Angel R. Martinez - Chairman of the Board of Directors, Chief Executive Officer and President Thomas A. George - Chief Financial Officer and Principal Accounting Officer Linda Pazin

Erinn E. Murphy - Piper Jaffray Companies, Research Division Sam Poser - Sterne Agee & Leach Inc., Research Division Randal J. Konik - Jefferies LLC, Research Division Robert S. Drbul - Barclays Capital, Research Division Taposh Bari - Goldman Sachs Group Inc., Research Division Omar Saad - ISI Group Inc., Research Division Corinna L. Freedman - Wedbush Securities Inc., Research Division Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division Scott D. Krasik - BB&T Capital Markets, Research Division Camilo R. Lyon - Canaccord Genuity, Research Division Howard Tubin - RBC Capital Markets, LLC, Research Division

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Deckers Outdoor Corporation's Second Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] We would like to remind everyone that this conference is being recorded. Before we begin, I would like to remind everyone of the company's Safe Harbor policy. Please note that certain statements made on this call regarding the company's expectations, beliefs and views about its future financial performance, brand strategies and cost structure are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to the company's anticipated revenues, expenses, earnings, gross margin, capital expenditures, brand strategies and cost structure, as well as the outlook for the company's markets and the demands for its products. The forward-looking statements made on this call are based currently -- I'm sorry, are based on currently available information, and because its business is subject to a number of risks and uncertainties, some of which may be beyond its control. Actual operating results in the future may differ materially from the future financial performance expected at this current time. Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the Risk Factors section of its annual report on Form 10-K, and on its other documents filed with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements. I would now like to turn the conference over to the President, Chief Executive Officer and Chair of the Board of Directors, Mr. Angel Martinez. Please go ahead, sir. Angel R. Martinez: Well, thank you to everyone joining us today. With me on the call is Zohar Ziv, Chief Operating Officer; and Tom George, Chief Financial Officer. In addition, I'd like to introduce Linda Pazin, our new VP of Investor Relations and Corporate Communications, who is also on the call. The second quarter, while our smallest volume quarter, was an important transition period for the UGG brand that have left us feeling much more confident about our growth prospects in the back half of the year than we felt 12 months ago. The transitional product we've developed to help better bridge the gap between spring summer and our key fall holiday season. It was very well received retail consumers, our customers, and the initial styles that were introduced late in the second quarter have performed very well at major wholesale accounts and in our direct-to-consumer channel month-to-date. The quality of our inventory, which I'll address in more detail in a moment, is in much better shape, both in the channel and in our distribution centers. It's much cleaner than a year ago and we have key fashion styles on hand to deliver on time in early August versus last year, when factory delays met these important transitional products, didn't arrive on the shelves until late September. And we believe that the combination of solid spring sell-through, more compelling, more relevant product collections and much improved in-store merchandising has created far better momentum across each of our regions and distribution channels at the start of this year's third quarter versus what we experienced in 2012 when we were battling several headwinds beyond our control. Despite the pressure on our Teva and Sanuk brands sandal business from cold and rainy weather during larger durations of Q2, we were able to achieve sales within 2% of our guidance. Additionally, our second quarter revenue was in line with guidance on a constant currency basis. We reacted quickly by deferring certain expenses, primarily marketing, selling and retail dollars to the back half of the year to take better advantage of the busier fall selling season, which enables earnings to exceed expectations. The second quarter ended with inventories up 4.6% year-over-year, a growth rate that is much more aligned with sales trends than in the previous several quarters. While this was a positive development, inventories were higher than we originally anticipated driven mostly from a timing issue from us, accommodating factory requests to take some small fall deliveries ahead of schedule so they can better be prepared for their peak production period. This product will be utilized to fulfill early season demand at key wholesale accounts and are expanding direct-to-consumer channel, which includes 36 more stores compared to this time a year ago. Lower than originally planned first half sales for Teva and Sanuk contributed slightly to our inventory growth, but we expect to work down this excess inventory over the remainder of the summer. While we're comfortable with the quality and size of our inventory as we head into our key-selling season, we plan to continue to focus resources to improve the slow timing of inventory receipts. We recently hired a new senior executive in supply chain planning, who we believe will add significant improvements to tracking and management of our order status with factories. I think it's also important to note that this management team has a very good track record of turning inventory, and while our level of carryover for the past few years have been higher than usual due to -- in part to, back-to-back mild winters, history shows that we have not needed to write off or write down significant inventories at any point and we believe that this will continue to be the case going forward. Looking at the brand's recent performances in more detail, starting with the UGG brand. While domestic wholesale selling was down modestly, the UGG brands U.S. wholesales customers experienced good sell-through of the spring line led by then Covar [ph] espadrille collection, fashion sandals, specialty spring classics and slippers. This fall is very good Q1, during which cold, snowy weather in many parts of the country help drive additional sales of classic boots and other colder weather styles. Demand for spring styles, as well as new transitional products such as driving mocs, smoking slipper silhouettes, ballerinas and trend-right sneakers, which were introduced late in the quarter, helped drive another strong quarter for our domestic eCommerce business. Our digital marketing programs are yielding significant year-over-year traffic increases to our Australian Hoka. These styles performed in concept stores as well especially classics such as our new Josette boots and the companion handbags performed well early, and slippers continue to sell year-round online and in the concept stores. Our recent market research has reaffirmed our belief that the UGG brand remains the top-tier brand relative to the competition. Approximately 80% of women in the U.S. are aware of the brand, over 40% have considered buying the brand and about 20% have purchased the brand -- 25%, I'm sorry, have purchased the brand. This places the UGG brand in the top 5 in their peer group in the competitive female category. This is great news and we believe it reflects the strength of the UGG brand as they gear up for the fall marketing campaign supporting their 35th anniversary. In terms of our domestic retail performance, comps were down 10% on top of a mid-single-digit increase a year ago. The comp decline was merely a function of traffic, which we believe was primarily due to weather and our decision to run our spring digital and out-of-home advertising campaign in Q1 this year versus Q2 last year, as the first quarter is a much bigger period for retail. A shift in product mix towards low average selling price product, including slippers and casual shoes also weighed on comps. A decline in comparable transaction in the quarter was partially offset by an increase in units per transaction, which translates into more consumers experiencing the UGG brand. As we continue to develop our omni-channel strategy, we are pleased that in the U.S., on a combined basis, our direct-to-consumer business was up approximately 14% as our operational initiatives to drive conversion took hold. Moving on to our European business. Many wholesale customers in the U.K., our largest market outside the U.S., experienced their best spring-selling season ever with the UGG brand. Their performance earlier in the year was driven by cold temperatures including the coldest March in the U.K. in more than 50 years. As weather warmed toward the end of the second quarter, sales of non-boots spring styles such as flip flops, fashion sandals and espadrilles accelerated. What we experienced in our U.K. wholesale channel is also true of our direct-to-consumer business. Stronger first quarter results, driven by cold weather, were followed by a slightly softer Q2 results, where sales of non-boots spring style didn't pick up until temperatures warm later in the quarter. Comps in the U.K. were flat for the quarter. Our U.K. results so far this year are encouraging and we have a long way to go in building added confidence -- we've gone a long way as well in building added confidence in the long-term viability the UGG brand in this very important market. And you'll remember that we've faced some challenges in the last few years, we've overcome those and the consumers responded very positively to the brand in the U.K.. Now, we have to make sure we capitalize on this momentum, while also replicating our progress in Continental Europe where conditions continue to be more challenging. The results also show strong correlation between sales and weather in Europe, highlighting the need for more transitional and nonseasonal products, something we're addressing in all of our markets. Now to Asia Pacific, where the UGG brand continues to demonstrate great momentum. Particularly in Japan, our retail store comps up in the mid-20% range, driven by a positive response to this year's spring line. Comps in China were down mid-single digits, a marked improvement from recent quarterly trends, which we believe is attributable to the new merchandising and marketing initiatives that we've recently implemented. We continue to believe that the UGG Asia Pacific region, and I'm not just referring to Japan and China, offers significant opportunity for the UGG brand and we're moving quickly but purposely to capitalize on the prospects we've identified in each country. In addition to the 7 stores we expect to add in Japan and the 15 new stores we expect to add in China, there will be multiple partner stores by year end in all of the original distributor markets for the UGG brand, including South Korea, Taiwan, Mongolia, Singapore and Australia. Turning to the Teva brand, sales were down year-over-year as reorders didn't materialize to the levels we expected given the unfavorable weather. Our sandal sales, which declined in line with the industry were partially offset by gains in our closed-toe category. As mentioned on prior earnings calls, we continue to focus on transforming the Teva brand into a more complete outdoor footwear brand in order to increase its growth prospects and lessen its dependency on weather. Our new TevaSphere technology will be expanding with new color updates for fall. In addition, we're introducing 2 new casual styles for men and 2 new boot collections for women, one of which, the Capistrano is being given platinum-level marketing designation by our #1 retailer, REI, which is the first for the brand. Before I turn into the Sanuk brand performance for the quarter, I wanted to remind everyone that the Sanuk brand started off as a predominantly male one-season surf brand when we acquired them in 2011. Now we're transitioning the Sanuk brand into a lifestyle brand that will be featured in department stores, sporting goods and outdoor