Crocs, Inc. (CROX)

Analyst Day 2012

← View all transcripts

May 23, 2012

So of course, forward looking statements are safe harbor for you guys to look at. I'd like to just frame today and talk about what we think our business looks like over the next 3 years, answer any questions that you guys have as we go through the long term. And then we're going to do some specific drill downs as we go through the presentation today on things that I think are concerning in the general market, things like Europe, what does that mean to Crocs, FX, what is the foreign exchange impact to our business. And so we're going to do some specific that When we think about our business at Crocs, I know we've said this many times before and I think it is worth repeating. We think about ourselves as moving from this clog company, which we've been, which we still have high 40% revenue tied up in clogs, different types of clog products that we sell kids, adults. And how we move ourselves gradually, but progressively towards being a much more of a casual lifestyle play. And I think what you're going to see in the products around you, we have our Americas sales and marketing meeting going on right now for spring summer 2013. So what's going to happen is when it's an appropriate breaking point then probably after Dale presents. We're going to take you into the room to kind of cordoned off there, closed off and we're going to show you what the line looks like. We're going to show you how it's going to market. So you're going to get a kind of a preview that we would normally show until we get into trade shows, but you're going to get a much better perspective here. So there is about 140 people also on campus this week, our U. S. Sales force, our Canadian group, our distributors from Latin, South America too. But this is something that we are working at hard. We think that it drives us to a far better place in the next 3 to 5 years. And we don't think we really have a lot of natural competitors in this $30 to $60 price point that we really position the brand around today. Balanced international growth, I've spent over the last 8 weeks, I've spent 6 weeks abroad, mainly because 65% of our revenue comes from abroad and I really need to be out there and working with understanding what's happening with the business. And I come back, I'll talk through it today. I'm really excited about what's happening in Asia, of course. But actually, I left Europe in both occasions very bullish about what's happening relative to our business. And like I say, we're going to talk about that. It's the smallest piece of business. They only 17% of our revenue comes from the European marketplace. But if we think back 5 years ago, Europe was larger than Asia at that time. We kind of lost our way. We stayed with the clogs too long. We didn't distribute. We didn't build out as you're going to see today in numeric terms platforms either in retail or in e commerce that drives our Asian and American business. We made a mistake on the Q4 earnings call that we Q1 earnings call that we didn't book in this right upfront and say right out of the chute. We're really happy with where we're at not only for the quarter, for the year. This top line growth that we're going to talk about today on a constant currency normalized basis is driving what we said 15% to 20% top line growth. And we're going to break it out more granularity than we ever have for you. So hopefully that kind of gives you a better feeling. And we're committed to running a good business. We're committed to the consistency that you've seen from us, how we manage SG and A. We're going to give you more details today on retail and all that and how that ties to how we financially manage a strong balance sheet here at Crocs. And I think that there's a little bit concern sometimes too about inventory levels. I've said this from the day I became CEO, we'll never have an inventory problem here as long as I'm here. And I'm totally committed to this internally to the Board and to the Street. And we don't have an inventory buildup issue here. We're going to talk through that in more detail with you today too. We manage maybe at times too tightly. Maybe we're sacrificing a little bit of top line growth, but we are not going to go out and chase business from an inventory standpoint. When we have our conversations and I did this yesterday with the Americas sales group, we break it down in this simple of a way with them that 5% of our growth, 5% of our growth has to come from geographic expansion. So I look at what we're doing in China today or what we're doing in India, what we're doing in the Middle East, which we'll talk about during the day today, what we do in Eastern Bloc countries. So we're just going into Josie's favorite homeland. We're just going into Poland now and there's a huge amount. Is that fair? Only one person writes me, asks me if the website is in Polish, right, of all of our investors. Nothing can read Polish, but I think all kidding aside, I think Central and South America offers us huge growth. All we're asking, our salespeople in any region that we talk to is 5% growth. That's all we ask for. 5% growth in new geographies. All we ask them is for 5% growth in ASP. We're not trying to go from a 30 % growth in ASP. We're not trying to go from a $30 clog to an $80 nice dress shoe. We're inching up the brand and you see some of the things in front of you. The Be Bold, the Horace collection, we're going to talk with you guys about today, you're going to see it in the other room. A whole new place where we can continue to expand our flats, our sandals, our women's wedge business into a whole new more innovative space building on our heritage of molded, cool, innovative product. 5% wholesale expansion, a few more doors and more placement of product in the doors that we have today. We're going to talk with you about our sales philosophy when it comes to adding new accounts versus kind of building and defending the space that we have today. Once you get space at wholesale, unless you really have a difficult time selling through product, which we have not had the last 3 or 4 years, then wholesalers are conservative. They're not going to give up your space to someone else if you continue to do the right thing. 5 percent, it's all we have, wholesale expansion. And lastly, in retail, we're expanding retail doors this year somewhere between 80 100 net doors for the year. We continue on this. That's 25% growth on door count. If you think about again our business, this 438, 439 retail doors that we have today generates a significant amount of revenue for our business, right? And you're going to kind of continue to see that investment in retail as we don't grow wholesale at a rapid rate. You're going to see a little bit more of a shift to being direct to consumer. So we get the product placement that we want to have in the next 2, 3 years and we're going to talk in more detail about that today. So with that, I'm going to turn it over to Jeff to do a retail review review for 2012 and then I'm going to come back and talk about channels and regions. Thanks, John. Welcome everybody. Hope everybody had a good trip out here. Nice to see everybody here. Thank you for coming. Just wanted to kind of recap Q1, set off the tone for the day. And then as John mentioned, we've got a busy presentation over the next couple of hours for you walking through a number of different topics. We'll talk about each one of these individually as we go through the next couple of hours, specifically revenue. John will talk about revenue in the wholesale retail Internet as well as our international expansion. For the Q1, as John mentioned, we were up 20% on a year over year basis. Gross margin, we'll talk about that later in the presentation. SG and A as a percentage of sales, we'll talk about that, give you a little bit more information on the SG and A aspect of our business. And then overall operating margin for the Q1 of 14.6 percent, an improvement of 160 basis points in Q1 versus Q1 2011. You can see that on the bottom line, EPS was 0 point guidance for 20 12 Q2, dollars 3.35 to $3.40 tax rate at that time 22%. We'll talk a little bit more about taxes later in this presentation as well. And then diluted EPS, the guidance was $0.61 to $0.63 At that time, we estimated that euro to U. S. Dollars would be $1.31 and the Japanese yen would be about $82.5 I think the key message today and you'll hear this from all three of us is that our consistent with prior meetings, we believe our long term sustainable growth story continues as we penetrate international markets. We look at our international footprint, driving a wholesale expansion, increased product portfolio driving ASP and then finally our retail and Internet investments around the globe, driving overall revenue up about 15% to 20% on a constant currency basis. We haven't deviated from that message and we continue to maintain our objective of driving that long term sustainable growth rate. And I turn it back over to John to talk about both the international expansion as well as the channel expansions. Thanks, Bill. Just real quick, as we sit here today, different facility, maybe worth noting. We were in a building across the parking lot. The time you were there, people who came. This building here now is completely ours. We're renovating the back half where product development was where we met last year and that'll be where marketing and our product development groups are at. And as you do tour through here today, you're going to see finance, our supply chain management, e comm are all in this building. It's really quite nice. We're all interconnected today and this is all of our corporate organization here. Across the parking lot, there's one building that you'll see kind of a mustard cone colored building cross parking lot. That's our Americas business over there. That parking lot is not big enough sometimes and at other times it's too big. But we do try to kind of separate church and state. What goes on in the regions is theirs to do. What we do at corporate is much more strategic, much more directed towards strategy system, overall consolidation product development. So there is kind of that separation in the building. Nice part about this is, this is about 60% this space here that we moved into after renovation moving into this about 60% of the price we paid for the building that we were in. So it's a nicer space for us. It's much more conducive as you're going to see. We have a little cafeteria here, 4.50 people basically on the campus between corporate and the Americas group today. Jeff goes through this chart and I think that this is a really good representation of the management of this business. And I know it doesn't look at the balance sheet side of this, but that would also look equally as good. But when we put this up and we look at this internally, I can't determine what investors think about what this business is doing. But what I can do and what we as management team can do is control what's transform our business from just molded products into other products, holding those margins, driving operating margins up as we go and to control SG and A, which we had a little bit of history of issues early on with SG and A that we've overcome. I think this is a really nice place to start with where this business is at and where it's growing. And I think it's a testament to the management team that is here, that is focused on this and has delivered these results and are the same groups that are committed to continuing to grow this business. So let's talk about channels first and then we'll go into regions after that. And again, as I get into this, you may have specific questions and things that you may want to ask. Jeff might jump up and help me with specific things if need be. But if you look at our overall business, if you look at 2011, 2012 and as we go into 2013, yes, there is a gentle shift here as we're putting more retail stores online in Europe. We're seeing an opportunity in specific key locations in the U. S. To add and also in our Asian business where you're going to see we have a high mix of both Crocs stores as well as partner stores. And I think the numbers might surprise you a little bit. We've talked about this before, but I think you're going to see it up on the screen today. It kind of goes to show what drives what is the underlying things that drive our business in Asia? What are the underlying things that drive our business in Europe and the U. S. Americas marketplace. So a little bit of shift we see in the next couple of years, a little bit more directed towards retail. But as we continue to try to sell in and we'll talk about our wholesale strategy, if we gain additional doors in wholesale, we don't over distribute the Duluth brand, which we're very cognizant of what the trade offs are there, then we'll see what that balance comes back to be. But it's our preference that we stay in that 60 kind of 40 split, but we're moving a little bit more towards the direct. If we look about growth, if we just take Q1 as an example of kind of how that growth looks, remember that retail has a 10% comp growth on that year over year. In our comp base today, you guys have asked this question before, we have about 72% of all retail doors fall in the comp base. And it's a question of time, how many stores do you consider? Is it 80? Is it 50? You guys are changing formats. You stay in a mall, but you move from a kiosk to a store, you're changing a store size inside a mall. 72% of our retail falls in a comp base and we comped up 10%. Now I think we all know and I think this is pretty consistent with what you hear in the marketplace today. We did do see some pull forward from April for holiday reasons and just for weather reasons between April March. And we talked about this even when we did the Q1 earnings call. That's why when we talk about the first half of the year, we're very bullish that we're above plan of where we're going to be at the bottom line and we think that it's going to equal out a little bit between Q1 and Q2 on the top line revenue. So a good strong start to the year from a growth standpoint, wholesale, retail and Internet business, kind of showing that there's a good appetite for the brand in the marketplace today. We think about channel sales. We've continued to build doors. I'm going to show you some of the things that we're doing with some retailers. I did not pull some of the same slides from Europe or Asia. I think sometimes we can relate here. Investors can relate a little bit more with what's happening with the brand with U. S. Wholesale customers. So I'm going to show you some specific things that we're doing with key customers today and how when we talk about building these kind of wholesale partnerships, what do I mean? What are we actually doing there to gain more space both in real estate and number of SKUs that we're distributing in those particular retailers? And also we are working really hard and Dale is going to talk about this again to continue to build a Q4 business. It's not going to happen overnight. We never said it would happen overnight. But for us to be relevant, we have to continue to design cool innovative products. You see some products up here. Our mammoth collection comes back this year. Dale comes from Nike and Doug Hayes runs our Americas business comes from Adidas. He is President of Adidas in Canada. And when we look at models and we ask them, how many models in your history in those really key brands did you sell? 10,000,000 pairs of shoes up. Our mammoth collection of products, we sold over 10,000,000 pairs of shoes up. This is a franchise for us not to go past or forget about, but to build on. And we took the mammoth out of the line last year in our U. S. Marketplace. It got a little bit distributed, broken. It didn't really have the right maybe distribution and pricing around it. By taking it out coming with a new series of products this year, a little bit upgraded, a little bit different design, then we believe we're kind of building on a franchise. But hopefully, we'll do better. Cobbler collection in our boot line, we're committed to inching those forward each season. And Dale is going to give you some specific numbers today. So you can see so what does that mean in terms of flats and boots and how is this kind of coming together for Crocs as a brand? Not a Mac person, so sorry. Big debate inside. Some people have Macs, others don't. I'm not capable yet of running a Mac, so. Any questions at this point? Yes. Yes. Yes. It's hard to tell, right? I mean, clearly with Europe, same situation. There is clearly a pull forward on the European piece, nicer weather. I hate to say and when we're at ICR, we talk about what weather does to the business, it does impact our business. And the fact that Easter came earlier also had an impact on the business. And the fact that it has been cooler since then for both Europe and for the U. S. Marketplace. It clearly moves some revenue forward in the process. Asia is a little bit different because you just have a spring kind of holiday in China. You have Golden Week in Japan that falls in the early part of Q2 and those don't fluctuate between seasons. So we don't see it on the Asian side of the business when it comes to retail or comp store sales, but you do clearly see it on the Americas and the European side. Yes. A point of clarification on comp store base. When you convert much less to a store, it also comps It Yes. It does. And if we had a store in a mall and let's say we took a smaller space or a larger space, then even though we are in the same mall, you don't put that in your comp base. We don't put it in our comp base. Okay. The next question? Yes. When you went through the guidance numbers briefly, you said you used the past 10 where the guidance was? Guidance was for Q2. For Q2, Jeff, just reiterated. Right at the beginning of the presentation, he put it up and said here's our Q2 guidance. Nothing's changing. Nothing's changing. Okay. You got cut me a break here. 10 years in Asia, I'm kind of a bit ESL at times. So English is a second language for me. So you're going to have to tenses that I might get mixed up. No, that is a big difference. I know. No, so that's why we did it right upfront. So Jeff kind of putting up guidance for you in advance. Hopefully that was clear that we're telling you right out of the shoot and everything you're going to hear from us is nothing's changing for the quarter. Nothing is changing for Q2. If I look at kind of our core business today and I think about the Americas, we look at wholesale as a really important part of what we do. And we really look at how distribution works. But again, just to step back a little bit, it's kind of a history of what's happened. In the early days, a lot of our revenue stream came from sporting goods and came from department stores, bigger box people. That changed. I think everybody understands that all changed 3, 4 years ago. And we don't have a significant presence in department stores today with the exception of kind of that channel that we do with Kohl's today and kids with Nordstrom's. And this offers us a huge opportunity, but I think we have to prove brand relevant for a number of those retailers to stay engaged. Dillard's business has gone down for us and the departments are safe significantly over the years as we've transitioned. But we're going to show you today what we're doing with dealers. We're going to show you what we're doing with Dixon Academy to try to rebuild that space without getting into a distribution problem again and having proper channel segmentation, line segmentation from products that you find. I think our European business needs rebuilding. And I've been there twice now. As I said in the last 2 months, I'm really happy with the group of people that we have hired and we're going to talk about Europe specifically a little bit later when we go through reach. And I'm really happy with what we have. We had a sales meeting there 2 weeks ago. The energy, the enthusiasm for what's happening, I know that in the 2000 and 8, 2009 frame from the outside, we're a little bit in disarray. But the mantra inside was really how do we take market share and how do we not waste a recession. A recession is a bad thing to waste. And that's the same kind of thinking that we have going on with our European team today. Recession is a bad thing to waste. So how do we take market share? We're a 30 to €60 price point product. How do we stay relevant to people where their spending is tighter and they are looking for value today? There's no question. We've opened up new outlet stores here in the last 2 months. Our outlet stores have done extremely well, foot traffic, conversion, the types of products that we're selling. You clearly see that that European consumer today is more concerned about the spending that they're making on consumer type purchases than ever before. And whereas we're kind of that clog product that they go to, how do we become that casual lifestyle shoe. And part of that is the upside for this brand is we don't have major partners in the UK, France or Germany today. We have a lot of independents. We have a lot of smaller chains that stuck with us through that period of time. So our management focus in our European business today is just how we get 1 or 2 key accounts back on board with the brand as we go into spring summer 2013. And so I think a lot of good work is being done there. Asia, I think, Ted Lee, who is our VP, General Manager for China, said this last week during the Asian sales meeting. We have the hook well planted in most of our Asian markets today. People are going through the stores. They're looking. A Sometimes they eat in a shop, sometimes they shop in a eat, but basically in that order. And so you get a