Wolverine World Wide, Inc. (WWW) Q3 2015 Earnings Report, Transcript and Summary

Good morning and welcome to Wolverine World Wide's Third Quarter 2015 Conference Call. All participants will be in listen-only mode until the question-and-answer session of the call. This call is being recorded at the request of Wolverine World Wide. If anyone has any objections, you may disconnect at this time. I would now like to introduce Mr. Chris Hufnagel, Vice President of Strategy, Investor Relations and Communications for Wolverine World Wide. Mr. Hufnagel, you may proceed. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Thank you, Andrew. Good morning and welcome to our third quarter 2015 conference call. On the call today are Blake Krueger, our Chairman, Chief Executive Officer and President; and Mike Stornant, our Senior Vice President and Chief Financial Officer. Earlier this morning, we announced our financial results for the third quarter of 2015. The release is available on many news sites or it can be viewed from our corporate website at wolverineworldwide.com. If you would prefer to have a copy of the news release sent directly to you, please call Tyler Deur at 616-233-0500. This morning's press release included non-GAAP disclosures, and these disclosures were reconciled with attached tables within the body of the release. Comments during today's earnings call will include some additional non-GAAP disclosures. There is a document posted on our corporate website entitled WWW Q3 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, wolverineworldwide.com, by clicking on the webcast link 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 U.S. securities laws. As a result, we must caution you that as with any prediction or projection, there are a number of factors that could cause results to differ materially. These important risk factors are identified in the company's SEC filings and in our press releases. With that being said, I'd like to turn the call over to Blake Krueger. Blake? Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks, Chris. Good morning, everyone, and thanks for joining us. Earlier this morning, we reported our third quarter results highlighted by solid earnings in line with our original guidance. This performance is reflective of the high and consistent quality of our earnings engine, the power of our diversified brand portfolio, and the disciplined manner with which we operate our business. In spite of the current global retail environment, which continues to be choppy, our consolidated business and two of our three brand operating groups generated adjusted revenue growth during the quarter, excluding the impact of currency, the Patagonia Footwear exit and store closures as applicable. Mike and I will refer to adjusted revenue in this context in our remarks. But we'll also provide corresponding reported revenue figures. In step with our previously announced demand creation investment strategy, our quarterly marketing investment increased approximately 26% to support the long-term health and vitality of our brands. We remain committed to investing behind our brands and plan to accelerate revenue growth through product innovation, and deeper and more insightful consumer connections, all supported by a strong operational platform and our extensive global distribution footprint. For today's call, I'll cover our consolidated and brand operating group results, speak to some of the headwinds in the global marketplace, and then focus on key brand performances and related strategic updates for the quarter, specifically, the Stride Rite, Sperry and Merrell brands. Beginning with consolidated results. Adjusted revenue grew 0.7% versus the prior year, and reported revenue was $676.9 million (sic) [$678.9 million] (4:16), a 4.5% decrease year-over-year. We delivered adjusted diluted earnings per share of $0.48 for the quarter, in line with our original guidance and achieved strong gross margins across the portfolio, while effectively managing discretionary SG&A, which was only partially offset by the increased marketing investments behind our brand. Focusing in on the brand operating group performance, starting with the Performance Group. Adjusted revenue grew 3.8% with Chaco posting exceptionally strong double-digit growth, Merrell generating low single-digit growth, and Saucony contributing mid-single digit growth in the quarter. Adjusted revenue for the Lifestyle Group was down 5.1% with Sperry down less than 1%, Keds down low single digits, and Stride Rite down high single digits. Hush Puppies saw a constant currency low-teens decline, due primarily to our decision to realign our domestic distribution strategy. The brand's international licensee business remains strong with revenue up double digits. Concluding with the Heritage Group, adjusted revenue grew 2.9% with Cat delivering mid-single digit growth, Wolverine producing low single digit growth, HYTEST growing at a solid double-digit pace, Bates down less than 1%, and Harley-Davidson down high-single digit. Mike will provide additional detail regarding our financial results in a few minutes. So, now let me share our perspective on the global macroeconomic environment, which impacted our results in the third quarter and is expected to continue into the near future. Heading into the back half of the year, we identified and planned for a variety of global macroeconomic challenges, many of which persisted and some of which became more challenging relative to our prior expectations. Although many of our key global markets have performed well, a number of others are exhibiting some stress for a variety of different reasons. In many international markets, the strong U.S. dollars put pressure on the cost of footwear and the ultimate retail price to consumers as most of the world purchases shoes in U.S. dollars. This, in turn, has and will continue to drive up the retail prices of footwear in many markets. Earlier this year, we chose the proactive path to protect gross margin by selectively increasing prices in our own international markets. We believe this action was appropriate for the long-term health of our brands and business, realizing it to put some pressure on revenue growth in the short term. In addition to currency, one of the biggest stories over the last several months has been softer global demand across many industries including consumer soft goods. This, in turn, is reflected in the economic challenges in China and its manufacturing slowdown. This has taken a toll on countries with commodity-based economies. For our business, a couple of examples of countries impacted by declining commodity prices are Russia and Canada, both of which have seen declining GDP this year. Although, not commodity-dependent and faring better, Europe has not been immune to the economic and consumer uncertainty and is still struggling to deliver economic growth above 2%. In the United States, while the economy has remained on relatively stable footings through the first half of the year, traffic trends at retail have remained soft. Consumers' sentiment has eroded somewhat in recent month and unseasonably warm weather appears to have stunted early fall shopping. We believe that inventories at retail have been building through the year, resulting in tight open-to-buy and a more cautious stance by retailers ahead of the critical holiday shopping season. A combination of these factors across numerous markets around the world resulted in a tougher demand environment, especially late in the third quarter, and we believe that it's prudent to expect many of these factors to persist in the fourth quarter and the first half of 2016. This has caused us, along with others in and outside of our industry to temper the near-term outlook. While we have a strong brand portfolio and a resilient business model, we expect the short-term environment to remain status quo. The obvious question is how we are adjusting to the current global realities. Over the past year, we have strategically and tactically adjusted to this dynamic environment in a number of different ways. Specifically, our inventory is high quality and it's as clean as it has been in several years. We are narrow and deep in core styles and collections, which puts us in a position to satisfy consumers and retail customers who are buying closer to need. Second, we have initiated actions across our brand portfolio to develop products to backfill price points that have been impacted by the stronger U.S. dollar. We have also critically reviewed the scope of our brick-and-mortar store fleet to align the number of stores with the changes in consumer, shopping behavior and the impact of digital, social and mobile technologies. The team has focused on forging stronger relationships with our customers through deep insights, compelling marketing and by creating a consistent omni-channel experience. And lastly, we have invested in our innovation and product creation engines to generate new offerings consistent with current consumer product preferences especially in the ath-leisure athletic category. We know that growth is dependent on offering the consumer a great brand experience and something that is unique beyond price and believe these initiatives will drive future growth and closer connections with our consumers. We expect that our business model will continue to generate strong free cash flow and a high quality earnings stream. I'll now focus on the key brand performances in the quarter and related strategic updates starting with Stride Rite. Stride Rite's exposure to the domestic brick-and-mortar store channel created the most significant challenge for the company in the third quarter. Sluggish macro retail traffic trends in an aggressive promotional environment presented some headwinds especially as we saw it to be less promotional. Although our store conversion improved, traffic declines persisted. Given the current retail environment in the trend in Stride Rite stores, we are taking action to refocus the Stride Rite business and update our Strategic Realignment Plan, which is focused on realigning our consumer direct priorities and resource allocation to fuel e-commerce, mobile and omni-channel initiatives. This plan, which was originally announced over a year ago, has proven to be the right direction. And we have decided to reevaluate the Stride Rite brick-and-mortar fleet with an even more critical eye. We plan to ensure optimal rationalization of our stores and to continue our investments in digital initiatives where we are seeing strong growth and great progress. This will all better align the brand with how the modern mom is shopping. At the same time, we intend to continue with our progress in thoughtfully expanding our wholesale distribution in conjunction with a strict product segmentation strategy to make the brand more accessible to consumers. We expect the result will be a healthier Stride Rite Children's Group, aligned with today's consumer, and poised to focus on the brand's best opportunities. Switching gears to Sperry. The Sperry business was essentially flat in the third quarter with adjusted revenue down less than 1%. This top line performance was softer than expected with most of the decline coming from the boat shoe category. However, the brand's product category expansion strategy has started to produce meaningful results to offset the women's fashion trend, cycling away from the boat shoes silhouette. Non-boat product categories contributed nearly half of the brand's total revenue in the quarter and delivered very strong double-digit growth, especially in vulcanized sneakers and boots. The brand also delivered a strong 380 basis point gross margin expansion in the quarter, a key initiative for us through select product price increases and the benefits from the Odysseys Await campaign. In 2015, we made investments to position Sperry for long-term sustainable growth as a global lifestyle brand. We launched the Odysseys Await platform this spring. And we're now seeing data that this investment is beginning to move the needle with the consumer, growing brand awareness, solidifying brand affinity and influencing purchasing decisions. We also brought the platform to life in a new store design that is currently being rolled out and is producing very strong double-digit comp revenue growth while nearly doubling the penetration of apparel and accessories. Although Sperry is an established business of significant size today, we believe it is still in the early stages of its lifecycle with incredible growth potential for the company. And we're excited by the early successes to move beyond its dominant position in the boat shoe category. Moving to Merrell, the Merrell brand was up 1% on a constant currency basis and remains a leader in the Performance outdoor footwear category. Its new Performance collections, Capra and All Out, continue to win at retail during the third quarter. The smaller active Lifestyle category followed a stronger Q2 with a softer Q3. But the new men's Telluride and women's Ashland collections successfully launched late in the quarter and are performing well this fall. Increasing brand awareness for Merrell is a critical opportunity, as consumers who know the brand love it. But today, the brand ranks relatively low in consumer awareness. This is a significant opportunity. The new leadership team has developed a new brand platform and product initiatives along with an aggressive go-to-market strategy designed to amplify Merrell in the marketplace and increase awareness. Merrell plans to support a more robust and compelling product assortment with the launch of the new brand platform, Do What's Natural, and associated demand creation investment. A planned comprehensive go-to-market strategy will focus on driving results at retail with key retail partnerships. Partners that signed up to present specific product franchises like the expanded Moab collection as their big story and have committed to critical space on the sales floor and other supporting investments. The strategy is in place and the partners have lined up to support this growth initiative. As a company, we have a balanced business model that has consistently delivered earnings in a variety of global macroeconomic environments. Our strategic advantages within the global marketplace remained clear and compelling. First, our portfolio of authentic heritage brands provides us with an opportunity to service many different consumer groups across the wide range of product categories and countries. Second, we also possessed an exceptionally strong operations platform. Third, our extensive global distribution footprint has been a competitive advantage for us for decades. And lastly, we have a deep and seasoned global team. While we expect the near-term global retail environment to remain somewhat challenging, this landscape creates some great opportunities for our brands to expand internationally. In the short-term, we are especially focused on executing against our business model, which has consistently produced strong cash flow and a high-quality earnings stream to help drive our strategic brand investments. I'm excited about the opportunities that lie ahead for our family of brands. With that, I'll now turn the call over to Mike Stornant, our Senior Vice President and Chief Financial Officer, who'll provide additional commentary on our performance in the third quarter, as well as more details regarding our expectations for the balance of the year. Mike? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thanks, Blake, and thanks to all of you for joining us on the call today. We are pleased with our earnings performance in the third quarter with adjusted earnings per share of $0.48 per share, in line with our original guidance of $0.47 to $0.49 per share. Earnings were bolstered by a strong gross margin performance and discipline around discretionary spending which allowed us to increase our marketing investment by approximately 26% and overcome a softer-than-expected revenue performance. Adjusted revenue was up 0.7% in the quarter after considering FX, store closures, and exiting the Patagonia Footwear business, and reported revenue of $678.9 million was down 4.5% compared to last year. Third quarter revenue growth was lower than expected, due primarily to several factors that impacted our North American business. The softness in Q3 revenue can be categorized as follows. Direct to consumer, predominantly Stride Rite store performance, contributed roughly one-third of the net shortfall. Footwear retail traffic in the U.S. market was softer in the quarter, and traffic for our stores was also challenged. Key tactics expected to drive improvements in comp store performance especially for our Stride Rite stores were not as productive as expected. In addition, efforts to be less promotional within our stores and online put pressure on growth. Wholesale revenue excluding our DTC channels for Sperry and Merrell contributed roughly one-third of the net shortfall, focused mainly in the North American market. The remaining softness was experienced in our North American wholesale business across several brands. During the quarter, retailers became more cautious as the U.S. retail landscape remained promotional, and inventory levels continued to increase across channels. We believe these factors impacted demand for many of our brands. We continue to believe that the fundamental strength of our operating model and the disciplined way we run our business gives us a distinct competitive advantage. Our healthy earnings performance in Q3 is evidence of this. Let me provide more insight regarding the key actions that helped to deliver our earnings results in the quarter. Gross margin in Q3 was 40%, slightly better than we forecasted and flat with the prior year, despite 60 basis points of FX headwinds. Our brands have been very proactive with strategic price increases across various categories and markets to protect or enhance gross margin, many of which were implemented in Q3. In addition, product costs were managed very effectively, highlighting the operational excellence of what we believe to be our best-in-class product development and supply chain operations. These actions helped to offset the impact of the stronger U.S. dollar in our non-U.S. markets, a lower contribution from higher margin DTC revenue and other mix shifts across the portfolio. The company remains very focused on protecting gross margin performance across the business. Adjusted operating expenses were $191 million, up $4.2 million or 2.2% versus the prior year, including a $3.4 million increase in non-cash pension expense. This result was meaningfully better than our projections as the business responded quickly to a retail environment that softened during the quarter. Variable cost declined naturally due to the lower sales volume and discretionary spending was managed effectively. The company continued to invest in important demand creation initiatives, albeit at a slightly lower level than originally planned. As mentioned, overall marketing spend was up approximately 26% in the quarter. Incentive and stock compensation expenses were lower than planned and approximately $4 million lower than last year. Adjusted operating margin was a very strong 11.9%, up significantly from our expectations entering the quarter. Net interest expense in the quarter was approximately $9 million or $1 million lower than the prior year, reflecting the year-over-year principal reductions, including year-to-date voluntary principal payments of $58 million made in the first quarter, and a lower interest rate on our term loan driven by our declining leverage ratio. The adjusted quarterly tax rate of 30.4% was higher than projected and higher than the prior year due mostly to a shift in the jurisdictional mix and the timing of certain discrete items. The reported tax rate in the quarter was 29%. In addition to a solid quarterly earnings performance, the company's balance sheet remains very strong. We ended the quarter with cash and cash equivalents of $196.4 million and net debt of $629 million, down $236 million since Q3 of 2014 and down $544 million since the acquisition of PLG in 2012. Our current leverage ratio is 2.3 times compared with 4.0 time at closing, and we project full-year adjusted EBITDA, as defined by our credit agreement, to be in the range of $340 million to $350 million. Third quarter accounts receivable improved by $109.3 million or 22.6%, benefiting from the financing agreement entered into in Q4 of 2014, and from continued improvements in DSO and cash collections. Inventories were up 6.3% due mostly to lower-than-anticipated sales in the quarter and incremental investments in cold weather product for Sperry in advance of Q4. We believe the quality of our inventory today is very high, with a healthy aging relative to last year. We continue to use disciplined tactics to manage inventory levels, which includes adjusting the supply chain inflow where appropriate, maximizing selling opportunities within our own DTC channels, working closely with retailers on future demand planning, and liquidating non-core items due to the traditional closeout channels. Inventory levels appear to be relatively high across the retail landscape, including traditional closeout channels. And therefore, we expect that it will take a few quarters to manage inventories down to a normalized level. As our current inventory position is clean and largely constitutes core styles, we believe our approach is preferable to liquidating otherwise good inventory and overly reduced prices. During Q3, we took advantage of our healthy credit standing, strong balance sheet and favorable market conditions to amend our senior secured credit facility, which, among other things, extended the term by nearly two years, upsized the revolver capacity to $500 million, and resulted in more favorable pricing. This amendment is projected to provide us greater capacity as we consider strategic opportunities and more flexibility related to certain restricted payments, including future dividends and share repurchases. On a year-to-date basis, we repurchased approximately 447,500 shares of the company's stock. We have just over $187 million remaining under the stock buyback program approved by our Board of Directors in 2014 and plan to continue to look for favorable buyback opportunities over the balance of the year. Now, let me turn to our 2015 guidance for the fourth quarter and full fiscal year. During Q3, macroeconomic challenges in international markets persisted, and the U.S. retail market softened. We believe these conditions will continue in the short-term and the expectations for a strong holiday season remain mixed. As a result, we are updating our Q4 and full-year revenue and earnings guidance as follows. Adjusted Q4 revenue is now expected to be flat to down low-single digits compared with Q4 2014, a quarter when we experienced growth of 9.2%. Reported quarterly revenue will be in line – will be in the range of $750 million to $770 million or down approximately 5% to 7.5%. Adjusted full-year revenue is now expected to be up low-single digits and reported full-year revenue is now expected to be $2.69 billion to $2.71 billion or down 2% to 2.5%. We now expect Q4 gross margin to be up slightly despite a 100-basis-point headwind from FX. Full-year gross margin is expected to be flat with the prior year. Adjusted Q4 operating expenses are now expected to be down low-single digits compared to last year despite a $5.6 million increase in non-cash pension expense. For the full year, adjusted operating expenses are expected to be up very low-single digits despite a $16 million increase in non-cash pension expense. Net interest and other expenses are expected to improve in Q4 by approximately $8 million as a result of lower debt position, lower pricing under the new credit facility, and other benefits. The full-year adjusted effective tax rate is now expected to be in the range of 26.5% to 27%. This rate is lower than our previous guidance of approximately 27.5% as a result of a shift in jurisdictional mix of taxable income and some discrete benefits expected to be recognized in the fourth quarter. Based on all of these factors, Q4 adjusted earnings per share are now expected to be $0.31 to $0.34 per share, an increase of approximately 3% to 13% compared with last year, and full-year adjusted earnings per share is now expected to be $1.44 to $1.47 per share. I also wanted to provide an update on revenue guidance for Merrell and Sperry. Given the aforementioned global headwinds and challenging retail environment, we now expect Merrell's constant currency revenue to be flat with last year and Sperry to deliver low-single digit constant currency growth for the full year. With regards to Merrell, continued strong growth in the Performance category is forecasted to be offset by softness in our active Lifestyle segment along with some specific regional challenges, given the brand's expansive international footprint. For Sperry, strong growth in boots, vulcanized and active styles, coupled with the steady growth in consumer direct and international are forecasted to be partially offset by softness in the boat category. I will now provide an update on the go-forward strategy for our brick-and-mortar fleet especially for Stride Rite stores. Blake spoke to our Stride Rite business and our Strategic Realignment Plan in his prepared remarks. And now, I will provide some additional color on specific steps we are taking to improve the returns in this important but underperforming segment of the business. Our Strategic Realignment Plan was initiated in July 2014 and updated during our Q2 earnings call. In July, we shared an updated plan to ultimately close 175 stores with approximately 120 stores expected to close by the end of 2015. As a reminder, we shuttered 59 doors in 2014 under this plan. Based on current store performance and trends and consumer shopping preferences, we now anticipate closing an additional 25 Stride Rite stores, increasing the ultimate closure count from 175 stores to 200 stores across the portfolio. We are currently reviewing our lease exit strategy and negotiating with our landlords, a process that will continue through the balance of the year. We still expect to close at least 120 stores under the plan by the end of 2015. The remaining store closures are planned to happen in 2016 or at a normal lease expiration, and this would be determined based on the outcome of our negotiations. For Stride Rite, this would leave a go-forward fleet of approximately 125 doors. This reconstituted fleet is expected to be much more productive and profitable, located in a combination of viable, specialty, and outlet centers across the U.S., and most importantly, in line with the go-forward strategy of the brand. As a result of incremental cost associated with store closures and further reorganization changes across the portfolio, we now expect reported diluted earnings per share in the range of $1.28 to $1.31 per share for fiscal 2015. We will provide more details on the Strategic Realignment Plan and associated costs and savings as part of our fourth quarter conference call. Before we open the call up to take questions, I want to emphasize just a few points. The leadership team at Wolverine remains incredibly focused on those initiatives and activities that will reenergize growth and allow us to fully leverage our great global brand portfolio. As we have done in the past, we will continue to operate in a diligent and disciplined manner both in the execution of our business model and the management of our working capital to deliver consistent profit and cash flow for our shareholders. A key priority for cash will be to fuel organic growth by investing in key initiatives related to omni-channel expansion, international opportunities, product innovation, and further talent acquisition. As always, we planned to continue to carefully evaluate other opportunities including share repurchases and strategic acquisitions. Thanks for your time this morning. We will now turn the call back over to the operator. Operator?

