Wolverine World Wide Inc (WWW) 2012 Q2 法說會逐字稿

Good morning and welcome to Wolverine Worldwide's second-quarter 2012 earnings conference call. All participants will be in a listen-only mode until the question-and-answer session of the conference call. This call is being recorded at the request of Wolverine Worldwide. If anyone has any objections, you may disconnect at this time. I would now like to introduce Miss Christi Cowdin, Director of Investor Relations and Communications for Wolverine Worldwide. Miss Cowdin, the floor is yours, ma'am.

Thank you, Mike, and good morning to everyone and welcome to our second-quarter 2012 conference call. On the call today with us are Blake Krueger, our Chairman, CEO and President, and Don Grimes, our Senior Vice President and CFO.

Earlier this morning we announced our financial results for the second quarter of 2012. If you did not yet receive a copy of the press release, please call Brad [Van Houte] at 616-233-0500 to have one sent to you. Our release is also available on many news sites or it can be viewed from our corporate website at www.WolverineWorldwide.com.

This morning's press release included non-GAAP disclosures and these disclosures were reconciled with attached tables within the body of the press release. Today's comments during the earnings call will also include some additional non-GAAP disclosures.

There is a posting at our corporate website that will reconcile the non-GAAP disclosure to GAAP. To view the document please go to our corporate website, www.WolverineWorldwide.com, click on Investor Relations in the navigation bar, click on Webcasts at the top of the Investor Relations page, and then please click on the link to the file called WWW Q2conferencecallGAAPversusnonGAAPdisclosures below the webcast link.

Before I turn the call over to Blake to comment on our results I'd like to remind you that the predictions and projections made in today's conference call regarding Wolverine Worldwide and its operations may be considered forward-looking statements by securities laws.

As a result we must caution you that, as with any prediction or projection, there are a number of factors that could cause results to differ materially. These important risk factors are identified in the Company's SEC filings and also in our press releases. And with all that being said I would now like to turn the call over to Blake.

Thanks, Christi, good morning to everyone and thanks for joining us this morning. Earlier this morning we reported our financial results for the second quarter where we achieved record revenue behind strong growth in all of our major US businesses as well as key global markets including our Latin America distributor operations. We're pleased with our performance in the quarter despite the economic uncertainties facing some parts of the world and remain well-positioned to drive results in the current environment.

It's clear that the global economic recovery is yet to fully materialize and the macroeconomic uncertainty surrounding Europe is having a direct impact on the retail environment in that region as well as an indirect spillover effect on several other markets. However, for our brands, broad lifestyle trends remain in our favor driven by a global consumer appetite for authentic heritage brands, Americana styling and prep, lightweight and minimalist, boots and health and wellness.

Despite the macroeconomic challenges our brands are winning on a global basis and we remain focused on exceeding the expectations of our target consumers, expanding our international footprint and, as always, delivering innovative products. We've been pleased with the pace of incoming orders, which were up at a strong double-digit clip in the quarter, demonstrating the strength of our product lines and retailer confidence in our brands.

Our "narrow and deep" inventory investment philosophy continues to ensure strong levels of customer support and is reflective of prudent working capital management. As we focus on operating our 12 brand global portfolio, soon to be 16 brands, we are keenly aware of balancing long-term investment strategies while delivering short-term financial results. We achieve this by investing heavily in our most promising initiatives and aggressively managing SG&A in line with the current economic landscape.

Our financial results in the quarter were driven largely by the strategic investments made within our brands in recent years. I'll mention some of these initiatives in detail later in my comments, but our results lead us to remain very confident in our business model despite the headwinds currently faced by several larger economies.

While we would have liked to have seen stronger growth in Europe, overall our brands are gaining market share and growing globally. We remain very optimistic about the momentum in our brands in most global consumer markets and plan to deliver another record year of sales and earnings.

Now I'll spend a few moments talking about the performance of our brands; I'll start with the Outdoor Group and provide an update regarding the PLG acquisition a little bit later.

The Outdoor Group, which includes Merrell, Chaco and Patagonia Footwear, remained at the Company's largest revenue and earnings contributor in Q2. Revenue for the Group increased at a low-single-digit pace during the quarter as challenges in Canada offset a portion of the significant sales gains in the US.

Beginning first with Merrell where core products in the Merrell Barefoot collection helped drive a high-single-digit increase in the US in Q2. Performance of Merrell Barefoot remains exceptional in the US, driven by strong consumer and retailer interest which helped the category achieve a very high double-digit sales gain.

Outside of the US Merrell Barefoot was first to market in many countries for this category of footwear and sell-through in both our subsidiary and third-party markets has been increasingly very good. Despite the challenging retail environment in Europe, strong sales of Merrell Barefoot in Q2 helped lead Merrell to a low-single-digit sales gain in that region.

Merrell apparel turned in an exceptional quarter of high-double-digit growth due to improved timing of seasonal deliveries, international expansion and further expansion in the US outdoor specialty channel. Despite a challenging outdoor apparel environment in the US due to the carryover effects of last winter's unseasonably warm weather, Merrell apparel has gained broader distribution with its new offerings that feature a better value equation for consumers, an improved fit and better alignment with Merrell footwear brand stories and product category franchises.

While Merrell's recent success has been impressive, I'm even more optimistic about the upcoming product introductions. For over 15 years the outdoor industry has turned to the Merrell brand for innovation leadership and for simply what's next. Driven by deep consumer insight, the brand's positioning is evolving from pure outdoor to what we call outside athletic.

We see traditional outdoor consumers are adopting a more athletic point of view as they are pressed for time and seek fast and light products for their done-in-a-day or even done-in-an-hour activities. Also, athletic consumers are adopting a more outdoor point of view as they are taking more of their workouts outside. Merrell is perfectly positioned to take ownership of this convergence trend and will do so with its new M-Connect Series of products, the single biggest product launch in the history of the Company.

M-Connect is a series of products in categories of footwear engineered and tested to empower the outside athlete across a full range of activities from running to trail running to outside fitness and training and to hiking. The first segment of the collection will launch in October of this year with the remaining product segments in Q1 2013.

The reaction from our largest retail and global brand partners has been extremely positive. They are aligned to Merrell's clear vision of how the barefoot, minimalist and lightweight trends are evolving and support Merrell's new product introductions across a continuum of activities that take advantage of this growth opportunity. Most importantly, they simply love the product.

