David Weinberg - Chief Financial Officer, Chief Operating Officer, Executive Vice President, Principal Accounting Officer and Director

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division Scott D. Krasik - BB&T Capital Markets, Research Division Sam Poser - Sterne Agee & Leach Inc., Research Division Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Greetings, and welcome to the SKECHERS USA, Inc. First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this point, I would like to turn the conference over to SKECHERS. Please go ahead.

Thank you, everyone, for joining us on SKECHERS conference call today. I will now read the Safe Harbor statement. Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements involve known and unknown risks, including, but not limited to, global, national and local economic, business and market conditions in general and specifically as they apply to their retail industry and the company. There can be no assurance that the actual future results, performance or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the company's filings with the U.S. Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all other reports filed with the SEC as required by federal securities laws for a description of other significant risk factors that may affect the company's business, results of operations and financial conditions. With that, I would like to turn the call over to SKECHERS' Chief Operating Officer and Chief Financial Officer, David Weinberg. David?

Thank you for joining us today to review SKECHERS first quarter 2013 results. Net sales for the first quarter were $451.6 million, and earnings from operations were $15.3 million. Our first quarter 2013 sales increased by 28.6% over the same period last year. This was the result of double-digit growth in all our revenue channels: domestic wholesale, international and our company-owned retail businesses. We view the continued growth as a testament to the strength of our brand and our fresh product offering. Net income for the first quarter was $6.7 million, and diluted earnings per share were $0.13. We'd like to note that the combination of 2 items negatively impact our earnings per share by $0.08. First, when our short-term intercompany investments in our foreign subsidiaries were translated into U.S. dollars, the stronger dollar resulted in a foreign currency translation pre-tax loss of approximately $3 million, which is included in Other on our income statement. In addition, we agreed to a $2.5 million credit to an account that had purchased a significant portion of our excess toning inventory in 2011, which impacted overall gross margins by approximately 50 basis points. Additional first quarter highlights include: a 44% increase on our domestic wholesale business; a 20.7% increase on our international business, including a nearly 30% growth in our international distributor business and an 18% increase in our international subsidiary and joint venture sales; a 16.9% increase in domestic and international retail sales; a 24% increase in e-commerce sales; a 47.1% increase in pairs shipped within our domestic wholesale business, with double-digit growth in our Men's, Women's, Kids and Work divisions. Further financial highlights for the first quarter include: inventories down over $85 million from the fourth quarter due to strong sell-throughs; a strong balance sheet with $264.7 million in cash or approximately $5.24 per share; and a return to profitability, with earnings from operations of $15.3 million. We are pleased with the continued strong gains we achieved in the first quarter, which follows a much improved fourth quarter, and with the significant improvements in our earnings from operations, net income and EPS, all of which reflected a loss in the first quarter of 2012. With fresh product, effective marketing and more efficient operations, we believe the positive momentum will continue in 2013, as we continue to grow our business around the world. In our domestic wholesale business, first quarter 2013 sales increased 44% or $58.8 million versus the same period in the prior year. This was due to double-digit improvements in our Men's, Women's and Kids lines and a 47.1% increase in pairs shipped. With an increasingly diverse product mix, we saw improvements with nearly every product line experiencing double-digit growth in the quarter, including our Men's and Women's SKECHERS GO, SKECHERS Sport and SKECHERS USA lines, and our Women's BOBS and Active lines, among others. Thanks to the continued sales growth of BOBS, as of last month, we have donated more than 4 million pairs of shoes as part of this program. Our Performance division continued to perform exceptionally well in the first quarter in particularly, our SKECHERS GOwalk line for women, On the GO for men and SKECHERS GOrun 2 for men and women. We believe sales of our Performance footwear were positively impacted by our humorous SKECHERS GOrun 2 Super Bowl commercial, which pitted men against cheetah. We received a lot of media attention, placing in the top 10 in several Super Bowl advertising polls. We continue to air this commercial on a new spot for SKECHERS GOwalk to support our spring business. We supported our lifestyle lines with commercials for Women's Sport Flex, Memory Foam, BOBS from SKECHERS, Daddy's Money, SKCH Plus 3 and Men's Relaxed Fit, starring Joe Montana. During this key selling period for Kids, we also aired commercials for Twinkle Toes, Bella Ballerina, HyDee HyTop, Air-Mazing and Mega Flex. As always, we supported our marketing efforts with in-store and print campaigns, including key running and lifestyle publications. We believe these marketing campaigns were instrumental in supporting our growing sales. The demand for our Performance and lifestyle product continued during the quarter, with the only exception being sandals, which did not perform well due