lot of people that are always looking for what's new and what's fresh. And as long as we continue to stay on trend in that marketplace today and a lot of good programs with our key accounts in China, in Japan, in Korea, in our major market, then I think what you continue to see is activation is building, our business continues to stay strong. And we have consumers that want to be in Crocs. Sometimes they're in the U. S. Sometimes we don't want to be seen maybe publicly in Crocs yet. We're getting closer to that. But I think in our Asian markets, we're getting more real estate, we're getting more placement of product. And you see it when we talk about NPI and what our new product percentages are in those markets and then it carries over to other parts of our business. This is how when we think about wholesale This is how when we think about wholesale accounts today and I'm not dropping names in here, so please don't ask me where certain accounts fit here today. Just think about this in terms of general terms. When we have gone to market, our main focus is right over here on the right. So we have to go through and say, look, there are certain places we just can't be. And those are accounts that just the low potential, the kind of lack of synergistic working relationship. We're a 20 as you guys know, dollars 25 wholesale price point. We can't afford to do pre book product. So there's certain models that just by the people that work within those products, models that just by the people that work within those environments is not going to work for us. On the right hand side, those places where we have built relationships in any market globally, we want to continue to get a little bit more space because they're going to those buyers are going to continue to put us in channel, in space, how do we continue to optimize. And looking at product offerings today, much better business intelligence about what sell through rates are on products, cross pollinating information. How do we really optimize those key accounts that we're going to we have what we're going to get. We're not going to get any more space in certain accounts. Now how do we make sure we're putting in the best products, the most appropriate products? And as we go up, how do we protect the space that we already have, take additional shelf space and how do we build those really good relationships and how do we build that kind of connection. So let me show you what that looks like. What does all that look like today? So for 2 weeks, we did most recently a takeover campaign with Famous. And I think you guys see what the comps per sales numbers are like and the growth that we've had, the amount of product that they took in store this year was higher than the previous year, which was higher than the previous year, getting more space, getting more mind share with the major retailer and really 5 of their top models sold in those 2 weeks were Crocs products. So not only did we build this campaign with them from visual standpoint, from a co op marketing standpoint, but they saw the foot traffic and they see the conversion for a wider portfolio of lifestyle products. This would be another shot, so you can see how the stores were merchandised both in the window as well as in store and caps. For us, this has been a major focus for the last 2 years with our U. S. Wholesale business. Our brand presence in those wholesale accounts is either put to a rack or to a small corner. Well, it doesn't look like that with a lot of our major accounts this year. We've put a lot time and effort into doing co op marketing and getting better space. This would be Bell's. We are the Crocs' destination in Florida. That's their kind of pitch. We're your destination for Crocs in the Florida marketplace. They've given us significant space kids, women's and men's end caps complete rows of product placement and boxed product here also. If you look at Dillard's, this is 85 fixtures and 60 stores. So they're testing out. We've pulled all the product out of Dillard's that was there before. Some of the remnants of things that didn't sell that really made the brand not look very good last year and still in some of their stores were not cleaned up completely yet for this year. So we look much better for kids for women, a much more lifestyle emotional connection that we've talked about and as you see today, how do we get people to think about that well additionally and how do we make that connection with the mom, who's our number one consumer and with kids. Those are our primary consumers, loyalists of Crocs that accounts for about 75% to 80% of what we sell today. So how do we make that connection? Academy, we've always had for those of you that have been in Academy, they've been a long term account. Academy is one of the few wholesalers, I think there's only 2 that never decreased in business year over year with Crocs. So even in the difficult years, they stayed connected. This year, for the first time, we now get end caps at Academy stores in 2012. You're walking down this year, you get to see Nike, Adidas, all the different brands. And this is the 1st year where we've kind of earned the right to have our own end cap, really pushing more sandals and flip flops in this marketplace. They're a long term kind of partner for us. And what we're doing this year is kind of a fun campaign. If you guys have ever been in Academy stores, they're the only ones that just have these massive displays of camo products. Have you guys seen this? Anything that we built that's camo or anything that we're willing to put camo on for them, they buy and they sell. I mean that's who they're consumers. So we're doing a fun program with them this year where we're giving away a Rubicon Jeep that's all camoed out and so it's part of a co op marketing program that we're doing with them. DICK'S, the conversion rate on product with DICK'S is about 60% higher once they committed and once we committed to doing end caps. And these were 2 that we did with the kids program in the spring kind of late winter there kind of early spring February, March timeframe. So what we see the conversion rate when they give us the space and we're able to go in there and merchandise the brand, we see a considerable uplift in what a shop in shop would an end cap program looks like for the brand. And have you seen other where getting the end makes that dramatic of increasing sales? Sales, Famous. Those 3 this spring have really seen significant. What does it take to get those in caps? Because obviously, clearly, you want to have everywhere you are, you want to have in caps now. Yes, it depends. Right. I think in the case of Academy, it's just part of that progression of our business with them. And Dick's is kind of buying our space back in a little bit, spending some co op marketing dollars, committing some of our own merchandising people to make sure that the product that is flowing in there isn't getting stuck in the backroom, is getting merchandise on the line and watching internally here, watching really what sells through and making sure that they stay in stock because nothing hurts you more than being out of stock of core kind of colors and sizes what's hot. So an internal commitment and some dollars, no question. Same thing for Famous Footwear co op spend. And how quickly at the retailers when you get a sell through report knowing what the selling price is? Yes, daily. Daily on those. And weekly we look at that with the planning group with the wholesale planning group if they're out of stock or if they need additional product pull. And then you will reship to the store how often? Whatever they pull. It's kind of up to them. We're trying this year to really push that at once a little bit harder than we have for probably 2, 3 years now. We have product in this year. We bought a little bit more inventory than we have in on in Ontario, all geared towards this is what we think is going to sell through. Our Ailey line of new products, kind of the cork wedge flat, I mean sell through on that runs anywhere from 14% up into the 30%. That's been a huge successful product for us. So how do we take that and maybe put that into Famous into some of the key accounts that will take that product even for end of Q2, early Q3. And so it's a little bit more proactive approach. That was what it was years ago, but kind of rebuilding the business, we shy away a little bit from chasing too much on inventory. It just seems from some of the slides maybe you have a little bit more of an emphasis on department stores and No. I just I mean, I pulled what I thought was the best photography that we have. So there's a marketing deck that comes out on a monthly basis. I mean, I think Shoe Carnival is one that we do a really good job with today. Shoe Carnival is one that we do a really good job with today, good visual, good presentation. I think DSW, Shoe Carnival, Kohl's, Famous Footwear, the people that are in the middle there that are that mid tier channel. I mean, a lot of focus and a lot of brand building with them, more space, more style this year than before. No, I just picked out a couple that we had. Bells is kind of in between. Belks would also be somebody starting to kind of continue to work with us. So now it's just what I picked from the deck. And I tried to have a few from different DICK'S and Academy too. Yes. Yes. Some are committed throughout the year. Others we're still working on, right? So we don't want to give up the retail space. So how do we convince them that fall product is going to sell in their stores? And Doug and I go out, we're going to go out again at the end of June kind of look, we're humble, we're happy to go out and beg for and see how we can work with key partners to get them to be convinced that we are going to sell into the fall and even for rain boots and some of the kind of core products that might fit their consumers that they stay with us. Some are committed through the year, others aren't. Yes. Yes, Phil? You talked about just the following department stores. Certain department stores, you have to pay off a lot more money than others. Are you staying away from the biggest? Yes. I mean, it's actually kind of in that lower left column. I mean, we have this challenge, right? And I think that all brands go through it. We don't want to go back into the over distribution stage again nor and that was on that left hand side. And I want to go into that upper left quadrant, which means that we're going to go chase something just to take doors. So, down here there's just certain ones that aren't going to fit the model. And would we like to do business with Macy's and some of them? Yes, there is a space of certain products that we'd like to put in there to continue to distribute flaps and wedges and Bill is going to show you that product portfolio. So yes, would we like to do that? Yes, we'd like to open that up. But Sam, we go on this left side and there's some big potential growth plays out there. I don't know if we're relevant for JCPenney's as they remake themselves. I don't know if that's the right way to place for us to go and grow to. But when we look at this left side, we are not going to sacrifice the right, the people that we've built this with, the independence and the key people that we've worked really hard at over the last 3 years just to add door count. And you know what, it will pop us for 1 year, maybe 2 years, then we're going to have a problem that we're going to have to deal with. That's not our long term interest to build a healthy brand here. And we could have grown Asia when I was there years ago at a more rapid rate, but that's not my philosophy. It's do things right. Don't have to redo them and don't have to ask your current partners forgiveness for doing things that impact their business either. They've been pretty loyal to us over the last 3 years, DSW, Famous, Shoe Carnival have all been good partners. So let's not disrupt that relationship. Just to go up the left side. So we can talk more about wholesale but that kind of gives you a general feeling. I think our business as I talked about Asia would be very similar to that in terms of programs that we do with Murasaki and Zebo in Pacific in China, some of the activation programs. The amount of space that we have in shop in shop in their stores and those key accounts has been pretty significant and continues to build. On the retail side of this, we continue to look at our pipeline of stores, relevant stores, proper stores, right locations, not what we did before maybe to take locations because they were available or we thought that was a place where we could play. We've learned a lot about our retail business over the last 3 years. Retail is up and we are going to continue on that path to add 80 to 100 stores this year. What does that look like when we think about growth today? We're doing a lot of transition as we've said this year in the Americas. We're giving up space in kiosks. We're taking space in high traffic and outlets. This is the place where we do the best as we continue to look at this and study this. High street stores in New York or Chicago, this is not a high enough traffic area for us. We don't get the branding that we need. But where we do, do well is in those right malls, right locations and outlet. Asia, as you see, such a large territory. So 5 or 10 stores here, 5 or 10 stores there, all of a sudden it becomes meaningful. And as you can see, our commitment in Europe is to continue to build that out. Just in the month of April, we opened up stores in Frankfurt, Nice in France, Rothenheim also in France outlet store and Swindon in the U. K. And then we will open, I'll show you what our new retail format is going to look like. We're kind of into Phase 2 of what we are trying to do from a retail branding stand question. So what makes Asia go? What gives us such a growth dynamic in that marketplace? First off, it's a very large region. So just remember that we include in our Asian numbers everything from Japan to Australia to South Africa and everything in between. So that's a much larger format than maybe other markets. And when you think about that Asian business, this all up. All these partner stores, we don't have any investment. They're not franchises. We have no investment in this. We work with them on branding guidelines. Those 436 stores there are built with our distributor partners or others in the wholesale space. So that shows up as wholesale revenue. So when you look at wholesale revenue in the nation, you say, wow, it's 70%. It's true. It's 70% as we sell into them. But they also realize from a branding standpoint that they have to have retail to get the product distributed. So anyone I'll give you 2 kind of data points. Anybody who's been to Israel will tell you that he is a marketing machine. And he's transformed this business there. He's been with us for 7 years, 2 brothers, Michael and Amos Horowitz. And Vik transformed that business there from wholesale to 36 stores. 55 of these are in Israel where he sells about 600, 650,000 pairs of shoes a year. So obviously, the 6000000, 7000000 people live there are not buying all those shoes. But it's great brand building for us because so many people go through that marketplace. So many people kind of see the breadth of products that he brings into and he is a great partner for us. The story that I love best last week in Asia during the sales meeting was and I've talked about this on the call, so this just kind of adds to my enthusiasm is we're at a dinner after the 1st night and our new Saudi distributor is there and they brought in 2 containers of shoes with the intention that they were going to open 2 stores and start to do some wholesale. And so the 1st store opened in Riyadh. And in the 1st week of sales, things just kept getting bigger and bigger and a lot of word-of-mouth. They're not doing any marketing. There's no advertising out there. They open up the store. On Friday, which is kind of our Saturday, right? They're Friday. They're off Friday, Saturday. They're Friday, they sell 700 pairs of shoes in one shop in one day. They then determine that the rate of shoes that they're selling is so great. They don't have enough shoes in women's line to open the 2nd store. So then they're scurrying to pull product out of Dubai to open the stores. These guys have 2 stores open. They're just ecstatic with what's happening and they're committed to open 6 to 7 stores by the end of this year and they're planning to open 35 to 50 stores in that marketplace in the next 3 years. So when we think about how that business dynamic works, it's not just the 80 plus stores that we have in Japan with partners in the southern portion of Japan and it's not just the stores in Israel, it's partner stores really throughout the entire region. And that gives us that huge drive in wholesale and it gives us a huge drive in our retail business. John, what's the difference between what are the best live selling items in Asia and is it different between and the U. S? Is it Massive, massive. So Santa Cruz, Wahoo, cannabis deconstructed casual men's shoes. I mean, we're just starting to see some people in Europe men's kind of stores start to sell those in any meaningful way, whereas that's a million both those are 1,000,000 club member soon to be 1,000,000 club member products that we sell, which are great kind of go to casual products in the U. S. Doesn't resonate anywhere in Europe whatsoever. If you go to Korea, you put any kind of brand message even for adults, you put Mickey Mouse, Hello Kitty, I mean that market is so licensed kind of thinking or driven. It's just this total anomaly. Yes, we sell thinking or driven. It's just this total anomaly. Yes, we sell other core products, but if you look at the volume of licensed products in that particular market, it's just a completely different dynamic. You have to kind of understand the consumers. So yes, Steve, there is a significant difference. I think sometimes between Asia and the U. S, there's not always that much difference. They kind of look at U. S. Trend, but European footwear, and you guys have all seen European footwear is a little bit different and we're trying certain products that are a little bit more streamlined only or heavily in the European marketplace just for them. It's a little bit different dynamic, especially in the future. You said at the beginning of the presentation, I think you said 40% of your business is still closed. A little over 40% is still closed. If you look at that percentage, Americas, Asia and Europe, what was the difference there? Asia would be the less, it would be the least. America would be in the middle and Europe is still about 70% clogged. And so our big push in the European space. And I think what we see in our own retail stores, when we talk about European retail stores, and I'm going to talk about this on the slide earlier, so I'll just say it now. I mean, 30 percent of our sales in April in our own stores getting in and really merchandising the line differently, popping the story differently is new products. So that's one data point. I'm saying it's a trend, but what we see by doing the right thing in April, all of our stores with new products in them, all of a sudden we see our NPI jump in Europe to levels that we haven't seen before and non clog on top of that. So it's encouraging. It says that we can sell a lifestyle product into this space. It's going to take some work. The moment you've all been waiting for. Let's talk about retail metrics, right? Sam, are you happy? I know you're not hard of hearing. So when we look at formats today and when we talk about this, we're talking about the general kind of curve, right? There are right things each end of this. Generally, our average store size in the U. S. Today is in that 1500 to 1800 square foot range. In Asia, as I said, Asia is a massive market when we talk about this. We have a store in Hong Kong that's 6.50 square feet that does more than $2,000,000 a year. You've got stores that are 6.50 square feet that do $350,000 or 4 $100,000 per year. And so on average, you get to an average store sales of right in that $750,000 to $800,000 range per store. Yes, we have super performers in markets where it's well above that, but it's also heavy foot traffic. It's also kind of a different retail dynamic. The internal metrics, it has to hit 20% or higher operating income hurdle rate before we say yes to sign off on it. Are there exceptions to this? Of course, there's exceptions to this. When we want to be in specific locations or maybe we don't feel like the data is maybe it's a little bit conservative, we're going to take a look at those particular locations or stores. But in the past, when we opened SoHo or when we opened State Street in Chicago, those were open more marketing kind of thinking that we needed the branding, we needed the position, we needed to be in a certain location. You guys have seen this over time. Those days are long gone. We're not looking for a $4,000,000 $5,000,000 investment in a location that we don't think generates the right kind of operating income revenue stream for the brand. So anything that you've seen, almost same thing with the 95%, 98%, surety, we've opened, like I said, we're looking for places like that in Florida or on the coast, Texas, Southern California, which is a market that's been building for us over the last few years. Our European, Asian locations all fall within the same criteria. We use retail consultants in every market that we operate in today to be relevant. And the head of our U. S. Retail development is in Las Vegas this week for ISICSC. Return on investment 35% or greater payback on some insurers that we open today, they return, they pay back within a year. Some stores take 2, 2.5 years. But anything that we look at when it comes from an