Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Quiksilver, Inc. (NYSE:ZQK)

F4Q08 (Qtr End 10/31/08) Earnings Call Transcript

December 18, 2008, 4:30 pm ET

Executives

Bruce Thomas – VP, IR

Bob McKnight – Chairman, President and CEO

Joe Scirocco – CFO

Marty Samuels – President, Quiksilver Americas

Analysts

Brandon Ferro – KeyBanc Capital Markets

Eric Tracy – BB&T Capital Markets

Mitch Kummetz – Robert W. Baird & Co.

Kate McShane – Citigroup

David Glick – Buckingham Research

Sean Naughton – Piper Jaffray

Jim Duffy – Thomas Weisel Partners

Carla Casella – JP Morgan

Bill Reuter – Banc of America

Jennifer Black – Jennifer Black & Associates

Jeff Van Sinderen – B. Riley & Company

Emily Shanks – Barclays Capital

Jeff Mintz – Wedbush Morgan Securities

Operator

Good afternoon, ladies and gentlemen. At this time, all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be given for you to queue up for your questions at that time. (Operator instructions) And just a reminder, today’s conference is being recorded. Now, at this time, I will turn things over to our host, Mr. Bruce Thomas, Quiksilver's Vice President of Investor Relations who will chair this afternoon's call. Please go ahead, sir.

Bruce Thomas

Thanks, operator. Good afternoon, everyone, and welcome to the Quiksilver Fourth Quarter Fiscal 2008 Earnings Conference Call. Joining me today are Bob McKnight, our Chairman, President, and Chief Executive Officer; Joe Scirocco, our Chief Financial Officer; and Marty Samuels, President of Quiksilver Americas.

Before we begin I'd like to briefly review the Company's Safe Harbor language. Throughout our call today items may be discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding Quiksilver's business outlook and future performance constitute forward-looking statements and results could differ materially from those stated or implied by these forward-looking statements as a result of risks, uncertainties, and other factors including those identified in our filings with the Securities and Exchange Commission specifically under the section titled ‘Risk Factors’ in our most recent Annual Report on Form 10-K. All forward-looking statements made on this call speak only as of today's date and the Company undertakes no duty to update any forward-looking statements.

In addition, this presentation may contain references to non-GAAP financial information. A reconciliation of non-GAAP information to the most directly comparable GAAP financial information is included in our press release, which can be found in electronic form on our website at www.quiksilverinc.com.

With that out of the way I would like to turn the call over to Bob McKnight.

Bob McKnight

Thanks, Bruce. Good afternoon, everyone, and thanks for joining us for our fourth quarter conference call. As you all know by now we completed the sale of Rossignol on November 12th and we are very pleased to have closed the transaction within the timeframe that we expected under such difficult circumstances.

Moving forward without exposure to the hardgoods business dynamics provides us with a lot more certainty with respect to our use of cash and other resources. The completion of the sale eliminates a considerable distraction for our people and allows our management team to focus on our three great core brands and on our balance sheet. And it certainly changes the tone of our conversations with the banks, our shareholders, and bondholders, new potential stakeholders, and of course, with our employees. We now have a renewed perspective and the morale is clearly moving in the right direction.

I am very proud of the people in the Quiksilver organization for the determination and the fight they are exhibiting as we press our way through this horrible economy. I am pleased with our fourth quarter performance and the job we did to deliver on an outlook that we revised in June. This has been a difficult environment to navigate the team’s done a good job delivering on our guidance.

Let's now turn to the high level financial highlights from the fourth quarter focusing on our core apparel and footwear brands, which now compromised [ph] our continuing operations.

Consolidated net revenues for the fourth quarter of fiscal 2008 grew 3% to $607 million. Consolidated gross profit declined by 100 basis points to 48.1% of sales while expenses during the quarter increased 130 basis points to 38.2% of revenue.

Excluding the charge to goodwill that Joe will discuss a bit later, our continuing operations delivered operating profit of 8.3% of revenue or $15 million.

Income from continuing operations for the four quarter, excluding the goodwill charge, was $42 million, or $0.32 per share, compared to $44 million, or $0.34 per share in the fourth quarter of 2007. Our performance this quarter, overall, was a bit better than expectations due largely to a tax benefit. Nonetheless, it’s gratifying to have performed at this level given the difficult challenges we face every day in the retail marketplace.

With regard to fiscal 2008, revenues from continuing operations increased 11% to $2.265 billion. We generated operating income of $194 million excluding the goodwill charge and our adjusted earnings of $0.93 per share was a bit better than expected due to the favorable tax provision. This result was higher than the $0.90 per share we earned last year.

In particular the performance of our European business was very impressive, generating $100 million of operating profit. That’s roughly $100 million or about 16% of sales. We are extremely proud of our European team.

But (inaudible) on the minds of our stakeholder these days is our overall financial condition and Joe and I hope to provide some clarity today along with a few updates on steps we are taking to improve our capital structure. We said in October that we were evaluating potential financing alternatives, plan to seek additional committed forms of financing, potential sourced of alternative funding we mentioned at the time including our existing lenders, whether for short of long term financing and the broader capital market. In light of the turmoil in the global capital markets we expanded our review to include private equity investment capital and other strategic alternatives. In support of this initiative, we retained Morgan Stanley as our financial advisor to assist us in this process.

In addition to the effort to explore these alternatives, we have undertaken a comprehensive initiative to improve our capital structure. Our team has been focused on securing either new or amended financing agreements designed to reduce and eventually eliminate the risks associated with our current debt structure and the uncommitted nature of a portion of our debt. The good news is that our banking partners, especially in Europe, now look at Quiksilver in different light after the sale of Rossignol, and the banks are eager to further their relationships with us.

We have already been successful in securing amendments to several term loans and lines of credit to accommodate the impact that the worsening economy has had on our business and on our Rossignol sale process. And you will hear from Joe that we have made more progress over the past several weeks in positioning ourselves for many more years of future success. Now that we have eliminated our exposure to hardgoods manufacturing we’re refocused our attention towards our three strong board sport lifestyle brands – Quiksilver, Roxy, and DC.

Despite an increasingly challenging retail environment, let’s not forget that Quiksilver and Roxy remain leading brands for surf and action sports for young men and girls throughout the world and DC is one of the top three footwear brands in the entire action sports industry. We believe retailers will continue to rely on us a market leader in these challenging times, which may even result in market share gain. We have longstanding relationships with our customers and we have entered tough business cycles together in the past. We continue to work with them in position our product in the best way possible to maximize our sell-through and to capitalize on the broad appeal of our brand.

Amidst all the economic woes, we continue to be inspired by the performance of our athletes who connect to us to the board sports culture and establish through their performance the credibility, authenticity, and global appeal of our great brand. And 2008 was a particularly strong year for Quiksilver, Roxy, and DC athletes.

