Earnings Call: Q1 2013

Apr 26, 2013

Good day, and welcome to the VF Corporation First Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Lance Allega, Director of Investor Relations. You may begin, sir. Thank you, operator. Hello, everyone, and thank you for joining us today to discuss VF's Q1 2013 results. Before we begin, I'd like to remind participants that certain commentary included in today's prepared remarks and the Q and A session may constitute forward looking statements under the definition of federal securities law. Forward looking statements include management's current expectations, estimates and other projections about our business results of operations and the industries in which BF operates. Actual results may differ materially from those projected in the forward looking statements. Important factors that could cause actual results to differ materially from those projected in the forward looking statements are discussed in the documents filed with the SEC. Additionally, participants on today's call may discuss non GAAP financial measures. You'll find the appropriate reconciliations in our press release, which was issued about an hour ago and at our website atvfc.com. Joining us on today's call will be VF's Chairman and Chief Executive Officer, Eric Wiseman Bob Scherer, our Chief Financial Officer and our Group President, Scott Baxter, Karl Heinz Salzberger and Steve Rendle. Following our prepared remarks, we'll take your questions and we'll ask that you limit your questions to 2 to allow us to get to as many of you as possible. In the event that you have additional questions and are not covered by others, please re queue and we'll do our best to get back to you. Thanks for your cooperation on this. And now I'll turn the call over to VF's Chairman and CEO, Eric Weizmann. Eric? Thanks, Lance. Good morning, everyone, and thank you for joining us today. 2013 is off to a great start for us with results beating our expectations. Consistent with what we told you in February, our Q1 revenue growth rate was a few points below our full year target of 6%. And as we've seen over the last year, our diverse model continues to deliver great bottom line results, especially from our lifestyle brands and our international and direct to consumer businesses. In fact, our record earnings per share in the Q1 was a little better than our expectations. And with record revenues and record gross margin, it's another fantastic quarter for VF. During the quarter, our outdoor and action sports business grew revenues by 10% amid concerns about fluctuating weather conditions impacting our cold weather brands. Our international business was up 6%, despite continued economic weakness in Europe and an inventory overhang in China. And our direct to consumer business rose 12% with strength both here and abroad even in a generally sluggish macro environment. While the economic environment is overall a headwind, we are very encouraged and proud of the consistent improvement in our profitability. Both gross and operating margin showed substantial expansion over the prior year's Q1 with gross margin up 2 40 basis points and adjusted operating margin rising by 130 basis points. Together, this growth and profitability enabled VF to deliver a 25% improvement in adjusted earnings per share to $2.43 Looking to the balance of 2013, with a slightly stronger than expected start to the year, we're raising our full year adjusted earnings guidance by $0.05 per share to $10.75 With 3 quarters still ahead of us and many dynamics at play, we feel it's prudent to maintain a fairly cautious approach to guidance, while we continue to seek and invest in new opportunities for long term growth. And speaking of long term growth, it was a little over 2 years ago that we got on stage in New York and took you through our 5 year plan. By every measure revenues, margins and earnings per share, we're well ahead of the 2015 plan we presented then. So it's time to get back on stage, which is exactly what we plan to do on June 11 in New York, where we'll take you through the next 5 years of ES strategies and the performance you can expect us to deliver. But back to 2013, this is a year of opportunity, opportunity to strengthen our brands, to innovate more meaningfully and to connect with and reach even more consumers. Our diverse portfolio of brands backed by deep consumer insights and a relentless focus on operational excellence is built to inspire consumers and generate consistent returns for our shareholders. We continue to invest thoughtfully and consistently behind key drivers of top and bottom line growth and these investments are certainly paying off. So with a great start, the right strategies and superior execution, we're looking forward to delivering another outstanding year to our shareholders. And with that, I'll turn the call over to Steve, Karl Heinz and Scott who will take us through the top 5 VF brands and then Bob will close out with a deeper dive into our financial results. Steve? Thank you, Eric. First quarter global revenues for The North Face were up 6% fueled by very strong growth in the brand's D2C business, which increased 25%. Globally, we also saw a slight increase in our wholesale business. In the Americas region, revenue was up 3%, helped by winter weather that arrived mid January and continued until just recently. In fact, our D2C performance was strong in the quarter, up low double digits and the highest comps in over a year driven by solid sell through of winter related apparel including insulated jackets, fleece and shelves as well as spring weight rainwear and performance athletic apparel, clearly evidence that The North Face brand is strong and its product coveted as the industry's best, all of which gives us confidence that we have a great year ahead of us. Looking out towards fall, as expected, retailers have remained cautious with their orders, which are in line with our expectations. So definitely a good start to 2013 and great confidence in our ability to achieve high single digit revenue growth for the full year. As I outlined on our year end call, we are focused on 3 key areas to grow The North Face brand in 2013 product innovation, marketing and D2C. And with the Q1 behind us, we're definitely firing on all cylinders in these initiatives. First up product. Product innovation is at the core of The North Face DNA. It motivates performance, stirs adventure and inspires people to get outdoors. Building on the success of our activity based model, we've got a great new collection due out this fall known as Steep Series. This brand new premier line of snow sports apparel is inspired by our expedition level products and will be complementary to our outdoor Summit Series collection. Featured this fall in ski specialty shops, our own stores and online, steep series will help further position The North Face winter action sports products as a natural extension to the core brand. And of course, we're really looking forward to this fall's launch of ThermoBall, a product innovation we see as a real game changer and a a core component of our Science of Warmth technology platform. ThermoBall offers versatility for a variety of conditions and will play a major role in our amplified transitional outerwear offering this fall. Finally, our Flash Dry technology and amazing innovation designed to improve moisture management and temperature regulation continues to be included in our increasingly greater number of styles and is exceeding our expectations. And hot off the presses, we just learned that 7 products from The North Face were named among the best recommendations from the Outside Magazine in their 2013 buyer's guide from our Casimir 36 backpack in 4 different jackets to our new HyperTrack Guide Trail Running Shoes and the MICA FL tent, which won the Gear of the Year Award, very exciting callouts and further confirmation that our activity based model and focus on innovation is paying off. On the marketing and D2C fronts, we're planning a significant acceleration in investments behind our digital and online branding efforts to help drive brand awareness and increase conversion in our own stores. We've also made great progress on improving The North Face omnichannel experience. This initiative enables consumers to research and view products online, pay for them and then pick them up at their local North Face