investment standpoint, that hurdle rate has to be within that 1 to 3 year range, preferably 1 to 2 years on most stores that we open today. So hopefully, this helps give a little bit more granularity to how we think about retail, how we open retail from a financial metric. John, what's happening to the Asia store cost? Is that factoring in some of the inflationary pressures in China and other markets that's trending up year over year? On the average store cost build out, it doesn't really change that much. When we go and we build out a store, labor costs are cheaper. All that material, we buy in volume for our stores in Asia, in China. So they can just pull directly out of the China DEC when they open a store. So the store fit costs are cheaper. We're looking how we do that same thing for our U. S. And European as we get to a new format, how we buy and get our initial build out cost to be lower. But the labor cost to build out stores and just that dynamic is just so much cheaper. So I mean that has a huge impact, nonunion labor get it up, get it quick. It gets done too. They're in and out where times it takes months here in the U. S. To get stores built out. On rent, Jeff, clearly in certain markets rent is clearly jumping. Hong Kong, you're starting to see rent in prime locations, not so much out in the territories, but in prime locations, if you want to be down there, oh, yes, rents are going 20% to 50% in a lot of the locations. Most of our rents there are 3 years out. So we don't see that ramp impact yet. But sell through and margin, we have to believe we're going to continue to work to offset some of that impact. John, is there a regional difference in sort of the comp ramp over the 1st couple of years of a store? Matt, how does that look? Yes. It's a very interesting thing. As I said, in a lot of our Asian stores, you're going into a brand new mall that's opening. Everybody wants to go try the new restaurants, everybody wants to go kind of see what it's like. I think that same dynamic what I saw in the Middle East I was in, Dubai, Kuwait, Istanbul, same kind of feeding frenzy. The bad news is that you still have a year and a half left on your lease in the other mega mall that was built and now everybody wants to rush to the new mega mall and be part of that dynamic. But clearly, yes, your 1st years in most of your Asian markets are such that they're actually equal to maybe even higher 1st year than they are even 2nd year depending upon how the mall stays and what the flow looks like. Whereas I think for both our European and U. S. Business, we see about a 10% to 15% uplift between year 1 year 2 as people come to know that you're there and come and shop there and that dynamic kind of changes a little bit in U. S. When you look at the profitability on the store, do you assume that this is 1% of the Jeff, how do we look at that? Maybe you stand up, if you don't mind. Okay. I think it's important to people on the webcast too. So when we look at a new store on a pro form a basis, we look at 1st year operating income over 20% is kind of the guideline we're looking for 2nd year, 3rd year, 4th year, all of those years should be over 20%. As John said, sometimes make an investment in a store where it's not going to be 20% in the 1st year, maybe it is in the 2nd year because of some issues in the 1st year, it doesn't hit it. Make judgment calls beyond this is the strict rule of 20%. Same too with return on capital employed and return on investment. If you look at it internally, return on capital employed, which includes inventory, which is a little bit lower within return on investment, which is just the pure amount of money you're putting in store. But you're developing in net stores. Yes. That class of that group of stores that are going to be profitable this year or even lose money because of the opening expenses? Profitable. Profitable. Profitable. And if their stores if the balance shifts like that and it's Asian stores, then we know in years of experience of opening stores there, especially in new malls, it's going to drive higher than 20%. So the benefit that it usually gives us is that when we look at the pool, we look at those 80 to 100 stores together, yes, we assume, we work on, we talk to, we drive that they're going to be 15% to 20% operating income as a group. And we look at it every month. We work with the regions every month. We have a retail team that says why they're not hitting those hurdle rates, why is it like that? You get into that. The face that you get certain stories that sometimes just don't resonate in market, but as a grouping, that's the focus. Just real quick, Tim, you had a question? Capital plus inventory. So the return on investment includes just the cost of 4 wall stores, the return that we're getting on that 4 wall stores divided by investment into that store. So it would include we would it's on a cash basis, so you would back out the depreciation and depreciation, maybe the analysis on an IR basis. What would the terms of those releases that you get kicked out and stuff if they don't work going 2 to 3 in our Asian markets, basically 3-three-three kind of European style retail that you can kick out after 3 years. The U. S, well, we get a wide spectrum, don't we? I mean, we get outlet stores that are 3 years. We get some that are 5. And we've kind of shied away from really those long term lease commitments. And we've gone away from a lot of those high street stores or major kind of retail markets. But Sam, there's always some that are out there that are going to be above 5 years. Do you want to add on that? So the question is for people on the phone. So the question is really do we open stores throughout the world in more warm weather locations. Obviously, we do better warm weather locations, right? We don't have that same seasonality effect. When we open up in Woodbury Commons, there is a certain cyclicality to that business, right? And people are going to shop at certain times of the year. When we open in Miami or when we're in Orlando, I mean, clearly the dynamics are going to be a little bit different in warm weather. So yes, I mean, to our brand, it's more beneficial. I'm going to show you Nice, France that we just opened. We try to focus in location like that, tourist destinations in the Caribbean, in Florida, in California, warm weather, Southern California, Southern California, Southern California for us from a marketing standpoint. Yes, we're very cognizant of being in those locations. All that said, we do extremely well in Japan almost every month throughout the year. Again, it's just how do we continue to build that connection with the consumers in other markets the way we have in Japan, China, where they don't have as much drop off. Sorry? Yes. I was going to say that some of our best performance stores in Europe are in the North region and in Europe and Russia. So a lot of it we overcome the Yes, it's really interesting dynamic that our highest penetration rate is actually in the Nordics and our best performing retail today where we have 9 stores in Russia. Again, how do you establish the brand? How do you make that connection? How do you get consumers to think about it? When I first went to Russia about a year and a half ago, I walked in, I said, you guys have got to change this. It's clogged. It's so heavily clogged dominated. That's that European influence on the Russian model. If you go in the stores today, they're 30%, 35% clogs. They've just gotten much more lifestyle proliferation of products. Great. Well, the target is 20% is kind of the minimum is a better way to put it than necessarily target because obviously we're some parts of the world we're targeting for much higher. If you look at the 4 wall returns on some of our stores, they range again, right? We have some that are very strong performing stores and some of our best markets like Orlando and Hawaii and Hong Kong, those stores do fantastically well. So we have some very high ones and we've got some that bring the batting average down overall. But in general, it's pretty good. I think in general, we feel if we can run a retail business at above 20% operating income and we can continue to drive that, that's a pretty good dynamic. And that kind of return on invested capital, Yes. So the question people have shown is, have we opened stores in the U. S. Marketplace that just didn't work very well. I'll give you a perfect example right here in our backyard. We opened in Cherry Creek, higher end mall in Denver, nicer area of town. Our consumer doesn't shop there. That's not a place where it's really relevant. Rents are expensive. I don't know many people in that mall that make a whole lot of money. Saks pulled out of that mall about 9 months ago. And we've got we've become much more understanding of who our consumer is and where they shop. We're no longer aspirational when we think we're going to go into these higher end malls or higher end locations and say this is a place where we're going to do well. So yes, we shy away from those high end malls that we just don't do well there. We can't sell enough. We're not on Main Street. A lot of times they'll park us off on the side streets. We don't get the traffic through the stores to really make the connection. On the other hand, we go into mall like Mall of the Americas, we get high traffic area and we already have good brand presence there and it does fine. That's the right kind of calibration for us. Okay. Thanks, Jeff. So we tried the initial concept that we showed you before, which was a little bit woodier, a little bit greener, a little bit different kind of feel to it. And what we come back to is that the store itself has to have a more female appeal to the store that the greens, the woods where we like it and those three stores have done okay since they've opened. So we opened in streets of South Point in Durham, North Carolina, in Austin and in all the Americas. We've kind of found that for the brand and for our consumer, we have to lighten it up a little bit, stay true to kind of what the roots were kind of having that little bit more outdoor kind of feel to the product. And so what you see, this is the style of store that we're going to open in Blue Water in London here in about 4 weeks' time. So a little bit more open, a little bit lighter, much more user friendly. What you're going to start to see is in the stores, there are display racks underneath and these racks will also be merchandised where we can start to put boxed products into the stores as we move to a little bit higher price. And as we have more boot products, we need to have that kind of merchandising flexibility in the store. So we're going to see kind of second generation what that looks like for the brand. But we like this feel a lot better than the initial take. Yes? Lower capital investment on this store. Yes, about $45 per square foot less when we build out like this. And the idea that we're cleaning out fixtures and we're going to a more standardized model. So we think it has a big impact, Jim. So as first is getting it out and getting the feel for it and then really then deciding how that cuts in. Our desire is we're going to stay with the existing format till the end of 2012. Any new stores really will be those stores that are in the pipeline that open after January 1, 13. So we're going to see how this works in So John, this is a prototype. I mean, is the idea to take this prototype evolution and start taking features that work particularly well and trying to go back and do partial remodel to existing stores before the leases run out. I don't know, Jeff. We're going to kind of see how the dynamic works. We took certain things that we liked, certain things that worked from the first format, incorporated that into this. So we kind of get a 2nd generation of learning. I think as you guys have chances to meet maybe when we take a break here, we've got some of the other executives here, maybe we can introduce again and if better conversation with Andrew Davison or Becky Gevart to kind of talk about kind of some of the work behind this. Angie is in Europe this week, so she's not here. But a lot of thought, a lot of work is going to because we're going to see how the learnings kind of apply. And then we're going to make those decisions then how we want to retrofit out stores on a going forward basis. If it's highly successful, then we're going to be more incentivized to start to make some changes. A lot of times we say that, but if you look at mall store data today, if you look at outlet, sorry, mall store data, revenue per square foot, you guys get this, you see it, we see it. We're usually within the top five and certainly within the top 10. So when we talk about taking revenue per square foot up per store, it's not like we're sitting in the bottom third trying to figure out how we're going to get to the middle half. I mean we're generally, especially on outlets, in that upper quadrant in most of the locations that we're in. This is not this is an actual picture. This is not just a rendering. So this is actually the store in Nice, France. It's on 2 floors. It's in a really nice location. It's done extremely well out of the chutes. But it kind of goes back and gives you an idea of how we can connect, especially with tourists in this particular market to kind of think of the brand in a non clog way. A lot of the products that you see out are women's flats, women's sandals, women's flip flops and it's done really well and it proves us again back to the question asked are you opening up in warm weather climates? Yes. And this is a great destination and it's right it's a great location for us. Why did we not open the store center? I mean, we waited in Europe longer to get the right locations and now we're getting better looks at locations in 2012, 2014, 2015. Internet, if we think about what the Internet is doing for the business, we have clearly backed off on the Internet side in terms of discounting. Have you guys noticed? We've clearly turned off the discount meter and we're really pushing new products. We're taking margins up in both Europe and in the U. S. When it comes to our Internet business. Volume is not growing at a faster rate. But we as a company have said, and I'll show you next, we have lots of people out here. So 277 in sites. This shows up as wholesale business in the U. S. That are buying product, Zappos, shubuy.com, Amazon. They're all pushing a significant amount of volume and they're turning it on and turning it off. And we also let Zulily and some of those do the discount promo to the brand instead of us doing it ourselves. So we're trying to become much more brand conscious, much more focused in our Internet business to kind of get off this chase revenue at a margin impact. Now I put one caveat in it, that's all true until we get into the Q4 in the U. S. Market, right? And then it's kind of a free for all. You got to go with what the flow is. You got to go with what that dynamic looks like at the macro level. But significant amount of development in the Americas and Europe with partner again, would drive the business in the U. S. Today, would drive that brand perception. We've got great partners here today to kind of help get that messaging out. So we think we're happy to see this thing continue to grow at a 10% to 15% rate. We got a jump years ago on the competition when it came in getting the brand out. This is still a pretty sizable business for us when you think of 120 $130,000,000 through the Internet side today selling only footwear, not selling apparel or other accessories. So I'd like to do if you guys are okay with this is how about if we give you a 10 minute break? How about at this point before we jump into the regional piece of this, how about if we give you guys 10 minutes? It's 130, so maybe try to come back at about 140 and I'll go through regions and then Dale is going to go into products after. I tried. For those joining us on the webcast, we will resume at approximately 140. This line will be muted for the next 10 minutes. Thank you very much. So, do you guys like it? Yes. So, we have 3 different video clips, 4 different video clips to show at the sales meeting. They get a lot more jazz than financial people do about that kind of stuff. So I'd like to maybe make that transition over in the regional piece. And I'm trying to consolidate down into the top kind of 3 to 5 things that we focus in on markets a little bit more expanded on the European piece. If I don't get enough if we don't get too enough details in here, please ask whatever you'd like to know in the European piece and I'll tell you to the best of my ability what we think, what we see. Before I jump into the regional piece, maybe if you don't mind, maybe we've got some of our executives in the back. So maybe first, Christy at Saito. So Christy, in all this great product that you see around you here is a key member with Dale. Beth, who's going to talk next set of product development and bringing this to life in with product development and merchandising role. Next to her is the woman with the camera eye here, Becky Gebhardt. Becky has been here about 15, 16 months. You guys have seen the transformation of our visual merchandising piece in conjunction with Andrew Davidson, who I think stepped out, just made a huge impact on how we create this emotional connection with our consumers. And Becky runs our creative group here. Katie Lachie has been here 4 months now. Katie is the VP for Communications, Corporate Communications, both internal and external how we go to market. And so I'm sure you introduce yourself to Katie while you're here. Dale is going to talk. Jeff, you know. And everybody else left. So if anybody else comes in, we'll they've got work to do. They can't be sitting in here all day. So we ask them to kind of bounce in and bounce out. With the sales meeting going on next Thursday, they've got other things going on too. From a regional standpoint, when we talk about next 3 years, I don't think this is any surprise. I've said this repeatedly. I think our plans are that the growth rates in the U. S. Are good and what we're continuing to do in the U. S. Is good. But I think really by the end of 2013 Asia will be larger than the U. S. And that has various implications on our business. As we move gradually towards a little bit more direct as I talked about earlier. And as we move ourselves a little bit more towards Asian consumers and it gradually grows, then I think that what you see is a little bit stronger performance at a gross margin and operating income, bit stronger performance at a gross margin and operating income level into 2013 if we drive them in this direction. But we think based on what we see sell ins, sell throughs a little bit on the fallwinter. Actually Jeff is going to go through backlog with you later in the presentation. He'll talk with you kind of about what we see in the first fall holiday, 2012 where the uptake of the line is. It's more dynamic and it's our brand presence is stronger. We didn't have the damage that we had in the U. S. In 2,007, 2008 to recover from. So that kind of path forward is a little bit more easier. Regional results, again, if we think about the quarter, what we look at on an FX neutral basis, it was 18% up in the Americas. Again, that growth drive in Asia, 39% up on an FX neutral basis. And Europe year over year, what makes me encouraged, I'm going to talk about this later, what makes me encouraged actually on FX neutral basis, we're actually up 2% year over year in a pretty darn tough environment in Europe, partly because we're doing better in the direct to consumer space. We have a little bit more direct to consumer space. But even at that, we only have 3 stores, 3 incremental stores open from Q4 to Q1 in Europe. So we didn't open as many stores as we wanted. A lot of those stores did open in April and I think what we're going to see is we're going to see some of that start to play itself out through 2012 and into 2013. So let me talk about the Americas. And again, when you talk to people next door, when you see the energy that's going on in that room, they're building now on a base of a solid wholesale distribution channel. How do we take space? Where do we add certain accounts? Product segmentation, you're going to see that when you go in the room next door, you're going to hear that and they're really focused on making sure that we've got the right products. You're not going to find hirace in sporting goods. It's not going to happen. There's a much more directed line assortments that Christy, Citus taking control over on a going forward basis where we've got a much greater focus on where we're placing products than ever before. Development of accounts in specific channels and additional doors, we've got certain accounts that we want to go open up that maybe we did business with before that there were some hurt feelings or there was some things that we need to work through with them, places where maybe they didn't want to take our product before. But with the assortments that we have now, it opens up new channels. And what we consistently say and what you see in the numbers is we ask them you got to give us greater presence. In the early days in Japan in 2,005 and 2,006, we tried to fight these battles with Murasaki and with ZVO and with beans and with a lot of our major retailers in Japan if we give you the product for springsummer, you have to guarantee presence in fallwinter, because we knew even back then that for us to get to 4 seasons that we needed their commitment. And even if sell through wasn't as good, they were blowing through products in the other 6 to 8 months of the year. So there has to be a certain amount of trade off in there. So as I said earlier, a lot more work in the state to try to keep that brand presence into fall holiday 2012, definitely into 2013. 