In October, Quiksilver surf team rider Kelly Slater clinched a recording-setting ninth ASP World Surf Championship. Kelly was both the youngest and now the oldest ASP world champion at the age of 36. And Kelly’s fantastic run continues to amaze us all as just last week he won the final stop on the tour in Hawaii at the Pipeline Masters off the north shore of Oahu for his sixth win of the year.

The Quiksilver family was hugely successful at this year’s Surfer Poll Awards in September with Kelly again taking home the Rider of the Year award and Roxy team rider Sofia Mulanovich was voted Female Rider of the Year for the fourth consecutive year. In addition, Dane Reynolds, Clay Marzo, and Mark Healey also won key awards. The Surfer Poll Awards are strong indicators of the popularity of these athletes and the reach of their appeal within our target demographic.

Tony Hawk’s recent skateboarding tour made 24 stops in 45 days during its nationwide tour of United States. The tour was great for our exposure as it reached well over 100,000 kids and featured some of the best action sports stars in the world.

Our Roxy team riders once again proved dominant in this Year’s ISA World Surfing tour as surf team rider Sally Fitzgibbons won the ISA Open Worlds Women’s Champion and Lora [ph] was crowned ISA Open Junior World Champion.

And DC’s skate team rider Danny Way had another decorated year winning the silver medal in the popular X Games where he also claimed the coveted title of Athlete of the X Games.

So, in summary, we're pleased with our solid fourth quarter financial results, especially given the retail climate created by the economic downturn. We are prepared to work very hard in 2009 to overcome the headwinds faced in our business and our industry. And now that Quiksilver is free of the operating burden and risks associated with the hardgoods manufacturing business, the Quiksilver team is enthused to get back to our roots and perform as the world’s leading action sports lifestyle company.

Thank you. And now, Joe will take you through the financial detail.

Joe Scirocco

Thanks Bob. Good afternoon, everybody. I will be addressing our continuing operation. That is our results without Rossignol, which we sold on November 12th.

For continuing operation, consolidated net revenues grew 3% to $607 million in the fourth quarter compared with $587 million in the fourth quarter a year ago. Revenues from the Americas were up 10% over last year as both our wholesale and retail segments grew. Higher Americas wholesale revenues were driven primarily by additional shipments from our Mira Loma facility that were delayed in Q3 and some early shipments of DC products along with incremental business from Latin America.

Our DC business in the Americas continues to exhibit good growth and strong demand enabled us to ship an additional $10 million earlier than we had originally planned. We expect this to lead to lower Q1 shipments for DC.

At retail four new stores in the quarter and 24 stores that have opened during the last year drove the Americas retail revenues higher by double digit percentage, offsetting modestly negative comps.

European revenues in constancy currency were down 6% for the quarter in part due to the timing of shipping. As you may recall, we made some early deliveries in the third quarter that we previously expected would fall in the fourth quarter and we experienced a similar shift in timing from Q4 of fiscal ’08 to Q1 of fiscal ’09. Retail comps were down high single digits, but were offset by 13 new stores opened in the fourth quarter and 37 net new shops including (inaudible) that were opened in Europe during the fiscal year.

It’s important to put all these into context of another outstanding performance turned in by our European team for fiscal 2008. For the full fiscal year, European revenues grew roughly 4% in constant currency to EUR623 million. Operating income grew faster than revenues and the business again generated a very strong operating margin approximating 16%. The economies of Europe may be softening but we continue to expand our market-leading position there and to earn great return.

In the Asia-Pacific region, revenues were up 10% over the fourth quarter of 2007 on somewhat stronger performance in Japan.

Our overall gross margin decreased by 100 basis points to 48.1% for the quarter largely as a result of margin pressure in the U.S. This reflects prevailing market conditions. We are currently prioritizing inventory reduction and cash generation even at the expense of gross margin. In general, discounting offset any significant improvement in our European and Asia-Pacific margins that occurred from favorable foreign exchange gains, or sourcing improvements.

On the bright side, the inflationary conditions we anticipated in China and elsewhere for fall 2009 inventory purchases may ease now that global apparel demand has weakened as much as it has. However, this comes in the context of weak consumer demand and the evident need to discount prices in order to encourage consumer spend.

Fourth quarter SG&A expenses grew to $231.6 million from $216.6 million a year ago. Although expenses were roughly in line with our expectation, SG&A grew by 130 basis points to 38.2% of sales in the third quarter, up from 36.9% a year ago. Among the items that contributed to the higher expenses were cost associated with the incremental addition of 66 new retail shops since the fourth quarter of 2007, higher DC operating cost, and the cost of new infrastructure in Brazil and Mexico.

For accounting purposes, we performed our regular annual assessment of the value of intangible assets as of October 31, 2008. Current market conditions evaluation metrics caused a $55.4 million goodwill impairment charge associated with our business in Australia. The goodwill impairment charge is a non-cash expense and does not affect our operation, cash flows, or covenants associated with our debt.

During the quarter we also analyzed the profitability of our retails stores and determined that a total of 25 stores primarily in the U.S. were not generating sufficient cash flows and are unlikely to achieve desired profitability. As a result, we recorded approximately $10 million in fixed asset impairment charge. We plan to close nine of the 25 stores during fiscal 2009 and will be working to close the remaining 16 stores as soon as possible. The $10 million charge does not include any cost to exit leases which would be charged to future earnings upon store closure.

The operating margin in our core business excluding the goodwill charge was 8.3% of sales in the fourth quarter compared to 12.2% in the same quarter a year ago primarily because we absorbed $10 million of store write-off into our operating income, but also as a result of margin pressure and expense deleveraged.

Interest expense was $9.5 million in the quarter, which is lower than it was for the same quarter last year due largely to changes in currency translation.

Our tax provision was favorably impacted by approximately $0.04 in the fourth quarter by the relatively new accounting standard that requires companies to release provision for contingent tax liabilities if they did not materialize during the quarter. In this case, certain provisions were made in France and were released following a court decision that made them unnecessary. As we have previously noted, these kinds of adjustments, favorable or unfavorable, can emerge from time to time.

Consolidated income from continuing operations for the fourth quarter excluding the charge for goodwill was $41.6 million or $0.32 per share compared to $43.9 million or $0.34 per share in the same quarter a year ago. This result was essentially in line with our expectation as we did not plan for the favorable tax adjustment.

I’d now like to turn your attention to the balance sheet for a few moments. Receivable at $470 million are 2% lower than for the same period last year, but 6% higher in constant currency. On an overall basis DSOs decreased by three days to 66 this year compared with 69 in the fourth quarter a year ago, primarily as a result of currency effects.

