ESQ will be a true standout in the marketplace with the introduction of a compelling land, air, and sea collection combining performance-driven design with sensible functionality.

Supporting this key collection will be dynamic marketing support alongside new executions of our "ESQ and You" campaign which continue to resonate strongly with consumers and retailers alike.

We also look forward to cable TV advertising this fall, featuring new products from ESQ's Rally, Venture and Beacon collection.

Our licensed watch portfolio experienced a very strong second quarter and year-to-date period.

This category increased 51% year-over-year led by the introduction of the Hugo Boss watch brand.

Coach, Tommy Hilfiger and Hugo Boss each target a distinct consumer group with strongly differentiated products and brand positioning in the marketplace.

Coach continues to be embraced by a loyal consumer base in North America and Japan.

In line with the Coach philosophy, we are focused on curtailing distribution and improving productivity, which has proven to be a successful strategy.

Fashion newness continues to flow on a regular basis as we work closely with the Coach team to develop synergies between watch and handbag design.

Sell-through of key families including Lexington, Madison, Signature and Gallery is strong and we look forward to a significant increase in product newness during the second half of the year.

Tommy Hilfiger has returned to its roots as a premium American lifestyle brand and our Tommy Hilfiger watches and marketing programs reflect this image.

New styles such as Blackbird, a sport classic piece with a multieye function movement, will be used in this fall's advertising campaign as well as Yarmouth featuring nautical styling.

During the second quarter we completed the rollout of Hugo Boss watches, which is now present in 37 countries around the world.

Brand right and priced appropriately for the higher end of the fashion watch market, Hugo Boss watches will leverage the power of the Hugo Boss brand on a global basis as we work towards building this brand into a significant business for our Company.

At the end of September we will introduce the much-anticipated Juicy Couture timepiece collection to the market.

Already, this collection has received tremendous accolades from the press and retailers alike.

Juicy timepieces are trend right, novel and have a distinct attitude about them.

With prices ranging from 195 to $595, this fun and whimsical collection will launch at high-end department stores, Juicy Couture retail stores, and select specialty stores.

You can also preview the collection now on juicycouture.com.

As we enter the second half of fiscal 2007 our Company is well positioned for an excellent year.

We look forward to the multitude of powerful marketing programs we have planned for the fall season.

We are aware that factors such as high energy prices and higher interest rates could have an effect on customer's discretionary spending.

Nevertheless, our consumers have remained resilient and we continue to execute our business plans.

Our strong financial position will fuel our brand's continued growth and enable us to continue investing behind and executing on our long-term initiatives.

I would now like to turn the call over to Gene.

Thank you, Efraim, and good morning, everyone.

We recorded strong financial results in the second quarter ended July 31, 2006 fueled by strong sales.

Sales for the second quarter were $126.6 million, or 9.8% above prior year.

Sales in the wholesale segment increased 10.9% to $106.1 million.

Our luxury category, comprised of Ebel and Concord, was below prior year by 7%.

Ebel sales were above prior year by 7.2% driven by a strong global response to the launch of the new Brasilia collection.

Concord was below prior year as expected.

Our accessible luxury brands, Movado and ESQ, were above prior year by 9.5%.

Movado continues to achieve very good sell-through at retail in our major chain and department store business and saw good response to the launch of the Series 800 sport collection.

ESQ continues to generate positive response from our retail customers through the new model introductions and new marketing campaign.

We also continued to expand ESQ's domestic distribution.

Our licensed brands, Tommy Hilfiger, Coach, and Hugo Boss were above prior year by 51.2%.

All brands were above last year.

The growth was primarily the result of the launch of Hugo Boss watches globally as well as growth for Tommy Hilfiger both domestically and internationally.

The domestic wholesale segment was up 6.2% from $69.6 million to $73.9 million.

The international wholesale segment was up 23.5% from $26.1 million to $32.2 million.

The retail business posted a 4.1% increase over last year.

The increase was driven by an overall 20.9% increase in Movado boutique sales.

This was the result of a 9.3% comparable store sales increase along with the addition of four non-comparable stores year-over-year.

The company outlet stores were below prior year by 7.1%.

