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

Corinna Van Der Ghinst - Citi Investment Research Sam Poser - Sterne, Agee & Leach Inc Danielle McCoy - Wunderlich Securities Jeff Van Sinderen - B. Riley & Co. Christopher Svezia - Susquehanna Financial Group LLLP Scott D. Krasik - Buckingham Research Group Jim Chartier - Monness, Crespi, Hardt, & Co. Corinna Freedman - BB&T Capital Markets

Greetings and welcome to the Skechers USA Incorporated Fourth Quarter and Year-End 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. At this point, I’d 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 the 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?

Good afternoon and thank you for joining us today to review Skechers' fourth quarter and fiscal year 2014 financial results. Our sales for the fourth quarter were $569.7 million, a 26.4% increase over last year, and the highest fourth quarter sales in the Company's 22-year history. This growth followed record first and second quarters and the third quarter that was our highest quarterly sales ever. This led to an annual sales record of $2.378 billion for the full-year 2014. The outstanding fourth quarter was the result of double-digit increases in our domestic and international wholesale and company-owned retail businesses, which benefited from the broad appeal of our diverse men’s, women’s and kids’ footwear collections. Further in the quarter our average price per pair increased by 7.4% in our domestic wholesale business. We saw 8.6% comp store increase in our global company-owned retail business. We achieved double-digit increases in many key countries that were negatively impacted by currency issues, all of these factors are testament to the increasing strength of Skechers. Fourth quarter sales and financial highlights include record fourth quarter revenues, a 24.3% increase in our domestic wholesale business with a 15.7% increase in pairs shipped and a 7.4% increase in average price per pair, a 37.9% sales increase in our international wholesale business with a 31.3% increase from our distributors and a 41.1% increase from our subsidiaries and joint venture partners, a 22% sales increase in our company-owned retail stores, which included an additional 59 net new stores opened in 2014, 17 of which were opened in the fourth quarter. Earnings from operations of $33 million, gross margin of 45.2%, net earnings of $21.9 million and diluted earnings per share of $0.43, inventories up 26.7% from a year-ago and inline with expected sales and a strong balance sheet with $466.7 million in cash or approximately $9.15 per diluted share. It is important to note that during the fourth quarter of 2014, our net earnings were negatively impacted by approximately $7 million, or $0.14 per diluted share of which $4.7 million, or $0.09 per diluted share was the result of negative foreign currency translations and transactions and $2.3 million, or $0.05 per diluted share, was the result of foreign and domestic bad debt write-offs. Full-year highlights include record annual sales, being named 2014 Company of the Year by both Footwear News and Footwear Plus, achieving the position of a number one walking footwear brand in the U.S. and the number two footwear brand, increasing our combined international retail and wholesale business by 46% to approximately 35% of the company’s total business which is well on our way to our three to five-year goal of international being 50% of our sales. The opening of the thousandth Skechers branded retail store in the fourth quarter, bringing us to a total of 1,042 Skechers stores worldwide at year end. Signing two global recording artists Demi Lovato to reach young women and Ringo Starr targeting adult men. The fourth quarter saw a continued momentum which was the result of the global demand for our innovative footwear. We shifted our fall 2015 buy meetings with key domestic accounts as well as our meetings with our international distributors into the fourth quarter, two months earlier to allow us to meet the incoming order rate for our new product. With record domestic and international bookings in the fourth quarter, our year-over-year worldwide backlogs are up 60% at December 31, 2014, which we believe is a clear indicator that our momentum will continue. Now turning to our business in detail. In our domestic wholesale business, fourth quarter sales increased 24.3% or $46.9 million as compared to the prior year period with a 15.7% increase in pairs shipped and a 7.4% increase in average price per pair. For the year sales increased 24.4% or $195.8 million which included a 19.1% increase in pairs shipped and a 4.4% increase in average price per pair when compared to the prior year period. The growth was the result of double-digit increases in our women’s and men’s footwear offset by a single-digit decrease in our kids offering. Our sales increases were broad-based. We achieved double-digit increases in our men’s and women’s Skechers Sport. Skechers USA and Skechers Work lines and our women's sport active, Skechers GO, and women's winter boots as well as single-digit gains in our women's on the GO line. Our relaxed fit business benefited from TV campaigns with Pete Rose, Joe Namath, Joe Montana and Brooke Burke. Additionally, we supported our adult lifestyle business during the quarter with commercial for women’s Skech-Air and our men’s and women’s Skechers Sport and Heritage Group collection. We believe we are also bridging the gap between the adults and kids by targeting teens with multiplatinum recording artist Demi Lovato with our Skechers colorful, comfort, print, television and YouTube campaign. Demi fresh style relates to teens and tens of millions of followers on social media. While we experienced a single-digit decrease in our kid’s footwear in the quarter, we had a single-digit increase for the year. As in the third quarter the decline is due in part to the planned decrease within one account in the South. We believe our kid’s business is stabilized and we are well-positioned for growth with year-over-year double-digit increases in our backlog at December 31, 2014. The renewed strength in our kid’s footwear’s in part due to our light weight sport collection, new developments within Twinkle Toes and Z-Strap, the innovative new Game Kicks lines which features a built-in memory game and the co-branded Starwest collections for boys which will launch in fall 2015. We continue to support our kid’s business with commercials targeted to kid’s including new spots for Twinkle Toes, Z-Strap with Skech-Air and lightweight sport. Key drivers in our performance lines were the updates to our Skechers GOwalk platform including the successful super sock and the introduction of GOwalk 3 in the fourth quarter both of which were supported by commercials. Expanding the platform to teen girls, we also aired a GOwalk commercial targeted towards juniors. The fourth quarter saw the launch of Skechers GOrun 4 at the New York marathon within in a company marketing campaign featuring elite runners Meb and Kara Goucher, both of whom competed at the celebrative event, with Meb being the first American to cross the finish line. In support of Meb as well as the performance running line, we had new noncommercial featuring GOrun 4 by Meb. We will continue to run many of our existing commercials this spring including our Demi Lovato campaign and we will debut commercials including Sketch Stretch V for women, Stretch Fit starring Brooke Burke and the new unisex sports spot. In January we shot the new Ringo Starr Relaxed Fit print and television campaign which were launched this spring and we plan to shoot recently retired New York Yankees Mariana Lovera this spring. We believe Ringo will not only help elevate our men’s business in the states but also around the world. Based on our domestic wholesale backlog and our continued focus on