store. It also allows quick, easy and free web purchase exchanges in all of our retail stores, a very important and seamless feature to create a great shopping experience. Such a great experience in fact that Forbes Magazine recently recognized The North Face app as the highest in customer satisfaction. We're also working to better leverage our loyalty and CRM programs. We've seen early success with The North Face VIP program, which combines web and store transactions to accumulate points towards future transactions. With more than 100,000 members already in our system, we have a two way conversation with shoppers that purchase more frequently, have higher dollar baskets and are clearly the most hardcore brand evangelists we have. And the great news is our marketing and consumer awareness efforts are paying off. In fact, our latest annual brand equity score improved markedly in 2012 from 2011, which validates the increasing momentum and relevance of The North Face brand with consumers. So with amazing innovations supported by great marketing and an elevated retail experience, there's a lot to look forward to for The North Face brand in 2013. Now here's Karl Heinz to run through the international business. Thank you, Steve and good morning everyone. Outside the Americas, The North Face brand grew 11% with balanced strength on In Europe, The North Face saw a modest increase in revenues driven by strong results from our DTC business offset by a modest decline in the wholesale channel. In fact, The North Face DTC business in Europe was a real bright spot in the quarter with nearly 30% growth including more than 30% growth in online sales. Although the overall consumer environment remained soft in Europe, our DTC comps were up at low double digit rate, which demonstrates the brand is strong and gaining share against our competitors. We are confident to say that we believe that The Nordface is the best positioned brand in the outdoor industry in Europe. On the product front, given the great product innovations mentioned by Steve as well as our European decora collection and the strong equipment offering, we are quite pleased with consumer reception and growing brand awareness. And specifically, we see robust opportunities for European specific fits, colors and regional relevant product to create an even greater connection with our consumers' active lifestyles. And speaking of connecting with consumers, we continue to find great ways to share our brand story and engage them on many levels. A highlight from this winter was our sponsorship of the Freeride World Tour, the world's premier big mountain free skiing and snowboarding competition, where our Adlands won the men's snowboard and men's skis competition. This tour was viewed live by over 300,000 people with hundreds of videos and articles available online and in print. Turning to Asia. We continue to see excellent momentum for The North Face brand with revenues up nearly 40%, driven primarily by outstanding growth in China partner door expansion and the largest springsummer product offering. In China, we opened 20 new partner doors and successfully converted Hong Kong to an owned market during the quarter, which added an additional 60 partner doors. Our efforts here are also focused on building brand awareness and engaging consumers around the outdoors. In fact, we recently hosted the largest amateur ski and snowboard competition in China with more than 400 participants. We're also currently executing an integrated marketing campaign to promote our Spring Summit series and hiking footwear. The industry best products, improving retail experience and leading the outdoor conversation with consumers gives us great confidence in 2013. Now let's move on to Vans. Steve? Global revenue per Vans in the Q1 was up 25% with strong double digit growth in all three regions including both the wholesale and D2C businesses. This impressive performance puts the brand well on track to become VF's 2nd largest brand in 2013 behind The North Face. Momentum continued in the Americas region with more than 20% growth on revenues balanced across our D2C and wholesale channels. Of particular note in our wholesale business are very strong sell throughs of men's apparel, a business that is gaining significant momentum. In fact, on a year over year basis, it's up more than 50%, a great sign that our styles and efforts to connect with consumers are working in concert to drive substantial growth. On the footwear side, we continue to perform very well. In many cases, Vans is the top performer in many of our key accounts, Building on our core classics business with new materials, prints and collaborations from Metallica to Marvel Comics and new styles such as the Authentic High, we are broadening the opportunities for growth in our core business. As you know, one of our key growth drivers is geographic expansion. This strategy with particular focus on the East Coast in 2013 is an ongoing success. By working closely with key partners and opening our own retail stores using aggressive target city marketing and providing product innovation in weatherized classic Vans footwear and apparel, we are driving awareness and affinity for Vans in big important new markets. We continue to excel on the consumer connectivity front as well, engaging consumers in creative activity based ways. The best and most recent example is the Vans Custom Culture National High School Art Competition. The contest, which is in its 4th year, drew more than 1400 entries from high school art classes in all 50 states. Charged with creating a work of art from a blank pair of Vann's shoes, this year's winner will be crowned at the Whitney Museum in New York in June receiving $50,000 to support that school's commitment to art. Continuing the focus on geographic expansion and consumer connectivity, we also successfully launched the first stage of our new global brand campaign called Anthem. The Anthem campaign seeks to significantly increase brand awareness through a unified global effort, which centralizes the historical authenticity of Vans off the Wall culture. And finally, we're hard at work laying plans as the new sponsor of the U. S. Open of Surfing in Huntington Beach in July. As the largest surf contest of its kind in the U. S, we can't wait to bring Vans Off the Wall culture to the epicenter of surf. Now I'll pass it over to Karl Heinz, who will take us through some international highlights. Outside the Americas, Vans revenues were up 30% with similar wholesale growth and DTC growth north of 40%. In the Q1, Vans continued its outstanding momentum in Europe with revenue up more than 30%. We continue to see strong share gains in this crucial market, which gives us great confidence that we'll deliver another year of impressive growth. So impressive in fact that is on track to become VF's 2nd largest brand in Europe behind Dimelan this year. Our efforts to dive Vans off the wall culture deeper into Europe are also proving successful. We held House of Vans Berlin in January hosting 3 nights of music, photography, skate culture and street fashion. This event drew almost 5,000 attendees with 370,000 visitors participating via live webcast. These events serve to bring youth culture together, unique opportunity for us to educate consumers about our products and meet a backdrop of music and art, ultimately creating a deeper emotional connection with the Vans brand. During the quarter, we opened stores in Paris, Maastricht, Glasgow and Dusseldorf and underwent a major retrofit of our economy store in London to showcase our new Vans retail concept. Vans Asian business also posted strong results in the Q1 growing more than 20%. Here we have seen success with product collaboration that have regional and local aspects such as our Year of the Snake product line in China. These products have proven to be very effective in ensuring that the brand remains relevant in the region and inspirational to the youth culture there. Here too we are using special events like the House of Vans experiences we've hosted in Europe to drive consumer interest and lead the conversation of youth culture. Also I'm very happy to report that we successfully converted South Korea to an owned market during the quarter an exciting country for future growth. Overall, a great start to the year for Vans Global and much more to come. With that, let's