Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Deckers Outdoor Corporation Second Quarter Fiscal 2011 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded. Before we begin, I would also like to remind everyone of the company's Safe Harbor policy. Please note that certain statements made on this call regarding our expectations, beliefs and views about our future financial performance are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to the company's anticipated revenues, expenses, earnings, gross margin and capital expenditures and the outlook for the company's markets and the demand for its products. The forward-looking statements made on this call regarding our future financial performance are based on currently available information. And because our business is subject to a number of risks and uncertainties, some of which may be beyond our control, actual operating results in the future may be -- may differ materially from the future financial performance expected at the current time. Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the Risk Factors section of its annual report on Form 10-K and its other documents filed with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements. I would now like to turn the conference over to the President, Chief Executive Officer and Chair of the Board of Directors, Angel Martinez. Please go ahead, sir.

Well, thank you, operator, and thank you, everyone, for joining us today. With me on the call are Chief Operating Officer, Zohar Ziv; and Chief Financial Officer, Tom George. We're pleased with our overall results for the second quarter, particularly given the recent changes to our business model overseas. As a reminder, Q2 has historically been our lowest volume sales quarter. And this year, it was even more pronounced with our conversion to wholesale operations in our 2 largest international markets, the U.K. and Benelux. We've also added 11 more company-owned stores during the past 12 months as we accelerate the expansion of our retail division. Therefore, as we carry -- as we are carrying a lot of inventory, a lot of additional subsidiary and store expenses this quarter without the full sales benefit, which should come during the back half of the year. While Tom will review the financials in more detail, our second quarter sales growth of 12.5% reflect the impact from approximately $30 million in UGG brand sales to our U.K. and Benelux distributors last year that will ship out and be recognized as wholesale sales in the third quarter of this year. Second quarter sales of $154 million were approximately $11 million above planned, which helped to offset some of the additional expenses and reported loss per share that was better than projected. We witnessed growth in our domestic and international wholesale and consumer-direct channels driven by demand for the UGG and Teva brands. It's important to highlight that a good deal of the growth we experienced in the second quarter and year-to-date has come from new products introduced in 2011 or within the past few years. For the Teva brand, growth included a much larger collection of closed-toe footwear. The expansion of closed-toe footwear has…

Thanks, Angel. In the second quarter of 2011, net sales increased 12.5% to $154.2 million from $137.1 million in the second quarter of last year. Net sales of UGG brand products increased 8% to $108.3 million from $100.2 million in the second quarter last year. As a reminder, approximately $30 million of UGG distributor sales to the U.K. and Benelux from the second quarter of 2010 will shift out and be recognized as wholesale sales in the third quarter this year. Net sales of Teva brand products increased 29.1% to $40.3 million in the second quarter from $31.2 million in the same period of 2010. Combined net sales of the company's other brands were $5.7 million in the second quarter of 2011 compared to $5.6 million a year ago. Included in these brands, sales numbers were global retail store sales of $20.1 million, up 102.2% from $10 million in the second quarter of 2010. This was driven by 11 new stores and a same-store sales increase of 23.6% with those stores that we're opened for the full 3-month period ending June 30, 2010 and 2011. Sales for our global eCommerce business, which are included in the brand sales numbers as well, increased 10.3% to $5.7 million in the second quarter, up $5.2 million in the prior year. Also, included in the brand's sales numbers, domestic sales for all brands increased 26.9% to $82.8 million from $65.2 million in the second quarter of last year. And international sales were $71.5 million, flat with a year ago in spite of the aforementioned shift in UGG revenues, underscoring the growth we experienced in our other European countries. Gross margin for the second quarter of 2011 was 42.7% compared to 44.3% in the year ago period. The decline was attributable to large duty refunds…

[Operator Instructions] And our first question comes from Bob Drbul with Barclays Capital.

The -- I guess the first question I have is on the gross margin guidance, can you elaborate a little bit more in terms of the more conservative posture on the -- especially on the direct side? Just trying to understand where the increased risk stems from at this point.