retailers in 2014. I'm very excited about the product that has been developed for the female consumers and that will be featured in our spring 2014 line. These changes are important part of the growth story for the Sanuk brand. Sanuk brand's sales while up 7.5% for the quarter, were also hampered by cold rainy weather throughout much of the quarter. There were pockets of strength, particularly, our direct-to-consumer channel, which was up over 80%, driven by the continued strong performance of our eCommerce site and the addition of the brand's first store, which opened in Santa Monica earlier this year. We're encouraged that the brand's sandal sales outperformed the industry average this season, driven by solid sell-through particularly in our women's Yoga Mat franchise according to independent retailers and department stores. We expect the brand will gain momentum in the second half of the year based on several new product introductions. Fall 2013 represents the first time we'll have the Sidewalk Surfers styles in men's and women's that are relevant during the critical transition from summer to fall and holiday. We're also building off the success of our chill collection that's updated its styles that are lighter weight to allow our Sidewalk Surfer-loving customers the ability to wear their favorite styles deeper into the year. You'll also see new boots from the Sanuk brand, including more new women silhouettes and feminine colors and patterns. We believe that the R&D efforts will transition the brand from primarily hanging footwear merchandise brand to a meaningful player on the footwear wall in our surf, outdoor and footwear specialty channels, during what has traditionally been the brand's off season. I'll now turn the call over to Tom for a deeper review of the numbers and an update on guidance. Thomas A. George: Thanks, Angel. Today's earnings release contains a good amount of detail about our second quarter sales and earnings, including sales by brand channel and geography. Therefore, I'm going to limit my discussion to primarily the gross margins, operating expenses, the balance sheet and guidance. Gross margins for the second quarter was 41.1% compared to 42.2% in the second quarter of last year. The 110-basis-point decline was primarily attributable to a higher close-out sales combined with higher cost to goods sold that were the result of increased sheepskin price that we locked in at the end of September '11. The benefit of last year's lower sheepskin cost won't be realized until late Q3 or early Q4 this year. Total SG&A expense for the quarter was $112.6 million, or 66.2% of net sales, compared to $102.3 million, or 58.6% of net sales a year ago. The dollar increase versus a year ago was primarily due to approximately $10 million of additional expense related to our retail operations, most of which is for the 36 new retail stores that were not open during the second quarter last year, as well as higher performance-based compensation expense, partially offset by a decrease in Sanuk earnout accretion compared with a year ago. Operating loss for the second quarter was $42.8 million compared to an operating loss of $28.7 million last year. The decline in operating margin was a result of a decline in gross margin combined with the increase in SG&A as a percent of sales. We recorded an income tax benefit of $13.8 million in the second quarter compared to $8.4 million in the second quarter last year. Second quarter diluted loss per share was $0.85 versus $0.53 a year ago, and compared favorably to our guidance for a loss of approximately $1.10. The upside relative to our guidance was driven primarily by lower operating expenses of approximately $11 million, approximately $5 million of which we shifted into the back half of the year to take better advantage of the busier fall-selling season. Regarding our retail operations for all stores open at least 12 months at June 30, 2013, average sales per square foot was approximately of $1,500. And total square footage at end of the second quarter, it was approximately 241,000 square feet compared to roughly 139,000 square feet at the end of the second quarter 2012, representing an increase of about 70%. Turning to the balance sheet. Our June 30, 2013 inventory increased 4.6% to $362.1 million from $346.3 million at June 30, 2012, an increase of $15.8 million. UGG brand inventory increased modestly by $2.5 million, or 0.8% to $311.4 million to support the current wholesale order book, as well as our DTC business growth. In addition, the balance included early deliveries of new transitional and fashion products for fall '13, as well as approximately $11.2 million is due to 36 more retail stores compared to a year ago. We're pleased with the quality of the UGG brand inventory as in-line and carryover products represented approximately 90% of UGG brand inventory. The remaining 10% is inventory, either in or available for our outlets. Regarding orders for in-line and carryover products as of June 30, we have more orders than we have inventory. So in Q3 and Q4, we are expecting additional inventory to fulfill our wholesale order book, as well as our DTC business, which has grown to over 30% of our business. In addition, we will have inventory of key styles available for reorders from our wholesale customers. With regard to our other brand, Teva brand inventory increased $3.8 million to $24.9 million, and Sanuk brand inventory increased $5.1 million to $14.4 million as a result of lower-than-expected sales for the first half of the year. Our other brands inventory increased $4.4 million to $11.4 million due primarily to the Hoka brand, which we acquired in September 2012. At June 30, 2013, our cash and cash equivalents were $49.1 million compared to $114.4 million at June 30, 2012. At June 30, 2013, we had $26 million in outstanding borrowings under our credit facility compared to 0 a year ago and $33 million at December 31, 2012. The decrease in cash and cash equivalents and the increase in outstanding borrowings year-over-year are attributable to $120.7 million of stock repurchases over the past 12 months at an average price of $43.65 a share and $64.5 million of cash payments for capital assets, which includes $34.7 million of retail expansion, $17.1 million for the new headquarters facility and the balance of $12.7 million for IT infrastructure and maintenance, as well as other expenditures, offset in part by cash provided by operations. During the quarter, we did not repurchase any shares of the company's common stock. And currently have $79 million available under the $200 million stock repurchase program announced in July 2012. Now moving on to our outlook based on second quarter results and current visibility, which now includes an increased contribution from our direct-to-consumer channel sales, driven by the opening of approximately 36 retail stores, up from the previous plan around 30. And stronger eCommerce trends, we now expect revenues for 2013 to increase approximately 8% over 2012 levels compared to our previous expectation of 7%. For the full year, we now expect UGG brand sales to increase by approximately 7% to 8%, up from our previous expectation of 4%. We now expect Teva brand sales to be flat to slightly down compared to our previous expectation of 6% growth, and Sanuk brand sales to grow approximately 5% versus our previous expectation of between 10% to 13%. Our other brand sales are expected to generate $39 million of revenues in 2013. With regard to earnings, we're raising our outlook and now expect diluted earnings per share to increase approximately 8% over 2012, up from our previous guidance of 5%. While second quarter earnings came in ahead of guidance by approximately $0.25, roughly half of the improved earnings was related to a shift in the timing of certain marketing, selling and retail and other expenses, which we expect to spend in the second half of 2013. Operating expenses in the back half of the year are also increasing from 6 additional retail stores. We now plan to open plus additional IT investments now scheduled for the fourth quarter. Our forecast is still based on SG&A as a percentage of sales of approximately 34%. We now expect gross margins to improve an additional 30 basis points above our previous expectation of approximately 46.5%, driven by increased contribution for our direct to consumer channel. For the year, capital expenditures are projected to be approximately $85 million to $90 million, with $40 million for retail stores and approximately $40 million for the corporate facility, IT and other maintenance items. And we are still planning to refinance our corporate headquarters by securing long-term financing. For the third quarter of 2013, we expect revenues to increase approximately 2.5%, and diluted earnings per share to decrease approximately 41% over 2012 levels. For the fourth quarter 2013, we expect revenues to increase approximately 14.5% and diluted earnings per share to increase approximately 38%. This quarterly EPS guidance is in line with our previous disclosure. And as a reminder, roughly 85% to 90% of our projected second half earnings are expected to come in the fourth quarter. I will now turn the call back over to Angel. Angel R. Martinez: Thanks, Tom. As we take stock of where we are at the half point in the year, I'm pleased with how the first half has unfolded, following a challenging 2012. Obviously, there are always areas of the business so we can improve upon, and that we'll control -- there will continue to be factors impacting us that are outside of our control. That said, I think we're taking the right steps towards effecting positive change at Decker this year. And more importantly, over the long term. I could not be more confident about our products pipeline that we have in place for fall 2013, which is seeding into the 2014. I believe fall 2013 is the UGG brand's strongest, most complete line that we've developed. We made great progress in 1 year to broaden the appeal and accessibility of the brand, including having more transitional products to help bridge the gap between late summer and the start of fall weather, with more attractive opening price points in our casual and fashion collections, combined with non-core products that better reflect the UGG brand DNA and a broader lineup of specialty classes. And while still very early, sell-through so far in July supports this thesis. In the U.S., wholesale inventory levels are much cleaner than they were a year ago. And we believe that our retail partners are equally excited about the freshness of the fall line. In Europe, we feel like we've turned the corner with the UGG brand in the U.K., and with good momentum coming out of Q2 combined with a much stronger product line, we're encouraged about our prospects for growth this coming holiday season. We believe that Asia continues to be a source of growth and opportunity, particularly for retail expansion in China and Japan. As we make additional investments to our merchandise offering and marketing programs based on a better understanding of the regional differences between East and West, we believe that we can build market share in these 2 large and important consumer markets. We look forward to updating you again in about 90 days when we report our third quarter results. By then, we'll know a lot more about our sheepskin needs and costs for 2014, which, at this point, would be premature to comment on. And by late October, we'll have much better visibility in how the holiday season is shaping up. Given the unpredictability of weather and especially what has transpire in the last 2 winters, I think we're taking the right approach to planning the business for the remainder of the year, while at the same time, investing in new products and new processes that both mitigate our dependence on weather and create new growth vehicles for the future, including a specialty running category where Hoka, our newest brand addition, gives us an immediate and legitimate platform to complete. With a strong balance sheet and strong cash flow, we're well positioned to execute on the strategic plans for evolving each of our brands and driving sustainable earnings growth and increased shareholder value, well into the future. Operator, we're now ready to take questions.