move on to Timberland. Thanks, Gaige. In line with our expectations, global revenues for Timberland were up 2% in the Q1. As we start our 2nd full year of VF ownership, we're very pleased with the progress we're making against our strategic initiatives to position the brand for long term growth. Our expectations for full year revenue growth remain in the mid single digit constant dollar range. In the Americas, revenue increased at the mid single digit rate. With more seasonable weather conditions and efforts around rigorous product segmentation and rightsizing distribution, Timberland is gaining Timberland is gaining traction with growth in the brand's D2C and wholesale businesses. On the product front, both core and new programs performed well, demonstrating what we believe to be a genuine interest in both heritage and new styles. The men's boots business saw great success due to a combination of proactive inventory and style management. A great example of this is Timberland's classic yellow boot, which achieved strong growth at full price in the quarter reinforcing and underscoring its iconic status. That said, Timberland is not relying solely on its product archives to drive growth. New styles like Stormbuck Light Oxford and Newmarket Cup Soul 2.0 saw great results in the Q1 following well supported launches. These products embody a successful blend of classic and new, which is the backbone of Timberland's best then better now marketing campaign. The new campaign, which is set to launch this fall, marks the celebration of the company's 40th anniversary. On the Timberland PRO side, we're also building momentum with great innovations like our anti fatigue technology and new products like Hyperion and Boondock. PRO continues to set the standard for the comfort and protection needs of very demanding industrial consumer. Timberland's D2C business achieved strong double digit growth in the quarter. More favorable weather and our targeted operational initiatives designed to drive conversion proved quite successful. In our own doors, we're also continuing work on creating a more streamlined premium selling environment, one that allows us to better showcase the product and brand and ultimately provide a much more enjoyable consumer experience. Online, we're working to strengthen our mobile capability, upgrading consumer messaging and better leveraging affiliates and partners. Together these initiatives are paying dividends. Consumers have responded very well with conversion up in all formats throughout the quarter. Overall, a great quarter and very pleased with the progress we're making. Now here's Carl Heinz to take you through Timberland's international business. Timberland's revenue outside of the Americas were flat year over year, including a mid teen increase in Asia offset by a mid single digit decline in Europe. In line with expectations, revenues for Timberland in Europe were down at the mid single digit versus last year. In a still soft market, our DTC business a bright spot, up at mid teen rate. This was offset by a low double digit decline in our wholesale business with continued particular weakness in Southern Europe Timberland's largest market. Echoing Steve's comments, here too we are very encouraged by the progress we continue to make against our strategic initiatives. In fact, and though it's still early, we are happy to report that initial signs for fall footwork bookings are positive, a clear indicator that gives us great confidence that we are positioned right where we expect it to be. In footwear, we did see some bright spots in the quarter, including success in our transitional product offering, stormbuck assortment and in our classic collections for both men and women. We also saw positive results in our apparel business with specific strength in outerwear and pants. With this year making Timberland's 40th anniversary, our marketing efforts are focused around craftsmanship and heritage. We also recently deployed a new email marketing system, which will allow us to target consumers on a more customized and relevant basis and gain key insight going forward. Asia's Timberland business continues going forward. Asia's Dimelon business continues to perform well and grew at mid teens rate both in wholesale and DTC with positive results across all product categories. We opened 1 new retail door during the quarter as well as one e commerce site both in China and are making great strides connecting with consumers in the region. Now, I'll turn it over to Scott to take a look at Wrangler. Thank you, Karl Heinz and good morning everyone. First quarter global revenues for Wrangler were down 2%. In our Americas business, revenues were about flat with increases in our Western Specialty and Latin American businesses, offset by a slight decline in sales to our U. S. Mass channel. Recall that in the Q1 of 2012, we pulled forward seasonals due to a very early spring here in the U. S, which created exceptional growth in that period. We expect 2nd quarter global revenues for Wrangler to increase at a mid single digit rate. Overall, the Wrangler business is in line with our expectations for the full year. In our mass channel, our jeans and Wrangler advanced comfort products continue to gain significant momentum and our premium performance cowboy cut in our Western Specialty business is exceeding our expectations really spot on with this very important and growing consumer base. We're also hard at work with our key retail partners enhancing our brand's in store presentation. From mass to specialty, we have a number of initiatives geared at more meaningful ways to tell the Rango story, a story of innovation, authenticity and value. We're also seeing encouraging results and success with our expansion in the sporting outdoor and regional mid tier locations, all very important channels that allow us to really dial in the product, brand presentation and how we tell the Wrangler story to a broader range of consumers. Quarter after quarter, I seem to mention it and I will again here too. Wrangler in Latin America posted strong results fueled by growing brand awareness and great reception to our retail expansion, particularly in Argentina and Chile. And on the marketing front, we're excited to announce that we drafted New Orleans Saints quarterback Drew Brees to join the Wrangler team. Drew's dependability, work ethic, family values and personal generosity make him a natural fit for Wrangler. So stay tuned and look for a new campaign expected to launch sometime in August. And now, here's Carl Heintz with a few words on While our Wrangler business in Europe was down at the mid single digit rate, it was also in line with our expectations and we are seeing some bright spots. Our innovation focus on denim performance and fit is paying off and our new products are selling too well. As a result, we are experiencing strength in the emerging markets particularly Russia and a few of our key accounts across Europe. Also due to a continued focus on operating efficiencies, our profitability continues to improve. Now back to Scott with Lee. Thank you, Karl Heinz. Revenues for the Lee brand on a global basis were down 6% in the quarter, which was about in line with expectations. And here too, the comparison was pretty tough due to the seasonals pull forward in last year's same period. In 2013, we continue to expect modest growth on a global basis driven by mid single digit growth in the Americas with particular strength in the second and third quarters as new introductions in seasonal product lead the way. Revenues for the Lee brand are expected to increase at a mid single digit rate. Given the ongoing challenges in the mid tier channel, which ultimately we feel are short term in nature, we remain vigilant about creating new growth opportunities. Advanced fall bookings for new product including perfect fit for women in modern series for men are very encouraging and a clear indicator that our products are being well received. Another great example, one that you've heard me talk about on previous calls is our Lee Platinum label collection. A few quarters ago, we started with a small test of this product with one of our key department store partners and we're pleased to report that it has continued to gain sizable momentum. In fact, following strong consumer response, we're adding an additional 150 doors this