to the cooler temperatures in much of the country. We are looking forward to delivering new styles across our diverse product platform through the remainder of this quarter and into back-to-school. We are encouraged by our April meetings with our key accounts, who gave us both positive feedback on our current product in the market, the product they have on order and future plans. In the first quarter, our total international subsidiary, joint venture and distributor sales increased by 20.7%, with our subsidiary and joint venture sales improving by 18.1% and our distributor sales by 29.9%. The significant subsidiary growth is attributable to 8 of our 11 regions improving in the quarter, including triple-digit growth for one country and the transition of Japan to a wholly-owned subsidiary. We would like to note that we remain cautious about several European countries due to the challenging economic environments, including Spain and Italy, the latter of which saw a small improvements in the quarter. Similarly, the economic environment in select Eastern European countries also presented challenges to several distributors. We are pleased with the growth we did experience in Russia, Scandinavia, the Baltics, Turkey and Greece, an area that continues to be severely impacted by its economic climate. The Americas continues to be a strong market for both our distributor and subsidiary business, with growth in all key regions. We are particularly pleased with the growth in Canada, under the guidance of a new country manager, and Brazil, a market we relaunched with new focus on product. Our key distributor in the region, who covers much of Central and South America also saw improvements in the quarter, but remains cautious due to economic and political challenges in 2 of his key markets. As in the fourth quarter, the Pan-Asia region continues to be a key driver on our international sales growth. Our JVs, China, Hong Kong and Southeast Asia, all saw double-digit improvement, as did several of our key distributors, including Australia and New Zealand and South Korea, though South Korea remains cautious due to the political environment. And Japan is now making inroads as a subsidiary, delivering its first big shipment in the first quarter and expanding its presence on TV and in-store with a marketing campaign that was launched last month. We believe Japan will positively impact our international subsidiary business over the next 2 to 3 years. Finally, our distributors across the Middle East and Africa regions showed significant growth, including the UAE, which is one of our biggest distributors. They continue to enter new markets and expand their retail presence. At quarter-end, there were 260 distributor-owned or licensed SKECHERS retail stores around the world; 118 SKECHERS stores in our joint venture countries in Asia, including those run by licensees in the region; and an additional 21 company licensed stores in Canada, Spain, Portugal, Ireland and the Netherlands. 10 SKECHERS stores were opened in the first quarter by our joint ventures, franchisees and distributors. These include 2 each in South Korea, China and Hong Kong and 1 each in Saudi Arabia, the Philippines, Denmark and Lebanon. The stores in Denmark and Lebanon are our first in these markets. The 2 stores in South Korea bring our store count to 75 in that country. And the 2 stores in China bring our store count to 56 in that country. Already in the second quarter, our distributors and JVs opened an additional 12 stores, with another 20 on plan for the balance of this quarter. 5 stores closed in the first quarter, 1 in Indonesia and 4 in Russia. 1 store in Singapore closed in the second quarter. As in the U.S., we are seeing an increased demand for our product in many countries around the world, reflected by the growth we experienced in the first quarter. Even with the challenging economic and political environments in some regions, we still anticipate our international sales to grow overall. With Easter moving into the first quarter and the trend of booking orders closer to need, we expect our international business to be flat in the second quarter and then continue its significant growth in the third quarter. As we continue to book more at-once business for our autumn/winter collections, we believe our fresh looks and marketing are on-trend for consumers around the world. For the quarter, total sales in our company-owned retail business increased by 16.9%, with domestic sales improving by 16.2% and international sales by 21.6%. For the quarter, we had positive domestic comp store sales of 11.3% and international comp store sales were up 19.4%, for a combined increase of 12.2%. We'd like to note that domestic comp store sales have accelerated in April. At quarter-end, we had 353 company-owned SKECHERS retail stores. In the first quarter, we opened 1 store each in Puerto Rico, Utah, Florida and Glasgow. Additionally, we closed 5 stores in the quarter. To date in the second quarter, we've opened another store in Puerto Rico, 1 in Phoenix and our first in Santa Barbara on State Street. We also opened a new store in Japan, bringing our total in that country to 4. We anticipate closing 5 stores in the second quarter, while opening an additional 3. For the remainder of the year, we expect to open another 28 to 32 stores. We view our SKECHERS retail stores as a profitable branding vehicle, and along with opening new stores, we continue to remodel key locations, including our Times Square store, which is in the completion phase of an exterior remodel, including improved LED signage. Though a small part of our total sales, our SKECHERS e-commerce business in the U.S. continues to grow, with a combined 24% increase in the first quarter 2013. While our e-commerce sites are primarily branding tools that allow us to highlight our marketing, showcase the breadth of our SKECHERS