Wolverine World Wide, Inc. (WWW) Q4 2015 Earnings Report, Transcript and Summary

Good morning and welcome to Wolverine World Wide Fourth Quarter 2015 Conference Call. All participants will be in listen-only mode until the question-and-answer session of the conference 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, Ed. Good morning and welcome to our fourth 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 fourth quarter of 2015 along with our 2015 full year results. The release is available on many news sites or it can be viewed from our corporate website at wolverineworldwide.com. If you'd prefer to have a copy of the news release sent to you directly, please call Tyler Deur at 616-233-0500. This morning's press release included non-GAAP disclosures, and these disclosures were reconciled 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 Q4 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 we start, I want to provide some additional context and information. When speaking to revenue growth, Blake and Mike will primarily refer to underlying revenue growth, which adjusts for the impact of foreign exchange and excludes revenue from store closures and the exited Patagonia Footwear and Cushe businesses. We believe underlying growth best reflects how our global businesses are performing in the marketplace. In addition, we will be providing adjusted financial results, which exclude restructuring and impairment, acquisition-related integration costs, and debt extinguishment costs and constant currency results. Where appropriate, we'll also provide reported results, and as always, you can find tables reconciling these disclosures in our earnings release and on our corporate website. As an additional note, our fiscal 2015 was a 52-week period versus a 53-week period in 2014. As such, our fourth quarter 2015 had one less week when comparing to 2014. The extra week in 2014 accounted for approximately $7.5 million revenue or approximately 100 basis points of growth in 2015. Finally, for the purposes of this call we report our fourth quarter and full year 2015 results in our former brand operating group structure. We will begin reporting results in our new brand structure, which was announced on February 4, with the first quarter of 2016. Now, 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 fourth quarter and full-year results for 2015. We're pleased to have delivered strong adjusted earnings in the fourth quarter, $0.33 per share, which translates into a 33% increase on a constant currency basis. The company also delivered revenue in line with guidance, $751.2 million for the quarter. These results, especially our earnings performance, are noteworthy in what continued to be a choppy global retail environment impacted by soft consumer demand. In this challenging landscape, our business model, strong brand (4:26) quickly to mitigate headwinds proved to be critically important in generating quality results, largely due to our early recognition of the overall retail and global consumer environment. While our full-year financial performance did not live up to our original expectations, we continued to invest in our brands and talent to drive future growth. I was proud of our team's ability to adjust to the volatile and fast-changing retail marketplace and drive the business forward to close the year. As we start the new year, I'm pleased to report that we've made significant progress against our key strategic initiatives. We took important steps to strengthen the company and to position our portfolio of brands for success in 2016 and beyond. Over the past 12 months, we better positioned Merrell, Sperry, and Saucony, our three largest brands, for further growth expansion as leading head-to-toe lifestyle brands. We further expanded our international footprint, already one of the best in the industry, by executing 121 distribution agreements in 2015. We accelerated eCommerce growth, which was up nearly 20% year-over-year and almost 25% in Q4, through investments in talent and resources and by leveraging our new digital platform. We continued to execute against our strategic realignment plan and further optimized the components of our store operations in pursuit of future growth and profitability. And finally, we reorganized our brand operating group structure and senior leadership team, which positions us to better capitalize on the global opportunities we have for our family of brands. Looking ahead, we remain committed to accelerating growth through key strategic initiatives focused on product innovation and deeper consumer insights and connections, which I will provide more detail on in a moment, all supported by our strong operating platform and extensive global distribution footprint. For today's call, I'll touch on brand operating group results for the year and then spend the majority of my time taking you through a strategic overview of the company. Mike Stornant will provide more detail on 2015 Q4 and full-year results as well as 2016 guidance. Focusing on our full-year brand operating group performances starting with the Performance Group. Underlying revenue grew at 6.3% versus the prior year, led by exceptional growth in Chaco, which posted growth of better than 50%, Saucony which grew at a low-teens rate, and Merrell which added growth in the low-single digits. Underlying revenue for the Lifestyle Group was down less than 1%, with Sperry growing low-single digits, Keds up mid-single digits and Stride Rite down low-single digits, driven primarily from planned store closures. Hush Puppies saw an underlying revenue decline in the low-teens due to our decision to exit some domestic distribution. Encouragingly, the brand's international third-party business remains strong, with revenue growth in the low-teens on a constant currency basis. Underlying revenue for the Heritage Group was flat, with Cat and Harley-Davidson growing low-single digits, Wolverine down low-single digits and Bates and HYTEST producing mid-single digit growth. I'll now use this opportunity to outline the company's strategic direction and our progress on the key priorities for the business in the coming year. We take a very active approach in managing our global brand portfolio to ensure that we aggressively fuel growth and take advantage of opportunities in key markets around the world. Over the last year, we've executed on our multi-year demand creation investment strategy and also focused on Saucony, Chaco and eCommerce. At the same time, we responsibly addressed underperforming businesses, including the exit of the Cushe brand, and took actions to improve the performance of our retail stores. We've also recently taken action to accelerate our global apparel and accessories initiatives across the organization. All of these moves are designed to drive growth, increase profitability and create value for our shareholders. Over the past few months, we've taken a number of important steps. First, let's start with the actions we've executed in our retail store operations. Stride Rite plays an important role as a children's expert in our portfolio and has a profitable and healthy wholesale and eCommerce business. However, its store business has underperformed. Consequently, in 2015 we accelerated store closures and improved the performance of the go-forward stores by infusing new leadership and applying a sharp focus to the business during the all-important back-to-school and holiday season. As a result, we saw the year-over-year comparative sales trends improve over 500 basis points in the fourth quarter relative to the first three quarters of the year. Encouragingly, these better results have continued and accelerated in early 2016. In November, to further align and leverage all of our direct-to-consumer operations, Stride Rite was moved into a consolidated Consumer Direct Group. Looking ahead to 2016, we will close more stores as part of our strategic realignment plan, improve the profitability of our go-forward stores and fuel our rapidly growing eCommerce business. Performance of our retail stores has improved significantly and we're encouraged about the direction of the business today. We recognize that our apparel and accessory initiatives have not evolved at an acceptable pace. And during Q4, we took the action to accelerate growth in these important categories. Many of our brands have significant global lifestyle opportunities and continued expansion beyond footwear is a critical strategic initiative for the company. To accelerate our progress, we centralized all of our brand, apparel and accessory teams under a new seasoned leader to coordinate efforts and to take advantage of the opportunities across the portfolio. There's much more to come here, but these changes put us in a much better position to win. And thus far, I'm encouraged by our progress. We firmly believe that growth starts with intimately knowing our consumers, including who they are, what they want and how we can better exceed their expectations. In 2016, we will significantly increase our investments in consumer insights, more than doubling our people and resources in this area. Better and more meaningful consumer insights will directly benefit our product design and innovation engine. We will amplify trend research and roll out a new Innovation and Design Center focused on the consumer, product design and marketing. The Innovation and Design Center will act as a powerful catalyst for innovation across the organization and play a critical role in influencing the future of the company, directly driving vital growth projects and new technology introductions and fundamentally changing the way we operate. Through consumer insights, product innovation and compelling marketing, we remain focused on organically growing our brands around the world. Turning briefly to external growth initiatives. We have a successful 20-year track record of adding brands to our portfolio and we'll continue our pursuit of potential acquisition opportunities. Our capital structure and organizational readiness gives us the capability to take on a strategic acquisition. And M&A has been and continues to be a core competency of the organization. Since the close of our most recent acquisition, we've reduced our net debt by nearly $550 million. This said, we have a well-defined set of acquisition criteria against which we evaluate all opportunities and are not operating against any internal timeline to execute the next acquisition. Today, accelerating organic growth is our priority, but it's also important to monitor potential acquisitions in the event the right strategic fit and value-enhancing opportunity becomes available to the company. Switching gears, I'd now like to spend a few minutes focusing on Merrell, Sperry, Saucony, the three largest brands in our portfolio. Merrell is positioned to go-to-market in 2016 with a comprehensive and exciting plan, delivering new product, amplified marketing, and strong execution at retail. New product introductions are planned to create big stories, enable the brand to build on its winning Moab and Capra collections through an expanded product line and strategic distribution segmentation. The Moab franchise is already the industry's best-selling lightweight hiking shoe, and Capra is expected to pass 1 million pairs this year. Merrell also plans to lead our brand in introducing the game-changing Arctic Grip, anti-slip technology, which improves traction up to three times on wet, icy surfaces. This is a remarkable innovation to experience in person, as some of you did at the Outdoor Retailer Show. Our global exposure for this breakthrough technology, which will originally be incorporated in our Merrell, Saucony, Sperry, Wolverine, Cat and Hush Puppies brands for this fall, delivers a meaningful competitive advantage for clearly differentiated product. Merrell and our other brands will bring this technology to consumers through aggressive go-to market strategies including significant retail partnerships to create an extensive point of sale presence. Merrell will also be the first-ever presenting sponsor of Tough Mudder, the leading outdoor obstacle challenge which has been run by over 2 million participants around the world. Our second largest brand, Sperry, is focused on moving beyond its franchise boat shoe category where it remains dominant to develop as a global lifestyle brand. Although the boat shoe category slowed this past year due to a shift towards more athletic-inspired silhouettes, the Sperry non-boat shoe styles grew nearly 20% and now account for nearly half of the total business. The Saltwater Duck Boot collection was a fantastic success in Q4 and propelled Sperry to the number two rank in the rain boot category according to NPD. The Saltwater was the number one boot in the United States for this fall. The Sperry boot program will be greatly expanded for fall 2016 and there's been an incredible early response from retailers to the broader program. The brand will also introduce the new Paul Sperry collection this year, a modern and innovative collection to connect with our younger consumer and capitalize on the athleisure trend. And I'm excited about the great new product in the Sperry pipeline and encouraged by what I'm hearing in the marketplace, especially from our consumers. Saucony, our third largest brand remains intensely focused on product innovation. The brand has grown over the past several years with a steady introduction of cutting-edge technologies. Saucony launched the EVERUN cushioning and energy return technology in late 2015 and plans to expand this award-winning innovation across the product line in 2016. In fact, the first three styles from Saucony with EVERUN won – all of them won Editor's Choice Award from Runner's World. Footwear styles incorporating the ISO-Fit technology introduced in late 2014 also continue to build. In addition, the brand will ramp up its Life On The Run collection with new product introductions, which we believe represents a significant growth opportunity in the athletic casual athleisure category. Finally, the heritage-inspired Saucony Originals business which grew over 60% in 2015 will continue to move forward with fresh product designs, compelling storytelling and strategic distribution expansion. Finally, I want to spend a minute providing you with an update on our omni-channel initiative and the strong growths we're seeing as a result of our efforts. eCommerce development across our portfolio continues to present a significant growth opportunity as we create a stronger bond with our consumers. We strategically invested in 2015 and drove accelerated growth, outpacing the industry, especially in the last quarter of the year, with growth of nearly 25%. We will continue to invest in this fast growing profitable channel in 2016, focusing on a seamless omni-channel brand experience for the consumer, especially in mobile, which experienced growth of over 100% in 2015. The consumer and retail marketplace continue to evolve at a rapid pace. And we're excited and energized about the new opportunities ahead in this area. Transitioning now to our expectations for the year ahead. I feel very good about where the company stands today and I'm excited about our efforts to take advantage of our many global opportunities. And to address the segments of the business that we're not meeting our expectations. I am, however, a little cautious about the year ahead as the visibility into 2016 is less clear than normal. Domestically, we expect the hangover from a tepid holiday retail season, coupled with high inventory lessons – or levels to have a meaningful impact on the first half of 2016. The shift in consumer behavior is also continuing with consumers migrating to online channel and both consumers and retailers buying closer to need. Globally, some of the uncontrollable challenges currency issues, economic slowdown