[Operator Instructions] Our first question today comes from Erinn Murphy, Piper Jaffray. Erinn E. Murphy - Piper Jaffray Companies, Research Division: Angel, I guess my first question is for you, I guess you commented earlier on in your script about the direct-to-consumer business kind of month-to-date is starting to improve. I'm just curious if you could expand upon that comment. Is that -- are you seeing it more in traffic or is it ticket-based? And what style is the consumer right now gravitating towards? Angel R. Martinez: Well, we had actually pretty consistent performance across our entire DTC from eCommerce business, to our own stores, the Covar, as I mentioned, consistent style selling and our wholesale customers as new products has arrived. We got a little bit of -- we had success with the sneakers. Once the weather warmed, the sandals started performing. So in general -- and the new fashion product, what we call transitional product. But really, it's the right price point in boots and lighter weight, early fall product that has been performing well. So and we are starting to see the same thing happening as we're getting early reads from our wholesale customers. So we're pretty feeling pretty good about that. Erinn E. Murphy - Piper Jaffray Companies, Research Division: Okay. That's helpful. And then, I guess, from a wholesale perspective and in general kind of across the industry, there's been a lot of concern in both apparel and footwear brands just on the retailers are taking a little bit more cautious view in the order book. I mean, can you just articulate on what kind of behavior you're seeing, kind of thus far, for the fall holiday deliveries. And then I guess, to that, if there's any just update on the backlog, you just comment more orders than inventories. But just any color on both how retailers are feeling thus far this season and also, on your backlog. Angel R. Martinez: Okay. I think caution is the right word. I think everyone is approaching and especially after the last 2 winters, very cautiously. That's why it's important for us to make sure that we are in a good position to meet their near-term needs when -- with our core products. So we decided to take some projects early. We understand that consumers out there are buying closer to their needs, closer to the season. Retailers are reacting accordingly. And we're in a good position to fill in around core styles, which is pretty essential for us, assuming, of course, that we get them more normalized winter. So in general, we're feeling pretty good about the inventory position we're in and the availability of core styles we're filling. Thomas A. George: And Erinn, this is kind of related to the backlog, there's really no change since the past quarter because especially for the open business is primarily -- the wholesale business is primarily prebooked and -- but to add some color, consistent with what the last quarter, the pre-booking came in more skewed to the fourth quarter versus the third quarter because to some of those points Angel mentioned, the retailers are being more risk adverse early on and they want more product later during the specialty peak holiday selling season. Erinn E. Murphy - Piper Jaffray Companies, Research Division: Okay, and then I guess, to the inventory comment as well, I mean, it's better exiting Q2, but could you just talk a little about the complexion of this balance between both the independents and the major wholesalers? Thomas A. George: In terms of inventory in the channel? Erinn E. Murphy - Piper Jaffray Companies, Research Division: Yes. How are you feeling kind of the delta between the 2? Thomas A. George: I think we feel pretty comfortable there. As time has marched, we're already more comfortable with how the -- our larger wholesale customers, the bigger retailers have their channel to clean up. And I think as this time marched on here, the independents have gotten a little bit cleaner as well, but not to the same level as the larger customers.