Turning to Chaco, our pure outdoor adventure brand took advantage of favorable warm weather patterns in the US and turned in strong double-digit growth in Q2. Chaco is continuing its pursuit of seasonal diversity and is now delivering its new fall range of closed toe boots and issues.

Additionally, our recent investments in the Customize My Chaco's program, which allows consumers to custom design their own Chaco sandals online, has led to significant incremental revenue and interest in the brand. Traffic to the website has increased significantly and MyChacos.com now frequently rises to the top of our eCommerce list.

Next I'll focus on the Heritage Group, which includes the Company's oldest brand, Wolverine, our two largest licensed footwear businesses, Caterpillar and Harley-Davidson as well as Bates and HyTest. Group revenue declined slightly during the quarter as strong growth in the United States, especially for Wolverine and CAT, and strong growth in our international third-party markets was offset by softness in Europe and planned declines in the Harley-Davidson Footwear business.

Turning to Wolverine, the brand finished the quarter with excellent double-digit revenue growth. Wolverine continues to dominate the core work segment in the US and remains the market share leader per SportScan Info data. Strong performance by the core DuraShocks and Contour Welt collections, as well as new introductions like the SwampMonster drove strong revenue and order gains.

The Wolverine apparel line, which is focused on the core work and outdoor product category continues to generate consumer interest at retail as sales were up at a very strong double-digit pace for the quarter. While we are still relatively early in the lifecycle for Wolverine apparel, excellent performance over the last couple of years with almost every product placement leads us to believe that this could be a significant business.

A lifestyle presentation at retail, which includes footwear and apparel, helps create a dominant brand presence that leads to increased sales in both categories.

Turning to CAT footwear, our largest licensed brand. In Q2 very strong double-digit gains in the US and international third-party markets were offset by weakness in Europe. While CAT's innovative anti-fatigue work products continue to drive the US business, significant gains were also made in the casual and women's category which grew at a triple-digit and strong double-digit pace respectively during the quarter.

Judging by the enthusiastic response by retailers and global partners to our new product introduction, we're confident the CAT business will continue to deliver revenue gains in the second half and beyond.

Next to the Lifestyle Group, which includes Hush Puppies, Sebago, Soft Style and the most youthful brand and our portfolio, Cushe. Overall Group revenue for Q2 was essentially flat as gains in the US Hush Puppies and global Cushe businesses were offset by a decline in Sebago and Hush Puppies in Europe.

Beginning with Hush Puppies. Overall the brand turned in a low-single-digit revenue increase during Q2 as growth occurred in all major geographic regions except Europe. Key products driving the global sales increases were the laid-back Luxe collection as well as heritage styles in the 1958 collection.

The Hush Puppies brand also continues to add dedicated points of distribution around the world as 27 new Hush Puppies concept stores were opened in Q2 in countries like China, Malaysia, India, Pakistan and Taiwan. We're certainly pleased with the momentum in Hush Puppies, our largest brand in terms of pairs, where success is being driven by better grade product and compelling marketing.

Turning to Cushe. This brand continued its impressive growth momentum in Q2 with a strong double-digit increase. Key products such as the Cushe slipper collection maintained strong sell-through at retailers like Nordstrom's, Cabella's, the Forzani Group in Canada and Flip Flop Shops where the brand is now a core vendor after a successful test earlier in the year.

In addition to channel expansion, Cushe is also making significant progress in its women's business, another key growth initiative for the brand. Women's revenue grew at a much faster pace than men's in Q2 and the current Cushe backlog indicates that this trend will continue. The new boot collections launching in the fall and the hyper light collection next spring will help the brand become a four season offering for both men and women.

Turning to Sebago, our premium New England heritage brand. Solid Q2 double-digit revenue growth in the US was offset by softness in Europe. We're optimistic about the brand's prospects for the remainder of the year given the backlog position and several unique brand building initiatives that are underway.

As one example, this fall Sebago has teamed up with one of the world's most popular rock bands, Linkin Park. Together they developed a special edition boot that will be offered to a handful of the world's most premium independent retailers. Only about 500 pairs will be manufactured globally with a portion of the proceeds designated for the Music for Relief charity. The launch, scheduled for November, while very small in terms of pairs, is expected to reach over 100 million consumers via Facebook, Twitter, blogs and influential websites.

Next I'd like to briefly discuss the strong Q2 performance of our direct-to-consumer business, which includes about 100 brick-and-mortar retail stores in the US, Canada and the UK as well as 38 global websites.

Direct-to-consumer revenue increased at a strong double-digit rate in Q2 as our product offerings resonated well with consumers in our own stores and online. Performance in North America was especially strong as comp store sales in the quarter grew at double the rate of the industry average. We're obviously very pleased with the excellent growth in our direct-to-consumer business.

Turning to our acquisition of the Performance and Lifestyle group of Collective Brands, consisting of the Sperry Top-Sider, Saucony, Stride Rite and Keds brands. Our transition and integration planning is in full swing and, frankly, ahead of schedule. And I couldn't be more pleased about the many global opportunities for value creation that these four brands bring to our shareholders.

We expect to close the transaction late in our third quarter or early in our fourth quarter. This transaction is a perfect dovetail fit for the Company in terms of the brands, genders and geographic opportunities and I'm more excited today about this transformational acquisition than I was when we announced it a couple of months ago.

The acquisition will immediately address five targeted growth areas for our Company -- women's, athletic, casual, kids and retail. Each of the Sperry Top-Sider, Saucony, Stride Rite and Keds brands have a strong authentic heritage, excellent consumer loyalty and market positions that are both unique and differentiated.

While about two-thirds of Wolverines' pairs are currently sold outside the US, less than 10% of PLG's revenue is generated offshore. The international opportunity for PLG is huge and we have already received a tremendous amount of interest from international distributors and partners who are looking to expand the existing global footprint for these brands.

The acquisition will obviously be transformational on a number of fronts, not the least of which is the size of the combined company. The transaction will create the largest multi-category footwear company in the world, outside of the two largest athletic companies, with about 100 million pairs of better grade product marketed in around 200 countries.

The ability to leverage this scale in the supply-chain area is certainly significant, but it will also enable us to attract new talent, cross pollinate the existing teams and enhance our global infrastructure and regional resources. Obviously we remain very excited about the acquisition in terms of the four brands which have a combined brand lifetime of over 380 years, the talent coming with the business, the fit with our business model and the integrated future opportunities for shareholder value creation.