The first question comes from Jim Duffy of Stifel. Please go ahead. Jim V. Duffy - Stifel, Nicolaus & Co., Inc.: Thanks. Good morning. Blake W. Krueger - Chairman, President & Chief Executive Officer: Good morning, Jim. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Hi, Jim. Jim V. Duffy - Stifel, Nicolaus & Co., Inc.: Question for you guys on the Stride Rite brick-and-mortar business. Does that business make money? And can you help us with a better understanding of the calculus around restructuring? What type of comps are you assuming in the economic assessment for the stores looking forward? Are you assuming that the store base continues to comp negatively in your assessment of which stores need to be closed? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. We've got a complete fleet review under the way, Jim. The brick-and-mortar stores themselves at the present time are not profitable. So, we believe that going forward, the 125 stores or so stores that would be part of the go-forward fleet will be profitable. You have to remember Stride Rite, which has a dominant presence in mid-tier and better children shoes in the United States, has, frankly, a great and profitable wholesale business and also a growing e-commerce business as well. So, our assumptions going forward for the 125 stores are fairly conservative. There is no hockey-stick positive assumption assumed in our part, a realistic bottoms-up examination of the fleet. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: That's right. And just to add to that, I mean, we're looking at, obviously, the best real estate in the fleet. The stores that remain on the go-forward fleet list are those that are – where the four wall is obviously the highest and where they have the most momentum, Jim. So, the other part of the profitability of that model, obviously, has to do with just how we operate underneath that and with many fewer stores, we think we can be much more efficient and more productive with the support that goes along with running those stores. So, our modeling right now, as Blake said, is pretty conservative, but our ability to focus on the right stores and the right real estate makes the math work out a little bit easy for us. Jim V. Duffy - Stifel, Nicolaus & Co., Inc.: Mike, will that be a pro forma benefit to earnings, the more aggressive store closure agenda? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yes, it will. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Jim V. Duffy - Stifel, Nicolaus & Co., Inc.: And then another question for you guys. Just looking forward, how much do you feel you need to reset volumes to keep the inventory balance at retail at a healthier level? Mike, I know you mentioned this is going to last for a couple quarters. Are you guys indeed seeing down orders as you look into spring 2016? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Jim, I think, we've seen with a kind of a mixed back-to-school season here domestically in the U.S., a very warm September. I think we've seen, as you know, from the reports, inventory of retailers in the United States have kind of ticked up all year. So, we think the channel now is fairly full, any number of distribution channels here in the United States. I would also say that in this type of an environment, it's no surprise that retailers are taking a pretty cautious approach to reorders and their own inventory levels. So, we don't really see that environment changing that much over here over the next several months. Certainly, our inventory is narrow and deep in core styles and we're going to be ready to service our retail customers who need it over the next several months. Jim V. Duffy - Stifel, Nicolaus & Co., Inc.: Okay. Thank you. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thanks, Jim.

