Skechers USA (SKX) on Q4 2015 Results - Earnings Call Transcript

| About: Skechers USA (SKX)

Skechers USA, Inc. (NYSE:SKX)

Q4 2015 Earnings Conference Call

February 10, 2016, 16:30 ET

Executives

Andrew Greenebaum - IR, Addo Communications

David Weinberg - COO & CFO

Analysts

Corinna Van Der Ghinst - Citi

Jay Sole - Morgan Stanley

Sam Poser - Sterne, Agee

Jeff Van Sinderen - B. Riley & Co.

Scott Krasik - Buckingham Research Group

Chris Svezia - Susquehanna Financial Group

Corinna Freedman - BB&T Capital Markets

Operator

Welcome to the Skechers USA Incorporated Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions]. At this point, I'd like to turn the conference over to Skechers. Please go ahead.

Andrew Greenebaum

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 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?

David Weinberg

Good afternoon and thank you for joining us today to review Skechers fourth quarter 2015 financial results. Please note that all share and per share information mentioned on today's call has been retroactively adjusted for the three-for-one stock split which was effective October 15, 2015. Our sales for the fourth quarter were $722.7 million, a 26.8% increase over last year and a new fourth quarter record. This resulted in a new annual sales record of $3.147 billion and the first time we have achieved annual sales in excess of $3 billion.

Fourth quarter highlights include record fourth quarter revenues; earnings from operations of $54.7 million, a 65.7% increase; net earnings of $29.4 million; diluted earnings per share of $0.19; gross margin of 45.6%; a strong balance sheet with $508 million in cash or approximately $3.29 per diluted share; an 8% increase in our domestic wholesale business with an increase of 2.5% in average price per pair; a 64.9% sales increase in our international wholesale business, which included strong triple-digit gains in several key regions including China and the Middle East; a 20.2% sales increase in our Company-owned retail stores which also included an additional 68 net new stores opened compared to the prior-year period of which 22 were opened in the fourth quarter, including our second store in Times Square; worldwide comps of 9.1% in our company-owned Skechers retail stores; and new marketing campaigns starring Brooke Burke-Charvet, Kelly Brook, and Sugar Ray Leonard all launched in the quarter.

Of note, our annual effective tax rate for 2015 increased slightly to 21.7% from 21.3% as of September 30, 2015, which increased our fourth quarter effective tax rate to 23.9% and reduced our earnings per share by $0.01. In addition, the Company's gross margins were negatively impacted by approximately $8.1 million due to negative foreign currency translations and an additional $2 million in other expenses related to foreign currency transaction losses during the fourth quarter of 2015.

Full-year highlights include record annual revenues, earnings from operations of $350.8 million, net earnings of $231.9 million, diluted earnings per share of $1.50, gross margin of 45.2%, worldwide Skechers retail store count including third-party owned Skechers stores stood at more than 1300 locations achieving the position of number two footwear brand as well as the number one walking and work brands in the United States, growing our international business to 40% of our total sales bringing it closer to our two- to three-year goal of international representing 50% of our total business, and Skechers being named company of the year by Footwear Plus and Robert Greenberg receiving the Lifetime Achievement award from Footwear News.

The growth we achieved in the quarter and for the full year was due to the strength of our men's, women's, and kids’ lines led by the global acceptance of our Skechers Sport, Skechers GOwalk, Relaxed Fit, and sporty styles for kids. The gains in the U.S. came despite sluggish retail environment in the back half of the year and within our international business despite negative impact of foreign currency exchange rates in several key markets. We believe the momentum we experienced throughout 2015 will continue through 2016.

Now turning to our business in detail, in our domestic wholesale business fourth quarter sales increased 8% or $19.3 million and full-year sales increased 22.2% or $221.8 million, both as compared to the same prior-year periods. We're pleased with the growth in the quarter, especially given the sluggish domestic retail environment and unusually warm weather. The growth in the quarter was the result of a 5.4% increase in pairs shipped, a 2.5% increase in average price per pair, and double-digit increases in kids as well as single-digit gains in our men's and women's business.

For the holiday selling season, we ran numerous campaigns supporting our brands. For adults, this included the launch of our new Skechers First campaign featuring Brooke Burke-Charvet and relaxed fit women featuring Kelly Brook, Sugar Ray Leonard for Skechers Sport, Ringo Starr with Men's Relaxed Fit, as well as our Skechers GOFlex commercial among others. In support of our kids business, we ran multiple animated and live-action commercials, including spots for Twinkle Wishes and Game Kicks, both great holiday gifts.

Our brand ambassadors also utilized their own social channels to post images with Skechers shoes, some of which gained more than 700,000 likes as we've seen with Demi Lovato. Later this week, the Skechers Performance Los Angeles Marathon will take place with 26,000 runners and an estimated 50,000 attendees at the expo. Skechers Performance elite athletes, Meb and Kara Goucher, will also be competing at the Olympic trials on February 13.

As we look to spring, we're excited about delivering fresh new styles and the launch of the new Demi marketing campaign for Skechers Burst this month and the upcoming campaign for our newest ambassador, multi-platinum pop artist, Meghan Trainor, who will be appearing in a print and TV campaign for our new Skechers Originals design. We're continuing to focus on designing and marketing innovative product and are looking forward to meeting with accounts next week at the Platform show in Vegas.

International wholesale achieved the highest percentage and dollar increase of our three distribution channels. Total international sales increased by 64.9% or $97.4 million in the fourth quarter and 58.8% or $405.2 million for the full year. This sizable growth came despite currency issues in several key markets including Brazil, Canada, and Chile. We implemented price increases that will be reflected in our shipments for the first quarter which will help us mitigate the currency headwinds.

In the quarter, the growth came across nearly every region with double-digit gains in the Americas, Asia-Pacific, Europe, and the Middle East. Fueling these gains was the shipment of 1.7 million pairs by our China joint venture and the shipment of more than 2 million pairs to our distributor in the UAE who handles the sales of Skechers across much of the Middle East and into Africa. The only region that did not grow was Eastern Europe due to both political unrest and the transition of several distributors to a centralized subsidiary model in 2015. We expect our new central eastern European subsidiary to positively impact our sales in the next couple of years.