12 definitely into 2013. 12 is going to have its own dynamic in the U. S. A lot of our marketing as we showed you earlier is really driving trying to drive new consumers to the brand. So what does that mean? 12 can have its own dynamic in the U. S. Well, I think you on the on hand, this is backed up. There's inventory backed up. So a lot of retailers when they look at what open to buy is based on their inventory position and brands that they already have in line, it's a little bit harder for them to wholesale accounts to bring in new brands into the marketplace. I think we have great product and you're going to see it as you go through and we can talk about that further. We have great new products. Our whole cobbler collection is kind of series down into the last into the I mean, for our products last year, this cobbler collection of products didn't get placed in it. We're not seeing wholesalers willing to take open to buy dollars and open up new segments. But for our own stores, what you're going to see is them merchandise with Mammoth, with the cobbler collection of products and boots and I don't know, Chris, did you guys have one with the Rain Flow? Do we get one? No. Rain Flow has been. So if you haven't seen this or felt this, I want you guys to check this out, take the liner out of this. So this is all new technology, all new kind of innovation when it comes to material development that Gale and his staff have gone through years to bring to market. And this fits right into our category, the patented kind of hunter boots, where we think we're not trying to go into technical winter products. What we're trying to do is be really your go to rain product for kids and for women. So when we look at this from a product standpoint, then this is what we need to place and we need to have some confidence in the line when they array that beautiful looking product and technically and fit it's outstanding. And again, Crocs Comfort, super lightweight on your foot with a whole different kind of feel. When first did it, the original ones were in blue. So the internal joke was it was Smurf skin. So that was price point on the rain flow is $79,000,000 New retail locations, as we just talked through the retail piece of this, I think we're taking larger retail space and I think we're getting better sell through on the stores that we brought online 2011, 2012. I think as I said earlier, part of what you're going to see is we've gone far less promotional, let other people be the promotional arm from the e commerce site if we sacrifice a little bit of growth, that's okay in the short term. We've got to recondition customers not to sit back and wait. We condition customers, we condition you. I had to sit back and wait and every week we give you some kind of promo, a BOGO, a buy 1, get free shipping, whatever it was. It was too discount oriented. You have to just like with JCPenney in the same space, you at some point in time have to get off this crack cocaine that you're on to just continue to try to drive the business. We've got pretty good product placement. How do we do that differently? The customers who are willing to expect to allocate their supply. Yes. Is that something you're going to be willing to stock We are. Just those 3, Steve. And only in selected colors and only in selected models where, A, the sell through was good last year or like kind of on the Mammoth, where we're going to put it in our own stores. And a little bit what's shorted our Q4 revenue the last 2 years is we didn't place strong enough bets on inventory. I'm not saying we're going to get crazy about inventory, but we're placing stronger bets for having stock available, just those 3. Rainflow, which is going through here today, which we think will do well based on early studies and tests. Mammoth, which I said is a $10,000,000 paraceler, getting that back out into the marketplace. That's a $35 kids with $35 adults is $45 price point, it's not an egregious amount. And then also with cobbler where most of our cobbler product was sold out by about the second week in November. We never even got to January with that product. It was pretty well picked over. So we are going to place our best this year. Yes. You hinted earlier Yes. You hinted earlier regarding App1's business and you're expecting a little more App1's business this year. How does that I guess in the U. S. Before talking about that, but how does that roll into the guidance you've given for the Q2? What's that balance expectation? And then how do you look at that ongoing throughout the year relative to prior years? Yes. I think for Q2, Sam, I think we have better kind of insight on what sell throughs are going to be. That's not going to move materially. It could be up a little bit or down a little bit, but probably up a little bit based on what we've seen in terms of products and sell through and what we're kind of chasing to support wholesale retail partners there. On the back half of the year, I think it's too early for us to tell at this point in time how it's going to play out. There's a lot of work on our part yet ahead of us. I think there's a lot of senior management time that has to go out and say, look, we've done really well together. We need your help in the back half of the year end to Steve's point, because we are going to place bets on those. Those are carryover products for us. We're not doing anything that's going to be not in the line for 13. All of those three products are in the line for 13. So that's really going out and really working hard to try to maybe get some additional wholesale orders for Q3, Q4. Would I just follow-up, I mean, would you do a situation where you might have some larger cats that is bulking a little bit, say, look, give us 30 doors early, let's see how it does and then we can roll from there? Right. Is that the kind of work we do? Yes. Absolutely. And a lot of times, it's they're in that in between. They're not really the women's isn't really back to school and it's kind of the end of the summer and they're waiting for fall. So give it a shot. Yes. Are the stuff that's going to be in the line the next year, Yes. Those are all great. It's just the rapid sell through sometimes your model track is at 8% or 10%. But when ALAE is selling through somewhere 14% to 30%, then those model stacks out the window pretty quick. Kevin, what do I do? I hit the lower here. I hit this one. Sorry to feel like decades. For Asia, if there's 3 kind of key building blocks in our Asian marketplace, it's really continuing to stay relevant, staying on trend. Trend. In Asia, the brand perception is the strongest. When it comes to how people think about this in China, we're aspirational. We actually charge a slightly higher price in China than we do in other markets because when we position the brand, it's the same people that are buying Starbucks, it's the same people that are looking to say, I want to be this, I want to communicate this. And it's a whole different kind of marketing dynamic in a lot of our Asian markets, say, in a lot of our Asian countries today. How to continue to keep it fresh and how to continue to do fast retailing in those markets, that's the key for us. So how we change over stock every 6 weeks to 8 weeks in stores or with our retail partners. Developing new wholesale accounts, there are certain markets where we're just under distributed today. If you look at the number of actually doors that we have in Japan, we are under distributed as brand even though it's $170,000,000 worth of business, there's still a lack of distribution in certain locations and in certain areas. And again, leveraging brand strength and staying in season all four seasons. You guys saw the number of stores that our partners have built, they want to stay in season. They have to stay relevant with the product. They have to flow rain boots and you'll kind of see what backlog looks like for Asia for the 3rd Q4. Retail expansion internally and with partners, I talked about this earlier, this is really important to us. It's really important as part of brand building and it's really important in terms of staying connected with consumers as those markets grow and develop. Building e commerce, the upside here in our business and something we're focused on, we do any amount of business in today, which is about $12,000,000 to $14,000,000 in per year is Japan. And so we bring up our new Demandware site in Japan in the late Q3. Korea only opens in about 2 weeks' time, so about the 1st week in June. Taiwan started in the Q1. We think that these are good markets for us from an e commerce standpoint where people do shop online, buy online, not just shop online, buy in stores. And the other market versus Australia when it comes to what we think from an e commerce standpoint where we continue to sell products. Most of the other markets there, they're going to look at it online, they're going to buy in store, they're going to have dinner, they're going to buy at retail. But we think that those can be good platforms for growth in Asia over the next 3 years. You mentioned before that you wanted to grow new geographies by 5%. Right. And if you open up countries like that, can that be Should be simple, right? Should be basically simple. When you look at what's happening in the Middle East, when you look at opening up those channels, that's what gives us confidence that we should be able to drive top line revenue 15%, 20%. It's all about execution at this point, right? And it's amazing. Another $1,000,000 in Korea, getting Japan just to $3,000,000 a month, up from $1,500,000 a month, less than $1,500,000 a month. That's key wins for us in the stage of development that we're at. Sometimes we always have to remember, we're about 7 years old. This is maybe our 8th year of business. We didn't really do much. If you think about this, 2,004, we stayed for our 10 year anniversary. Not much happened. We only sold 1,200,000 pairs of shoes in 2,004. And a lot of that was thanks to Alex Dillard and Alex with River Rafting in Colorado found the shoes, started to put them in his stores in the Q4 of 2004. We didn't do much. Most of that revenue all came in the Q4. And the fact that the next year we only did 7,000,000 pairs of shoes, sometimes it's hard to think about this in the terms of us. We have a hard time. I the staff will tell you, I have a hard time. The fact that in the last 5 years, we've shipped over 225,000,000 pairs of shoes. I mean, it's a little bit phenomenal. And to open up 3 channels and to be in these markets and be as effective as we are today, I mean, I think that's really a lot of hard work by a lot of really good people. But the opportunity as an investor and as a company exists, it's continuing not being lackadaisical and being happy to hit $1,000,000,000 to tell you to say, okay, how are you in the next 4.5 years then get to $2,000,000,000 And dollars and that's the internal constant push. Yes, there are opportunities that are there. All we have to do is go execute. And we're not Adidas fighting with Nike. We don't have a natural predator in this space that we're fighting over market share with. We're fighting with local brands. We're fighting with smaller niches to be that brand of choice for casual lifestyle products. And you saw some, you're going to see more when Dale talks. The opportunity is there. You've got to execute. Europe, I have 2 slides that talk a little bit about Europe. And I know that there's a lot of questions. If I don't cover it, please ask. When we think about building our wholesale channel by far go shop anything in Europe and tell me where you find Crocs today. And tell me where it's there in a meaningful way because even some of the people that have Crocs today that would be deemed an independent they're just selling through some of the old products that they have or they've stayed connected just to the simple racks, 1 or 2 racks in a store. So opportunity for us to build the brand there with the new management team, again, is clearly in front of us. New structure, Kimo Salmi was our Commercial Director for Russia and the Nordics. He's Finn and him coming down and running all of our commercial operations in Europe is a great internal move for us having somebody who really knows how to work. We've taken a much different approach in Europe over the last 18 months. Mike DeBell who ran Asia went and spent 6 months in Europe last summer restructuring that, getting the new General Manager hired and getting chemo to move down. And in building that, we're really decentralizing out of where we were in the past in The Hague, not very convenient, not good work ethic, a number of different dynamics there. We've now moved the office closer to Amsterdam. So we're all over about 6, 7 miles from Amsterdam, really 6 minutes from the airport there in Schiphol. That dynamic changes. We've pared down our headquarter operations in Holland. We've moved out jobs into Germany, into France and into our U. K, London offices. K, London offices, so we get a little bit more decentralized. The 4th point is the one that we're working through that will transpire. I can't really probably tell you more than what I'm about to tell you because we don't know any more than that. But we have been working on the Benelux marketplace that would transition back to us in January of 2013. We've already said that's coming back to us as a direct market. But because we're now selling in springsummer 2013, 13, they've kind of come back and said, you know what, we would be it would be better if we transition this out sometime maybe in early Q3. So as we know more as that finalizes and crystallizes, then we'll talk about it in the next earnings call. But that means we're going to take back about 9 stores. So in that partner list they had 11 stores. We're going to take back 9 stores in the process and we will then take back the Battle Electric Market on a direct basis. We've paired off some of our Holland staff. They've been working on this for about 9 months now to put in our systems and to hire over staff and to make that transition. Spain, it's just kind of a recent occurrence where it's clear that they're struggling. The distributor partner that we have there is just struggling financially. It's probably something better that we come to. We've got a long standing relationship with them. They've been there since 2004. But it's just I don't think it's not going to work for the long term. So again, we'll update you more on that. That will probably come back as a direct channel to us. Only 2 stores there that they have, they carry Speedo and 6 or 7 other brands. So they're going to take some of the existing stores, convert those to multi brand stores of their own. Our existing distributor is going to continue to carry those brands. But for us, we have 2 dedicated stores, 1 in Madrid and 1 in Barcelona. So we'll tell you more about that. But just to put it in terms, this is 17% of our business is in Europe, less than 1% is in Spain and like 0.3% is in Greece. There's a lot of questions about what's happening in the European market. But in those kind of key markets, crux Europe business. You said on the Q1 call that you What percentage of the European business is penalized? Yes. Yes. I got to say it's in the 5% to 6% range. But maybe Jeff can come back to get that number and then we can Yes. And so if I think that, Mike, is the wholesale piece of this, e commerce, I mean, we've again taken that same step back. So we're maybe not comping up on our European e Commerce business, but from a margin standpoint, we're doing better. And so what we've done is we've traded off being promotional every weekend with some kind of campaign to trying to do more brand building, selling in the new line, getting consumers to think about it differently. Today, we have about 1,500,000 people in our European CRM database. How do we kind of create that tipping point there when it comes to how people think about the brand? More life without less clog. And just real quickly and I'll see if I answer this in the next slide. When think about then retail, we're going to basically double almost the number of doors year over year. We're going to go from roughly 31 to 60 doors in Europe in 2012. And again, opening up 5 or 6 in Russia and we just opened up in Stockholm and opening up doors in Germany, an outlet store in France. Each one of these makes up a much bigger investment from a crack standpoint, but it's clearly what we should have done 2, 3 years ago to get the brand message out there. And we're just significantly behind the rest of the company. What I say here is as we do the right thing, as we get it merchandise in the right way as those stores come open, the consumer looks at this 30% of our revenue came from new products for springsummer 2012. We think we should be able to sell women's flats. We should be able to sell wedges. We should be able to sell kind of our core products globally. And yes, there's some color nuances and a few changes, but really that's consistent. And just doing a better job of it, working harder, asking for the business that we haven't had before and outlets and high traffic areas I've showed you for those retail locations. Last, we think where we sit today having gone and spent time with them, I spent 5 days in our European sales meeting. I talked to every possible group. I sat with 1 group at lunch or another group at dinner and just really kind of getting the feeling for it. I mean the energy that's there, yes, the market is struggling, but we're I don't want to say that we're recession resilient, but we are a good price for value. And now we just have to kind of get that message out. So Mike in the total scheme, we're going to be on budget, on plan this year. We don't see a decrease to 2011 levels. And we think based kind of on where they're at today and some of the things that they're seeing real time that they're going to be maybe even slightly up year over year. That's with 30 new stores. So clearly a little bit of wholesale shifting? Nothing that you're going to see until really in a meaningful way until 2013 on the wholesale side. But I like the fact that we're trading off revenue at a higher margin and getting new consumers into the brand. Once you see that situation breakout in Spain, do you see maybe longer term allocating more capital towards that market? It seems like you have a sort of product price point. Yes. It seems to be under penetration. Yes, for Spain. Yes, for Italy. Those two markets, they're both places where I think we would do much better by having some of our own retail stores in the right location. And let's face it, I mean rents are coming down in those markets pretty significantly. So we are opening up outlet in Italy in 2 locations this year. So we are going to start to build a little bit of brand presence. We've said this before, we took back our retail rates last year in Italy. Now he is going to open some stores in 13, our existing distribution partner. But he's not he's a whole seller. He carries other brands. He carries Teva. And so he's more focused on building out the wholesale. And the Italian situation was the one that's interesting in that actually our revenue to our wholesale to our distributor in Italy is going to go up this year mainly because he was over inventoried last year. He didn't buy a lot of product last year. So one of the internal dynamics is, yes, the market is struggling, but for us, he's so low on inventory that he's actually going to buy more in 12 than he did in 11 just because of where he's at as a business. How many stores can you speak for the business? So we have Deloitte and Touche do work for us in their European consulting business and the number of stores that we look at in locations anywhere between 30 40 stores over a 5 year period. In Italy slightly higher than 40 to 50. Interestingly enough, that quiet market that I referred to earlier, that Poland market, say, Echo has 50 stores of their own. People don't understand the spending and the kind of footwear marketplace that affords itself in Poland. Some brands are actively going into that space. And so for us, we think that this also offers a good potential to grow either directly or with our partner there. You said just going back to the European wholesale, you said you have a lot of independent smaller chains you're dealing with now. When do you build or when do you get visibility on their orders for spring of 'thirteen? And is that a better order book than if you're dealing with department stores or big sporting order of both than if you're dealing with department stores or big sporting chains? I think we're going to find out. So we're putting more work into, as I said earlier, into those mid tier kind of chains like we did here years ago. So we don't have a strong presence in shoes in Europe, even though we do some work with Genesco here in the U. S. And Journeys. We don't have a strong brand presence in a lot of the mid tier footwear brands where we should have a better presence. Just like we didn't 3 years ago, we had hardly any presence at the mid tier, right? And so that's a big focus for our team there as far as getting product placed and then now continuing to build confidence as we sell through this year with the existing independent kind of lower smaller kind of chains that we have. So we're doing a test, for example, with Decathlon in France. So we start with 50 store test with them to see kind of how that's going to work. That's a good mid tier for us, kind of sports retailer. We segment the right kind of product into that space that offers an opportunity that we haven't had before. And so those are commitments already for 13? That's for 12. And then we work with a number of different key retailers today to try to kind of get ourselves back in. Pre books