Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Deckers Outdoor Corporation Fourth Quarter and Fiscal 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being recorded.
Before we begin, I would also like to remind everyone of the Company's Safe Harbor policy. Please note that certain statements made on this call regarding the Company's expectations, beliefs, and views about its future financial performance, brand strategies, and cost structure are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to the Company's anticipated revenues, expenses, earnings, gross margin, capital expenditures, brand strategies, and cost structure as well as the outlook for the Company's markets and the demand for its products.
The forward-looking statements made on this call are based on currently available information, and because its business is subject to a number of risks and uncertainties, some of which may be beyond its control, actual operating results in the future may differ materially from the future financial performance expected at the current time. Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the Risk Factors section of its Annual Report on the Form 10-K and its other documents filed by the SEC. Listeners are cautioned not to place undue reliance on the forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements.
I would now like to turn the conference over to the President, Chief Executive Officer and Chair of the Board of Directors, Angel Martinez. Please go ahead sir.
Angel R. Martinez - Chairman, CEO and President: Thanks operator, and welcome to everyone joining us today. With me on the call is Zohar Ziv, Chief Operating Officer; and Tom George, Chief Financial Officer.
We believe that great brands endure through a periods of adversity and that’s what we would nest us 2012 came to a close. When consumers eventually came out and shopped, albeit later than anticipated, it was clear to us based on the sales results that the desirability of the UGG brand does not win despite some of the recent challenges facing the business. And we believe that it is still strong and in demand.
Beyond the results there were other highlights from the fourth quarter that speak to the health and relevance of the UGG brand and give us added confidence about the future. They include the UGG brand being the number one searched item, searched term online during the 2012 shopping season, meeting out popular brands such as Apple’s iPad and Kindle’s Fire. And our eCommerce orders increasing 33% during the four-day period following Thanksgiving that is book ended by Black Friday and Cyber Monday, the biggest shopping days of the year.
These metrics support the findings from our marketing study earlier in the year that indicated intent to purchase on brand interest increased meaningfully from our inaugural study that was run in 2010. The strength exhibited by the UGG brand is encouraging given the number of significant challenges that we faced in 2012.
To recap, we experienced increased cost pressures from a dramatic spike in sheep skin prices. We battled macroeconomic headwinds in Europe and dealt with another year of record warm temperatures. With all of these challenges we still grew overall sales for 2012 and generated respectable earnings in margins especially when you take into account the increased sheepskin cost, which alone created approximately 450 basis points of gross margin pressure, which was worth approximately $1.19 in diluted EPS.
Starting with the UGG brand U.S. wholesale, sales were softer than expected as a result of higher than expected cancellations. All in all, though, we are pleased with the brand's domestic wholesale performance in light of a second consecutive warm winter. While warm temperatures did impact early demand for the core classic and cold weather boots, which drove the cancellations that I mentioned, sell-through accelerated as December progressed and the weather got colder. Meanwhile, sales of our slippers, specialty classics, and casuals delivered consistently solid weekly sell-through throughout the quarter.
With regard to classics, it has become more evident that as a greater percentage of sales are generated outside the moderate year round climate of California, particularly in the North East, that weather is playing a larger role in sales trends. This is important to understand for two reasons. First, it reinforces our belief that the recent change in the brand's growth profile has been driven by external factors, namely weather, and higher price points from the increase in sheepskin costs, and isn't reflective of consumer sentiment. Second, going forward, we believe it's likely that an even higher percentage of plastic and cold-weather product sales are going to be concentrated in the fourth quarter. We are adjusting our supply chain resources accordingly, while also introducing new fall products for the transitional period between summer and the holiday selling season.
In terms of our international business, in Europe, the UGG brand performance varied noticeably between the U.K. and our direct and distributor businesses on the continent. Our U.K. business was driven by several strategic changes, including an improved distribution network, an enhancement store, and out-of-store marketing programs, which led to an increase in reorders, helping deliver a fourth quarter sales gain for our U.K. wholesale business.
Our recent results, which included significantly less promotional activity, are an encouraging sign for the UGG brand in the U.K. and extremely rewarding given the effort that went into restructuring this business following the challenging situation that we encountered after taking back the distribution in early 2011.
We now plan to focus on improving our wholly-owned operations in Benelux and distributor business elsewhere in Europe, both of which suffered from excess carryover inventory in the channel following last year's mild winter and difficult macroeconomic conditions in the region.
Turning to Asia wholesale, our UGG brand closed out a solid year in Japan fueled by a broader product offering with key accounts. This was offset by declines in distributor sales as a result of the transition to a new distributor in Korea and later deliveries of spring product across the region versus a year ago.
Now to our retail division, which posted fourth quarter sales of $135 million, an increase of 37% from a year ago, driven by 30 new stores, partially offset by a low single-digit comp store sales decline. Comps came in favorably versus our outlook for a low double-digit decline with Japan and U.S. outperforming expectations. Please keep in mind our comp store base is still small, especially in the international regions, and therefore this comparison may not necessarily be indicative of the global retail performance.
U.S. same-store sales were flat on top of an 11% increase a year ago. Like many retailers, we experienced soft traffic patterns during much of the fourth quarter. Despite this, sales for our slippers, specialty classics and men's products were solid with late-season demand for classics helping reverse early declines. At year-end, we had 26 U.S. locations, 18 of which are in the comp base.
Japan retail store performance improved to an improved inventory assortment – due to an improved inventory assortment versus a year ago. And a positive consumer response to new merchandise offerings particularly men's and kid's footwear and accessories.
We ended 2012 with 14 stores in Japan, up from 10 a year ago of which 7 are in the comp base. Japan comp store sales increased in the high teens. Total retail sales in Europe benefitted from the addition of new concept stores, including our first two stores in Paris, several in around London such as Piccadilly, Knightsbridge and Richmond, as well as new outlets in Liverpool and Portsmouth, while fourth quarter comps were down double-digits due primarily to the redistribution of traffic from new store openings in London our European retail in total generated strong profit gains. At the end of the year, we have 11 locations in the U.K. and the two new stores in France of these four are in the comp base.
Finally in China, comp trends were similar to Q3 down med teens as we continue to see consumers migrate to our newer stores due to their location and accessibility to many of the large suburbs around Beijing and Shanghai. Total retail sales increased 62% driven by the nine new stores we opened since the end of last year, which in aggregate are performing above expectations.
We currently have 20 stores in China, six of which are in the Q4 comp base. For all stores opened at least 12 months at December 31, 2012, average sales per square foot was $1600. This figure compares to sales of approximately $1700 a square foot for the trailing 12 months ended September with a difference driven by the addition of our Canadian location as well as several China stores in countries where store productivity levels are below the company average.
Total square footage at the end of 2012 is approximately 210,000 square feet compared to roughly 130,000 square feet at the end of 2011, representing an increase of about 62%.