Further detailing our growth in international, our combined wholly-owned subsidiary saw net sales increases of 19.5% in the quarter and 31.5% for the full year. For the quarter, the strongest dollar gains came from the United Kingdom and Germany and on a percentage basis, Benelux and Chile. Several subsidiary countries did not show sales growth in the fourth quarter, yet still had double-digit growth for the year. We believe the lack of our quarterly growth is a timing issue with the shift of some shipments into the first quarter of this year.

Additionally, in the fourth quarter we cleared out inventory in Japan and Brazil to begin 2016 with fresh product. We believe Japan especially will begin to profitably grow as we continue to focus on delivering the right product and the right quantities into the right stores. Additionally, in the fourth quarter, we began shipping into Panama, Peru, Colombia, and Costa Rica as well as several other countries through a new Latin American subsidiary after transitioning our Panama-based distributor to a subsidiary model earlier in 2015. With a strong network of stores in Latin America and stores opening in Central Eastern Europe, we believe these new subsidiaries will positively impact our operations in the next couple of years.

To prepare for the accelerated growth in Europe we're increasing the capacity and efficiencies of our European distribution center. We just completed our third expansion phase and shipped more than 2.3 million pairs in January which is more than double what we shipped in the same month of 2015 and they eliminated the operational inefficiencies we noted in the prior year. In May of this year we will complete the fourth expansion phase, giving us more than 1 million square feet of distribution space.

Our joint ventures in Asia grew by 93.3% for the quarter and 113.7% for the year led by triple digit gains in China for both the quarter and full year. With 162 Skechers retail stores, an extremely strong eCommerce business and more than 1.7 million pairs shipped in the fourth quarter alone, we believe there is still tremendous opportunity across China to build the brand, especially within our men's and kids divisions which are just getting started in this vast market.

Our international distributors improved by 91.6% in the fourth quarter and 69.9% for the full year. We're pleased that this significant growth was achieved despite the transition of distributors in Latin America and Central and Eastern Europe to subsidiaries but would also like to note that the strong gains were in part due to a shift of some distributor orders from the first quarter of this year to the fourth quarter of 2015.

Numerous countries led to quarterly growth within our international distributor business, most notably our partner in the UAE with triple digit growth and a significant dollar gain. Additional markets with strong dollar and percentage gains for the quarter are Australia, New Zealand, Taiwan, Israel, Philippines, Scandinavia, South Korea and Turkey, as well as strong results from many other countries. Along with a thriving wholesale business, most of our international distribution partners have opened Skechers retail stores and we have a growing network of franchise Skechers stores in countries where we handle the distribution of our product.

At quarter end there were 796 Skechers branded stores owned and operated by our joint ventures, franchisees and distributors outside the United States. Of these, 414 are distributor owned or franchised Skechers retail stores and 298 Skechers stores in our joint venture countries in Asia, including those run by franchisees in the region. Additionally, there are 84 company franchise stores in those countries where we directly distribute our product.

In the fourth quarter 85 third-party stores opened. These include 23 in China, 8 in Mexico, 7 in India, 6 in Indonesia, 5 each in Thailand and Malaysia, 4 in Germany, 3 each in Australia, Turkey and the UAE, 2 each in Taiwan, South Korea, Kenya, Japan and Brazil, 1 each in Belarus, Brunei, Denmark, France, Ireland, Italy, Myanmar and Oman. Nine stores closed in the quarter. Thirty-one third-party Skechers stores have opened to date this year and we expect another 250 to 275 to open in 2016. Of note there are now 162 Skechers stores in China, 76 in South Korea, 62 in Mexico and 44 in Malaysia.

International has grown to 40% of our total sales and is well on its way to our goal of representing 50% of our total business in the next 2 to 3 years. We believe there is a tremendous opportunity to continue to grow the Skechers brand around the world. The growing third-party retail base, including our expanding franchise network, is positively impacting brand recognition as the stores showcase a more complete offering of a diverse, stylish and comfortable footwear selections.

The continued demand for our footwear has also resulted in more exposure in store and online as we see new Skechers-branded windows, brand shops and displays in France, Germany and Spain as well as China, Turkey and Australia and many other global markets, worldwide sales in our company-owned retail stores increased by 20.2% for the quarter and 20.7% for the full year. For the quarter, domestic sales grew by 14.5% and international sales by 43.4%. This included positive comp store sales of 8.2% domestically and 13% in our international stores for a total of 9.1% comp store sales increases worldwide.

At the end of the quarter we had 517 company-owned Skechers retail stores of which 127 or 25%, were outside the United States. In the fourth quarter we opened net 22 stores, including our second store in Times Square, our first in Poland and three in both Japan and the UK. In addition, we expanded our warehouse store in Gardena, California, to 30,000 square feet, making it our largest Skechers store. As we look at 2016, we believe that company-owned retail stores are on target with mid to high single-digit retail comps in January. During 2016, we plan to open approximately 55 to 65 stores, including 8 to 10 stores during the first quarter.

Now turning to our fourth quarter and full-year 2015 numbers in more detail, fourth quarter sales reached another record increasing 26.8% to $722.7 million compared to $569.7 million in the fourth quarter of 2014. The improvement was a result of net sales increases of 8% in our domestic wholesale business, 64.9% in our international wholesale business and 20.2% in our company-owned global retail business which includes a 9.1% increase in comparable store net sales for the quarter.

Fourth quarter gross profit was $329.9 million compared to gross profit of $257.6 million in the fourth quarter of 2014. Gross margin was 45.6% compared to 45.2% in the prior-year period. In addition the Company's gross margins were negatively impacted by approximately $8.1 million due to negative foreign currency translations and an additional $2 million in other expenses related to foreign currency transaction losses during the fourth quarter of 2015.

