Good morning. My name is Jackie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warnaco Third Quarter 2008 earnings conference call. (Operator Instructions) I would now like to turn the call over to Deborah Abraham, Vice President of Investor Relations. Please go ahead ma’am.

Thank you. Thank you for joining us. On the call with me this morning are Joe Gromek, Warnaco's President and CEO; Larry Rutkowski, our CFO; Helen McCluskey, our Group President, Intimate Apparel and Swimwear; and Frank Tworecke, our Group President, Sportswear. Joe will begin this morning with some comments on the quarter, followed by Larry, who will review the financials and update our guidance. Helen and Frank will take you through some segment highlights, and following our comments there will be an opportunity for you to ask questions. Today's comments are based on Warnaco's adjusted results on a continuing basis, which excludes restructuring, pension expense, certain other tax items and other items, including the nonrecurring tax charge related to the repatriation of proceeds from the sale of Lejaby. The Company believes it's important for users of the Company's financial statements to be aware of the adjusted financial information related to the Company's income from continuing operations, as such measures are used by Management to evaluate the operating performance of the Company's continuing business on a comparable basis. A reconciliation of actual results to the adjusted are available in the schedules accompanying today's press release. As we've done in the past, our group operating results will be discussed excluding the allocation of shared service expense. The allocation amounts can be found in the tables attached to our earnings results released this morning, as well as in our Q's and our K's. Quickly before we begin, let me remind you that today's conference call may include comments regarding the Warnaco Group's business outlook and may contain forward-looking statements. Any forward-looking statements and all other statements that are made on this call that are not based on historical facts are subject to risks and uncertainties, and actual results may differ materially. Information concerning a number of the factors that could cause actual results to differ materially from the information that will be discussed is available in Warnaco's filings with the SEC including the Form 8-K furnished today. Now let me turn the call over to Joe.

Thanks, Deborah. Good morning. This morning I will review our third-quarter results, update you on the most current trends in our business, including October comps, and share with you some actions that we will be taking to navigate through the current economic environment. Our third-quarter results reflect the continuing success of our long-term strategies to grow our Calvin Klein businesses, expand geographically, and build our direct-to-consumer initiative. Our Calvin Klein business continued to drive our growth with a 20% increase in revenue. All geographies contributed to this growth. Operating earnings grew modestly in dollars, up 7%, as earnings were adversely impacted by currency and a higher tax rate. On a constant-currency basis, operating earnings rose more than 28%. Our ability to achieve these results despite challenges around the globe is a testament to the power of our brands and the investment we have made to support geographic expansion in our direct-to-consumer initiatives. While we face currency headwinds from our global strategy near-term, the fundamentals of our business remain strong, and we believe we are poised to continue our expansion and gain market share in all areas. Looking at our business. Calvin Klein delivered another strong performance. We experienced double-digit growth in Calvin Klein jeans, Calvin Klein underwear and Calvin Klein swimwear. We continue to leverage our regional and country platforms to drive our Calvin Klein businesses and our direct-to-consumer initiatives. International revenues accounted for 57% of total revenues for the quarter, and were up solidly in all regions. Europe rose 16%, Asia was up 31% and our business in the Americas was up 43%. The diversity of our revenues across geographies, channels and customers helped mitigate softness in certain markets. We are continuing to expand in markets such as Germany, Russia and Brazil, where Calvin Klein is relatively under-penetrated. In…

Thanks, Joe. Turning to our third-quarter adjusted results. Revenues rose 16% to $549 million, including $11 million of additional goods shipped primarily to membership clubs at the customers' request. Gross margin increased 380 basis points to 47%. SG&A, as a percent of net revenues, increased 470 basis points to 37%, due in large part to currency. Operating income was the $54 million or 10% of net revenues compared with 50 million in the prior-year quarter. Income from continuing operations increased 10% to $35 million, or $0.74 per diluted share. For the quarter, the impact of foreign currency exchange rates increased revenue and gross profits by approximately $8 million and $2.0 million, respectively, but also increased SG&A expense by $15 million, primarily related to the mark-to-market of US dollar-denominated trade liabilities in certain of our company's foreign subsidiaries, and thereby decreasing operating income by approximately $12 million. At the same time, we realized $3 million in other income from our hedging strategy. On an adjusted basis, for both the quarter and year-to-date, our effective tax rate was approximately 32%, and we expect that rate for the balance of the year. The increase in our tax rate reflects the mix of profits shifting geographically and the impact of foreign currency exchange rates. Looking at the balance sheet, we ended the quarter in a strong financial position. We have substantially reduced our long-term debt, and we believe we are well positioned to fund our expansion initiatives and weather the challenges of the current macroeconomic environment. Cash and cash equivalents as of October 4, 2008 were $123 million compared to $189 million as of September 29, 2007, the decline reflecting the reduction in our long-term debt. During the quarter, as previously announced, we closed on a new $300 million asset-based revolving credit facility. As…

