Welcome to the Crocs, Inc. conference call to discuss the company’s revised guidance for the first quarter and full year. (Operator Instructions) Before we begin, I would like to remind everyone of the company’s Safe Harbor language. Please note that some of the information provided in this call will be forward-looking statements within the meaning of the securities laws. These statements concern plans, forecasts, guidance, projections, expectations, and estimates or objectives for future operations. The company cautions you that a number of risks and uncertainties could cause Crocs actual results to differ materially from those described on this call. Crocs has explained some of those risks and uncertainties in the Risk Factors section of the annual report on Form 10-K and its other documents filed with the SEC, and you are encouraged to read that section and all other disclosures appearing on our filings with the SEC. Crocs intends that all of its forward-looking statements in this call will be protected by the Safe Harbor provisions of the Securities Exchange Act of 1934. Crocs is not obliged to update its forward-looking statements to reflect the impacted future events. I would now like to turn the conference over to the President and Chief Executive Officer, Ron Snyder.

With me today on the call is Russ Hammer, our Chief Financial Officer. As you saw from our release, yesterday after the close, we have revised our outlook for the first quarter and the remainder of the year. We also announced the shutdown of our Canadian manufacturing operations. Finally, we increased our share repurchase program. We’ll discuss each of these topics, keeping our prepared remarks relatively short to provide sufficient time for any or all questions. With regard to the first quarter, we now expect sales to be in the approximate range of $195 to $200 million versus our previous guidance of approximately $225. While this is an increase of between 37% and 41% year-over-year, it is below our initial guidance. The shortfall in our top line was primarily attributable to weaker than expected domestic sales due to the challenging retail environment. In addition, colder than normal temperatures across much of the US have delayed the starts to the spring season, which have impacted sales of sandals and other open-toed footwear throughout the industry, evidenced by the recent Sports Scan data. I think it is important to note that in years past, we have typically seen a nice uptick in sales at the end of the first quarter, but this year we experienced a deceleration towards the end of March, which is consistent with industry commentary about March same store sales results. We now expect to report diluted earnings per share on an operational basis in the range of $0.08 to $0.13. Additionally, in an effort to proactively reduce expenses, we made the strategic decision to close down our Canadian manufacturing operations and consolidate our production at our lower-cost company-owned and third party facilities. Therefore, as a result of the shutdown, we incurred a portion of the onetime pre-tax charge…

(Operator Instructions) We’ll take our first question from Jeff Klinefelter - Piper Jaffray.

On this guidance for Q2, given that your first quarter is coming in at a 45% gross margin and 39% SG&A, you’ve now reduced Q2 pretty significantly as well in terms of revenue. How so quickly can you anticipate getting back to the mid-50s gross margin and low-30s SG&A? How can you move that fast? And how much of it is the adjustment from the Canadian business?

We feel that we’ve looked through our numbers and as we move into Q2 we’ve reforecast our sales in each region and our expenses, of course, and we feel very comfortable with the numbers that we’ve given. It does help quite a bit, taking out a factory that we weren’t utilizing and had higher costs than any other factory that we had in the world. We’ll save in the range of over $5 million, $6 million for the quarter by taking out that factory and it could be a little bit more than that.

But the lower sales volume as well that you are experiencing, you’re still just by taking out the Canadian facility, you are able to cut the de-leverage to that extent within one quarter, is that right?

Yes. We delayed the addition of heads relative to our plan that we had in-house, but we’ve also moved some of our capital expenditures, business improvement systems into later in the year and into 2009. So we feel comfortable with the guidance that we have now given for Q2 and the remainder of the year.

In terms of the inventory up 55 to 10%, that seems modest in comparison to the sales miss in Q1 and the forecasted sales miss in Q2 from prior guidance so can you give us some color on how you keeping it contained at that level. For example, what was the actual manufacturing that you did during Q1, new manufacturing? And/or any updates at all on your excess inventory disposition strategies, is it going out to any authorized channels or are you discounting any product at this point?