The next question comes from Ed Yruma of KeyBanc. Please go ahead.

Hi. Thanks very much for taking my question this morning. I know that you aren't going to spend the full allotment of demand creation dollars. So, I guess, could you contextualize if you're still going to spend the $100 million over three years? And I know results have been a little bit difficult, so maybe it's hard to tell initially but are you seeing positive results? And I know much of the spend was targeted towards Sperry this year. Thank you. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would say on the incremental investment spend, right now, our three-year plan is intact. And we would proceed along our original line. Frankly, for this year, it's come down a few million dollars, our spend, but 80% or so of the spend this year occurred in the first half and Q3 with only about 20% planned in Q4. So, this year, you're right, it was about two-third spend on Sperry. And frankly, next year, our focus will be on the Merrell brand.

Got it. And clearly, the foreign market's been challenged, but I guess are you seeing kind of increased incursions in the Merrell space and do you think that's weighing on results? Thank you very much. Blake W. Krueger - Chairman, President & Chief Executive Officer: We haven't really seen that. I mean, as you know, competition is always fierce in our industry domestically and on a global basis. Merrell still remains the category champion in Performance outdoor product. We've missed the beat over the last couple of years in the Lifestyle area, but the new team is kind of focused on righting the ship there and getting back to healthy growth in that category.

Great. Thank you very much. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks, Ed.

The next question comes from Jay Sole of Morgan Stanley. Please go ahead. Jay Sole - Morgan Stanley & Co. LLC: Hey. Good morning. Blake W. Krueger - Chairman, President & Chief Executive Officer: Good morning, Jay. Jay Sole - Morgan Stanley & Co. LLC: So, want to follow up on the inventory. It sounds like the inventory is clean in terms of the quality and the inventory is high. But maybe there's a little bit more than you'd like and part of the plan, among many things, is to delay some future receipts. Now if that's right, at what point does the inventory that's high quality now become aged? How quickly do you have to move it to avoid having those big markdowns at the end of the season for the inventory? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah, exactly. It's a good question, Jay. I mean, this is really, obviously, very new inventory. We talked about it at the end of Q3. We mentioned Sperry, who's built up a little bit of inventory around their boot program. And that's selling through really well right now. We don't see there being any issues moving through that inventory. Some of our other boot brands also built a little bit more inventory in the quarter, had a little more – had a little bit of softness in revenue, as we mentioned. But it's core product and they've already made the adjustments. It's not something that we're doing right now, but they scaled back on their inflow of goods a few months ago. And they'll have their inventory levels down by the end of the year on the boot stuff. So, it sort of depends by brand, but in general, we don't think a two-quarter or three-quarter work through of this would be unusual based on the nature – the core nature of the inventory. But at the same time, we're being conservative. We're trying to be conservative to sort of plan through that way. We get opportunities to move the inventory faster, we will. But we're not going to take silly price concessions at this point. It's not the right thing to do for the business. Our balance sheet is still super strong, so we don't need to take any kind of drastic effort to quickly reduce the inventory faster than what would rationally be done. Jay Sole - Morgan Stanley & Co. LLC: Okay, that's helpful. And then maybe, Blake, you just touched on competition before. Can you just talk in broad terms about market share for some of the different brands, maybe in the U.S. and by the way, congratulations on a great Michigan State victory last weekend. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. That's exactly how I had planned the last 10 seconds of the game, just to let you know. But anyway, they pulled it out. I'm sitting here with Stornant who's a University of Michigan fan. So, it's been a little hefty here over the last couple of days. But I would – specifically, what was your question? Jay Sole - Morgan Stanley & Co. LLC: Just on competition, just your thoughts on how the different brands are faring in terms of market share in the U.S. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would say – let me go through our big brands. As you know, the data is not perfect. It comes from a couple of different sources. It doesn't cover the whole footwear market, and this is domestically. The data internationally is even harder to get and make any sense out. But as you know, the U.S. footwear market grew about maybe 5% over the last 12 months, more than half of that probably was price increases. So, a relatively stable overall market in terms of pairs. Clearly, when you look at trends today, one of the big trends – continuing big trends has been ath-leisure and athletic casual. We've got a number of brands who can participate in that arena. To be a little self-critical of the company, we probably have not been fast enough trying to take market share in that area, market share for Merrell, Saucony, Sperry, Keds and even the hush puppy body shoe collection. So, that probably – since this has been a long service trend, probably five years or six years, a bit of miss for the company. Merrell retains its number one position in Performance outdoor, certainly in the Lifestyle category. It's got a lot of room for growth. Sperry remains absolutely dominant in both. But especially on the women's side, we know that the boat shoe silhouette has been trending downward from a fashion perspective. It had frankly leveled off a couple of the quarters earlier in the years and it's trending down a little bit again. So Sperry, Merrell, kind of still dominant in their core categories. Wolverine boot remains the number one work boot brand in the premium market across the U.S. market. Cat, more of an international brand, really an urban lifestyle brand on an international front. It's seen some very solid growth. And then our other brands also fill some niche areas. Like as I've said, Stride Rite is clearly dominant in kids. Jay Sole - Morgan Stanley & Co. LLC: Got it. Thanks so much.

