Wolverine World Wide Inc (WWW) 2015 Q1 法說會逐字稿

Good morning and welcome to Wolverine World Wide's first-quarter 2015 conference call.

(Operator Instructions)

This call is being recorded at the request of Wolverine World Wide. If anyone has any objections, you may disconnect at this time. I'd now like to introduce Ms. Chris Hufnagel, Vice President of Strategy, Investor Relations and Communications for Wolverine World Wide. Mr. Hufnagel, you may proceed.

Thank you, Zilda. Good morning and welcome to our first-quarter 2015 conference call. On the call today are Blake Krueger, our Chairman, Chief Executive Officer and President; and Don Grimes, our Senior Vice President and Chief Financial Officer. Earlier this morning we announced our financial results for the first quarter of 2015. The release is available on many news sites or it can be viewed from our corporate site at www.wolverineworldwide.com. If you would prefer to have a copy of the news release sent to you directly, please call Tyler Deur at 616-233-0500.

This morning's press release included non-GAAP disclosures and these disclosures were reconciled to the attached tables within the body of the release. Comments during today's earnings call will include some additional non-GAAP disclosures. There's a document posted on our corporate website entitled "WWW Q1 2015 Conference Call Supplemental Tables" that will reconcile these non-GAAP disclosures to GAAP. The document is accessible under the Investor Relations tab at our corporate website, www.wolverineworldwide.com by clicking on the webcast at the top of the page.

Before I turn the call over to Blake to comment on our results, I'd like to remind you that predictions and projections made during today's conference call regarding Wolverine World Wide and its operations, are forward-looking statements under US securities laws. As a result, we must caution you that as of any prediction or projection, there a number of factors that could cause results to differ materially. These important Risk Factors are identified in the Company's SEC filings and in our press releases. With that being said, I'd like to turn the call over to Blake Krueger. Blake?

Thanks, Chris. Good morning everyone and thanks for joining us today. Earlier this morning, we reported our first-quarter results highlighted by constant currency revenue growth in virtually every region of the world and better than expected adjusted diluted earnings per share. Our strong earnings performance was driven in part by favorable consumer reaction to our multi-year brand building investment strategy, excellent growth in our eCommerce operations, a solid year-over-year gross margin expansion, and the disciplined execution of our global business model. The diversity of our brand portfolio, coupled with the geographic reach of our international distribution footprint, mitigates risk and continued to serve the Company well in the first quarter.

I'm going to briefly review our consolidated financial results and will primarily speak to constant currency revenue performance, as that is more reflective of the progress our brands are making in the global markets. I'll then offer some specific strategic commentary in our operating groups and brands.

For the quarter we delivered revenue of $631.4 million. On a constant currency basis this represents growth of 3.4% versus the prior year, and was essentially in line with our expectations going into the quarter. On a reported basis revenue grew 0.6%, reflecting a negative 170 basis point impact of the retail store closures associated with our strategic realignment plan and the exit of the Patagonia footwear brand.

On a constant currency basis, all three operating groups grew their revenue in the quarter. Additionally, every region of the world also delivered constant currency revenue growth, with the single exception of EMEA, which was down low single digits and up against a strong performance during last year's first quarter.

Adjusted diluted earnings per share for the quarter were $0.37, exceeding our expectations going into the quarter. Foreign exchange hurt our earnings in the quarter by $0.02 a share. Don will provide additional color regarding our overall financial results in a minute, but before that I want to provide some details on our operating group and brand performance.

The Lifestyle Group delivered revenue of $243 million which represented constant currency growth of 3.6% versus the prior year and reported growth of 2.1%. On a constant currency basis, strong mid-teens revenue growth from Sperry and low single-digit revenue growth from Keds, were partially offset by declines from Stride Rite and Hush Puppies. Sperry continued its resurgence, following its high single-digit growth in the fourth quarter of last year; the brand continued its positive performance by posting strong mid-teens reported growth in the quarter.

Our focus on compelling stories and product drove a strong performance in North America, highlighted by a double-digit increase in men's and a high single-digit growth in the women's business. For the important boat category, a category where Sperry has around a 70% domestic market share, the brand delivered low double-digit revenue growth in the quarter and I'm pleased to report that with the women's boat category, returned to growth.

Sperry eCommerce posted very nice double-digit revenue growth in the quarter, driven by increases in both traffic and conversion. We're beginning to see the rewards of our investments in our omnichannel initiatives as virtually all key performance metrics for www.sperry.com were up in the quarter, lead by a 600 basis point gain in mobile penetration.

Internationally, Sperry had a very strong performance in the quarter with our global third party business growing nearly 50% year over year, and owned operations in EMEA growing nearly 20%. As you know, Sperry's new brand platform, Odysseys Await, was launched this spring via global campaign inspired by and targeting what we're calling intrepid. A consumer group united by a shared mind set, picking meaning and unique experiences in their lives. This campaign is the first expression of Sperry's new brand platform which taps into the inventive and irreverent mindset of the brand's Founder, Paul Sperry, an inventor and the original intrepid.

The centerpiece of the new platform is an initiative entitled Odyssey Project. Sperry is sending 80 influential consumers on a variety of global odysseys, creating millions of inspiring moments and fueling Sperry's narrative throughout the year, all collected under the hashtag #OdysseysAwait. The stories will also be housed on a new Tumblr platform and fully integrated with www.sperry.com.

I couldn't be more pleased with the progress we've made in Sperry in just a few short quarters. There is tremendous energy within the brand. Retailers are engaged and excited about the new brand direction and most importantly, our consumers are reacting positively to the new brand platform and products.

Moving on to Keds. After several consecutive quarters of strong double-digit growth, Keds posted constant currency revenue growth in the low single-digits for the quarter and reported revenue growth that was essentially flat to last year. The unseasonably cold spring and frustrating West Coast port situation put some pressure on the core North American business, while the brand's business in EMEA was negatively impacted by the shift from a top line, to a distributer based model for some key markets.

We remain very positive on Keds' outlook for the balance of 2015. As expanded fashion collaborations, strong momentum in international markets, especially Asia Pacific and Latin America, and the sponsorship of Taylor Swift's upcoming 1989 tour, are expected to drive strong year-over-year growth through the brand.

To close the Lifestyle Group, both Stride Rite and Hush Puppies posted revenue decline from the quarter in both constant and reported dollars. Stride Rite's decline was driven by store closures and continued pressure in brick and mortar retail operations. Hush Puppies' revenue was impacted by our decision to change distribution strategies relative to the low margin Department Store channel, which more than offset excellent double-digit revenue growth in third party markets.