Bob, that -- what we're considering there is it's new markets, new direct markets, large amount of revenue growth we expect in the back half of the year, and you have to address new customer relationships. You have to address currencies. You're throwing estimates relative to discounts, return rates, reorder rates and all that. And we think at this point in time, it'd be appropriate to just be a little bit more cautious there relative to where we were. I mean, we were really -- the approximate 51%, we were within the bounds of reason, really, at the 51% anyway, and it really boils down to really just basis points difference there. And in the second quarter, that albeit a small quarter, not a significant quarter, it does impact the total year. And when -- we can get into some more detail on that, but one of the things that brought down the second quarter gross margin was the Simple brand, where we did some write-downs in some inventories and prepared that, and that's probably one other thing. I can get to more detail in the second quarter. I don't know if you want me to get into that right now, Bob.

I mean, it'd be -- I mean, yes. I'll definitely be interested in that.

In the second quarter, there were a lot of puts and takes as well. But one of the other things that -- and to remind everybody, we did have cost increases this year that we outlined at the start of the year. So, that put some pressure not only in the total year guidance but also the -- which we knew at the start of the year. But relative to 2010, the cost increase pressure is like 130 basis points relative to 2010 in the second quarter. On the other side, we've got a big lift relative to more retail sales. That's about 140 basis points. The Simple -- preparing Simple that was about 60 basis points and then remember, we had a real tough comparison to the second quarter last year, where we had about 230 basis points of lift relative to duties. And then one more thing to consider for all the puts and takes is now that we're direct internationally, we do have a lift in the U.K. and the Benelux. It was about 120 basis points. So if you track all those through, that explains the pressure in the second quarter of about 160 basis points.

Got it. Okay. And just a couple more questions. On the comps this quarter, can you give us the U.K. comp and sort of where the delta was? When you look at the nice acceleration on the comps from Q1 to Q2, any call outs that you would highlight?

Yes, I think we did see some significant improvement in the U.K. comps, and we saw a really strong improvement, really, in the U.S. comps as well. And so that's pretty much what drove that. Obviously, very, very pleased when we ended up at 23.6% comps for the quarter, up from just about 3% in the first quarter. So we're really pleased to what turnaround we're seeing there, especially on the U.K. side.

Right. And then just one last question that I have, Tom, is on the UGG business for the fall, in terms of the order book, how did you guys end up with the outerwear and accessories category for the UGG business?

I'll turn that one over to Angel.

Yes. One thing to understand about our outerwear and accessories business, first of all, our accessories business, the hats and gloves and the licensed business, and they've had some nice gains. We've been performing very well, but it's a licensee, you can see from the distribution we have penetrating more top-end retailers and a great assortment of product. On the outerwear, that's been product that is primarily driven to balance out the mix in our stores, and we're really focusing on that entire concept at the moment to make sure we understand what a consumer wants from UGG in terms of apparel, including outerwear. The best place to discover that is in our stores. We have some limited wholesale distribution of that product, which is performing quite well, but I don't feel it's a complete line yet. I don't feel that we have learned everything we need to learn about the appropriate seasonality and the weights of the sheepskin for outerwear, et cetera. So that's a work in progress. You'll see more of that as our stores evolve, and more of the mix in the store is apparel.

And we'll go next to Jeff Klinefelter with Piper Jaffray.

Yes. Just a few questions for you. First of all, Tom maybe we just clarify this shift math for the UGG business. You think about $30 million of distributor shipments come out of Q2 and into Q3 and then you talk about that being approximately $50 million truing up to $70 million or $75 million in traditional wholesale shipments. Are we suggesting that on a year-over-year basis, you're seeing -- you're seeing growth off of what would have been $30 million, and it's an equivalent of $50 million today?

Yes, Jim. That's right. That $30 million has moved to $50 million with some organic growth there and then that converts on a -- at a wholesale basis to $70 million to $75 million. So yes, we are. We're really pleased so far where we're at there.

Okay. So that -- and that's very meaningful year-over-year growth for that market. Is that coming from an expansion of some doors? Is that an expansion of floor space? Can you just give a little bit more color on that?

Yes. Jeff, it's Angel. I think what you'll see as time goes on is the same type of improved spread and assortment of styles that we had here in the U.S. A few years ago, as you may remember, we were primarily -- we were classics and slipper driven for the bulk of our business. As we took over the U.K. business, it appears that the focus was a little too dominant on classic in that market as well. So the team has done a great job in balancing the spread and assortment of stores. We're starting to see a much better representation of the brand across the multiple styles that we have, and I think that that's certainly leading to an improved sell in and a more interested and enthusiastic consumer.

Okay, that's great.

So we expect UGG to be improved by that too.