The next question comes from Taposh Bari of Goldman Sachs. Please go ahead. Chad H. Sutherland - Goldman Sachs & Co.: Good morning. It's Chad Sutherland on for Taposh. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yes. Chad H. Sutherland - Goldman Sachs & Co.: Can we go through the constant currency sales by geography, so EMEA, APAC, LATAM, et cetera? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah, let me see if we can find the exact data. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: I would (44:54) Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. In constant currency, I would say our International business overall did very well in the quarter. The two regions that performed best were Latin America. So it was nice to see kind of a spring back from some trends we'd seen in Latin America over the last couple of quarters. Asia Pacific, certainly, as a percentage growth, was our number one region for growth. Really, Europe and U.S. were somewhat more challenged markets in the quarter. So, if you're looking at it from a quarter standpoint, International Group certainly met or exceeded expectations with the best performance by far in Latin America and Asia Pacific. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. They were both up over 20% in the quarter kind of as expected. And we talked a lot about some of the challenges we had in the EMEA region going into the quarter. In our last call, we talked about challenges for Russia and Italy and some of the markets in the EMEA region. So, it's fairly flat in the EMEA, but the other two regions were really strong. Chad H. Sutherland - Goldman Sachs & Co.: Great. Thank you. And then, just to follow up on Keds, it looks like the performance there slowed down pretty meaningfully in the quarter. Any color, any context on what's going on with that brand and what the outlook is? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, really, Keds did not anniversary. They had a pretty – a significant transaction last year in Q3 with one retailer decided for a variety of reasons not to anniversary that this year. When you take away that one – basically, that one transaction, Keds this quarter would have been up double digits again. So, our expectations for Keds' future growth is unabated at this point. Blake W. Krueger - Chairman, President & Chief Executive Officer: And that was expected, too, Chad. That was not a surprise. Chad H. Sutherland - Goldman Sachs & Co.: Great. Thank you.

The next question comes from Corinna Van der Ghinst of Citigroup. Please go ahead.

Hi. Good morning. Thank you. Blake W. Krueger - Chairman, President & Chief Executive Officer: Good morning.

Good morning. Just thinking of some of the discretionary SG&A reductions that you guys were able to take in the third quarter, how much more flexibility is there in your SG&A plan for Q4 versus what's embedded in you guidance today? And could you kind of just walk us through what specific buckets could be flexed to lower if necessary? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure. Yeah. When we look at Q3, there was a variety of things. And I tried to highlight the bigger contributors in my prepared comments, but obviously, with volume, there's some variable costs there that would change. Blake mentioned the fact that we still have committed some of our demand creation investment. We're not planning to adjust that at this point. The typical things that we do from day to day across a 15-brand portfolio in every region of the world, we have levers that we can manage in a proactive basis. In the third quarter, we had to respond to some trends that sort of materialize in the quarter, and going into Q4, we have a little more visibility to what some of those would be. We're being pragmatic about that in Q4. And I would say, there's probably a little less flexibility in the Q4 number than in the Q3 number. But, as always, we'll monitor and continue to challenge our spending in all the discretionary areas during the course of the quarter.

Okay, great. And then, just to follow up on Sperry, it looks like the setup this winter is for a pretty strong season for cold weather boots, and you mentioned shipping in some very cold weather products in the third quarter. What is your guidance kind of incorporate for that business? Do you need to see a strong cold winter season in order to meet the current guidance for Sperry? And if there is a strong season, is there additional capacity to chase that once demand is there? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, we overemphasized our investment in Sperry boots for this fall. I would say that of all of our brands, probably Sperry is the least affected by weather at this point, it appears, in this fall season. Their boot programs have sold in very well early. They're selling through very well right now. We probably wished with hindsight we even had a little more inventory than we have today, but Sperry's initiative kind of to move beyond both and especially this year into vulcanized sneakers and into the boot category has been very successful. So, we don't really see any risk at all with Sperry on the boot side for this fall.

All right. Thank you so much. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks.

The next question comes from Jonathan Komp of Robert W. Baird. Please go ahead. Jonathan R. Komp - Robert W. Baird & Co., Inc. (Broker): Hi. Thanks, guys. Maybe if I can start with just a clarification on Sperry. Blake, I know you've talked about the Odysseys Await campaign, leading to some improvements in the customer metrics that you track. And I'm wondering if you can just provide a little more context to that and then maybe some color on when you think that brand can get back to sustainable growth going forward. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I think there's no doubt we saw with the pretty significant investment in the first half, continued behind Sperry which continued into Q3. We saw the metrics really move in the right direction for that brand, whether it's consumer affinity or especially brand awareness. We saw very strong triple, quadruple-digit increase in awareness for both men and women for Sperry in especially that critical 16-year-old to 24-year-old demographic. So, that was very good news. Sperry is obviously focused on product creation and innovation. It's focused especially in moving beyond boat. Sperry is a wonderful brand, no impediment. Our retail customers want and need a big Sperry business. The consumer is certainly accepting of Sperry's expansion into other footwear categories. So, we're obviously going to focus on that and continue. Certainly, as far as overall growth, we're just looking to see what happens with the boat shoe trend from a fashion standpoint, pretty much more on the women's side than the men's. There's been a little leveling off in the men's, but that's been more of a steady-on category for Sperry. It's really the fashion trend on the women's side that's been – that we're replacing, frankly, with product beyond boat. Jonathan R. Komp - Robert W. Baird & Co., Inc. (Broker): Got it. That's helpful. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: The only thing I'd add too, just on the platform investment and some of the things that are happening there. Really important to know that our international partners have embraced that platform, too, looking at opening new stores under the new concept, but just a much more accessible global platform in the old Sperry Top-Sider story. And I think that's really important, because we obviously see opportunity for growth for Sperry outside of the U.S. Jonathan R. Komp - Robert W. Baird & Co., Inc. (Broker): Got it. That's helpful. Maybe then just a broader question, as you look forward today for the overall business heading into 2016. I'm sure we'll hear a lot more about this in a few months. But just wondering if you can maybe, from a high level, talk through some of the major puts and takes that you see. And as you sit here today, if you think kind of a meaningful earnings growth scenario is possible next year given some of the puts and takes that you see. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would say it's – we've just entered the fourth quarter. We haven't even completed this year's holiday season. So, we're really not in the position to give you as much as everyone might like at some specifics on 2016 guidance. I would say that really kind of my prepared remarks kind of say it all. We've taken maybe a conservative view of the world right now and the global consumer. At the present time, we think this is an opportunity for us to take market share in various markets around the world. And you have to remember, our business model consistently produces record free cash flow and earnings. One of the things we forget about is even if you go back to 2009, the biggest recession year we had, we had about a 10% decrease in sales, currency neutral. Our business model and the teams still delivered a record earnings and profit in that year. So, I think that's kind of reflective of just what's in our DNA and how we can operate the business. We're pretty efficient operators across our brand portfolio. Jonathan R. Komp - Robert W. Baird & Co., Inc. (Broker): Got it. Okay. Thanks for taking my questions. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thanks, Jon.