Turning to the Performance Group. The Performance Group delivered revenue of $243.4 million, constant currency growth of 2.1%, and a 2.2% decline on a reported basis. From a constant currency standpoint, exceptionally strong double-digit growth from Chaco, low single-digit growth from Saucony and flat year-over-year performance from Merrell, drove the quarterly increase.

Merrell's flat constant currency revenue translates to a mid single-digit decline on a reported basis, reflecting global nature of that brand. The brand's performance outdoor category posted a high single-digit gain in the quarter, on the strength of Merrell's global capital launch and several new innovative product introductions, including updates to the iconic chameleon franchise. This marks the seventh consecutive quarter of growth in the performance outdoor category for the brand.

The men's active lifestyle business generated nice gains, but softness in the women's casual business continued. As expected, the brand's smaller segment outside athletic, posted a decline in the quarter as we comped against a highly successful all out introduction from last year. This past quarter, www.merrell.com launched on the Company's new eCommerce platform and was with similar launches for our other brands, we are seeing a very positive uptick in most key metrics since the new site went live. Online traffic and conversion have increased at a strong pace for Merrell, resulting in eCommerce growth exceeding 30% in the quarter.

Looking ahead, we're excited about the many positive trends in the Merrell business. The extension of the Capra franchise this fall with new product introductions in leather and Gore-Tex, recent sell-through of the all out collection, positive performance of the women's Terran collection and the active lifestyle sandal category and the continued global momentum in Merrell's iconic Moab collection.

Moving to Saucony. On a constant currency basis, the brand posted a low single-digit revenue increase, but reported revenue was down slightly as a result of the FX impact on the larger base of offshore business. The innovative and premium priced ISOFIT series is performing very well at retail and continues to generate praise from the trade and runners alike.

Saucony originals continued to perform phenomenally well around the world, especially in key influencer markets such as the US, the UK, Italy and Japan. After doubling in size in 2014, originals group had an exceptionally strong double-digit pace in the quarter and we expect this momentum to continue.

Staying with the Performance Group. The momentum in Chaco continued to build, with the brand posting growth over 70% for the first quarter, largely on the strength of its new closed toe collection. The classic Z sandals also continued to perform exceptionally well at retail and site visits at www.chaco.com were up over 50% for the quarter, further evidence of the brand's heat, with the custom My Chaco program up over 85% versus the prior year.

Finally, the Heritage Group delivered revenue in the quarter of $126.1 million, representing constant currency growth of 7% and reported growth of 4.5% versus the prior year. On a constant currency basis, strong double-digit growth from Bates, nearly 20% growth from CAT footwear, mid single-digit growth from HYTEST and low single-digit growth from Harley-Davidson, were partially offset by a revenue decline from Wolverine and Sebago.

The momentum in the Cat footwear business continued, with its revenue growth in the first quarter geographically balanced. Nearly all regions contributed to the brand's strong constant currency double digit revenue increase. The important work category continued its double-digit growth pace, while both men's and women's lifestyle products posted gains over 40% in the quarter. On the innovation front, ease, the brands proprietary cushioning technology continues to perform very well.

Finally, the performance of the Wolverine brand in the quarter was impacted by timing delays, associated with the West Coast port situation. We expect to recoup through a majority of these sales in the second quarter and expect strong growth from Wolverine for the full year. The brand remains a category leader in work, while the heritage category continues to post strong results driven by the iconic 1000 mile and Since 1883 collections. All in all an excellent quarter for the Company and a good start to the year.

Before turning the call over to Don, I want to provide a brief update regarding two of our most important strategic growth initiatives -- the international expansion of our newest brands and our omnichannel transformation initiative.

First, we continue to focus on expanded international distribution for Sperry, Saucony, Keds and Stride Rite. The most recent additions to our portfolio, and brands that we believe have tremendous global growth opportunities ahead of them. We continue to make great progress here and as we've said in the past, it's a steady build as we bring partners online and they establish operations, including the opening of retail stores in their respective countries and regions.

Since the acquisition closed, we've executed over 80 new distribution agreements and our four newest brands are new distributed in 50 more countries than they were just over two years ago, more than a 50% increase. Additionally, over 400 new points of global controlled distribution have opened, an increase of almost 150%. These locations are building blocks for progress and driving brand awareness and generating consumer loyalty. Obviously, I'm very pleased with the progress we've made and the solid foundation that's been built to accelerate the global growth of these iconic brands.

Second, I'm very pleased with the recent progress we've made in our omnichannel transformation effort. Our time and investments in this critical initiative are showing early signs of strong returns. In the quarter, our consolidated owned eCommerce business grew over 30%. Our total flight visits were up nearly 20% across the portfolio and conversion also increased. Mobile penetration increased nearly 700 basis points and today, visits from smartphones and tablets represent more than 30% of our total eCommerce sales. The consumer is clearly engaging with brands in a new way and shopping preferences continue to evolve.

We will continue to invest in these omnichannel efforts and expect in the year ahead that we will have a unified consumer database across our brand portfolio, our consumers will have new and enhanced mobile payment options both online and in store, many of our stores will also be Wi-Fi enabled, providing our consumers the seamless shopping experience they desire. Our consumers will have enhanced shopping opportunities through an endless aisle capability, meaning all inventory whether designated for retail or wholesale, will be available online to our consumers and several of our key brands will offer new and exclusive custom products online.

Consumer behavior in the global marketplace continued to evolve at a rapid pace and we've been working hard to get ahead of the curve to meet and exceed the needs and desires of the new consumer. We believe the power, diversity and global reach of our brands, coupled with our continued operational excellence remains a distinct and competitive advantage and provides us with the platform to deliver consistent results for our shareholders. While the global marketplace and strengthening US dollar provides some challenges, it also creates some great opportunities for us to expand and take marketshare, in countries and regions where the competition is less strategically or operationally sound.

We have authentic brands, the broadest and strongest global operating platform, and most importantly, a great team. I'm excited about the many opportunities that lay ahead for our family of brands.

With that I'll now turn the call over to Don Grimes, our Senior Vice President and Chief Financial Officer, who will provide additional commentary on our performance in the quarter, as well as provide more details regarding our expectations for the balance of the year. Don?

Thank you, Blake, and thanks to all of you for joining us on the call today. As Blake noted, we were pleased with the Company's performance in the first fiscal quarter. Our first-quarter results underscore the combined power of our brands, diversified business model and strong international footprint that together continue to deliver excellent financial results.

While consumer shopping preferences continue to evolve at a rapid pace, we believe the investments we're making in our brands, including the investments in consumer demand creation and omnichannel initiatives, position us to capitalize on the many opportunities we've identified to accelerate our growth around the world in 2016 and beyond.