Fourth quarter selling expenses increased $17.7 million to $57.9 million or 8% of sales compared to $40.2 million or 7.1% of sales in the prior quarter. As a percentage of net sales, advertising expenses were 5.5% and 5% of the fourth quarters of 2015 and 2014, respectively. The $11.2 million increase in advertising expenses was primarily attributable to higher international advertising expenses of $5.3 million and increased domestic advertising of $5.9 million.

In addition, sales commissions increased $600,000 due to the conversion of our sales force from agents to employees in Italy and $4.6 million related to commissions in our newly formed Latin American subsidiary for third-party operations.

For the fourth quarter general and administrative expenses increased 18.5% to $221.1 million or 30.6% of sales compared to $186.6 million or 32.8% of sales in the prior year which represented a 215 basis points improvement in operating leverage. The year-over-year dollar increase in G&A was primarily due to our increased store count and rent expenses as well as increased warehouse and distribution costs related to significantly higher sales volume.

During the fourth quarter of 2015 earnings from operations increased 65.7% to $54.7 million or 7.6% of revenues compared to $33 million or 5.8% of revenues in the fourth quarter of 2014. Net income increased 34.3% to $29.4 million compared to $21.9 million in the prior year period. Net income per diluted share in the fourth quarter was $0.19 on approximately 154.6 million average shares outstanding compared to $0.14 on approximately 154.1 million average shares outstanding in the prior year period.

Net sales for the year ended December 31, 2015 hit a record high increasing 32.4% to $3.15 billion compared to $2.38 billion in the prior year. Gross profit also increased 32.9% to $1.42 billion compared to $1.07 billion in the prior year. Gross margins were 45.2% compared to 45.1% in the prior year. Selling expenses were $235.6 million or 7.5% of sales compared to $181.1 million or 7.6% from last year. General and administrative expenses were $849.3 million or 27% compared to $690.9 million or 29.1% last year. Earnings from operations improved significantly year-over-year to $350.8 million or 11.2% versus $209.1 million or 8.8% for the same period last year.

Our higher levels of profitability provide a strong foundation for continued growth while making important investments in R&D, product development, new stores, international expansion, marketing and completing the final phase of our European distribution center. Our effective tax rate was 21.7% compared with 20.5% in 2014. We expect continued growth internationally will positively impact our effective tax rate which is forecasted to be between 20% and 25% for 2016.

Net income for the year increased 67.1% to $231.9 million compared to net income of $138.8 million in the prior year. Diluted earnings per share were $1.50 on approximately $154.2 million average shares outstanding compared to diluted earnings per share of $0.91 on approximately 153.1 million shares last year.

Now turning to our balance sheet, at December 31, 2015, we had $508 million in cash or $3.29 per diluted share. Trade accounts receivable at quarter end were $343.9 million and our DSOs at December 31, 2015, were 36 days versus 38 days at December 31, 2014. Total inventory, including merchandise in transit at December 31, 2015, was $620.2 million, representing an increase of $120 million from the third quarter and an increase of $166.4 million or 36.7% from December 31, 2014. Given the strength of our business and strong sell-throughs, we're very comfortable with our inventory levels.

We have had a very strong start to the first quarter with January sales up approximately 35% over the same month last year. Our backlogs are up 9.5% at December 31, 2015 which were impacted by several international distributors pulling forward approximately $15 million to $20 million in shipments from January to December. Additionally, on our domestic accounts through their own inventory concerns are ordering closer to season and our backlogs are significantly stronger for the first quarter shipments. It is also important to note that our backlogs do not include Company-owned Skechers retail stores which we have increased by 68 stores year-over-year, as well as our joint ventures in Asia, including China, where we'll have a strong double-digit growth in 2016.

Long term debt at December 31, 2015, was $84.6 million compared to $116.5 million at December 31, 2014. The decrease was due to pay off and pay down of our domestic distribution center loans. Shareholders' equity at December 31, 2015, was $1.4 billion versus $1.1 billion at December 31, 2014. Book value or shareholders' equity per share stood at approximately $8.90 as of December 31, 2015. Working capital as of December 31, 2015, was $993.5 million versus $779.3 million at December 31, 2014.

Capital expenditures for the fourth quarter were approximately $60 million of which $13.3 million was related to 22 new company-owned domestic and international store openings and several store remodels, $4 million for additional equipment upgrades at our European distribution center and the completion of phase 3 of our facility, $15 million for corporate property purchases for future development and $17.4 million for new office space for our China joint venture. We expect capital expenditures for 2016 to be approximately $60 million to $65 million which includes 55 to 65 retail store openings, the completion of our European distribution center expansion, an additional corporate land purchase and expansion of our corporate headquarters.

In summary, our new fourth quarter sales record and our new annual sales record, including the annual gains of 22% in our domestic wholesale channel and 59% in our international distributor and subsidiary business channel over 2014 is very significant given the sluggish domestic retail environment in the back half of 2015 as well as declining currencies in several key countries. Further, the gains of 20.7% in 2015 for our worldwide Company-owned retail stores and strong comp store gains give us further confidence that the demand for our fresh product continues in the United States and around the world.

In 2015, we became the second largest footwear brand in the United States as well as being named Company of The Year by Footwear Plus magazine and sketchers CEO, Robert Greenberg, received the Lifetime Achievement award from Footwear News. Additionally, we signed several new notable influencers, including Meghan Trainor and saw the launch of two great marketing campaigns featuring legends Sugar Ray Leonard and Ringo Starr. Internationally, a Korean pop group, SISTAR, helped bring awareness to our successful relaunch of D'Lites in Asia.

We believe the greatest potential for our growth is in our international markets and we believe the growth we're achieving across Asia and Europe is particularly indicative of the broad acceptance of our brand. We expect to continue to broaden our product assortment and open more Skechers stores to meet this demand with 1340 open to date, of which 517 are Company-owned Skechers stores. As we look at 2016, we believe our Company-owned retail stores are on target with mid to high single digit comps recorded in January.