We’re not really discounting any product at this point, except we sold a little bit of end of life product that’s not our standard. That’s not in any of our core style that we speak of, some old styles that we had from years past. We sold a little bit to TJ Maxx at the end of the quarter.

What was your manufacturing during the course?

We’re going to have more that in the earnings call, exactly what some of our manufacturing was. I can tell you that what we’ve done is we’ve aligned our production to the current demand in the marketplace. As we stated before, we’ve built up inventory in order to meet expected uptick in demand that we still expect in Q2 and Q3 of this year. However, we’ve looked at all of our pre-books, our forecast and we’ve aligned our production in our factories all over the world to more closely match that.

Question on your domestic forecast for Q2 embedded within your revenue guidance where you’re looking for the domestic account or the domestic business in total. And then any other color you can provide beyond the two sporting goods retailers. What’s happening in your department store channel? What’s happening in the independent channel right now?

What we’re hearing, we get some data and some of it is only word of mouth. We’re hearing we’re still one of the best selling items in the footwear category and really every retail that we are in whether it be shoe stores, independent department stores or sporting goods. So, we’ve been very optimistic on that. Now as you can see by the numbers in a very difficult environment for footwear and apparel we continue to grow. We continue to grow on fairly large numbers at this point. Our US business is expected to grow in Q2 about 4%, and where we grew about 13% in Q1 and our international business is expected to grow between 20% and 30% for the remainder of the year.

In Q1 how much of that business was Mammoth product? Do you have a sense within that 13% growth Mammoth versus core versus new styles?

I don’t really have it at the top of my head, Jeff. Of course the Mammoth was a big contributor to Q4, but not so big a contributor to Q1.

We’ll take our next question from Jim Duffy - Thomas Weisel Partners.

On the guidance, it seems you forecast improvement in the second half of the year versus the first half of the year, which is contrary to what your seasonality has historically been. Can you speak to that please?

Part of it is the third quarter is always been a very strong quarter for us and our strongest quarter of the year. We see the sell-through start through, say that middle of Q2 and we ride the momentum through really to end of the warm season in each market around the world. So we do expect a fairly large Q3 and that coupled with we had a lot of success with our warm products, our Mammoth and some other products that we had in Q4 of last year. This year, we’ll begin shipping that product in Q3 and have sell-through in Q4 or at once business in Q4 for that product. So I think we’re pretty confident on the sale side. On the cost side, with inventory now in-house and we’re planning our production and our shipments very effectively now, we’re going to be cutting down airfreight. So by Q3 airfreight becomes a very small portion of our product expense, which takes out of a chunk of expense, which obviously helps our margin in Q3 and Q4.

Say the sales do fall short of your plan. What are some of the additional leverage that you might have to employ to streamline the expense structure?

We don’t expect that, we think we put in a pretty good plan now for the remainder of the year. We, of course, still have some variable costs in SG&A. We’ve got some level of variable cost still in manufacturing but we don’t anticipate any further moves for the remainder of the year.

Can you speak to what you’re seeing from inventories in the channel? Are you comfortable with where inventory levels are there? And then follow-up to that, where would you see inventory levels at the end of the year, do you think that you can make improvements from where the balance was at the end of ‘07? Second part of it relates to your anticipation where the inventory levels would be at the end of ’08. Would you be able to see improvement from inventory levels at the end of ‘07?

Well, with channel inventory, we feel pretty comfortable with the inventory in the channel. It was certainly a little bit higher than it was in 2007, so we didn’t get the uptick in business that we got in March ‘07 in ’08. We’re now starting to see some of that improvement in April, as the weather starts to warm and the at once business starts to grow. The second part of the question, we expect that at the end of ‘08 the inventory, Jim, I have to cache this with depending on what our sales forecast and what the demand curve looks like as we go into spring of ‘09. We’re going to properly position our inventory to meet that. We will not be building excess, since we now have the capacity and we now are confident that we can make product more closely to the demand for the products and for the sell through of the product, we won’t be adding product a quarter early as we did this last year.