That's great. Just a couple of quick things. Sanuk, up 57% year-over-year in the first half, anything you could add to that? What's driving that again? Is it distribution? Is it expanded assortment? I mean, that's a pretty impressive growth year-over-year.

Well, now you know why we wanted to buy the brand.

I'm not sure why you wanted to sell it.

No. You know what? It’s a brand that's really on the launching pad. Growth for them is just enthusiasm, excitement over the product line. They've expanded into some nice categories. The balance is 50-50, men's to women's. There is really a great momentum and an energy around that brand in the action sports and surf markets. So we anticipate that with we bring to the party, we should be able to help them achieve up to a 40 year -- a 40% full year growth, which is, yes, it's a nice round number. And that's a good indicator of the kind of momentum that they have.

Okay. So that -- just to clarify, that's not necessarily pure organic growth in the same doors. There has been some expansion of assortment to get to that kind of a growth rate.

Oh, yes. They have been doing that. They're getting demand in independent specialty. They're getting demand from department stores. The dealers are doing a great job with them. And so yes, they've already begun the process, but obviously, we're going to add some gasoline to the fire, so to speak.

Okay. Just one last thing quickly. On Teva, I know you mentioned closed-toe, I think you said for this last period was 12% versus 6% the prior year of the sales, so essentially doubling the penetration of closed-toe. What's your objective there? Where do you see that going on a seasonal basis and an annual basis?

I don't really see any reason why closed-toe can't represent 50% of our seasonal -- our spring business and it really, over time, should be at least 40% of our total annual business. Now if you throw in the mix of products from Europe, you're going to see, in Europe, probably a bigger mix of closed-toe to sandalized product in a typical year only because of the seasonal needs for waterproofing and weather product in Northern Europe. And we are addressing that with insulated product and waterproofed product and that kind of thing, and obviously, that product is at a higher price point. So what we're seeing is the evolution of Teva exactly in the right direction as a lifestyle brand, and I expect this type of shift to continue.

Okay. Do you have a general characteristic of the price difference percentage-wise closed-toe versus the non-?

Well, I mean, I'd say on average, you're looking at probably a $20 at retail, more expensive products than sandalized products, performance sandalized products. So you take a good-performance sandal at 75, you're going to see it closed to a product at about 95. It's about the norm.

From Sterne Agee, we'll go next to Sam Poser. Sam Poser - Sterne Agee & Leach Inc.: With the Sanuk acquisition, Tom, you mentioned that the -- there's the charge in the third quarter. How much was that that you said it was going to be in Q3 for the Sanuk number?

Sam, that's about $3 million, $3.5 million is in the third quarter. Sam Poser - Sterne Agee & Leach Inc.: And there was how much of that? And it was $4.5 million so it's $1 million.

We're in -- within the first half of the year. Sam Poser - Sterne Agee & Leach Inc.: And you had -- okay, that makes sense. And then -- so that's really the only -- that's a true -- those 2 were true onetime charges. Correct?

Right. The ones we outlined, the first 2 quarters and the third quarter, yes. Those are true onetime charges associated with the doing to deal. Sam Poser - Sterne Agee & Leach Inc.: Okay. And then could you break out what the Sanuk sales were by quarter in Q1 and 2?

No, we're not doing that. Again, they're unaudited numbers at this point in time. We gave you the frame of reference of the growth for the full 6 months. But I think giving you the -- it's still at this point in time primarily the spring business. You really want to look at the spring season, the first 2 quarters added together and compare that to the prior number, and... Sam Poser - Sterne Agee & Leach Inc.: I mean, is it pretty even between quarters? Or is it more weighted to the second quarter just given the like -- given the kind of product it is?

There's -- it's fairly, fairly even. Fairly even a little -- it depends -- again, it depends on the reorder rate, right? But it's a fairly even mix, a little bit skewed to the second quarter. Sam Poser - Sterne Agee & Leach Inc.: Okay. And then lastly, when you're looking at the overall business right now and the retail specifically, you added 2 more stores to your mix. So you're opening 17 this year instead of the prior plan of 15 that I understand. What -- are you thinking of a -- I mean, what -- are you thinking that you can sort of sustain that kind of 20% growth? And could you also talk about the timing of the other store openings for the balance of '14 that are going to still open?