in some key countries, and geopolitical volatility are expected to continue and have become the new normal. While 2016 will present some challenges, we see the year ahead as real opportunity. We have a great brand portfolio, broad geographic reach, an exceptional operating platform and a talented and nimble team focused on the consumer and driving product innovation. With respect to our 2016 outlook, we expect revenue to be impacted by over $100 million due to store closures, the Cushe exit and currency. We also expect currency to have around an $0.18 per share impact on EPS. Despite these headwinds, we expect our revenue and earnings to be about flat with 2015 at the top end of our current 2016 guidance range. While visibility into the current year is a little more murky than usual, we do expect revenue and earnings to be stronger in the second half. As excess retail inventory clears and our largest brands introduce significant new product collections. For Merrell, growth in 2016 will be driven by the expanded product offerings in franchise collections, including Moab, Capra and All Out, which will be released this summer and fall as part of the brands go-to-market partnerships with key retailers. The Arctic Grip program for Merrell and five of our other brands will roll out this fall. The first Merrell-sponsored Tough Mudder event will not happen until late March with over 50 events across seven countries scheduled for the rest of the year. We expect Sperry to have a challenging first half given continued softness in boat shoes, with growth coming in the second half on the strength of its expanded boot and not boat product offerings. In 2015, Sperry grew non-boat shoe categories to nearly 50% of sales, and we expect this trend to continue. Finally, Saucony should continue to generate growth throughout the year on the strength of its technology athleisure and Originals product offering. Mike Stornant will provide more details in a moment and we will, of course, provide additional insight and update as the year progresses. Looking ahead, we are focused on our consumers and on delivering outstanding product innovation. Our business model has been a differentiator and earnings generator during times of change and it's allowed us to consistently invest in our strategic priorities, while returning value to our shareholders. On that note, I want to sincerely thank our 6,000 Wolverine team members around the world for their hard work, dedication to the company, and most importantly, their passion for our brands and consumers. 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 2015 result as well as provide guidance for 2016. 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. During his prepared remarks, Blake provided meaningful insight regarding our 2015 fourth quarter and full year results. I would like to add that I'm extremely pleased with our performance during a volatile time. After a very strong start to the year, in mid-September we foreshadowed the current environment and the company responded quickly to the challenge. We acted early, swiftly and with a strong sense of urgency, all consistent with Wolverine's culture and core values. As a result, our early actions allowed us to overcome tough conditions and we are now well-positioned to navigate the uncertain global landscape in front of us. Let me review the specifics of the company's fourth quarter performance followed by greater detail on full year results. The company's earnings performance was strong relative to a challenging retail environment as global economic pressures worsened, holiday sales proved tepid, and the unseasonably warm weather persisted in certain regions. We proactively managed the business to deliver earnings growth and strong cash flow in the quarter. Adjusted Q4 earnings per share of $0.33 were in line with our guidance, representing a 10% increase over the prior year's $0.30. On a constant currency basis, adjusted earnings per share were $0.40, representing significant growth of 33% versus the prior year. On a reported basis, earnings per share were $0.12, compared to $0.10. Fourth quarter reported revenue of $751.2 million was in line with our guidance. Underlying revenue declined 2.9% versus the prior year and reported revenue was down 7.1%. Our diversified brand portfolio helped mitigate risk in the quarter, led by exceptional double-digit growth from our third largest brand, Saucony. This performance included double-digit constant currency growth in all geographic regions, fueled by continued product innovation including EVERUN and new Originals offerings. Chaco continued its positive momentum and contributed strong low-teens growth in the quarter and full year growth of just over 50%. The Chaco business continues to generate great momentum. The Stride Rite wholesale business performed well in Q4, growing strong double-digits and benefiting from the new Surprize by Stride Rite Program recently introduced at Target. The Sperry brand exceeded our expectations for the quarter. Down low single-digits against strong high-single-digit growth last year. Sperry experienced very healthy triple-digit growth in boots, specifically the trend-right Saltwater Duck Boot collection, offset by projected lower boat shoe sales. Merrell's Q4 constant currency revenue was down low-single digit, due mostly to softness in the cold weather performance boot category, offset by improvements in the active lifestyle category. Entering Q4, we anticipated a variety of headwinds, including troubling macroeconomic factors for some of our key international markets. However, the pervasive warm weather in certain regions of the U.S. and other international markets presented an additional challenge for a few of our brands with significant cold weather product offerings particularly boots. Merrell, Cat, and Wolverine experienced some softness in the quarter due to weather. Our work boot brands were also impacted by high unemployment in the oil and construction sectors and soft economic conditions in key international markets, especially Russia. Fourth quarter constant currency revenue was down high-single digits for Wolverine brand and down high-teens for Cat, as a result of the challenging macroeconomic conditions mentioned above. eCommerce is strategic priority for the company was a bright spot in Q4 and grew almost 25%, including strong double-digit growth from our three largest brands, Merrell, Sperry, and Saucony. Mobile grew triple-digits in Q4. As planned, we continued to close underperforming stores during the quarter. In addition, new leadership and operational improvements resulted in a much better year-over-year comparative store sales trend in Q4, which was up over 500 basis points relative to the first three quarters of the year. Full-year reported revenue of $2.69 billion was in line with our guidance and represents underlying growth of 2.1%. On a reported basis, revenue was down 2.5%. Full-year adjusted gross margin on a constant currency basis was 39.7%, compared to 39.4% in the prior year, as a result of proactive strategic price increases early in the year and effective management of product costs. Reported gross margin was 39.1%. For 2015, adjusted operating margin on a constant currency basis was 9.4%, compared to 9.9% last year. Higher pension expense and planned incremental brand investments accounted for approximately 150 basis points of deleverage. Discipline over the remaining operating expenses resulted in approximately 100 basis points of improvement. Fiscal 2015 adjusted operating margin was 8.9% and reported operating margin was 7.5%. Net interest expense for the year was approximately $38.2 million, $7.2 million lower than the prior year, reflecting an $80.9 million reduction in debt principal, including $58 million of prepayments. The full-year adjusted effective tax rate was 27%, compared to 26.2% in the prior year and our reported tax rate was 25.2%. Full-year adjusted earnings per share were $1.45, including a negative $0.13 per share impact from currency, compared to $1.62 in the prior year. On a reported basis, earnings per share were $1.20, compared to $1.30 in the prior year. During 2015, the company generated $165.5 million in free cash flow and maintained a strong balance sheet. We ended the year with cash and cash equivalents of $194.1 million and net debt of $625.9 million, down $51 million since year-end 2014 and down nearly $550 million since the acquisition of PLG in 2012. As of year-end, our leverage ratio was 2.28 times, compared to 4 times at the closing of the PLG acquisition. Adjusted EBITDA was $334.5 million for the year. To return value to our shareholders, we repurchased $92.6 million in common stock during 2015, leaving $107 million of our share buyback authorization available as we entered 2016. We also paid out $24.4 million in dividends to our shareholders during fiscal 2015. Net working capital was $660.5 million, down 5.8% versus the prior year. Accounts receivable improved by $13.8 million, while inventories increased 12.7% or $52.6 million. Ending inventory was approximately $15 million higher than expected due to lower Q4 boot sales and the soft retail environment. Nearly all of that excess is comprised of core boot and other carryover styles. The quality of our inventory remains very high, with closeout and aged inventory at relatively low levels. We will continue to work through our inventory in a rational manner over the coming months and expect to reach normalized levels during the second half of 2016. Overall, our priorities for cash are as follows: drive organic growth, primarily through investments in product innovation, omni-channel growth and demand creation, return value to shareholders through share repurchases and consistent dividends, pay down our debt and pursue potential value-enhancing acquisitions. Before moving to our discussion on 2016 and related guidance, I want to provide an update on the company's strategic realignment plan, which is primarily focused on addressing stores that are underperforming in today's difficult retail environment. This plan was initiated in 2014 and updated most recently during our Q3 2015 earnings call. We have closed 104 stores through 2015 and plan to close approximately 100 stores in 2016, including 60 at normal lease expiration. In addition to store closures, we've restructured our DTC organization resulting in a more efficient, lower cost infrastructure appropriate for the size and complexity of our fleet. The strategic realignment plan was focused mainly on addressing our underperforming Stride Rite stores. During the fourth quarter, we recognized non-cash fixed asset impairment charges of $11.5 million related to the projected performance of stores that will close in the future. And a trade name impairment of $2.5 million for Stride Rite. Now, I would like to transition to our 2016 revenue and earnings guidance. We believe that the soft consumer demand and challenging retail environment experienced in the fourth quarter of 2015 will continue into the New Year, both domestically and in key international regions. Limited visibility into the back half of 2016 is contributing to a higher level of uncertainty and conservatism for many of our global customers and distributors. As a result, we are taking a cautious position regarding our 2016 guidance. While our current view may ultimately prove to be somewhat conservative, a number of unusual factors are impacting our outlook, including higher than normal inventory levels at retail resulting in limited open-to-buy until seasonal goods are liquidated, currency headwinds from a persistently strong U.S. dollar which have resulted in higher product costs in most international markets, financial instability for some of our domestic retailers and global customers, ongoing softness in global demand as evidenced by persistent downward pressure on commodity prices and a slowdown in China's economy, and strong trends in eCommerce growth which have put pressure on traditional brick-and-mortar retailers. Revenue in 2016 will be negatively impacted by approximately $100 million due to FX translation, store closures and the exit of the Cushe business. With this in mind, we expect 2016 reported revenue in the range of $2.475 billion to $2.575 billion, a decline in the range of approximately 4.3% to 8%, and 2016 underlying revenue to be almost flat with 2015 at the high-end of our range. Gross margin is expected to benefit from the price increases implemented midway through 2015 and lower product costs in the second half of 2016 offset by approximately 90 basis points of negative foreign currency impact. As a result, gross margin is expected to be flat to slightly down in 2016. We expect flat to slightly lower adjusted operating margin versus the prior year despite strong currency headwinds and slightly lower underlying revenue. Operating margin will benefit from our ongoing strategic realignment plan and other reorganization activities executed earlier this year, along with meaningfully lower pension expense. We remain committed to our multi-year investment plan, focused on delivering future growth through demand creation, our omni-channel eCommerce business, consumer insights and product innovation capabilities. We expect 2016 net interest and other expenses of approximately $35 million to $38 million, an effective tax rate of approximately 28% and diluted weighted average shares outstanding of approximately 97.5 million shares. As a result of these inputs, full-year fiscal 2016 adjusted diluted earnings per share are expected in the range of $1.30 to $1.40, which includes the negative impact from foreign exchange of approximately $0.18 per share. On a constant currency basis, adjusted earnings per share are expected to be in the range of $1.48 to $1.58, growth of 2% to 8.9%. Additional store closures and other H1 non-recurring restructuring costs of about $16 million, or approximately $0.10 per share, results in expected reported earnings per share in the range of $1.20 to $1.30. We are forecasting full-year depreciation and amortization of approximately $46 million and adjusted EBITDA in the range of $280 million to $305 million. Capital expenditures are expected in the range of $65 million to $70 million, primarily for investments in omni-channel initiatives, information technology and distribution center and other facility enhancements. Focusing on Q1 2016, we expect reported revenue to decline in the range of approximately 9% to 11% and Q1 underlying revenue to decline in the range of approximately 6% to 8%. Adjusted diluted earnings per share for the first quarter are expected in the range of $0.21 to $0.24, reflecting lower revenue, a negative foreign currency impact of approximately $0.06 and the earlier phasing of incremental brand investments compared to last year. On a constant currency basis, adjusted earnings per share are expected to be in the range of $0.27 to $0.30. Reported earnings per share are expected in the range of $0.12 to $0.15. During 2016, we will focus on those things that we can control and adjust to the current conditions, which we consider to be the new normal. In this environment, we plan to continue our incremental investment strategy, focusing on our product innovation engine, consumer insights, the critical starting point for all of our initiatives and decisions as a company, the organic growth of our brands, particularly Merrell, eCommerce and mobile infrastructure and apparel and accessories opportunities. Let me simply conclude by saying that, despite a cautious outlook for 2016, we will continue to be diligent and deliberate as we manage the business in a proactive manner. Most importantly, we continue to invest behind initiatives and capabilities that will drive future growth. Thanks for your time this morning. We will now turn the call back over to the operator. Operator?