We're looking forward to the spring selling period with the introduction of more fresh styles, the launch of the new Demi Lovato campaign for the Skechers Burst, Demi Boot and the Meghan Trainor campaign for Skechers Originals. And Brooke Burke-Charvet is on the fall season of Celebrity Apprentice which will bring more recognition to her and the brand. We're also looking forward to the Skechers Performance Los Angeles Marathon this weekend with both Meb and Kara running for a spot on the U.S. Olympic team.

With a strong start to the first quarter and the broad acceptance of our brand worldwide, we see significant potential to grow our business in 2016 by investing in our product, marketing and infrastructure. We remain comfortable with the majority of the analysts current consensus range of $885 million to $920 million in net sales and $0.50 to $0.55 in earnings per share for the first quarter. And now I'd like to turn the call over to the operator to begin the question and answer portion of the conference call.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question is from Corinna Van Der Ghinst with Citi. Please go ahead.

Corinna Van Der Ghinst

I would like to start with getting more details around the really strong acceleration in international growth that we saw this quarter. Can you tell us what China revenues ended up at for the year and kind of how you're thinking about your latest guidance on China for this upcoming year with store growth and revenue plans?

David Weinberg

China ended up going from what was $86 million last year to $220 million plus this year. While we don't expect the same percentage, I think they will continue to grow at what they say is mid-to-high double digits, but I think they have a shot to be even more than that. They have always been fairly conservative as far as estimates are concerned, and we're getting a lot of positive feedback from their franchisees that are opening stores, so I think our international acceleration will continue in most places.

Our European business will have a very strong first quarter. As we said, we started off with 2.3 million pairs in January, which is quite significant and they also carry a slight price increase as far as local currency is concerned, and if the euro continues in that 11.1, 12 range, it will be a very positive outcome for Europe as well, and our distributors continue to go quite well. We have quite positive things out of Middle East and out of Australia which are our biggest and certainly out of all the rest of that performed quite well. There are very few places as we said, other than Eastern Europe, where we're not showing significant strength, and even go so far as today we heard from the people that are GDS [ph] in Germany and getting significant feedback and looking for more and more product and inventory. So, international is lining up to be a very, very strong year for us again.

Corinna Van Der Ghinst

And are you willing to share with us what kind of growth rate you are assuming for international wholesale for this year? Should we continue to expect a similar piece of growth as we get into the next couple of quarters?

David Weinberg

I hate to commit too far out. I think getting started, they had a very strong January, so I think things continue. We just had a more difficult January last year in Europe because of the distribution center, so part of that is a pull-forward, although it is an extremely high base. We actually did more in January this year in pairs than we did in February last year, which was a catch-up month for us, and China also doubled again in the first month this year, but those are easier comps and they tend to get more difficult through the year.

We're still thinking first quarter is somewhere in the 35% maybe plus range as far as growth is concerned, maybe a little higher than that. And then we anticipate we will level out some as the comps get more difficult, but growth will continue at a significant double-digit rate through this year, so far as we can tell.

Corinna Van Der Ghinst

And then on the U.S. side, it looks like some of the data out there continues to look a bit stronger than the reported domestic growth of high-single digits that you guys reported in the quarter. Can you give us a little bit more color on how your inventories look in your wholesale accounts right now? Are there any categories or channels specifically where you feel like you guys might be a little heavy or light on products?

David Weinberg

Well, think we're light everywhere, but that's probably not unusual given the environment. I think what you see happening is last year was so strong and we had such a strong pull-forward that we had -- people had to come order early because we were running into capacity issues as far as production is concerned. That is no longer a concern this year, and obviously we can't grow at the same levels as we did last year, and I think what you see is we do have better sell-throughs.

I think we hear the same thing, the same thing from some customers in the backlog or their acceptance of inventory would indicate, and that is the same thing we talked about in the fourth quarter, it's they have overhang on some inventory pieces of their own and some of those announcements have come out recently, and we're doing significantly better sell-throughs on significantly less inventory which allows them to clean out their older inventory.

I think it's fair to say no one has ordered deep into the second quarter. We have orders in the first quarter that would be significantly higher as we said in our remarks. We still expect probably high-single, low-double digit growth in domestic. That is not assuming any pull-forward and I think what you also see is that there’s a number of people that we do business with that have announced store closings, and they are reevaluating how much inventory they need and when to come order and trying to chase it a little bit. But what we do hear is that we continue to sell very well. No one is taking our place. Everybody likes the new product and as either retail gets somewhat better or their inventories come more in line, I anticipate they will come and step it up.

Now, we also anticipate that as we go into back-to-school next year with easier comps, very difficult in the first two quarters and last year's second quarter was a perfect storm with Easter moving and after [indiscernible] and us finishing our distribution center in Europe, so I anticipate we have tougher comps to meet in second quarter and we would accelerate the increases as we go into the third quarter with fresh products and hopefully a little healthier retail environment.

Corinna Van Der Ghinst

And if I could just sneak in one more question, on SG&A obviously you guys have the automation coming online this year which you guys have been talking about for quite a while and you are already starting to see some benefits from that, but what kind of SG&A leverage can we expect this year just given all of the moving pieces with Europe and some of your other investments?

David Weinberg

We should have a positive impact just from gross margins if currencies don't go significantly against us. So, I think we will see the same or better than we've seen this year. As we've said in the past, we leverage best in the United States and that is a slightly slower growth piece for us now. We will leverage very well in the first quarter obviously in Europe and that should be significant, but we have not really begun in China and as they continue to double obviously they put some pressure, now will we will see significant leverage in retail because we're opening stores and that just by its nature brings increased operating expenses, especially in personnel and rent and I don't think we can anticipate significant double-digit comp store increases as we had in the past three years.

We're into year four and while we have mid to high single digits, that also is a slight headwind to leverage. So I think on par where we said before as we get to 3.6 billion, 3.7 billion, we will get what we believe somewhere around 12.5%, 13%, 14% operating margins depending on where it comes from and we're still onto that barring any big changes or change in our growth scenarios or currency.

Operator

The next question is from Jay Sole of Morgan Stanley. Please go ahead.