Inventory at quarter-end was $312 million, up 5% compared to the same period last year, and up 15% in constant currency. The increase in inventory supports the 66 new stores added since last year along with new business in Latin America. We have taken and are taking steps to control inventory levels in the context of uncertain demand.

We recognize that investors are focused on our liquidity, debt levels, and capital structure, so let me give you an update on our current financial condition and financing efforts. Now that we are free and clear of the impact of Rossignol on our day to day operation, our near-term capital and financing needs have become clearer to our banking partners and we are in a better position to realign our debt, and let us tell you why.

On October 31st, our total debt stood at $1.071 million, including Rossignol’s debt. And we had approximately $215 million of available liquidity. For purposed of this update, we define available liquidity as non-restricted cash and available borrowing capacity. More recently, this level has declined as a result of normal seasonal fluctuation to a range of between $100 million and $125 million.

Our leverage has improved dramatically. With EBITDA from continuing operations for fiscal 2008 of $279 million, our pro forma leverage ratio as of October 31 was approximately 3.8 times.

And finally, now that the sale of Rossignol is complete and we no longer have material earn-outs to pay for transactions such as our 2004 acquisition of DC Shoes, we expect to resume our historical pattern of generating free cash flow from our core business. We plan to use this cash flow to reduce debt.

In a perfect world we would establish global credit lines. So because of the way our banking relationships and business have evolved over the years, we’ll be working on a regional basis to improve our capital structure. With that in mind we have undertaken four initiatives to support our liquidity requirements.

First, we are in discussions currently with our European banks to refinance our short-term and uncommitted debt, including the EUR55 million facility, which is due in March 2009, and the discussions are very encouraging. These banks have been with us a long time and have been eager to work with our European business, which is consistently very profitable and cash flow positive.

The recent obstacle for this historical support was our ownership of a risky, capital-intensive ski business. Based on our discussion, we expected that our European banks will negotiate with us a term sheet for a multi-year committed credit facility in January, 2009.

Second, in Australia, we are working to put in place a bank commitment for a $20 million line of credit, half of which was previously uncommitted. We expect that this facility will be available to us in mid-January.

Third, we are negotiating a term loan to supplement our current credit facilities here in the U.S. subject to approval by our U.S. lenders.

And finally, we are exploring methods of generating more cash from internal resources such as improved accounts receivable collection, inventory efficiency, and expense reduction. So, to sum up the situation, we believe that our cash flow from operation together with existing credit facilities and available credit will be adequate to fund our capital requirements.

In addition, we believe that we can obtain the additional financing needed to improve our debt maturities, reduce the amount of our short term uncommitted lines of credit and better position ourselves for the long term. At the same time, we also realize that the availability and cost of new financing is subject to credit market conditions, which seem to be changing all the time.

As a remainder, we mentioned last quarter that we expect to record a significant non-cash loss on the final sale of Rossignol. Because we closed the sale transaction in November, this loss will be recorded in our fiscal Q1 results. The loss is driven by the difference between the sale price and the carrying value of Rossignol’s working capital. We estimate that this non-cash charge will be approximately $150 million. However, it will not affect the Company’s operation, cash flows, or covenants associated with our debt.

Now, let’s turn our attention to the outlook. As you know, business conditions around the world continue to deteriorate and any type of outlook for the first fiscal quarter and next year would be highly dependant on holiday results and the level of inventory remaining in the channel after the next several weeks. Spring shipments are subject to how well retailers come out holiday and January clearance sales. As a result, even our first quarter outlook is difficult to estimate with any level of accuracy right now. However, we will try to be as helpful as we can in talking about the business and providing some commentary about both the Q1 and full year outlook.

The first quarter is traditionally our lowest volume quarter and relatively modest swings in sales or margin or margin can have a big impact on earnings. like our competitors, we have a seen a decelerating trend in retail comps thus far in the quarter, which we are assuming will be the trend for the next few months. Over the first half of the quarter the euro has really bounced around declining to an average level of around 1.28 compared to 1.47 last year. And as we mentioned, we shipped about $10 million of DC products in Q4 that otherwise would have been included in Q1 results.

Taking these factors into account we believe sales could be down somewhere in the low double-digits and that we could incur a loss of up to $0.10 per share. Interest expense is expected to be around $16 million and we are assuming a tax rate of approximately 30%.

Regarding currency, note that the first quarter of fiscal 2008, we translated the euro at 1.46 and the Aussie dollar at $0.88. Our historical results include regional revenue and operating profitability, so you can make your models based on these factors.

For the full fiscal year, our best guess at this point is a revenue decline in the high-single to low-double digit range driven by continued contraction of the marketplace and declines in the value of the euro and Aussie dollar compared with fiscal 2008. For the full year of fiscal 2008, we translated the euro at $1.50 and the Aussie dollar at $0.87.

Operating margins are difficult to estimate because of uncertain demand. However, it’s reasonable to assume some erosion whether because of pricing pressures in the market or expense deleveraging in the context of declining revenue. Of course, we are planning to reduce expenses to compensate for tough business condition, but we need some more time to formulate our plan. We are tentatively assuming interest expense of around $70 million. We are assuming a tax rate of around 25% to 30%.

And to help you a bit with currency, note that for the full year every $0.05 swing in the euro equates to about $30 million swing in revenue, $5 million to $6 million in operating income and $0.02 to $0.03 in EPS.

In comparison with recent years, we are planning to open very few new stores in 2009. We have reduced our CapEx budget to around $60 million from roughly $94 million in 2008 and our depreciation and amortization is planned to be around $60 million.

We plan to control working capital in line with revenue trends as they develop although we’ll defer making a specific estimate of working capital at this time.

Obviously, the current environment limits our visibility on the business and we will look to update this as we come out of the holiday and head into spring season.

With that, I will turn the call back to Bob for closing remarks.

Bob McKnight

Thanks, Joe. As we’ve mentioned, the business climate in November and December has been worse than anyone expected. We are carefully monitoring the holiday shopping season and have a watchful eye on our performance in our target markets and our core accounts. And we continue to control inventories through clear communications with our partners. But our brands remain strong and we believe retailers will continue to rely on us as a market leader in these challenging times. Our Quiksilver, Roxy, and DC brands comprise one of the strongest portfolios in the industry, and we continue to believe there are tremendous opportunities for growth and profitability ahead of us.

Bruce Thomas

Operator, that concludes our prepared comments. We are now ready for the question-and-answer session.

Question-and-Answer Session

Operator

Thank you, Mr. Thomas. (Operator instructions) And we’ll go first this afternoon to Brandon Ferro of KeyBanc Capital Markets.

Brandon Ferro – KeyBanc Capital Markets

Hey guys.

Bob McKnight

Hi, Brandon.