delivering innovative products and relevant marketing, we believe we will again achieve strong gains in 2015. In the fourth quarter, our total international subsidiary joint venture and distributor sales increased by 37.9% as a result of the strength of a diverse product initiatives, our subsidiary and joint venture sales improved by 41% and our distributor sales improved by 31.3% we are pleased with the continued growth in our international business especially given the headwinds from foreign currency exchange in some key markets. With the combined 41% growth for the quarter and 40.4% for the full year, our subsidiaries continue to perform extremely well. In Europe where we face currency issues, we achieved increases of 38.3% for the quarter and 50% for the year. The highest dollar increase came in your largest subsidiary, the UK which shipped more than 2.7 million pairs in a year. With our wholesale and company owned retail stores combined the UK surpassed $100 million in sales for the year, a significant achievement. To continue to grow our business in the region and capitalize on the success we are experiencing in the first quarter of 2015, we announced the transition of several distributors in Central Eastern Europe to a wholly owned subsidiary that will oversee 14 countries including Croatia, Czech Republic, Hungary, Romania and Serbia. With headquarters planned Budapest and smaller satellite offices in select countries, we believe this will positively impact our European operations in 2016. We completed the installation of the initial phase of the automation equipment of our European distribution center in the fourth quarter. However, we have found it is not sufficient for our expected growth in the region and we are currently planning additional phases and growth expansion, which will be substantially complete by the end of 2015. Additionally, we are pleased that Chile had double-digit sales increases in the quarter despite currency losses. We have established the company operated distribution center to more efficiently handle our business, which now includes a strong wholesale base and 29 retail stores at year end. Our Southeast Asia joint ventures continue to perform very well with combined growth of 59.9% for the quarter and 41.7% for the full-year, which includes increases in China of 129% in the quarter and 87.7% for the year. The growth in China is primarily due to GOwalk and our lightweight sport footwear for men and women, as well as the addition of a strong kids business, which launched with shopping shops throughout China. All indications are that our sales in China will continue to grow at this accelerated phase and become well over a $100 million business in 2015. Our international distributors also achieve strong growth in the quarter with 31.3% and 54.1% for the year. The quarterly increases were primarily the result of triple digit growth in the Middle East with 2.8 million pair shift for the year and double-digit growth in Australia, New Zealand, Mexico, the Panama region, the Philippines, Scandinavia, South Korea, Taiwan across Eastern Europe as well as strong results for many other countries. To showcase the brand and our complete offering, most of our international distribution partners have opened Skechers retail stores and we have a growing network licensed Skechers stores. At quarter end, there were 593 Skechers branded stores owned and operated by our joint ventures, licensees and distributors outside the United States. Of these, 388 are distributor owned or licensed Skechers retail stores, 173 Skechers stores are in our joint venture countries in Asia including those run by licensees in the region. Additionally, there are 32 company licensed stores in Brazil, Canada, France, Ireland, Portugal and Spain, countries where we directly distribute our products through subsidiaries. 54 distributor and licensed stores opened in the fourth quarter, including one each in the new markets of Nepal, Romania, Slovakia and Zimbabwe. Additional Skechers stores in existing market include 10 in China, eight in Mexico, four each in Australia, India and Malaysia, three in Russia, two each in Kenya, France and South Korea and one each in Canada, Denmark, New Zealand, Georgia, UAE, Estonia, Israel, Taiwan, Vietnam, Saudi Arabia, and Ireland, two stores closed in the quarter. Six third-party Skechers stores have opened to date in the first quarter and another 145 to 155 are expected to open during the remainder of the year, including our first stores in the Czech Republic and Sweden. International Express becoming in sync with our new product launches and marketing. Kids and men’s are growing in countries worldwide narrowing the product mix in the United States and where ever you go around the world you will see the same strong looks in every market. And in Asia we have also reintroduced one of our heritage styles which has caught on with young men and women. Our advertising campaigns are translated into numerous languages appearing on TV and in magazines around the world. With double-digit backlog increases the strong growth plans in many countries including the UK, China and the UAE, we believe this momentum will continue through 2015. Now with 34.5% of our total sales, we expect international to become 50% of our total business in the next three to four years. Worldwide sales and our company-owned retail stores increased by 22% for the quarter with domestic sales grown by 15.5% and international sales by 56%. This included positive comp store sales of 6.7% domestically and 19.1% in our international stores for a total of 8.6% comp store sales increased worldwide. At the end of the quarter, we had 449 company-owned Skechers retail stores around the world including 87 outside the United States. In the fourth quarter, we opened 19 stores, of which 12 are domestic and seven are international. These included new stores in Arizona, California, Hawaii, Idaho, New York, Nevada, and Texas. The international locations opened in the quarter included five in Canada and two in Chile. We closed one domestic and one international store in the quarter. We have opened three stores in the first quarter to date and we have another six to 10 plants with the remainder of the quarter with another 40 to 45 company-owned stores expected to open for the full-year, we should reach the 500 company-owned store milestone by year end. Domestic e-commerce sales decreased 4.5% for the quarter and are slightly down for the full-year. We are in the midst of the revamping the skechers.com site to responsive design ideal for mobile devices which will also include user generated contacts. Now, turning to our fourth quarter and full-year 2014 numbers in more detail. As I discussed earlier, fourth quarter sales increased 26.4% to $569.7 million, compared to $450.7 million in the fourth quarter of 2013. The significant growth from the prior year period was the result of the double-digit improvements in our domestic and international wholesale and retail businesses all of which benefited from our universally appealing men’s, women’s and kids’ product. Fourth quarter gross profit increased to $257.6 million or 45.2% of sales compared to gross profit of $200.6 million or 44.5% of sales in the corresponding prior year period. The increase was due to a combination of stronger sales throughout our distribution channel. Fourth quarter selling expenses were $40.2 million or 7.1% of sales compared to $33.5 million or 7.4% of sales in the prior year. The dollar increase in advertising and marketing expenditures was to support all of our diversified product categories both domestically and internationally. For the fourth quarter, general and administrative expenses were $186.6 million or 32.8% of sales compared to $153 million or 33.9% of sales in the prior year. The dollar increase in G&A was primarily due to our increased