This was primarily the result of an 8.7% comparable store sales decrease, reflecting reduced traffic and product assortment.

As of July 31, 2006 the Company operated 28 Movado boutiques and 29 outlet stores.

Gross margin for the quarter was $78.5 million, or above last year by $8.5 million.

The increase in gross margin is primarily due to the sales increase.

Gross margin as a percent of sales is 62% versus 60.7% last year.

The increase of 130 basis points was driven by higher margins in our Movado boutiques due to the sales mix and higher margins from our jewelry products and margin percentage improvements across most brands due in part to higher margins on our new model introductions.

Operating expenses were $64.4 million, or 11.7% above last year.

The principal reasons for the increase in expenses are higher marketing expense to support our growth initiatives, added spending resulting from the retail expansion, higher payroll and related expenses reflecting general salary increases, increased headcount to support the growth of both new and existing brands, and higher equity compensation expense.

In addition, higher costs were incurred as a result of the consolidation of a majority-owned joint venture established to distribute our licensed brands in Germany and France.

Net interest expense was $303,000 below our prior year expense of $884,000.

As you'll recall, in the fourth quarter last year, we repatriated $150 million in cash under the American Jobs Creation Act.

This resulted in more cash in the U.S. and higher borrowings in Switzerland.

The increased cash invested in the U.S. generated significantly higher interest income than in prior years, more than offsetting the interest expense from the borrowings in Switzerland.

The average interest rate earned on our cash was 4.9%.

Our average debt for the quarter was $99.3 million compared to $72.1 million prior year.

Our average borrowing rate was 3.7% versus 5.2% prior year.

As you are aware, we established a joint venture with a European partner in the first quarter. 100% of the financial results of this joint venture are included in our overall results with our partners' 49% interest reflected in the minority interest line on the P&L.

For the quarter, the joint venture recorded minor operating income.

Income taxes were provided at a 17.5% effective tax rate versus a 25% rate prior year.

The lower effective tax rate is primarily the result of our ability to utilize a greater portion of our Ebel-related Swiss net operating loss carry forward.

This lower effective tax rate had the effect of increasing diluted earnings per share by $0.04.

Net income was $11.3 million versus $8.6 million last year.

Earnings per diluted share was $0.43 versus $0.33 last year.

Looking now at the year-to-date results.

Sales for the six-month period were $224.3 million, or 10.5% above prior year.

Sales in the wholesale segment increased 11.2% to $187.1 million.

Our luxury category was above prior year by 6.2%.

Ebel was above prior year by 37.9%, while Concord was below prior year as expected.

Our accessible luxury brands were above prior year by 7%, both Movado and ESQ were above prior year.

Our licensed brands were above prior year by 36.4%, reflecting the launch of Hugo Boss watches and the global growth in Tommy Hilfiger.

The domestic wholesale segment was up 5.9% from $122.5 million to $129.7 million.

The international wholesale segment was up 25.4% from $45.8 million to $57.4 million.

The retail business posted a 6.9% increase over last year.

The increase was driven by an overall 16.6% increase in Movado boutique sales.

This was the result of a 7% comparable store sales increase along with the addition of the four non-comparable stores year-over-year.

The company outlet stores were below prior year by .9%.

This was the result of a 2.6% comparable store sales decrease as well as the factors which I stated earlier.

Gross margin for the six-month period was $138.1 million, or above last year by $15.3 million.

The increase in gross margin is primarily due to the sales increase.

Gross margin as a percent of sales is 61.6% versus 60.5% last year.

The increase of 110 basis points was driven by the same factors as indicated for the quarter.

Our operating expenses were $120.6 million, or 11.2% above last year.

The principal reasons for the increase in expenses are again the same as outlined for the quarter.

Net interest expense was $355,000, below our prior year expense of $1.7 million.

Our average debt for the six-month period was $102.8 million versus $61.9 million in the prior-year period.

Our average borrowing rate was 3.6% versus 5.4% prior year and the average interest rate earned on our cash was 4.7%.

For the six-month period, the joint venture recorded a minor operating loss.

Income taxes were provided at a 17.5% effective tax rate versus a 25% rate prior year.

This lower effective tax rate had the effect of increasing diluted earnings per share by $0.05.

