Jason Kaspar (Kaspar Investments LP): How Royal Elastics in the long term 5, 10 years from now fits into the way you are moving your K-Swiss brand?

Steven Nichols: We look at Royal Elastic as a totally separate project. The average consumer has no idea that there is any correlation with K-Swiss, and that allows Royal Elastics to do different things. Whatever we are doing to K-Swiss almost has no rollover on Royal Elastic with certain exceptions. We do not know how to sell shoes that we make pennies on the dollar and sell them at Target and Wal-Mart and places like that. We do not understand that business. We are in factories that make high-quality shoes. That means the price points for Royal Elastics either has to be K-Swiss or above, and the distribution has to be in places that we are comfortable with. So, aside from that, Royal Elastics has some interesting sub-licenses, Andy Warhol. It has something called Harajuku. It has L.A.M.B. They can do a lot of innovative things in addition to the Royal Elastic brand. The brand is less classic, more irreverent. And basically just as a 5% of our total asset with the chance of us getting it right and something big time happening, we are still playing that game.

Jason Kaspar (Kaspar Investments LP): How are you positioning in Asia?

Steven Nichols: In Asia, our price points are high in every thing we do. There are three Royal Elastics stores that we own in Taiwan, and they drive the business and do well. We have an excellent distributor in Japan. It does well. I always felt that because the shoes are fully elasticized and do not have shoe laces, you just slip them on, slip them off. That traditionally people in Asia, when they come in their house, they take their shoes off. I always felt that there was a great advantage to have a brand without shoe laces in Asia, and that has been one of the reasons that have worked. There is a definite shift in what has been going on in the athletic business. In women shoes, athletics does not have the power and punch that it used to have. Something is happening at athletics. A few years ago, we felt that what might happen is more fashionable athletics might be a place to go, and Royal Elastics has a possibility of capturing that niche. We still have not proven it with Royal Elastics, but up until this year, it has been immaterial until the entire scheme in the K-Swiss with some upside potential and that is the way we looked at it.

Jason Kaspar (Kaspar Investments LP): Various CEOs have repeatedly pointed to March and it continued into April of just economic activity falling of the cliff from trucking companies to other retail companies. Did you at all see a slowdown in phone rings and calls and stuff in March, both in the US and international?

Steven Nichols: We firmly believe that our problems are self manufactured that we did not move our product and marketing ahead at a point where our brand was in demand, and we had to move ahead and we stayed where we were. We are paying the price for it. Once we get our act together, then we will move ahead. In the worst of times, there is successes. In the best of the times, there are failures.

Scott Krasik (CL King): In the first part of the decade when you did add some good earnings, it seems like your gross profit dollar is growing and holding G&A flat. Since the business is now trending towards the bunch of little things that may not be working and may not be that profitable, would any real flow through the earnings be sort of push back and almost like a multiplier effect it would take a few years until classics or some other category came back to give you that boost in actual gross profit dollars?

Steven Nichols: We have relatively small fixed costs compared to other industries, in our own factories, a number of things we have got to keep going. The only major variable we have that is big dollars and variable is marketing. This year, we elected not to drastically cut marketing. When you have a position of 1% of the marketplace, if our marketing and our products are right for us to go from 1% to 3% that could happen in two quarters at which point we could return to the profitability we have had in the past.

Sam Poser (Sterne Agee): What is in the sport style product that is performing well?

Steven Nichols: We do not have anything that is performing well at retail. We do have products that we will introduce for the first quarter within the next 30 days to 60 days and big question is the significantly better products than what is our retail. The marketing that is surround those products maybe better. If the answer to both of those yes, then our business will go up, if the answer is no, then our business will either go down or stay where it is.

Sam Poser (Sterne Agee): How is the new product going to be different?

Steven Nichols: The difference is that the brand that we have been for 40 years, we can not abandon that. You will have to walk in and look at the shoes and say, alright K-Swiss is still number one. You have not metamorphosised and come in a caterpillar and flown out a butterfly. You look at each individual offering and you will say that the lasts look thinner and crisper and the designs look fresher and newer. If every shoe is 10% better, then that is terrific and that is what a real success could be. This is the category that we have been the strongest in. This is not reinventing everything from soup to nuts. This is refining and refining and along with that, has to be marketing campaigns that the core consumer. These are relatively young people and get excited about the brand. It is hard to get excited about the brand, when the product is dodgy and has not moved ahead.