salaries rent from the 59 additional stores, increased warehouse and distribution costs related to higher sales volume, and the completion of the initial phase of our automation upgrade at our European distribution center and the establishment of the company operated DC in Chile. Of the $33.6 million increase in G&A, $9.6 million was due to increased expenses related to our international operations and $8.1 million was related to operating the additional stores when compared to the prior year period. During the fourth quarter of 2014, earnings from operations were $33 million or 5.8% of revenues compared to $17.1 million or 3.8% of revenues in the fourth quarter of 2013. Net income during the quarter was $21.9 million, compared to $14.2 million in the prior year period. Net income per diluted share in the fourth quarter was $0.43 on approximately 51.4 million average shares outstanding, compared to $0.28 on approximately 50.7 million average shares outstanding in the prior year period. It is important to note that during the fourth quarter of 2014 our net earnings were negatively impacted by approximately $7 million or $0.14 per diluted share of which $4.7 million on $0.09 per diluted share was the result of negative foreign currency translations and transactions and $2.3 million or $0.05 per diluted share was the result of and foreign and domestic bad debt write-offs. In the fourth quarter we’ve recorded income tax expense of $2.8 million compared to approximately 377,000 in the prior year period. Net sales for the 12 months ending December 31, 2014 increased 28.8% to $2.378 billion compared to $1.846 million in the prior year period. Gross profit was $1.72 billion or 45.1% of sales compared to $818 million or 44.4% of sales in the prior year period. Selling expenses were $181 million or 7.6% of sales compared $153.5 million or 8.3% last year. General and administrative expenses were $690.9 million or 29.1% of sales compared to $579.4 million or 31.4% of sales last year Earnings from operations were $209.1 million versus $93.6 million for the same period last year. Net income for 2014 was $138.8 million, compared to a $54.8 million last year. Diluted earnings per share were $2.72 on approximately 51 million average shares outstanding compared to diluted earnings per share $1.08 on approximately 50.6 million shares last year. Our effective tax rate for the year-ended December 31, 2014, was 20.5%, which was down from the forecasted rate of 22.6% at the close of the third quarter 2014. The decrease our effective tax rate was due to increased international profitability combined with slightly decreased domestic profitability. We expects improved international sales and profitability to continue to have a positive impact on its 2015 effective tax rate, which is forecasted to be between 20%and 25%. And now turning to our balance sheet. At December 31, 2014, we had $466.7 million in cash or approximately $9.15 per diluted share. Trade accounts receivable at quarter-end were $272.1 million and our DSOs at December 31, 2014 were 38 days versus 43 days at December 31, 2013. Total inventory including merchandise in transit at December 31, 2014 was $453.8 million, representing an increase of $95.7 million from December 31, 2013, and an increase of $90.8 million from the third quarter. Given the strength of our business including our extremely strong backlogs and increased retain store count; we are very comfortable with our inventory position. Long-term debt at December 31, 2014 decreased to $15.1 million, compared to $116.5 million at December 31, 2013. The decrease is primarily due to the reclassification of long-term debt to short-term debt on our distribution center and distribution center equipment. We expect to refinance the distribution center building before the end of 2015. Shareholders equity at December 31, 2014 was $1.1 billion versus $979.9 million at December 31, 2013. Book value or shareholders equity per share stood at $22.23 as of December 31, 2014. Working capital was $780.7 million versus $704.5 million at December 31, 2013. Capital expenditures for the fourth quarter were approximately $15.5 million of which $8.3 million was related to 17 new stores and several store remodels and $3.7 million was related to continuing phases of the automation upgrades of our European distribution center and $4 million for additional equipment upgrades at our domestic distribution center. We expect our capital expenditures for 2015 to be approximately $60 million to $70 million, which includes 50 to 60 retail store openings, equipment upgrades at our European and domestic distribution centers and an additional real estate purchase. In summary, 2014 was an exceptional year for Skechers in terms of financial and operating results, global growth in our key distribution channels, stemming from our product and marketing execution. We’ve achieved four record quarters including the highest quarterly sales in the company’s 22-year history, which resulted in a new annual sales record of 2.378 billion. For our wholesale business in 2014 the highest rate of growth in dollars and percentages came from international with most of our key countries achieving double-digit increases in the full-year including more than 50% in two of our largest markets, the UK and China and triple digit growth in another key market the UAE. Given the significant increase in our backlogs, we expect this momentum to continue as we look to international to become 50% of our total business in the next three to four years. Key to the international success is the growth of our men’s and kids’ businesses alongside the successful women’s business and the opening of Skechers retail stores. In the fourth quarter our 1,000th store was opened in Mexico. At the end of the year there were 676 Skechers branded stores outside the United States, 87 of which are company-owned. We expect to reach 700 international stores in the first quarter of 2015 and to open stores in new markets such as Sweden and the Czech Republic. We expect to open another 50 to 60 company-owned stores this year and as the planned growth from our distributors and licensees, we expect to have approximately 1,250 Skechers stores around the world at year end 2015. Within the United States we are continuing to see our product resonate with consumers at Skechers became the number one walking brand and the number footwear brand in America. With many orders already in for fall winter 2015 we are able to deliver more product in a timely manner. From our product standpoint the key sales drivers around the globe were consistent and were comprised of our stylish comfortable footwear across our lightweight sport, casual and walking lines. We are introducing new lines for adults and kids’ this year including the Star Wars co-branded line for boy’s that will be available in the United States and select markets around the world. From a marketing standpoint, we are continuing to support all of our key lines with campaigns that include TV, print, online and in-store initiatives. We are pleased to have two global recording artists on our roster, Demi Lovato and Ringo Starr as well as the much beloved leap runner and Olympian men. The strength of the Skechers brands, innovations in our broad based products and targeted marketing led to record annual sales in 2014. As we continue to innovate our product lines and build our infrastructure coupled with our retail growth trajectory, and accelerating backlogs, we believe we will achieve a new quarterly sales record of $690 million to $710 million in the first quarter of 2015 and earnings per share of $0.95 to $1.05. And now I would like to turn the call over to the operator to being the question-and-answer portion of the conference call.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Corinna Van der Ghinst of Citi. Please go ahead.