I'd just like to take a moment to thank the team for delivering another solid performance despite a challenging macroeconomic environment in Europe. Their rigorous execution of our business model helps us mitigate risk and deliver in a variety of economic situations. Strategically we remain focused on delivering consistent value for our shareholders as well as bringing game changing product innovation to market. We remain confident that 2012 will be another year of record revenue and earnings for the Company.

Now I'll turn the call over to Don Grimes, our Senior Vice President and CFO, who will add some additional commentary on our Q2 results and expectations for the full fiscal year. Don.

Thanks, Blake, and good morning to everyone. Earlier today we released financial results for our fiscal second quarter that, although reflective of the economic challenges around the world, were much in line with our previous expectations. I'll take a few minutes to share more details on those results as well as offer our current thoughts on our expectations for the back half of 2012.

This morning we reported record second-quarter revenue of $312.7 million, an increase of 0.8% compared to second-quarter 2011 revenue of $310.1 million. Revenue in the quarter was negatively impacted by $3.8 million from foreign exchange translation.

Continued strong growth from Wolverine retail, which was up about 15%, high-single-digit to double-digit growth in the United States for Merrell, Wolverine, Cat Footwear, Sebago, Chaco and Cushe, and nice growth from the distributor businesses for Cat Footwear and Hush Puppies was offset by the impact of continued macroeconomic challenges in Europe.

Recall that in fiscal 2011 Europe represented just under 20% of our reported revenue and the broader EMEA region represented about 25% of revenue. Although we're not immune from the impact of what's going on in Europe, times like these reinforce the advantages of our global business model, a diversified brand portfolio that targets multiple consumer segments through a variety of channels in over 190 countries around the world.

Our brand portfolio will become even more diversified with the pending acquisition of the Sperry Top-Sider, Saucony, Stride Rite and Keds brand, but more on that in a bit.

Turning to reported revenue in the quarter for our wholesale operating group, the Outdoor Group, which consists of Merrell, Chaco and Patagonia Footwear, delivered revenue of $130.7 million, a 2.7% increase compared to the prior year. Many of our retail partners here in the US and around the globe note that the Merrell brand continues to outperform the competition, particularly in the barefoot, minimalist, lightweight category where the brand is experiencing strong sell-through.

In fact, per OIA vantage point, Merrell's market share in the outdoor specific category amongst all retailers on a calendar-to-date basis through June 30 increased 100 basis points to 15.2% and had a massive increase in share to 36% in the barefoot/natural running category with specialty retailers.

The fact that Merrell is performing well is very encouraging as the hangover effect from last fall/winters tough selling environment gets more and more in the retailers' collective rearview mirror. The Merrell team remains tremendously excited about the future growth prospects for the brand and, as Blake mentioned, is particularly enthused about the new M-Connect performance footwear collection for spring/summer 2013 which features a wide range of cushioning and heel to forefoot drop options for different athletic activities to appeal to a broader range of consumers.

Based on initial reactions from key retail customers we expect this new collection to be a big success and we're sure it will be a hot topic of discussion at the upcoming Outdoor Retailer Show in Salt Lake City where the Merrell brand always shines.

Next let's turn to the Heritage Group which consists of our Wolverine, Cat Footwear, Bates, Harley-Davidson and HyTest businesses. This Group delivered revenue during the quarter of $99.4 million, down 3.4% versus the prior year. Wolverine and Cat Footwear in the US, Wolverine apparel and Cat Footwear's distributors business all delivered strong double-digit revenue growth.

Unfortunately these gains were more than offset by weakness in Europe, particularly for Cat Footwear, and the negative impact on our Harley-Davidson Footwear business from the more restrictive distribution channels in the US market.

The Lifestyle Group, home to Hush Puppies, Cushe and Sebago generated revenue of $41.3 million during the quarter, essentially flat with the prior year. For Hush Puppies revenue growth in the US, Canada and third-party licensee markets was partially offset by European challenges.

Cushe again delivered double-digit growth during the quarter driven primarily by its surf-slipper product category and Sebago's revenue was hurt again by difficulties in Europe where the brand has a very significant presence.

Gross margin in the quarter was 37.8%, a decline of 160 basis points versus the prior year. Higher product costs, increased closeout sales and lower margin on those closeout sales were only partially offset by strategic selling price increases and modest FX contract gains. Quite frankly, we took the actions during the quarter that we felt we needed to take in order to bring inventories into alignment, and the impact of those actions came through on the gross margin line.

We pride ourselves on our attention to both gross margin and operating margin and we expect improved gross margin performance over the balance of the year. Partly in response to the challenging trading conditions in Europe, we demonstrated tremendous SG&A discipline particularly over discretionary spending.

Reported SG&A in the quarter was $95.2 million compared to $88.8 million in the prior year. However, included in reported SG&A were $4.9 million on nonrecurring costs related to our pending acquisition of Collective Brands' Performance + Lifestyle Group. The acquisition-related expenses in the quarter are primarily fees to third parties for due diligence, legal work, credit ratings and transaction advisory services.

Additionally, as has been previously noted, we had incremental non-cash pension expense during the quarter of $2.4 million. The two items noted, PLG acquisition-related expenses and incremental pension, accounted for more than 100% of the increase in reported SG&A, again reflecting significant discipline managing discretionary operating expenses in the quarter.

Consolidated SG&A as a percent of revenue adjusted for the nonrecurring acquisition-related expenses only increased 30 basis points to 28.9% primarily due to the incremental pension expense. However, each wholesale operating group and Wolverine retail delivered operating expense leverage in the quarter.

Income tax expense in the quarter reflects a nonrecurring $3.3 million benefit from the reversal of prior year's reserves driven by a favorable court ruling in a foreign jurisdiction in the quarter that supports the Company's long-term tax planning strategies. We continue to explore all avenues to prudently manage down our effective tax rate.

Fully diluted weighted average shares outstanding in the quarter were $48.4 million, down from the prior year's $49.3 million, reflecting primarily the benefit of share repurchases that occurred since the end of last year's second quarter.

Getting to the bottom line, reported fully diluted earnings per share were $0.42 per share, a decrease of 12.5% versus the prior year. While the tax benefit just mentioned added $0.07 to reported EPS, earnings were reduced by $0.06 per share related to the $4.9 million of nonrecurring transaction expenses noted earlier.

I also want to point out a new line item on the income statement in the earnings release -- net loss attributable to non-controlling interest, which is below net income on the P&L. This line item which is relatively small in Q2 backs out our partners' 49% interest in Lifestyle Brands of Columbia, the joint venture we announced this past April. Given that Wolverine owns 51% of this joint venture entity, we are consolidating 100% of the entity's financial results and then adjusting for the minority interest on the new line item.