I'll now provide more details on the quarter ended March 28, 2015, and conclude my prepared remarks by commenting on the Company's expectations for the balance of FY15, including some insight on the second quarter. I'd like to remind you that all current and prior year financial results discussed today have been adjusted to exclude integration expense as it related to the PLG acquisition, costs associated with our 2013 debt refinancing and restructuring charges related to both the 2013 closure and sale of our Dominican Republic manufacturing facilities, and the strategic realignment plan announced last year.

We reported revenue for the first quarter of $631.4 million, representing growth of 0.6% versus the prior year. Mid single-digit growth from the Heritage Group and low single-digit growth from the Lifestyle Group were partially offset by a low single-digit revenue decline from the Performance Group. Constant currency revenue growth of 3.4%, as foreign exchange had a $17.3 million unfavorable impact on first-quarter reported revenue. As noted by Blake, all three of the Company's operating groups delivered constant currency revenue growth in the quarter, with high single-digit growth from the Heritage Group, mid single-digit growth in the Lifestyle Group and low single-digit growth in the Performance Group.

First-quarter revenue growth was negatively impacted by the retail store closures associated with the previously announced strategic realignment plan and the exit of the Patagonia footwear license. Together these factors negatively impacted reported revenue by approximately $10 million and as noted by Blake negatively impacted revenue growth by about 170 basis points.

On a reported basis, strong double-digit revenue growth in Asia Pacific and low single-digit revenue growth in the US and Latin America were offset by a high single-digit revenue decline in Canada and a mid-teens revenue decline in EMEA. However, constant currency growth was significantly better with very strong double-digit growth in Asia Pacific, high single-digit growth in Latin America, mid single-digit growth in Canada, low single-digit growth in the US, and a low single-digit revenue decline in EMEA, a region that is comping against double-digit growth in last year's Q1. These international regions continue to be critical to growth across our portfolio and we believe the constant currency revenue performance is evident that the investments we're making are paying dividends in these regions.

Moving on to the rest of the income statement. Gross margin for the first quarter was 41.4%, an excellent increase of 60 basis points versus the prior year on both a reported and adjusted basis. The gross margin expansion was driven primarily by strategic selling price increases and lower closeout sales, only partially offset by product cost increases. Given foreign exchange forward contracts that were in place at the beginning of the fiscal year at more favorable rates, FX had a minimal impact on gross margin in the quarter.

Consistent with our expectations and the commentary that we provided during our February earnings call, adjusted operating expenses for the first quarter were $198.8 million, an increase of 4.4% versus the prior year. This increase was driven primarily by the planned 18% increase in marketing expense, and $3.4 million of incremental pension expense, partially offset by excellent discipline throughout the rest of our cost structure. As a percentage of revenue, adjusted operating expenses were 31.5%, an increase of 110 basis points versus the prior year.

Reported operating expenses for the first quarter were $197.8 million, an increase of 3% versus the prior year. Adjusted operating margin decreased 60 basis points to 9.9%, while reported operating margin was flat to the prior year at 10.1%. Net interest expense in the quarter was $9.5 million, $1.4 million lower than the prior year, reflecting year-over-year principal reductions including voluntary principal payments of $58 million made early in the first quarter, and a lower interest rate on our term loan driven by our lower leverage ratio.

The adjusted tax rate for the first quarter was 29.2%, up 60 basis points compared to the prior year. The increase is primarily driven by a modestly negative jurisdiction on mix shift. The reported effective tax rate for the first quarter was 27.3%. Diluted weighted average shares outstanding for the first quarter were 100.8 million.

Adjusted diluted earnings per share for the first quarter were $0.37, better than we had anticipated early in the quarter, but down compared to prior year earnings of $0.38 per share. The decrease versus the prior year was driven by the consumer demand investments we're making primarily behind the Sperry, Merrell, Saucony and Keds brands, the higher pension expense and unfavorable foreign exchange, with the latter negatively impacting earnings by $0.02 per share. Reported diluted earnings per share were $0.39 compared to $0.36 per share in the prior year.

Turning to the balance sheet. Accounts receivable were down 26.2% versus the prior year to $357.2 million. The decrease was driven by both the accounts receivable financing facility that was put in place at the end of FY14and an organic four day reduction in consolidated DSO. Inventory decreased $45.9 million, or 9.8% versus the prior year driven by retail store closures, delays in the receipt of goods due to the West Coast port situation, and continued aggressive management of inventory. We believe our inventory is in very good condition and that retail inventory is balanced with consumer demand.

With the benefit of $12.7 million of improvement in year-over-year operating free cash flow, we finished the first quarter with cash and cash equivalents of $121.3 million and net debt of $736 million, which is down $271.5 million from the same period last year. We remain focused on our previously stated objectives for cash, investing behind our brands to fuel organic growth, maintaining our cash dividend, paying down debt and pursuing strategic acquisition opportunities. While we do not execute any share repurchases on the open market in the first quarter, we plan to continue to assess opportunities to do so depending on market conditions and other factors.

Let me turn now to our 2015 full-year guidance. There are many things to be excited about in our business and we're very pleased with the initial response from both retailers and consumers to the incremental brand building investments we're making behind several key brands. However, as we've discussed, we expect a much stronger US dollar that will have a meaningful negative impact on reported revenue and earnings this fiscal year.

Today we're reaffirming our estimate for full-year revenue in the range of $2.82 billion to $2.87 billion, representing reported growth in the range of approximately 2% to 4% versus the prior year. We're also reaffirming our expectations for constant currency revenue growth in the range of approximately 5% to 7%. Finally we're also reaffirming our expectations for full year adjusted diluted earnings per share in a range of $1.53 to $1.60, and constant currency adjusted diluted earnings per share in the range of $1.71 to $1.78.

Just to highlight a few of the key factors included in our outlook for FY15. Accelerated growth from our largest brands, including anticipated mid to high single-digit full year reported growth for Sperry and mid single digit constant currency growth for Merrell. Headwinds related to the exit of the Patagonia footwear license and the retail store closures associated with the strategic realignment plan and continued challenging traffic trends for our brick and mortar retail stores.

As it relates specifically to the strategic realignment plan, we continue to evaluate the appropriate number of store closures. Based on store performance to date and discussions with key partners and major real estate developers, we still anticipate closing approximately 85 locations during 2015, with a vast majority anticipated to close toward the end of the year. However, we now expect to incur total pretax charges of approximately $44 million to $48 million related to the overall realignment plan, of which $18 million is expected to be incurred in FY15.