Net income was $14.2 million versus $9.5 million last year and earnings per diluted share was $0.54 versus $0.37 last year.

Now taking a quick look at our balance sheet.

Our cash as of July 31, 2006 is $78.1 million versus $50.3 million last year.

Accounts receivable of $128.4 million is above prior year by $19.6 million.

This increase is attributable to the sales growth in Ebel where longer payment terms are the norm for luxury brands and to the higher sales growth in our wholesale business versus the retail business.

The retail business is a cash business, while payment terms are the norm in wholesale.

Inventories of $215.5 million increased by $12.4 million from last year.

The increase is due to seasonal build of product made in anticipation of the upcoming holiday selling season and higher Concord inventory as a result of the reduction in sales.

Total debt consisting of both short and long-term debt was $97 million versus $82.5 million last year.

Capital expenditures were $6.8 million and depreciation expense was $7.7 million.

We expect our capital expenditures for the year to be approximately $20 million and depreciation expense for the full year to be approximately $16 million.

Overall, we are very pleased with the financial performance in all respects, delivering a very solid P&L performance and maintaining a sound balance sheet.

Now let me turn the call over to Rick.

Thank you, Gene.

Good morning, everyone.

We're very pleased with the results we delivered during the first half of the year, which continued to reflect the success of our brand and business investments, new product offerings, and enhanced productivity.

We remain focused on executing our strategy and achieving our long-term objectives, which include first, realizing the opportunities taking place in our existing businesses.

This includes the continued growth of our Movado boutique business as we convert this business into a profitable operation, our accelerated growth plan for ESQ, the ongoing revitalization of Ebel to its historic stature as a global luxury watch brand, and the restoration of the health of the Concord brand.

Second, a continued focus in ramp-up of our newest businesses, Hugo Boss, Juicy Couture, and the spring 2007 launch of Lacoste watches.

Third, continued improvement of our financial returns, namely operating margin, which is the top priority for our Company.

As we reap the benefits of investments made behind our brands and businesses, we are committed to building long-term shareholder value through increased scale and a combination of gross margin improvement and the leveraging of our existing infrastructure, our goal is to ultimately expand our operating margin from the historic 10% level to the mid-teens.

Now I'd like to turn to our financial outlook.

We remain aware of the current macroeconomic factors which could impact consumer discretionary spending, including higher gas prices, higher interest rates and general economic uncertainty.

To date, we continue to experience healthy trends at retail.

Therefore, we continue to project diluted earnings per share for fiscal 2007 to range between $1.53 and $1.58.

This guidance includes an approximate $0.08 per diluted share expense associated with the adoption of FASB 123R and the shift in the composition of our equity-based compensation plan from options toward restricted stocks.

Net sales for fiscal 2007 are expected to grow between 10 and 11% from last year.

As you know, our Company has established a strong track record of financial success.

We continue to focus on long-term strategic goals and objectives and as such have determined that providing quarterly earnings guidance is not consistent with this long-term view.

We recognize the importance, however, of continuing to provide our shareholders with a means to measure our performance and progress against our stated goals and objectives.

Therefore, we will continue to provide annual earnings guidance and conduct quarterly conference calls to keep you informed of our strategies, as well as key drivers of our business as we move forward.

With that, I would now like to open up the call for your questions.

[OPERATOR INSTRUCTIONS] Your first question comes from Christine Koerber of JMP Securities.

Hi.

Congratulations on a nice quarter.

A couple of questions.

First of all, can you talk a little bit more about the Juicy launch and the number of doors you're going into initially?

And second, can you give us a little more color on Concord, especially with the move to Switzerland and the new President?

When we would expect to see Concord start contributing to top line as well as bottom line again?

And then lastly, looking for a little more color on what you're expecting from the holiday season based on orders and shipments so far by retailers.

Thank you.

Let me start with Juicy.

We are launching it really through high-end department stores as well as specialty stores and the Juicy Couture locations and approximately about 150 doors we will launch in this fall to 200.

And we've had a tremendous response to our collection and we should be delivering it at the end of this month.

A lot of excitement behind the Juicy brand and we believe a really unique offering on the product front as well.