Thank you. Hi, David.

Hi.

I was wondering if you could just start off with FX and how much impacted included in your guidance for the first quarter and also how are you thinking about it for the balance of 2015. And then also if you could just kind of walk us through how FX is expected to impact your top line versus growth margin in SG&A lines?

That’s difficult to talk about the year in total, because we think we’re going to have pricing power as we get into the back half of the year certainly as we delivered our newest products. So that remains to be seen, but in our guidance we just assume our currency rate equivalent to where it is now with no significant change to either side. So we are taking that into account and of course putting it with our model for how much volume will do in each place which is open to fluctuations and changed as it is. Though our number of places that don’t have significant risk like in China and Southeast Asia and our distributors that sell in dollars and even in Europe which is probably our biggest concern as far as volume, the UK is our biggest market and they don’t seem to have the quite the same swings as the euro. We have taken into account, Canada which is a big swing, but we think we’ll have pricing power there as well in the back half of the year. So from everything we can see broken down, we’ve just taken the new currency exchange, we haven’t raised prices in the first quarter as yet, since they were committed to prior to and whatever we see as far as overhead and margin decreases or margin hits are in our assumption, but we don’t see in the overall that it moves gross margin that significantly since we are growing everywhere including our store base. So we may see a 100 to 200 basis point decrease in gross margin in the first quarter should everything be equal and there is a possibility that it could be somewhat less as we go somewhat faster in other parts of the world.

Okay, great. And then maybe you could just walk us through the decision that takes Central Eastern European back so early in the year? Can you talk about what you’re seeing in that market in terms of demand and maybe why you would do it so early and what other kind of investments that you still need to make in that business this year and just general thoughts on the microenvironment in Europe as we go into 2015?