The increase in our restructuring charge estimate is driven by three factors. Higher lease termination costs primarily for retail stores in the UK, increased inventory write-downs of stores that are closing, and an increase in the scope of the plan to consolidate some of our international operations in order to create efficiencies and stimulate the sharing of best practices across our portfolio. As a result of the revision to the estimate of our realignment plan charge, we now expect reported diluted earnings per share in a range of $1.42 to $1.49 for FY15.

While the comments I've just taken you through cover expectations for the full fiscal year, I'd like to provide a little more color on our expectations for the second quarter that ends June 20. Based on quarter to date results and anticipated business over the balance of the quarter, we expect constant currency revenue growth in the range of 3% to 4% and reported revenue growth of approximately 1%. We expect the Sperry brand to be approximately flat in Q2, due to the shift of the Easter buying season from Q2 last year to Q1 this year and to retailers taking spring shipments a bit earlier this year, which had some benefit on the first fiscal quarter.

For the first half of the fiscal year we expect Sperry's reported revenue to be up in the mid single-digit range and as noted, we expect full year reported revenues to grow in the mid to high single-digit range, great performance after what was a challenging year for the brand in FY14. Based primarily on a negative mix shift away from high margin royalty business and a more significant impact from FX, we expect Q2 gross margin to be moderately down versus the prior year and we expect an increase in operating expenses, specifically brand investments and incremental pension expense similar to what we experienced in Q1.

Further, the stronger US dollar is expected to have a more significant impact on earnings in Q2 than was experienced in Q1. As a result, we expect Q2 reported and adjusted earnings in a range of $0.18 to $0.20 per share. Thanks for your time this morning. We'll now turn the call back over to the Operator to take some questions.

(Operator Instructions)

The first question comes from Taposh Bari with Goldman Sachs.

Hi. Good morning, everybody.

Good morning.

Don, quick question for you on Stride Rite, Patagonia. I know you've quantified the revenue impact. How impactful are both of these exclusions on EPS, both for the first quarter and for the full year?

Yes, for the full year, the loss of Patagonia is about $0.02 per share negative impact and the retail store closure related to the realignment plan for the full year is a benefit in the $5 million and $6 million range, or about $0.04 a share.

Okay. So, Patagonia hurts you $0.02 and Stride Rite helps you $5 million to $6 million? Correct?

Call it $0.04, right.

Okay. And, how does the pace of Stride Rite flow throughout the year?

Probably -- of the store closures, probably more of a help in Qs 1 through 3, and less of a help in Q4 given that Q4 would be a more -- even for stores that are for the full fiscal year, money-losing stores would be marginally profitable in Q4.

Great. And then, just quickly on Sperry. You didn't mention apparel -- was hoping you can comment on the performance of that new category within your stores over the past couple of quarters and how those stores are comping.

Yes, we've done a change in direction in the Sperry apparel. We've gone to a new vendor kind of a design and make, but for our own DTC business, including the stores and eCommerce business of our international partners. So it's a more retail appropriate and retail focused product line versus the original product line that was probably aimed a little bit more at wholesale and US department stores. So we view that as kind of a big plus for the Sperry brand.

As far as the Sperry stores are concerned, we had a -- virtually all of our formats, we had tough traffic comparisons in Q1. We anticipate that's going to improve, but pretty challenging overall traffic declines across our fleet in Q1. On a comp-store basis, the Sperry stores probably were still down in low single digits in Q1 but, frankly, performed better than many of the other formats we have in our fleet.

What we experienced, our answer to your question isn't specific to apparel in comp-store sales, just the overall Sperry stores. But we had -- obviously, like a lot of retailers had a number of store closures during the quarter due to weather. But even for stores that didn't close, traffic was so negatively impacted by the cold weather that it really had a negative impact on comp-store performance across our fleet of retail stores. And Sperry was one of the better performing concepts, but still was down low single digits in terms of comp-store performance in the quarter.

Okay.

I'd also say, Taposh, that clearly apparel and our six or seven or eight license agreements that are also working to place product in Sperry stores is having a beneficial impact on those stores.

Okay. Maybe just a quick follow-up, then, on Sperry. It sounds like the brand is heading in the right direction, even if we adjust for the calendar shift between Q2 and 1Q. If you could talk about how you're feeling about that brand at wholesale and retail, and if the trends are kind of similarly positive or if there's a divergence between the channels?

I think we feel very -- given what was frankly a tough 2014, we feel very good about the change in direction in momentum in the Sperry brand. We're seeing it, certainly, here in North America, which is the largest market for Sperry, but we're also seeing some pick up overseas -- Asia Pacific and Latin America, in particular. And we're seeing, really, Sperry now perform very well in just about every distribution channel in the United States. I would say, especially in those stores and store chains that are aimed at a younger consumer, it continues to perform very well. Women's boat has bounced back, which is a very good sign for the brand and men's continues to perform at a high level.

And, Taposh, I will say that, given some of the dislocation between Q1 and Q2, it's really kind of a first half story for Sperry and a second half story for Sperry. As I mentioned, by the time we conclude Q2, we expect Sperry to be up in the mid single-digit range on a reported basis, but the outlook for the second half of the year is for stronger growth than that. And, importantly, the outlook for FY16, based on the investments we're making this year, is even better than what the expectations for all of 2015.

Great. Thanks, guys.

Thanks.

The next question comes from Jonathan Komp with Robert W. Baird.

Hi, thank you. If I could just ask a question about the revenue outlook for the year, and really the context here is obviously the reported results in Q1 and the guidance for Q2. On a constant-currency basis you'll be in that 3% to 4% revenue growth range for the first half of the year. So, in context of reaching 5% to 7% full-year constant-currency revenue growth, could you maybe just talk about some of the factors more specifically, what gives you confidence to get there and maybe tie that in with the backlog that you're seeing currently?

I'll start and then I'll let Blake fill in. Kind of dovetails from the last comment I made regarding Sperry, Jon, in terms of a more favorable outlook for the second half of the year. That pertains to a number of the brands in our portfolio. You look at the brands that Q1 performance trails where we expect the brand to deliver for the full fiscal year. That would include Merrell, Saucony, Wolverine, Keds, and Harley-Davidson -- and I'm ignoring some of the even smaller brands in our portfolio than that. So, in some respects due to timing either Q4 versus Q1, or Q1 versus Q2, we have about six brands whose Q1 performance trails what we expect the brand to deliver for the full fiscal year.