And then really as your Canadian facility didn’t have a tremendous amount of capacity, but does that change your ability to chase business in North America with the elimination of that facility?

No, we still have a very flexible manufacturing factory in Mexico. We’ve been bringing that facility up for the last, really 2.5 or so years, bringing in more capabilities. And it just makes sense to consolidate all of our manufacturing in North America in a lower cost factory, in a factory that had more capabilities to do sewn product, [inaudible] product, and molded product. We compounded on material down there, so that’s a very vertically integrated factory where the Canadian facility didn’t have all those capabilities.

Can you speak to the number of doors you are seeing both domestically and internationally at the end of the quarter?

We’ll have an update on that at the call, but it’s risen slightly. It’s slight flat in the US and risen slightly internationally.

And we’ll take our next question from Mitch Kummetz - Robert W. Baird.

I don’t know if you want to talk about it now or wait till the call as well, but in terms of your outlook for door count by the end of the year, 2008.

We’re going to have a little or have more clarity on that at the earnings call. It’s becoming a little bit modeled in some new doors that we add. We don’t offer all of our product line. We’ve added golf doors for our golf product lines, which don’t really get reported in the 13,000 doors that we talked about in the last call. So what I’m going to do this next time we’ve got, for example, we have doors now for our Ocean Minded brand. We sell to [Paxon] and Journeys and some other that aren’t counted in the 13,000 but we’re going to start to break those out because we have quite a few more doors than the 13,000 now if you count all of our brands. Internationally, we are going to still aggressively add doors through 2008 as we continue to build the brand and in many of the markets that we’re still early in the penetration phase. So we expect to be adding doors in countries throughout Europe, where we’re newer, and certainly some of the Asian and the emerging countries where we have a lot of activity these days.

Can you just speak a little bit to your overall visibility for the year, in terms of your forecast? What gives you that level of comfort in terms of your new guidance, and maybe talk a little bit about pre-book orders that you have, and I think you mentioned 48 styles that are pre-booked to a certain level. What does your overall backlog look like and how much of your business over the balance of this year is going to be driven by backlog?

We had a really tough backlog here. I would say that our pre-books currently are in the 40% range of what we expect to ship for Q2. And that’s about as expected, a little bit higher than it was last year at this point. We are confident in the floor space were being given at retail, the sell-through that we’re seeing from some of our key retail partners where we get that data is still quite good even in a very, very difficult retail environment. You have to remember that we’re still a bit of impulse buy. Much of our product line is an impulse buy and we need the traffic in order for our sales to really pick up. But that said, even without the traffic we continue to sell at higher rate than last year and last year was a pretty good year.

Can you give us some additional color on Q1 product performance, core versus non-core or any of the new styles that either got good traction or maybe you fell a little short of your expectations?

In our pre-book right now our core models are about 55% of pre-books and that’s about as we expect because remember the core is all the replenishment business. So as even comes along we’ll be able to replenish much more core than we will with the new product. The new product will take a little bit longer. We’re seeing very good trends for our new styles. And as I said, we now have 48 styles and if you count all of our styles from all of our brands we have about 250 counting Ocean Minded all the different styles that we have of our license produce, we have about 250 styles. We now have booked a 50 of them that have sold over 50,000 pairs so far this year, which is quite encouraging. We obviously aren’t a one-shoe company anymore and we’re hearing that some of the winners for the spring already and it’s still quite too early to tell, but some of the products coming from last year are Cleo, and Capri and the Crete, some of our Ocean store models are selling very well. Early on we are also seeing a nice sell through on the Malindi and the Adara, which are about equal and successful for in early season. And then in our new men style called the Yukon are really getting some nice traction and that’s really helping our male business. And of course, we are doing extremely well in the entertainment licensed products with all of the different entertainment shoes that we have now. We’ve got a quite a number of those.