Europe has held up very, very well for us. As we said in our prepared remarks the fact that we have happen now expand our distribution center after having just finished it given the demand we see in just Western Europe from where we are now. As we move East it’s always been easier for us to go to countries and parts of the world where we’ve had very good distributors prior to if the net brand is known even though they can’t grow as quite as quickly as we feel we can. The timing is just effective because that’s one of the distribution agreements we’re running there of course and they either had to be renewed or we had to be move in, we weren’t prepare to commit for a significant period of time because we think the Skechers branded stores there and the potential wholesale business as well as our potential for retail are just significant and after we finish the expansion of our distribution center in Europe by the end of 2015 by the time that part of the world is ready to go, we should have significant capacity and should leverage the new parts of the distribution center quite well. As far as capital required it’s very small, we don’t have a big purchase price as the distribution agreements were expiring. So it’s a matter of just opening new office and hiring personnel and getting them some samples and certainly some overhead with that, but nothing outrages and getting them started on selling. And we will be looking for more retail space, so to the extent we find some obviously that would be expect, but no different than anywhere else in the world and we should be able to build those stores in the same timeframe is that we were else. So the commitment is not outrageously large certainly given our size, we think we have the capacity that we can leverage a significant investment in the distribution center and the timing just happens to be right for us because we’re growing everywhere in the world and there is no reason to think that we won’t continue there.

Okay, great. And then just lastly if you could give us a little bit more detail on that 60% backlog number, how much of that increase can be attributed to shifting your fall 15 order period earlier and you know what the backlog number would be if you stripped that out?

I don’t think any of it is attributable to the fact that it’s early. We only book out six months, so the fact that they sold early, I think its more of a factor of sell through and commitment to the brand on a worldwide basis, so its grows everywhere. So we really are only out till I believe end of June, early July as far as the December 31 backlog is concerned and it is everywhere in the world. I think its part and positive, what we said at the end of the third quarter when the backlogs grew that we have a very big commitment for first quarter and that’s where it is, we said when the backlog was so big that we do better in the first quarter than fourth quarter simply because that’s the way the backlog had broken down. So I think what you see is that their commitment has increased if anything for the first quarter and now has moved into the second quarter as well and I think that’s attributable sell throughs and product and people’s perception of what we – how we will do as we get into the back half of the year.

Okay and breakout between international and U.S. backlogs?

Well to give that much and I don’t want to get into too much detail, but it’s fair to say that international is higher than domestic. Domestic is slightly lower than the overall number and international is higher.

Okay, thank you so much.

Thank you. The next question is from Sam Poser of Sterne, Agee. Please go ahead.

Good afternoon David, how are you?

I’m doing pretty good.

Like had imagined. Anyway a couple of things. A clarification about the last question about gross margins. What are you expecting the gross margin to be in the first quarter, was it down – just going to be down ion those markets where you are most affected or was that a total down, just want a clarification on.

That was a total down, when I said the 100 to 200 basis points maybe. You know that’s my case right now for the overall, that would be down somewhat more I think in Europe, but certainly not in any – certainly not in Switzerland and they make up - well England probably makes up a good 20% of - its certainly our biggest market 20% of the European marketplace and Switzerland has another small piece. So it really is only Central Europe that is with the euro. So depending on how it breaks down and where the currency ultimately ends and how much pricing power we have in the back half, its only a Q1 estimate right this minute.

And so you have really not - so in your expenses then you are going to benefit, I mean that’s the only way you get to your guidance, in just…

Well yes, of course we get the benefit for the expansion and everything that flows as far as rent is concerned out there and we do have some big rent and personnel. So to that extent you get somewhat of an offset that would flow through our gross profits.

No, no of course. And then did you pull - are you because of the strength of the dollar, are you pulling some of your international such as European initiatives forward, infrastructure wise I mean are you being a little more aggressive there because you are able to say, do it for less money.

No, that’s not a considerable thought process. The thought of moving it up considerably is because the demand is growing significantly faster than we even thought six months ago. Our European business I mean the fact that we got to a $100 million in England was way beyond the scope of what we would have thought this time last year going into the areas even as hot as we were getting and it seems to be continuing. Germany has come back very strong, Italy, Spain and those places where you wouldn’t anticipate significant growth is very, very good and we’re starting to book for the second quarter and into the third quarter. And I think it continues to - moving on and taking Central Eastern Europe, I think it’s a good time to move forward the fact that will get a benefit from currency on the build is almost secondary. I would rather have the margins than worry about the cost of the build. Because at the end of the story when it comes back to the financial reporting it’s just something that will be built in euros, and we’ll have to reclass it as far as dollars concerned for depreciation charges as we go forward. So I will get a break in cash, I don’t know - there is a P&L break forever. I would take slightly weaker dollar as far as the European marketplace is concerned.

Understood. I mean can you talk a little bit about what you are seeing at the port, the West Coast ports right now?

I see a lot of boats. I can’t quite see them out of my window but there is a lot of boats out there. I mean we are having difference than anybody else. It’s slow. We think we are somewhat behind we could be doing better. Unfortunately, when we reported those inventory increases if you look at our position at the end of December domestically the biggest piece of our inventory growth is in transit so it all has to come through the port. So overall takes longer than we would have anticipated. Right now we still are on time, we try to get as much in early as we can. So things are coming in earlier which certainly increases the size but it’s slow, but certainly workable. We’re hoping for a resolution as quickly as possible and that certainly would help. But right now we are making do but we have more insight than anybody else what happens over the next couple of weeks.

So like from goods leaving China right now, is that something where you might reroute them somewhere else to help make sure you get them through.