And, really, our outlook -- we have a lot more better visibility into Q3 in particular, which is more of a futures-weighted quarter than is Q4 for example, based on where the backlog sits today. And everyone knows that the backlog we disclosed in our 10-K that we filed a few weeks ago, that backlog year-over-year growth clearly not representative in the mid-teens range, not representative of what we expect for full-year revenue growth. But the visibility we have into Q3, more limited visibility into Q4 but still decent visibility into Q4, and we feel good about what we're citing as our constant-currency revenue growth. And so, clearly, we expect to pick up in the back half of the year.

Some of that's driven by timing and some of it's driven by the investments that we're making in the first half of the year. We noted, in our Q4 earnings call in February, that, unlike years past when our incremental investments -- our investment plans have been more back half weighted, we came out of the gate investing behind key brands early this fiscal year, as evidenced by the 18% increase in marketing spend in Q1. And we're seeing that benefit in our backlog, which gives us confidence in delivering the back-half revenue growth.

Great, that's helpful. And then, maybe just one more specifically on Merrell. I think you lowered the full-year constant-currency revenue growth target just slightly, to mid single digits -- I think you said, last quarter, mid to high -- so any major call-outs there in terms of what you're seeing or the confidence for that brand?

Not really. I would say the major call-out there would be around women's casuals in the active lifestyle area. That's our biggest opportunity right now; that sub-category has underperformed for the brand for several quarters. The brand is taking -- has a number of action plans in place to improve that.

The performance outdoor category continues to perform very well. We've got a strong product pipeline there and a strong product pipeline in outside athletic, although that's the smallest of the three categories. Men's casuals in the active lifestyle arena also continued to be very strong. So I would say our outlook for the full year is tied not just to our order book, but, really, our view of how women's casuals are going to perform for the last three quarters.

I will add to that, Jon, that our view about the brands performance this fiscal year in EMEA, in particular, the Russian market is a little bit more bearish now than it was when we provided our initial outlook back in February. So we -- it's clearly taken down our revenue expectations for that market, given the kind of tumultuous situation there. That's certainly what the driver and a revised forecast for the Merrell brand.

Got it. Thank you.

Thanks.

The next question comes from Edward Yruma with KeyBanc Capital Markets.

Hi, good morning, guys. Thanks for taking my question. I guess just as a follow-up to the previous question, the guidance for 2Q would suggest, obviously, a different flow of earnings than maybe you had last year. Obviously, you talked about some of the confidence in 3Q, but is there -- how should we think about the seasonality of earnings for the back half of the year, particularly given that deviation to the consensus estimate for 2Q?

So, you're asking how we should think about Q3 and Q4?

Yes, the balance of earnings between the two, since it would suggest that it's going to be different than maybe you had last year.

I'm not going to give Q3 and Q4 earnings guidance, Ed, but what I will say is, if you look at our full-year earnings guidance and compare that to the slight shortfall versus the prior year in Q1 and the more meaningful shortfall versus the prior year in Q2 -- when you get full-year earnings guidance that's below the prior year in total, not surprising it has certain quarters that are below the prior year in terms of earnings. But if you take our outlook for $0.18 to $0.20 of adjusted EPS for Q2, clearly down from the $0.31 per share last year, we would expect to deliver earnings growth in the back half of the year in each of Q3 and Q4 -- or certainly for the back half of the year. So, clearly, in order to get the full-year earnings guidance, which we feel good about, we're going to deliver earnings growth in the back half of the year in order to get within the range that we're talking about.

Got it. I know you provided some brand-specific details on the port delays, but any kind of top-down view what was the overall impact, and did you have any kind of impact to gross margin because of late deliveries?

You know, we were pretty proactive on the whole West Coast port situation. We did have some impact in the quarter, primarily in the Keds and Wolverine brands, I would say, but I'm not sure it was really material. In total, it was probably in the $10-million range for the quarter. And we would expect, especially for the Wolverine brand, to claw most of that back in Q2. And on the Keds brand, we'll get a portion of that back, although we may miss a little bit of turn at the retail level there. So, not, frankly, super material -- about $10 million in the quarter.

Got it. And one final question. I know you have been really focused on the Merrell performance piece and I guess you're seeing some good growth there. Any innovation, or how should we think about the Merrell casual piece and how are you thinking about that for the balance of the year? Thank you.

I think on the casual piece for Merrell, men's remains strong and growing. Women's, it's primarily a design and fashion issue, and so that's where the brand is focusing on new talent and some new initiatives. And working on an accelerated introduction for several new programs.

Great. Thanks so much.

The next question comes from Jay Sole with Morgan Stanley.

Hi, good morning.

Good morning.

It sounds like the incremental $30 million that's being invested this year is being spread a little bit more beyond just Sperry and Merrell, which is what it sounded like in January, that you committed that money to Saucony and to Keds. Is that true? And then, the second part of that question is, if it is, do you still see $30 million as the right number for this year, or might you flex it up or down?

You know, I think we always have the ability to flex it up or down. I suspect the number for the full year is going to be in the $25 million to $30 million, $32 million range. A lot's going to depend, frankly, on what happens at retail here in the US over the next quarter or two. We've -- as Don said, we came out of the gate spending as planned. I would also say, most of the money has been spent behind Merrell, including the capital launch and especially the new brand platform for Sperry. There's been a little money allocated -- incremental monies allocated to Saucony and Keds, but the majority of it certainly behind Sperry and then the Merrell brand.

And the Saucony and Keds investments, Jay, will be primarily in international markets to drive the continued international growth of those two brands there. But, as we noted in our -- throughout the last quarter we've noted that the $30 million of incremental investment, about $18 million of that's going behind Sperry and primarily behind the Odysseys Await campaign.

Got it. And then, if I can ask one other, Blake, you mentioned some interesting detail about the steady international build that's going on with the PLG brands. Can you offer some checkpoints as to how you see those brands developing internationally in terms of when they really begin to ramp from where they are now and where they are going to be, going forward a couple of years?

I would say, as I said in the past, international expansion for new brands -- it's like building an annuity. It's an annuity, overall, that's there for us and grows year after year after year. It's always a bit of a steady and slow build in the beginning and then gains some momentum. So, we expect in terms of actual pairage in dollar revenues for -- and, of course, the profit that drops to the bottom line, for that to continue.

I'll also say that, out of the box, we've probably seen accelerated expansion more on Saucony and the Keds brand -- Saucony, especially in Europe, and Keds, in Latin America, but especially in Asia Pacific. We've seen excellent growth, as well, out of Sperry. And, probably, of the four newest brands, probably the brand that has the lowest growth rate so far is Stride Rite Children's group.