There's really nothing out there in the market like it.

Concord has really been, for us, a brand that's been a truly global brand for us in terms of really breaks out a third of our business in the Far East, a third is in the Middle East and Europe and a third in North America.

So we felt that moving the headquarters to Switzerland would really be a strong statement in terms of our international business and also focus on global development and that's proven initially to send a very good message to our global distribution and we expect really over the next, for fiscal 2009 that really Concord should be back in a stronger position.

Next year it will continue to be a restructuring year for the Concord brand.

And I think it's very early to say how the holiday season is going to shape up.

So far, we've seen a resilient consumer and, fortunately, I think energy prices have begun to drop a little bit.

But those are concerns in the marketplace, but we've seen a resilient consumer and we have very strong plans in place behind each of our businesses for the holiday season.

Thank you.

Thank you, Kristine.

Your next question comes from Jason Asaeda of Standard & Poor's.

Hi.

Good morning.

Congratulations on a great quarter.

Could you just talk a little bit about what was happening in, I guess, the outlet stores during the quarter?

Was there just less clearance product available?

Well I think we saw, it wasn't less product, it was a mix of product, and also we saw decreased traffic and we think that some of that may have been had to do with energy prices as well as the product assortment that was in the stores.

And we are working on our product assortments in the store and we believe that will have a positive affect in the second half of the year, although we're not forecasting any strong business in our outlet stores in the second half of the year.

Okay.

We are continuing to focus on strong gross margin and we continue to deliver strong gross margins in that vehicle as well.

Great.

Thank you very much.

Thank you, Jason.

Thank you.

Your next question comes from the line of Arnold Brief of Goldsmith and Harris.

Just a couple of questions.

Could you give us an update on how Movado is doing in China?

Number one.

Number two, could you give us, I think you've done it before, but just to see if there's any change, the ultimate number of doors that you want Juicy and Hugo Boss to go into, I mean the goal may change, but what is your goal now for the number of those doors?

And finally, is it fair to say the outlet stores are sort of a reciprocal of your other businesses?

In other words, if your wholesale and boutiques do really well that the assortment and product that's left to go into the outlet stores becomes more limited and the results from the outlet stores go down or suffer a little bit, the better your other brands do at wholesale?

Well, let me take the China piece first.

China, for us, is a long-term proposition and we continue to invest and build that marketplace.

Our sell-through continues to grow.

It's still a very small market for us.

We are strengthening.

During this quarter we will be adding to our staff there and strengthening our management team and leadership team for China so we're excited about that and we really see China developing for us over the next two to four years.

In terms of the Hugo Boss stores, there's one thing I think that's important to recognize is that Hugo Boss for us is a much bigger business outside the United States than inside the United States.

It is a truly global brand with very strong position in Europe, we're also developing it in Asia.

I think it's a little early to talk about the number of doors.

Rick, how many doors do we currently have for Hugo Boss?

Hugo Boss we're probably in the 1500 range.

But again here, what we do is we focus in on what we expect the sales level to be.

And as I've said in the past, our licensing brands, when we enter into those, we would expect a minimum sales level about $20 million as we mature the business, and ideally more in the 30 to $50 million level.

And I guess the last question was more on the outlet business, and I think your comment is certainly a valid one where it does have an impact that as the business performs much stronger in our wholesale business and in the retail side of the business, the outlets then have less of an assortment available and, clearly, that has been a little bit of the impact in the first half of the year in our ability to address that.

But also with the expansion of the brands that we have and the amount of product offering and a lot of the newness that's in there certainly has been a factor as well, because we obviously have expanded our businesses quite a bit.

So, we're, again, very comfortable with the outlet business, very appropriate, very profitable for us.

And as Efraim said before, our focus is making sure that we maintain strong margins there and we certainly have been doing that as opposed to trying to react on a short-term basis to just make up sales without driving the bottom line.

Thank you.

Thank you.

Your next question comes from David Taylor of David P. Taylor and Company.

Thank you.

I have a question for Gene.

Could you discuss the accounting with NOLs?

I was under the impression that when you changed your estimate on your foreign profits, specifically Swiss profits, that you took in a one-time reduction in the NOL which translated into a lower tax rate.