Turning to the balance sheet, inventory at quarter end was down 1.3% reflecting discipline related to the inflow of incoming goods, an increase in at-once orders filled out of our warehouses and, as noted earlier, the efforts were made in the quarter to work our way through closeout inventory.

We finished the quarter with cash and cash equivalents of approximately $157 million and $28 million drawn on our current $150 million revolving credit facility. Tighter working capital management and lower capital spending in the quarter contributed to an approximate $38 million increase in year-to-date operating free cash flow.

Let me now turn to full-year 2012 guidance and some more specific commentary on the back half of the year. It's important that everyone understands that our guidance excludes any impact on the pending PLG acquisition, whether incurred to date or expected to be incurred over the balance of the fiscal year. We will incur additional nonrecurring expenses related to the transaction over the balance of the year and into next fiscal year and we will share details on those in future quarterly earnings calls.

Turning to revenue, we are reaffirming our full-year guidance in the range of $1.46 billion to $1.5 billion representing growth of 3.6% to 6.4% compared to the prior year and representing the Company's third consecutive year of record revenue.

This view on full-year revenue and the Q3 to Q4 growth that it suggests is based on numerous factors including, A, expectations for strong at-once orders driven by extensive and ongoing dialog with key retail customers and their assertions that they are under order for the fall season; B, our expectations of a normal weather pattern this coming fall/winter versus the atypical warm weather last fall/winter which also will help at-once orders; C, a detailed bottoms-up accounts-by-account analysis for the remainder of the year; and D, continued strong performance from Wolverine retail.

It's important to note that our sales comparisons ease in the second half of the year, particularly in Q4, when revenue growth last year was in the mid-single-digit range. Finally, we continue to expect challenging trading conditions in Europe, a choppy environment in Canada and continued solid performance in our US businesses.

We are maintaining our estimate for diluted earnings per share in the range of $2.70-$2.80 per share representing growth of 8.9% to 12.9% over the prior year and again the Company's third consecutive year of record earnings.

Embedded in this guidance are expectations for a full-year gross margin that is modestly down versus the prior year, increased operating expense discipline over the balance of the year and a full-year effective tax rate of approximately 21%. We are still using fully diluted weighted average shares outstanding of approximately 49 million in our full-year calculations.

We expect Q3 revenue growth in the low- to mid-single-digit range and diluted earnings per share approximately flat with the prior year. Most of our full-year revenue and earnings growth is projected to occur in the fourth quarter which is consistent with comments we've made since we first offered 2012 guidance back in early February and supported by the bottoms-up analysis that I just mentioned.

In summary, fiscal 2012 is expected to be another year of record financial performance for the Company and we remain steadfast in our belief that the innovative and trend right products across our diversified brand portfolio will help us continue to deliver record results in years to come.

Before I close and turn it back over to Blake for final comments and then Q&A, I thought it would be helpful to provide additional insight into the PLG acquisition and, more specifically, where we stand on the financing front since I have fielded many questions on that topic over the last two months.

We received the Company's first ever credit ratings early June with as expected and as hoped for corporate credit ratings of Ba3 from Moody's and BB- from Standard & Poor's, both with stable outlooks. Recall that our expected capital structure was going to consist of $900 million of senior secured term loans and $375 million of longer-term notes.

The term loans were significantly oversubscribed as lenders appreciated the strategic rationale behind the acquisition, Wolverine's business model and our history of consistent financial performance and cash flow generation. We expect to execute the credit agreement for the $1.1 billion of senior secured financing, which includes a $200 million revolving credit facility, in the very near future.

The remaining piece in the financing is the Notes offering which will occur in mid- to late-September with the transaction closing almost immediately thereafter.

Finally, allow me to say that we are even more excited today about the growth prospects of the four brands we're acquiring and the opportunities for significant shareholder value creation than we were on May 1, the day we announced the deal. We have a dedicated team working on detailed integration planning with both the PLG and Collective Brands leadership teams.

Although we're not specifically updating the forecast today, I will say that we feel even more confident about delivering true cost reduction synergies at or above the high end of the range previously communicated and in our ability to generate these synergies more quickly than previously projected. And we feel even more confident about delivering true incremental earnings per share in 2013 and 2014 at or above the high end of the range previously communicated.

The strategic fit between Wolverine and PLG remains incredibly compelling and we couldn't be more pleased with the progress we're making, the cultural fit between the two organizations and the real tangible benefits to be generated once we close the transaction. Thanks for your time this morning; I'll now turn the call back over to Blake for some final comments.

Thanks, Don, and thank you all for your time this morning. We'll now turn the call back to the operator so we can take your questions. Operator?

(Operator Instructions). Jim Duffy, Stifel Nicolaus.

I imagine you knew this question was coming, but, Blake, I believe you said orders up at a strong double-digit pace. Is that representative of what would have been your backlog number?

Not really, Jim. As we've said the last couple of quarters, we did a pretty detailed study as to whether backlog was more or less of a predictor on our sales results. And frankly over the last three or four years, it has been increasingly more volatile, less of a good predictor. So we just thought we ought to let you know that the pace of incoming orders, future and at-once, was up very strong double digits in the quarter.

Okay, I see. And then big picture question here. From the appearance of the headline numbers for Qs 1 and 2, it looks like a base business that is slowing. The presumption in the investment community by some is that PLG becomes your vehicle for growth. Yet, the commentary on certain brands suggests otherwise.

Is there anything you can do at the corporate level to kind of disaggregate the impact from hangover of a warm winter and European headwinds to represent the trajectory of the base business otherwise?

It's frankly a little bit difficult. Europe is probably choppier and more volatile than we probably thought at the beginning of this year. It's clearly having an impact on our businesses and the industry and frankly a lot of other industries.

I would say that we develop plans every year to grow each one of our brands and businesses. It is one of the key advantages of having a portfolio of 12, soon to be 16, brands. We've got plans -- preliminary plans in place to grow the PLG businesses as well as our own.

We joke a little bit internally here that we are not sure which is going to be our first billion-dollar brand, Merrell or Sperry, but that is a good internal challenge to have at the Company, but certainly in markets like the USA, which has remained pretty robust for footwear. So the spillover effect from Europe on the USA for our industry has not yet been that negative. We'll see what the future holds, but currently it's pretty robust here in the United States.