Brandon Ferro – KeyBanc Capital Markets

I kind of wanted to start on the liquidity and debt issues. Can you just clarify for me – I think in you press release and then the prepared commentary we talking about effectively turning all those short-term uncommitted lines into long-term committed ones?

Joe Scirocco

Well, in Europe we are talking about – yes, we are talking about that. So effectively we have some uncommitted lines in Europe and a much smaller amount in the Asia-Pacific region, but the answer is yes.

Brandon Ferro – KeyBanc Capital Markets

Okay. So the vast majority of that 165 will be committed long-term credit.

Joe Scirocco

Well, we expect to negotiate a term sheet in January.

Brandon Ferro – KeyBanc Capital Markets

Okay. And then just the supplemental term loan in the U.S., can you give us a sense of why that’s needed, how big it might be? I am just wondering if you are thinking existing liquidity is adequate. What is kind of driving the need for that supplemental addition there?

Joe Scirocco

It’s just the supplement that is intended to give us a little more flexibility in this final year of our ABL facility. The ABL matures in April of 2010 and so as we bridge from here to there we believe it would be very useful to do that. I really don’t want to go into the terms at this point since we are in discussion without it, but essentially it would be a secure junior terms kind of thing. It would operate within the context of our existing asset-backed credit facility here in the U.S. and it would be subject to approval by our lenders. So we’ll do this in consent with them.

Brandon Ferro – KeyBanc Capital Markets

Okay and then just lastly I think – we think you guys have done a good job in terms of putting things together with the bank group. It looks like they are amenable to getting you through your current near term situation. But you also talked about other financing needs in the press release. So I am guessing you are alluding to private equity there. I am wondering what’s in the capital structure might we take care of with private equity above and beyond what you’ve done with the banks here.

Joe Scirocco

Well, again, not to go into the details of our strategic alternatives here, but just bear in mind that at the time we launched this process the markets looked a little bit different. So the scenario that might unfold today could be different than the one that might have unfolded at a different time when the share price was quite a bit higher and high type investment and that kind of thing had different characteristic. But at this point in time the strategic alternatives were intended and are intended to deal with the overall capital structure whereas some of the other things that we’re doing are more related to short term liquidity type needs. So it’s really – it’s operating on two levels.

Brandon Ferro – KeyBanc Capital Markets

Okay. Thanks a lot guys. I appreciate it.

Joe Scirocco

Thanks, Brandon.

Operator

We go next now to Eric Tracy with BB&T Capital Markets.

Eric Tracy – BB&T Capital Markets

Good afternoon. May be just follow-up on the liquidity. As we think about ’09, could you walk us through – it sounded like at least based on the assumptions you laid out – I believe I heard you said you expected to still be free cash flow positive next year but may be walk us through sort of what the liquidity covenants are and if they reset as the year progresses?

Joe Scirocco

Right. Well, you can understand in terms of our covenants we don’t have any performance covenants that we expect to affect us. We do have a number or restriction including limitations on indebtedness, mandatory prepayment requirements, certain restrictions on payments and inter-company activity none of which by the way is triggered by the special charges. So we don’t expect our operating covenants to come into play.

Eric Tracy – BB&T Capital Markets

Okay. Is it possible just to get a little bit more clarity as to the cadence of your free cash flow, how you sort of view it taking shape next year?

Joe Scirocco

Sure. I mean the – I guess start with the fact that we haven’t put a definitive outlook out there. we are giving you some indications on how we are thinking about the year, but we haven’t put out a specific forecast. Under normal conditions I would think that that we would be generating free cash flow in the range of $100 million this year. on an earlier call I had a made a reference to $75 million to $100 million but with some of the restrictions and cut-backs on capital spending and the like I would think that will go closer to $100 million may be more. Those are under normal conditions. So I think you can start by making some estimates about current market conditions and how that might vary, but essentially on a seasonal basis we probably average on the order of $550 million to $600 million in working capital on an annual basis. That doesn’t fluctuate very much on a quarterly basis. So if that’s helpful you can factor that in.

Eric Tracy – BB&T Capital Markets

Okay. Now that’s fair. And then maybe just you mentioned the assumptions actually in terms of operating margin, some erosion there given the conditions and obviously would expect some G&A leverage. May be talk through the various puts and takes around gross margins and referring a little bit back to the global sourcing initiatives that you may have in place as well as just lower commodity cost that how those can potentially offset currency or just the overall markdown pressures that you are seeing?

Joe Scirocco

We can talk generally about it. It will vary region by region. But as a general rule we bought spring pretty much on the same cost basis as we have expected, so it would have taken into account whatever types of improvements in sourcing margins that we had underway and we believe we are achieving those objectives. On the other hand, pricing pressure on sales these days is a lot more competitive around the world, a lot tougher, so it’s going to be less visible I think to investor to actually see that come through and it really is all about pricing in the marketplace these days. We had been thinking about inflationary factors in China and other parts of Asia for fall 2009. As we said, I don’t think that will materialize to the same degree we had considered principally because of weak demand in apparel imports coming out of major developed countries. But, on the other hand, if we can't sustain price in the marketplace as few people seem to be able to do these days, then you would not expect to see the benefit of these sourcing improvements.

In terms of currency, because we hedge forward the – we are probably hedged forward on the order of 18 months around the company but because we hedge we don’t see the same level of volatility in pricing as you do when you look at (inaudible) so that’s a moderating factor. There is a lot of moving parts here. I hope that’s helpful.

Eric Tracy – BB&T Capital Markets

It is, it is. And then maybe just lastly, Bob, just kind of bigger picture. If you could kind of talk through your thoughts obviously a horrific retail environment out there, but just now back to the core business or Quick, Roxy, and DC, sort of your ability to take share from some of those smaller players that will more than likely get weeded out and maybe just kind of talk through from a bigger picture perspective.

Bob McKnight

Yes well we know it’s pretty tough out there right now and that was seen in the results from October and November. Now December is not much better. So, it’s very tough out there. We try to stay in touch with our core retailers not only here insurance America, Hawaii, California, Florida, East Coast, West Coast, but also our core retailers in Europe and Australia. Keep in mind we are – 77% of the business we do is with independent shops around the world and so we can make phone calls to our reps and our management, be very close to their activity and therefore monitoring their sell-throughs and inventories and staying close to them. And we have been through this before, may be not at this level, but through this before ’91 and after 9/11 and a few other times. So we have very great long-term relationships with people. So I think that at the end day they know we have Quiksilver, Roxy, DC that are three very important brands, arguably the brands along with a couple of others that keep the doors open and so it’s fair I know that they needs us, we need them. Therefore we have a very strong spring order book currently. We are not sure about what the erosion might mean going into the New Year based on holiday sales, but we’ll deal with that when we get to it. And – but we are sure that we’ll get the biggest share of the orders that are out there and they will pass first and we are in a very strong position that way, so we therefore might take market share like we said in the comments.