I don’t even know where that would be. I’m open to suggestions I mean 70% - well Seattle is backed up as we are and the boats are well up to San Francisco and the last time we tried that, it took longer because of the increased impact on places like Seattle and Vancouver and even south as we went into Mexico to get because of course there aren’t enough chassises and there aren't enough movement. So barring a catastrophically long-term strike even if there was a closure for two to three weeks, we still better off moving a computer port right here. I don’t know if there is any room and this place causes - there is not enough port space in the rest of the United States to cover what’s going to happen here.

Okay, and when you look at for the rest, you talked about you expected the momentum in the international business to continue based on what you are seeing right now and you’ve said a few times. Can you give us some indication of the kinds of annual growth rates you might be looking at for our international business?

Going into the first quarter, we are looking at least equivalent to last year and maybe some acceleration, but we’re waiting to see what happens with currencies and some of those other items around the world.

So I mean you think that I mean we would be safe to say that 25% to 30% revenue growth for the full-year would be a reasonable number at the starting point?

Sure.

Okay. Well, thank you very much, good luck.

Okay, thanks.

Thank you. The next question is from Danielle McCoy of Wunderlich. Please go ahead.

Hi, thanks for taking my question.

Always.

I was actually just wondering about if you could talk a little bit more about where you are seeing the distribution expansion in the U.S., so you could talk a little bit about the sporting goods channel and what you are seeing in the specialty running channel?

We’re now different, our big business is still in the family footwear channel and some of the specialty stores, we are doing significantly better in the running stores and not significantly different although we have some test and nothing that would move the needle as far as the sporting goods stores are concerned. So nothing is changed other than we’re getting bigger everywhere and we resonate in a lot of places. So we expected whether it’s store count or where we sell we have more categories, more styles and certainly some pricing, our average price has gone up some. So we seem to be resonating and getting our piece to where we are the strongest. The growth is not coming any significant degree although maybe to us minor degree for many new distribution in the United States.

Okay, great and then what should we be assuming for the impact of the closure of targeting Canada?

I’m not sure yet, I mean it was not the biggest piece of our business and it was relatively new for us. I don’t know over the year whether the loss is going to be for receivables if any. Although I anticipate there will be some and the business wasn’t more than a couple million a year, it’s not anything that couldn’t be picked up by target domestic should it resonate that was too early in the game. So while that maybe an opportunity cost for somewhere along the line, the actual year-to-year change won’t be significant at all.

Okay, and then just lastly, at the last show I notice that you guys are using a lot of the same or similar technologies that you’re using in your GOwalk in some of your other categories, should we going forward look at this as increasing the volume in that particular technology impossibly and saving on the cost in those areas?

I don’t know you save all the cost significantly by using them, obviously we were always developing new technologies, you’re probably see some as it come to the show and I think if you tell our guys that GOwalk was a similar technology that the new GOwalk is not significantly different and better than the old, they would take it personal. But we are always developing, we are always trying to move it throughout our product offering I don’t know that anything is so stagnant that you would say it just going to make money just on volume. We are constantly developing, we are constantly moving through our product lines and the new technologies will give us better pricing power as they come on board.

All right, great. Thanks guys, good luck.

Thanks.

Thank you. The next question is from Jeff Van Sinderen with B. Riley. Please go ahead.

Hi, congratulations on your continued business momentum.

Thank you.

David, let me ask you this, I know you mentioned pricing power with new product in the second half maybe you can talk a little bit more about how you see that developing just wondering what elements you see there. And then also I think you said gross margin you thought would declines could lessen throughout the year, just wanted to make sure we got that right?

Yes, we are talking in that particular perspective as far as Europe is concern are probably where the currencies are the weakest. I think all people that sell our product lines into those parts of the world are dollar denominated and certainly make them in the same parts of the world and there is going to be some price increases and inflation just because of the deterioration in the local currency whether we make it all back or not I am not really sure yet, we’ll see as we go along. But I think the fact that we are so much in demand and that there is going to be some price increases across the board with some people have don’t to as well that we will have some as we go forward. I don’t know anything specific right this minute, we are just getting everything and are costing together to see what comes on, but I would certainly be surprised if you didn’t have some pricing as we go forward as far as Europe is concerned.

Okay, good. And then in the discussion about growth I think 25% to 30% was talked about and that was I just want to clarify were you okay in 25% to 30% overall revenue growth for the whole company or were just referring to international there.

So I think that question was about international but I would probably be okay with that for the whole company too. So certainly in the 20% plus range so far, maybe even more. If you look at it we are up significantly higher, we are going to - let's say the middle part of the range is $700 million from what was $545, $550 so that’s certainly in the ballpark, I don’t know that we are going to see any kind of slowdown, I don’t see any yet. So that’s a good place to start.

Okay great. That’s great to hear. Thanks very much.

Thank you. The next question is from Chris Svezia of Susquehanna Financial Bank. Please go ahead.

Hey David, how are you?

I am good.

Just a housekeeping note, on the backlog up 60% that increases is you guys see that in dollars, its not local currency, correct?

That’s correct and I did it in local currency, it would be significantly higher.

Okay, fair enough. Just to clarify the 26%, 30% revenue growth for the first quarter, can you just maybe talk about U.S. wholesale business, I mean is that - have to accelerate sequentially from what you did in the fourth quarter in North of 25% if international is only up call it 26%, 27%.

It would be in that ballpark.