The next question comes from Erinn Murphy of Piper Jaffray. Please go ahead. Erinn E. Murphy - Piper Jaffray & Co (Broker): Great. Thank you. Good morning. Blake, I guess for you and then maybe, Mike, if you could weigh in as well. I mean, given how you guys have framed up the environment, could you just speak a little bit more about the underlying sales assumptions for Q4? So, maybe particularly delving in on the wholesale side, what are you assuming for reorders? And then has the initial order pattern shifted back later in the quarter? And then maybe if you can finally just parse it out by what you're seeing with some of your better department stores versus the mid-tier versus the family channel. That would be helpful. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would – I think, Erinn, you have to remember about half our pairs are sold in international markets. But we can certainly focus on the U.S. market. I think retailers right now and consumers, to a certain extent, are buying closer to need. They're taking a conservative approach coming off the back-to-school season. We've all seen the numbers from the retail federation as to what they expect the holiday season, which is a bit softer than what we experienced last year. So, I think retailers and consumers are buying closer to need. We're certainly going to have the inventory and core styles to satisfy that. As far as channels are concerned, it's still a little bit early to get a read on that. Certainly, we know that the more price sensitive, lower distribution has done well over the last couple of years. With respect to the promotional environment, I believe it's going to be very promotional this fall. I think if this weather pattern continues a little bit, we're already seeing some increased promotions across the industry. We think Black Friday is going to start substantially earlier than Black Friday, for example. So, it's just the environment we find it in right now. Clearly, though, if you're a brand or a retailer that is out there with fresh product, you're going to do well at just about any price. So, it's interesting across our business. Some of our most expensive product, Wolverine 1000 Mile, Sperry Gold Cup, some of our more premium priced product continues to sell through very well and register with the consumer. So it's a little early yet. I think the mid tier department stores in the U.S. will probably be a little bit more promotional than they were last year in this environment. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. Just to add a couple things, Erinn, to that point. A good example for Merrell is how much success they had in the third quarter with some of that premium distribution. That's really for the really strong category form especially in the U.S. that your Performance product was up almost 5% in Q3. So there's some interesting, interesting signs there in terms of how the market is working. In terms of the way we developed our revenue forecast for the quarter, Q4 is typically a quarter where we'll see about a third of the orders come through as at once or reorders, the sort of the nature of our business during that quarter. Q2 and Q4 are the quarters where we see more of that activity. So we're still assuming that we obviously have the benefit now of three full quarters of order intake and everything else to kind of use as a barometer for what we're projecting into Q4. And so we're being – I'll say we're being properly realistic about what we expect in Q4. And that's obviously one of the reasons why you see the revenue guidance coming down to the level that it is. So we've got brands that are winning. We've got several brands that are planning really meaningful growth in the fourth quarter based on the demand they're seeing in their business. Saucony is one of those brands that will see double-digit growth in Q4 and we've got some of our other brands in the mid to high single digit range as well. But our order assumptions and our revenue projections are fairly conservative at this point. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. Thank you, Mike. And then just on the Stride Rite closures, what's the impact implied in your fourth quarter guidance? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: And impact relative to... Erinn E. Murphy - Piper Jaffray & Co (Broker): Just to revenue, excuse me. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Revenue. There aren't – there's nothing changed. Most of the stores – I think all of the stores at this point that are still open will be opened almost all the way to the last day of the year. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: But from a revenue standpoint, there won't be any impact until next year. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. And then just my last clarification question, just going back to Jay's question on inventory, so it does sound like it's going to take two quarters to three quarters maybe to work through some of the inventory. I guess, specifically, where are you planning the increase to be by the fourth quarter end? Thanks. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: We're still – we've got – we're up about 6.5% right now. It's possible based on some of the trends and, again, it depends on brand. I mentioned our boot brands. We expect the boot brands are going to get back to normal by the end of the quarter. So, we're projecting something similar in the high single digits. But it could be – very well be slightly better than that if we get the right weather and other conditions help us out. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. Thank you, guys, and best of luck.

The next question comes from Christian Buss of Credit Suisse. Please go ahead. Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): Yeah. I was wondering if you could talk a little bit about where you're finding SG&A savings to bring that SG&A dollar amount down in the fourth quarter. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Where we're finding savings, Christian? Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): Yes. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Again, similar to Q3, we're going to see some of those variable costs flow through. We've got benefits in several different areas. And some of the benefit that we got in Q3 related to some incentive comp adjustments, those will flow through to a much smaller extent in Q4 as well. There's not really one focused area. Our marketing spend in the fourth quarter is going to be flat with the prior year at this point based on our projection. So – and as Blake said, we still have a little more to spend on our demand creation investment. So, it comes from a variety of different areas that, frankly, we look at on a quarter-by-quarter, period-by-period basis. Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): That's helpful. Thanks. And I was wondering if you could talk a little bit about the level of visibility that you have right now? You mentioned some challenges with the open-to-buy. In the past, you've talked about the fourth quarter being a heavy reorder business. Could you talk a little bit about what's embedded in the expectations and in your visibility? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, overall, I think we've taken a fairly conservative view of our Q4 based on what happened in period nine or happened in mid – the last month of our third quarter. So, we did see cancellations tick up a little bit. We saw retailers getting a little bit more conservative. I'm talking here about the U.S. and not international of course. And we've reflected that all in our Q4 guidance. Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): That's helpful. Thank you and best of luck. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thank you, Christian.

The next question comes from Steve Marotta of C.L. King & Associates. Please go ahead. Steven L. Marotta - C.L. King & Associates, Inc.: Good morning, everyone. Most of my questions have been asked and answered. But, Blake, I have one question for you. And I understand the reticence about speaking about 2016. But can you comment at all on the spring 2016 – spring/summer 2016 order book trend you're seeing there, whether you're – where you want to be or not, just anything directionally there. And again, I understand the reticence of giving a specific number or even a directional number, but anything at all would be helpful. Thanks. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, I will say that, we don't comment on our order book anymore, as you know, for a variety of good reasons. It's still early to comment on 2016. We'll have plenty of details regarding our operating plan for 2016 when we report our Q4 results. I would say right now though that some of the overall trends we're seeing, attitude by retailers primarily here in the U.S., we're seeing that also reflected into 2016. They are just playing at a – are pretty conservative at the right time. Maybe we'll get some weather. Maybe a couple of other things will break for their business another way, but right now, they're taking a pretty conservative approach on any number of levels. Steven L. Marotta - C.L. King & Associates, Inc.: That's helpful. Thank you. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks.

The next question comes from Mitch Kummetz of B. Riley. Please go ahead. Mitch Kummetz - B. Riley & Co. LLC: Yeah. Thanks. I just want to follow up on Steve's question because, Blake, in your prepared remarks, you talked about these factors persisting into early 2016 and you answered it there. So, what are the factors that you expect to persist? Is it just weak traffic trends? Is it high promotional levels? Is it conservative on the part of retailers? And again, does that manifest itself in just – especially as you're thinking about the early part of 2016, does that manifest itself by retailers maybe revisiting their spring order books and maybe haircutting those or is there just underlying assumption that in Q1, you would still expect to pick up normally some re-orders on fall holiday and now, you probably think less of that will come through? Just based on those factors, could you just maybe elaborate a little bit more on that? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah, Mitch. I mean, frankly, it's a little hard at this point since we're just getting into the holiday, or just approaching holiday selling season. I would say all of the factors you listed at the present time we believe are going to continue with respect to our domestic business. Our International business, which is about half of our pair, we are also anticipating that the dollar is going to remain very strong. So, in response, our brands are working on their product engines to bring in product – a lot of product to price points that have been vacated for international partners. So, we all read about the geopolitical risks and challenges that are going on everyday around the world. We really don't see any calming impact having there. We think it's going to be more a status quo. We do think, though, at least domestically, retailers are buying closer to need and they're going to be reliant on brands that they trust and companies that can afford to be there with product when they need it. And really, I'm not being – I'm not trying to dodge your question. I'll have a lot more insight when we get into December. But that's kind of the status at the present time. Mitch Kummetz - B. Riley & Co. LLC: Got it. I can appreciate that. And then just as a housekeeping. One, what is your euro assumption for the fourth quarter? And then two, Mike, you talked a little bit about in your prepared remarks. I mean there's a gap between your sales and earnings guidance for the fourth quarter. And it sounds like some of that was on interest and tax. Could you just – if you just go over that again or just maybe get maybe a little more specific on what your specific Q4 interest expense, other income and tax assumptions are? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure. Yeah. I mean, I guess on the interest side we talked about that and there's – a big chunk of that benefit is just coming from lower debt position, lower cost of interest, et cetera. And there are just several other things that some of it relates to how we translate our balance sheet, re-measure foreign-denominated balance sheets, the re-measurement value of that, the impact of that flows through to that line item on the P&L. So, there's a little bit of benefit in there. And there are a few other things that are flowing through that particular line item. The tax rate is really, again, very much about the dynamic of our global business. And we have an opportunity to recognize more income and some lower tax jurisdictions, including our Hong Kong business which is very profitable and at a very low tax rate. And then we also have just some discrete adjustments that we have planned to flow through in the fourth quarter that we didn't have last year. The rate I quoted, I think full year rate, between $26.5 million and $27 million, that could be anywhere between $1 million and $1.5 million of tax benefit that would impact the rate. So, it's not that meaningful, but we're calling out in terms of updating the guidance. So, those are the main drivers there. As far as the exchange rate, you asked about the euro? Mitch Kummetz - B. Riley & Co. LLC: Yeah. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: The spot rate right now or the forecasted rate that we use for Q4 assumption was 1.13. Mitch Kummetz - B. Riley & Co. LLC: All right. Thanks, guys. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure thing.