Joe Scirocco

Eric, before we move on to the next question, I just like to come back to your earlier question about expected cash flows. I made the comment in prepared remarks, but just to emphasize, retail CapEx for fiscal 2009 is expected to be substantially below fiscal 2008, probably less than half. In addition, looking back on 2008, we spent approximately $30 million on earn-out payments for DC and some other things that will not be recurring. So, we really do have some opportunities between capital spending reductions, tightening on inventory, being more willing in the context of weak pricing to liquidate goods as and when appropriate and in the right channels of course. But we think there are some things we can do to improve cash flows in that regard

Eric Tracy – BB&T Capital Markets

Okay, great. Thanks guys. Best of luck.

Operator

We go next now to Mitch Kummetz of Robert Baird.

Mitch Kummetz – Robert W. Baird & Co.

Yes, thanks. Two questions. First of all, maybe Joe or Marty you can help me out a little bit on Q4 sales by brand. Could you provide that information?

Joe Scirocco

I mean we typically don’t – as you know Mitch, go through brand sales, but it won't surprise you to hear that DC led the pace. The business continues to be very strong and we did have some timing shifts. So, in terms of when you actually ship the inventory that’s relevant to the question of how it’s performing at retail. But DC has been the leader and very strong. The (inaudible) business is tough all over and so I’ll probably let Marty add any comments that he would like to make about them.

Marty Samuels

I mean I think that as Joe described DC is still having double digit (inaudible) of increases in the Junior business. So, Roxy is struggling a bit. That’s not just an Americas issue but kind of a global issue. And I think the Quiksilver brand is pretty stable (inaudible) holding its own share in the market.

Mitch Kummetz – Robert W. Baird & Co.

Okay. That’s helpful. And I appreciate the level of detail that you’ve given on the Q1 and ’09 outlooks but is there – would it be possible to maybe speak to you sales expectations by region?? I mean you talked about down double digits in the first quarter and then down high-single to low double digits for the year. Can you maybe provide a little context in terms of how you look at that by region?

Marty Samuels

I would actually like to – I’d like to defer until we come forward with a full set of expectations for the year, but in general – general commentary I think that business in Europe continues to be paced by DC and the annualization of stores that we had opened over the course of the past year, business is very strong. With the exception of the juniors market which is challenging to us, we feel good about that. In the U.S. demand is really somewhat uncertain at this point. I think we should probably defer.

Mitch Kummetz – Robert W. Baird & Co.

Okay. Fair enough. And then, Joe, you had mentioned on the SG&A you are hoping to reduce expenses there and with the sales expected to come down for the year high single to low double digits, you think you can take that level of expense out of the SG&A line or not to that degree.

Joe Scirocco

Difficult to do, particularly on the retail side of the accounts. I mean that’s the cost, fixed cost nature of the retail store base makes that challenging. On the wholesale side, we have a little more flexibility and are looking at that. But it’s really a question of how far and how fast we have to adjust.

Mitch Kummetz – Robert W. Baird & Co.

And where are the levers on the wholesale side to cut cost? Are there any obvious ones?

Joe Scirocco

Well we try to do it in an intelligent way and not undermine the brand credibility or strength by pulling back on marketing and things like that.

Bob McKnight

I mean we are looking at every area of spending. We are looking at travel, we are looking at promotion, we are looking at headcount. We looked at every GL [ph] we have and we are trying to adjust to a new reality as to what our (inaudible)

Mitch Kummetz – Robert W. Baird & Co.

And then two last quick questions. On the inventory I think you said it was up 5%. Is there a target that you would like to see it at the end of Q1 just given the environment trying to manage that down?

Joe Scirocco

Well, we’d like to see it to be in line with sales or better and we also made the comment that it’s up 15% in local currency. If you look at the total inventory growth, about 25% of it is related to new retail stores, 25% is related to Latin America. The balance is essentially currencies and goods, so it’s a question of what reorders, our ability to liquidate through our own outlets and other normal channels. And I think we are – many of our competitors are in a similar situation in which we feel we are controlling it. We have adjusted the inventory buys for summer and fall down in accordance with our expectation. On the other hand, we are competing for space and demand. It has been uncertain.

Mitch Kummetz – Robert W. Baird & Co.

And then last question, Joe. You reported a big foreign currency gain in the quarter. I am assuming given your hedging that you would expect to see additional currency gains going forward. Is there kind of a number we should be thinking about for either the first quarter or the full year?

Joe Scirocco

Are you referring to the $5 million –

Mitch Kummetz – Robert W. Baird & Co.

Yes.

Joe Scirocco

– impact in Q4? Yes, that’s really the impact of inter-company current account between the U.S. and Europe, so that number is a little bit difficult to predict as we’ve modeled out for fiscal 2009. We did not put a number in there That’s something that we would tend to think about in the context of a broader assumption, which might include, for example, interest expense. So we tend think about these currency movements and other non-operating things as interest and other.

Mitch Kummetz – Robert W. Baird & Co.

Sure. Okay, alright. Thanks. Appreciate it. Good luck.

Operator

We’ll go next now to Kate McShane of Citi.

Kate McShane – Citigroup

Hi, thank you. I think this question has been asked in a number of ways. I am going to try an ask it again in terms of the strength in growth of your Americas business during the quarter. Was it completely the DC brand that the shipments moved into this quarter? Did you benefit from any market share gain and/or higher selling prices during the quarter?

Bob McKnight

Well I mean as Marty shared, both Quick and Roxy in the quarter were up slightly, so it’s not just on our – it’s not just DC.

Marty Samuels

And our retail business was up. I mean I wasn’t up on grand scale (inaudible).

Bob McKnight

Yes.

Kate McShane – Citigroup

Okay. And then can you talk a little bit about what promotional environment was like at your own sourcing this quarter versus (inaudible) and other channels and at other retailers? And can you remind us what channels (inaudible) what channels that does go through?

Marty Samuels

I will answer the excess inventory. The excess inventory per channel is close to as our full priced accounts. The first people we try to move out with. Then we go through our own outlet stores and then we use the traditional off price channels, (inaudible) outlet will be the primary vehicle.

As far as our own promotional paid [ph] I think as most people know in our full price retail stores historically we’ve been full price and the only time we’ve been in promotional is in the after Christmas clearance environment and in the July kind of summer clearance environment and we’ve tried very hard to maintain that position, but I will admit that not so much in the fourth quarter but here in the first quarter in November with Thanksgiving and here in the latter stages of Christmas. We are having a little bit greater degree of promotional activity in seasonal categories than we historically have. I think much less so than most of the marketplace but we have these in the current environment.

Kate McShane – Citigroup

Thank you.

Operator

We’ll go next now to David Glick of Buckingham Research.