And, Jay, just to give you additional color, Blake mentioned in his prepared remarks the number of distribution agreements that have been executed for our Boston-based brands since the acquisition closed. But, to provide you another data point to illustrate progress that we've made -- and not that we're there yet, but, in the first quarter of 2013, if you looked at the wholesale business for our four Boston-based brands, they did 12% of their units in markets outside of the United States. That percent increased to over 18% in the first quarter of 2015. So, a 50% increase in the percentage of unit volume done outside of the United States and that would be -- that would follow a similar trend in terms of the operating profit contribution. So, we've made significant progress and we're pleased, but there's still a lot more progress to be made and a lot more revenue and profit to be generated, and so that's what we're continuing to do.

Got it. And would you say the units -- the percent of units from those brands can equal what the percent of units is for the Company as a whole over time?

Yes, for sure. If not more.

If not more. For Keds, Saucony and Sperry, that is true.

We have certain brands in our legacy portfolio that maybe don't have the same international potential as some of the Boston-based brands that we acquired a couple years ago.

Got it. Thanks so much.

The next question comes from Erinn Murphy with Piper Jaffrey.

Hi. This is Eric on for Erinn today. I just had a quick question, I know you talked about Merrell and Sperry having pricing power as you go to market with improved marketing strategies and spending. I was wondering if you could quantify how this impacted sales and gross margin, and if that can continue throughout FY15?

That was, for Sperry in particular, for about Q1 and the full fiscal year, sharper pricing supported by the marketing investment was a contributor to Q1 gross margin and for the full-year gross margin for the brand and as the Company as a whole, given the size of the Sperry brand. Merrell, a little bit less gross margin expansion in Q1 and for the full fiscal year than Sperry. But, clearly those two brands of the 15 brands in our portfolio have the most pricing power and the ability to price accordingly and to drive gross margin up through selected price increases. And that was most prominent for the Sperry brand in Q1, and we ought to continue to see that over the balance of the fiscal year.

Okay, great. And then, just from Europe overall I know you have another pretty challenging compare in Q2. How -- do you think that can be positive on a constant-currency basis given the -- starting to accelerate in the second half, and do you think that market can turn overall for the year?

Yes, I mean we're not giving specific guidance by region for Q2, but I would think it would be in the similar range of what we experienced in Q1. You're right, we did have tough comps for the first half of the fiscal year for EMEA. But -- I know we're taking FX out of the equation, talking about constant-currency performance, but I would expect it would be a similar result to what we delivered in Q1. Eric, you there?

Yes, perfect. Thank you.

The next question comes from Scott Krasik with Buckingham Research Group.

Yes, hi, everybody. Thanks for taking my question. Just a couple clarifications. First, Don, last quarter you said that the only quarter you'd expect earnings growth was 4Q. Now you said maybe 3Q and 4Q, is that right?

I kind of qualified it as I was saying that. In my head I filtered, I think really for the back half of the year we expect earnings growth. So, I don't want to -- I want to clarify. I'm not saying Q3 and Q4 each, but for the back half of the year, for sure, based on the earnings guidance that we've reaffirmed today.

Okay. Okay.

Thank you for the opportunity to clarify that.

(Laughter) Okay, so TBD. And then, just on Merrell, it's really a tale of two businesses, right? You seem to be growing solidly in outdoor, and you have been for some time, but it just hasn't flown through because of all these other offsets. When do we start to see a more sustained growth for Merrell?

If you're talking in particular about the women's casual category, I would say we'll begin to see some progress in the fall season a little bit with our late fall introductions, and into spring of next year.

And that's been sold in and you --

We're, frankly, trying to accelerate that timetable. So -- but I'm just giving you our current view.

And there's some visibility there that you've sold that in?

Yes.

Sorry. Before you ask the next question, what I'll say is that with the challenges we've had in the active lifestyle part of the business and the declines, candidly, we've had in the outside athletic part of the business, the performance outdoor -- with seven consecutive quarters of strong growth in performance outdoor now represents over 60% of Merrell's overall business, with about 30% being the lifestyle product and then far less than 10% being outside athletic. So, as we continue to deliver growth and performance outdoors, can have an increasingly positive impact on the brand's overall results.

But what I will say -- full stop on that point -- the next point is, for the brand to get back to the level of growth that we have experienced in the past and that we intend to get the brand back to, which is the consistent high single-digit to low double-digit growth, that trend of performance outdoor -- being a bigger and bigger part of the business for Merrell -- needs to reverse and the lifestyle part of the business needs to regain footing -- no pun intended -- which is kind of what Blake said. So, that is the goal going forward, and we are working really hard at making sure the lifestyle product is singing to both retailers and consumers.

Okay, that's helpful. And then, just on Sperry, the decline last year in 1Q sort of mucks up the growth. So, just to put it into perspective, obviously strong sell in. Can you maybe talk about some of the sell-through trends that you're seeing at retail for Sperry to give us confidence that the brand can achieve mid to high single-digit growth for the year?

Yes, we continue to see great performance on the men's side in boat. That never really slowed down that much. It was more of a stable business. It's certainly refreshing to see women's boat pick up and deliver some growth. We are seeing the new women's boat product and there's a bigger pipeline coming for fresh new product in the women's boat category, so we feel very good about the boat category.

We also feel especially good about vulcanized, which had a significant uptick in Q1 and a number of other areas, including boots. So, I would say Sperry's -- one of the reasons why we have confidence looking into the back half is the fact that the response we've had back from retailers and consumer panels on category extensions for Sperry has been very, very positive, especially in the boot arena.

Okay.

And, Scott, I know you rely heavily on SportScan data, and we use more MPD. The March MPD data for Sperry turned positive mid-single digits, which was very encouraging to see after several quarters in a row of negative results from MPD for Sperry on the sell-through. So, we're seeing a turnaround in the brand's performance at retail, not just what we're shipping in but actually what is being purchased by consumers.

Yes, exactly. Okay, cool. Thanks, guys.

Thanks.

The next question comes from Sam Poser with Stern Agee.

Thank you for taking my questions. I just want to follow up on Sperry, and you just mentioned MPD and SportScan. How much of your Sperry sales are helped by selling the goods back to the two retailers, or one and a half of the two retailers that you pulled it out of last year?

I would say -- you're talking specifically about a couple of retailers in the family channel, Sam?

Correct.

I would say it was -- in Q1, it was helped but it would be, overall from North American sales, low single digits, maybe 3% or 4% range. I don't have the exact figure --

I'm sorry, it was a few million dollars. The brand still would have grown double digits, Sam, even without that expansion of distribution.