footwear and direct consumers to the nearest brick-and-mortar location, they are also a profitable revenue channel. Our licensing division is also expanding. We generated $1.8 million in licensing revenues in the first quarter from our many licensing partners, which includes eyewear, apparel, backpacks and socks, all branded SKECHERS. Men's and Women's SKECHERS performance and sport apparel launched this quarter in select SKECHERS retail stores, as well as in several wholesale accounts. Now turning to our first quarter 2013 numbers in more detail. As I discussed earlier, first quarter sales increased 28.6% to $451.6 million compared to $351.3 million in the first quarter of 2012. First quarter gross profit increased to $192.7 million or 42.7% of sales compared to gross profit of $155.7 million or 44.3% of sales in the prior-year period. The increase in gross profit was due to the combination of increased sales volumes and sell-throughs across all our revenue channels, improved quality of inventory and more in-line product. The decrease in gross margin was due to a combination of factors, including: product mix that resulted in slightly lower ASPs; the cleaning out of some inventory at lower margin; and previously discussed $2.5 million credit or 50 basis points for toning products sold in 2011. Going forward, we continue to expect gross margins to be in the 42% to 44% range. First quarter selling expenses increased $7.3 million to $37.7 million or 8.3% of sales compared to $30.3 million or 8.6% of sales in the prior year. The dollar increase in advertising and marketing expenditures was to support both our new and existing product lines and the growth of our business in the United States, as well as overseas, including our subsidiary in Japan. For the first quarter, general and administrative expenses were $141.5 million or 31.3% of sales compared to $130.9 million or 37.3% of sales in the prior year. The increase in G&A was primarily due to a combination of higher salaries and wages, outside services, higher rent from our increased retail store base and increased warehouse and distribution costs related to higher volumes, plus additional distribution costs in Japan and Brazil. During the first quarter of 2013, earnings from operations were $15.3 million compared to a loss from operations of $4.4 million in the first quarter of 2012. Net income during the quarter was $6.7 million compared to a net loss of $3.7 million last year. Net income per diluted share in the first quarter was $0.13 on approximately 50.5 million average shares outstanding compared to a loss per diluted share of $0.07 on approximately 49.3 million average shares outstanding in the prior year. A stronger dollar resulted in a foreign currency translation pre-tax loss of $3 million on our income statement. Income tax expense was $2.3 million or 23.1% for the first quarter of 2013. This compared to an income tax benefit of $3.8 million or 53% in 2012. And now, turning to our balance sheet. At March 31, 2013, we had $264.7 million in cash or approximately $5.24 per share. We believe the reduction in our cash balance was primarily due to timing differences in the receipt of inventories, payments to our factories and our increased sales in February and March, which increased our receivables balance. As of this week, we have an excess of $350 million in cash. Trade accounts receivable at quarter-end were $283.4 million. And our DSOs at March 31, 2013 were 50 days versus 53 days in the prior period. Total inventory, including merchandise in transit, at March 31, 2013 was $253.7 million, representing a decrease of $85.4 million from December 31, 2012 and an increase of $39.1 million from March 31, 2012. Long-term debt at March 31, 2013 was $125.5 million compared to $128.5 million in the prior-year period. Long-term debt primarily relates to our distribution center and related equipment. Shareholders' equity was $929.2 million versus $919.1 million from a year ago. Book value or shareholders' equity per share stood at approximately $18.40 as of March 31, 2013. Working capital was $654.8 million versus $647.8 million at December 31, 2012. Capital expenditures for the first quarter were approximately $7.8 million, which primarily consisted of new store openings and several store remodels. In summary, we're very pleased with our continued sales growth in our businesses in the first quarter of 2013, as we saw a double-digit gain in each of our business channels. The continuing positive comp sales increases we are experiencing within our SKECHERS stores, which are the first to receive new product, and the double-digit sales gains in our Men's, Women's and Kids divisions for domestic wholesale leads us to believe that consumers continue to see SKECHERS as the footwear brand of choice. Also, our growth in our now award-winning Performance division is proof that consumers are also embracing our technology-based running and walking products. We view our SKECHERS retail stores as key indicators to the success of our wholesale business, and to this end, we plan to open more stores in the United States and around the world, and believe our brand will continue to gain momentum in domestic and international wholesale markets. We are encouraged by the meetings with our key accounts last month, as well as sales in our company-owned retail stores. However, with Easter falling in the first quarter of this year and with the potential for back-to-school delivery shifting into the third quarter, we expect growth to be significantly stronger in the third quarter than in the second quarter. Basing on demand for our brand and our increasingly diverse product mix, as well as our global distribution platform, we believe we will continue to grow in 2013 and beyond. And now, I'd like to turn the call over to the operator to begin the question-and-answer portion of the conference call.