If you look at how our brands performed in the quarter and how we expect them to perform for the remainder of the year, it's going to be a key growth opportunity for us. And it's going to be across the whole portfolio whether it is Cushe, whether it's Wolverine number one position in the USA work, whether it's Cat Footwear, whether it's Merrell who had an outstanding Q2 here in the USA, which is their largest business. We're pretty upbeat despite some of the macroeconomic choppiness.

Jim, I will say that we're not letting certain short-term region specific economic challenges, whether it's the macro challenges in Europe or the issues with one of our largest customers in Canada that has mitigated some of our growth in the first two quarters of the year.

And again, to go back to -- we're comparing ourselves this year two quarters last year in which revenue growth was 16% and 20%, but we're not letting some of those short-term factors make us believe, and we don't want anyone else listening to the call today to believe that we don't have significant growth opportunities in our current 12 brand portfolio.

We expect to get meaningful growth from the four brands that we're going to be acquiring later in the year, but we still have plenty of organic growth opportunities with the brands that we currently have.

That's helpful. Don, can you share what growth for just the US business as a whole was during the quarter?

It was high-single-digits.

Okay, that's great. And then last question related to PLG. I believe you were initially talking about a July 31 close, you're now talking late September. What are the current expectations for PLG's earnings contribution in '12?

Well, when we announced the deal on May 1 I think there was a -- I don't want to say a disconnect, but we talked about a closing in late summer to early fall. The earnings accretion number that we were using was based on a 7-31 close which would have -- had been the thought at one point, but we knew -- it was I guess probably a few days before the May 1 announcement day that we were probably looking at maybe a late summer, early fall close.

We did say on May the 1st that we expected, excluding nonrecurring deal costs and integration costs that we incurred in 2012, that PLG would have a minimal contribution plus or minus the 2012 EPS. But we're not updating that today, so that would be still -- we'd stand by what we said on May the 1st.

I see. Thank you.

Taposh Bari, Jefferies.

Nice job. I wanted to ask about I guess the gross margin contraction in the quarter, I'm surprised that the winter from two quarters ago now is still playing a role in the second-quarter margins. I understand that you cleared inventory there, but can you just give us a sense of whether this is the end of the collateral damage from last year's winter or is there still a possibility of seeing some more inventory or gross margin contraction in the coming quarters in the event that you can't clear some of the inventory?

As you know I'm sure, we have closeout sales every quarter. We did have incremental closeout sales and at a lower gross margin in this year's Q2 than last year. I would say that part of the closeout sales, the incremental closeout sales that we had in Q2 was related to the hangover effect of last fall/winter but not completely.

And I would say, to use your term, Taposh, we're through the collateral damage in terms of closeout sales and negative gross margin impact from last fall/winter. Having said that, we do have closeout sales every quarter.

So I guess maybe if I could ask the question another way. Can you help, as you usually do, Don, kind of decompose the gross margin contraction amongst closeouts versus cost, etc.?

Sure. Pricing contributed -- our selling price increases was about 300 basis points of a benefit to gross margin, more than offset by higher product costs of about 320 basis points. We had the FX contract gains that helped gross margin by about 50 basis points.

And then we had a pretty significant, more significant than normal negative mix impact, sales mix, which was represented by the higher closeout sales at lower gross margin and a slightly negative mix in our volume direct business towards customers that had lower margin than other customers.

But the biggest components of the negative sales mix was the higher closeout sales, that lower gross margin that was about 200 basis points of gross margin contraction.

Okay, then within the closeouts, I mean how would you break out the effect of winter versus just the environment within that 200 basis points? Is it kind of 50-50 or more environment-related right now?

I mean, I don't have the figures in front of me. I would say our Q2 normal closeouts were consistent with prior years and the remainder was probably attributable to some leftover cold-weather product and winter product.

Got it, okay, that's helpful. And then the other question I had was just as it relates to gross margins. Don, you had mentioned that you're expecting gross margins to be up in the balance of the year. Is that individually for 3Q and 4Q or in aggregate? And how does that outlook compare to kind of what you were expecting as of last quarter, particularly for the second half of the year?

I'd say it's consistent with our previous outlook; we're not giving gross margin guidance by quarter, we're trying to be helpful by giving you some revenue and EPS guidance for Q3. But we do expect gross margin and Q3 and Q4 combined to be up versus the prior year leading to the full-year guidance of gross margin to be modestly down versus prior year. And on a year-to-date basis our gross margin is down 110 basis points. So we expect improvement on that over the balance of the year.

Okay, thank you very much. Good luck.

Christian Buss, Credit Suisse.

I was wondering if you could talk a bit about the management of inventory? It looks like you've managed inventories very carefully here. How comfortable are you with your ability to support the re-acceleration of sales you're expecting in 3Q and 4Q?

Well, I think we've been -- we feel pretty comfortable internally. As you know, for a number of years we've been on a narrow and deep kind of inventory philosophy. We carry a little bit of everything. About -- still about half of our sales are generated by at-once or short future orders. And so, we carry a little bit of everything, but you need to be narrow and deep in the key items and you have to do that for just about every brand in our portfolio.

So we've been on that track for at least four or five years and it's paying dividends for us. As always though, we're also working on shortening the supply chain. So taking time out of the equation, quicker development, shorter lead times and that's just a constant focus of ours.

I'd also say, Christian, that our ability to fill the at-once orders that we expect over the balance of the year is also a function of the inflow of goods that we have scheduled to occur over the balance of Q3 and into Q4 as well.

That's helpful. And could you talk a bit about the SG&A expense controls that you've identified? And can you talk a little bit also about your marketing spend and where that's gone in the front half of the year?

Yes, I mean, we've really tightened down on all areas of discretionary spend, excluding obviously the almost $5 million of acquisition-related expenses. So as Blake noted in his prepared remarks, in times of perhaps more challenging top-line revenue growth we rely on investments that we've made in the past 12 to 24 months to bolster the brands and the business.

So we really took a hard look at incremental hiring in terms of what positions we were going to fill in Q2 and beyond. We noted in our Q1 earnings call that we had some employee separation costs of over $1 million that are benefiting the financial results in our reported SG&A in Q's 2 through 4. So we really looked at all areas of discretionary spend and we feel like that's what a well-managed company needs to do in tougher economic times and in responding to the challenges in Europe and Canada.

Thanks a lot and good luck.

Kate McShane, Citi Research.

Blake, I think you had mentioned during your comments that you had done this bottom's up analysis with a lot of retailer insight into their ordering patterns or what they expected to order for Q4 of your products. And I wondered if you could expand on that a little bit more and also any kind of feedback you're hearing from the retailer about the health of the consumer in the US and how inventory levels are currently.