As you'll be able to compute, new stores are generating sales per square foot below our original or early fleet of stores. New store productivity is still very high, in the neighborhood of $1,000 to $12,000 per square foot on an annual basis. This is how we are modeling new stores going forward along with a four-wall operating margin in the mid-20s versus mid-30s for the earlier stores. The average new store investment is still around $1 million with a payback that is in line with our historical performance of one year.
In terms of our e-commerce channel, the UGG brand's e-commerce business increased 30% in the fourth quarter from a combination of positive developments. These included increased traffic on our existing websites in the U.S., the U.K., and Japan; higher conversions on classic and fashion product; an increase in mobile sales; and the addition of two new sites, one servicing the Benelux in France and another covering the rest of the European Union. This channel was our most consistent in 2012, particularly in the second half when weather in specific regions was a big factor in sell-through in our stores and wholesale accounts.
With advancements in technology reshaping the way the consumer shops along with our focus on reducing the impact of weather on sales, we are implementing several new initiatives, which I'll detail later, to capitalize on the current momentum and increase the penetration of e-commerce in 2013.
Quickly touching on our other brands, the Sanuk brand had a very strong fourth quarter with sales up 39% versus a year ago led by marked success in a number of key national accounts. The acceptance of the Sanuk brand's expanded collection of colder weather shoes and boots was very positive, while at the same time consumer demand for SIDEWALK SURFERS and Sandals, particularly in the warmer regions of the U.S., remained robust. These trends were mirrored on our website, sanuk.com, which finished the year well above expectation, driven by all categories and gender-specific products.
For the Teva brand, there were a number of factors that negatively impacted the brand's fourth-quarter performance. The biggest thing is difficult comparison with a year ago when we shipped a large amount of core sandals ahead of scheduled price increases in January 2012. These early shipments accounted for nearly 90% of the decline in Teva brand's Q4 domestic business. The bottom line is we did not experience the reorder business we had expected given the following sell-through of Teva brand collections. We believe consumer demand is there, but in light of the softness in the outdoor industry, retailers have no appetite for additional inventory.
And before I turn it over to Tom I'd like to emphasize that while I was not pleased with our results in this challenging year, I am satisfied with the significant progress that we made as a company this year, improving our product lines, refining our operational capabilities, and focusing our management teams on the significant growth opportunities that lie ahead of us. While it was a challenging year, we have stronger brands, stronger people, and strong foundation for growth.
Tom will now review the numbers and outline our guidance.
Thomas A. George - CFO: Thanks Angel. Today's earnings release contains a good amount of detail about our fourth quarter sales performance, plus Angel has covered each brand, channel, and geography pretty thoroughly, therefore I am going to limit my discussion primarily to gross margins, operating expenses, the balance sheet and guidance.
Gross margin for the fourth quarter was 46.3% compared to 51% in the fourth quarter last year slightly lower than our expectations. The 470 basis point decline is primarily attributable to an increase in product cost for the UGG brand in relative to expectations of the gross margin approximately 47% the small decline is due to increased closeouts markdowns as well as product mix.
Total SG&A expense for the quarter was $141.9 million or 23% of net sales compared to $131 million or 21.7% of net sales a year ago. The dollar increase versus a year ago is mainly due to $12.2 million of additional expense related to our retail operations most of which is for the 30 new retail stores that were not opened during the fourth quarter last year, as well as increases in marketing and eCommerce expenses partially offset by lower performance-based compensation, lower legal expenses and the positive impact from foreign exchange rate fluctuations.
SG&A expenses were below projections, primarily due to the savings and retail incentive expenses. Operating income for the fourth quarter was $144.1 million compared to $176.8 million last year. The decline reflects the reduced gross profit as well as the increased operating expenses.
We recorded income tax expense of $43.3 million in the fourth quarter with an effective tax rate of 31%. Fourth quarter diluted earnings per share of $2.77 compared to $3.18 a year ago and exceeded projections. We achieved our EPS projections despite the sales shortfall due to lower than projected operating expenses and a lower outstanding share count as a result of our repurchase activity.
During the fourth quarter we bought approximately 932,000 shares of our common stock in average price of $38.64 per share for a total of $36 million. These purchases were funded using our cash position and borrowings from our credit facility.
For the full year, we repurchased 4,514,000 shares at an average price of $48.89 per share for a total of $221 million. At the end of 2012, we have $79 million remaining on the $200 million authorization announced in July.
Turning to the balance sheet, at December 31, 2012, inventory increased 18.5% to $300.2 million from $253.3 million at December 31, 2011. By brand compared to December 31, 2011, UGG brand inventory increased $46.5 million or 23% to $248.3 million. Teva brand inventory decreased $1.4 million to $27.8 million. Inventory for the Sanuk brand decreased $1.6 million to $14.5 million, and our other brands inventory increased $3.4 million to $9.6 million.
I'd like to provide more detail regarding the comfort and quality of the UGG brand inventory. At December 31, 2012, in-line and carryover products represented approximately 80% or $200 million of the UGG brand inventory. The remaining $48 million is inventory available for our outlets or the closeout channel and we believe had been valued appropriately. This number has been included in our forward margin guidance.
Regarding orders for in-line and carryover product, as of December 31, we had orders for approximately 60% or $120 million of the inventory. Although it is still early in the fall 2013 pre-booking process, nevertheless when complete, we expect a significant amount of remaining $80 million of in-line product to be pre-booked for 2013 with the balance available for our retail stores and e-commerce business, which combined has grown to over 25% of our business.
Regarding the approximate $47 million year-over-year increase in total inventories for all brands, approximately $16 million is due to higher unit cost and $10 million is due to 30 more retail stores compared to a year ago. At December 31, 2012 our cash and cash equivalents were $110.2 million compared to $263.6 million at December 31, 2011. At December 31, 2012, we had $33 million in outstanding borrowings under our recently expanded credit facility compared to zero at December 31, 2011 and $275 million at September 30, 2012.
The decrease in cash and cash equivalents and increase in borrowings year-over-year is attributable to $220.7 million stock repurchases over the past year and $61.6 million of cash payments for capital assets, which includes $34 million for retail expansion, $11.6 million for the new headquarters facility, $7 million for IT infrastructure and maintenance, as well as other expenditures, offset in part by cash provided by operations.
Now moving to our outlook, based on current visibility, we expect 2013 revenues to increase approximately 7% over 2012 levels. For the full year we expect UGG brand sales to increase by approximately 4%, Teva brand sales to increase by approximately 6%, and Sanuk brand sales to increase by approximately 15%. Our other brands combined are expected to be approximately $40 million. While we continue to strategically address the impact of weather conditions on our business, our top line guidance assumes another mild winter, the winter we just had as well as for the UGG brand a similar amount of reorders and cancellations as we experienced in 2012.