[Operator Instructions] Our first question is coming from the line of Mr. Jeff Van Sinderen with B. Riley. Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division: David, maybe you can just talk a little bit more about the shift or about your feeling that orders may fall more in Q3 than Q2. Is that a function at all of retailers telling you that they think back-to-school is going to be later this year? Or are they shifting delivery dates for that? Or maybe you can just give us a little more color on that.

Well, it's twofold. It has to deal with both our distributors and domestic wholesale, obviously. We did move some business into Q1, both domestic, I believe, because of Easter and our distributor base. And if you remember back, we had significant increases in inventory, which people speculated about at December 31 because everybody wanted to take them in earlier. And we had brought in significant inventories, saying we're getting ready for the season, which was going to start earlier this year than in prior years, which turned out to be true. So that's part of the movement from Q2 into Q1. Now for the back half, our distributors primarily are not as strong in Q2 and have been taking so much inventory into Q1 and distributing it through their base, especially with places like Korea and Venezuela and Colombia having more difficulty. And then some in Eastern Europe, we think that digests through and continue to grow for a new season in third quarter, which is primarily their strongest season. I think what happened domestically is while we fully expect to continue to grow, it won't be at the same level for domestic wholesale as it was at the end of last year and the first quarter. I think what happened was that spring started off slow, and now people are chasing it, and we can't get deliveries as early enough as June as they'd like. So what we're gearing up to is we're not sure how that June, July shift will work. We think most -- a lot of our customers came late and will get more product in July. Most of them seemed fully willing to accept it in June if it becomes available, which becomes a production issue, so there is a possibility for certainly picking it up. But more likely, given our inventory controls and as hot as we are over a significant amount of our product to catch up completely before July may be difficult. So the conservative tack would be to plan on moving it into July, which should be fine, and show that -- if you count June, July together, we will still show significant growth. Unfortunately, for us, it does flip over a quarter-end, so sometimes we have to take June as it is. So between those two, we'll still show some growth in Q2, but we've had significant growth in Q4 and Q1 and anticipate significant growth in Q3. So that's just the timing of the calendar and the way our international business came in this year. Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division: Okay. But if we're talking about domestic, it sounds like you still have pretty strong order trends in your domestic business, but some of it is just sort of a push-out and a little bit of a production fitting delivery schedule issue.