Thank you. Our first question comes from Erinn Murphy of Piper Jaffray. Please go ahead. Erinn E. Murphy - Piper Jaffray & Co (Broker): Great. Thanks. Good morning. I was hoping you could speak a little bit more just about the inventory overhang that you reference in the fourth quarter. Just how much of that was boots and colder weather product? And then how does that affect your visibility as you think about the fall 2016 order book thus far? Blake W. Krueger - Chairman, President & Chief Executive Officer: Erinn, I assume you're talking about retail inventory in general? Erinn E. Murphy - Piper Jaffray & Co (Broker): Yeah. Exactly, in general. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Okay. I really recently read some articles and retail inventory, at least here domestically, is at a 19-month high compared to sales. So it's one indication of where in general consumer soft goods and hard goods stand. And someone else estimated that current inventory is about 15% higher than last year's. So we've been fortunate here in the United States to have received some weather finally in January and February and that's helping to clear out some of the seasonal inventory. I've heard a few reports about a few retailers packing and holding some carryover stock, whether it's outerwear or boots. But there certainly is an overhang right now and, frankly, as we view the retail environment, it's going to take at least two quarters maybe into the third quarter to clear most of these goods and get down to a normal level. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. I guess, Blake, as you guys are talking to your partners within the retail community, how are you seeing that order book shape up for you guys thus far for fall if you were to parse out what you're hearing from some of your majors versus some of your independents? Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, most of the retail community recoiled a bit from the very tough holiday season. And so orders have been very stingy, very hard to get future orders in general. For us, we have seen some sharp light in a couple areas, the Sperry boot program, Arctic Grip and some other initiatives that we have for fall. So we do see retailers stepping to the plate when they see some really fresh, innovative product. But it's going to be a while here as we recover from in general high inventory levels. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. And then, Mike, for you, just a clarification on the guidance as you think about the first quarter in context to the balance of the year. When you talked about revenue being down 9% to 11% on a reported basis, how much of that is from foreclosures versus FX as you're starting the year here versus just tepid sales quarter-to-date? Just help us think about that revenue decline. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah, we talked about the difference between reported and underlying growth, it's about 2%, it has a 2% headwind, both currency and those store closures combined. The Cushe business, not a big impact in the first quarter. But I think the other factor which you're speaking to is the overhang on inventory and so just at retail. So what we're seeing right now is that kind of trend improving in the last three quarters of the year. But for Q1, we'll probably take the biggest decline in terms of revenue percentage against any of the other quarters in the year. So, we think that that overhang in inventory, we're starting to see some spark in at-once activities for some of our boot business, for instance once we saw some cold weather, but we're certainly not planning on that to continue dramatically. So, right now that's the sort of the headwind ahead of us. Erinn E. Murphy - Piper Jaffray & Co (Broker): And then, I guess, just last is related to the EPS guidance that you gave for the first quarter. Can you just balance out how you're thinking about the expense structure that's here? I think you guys have a pretty hefty marketing spend behind Merrell and I believe that's first-half weighted. So, should that... Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Okay. Erinn E. Murphy - Piper Jaffray & Co (Broker): I mean, is that first quarter weighted in particular? Or should we continue to anticipate some pressure, at least relative to the top line on the second quarter as well, when you think about that spend? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. I think the spend is, certainly, first-half weighted for the investments there. We're activating some of the go-to market programs in March, but a lot of that money, obviously, spent earlier in the quarter and will continue to be spent in the second quarter. So, we are seeing some front weighting of that in the way the quarters are phasing out. Erinn E. Murphy - Piper Jaffray & Co (Broker): Got it. All right. Thank you. Best of luck. I'll let someone else hop in. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Thanks.