And moving on now to Sam Poser with Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: Well, I'm going to take your inventory on here. Could you tell us how much inventory -- was it $16 million of inventory that you allowed to come in early? Because you said you would be under $300 million. [indiscernible] Thomas A. George: Yes, Sam, good question, let me give you some color on that. We had talked about being at about $300 million. We came in a little bit over $362 million. We used a little bit about was related to Teva and Sanuk, very slight amount. The rest is really mostly, mostly timing and so you're working with maybe $55 million there. And $30 million to $40 million of that $55 million is based on our decision, to bring product in early so we'll be better prepared, to put the product in our warehouse and service our backlog and our DTC for the back half of the year, and i.e., not be late on fashion product in -- similar to some of the things that happened last year. I think the ad in terms of the quantity of inventory, we gave you some good color about -- we need to bring more inventory in. Our wholesale order book alone is going to take care of inventory we have at the end of June. So we need to bring more inventory in to be able to service our DTC business, as well as have the opportunity to chase some business within. Sam Poser - Sterne Agee & Leach Inc., Research Division: I mean, with all due respect though, as you said, that's much more of a fourth quarter story than it's a third quarter story. So, I guess, the question to you is what is your target -- given your current sales guidance with the gross margin and everything, what is your target inventory for the end of Q3 and your target inventory for the end of Q4 to set yourself up properly for 2014? Angel R. Martinez: I think we would like to communicate on our inventories as we have seen some improvement in it. There's always have great quality and we have never large write-off issues. Just look at it more on a 12-month moving average kind of basis, and we expect to continue to have our inventory levels more in line with forward sales trends and continued improvement on a 12-month moving average basis over time. I think, we're too much focused on the inventory any one point in time. So I think you need to look at the improving trends over time. Sam Poser - Sterne Agee & Leach Inc., Research Division: Well, yes, but the thing is the trend because of the business at the end in 2012 -- at the end of 2011 through 2012, the inventories were so bloated at that time that you're comparing it also by a higher number to start with that was too much to begin with. So the year-over-year comparisons don't work anymore. You got to get back to like Q3 2011 inventories or Q2 2011 inventories to get more of a like-for-like. And so the question is this, where are your target inventories? So I'm thinking you need to make sub 250 by the end of the year, period. Just to be set up to get your turns right and everything else. Am I in the ballpark and so on? Thomas A. George: I think that just the frame of reference to ground everybody in the call. Our UGG brand inventory is up slightly, a lot lower than the implied sales growth in the back of the year, which is 10%. So again, you need inventory to be able to service growth in the back half of the year and we feel good and especially good about the quality of that inventory where we stand and we feel pleased to where we're headed on the management of it as well.