year, which should bring the total to nearly 450 locations by year end. So a great case study of how innovative product and consumer connectivity can generate an excellent long term growth opportunity. Now back to Karl Heinz to discuss Lee's international business. In Europe, during the Q1, Lee brand revenues were down at the mid single digit rate. Here as well, we are beginning to experience some success with our new product innovation. During the quarter, we saw good sell through of our New Stitch Deluxe Women's product across most of our key accounts. And this quarter, we are launching a new collection for men called Blue Label. In our DTC business, although still quite small, we are encouraged by double digit comp performance in our new retail format. We will continue to roll out this new format with additional owned and partner stores opening in 2013. This is on the heels of successful launches in 2012. Lee also benefited from improved operating efficiencies and is delivering stronger profitability. The business is on track with our full year expectations. In Asia, Lee continues to be impacted by efforts to right size channel inventory levels. As we stated on our 4th quarter size channel inventory levels. As we stated on our 4th quarter call, lease performance in Asia will be particularly challenging in the first half with the expectation that the business begins to normalize in Q4 of this year. Even though sales were down, profitability exceeded expectations driven by favorable product mix and lower product costs. We have seen solid results with the recent introduction of Urban Riders, Ifink and Stretch Deluxe. So our new products are doing well, just tempered by current channel dynamics. Additionally, we're increasing the number of partner door locations executing very focused marketing campaigns and expanding our digital and e commerce capabilities. Now I'll turn it over to Bob who will take you through our financial highlights in greater detail. Thanks, Carl Hynes. Well, I'll wrap up today's call with some additional commentary around our Q1 results and our strengthened full year guidance. BF's total revenues were up 2%, which was in line with our expectations. Recall that back in February, we indicated that we expected just modest growth in the Q1 due to tough comparisons against the very strong performance in last year's Q1, in part due to some timing shifts in shipments. So we're tracking right on plan. As a reminder, our revenue comparison was negatively impacted by about 1% from the sale of John Varvatos in April of 2012. Gross margin, a key component of VF's long term growth story was right in line with our expectations improving by 2 40 basis points to an all time high of 48.1%. As discussed in the press release, we saw improvements across nearly all our businesses with the biggest improvement coming from our Jeanswear Coalition as well as a continued shift in our mix toward higher margin businesses. For the full year, we remain very comfortable with maintaining our previous guidance for a 100 basis point improvement in gross margin. Our SG and A ratio as a percent of revenues rose 100 basis points to 34.4% in the Q1. Half of that increase came from our growing D2C business and the other half is due to higher levels of marketing spending. This is a significant year of investment for us in direct to consumer with an all time high number of new store openings planned. And as you know, most of the benefit from those new store openings will come in the second half of the year when our direct to consumer business is strongest. And as previously indicated, we are increasing our marketing investments behind our brands, given the success we've had from those investments supported by the work we've done to measure their returns. That said, we remain very disciplined about controlling costs and focusing investments across all our businesses and brands to ensure the right balance between growth and profitability. Despite these increased investments because top line leverage on a full year basis, we expect that our SG and A ratio will remain relatively flat for the year. In terms of operating margin, our strong gross margin performance helped drive a 130 basis point improvement in adjusted operating margin to 13.8%. Here too, we remain comfortable with in adjusted operating margin to 13.8%. Here too, we remain comfortable with maintaining our full year guidance of an increase in operating margin by nearly 100 basis points. And that brings us to the bottom line, where adjusted earnings per share, which excludes Timberland acquisition related expenses of $0.02 per share in the quarter, grew by 25 percent to $2.43 from $1.94 per share last year. Earnings in the quarter included a $0.12 per share discrete tax benefit, primarily related to the impact of U. S. Tax law changes enacted in 2013, which were retroactive to 2012. I'm going to refer to this as the fiscal cliff impact. It's important to note that benefit was anticipated and built into our plans. On a GAAP basis, which of course also included the tax benefits, 1st quarter net income was $270,000,000 with a 26% increase in earnings per share to $2.41 Now a few quick comments on our overall Coalition results. First Outdoor and Action Sports. We continue to be really pleased with our results here. Our brands are strong and growing, gaining share and expanding around the world, which should lead to another great year of record top and bottom line performance. Total outdoor and action sports revenues were up 10% with solid growth across our top brands including a high teens increase in D2C and a nearly 10% increase in our international businesses. This coalition also continues to deliver outstanding profitability with a 40 basis point improvement in operating margin in the quarter to 16.4%. Jeanswear revenue growth took just a bit of a breather this quarter, but we did anticipate somewhat challenging comparisons. You'll recall that last year, Jeanswear posted exceptionally strong revenue growth in the Q1 due to early shipments in the U. S. Of spring seasonal products, the rollout of the Rockin' Republic brand and a strong Asian Jeans business. This year, the timing of shipment of those seasonal goods in the U. S. Has returned to normal cadence and our jeans business in Asia was negatively impacted by channel inventory issues as we've previously discussed. But the real story in jeanswear this quarter is around profitability with operating margin reaching 20% including improvements in both the Wrangler and Lee brands across every region of the world. Congrats to our global jeanswear teams for delivering this extraordinary performance. And turning now to ImageWare where revenues declined 9% versus last year. This too was pretty much right in line with our expectations given very tough comps in our Image business where revenues increased over 20% in last year's Q1 helped by some catch up in shipments of strong orders in oil and gas. Impacting this quarter's results was the timing of a program renewal, which is expected later this year. In terms of our licensed sports business, revenues were flat year over year. We're looking forward to stronger top line results in our ImageWare Coalition in the second half of the year based on a strong pipeline of new product initiatives in both the Image and licensed sports sides of the business. In terms of profitability, you likely noted the decline in operating margin cited in the press release, which is due primarily to reduced sales volumes. Sportswear revenues were up 4% in the quarter with growth tempered by a shift in the timing of Nautica wholesale shipments from the 1st to the 2nd quarter. On the D2C side, Sportswear achieved growth of more than 20%, reflecting healthy double digit gains in both Nautica and Kipling's D2C businesses. Our sportswear business is headed toward a great year and we expect 2nd quarter revenues to grow by a mid teen percent. Since the sportswear and contemporary businesses were not yet covered on this call, I'll provide a little bit more color around these two businesses. Nautica achieved modest revenue growth in the quarter and continues to benefit from its focus on performance benefits, easy care, wrinkle free and moisture wicking now built into nearly half of its product line. With its men's sportswear business delivering consistently solid performance, Nautic is expanding