Our next question comes from Jessica Schmidt of KeyBanc Capital Markets. Please go ahead.

Thanks for taking my question. So, I know that you made some changes, organizational changes this quarter to kind of consolidate initiatives in apparel and accessories, but just given challenges that you've had there, would you consider licensing these businesses out on soft brands or would you ever look to make an acquisition that might build up some competencies in these categories? Blake W. Krueger - Chairman, President & Chief Executive Officer: I think frankly, we would consider the right strategic tuck-in acquisition in that area. You have to remember, we've licensed these areas maybe predominantly for our Hush Puppies brands since 1959 in a number of countries, different countries around the world, especially a number of programs in Asia-Pacific. So, it's something we're certainly used to. It's just a critical strategic initiative for us as we look ahead to developing global head-to-toe lifestyle brand. So, we do have no leadership. Some years ago, these efforts used to be consolidated under a single solid line reporting relationship in the company and frankly, we've moved back to that structure to be more effective and efficient.

Great. And then I guess just quickly, how much of the $18 million in the Cushe business were you able to recapture under Merrell? Blake W. Krueger - Chairman, President & Chief Executive Officer: It's hard to really estimate at the present time. We will get some of that under Merrell, but I don't know today if it's a third, if it's 50%. It would probably be something in that range.

Great. I'll pass it along. Thank you. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Thanks.

Our next question comes from Jim Duffy of Stifel. Please go ahead. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Thanks. Good morning. Hope you guys are (47:16). Blake W. Krueger - Chairman, President & Chief Executive Officer: Good morning, Jim. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Hi, Jim. Jim Duffy - Stifel, Nicolaus & Co., Inc.: So, my question is around SG&A and the restructuring specifics. Just looking through the outlook, the guidance seems to imply a reduction in SG&A that goes beyond the savings from restructuring. I know a year ago you talked about the $100 million investment behind the brands, you've mentioned some planned investment in consumer insights and innovation. I guess, I'm just wondering where you're finding savings in the ongoing business to show leverage and afford these additional investments even with down volumes. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. I mean, Jim, we've been working really hard on that in the last quarter or so. And we've, obviously, made some great headwind in restructuring our D to C group and getting more leverage on the store operation side of the business. So, we're going to see some benefits in 2016 and beyond for that. We've made some other organizational changes, too, not quite as dramatic but in the first quarter, you'll see a little bit of additional kind of nonrecurring restructuring costs related to some other changes we made in the organization, leaning up the group and just positioning ourselves for the tough road ahead a little bit. We've also got some benefit from pension expense this year. And that's going to be a tailwind for us for a change. So, those are some of the main drivers. I think from the standpoint of just being able to maintain our operating margin, it's really important to realize that we've done a lot in the last year, really combat the FX headwinds that we're dealing with. So, those product cost improvements, the cost engineering there and some of the benefits we're seeing from the lower input costs in the latter half of the year, price increases that we took, tough decisions we made last year to increase prices, those are all starting to pay dividends for us as we're able to maintain our gross margin in a pretty tough environment. So, I think, just being proactive and working through the organization for efficiency opportunities is pulling us in a position to maintain our operating margin at a flat level. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. And then, Mike, can I ask you to provide some more detail around the restructuring expenses. How soon do you expect to be able to get out of some of these leases? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Can you break up cash versus non-cash components of that? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. Jim Duffy - Stifel, Nicolaus & Co., Inc.: And then talk about how that all rolls up to cash flow objectives for the year. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. For sure. I mean, we talked about another $16 million or so of expense in the first two quarters. Most of that is going to be cash related. And it's primarily going to be related to our store closures. Most of those will be done by the end of the first quarter. There's a little bit of hangover into Q2, but not much though. It's $16 million, say $15 million of that, maybe a little less than $15 million of that is cash and really driving the further improvements that we're talking about in terms of getting out of some stores. And we've already incurred some those costs in Q1, as we talked about related to some of the organizational changes that we made. So, not a lot of additional sort of restructuring exposure in the back half of the year that will be done, certainly, by midway through the year and most of it will be behind us by the end of Q1. Jim Duffy - Stifel, Nicolaus & Co., Inc.: And then do you have cash flow objective for the year you can share? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Free cash flow, probably in the range of $180 million to $190 million. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Thank you. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure.