Yes. The balance of '14 will be in the fourth quarter, mostly the fourth pretty much. Sam Poser - Sterne Agee & Leach Inc.: So like 2 in Q3 and the balance in Q4 kind of thing?

Yes, yes. In terms of sustaining that kind of growth, it's really determined by locations where we -- which particular locations are available in the context of other appropriate brands for the UGG brand. As I've always said, we are not in the business of replacing our wholesale business with retail stores. These stores are an enhancement in environments where we feel the brand has enough momentum and energy and that a store would create some buzz around the new products, and that's exactly what happened. People see our new products and the spread and assortment in our retail stores, and it creates a real demand for that product at wholesale. So we're being very selective. I think we could -- really, if we wanted to, we could accelerate the store rate, the store growth rate more, but we're being pretty methodical about that. I'm going to continue on that path. You also have to appreciate that operating stores is difficult, and we are improving and perfecting our operating model. It's gotten so much better than it was, and I'm glad we didn't put pressure on ourselves by overly exhilarating the store opening. And then you take a look at the same idea and spread it out over the whole world, you really need to have people capable in each region to operate the stores at the right level. We're being... Sam Poser - Sterne Agee & Leach Inc.: All right. One last -- oh, I'm sorry.

As I said, we're just being methodical and probably a little bit cautious, but I think that's okay. Sam Poser - Sterne Agee & Leach Inc.: And store openings over the next like 5 years, how do you look at that? I mean, are you talking about having 150 stores globally, you think?

Yes. Well, we're thinking about 25 per year. That's about the right number once we hit our stride.

We'll go next to Taposh Bari with Jefferies & Company. Taposh Bari - Jefferies & Company, Inc.: I was hoping, Angel, you can talk about the backlog and how that looks particularly for your classics business as you enter the second half.

Okay. Well, I mean generally, and you may know this, the last few years, we really have been holding classics growth flat as a percentage of the total. And we've done that because that's really been the way in which we've been able to innovate around classics and create more spread and assortment of not only core classics styles and colorways but products that we don't classify as classics but appeal to the same consumer and allow us to broaden the appeal even to younger customers as well. So classics will continue with that same strategy. For example, you don't see us marketing classics, actually, which is a very interesting thing that we do. We market the new stuff, and it creates demand for classic. And so classic is our core assortment. It's the initial reason that retailers got excited about the UGG brand. But what keeps them excited and what keeps consumers motivated about all of our new stuff is the styling, the innovation and the function of the new product. And that's -- we'll keep doing that. Taposh Bari - Jefferies & Company, Inc.: Okay. That's helpful. And then I just -- I also wanted to ask if you can kind of give us some more color. I appreciate the kind of U.S. wholesale business data point earlier in the call. So it sounds like your U.S. wholesale business has been up about 20% so far for the first half. Can you give us a sense of how you're kind of -- or planning that business for the second half?

Yes. I mean, we have some big comparisons in the second half for the year. We have a lot of new initiatives and good marketing programs in place. But we're -- again, it's a big -- a lot bigger numbers to compare against in the second half of the year. So that obviously -- and not the same order of magnitude of growth that occurs in the first half and then other things going on in the second half. We've got a big international business as well as a lot more retail stores. So that's sort of some color on the second half of the year.

And also, we have put the marketing initiatives we talked about, particularly in the men's side. We expect to see a nice blip in men's sell-through this -- in the fourth quarter, especially with Tom Brady and the marketing kicking off September 1, as I said. New colorways, new styles, a whole new product that's really going to -- well, it's kind of hitting retail now and will over the next month represent, in some cases, quite an expansion of the assortment. So we've had expectations for sell-through on those new products and new customers coming into the fold. Taposh Bari - Jefferies & Company, Inc.: Okay. And just a final question that I'd add was, Tom, I was hoping you can give us some more color around kind of the gross margin and SG&A seasonality between the third quarter and the fourth quarter. Because it looks like there's some pretty meaningful margin headwinds in the third order and then some kind of the relief into the fourth. I was hoping you could just give us some more additional color on that.