its presence on the women's side, building off solid results both online and in its outlet stores. Nautica is testing a new women's sportswear line in department stores. We're really excited about the potential of this future growth for the Nautica brand. And a quick word on Kipling. The brand continues its run of double digit growth in the U. S. Led by its innovative crinkled metallic nylon bags and in backpacks, accessories and totes. The steady improvement in sportswear profitability we saw throughout 2012 continues with operating margin up 14% in the quarter and an 80 basis point improvement in operating margin. So all in all, a good start to the year and a great year ahead for our sportswear group. And finally contemporary brands. Keep in mind that the comparisons here are impacted by the sale of the John Varvatos business, which occurred in April of 2012. If you take Varvatos out of 2012, revenues were down 4% in the quarter with an increase in D2C revenues offset by a decrease in wholesale sales. Contemporary business in premium department stores appears to have softened a bit in the Q1, a trend we see continuing in the 2nd quarter. But with strong and well received product collections for the fall, we expect the business to get back on track in the second half of the year. And of course, no VF earnings call would be complete without a couple of comments on 2 primary growth drivers international and direct to consumer. Total international revenues were up 6% in the quarter with growth in all three regions Europe, Asia and the Americas. The growth was well balanced between D2C and wholesale. Within international's developing D2C businesses, revenue growth was at a high teen percentage. Our Q1 international results were also right in line with our expectations. And taking a look at our direct to consumer results on a global basis, 1st quarter revenues up 12% or 14% excluding the impact from the Barbados exit. With double digit increases across nearly all of our outdoor and action sports brands Nautica and Splendid Nella Moss, it's clear that the investments we continue to make in our D2C businesses are really paying off. Direct to consumer is a big part of our immediate and long term growth plans. In this Q1, we're right on track with both our growth expectations and profitability improvements. And ending with a couple of balance sheet and cash flow highlights, we continue to be incredibly proud of the rigorous discipline around managing our inventories, which were down 7% year over year. Also during the quarter, repurchased a total of 1,700,000 shares for approximately $280,000,000 and contributed $100,000,000 to Versus pension plan, which is now nearly fully funded. Turning to the remainder of the year, let's revisit our full year outlook. We continue to expect 6% revenue growth to approximately $11,500,000,000 And with a great Q1 behind us, adjusted earnings per share are now expected to rise to $10.75 with a $0.05 increase over our prior guidance of $10.70 and representing a 12% increase over 2012 levels. As noted in our press release, it's important to remember that last year's Q2 adjusted earnings per share results of $1.11 included a $0.10 per share discrete tax benefit primarily related to the settlement of prior year's tax audits. And there were 2 additional items that were excluded from adjusted earnings per share due to their unusual nature, but obviously included in the $1.40 per share reported on a GAAP basis. They were a $0.32 per share benefit related to the sale of John Varvatos and 0 point 0 $3 per share of acquisition expenses related to Timberland. Now taking a look at the revenue cadence for the remainder of the year, we expect 2nd and third quarter revenue growth to be more consistent with our full year growth expectation and the 4th quarter to see the strongest comparison of the year driven by the growing contribution and expansion of our direct to consumer business. Also one last item, our assumed euro to dollar rate remains unchanged at $1.30 At this rate, the impact of a $0.05 move in the euro against the dollar would be about $60,000,000 in revenues and $0.10 in EPS. So to wrap it up, we're off to a great start for the year. Across nearly all key measures, we're right on track with where we plan to be. With the strongest brand portfolio in our industry, improving profitability with a clear path continued margin expansion and a balance sheet that is strong and flexible, we look forward to another year of strong growth. In fact, the Versus story is better than ever and we're really looking forward to sharing our new 5 year plan with you at our Investor Day in June. We hope all of you can join us. And with that, we've concluded our prepared remarks. So I'll hand it back to Eric. Thanks, Bob. No real additional comments. We're thrilled with our start to the year, confident in our outlook and ready for your questions. Thank you. And we'll take our first question from Kate McShane with Citi. Bob, I was wondering if you could help us understand your inventories look like they're in very good shape on the balance sheet. But regionally, can you walk us through what the inventories are like in Europe and China at this point in time? Yes. Actually, Kate, we're in yes, we're in good shape across the board. As you know, we've this is an area we've put a lot of focus on and that focus has been placed on our global inventory levels. The calls that we've referenced in the past, we have we do those calls on a global basis and touch base with our leaders around the globe. So our inventories right now across our businesses, across our brands and across our geographies are really in pretty good are in good shape. Okay. Great. And then my second question is, I was just wondering if you could talk through your backlogs into the back half of the year now that you have an increased visibility into that. Were the backlogs better or worse than you expected when you last spoke to us in February? And is there still the possibility for The North Face to get more orders at this point in time for the winter? Hi, Kate. This is Steve. I'll take this question since you seem to have the North Face in the middle of it. It's we've come through the fall booking season and we mentioned the caution that's in the retail community. And this year's booking sequence is a little bit longer. There's a longer tail to this than we've seen historically. So it's a little early for us to cite actual numbers. But I can tell you that the orders that we're taking in are very much in line with our expectations in our high single digit guidance that we gave in our year end call. Great. Thank you. Moving on, we'll take our next question from Bob Drbul from Barclays. Hi, good morning. Hey, Bob. I guess I got two questions. The first one is on Timberland, Timberland Europe, are there any plans to rationalize the Southern Europe exposure? And what could be the inflection point in the European business there? Yeah, Bob. Hi, Andrew. This is Karl Heinz here. As you know, Southern Europe is the largest market for Timberland in Europe, particularly Italy. And we all know Italy at the moment is a tough spot to sell any kind of goods. We have 2 kinds of channels where we work with Timberland. 1 is the wholesale channel, which clearly suffered especially in Southern Europe as we said in the press release. The other one is DTC, which has 2 components. 