Our next question comes from Taposh Bari of Goldman Sachs. Please go ahead. Chad H. Sutherland - Goldman Sachs & Co.: Good morning, it's Chad on for Taposh. My first question is on the new brand operating group structure. Can you just help – tell us how the change in structure better positions your core brands for accelerated growth? Blake W. Krueger - Chairman, President & Chief Executive Officer: We don't do this slightly obviously. We've done it every several to five or six years historically as we've added or pruned brands from the portfolio, but this is something that we gave a lot of thought to and it developed over time. There's a number of – basically, we wanted to put the right brands with the right leaders. So, last year we had elevated Richie Woodworth to Group President and it makes sense, given the location, for example of Saucony in Boston to report to Richie. It's a brand that he ran for almost nine years, the growth there has been pretty spectacular and it just made a lot of sense. So, we grouped Saucony under Richie. And then, with respect to James Zwiers, who most recently had been running our international group, we grouped all of our brands with probably the most international penetration under Jim. So, when you look at Merrell, Hush Puppies, Cat, Sebago, those are all brands that have a substantial portion of their pairs offshore. And Jim was coming over from directly running our International Group. As you know, Jim has been 18 years at the company and hasn't quite held every job there is at the company, but it's getting close. And then under Ted Gedra for the Heritage group, we grouped our four core boot brands that are largely focused on the U.S. market and have a lot in common when it comes to consumers and to our retail customer. So, that's basically the logic behind the new group structure. We're going to be providing in a few weeks here to the investment community detailed historical sales data and stuff to help guide you throughout 2016 and beyond. Chad H. Sutherland - Goldman Sachs & Co.: Great. That's helpful. Thank you. And then, one follow-up just on Stride Rite. Can you help us – help to sort of size how big that business is today, what this mix is between wholesale and retail, how many stores there are versus how many there were at the peak? Just any parameters you're willing to give us on that business would be really helpful. Thanks. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I'm just kind of quickly looking here. So, Stride Rite today would have about 220 stores to 230 stores as it stands today. The vast majority of the closures in 2014 and 2015 were Stride Rite stores, although there were some other stores in our fleet that were also closed. So, Stride Rite today is about 220 stores. Very profitable eCommerce business and very profitable wholesale business. The wholesale business would be in the $140 million to $150 million range just to give you some idea. Chad H. Sutherland - Goldman Sachs & Co.: Okay. Thank you. And then, how big is the retail business? Blake W. Krueger - Chairman, President & Chief Executive Officer: In dollars? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: About the same. A little bit bigger. It's about 50% retail, 50% wholesale. Chad H. Sutherland - Goldman Sachs & Co.: Okay. Great. Thank you.

Our next question comes from Jay Sole of Morgan Stanley. Please go ahead. Jay Sole - Morgan Stanley & Co. LLC: Hey. Good morning. I was just wondering if you can dig into the sales guidance a little bit for next year within the different groups, the Performance Group, Lifestyle and Heritage. Can you tell us what you see in some of the growth rates for the different brands being, Sperry, Merrell, Saucony? Could you – anything you can share with us on that regard would be helpful. Thank you. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. We really don't go down that alley for a bunch of good reasons, and probably this year for even better reasons, given the probably the lack of clarity on what's going to happen here and a little bit in the first half but especially, in the back half of the year. So, across the board, we're pulling all levers to drive growth this year. Orders have been, frankly, pretty – future orders, pretty stingy to this point in time, which is completely understandable, given the retail situation with respect to inventory. So, we'll certainly give you some in a couple of weeks here, some historical revenue parameters on the new operating group structure. Jay Sole - Morgan Stanley & Co. LLC: Okay. Maybe a different question, maybe about sales. It sounds like there's two different themes here. On one hand, weather obviously impacted the boot business with Cat and Wolverine, but, at the same time, you are talking about macro, you mentioned China and different things that are continuing into 2016. So can you help us to segregate like what's really going on? How much is weather? How much is macro? Because it's not quite clear what the most important drivers are? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, I – well listen, I was – first of all, I was proud that I think I got through my script without saying the word weather, which drives me crazy, but anyways, so, it was obviously a factor in setting that aside. Internationally, it's a little bit of an unusual time. The slowdown we're seeing, my personal view is that low commodity prices generally don't lead countries or regions to greater growth. They're really a reflection of lower consumer demand. It can be lower consumer demand for soft goods or hard goods. You've got geopolitical risks in some countries, and some countries are suffering. Russia, millions of refugees pouring into Europe. This is all having an impact on business. And then you've got the internationally, the very strong U.S. dollar. I think the pound in just two days this week fell to an eight or a nine year low against the dollar, for example. So, you're seeing these kind of wild swings in currency. Most of the world, virtually all of the world buys its footwear in the U.S. dollars and sells on local currency. So, you can imagine a little bit of a disruption that can happen when the U.S. dollar strengthens 20%, 25%, 30% over a period of only two years. So, what's interesting right now from my viewpoint is internationally there are number of factors going on. Some of them are related, frankly some of them are not related. China, for example, where our business is relatively small compared to our total continues to grow at meaningful level. Is China going to have a hard landing or is China going to have a soft landing here as they migrate from a manufacturing export mindset in economy to an internally driven consumer consumption economy. Those are some big issues, certainly, above my pay grade. We're just positioning our business to adjust to all possibilities as we look ahead here. Domestically here... Jay Sole - Morgan Stanley & Co. LLC: Got it. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah, domestically in the United States, we have this slow burn recovery. So, it's not bad, but it's not great. On the other hand, the good news for us in the footwear industry is if you're there with fresh, innovative product, if you're there with the right product, Saucony EVERUN, Merrell Capra, Sperry Saltwater Duck Boots, you can win. So, that's the good news for us that we got a lot chances to win in just about any environment. But it is frankly a bit unusual at the present time. I've been talking about this internally now for well over a year. Jay Sole - Morgan Stanley & Co. LLC: If I could just ask you one more. Blake W. Krueger - Chairman, President & Chief Executive Officer: Sure. Jay Sole - Morgan Stanley & Co. LLC: You talked about your omni-channel, how are you defining omni-channel right now? I mean, is it going to be a big store build-out plus eCommerce? Is going to be for all brands? Just certain brands? What is the vision that you have for the company to make it the omni-channel, given the omni-channel capabilities it needs? Blake W. Krueger - Chairman, President & Chief Executive Officer: I always go back to the consumer. So, what does the consumer want? The consumer wants their brand to be there on a consistent basis, whether they're on their mobile, whether they're in a store and they see something they wanted delivered to the house, whether they're on their computer, wherever the consumer wants to interact with the brand, that's frankly how I kind of view omni-channel. Hence, especially over the last year, we've spent a lot of money on platform, systems, talents, and other resources to really stay on a parallel course with our consumer. We don't really see those – the consumer, clearly, is voting with their checkbook towards online. I think in general in the U.S. in the holiday season, online was up about 13%, we were up about double of that for our own brands. On the other hand, what's also interesting is retailers that started off as pure online brands are now finding a great need for stores. Everybody realizes today that the consumer will spend more money in a store, and they still spend more in a store. And, frankly, the consumer still enjoys that touch, feel, try-it-on experience. So, omni-channel really involves stores, online certainly, and then, of course, your work with your good wholesale customers. Jay Sole - Morgan Stanley & Co. LLC: Got it. Thanks, Blake. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks.