Gross margin for the third and the fourth quarter, we're really, at this point in time, looking at gross margin similar to the prior year. Granted this year relative to the prior year, we've got the cost headwinds. At the same time, we've got the direct model in Europe as well as some more retail stores. So net-net, it should be similar to the third quarter and the fourth quarter of last year. And in terms of G&A growth, a lot more growth in the third quarter as we get prepared those. Albeit most of the stores open in the fourth quarter, there is the startup cost, so to speak, of preparing stores for the fourth quarter as well as the cost in the third quarter. There's also the Sanuk cost that are included in the third quarter we talked about earlier in the call. And so in terms of growth, year-over-year, the just G&A is going to grow a lot higher percentage wise in the third quarter than it will in the fourth quarter.

Our next question comes up from Mitch Kummetz with Robert Baird. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Tom, just to follow up on that last question. I want to be clear. So on the gross margin side, Q3 4, you're basically saying kind of flattish gross margin the last year and then SG&A, more growth in Q3 than Q4. But can you say specifically how much of the SG&A growth in Q3 -- I mean, maybe if you could give it as a percentage of sales or a dollar increase or maybe if you can tell us what the impact is from the European transition. Because I would imagine, with the sales increase that you're expecting, there'll be some variable SG&A in terms of dollars that's tied to that.

Yes, Mitch. I mean, to give you a little bit more color what's going on in the third quarter compared to the prior year, there's obviously the retail stores we talked about there. On international, there's similar growth in SG&A in international when you consider the transaction cost. Those were in the first half for the year, but we consider some international marketing. We have now a direct -- we have operating expenses in 2 large markets over there. So in total -- and we have Japan and Asia Pacific. We've been building up infrastructure there. So that growth is going to be similar to the retail stores. And like you said, you've got some expenses and then there's the IP expenses we have in the third quarter and in the fourth quarter as well. And then the deal cost for Sanuk, close to $3.5 million, $4 million. Those are in the third quarter as well. So hope that gives you some clarity on -- a little bit more color on the third quarter. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Yes, that does. And then maybe on that last piece, segue to Sanuk, because you guys are -- your guidance on the year includes the acquisition cost on Sanuk, right?

Yes, that's right. I mean, we've got -- we only have the back half of the year Sanuk revenues and the operating expenses, their lowest half of the year, right, because they're primarily a spring business. But we've got 4 quarters worth of cost, because we've been working on this for a while. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: So what is the impact on earnings from -- so it's dilutive to earnings as you're guiding, right? And what is that dilution? And then -- and what -- and so then, what's the accretion if you take out the acquisition costs?

Yes. I mean, when you include to the deal cost for the year, it's like $0.04 to $0.05 of dilution, really, in the third quarter. When you back out the deal cost, really just the back half deal cost even, when you back that out, you've got -- you're modestly accretive, in the slowest time of the year for them, a couple of cents. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Okay. All right. That's helpful. And then on the inventory, I know you kind of went through by brand. But could you say how much of the inventory increase is related to the European transition? And then could you also say if there's any excess in the inventory? I know, Angel, you talked about some softness on the sandal side with Teva given the weather. And I'm wondering if you guys were able to move inventory in the second quarter, if there's anything that gets carried over into Q3 that might be considered excess.

Mitch, on the inventory, yes, I can give you that. On the international side, they're close to -- it's roughly a $50 million to $55 million increase, relative to the prior year on the international side, because we're on a distributor model and had very little inventory a year ago. Some of the increases, the retail stores, I think another thing to point out is the average unit cost throughout, closer to 10% year-over-year. So -- and you've got a good close to $20 billion of the increase year-over-year is relative to the average unit cost. And I think another -- a couple of other points on inventory. Teva, you know all of you, it's a good-sized brand. In this day and age, in terms of factory capacity, you've got to order key styles early on and bring those in early, which we have. And those key styles carry, do carryover to future periods. And I think another key point is if you look at what the inventory requirements that are implied given our guidance for the back half of the year, you can see we're going to have to bring in more inventory to be able to handle the growth in UGG sales we've seen in the back half. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Okay. But there's no existing on Teva side in inventory, spring excess?

Really no more than normally one would normally expect. Back and then you find we're really sensitive to making sure what we put in the line can carry over as well. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Got it. And then last question. On Simple, I know you guys -- where are you in the process of shutting that down? I assume you built inventory for the back half. Maybe I'm wrong about that. And then given that you are shutting that brand down, what would that mean in terms of earnings impact next year? I assume that business was losing money for you guys.