Sure. I would guess -- just to take a step back, I think frankly the retailers themselves for the last six or nine months have been a little more conservative than the actual consumer. The actual consumer, especially in the United States, it's been a pretty robust environment for footwear and in most parts of the world.

I think the retailers though have been kind of looking at Europe, wondering what's going to happen, and have been trying to push a little bit more of the inventory carrying burden back on vendors and brand owners like us. So my impression right now is despite the fairly warm winter and fall last year, retailer inventories in the United States are in very good shape.

We've had a number of large retailers frankly tell us that we placed our orders, we truly believe were under bought for fall, for example, but we just expect you to have the inventory on hand when we come back to you. So we don't especially like that, we wouldn't have ordered it up that way, but that's the reality in the current environment and certainly something we feel we can deal with.

Okay great. And then, Don, can you just help us understand what's exactly in the EPS guidance since you had the $0.06 impact from PLG and then the $0.07 tax benefit in Q2?

Yes, what's not in the EPS guidance is the -- are the $4.9 million of acquisition-related expenses. So on a reported basis the guidance is $2.64 to $2.74 as we note in the last paragraph of the earnings release.

Okay. But the tax benefit is in that, so is there an offset to that since guidance is staying the same?

No, that's the guidance. We still -- we maintain the guidance in the $2.70 to $2.80 range, earnings per share, which will represent still nice growth over last year's $2.48. That does not include the $4.9 million of PLG-related expenses.

Okay, thank you.

(Operator Instructions). Chris Svezia, Susquehanna Financial Group.

Could you guys by any chance just give us a sense of how much Europe or EMEA was down in the quarter? I think you referenced that US or North American business up high-single, I'm just -- any parameters about how much the European piece was down?

I mean, EMEA and Canada, which are second and third largest geographic regions, Chris, on a reported revenue perspective were both down in the low- to mid-double-digit range in the quarter.

All right, thank you. And then with regard to -- just going back to Kate's question here where she was trying to ask about the tax piece. I guess one of the observations would be you maintained your earnings outlook, but it seems like when you went into the second quarter you weren't expecting to get a $0.07 tax benefit. What are you -- is there maybe currency not as favorable, maybe that's some of the offset? I'm just kind of curious of the puts and takes in that earnings outlook for this year.

Yes, you hit it, Chris, currency is one and recall that we guided to flat to slightly up gross -- full-year gross margin in the previous quarter and we're guiding to modestly down gross margin now. So those would be the two main factors.

Okay. So on the gross margin it looks like you took your medicine in the second quarter to clear out the inventory to be in better shape, as you go into the key fall selling season you'll see better gross margin improvement in the back half of the year, is that fair to say?

Yes.

Of the 6 to 10 -- when you talk about PLG and you mentioned the synergies I think initially $6 million to $10 million, if I got this correctly, you feel better about maybe coming close to the upper end of that range, is that fair?

Yes. And also the timing of the realization. We had said on May the 1st that we were modeling not realizing any synergies until month 13 post close. And we better realize now that we'll start realizing some synergies almost really from day one of close given the work that we've done from May 1 through today.

Okay. And that would give you better -- or some increased confidence that $0.25 to $0.40 accretive benefit X items for '13 coming closer to the upper end of that range, if I got you correctly?

That's the correct way to look at it, yes.

Okay. And when you think about international and the opportunity to take these brands from PLG and to kind of plug-and-play as we would say internationally. I know that they already have some subsidiary and some places where they distribute product, but how long does that take for you guys once you close a transaction to start getting revenue growth or gains from putting some of these products in international markets through your own distribution?

Yes, Chris, I would say it doesn't happen immediately despite the fact that we've got a cadre of international distributors and partners that have been with us 20, 30, 40, some almost 50 years. Just to take one example, when we acquired Cushe, a small brand, almost no international distribution, we're in 100 countries today, a couple of years on from two and a half years, three years on from the acquisition date.

So we think some of the brands will be a quicker ramp up internationally. PLG has some good partners in place right now in some countries and we want to leverage some of what they have, but we think we're going to do this very quickly measured against our competition or anybody trying to do this on scratch.

Okay, and last question I have is just on -- can you just explain what the on orders up double-digits, the comment you made very early, I think someone asked a question about it earlier. I'm trying to understand the context of that. I know you said it's not a backlog number, but can you run through that one more time, what you meant by that?

Yes, I mean when we talk about -- we measure, one of the our measurements are total incoming orders in the quarter. And they can be at-once, they can be futures frankly, there's other categories, there's short futures. Most of the orders we would have received in Q2 would be for Q3 and Q4 delivery, maybe some spillover into the next fiscal year, but most of those orders would have been for Q3 and Q4 delivery.

They were up a pretty strong double-digit overall incoming orders in the quarter. Futures surprisingly -- a little bit surprisingly strong, but that's probably reflective of lean inventories by retailers and we hope of course positive reaction to our product line. So that was very encouraging.

Obviously our planned slowdown in the Harley-Davidson business and our low margin Bates businesses had a negative impact on incoming orders in the quarter. So it's probably a little more positive than even our actual experience.

Okay, so I mean it's fair to say that your backlog is positive?

Well, we'd prefer not to comment on backlog when it's good news and not comment on it when it's bad news. We frankly would prefer to be consistent. So we'll just -- we've been trying to politely wean everybody off backlog as a focus area.

All right, fair enough. Thank you very much. All the best.

Edward Yruma, KeyBanc Capital Markets.

You guys once again demonstrated really strong SG&A control, but I want to focus on SG&A in Europe. If macro economic conditions stay weak there is there more SG&A for you to cut there or do you feel like you're appropriately lean?

Well, I would guess right -- there's more SG -- to quote Don, there's always more SG&A to cut more efficiencies to wring out of your business model. We think we've taken the appropriate actions given the choppiness in Europe and the volatility in Europe, but there's probably always a few more things we can do over there. Certainly when you look at implementing and transitioning over the PLG European operations and combining those with our operations there will be some synergies there that we'll realize for sure.

And I will say that -- I may have mentioned this to you. I'm having a flashback that we may have had this conversation in New York a few weeks ago, but Europe has been the one part of our business that has probably demonstrated the most SG&A discipline on a year-to-date basis in terms of rightsizing the organization over there in response to the challenging trading conditions.