are just starting, so they're just taking the line out now in Europe. They're still seeing this 2 weeks ago. So more of that work is being done. And I think by the time we get to the end of July, we're going to have a much better feel for what that is. I mean, more pre books still come in all the way through the end of the third quarter, but we're going to have some indication of whether they're going to give us a look in some of the other retailers in Europe for 13. I mean, we had a much bigger distribution. It's just imploded much in Europe. Now it's how to go back and build that. When you think about the wholesale distribution in the U. S. Or in the Americas and in Europe, how much of the growth is going to come from broader assortments, broader and deeper assortments versus new distribution? Yes. I think what we've said this year is we're going to see about 50% of our growth come from ASPs and about 50% are going to come from unit. And I think we've got to continue to work at that unit growth. So ask that again. New distribution, new channels. Like how much can you expand with an existing distribution versus opening new accounts? Yes, it depends upon the channel. Like we're not looking for any additional mid tier footwear players. We just want to continue to build our existing relationships in that space and just have better products suited for their consumers. I don't think you're going to see significant door growth in the U. S. In 2013, if that's kind of where that question is. I don't think we think that we need that much more distribution. We need certain in certain markets, we need more. And in certain doors that we're in today, we need to engage them better. They need to have the right product in their stores. Maybe Jeff, can we hold that? Jeff is going to go into and talk a little bit about that. We can mix that into kind of what the numbers look like there. Okay. Jeff is going to cover that and he's going to give you guys back I know this is a big day today guys. So you're going to get actually backlog by region today too and Jeff's going to talk about profitability by region today too. So this is worth your trip. So any other questions on regions or kind of channels before deal shifts over? I guess what's your expectation as you grow in Europe outside the clogs? Do you expect units to grow eventually or are you going to just replace the clogs? What we would like is we'd like it to be incremental, right? I don't know what the curve we don't know what the curve is going to look like where so much of it is clogged today. I mean is that going to stay strong channel for us and that we're going to add to it as we do in other markets today which drives the top line growth? Are we going to see a consumer come in and say, well, I'm not really interested in your existing models. I'm going to go with the new retro run of product. I don't know. We don't know yet how much trade off we're going to see in Europe with that consumer. So we never pushed this hard to get them to think about us in a different way. They trade off a clog for flat. I mean, it seems like it's a different application. It seems like intuitively it should be an incremental sale. I came in to buy this clog. I found this really cool, new women's flat. So I'm going to buy this flat and it should be incremental. We're going to see. Okay. Thanks. Hi, everyone. I'm Dale Baffum, Senior Vice President of Product. And today I'm just going to talk to you, I'm going to be pretty brief, how we think about product and how we think about diversification, how we've been doing on that efforts in diversifying and then just what the future looks like in this fall and next spring a little bit. So back in 2000 and we started with our core classic clogging, nothing new or different for you there. I got this thing going backwards here. But as we started to think about this in 2,007, 2000 and 8, we wanted to think about how we could start to diversify from that known clog silage. We still want to protect our core. We still want to protect that clog and our market share there and try to grow that, but we also wanted to start to diversify. So we identified 4 new areas to think about outside of the core. Casual in the upper right hand corner, stylish styles up there in the upper left, lower left active category in the lower right. How do we start to think about winter as a program? So you start to look at the product line. As you look at winter, we line the clock, very simple. And then Mammoth and John spoke to that already and I think it was was it 10,000,000 pairs or 5,000,000 sorry, I forgot how many pairs, maybe it was 10,000,000 pairs of Mammoth that were sold. Santa Cruz was launched in 2008 casual men's deconstructed shoes still part of our line still a big seller and well into the over 1,000,000 pairs. Malendi women's flat styles and flats have become a very part of our base product line. And then we started to look at how do we get into this active category and we looked at post activity, so prepare series after working out. And that's really how we looked about how we start to think about diversifying. Then in 2,009, 2010, 2011, we started to look at how can we go to the next level. We've built these 4 new pillars around core and they all contain the same DNA of the original Crocs product, but how do we start to look at this in a way that we can look at new channels, new markets? How do we start to segment our product? How do we find new consumers? And that's how we really started to look at this program and following that same thought process going out from the Santa Cruz we looked at sneakers. Sneakers is the biggest category of shoes available out there. We have to look at what the Crocs opportunity intake is in the sneaker category. In the upper product there we actually made a specific sneaker for the European marketplace. They like their silhouettes a little slimmer, a little bit tighter on the foot. So we're starting now to not only segment product by channel, we're starting to make specific products for a particular region. And then we in 2011 introduced the translucent series with the ADRENNA flat up there, a new injection molding material, in this case, TPUs, thermoplastics and start to take our leadership in injection molding to new places and starting to use new materials and softer materials. And what this material allowed us to do is to make the shoe a lot sleeker on the foot, a lot sexier and more colorful in different ways that can match with different outfits. We continue to build on wedges and heels that we had luck with in 2008 and then we looked at the toning category in the active area. And finally, we introduced our first boots in 2009 2010 and we started to get a little bit of placement there, starting to get a little bit of a foothold in the wintertime. So now how we look at it going out in this new season, which you're going to see a lot of these products is we're continuing to build that sphere around that original core. We're continuing to maintain that same DNA. We're continuing to stay in those same four new pillars, but do it in a more innovative way. How do we do it in a new way that excites the consumer, brings innovation to the brand and brings a little bit of a cool factor to what we do and changes the perception to Crocs and brings in new consumers. That's what we feel like we when you look at the line, that's what we really feel like we're going to do in 2013 with this product line. So we have a new sneaker up there. And a lot of these products are in and around the room, but you also see them in a minute when we go into the other room. It's the lightest sneaker possibly ever built. It's got our DNA, it's fun, it's colorful, it's lightweight and at the recent Asian sales meeting they just went crazy over this product. It's a combination of a casual Santa Cruz that we progress from and yet it brings in that Crocs DNA with the cross light bottom and lots of fun colors. So very exciting new project for us. I always think it's incremental. It's a new customer, a new consumer for us. I had never thought about Crocs before. And then the retro series, which you see on the wall here, instead of just building off our traditional core clogs in retro, we actually now are launching the retro with a flip, a Mary Jane and a wedge and launching it all together as a complete collection. First time we've taken our core product like that and launched it as a complete collection. So we can go into a retailer and sell them the whole product line. So this is your wall. This is what it's going to look like. This is the story. This is the marketing. It's all integrated and it's all launching at the same time in a very effective way. And that's new for us to be able to launch products in this type of way. Hierarchy, new flat right here and then back to the innovation. When you get a chance to steal this product, it's incredibly lightweight, very soft and malleable, forms to the foot and it's an over molding technology that's proprietary to us. We spent a lot of time developing this. This is from one tool. You can actually see on that product up there, we have 4 or 5 colors all from one tool. So it's all injected. What that means is it's very cost effective to produce this product. But yes, you get full colorful fun product that no one else in the marketplace has. It's very unique and it's uniquely Crocs. But and then it's fun with the sun dresses and different outfits. And if you look at it again, you wouldn't imagine that's a Crocs. It's very slim and sexy on the foot and goes with lots of the outfits that are being on trend right now. So this is very exciting project to us not just from that it's great looking and comfortable, but just the pure innovation of it. It's just fantastic. I saw it 60, 45, there's different versions. We have 4560. It's very cost effective to make with just the one tool. It's fantastic. And if you can tell, I'm very passionate about this. It's really great. Believe me. And then another fun thing is this company was founded by 3 guys on a boat. Just boil it down to the simplest denominator. There's a lot of stories around those 3 guys on the boat and what was going on in their head. But when it sounded like 3 guys on a boat, we belong in this boating space. So we have to think about it in a little bit different way. We have the shoes that I'm wearing, which kind of traditional leather, hard to compete with our competitors there. How do we think about this in a Crocs way? And if you think about boat shoes, they've never really changed since Fred Sperry launched them in the early 1900s. There's leather with hand sewn with a a bottom on it and you tweak it a little bit. But we've been able to come up the way and you'll see them there to mold this product and bring in those cues with the leather lacing and the site outsole bottom and different other cues that make it a boat shoe, but in a crocs way. So it's really revolutionary within the boating category and ties it back to again our heritage of 3 guys on a boat. So we feel like this is a fantastic new category for us. When we go into the other room, you'll see them displayed. They float. They're colorful. They're fun and they're right in our DNA. So we're very excited about this product line. And we have it kind of grouped in here in the active category because it is at the site bottom that you could actually use these on the boat and use them for both. And then also we've launched in a new category in golf and for you to know my background, my company bike golf back in 2007. And so this is particularly fond of my heart and it's a great opportunity. And what it does is it brings a new consumer to Crocs that never would have considered us before. They hear about how comfortable that golf shoe is and it's associated with a big name in golf. They start to think about Crocs in a different way. They start to think of not so much of us as this, but start to think of us as something that can be in this active category because it's so comfortable and fresh and different and new. So, winter category and Don alluded to this already, but we're serious now about being an all year round brand. We got rain boots. We're serious now about being an all year round brand. We got rain boots. We got more warm functional boots. We're bringing the mammoth down in here. So, we have lots of collections and really great products at a great value, fantastic products at a great value. And you can just see how fun and colorful it is. Particularly the rain boots, I feel strong about because it's right in our DNA. It's lightweight, it's made from our material, flexible, easy on and off. And then what's really neat is how you display these out and spread them out, the color just pops. It's just fun and you just want to gravitate and go check it out. And particularly with the RAINFLOW product, you see that out there. People when we put it out there in our initial reads to get on the test, people just want to touch it and feel it and see what this product is all about. So, it's a fantastic opportunity for Crocs again to find new consumers that we couldn't have gotten and I believe new channels. If you start to look at where you can place products like that, it's a new channel for Crocs. So does that roadmap resonate with everybody? Does that make sense on the way we think about things? Any questions on that? When you have the when you show retailer the the product, like Grandma Truck does make a lot of what is the pushback you get? Why don't they just take it off? Honestly, I don't make that many sales calls, so it would be a lot of conjecture for me to give you that answer. I think I've been in this business a long time. It takes persistence and consistency. They need to know you're going to stay at this, that you're going to be active. And it's kind of like show the clock in the calendar on this too is that we're going to plug away at this and we're not going to give up and we're going to keep showing that, hey, we mean it to be in this business. I think this one we're going to get a lot of placement. But on some of the other more expensive type products, it's going to take some time to build out that business. If you think about one of our competitors in sheepskin, they were the hockey stick. They were here and they were staying there and then something triggered in this case, it was Oprah Winfrey, triggered that and then it shot up. You have to be there. You have to be persistent and consistent and we will be. We'll keep plugging away at this. And we'll get our inch by inch as John put it earlier. We'll get our space. Yes? Yes. That's a really great question. So if you look at this math, where would U by Crux fit? It's stylish, so it goes up in that category, but then it's not really in our DNA wheelhouse, right? So we're not there yet as a brand to go there, but we have learned that we can get that consumer because the product that's on the marketplace now does sell, just doesn't always sell to our expectations. And we're just not there yet as a brand that we can start to talk about higher end leathers and fashion and heels and wedges and we're not just there yet. But it doesn't mean that our circle as it starts to expand, we can get there in the right way. Did I answer your question? Anything else? So Jeff's going to go into a lot more detail, but another way of looking at this is by silhouette too. Mostly silhouettes would fall into one of those four pillars outside the core. So clogs obviously is our core business. So even though we talk about expanding away from the core, we don't want to not grow the core. We want to protect that and maintain it and actually grow it and stay very strong there, but we want to start to grow more aggressively or factor outside in those other pillars. So you can see boots that has a very nice growth curve, very manageable, very steady growth curve, flat. It's been very strong for us in growth. We started with flat before we started with boots. So it grew and now it's maybe starting to plateau a little bit. But I don't I think it will continue to grow. Sandals will be a big growth area for us in the future as we develop out new products and particularly I believe this is my opinion, but the hirachi series particularly will start to really help us drive those sandals. Casual sneakers, again, nice steady growth there. And then casual shoes has been real nice. So, Jeff will get more detail into that. But the point is that it's working. Point is that as we move into these other pillars and silhouettes outside of that core clog, we are growing our clog business, but we're also growing outside of the in those four pillars. But we're also growing outside of the in those four pillars. Are there regional differences between the both that you're seeing for instance that sneakers you mentioned Asia that's going to be an easier sell in Asia than probably going to be in the U. S. Just based on the history you've had and so on and so forth from what I understand. Yes, I can't really say, because I'm not outselling in all those different regions. But yes, some products as John mentioned earlier clogs are still stronger in Europe. I just believe we're in different areas of maturity. And so right now Europe's a little bit more immature. So they have a lot of opportunity to start driving, say in this case sneakers and particularly the sneakers that if we design for them it's still a little bit more slim because that is a trend and it is one of our biggest categories. Asia right now is more open to all kinds of different possibilities of what Crocs could be, particularly China and Japan. They are looking for ways to expand the line. They're very aggressive in their mindset and they view Crocs as a very comfortable, easy on and off brand and so they're looking to expand outside the clog. In America, very competitive on a sneaker type business, but we're focused on casual sneakers, more of a lifestyle type product and I think we have a lot of opportunity there. We just have to be persistent, consistent, keep telling that story that we belong there. When you try it on, it's so comfortable, so lightweight that it really does have unique position. We just got to keep working at it, keep plugging away and it will come. Are you building these products all to higher more at or higher margins in the clog, just through a combination of high price? We got a mark down, I think, mark down. Clog is a really profitable business because it's easy to make, it's simple to make. So when you get into this area where there's a lot of competition, it gets more challenging to try to maintain that type of margin. But they do have a higher dollar value per pair sold, right? That answer your question? Yes. So just what's the rationale here? Where do you have you balanced that or as long as you can question the price, I guess? We look at it aggregate. So we make sure that we maintain our aggregate gross margin depending on what the model mix is between sneakers, clogs, flats, other shoes that we maintain an overall aggregate gross margin. Anything else? Okay. So then the future, we're going to continue to hit this drumbeat and stay at it and keep driving into these new pillars. So You'll see the Crux Band winter boot come out this fall. You saw the earlier version. It's an updated version with the new material. It's really scrunchy and comfortable. We call it warm and toasty and fantastic colors too. The new Mammoth series, we call it Mammoth EVO because it's an evolutionary product. It's not revolutionary for us, but it's keeping that that's protecting our core that we make that Mammoth that line clog and it's really a fantastic product. Rainflow, flow, we've already talked about, but purpose built, first time for us really to go after a specific category being purpose built, in this case rain boots. And as we said earlier, it really feels like this is our should be our sweet spot. We really feel comfortable here. We have a lot of fun products in rain boots. And then John already pulled out the cobbler clog. But like he said, last year we sold out within weeks of dropping it into our stores. So it's very stylish and it's comfortable and it's a great value and comes in an EVA version, a suede version and then a good, better, best with a high air and leather version that we can segment to different channels and different customers. So when you look at it, we really do have a great story for fallwinter and it builds off of that core. And then for spring 2013, which you're going to go see here in a few minutes in the other room, we talked about the boat shoe series already, but it's very emotive. It's back to our heritage and it's a lot of fun colors and it's really simple design, but it's very difficult to execute, but it's just a fantastic product. You put it and you throw it in your hands. It's so lightweight. It floats on the pool. If it falls off, it in your hands, it's so lightweight, it floats on the pool. If it falls off in the water, it's going to float and it's just got a lot of neat dynamics about it. Just a fun story to tell. Herakji again, we talked about very innovative. The retroserix which is very uniquely Crocs is taking our core DNA with that clog putting on a retro bottom from the 1970s type Nike or Adidas type original shoes which is right on trend again. If you start looking at the magazines you'll start to see retro originals starting to come back into the trendy lexicon. So we're going to be right there on trend. And then BLA series, which we talked about already, but for us, it's our 1st array in the sandals with leather uppers and a little bit more stylish and fashionable bottoms. And John already gave you the sell through numbers, but they're fantastic 10% to 30% depending on where they're located. So we feel very strong about the future. So we've been diversifying. We've been successful