And moving on next to Randy Konik with Jefferies. Randal J. Konik - Jefferies LLC, Research Division: Quick question. So just -- can you just give us a little bit more color about what the accounts are saying in terms of the -- it sounds like the backlog and the order book is obviously improving. What are they telling you? And are they -- is it because they feel better about the environment? Are they feeling better about the products? Just first question is on what specifically are these accounts kind of talking to in terms of impacting the backlog. Angel R. Martinez: Well, first of all, from a product point of view, great response on the product. So far, happy with sell-through on the product. We have actually people who order a little light on core plastic product. They're to worry them. I think they find themselves in a position to chase some product as the season progresses. Backlog hasn't -- it hasn't changed. So we really feel going into this third and fourth quarter pretty confident about the reaction we found, the response from retailers, the sell-through of the products, the quantity of inventory, all things are positives. Randal J. Konik - Jefferies LLC, Research Division: Okay. Got it. And then in terms of just remind us where should we be at with Pure over the next 12 months? Angel R. Martinez: Now, we said and it's been -- we're very happy with, by the way, the way in which Pure has evolved. We said the real benefit of Pure would be felt in the more mid- to longer-term period. So we had, as you may recall, regular sheepskin that we had to work through in 2013 and we continue to now as we move through that inventory of raw materials appropriately replace our needs for table grade with Pure and we're continuing down that path.

Now in regards to UGG Pure, we just wanted to remind people that we were also looking at expanding it into our home product and really delivering the best product possible for our consumers with as much diversification as we can. And as Angel mentioned, by the end of 2013, we're going looking to deliver up to 10% of our product using exclusively UGG Pure and up to about 25% in the medium term. Randal J. Konik - Jefferies LLC, Research Division: Got it. And then lastly, Tom, just kind us through on your thoughts on buybacks in your business right now in terms of obviously a share repurchase activity. How do we think about cash generation in this business over the next 12 months and the corresponding buyback activity? Thomas A. George: Yes, good question. The business model stretches with the margins we have and the investment strategy. It generates a lot of good cash flow, good operating cash flow. So we do have that opportunity with that operating cash flow to be able to reinvest in the business and I think there is more of a lean now to reinvest in the business versus repurchasing stock. That being said, we still have $79 million available on the current authorization and will -- with that, we'll consider opportunistic repurchases as well.