At December 31, 2012, our backlog was $323 million, down 17% from $387 million at December 31, 2011. The decline is primarily attributable to lower pre-bookings for UGG brand domestic wholesale business. We believe the decline is due to the timing of customer orders as customers are starting to be more cautious with the timing and amount of pre-booking due to now two years in a row of inconsistent weather.
Thus far we have been pleased with retailer response to several collections led by specialty classics and slippers with that said due to the inconsistency in winter weather and its impact on our retail partners overall business. We have developed conservative assumptions with regard to the remainder of the booking period which closes in late April.
Looking at our bottom line, we currently expect 2013 diluted earnings per share to increase approximately 5% over 2012 levels, embedded in this guidance our gross margin assumptions of 46.5% for the full-year, the projected 180 basis point improvement over 2012 levels will be driven primarily by lower raw material cost mainly sheepskin.
The 11% reduction in our sheepskin prices expected to help gross margins by approximately 150 basis points on an annualized basis, with the entire benefit coming in the second half of the year and mostly in the fourth quarter. 2013 gross margins will also benefit from a greater contribution from our retail division. Our guidance also assumes SG&A as a percentage of sales of approximately 34% and the main components of our increased spending are as follows; the full year expense associated with the 30 stores we opened in 2012 and 24 which opened in the second half of the year, cost associated with approximately 30 new stores we plan to open in 2013. We will also make additional investments in marketing our Asia wholesale and retail infrastructure that we believe are important to the long-term development and growth of the Company.
Our capital expenditures in 2013 are expected to total approximately $85 million, with $30 million for the corporate facility and the balance of $15 million for retail stores, IT, and other maintenance. Capital expenses for 2012 were $62 million, including approximately $12 million for the new headquarters. We are still planning to refinance our new corporate headquarters by securing longer term financing. For the first quarter of 2013, we currently expect revenues to be flat compared to the first quarter of 2012 and a diluted loss per share of approximately $0.12 per share.
As a reminder, a significant amount of our operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter. This includes the cost associated with the 24 new stores that were not opened until the second half of 2012. Therefore, due to aforementioned increases in SG&A, we expect our earnings to decline in the first half 2013 as compared to the first half of 2012, which are typically our lowest volume sales quarters. And we expect our earnings to increase over 2012 in the back half of the year.
More specifically, we expect the Q2 loss to be close to double last year's loss and with regard to back half earnings, based on the growing contribution of retail. We expect an even greater percentage of second half earnings to come from Q4.
I will now turn the call back over to Angel.
Angel R. Martinez - Chairman, CEO and President: Thanks, Tom. Well, as you've heard, there were several aspects of our fourth quarter performance that we believe demonstrate the vitality of the UGG brand and bolster our confidence about the future. With that said, some of the challenges we have faced in 2012 have not fully abated, namely uncertainty around the weather and timing of an economic recovery in Europe. Mindful of these obstacles, we plan to make strategic investments during 2013 in the areas of the business we think are critical to the ongoing development of our brands and channels, while at the same time mitigate risk from the external factors beyond our control.
Let me outline our business plan for the coming year. From a product perspective, I think, I've touched on several of the initiatives, but here are the priorities; introduce more transitional UGG brand product to drive excitement and demand during historically slow retail period between back-to-school and Thanksgiving; leverage the popularity of classics to attract new consumers via a broader selection of specialty classics and classic derivatives; improve the accessibility of UGG brand's fashion boots through more attractive opening price points; expand our men's and kid's businesses. Reduce our dependence on sheepskin by further enhancing proprietary supply chain technologies and other initiatives, which I will discuss momentarily; develop more regional specific product and continue to evolve the Teva and Sanuk brands into year round businesses.
In terms of distribution, we are taking a harder look at the wholesale channel with a long-term view of possibly narrowing the UGG brand's domestic account base. At the same time, we're moving forward with expanding our global retail footprint in 2013 as our stores generated significant profitability in 2012 and on average paid back in approximately one year.
At this point, we have signed leases for seven locations, two in Asia and five in the U.S. This includes our first company owned Sanuk brand store, which is scheduled to open in Santa Monica in April of 2013. We're currently in negotiations with additional stores – for additional stores and have a sufficient pipeline of open stores approximately to the 30 we opened in 2012.
With the addition of Dave Powers we've gained important insights and identified opportunities in store operations and merchandising that we will be applying to the business. These include smaller format stores that carry lower operating expenses and they are less expensive to build out. Within the stores we're focused on telling better stories around the product lines, using enhanced visual merchandising, increasing the number of store exclusives, and maintaining better inventory assortments of key styles. We're also redeveloping our outlook strategy to take a better advantage of these highly profitable locations.
For e-commerce we're investing in mobile capabilities, elevating our CRM program and enabling some Omnichannel tactics such as pickup and store. We're developing product customization, which we plan to activate this year. And finally we plan to launch our site in China this summer and are continuing to evaluate new market opportunities in Europe and Asia.
Investments in marketing are also a priority with the targeted spend as a percent of sales consistent with 2012. We continue to shift a higher percentage of resources towards digital programs and away from print in an effort to enhance our direct connection with consumers and increase our return on investments. In the international markets we've made initial progress fine-tuning our brand message, but there's still work to be done improving our marketing insight and capabilities to ensure each program and campaign is resonating with consumers in our different geographic regions.
In the past year we've gathered some important consumer insights, particularly in China which will be helpful in shaping our product and marketing strategies going forward.
In terms of personnel, there are some key positions that need to be filled in 2013 primarily in the Asia region as well as our global direct-to-consumer operations. Based on current momentum in the near and medium-term opportunities, we believe exit in Asia, we are allocating more international resources to Asia versus Europe this year.
With regard to our supply chain we’re very excited about a new proprietary process developed over the last two years and we believe could have meaningful impact on future sales and margins. Our innovation team was tied to with exploring and developing alternative materials that had to enhance the consumer experience while also helping us mitigate the unpredictability of material costs. The result of the innovation team's effort is (UGG Pure), a pure wool material with improved feel and consistency which will first be used in linings and some foot beds this year. With (UGG Pure) we expect we'll be able to lower our product cost and pursue profitable new growth opportunities, some of which were previously not economically viable. (UGG Pure) gives us another important key to further unlock the lifestyle nature of the UGG brand well beyond footwear.
Last and most importantly we continue to monitor and adjust our UGG brand inventory commitments which will reduce our working capital requirements, thereby freeing up cash. We expect that inventory levels more in line with our back half 2013 sales forecast by the end of the second quarter when they are projected to be down versus the same date last year and flat with the end of 2012. The ultimate level will depend on certain factors particularly how our new transitional product pre-books as these styles will need to come in by the second quarter for delivery in Q3.
