May 31, 2018 • 09:00 am ET

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Q & A
Operator
Operator

Thank you. (Operator instructions). We'll take our first question from Ronald Bookbinder with IFS Securities.

Analyst
Ronald Bookbinder

Good morning and congratulations on a nice start to the year.

Executive
Oscar Feldenkreis

Thank you, Ron.

Analyst
Ronald Bookbinder

On the licensing shift, what would Q1 EPS have been had it not been for the licensing shift, and should we expect Q4 EPS to be somewhat inflated by it being back-end loaded on licensing?

Executive
Jorge Narino

The shift that's occurring in licensing is not going to have a material impact to the quarters. For the year, licensing will remain fairly consistent with what we had last year. The re-class of the $1.5 million has no impact on EPS because it's just a movement from SG&A up into the revenue line. What the new revenue standard is causing us to do is to recognize our overages related to our licenses as the overages are occurring, as opposed to more spread pro-rata over the year, but it's not a real material impact to each individual quarter.

Analyst
Ronald Bookbinder

Okay. Your payables leverage was down to around 35%, the lowest level since Q1 two years ago. With the paying off of the 7.875% debt, should we look for the payables leverage to go back to its typical high 50s?

Executive
Jorge Narino

No, I mean, I think it's just the timing of where we were in terms of our payments at the end of the quarter. I wouldn't consider this an anomaly, and I would just think that our AP will continue to be more in line with what we normally have at the end of the year.

Analyst
Ronald Bookbinder

Okay. Penguin Golf, how was that doing?

Executive
Oscar Feldenkreis

We've started shipping it now, Ron, in April, and the reception has been very strong across the USA channels, and we feel that that could be a good opportunity for the future for us. It's small, right now, we're just starting to deliver it now that the season has started. We'll have more success and feedback in Q2, Q3.

Analyst
Ronald Bookbinder

Okay. Rafaella dresses, you've got out of the dress business. Why are you getting back into it?

Executive
Oscar Feldenkreis

Rafaella always had dresses. It's in the -- Rafaella is a collection, so they always had dresses. What I meant to say is that they're adding additional casual pieces to the assortment. That's all that means.

But they might be giving up more dress pants and adding more casual dresses to go with the casualization direction of the brand.

Analyst
Ronald Bookbinder

Okay. But you have to have designers and all to create that line, and having gotten turned Laundry into a licensing business, why wouldn't you just license out Rafaella's dresses also?

Executive
Oscar Feldenkreis

Because the business in Laundry was a classification business and it was social and evening dresses. It has nothing to do. This is really part of a collection. Remember, Rafaella's collection is comprised of sportswear, so it's sportswear dresses, that's all it is. It's an element really for the spring season, it doesn't have anything to do with the fall season.

Analyst
Ronald Bookbinder

Okay, great. All right, well thank you very much,