But from the wording in the press release with the 17.5% tax rate expected for the rest of the year that would suggest that there's a continuing credit to the income statement.

Could you comment?

Yeah, David.

When we -- and you're absolutely correct.

When we reassessed our business and reassessed the utilization of the NOL, what we then do is assess for the full-year what our effective tax rate is going to be.

So when we did it at the end of the first quarter, it was as a result of an opportunity with the tax strategy in Switzerland and therefore we recognized then at that point in time over the full-year it meant we'll be at a 17.5% effective tax rate.

So it wasn't basically -- it wasn't the one-time activity in the first quarter, but it was more so the affect on the whole year.

Now looking into the future just in general terms, do you -- your change in assumptions only impacted '07?

It says nothing about fiscal '08?

Is that correct?

That's correct, that's correct.

We expect fiscal '08 to be in the 25% range right now, but certainly we'll reassess that as we get closer to the end of the year and do our new budgets.

This is Rick speaking.

The benefit that we picked upon the NOL for Ebel is not only a benefit that we would realize this year but expected to realize over the next couple of years.

So you have to look at the life expectancy of the carry forward in what you would expect from that so not all of that cash would be realized in this fiscal year, but you do have to book it that way.

Okay.

I understand that.

How large is the NOL as we speak now?

We still have about $100 million left on our books.

In U.S. dollars, not Swiss francs.

It's in U.S. dollars.

And that's the gross amount.

The tax benefit of that is obviously only about 15 to 20% of that.

Right.

Okay.

Thank you.

Thank you, David.

[OPERATOR INSTRUCTIONS] Your next question is from David Taylor of David P. Taylor and Company.

I got back in the queue, I should have just stayed online.

Have you been experiencing any inflationary cost pressures around the world?

I think you obviously have rising costs in terms of labor and that goes on all the time, but we have taken steps to protect our gross margin as we move forward, so we evaluate that all the time and as you've seen, we delivered very strong gross margins for the quarter and the six months and we continue to have expectations to improve our gross margins.

So our focus is really on our gross margins and obviously we have to accommodate ourselves to increasing costs when they do arise.

To what extent are these rising costs occurring in the PRC?

What sort of impact does that have on you, big, little, what?

So far, not any material impact at all.

But we do -- we are aware that there could be rising costs around the world and we do take that into account as we build our gross profit requirements.

Okay.

Thank you.

Thank you.

Your next question is from Pamela Brown of Gabelli & Company.

Thank you.

I just wanted to touch on the strong comp at the Movado retail boutiques and see if that was a result of product mix or anything else in particular?

It's a combination of strong product assortments in our boutiques, strong jewelry performance as well as strong watch performance and also, we have to recognize that Mother's Day was later into May a little bit, which shifted some of the first quarter sales into the second quarter.

Okay.

Okay.

That's helpful.

And then can you just remind what it is about the international wholesaler that continues to perform so strongly?

Is that just a result of relatively small numbers compared to the domestic wholesaler or is there something about the distribution that's changing?

No, I think it's a dual function and we expect it to continue to remain at very strong trends.

It's the growth of Ebel, which has had a very strong growth on the international front as well as our licensed brand businesses and portfolios that have a very strong presence in the international marketplace.

So even now, next year with the addition of Lacoste, we also expect that to have a very strong international presence, as well as a strong domestic presence.

And when you look at our mix of business, we have grown quite rapidly from a standpoint of the percent of our sales being driven from international.

They've gone from low teens to low 20s and we see that continuing to grow a little bit over the next couple of years.

Okay.

And then finally, do you break out for us how much of your Ebel revenues come from international?

I don't think we break it out, but I think we have said in the past that it's approximately two-thirds to 70% of our Ebel business comes from the international marketplace.

Okay.

Thank you.

Thank you.

Thank you.

That concludes our question-and-answer session today.

I'll now turn the call over to management for any closing remarks they might have.

I would like to thank all of you for participating today and we have a very exciting view of our marketing plans and support for our brands for the second half and I hope you're all able to see the strong support we put behind our brands.

Thank you again for participating today.

This concludes today's conference call.

Thank you for your participation.