Good day, ladies and gentlemen, and welcome to the G-III Apparel Group, Ltd. Fourth Quarter and Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Neal Nackman, Chief Financial Officer. Sir, you may begin.

Thank you. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to adjusted EBITDA and non-GAAP net income per share, which are both non-GAAP financial measures. We have provided a reconciliation of non-GAAP net income per share and adjusted EBITDA to our net income per share and our net income according to GAAP in our press release and on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good afternoon, and thank you for joining us. With me today are Sammy Aaron, our Vice Chairman; Wayne Miller, our Chief Operating Officer; Neal Nackman, our Chief Financial Officer; and Jeff Goldfarb, Head of our Business Development. We finished the year with a good fourth quarter. Revenues in the quarter were $375 million, up 28% compared to last year. Adjusted net income per share, which excludes costs associated with our acquisition of Vilebrequin increased to $0.41 from $0.25 per share last year. Diluted earnings per share increased to $0.40. Revenues for the full year were $1.4 billion, up 14% compared to 2011. Adjusted net income per share for the year was $2.92, up 18% from $2.46 in 2011. These numbers represent across-the-broad strength to the business and the sustained pace of strategic development and diversification. Let me first give you a quick rundown as the major drivers in our business. Outerwear, which is now less than half of the total business, again, for the year and the fourth quarter, finished up in good shape. Sportswear, women's suits, handbags and dresses each had a good season. From a brand perspective, Calvin Klein lead these advances but several brands including Kensie, Eliza J, Guess?, Dockers and Levi's also performed well. I want to call out a very strong performance from our team sports business. Net sales and operating profit for this business were up 30% and 290% respectively. NFL, with our newly expanded license, had one of the best years in recent memory. In Team Sports, we had a strong increase in both outerwear and sportswear. We were pleased to see a quarterly 12% comp store increase at the Wilsons -- at Wilsons, which contributed to our performance. In the year ahead, we believe with we can continue to create productivity and…

I'm going to -- you have to forgive me, I'm going to back up a little bit because unfortunately, we were disconnected so I'm going to guess, I'm going to guess backwards a little and go back to our Wilsons retail business. Our Wilsons retail business turned a corner this past year. Full year comparable store sales increased by 12.6% and our average sales per square foot were approximately $350. This is strong progress but what we want and we expect to build on this and we're even going to do better. We're working toward higher contribution margins and stronger cash flow. Even so, our unit economics are now sufficient to support renewed store growth and we're planning to open approximately 20 new locations in 2013. With regard to our larger corporate strategy, I'll note that the Wilson's business is also important because it supports development efforts for our other brands that have a specialty retail component: Vilebrequin, CK Performance and Andrew Marc. We're confident that Vilebrequin, our newest acquisition, will ultimately prove to be amongst our fastest-growing and most profitable initiatives. The leadership we have in place is excellent. We're very excited that this status brand is now led by some of the best brand builders in the world. We're focused on growth and on making the necessary investments in personnel, infrastructure and marketing to capture a substantial opportunity in both retail and wholesale. In retail, we will build on a strong performance of our company-owned stores and expect to add approximately 5 to 7 new doors this year, up from 60. In wholesale, we're excited about a new shop in shop concept that we think will reinforce the strong position of the brand. In addition to growth in men's and boys, we have already begun designing into new…

Thank you. For the full fiscal year, we reported net sales of $1.4 billion, an increase of 14% compared to last year's net sales of $1.23 billion. Net sales of licensed product increased 17% to $981.8 million from $840.7 million. And net sales of nonlicensed product increased approximately 2% to $281.9 million from $277.6 million. The fiscal year's results include our nonlicensed product segment net sales of $19.1 million from the operations of Vilebrequin for the stub period from August 7, the date of acquisition, through December 31, 2012. Vilebrequin's results will be included in our consolidated results on a calendar year basis. Net sales in our retail segment increased 19% to $196.2 million from $164.3 million in the prior year. Sales of our licensed product increased due to increases in the sales of Calvin Klein, the new Kensie and King Sports product lines. Increased sales of nonlicensed product were primarily attributable to sales from Vilebrequin while set in part by the decrease in net sales of our Andrew Marc product lines. The retail segment increases were from a combination of higher store count, as well as comparable store sales increases of 12.6%. Our net income for the year increased to $56.9 million or $2.80 per diluted share from $49.6 million or $2.46 per diluted share in the prior year. In the fiscal year, we incurred approximately $4 million, or $0.12 per diluted share after taxes, of expenses related to the Vilebrequin acquisition. When we exclude this cost from our net income, our adjusted non-GAAP net income per diluted share was $2.92 for the year. The overall gross margin percentage for the year was 32.3% compared to 30.1% in the prior year. Gross margin for the licensed product segment was 28.5% this year compared to 26.5% last year. For the…