David Glick – Buckingham Research

Good afternoon. Joe, just a quick question about debt levels just to make sure that I heard you correctly. You ended the quarter at $1.071 billion and it's now in the kind of $950 million to $970 million range. Did I hear that correctly and that's the level we should think about? And obviously it's a little bit volatile due to working capital needs, but that's kind of the baseline we should think about going forward?

Joe Scirocco

No, no, David. Thanks for asking and let me clarify. We did – we ended the year at $1.071 billion in debt. That includes about $10 million that was associated with our discontinued operations, but we have not reduced debt to the $950 million level. I think what you're confusing is we talked about changes in availability under our credit facilities, and that number I pegged at around $100 million to $125 million as of a date more current than October 31st.

David Glick – Buckingham Research

Got it.

Joe Scirocco

So now the way you should think about this and just in terms of the interest expense assumptions we're talking about, at current debt levels – and you have to make your own assumption about how much free cash flow would be available to pay down debt for the year. But in fiscal 2008, in the continuing operations, we reported $45 million worth of interest. Bear in mind that our total interest expense for fiscal 2008 was $59 million and the difference is that our continuing operations now will have to absorb the interest expense that was previously picked up by the Rossignol business, or I should say assigned to the Rossignol business. Quiksilver paid for it, but it was for accounting purposes included on their books. So the increase that we are currently forecasting is really from $59 million to approximately $70 million on the year. We make some assumptions in there about refinancing, but obviously not about a larger, more strategic refinancing of that nature. This is more just about the operating initiatives that we've laid out for you. Is that clear?

David Glick – Buckingham Research

Thank you. Yes. And then the revenue outlook, high-single to low-double, obviously that has some currency impact. How would you characterize the difference between that and constant currency? Is that 200 basis points, or can you help us understand what your constant currency assumptions are?

Joe Scirocco

Well, I think if you just look at the translation rates, if, for example, you were to work with a $1.30 at this point compared to an average of $1.50 for last year and apply that to the EUR620 million some odd worth of European revenue, you get a sense of the impact. It's like every nickel is about $30 million swing in revenue just with regards to our European business. So I think you can get there.

David Glick – Buckingham Research

Okay. Well, obviously, we’ll do the math as well. And then the restricted cash on the balance sheet, could you remind us what that is?

Joe Scirocco

Yes. We have a standby letter of credit in France on behalf of – the beneficiary of which is the former owner of Rossignol. It secures a payment that we have to him, which is really deferred purchase price, not an earn-out certainly, or it wouldn't be on the balance sheet. But it is deferred purchase price and we have cash collateralized that standby LC for about the past two quarters or three quarters now.

David Glick – Buckingham Research

Okay, great. Thanks a lot. Appreciate it.

Joe Scirocco

Sure.

Operator

We'll go next now to Sean Naughton of Piper Jaffray.

Sean Naughton – Piper Jaffray

Good afternoon. Quick question for you on the liquidity covenants, Joe, that you outlined before. You said there wasn't anything on the performance side. But can you remind us of what the timeline of these payments may be?

Joe Scirocco

Timeline of payments or you want to talk about covenants or I am not sure–

Sean Naughton – Piper Jaffray

Well, just specifically the timeline for the payments for 2009. I think you have one that's coming due potentially in March and then just anything else for the remainder of the year.

Joe Scirocco

I mean, yes, the big one is the EUR55 million that comes due I think on March 14th, and then there are other smaller components of our European debt which are normal and recurring, amortizations that have been built into the European debt structure and cash flow projections for some time. So that's just normal and minor amortization of some term loans over there. I don't know the specific dates of each one, but the big nut is EUR55 million on March 14th.

Sean Naughton – Piper Jaffray

Got it. And then –

Joe Scirocco

And again, we are in discussions with the European bank who have just been waiting eagerly for us to sell Rossignol so that we had some level of predictability. We've got a European business with year in, year out, highly profitable 16% operating margin, 100 million in operating income – EUR100 million in operating income. So we think we can have a financing in place well before the March maturity. But even with the March maturity and no committed financing put in place we think we would be okay.

Sean Naughton – Piper Jaffray

Thanks. And then the 25 stores that you plan on closing, nine of them in 2009 and then 16 others as soon as possible, are those nine that are coming to be closed in 2009, are those expirations of leases that are coming due in 2009?

Joe Scirocco

No, these are – they are not expirations. They are stores that we're in negotiation to work our way out of them, but they may or may not coincide with negotiations. We are not planning for those nine; however, any significant cash outlay in order to close those stores. They are more modest and they are things that we had for the most part anticipated.

Sean Naughton – Piper Jaffray

Okay. And then on just the retail business, maybe, Marty, if you could chime in, were there any differences between kind of the full priced and the outlet channel, and then kind of the traffic versus ticket on any of those and the comp bases versus those? I'm assuming most of it is traffic related.

Marty Samuels

I mean, clearly, mall traffic, street traffic; tourist driven venues have all taken a hit. But as one might expect, the off-price channel, the outlet stores, is holding up a little better than the full priced channel because the customer is definitely trading down and price sensitive, and because we have not been as promotional in the full priced environment as many competitors in that environment.

Sean Naughton – Piper Jaffray

And then finally on – anything on – so DC, I think you have about 30% is in the apparel and 70% is in the footwear. Are those still good numbers in terms of judging that particular side of the business and just the mix? And then any difference in the growth in those two particular categories within DC?

Marty Samuels

I think the apparel and accessories now represent about 35% of the volume, and footwear is more like 65% of the volume. I think the apparel is probably growing at a slightly faster rate because it is a smaller business and there's a lot more room for distribution, expansion, and just within existing doors more penetration. But the footwear business has also been quite strong.

Sean Naughton – Piper Jaffray

Okay, great. Thanks for your time and best of luck.

Operator

We’ll hear from Jim Duffy of Thomas Weisel Partners.

Jim Duffy – Thomas Weisel Partners

Thanks and happy holidays, everyone. Most of my questions have been answered. Couple quick ones. So, you're in a competitive market. As you've alluded to there's a number of brands with excess inventories. What extent are you seeing price deflation in the market? Do you think that's a temporary phenomenon?

Bob McKnight

There's definitely – I think in the off-price channel, there's price compression because there is more product than there is demand. How long that's going to go on, I think certainly for the next couple of months, but beyond that, I know that as we mentioned before, we are very diligent about the types of inventories we are going to build. And I would suspect and hope that most people in the industry would take the same stand. Then we will get a little more balanced pricing.

Jim Duffy – Thomas Weisel Partners

And, Joe, given some of the challenges at retail, particularly maybe with some of the independents, have you made any adjustments to doubtful – allowance for doubtful accounts?