I want to close by acknowledging the effort put forth by this organization in 2012, for business to persevere through such a challenging operating environment is a testament of the strength of our people and their commitment to our consumers and our shareholders. Thank you to everyone for your continued support.
Operator, we are now ready to take questions.
Operator: Randy Konik, Jefferies.
Randal Konik - Jefferies: I guess questions for Tom. Tom, you gave a very interesting statement regarding your top line assumptions for 2013. You said that 7% outlook growth includes a similar winter kind of assumption to this year. Now to clarify, does that kind of incorporate similar amounts of closeouts, similar amounts of at once pre-book et cetera. How should we be thinking about that there, because the way it kind of looks to me is that the probability would increase in year three, that the winter should theoretically could get better? And then second, we have almost likely a car analogy here where almost women haven't been buying UGGs for two years of the replacement cycle could actually get better in year three here. So just trying to get a level of what should we be thinking in that similar winter comment regarding the top line, how should we be thinking about that? That's my first question and then I have a follow-up. Thanks.
Angel R. Martinez - Chairman, CEO and President: Yeah, Randy, what we've assumed in the guidance, we are pretty cautions here in light of the uncertainty around the weather. So we've really assumed minimal reorders similar to what we experienced in 2012, i.e., minimal reorders and we've assumed similar cancellations that we received in 2012, and we received a fair amount of cancellations relatively large amount relative to our historical pattern for cancellation. So that's the assumptions that we put into it. At this point in time we run a pre-booking process, we want to make sure we were cautious on our domestic wholesale business and...
Angel R. Martinez - Chairman, CEO and President: This is Angel. I think the replenishment component is something to keep in mind. We are the number one – in terms of footwear gifted items at the holidays, and we saw with the onset of colder weather people did Russia to replace some of the UGG product primarily it was a lot of slippers a lot of the new styles. Some of the classic products does not affect in the daily beast that is always there was an article on the resurgence of UGG Classic. So, that's I would go where we when, I don't think that we when, but people are rediscovering, and so that as well. It just still right now consumers are challenged by the multiple opportunities that have the byproduct, not just in retail environments, wholesale environments, but in online et cetera. So, we are sort of try and evaluate all that stuff in our assumptions.
Randal Konik - Jefferies: I'd say, just it does feel like the visibility and predictability at least we're starting come a little bit more into focus here. I guess so my follow-up question would be definitely around the comp store sales number. So, if we look at the comp in the fourth quarter down 3-ish versus the third quarter down 13. I mean would you argue that because it's a holiday quarter that speaks to that strength of the brand? I mean what did you see in the quarter did progress towards the up until Christmas or how did the comps in quarter kind of play out, because it was a big beat versus expectations. I'm just curious there for your thoughts.
Angel R. Martinez - Chairman, CEO and President: Well I think first of all weather was a factor. I think certainly the back-half of December the weather did improve to what we call out weather and it was a significant factor. I think consumers are putting off their purchasing to – as we've said, beginning of last year even, buy now, wear now. So they're just developing a habit of buying closer to the market, which as I think part of why we've made the decision that our expectation is that we're going to see more of our business weighted towards the fourth quarter than we had seen in the past, and I think that this is also a component of the Omnichannel strategy that seems to be emerging in so many different manifestations. I mean it's still hard to understand the full impact of Omnichannel on consumer behavior, on the impact to unconventional wholesale customers. Consumers want what they want and they want it now. And they want it in every easy way they can get it. So that has a ripple effect on a lot of assumptions and a lot of investments that people make in terms of inventory levels, etc. So this is all still shaking out and we're being cautious, but I think we have our eyes open and we're working very, very hard to project the impact of what I would almost call a revolutionary change in the wholesale environment and consumer behavior around Omnichannel.
Randal Konik - Jefferies: Tom, (can I sneak another) question, just a clerical question. The headquarter CapEx that you're guiding for in 2013, are we to assume that there's no headquarter CapEx in 2014?
Thomas A. George - CFO: Yes, and let me also clarify something. The 2013 CapEx of $85 million, $30 million of it's for the facility and I think I misspoke when I said $15 million for everything else. It's really $55 million for everything else, and you are correct.
Randal Konik - Jefferies: So, $30 million of that could theoretically go – is going to away in 2014, so improving free cash flow cycle.
Thomas A. George - CFO: That’s right.
Operator: Bob Drbul, Barclays.
Robert Drbul - Barclays Capital: The first question I have, Angel, you mentioned the potential to narrow the account base on the U.S. wholesale business, so I wonder if you could expand on that a little bit maybe like the magnitude that you think might be necessary. And then the second question that I have is essentially around pricing on the classics, can you just talk about the pricing strategies heading into ‘12 both in the U.S. and some of the international businesses on lot of your marquee style?
Angel R. Martinez - Chairman, CEO and President: Sure. Well first of all our classic pricing we saw that, the classic pricing is something that our researchers said consumers have an expectation of quality with the UGG brand and are willing to pay a premium price, but when we push the price beyond a certain point we start seeing negative effect, and we saw that last year. We expect that we will be able with (UGG Pure) and other improvements in supply chain in the design and development that we will be able to hold our structure now and actually evolved our pricing to fill in in our product line to fill in some areas where we are leaving opportunity open to the competition. And that’s a worldwide statement. We feel that in markets like China, for example, we are price quite high and I think that we are speaking a very high end luxury consumer and there are people out there with knock off product selling out 20%, 30%, 40% below driving a very, very big business on the tails of UGG. We feel that that’s an opportunity for the UGG brand and we're going to be developing product to address that. What was the first question again, sorry.
Robert Drbul - Barclays Capital: Distribution.
Angel R. Martinez - Chairman, CEO and President: I said before that as the brand has evolved and our men's business, our kids' business, our year round business, it requires a commitment of inventory, it requires a commitment on the brand by a retailer, and where we get those commitments and we see that kind of support for the brand, we have partners for life if you will. However, there are some environments where we don't – we are not happy with the brand presentation. We are not happy with the support for the year round elements of the business, the support for the men's product. So we have to reevaluate whether or not those are long-term participants in the brand success going forward. Consumers today expect a full brand experience when they have a brand they love like UGG. They don't want to see a piecemeal representation and a brand I guess cheery picked and put out there in retail. So we are taking a very hard look at that, very important part of what we will be doing. When you walk into an Apple retail, you expect to see a full array of Apple products. You expect to see all the new stuff, you expect to see it celebrated in the presentation and that's what we'll have with the UGG brand.
Robert Drbul - Barclays Capital: Just one more question is on the share repurchase was pretty solid. Could you maybe give us an update on the Board's perspective or the Company's perspective on the capital structure and the willingness to sort of take on significant debt or any level of debt to continue the repurchase authorization?