1 is own stores and the other one which has Timberland has a great presence is partnership stores. Now even in challenged markets like Italy where we have 150 stores, we have seen last year actually positive comps on our own partnership stores and the same for Q1. So we just won also an award in the U. K. For the hottest footwear company, which we're pretty confident. Clearly, we're not immune from what is happening in the market. But the fact that in our own stores the comps are good shows that the brand is strong. Got it. Okay. And then my second question is around the mid tier channel for you guys, maybe Eric or I don't know if Steve, but the denim brand the denim business in the mid tier and the outlook there and some of the other brands that you have in the mid tier, can you just help us understand how you have that estimated and forecasted for the rest of the year right now? I think I'll Hey Bob, it's Eric. I'll take a shot at that since it's across VF. Our 3 biggest businesses in the mid tier are our Le Jeans business, our Vans business and our licensed sports business. And there's really no change in our outlook from where we started the year. The channel has been a little difficult for a host of reasons that have been well documented in the press. And the interesting thing is actually there may be it may get a little bit better for us than we're currently thinking. And the reason I'm saying that is around the Lee business. JCPenney is indicating that they're going to try to attract their traditional shopper. And that traditional shopper was a good Lee customer. And to the extent they're successful at getting that traffic back in the door, we're very confident that the Lee brand has the right products and value equation to get more business. The Vans business in the channel has actually done pretty well. At J. C. Penney in particular who decided to use Vans as an action point to connect with youth consumers. Our Vans business is actually up. So we're pretty confident about that. And the licensed sports business is so much a factor of which teams are playing and who's winning. And there's no change in that. Did that get to the heart of your question? Yeah, definitely. Thanks, Eric. Moving on, we'll take our next question from Michael Binetti from UBS. Hey, guys. Good morning. Congrats on a nice quarter. Thanks, Michael. First off, maybe Bob, I could talk a little bit more about the gross margins for the year, maybe look at the cadence over the next few quarters to help us with their models? And also can you talk about maybe how much of the improvement in the quarter was from things like product cost versus longer term drivers? Sure, Michael. So the cadence of gross margin as you might expect, the Q2 actually each quarter will show nice improvement in our gross margins. In the Q2, the improvement will be less than it was in the Q1. And in the 3rd and 4th quarters, it will be a little less than it was in the second quarter. The bigger improvements as you said, what drove the Q1 improvement, Really consistently seeing that 60 to 70 basis points from mix. So in the Q1 of the 2 40 basis points about 70 was related to mix and the remainder was related to primarily product costs. Yes, in the Q1 a significant portion of that was related to jeans wear and that will continue not as strongly, but will continue into the Q2 as well. So but I'd repeat one of the things that one of the comments that I made in my commentary is that we expect to see gross margin expansion across the board in nearly every one of our businesses on a full year basis and actually we saw that in the Q1. So we're seeing improvement across the board, but jeans wear clearly led the way in the Q1. Nick, if I could just follow-up a little bit maybe a little bit more color on Timberland. I think obviously that's been in the spotlight as you guys look to try and accelerate that. And I think that especially like the direct to consumer coming in at high teens was a pretty unexpected number and fairly good. It seems fairly good, particularly given unit growth might still be sluggish. Can you just talk about the brand a little bit? And what's going right now? You guys have talked lot about how apparel will be launched in the second half or what maybe some of the other things you think are going right now and maybe look ahead to the apparel in the second half? And then maybe also just talk about the operational initiatives you mentioned that you're working on in the D2C doors there? Thanks a lot. Okay, Michael, this is Steve. Karl Heinz and I'll split this. I'll cover the Americas piece and toss the ball to Karl Heinz for the international piece. So, as I mentioned, we're really encouraged with our Timberland business. Over 14, 15 months ago, we began to wrap our arms around this, begin to work diligently on a lot of the integration initiatives, which focused mostly on operational improvements and improving product and getting clarity around what the brand stands for. And what you see coming into 2013 is really that paying off across both our wholesale and B2C channels. Our product pipeline, as I mentioned, the heritage product as well as the new products are resonating very nicely across all channels. Our marketing message is very clear and you can see that in how consumers are responding in our online environment and we're very looking forward to the launch of our new campaign this fall. The operational comments that I made around D2C, We have a new leader within our D2C channel and that leadership team really bore down on the key performance indicators across the retail channel. And we've focused very hard on that retail environment 1st and foremost, improving the clarity of the in store, narrowing down the assortments and focusing 1st and foremost on servicing consumers and conversion. And we've seen that really pay off nicely and are very confident with how that will lead us on to the balance of the year. Michael, moving to Asia first. In Asia, we continue to do well with TIMALANTA. As I mentioned in the script, we are up both in DTC and in wholesale. We have great presence in Japan, in Malaysia, in Taiwan, Hong Kong. We have subsidiary. And also the brand is now embedded in our headquarter in Hong Kong with our brand. So they will particularly benefit for our know how we have in China with Timbaland as we mentioned is a little bit we I mean we're just starting with China. So that is for sure a great opportunity. Europe I touched before. I think what is pleasing I always say we're not immune from what is going on in Europe and we all know what the situation is. But we do see great results especially in our DTC which is an indicator that the brand is healthy. We were up mid teens, which is very strong in Q1, which give us confidence. And also as I mentioned, the future the fall orders are coming in actually a little bit better than we expected. So all in all, Divalent, I guess, we are pleased with this brand. All right. Thanks a lot, guys. Thanks, Michael. Moving on, we'll take our next question from Erinn Murphy from Piper Jaffray. Great. Thank you. And let me add my congratulations. My first question is actually surrounding the denim business in Asia. Understanding the inventory overages just in the channel there, has there been any change in terms of how you're thinking about the potential stabilization there in the second half? And how should we in this context think about China and say again Let me say again, Li has been one of our strongest performers in the last years in China and we don't change that in the midterm. It has been strong growth, very profitable. As we said, there's a short term issue, there's overhang in inventory in the channel, which by the way is only related to jeans. We don't see that in all our other brands and they're all doing nicely as we saw. You heard the numbers on North Face. So long term, we're absolutely confident that we go back where we have been. And as we mentioned by the end of the year we plan we expect this to stabilize. Okay. That's helpful, Karl Heinz. And then just I guess a second question for you following up on the European kind of macro situation. I mean how are you seeing or have you seen any kind of change in consumer trends in terms of shopping patterns or even either channel preference? Maybe it is a little bit of distortion towards the DTC, just given the sustained weakness there. And then I guess secondly, if you could call out and clearly Southern Europe is already very weak and you've called that out as many companies have. But any other markets that either over indexed or under indexed relative to your average trend in Europe that could be helpful to kind of frame up the context there? Thank you so much. Yes. So the good news is we have a diversified portfolio of brands, right, which help us. And the second good point is we are not overexposed in one area. We do we are pretty diversified in many countries in Europe, especially in the big five in the five countries and also in the emerging markets. So again, we see some softness for sure in the Southern Hemisphere in Spain and Italy. And Spain just announced numbers yesterday, so they're not really encouraging. But the good news is again because we have this diversified portfolio of brands and you see the results we still continue to deliver on brands are really stellar. We don't