Yes. Mitch, this is so Zohar. As of the process that we indicated, we're going to trade it out by the end of the year. So we are not selling spring '12. Basically, we're doing -- we're liquidating the inventory that we have and selling the book. And as to the second part of your question? Mitchel Kummetz - Robert W. Baird & Co. Incorporated: The impact on...

The impact on earnings. I mean, that should be positive, because you are right. It has been dilutive to earnings. Mitchel Kummetz - Robert W. Baird & Co. Incorporated: But can you say how positive? I mean, how negative is it on your guidance for this year?

Yes. I mean when you look at our forecast for this year, I mean it -- albeit small, but it's close to a couple of million.

Our next question comes from Jim Duffy with Stifel, Nicolaus. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Believe it or not, I still have a few questions. Related to Bob's question about the U.K. comps, did you indeed see a normalization of inventory flow in the U.K. and the Benelux during 2Q?

Jim, is that -- your question there, is that relative to the wholesale business there? Jim Duffy - Stifel, Nicolaus & Co., Inc.: Correct. With some of the delivery issues you reported in the first quarter, did you indeed resolve those and see smooth operations during the second quarter?

Yes, we did. We're pleased with how that turned in the second quarter. So we're really pleased how that went. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. Great to hear. And then a little more detail on the shift dynamic. With the shift of $30 million from 3Q into 4Q, could we expect a similar growth rate and gross up into 4Q that you saw with the balance of the 2Q, $30 million?

One thing you need to keep in mind there on that, Jim, is the fourth q -- Q4 business is a heavy -- heavily dependent on reorder kind of business. So you have to be more cautious from an expectation and planning point of view there. So we haven't given any specific guidance on that. It's still a little too early to tell. On that, I think net-net, I think it's safe to assume it's going to be lower than the third quarter impact. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. So you'll see -- just to be clear, you'll see a gross up from the conversion of elimination of the distributor discount and you're not yet comfortable predicting what the growth rate of that would be.

I think that's the way to look at it. There's a change in model, so you'll see a gross up, everything being equal, but we're -- not at this point in time. Given it's so dependent on reorders, we're not ready to go into detail what the magnitude of the volume increase may be. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. That makes a lot of sense. And then with respect to the fourth quarter, is there anything that's going to be anniversary-ed in the fourth quarter from the U.K., Benelux distributor business? Is -- my point being is the shift from 3Q a pure shift to 4Q over a clean balance? Or is there something else that goes away from fourth -- 4Q a year ago?

Net-net, there could be some more reorders to the compared distributor versus wholesale, but that is all in the magnitude of things. It's not -- nothing to really to get wrapped up about. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. And then last question. You mentioned completing the buyback program. What's the thought process on re-upping that? When would the next opportunity for that be?

We're working -- we're continuing to valuate that. When we're prepared to talk about that some more, we'll talk about that.

And we'll go next to Chris Svezia with Susquehanna Financial Group.

I guess, Tom, just to go back to just the prior question here. Just on the fourth quarter potential shift, you are obviously assuming in your guidance that there is some shift of that revenue, some modest gross up but not obviously expecting anything significant at this point. Is that just a fair assessment?

I think a better way to look at it is that where, obviously, there is a change in model, there's going to be some growth from a unit point of view but because of the reorder -- so dependent on reorders and it's still early at this point in time. We were new to those markets on a direct basis. We just want to be more cautious. I think an added point I made is net-net, at this point in time, we're presuming it's going to be lower than the third quarter.

Right. Okay. All right. On inventory you went through a lot of moving parts there, very helpful. But I'm just curious, as you go into the back half, just any thoughts when you look at third quarter. Could it still be up a similar amount? And I'm assuming, coming out of the second quarter, when you guys reported these numbers, you hadn't shipped a lot of products to your subsidiaries. So that was obviously down the books as well, correct?

So on -- let me get one at a time. On the third quarter, we do still -- given the sales projections we talked about earlier, there's still some more inventory to be brought in here. And then we also have 11 -- by the end of the year, 11 more stores -- at least 11 more stores in play by the end of the year. So we're going to have some good inventory levels again by the end of the third quarter. I'd say from a percentage wise, it's probably -- it could be percentage wise, close to the same kind of growth as we saw in the second quarter, a little less.

Okay. Okay. And then on something you guys haven't talked about a little bit. What -- just give an update on your shop-in-shops in terms of how many you have, how many you expect to grow this year. And I think, historically, there's been, I don't know, about 30% or so pop when you guys put these in place. I mean could you just give us some update on where you are with those?