Jay Sole

Can we walk just through the inventory growth in a little more detail because there is some talk about the timing of Easter, the Chinese new year, catch up from last year's port strike. Can you talk about some of the different variables that have affected the inventory number and then maybe the composition of the inventory in terms of new stuff versus older stuff?

David Weinberg

We don't have any significant older stuff. That I can start with. We sold through quite well and it is quite in demand. We might have little pieces here in there. Like we mentioned, Japan cleaned up some Brazil because they are relatively smaller and they had significant currency issues and we're still finding our way as to what really sells and moves. I will tell you that the stores in Japan have done very, very well, so we've got a better handle and we sell now and we're excited about the growth we can achieve just in our retail businesses in Japan as well.

I think it is just the mixture of inventory change. Last year we had a lot more in transit and a lot more working processes as we were trying to catch a bigger growth piece. I think it is fair to say we have more outlets to store inventory now. We had to put inventory into South America, we had more stores to put inventory, we had to put inventory into China.

Obviously they are still growing at double digits and for our stores as we go forward, I think it's fair to say if you look at our inventory and the inventory count, the physical count we had at year end and looked at 35% growth in the first quarter, you would see that we're turning our inventory everywhere we have significant amounts and that would be United States, Europe, China and in Chile more than six times a year given the count we had at the end of the year.

So as like we said before, we wanted to get off to a fast start in the quarter. We had high demand for the product. The fact that we're up 35% and we have shipped a significant -- in the first six weeks we've shipped well into high double digits of the amount of inventory we counted at the end of the year that we're going to get a good turn on it and should things go well through the sell-throughs or the macro pictures, we will have the possibilities of pull ups and an extra return because everything is into the marketplace earlier this year than we were able to do last year for various reasons that were just question.

Jay Sole

And then maybe if I could ask you about gross margins in 4Q, it sounds like there was about say 140-150 basis point impacts from FX on gross margin yet gross margin was still up 40 basis points for the year. So can you just talk about what were the drivers of gross margin in the quarter? What were the factors that kind of led to such a big organic growth in gross margin?

David Weinberg

Well, it's a couple things. While we only put our price increases through across the board for the first quarter, all our new product that we delivered into the back half of the year that was relatively new came with new pricing and I already had that built in. So we had additional margins than we would have anticipated for a lot new shipments into the fourth quarter both from the distributors that took that $90 million early or part of it early and from Europe as well.

Our retail business continues to grow and with the new stores that was a slightly higher percentage of the business, so basically we had a switch. Domestic wholesale which is not one of our higher gross margin businesses, had a decline in percentage of the overall and our international business, especially the higher margin groups through some of the subsidiaries and new products from the distributors and our retail stores had slightly higher, so we had a shift in some of it and we just had naturally higher -- slightly higher margin product in the fourth quarter or in the back half of the year from our new developments.

Jay Sole

And maybe just one last one from me, it seems like there is apparel that is showing up in the retail stores in the U.S. What is the plan for apparel this year and potential impact-- how much is it in your guidance right now and how much are you kind of expecting it to be a strong performer?

David Weinberg

It is a very small part of our guidance. We're only really putting into our retail store so it goes into our conversations about comp store sales and where we think we're going to be. It is a very small piece. All it has for us is significant upside. We expect over time that we will be a significant player in that, but right now we're just coming out. We want to test it correctly, make sure it fits our customers. It is getting a very good response in our own stores, so we feel here in our offices that we have a shot to grow it at a faster pace as we get to the back half of the year, but it will not be significant to our growth this year. That will be another two or three years out before it has significant impact.

Operator

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

Sam Poser

A couple things, one, just to break it down. On the selling expenses you had some deleverage for the first time in a long time. How should we think about that in the first quarter and throughout the year?

David Weinberg

Same, I'm so glad you asked that question because I wasn't sure it would make it through our remarks and things like that. As we mentioned, there was a very small shift in the amount spent for advertising in general. We reserved $600,000 additional for our agents in Italy because we're transferring from an agent-based sales group which is the only one we really have in the world for our own accounts or our own subsidiaries, to our own internal sales force.

So that truly was a commission base, not an advertising base on the selling piece, so that is a one-time charge. We actually anticipate that that number will go down significantly from the agents to our own sales people because we can leverage our own sales people at a better rate than we can agencies. Like I said, this $600,000 is on top of what we had paid the agencies anyway. So that truly was a different piece.

The other part is when we set up our subsidiary in South America we worked out a deal with our old distributor to handle the infrastructure for us which is the warehousing, the shipping, the office, the managing of the personnel on a percentage basis so we wouldn't have significant start-up costs and he basically works on a commission of sales so that we wouldn't have to invest too much into it and he had his own infrastructure anyway that somewhere along the next few years he will be winding down. That was a very positive thing. That was $4 million.

If you take that out, you would have seen either fairly equivalent or maybe slight leveraging to the selling line this time, so those two items, one will not repeat and one will repeat until we take over our infrastructure entirely in South America and by and large we broke even because of the situation there, so that is an offset to sales on the top line and it's margin, so that is sort of a placeholder not to be considered as an ongoing expense for advertising or marketing.

Sam Poser

So how should we think about selling expenses next year? Are we going to see some leverage in the year or are we going to have deleverage because of all of this through the year?

David Weinberg

I think you will still see leverage if you take this piece out. We're actually thinking about redefining it and putting it into the operating line anyway simply because the business is going to be much bigger than we thought and it will be a bigger item. So we will probably pull it out and put it into the G&A, so you will see leverage to the selling line and that piece will move along with whatever our top line growth happens to be in that part of the world certainly for the first six months.

Sam Poser

A couple more things, one you mentioned the in transit. Can you give us some idea of what the in transit is like at the end of 2000 -- the difference in the in transit at the end of 2015 versus the end of 2014?

David Weinberg

Well, without getting into too much detail and too much information, I think it is fair to say given our whole production schedule we had a higher percentage of inventory physically here. We have a smaller percentage in transit and a slightly smaller percentage even in process certainly in pairs as it was done. So we just moved up the cadence and, like we said at the third quarter, it is only a timing issue. Actually, the amount of inventory we have committed which would include work in process as well as the items we count at year-end inventory, is a lower percentage of our bookings, especially if you take into account China and our own projections for our retail stores than it was last year.