expect Europe to change significantly in the future. We don't expect it to get worse and probably get better. But again, we are pretty confident. On the DTC side, we said that it's a great opportunity for us going forward. We don't have the size of the DTC business we have here in North America and we are building it up. We're investing in people, talents. We're actually accelerating now the opening of stores. So overall, our plans for Europe, while this year they had a little bit softer, but really confirm what we have said, which is mid single digit up. But longer term, we plan to go back to the usual growth rates we had in the past. Yes. Aaron, it's Eric. I'll add just a little bit of color to that, because it gets it lets me speak about VF's model, which we think is so important to our consistent success. If you look at our big three brands in Europe, Timberland Vans and The North Face. The North Face and Vans are primarily build out in Northern Europe they're doing exceptionally well. Timberland is primarily the biggest market is Italy. But it's that portfolio that lets us get through a year like 2012. I think we were up 10% in Europe. On the other hand, they're nodding. That's the right number. And we're looking at high single digits for this year. And it really is because we're able to say, all right, if we can't affect the economy in Italy and we can't, what we can do is increase the investment in our Northern European brands where the economies are stronger. And that's exactly what we're doing. And that's why Vans has had so much success in Northern Europe is we've just chosen to invest more there because that we can take action on, while we respond prudently where there are more challenges in Southern Europe. And that's how we work our model. So thank you for letting me make that statement. Just a final point. We never talk about the other brands. Clearly, the top 3 brands are the major drivers. But this year we saw in Q1 and particularly in the full year on other brands like Smart Roll, Napa Berry, Kipling, Eastpak, we all expect them to grow in Europe this year, which is positive news. Great. Thank you guys. That's very helpful. Best of luck. Thanks, Aaron. Moving on, we'll take our next question from Omar Saad from ISI Group. Thank you. Great job on the margin, guys. It's really impressive. Thanks, Omar. I wanted to follow-up. I know the DTC mix has been one of the drivers on the gross margin side. Could you kind of remind us where you are in terms of DTC penetration? What percentage of the business it is overall, where it was a few years ago? And how high you think it can go over time? Cannibalization with the wholesale channel, is that something you think about? And then how does online fit into your long range thinking about the direct channel? Well, I'll start with that to respond to the first point in terms of the penetration that we have. We're in a few years, it wasn't all that long ago that our percentage was really quite low in direct to consumer. So it's expanded very, very nicely over the past number of years. In 2012, D2C was represented 21% of our total business in 2013. We expect DTC to be 23% of our business. And we're excited about laying out our plans for the future over the next 5 years. But it's safe to say that we do expect to continue to see direct to consumer expanding as a percent of our total business. Yes. And you asked about cannibalization with wholesale. Do you see any channel conflict there? Has that been an issue at all? And then online how it fits in? Sure. Omar, Eric here. We try very hard to use this as a supportive strategy for our brands and to avoid cannibalization. And we actually work with our wholesale partners to where they know where we're going to put stores. A great example of this is Vans, which in the last 2 or 3 years has put up a lot of stores around New York City, around Boston, now around Philadelphia, where we didn't have substantial distribution. And we just didn't have the doors there that let the brand speak to the customers. So we're putting the doors there. And that's true in markets in Europe and in Germany. It's true in the U. K. That's how we look at it. And we have so much runway because we ended last year with roughly 1100 doors across all of our brands across the world. So we're so relatively undeveloped that we still see lots of runway before the cannibalization thing comes into play. The e commerce thing is a tricky thing, because we don't know what that's kind of we can't really say where those customers are coming from, whether they're new customers to the brand, whether they used to shop in our stores or somebody else's stores. What we do know is we have to create a compelling way for consumers to engage with our brands from their phones, from whatever devices they have. And we have to let them shop while they're there. And that's a rapidly growing piece of our business and a rapidly growing piece of the consumer experience not just in the U. S, but also in Europe where I think last year we put new websites up in 7 countries. Is that yes, that's correct. It was 7 countries last year. So we're beginning to do that there. And I don't know how to discuss the cannibalization of that because we know it's the right thing to do. And if it elevates the brand experience which we think it does it should be good for everybody. No, Mark. I guess I'd just add to that is all of that of course supported by very strong profitability in our direct to consumer businesses and really, really high returns on the investments that we make. It's what gives us the permission and the reasons that we continue to invest heavily. The last bit of color I'll add to that because it gets to some of Carl Heinz's observations about the strength of our DTC business in Europe where our wholesale business is not so great in some markets. I do think that there we're putting up our best when we open a store, we're all in. And we put the Bring the Brand to life the best way we know how with strong inventory across all the styles. And some of our wholesale customers aren't able or willing to do that now in this environment. And willing to do that now in this environment. And our willingness to do that, I think, is helping us. And it shows that when you put the whole brand out there in all of its glory at a retail environment, people are still shopping. That's That's interesting. Thanks for all the color. Thanks, Omar. Moving on, we'll take our next question from Lindsey Dunkerman. Hey, good morning, everyone. Good morning. I was hoping you could as we look at MG and A line, can you tell us the increase the split between sort of brand investment, DTC spending and then mix or other corporate items? So in other words, how much of the increase was a function of your investment in direct versus your investment in brand building stuff? Yes. Bob would be happy to take that question. Right. So in the Q1, there was a 100 basis point increase in our SG and A and it was evenly split. At the beginning of the year, on our initial guidance, we indicated that from a marketing standpoint that we were going to up our spend this year. Right now, we're continuing to plan on an increase of more than $60,000,000 in the marketing side and about double the rate of our revenue increase. As I said in my comments, the reason we're willing to do that is because we absolutely believe with a lot of confidence we're getting a great payback on those investments and we support that with some science behind that in terms of measuring results. And yes, the other side is related to the heavier pay or the heavier investments in the direct to consumer side as well the high number of new store openings. So in that Q1, it was exactly half and half, the 100 basis point increase. On the direct to consumer piece, you talk about investments upfront in the year and then generating greater returns on that in the back half. Can you just remind us sort of by concept where your increases in square footage are and where you expect to see the most improvement? Yes. The what I can say is this is that clearly where we're investing in opening new stores and the high number of new stores is absolutely aligned with where we have our strongest returns. A high percentage of the new store openings is in the Vans brand around the globe, not just in the U. S, but in Europe as well. And then of course The