[Operator Instructions] We will now move to Bob Drbul with Barclays. Robert S. Drbul - Barclays Capital, Research Division: I guess, Tom, for the -- my question is when you look at your assumptions in the back half of the year in terms of the sales assumptions and the margin assumptions, can you just explain in what you would view as conservatism that you have built-in. I understand the new stores, but like the margin recovery piece of it and just the sales piece of it, how you estimate it especially the new stores and the retail stores to get to the top line and the bottom line assumptions that you're looking for now at this point in time with the visibility that you have. Thomas A. George: We feel comfortable with where we're at the guidance we put out for the back half of the year. I think one thing to consider as we grow our DTC business, we have been seeing improving trends. On the eCommerce business, there's some strong trends there and were getting more and more sort of intelligent and experienced into how to drive more and more business into our eCommerce through our website. So there might be an opportunity there. On the retail stores, I mean, we've -- in our guidance, we assume we're going to open 6 more so, i.e., 36 versus the earlier guidance of 30. So obviously, as we grow retail around the world, there is always a of approval of additional stores, i.e., locations and whatnot we're looking at. So you have to work with the larger inventory to be able to secure the 6 additional, so there may be some opportunity there, but can't necessarily promise that at this point in time. And we feel good where we're from a margin point of view and specially that DTC business where -- how we can drive additional profit dollars with more DTC money. So if there's -- we end up having more DTC business versus wholesale business in the back half of the year, obviously, that could drive a lot of profit opportunity. Robert S. Drbul - Barclays Capital, Research Division: Okay. And then on the retail business in Japan and in China, in Japan, the 20 and the China sequentially improved, still negative. Can you just elaborate a little bit more in both of those markets and sort of the game plan especially in China going forward? Thomas A. George: Japan, really pleased with that like for the quarter. I mean, every store comped positively. If you go over to that market and just see the energy in that market, you could just see how our product is really, the changes we've made to the product offering there and how we're driving traffic to the stores, you get pretty excited. And some of the new stores were opening in some of the locations have very high traffic locations with the right demographics. So very excited about Japan. And China is getting the -- the better inventory feel, broader product assortment, some product learning, some more marketing around awareness of the brand and driving traffic to the stores in China is what makes us excited about that opportunity which helped drive the improvement there.

And moving on, we'll now go to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: I wanted to ask a question about UGG wholesale in the second quarter. My math gets me to UGG wholesale being down about 20% in the quarter, is that right? And if so, a quicker modeling and more stable growth rate year-over-year in the back half just kind of backing into the numbers. So A, just curious to know what drove that decline in the second quarter, I guess, to start. Angel R. Martinez: I mean, from a modeling point of view in the second quarter, you're pretty close to where we ended up in the second quarter for UGG. It was a combination of not only the domestic business, but some of the international business as well. Going forward, we still have -- that's pretty broad. So in the back half, we're -- we have cautious expectations as well for our wholesale business in the back half. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. And I guess on that point, I think, historically, your business is in largely pre-book for the fall winter business. Does the composition -- I know the retailers are buying closer to need and receive closer to need. But does the composition for the entire season change of pre-book versus that 1 this year, versus last? Thomas A. George: No. Not really, other than 2 tough winters where we had a fair amount of cancellations, but we still maintain some cautiousness around cancellations and very little reorders in our projections. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. That was my other question for reorders. Are you assuming kind of flat reorders, reorders to be up, down? If you can just give us any kind of context there. Thomas A. George: Virtually none. Taposh Bari - Goldman Sachs Group Inc., Research Division: Virtually none. Hopefully it's better than that, right? Last one for you, Tom. Last one for you, square footage. I think you've been providing that for the past couple of quarters. Square footage in the last 12 months, sales per square foot, are you no longer providing that or? Thomas A. George: I think we did -- we provided the square footage in there. It was -- sales per square foot on an annualized basis on -- for the comp basis, around $1,500 and total square footage as well over 200,000 square feet now.

And we'll now go to Omar Saad with ISI Group. Omar Saad - ISI Group Inc., Research Division: Can you -- so you guys have guided to the second quarter kind of top line last quarter around flat. And I know this is the smallest quarter, but came in a little bit below that. But you raised the revenue guidance for the full year. Can you just help me understand what are the areas of the business that give you the confidence despite a little bit softer Q2 top line and maybe you had anticipated that you kind of felt like it was appropriate to bring up the full year. Are there certain things going on with some of the brands, certain categories or the DTC side of it? Sounds like the Internet business is strengthening. Any insight there would be helpful, and then I have one follow-up. Angel R. Martinez: It's the DTC business. We feel more and more comfortable with that. We have that improved eCommerce trends and we're going to open -- in the guidance, it assumes we open 6 more stores than we did before. So that gives us the comfort level on the revenues. I think that ripples through and gives you more margin dollars to work with as well and there are some additional OpEx to offset that. But that gets you to a revised guidance that gets our earnings growth in line with our sales growth as well. So that's why we -- that's the driver of the improved guidance. Omar Saad - ISI Group Inc., Research Division: Understood. And then, Angel, could you talk about a little bit as you're getting a little more opportunity to work with the UGG Pure material and then integrated into some of your products and thinking about it going forward. Can you talk about the design teams, the designers and the company, some interesting ideas about being able to do more with the product from a design standpoint, with those materials, from a design standpoint. Are we going to see -- have an opportunity to see, coming from new styles with the UGG Pure this fall? And then rolling out next year? Just any update on that front would be really helpful. Angel R. Martinez: Yes, you're going to see -- I think, probably the operative word for the design team when it comes to UGG Pure is liberating. Because really what it does is allows for even color. For example, there are limitations in what you can do in color with conventional sheepskin because of certain colors it doesn't take well. They're too caustic on the skin side of the hide. UGG Pure allows us a lot more diversity in color, which is really important. Now from a texture point of view, we have the opportunity to engineer different textures into the material, which we never had that opportunity before. Overall, sort of the pile itself. In other words, the density of the material, we can bury that. So it allows us to make product that is less bulky. And as a result, allows us to have more form fitting footwear, which -- one of the things we found out from consumers who were objecting, they were interested in the brand, they love the slippers, but they were objecting to the shoes as outdoor fashion because the product was too bulky. And now this allows us to have much more closer to the foot shapes and feel for the product. So those are all things that are liberating to the design team and you'll see over the next several quarters tremendous innovation when it comes to the product design. I think fall '14 is something I've already previewed, obviously, now that's just very exciting product. I've never seen anything like that from our brand and that's only possible because of what UGG Pure has allowed the designers to now think about and go execute. Omar Saad - ISI Group Inc., Research Division: Understood. And will some of that be at the fall show this year or the preview line? Angel R. Martinez: You'll see fall '14, you'll see that in the preview line. And we'll have our fashion show. We'll have a product preview at the -- at our showroom.