Angel R. Martinez - Chairman, CEO and President: Yeah, Bob, I think the Board is open to be more flexible from a capital structure point of view in incurring some debt. That being said, we are cautious about the business and don't want to incur too much debt, as obviously the seasonal in the business in the third quarter, especially, there is a large consumption of working capital thereby some good size draws on our working capital line. So, I think ne-net, there's sort of a general trend to being more open to some borrowing related to the share repurchase. That being said, we see a lot of opportunity within our own business to continue to reinvest in our own business vis-a-vis repurchasing stock. I think the last 12 months where we repurchased $221 million of stock that, I think that sends a strong message about our confidence in the business itself.
Operator: Erinn Murphy, Piper Jaffray.
Erinn Murphy - Piper Jaffray: I had a question for you on the marketing spend if you think about 2013, what mediums and regions where you will be waiting your investment towards and how should we think about the new customer acquisition and then revenue growth prospects from some of these marketing initiatives and then I have a quick follow-up for Tom.
Angel R. Martinez - Chairman, CEO and President: Sure. Well, I mentioned Omnichannel earlier and I think it's pretty clear that that is becoming the driver of marketing strategy. The ability to have a relationship one-on-one with the consumer today, intersect that consumer in every way they care to shop and they care to access your brand is really critical and it's global that's not just the U.S, that's what's happening all over the world. So, it really requires us to reallocate our marketing expenses in a way that puts us where we need to be over the course of the next few years. So that we're not missing that opportunity to offer all of our brands, offer consumers access the way they want them, when they want them. This is as I mentioned revolutionary moment I think. I think that we're still, all of us, I mean everyone in the industry and I think all of retail is still assessing the impact. I think it has broad implications for how retailers sell product in the future, how brands put their products out there and the idea of running magazine ads like we used to run it's like the old adage; 50% of it works, I just don’t know which 50%. That's been way obsoleted now because we can run digital advertising, digital marketing, and we can tell you precisely that day how well that performed and where and to what extent it was a good investment. So we're orienting ourselves towards this future and that's what's happening.
Erinn Murphy - Piper Jaffray: And then Tom, just a quick clarification on the guidance, I just want to make sure I heard it correctly. For the first quarter loss per share was about $0.12 and you said the second quarter lost about 2x of what it was last year. Was that correct?
Thomas A. George - CFO: That's right.
Erinn Murphy - Piper Jaffray: Okay. So then I guess the implicit guidance for the back-half would be somewhere in the kind of mid-20% year-over-year growth rate. So maybe just help from the visibility that you have here, help us appreciate the reacceleration of growth in the second half. Is part of this kind of tied to the higher retail weighting in that second part of the year due to the flow-through of the new stores opening and then what are some of the other catalysts? Is it replenishments like Randy spoke to earlier and some of the other things that you're seeing at this point?
Angel R. Martinez - Chairman, CEO and President: I think the biggest driver, you hit on it, the retail stores will have another fourth quarter, and just a point of reference, in the fourth quarter the typical retail store does about half its annual revenues and it does about three quarters of its annual operating profit all in the fourth quarter. So this year's fourth quarter will have another year of openings we had in 2012 and then we will have another 30 stores. So, that’s the big catalyst as well as we have some more eCommerce business expected over the course of the year it's really driven in the back half and lot of that’s driven by some new initiative in eCommerce as well as our international eCommerce site. And then Sanuk and Teva had some growth in the back half of the year especially the fourth quarter with Teva it's more close to footwear and Sanuk is more of a rounded off fall line.
Operator: Omar Saad, ISI Group.
Omar Saad - ISI Group: Angel, could you maybe give us a little bit more color or insight into some of the interesting comments you made at the end about this (UGG Pure) product and you also made some comments about bolstering kind of your transitional product offerings, we are hearing more and more from some of the cold weather sensitive brand out there given we are changing weather pattern and retail order pattering. We are hearing more and more about an emphasis on transition product, are the two related or you may address them separately.
Angel R. Martinez - Chairman, CEO and President: So, I think as we look long-term, yes they are related in the sense that transitional product is at lower price points generally speaking, it's not the sheepskin product that classic is and classic were dominants on the fourth quarter. So we already know, because of our success with extensions of our (marketing) program for example, and variety of other stuffs, we have done. The consumers are amenable to it, we have the really kind of being tip toeing around and we really didn’t have the capability given the sheepskin pricing issue to address the breadth of price points that are required in order for us to fully exploit the development of that kind of a product line. On Pure allow us to have a lot more flexibility. It is in every way superior to the current feel of our product, that's good as our products feel, we feel we've hit on something even better and consumer testing has already demonstrated that it is preferred to a significant level in terms of its supplement it's softness et cetera. So there are some things and you'll see them in the lines in the foot beds or soft lining as we say and use sort of minimally as we're ramping up on this new material approach. It's pretty exciting because it does give us less of a dependence on the availability of sheepskin in the global market. So that's not to say we won't be continuing to create product using the conventional materials, it's just means that we'll be far or less dependent on the sheepskin, the twin-faced that we've been using. And the other thing that it does is that it gives us the chance to explore some lifestyle products and home products which we've been dabbling in that. But again the same reason that we haven't pursued it more aggressively when we would create these products, we'd find ourselves almost priced out of the real volume opportunities at the still quality premier level, but our prices were too high. This now allows us to fully evolve the Apple idea and we're pretty excited about that.
Omar Saad - ISI Group: Question on SG&A, I think you guided to 34 range this year, up a bit from last year and then obviously not that too longer you guys had a 25%-ish type rate and 20-ish rate, great to you see you guys ramping up investment in brand and (management team) and infrastructure and framework. How do you think about it long-term? Is that kind of a level that feels right to you relative to sales or did you see enough significant opportunities out there where you're going to continue to aggressively invest and maybe continue to delever a little bit.
Thomas A. George - CFO: There is when you think about SG&A long-term sort of also need to look at what the gross margin may look at long-term. I mean with the increase in the direct to consumer and some of these other initiatives around input cost, I think there is opportunity to expand gross margins obviously above our current level. That being said, we need to be invest to drive the growth and I think we need to on a longer-term basis look at the Company more similar to either multi-billion dollar global multi-channel brands in when you sort of net out there and net outs new view on operating margins more in the mid-teens on a longer-term basis on a much large company.
Operator: Taposh Bari, Goldman Sachs.
Taposh Bari - Goldman Sachs: I guess I just wanted to start on same-store sales. So, Tom, do you mind giving us some clarities as to what your assumptions are for same-store sales for both the full year and first quarter guidance?
Thomas A. George - CFO: Yeah, for the full year, again, we want to be cautious there and we are looking at full year total company same-store sales assumption of relatively flat and sort of embedded in that is some improvement in China and in U.K. still some work to be done there, but at least I've started to identify some of the issues there. So that's that. And in the first quarter another thing on the full year number is Japan, some tough comparisons there on some of these newer stores going to the base, so we don’t expect the same-store sales in Japan to continue at the high clip they've been. So that's the full year number, flattish. In the first quarter we expect some modest kind of growth in the first quarter, but still relatively small in the first quarter as well.
