George Powlick: We look forward to paying taxes.

Sam Poser (Sterne Agee): Could you give some feel for the currency effect both on international revenue and on the futures?

Steven Nichols: If we make a Euro profit, in Europe, when we bring it to the United States, it is more than the dollar. When we buy things in China, that we used to be able to buy for a dollar, they want more than a dollar. American currency is down. The euro is up. Chinese currency looks like it is rising. Canadian currency is up and you could figure out how this affects.

George Powlick: There is a currency positive of impact on our numbers. We did not hide behind when it was going the other way, we are not going to triumph it when it is going this way.

Sam Poser (Sterne Agee): Was it more of an affect this time relative to the numbers?

George Powlick: No, I do not have the numbers in front of me because we do not disclose this often, so, in fact, never so.

Sam Poser (Sterne Agee): You talked about purchases of $6 million in trademarks. What that was?

George Powlick: We are in the process of acquiring trademark rights to a footwear brand and when that process is complete, we are making announcement, but it is not complete yet.

Sam Poser (Sterne Agee): Your sales were down significantly your inventories up. There is a lot of variance and unusual on your stock sales ratio going into the second quarter. How current is the inventory considering the backlog and then inventories were up, backlogs down and sales have been down?

George Powlick: The inventory is higher than we like it. We evaluate every quarter as all companies do the adequacy of their reserves in relation to that inventory. We think we have provided adequate reserves, but the inventory is higher than we would like no question about it.

Sam Poser (Sterne Agee): Where would you like to see the inventories end up on a year-over-year basis?

George Powlick: We work on day to day trying to hit singles and it turns out we win the game. We are putting pressure on our people to get our inventories more inline with direction of our backlog and sales and believe me they are working hard, but it is a moving target all the time.

Sam Poser (Sterne Agee): Do you have an interest income?

George Powlick: It depends on what the interest outlook is and it depends if we ever get the opportunity to repurchase some shares, we will have less cash but those are the two variables.

Jeff Van Sinderen (B. Riley): Will FootLocker continue grouping your product by brand rather than by sport category?

Steven Nichols: It is hard to tell what they are going to do. We have enough trouble running our own business as opposed to running theirs, but I think that they had such a small amount of our performance product that it was not enough to be all four by itself. That is why they have put up with our everyday shoes.

Jeff Van Sinderen (B. Riley): What does the bulk of the inventory consist of at this point and what do you think the excess inventory would go to reserve that channel occupies or what happens?

Steven Nichols: If you fully understand our brand policy and that is to take care of our brand on a long-term basis. The bulk of our inventory is white shoes that are uniquely K-Swiss. We mean the timeless and the classic. We have the financial capability to sit on inventory for period of time. This is not the type of inventory that spoils rapidly. We might just dole it out, small doses over a long period of time. We do not have to run a big fire sale and get it out before it spoils. Our inventories will get in line but it could take a year or two years. The biggest factor will be our patience in dealing it out. It goes to people that we have traditionally sent our inventory to. We do not advertise and can move large quantities of inventory at Marshalls and TJ Maxx and Ross and all of these people who have businesses that the amount of shoes K-Swiss supplies them is minor.

Jeff Van Sinderen (B. Riley): Can you give more color on the apparel business developments?

Steven Nichols: We are making some progress against our plan, and our plan is upscale in apparel. The apparel will be going into Barneys. It will be going into Saks. We currently have two windows at Harrods in London. This is upscale. One step down from those will be going into the largest athletic retailer in the U.K., somebody called JD. They will have our apparel in back-to-school period of this year. Our plan is for the apparel to be upscale and premium and be one of the things that pull the brand up. We are sticking with that premise.