Key questions and answers from the fourth quarter earnings call conducted by Pacific Sunwear of California Inc. (PSUN: chart) on March 12, 2009.

Paul Lejuez (Credit Suisse): How do we think about future cash backs?

Michael L. Harry: Our cap ex number is going to be subject to change as we go through this environment. If we experience a 2009 that is as bad or worse than 2008, what we would be doing is continuing to negotiate with landlords to defer refresh projects even further than what we have so far.

Paul Lejuez (Credit Suisse): As you think about inventory do you think for the full year 2009 is that a source or use of cash?

Michael L. Harry: If you track our inventory as we go through the year we will keep it down per square foot consistent to where it is now. Depending on exact timing of receipt close and other adjustments we might make it might move a few percentage points one way or another at a given quarter but we expect to maintain significantly reduced inventory levels throughout the year until we see some kind of change in the average sales trend.

If were to see an improvement, naturally we might ease up a little bit and chase some business but for the time being I would expect that we will maintain levels that are consistent with what you see and what we just announced.

Kimberly Greenberger (Citigroup): Is there something about the spring merchandise execution that is troubling you?

Sally Frame Kasaks: Our inventories are more current now so we have less sales goods within our mix right now which is a good point to bear in mind. We also don’t forget there was some footwear business last year so it’s an accumulation of things from an apparel point of view.

Plus, there is a calendar shift and we just weren’t quite sure how to do the March/April plan. So, it’s not a function of assortment or inventory levels, we were just being conservative in Q1 and we believe that’s the right way to go. I feel very confident that we did the right thing there.

Kimberly Greenberger (Citigroup): What are your high level thoughts on how you balance inventory management with sales opportunities?

Sally Frame Kasaks: We’ve actively brought down our inventories but we have actually wanted to build in some flexibility to be able to adjust. So, for example in young men’s we accelerated t-shirt deliveries, we brought goods forward where we could. In juniors again, we brought some things forward not because we were concerned about sales in the month of February.

I think our issue was to get these products in so we could get a good read on certain categories that we know we’re going to have to project for back to school.

That said, I do not think we’ve been too low. I believe we’re about right, it gives us the opportunity to chase. We had product positioned out there, are bringing some forward.

We’re just doing the basic merchandising that happens in an environment which is not predictable. So, I feel like the inventory levels are right. The only hindsight I might bring is that we probably should have slowed goods a little bit earlier in February just to be in position but it was not a significant amount.

Janet Kloppenburg (JJK Research): Do you feel like your cost structure is now lined up or in line with this level of sales decline?

Michael L. Harry:Yes. We mentioned in our commentary that we took a really hard look at our organization structure and tried to come up with what do we really need to run this business, what are some things that we need to reinvent in terms of how we’re doing them within the corporate office here and that was reflected in the recent work force reduction that we undertook.

It was a painful process, a painful thing to go through but we did it so we are structured appropriately for what we expect this environment to be.

Adrienne Tennant (Friedman, Billings, Ramsey): Can you talk about any macro shifts that you’re seeing with the customer in the active board sports arena?

Sally Frame Kasaks: Certainly our business, it’s still depends on the board shorts various activities there but, we’re also seeing the customer evolving in terms of what action sports look like and some of the references to some of the product lines. We’ve also seen a distinctive shift to our denim business.

So, we’re seeing shifts but I’m not certainly it’s board shorts, it’s something else. What we are just seeing is some custom preferences just moving in terms of the bottoms business right now is really very much a denims business.