Sam Poser

Then lastly, you mentioned that the backlog had improved. Can you give us an idea where the backlog stands today versus the same time last year? It is stronger now, so could you give us some idea of where that is?

David Weinberg

Basically what I said was is it is stronger for Q1 than it is in the overall backlog. So we anticipate shipping a higher percentage. Break it out, it is in the back half of Q2 that it is the weakest. So we still will have a stronger first quarter than the backlog would indicate because we're not booked out to the full extent of the six months from today into June and July, but we anticipate that is coming as we have had a pickup in the order rate at the end of January and beginning of February.

Sam Poser

That is based on the current sales trend that they are as good as they are?

David Weinberg

Yes, 35%. We're up high singles, almost double digits on our domestic wholesale business and our international business, we're always in a strong first quarter business and China has more than doubled, so if you add that into the backlog from last year, you would have a significantly higher number as well.

Sam Poser

Can I ask why don't you include the backlog -- why don't you include the orders to support your retail and the orders to support China into the backlog? So we can get a real apples to apples idea of what it is because you have a lot of your growth coming in areas where the backlog isn't -- you're not reporting backlog on.

David Weinberg

It is a twofold reason, maybe a threefold reason. First of all, China began and today still more than half retail as well as our own retail, so the retail analysis will cover both for the China part and our own. There are no orders for our retail business, there is only our projections for what we will need and what we make inventory for. So, if I give you a backlog number what I am in fact giving you or giving the world is my own projections for store opening, store shipments, inventory turn and comp store sales.

While we do discuss those things and you understand where we're for comp store sales and things like that and you could back into that number and the growth and the number of stores on a realistic basis, so I think it is fair to say that if we were up 20% in the fourth quarter or we're up 20% in the first month that our backlogs would have to be up 20% at the end of the year to have made that because we have to reserve the inventory somewhere and how much we move out.

That is a number that we adjust as we sell, so it is a number that we give and I think it is disingenuous for most people and I think why most retailers don't give it is because it is a number that we do for ourselves. It is not a guarantee anywhere. It is not an order that is placed that is going to be shipped to a third-party based on their own analysis. So, while I can give you my comp store sales increase and the number of stores and what I think is going to open, you would have to work back yourself.

It's a number that [indiscernible]. If our retail people come back and say okay, well, you know what, I think I'm going to have 15% increases in comp store sales next year even though most of us think that is way too high and I bought inventory and I told you that was my backlog, I think I would be taking you down a road that I shouldn't. So, in the meantime we ask you to just watch the stores, watch the store count, watch how they grow from year to year and understand that we're buying inventory to that same plan. The franchises are a new system.

We didn't have them last year. We didn't put them in this year. We're now working on redoing those numbers as they are become significantly large numbers because those are done and we will add the franchise number into our backlog numbers for our Southeast Asia group either in the second or third quarter when we make sure we have a clean number for last year.

Operator

The next question is from Jeff Van Sinderen of B. Riley & Co. Please go ahead.

Jeff Van Sinderen

David, maybe you can just touch on the order pull forward a little bit more from December -- I'm sorry, into December from January. Maybe about kind of what drove that and I think you said backlog is weakest for the second half of Q2. Do you think that is just a function of retailers ordering closer in and that backlog should fill in? Maybe we can start there.

David Weinberg

Listen, we're not going to be up as much as last year. I don't know that the retail environment here is that great, from what I've heard. I don't know -- people are planning us up higher than they are planning the balance of their business is the best of my understanding along the broadest base of our customer base. But I'm not sure as to the store closings and where things are moving so, yes, we will fill in that piece as we get into the second half and they are buying closer to [indiscernible]. What drove the move up is like anything else. It is an increased demand.

Our distributors have a slightly different timing that we try to bring out every time we convert a distributor to a subsidiary. In other words, they are a third-party in the middle, so while we attested or try to bring forward how hot we're in the first quarter and how big our sales are in January and February, our distributors is, what I believe, are going through the same motion and they want more product available for them to ship in January and early February so they moved up as much as they could, as much we could produce for them into December from January so they would be ready for the increased demand which we're seeing everywhere in the world for Q1. We built inventory and tried to be ready for the first half. They took their inventory early to be ready for the same piece, so there's is a timing issue driven by demand and the potential for a significantly strong first quarter for themselves.

Jeff Van Sinderen

And then maybe if you could touch a little more on the domestic wholesale business, I'm just wondering, are you seeing a difference in sort of the performance of your business or the pull of product between the department store channel and let's call it the family footwear channel, anything to call out there?

David Weinberg

Not yet. There are very significant positive and issues everywhere. I think across both of those we're tracking better than their footwear business in general, in the case of department stores and in the family footwear channel. I haven't heard from anybody, as I understand from the first question from Corinna is we hear the same thing. We're selling better. They are trying to do it with less inventory because of their overhangs and something else until they can clean it out.

So, as we said at the end of the fourth quarter when we were talking about this originally, we think it is to our benefit somewhere along the line those inventories will clear out and unless someone comes along and takes our place and develops something that sells better for them which we haven't seen, then we will ultimately get that space. The timing is more a macro issue and that is why with easier comps and them working on it so long we're starting to see some pickup already.

Jeff Van Sinderen

Okay. And then just a quick follow-up on apparel, I know you said that is really a test at this point. Just wondering if there is anything to report on sort of the test in your own stores or if it is too early? And then as far as timing of when that might start to go into wholesale, were you saying that was two to three years? I wasn't clear on that.

David Weinberg

I'm not sure. It will go into domestic wholesale when demand arises for it. We tend to build it up through the stores. I think it will go to international first. We have 1300 additional doors internationally that will start to put the apparel in as they get big enough to do. We're trying to build it from the Skechers perspective out and don't really anticipate it going to retail for at least another year or so, but it will be at least another two or three years before it potentially hits the part that it will be significant to the bottom line.