Okay, what was the acceleration DTC comps, January. I think they were up 16 or 17, is that just seasonal product or is that new products what's driving that in your stores?

That’s everything, I mean that’s across the board, it probably has something to do with what we are comping to go last year as far its concerned, but I think our store base both domestically and international has accelerated from what was December, which is never our strongest timeframe, so we usually have our weakest comps either its because we started strong in December, it remains that way, but this year going into January and to-date so far in February we’ve been double digit comp increases consistently week-to-week and over to six week period. So its obviously everything, we have a lot of new stuff in there, we don’t have a lot of seasonal, because we are not a big boot company to begin with. So it really is our core product.

Okay what is - I’m just curious, the increase in the backlog, a lot of that you maybe commented a lot of it was basically for Q1 that Q1 built for shipment for Q1. How much visibility do you have to that Q2 and Q3 given the fact that you ship so much back-to-school product typically very tail ended June anyway. So you have to be getting some visibility. I know its early, but some visibility to that. Just maybe…

Yes, we have good visibility into June, somewhat less visibility obviously July and also like I said we are pretty consistent, I don’t see anything that would concern me right this minute, we seem to resonate and I don’t see any real changes, we continue to book. We’ve had record incoming orders for the whole fourth quarter almost on a monthly basis. Our incoming order rate is just big everywhere in the world that’s domestically and internationally – and internationally converted to dollars. And we had a very strong incoming order month in January. So there is nothing that changed and nothing that would lead you to believe there would be changes further on in the year.

Okay. Last thing I have is just on the material handling, the short-term debt that - have why not paid off with the cash that you have it’s just because money is cheap and why not just refinance it just thoughts behind that.

Well, the plan right now is to pay off the equipment certainly and that’s probably into $25 million, $30 million range as it comes through the end of the year. The building is not 100% ours so we don’t have that choice. If it was ours, we would have paid it off, but we have a joint venture partner, so there are other criteria and he is a real estate holder. So he is got different needs and different that we help to come to terms, but that we will come to terms with as we refinance the building going forward. So it’s only because its not all ours.

Okay understood and last thing I just have is, when you guys think about taking pricing increases on the international side. And I assume you are commenting that you’ll probably do that for the second half. So I assume that’s beginning third quarter. Is it fair to say that it will cover the majority of what you lost from an FX conversion perspective or partial or just depends on the marketplace.

That will depend. Whatever we do, I think even more currently and as we continue going into the back half of the year. We are going to continue to increase our earnings simply because we are going to have so much scale. And we are grow regardless of that. So I don’t know that we pass it all. We have all along or not yet I mean we are still in the formative stages of that decision. We have our sweet spot in the marketplace we intend to stay there. So a lot of it will depend on what happens with currencies as we move forward and what happens competitively as we move forward, but we plan on keeping our place in the marketplace and continuing to grow itself. That decision is not made yet.

Okay understood. Okay all the best. Thank you very much.

Thanks.

Thank you. The next question is from Scott Krasik of Buckingham Research. Please go ahead. Scott D. Krasik: Hi, David.

Hi, Scott. Scott D. Krasik: Thanks for taking my question. So just a couple of clarification, so the comp, what are you expecting in the comp into your 1Q guidance in retail?

Originally coming up, we expected somewhere between high singles and low doubles going into the quarter. Scott D. Krasik: Okay. That’s helpful and I know it’s small but just e-commerce, how do you thinking about that not just for 1Q but throughout the year.

But we continue to use it, we do quite well with it, we don’t compete on our e-commerce site. We never compete on price and its more of a showcase for us. So while we have a massively large e-commerce business that’s not under our own banner, because we do support a lot of people in it, we are not looking to make it significantly large because we make no product to-date that is unique to the website nor do we compete on price. So we only do it as a convenience items where there is more colors, newer items if they come in something that might not be fully held at retail because they get hot and nobody - none of our customers have realized it. So it’s more a convenience and to keep it going, it seems as we continue to move along in our wholesale and online business growth with our third-party people around the United States. It has some kind of impact, but we love the views we get, and number of people we get and the people that were comparative sharpen our site to see what’s going on, so we get a lot of unique use and we get a lot of visitors and a lot of people interested and what the brand is doing and what the brand looks like and even with the commercials are, so we think it’s a net positive around our entire business. Scott D. Krasik: And then is it safe to say if you think that you can grew 25% to 30% revenue growth in 2015, that maybe you are taking up your domestic, I mean originally it sounded like, domestic would be growing in maybe the low to mid teens, but now maybe that would be growing like 20% for the year?

That’s the why it is in the first quarter, and that’s what I see with the order rate going forward, so I have no reason to think it doesn’t, but I don’t want to go that far out since we haven’t looked guidance in the past. I will tell you there is nothing about the incoming order rate to sell-through I hear. If you guys come to Vegas next week, you’d be able to talk to some of the customers and see why they are ordering so much. But I think, yes, I don’t see any slowdown yet. Scott D. Krasik: And then any change obviously you are not giving 2Q guidance, but if we don’t have pricing actions taken in 2Q currency, doesn’t change a whole lot with 2Q gross margin be down the similar amount to 1Q or it does mix effect things differently?