The shop-in-shops, we're really still tracking where we thought we'll be within the last quarter. But we currently have about 250 of those, and by the end of the year, we think we'll have around 370 shop-in-shops.

Okay. And then lastly, I guess Angel for you. When you think about what's going on with the UGG brand in U.K. and Benelux and just sort of what you're seeing in the back half of this year, any way to characterize how much of that is just coming from growing in existing doors, how much is just possibly new doors. I know you mentioned some new SKUs that are obviously getting placed. I guess just try to draw a parallel as to where you think that business is relative to maybe, I don't know, 7 years ago or so here in the U.S. Is that sort of where you are right now with that business?

I'd say it's more like 5 or 6 years ago here. Keep in mind, we really just got the sales team together there. There -- this is really the first season that they're selling in the way that we sell here. With the approach of spread and assortment, we've refined our distribution mix there. There have been some people that we're no longer going to be selling to, because we really didn't like the direction the brand was taking in some of those stores. So they've got a long way to go. I really feel that across the board, men's, women's and kids', we've got a lot of work to do in the entire selling environment. So I mean, I would correlate it to UGG here when it was really hot as a classic boot. They don't have slippers there, for example. That's one of the big categories. I mean, that's really not been a developed category there. Cold-weather has not been a developed category there. Surf which is another big category here, so we got -- we have a long way to go there. I'm really anticipating a very robust selling effort in the ensuing next couple of seasons.

Okay, helpful. And then if I can ask just one thing. Just any -- I know Geiger [ph] is a pretty important customer for you guys. Any thoughts about just kind of the change in ownership. They're looking to probably maybe grow the chain in terms of what's going on there. Any -- could this just be a pretty solid relationship for you guys.

Yes. It's an excellent relationship. And I think what this does is it allows us to do some more top-to-top planning with their management team and really leverage some resources that we both have toward building the brand. And so we're pretty excited about it. We think it's a great move, and we already have a great relationship. I anticipate it's just going to be more focused. And now, everybody's got a lot to gain from the UGG brand's success.

And our final question comes from Kelly Halsor with BB&T Capital. Kelly Halsor - BB&T Capital Markets: This is Kelly calling in for Scott. Just a question about your strategic leave with the Sanuk acquisition and your plans to expand to other retailers and internationally. Could you just give a little color around timing and like how well you could see some of these initiatives kind of playing out? Could it be as early as spring '12?

Well, the initiatives that -- when you want to expand in different channels, a lot of times, it requires a different product mix. So, fall '12 is probably the most realistic opportunity for upgrading product. It addresses the need of a certain channel. In terms of leveraging and expanding relationships we already have, we can begin that with spring '12. We also see that there is an opportunity in expanding their women's business into department stores where we already have relationships. They already have an excellent product line for women. We think that it just needs to get in front of more buyers and as well as the independent specialty stores. I think that Sanuk is a brand that there's a lot of curiosity about. And since they've been focused on action, sports and surf, those sales calls have not been made at the level and in the quantity that I think you'll start to see. So there's a lot of hanging fruit in what I call the spring season. And then as we have to develop product to address some of the new channels, that will extend to fall '12 and spring '13. Kelly Halsor - BB&T Capital Markets: Okay. And then in terms of new product or different distribution channels, do you see -- what are you looking at in terms of gross margin? Do you see any pressure there? Or just any color on that.

Well, I think one of the things they're very good at is being innovative and inventive about how to make shoes. They've got a great construction. It's not a shoe. It's a sandal, as they say. And what's make it -- from a production point of view, it's made like a sandal, and therefore, it has some advantages from a cost and production basis. We want to learn from them. So my goal would be to keep gross margins where they are with Sanuk. I think that they've learned some things as entrepreneurs and innovators that we can certainly benefit from. And not to say that they won't also make some other product that might be at slightly lower margins because it's more conventional construction. That's part of the mix. But as we all know, sandal brands typically have a higher margin than closed-toe brands. And even their closed-toe product is made like sandals, so there's a big advantage there. Well, thank you all very much for joining us. We are very satisfied with our results in the second quarter, and we anticipate that the year will continue on the same positive trend and look forward to talking to you on next quarter's call. I appreciate it.

And ladies and gentlemen, that does conclude today's presentation. We thank you for your participation.