Our next question comes from Steve Marotta of C.L. King & Associates. Please go ahead. Steven L. Marotta - C.L. King & Associates, Inc.: Good morning, Blake and Mike. I understand your reticence on commenting at specific brand sales expectations for 2016. Historically, however, you've given them for the near term. At least, could you please speak to Merrell and Sperry sales expectations in the first quarter? Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, yeah. We expect frankly Sperry to be down at a pretty good clip in the first half from what we see today. Boat shoes continued to be soft, maybe a little bit more – a little bit softer in men's interestingly than on the women's side of the business but still, trending down. Sperry is introducing some athletic casual, athleisure silhouettes. Certainly, for Sperry, we're not seeing any push-back from retailers or the consumers to category extensions. I guess the duck boot, the Saltwater Duck Boot, would be a good example of that. So, for us, it's just getting the Sperry product innovation engine ramped up quickly enough, never fast enough for me, to counter the falloff in boat shoes. With respect to Merrell, Merrell should have a bit more of a level year probably down a little bit here in the first half, but a lot of their initiatives around strategic partnerships with group retailers on Capra, All Out, Moab, and the introduction of Arctic Grip and really also the Tough Mudder affiliation, which will really get ramped up here late spring into the summer and next fall. A lot of those initiatives are really in midyear or beyond for the Merrell brand. So, maybe I would like it to be a little more balance, but it is what it is and we certainly like the initiatives going forward. Steven L. Marotta - C.L. King & Associates, Inc.: Thank you. That's helpful. Lastly, what is eCommerce in the aggregate as a percent to your consolidated sales? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: 5% or so. Steven L. Marotta - C.L. King & Associates, Inc.: Okay. And then... Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Too low. Steven L. Marotta - C.L. King & Associates, Inc.: Right. And if you include DTC in that, overall, what would the percentage be? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Right around 15%. 14%, 15%. Steven L. Marotta - C.L. King & Associates, Inc.: That's really helpful. Thank you. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Welcome.

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

Hi. Thank you for squeezing me in. I just wanted to follow-up quickly on the inventory discussion you gave some good color on caution in the marketplace. Did you guys actually take back any product from wholesale accounts? And are you going to clear that through your own retail stores or off-price throughout the year? And just then how are you strategizing your production for the year? Are you anticipating a higher level of at-once versus initial preorders this year and how are you kind of planning your ability to chase if the season ends up better than expected this fall? Blake W. Krueger - Chairman, President & Chief Executive Officer: There's a lot of questions there. Let me see if I can tackle a few of them and Mike can tackle the rest. I guess with respect to inventory, I don't believe we took back any inventory. Maybe we took back 10 pairs or 20 pairs here and there, I don't know. But we really did not take back any inventory. As the fall season and holiday progressed, we work pretty closely with our retailers to make sure they weren't stuffed. And that they had the right balance of inventory, our inventory on their shelves. With respect to our mix, I know a lot of our peers have reported inventory levels substantially greater than ours. And our 12.7% probably is 3% higher than our original expectations going into the fall. But for us, it's virtually all core products, certainly core product we're not going to dump in the closeout channel. For our inventory, our closeouts compared to last year are down about a third and our aged inventory is down about 25%, just to give you some frame of that. So the first half of what we're seeing is a continuing pretty volatile environment when it comes to orders. And for at-once orders, we can have some weeks with great spikes for some of our brands and then we can be flat for some other weeks. I think it's just all an end result of retailers trying to deal with the situation they currently find themselves in. We see that normalizing here as the year rolls out, but it's going to be some up and down for the time being. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: The only thing I would emphasize there is the fact that we certainly work closely with all of our retail partners and our distributors. So as we were coming out of Q3 and heading into Q4, we wanted to make sure there wasn't a great deal of overhang of our inventory in the marketplace in the first half of this year. And there's still more probably with certain retailers than they would like, but our ability to partner with them to make sure that we're not in a position to have to take a lot of returns back and the fact that our brands or the sell-throughs on many of our brands are kind of better than most even though the overall inventories with some of these retailers is a little bit high, those are all pretty good indications, another reason why we're not fearful of having to take significant markdowns in terms of liquidating the inventory that we have. So we've been proactive managing our own inventories down. That's why we feel comfortable with where we're going to end the year with inventories, but also just managing closely with our retail partners as we navigated the last three months or four months.

Okay. That's helpful. And then if I could follow-up with one big-picture question. How are you guys think about the long-term algorithm of the portfolio now given the reorganization, some of the brands or the exits that you have made and the appetite for acquisitions? Are you still thinking about the top-line growth story as a high-single digit long-term outlook? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah, I would say 2016 is going to be a year from a revenue growth perspective we're, frankly, not entirely happy with. We wish it was better, but we are realistic and we understand it's a pretty dynamic environment, especially when you have about 49% of your pairs sold outside the United States. So we're realists and we're dealing with all those kind of challenges. We're happy with our portfolio right now. A few years ago, we would have touted 15 brands. So we've pruned our portfolio and are focused on growth initiatives really for all the existing brands that we still have in the portfolio. Certainly, when you look at a Keds or a Saucony or a Merrell or a Sperry, some of our bigger brands, a lot of growth potential left there, both in the lifestyle area as well as footwear.

Okay. Thank you.

Our 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 the accelerated capital expenditures in 2016 and also how you're thinking about share repurchases for the year. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure. Well, the CapEx number that we shared in the prepared remarks reflects a couple big initiatives. One is, as you know, we're moving into a new office in the Boston area just down the road from our existing location, so there's some meaningful investment in that new space. I think we plan to move in sometime in June, so it's around the corner. That would be an unusual one-time impact on our normal CapEx. We typically spend between $40 million and $50 million a year on CapEx, so the numbers we're showing are elevated from that. The other initiative which we're still working through negotiating but we have it in the guidance is an expansion of our distribution facilities and looking at some strategies around that outside of the current infrastructure that we have. We have a couple of leases that are expiring in a couple of older facilities. And so in an effort to look for some future cost savings and synergies, we're reevaluating our distribution footprint. So those are the two big drivers that would take us out of the normal CapEx levels. Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): That's helpful. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: I'm sorry (1:10:53). Yes, we're always in the market. We're looking for opportunistic buyback scenarios. And one of the things, again, as you would be aware of, our notes today carry financial covenants that put some restrictions on those share buybacks. And we made some meaningful repurchases late in 2015. We were able to do that because we built up the capacity over a period of time in ways the covenants worked to be able to do that. And then that got reset and so we'll have to work through those covenants during the course of the year. We have some other options and we're looking at other ways to get amendments to those covenants. But in the meantime, we don't have any meaningful share repurchases embedded in our guidance. Christian Roland Buss - Credit Suisse Securities (USA) LLC (Broker): Thank you very much and best of luck.

Our next question comes from Benjamin Bray of Robert W. Baird. Please go ahead. Benjamin Bray - Robert W. Baird & Co., Inc. (Broker): Thanks for taking our question. Can you provide some detail on the 25% eCommerce growth in Q4 specifically? What was driving that acceleration? Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, frankly, a lot of work we've done over the prior year. We spent a lot of effort and time and resources this year putting as many brands as we could on a single platform, and that has been very efficient and very useful to help drive growth. We added talent throughout the year in the digital social area for our brands. I think that was a great contributor to the growth as well. And then we're simply just paying more attention to it. It's an important growth opportunity for the company. Probably should be at least 10% of our overall sales and that's how we're viewing the opportunity. Obviously, a highly profitable opportunity. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: I would also add that we had some real wins in the fourth quarter from a product standpoint. And we mentioned earlier that our three biggest brand had over double – very strong double-digit growth in eComm in the fourth quarter. So that very successful Sperry Saltwater Duck Boot was a big driver of success for their eComm business as well. So where we go out with exclusive product opportunities and/or early opportunities on our own sites, we're seeing success with that and we'll be continuing that strategy going forward. Benjamin Bray - Robert W. Baird & Co., Inc. (Broker): That's helpful. Thanks.