I think mix effects things differently and we’ve taken a closer look at that, our European business is the lightest in the second quarter. So the shift to distributors and may not be its - impact, but it’s too early to tell. I mean it just could be that we’re so hot, that people will move up their shipments even in Europe and we’ll continue to take them longer. It’s way too early we’re in a territory, where we are trying to supply all the needs, and we get a lot of requests and that historically is a very light period for international. So I don’t know it shouldn’t be any worse and might be somewhat better in Q2. Scott D. Krasik: Okay, and then just last I’ve been getting some questions about in the filings you obviously record a lot of earnings out of Jersey which I think is a low tax jurisdiction. Are you recognizing - your distributor sales that are captured, is it a portion of both subsidiary and distributor, and how that we’re thinking about that?

Its portion of our international, so those various places around the world that’s a big piece final that we do by the way just not to give anybody wrong idea pay tax in every jurisdiction which we do business, but the biggest piece of the ownership flows out mostly through Switzerland and then after that there is a slightly buffet to Jersey, so it’s not the biggest piece, but it’s certainly a piece and all our international business flow through Switzerland or Jersey. Scott D. Krasik: Okay, so it’s not necessarily Europe goes there one or the other?

No, all are international. Everything outside the United States and Canada goes through Switzerland and Jersey. Scott D. Krasik: Okay, all right. Thanks, good luck.

Thanks.

Thank you. The next question is from Jim Chartier of Monness, Crespi, Hardt. Please go ahead.

Hi, thanks for taking my questions. Could you just go over what’s the bad debt expense was related to in the quarter?

Yes, we had a distributor, the biggest piece is distributor in Russia that’s been having difficulties, we wrote-off just short of $2.5 million, the reason the impact was so large is that being international that was only impacted by 11% tax rate, so most of that is the biggest piece of the nickel and we had a company in the United States called [indiscernible] that was 500,000, but that’s totally taxed benefited in the United States, so not quite as large. So the biggest piece is because of Russia we had eight distributor in Russia that just not making it through this tough time.

Okay, and did you still what the FX impact was on the revenues in fourth quarter?

No we didn’t get into revenues around the world just it overall bottom line earnings per share.

Okay and you mentioned that some of your international sales are denominated in dollars, can you just kind of quantify how much of your international business is denominated in dollars?

The business we do with our distributors I think it vary throughout the year, I think it represents probably somewhere between 25% of 30% of our international business.

Okay and then on the European distribution center when – do you expect to leverage your international distribution or European distribution center expenses in 2015 or is it now pushed that to 2016?

No we should have some we are just getting it up and running, so it’s efficient as we would like to think that we are going to leverage part of it starting in Q2, certainly we’ll get some leverage although not the total amount because of the increase volume in Q3 and certainly by the end of the year in the first quarter of 2016 we should - unless growth continues in exuberant pace should get the full benefit of this investment.

Okay, and then you mentioned January comps last year?

We’ve actually been at double digit too, there is a lot more weather I think its just hard to believe on the east coast last year as far as domestic is concerned, but its not that big an issue.

Okay and then how much was incentive compensation up in 2014 and did you gotten to max out bonuses for the year and what's the plan for 2015?

Well the same bonus compensation - I would have to have to look at that. I really haven’t taken a look at the overall, it wasn’t significantly different than last year since its based on growth and we continue to grow year-over-year. Certainly on a percentage basis. So I don’t know that it was significant different, but you would have to call. I’ll look at the exact numbers if you want.

Okay. Thanks and best of luck.

Thanks.

Thank you. The next question is from Corinna Freedman of BB&T. Please go ahead.

Hi David.

Hi.

Most of my question have been asked and answered and I had a question about your cash, it seems like your savings are quite the rainy day and what's the confidence that you have in your 2015 outlook, do you have any - changes will also be on the return of that cash maybe to shareholders or at repurchase or special dividend, if there is any update you can give us on what your thoughts are.

I will tell you something we’ve talked about, but nothing we are ready to announce today.

Okay. Great, thank you.

Thank you. We have time for one final question; it comes the line of Sam Poser of Sterne, Agee. Pleas ego ahead.

Juts a quick follow-up David. The bad debt expense, that’s not going to repeat itself it sounds like.

No like I don’t, it would have to be somebody new to do that. So he is finished.

I mean so arguably. That’s a one-time nonrecurring charge that you just didn’t breakout as such in your release.

Yes, its not big enough, but its such an oddity, because we don’t have significant credit issues, we have them from time-to-time, you know we had the one in England a year or so ago but usually our customer is quite good. So yes, to that magnitude I would consider its a non-recurring certainly.

But I mean it was a nickel in earnings, it was a nickel in earnings so I mean that’s a little bit better than where you were.

We think we are on a great size, I mean you guys worry more about the nickel than I do, but yes, I mean it would have added a nickel would been nicer, but you know we had told everybody not to get too carried away with Q4 whole we are growing significant. We have a lot of investments to make and the truth be known, I would rather put a lot of more money into the distribution centers earlier, not realizing just how fast we are going to continue to grow here, but yes Q1 we will recoup a lot of that and it looks - at $700 million it’s a nice place to start for us.

All right very good. Thank you very much and good luck.

Okay. Thanks. End of Q&A

Thank you. That concludes the question-and-answer portion. I would now like to turn the conference back over to Skechers for closing remarks.

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.

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.