We think it ultimately will, we're just trying to be as conservative as possible while we're getting very good reads on it and it is doing quite well and we get positive feedback from the consumer base that we sell it to. It is such a small piece, it is very difficult to get a great handle on just how quickly it can roll out.

Operator

The next question is from Scott Krasik of Buckingham Research. Please go ahead.

Scott Krasik

I'm jealous. I'll see you in Vegas. The domestic backlog versus the international backlog, can you give us the breakdown there, please?

David Weinberg

We don't give them out, but domestic is certainly below what international is. International is well into the double digits, but domestic starts from a much bigger base. I will leave you to your own -- we're not going to start breaking them out by domestic -- it gets too [indiscernible].

Scott Krasik

And then you alluded to it, but can you give us a sense of what the backlog is for 1Q versus 2Q in the backlog you are delivering?

David Weinberg

1Q is more probably more like 60% or 70% of the backlog as it sits today. We're just getting into significant order rates for June and July.

Scott Krasik

I know you talked about -- well, I guess more importantly is 2Q backlog positive at this point?

David Weinberg

Yes, the whole backlog is positive to what it was last year, it is just more concentrated. It has got to grow, but that is not unusual. We always have that situation as you grow. We will in and then a lot of what you see that happens and comes is pull forwards because we have inventory here early. So this is not unusual, maybe the order of magnitude. We usually book out a little further, but we had bigger growth rates in the past. It was much more difficult to wait this long to order when you're growth rates are 20%, 30%, 40%. When it is only 10%, 15% you have the capacity to move some in from your flows from the following month, you don't have to come that early. We're not looking to -- you don't get closed out of the month quite as quickly as we have in the past.

Scott Krasik

And then how do we think about that, what was it, about $20 million to $30 million in pull forward last year into 2Q out of 3Q?

David Weinberg

From what I see today and what I see at the macro level I think we'd have a ways to go to repeat that, so I don't anticipate that happening this year. It is way too early to tell.

Scott Krasik

And then to the extent and I'm sure you do not want to get into this, but since you opened up Pandora's box, so January was up 35. Was that the easiest comparison of the quarter? Do February and March comparisons change meaningfully? Just to sort of tie back to your overall sales guidance for 1Q.

David Weinberg

I think it is the easiest comparison simply because Europe was the biggest single piece of that. It was more than a double, it was significantly more than a double. We went from basically less than 1 million pairs to 2.3 million pairs. As we said, with a slight price increase and obviously we could not ship that much, we will still be up I believe in the second quarter but certainly not by 2.5 times. There is not that much time left. I think what it does indicate is that there is a high demand for the product and the feedback I hear from the shows now starting in Europe, they are still in search of product and that is a very positive sign for us and we could be certainly surprised on the upside from Europe performance in the first quarter, but going back originally, it is the easiest month. It is usually the smallest month of the quarter and because of last year's situation in Europe, the easiest one to comp this year.

Scott Krasik

Okay. And then just last, tax rate for 2016 similar?

David Weinberg

We said 20% to 25%. I think most of us here think it is where we were this year, 21%, 22% depending on if unless there is a big shift into less tax jurisdictions, but that is where I would put it now. If you want to come down from the 20% to 25%, I think it is on the lower end, it is probably in the 21%, 22% as we see it right this minute.

Operator

[Operator Instructions]. And our next question is from Chris Svezia of Susquehanna Financial Group. Please go ahead.

Chris Svezia

Gross margin question, walk through how you think about gross margin playing out in 2016 maybe first half. Second half, how impactful currency could be and how that plays out. Just general thoughts, puts and takes on the gross margin.

David Weinberg

As I said before -- I'm laughing because while I know more about currencies than I ever hoped to know my whole life when I was educated on a formal base, I'm still not sure where they're going to go before this is all over, especially after hearing what's going on today. What I do believe currently is that we have some upside from Q1 last year. You remember Q1 last year came in at about 42% or so and then we ultimately got up to 45%. Should nothing change dramatically, I would expect somewhere in the 100 to 200 basis point improvement over last year simply because we should not take as big of a currency hit in Europe.

Now, obviously there are drags to that. If Japan runs away, if South America, the biggest drag we've had in the back half of the year has been in Canada which is a large growing business for us and they are -- there and Brazil and in some cases Chile that we called out on a report, you cannot raise prices fast enough. So they are dragging, they are significantly growing business.

As a matter of fact, we shipped about -- not to get into real numbers, but we shipped a significant number of pairs to Canada higher than last year's shipment and still have not reached a dollar denomination that we did last year. It takes more in those places. So depending on where the growth comes from and how it changes and what happens to those currencies in general and where the euro ends up and the fact that Europe which right now in its currency has a slightly higher gross margin rate than domestic wholesale, if the ratio shifts, will it be a positive benefit?

And then obviously the take from that is as fast as international is growing, it may take away a little bit percentage of overall sales that retail is and that is a slight down. So, I anticipate in the first quarter that we will have some positive benefit because it was just so bad in Europe last year in the first quarter, but that is a very one-dimensional thing that could change dramatically. As we go through the year, unless things change, we could have equivalent or even slight positives to the rate, but I am more concentrated on the first quarter now and that should see a slight positive.

Chris Svezia

As we think about the second quarter, I know it's a little further down the pipeline, but I know there were a lot of dynamics that occurred second quarter last year. I think the UK you did really well there, pulled in some full price business. There was some revenue shifting going on pulling out of Q3 into Q2. As we kind of all sit here today it is sort of looking at this 16%-ish top-line growth. I'm just curious, how do we think about -- are there any other puts and takes that we're missing as we think about the second quarter that we should be considering or just thinking about in terms of high level?

David Weinberg

Yes, I think second quarter for obvious reasons is the most difficult comparison that we have during the year. While I don't have major issue with the numbers on the street for an annual basis, I think the cadence of it certainly changes. We will have higher growth in Q1 than Q2 obviously. There were more puts. Europe, there was the port strike here. There were weather differentials here. Easter was in the second quarter, not in the first quarter, so last year second quarter was a perfect storm that chances are won't be repeated.