Joe Scirocco

Well, yes, it's been adjusted and we are always trying to strike a balance between being flexible on credit to drive business commercially, on the other hand being prudent about what we accept, what we don't. So, as you can see, on an overall basis, DSOs are in line given the current market condition.

Jim Duffy – Thomas Weisel Partners

You haven't written down any receivables or made a meaningful adjustment that would impact the net gross margin line?

Joe Scirocco

Yes, Jim, in just a couple of days when we file our 10-K, I guess we will disclose our provisions on a schedule, that's a routine disclosure, and so you'll be able to see it for yourself. I think it's probably true that provisions have picked up a bit in each region, and you should have the details in the public filing very soon.

Jim Duffy – Thomas Weisel Partners

Thanks so much.

Joe Scirocco

Sure.

Operator

And we’ll go next now to Carla Casella with JPMorgan.

Carla Casella – JP Morgan

Hi, can you hear me, alright?

Joe Scirocco

Sure, Carla.

Carla Casella – JPMorgan

I had one question about the stores you're closing, are they concentrated in any specific area of the country, or are there any common characteristics between the stores?

Bob McKnight

Well, of the 25, 21 are in the U.S. Of those, 12 of them are full-priced. Of the full-priced, 74% of the stores are in Arizona, California, and Florida, which are markets that we've talked about before and I think universally are more stressed than others. One of the characteristics I think is that most of them have been opened in kind of local markets, B or C markets where there isn't enough – strong enough tourist components. And I think that would characterize that group. In the factory group, there's really no particular pattern.

Carla Casella – JPMorgan

Okay. Great. And then what is your U.S. department store exposure now? What percentage of your sales is U.S. department stores?

Joe Scirocco

Well, it's on the order of less than 15%. Let's put it this way. It's actually quite a bit lower than that. If you look at our top ten customers in the U.S., they constitute something on the order of 15% or less of our business. If you look across the globe, top 30 customers of the Company probably do less than 25% of our business. And again, we will have some details put out in the K, which is coming out I think next week or certainly before the end of the fiscal year.

Carla Casella – JPMorgan

Okay, great. And then you mentioned that your availability was $100 million to $125 million more recently. Is that net or is that including about $50 million of restricted cash?

Joe Scirocco

No, it is not. So what we simply did was take an average estimate of cash on hand over the recent, say, three or four week period together with availability as we understood it at the end of November and we excluded from that calculation the restricted cash.

Carla Casella – JP Morgan

Okay. Great. So it would actually – if you include the restricted cash it would have been like $150 million to $175 million?

Joe Scirocco

It would have been, but we can't spend that.

Carla Casella – JP Morgan

Right. So that would compare to the $215 million that you reported at the end of October?

Joe Scirocco

No, the restricted cash was not included in the $215 million either.

Carla Casella – JP Morgan

Oh, okay great.

Joe Scirocco

The decline from the end of October until now is really just seasonal shifts as we begin to build inventories for spring shipping and that kind of thing, we utilize cash or credit to do that.

Carla Casella – JP Morgan

Right, exactly. Okay, great. Thank you.

Joe Scirocco

Alright, Carla.

Operator

We’ll hear now from Bill Reuter of Banc of America.

Bill Reuter – Banc of America

Good afternoon, guys. Just to make sure that I am perfectly clear on this, the $215 million of availability, are any of these – is any of this liquidity part of facilities that is uncommitted and can be pulled?

Joe Scirocco

At October 31 – hang on just one second. I think the answer, as of October 31 is a relatively modest amount. There was some availability on some Asia-Pacific overdraft lines, which are demand lines, but it's relatively minor.

Bill Reuter – Banc of America

Okay. So the number that can be pulled, even if we pull those, we would be somewhere near the $215 million? It wouldn't be a big difference?

Joe Scirocco

Correct.

Bill Reuter – Banc of America

Okay. In terms of your $60 million of CapEx that you guys have talked about for fiscal year '09, given the fact that you guys are going to be spending less on stores, can you talk to me a little bit about what some of that money might be used for?

Joe Scirocco

Sure. We've had a construction project underway for the past six or nine months in Europe. It's a campus facility intended to consolidate all of our facilities and put the brands together and change on the loose. That's a significant one. Normal maintenance CapEx or IT, for distribution centers, warehouse, equipment that kind of thing. Retail CapEx probably shrink from approximately $45 million in fiscal '08 to less than half of that next year.

Bill Reuter – Banc of America

Okay. If I thought about maintenance CapEx in the $20 million range, do you think that's $20 million-$25 million, is that ballpark?

Joe Scirocco

It's always a tough question to answer. I think if you strip out the retail component, you probably have an upper limit on your maintenance CapEx, so I would think something in the $30 million range is probably more appropriate.

Bill Reuter – Banc of America

Okay. And then just one last one, housekeeping, D&A for the quarter, can you give me what that was?

Joe Scirocco

D&A for the quarter – yes, I think D&A on the past quarter was $14.3 million.

Bill Reuter – Banc of America

All right, great. Thanks, guys.

Operator

Next now to Jennifer Black of Jennifer Black & Associates.

Jennifer Black – Jennifer Black & Associates

Hi, guys, I just have one quick one. I wondered in your own retail stores if there were any regional differences. And what I am curious about is, are you seeing any kind of flattening out in California? Or is it getting worse in any of these really tough regions?

Marty Samuels

I think in the last six weeks there's no regional differences in what's occurring. I would say that earlier, like in the summer, New York and the other tourist markets, South Florida, were holding up better. But I think as the environment has deteriorated and the currencies have changed, there's been a big hit in those tourist markets. And Hawaii has been compressed, New York has been compressed. I don't think there's any major differences in the U.S. We are seeing a bit better business in Canada at retail, and I believe also on a wholesale and a retail basis, Latin America is holding up better, and it appears that Europe is stable. Their retail comps have stabilized. They are not – beg your pardon?

Joe Scirocco

The tourists–

Marty Samuels

Right. Joe says the – I think all the people that were buying in New York and Florida are now back in London and Paris, so we're getting the customers back.

Jennifer Black – Jennifer Black & Associates

Okay. Well, just I guess what I'm trying to understand is particularly California. Is it becoming less worse or is it – I'm wondering, because I've heard the tax receipts in California that it's starting to flatten out as far as sales tax as far as sales tax–

Bob McKnight

So far, Jennifer, I would not say that California is less worse than that.

Jennifer Black – Jennifer Black & Associates

Okay, okay. All right. Thank you and good luck.

Operator

We go to Jeff Van Sinderen of B. Riley.

Jeff Van Sinderen – B. Riley & Company

Good afternoon. I guess one of the questions I had was, since most of your business is in the independent channel, what do you hear from those accounts in terms of promotional cadence or in terms of markdowns of your brands versus other brands? Are they focusing more – are they telling you that they are focusing more on larger brands that are established like your brands? In other words, I guess basically just trying to get a sense of how your brands are selling through versus competitive brands, and how that's impacting what the independent retailers are doing?