Sam, as we've discussed before, historically, Sperry's had a very good business in the family channel but, quite frankly, before the acquisition is shortly thereafter they didn't probably have adequate discipline or product segmentation. That required us, really, to take a couple of steps back and then, as we're reentering now a couple of those retailers, we're doing so on the understanding they are going to be less promotional. But, most importantly, there's going to be a strict product segmentation strategy that we put into place.

Thank you. And then, secondly, you talked about use of cash still looking at acquisitions. On the flip side of acquisitions, are you happy with all the brands that you currently have? Are any of them -- are you shopping any of those brands right now?

Yes, we usually don't comment on that, Sam, obviously. We've got a pretty disciplined approach to reviewing our brand portfolio. As you know, over the years, we've shed a few businesses and a few smaller brands, and we look at that on a routine basis. But, certainly, with respect to the four newest brands that we acquired, we're very comfortable with their performance and potential.

Lastly, can you be sort of somewhat specific on how -- on what you've seen from your additional marketing into the Sperry brand, or into any other brand for that matter, and sort of how you expect that -- how you're going to judge that pay-off and how you're thinking about that, sort of the marketing against the brands over the longer period of time?

Yes, as you know, it's always a bit hard to measure precisely the impact on marketing spend and other investments behind the brand. I would say, with respect to Sperry, which is our primary focus -- one of our primary focuses in 2015, a good chunk of the mid-teens reported and constant-currency growth for the brand in Q1 relate to the new brand platform. It's hard to measure that precisely, but I don't think we would have been there without our investment behind the brand and a focus on the brand.

I think the new brand platform and the Odysseys Await -- executions under that platform have been very well received by retailers. That kind of acted to reenergize the brand and the entire boat silhouette category. And so, we believe we're getting a very good return right now. It's just difficult to measure it with any kind of precision.

What I will say, Sam -- I think we've had this conversation but if not, if it wasn't you it was someone else -- but, when we were evaluating the decision to invest incrementally behind the Sperry brand, we looked at where the brand was and where we all agree the brand would trend -- how it would trend if we did not change the brand platform and the brand message.

And then we looked at what the brand team was willing to sign up for in terms of revenue growth and profit growth, if we invested the incremental investment dollars. And it was clear that it was a positive net present value investment opportunity if we could deliver on what the brand team thought they could deliver. And, so far, they're tracking at or above what the commitment was nine months ago. So we feel good about where we are.

Could I say exactly where the brand would be if we weren't making any incremental investment? No, we can't say it with precision, but we feel confident that we're getting a return on the investment dollars.

Could I ask one more question?

Sure.

You talked about the average selling prices, raising the price that's helping the margins. Could you talk about the relationship of whichever brand you'd like, or in total, or maybe it's Merrell and Sperry, your unit versus ASP -- the unit versus ASP dynamic and how sustainable that is going forward I guess?

Yes, Sam, I really separate that into two buckets -- the US market and the world. As you know, most of the world buys their shoes in US dollars, and we've seen a very strong appreciation of the US dollar over the last year. So, we're seeing our ability to pass on price increases domestically -- I won't say easier, but easier to understand, especially when it's coupled with the marketing expense and new exciting product.

Internationally, it's a little bit of a different situation, especially in those countries that have had a significant weakening of their currency. So, our international distributors are hedging a little bit more. They're focused on some lower price point products, maybe more in the good, better categories as opposed to the best categories.

They're also passing on some price increases, and we're working with several of our partners on local sourcing, which helps mitigate the currency situation. So it's really the US market that has a different set of criteria versus the rest of the world right now.

And I will add to that, Sam, just quickly that, from my perspective as CFO -- and we're all mindful of the power of revenue growth that comes via price increases, particularly if you're not selling any [shoe repairs] because of the price increase, because that flows right down the P&L with very little incremental cost to go against it. But revenue performance, at the end of the day, is a combination of unit volume growth and what you're doing on the pricing side.

But, I prefer revenue growth to come from additional sales price increases because that's more powerful impact to the bottom line. But the reality is, it comes from both. And so, a brand like Sperry, in FY15, will deliver us revenue growth via both significant price increases, supported by the marketing program, as well as unit volume increases.

Thank you.

The next question comes from Chris Svezia with Susquehanna Financial.

Good morning, everyone.

Good morning, Chris.

So, just a couple of things here from me. One, Don, your gross margin looked a little better in the first quarter. Just maybe talk to if you think about the balance of the year relative to the modest increase that you talked about last time. Is that still how we should think about it and, relative to that Q2 outlook, is that where the most pressure on gross margin should be?

Yes. To answer your last question first, the most pressure will be on Q2. Our outlook for the full fiscal year hasn't really changed. We probably had a little bit better gross margin performance in Q1 than we had expected. I think gross margin will be down, as I said, in Q2. But, for the full fiscal year, we expect gross margin to be about where we thought it was going to be when we gave our initial guidance back in February.

Okay. With regard to -- I just want to talk about -- I know backlog is not a perfect indicator, but I just want to understand this for one second. When you, in your K, was up 16.7 or something along those lines, numbers serve me as of mid February, your guidance is what it is, 2% to 4%. It, obviously, implies some acceleration in Q3 based on that backlog and shipment and timing. Can you maybe just talk to either, a, what has happened to the cadence of that backlog or, b, what are you assuming for either an at-once and/or a cancellation rate relative to that backlog as we think about the balance of the year.

Yes, I would think, Chris that, one, we expect our cancellation rate to be down this entire year. Our inventories were down almost 10% in Q1. We have been very disciplined there. We think inventories are balanced at retail. And so we think our cancellation rate, one, is going to be down.

On the other hand, we've had some significant shifts in order windows, which probably accounted for a bit of a spike up in our order backlog when the 10-K was filed, especially in the boot and rubber arenas across a number of our brands. It was just, frankly, we were required to take a view and place earlier, as were our retailers. So, that's accounted for some of the spikes you're probably seeing in our 10-K filing.

And I will say, as we expected, post-filing of the 10-K, our backlog has moderated, as we expected, because that was not indicative of what we thought our full-year revenue growth was going to be. So, it has moderated, but we still feel we're in a good spot as it relates to the back-half revenue growth that's reflected in our revenue guidance.

And anything on at-once? Any color about that?

I think, given the timing of the future orders, at-once business -- it would be reasonable to expect it to be a little down, that's what we're forecasting versus prior year, because a lot of the orders have come in earlier and so it might be less. Obviously, a big portion of at-once business in Q2 and Q4 is going to be a function of sell-through as well you get the fill-in orders that come through. So, similar to prior year, but maybe given the order book going into the last three quarters of the fiscal year, maybe net-net a little down.

I would say, I hate to mention weather, but I would say after we finally got a spring here on the East Coast and in the Midwest and in a good chunk of the country, we have seen a pickup in business and certainly at-once [a pair of] spring offerings.