Moving on now to Corinna Freedman with Wedbush Securities. Corinna L. Freedman - Wedbush Securities Inc., Research Division: Just a quick question on -- you mentioned slippers are now a year-round category. Are there any opportunities to take up pricing there or to expand that line any further? Angel R. Martinez: Yes, we have, this year, introduced an $80 price point in slippers again because of some advantages we have with UGG Pure. It allowed us to actually make a slipper that's for warmer climates is not quite as bulky. It's been very successful, very popular. Our continued success of our men's ascot continues to develop around the world. We're building a slipper business in markets outside the U.S. Where really in the U.K., for example, they had not really seen a slipper business. So we're pioneering an entire category of footwear in the U.K. So yes, you're going to see a lot more diversity again of color, of style, of the density of the material to allow us to evolve that business. We're the market leader by a very long stretch there. Corinna L. Freedman - Wedbush Securities Inc., Research Division: Okay, and then my second question is have you changed your philosophy about expanding distribution any for this year given your inventory? Just maybe there were some weakness, I think, in the higher end department stores and would you consider opening up some mid-tier department stores? Just -- do you have any updating thinking about that. Thomas A. George: We're very comfortable with our wholesale distribution. We have been cleaning up our distribution here and there, in various parts of the country where we've felt in some cases where we're not being well represented. That's an ongoing process. We have evolved to a very sophisticated direct-to-consumer model with our outlet stores and concept stores in the mix. And that certainly negates the need to run out and open less-than-desirable distribution and online. And we feel we have excellent wholesale partners across all channels and we don't see a need to go beyond that in the near term.

Moving on now to Mitch Kummetz with Robert Baird. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Yes, I want to begin, I just want to go through some of the assumptions or some of the assumptions that were discussed on your Q1 earnings call. I just want to be clear that we're still looking at kind of the same assumptions. So on the -- on your own stores, I think, it was mentioned last call, you were looking for a flat comp. I just want to be clear that, that's still the case in the back half or do you know expect to be better than that given some of the trends that you're seeing in retail or within your own stores? Thomas A. George: Yes, Mitch, this is Tom. We talked about in the last call, I think, it was -- we talked about a flat to slightly up comp for the total year. For the total year, that's similar what we're looking at now, flat to low-single digits kind of comp for the total year. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's helpful. And then you also said last time UGG wholesale would be down sort of mid- to high-single digits for the year kind of based on that way you're order book was shaping up and kind of your assumptions on cancellations and reorders. Is that still the case then as well? Thomas A. George: Yes, it's more for the totally -- well, sort of, the first half of the year is behind us and looking at the back half right now it's probably more focused on. And if you look at that our guidance for the back half of the year, the UGG domestic wholesale business is down more like a mid-single digits kind of. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. and then I know, Tom, you said that you're not assuming any material on the reorder side any real material improvement there or actually, I think, you said, you're really not looking for any reorders. I think the last call, you said you're expecting a similar level of cancellations, as well as last year. Is that still the case than? Thomas A. George: Yes, from the cancellation side, that's still is the case. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then real quick on Pure. I'm just trying to still get a better handle as to what the cost benefit is on that. And let me ask a question this way. So if you look at it like a footbed or a lining and you compare Pure to like table-grade sheepskin, I mean, how much of the cost differential is there going from like table-grade sheepskin on a footbed or a lining to Pure in those components. Is there any way you can give us -- give me a sense of that? Angel R. Martinez: Yes, this is Angel. First of all, yes, it's significantly better from a cost point of view. We haven't been specific into how much per square foot, et cetera. But more important than that, is better product. The UGG footbed doesn't compress. It doesn't sort of develop bare spots. It's just more durable. And that's from our experience and we'll continue to evolve that technology, continue to develop the testing procedures as we continue to evolve the product. But from our expert -- from our reviews so far, it's just better product. And the consumer will vote accordingly. But I think it will be presently surprised.

Moving on now to Scott Krasik with BB&T. Scott D. Krasik - BB&T Capital Markets, Research Division: Given the new store openings abroad and the momentum in Japan, can you just update us Tom, sort of the size of the markets ranking behind the U.K? Is Benelux still the #2 market? How do they compare to China and Japan now? Thomas A. George: Yes, let me -- I got that handy. For the total year, let me give you a frame of -- I'll give you last year's reference. U.K. was our biggest international market and then -- then Japan actually was #2. Benelux #3 and China, #4. This year, the U.K. still the largest market, then Japan comes in #2, China #3, and Benelux #4. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay. That's awesome. And then are the issues affecting China and Benelux similar and are the solutions similar or how do you frame the issues there? Thomas A. George: Different things. Benelux is really a wholesale business, lot of macro issues there to the point that they're -- the consumers when they do buy any brands, product, they down-selected the most affordable. So that's putting ASP pressures still some distribution issues there similar we had in the U.K. before we change that around. So we need to work on that. China, that's a retail market. We opened a lot of stores. We're getting opening stores. We now are adding the infrastructure and the personnel and the executive experience to be able to operate stores at a better rate and work on comps to make sure we have the inventory, make sure that we merchandise the stores correctly of those kinds of things. So that's why we're starting to see some improvements on the China comps. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay, Tom. That's very helpful. And then just last, when we were in the Nordstrom last week and the store associates kept saying, it's a no brainer for the [indiscernible] at 89, 90 or the Alloway. I mean where are you in terms of introducing product at that price point? And we'll we see even more next year? Angel R. Martinez: Yes, you'll feel definitely see more. Really this is going to be -- become a power alley for the brand. That's one of the things that we're very excited about. And again, given the flexibility that we have with raw materials, it allows us to address price points, meaning we have to abandon because of the rise in sheepskin pricing over the last 5 years or so. So we're very excited about, but not only the price points, but really the fashion, the quality, everything that we're seeing in the fall '14 line. I'm very excited to show you all what that looks like. It's going to be a breakthrough and you'll see for yourselves.