Yes, it's very true. I think because of the macro situation, a lot of customers didn't believe how hot we really were and our ordering patterns came in later as well, which is why that moved into June. While we had up orders for the first quarter, we had significant growth in April. And May will turn out to be, I'm sure, the largest May we've had outside of 2010 in the history of the company because people are just running that late overall, not realizing how hot we were in what may otherwise be a very not-so-hot marketplace at retail, so -- for footwear, anyway. So I think it's just the timing perception. And big customers of ours, domestically, have been trying to build supplies early for Easter and then push them back closer to need and not realizing how short we're going to be as the stuff came into the marketplace. Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division: Okay. And then you also mentioned that -- I think the sandal business has been tough for just about everybody due to the weather. And I'm just wondering if there are other pressure points in gross margin. I know there was -- there were some shifts going on, and obviously, you had a 50 basis point hit from the toning product. But is there anything else to read into there, either associated with sandals or puts and takes in terms of product margin in the quarter?

No, I don't think so. I think if you put the 50 basis points back, we're pretty much where we had planned to be. We would have been at 43.25, give or take, and for -- as bigger distributor pieces we had this time, and we're holding up well. The stores continue to increase their margins a little bit at a time while they continue to comp up, so we get a double benefit from them. The stores are really the best indicator. And they seem to be -- we mentioned they accelerated in April from first quarter, which was double digits. And it looks like now, they're even increasing on a comp store basis, on a percentage basis in May going into Memorial Day. So if Memorial Day has the same increases, percentage-wise, as we've seen the growth from April and May, then product may be even shorter as we get into Q3. Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division: Okay, good. So let me ask you this. I know there's been, at least in my channel checks, it seems like your wedge sneaker product has been pretty hot. Is there anything to talk about there in terms of, maybe, how much of your business that is or what we should be thinking about in terms of concentration of that business for back-to-school for fall, just as a hot category?

Actually, it's not a concentration business. And obviously, it will do better as the weather gets better. But it's a nice addition, but it's not overwhelming. It's not like our Performance product of GOwalk, on that order of magnitude yet around the world, although it continues to grow. So it's too early to worry about that particular product as a concentration point.

Our next question is coming from the line of Scott Krasik with BB&T Capital Markets. Scott D. Krasik - BB&T Capital Markets, Research Division: So just to drill down on the sales shift a little further. So what does your domestic backlog -- what's it running at right now? What's your international backlog running at right now?

Our international backlog is relatively flat. Our domestic backlog is obviously up some. It was slightly less than double digits going into this quarter from March, but it significantly increased since then. We've had a good April, and we'll have an even bigger May. I don't think it's a question of backlog to where they stand. The backlogs are significant. I think it's a timing issue between first, second and third quarter. Scott D. Krasik - BB&T Capital Markets, Research Division: I guess, I'm just trying to get to figure out -- I mean, you've given us some parameters around Q2. So I'm just trying to figure out how meaningful the sales growth in the wholesale channel could be in Q3.

It'll be certainly less than it was in -- oh, in Q3? Could have swore you were going to say Q2. So I'll do it my way. Q2 will certainly be less than Q3 -- Q4 and Q1. Q3, I think, could be as strong as Q4 and Q1 depending on how well Memorial Day goes. We've had a number of retailers call us and tell us how short they were going into Mother's Day, and if it continues to come out of Mother's Day stronger and gets stronger through Memorial Day, then a lot of good things can happen for us between now and the end of back-to-school, certainly for the balance of 2013. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay, so you're looking for mega growth here in Q3 again?