Our next question comes from Mitch Kummetz of B. Riley. Please go ahead. Mitch Kummetz - B. Riley & Co. LLC: Yeah, thanks for taking my questions. So, two questions. One, just in terms of the guidance. So, you expect better performance in the back half than the first half, but you have said that visibility is limited and you've also said that you expect retailers to be pretty cautious with the pre-books. So does it really boil down to just an easier back-half comparison and you're expecting more of a normalized winter so better reorders than what you experienced in this past fourth quarter? Or is it something else? Does it kind of come back down to just new product launches? And I have a follow-up. Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, Mitch, it's really all those things, really. It's some of the new product launches, a lot of which are really aimed at the fall selling season across our brand portfolio. It will be some easier compares certainly as we get into the fall next year. I've given up trying to predict weather. I think one of the reasons, frankly, the Saltwater Boot did so well for Sperry this year, it's a transition product. Is it a cold weather product, is it a hot? We sold the Saltwater Boot in August, September, October, November, December, until we were sold out to the pair. So it's a great example of a good fashion fit, but also a transition product. So all of our brands, like a lot of our competitors, are focused on transition product. And then, listen, retailers have been, as you know, Mitch, for the last 10 years, trying to push more and more of the inventory risk back on to brand owners. So we're seeing that a little bit as we roll forward here. There's a lot that's going on that's changing in the retail marketplace and it all relates to changing consumer behavior. So we understand that, we're working with our retailers in that regard. But there's been a lot of pushback on the brands to be more important to retailers in maybe the at-once side of the business than future orders. Mitch Kummetz - B. Riley & Co. LLC: Okay. And then on Sperry, I'm just trying to get a better understanding of the historical context on the boat business. I was hoping you could give us some color as to I think you said that like a little over half the business now, boat is, for Sperry. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. Mitch Kummetz - B. Riley & Co. LLC: Where is Sperry boat relative to peak? Is it down like 20%, 30% from peak? And also where is it from maybe six, seven, eight years ago prior to the big ramp on the boat shoe trend? Does it still well up from where it was back then before boat shoes ramped? I'm just trying to understand where it is. Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah, as you know, Mitch, this country, in particular, has always had an ebb-and-flow of boat shoe popularity. I would say starting seven, eight years ago, really Sperry almost singlehandedly increased the overall level. There's still volatility as we know in our comments reflected, but increased the overall floor for the boat shoe business especially in the U.S. market. So, today, the Sperry boat shoe business is still significantly bigger than it was seven, five, four years ago, three years ago. Your other question really goes, where is bottom? It's always hard to judge. We're seeing some signs that once we get through the first half of this year that we may be approaching bottom for that business. Our efforts are focused on keeping boat fresh, keeping it relevant. It always going to be an incredible business and relevant silhouette in the United States market and making sure we maintain our dominant position of whatever that market is. Today Sperry has about 70% ownership of the boat shoe market and we're not giving up any of that high ground to anybody. Mitch Kummetz - B. Riley & Co. LLC: Got it. Right. Thanks. Good luck. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Thank you, Mitch. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks.

Our next question comes from Scott Krasik of Buckingham Research. Please go ahead.

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

So, I don't think you specifically answered it from way back ago, Mike. So, what – how much is FX a headwind, just the FX portion to 1Q sales and the full-year sales please? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: For the first quarter only?

For the first quarter and then the full year. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. For the first quarter only, it's about a 2% headwind...

Okay. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: ...for the first quarter and for the full year, it's about the same.

Okay. And then I'm assuming the gross margin is going to be down significantly on 1Q, but you're guiding... Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yes.

...it to flat. So, can you talk about sort of what you're expecting or the environment to allow you to get back to a flat gross margin for the year, given the hole you're going to dig, please? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. Yeah. We talked a little bit about it too. So Q1 will be the biggest quarter. All of our FX earnings exposure is really in the gross margin line. So all these – it's the product cost related to new contracts that we've entered into in the last half of 2015. So $0.06 headwind in the first quarter is all product cost. We don't get the full benefit of some of the product cost reductions until later in the year. So where we're seeing commodity price benefits and input cost benefits in our FOBs, those aren't going to show up until later in the year. We know what they are. We've ordered shoes against those prices, but we have some carryover there. We're also being a little conservative on providing some provisions, some reserve, if you will, for any additional liquidation of the inventory that might pose an opportunity for us in the first quarter and second quarter. So, that puts some pressure on margin and would subside in the second half. So, it's really those factors and the timing of some of the benefits that we expect to see. FX will loosen up a little bit later in the year. And those product costs will start becoming a bigger tailwind for us as we move through the year.

Okay, perfect. And then just last, Blake, you mentioned that you have some product wins, right? Capra and Duck Boots and some of the Saucony product. So, I mean, really it just feels like you don't have enough good product to grow the business at this point. So you've been through Fannie and OR and Magic (1:20:29), what are the retailers telling you about the fall products? You obviously have some big platforms you're introducing. I mean, is that when you're going to start to see growth? Do you have the orders in hand? Can you talk about visibility? Blake W. Krueger - Chairman, President & Chief Executive Officer: Yeah. I mean, we certainly have the orders in hand for – or largely in hand for some of our key initiatives. So, our big partner retailers that have signed up with Merrell, for example, whether it's Capra, whether it's the expanded Moab line, we've got a lot of those orders in hand for that particular program. Obviously, everybody ran out of Sperry boots this past fall, so they know they need a good business. Sperry has shown that it's got a great line of transitional products which is great so. But other than some of these points of light, I would say, retailers at this point in time still being pretty conservative. As you know it, you can never have enough product wins. We are focused on our consumer and product innovation. That's one of the reasons why we're creating a new innovation hub to help supplement the brand's creative efforts in that particular area. So, it's something we're keenly focused on. We know at the end of the day we're an industry where if the product is right, everything else matters, and if the product isn't right, sometimes, nothing else matters. So, we're focused on it. We always wish we had a few more big stories. We've done a good job in 2015 of really filling the product pipeline, especially for Sperry, for example, in non-boat, and in Merrell as well, and across a number of brands for Arctic Grip. So fundamentally, it's going to be the focus on the consumer and product innovation that's going to drive organic growth. We can't control currency, we can't control some of the geopolitical volatility and instability. We can't really control commodity prices. So, as in 2015, we're focused on the controllables, whether it's gross margin, enhancing gross margin. We haven't taken our foot off the pedal behind investing in our brands. So, we're investing in our brand as we had originally planned. And we're especially investing in product creation and innovation.

Okay. Good luck. Thanks. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thanks. Christopher E. Hufnagel - VP-Strategy, Communications & Investor Relations: Thanks, Scott.

Our next question comes from Chris Svezia of Susquehanna Financial Group. Please go ahead.