So although there's always more -- there are always more efficiencies to be gained, I think that they have done -- made a great effort towards kind of demonstrating the type of discipline that we need throughout the organization.

And I think they recently signed some legislation that changes pension. Can you talk about the assumptions for pension contributions going forward and if that will benefit you at all?

You know, coincidently it was kicked over to me in an e-mail yesterday and I've kicked it over to our outside actuaries to make sure I have some salient talking points as to the potential impact on Wolverine prior to our Board meetings kicking off tomorrow. So I'll have to get back to you on that.

But there appears to be some funding release in the future for us, but we were expecting our funding to go down anyway in 2013 and beyond. We've been at fairly high levels of funding the last two years, but our plans on an actuarial basis remain 100% funded.

Great, thank you.

Mitch Kummetz, Robert Baird.

Let me start with asking about at-once. So as of last quarter you guys had mentioned that your at-once orders were up nearly 20% through the early part of the quarter. Can you say where they ended up for the quarter all in?

Yes, we can give you a little more color on that, maybe. I mean for the Outdoor Group they had a strong double-digit increase in at-once, frankly at-once and future orders in the quarter. The same could be true for the Lifestyle Group.

The Heritage Group -- the Heritage Group had a negative at-once order trend in the quarter tied primarily to Bates and Harley-Davidson. Their future orders for the Heritage Group, the Wolverine brand, the CAT brands were up at a strong double-digit pace is all. So overall the way we technically classify at-once, we would have been up low mid-single-digits, we would have been up -- without the impact of Bates and Harley-Davidson we would have been up --.

Low-double-digits.

Low-double-digits in the quarter.

Hey, Mitch, it's important to note that -- I know you know this and I know probably most of the analysts know this but it's worth repeating I guess -- that we classify at-once orders as orders that come in today that have a requested ship date within two weeks of the date of order receipt. And therefore everything else is a futures order.

But all futures orders are not scheduled to be shipped six months down the road, they're what we call short futures which are kind of like quasi at-once orders that may have a requested ship date in two weeks and a day or in four weeks or in six weeks. So those orders would still benefit the current fiscal year. And so, total orders were up at a greater clip than what we typically define as at-once orders, but many of those are orders that will ship in Q3 and Q4.

Got it, okay. And then just as far as your guidance goes, I mean you are saying that you expect strong at-once orders in the back half and I don't know if that means more than just at-once as you define at-once, if that also means these short futures orders.

Can you give us some sense as to what strong at-once means? Are you talking low-double-digits, high teens? I mean where are you expecting the at-once to come in in the back half to get to the sales guidance that you're providing?

It depends on the brand, but I would say to get to the revenue number that we're targeting we need a say double-digit increase in at-once orders over the balance of the year -- at-once and short futures.

Okay, all right, that's helpful. And then on the FX, I know you talked about the impact on sales for the quarter. Can you say what the all-in FX impact was on the earnings and then maybe what you expect the FX impact to be on sales and earnings for the back half of the year?

Yes, I think we had a $0.03 -- when you netted it all out we had a $0.03 per share benefit from FX in the quarter, which was primarily the FX contract gains that I talked about. And then we expect some FX based on current forecasted FX rates which are very close to spot rates. We don't have as much cushion in our FX as we would typically have at this time of year because the dollar strengthened after we kind of went official with our forecasted FX rates. But we expect some FX headwinds in the fourth quarter such that our full-year EPS will benefit only a penny a share from FX.

Okay, that's fourth quarter?

Some fourth-quarter headwinds, yes --.

Okay.

-- offset year-to-date tailwinds.

Okay, got it. And then maybe lastly, Don, you mentioned that between EMEA and Canada that was -- those markets were down I think you said low to mid-double-digits for the second quarter. Is that also your expectation for those markets into the back half of the year as far as what your guidance is?

We would expect a little bit better than that, but we're not expecting, for example, any great improvement in the European situation in the short term the next two quarters.

Okay, that's very helpful. Appreciate it. Good luck.

Andrew Burns, D.A. Davidson.

Two questions for you. The first one in terms of Canada, you mentioned potential impact from one key retailer exacerbating the weakness in that market. Is that something that's expected to continue for the balance of the year? I'm just trying to get the mix of economic related versus more company specific issues for Canada.

Yes, I think what we're referring to there frankly was the acquisition by Canadian Tire of the Forzani Group. I think quite honestly they've been going through some integration issues and probably a few new rules of the road in terms of inventory management and inventory levels and we would expect that to begin to snap back to what we consider normal.

Okay, thanks. And then if you could touch on the M-Connect launch and this convergence theme that you're seeing. It seems like that could also present the opportunity to get Merrell into new doors that were more athletic focused over time. Is that the case and when would we potentially see that?

Yes, we certainly believe that. Frankly the original barefoot collection was kind of the spear point for that additional distribution, which continues to build. M -- it's important to realize M-Connect is really a continuum of different collections of product from Barefoot to Bare Access to Mix Master to any new light Proterra, new lightweight hiking -- speed hiking collection that's gotten a tremendous response.

They're all focused on getting people closer to the earth. They're focused on a more glove-like natural fit. They're focused on outside athletic, by that I kind of mean fast, flexible and light. And as you know, light running and lightweight running have been one of the huge growth areas over the last several years and we don't see any let up.

So it's a -- the whole -- Barefoot was great in its own right, but Barefoot is the point that got Merrell into additional distribution, especially outdoor running specialty shops and some other athletic distribution, it's been a big benefit.

Thanks and good luck in the back half.

Diana Katz, Lazard Capital Markets.

Don, just so I'm clear, on the gross margin line in the back half, are you still expecting -- I guess are your gross margins in the back half still where you expected them after the first quarter? I mean still up but maybe is it slightly weaker now, your expectation, or has the plan kind of remained the same since first quarter?

Essentially the same. I mean I hope you guys appreciate that forecasting our consolidated gross margin is quite an involved exercise with all the moving pieces we have across 12 brands at dramatically different gross margins, retail, wholesale, third-party distributor business versus subsidiary market business.

So I'm not trying to say we don't put forth significant effort, but if we come within 20 basis points of projected gross margin in a quarter we've done a pretty good job and I don't want to imply there's more precision to it than that.

But answering your questions more broadly, Diana, we're pretty much in line with what we had previously expected. We expect gross margin improvement year over year over the back half of the year to get us to full-year gross margin that is modestly down from the prior year, but better than where we are on a year-to-date basis.