And then I also just wanted to add with Nordstrom that I'm really pleased with the results we're seeing and the offering, which is more transitional, more fashion product which is buy now, wear now. And consumers are really responding to getting more of that transitional product.

Moving on now to Camilo Lyon with Canaccord Genuity. Camilo R. Lyon - Canaccord Genuity, Research Division: I just want to go back to the inventory issue for 1 minute. Can you just help me understand where does the confidence level come from to take on more inventory and hold that at you and your DCU if the retailers necessarily committing to taking that product earlier. I mean, I know you guys are nice guys, but that seems to be not jive totally with what we're hearing from retailers and how they're trying to position their business. Thomas A. George: So just to confirm what we talked about earlier, Camilo, we actually have more orders than we had with current inventory levels right now. So we need more inventory to service the current orders. So that's obviously a good position to be in from that point of view. And I think another thing that to give everybody -- just remind everybody the frame of reference in terms of how the company is transforming into a more DTC business versus wholesale and distributor kind of business, you need inventory to support the DTC business, obviously, both the eCommerce and retail stores. And you need more drops of inventory over the course of the year and during the season have more and more fresher products. So as a result of that, you need to have more inventory. I think one other point -- I don't want to -- I can't say it really enough, we don't have -- with the strength of the brand, we don't have any issues from a major inventory write-off that maybe some other brands will have. And another thing to point out and when we did have some closeouts like any other footwear brand in the first quarter but nothing really of any significance. In fact, by the time it gets ready to finalize our closeouts for the quarter, sometimes I wish we could find more products to close out. So we -- and we've got the brand back to the strength of the brand it's been around for 35 years. So that's an experience in terms of how to manage inventories as well. Camilo R. Lyon - Canaccord Genuity, Research Division: Okay. And so the incremental $30 million to $40 million of inventory that you talked about, if the UGG inventories is only have decimal points, is that inventory then fashion-related product? Angel R. Martinez: It's a combination of both the transitional product for the third quarter, as well as some additional, what we call heritage kind of product, as well as other casuals. And it's a broad spectrum of a lot of different -- lots of different product. We'd rather get our hands on that inventory to be able to have it in our warehouse because we have moved a lot of inventory through our warehouse during the peak-selling season. We don't have to sit there and worry about waiting for inventory to be on the lot. And you know, this also enables the supply chain especially our factories to have more capacity to be able to manufacture even more product to meet the current order book we have because again right now are order book is higher than the current inventory we have on hand. Camilo R. Lyon - Canaccord Genuity, Research Division: So if you had more inventory then it would -- one would be led to believe that your revenue guidance will be higher, is that correct? Angel R. Martinez: Well, I think, let's look at this. I mean, currently, our UGG inventory at the end of June is up 2.5%, 3%, mid-single digits that are implied guidance for the back half of the year of UGG. Sales growth is up double digits, a 10% kind of number. So we're going to need more inventory to drive that kind of growth. And we'll also have the inventory available on the key styles to chase some business in season. Camilo R. Lyon - Canaccord Genuity, Research Division: And then just lastly on that, so do we expect Q3 inventory to be lower by $30 million to $40 million or will it be higher than $30 million to $40 million of that increment you took on sooner? Angel R. Martinez: I think, how we want to get everybody to view our inventory is continued improvement over time, which we've demonstrated on a year-over-year basis and inventories more in line with forward sales guidance and the quality will continue to be very strong.

And our final question today will come from Howard Tubin of RBC Capital Markets. Howard Tubin - RBC Capital Markets, LLC, Research Division: Just maybe one question on average price -- pricing. Maybe given all the initiatives you're working on in UGG Pure, what's going the average UGG price going to look like or maybe pricing on the collection this fall versus last fall or maybe 2014 versus 2013 is going to be trickling down over time? Angel R. Martinez: I think, as we continue to develop transitional product, the transitional product is at a lower average selling price. That said, as I mentioned in my comments, we're moving more units so we're putting more people on the ground which is a positive thing. When it comes to the high-selling season, the core assortments, that remains at the traditional price points and as we experienced over the last few years, we've been able to mitigate, taking the radical price increase. So we expect stability there in the core assortment. So really, you sort of have to look at our business as from 2 perspectives: One, is what's happening with price points at the peak season, of course, our core product selling, those price points will remain where they've been; and then we're introducing new products, new consumers into the brand at a lower average selling price. So if you take the net-net of it all, we probably, over time, we'll see as our business in the second and third quarter grows with the transitional product, you're going to see the average-selling price come down a little bit and then bounce back up in the fourth quarter with the core assortment. Thank you, all, very much for participating on the call. We look forward to updating you in 90 days as we move toward a successful conclusion of 2013. Thanks a lot.

That does conclude today's program. Thank you, all for joining today.