Hey, good morning, guys. Thanks for taking my question. I just want to circle back to some of the inventory for a moment. On your books, when it's up 12.7%. Could you just maybe just talk about what brands or categories have the heavy inventory? And what do you mean by it getting more in line as you go into the back half of the year? Are you still expecting it to be up? And how does that jive with, I guess, what seems to be high-single digit reported declines in revenue? Are you just meaningfully slowing down incoming receipts? Just how does that math work? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sure. Yes. I can walk you through it, Chris. I mean, first of all, it's – we talked a little bit in the remarks about boot inventory being a little higher than we would like. Part of that was a slowdown in the fourth quarter. Just in general, I mean, the oil industry and construction sector and some other areas have been hit pretty hard, and our work boot business softened up a little bit because of that and, obviously, the weather impacted boots across any of the brands that have cold weather product. But we have core inventory that was purchased mid-year last year that came in really across the portfolio. And that's something we have to rationally work through over the course of the year. The good news is in September when we – late August and September when we saw some of the softness, we started to act pretty quickly with our factories on the core – orders of core merchandise that are generally at a pretty regular cadence in the way we buy it. And we slowed that way down. And so, we already have visibility to the inflow side of the equation. We're going to see the inflow of inventories start to come down dramatically latter part of Q2 and Q3. We couldn't turn that off entirely and didn't really want to put that burden on our manufacturing partners. And so, we kind of managed through that over a reasonable period of time. So, we've got visibility to that. A meaningful reduction in inbound goods over the next couple of quarters. Core inventory that we don't see necessarily as seasonal even though, like Blake said, we have about 3% more at the end of the year than maybe we wanted to, based on some of the more seasonal cold weather stuff. But other than that, it's core products that'll sell-through, not necessarily waiting until fall for to liquidate. And then, at the end of the day, we're working closely with all of our retail customers on our projections there. So, when we talk about where we think we're going to end up at the end of the year, it would be down meaningfully from where we ended this year. And we're going to just make steady progress every quarter towards that. We'll probably see, again Q1 guidance what it is. We won't see an improvement in our inventory at the end of the first quarter. But after Q1 and certainly a meaningful reduction year-over-year relatively speaking, by Q2, and then even better performance into the latter part of the year. So, it's something we have pretty good visibility to and high level of confidence that we can achieve it.

Okay. Thank you. And then just I have a question on pricing. In the past you have talked about the ability to try to push through some pricing. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah.

As you sit here today, given the dynamics in the world we're in, and I think last call you referenced you had some challenges on pricing in certain categories. How do we think about it for this year? Blake W. Krueger - Chairman, President & Chief Executive Officer: I would say really how our brands approached this especially internationally as your – as carryover product goes from price that good but it goes to better, and your better inventory and styles go from better to best. It's incumbent upon your brands to come back with appropriate pricing of product in that – at that good category level. So, a good-better-best scenario, a lot of our efforts from some of our brands, especially those brands with the big international businesses is focused on bringing out great product at the good price point level. And obviously, over the last several years, we've usually been ahead of this game. We've been very proactive when it comes to pricing. We like to increase our gross margins and our operating margins every year in most years. That's our focus. You can't do that if you don't price appropriately. It doesn't mean that you'd take a blanket increase across the whole product line for a particular brand. You have to be smart about it. And I would say for some of our brands, our more traditional boot brands in the work area, it's a little bit tougher because they have a lot of product that is carryover product. And some of those styles have been around for two years, three years, more than five years. So, yeah, it's not an exact science but it just – it's something you have to work on every week and you've got to get on in front of it. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: And, Chris, we took that tough action last year, early in the year. And even with Sperry and their domestic business, they raised prices. And ultimately the consumer and the retailers out there frankly responded well to that. So, we don't have any meaningful or large scale increases planned for this year, there'll be some surgical increases where needed. But, overall, the benefit we're getting to margin is really a result of just getting the full year benefit from some of the work that we did last year.

Okay. Understood. Thank you very much and all the best. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thank you.

Our next question comes from Laurent Vasilescu of Macquarie. Please go ahead. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Good morning. Thanks for taking my questions. I wanted to follow up on the CapEx guide. How much of the 2016 CapEx should we anticipate for the new innovation and design center called out in the prepared remarks? Or is that something we should consider for 2017? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: There'll be some investment there, more in 2017. But luckily, we've got some facilities and capacity in our current footprint to take advantage of this year and as we build that hub up. And so, it'll become a more prominent investment beyond 2016. But there's a meaningful investment in 2016 as well. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay. Great. And then in the prepared remarks, there was a lot of discussion about potential acquisitions. On the flip side, would you consider divesting a brand or a segment in order to improve profitability or to reallocate capital in order to fund future growth? Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, I think, as you know, we've got a great history when it comes to capital generate – or cash generation and increasing EBITDA. So, we've never lack, fortunately, for funds or resources to organically grow our brand or do acquisitions. So, that wouldn't really come into our thinking. Our thinking about our brands over the year and we routinely take a look at our portfolio. And as you know, years ago when I was COO we got out of three businesses and we've exited a business or a brand from time to time when it didn't make sense or meet our future growth or earnings parameters. We're pretty happy with the portfolio we have today. We have no plans to divest of any of our brands currently in our portfolio today. We also have today, because of our fantastic performance over the last three years and our current leverage ratio, we have the ability to do more acquisitions. We're primarily focused on organic growth today, but Mike and I and the team here do spend an appropriate amount of time looking at potential opportunities. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay. Great. Thank you very much and best of luck. Blake W. Krueger - Chairman, President & Chief Executive Officer: Thank you. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thank you.

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

Good morning. Thanks for taking my questions. The difference between the adjusted number and the reported number is the store closing costs. Can you break that out by quarter for us? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: For which year, Sam?

In your guidance. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: It's almost all in the first quarter.

So, your net... Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Does that...

So your net earnings in the first quarter when you exclude that is $0.19, is that the correct number, or when you include that? Just trying to get that guidance that you gave for Q1. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: The guidance we gave of $0.21 to $0.24 excludes that number.

Okay. Thanks. And then there's a $4.6 million benefit you have in the quarter interest income or other income. Can you tell us what that is? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: In Q4?

Yeah. In Q4. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. We had a settlement on an outstanding legal issue that came through in Q4. Obviously, that's something that won't recur next year, so it's sort of a one-time benefit for us.

Okay. So, it should – so, on a net-net, that should be taken out of the books? Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Yeah. It's already reflected. Yeah. When I provided the guidance on our net interest expense and other expenses, that's reflected in that number.

Okay. And then, I mean, so it looks like in the guidance, since you've done the PLG acquisition, your sales based on the sort of midpoint of your guidance are going to be up about 80% since 2011. And the earnings number is going to be almost flat. So, I'm just trying to – I'm trying to – I just want to understand sort of like when is this – when are we going to get cranking here? Blake W. Krueger - Chairman, President & Chief Executive Officer: Well, I don't have those historical numbers in front of me, Sam. But, obviously, the PLG acquisitions added, even today with the Stride Rite stores underperforming, has added well over $100 million on an annual basis of EBITDA. Those brands were not performing at the level of historical Wolverine brands when we bought them. They were largely focused on the U.S.A. market. They didn't have really any higher – a great deal of higher margin international business. So, for us, I think it's – we're seeing some growth in some of the brands. The overall success of those brands has been hurt by the Stride Rite stores. We've addressed that over the last 12 months and into this month. When you take a look at the international penetration, just as an example, the Sperry brand in pairs grew 15% internationally last year. The Saucony brand grew 25%. The Keds brand, which has been a bit of pleasant surprise to me, grew about over 170% last year. So, we're finally getting some traction. It takes a while, as I've said before, with some of these brands. But we're finally getting some meaningful traction on the international front despite some of the macro challenges that we talked about earlier. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Sam, it's important to remember just between 2015 and 2016, now with the new guidance that we've given you, $0.31 of currency impact to results. So, just to put that in perspective.

Okay. So, that entire – I just want to clear. I just want to make sure I get this. The adjusted $1.30 to $1.40, that number takes out the currency but doesn't include that one-time - Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: That's reported results excluding the $16 million of restructuring that we talked about. That's going to be mostly in Q1 and partially into Q2. So that's our normal adjusted earnings per share. It's not currency neutral or anything else.

Okay. All right. Well, thank you very much for taking the questions. Blake W. Krueger - Chairman, President & Chief Executive Officer: You're welcome, Sam. Michael D. Stornant - Chief Financial Officer, Treasurer & Senior VP: Thank you, Sam.

Thank you. The question-and-answer session has ended. I would now like to turn the conference back 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 March 23, 2016. Thank you and good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.