Okay, thank you. And then in Europe, is there any more color you can provide maybe by category or brand? Merrell, I believe it was still up low-single-digits in Europe in the quarter, dramatically different than the other brands. Is that just new Barefoot distribution or is there anything else you could dive into in Europe beyond just macro?

I would say Merrell -- yes, Merrell had a low-single-digit increase in Europe in the quarter which frankly is quite an accomplishment in the current environment. Some of that is driven by -- quite a bit of that was driven by Barefoot and Barefoot derivatives. I would say as a region Europe has been the first region as a whole to really get on the Barefoot lightweight minimalist bandwagon, more so than some other parts of the world. And so, that was one of the reasons for Merrell's pretty great performance in Europe in the quarter.

The rest of the macroeconomic environment over there remains very tough. It's going to be tougher on some other industries than footwear. As you know, footwear does fairly well in a choppy environment in a downdraft environment as a product category.

There's a lot of consumer want in footwear, the footwear industry, but there's also a lot of consumer need. And footwear tends to do better in a little bit tougher economic environment. So Europe is a challenge at the moment, it will be a challenge for our industry, but probably as an industry we'll come out of this better than most.

Okay, great. Thank you very much.

Sam Poser, Sterne, Agee.

I guess most of my questions have been answered, but I just want to follow up on the guidance for a second. Can you walk through within the guidance sort of how you're thinking of sales by group for the balance of the year or for the full year? Like what are the expectations especially of the Outdoor Group for the full year within the range?

Sam, we have historically not offered revenue guidance by operating group or brand. Recognizing that we have a lot of moving pieces and versus forecast or plan a brand can over deliver, another may offset or more than offset another brand's under delivery. So we'll stick to our full-year revenue guidance and the Q3-Q4 revenue growth that that implies.

I guess -- let me ask you this, I'm assuming that a good amount of that at-once business that you're expecting is being driven out of the -- I would guess the Outdoor Group and the Heritage Group, the two big guns of the Company, is that a fair way to think about it?

That's a fair way to think about it, yes.

What happened -- I mean, I understand -- I mean you've got some really good sellers right now and you're seeing the fill-in orders coming in. But from what we're picking up is that retailers will fill in very good sellers, but they're not going to fill in good sellers regardless of where their inventory is given the environment. And you made the comment that there was -- that they're putting more pressure on you to have inventory for them. You said you didn't like that but that was the way it was. I mean --.

Sam, fundamentally, as you know, in our industry it comes down to product. Whether it's great economic times, mediocre economic times, even challenging economic times, if you're there with fresh product, product innovation you're going to do fairly well in our industry. So we don't give guidance by group, but we had incoming orders in Q2 were pretty much great across all of our brands, not just our largest brand, Merrell, certainly, but across all of our brands.

So a lot of that is fundamentally being driven by product introductions, new product. And as you know, you're not going to get any kind of orders from retailers unless your brands are performing for them, it's just inherent (multiple speakers) in the beast. So right now our brands are performing and not just in the United States but in 190 markets around the world.

Thank you. And then lastly, you don't talk much about Asia. What percent of your business is being done over in Asia right now?

About one-third of our unit volume is done in Asia-Pacific and Latin America, that's about -- and that's split about 50-50. So about 1/6 of our total unit volume is Asia-Pacific region, but the large part of that and we're including India and Southeast Asia. So India and China and Australia and Japan are the biggest markets for us.

But how is that business these days from the distributor perspective?

Pretty darn good. I mean, we had increases and even though we're very early in our growth lifecycle for some of our brands in the Far East, we had growth this quarter in China and expect more growth into the future, growth in India, certainly a great quarter in Latin America where we've got a lot of strong partners and businesses. So overall --.

I'll say with the organizational moves we've made over the last year and a half, with the creation of our International Group and hiring a managing director for greater China we are building the foundation for what we expect to be accelerated growth in Asia-Pacific versus the rest of the world over the next handful of the years.

Thank you very much and good luck.

Jonathan Grassi, Longbow Research.

I want to go back to Diana's question regarding product categories in Europe. To me it sounded like Caterpillar, the licensed footwear business, was the weakest of the brands in that region. I guess how would you do define that work-related construction boot for Europe? Is that the product category that is experiencing the weakest demand?

Well, yes, the work business in Europe is really totally different from the United States. In the United States workers generally pay for their own boots. They view them as a tool, a tremendous amount of brand loyalty. A little bit different business model in Europe. But some of the same boot silhouettes that we consider work and utility here are frankly fashion silhouettes in Europe.

And I think -- I don't think it's been more difficult for Cat Footwear or Hush Puppies, for example. I think they have just been such subject to the same macroeconomic conditions that is affecting all brands in Europe.

Was Caterpillar down the most for the region?

Probably in dollar amounts. Since it had one of the largest businesses in Europe, Caterpillar would be down -- I don't have the numbers right in front of me, but Caterpillar would have been down the most.

In terms of dollar impact, yes.

Certainly in terms of dollar impact.

Okay. And then in the UK they've had some rather unseasonal weather this year. How do you think that has affected your business in the second quarter?

Well, it certainly had -- we don't like to talk about weather too much, although Don and I do. We try not to let the other people in the business talk about weather. But they not only had a warm fall and winter in Europe, but especially the UK had a very cold and rainy spring. So they were hit not only with the macroeconomic conditions over there, they had kind of a double whammy on the weather two seasons in a row. So it certainly had an impact in Europe.

Okay, thank you.

Reed Anderson, Northland Securities.

Just one quick follow-up on the gross margin comments. Don, to the extent you contemplate gross margins getting better year over year in the second half, would that be fairly balanced improvement in both the third and fourth quarter? Or just given the comparisons, do you think the fourth quarter would be a little bit more pronounced improvement?

Yes, that was the same question posed earlier, but I forgot who it was. We're just going to stick to the full-year gross margin comment and the guidance that that suggests for Q3 and Q4 combined. But we do expect, just to be repetitive I guess, modest full-year gross margin decline but improvement in Q3 and Q4.

Okay, great. Thank you.

We thank you, sir. At this time it appears there are no further questions.

I would now like to turn the conference call back over to Ms. Christi Cowdin. Ms. Cowdin, you may proceed, ma'am.

Thank you. On behalf of a Wolverine Worldwide, I would like to thank you all for joining us today. And as a reminder, our conference call replay is available on our website at www.Wolverine Worldwide.com, and that replay will be available through September 18, 2012. Thank you and good day.

We thank you, ma'am, and to the rest of management for your time. You also have a good day. We thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you, and take care.