Taposh Bari - Goldman Sachs: And then (indiscernible) just wanted to ask you more of a high-level question. Obviously you had a very, very difficult 12-month period that you're coming out of. Looking back there obviously have been some pretty nasty macro headwinds including sheepskin, weather, Europe. Anything company specific strategically that you think you could have done differently looking back in retrospect?
Angel R. Martinez - Chairman, CEO and President: Well, we could have invested in better weather predicting. We have for quite a while, as I mentioned in my comments, for the last two years we've been working on this innovation of (UGG pure). It's not something that we have been shy about having. We put a lot of resources against this. It's been an important thing. I kind of wish we would've been even more aggressive there because it has proven to be validated as very important thing going forward. Now if I had to know how it would all have come together I really would've been even harder driving against that. So I guess I would also say that this transitional product that we're now doing, I would have liked to have begun that process earlier, but in a sense, it's very difficult when we knew what our – what the known components of pricing and raw material cost were what they were a year ago, (UGG Pure) is still not fully evolved, and so it was even hard then to get as aggressive about the development of the transitional product. But innovation is a key to our success in the future and this is really how hard we push on innovation is something that I've learned. We need to push even harder. I mean I think we need to get the entire organization focused on innovative ideas in every single component of our business and I think that frankly with all of those things that went down in 2012, the first few months we were a little shell shocked, we kept sort of saying to ourselves, this really can all be happening at the same time. And we caught perhaps a little bit flat footed well that’s not true right now to tell you that. We are in a full sprint mode and I think that’s a major lesson learned.
Taposh Bari - Goldman Sachs: Just wanted to sneak one more if I can. For the first quarter guidance flat revenue growth, that seems – you're going to have 30 more stores year-over-year, so I'm just trying to understand where the gap lies because it just seems like a very low number?
Angel R. Martinez - Chairman, CEO and President: I mentioned sort of a modest view on comp. We do have 30 more stores. At the same time, our wholesale business is under pressure in the first quarter compared to the year-ago quarter and that albeit last year it was a difficult winter in January and most of February. We still have had more classic boot kind of sales, the first couple months of last year than we've been experiencing this year.
Angel R. Martinez - Chairman, CEO and President: Also, there's one other thing that comes to mind when you were asking question what we have done differently, I don't think looking back that we would've pushed our suggested retail prices in line with our increases in material cost. We were trying to protect our bottom line, and I think it cost us, and I think that’s a lesson learned. I think in the end, and it's something we've always said, it's heart under fire to hold to it. The consumer rules, the consumer wants what they want and you have to be super careful not to go beyond a point where consumers feel that you've overstepped the boundary and we really – we knew that, we are conscious of that, but we wanted to satisfy all of you guys, so all of our shareholders. And I think we've got carved a little bit there. So I think that's a lesson learnt going forward.
Operator: Mitch Kummetz, Robert W. Baird.
Mitch Kummetz - Robert W. Baird: Let me start – I just want to get some clarification on the backlog. I think you guys said it was down 17% I didn't hear as of what date that was, so if you can remind me that. Could you also say what percentage of your fall pre-book is actually captured in that backlog number? And then, you mentioned that you'll take orders over the next couple of months. Can you say kind of what sort of projection on the overall fall pre-book is baked into your guidance for the year?
Thomas A. George - CFO: Mitch, its Tom. The backlog numbers I talked were as of the end of December 31. Early in the pre-booking process and the other thing we've seen this year I can’t mention it on the call was, it seem to be that the customers are viewing the product and ordering the product later than we saw last year. And last year, by the end of December, we had good amount of customers still although early that all reviewed written some of the products. On the pre-book, still early. We're pleased we have some of the products have been booking. The pre-booking process goes to the end of April. So, we've got a good amount, again we feel we've taken cautious look in terms of where the pre-books going to end by the end of April and we've developed our guidance.
Mitch Kummetz - Robert W. Baird: So, just a follow-up on that. So where – either can you tell me where you think it will end or could you at least say sort of what is your wholesale outlook embedded in your guidance? I mean obviously you guys open up stores. You expect some good growth from that your eCommerce business is running very well. But it sounds like the wholesale has been a bit weak, the backlogs have been weak, maybe we will see that tick up with some later ordering, but if you could either say kind of what's baked in on the wholesale side for your 2013 guidance particularly on UGG?
Thomas A. George - CFO: I think the wholesale guidance, again, being cautious here is all that other assumptions I led out for UGG. For the total year, we are assuming at this point in time the wholesale guidance could be down mid to high-single digits.
Mitch Kummetz - Robert W. Baird: Then my second question on this (UGG Pure), is there any way you can say like what percentage of your cogs you think that will represent for the year and what kind of impact does that have from a gross margin standpoint in terms of kind of that 150 basis point. I mean is that top of the 150 points so you are just benefiting from lower sheepskin costs or it's just kind of embedded in that or how should we think about the impact of (UGG Pure) from a margin standpoint on this year's numbers?
Zohar Ziv - COO: This is Zohar. I'll take the first part about the usage of that. Right now we are using it at lining and stock material. It's a significant amount of the usage that we've had. You know that can be about a quarter of what we are using, but we're not using the whole thing at this time and as we continue to develop and to develop the product, you will see a greater usage of the (UGG Pure) in our products.
Angel R. Martinez - Chairman, CEO and President: And Mitch, the 150 basis points that I talked about of improvement in the margin related to sheepskin that does include – portion of the 150% is related to (UGG Pure), albeit we're at the early stages of that really.
Operator: Scott Krasik, BB&T Capital Markets.
Scott Krasik - BB&T Capital Markets: Congrats to a better enduing to a tough year. Angel, you talked about transition product. What sort of reception have you seen specifically to the transition product in your bookings? Are customers interested in you guys playing a big role now in August through October in your non-classic product, that's my first question?
Angel R. Martinez - Chairman, CEO and President: Well I'd say yes, the transitional product and we're just not calling that. That's like a working name, but the casual product that we've been showing has booked extremely well. I mean it's booked extremely well for Q3. So we really feel like we've got momentum there. We've also had ballerinas doing very well, the driving mocs, our 'smoking slippers' those are all transitional products. And they are not sheepskin dependent per se. They have sheepskin touches, but they have been well received. We have had as well excellent sell-through on those products this fall when we introduce some and a more complete assortment that we had in the past. So, I think that really bodes well for the retailer and the consumer reception to this idea.
Scott Krasik - BB&T Capital Markets: And then you alluded to the fact that the retail stores you are opening now run at a little bit lower productivity and the returns are little bit lower. They have a function of where you open these stores as you maybe Europe improves on a macro basis or you have some better brand recognition in Asia, could it get better and if it is at the level due to the mix sense to keep opening stores the way you expect?