So I would tell you that to me the best opportunities are first quarter and I think because of what happened in second quarter took away from the third quarter that we have an easier comp and significantly higher potential for Q3. I think we have bigger growth in Q1. We will grow in Q2, probably not for the same level that we will in Q1 and Q3 and Q3 could be very good opportunity for us and it is our biggest quarter anyway, so that should hold up very well.

Chris Svezia

Last question I have is just on the inventories. Any thoughts you could share about how maybe that should play out through the quarter and just sort of where you might end the first quarter in terms of that inventory growth number? Does it start to subside as you sold more product in Q1 or just any thoughts around that?

David Weinberg

Certainly. Our inventory will close. I haven't really looked at what the closing inventory -- we had a pretty good first quarter and it grew, so I'm not sure where we closed but like I said, we thought we might have even more inventory. We're only up 37% -- 36% year-over-year and that is not significantly disequivalent to the growth rate that we have and we carry inventory for more places now because we have just base inventory for Central and Eastern Europe and for South America and certainly a growing business in Japan and significantly more stores.

So, we still think we're in good shape. We still think our inventory is spoken for. Our metric of where our production schedule is compared to our backlog which would in our case include what we guesstimate for retail and the franchises in China, our backlogs are higher as a percentage of our commitment than they were last year. So that usually -- unless things fall apart or change significantly, bodes for a very good inventory stream as we go forward.

Operator

And our final question is from [indiscernible]. Please go ahead.

Unidentified Analyst

I just wanted to circle back on China. When you talk about mid-double to high-double digit revenue growth, is that 50% to like 80%? Is that kind of what you are implying?

David Weinberg

Yes, not to redefine the statement, I think having done 220 as we said last year, I think most of us would be disappointed if it was at the bottom of 50% which would be at 330, but I don't know that any of us here think it will go all the way up to 440, but somewhere in between. There's a good chance. I personally lean to the higher side, but we don't want to get too carried away with ourselves this early in the year.

Unidentified Analyst

What is the store opening plan for China in 2016?

David Weinberg

We're moving to a franchise base, so while we will open, I'm not sure, I think it is somewhere in the 20-25 of our own, we talk in China more in terms of points of sale which includes all our shops which is the way we run our department store due to franchises. So I think it is fair to say that we will increase our points of sale in China by our planned 50% by the end of 2016.

Unidentified Analyst

Okay. And then on the European DC, are you seeing the cost benefit that you expected in January and February to date? And then what do you think the cost savings for 2016 are versus last year based on European distribution?

David Weinberg

Well, it's hard to say. We called out last year in the first quarter that we spent $7 million extra. That certainly has gone away. Those people have not been brought in. We will probably save even additional money because we have a lot of people from the United States. They are monitoring and trying to get it up and running and moving at a better pace, so I don't have final numbers yet for the first month, but I would tell you that our cost prepare has been down significantly this January to last January and when we put it together, it takes a little longer than that to close and we really have not gone through the January analysis, just getting ready for year end, et cetera, it will be significant.

Unidentified Analyst

Okay. And I just wanted to kind of talk about your sale into wholesale in the U.S. versus some of the industry data that is out there monitoring the sell through. Last year were retailers chasing so that they ordered a lot more inventory in the first quarter because they were afraid they wouldn't have it if they did not order it early? And when do you think wholesale domestically the top line there will kind of catch up to what we're seeing in the sell through data?

David Weinberg

I think it is the second half, unless something happens dramatically for spring and I think your analysis is correct. Our growth was so dramatic last year and there was a high demand for the product and it was across the board that people were concerned, especially with the port strike that if they ordered late we wouldn't be able to have it on time and their competitors might, so a lot of orders and a lot of detail came in early. Like we said today, we've caught up to production. There is no real thought that we can't produce.

We're prolific bringing goods in on time barring any external forces, so they know they have time to bring it in and to order month-to-month and they are trying to clean out their own situation before they get too carried away with orders. But they do admit and I think all the channel checks I've heard and I've heard from you guys and everybody else, is that we're selling quite well and no one is looking to plan us anything but up in a very difficult retail environment.

Unidentified Analyst

Are retailers asking you to hold on to more inventory? Is that a conversation you had with them?

David Weinberg

I don't know what that means. We take their orders and build to it. We try to get to the front end of their date so they can move things up a month or so if necessary, but no one has asked us to make anything extra and sit on it just in case they need it. That is not something that we do.

Operator

We do have one more final question that comes from Corinna Freedman of BB&T. Please go ahead.

Corinna Freedman

I just wanted to talk about pricing. I think you said AURs or ASPs are up 2.2%. I just wanted to confirm that. And then what are your expectations going forward? Given the strong growth internationally, is there opportunity to raise prices internationally? I feel like we've done a little bit of work and it seems like you're priced premium in China and I wonder if you can comment on that?

David Weinberg

It is 2.5%, but that is a domestic number. Internationally we're up first quarter. We raised our prices average, around 7% in local currency. What that will mean after the currency wars are over I'm not really sure, but we will certainly be in a better position than we were. In Europe at today's rate that would be a significant increase in AUR because we had -- I shouldn't say too significant, because we had planned it somewhere around $1.09 or $1.10. If we stayed $1.12 or $1.13, obviously that's somewhat of an upside to it.

In other currencies like Canadian dollar and Chilean peso and Brazilian real, we can't catch it fast enough. Those businesses are significantly smaller than Europe. In China we do get good margins. We're on the top end. We have not increased prices. The won has not depreciated significantly, but what little depreciation there is certainly we will absorb in gross margin at least at the current time. So those are the gives and takes on the pricing in various parts of the world.

Operator

Ladies and gentlemen, at this time I would like to turn the conference back over to Skechers for any closing remarks.

Andrew Greenebaum

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 filings with the SEC. Again, thank you and have a great day.

Operator

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

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!