Could be. Aren't I always? Scott D. Krasik - BB&T Capital Markets, Research Division: And then just on the gross margin, if you add back the $2.5 million credit to wholesale -- to domestic wholesale, I think your gross margin would've been about 36%.

Right. Scott D. Krasik - BB&T Capital Markets, Research Division: Traditionally, Q3 is actually a little bit higher than Q1 in domestic wholesale gross margin. Is there any reason why it shouldn't be this?

It usually is because winter product is more substantial shoes, and they comes with slightly higher margins. I think that would depend on the breakdown between Performance and Kids shoes, et cetera around the world. But yes, I would anticipate some upticks for Q3. Scott D. Krasik - BB&T Capital Markets, Research Division: And then, anything -- I mean, from last year, I'm sure you're off-price sales or close-out sales would be higher because you were so clean last year for the back half. But I mean, is it going to be abnormally high? Are the inventories still clean -- lean enough that you're chasing [ph]?

The inventory is still really clean. I mean, if you think about it, I mean, our stores, like anybody else, I mean, we've been short of product. We're only up $39 million year-over-year, and we were up $100 million in the top line and are building for some big increases for Q3. So unless there's a shift in some product or we have some Rompa [ph], we don't anticipate significant leftover inventory. I mean, it's always some, but it shouldn't be anything major, not yet anyway. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay. And then just last, I mean, it looks like you had a higher distribution cost related to the sales, so that was variable. Did you have $5 million of other higher distribution costs that weren't sales related? I'm just trying to read through the Q.

We had -- I don't think it was $5 million. We probably had about... Scott D. Krasik - BB&T Capital Markets, Research Division: Or $4 million maybe?

$2 million, $2.5 million in -- outside the United States increases because Japan didn't exist last year, and now we have a third-party in Japan. It's a fairly expensive place to run in for most of the first quarter. The end was very strong, so it sort of complicated that calculation. And also in Brazil, where we were growing. I think you might add that we -- our bonus plan kicked back in this year, and there's probably another $1 million change or close to -- somewhere between $1 million, $1.5 million in bonuses that were issued this year that didn't exist, obviously, last year. So the 2 of those together are probably in that $3.5 million, $4 million you're looking for.

Our next question is coming from the line of Mr. Sam Poser with Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: I have a question. How -- with the early Easter, did you pull forward some of the selling expenses into Q1, and how should we think about that going forward?

Well, I think what happened in Q1 was that our media expenses were only up about $3.5 million. The balance, the other $4 million, were production costs. And there was probably even another $1 million on top of that as far as agency costs outside. So I would think a lot of the production costs will have -- moderate through the second quarter, so if you think it pulled forward because we had a lot of new product and a lot of move-in, that's probably true. I don't have the final number on all the production costs and what new commercials we may or may not do, that's still in work. But as far as media concerns, we don't expect any more than about a $2 million, $2.5 million increase in media expense -- direct media year-over-year. Sam Poser - Sterne Agee & Leach Inc., Research Division: So I mean -- so how should we think about -- I mean, so in absolute dollars, your selling expenses should increase less in Q2 than they did in Q1, I would assume.

Yes. They'll increase certainly -- they should be less in real dollars and certainly less as a percentage since you're starting with a much higher base because of what selling expenses are in Q2 versus Q1. Sam Poser - Sterne Agee & Leach Inc., Research Division: Correct, okay. And then you talked about international business being flat -- international wholesale being flat in the second quarter. How should -- I mean, give us domestic while you're at it. I mean, relative, are we looking at going from a 44% increase to like a 20%? Is that ballpark? Or I mean...

To get to 20%, I think we'd have to have a much stronger June than I anticipate. I think it's more in the lower double digits, probably in the 10% range or north of there somewhat. Sam Poser - Sterne Agee & Leach Inc., Research Division: And then, does that put -- I mean, theoretically, the combination of the two, does that put Q3 sort of looking like Q1, theoretically?