The next question comes from Chris Svezia of Susquehanna. Please go ahead.

Good morning, everyone. Thanks for taking my question. Blake W. Krueger - Chairman, President & Chief Executive Officer: Hi, Chris.

So, I want to talk about pricing for a second, ASPs, and just kind of walk through. It seemed like in some brands, you are aggressive in pricing and had been. Maybe there's some pushback on the pricing thought process in some markets. But at the same time, we're also looking to, as you said earlier, backfill price points where other brands might have vacated. Just maybe talk about the pricing dynamic and your ability to take price and sacrifice a little bit of unit volume versus where you might have been six months ago on your thoughts on pricing and just how that plays out as we think about it going forward. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: I'll answer it first and then I'm sure Blake will want to offer some of his thoughts. But this is not a new tactic for us as a company. It was a pretty dramatic strengthening of the dollar as we entered into 2015 and probably had a bigger impact on our business this year than it would in a typical year. But the approach that we took is very consistent, and I don't think it's one that we regret at all. Our brands obviously continue to evaluate. What the impact really is out there is the fact that we raised prices, is it other consumer sentiment issues in those markets that are having a bigger impact on some of the demand issues. We obviously believe not only that we did the right thing. We have other competitors that didn't follow suit and are experiencing the same challenges in the market that we are. So, the good news is we got there early. We've been able to price that and we'll be able to anniversary that into next year. So, the opportunity to bring in products at those different price points to complement the assortment is something I think is an advantage for us because we acted really from a pricing standpoint. We're taking a long-term view that the dollar is going to remain strong for a while. And so, there's really not an option for us to pull back on pricing at this point. That's not something that we want to do. But we're going to be very clear about every style and every opportunity, every brand in each market, everyone is different. And we will be reevaluating that based on the benefit of a full season's worth of sell-through and everything else with our own foreign businesses and our partners as well and so, the model going forward here is to stay the course, but also to look for other opportunities to enhance margin as we go into 2016. Blake W. Krueger - Chairman, President & Chief Executive Officer: I would say, Chris, as well, the sourcing environment that we're seeing right now is probably the best I've seen in the last five years. So, certainly labor and overhead continues to go up when it comes to product cost, but leather is down significantly from last year. Lower commodity prices are also contributing to lower quotes from our factories. So, this will be the first year in many years where on carryover product we're probably going to see a pricing decrease.

Okay. All right. Thank you. And then the second question I had was just on the Merrell brand. Just maybe walk through what you're thinking about for spring of 2016. I think in March, there's going to be a pretty significant investment and marketing campaign. Is anything based on what you've seen in the business so far changed that thought process? Is that still a go-forward strategy? And any color about what you might anticipate or what you anticipate seeing from that investment? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would think – just to take a step back from Merrell. I mean, obviously the continued focus on product creation and innovation, not just in the Performance category, but especially adding some talent on the Lifestyle side, for our International businesses in particular, backfilling with good product, maybe good product internationally that is now priced like better product. And then, again to re-focus on athletic, casuals and ath-leisure. So, there is a number of levers that the team is pulling on the product creation side. We do intend to invest behind the brand platform, but a revised, more athletic company like go-to-market strategy for key offerings in the Merrell line. It can be an expanded Moab collection with one key strategic retail partner. I'm talking domestically now. It can be an expanded Capra program for another key strategic. It can be an expanded All Out program for another one and then some more moderately priced search and enjoy product for another key retailer. That's going to be a change for the brand and one that Jim gave and the team are implementing this year. In my view, still a big opportunity for Merrell. A lot of people don't know about Merrell. We think everybody does because it has such a dominant position in the outdoor category, but a lot of people don't know about Merrell, and yet the brand consistently sits there with the number two intent to repurchase of all brands in this market. So, there's a lot of different levers to pull, a lot of them are on the product side and some new introductions, and we're going to invest behind.

One quick follow-up is – I might have missed this, is Taylor Swift and Keds, is that still together after this year or is that – just any update on that relationship. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I haven't had a recent update but we think, certainly, Keds is coming out with a new brand platform and campaign. The Keds brand is frankly – I can't believe I'm saying this – but it's bigger than Taylor Swift, and she is about as big as you can get. But we're going to put more emphasis on the Keds brand this year, but we will still – it appears right now we will still have Taylor Swift on the Keds team into 2016.

Okay. Thank you. All the best. Appreciate it. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thank you, Chris.

The next question comes from Scott Krasik of Buckingham Research Group. Please go ahead. Blake W. Krueger - Chairman, President & Chief Executive Officer: We lose you, Scott?

Mr. Krasik, your line is open.

Hey, sorry about that. Sorry about that. Sorry about that, I know it's late. Blake W. Krueger - Chairman, President & Chief Executive Officer: Okay.

So, just a few clarifications. Thanks for taking my question. So, the 100-basis-point FX headwinds in 4Q impacting gross margin, maybe talk about what the benefits or the offsets to get to an up gross margin in 4Q would be. I think there's something with the treatment of your LIFO expense. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: No, not really. Not this year. Sometimes that happens in the fourth quarter, but we had some easier comps in Q based on some adjustments that were made to last year's fourth quarter, some allowance and promotional stuff that we had to deal with related to some of our brands, getting out of some distribution that we're not happy with. And so, we took some of that pain in the fourth quarter last year, which kind of increased our markdown exposure and some of those things that we're not going to anniversary. That's part of it. And we talked about that last quarter. But really, it's the price increases and it's the better quality of our business. And we were – we talked about cleanliness, I guess, or the high quality of our inventory. But it's really been true all year long. I mean, we're selling less closeouts. Our first quality sales are better. We've spent the last year really focused on cleaning up and focusing the inventory and it's had a real positive impact on gross margin. We talked about price increases for Sperry, as well as for our international markets and that's helped us to really combat or mitigate the currency costs. And we've had some other things go in our favor including the beginnings of some of the product cost benefits that Blake alluded to that'll be more meaningful next year, but still has a small benefit in the third quarter.

Thanks, Mike. And then, what percentage of your Sperry sales at this point are international? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: From a unit standpoint, it's about 10%.

But that's all traditional distributor-based business now, right? You're not licensing that at all? Blake W. Krueger - Chairman, President & Chief Executive Officer: Pretty much, yeah. We don't have a licensed business for Sperry, yeah. I would say, over the last three years, the Sperry international – 2013 was kind of a get-started year for many of our brands, our Boston-based brands, Keds, Saucony and Sperry. And we've had real growth in 2014 and real growth in 2015 that's accelerating. But the Sperry international business has increased at over a 20% clip over that period of time, as has Saucony, and frankly, the Keds international business is even higher than that. So, we always knew it was going to take a little time. But once we get some traction, it continues to grow.