I’m still little confused on the Q1 margin why it was as low as it was. Because as I calculated even with the sales having coming about $25, $30 million below expectations, it still looks like your cost to sales and your SG&A were actually up above plan on an absolute dollars basis. So I was hoping for a little bit more color there, did you just spend more than you were expecting initially in the quarter or were your gross margin forecast originally too aggressive?

No, so we did really two things, part of the mix is related to volume, a little bit of mix but more volume for about half of the mix. The other half was we were gearing up and continue to gear up for a larger Q2 and Q3, the numbers that we had given before were quite a bit larger than what we’ve now given as guidance. So we had under utilization at our company-owned and third-party factories, which certainly impacted the result, as well as our distribution centers where we were gearing up for much larger numbers in Q2 and Q3. We now size that appropriately and as we said we feel confident with the numbers that we’ve given going forward for the rest of the year.

We’ll take our next question from Jeff Mintz - Wedbush Morgan.

Can you talk a little bit about the inventory strategy as we roll into 2009? Is the plan to continue to hold the significant amount of inventory going into seasons and then use manufacturing capacity to meet at once demand?

No, not really. What we’re doing now is as I said; we were bringing-up capacities and capabilities in our various manufacturing sites around the world in Mexico, to some extend in Europe, certainly in China and Vietnam. We now have adequate capabilities to build all the various type of product that we have. So we don’t have to pre-build now. A few months before the season, we can stay closer to the season and hit the products that are selling well in season within a month or two of the shipment. So we won’t have to go into ‘09 with as to having an inventory level we did in ‘08.

So we should see inventory dropped in each quarter starting with Q2 or Q3 for the rest of the year.

Yes.

On your last call you had talked about a long-term growth rates. I believe it was 25% to 30%. Do you have any further update on that or do you still assume that that number is achievable over the next three to five years?

We’re going to take a look at that over the next few weeks and have more clarity for you on the earnings call.

And then have you started to see the need to pay mark down dollars in terms especially some of the department store accounts and if so what kind of an impact does that have on gross margins?

We really haven’t had mark down dollar issues at this point. Certainly, as we would bring on more seasonal product or fashion related product we would expect that could be an eventuality, but at this point we don’t pay mark down dollars.

On the international business, I’m a little bit surprised to see that you expected to slow from Q1 to Q2. Q1 still seems like significant growth and dropping to 20% to 30% in Q2, that’s still decent growth, but it’s a very rapid deceleration. Can you talk about kind of what you’re seeing there and why the rapid deceleration in growth?

Well, it looks like a rapid deceleration. We’ve really grew significantly in Q2 over Q1 in ‘07. So, we’re talking about bigger numbers obviously. So, the growth rate has come down. We could still continue to grow internationally very well. We’ve become a little cautious with the potential of the slowdown in the UK. Still too early to tell because we’re just getting into the season, but we’re cautious as we go into Q2 and Q3 with UK all over that get offset by the rest of Europe, which remains fairly robust. Also, we’ve seen a slower start in Asia than we had expected. We feel and hope that its weather related because they also had quite a bad March in weather in Japan and Korea. And we did see some nice numbers in our stores for this last weekend which the weather must be breaking there, but that’s why we’ve been appropriately conservative in those markets with limited data that we have.

We’ll take our next question from Robert Samuels with JP Morgan. Analyst for Robert Samuels – JP Morgan: It’s Alice Richards for Rob Samuels. Could you talk about where cash balance was at the end of the quarter and given the working capital drain how you plan on financing the buyback?

I don’t have a cash number for you. We haven’t closed our books around the world, so we will have that at the earnings call. We’re going to be generating quite a bit of cash in Q2. We’ll be financing some through cash, and we will probably use some data as well. As I mentioned at the close of the scripted remarks, we do remain quite optimistic about the business. We’re disappointed in the results for Q1. Obviously it was somewhat related to market trends and weather patterns that we didn’t have control over. However, we do feel very confident going into the now busy season, the spring and summer season for our products. We have some great new products that, as I said are already beginning to sell quite well, and we’re confident in that. Thank you very much, and if any of you want to call, Russ and I’ll be available the rest of the day. Thank you.