We had a strong year and we expect our momentum to carry into 2013. We're confident that we will have good sales and profit growth over the next several years. We have great organic opportunities and we'll continue to look at strategic additions to supplement our organic growth. Our goal is to continue to grow our licensed businesses led by Calvin Klein, as well as our own brands. We'll also look at more company-owned brands. In addition, we will build our retail business to complement our growing wholesale business. Our management team is strong. We have good execution and we have real good access to capital. As always, we remain very focused on building value for our shareholders. Our business partners, customers and consumers. Thank you very much for your attention today and your continued support and we're now ready to take some questions.

[Operator Instructions] And our first question comes from Erinn Murphy from Piper Jaffray.

I guess Morris or Neal for both of you on the fourth quarter, I mean, very, very strong topline performance and good margin recovery. I mean, you alluded a little bit, Neal, to the higher SG&A spend. And I guess, curious on if you can help parse that out a little bit more on how much of it kind of incremental to Vilebrequin? And then if you think about the SG&A versus the gross margin in 2013. Clearly, there's increase spending for some of the new businesses you have, but just help us kind of appreciate we should think about the dynamic between those 2 lines and then I have a couple of follow-ups.

Sure. With respect to the fourth quarter, we are starting to make investment spends in the Ivanka business, certainly VBQ in terms of SG&A and some of our other -- the swim initiative as well. None of those were really out of the -- with things that we didn't plan for. We've been talking about those kind of increases in SG&A throughout the whole year. Turning to next year, I think, we, again, look at this point to not lever the SG&A as we look into next year. We're making so many additional spends in terms of the VBQ business, which has run to higher SG&A spend level and then our other internal businesses as well.

Okay, to that level though, with maybe starting with VBQ, if you think about the opportunities, I mean it does, on a higher SG&A, but very, very strong gross margins, a lot of opportunities longer-term. How are you thinking maybe, Morris, for you about a pathway to accretion for this brand and how should we be modeling that, I guess, for you, Neal, as well?

We're working very hard at developing this brand as a sustainable status brand in resort wear. We're building an amazing team. Everyday there's an addition that we're extremely proud of. We've revamped the entire company basically. We've added amazing financial people, marketing people, IT people and the brand building is second to none. We've got world-class people that are leading the charge. We've pretty much aligned the company-owned pieces. Those are profitable. They're showing growth, comp growth, basically, every single day. The pieces that we don't control as well that are important to the future of the business are the franchisees. The franchisees were left a little bit unattended by prior management. We're dealing with all the issues. We're training them differently. We're trying to help them to realign their inventories so they can prosper and we can prosper. So the effort now is to fix the franchise model, which is going to take us a little bit of time. So I wouldn't look at this as a major accretive year. It's the year that we're going to do all the right things to sustain the future for this amazing brand. The wholesale initiative, we've added some effort. We're spending a lot of money on designing fixtures that will be important to the growth of the brand. We have several initiatives planned. One major one with Galeries Lafayette in Paris, where we'll have 4-points of sale and we'll have a unique build-out that should bring an entry-level for us into the Asian market as Galeries Lafayette is a major department store that's shopped by the Asian community. And as we're building -- and we're planning on building Asia as a source of income, it'll be a great showcase for us. So circling back, I wouldn't plan on this as a major accretive year. But I'm planning on this as being very productive year for the...

Thank you, that's very helpful, Morris. I guess just sticking with swimwear, I mean it's interesting that you guys are picking up the Calvin Klein ladies and men's swimwear business from, I guess, what was Warnaco, now, PVH. Just curious how you think about the strategy behind the transition. Are you going to be cleaning -- taking the opportunity to clean up some of the channel and reposition the brand? And then how are you thinking about kind of either relaunching or kind of the design element behind that? Is it going to be people from Vilebrequin that actually spend time on the design and development of this product? Or are there new people coming in-house to do that? And then I guess, longer-term, how big do you think that can be? [Technical Difficulty]

Erinn, go ahead with your question again.