Thomas A. George - CFO: I mean a lot – a good amount of it, there is obviously lot of different dynamics between what region you talk about, but our first class of stores so to speak, the first 48 are just great locations and are very productive. So, in terms of – does it make sense to open more stores, I mean look at those even with the productivity below the best freshman class so to speak. There are great returns, great operating margins and great returns on capital with those one year payback. So that coupled with some of the earlier trends we’re seeing out in the marketplace wholesale versus retail, Angel talked about it makes a lot of sense to do this.
Angel R. Martinez - Chairman, CEO and President: And also keep in mind that the stores we have got in Asia have been pretty much located in what you might call luxury environment. These are really premium malls. The neighbors are high-end neighbors if you will. The consumer is now evolving. The middle is coming up. The consumer for – and more malls are developing that cater to what you might call upper middle class or solid middle class people in Asia particularly China. And so we have opportunity to expand beyond the luxury locations that we've been in and which is fine for – those have been great for brand positioning and image. But I think that we have now got an opportunity to access more consumers, just a lot more consumers for whom the brand, and in China it's called UGG, that's how they refer to it. UGG is considered a premium high-end brand, high quality. So, our goal really has to be to make sure that we are merchandising product line appropriately for the Asian consumer and not even Asian, for the Chinese versus the Koran versus the Japanese and also making sure that we're hitting price points we need to hit, because this is really a critical component of our growth going forward.
Scott Krasik - BB&T Capital Markets: If I can stick one on Pure is the material something that you could put into made for outlet product? Is it that similar to sheepskin that you could use it to change the margin structure across the board?
Angel R. Martinez - Chairman, CEO and President: Well, I'm not going to speculate on exactly where our classic product we put it in. I would just say that it's as a material, it is softer. It is more consistent and the perception of the tire quality than even the natural stuff that's out there, which as much as we select for the best tides, a lot of the Shearling material itself, it feels a little coarse by comparison. So this is a significant enhancement to our product consistency.
Operator: Corinna Freedman, Wedbush Securities.
Corinna Freedman - Wedbush Securities: I wanted to ask about the longer-term plans for 2016 to get that additional $1 billion, the lower retail productivity change you are thinking there, the reduction in the wholesale base change your thinking there, and if there is any update you can give us on that 2016 plans?
Angel R. Martinez - Chairman, CEO and President: The innovation, we've talked about with (UGG Pure) and some of the recent learning's we have in our retail business especially in Asia. We're in at this point in time we're sort of going through the update process of our longer-term plans. So, I really can't comment or update any long-term plans at this point in time. But I will fallback what I said earlier with these opportunities we see in the (UGG Pure) innovation and even with the lower productivity the great returns on capital and great operating margins we see there, albeit we are going to have to invest in the right OpEx, and the right infrastructure to be able to grow a global brand. We obviously still feel there is great opportunities long run, long-term.
Corinna Freedman - Wedbush Securities: I just have one follow-up question about the NPD POS data that comes out monthly, is there any can you address any inconsistencies that you might be seeing on your side of the business versus what's been reported and do you expect that you being flat any time soon, that's my last question.
Angel R. Martinez - Chairman, CEO and President: Well, I guess couple things to talk about NPD data. It's not – it doesn't cover our entire distribution based and obviously didn't cover our retail stores or eCommerce. Some other categories below the lines in terms of where UGG falls and where UGG doesn’t fall. I think we've talked about how the sporadic weather how that's impact weekly sell-through, not only our wholesale but our owned retail stores. So it's one thing to look at. It's certainly in our mind not the most important thing to look at.
Operator: Eric Tracy, Janney Capital Markets
Eric Tracy - Janney Capital Markets: I guess if I could just touch on the supply chain and given the retailers changing ordering patterns in later I guess the transitional product being layered, but maybe just speak to the supply chain adjustments that are being made to try to smooth that and again just deal with that change.
Zohar Ziv - COO: Yeah, the change we're making is specifically timing of bringing the inventory when it's needed and building the transition product that Angel was talking about.
Angel R. Martinez - Chairman, CEO and President: And also just more responsiveness from our suppliers, in other words being more current with consumer preferences. This is a business historically that was wholesale driven. So we built product for introduction twice a year. We went to trade shows two times a year. The consumer wants fresh product every 60 days at a minimum, and you have to be much more reactive and especially when they seem to have access to sort of every presentation of product across the Internet. A fashion thing happens or a color happens or a (trend) motorcycle boot up and they pop big and they pop everywhere. So we have to be current, we have to be aggressive and that’s what these changes are going guarantee.
Eric Tracy - Janney Capital Markets: And then I guess I can just follow on is this conversation between wholesale and big retailer just DTC, Angel you think about the model longer term, what is the right percentage of the mix via domestically or globally. How far do you want to vertically integrate not alienating the wholesale partner but even on lower new store productivity clearly it's massively accretive sort of move – to move in that direction, so I can maybe just sort of speak to the longer-term structure?
Angel R. Martinez - Chairman, CEO and President: Well, I think we will always be – it will always be very important for us to be in the wholesale environment. Right now and I will just throw a number out, I wouldn’t ever see us less than 50% of our business being wholesale as it's been historically. Now how long before that happen, that’s up to the consumer. What they want and whether or not in many cases we even have the wholesale partners who make the transition to only channel. I think one of the things that I know about the foot wear business, it's really important for you to be available in-store with multiple brands. Obviously in our own environment it's only going to be a, but the true test of competitiveness is when you are in Nordstrom and you are up against all of the other great brand and you perform on that level. That’s what's unique about the footwear industry, people go to a store, they want to try on a variety of products. If they're looking for a boot or a loafer or a driving moc, they don't just want to try on yours. So, you have to win that battle of retails what I call the last three feet, that is always going to be a critical component of success for this company long-term. That's the key element of the footwear industry. And so our job is to be in the best environment, where the brand is presented consistent with our expectations and the consumer value that is placed on those brands. So wholesale will always be important, it will always be a key component. And frankly, over time, as retailers evolve to the new realities of consumer behavior, the partnership that we have with them is going to be absolutely critical, because it's going to be a multi-legged stool. You're going to have the Internet, you're going to have wholesale, you're going to have our own retail, and all three things have to work in concert for that consumer to be satisfied, and so it means that we have a lot of collaboration with our customers. That's why it's so important that we make sure we have wholesale partners that are committed to the same vision for the brand as we are.
Eric Tracy - Janney Capital Markets: If I could just sneak one last sort of near-term question. I'm trying to somewhat reconcile I guess the trends you're may be seeing year-over-year through January and February relative to seemingly much more beneficial weather, just being very cold across the country. I get still sort of working through the inventory, but maybe just speak to what that dynamic is and again why may the sell-through isn't strong?
