Sue Riley: You should take it up. There is going to be some capital spending but moderately. It was $17.7 in the quarter and if you round up you would be okay for the year.
Janet Kloppenburg (JJK Research): Did you say your carry over inventory was 9% versus 5% last year and does that mean the clearance inventory is higher than it was going into the second quarter 2007?
Richard Flaks: That is predominantly spring goods are higher as a percentage of our total. Part of that is because the go-forward inventory back-to-school is down but yes we are higher. The reason for that is last year the customer did not like our line so we aggressively marked it down early, the spring line. We were at $4.99 and under events by the beginning of April. This year we have not been as aggressive because we have not needed to be but we are clearing that inventory comparably at a sell through rate comparable to last year.
Janet Kloppenburg (JJK Research): When you look in to the back half of the year, do you look for your inventories to be as lean as you expect them to be coming out of the second quarter, which is down around 10% per square foot?
Richard Flaks: We do not give guidance out more than one quarter but directionally we do expect the inventory to be down. I just want to make one other point about the end of the second quarter. We gave guidance based on last year but if you look at it on a two-year basis it is flat to up to two years ago. I just do not want everyone believing that the big negative inventory position we are reporting at the end of the second quarter is a function of not having enough. It is a function of just rectifying where we were last year. We feel comfortable relative to two years ago.
Janet Kloppenburg (JJK Research): Could you talk about if there is anything you could do to affect the tax rate?
Sue Riley: It is a high tax rate. The actual taxes we will be paying out in cash will be lower than that. That rate is a function of our having repatriated cash from Asia so we are no longer permanently invested in that. There is little we can do with that rate this year. Rich and his team will be working to get that rate down in future years but this year the order of magnitude there is relatively that can be done.
John Zolidis (Buckingham Research): You indicated that 2/3 of the approximate $50 million of exit costs related to Disney have already gone out but you have these restricted assets in Chapter 11 that are on the balance sheet, about $99 million. Is that the working capital associated with the Disney Store business?
Sue Riley: Yes. The balance sheet is complex. The assets that were held for sale as of the end of the quarter primarily it is held in the bankruptcy. It is working capital. It is cash that we received, that the bankrupt entity received for the inventory that was sold to Disney.
John Zolidis (Buckingham Research): When you finalized the exit of Disney or you look at the balance sheet for next quarter is there any other working capital or cash drag that is going to out flow to Disney?
Sue Riley: There is nothing to Disney from CP. There is no cash movement from The Children''s Place to Disney or to Hoop. What you will expect to see is there are certain obligations that are obligations of The Children''s Place Corporation and that is the 1/3 remaining that we expect to pay out between now is things like severance for employees of The Children''s Place that had been associated with Disney but they were not the obligation of Hoop the entity and other items somewhat like that. I would expect to be largely done by the end of the year with some flow into next year. Not material amounts.
John Zolidis (Buckingham Research): Your stock is trading about $4 higher at about 15%. You had previously talked about making a bid for the company at $24. The stock is currently approaching $33. Given that you are early in seeing the progress and improvement from a number of the initiatives you have in place, how would the Board consider a take out proposal from either Ezra or another party in light of the potential for the stock to go higher based on your own performance as the year progresses?
Chuck Crovitz: The Board is going to do what the Board would typically do. I think you just outlined the calculus that any Board would go through in evaluating offers. We basically have here sort of a high class problem. It is great that the strategies are starting to take hold and the stock is going up. I think it just puts the shareholders in a good position overall. That is what our objective has been.
Dana Telsey (Telsey Advisory Group): Can you talk about in the current environment how are you looking at the promotional cadence going forward particularly as you compare back-to-school?
Richard Flaks: We are being cautious based on what we saw last year with back-to-school so what we have done is we have positioned the strategy that does not necessarily anniversary last year’s promotion activities. We have the contingency to go there if we need to because we could go into back-to-school and see something different to what our expectations are. It is early for us to lay out our promotional strategy because we are keeping our options open based on the experience we had last year.
Dina Sweeney: From a merchandising perspective, we differentiated some of the products in fall one to fall two this year, driving it towards a wear-now perspective. Holiday has been more of an evaluation of reducing that SKU assortment and allowing the product the time to live on the floor.
Dana Telsey (Telsey Advisory Group): Do you have any update on the CEO search?
Chuck Crovitz: That is ongoing. No particularly update on that but it is ongoing.
Linda Tsai (MKM Partners): With regards to ending second quarter inventory levels being lower than last years it sounds like an improvement from what you were previously expecting at the end of the first quarter. Was this a function of discounting more to sell the inventory or was there something else going on?
Richard Flaks: No. We just said we were going to be negative. We have not given any definitive numbers around that. Now we are just being more definitive but it is in line with where we expected to be.
Chuck Crovitz: This is part of a longer-term strategy we talked about last fall that we felt we needed to bring inventory levels down and the first quarter that we could fully affect was this back-to-school period. This is the first time we are fully feeling the effect of that strategy.
Linda Tsai (MKM Partners): At what point do you think you will provide more detailed guidance?
Sue Riley: When we secure financing we can give you more visibility into what our interest expensing might be. At this point we have not identified a time we expect to go back and give guidance. Our business was volatile last year and as such we stopped giving guidance. We are not giving a definitive point of time at this time.
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