Erinn, I'm sorry did you get what I was saying?

No. I'm not sure where we got disconnected, Morris, but my last question had been on just the Calvin Klein's ladies and men's swimwear line. You talked about expecting to ship it this year. I know for Warnaco it had been $20 million to $25 million business. Briefly, it was at PVH. Curious on how you're thinking about the timing behind or how you think about the transition? And if you're going to take some -- the opportunity to clean up the channel, either reposition the brand, and then who will be managing this internally, will it be Vilebrequin? Will it be new people, internally? Or how should we think about this kind of transition?

I'm not certain where you got the $25 million number. That would be my first question. I guess I don't need an answer to it. But as the brand will be managed by an independent team. It will have very little to do with Vilebrequin. We'll learn about fashion through Vilebrequin, but it will be a seasoned team, the same as we always do. As we build the platform, we hire the best and simultaneously, we were going to be launching Ivanka Trump as a women's swimwear brand as well. So we'll have positioning in all the department stores before you turn around as the dominant swimwear supplier. We know how to source it. We currently do some swimwear in similar price points through our team business where we ship both men's and women's swimwear. We'll have a separate design team and, as all the pieces do, they'll report to Sammy Aaron, all the Calvin pieces. So same leadership team but it'll have an independent operating effort that will be classification driven.

Okay, perfect and we'll expect it to be shipping, sorry, just to clarify, the second half of this year for Spring 2014?

Yes, it will be shipped. I wouldn't plan on a huge launch. But yes, it will be shipped. It's currently being designed and we will catch a tail end of spring. We're working on the appropriate real estate. We're working on a buildout component that should enhance the product and it won't provide a good -- it won't provide a lot of difficulty in placing. Most of the outerwear buyers are also the swimwear buyers in department stores, so our relationship should support the immediate exploitation of this brand.

Our next question comes from Edward Yruma from KeyBanc.

This is Jane in for Ed. I was just curious, with swimwear coming online and dresses becoming stronger, how much will outerwear now become as a percent of total sales, I guess, this year and next year? I guess that's my first question. And then the second one was on inventory and dresses.

Well, I can't really give you the answer. All I can tell you is outerwear continues to grow. It's not shrinking. In pure dollar value, it will grow. The other pieces, because there's so many, it's going to grow at a faster rate that will bring down the percentage of the outerwear business. It's not that there's any weakness there, there's clearly strength. And our bookings for outerwear are stronger this year than they were in calendar 2012.

So, does year meaning that's this coming -- fiscal '13.

The year that we're in, yes.

And so the bookings for -- did the outerwear inventory plan for this coming fall is that greater than your plan -- what you had planned initially for last year or for this past year?

Our bookings for fiscal 2014, same time last year, our bookings this year are better than last year.

Okay, so higher. And then in terms of dresses, what is the ultimate potential for dresses in terms of total business? How much further can it grow from here?

It can continue to grow at double-digit increases. We have several new initiatives that are growing. I could tell you that, as a percentage, they might double in size. And then we have Calvin Klein. It's a matured business that is possibly the largest, single brand in the industry. That might not double in size but we're expecting increases in that business. As an industry, the dress business is many times bigger than the coat business. It's a multibillion industry, so growth is available to us in many different avenues. It can be done in private label. It can be done through our licensed brands. It can be done through our company-owned brands. There's huge growth available for us if we handle it right.

And my last question is just on the gross margin. How should we think about incremental gross margin expansion in 2013, given you had pretty strong margin expansion this past year?

We're forecasting probably flat to slight increases in our core business. And, of course, Vilebrequin will come in and that will disproportionally increase us. But, I think, if you look at the core business, we see cost to be pretty much not a significant factor for us. So we believe we'll be able to maintain to slightly improve our gross margins going into next year.

We also have Wilsons that all of a sudden has reached the scale that is significant to us and there's been a major margin improvement year-to-year and we're forecasting yet another significant increase for this coming year.

Our next question comes from John Kernan from Cowen and Company.

John? Operator, we might have lost John.

And it looks like he has disconnected. Our next question comes from Danielle McCoy from Brean Capital.

Operator?

I see no further questions at this time and would like to turn the...

Operator, can you check if we're still live or we're having trouble?

Yes, you are still live.

Okay, all right. I thank you very much for being with us and I apologize for a little bit of the complexity in our audio. Thank you very much for spending your time with us.