It may not be quite that high in percentage, but certainly, in between the two. I would get into the -- hopefully into the mid-20s and higher, maybe in the 30s, depending on how hot we get through Memorial Day. We expect Q3 -- I personally expect Q3 to be a significant increase. The biggest Q3 we ever had was $550 million, when we were as hot as could be. I don't see any reason we can't get close to 5 -- north of $500 million this year, unless things start to slow down somewhere. Sam Poser - Sterne Agee & Leach Inc., Research Division: Okay, all right. And then we heard -- just back to -- I mean, for the overall selling expenses on a year-over-year basis, I mean, it was up -- how should we be thinking about that now? I mean, I know that Robert hasn't made all the decisions yet, but, I mean...

We were up $7 million in the first quarter. We expect to be up -- if you count production costs, they may be $3 million or $4 million in the second quarter. And I think that's a good range, maybe even slightly less in the fourth quarter, unless something changes from the thinking now. But like I said, that's still a work in process, so not to be put in stone. Sam Poser - Sterne Agee & Leach Inc., Research Division: And then in Q3, it looks more like Q1 as the increase, give or take?

I would hope so. I mean, it's certainly possible. [indiscernible] Sam Poser - Sterne Agee & Leach Inc., Research Division: So the increase in the selling expenses?

No, I don't think so. Sam Poser - Sterne Agee & Leach Inc., Research Division: So you think that won't be as great as -- that won't be up $7 million. You think of it of like $5-ish million? Is that...

I don't have an exact number. So I think my impression today in all the conversations we had and the plans that are going forward, there will be somewhat less than the $7 million increase that we saw in Q1.

[Operator Instructions] Our next question is coming from the line of Mr. Chris Svezia with Susquehanna Financial Group. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Can I ask you international in Q2, can you parcel out the difference between your distributors and subsidiaries, or are they both pretty much flat? And can you just walk through maybe what's going on as you ship new products to markets like Germany, specifically, which had some challenges with toning in the past, what's going on there?

For Q2, our subsidiaries, joint ventures, et cetera, outside the distributors will be stronger certainly on a comparative basis than distributor. A big piece -- distributors will be down to bring international to a relatively flat quarter is what we see right now because the distributors stored their own inventory and it's not a constant flow. Once we sell it to them, how it moves through their customers, how they keep it, their reorder positions are significantly different. It's just based on when it leaves the Orient. So because of the big increase in Q1, for various reasons, and because their stronger seasons are invariably Q3 around the world, they will be weaker on a relative basis in Q2. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay, and Germany?

Germany seems to have, at least, found its bottom. We see some very positive signs that are converting a little bit at a time, so we don't anticipate any significant deterioration in Germany. And given the way sell-throughs are now, the weather's just starting to turn warm now, and we're getting some positive ideas, which leads us to believe we might be able to even show some slight increases in Germany for the back half of the year. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: And as you think about Q3, which is more important on the international side than Q2, what gives you the sort of confidence that you could start to grow distributor and, I guess, obviously, the subsidiary business maybe in a -- at a faster pace? What gives you that confidence?

Well, everything is based on our pre-lines and our meetings. Even those places that are going to be -- or those distributors that are going to be somewhat down, and they would include our people in South America and Korea. They all -- "they think they have the best product ever." They just bought so much in Q1 because they were all over it and didn't want to miss anything for Easter that they're planning their buys for Q3 to be significantly higher, barring any increases, any political friction or whatever might exist. The guys in South America have had issues in Venezuela and Colombia with some duties and things like that; things seem to be straightening out. Korea obviously had a situation with the North that they say impacted their retail to some degree with all the inventory. But everybody thinks the product's well, it's checking well. It's starting to -- it's selling very well everywhere in the world, and that's not unique. I think that's truly a timing. If I don't get any impression from talking to them, then anybody's got inventory issues or has any issues with the line as they've purchased it or what they're submitting to their customer base. So same as with pre-lines here and our own domestic customers as we keep open and in-tune to their customers and what they're looking for and how they -- what they tell us about the product and what they need. And it seems we have what they need, and they're all happy with the products. That's always a great place to start. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: So as we think about that mega third quarter, as Scott would call it...