Marty Samuels

From what I've seen, the independent retailers are not isolating specific brands in their promotional activities. They are looking at categories. And a little bit back to Jennifer's earlier question, the weather has flipped here in Southern California and in Northern California. We finally have snow. I think the snow businesses are starting to pick up a bit. The outerwear, fleece, sweater businesses are picking up, but that's where people have been very promotional because it is seasonal and they want to liquidate those inventories so they can bring in their spring merchandise. But there are some brands doing better than other brands, but I would say, in general, there are no brands being treated in a favorable way by retailers as far as their promotional cadence goes.

Jeff Van Sinderen – B. Riley & Company

Okay. How about just in terms of their general booking of new orders? Do you think they are leaning more towards the larger brands like yours or –?

Marty Samuels

No, they are supporting the foundation brands, of which all three of ours fit that category. I think, if you looked in general, if there's something incredibly new or compelling from a fashion point of view, that would be selling. Otherwise, it's very value-driven. But clearly, especially as far as forward orders go, the independent retailers and I think all retailers are narrowing their assortments, they are narrowing their focus and they are with the key supplier, and we are the key supplier.

Jeff Van Sinderen – B. Riley & Company

Got it. That's good to hear. And then another thing I was going to ask you about that I wanted to follow up on, I think I saw an article saying that you guys were not going to be at ASR any more. Is that right or maybe I saw something out of context?

Marty Samuels

Well, I wouldn't say we're not going to be at ASR any more. I don't know about the future, but I do know that we have informed them recently that we would not be attending the January show.

Jeff Van Sinderen – B. Riley & Company

Okay, is that just a timing problem–?

Marty Samuels

However that's for Quiksilver and Roxy. DC Shoes has decided to still be at the show.

Jeff Van Sinderen – B. Riley & Company

Okay. Fair enough. Thanks very much and good luck.

Bruce Thomas

Operator, we've got time for one or two more calls, maybe.

Operator

We'll take our next question from Emily Shanks from Barclays.

Emily Shanks – Barclays Capital

Hi, good evening. Thank you for taking the question. Just a question around the liquidity that you've quoted. You said that it was at some time post October 31. Is that in the month of November or December?

Joe Scirocco

It's based on November 30, but taking into account some inter-month fluctuation more recently.

Emily Shanks – Barclays Capital

Okay. And then in terms of the negotiations that you're in with your U.S. lenders, just want to make sure I'm understanding it correctly, are you negotiating with your existing ABL lenders to allow for a term loan that's essentially junior to that ABL piece of debt?

Joe Scirocco

Well, just to be clear, we are in discussions with a term loan lender. We have to do that within the framework of the ABL. And it's, of course, subject to their approval, but I don't want to go into detail about where it stands right now.

Emily Shanks – Barclays Capital

Right, no, I'm not looking for – I just was confused about are you talking with the existing lenders of the ABL or the Americas – or one of the other slots of that?

Joe Scirocco

We will be talking to them in due course about this, yes.

Emily Shanks – Barclays

Okay. Great. And then just one last final one, do you guys utilize factoring at all?

Joe Scirocco

In parts of our business, we do. We put a factoring line in place in Europe I think maybe four or five months ago with a subsidiary of GE, and so we use it in a limited way.

Emily Shanks – Barclays

Okay. And what about insurance?

Joe Scirocco

No, we used to use it with the Rossignol business, but now that has been sold we have no more insurance arrangements in place with our customers.

Emily Shanks – Barclays

Okay. Great. Thank you.

Joe Scirocco

Thank you.

Operator

And gentlemen, we have one last question. We will take that now from Jeff Mintz of Wedbush.

Jeff Mintz – Wedbush Morgan Securities

Thanks very much. Just a couple of questions here, on the store closures, other than the 25 that you've taken a write-down on now, are there potential closures that you're looking at perhaps with leases coming up or anything like that in 2009?

Joe Scirocco

Well, the lease expirations would be handled in the normal course, but in terms of broader closures, not planned at present. Our store portfolio, with the exception of these, has been systematically pruned over the years, so we don't believe we have further to go there at this point.

Jeff Mintz – Wedbush Morgan Securities

Okay, so we should – with only nine closures expected in 2009 then, we should expect to see net store openings for the year?

Joe Scirocco

No, we are going to open very few stores this year. I think we have two that were in the works in the U.S. There may be two or three in Asia-Pacific, and then there's some in Europe, but not very many.

Jeff Mintz – Wedbush Morgan Securities

Okay. Great. And then in terms of expenses, you cut corporate – or you cut SG&A expenses at the corporate level by something like $2.3 million in the quarter. I mean is that something that you can do on a quarterly basis going forward? Is that a reasonable run rate going forward, or was this quarter kind of exceptional in terms of cost-cutting?

Joe Scirocco

I think, on an overall basis, corporate expenses were, what, something like $45 million or something like that. And I would expect, for modeling purposes, I would do something comparable next year. These numbers could move around and there is various one-time kinds of events that go into the corporate expenses, so they are a little bit hard to predict. I would just use the same level for modeling purposes.

Jeff Mintz – Wedbush Morgan Securities

Okay. Great. That's very helpful. And then I guess finally just a bigger picture question, over the last couple of years you've given kind of a longer-term growth rate for the Roxy, Quiksilver, and DC brands, and obviously no one foresaw the retail environment we would be in. But looking out a little bit longer-term, has anything changed in the brands that makes you think that those longer-term growth rates aren't achievable once things get back to a more normalized level?

Bob McKnight

No, in fact it's still our three year to five year plan get those levels. It's just the current headwinds make it very, very difficult to do that and we have to navigate through this period. But there's nothing underlying that that would change our opinion on the growth parameters of Quiksilver, Roxy and DC.

Jeff Mintz – Wedbush Morgan Securities

Okay. Thanks, Bob, very much for that and good luck.

Bob McKnight

Thank you.

Joe Scirocco

Thanks very much.

Bruce Thomas

So that concludes today's call. On behalf of everyone here at Quiksilver, thank you for participating, and we look forward to providing our next quarterly update in March.

Operator

Thank you, gentlemen. And ladies and gentlemen, the replay of today's conference will be available starting this afternoon at 6:30 P.M. Central Time running through December 25 at 6:30 P.M. Central Time. You can access the replay by calling 719-457-0820 or 888-203-1112 using confirmation pass code of 6420420.Again, thanks for joining us. We wish you all a good afternoon. Good-bye.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Quiksilver, Inc. F4Q08 (Qtr End 10/31/08) Earnings Call Transcript
This Transcript
All Transcripts