Okay. Last question I have is just, not to beat this to death but you know how we love to beat this to death. On Sperry, just could you maybe talk to why the delta in same-store sales performance, when you say comps were down in the quarter, which you would have thought maybe got a little lift from the timing of Easter a little bit towards the tail end of March, and between the US wholesale division being up as much as it was.

Yes, I think as I said the Sperry stores were, on a comp basis, probably our best performing segment across our fleet. So, in that respect, it was good, but any mall-based operation and, as you know, with the weather the outlet arena has been -- it was really suffering in Q1 and a bit into Q2 here. So, we would have preferred a positive comp-store increase for Sperry in Q1. It was down low-single digits, which is pretty good, but the performance was actually pretty good especially when you consider the traffic was off substantially more than that.

The brand had a very solid, if not very strong Q1, Chris, with boat shoe up double digits, vulcanized product up over 20%. The boot business, obviously in the first part of the quarter more so than the latter part of the quarter, up very strong double digit continuing the results that the brand delivered in Q4. But I will say that you're talking about the divergence between our overall brand revenue, which is primarily wholesale driven versus our comp-store sales performance, I would say as someone noted earlier in a question, we did have an easier comp in Q1.

Retail inventories were quite high going into Q1 last year as we had a really tough Q4. So there were far more order cancellations in Q1 last year and fewer outgoing shipments that we were comping against this year, which helped drive that mid-teens quarterly revenue growth. And that would be probably the primary difference or point I would make in terms of trying to explain the difference between the overall revenue growth and the comp store performance.

Right. Okay. Only thing I'd mention is you would think your Company on retail would be a forward indicator for the brand. Obviously, if you had some good strength in boots, in vulcanized, that product would be in your stores, customers gravitate it, you'd get a positive comp there to directionally drive also the wholesale business as forward indicator, so that's why I was trying to understand the delta between the two of them.

I understand.

I think it was primarily a traffic issue in Q1.

Right. Fair enough. Okay, thank you very much. All the best, guys.

Thanks, Chris.

(Operator Instructions)

The next question comes from Laurent Vasilescu with Macquarie.

Thank you very much. Good morning, and thank you for taking my question. It was outlined that this quarter's gross margin increase was offset by product cost. I think last quarter it was mentioned that you were seeing benefits from lower crude prices for raw materials and freight. Could you parse out further the product costs increases you're seeing, is it coming from leather, is it coming from labor, and if so by how much?

I will tell you we're in a pretty benign sourcing environment right now. Certainly petroleum-based components, the prices on those components have eased. Leather is still high by historical standards but has also eased a little bit in the 5% to 8% range here over the last couple of months. So, most of the increases we're seeing now are labor increases -- labor and overhead increases. And, although we, for the year, expect to see some overall price increases across our hundred million pair of sourced product, it's a reasonable benign environment, I would say right now, with the labor increases kind of offsetting some of the savings in the component side.

And I will say, Laurent, that we work very hard to mitigate the impact of cost increases. But I tend to not look at cost increases in a vacuum, or look at selling price increases in a vacuum, but look at those two in tandem. And, in the quarter, the gross margin benefit from selling price increases across the brands in our portfolio was more than double the negative impact of product cost increases. So, that was a big contributor to the overall gross margin performance in the quarter.

Okay, great. And then, on international, last quarter it was outlined that you had nearly 70 international agreements; I think this quarter it was 80. Curious to know how many agreements you're envisioning for the end of 2015 and potentially for 2016. And any additional colors on the 2015 agreements by region, that would be great.

It's pretty difficult to quantify. We've got a number of agreements, a number of countries, a number of regions in the works across our four newest brands, and I would say the international rollout here has met our expectations and we believe it's going to continue to meet our expectations. But it's almost impossible to identify when specific agreements are going to be signed and the marketing process begins.

But I would suggest that the revenue benefit in 2016 internationally for the Boston-based brands will come more from the agreements that we have signed in 2013, 2014 and to a lesser extent 2015, and less from any new agreements we might sign over the balance of this year or the first part of 2016.

Okay, great. And then, lastly, Asia Pacific grew double digits, could you parse that further in terms of particular brands?

Yes, I would say for Caterpillar remains very strong in Asia Pacific, but we've also seen some large businesses build fairly quickly on Keds and Saucony. And so, as a region -- I know we keep reading articles that there's a slowdown in Asia Pacific, and China's only posting an anemic 7% GDP growth rate, and this and that, but for our brands certainly Asia Pacific is a sweet spot right now and we expect that to continue.

Thank you very much. Best of luck.

The next question comes from Danielle McCoy with Wunderlich.

Good morning, everyone. Thanks for taking my questions. I was wondering if you could just give us a little bit more color on the West Coast port situation, when you kind of see that normalizing, and how much of the decline in inventories were related to the port? Thanks.

Yes, as I said before, we probably only had $10 million of the impact on the revenue side in Q1. For us, I would say the situation is back to normal. I'm told the situation is going to be completely back to normal for Long Beach and other ports in the next several weeks. Of course, now we've got some picketing going on by truckers on -- with a disagreement over their status whether they're independent contractors or shouldn't be considered employees, but we're monitoring that very carefully, we'll keep an eye on that, but right now we don't think that's going to have any kind of material impact on our performance.

I would say, Danielle, about half of the inventory decline might be related to the port situation, with the remainder of the inventory decline driven by the retail stores that we closed at the end of last year. And just overall aggressive inventory management, just moving out the inventory that is classified as close out. If you look at our balance sheet you also see our accounts payable are down year over year, and that relates to just the delay in the receipt of inventory which, at the end of the quarter, would have actually, obviously, caused inventory to go up and cause accounts payable to go up. So we receipted that in the first part of Q2.

All right. Great, thanks. And then, just a few housekeeping questions. Just on expectations, if you can give us around D&A, share count, and tax rate for the full year?

D&A, about 50 million plus or minus; the tax rate would be similar to the guidance we provided last quarter, 27.5%; and CapEx, in the $45 million range plus or minus -- and what was the last, other point?

Share count.

Share count of 101.6 million will be our guidance for the full year, weighted-average shares outstanding.

Great. Thank you, guys. Good luck.

Thank you. The question-and-answer session has now ended. I'd now like to turn the call over to Mr. Chris Hufnagel. Please, sir, go ahead.

On behalf of Wolverine World Wide, I'd like to thank you for joining us today. As a reminder, our conference call replay is available on our website at wolverineworldwide.com. The replay will be available until May 27, 2015. Thank you and good day.