at it. And we're going to continue to beat that drumbeat of those 4 new pillars outside of our core and we're just going to keep working it and working it and I just think it's by far I believe our best product line and we're just really excited about the future. So any questions for me? Are they ready for us over there? All right. So we're going in the yeah. We're gonna go out go into sales meeting room. They're going to have evacuated hopefully and you'll see all the different stations of the new product lines and then we'll be there to answer questions. Good afternoon for those joining us on our webcast. We will be breaking for a short break for about 15 minutes. So we will resume a little after 3 pm Mountain Standard Time. Jeff Lascher will be presenting as well as we'll have a short question and answer period. Again, we will resume webcast at 3 pm. Thank you very much. Good afternoon. This is Kevin Kim from Crocs as the Investor Relations Officer. We will be starting our presentation with Jeff Lascher at approximately 3:0:5 pm Mountain Standard Time. Again, we will resume our presentation at 3:0:5 Mountain Standard Time shortly. Thank you very much. For those of you that are still online with us, we will begin again momentarily. So some highlights on the finance side and then we'll have a special presentation, special guest to present to you and then we'll take some Q and A and then we've got some guests for you guys before we break over to the Bolder store and enjoy dinner together. So some investment highlights that John and Dale have taken you through. We really feel confident about our product driven international growth expansion. The key message is again casual lifestyle footwear brand, balanced international growth, long term 15% to 20% sales growth on a constant dollar basis and then resulting in strong balance sheet with strong financial results. So you can see on this slide, we've added tax rate and EPS. We're going to talk about each one of these particular six categories over the next 30 minutes or so and then open for questions as well as we go through them. Talk a little bit about revenue, talk a little bit about operating margin and then we'll talk a little bit about tax rate and then the effect of tax I'm sorry, of FX on our business. So again, to reiterate 15% to 20% long term sustainable FX neutral revenue growth, we think we can get that from a combination of increased ASP units. You can see those are Q1 numbers. Our new products, which represent 38% of total revenue in Q1. At the same time, it's not we shouldn't miss that clog space continues to grow for us. So we still even Q1, even as the percentage of clogs went down from 51% to 49% versus prior year, the overall revenue increase in clogs was still 12%. When we look at the product categories, we see that still 7 product categories generate over $30,000,000 in sales. And so as Dale said, we're going to talk a little bit more about the investments that we've made around the marketplace, we can see this is how the pie chart kind of breaks out. 48% of our sales for 2011 were clogged, 14% were the other category, but specifically 4% were sandals, 5% casual sneakers and around the wheel to the 12% of our business that's flat. And you can see on this particular chart, you can see the flats business that I just talked about has doubled since 2010, now represents about 12% or sorry, 11% of our total revenue in 2011 will be about $122,000,000 business in 20 12. Our boots category, a couple of years ago, we were really excited about our fall holiday 2010 sales success in boots, came back in 2011, dollars 47,000,000 in 2011 was about 5% of our total sales generated out of the boots category. And this year that debt business will be a $74,000,000 business. So we've kind of quietly grown this boot category, which includes all the rain boots behind me, all the winter boots over on the left side categories. Sandals $43,000,000 to $86,000,000 doubling of our overall sandal business. Again from a clogs perspective, even as all these other categories are growing, we're still seeing the clog space grow from $520,000,000 last year to $585,000,000 in 2012. These are our projections for 2012. The 2011 numbers are obviously actual. So what does this mean to our investment community? We think that the strength of our new products, the continuing growth of our molded products as you saw in the spring summer 2013 category over here in the Be Bold section, all of those products, the translucence that we came out with, all of our strong spring summer 12 product line together with the operating leverage from higher ASPs, strong international growth, all of those factors together should help us drive gross margin about 100 basis points up to about 100 basis points improvement from 2011 levels. As we look at SG and A, there's been a lot of questions over time. So what does our SG and A look like from a direct versus indirect? This chart was 2011 and we'll show you 2012. You can see in 2011, we spent about $185,000,000 in the direct channel that was broken out. 46% of that spending was in rent, 23% was in other, which includes marketing costs, credit card fees and other promotional aspects of running our retail stores as well as our Internet channel, which utilizes all of the bloggers and then the Googles of the world where that's driving some of our revenue and activating that revenue online. And then labor 31% for 2011. Indirect spending was 48%. So where we think we're going in 2012, we think we're going to be able to leverage our indirect spending, drive that percentage down 52%, at the same time our direct spending going up to about 48%. How does that break out for 2012 SG and A cost? Rent about 43%. We still think labor is going to be about 31%. You see rents a little bit higher as a percentage of revenue. As we move into Europe in a bigger way, Asia's shop in shops and lower rent structures dilute a little bit as we add retail stores around the globe in other markets where the lease is a little bit more expensive. The other category, however, we continue to drive efficiencies and leverage that other spending, that marketing spend across a broader portfolio of stores. You guys were in a race. I'll go with Steve first. Sorry, Joel. The rent in the U. S. Mostly fixed or variable? The rent in the U. S. After the kiosks are completely closed out will mostly be fixed. The kiosks model is a variable model. So you should be if you're going to run the comps you've been buying, you should be able to get Over time, we expect that we'll be able to grab some leverage on our rent base. Joel? So It's relatively new. I think what we said after the Q1, we were up 70 basis points in the Q1 results. Last year, we were slightly better than the prior year. We've always kind of thought that we'll be in that same ballpark as last year, but we've got some confidence because of all these different factors to now call out that we think that our cost of goods sold structure is going to be able to generate a bit better improvement in margins next year up to about a full point. So it's somewhere between 0 100 basis points overall where we should be able to see a positive improvement on margin. Yes. As you know, I mean, this is a there's a lot of variables behind the gross margin line, whether it's discounting that goes on in the retail space, the gross to net walk on the wholesale space, all the returns that we have, the returns reserve assumptions, all of the different variables that go in. When we put it all together, Joel, and we kind of run it through all of the different algorithms, cost of goods sold, we think overall it's going to be about 100 basis points 0 to 100 basis points improvement. So kind of a little bit of everything to answer your question, a little bit less discounting, a little bit more improvement on our supply chain, a little bit of leverage on ASP, a little bit better product margins internally, all those things are going to be a little bit better, offset by some minor things going the other way. But we think overall, we'll be able to improve that. Okay. So what does the SG and A leverage look like at the consolidated level? Again, we think we'll be able to leverage our SG and A expenses somewhere again from 0 to 60 basis points where we think we should be able to generate some positive leverage on our SG and A line. Again, because of the indirect SG and A, the direct SG and A leverage over the other costs, labor costs being held flat, we expect this is offset by again in the Q4, because I just want to head off a question, in the Q4, we do expect that the SG and A as a percentage of revenue will in the low to mid-40s similar to last year because of the lower revenue numbers in Q4. Questions on SG and A? Yes, Jim? This is this all excludes that. So that's an apples down. Yes. We took all that out of this analysis. So what Jim is referring to is last year, we had a credit last year in the FX gainloss account as we used to account for those gains in SG and A. We've moved those down into other income because of our hedging strategy. Those are going to be netted out in the other income line. And over time, we think that's more relevant to show as other income than show you guys as a net credit to SG and Okay. So moving over to operating margin. Obviously, the math is fairly simple. Gross margin minus our expected SG and A. We think we'll be able to drive our operating margin improvement up to about 160 basis points. We think we'll be somewhere between 14% and 15%. We as a management team are still focused on driving a 15% return on sales at the operating margin line over the long term. And we think we can get that in the management team. Questions on that, Corrine? Yes. We haven't said a longer term. Obviously, once we get to 15, then we'll come back and say, we'd like to get to X. I think the next logical goal would be to move that goal line back 2 points and drive to 17%. But at this point, we're just focused on getting to 15%. So some other financial information. I think there was a lot of questions about backlog. I'd like to take you through a little bit about backlog by region. This is how it's split between Q2 and second half. You see Q2 represented an 11% growth. 2nd half also represented an 11% growth. Americas at the time, we told you Americas was up 12%, Asia was up 18% and Europe was down 13%. But when you look at it on a constant currency basis, you want me to go back one, Scott? Sorry. So these are all the same information we gave at the end of Q1. So there's no new information there. Good? Okay. So on the backlog by region, breaking this out, you can see Americas at the end of Q1 2011 was €89,000,000 at the end of Q1 2012 was 100,000,000 dollars up to 12%, basically flat to the constant currency line to 12% as well. Europe $42,000,000 last year $37,000,000 this year, a 13% nominal reduction, but on a constant currency basis, it was down 6% Asia, dollars 1.29 to $1.52 up 18% in both nominal and constant currency. At the bottom, it's the key information, right? So last year Q1 2011, we sat with a euro at $1.41 this year the euro was $1.33 and last year the yen was $82.87 this year the yen is $82.42 Last year we benefited in Q2 as those pre books and those backlog that backlog revenue rolled into Q2 at a higher average rate. You can see both the euro and the yen both expanded relative to the dollar and we benefited from that on the currency on the revenue line. In 2012, we'll see a little bit of that because the yen improved significantly from the $8,200,000 at the end of March, but the euro has gone back and actually today it fell even further down to $1.36 So we are exposed to the euro line on that particular book backlog, but on the yen line we should benefit. So how does that look when we look at foreign exchange overall? How does it look to you as an investor? You can see our total sales, 36% of our total sales are in U. S. Dollar, 15% of our total sales are in the yen, about 17% is in the euro. And again, this is last year's numbers. You can see Korea was 3%, the Brazil real was 3%, the Canadian dollar was 3% and the other category was 23 percent. The other category includes many currencies that are actually tied to the U. S. Dollar or basically float together with the U. S. Dollar, Hong Kong dollar, Chinese RMB and other light currencies that move together with the dollar. Our UK business is actually going to show that to you in a second. So importantly, although from yen and other category, 15% of overall sales is Japan, 23% other, about 50% of our operating income comes from Asia, 34% of our operating income comes from Americas, 16% comes from Europe. This excludes FX gain. This is just a pure operating income line. So you can see we're highly profitable in the Asia marketplace. And as a percent of revenue versus our operating income, Europe also generates some significant returns. So we lifted this right out of the 10 ks just to walk you through the effect of FX on our business. So we have a little bit of education for you about the euro and how the yen and other currencies affect us as a business. You can see our revenues in Americas $448,000,000 $381,000,000 in Asia, dollars 171,000 in Europe. Operating income $77,000,000 in Americas, dollars 126,000,000 in Asia, dollars 38,000,000 in Europe again right out of the 10 ks. Importantly though for the first time we're showing you what our local currency cost is as a percentage of our total cost base. So 8.7% of that $371,000,000 that we spend in the Americas associated with product costs, SG and A and other cost of sales, 8.7% of that total cost base is local currency, Brazil Real, Canadian Dollar, Mexican Peso. In Asia, 56.2 percent of our total cost structure is in local currency, Chinese RMB, Japanese yen and other currencies like that. In Europe, 54.7% of our cost structure is in local currency. So importantly, the operational costs are impacted by the currency movement, but don't move sorry, they move in the opposite direction of revenue, it's not 100% to 1. So when we look at it and we say, how does the key currencies impact our overall business, you can see the Brazil real 6% of our overall Americas business, 6.5% of Canada of the Canadian dollar is in foreign currency. Then in Asia, 41% is Japanese yen 9% is the Korean won ninety percent is euro of the Europe business with 3% of our Europe business being denominated in British pound. So importantly on the bottom, Americas, if we saw a 10% movement in key currencies, the Canadian dollar and Brazil real, we would see about a $2,500,000 operating income impact off of a $5,000,000 revenue hit. In Asia, plus or minus 10% of those key currencies equates to about a $17,000,000 revenue impact, 11.7 percent operating income. And then finally in Europe, plus or minus 10% results in a $16,000,000 improvement or $16,000,000 impact on revenue and a $9,600,000 operating income impact. I think this is really important to you as investors to understand how we benefit from the Japanese yen getting stronger relative to the U. S. Dollar and how we face some headwinds associated with the euro getting weaker against the U. S. Dollar. Questions? This will all be available, yes, in about 5 minutes, 4 o'clock, 35 minutes. Mexico Yes, because we don't sell to the Mexican distributor in pesos, but we do benefit. Ironically, we actually benefit from a stronger U. S. Dollar relative to the peso because we do manufacture in Mexico. So we benefit by having lower labor costs in Mexico as the U. S. Dollar gets stronger. Well, we think that as John mentioned in his particular conversation, there's some opportunities for us to go get at once business in Q2, at once business in the second half, especially in Q4. So we're obviously not stopping our sales efforts. You can see all the sales meetings going on around us. We are driving for wholesale activities to increase that 12% over time. In the near term, this is probably the way it's going to roll out, but we're still hopeful that in the second half of the year we can drive some additional revenue there. Sam? Did you mean to say 17% operating margin target that you threw out there long term? Well, Sam, I think the direct no, it's fine. The direct answer was we're focused on 15% first, and then we'll reset the target once we get to 15%. Right. But you've already thrown out a 17% number. So if you end up resetting the target to 16%, everybody in here is going to be putting that 70% and we know that already. So I can pretty good on the We're always going to be driving for additional operating improvement. So that's the message from John and I is that we're never going to stop trying to drive the overall improvement in the organization. So once we get to 15%, we'll have a new target and it's logical that it'll be The new target is 17%, and if the new target comes out at 16.5%, everybody is here with me. I mean, as you said, and I just want to make sure you're reaffirming that or you're going to or you want us to take it off the table right now? I want the message is we're trying to get to 15 0.6% of that was the 0.6% of that was FX gain, so about 13.1% was our operating margin in 2011. So we're striving for about 2% improvement between this year and next year to get to that 15%. Scott had his hand up. Can you just talk about are there any moving parts within the backlog number of either businesses or parts that didn't recur or things that might skew one way or the other as you move forward? Well, as you know, as we talked about the end of Q1, there was a big issue last year about in Asia about $3,000,000 of that $129,000,000 from last year was Japanese volume that slipped into Q2 because of the tsunami and that's not repeating. So maybe the best way to look at Asia is coming off of $126,000,000 to $152,000,000 not necessarily $129,000,000 to $152,000,000 Those are kind of the big callouts. I think, Jim? Yes. Percentage of cost in the call to the 2019,000,000 Great question. I mean, if you look at this particular chart, Jim, you can see Japan is up 15%, Europe is at 17%. But we as John talked about the Europe sorry, the Asia rate of growth is significantly better than the global. So we wouldn't actually anticipate the 12% we have a little bit stronger Japanese yen on a pie chart basis. And then some of that other category would also grow significantly as well. We've seen as John was talking about, we've seen fantastic growth opportunities in the Middle East and the distributors throughout Southeast Asia as huge revenue opportunities for us. That's perhaps more interesting even than the question that I answered to the question that I asked. I'm just talking about the cost. Probably not. I mean nothing like a headline number one way or the other. So we're not moving all of Dale's product development team into local market. Okay. Other questions before I move to tax? So I think in the past, we've always said, we anticipated our tax rate to be somewhere in the 22% range for 2011%. We've done a lot of work around the globe moving our or putting our structure together. And frankly, the fact that the rest of the world is making a lot more money as you saw in the slides earlier, even more so than we anticipated for 2012. We actually anticipate that our tax rate will get a little bit better for 20 12. We should be in that 19% to 21% range overall. That will be different quarter by quarter. Most of the benefit will come in the second half of the year as we drive our tax structure down. What was the original guidance? 22%. Okay. So what does that mean to you as an organization if you put all the pieces together? We see revenue growth 15% to 20%. We see gross margins 53% to 54.6%. We think our SG and A somewhere between 40.2% and 39.6 percent. So therefore, we think our operating margins will be somewhere between 0 and 160 basis points better. Tax rate now at $19 to $21 we believe our EPS for the year will be about $1.47 using all those midpoints. Importantly, that's based off a currency as of threethirty 1. Again, we're seeing a little bit of pluses and minuses around the globe yen getting better, euro getting weaker. I just did. Yes. So Yen was it's all based on those 3.31 numbers that we did. 132, sorry, I had to go back. I don't have the wasn't prepared for that one, Jim. Sorry. It was yes, I just had it. 31. 