Angel R. Martinez - Chairman, CEO and President: Well, we see whenever the weather gets cold, we see very strong performance in our stores and on our Internet sites. It's become just – a very precise barometer. It's amazing actually. This wasn't necessarily the case when we were in an environment where let's say our business was concentrated in California, and we have cold nights in California even in the summertime. So, our business was pretty stable, because people put on UGG in the evenings to go out on a cool evening. Well, it really did change the dynamic for our brand in ways that we began to understand a lot better with the real extreme swings in weather. The real extreme swings in weather sort of highlighted this consumer behavior and really created for us a need to really diversify the product offering and do some things that if the consumer loves UGG, they love it for the comfort, they love it for the quality and the luxury. We want to make sure that there is a version of UGG that they can wear in most weather environments.
Operator: Christian Buss, Credit Suisse.
Christian Buss - Credit Suisse: I was wondering if you could provide some help with us in understanding what the incremental expenses on the SG&A front are associated with the new store openings to sequentially over the course of the year.
Thomas A. George - CFO: Christian, it's Tom. I mean in terms of the year-over-year guided OpEx versus where we were at in 2012. I mean really most of the year-over-year increases really related to the retail stores as well as our eCommerce business. That fit net-net with the – we're just talking about 24 stores that now are open - excuse me, the 30 that we opened in 2012, they are obviously going to roll in starting the first quarter of this year. And then as we opened the roughly 30 more stores in 2013, most of those will be in the fourth quarter. I think another subset of that retail and eCommerce to give you little granularity is our eCommerce business, which is about 10% of the total overall OpEx increase for the year and there is a fair amount of variability in eCommerce business and we're looking at some good strength in the eCommerce business. So, hopefully that gives you some – the typical retail operating expenses or the amortization of the leasehold improvement, the supplies, the labor those kinds of things.
Christian Buss - Credit Suisse: So, we could be seeing a step up in the incremental SG&A expense year-over-year in the first quarter and through the balance of the year. Is that correct?
Angel R. Martinez - Chairman, CEO and President: That's right, yeah, because you've got this…
Christian Buss - Credit Suisse: Then I wanted to ask the guidance for other revenue is for basically a doubling of other revenue year-over-year. Could you talk to me about how you get there?
Angel R. Martinez - Chairman, CEO and President: The biggest drivers in that are the couple brands. Although we see growth in every one of the brands, it's in that other category, the biggest growth is in our new brand and as well as our new brand Hoka, those are the two biggest drivers.
Zohar Ziv - COO: Just to give you a little color on Hoka, Hoka One One is a running shoe brand that was developed for ultramarathon running. We're talking 50, 1000 mile races in the mountains, has tremendous momentum in running specialty, extremely authentic brand. We have been looking for an opportunity in the athletic aspect of footwear. We don't play in that arena; that's the biggest piece of the business when it comes to footwear globally, and we wanted to make sure it was an authentic brand, preferably a running shoe brand. So we're pretty excited about Hoka. It's still young, it's still small, but it's evolving very quickly. They're extraordinary shoes. They really are amazing products.
Christian Buss - Credit Suisse: Will that revenue flow in starting in the first quarter or is that weighted later in the year?
Zohar Ziv - COO: Probably more the beginning, Hoka.
Angel R. Martinez - Chairman, CEO and President: On that one particular brand, hang on, it's more – it is more in the back-half than the front-half. It's fairly and fairly even.
Operator: Howard Tubin, RBC Capital Markets.
Howard Tubin - RBC Capital Markets: Just really quickly, Angel, just you spoke about looking at your outlet stores differently and redeveloping your outlet store strategy, any more detail you can give us on that?
Angel R. Martinez - Chairman, CEO and President: Well, I think outlet stores for us have been something that we've been a little bit opportunistic on. We haven't put the focus on an outlet strategy as compared, separate and distinct from a first line store strategy. If you look at some of our outlet stores, I think they are wonderful looking stores. It's a great shopping experience. We are going to be more focused – focusing more on the merchandising of those stores as distinct and separate from our concept stores. We're going to be more aggressive about locations as they pop up opportunities that may surface in malls that we feel we need to be in. Whereas we've been putting the priority on concept stores in last few years, but the outlet stores are very profitable as you know, and they provide a great opportunity for access to the brand by consumers, especially now when we can create price points that enable us to be more flexible there. So, creating product for those stores that really fills the UGG expectation by consumers is a good opportunity.
Operator: Camilo Lyon, Canaccord Genuity.
Camilo Lyon - Canaccord Genuity: So I had a question. With respect to the transitional product, how are your wholesale accounts splitting their open-to-buy dollars between the classic UGG orders that they had in your status versus the traditional product? Is there a shift in allocation of dollars? Are you getting a bigger share of that open-to-buy, if you could just shed some color on that, that'd be great?
Angel R. Martinez - Chairman, CEO and President: I think over the last few years, we've seen our classic business remain pretty much flat to the total. And the growth has been coming from a lot of the new styles, including the casual styles that we've done over the last couple of years. And transitional product sort of falls into that domain. It opens up the business to more seasons for the retailer. At first, I'd say about four years ago when we really first started developing this product, there was a big question mark as to whether we could sell a product beyond classic slippers and classic boots. The consumer has answered that question. They've really said they love the brand. The brand can come at them and from everything from sandals to driving mocs as I mentioned earlier, and so we're not seeing a retailer. It's not an either/or, it's an 'and' conversation. We're taking market share from people that we have not in the past competed with because of this development of our casual product. UGG Classic is UGG Classic. That is a business almost in and of itself. It's as we said, heavily fourth quarter. It's a big gift item. The casual product is bought for a very different purpose, although people still expect it perform like UGG.
Camilo Lyon - Canaccord Genuity: Okay. And then some of the casual products then going to have lower ASPs since it's selling earlier in the season, and does that have an impact in how we should look at the overall back-half ASP picture?
Angel R. Martinez - Chairman, CEO and President: I'd say generally speaking yes because by nature it's not boots. Boots are more expensive. As a nature of the product ballerina is driving mocs and those kind of things are lower price point products.
Operator: This does conclude our question-and-answer session. I will now turn the call back over to the speakers for any additional or closing remarks.
Angel R. Martinez - Chairman, CEO and President: Well, thank you all for participating on the call. 2012 was a very difficult year, a very tough storm that we weathered as a company. But as the old saying goes, what doesn’t kill you, makes you stronger, and we are definitely stronger as a company. We're stronger as all of our brands, a lot more focused and I think it bodes well for the future. I'm incredibly proud of our team around the world and the way we've managed through all of the challenges, and all of us are very excited about the future and the kinds of things that we now get to do with all of our brands. So thank you all very much.
Operator: Thank you. That does conclude our conference. You may now disconnect.