North Face and Timberland really round out the top 3. That's where the investments are going. Yes. And that's slightly more than half in the U. S. And slightly less than half internationally. So it's a global strategy. Okay. Have you given us actual store count? We did. We said that we'd open about 160 new stores this year. Okay. And then if you can comment at a high level how you guys think about the deal environment out there, the M and A opportunity, what the pipeline might look at look like and how you think of as far as where multiples are today relative to where you'd like them to be? Yes. We're still actively looking. I don't normally respond this way that I just don't know that the environment is a lot different than what it's been. A lot of the deals that we've made have resulted from long standing relationships and that have again been built over a period of time. So, it's the same approach that we use today and we're still looking. In terms of multiples, the same kind of thing. The multiples don't from what we see and what we're willing to pay really don't vary a lot unless a business is really in a trough. Then we might have to pay a little more, right, in terms of the multiples. But it just doesn't from our viewpoint, it just doesn't change a lot over time. Good brands are still treasured possessions and to get the right brands it requires the right kind of investment. Okay. Thanks everyone. Sure. Thank you. Moving on, we'll take our next question from Mitch Kummetz from Robert Baird. Thanks. Thanks for taking my questions. Two questions. Let me start with Bob. I'm trying to gauge how conservative your gross margin guidance is on the year. You're saying up 100 basis points. It sounds like you expect mix to be about 60 to 70 basis points of that. Just in the Q1, the benefit that you got from lower input costs, I think puts you in the black 30, 40 basis points even on the year. So I mean, what are the other puts and takes here that gets you to kind of your guidance on the year? Yes. So what happens Mitch of course is the year goes on, as the year goes on, we won't see the same benefit that we saw from Jeanswear in the Q1. Obviously, all this is about what we're comping against in the earlier part of last year. And in 2012, in the Q1 of 2012, we brought in very, very high denim costs, right? So we were comping against that. That's why the big improvement. In the Q2, you remember the sequencing last year as we looked at the improvement started to come as costs came down in the jeanswear business. So in the Q2 we're matched up against costs which weren't quite as high as they were in the Q1. So as I said earlier, the improvement in gross margin in the 2nd quarter will clearly less than it was in the Q1. And then in the latter part of the year, the cost from a cost standpoint is more normalized at that point in time. We just we don't have the same kind of impact from the Jeanswear side. We're also I mean we're seeing some benefit in even in ImageWare for example. Our costs there were higher last year and they've come down some. But in the second half of the year again a much more normalized situation relative to product cost. But what we have is we continue to have that mix relative to product cost. But what we have is we continue to have that mix impact that we very consistently talk about and you just mentioned, will help us in the second half of the year. So that's really the way to think about it. A little bit bigger product cost impacts in the early part of the year and then that continuation of our mix early part of the year and then that continuation of our mix benefit coming in the latter part of the year. And sure, we're always going to be a little bit cautious relative to the guidance. So there's no so there aren't any real puts and takes of significance other than the costs and the mix as we think about the year? Yes. Those are the 2 bigger factors. What we're also seeing some benefit, but it's just not at the same magnitude from efficiencies that we see controlling the inventories. When we reduce our inventories by over 100,000,000 dollars like we did in the Q1, it just creates less exposure related to inventory. So there are some efficiency gains. As I said, we expect to see gross margin improvement in every single business on an annual basis and that's not driven by product cost. It's just driven by controlling inventories and having great product and be able to get to earn the margins. So there are some other factors, but yes, those are the big pieces. Okay. And the second question I had is, I'm just curious with the slow start that we've had this spring, I mean, you guys talked about the impact that that had on Q1, some benefits, some negatives. But what's the impact that has on Q2? Do we lose kind of I mean, how significant is your At Once business in Q2? And do you lose or do you think you lose out on any business there versus a year ago given the slow start to spring? Any maybe backup of in season inventory at retail right now? Let me take a shot at part of that. Last year, we shipped some of our spring merchandise in the Q1 because it was a warmer year. So this year that's going to be a 2nd quarter shipment for pieces of our business compounded by the fact that it's been a cooler than normal quarter for us so far. So we're shipping the goods this quarter, but right now they're not selling. How that's going to play out my guess is summer will come. It will get warm and that stuff will sell. The question will be does the summer get here in time that they sell at full price? And that I don't know the answer to. All in, I think we're going to get through that period just fine. Does anybody else want to enhance that comment at all? I think this is Scott. I think it equalizes itself out. I really feel good about the spring. I think it's a compelling offer that we have. We have a nice assortment out there. And summer will come. It's just a little bit about a 6 week differential from last year. You saw the weather change about 6 weeks early last year. It's about 6 weeks later this year. But if you go back to 11, you go back to 10, it's back to a normal pattern this year. Maybe a week or 2 cooler, but I feel confident going forward. Yes, Mitch, this is Steve. From an outdoor and action sports position here in the Americas, the season is actually lining up consistent with how our goods flow. Our biggest spring business in the Q1 would be Reef and Reef had a very good quarter. Follow that with Vans and the results that we posted for Vans were extremely strong. And in The North Face, though we saw very good sell through of our winter weight goods, we typically sell quite a bit spring rainwear in the Q1, which then leads us into the sportswear sets in the Q2. That's when equipment has shifted to opening up. And all of that really is lining up nicely to deliver against our plans. Okay. That's very helpful. Appreciate that. Thanks. Good luck. Thanks, Mitch. Moving on, we'll take our final question from Christian Busch from Credit Suisse. Yes. So I was wondering if you could provide some perspective on the new channels of distribution you've opened up over the last year or so for vans and what you've seen there? What successes you've had? And if you could talk a little bit about the 66 product that would be helpful as well? Sure. And Christian, this is Steve. So really the only new channel we've opened up over the last 12 months was moving into Foot Locker with the 66 collection. Otherwise Vans stays very, very committed to their disciplined product segmentation strategy across a very clear set of channels. Our 66 collection has done very well with Foot Locker. They remain very confident as do we in the growth potential of that particular line extension. As we access a consumer that's adjacent to our core action sports consumer in that athletic space. So very positive and you'll continue to see growth in commitment from where we've extended. That's great to hear. Thank you very much and good luck. And gentlemen at this time, I'd like to turn the conference back over to you for any additional or closing remarks. Yes. Thank you all for your time and attention this morning. We do have an event coming up between now and our Q2 earnings release on June 11 in New York City. We're going to be laying out our 5 year growth plans. And we're looking forward to that meeting. Hope you are