131. Thank you. And 82.5. Percent. Thanks, Jim. And just the impact, any impact that you're hedging is having, net performance or any changes that you're going to make in the hedging strategy? Yes. When we look at hedging, we look at it kind of in 2 prongs. One is we go after the balance sheet first and you can see in the Q1, we were kind of surprised by the sudden movement by the end. When we move back, we're able to grab some off the table and kind of take off some of that exposure on the balance sheet side, move that other income We think at the end of the day, we'll be able to offset most of that throughout the first the next three quarters. So there'll be a little bit of noise that will still flow through. On the other side that we do we are actively in the market place hedging some of our operating income on a quarter to quarter basis just to protect ourselves once we tell you guys this is where we think we're going to be for the quarter. We go out and protect ourselves in the operating income line. Those hedges actually this quarter will generate a little bit of revenue for us. And you'll see that in the other income. Okay. Are there customers that you drop this year that were in there last year? And I understand from other retailers that they're booking tighter. So is it really apples to apples or some of your customers holding your orders back and not committing for fall until they see spring? In a second, anyway in the U. S. Market? Yes. I think in the U. S. Market, as John talked about on the call, there's some risk aversion going on in the channel that we hope to be able to overcome as we get closer to the actual quarters. We do have the capability of fulfilling orders for the second half at this point. So we're still hopefully we'll be able to drive that a little bit further. But as far as big headline customers that dropped us or we dropped them, there's really no big headline number there. And you don't see the same phenomenon in Europe other than the one issue where John talked about how you distribute these products? You're not seeing a good lady looking in Europe where there's some Yes. I guess I should let Mike speak to that. Mike Pavel just joined us to be over in Europe. He was in Europe for all of last year and I'm going to call on him to kind of help us out here. Mike heads up our global sales initiative. Joel is up first, sorry. I'll come back in. Yes. So the question for those on the call still, what's the flow through impact of an additional revenue increase is basically what you're asking for. We don't see those kind of correlated directly. There is that category of other in the direct channel where we talked about credit card fees and other kind of variable expenses, labor costs. So there's a little bit of variability on our SG and A that's associated with revenue, but the major variable cost is product cost associated with delivering that additional revenue. Yes, those are kind of disconnected components. So if we were able to see additional product cost savings, yes, those would flow through. It wouldn't be any additional directed investments, so to speak, that we would take off. We might do other things that are not correlated to that, but directly You had a question first. So I mean one of the kind of things about running a multinational company as you guys all know is that the more money you make in the U. S. The higher your tax rate. The lower your income in the U. S. The lower your tax rate in general. I mean that's the same for if anybody in the S and P 500 stood up here. So the real game here is how much do we think next year's revenue and income will be in the USA. So as the rest of the world is growing faster, that's generating additional tax savings and that's what you're seeing this year. As we get into closer to year, we'll be we'll try to continue to be as transparent as possible about tax rate. So this is real time information. We're driving this forward. We're doing forecast and we're coming back out to you guys telling us where you think we're going to go. 12. I said we're benefiting from our structure that we've changed in 2011 and the small changes we've made in 2012. There's no real big headline changes to our structure, if that's what you're referring to. To. You laid out a pretty good story and something was better than others. Where are you now with repatriating some of the cash? God, you are great, Scott. You should come to all of these. We're can talk about cash next. So I think when we look at our balance sheet, we're not ignoring the balance sheet component of our income of our financial statements. So here's some information about our cash structure. We do think that our cash will be about 40% higher at the end of 2012 than it was at 2011. We do think that we're going to be able to hold our inventory in line with our sales growth. We are going to have a little bit of modification for those of you that are aware of things that went on in 12, we'll have 12, we'll have a little bit more in our distribution centers than we have on the water at twelvethirty one the way we're planning it this year. So we'll have a little bit less in transit inventory that does not reflect on our balance sheet at year end versus as we change some terms with our plans. Okay. So by the end of the day, we think our inventories will be about in line with our sales growth. As John talked about at the beginning of his presentation, this management team is committed to not run into an inventory problem. And you see our inventories kind of flexed over time kind of moving along with our revenue growth. It's our best probability of all of the different factors we put in. And yes, there are some assumptions in there that we're going to be able to close some sales. So it's the way we look at our crystal ball right now and we think that our revenue at the end will be about 15% to 20% constant growth and this is what it looks like with all the midpoints of all the different points we put out there. Jeff? So I think that's a great question about repatriated cash. If you So as you know, the vast majority of our cash is overseas. We are watching the marketplace as far as what's the best usage of that cash, whether it's dividends or stock buybacks or one time dividend or some other usage of our cash. We're constantly reviewing the landscape for that. At this point in time with all of our cash overseas, we still think the best thing for us to do at this point in time is to continue to reinvest in our business and have a strong balance sheet for any future investments that we want to make. There are no limitations based on the tax jurisdictions on how you can pull your capital for your investment needs? Well, there's a cash impact of us repatriating cash because we'd have to pay taxes. There's also potentially some tax rate impact if we started to repatriate money. There is some cash that's held overseas that is constrained by our ability to specifically China and other markets around the globe, where we're constrained in our ability to flow the cash out. So it's not like we could take all of that money back into the U. S. Today even if we wanted to. We also have a constraint on our debt coverage, or debt covenants associated with how much we can buy back. And that's $25,000,000 Jeff? So with the Q last year you just disclosed, I believe the tax repatriated all the cash just to keep an hour filed was $27,000,000 Is that correct? That's all right. Yes. Restriction. Due to foreign jurisdictions of 13,000,000 dollars Yes. So I guess that would is this 30 And then we would not no, I mean those are 37 plus 28 plus. We wouldn't want to bring all of the cash back and drain all the working capital required in the local markets either way. So that's why we think when we look at the overall business and where it's invested around the globe, it's still important to us to have a strong balance sheet in those local markets as well. With that $27,000,000,000 in theory, if you brought all the cash back, you have to pay a tax bill. Correct. That's the cash impact of us repatriating the money. And in a scenario where you decided that you wanted to bring it back to let's just take the extreme Well, we've had conversations like that internally and we continue to look at the best way to bring that back. We have the capability of doing that fairly quickly. We haven't really stress tested it at $10 $100,000,000 level, but we stress tested it at $25,000,000 for example, because that's our loan covenant cap. Why do you I'm assuming that, for example, I saw you tapped into the revolving line of credit Is that basically because you have cash needs of the states, but the cash is in other jurisdictions? Yes, that's exactly right. We ended up in the Q1 with a line of credit balance because of the AP associated with the United States business. And then as Q2 rolls out that cash comes in from collections as well as from intercompany settlement and that will go back to 0 by year end. So just to understand what's possible, not what you've discussed or what probable, but just from a possibility standpoint, if you wanted to buy back a bunch of stock, you can bring cash back, pay off the debt. So now you're no longer constrained by that covenant? Well, our intention is to continue to manage the balance sheet and get position to start with. So those are kind of 2 separate conversations. We do intend on having a debt free balance sheet here in the near term. So that's kind of one focus. 2nd focus is if we decided to do anything on the stock repurchase, we could do something subject to constraints around the globe about repatriation and tax benefits and tax impacts of that as well as the loan covenant. Yes. I was just getting at it. Is it not what you plan to do, but is it actually possible to do it? I think you have to cut it. The answer is that. The answer is yes. We're not going to do it. I'm not asking him to ask what's possible. And so this is where the bakery thing starts to happen. And so he's asking, he's trying to answer. The answer is we're not going to buy that stuff. What I'm asking, John, I'm asking if it's possible as opposed to. I didn't know what you're talking about. Yes, there's a ton of hypothetical here. And there's a ton of hypothetical of how we could move cash and how we would pay for things. At the end of the day for us, when we look at this today, we think if we're going to bring back what are we going to do? We're going to bring back $25,000,000 and we're going to buy back 9 shares. It's not going to do a thing to the company. John, never even asked. I was just asking I know. And I'm just trying to be clear, Jeff, with this because where we've gotten trouble with this, we've gotten trouble with this 2 quarters ago. When we got in a conversation and Jeff was trying to answer questions on a conference call and trying to dance around it and talk about hypothetical business, then what happened? What happened amongst investment base is Jeff, it got confused. Why are you guys what is your strategy? I'm not sure I understand your strategy. So I'm telling you in our conversations with the Board, when we look at the company today for us to buy back a money shares stock and take money shares out or 2 money shares stock out right now, we're not going to do it. And I just wanted to be clear, Pam. But I just want to be clear, I never asked that. I understand. I understand. I understand what it could. I understand what I am, Jeff. And the answer is, yes, you can do all sorts of things. The problem of it is that if you change the way your tax structure work and how we're doing tax planning to drive cash into the U. S, which you can do over a period of time, once you set that in motion, you're done. This is what it's going to be for years to come. Because you can't go in and change tax strategy that impacts cash. IRS doesn't kind of look at this and kind of see playing games. This isn't fundamentally right for your business. This isn't actually enough to the right to pay. So no, it's not a realm of possibility. It's not a realm of possibility. And I think he's trying to be nice and trying to answer your question. And I'm just telling you, as conversations with the Board and our interim discussions is and I don't want you to walk out of here going, I don't know what they're going to do. And they just think we're going to buy what's the possibilities, their door open. There is no door open. There is no door open at this point in time. It's not in our long term strategy to buyback shares. It is in our long term strategy to continue to build cash. And when possible, then we'll go look at how we're going to invest it. Right now, we're investing it in retail stores in ways that we think that drives top line revenue, bottom line profitability. But what we really love is we really love the U. S. Government to change and open up a window and then we bring in tech, then, Jeff, it would be a possibility. Until that happens, it's not a possibility. It's not a possibility. So the primary rationale is just not to permanently change the tax structure? Because then you can't to drive cash in, you'd have to do things that would impact and then go out the amount of work and we just spent probably millions of dollars, kind of figure out if that's possible to do that and then what it would mean and how that would look. Today, what we've done is put years into this with DLA Piper and Deloitte and Touche to create this. And in fact, we're making more money in the Middle East today, more than what we thought, more money in Asia. I that, Joel, in the back of the room, the answer to the earlier question was, if you want to look at gross margin, you look at the bottom line there. It's all happening because Asia becomes a larger piece of our business next year. We make more money. Jeff showed you, we make more money in Asia than anywhere else. That's going to drive gross margins, it can drive operating income. And in that, it's going to drive more cash outside the U. S. And it's not our stated intent or is it management's interest to do this? And I think it's better just to be on and say to you, no, it's not a possibility. Yes. Hypothetically, over to the bar tonight, we can say all the intent. But I don't want you to think that that's the account because it's not. So I push back on the bookings. Talk about the later kind of booking cycle, retailers here, retailers in Europe, mix and Asia as well, said to you before I know we don't want to get in and start about bookings every 2 or 3 weeks. But is there anything you can share in terms of what you've learned since the quarter ended, what you're learning kind of on a real time basis from some of your retail partners? It's not material. I mean, we see bookings coming in. But I think to the question that Jen asked earlier, there is a certain amount of Atlas business that, yes, we're depending on. Yes, we expect based on history. And about profitability in the previous slide. That's where we're at. If materialized, capitalized on it, then there's some upside potential. If it got even weaker and we have some kind of recession leading towards election, they started to tighten up a little bit. And then we got some downside with it too. But I think we felt when we talked about this at the end of last quarter for the earnings release, I think we feel comfortable enough to say this is where we are on a global basis for top line. Knowing John and what you guys have kind of been true over the last year in Europe, volatility. When you think about that midpoint guidance that you put up on the slide, what would you say is your what are the couple of things that you say this is what it could take to throw us off that trajectory? I mean, this is would it be something that you're not being Or in the peninsula, Korea could probably have the biggest impact for all companies. That pulls China into it. If something happens, they launch other missiles Japan, there comes some kind of tension there to change consumer behavior. I don't think the dynamic of the Asian market starts to be able to see much disruption there. And I think we have such low downside risk in Europe today. That's what we said. Yes, there's very little downside in working with them being there twice in Long Beach City. So there's some things that can't really be pulled in other major markets. Because you think about that, what we talked about today and Jeff showed you, between China, Korea and Japan, that's 30% of our overall revenue. Brazil is currently a small part of your overall business. With all the events coming up down there in the next few years and because it's in a different hemisphere, a very large market that should suit your product quite well. What are you doing to build that really for Brazil comes down to pricing. The reason that's just not growing faster. The number of products that we build either in Brazil where we bring in bottoms from China, Vietnam, have those products assembled and sold into that market. It's a price point issue for brands that are importing and the duties and tariffs are just so high, it's limited our growth there a little bit. So building shoes in Mexico in our own factory, now adding more capacity in Vietnam, so we're shifting capacity in Vietnam, that can go in duty free to Brazil and that opens up the opportunity to grow a little bit more. And we are opening up our own retail stores and we have we've opened up our own e com site now in Brazil. So that starts to add the omni dimension, omni channel dimension to what we're doing. But I don't think it's fair to say we're not happy with 3% revenue in Brazil. And part of what we're working on while they're here this week is how that grows at a more rapid rate. Really Chile, Argentina and Brazil should be one of those 5% as I said to you, 5% growth from all those emerging markets or opportunities out there is not a lot, dollars 50,000,000 over all those channels. Are you working with a partner there or are you We have for 3.5 years now, we have our own operations in Sao Paulo. And we sell into agents and distributors in Chile and Argentina, but we have our own people on the ground in Sao Paulo. I didn't mean to be argumentative or anything. I just I have to be clear. When you guys leave your way, I just have to be clear. Be clear on what Sam said. It's 15%, it's not 17%. So Jeff is going to be nice and he's trying to say, okay. Yes, direct question. The answer is 15% is the number that we would love to hit. And there's 17%. There's other ideas about how you get to percent. There's other ideas about how you get to gross margin goes a little bit more and more shifts to Asia, it all happens. And yes, Jeff, back to a point here, there's a hypothetical it says 17%. Now you have 17 thing floating out there. So no, it's not 17. It's 15. That's what you should think about. That's what we think about. And that's pretty good for us. When you look at the beginning of what we talked about directionally for our business to get to $1,200,000,000 close to $1,200,000,000 this year in revenue and get those incremental increases in gross margin, SG and A down, driving up 2 points in terms of gross margin, that's a good year operating income, sorry, 2% operating income this year. That's a good year for us. And if we can continue to do that year over year, then we'll set those expectations accordingly. But we have to be pragmatic and we've got to be honest. That's what's reasonable. And if other things fall in our favor, then okay. If other things don't fall in our favor, that's different. And did you guys also was that clear when Jeff walked through tax rate change? Did you guys all understand what he said? 147% is baked at 22% tax rate, right? 19.20 1. Sorry. 19.20 1. Say that again. So the $1.47 EPS assumes the midpoint of all those ranges that we gave. So I'll walk you back to that, including tax, 20% effectively, right, because we did an absolute number based on Yes. Actually, the surprising part is year over year marketing goes down because if you remember last year, we talked about how much money we spent outside with Kramer Castle. And that money wasn't generating this kind of visual. So bringing it all in house, bringing in Becky and Givart and a small team of people that developed it, we have better brand control. We have far better visual, far better kind of emotional connection at a cheaper price. So actually, our corporate marketing year over year corporate marketing costs for people, raw costs down almost $1,000,000 year year, all by just doing it better, doing it in house and having better control over it. In different markets, they invest differently. So in the U. S, they have about 30 visual merchandisers that work for both the retail and for the wholesale channel that are out there working with our wholesale partners, replenishing, working with them, trying to pull in at once. That's not up that much year over year. That's really the only major market where we put any money like that into visual merchandising people. And then the spend, part of that savings on $1,000,000 in people costing outside services cost is going back to we're doing more ads this year in magazines. We're doing more things visually in the marketplace than we have before. So actually, we think we're getting more impact for the same amount of money. No. You think about what we did 2 years ago, that was $8,000,000 in the first half of the year and $5,000,000 in the back half of the year, dollars 13,000,000 into a market, which at that point in time was $350,000,000 stress. That's a huge spend just on television alone. And how many brands of our size, when you think about this being a smaller market, right, do that amount of advertising just they don't do it, they do it in advertising, just they just don't do it, they do it in other ways. And I don't think television for us is going to be an effective medium going forward. If we have opportunities here and there, yes, but not that kind of greenhouse now. I'd like to maybe shift gears real quick. We have a guest here who's got rained out today, if there's such things getting rained out. Hank is with us, Hank Haney is here. So maybe Hank could come up and say a few words. I'm glad to be with everybody here. It's my pleasure. I just came in for the next couple of days. So it's a little cooler here and a little wetter than it is in Dallas, but I'm glad to be here anyways. But I'm Hank Caney and I'm the one that they thought about when they thought about doing some golf shoes and I was really excited about the whole opportunity because obviously I've been in golf for a long time and everybody likes to be more comfortable. Crocs is known for making comfortable shoes. Everybody likes to be more comfortable. Crocs is known for making comfortable shoes and it's kind of a segment in the golf business that has just evolved in the last couple of years. I mean, for years, golf shoes were made where there was a lot of structure to them and they're basically very uncomfortable. And Fred Couples, who plays on the PGA Tour as a former Masters champion, he 1 year he wore these comfortable looking golf shoes at the Masters. And all of a sudden, it just spawned this kind of whole new look in golf and also a feeling golf too. And everyone started coming out with comfortable looking golf shoes, especially these companies that in the past had made very uncomfortable golf shoes with a lot of structure to them. And