I don't know it's a mega third quarter. It would be up third quarter. I mean, we could still move some of that stuff into June. So right now, we're pretty hot. I'm sure all your channel checks indicate that we're selling very, very well. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: No, no, no. They do. I guess, I'm curious about is, is it -- does international return to mid-teens growth? Does it return back to 20% growth? I'm just trying to get a context of what kind of growth rate you can think about in that [indiscernible].

Well, it may start later. I would be very comfortable with mid-teens and think very easily if we get any success with the warm weather. It was cold very late, and our stuff this year is better in the warmer weather. All the initial reports I'm getting with the weather starting to turn, especially in Europe, give me indication that they all think it's going to be positive in those places where it can be. I mean, Spain is still an issue and Italy, somewhat of an issue, although Italy's showing some signs [indiscernible]. But aside from that, China has gotten well. Our stores are comp-ing up significantly going into Q3, or most of Southeast Asia. India is just beginning. Japan is starting to sell. Japan will have a much a bigger second quarter, just from fill-in business than they had in the first quarter and continue to go in Q3. So Brazil is picking up, and it's planning to have a bigger second half than first half as the product gets into the marketplace and some of the check-throughs. So all the data we have as to sell-throughs in products seems to be in line with significant growth in Q3. And we really won't know that until we get closer. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay. Shifting gears for a sec -- to the second quarter for a moment. When you think about G&A, at $141 million, call it, in Q1, is that sort of a fair proxy to use for the second quarter, so this $141-ish million number?

Depending with the volume -- I have to see the store openings, I would think so because, obviously, bonuses will be down some. And the rest shouldn't increase significantly, although there'll be -- there may be some increases in some countries that won't be saved in other countries like Japan will probably have to increase some, but nobody will decrease, even if their volumes are slightly down. I don't have significant distribution expense as far as the distributors are concerned. So since they're coming down, I don't get it back from anywhere, and some countries are up. So I would say that's not a bad place to start. There may be some minor increases here and there, but it should be somewhere in that ballpark. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: And gross margin, you threw out 42%, 44%, which is a little bit higher than you'd typically give, 42%, 43%. Does that -- I mean, is Q2 -- just now that we've gotten out of that sort of little toning issue that you had, I mean, does that look more like a 43-ish, given how clean you are at retail? I mean, is that possible to be at that range?

Yes, I would think it's more in that range, simply because the biggest decrease will be distributors, which is the smallest gross profit, not necessarily the operating profit, and probably the biggest gainer because their comp store increases is retail, which is our higher-margin. So we do have a positive shift from 2 big pieces, and we'll see how the other piece is filled in. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay, can I ask you how Penny's is doing for you guys of late?

They're certainly not worse than last year. I'm trying to think of how to put it. We don't have any significant deterioration in Penny's, I mean, we haven't seen any major increases. But the deterioration we saw last year has held through. We're sort of flattish, maybe even slightly on the upside. What I can tell you anecdotally is that we think that they've changed some, and we're getting more requests for product. And if that request -- those requests for availability do convert to orders, we may even see some increases as we get to the back half of the year. So it's not that different than what I see in Europe. It's -- we've hit a bottom and we're moving along it, and we have some potential -- certainly more potential to the upside than the downside from here.

Ladies and gentlemen due to time constraints, at this point, we will have to end our Q&A session. At this time, I would like to turn the conference back to SKECHERS for any closing comments that they may have.

Thank you again for joining us on today's call. We would just like to note that today's call may have contained forward-looking statements. As a result of various risk factors, actual results could differ materially from those projected in such statements. These risk factors are detailed in SKECHERS' filing with the SEC. Again, thank you, and have a great day.