And any visibility there? Is that going to continue at that rate? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, we expect all three of those brands to continue at that rate. I mean, I would say, Sperry doesn't have as large as international business as Hush Puppies or Merrell or even Saucony, but we expect it to certainly continue at that rate into the future.

Great. Thanks a lot. Blake W. Krueger - Chairman, President & Chief Executive Officer: Very early on the growth curve there.

Thanks. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks, Scott.

The next question comes from Sam Poser of Sterne Agee. Please go ahead.

Good morning. Thank you for taking my questions. I wanted to know, could you give us the EBIT dollars by segment, number one? And to follow up on Mitch's question, what's the interest expense and the other expenses are expected for the fourth quarter in actual dollars? Could you just give us an idea of where that is or the range, please? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Give me the last part, Sam. I missed that.

The interest expense and the other expenses in dollars expected in Q4. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: All right. I can give you that. So, in Q4, on a net basis, it's about $8 million this year versus about $15 million, almost $16 million last year, I guess. So, $8 million improvement.

Combined or is that the interest expense? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: No, that's combined. So, the interest expense...

So, what's the... Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yep, the interest expense is $11 million versus $14 million last year. The other items are about $4 million benefit versus about $1 million expense last year.

Okay. Thanks. And then – and the EBIT by segment for the quarter? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: We don't generally give that out in the call, Sam. So – and I don't have it by segment right here in front of me anyway. But we typically don't share that.

No, I know. I just thought given the way the numbers have been changing over time and really that gives us a good look at the whole profitability picture by segment. Could you put out something before the Q and whenever that comes out to tell us because it will help everybody make a better gauge as to where things are, I believe. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Well, I think the Q is just about to go out. But we'll consider that in the future for sure.

Okay. And then you talked about the good sourcing, Blake, with the improvement in the sourcing. I know you've taken price increases, but I mean, what kind of efficiencies are you seeing? Are you changing the materials? Are you changing the materials that you're using, linings and so on to save money? Are you doing anything to upset the quality of the product or when you're doing – when you're making these changes? Blake W. Krueger - Chairman, President & Chief Executive Officer: No. Not at all, Sam. These are just what I talked about before including the improving prices are really tied to weather, commodities and how all of that impacts the sourcing sheet by pair. None of what I talked to earlier really goes to any kind of de-specking the shoes or taking any actions in that regard. And frankly, that's not something we would do as a company. All of our bigger brands certainly have a better – a good, better, best brand offering. But we don't anticipate any significant changes there whatsoever.

Just one last question. When you're looking at Merrell and Sperry across the different categories and looking within the quarter and into next year, of whatever growth you're planning, I mean, how much of this growth is going to be within existing distribution? Let's talk about the U.S. because international we'll have an opportunity for Sperry, but with an existing distribution or adding new distribution to the brands? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Most of the growth for next year, we anticipate from taking more shelf space at existing distribution. So, we do not, right now, anticipate any – for example, any significant family channel increase over what we had in 2015, Sam. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: As an example, for Merrell, Sam, I mean all of the partnership alliances that Merrell has right now are all with premium retailers, pretty much. So, the growth there and the new go-to-market strategy is really to play up the premium product as much as possible, and gain share in that same distribution with the same retailers, not just the channel.

Well, that just brings another question and then I'll let it go. You talk a lot about the macro, about the way the retailers are. At the same time, I think, Blake, you mentioned that you have to be right on the money with the product and so on. So, I guess when you're looking at the world around you, how much of the issues out there are basically you guys need to improve the products, improve the way you go to market with stuff versus the macro, because the macro, it seems like an equal opportunity annoyance for absolutely everybody. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I absolutely agree with you, Sam. I mean, the macro environment impacts everybody. We all know it begins with products, products, products. We know that in our industry, there is quite a bit a need as well as want, and if you're out there with great product, you've got a chance to win in any environment. And, when you look at Merrell and Sperry, for Sperry, it's fundamentally how fast can they move beyond boat. They're going to remain dominant in the boat shoe category, an extremely important category here domestically and in some international markets. But obviously, a total acceptance by the Sperry consumer and retailers to move beyond boat for Sperry and they're focused on that. And on Merrell, it's really a fundamental question of regaining some traction in the Lifestyle area for the brand. And again, the product creation innovation team there is busy on that. The new team, probably, is going to need a little more time to get where we want it to be, but that's the fundamental issue. The macro environment is going to test some smaller brands and smaller businesses. We've been through this before. We've seen this movie. And it's going to be a bit of a challenging environment for some good but maybe smaller brands and smaller businesses.

Thank you for taking my questions. Thanks. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Okay. Thanks, Sam.

The next question comes from Laurent Vasilescu of Macquarie. Please go ahead. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Good morning. Thank you for taking my questions. Can you update us on the number of international distributor signups? I think the last updated number was around 70. And can you tell us specifically how they are performing? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Are you talking about kind of our Boston-based brands? Laurent Vasilescu - Macquarie Capital (USA), Inc.: Correct. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I think we've got new agreements or re-upped agreements for over 100 countries today for those brands. Since the beginning of 2013, we've added well over 400 points of dedicated distribution for those brands. Saucony, Keds and Sperry are all growing at over a 20% rate each year and that includes the kind of – that includes the start year, which is really 2013. So, we continue to see strong double-digit growth there. We – those brands are still all underpenetrated internationally when you compare them to, for instance, a Caterpillar or Merrell or Hush Puppies. So, again, still early there. We still continue to make progress. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay, great. And then last month it was outlined during a conference that you were thinking about an acquisition in the range of $200 million to $600 million. Curious to know your updated line of thinking on this as we start seeing a more challenging macroeconomic environment. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I would say – that's a good question. I would say that as you know, we have a very disciplined approach when it comes to acquisitions. We have a bit of an unusual macroeconomic environment in front of us right now. We're focusing a lot of our time, energy in growing what we have and in getting more earnings out of our current portfolio. That being said, if the right strategic opportunity came around, the right dovetail fit, we are certainly in a financial position now to act on it. It could be a Lifestyle or Performance brand. We normally like brands with some authenticity and heritage. It could have some Lifestyle potential beyond footwear. Certainly, geographic expansion opportunities are always high in our criteria list. So, as I've said before, some of the best acquisitions we've done over the years are the ones we've had the discipline not to do. And we're pretty – we have a pretty disciplined approach and a pretty successful track record over the last 20 years. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Great. And then my last question is on favorable input costs. I think during the Investor Day a few years back it was mentioned that you purchased about $300 million worth of leather for 2013. And to your point that leather prices are dropping significantly over the last six months, can you help us think about the gross margin benefit for next year in terms of leather and also potentially on the oil-based inputs? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, it's hard for me to parcel it out whether it's leather or other commodity pricings. But we could anticipate overall, this is for carryover products kind of as an example. But we could see overall price decreases in the 1% or 2% range here over 2016. When you're sourcing 100 million pairs a year like we are, that is not insignificant. And it's something, frankly, we haven't seen in a long time. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Great. Thank you very much. Best of luck. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks.

Thank you. The question-and-answer session has now ended. I would now like to turn the call over to Mr. Chris Hufnagel. Mr. Hufnagel, you may proceed. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: On behalf of Wolverine World Wide, I would 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 November 20, 2015. Thank you and good day.

Thank you. The conference has now ended. You may disconnect your line.