I never really thought that you needed quite that much structure in the golf shoe. Technically speaking, I don't think it really matters. I mean, I've taught golf for 35 years and it's not something I've really ever thought about with how much structure you needed in your shoe. But when Fred Couples wore these shoes, all of a sudden everybody started making more comfortable shoes. But they really weren't that comfortable. They're just kind of comfortable looking. And Crocs is known for making comfortable shoes. So when I talked to John and talked to Dale and we talked about the idea of doing golf shoes and Crocs and what I'd be interested in being involved and it was very, very exciting for me. So I came here to Boulder, and I think it was probably about a year and a half ago. And we met with the whole design team and everybody was kind of worried that I was going to be like a little too conservative and anything for Crocs because they're the guys they show me some samples and I picked out all the ones I thought that were kind of stepping out the most or the ones that I like the most. But I'm kind of a casual guy. So it just it fit right in with what I like and what I like to see and feel. And I own golf shops myself. I've done more than just teach golf. I've run golf operations. I have 4 facilities that I own and operate myself in Dallas. I have another golf course in East Texas. And I have a junior academy with 150 kids from 31 different countries in Hilton Head. And then I have another academy over in China that I just opened. And so I see a lot of golfers. I've given so many lessons in my life. It's amazing. But I see a lot of golfers and teach a lot of golfers of different ages. And it was fun to work with the guys because they really wanted my input and I think I drove them crazy with all my emails. I don't think they didn't quite know what they're getting into when they asked me to be involved. So I've been deeply involved in the design and giving them feedback and just tell them what I thought and they send me sample after sample after sample. And it was an exciting process for me being a golf professional to be involved with this. And I knew we're on the right track when we went to the PJ merchandise show and we just had just kind of gotten our samples. And the PJ merchandise show in Orlando is, States. And there's the whole thing just full with all golf companies. And some of them have incredibly big booths and just massive displays. And we had this we had a wall that was a booth that was like 10 by 20. So it was about like the back wall here. And we had our display up and it looked really nice, but we're just kind of sticking our toes in the water a little bit down there at the PJ merchandise show and we just had our samples. And then the second day of the show, they came up and they said, you won the best new product of the show. And we're like, you mean the best new golf shoe? Or they said, no, you won the best new product of the whole show. And that was just really and that was just really an affirmation of that, the fact that we had a good idea and Prox is a great company and the guys have done a great job with the design. So it felt like, boy, we're on the right track. So it's fun for me to be involved. And I have a golf show on the golf channel called the Haney Project and I have all these different celebrities that I teach and it's given me a kind of a platform to be able to promote Crocs and wear the logo. And people always ask me now what's Crocs Golf and I tell them we have golf shoes and give us some good publicity and it's been really nice and fun and it's something that I'm very excited about. So I'm really excited about what we have coming out and the new shoes and all the new ideas that guys have. And I'm going to do a little golf clinic for those of you that will be there tomorrow. If you're aware, The one good thing is I know nobody will be as bad as Charles Barkley. He needs more than just comfortable shoes to help his pain. But the best thing that ever happened about helping him is now one ever tells me, Hank, he's never seen a swing like mine because nobody could be in fattest hands. But I'm more interested in how people look now. I'm just as interested in how they look and how they swing. It's been really, really good for me and fun. So is there any questions I can answer from anybody? Yes. How about winning adoption? I haven't been updated because I just walked through the door. But from what I understand, I think June is when they're supposed to be delivered. Yes. What's been the acceptance of that golf retailers versus some of the bigger traditional names in golf shoes? Yes. And that's a good point because golf I mean, we've been doing really, really well in Asia, especially with our initial orders and everything. But golf in the United States hasn't been growing. I mean, it's been kind of it's been declining ever so slightly for a couple of years now. Now it's pretty much leveled out last year. So obviously, you're kind of stealing market share if you're getting into this. But only to a certain extent because this is kind of a new category, if you will. So we're not only taking market share from other companies, but you're taking market share from the other styles of shoes, which obviously we're not the only one that's doing that. But I feel like we really have the edge because we do have the most comfortable shoe. And there's shoes that are made out of different materials. Some shoes are really, really meshy, if you will. So it's kind hard to really categorize. But I think just in general, we have the lightest coughs due to. So what I've seen so far is that the acceptance has been very good. I mean, when people just try them and we did a day at I did a clinic at the Gulfstream has a huge they're the biggest retailer in the United States. They have I think 85 stores and they're expanding and they have a big presence online and I also have a relationship with Gulf Smith too. So we are in their stores and I did a demo day for them, just a clinic at their Austin location and they have a big, big demo day with a lot of people attend and everything. And on that particular day and with every brand of shoes they had in there, I mean, I think they have been sold like 45 pairs of shoes that day and over 20 pair were ours. So it was really exciting just to be there and get a part of that. So it's been really good so far. And Golfsmith was just acquired by Gofftown, which is the biggest retailer in Canada. And I think they have over 50 stores in Canada. So that's going to also be obviously very, very good for us. But just getting in with Goss Smith and being able to get in those stores and have a presence and start to see some sales, I think it's going to be really, really good. I think because of what Hank does and how forward he is with the brand and really promoting, you get people like Academy now that would have never given us space, but because of Hank and because of what they see and people are asking for the shoes now. So they're testing the cross filters down in cabins or tend to sort of start to lift. And I think this year, what we said going into this was we'd be happy if we got into the green grass, people built the brand at the grassroots level, they already built bike at that level with kind of certain relationships with various golf channel partners. But I think next year will really be the year where we launched this in late January. Actually, I know it feels like it's a lot longer, but we've only been doing this for about 11 months, 12 months because Dale and I met you in March, end of March. So it's only through actually 15 months from when Dale sketched it. So when we launched those shoes, it was really an unfiltered sense, but it was only 9 months really development time. And to win that award, we weren't really ready to ramp up that fast this year. But the fact of it is that we'll sell over 100,000 pairs of golf shoes in the 1st year. And then anchor integration from them last year, spent time with the Bennett Golf Academy in China as well as in Hong Kong as well as with 2 of our major partners in Japan. And they went nuts. And the business in Asia on the golf side of it is very much the younger people who are looking for something like that. And we've done extremely well in Asia launching. So that's not a bad start for new shoe lines, more than 100,000 pairs of shoes in the 1st year. And at the rate we're going, we're selling these new shoots and such a map rate. We're replanting right now to capture some of the summer season. So it's been fabulous. It started to be fabless on TV all the time and now reruns from the existing season start to kick in at very good. Do you think you'll ever see a player wearing Crocs on tour? That's kind of it hasn't been part of our discussion. I mean, you're seeing now more touring pros that are wearing casual shoes like Matt Kuchar, who just won the TPC tournaments, wearing a more casual stylish shoe. So it is changing because at first, there's not enough structure, but now guys are kind of getting over that. And they all wear these shoes when they're practiced, a more comfortable shoe, if you will. But part of through my connections with the entertainment industry, I do something at the American Century Celebrity Classic. We're going to have a booth there. We're going to outfit everybody with shoes. I also obviously have my show on the golf channel called The Hanging Project and we have different celebrities on there. And then I'm going to China to do the tournament called the Star Trophy, which is a big tournament on an island at Mission Hills there too. So we're going to try to do something there. So a lot of what our thought was going in was more celebrity placement, if you will. And really that's kind of, I think, a better way to go than necessarily the pros. So we've got a lot of celebrity friends of mine, both in the entertainment and sports and music industry. So that's kind of what we've been doing is placing the product with them and getting them interested in it and letting the kind of word-of-mouth grow from there. But I wouldn't put it out of the realm of possibility that we might do something like that. But I think that the market that we see and that we're after, I think we can get there with a lot of celebrities more efficiently, to be honest with. We have a company that is called H2 and they carry a couple of different lines. So it's a group of private distributors and salespeople and they are distributing their product for us. So they're calling on all the golf shops. And for the spring buy in, if you will, we were actually a little bit late with getting some of our samples in everybody's hands that already made some of their calls, I mean, but they've been doing very, very good in terms of getting them in the shops. We kind of start off with a goal that when they called on those shops, they would be able to sell in it to a rate of just say 25%. And we were I haven't been updated yet again like I said, but from what I had heard in the 1st month or 2 that we were going, we were selling it at 75%. 75% of the shops that we're calling in were placing an order for the shoes. So it's been very good. We have 2 people inside channel today. So we saw our golf channel ourselves that we will work with Hank and the sell to go to Snow. So a lot of those larger accounts will do So you can tell I'm not just a celebrity endorser. I actually kind of know something about what we're doing. When you won the award show, and either based on what they told you, your impression of that show, what was the work based on? Is it the fact that they see this as a product that is going to reach a different audience that's the product that Gulf should reach or what part of the innovation or model of the product That's a good question. I mean, I'm not exactly sure when we won that award, what enabled us to be successful there. I don't really know. I mean, I think just a little bit of what you said, Boto, that it is they're looking for something different. They're looking for something new, not just a gimmick, but something that is truly different. And I think they're also people are enthused that Crocs is in the golf business too, because you're looking Crocs has such a great reputation for making comfortable shoes. And this is something that really this has been a void in the golf business. I mean, it's amazing. Everyone is scrambling to try and make comfortable shoes right now in the golf business because it's taken a pretty big portion of the golf shoe business. And frankly, I mean, a lot of shoes that you look at, they look comfortable kind of in this category, but they're really not. So I think that was people all they could go by was just holding this shoe and looking at it and feeling it and how light it was and how comfortable it was when they tried it on and how cushy it was. And I guess all the above that just led us be fortunate enough to get that award. Do you think outside of process participation or innovation, I mean, plus you are talking about the new movement in golf now on the pro side and color that they're wearing, the personality that are coming in? Is it you said something shifting in general with the overall growth? Yes. I mean, that's a good point. I mean, I don't think there's any doubt about that everything is shifting and dropping. I mean, it's getting brighter. I mean, you have to you have to give a lot of credit already to Rickie Fowler. I mean, just he's a young guy that's got a he's got a look, he's got a he wears bright colors, he's from California and he's kind of and he's kind of surfer dude kind of thing, although he was a motocross racer. But it's definitely changing. You see it with the kids. And I think it's having a big influence. I mean, they talk about Tiger and Tiger brought a lot of interest to the game. And a lot of people watch golf that hadn't watched golf before. But you didn't see just because Tiger was in the game, you didn't see like a lot of minorities playing golf. I mean, it just that didn't happen like people kind of thought it would happen. But you're definitely see like with Rickie Fowler, you see just so many kids that come out to tournaments and they're kind of dressed like him and casual. And the whole golf business is changing that way. I mean, I belong at a few Discovery Land properties and they're very, very prestigious properties and I have live at one in Dallas and I have another place at one in Cabo San Lucas and it's just really, really nice and incredibly exclusive, but yet super casual. So their whole deal is like casual elegance. And it's really kind of a shift in golf. I mean golf, the more exclusive the club, the more prim and proper it was. And now you see this shift in golf that's really occurring. And because there's a big focus on trying to grow the game of golf and part of growing it is just making it more fun for people. And I think that's one of the things you see with Crocs is Crocs is it's a fun company. I mean, it's a they make fun products. People like to wear them. And it says something different when you wear it. So I think we fit right into that whole movement and golf. All right. And last summer, I guess, Q3, you had a short order of product, your own power of stores, you had a little issue there. When I look at your inventory and I look at your square footage growth and I own all that, I have a hard time and the fact that ASPs are up, so it's actually less prepared. How do you drive the numbers and make up for last year's Q3 issue on such tonnage inventory growth. Well, I don't think 19% is exactly right. And if you look at the number of pairs of shoes that we have in distribution centers, they coupled with what we have in retail stores that we're doing the right thing and we're staying attentive. And our model is we can build 8,000,000, 9,000,000 pairs of shoes in Mexico. So our ability to go ahead and build product and ship this in region within 4 to 6 weeks really doesn't say that we have an inventory problem. The issues and how we plan retail and retail kind of collections for outlet. That was kind of the root of that whole thing. It wasn't a core business. It was outlet sales of really basically discounted products. So I think we've just corrective action in place to do that, to monitor that today. But I don't think when you look at the number of shoes that we have in inventory today that we have a shortage of some food imports. I don't think if you think about our business model today that let's just say on average about 50 percent of what we ship to wholesale is direct shipments now, is prebook. And you then think that only 40%, 45% spending from the market is spending throughout the year in Atlas business. Really, we only have 4 churns. I can't remember this, but maybe a little bit different. 4 churns, when I've already taken all the prebook out, means that probably turn closer to 3 should have adequate pairs of shoes to have inventory plus what I can pull forward from factories if we need to. So A Elite, we sold A Elite in tremendous rate. So we're pulling in 100,000 pairs of shoes on inventory a day that we can sell all the way through Q2, Q3. This goes back to kind of thinking about shoe manufacturing and product management a little bit different. That ability for us to be more affluent or more with factory, it's really basis when we first started. I said we can be different. We can have a different supply chain management in this space. And when things got tough, a lot of that stuff got shelved and we went to more traditional, let's be more standard in the industry. Let's make sure we're on time on development. Let's make sure we get a prebook. But let's not steer the same ditch to ditch either. Let's not go, hey, we're not going to do any prebooks and start it off by 2,006 to we're only a pre book company and we're not interested in kind of thinking about other things. Of course, it's kind of getting it back in the center again. So I mean, in my opinion, the rest of the management team, they should have adequate loop. I did once you get to, again, hear what Jeff said. So we are going to have a huge uptick. We're going to talk about inventory in Q4 because of the change in churn. What was in the transit now to what's going to be on our inventory at the end of the year, we're going to explain this. So when you get to the end of the year, you don't feel like all the inventory is out of control. It's just product that's closed for Q1 has to be in transit at the end of the year. It's going to be reflected differently at the end of 'twelve. So Chris has been to your point, that's not a real change in inventory. It's a real change in inventory. It's just a matter of where it's showing up on payroll book versus something else. John, you alluded to the outlet issue Q3 last year, but now you're more important in the family channel, the mid tier channel, I mean, they're aggressively promotional around back to school running logo. Does that change the margins potentially in Q3 in the Americas wholesale segment or what your retail Because we don't chase them. So like last year in Q3, I mean, when we went out to our stores at the end of June early July, product was already sold through. Kohl's wasn't chasing the replenishment. So they're going to buy a certain amount of product. They're going to sell through it. And that mid tier channel isn't chasing us into June, July August hard court to bring in additional product and then have it end up in the market on the state. So that wasn't really the issue. The issue more was that we could have or should have more at once business in that June, July, August timeframe if we can get them to continue to place orders and keep it in stock. Because last year, they were pretty much out of stock if you went in stores in July, they didn't have a lot of price. And that's like there are 2 gallons of sell through rate this year. They're going to share a little bit more in Q2 into early Q3. They're just going to you're going to walk into stores and there's not going to be a lot of product left. It's not bad situation, right? Mhmm. Sell through, leave it a little bit underrate since it's finding that right now. Other question? So thanks for coming today. And for those of you that are staying, we are doing kind of like happy hour hors d'oeuvres and everything. I have to say Julian here, I think 5:30 right, is what we start. Hank is going to come and hang out for a while, so you can talk to him tonight. And he's very humble. Dale will tell you he's very humble. I mean, he worked extensively with us on the products, came in here multiple times. I think his life's probably been a bit of a blur for the last 2 months, right? And the time that he's done, he's got perfectionist nature of golf, kind of transformed into the shoes and he's done a great performance for us. So we're happy to have him here. And for those of you that are going play golf with them tomorrow, you're going to get lots of points. Trust me, when you're done with what he's done for you tomorrow, you'll be, I hope, better off than when you started, but good luck with that. So a couple of administrative things. We do have a gift package in the back. We have Crocs classics in honor of our 10th anniversary this year. We thought it was appropriate that we have those available for each of you to grab a pair of our original classic shoe that set this ball in motion 10 years ago. As John mentioned, we'll have happy hour and some hors d'oeuvres and some food at the St. Julien at 5:30. Hank will be there. For those for anybody who's not planning on playing golf tomorrow, but would like to play, please let us know. We do have some slots available. So if your plans have changed and you do want to play, we do have some slots available for tomorrow. So thank you all for coming.

• Slides