Thanks, Larry. Despite challenging market conditions, the Intimate Apparel Group continued to post positive results. Revenue for the quarter was up 14%, and operating income was up 3%. Operating income was negatively impacted by planned increases in investments in Calvin Klein underwear and unfavorable currency exchange rates. As in prior periods, all geographies and brands recorded revenue increases. Revenue in our core brands was up 7%, and operating income was up 33%, achieving a 16% operating margin. Both Warner's and Olga gained market share in the quarter, which reflects increased presence in the mid-tier channel, including JC Penney distribution. The moderate (inaudible) market continues to be challenging, down 3% through September. However, both Warner's and Olga have posted positive sales gains at retail. We believe our focus on providing differentiated products has served us well to date and will enable us to continue to perform at a level above the overall market trend over the long term. Calvin Klein underwear had a solid quarter, posting a 17% revenue increase, led by a 43% increase in Asia. Gross margin was up 250 basis points, which reflects a 23% increase in direct-to-consumer revenue and a favorable impact from the launch of Seductive Comfort. As mentioned previously, planned incremental investment in marketing, direct-to-consumer and infrastructure in Europe, Asia and Latin America offset gains in revenue and gross margins resulting in flat operating income and an operating margin of 21% for the quarter. Operating margin is down roughly 400 basis points versus the prior-year period, which reflects the increased investment noted earlier and the unfavorable impact of foreign currency exchange rates of nearly $4 million. At retail, our direct-owned comp store sales were up 6%. Europe was up 3%, driven by our outlet channel, and Asia was up 26%, with particular strength in China.…

Thanks, Helen. The Sportswear Group's positive year-to-date sales trend continued through the third quarter. Revenues increased by 20%, gross margins improved by 250 basis points to 45%, and operating income increased by 20%, to 16% of net revenues. Beginning with Calvin Klein jeans. Revenues grew by $49 million, to $269 million, with an operating margin of 15%. All geographies experienced double-digit revenue growth led by a 26% increase in Asia, 20% in Europe, and 10% in the United States. We are pleased with the revenue expansion, and although operating income in dollars increased, the operating margin percentage declined by 100 basis points, due primarily to $8 million of unfavorable currency valuations. Both the wholesale and retail segments contributed to our positive performance in the quarter. Worldwide, wholesale revenues grew by 20%, experiencing above-average growth in women's jeans and accessories, and an expansion of domestic sales into the value channels of distribution. Retail sales in the third quarter increased by 30%. On a comparable basis, same-store sales were up 19%, driven by outlet store sales in Europe and freestanding stores and concession sales in Asia. Turning to the Chaps brand. Revenues grew by 7%, in part due to the timing of deliveries into the third quarter from the fourth quarter of this year and the continuing positive demand at the mid-tier channel of distribution. Operating margin improved to 19% versus 14% a year ago, as gross margins increased by 360 basis points and SG&A declined by 160 basis points. Continued improvement of sell-throughs at retail reduced the need for markdowns and reflects the positive response by our consumer to the enhanced aesthetic of the product offering and the superior price/value position of the brand. In response to the current economic climate, the Sportswear Group is monitoring inventory levels and future purchases to ensure they are in line with revenue expectations, while re-evaluating operating processes to improve efficiencies. As always, compelling product offerings, coupled with strong brand names and effective operating disciplines will propel our future results. Operator, this concludes our prepared remarks. We would now like to open the floor for questions.

(Operator Instructions) Your first question comes from the line of Jeff Klinefelter with Piper Jaffray

Yes. Thank you. Just a couple of questions for you guys. Maybe Larry, starting with you, on the trade payables. Could you get a little bit more specific on how this is actually hitting you from an accounting perspective, how this has changed or how going forward you might be able to hedge this differently?

Sure. Basically the $15 million unfavorable foreign exchange to SG&A in the quarter was driven primarily by mark-to-market of the balance sheet at the end of the periods, both the end of August and September. And as we mark-to-market those at the declining exchange rate, we had to take the charge, primarily to our trade liabilities in our Company notes. So that's -- that was the impact. Most of those, now, we have been monitoring closely we are making sure that we are using foreign -- local currency to pay down those as much as possible and mitigate the exchange-rate impact for the foreseeable future.

So you would anticipate with the new strategy, that the volatility of that line item would be more controlled in the future periods?

Yes, Jeff, that's correct.

Okay. Mix -- your tax rate, mix of profits geographically, could you just help just clarify that and remind us again kind of your major geographic -- global geographic regions, how your tax rates are different today and how these currency fluctuations are changing that?

Sure. Absolutely. In terms of what drove our tax rate up from 29% to 31.5% in the quarter, and therefore what we are using for this year in the balance, is the fact the mix of our profits by geography has changed. Much of this has been impacted by foreign currency impacting and reducing those reported profits back here, but also geographic mix. Jeff, as you know, our effective tax rate in the US is approximately 40%, where internationally our blended rate is closer to 20%. The fact is that seeing more of our profit percentage in US dollars raises that tax rate, and similarly, in other countries and geographies like Italy we are showing some profits at effectively a 28% tax rate.

Okay. Two other queries just quickly. Your retail operations showing op margin declines year-over-year. Just remind me, is this part of the investment spending in that division or what else is impacting those op margins, retail op margins?

Jeff, that's a combination of both the investment spend that we had indicated we would be doing, plus they are being impacted by foreign currency as well.

Jeff, remember we are operating 840 points of distribution around the globe. One of them is in the United States. So clearly, currency is having a major impact.

Okay. And Joe, on that topic, you are maintaining your growth rates, your square footage growth rates going forward would suggest that outside of currencies, you are still not seeing any alarming deterioration in performance in those markets, specifically Asia. And can you put that in perspective with what we're seeing in terms of headlines in those markets?

Sure. I think that we commented -- if we look back into the second quarter release, I think our comp stores were in the high double-digit numbers, somewhere in almost 20%. And we just finished the third quarter at 13%, and now for October we just reported 3%. We're being impacted around the globe, but in this environment, 3% is pretty good I think we stand tall with that kind of a number. As we are looking at retail space and new opportunities, our objective is a 20% four-wall profit before we sign up for a new door, and basically, we believe that we are still able to accomplish this, hence the continuation of the strategy. We believe we will gain market share in this very difficult moment.

Joe, are you seeing any changes in real estate deals in -- specifically in the Asian markets, given what's happening to their economy?

Yes. We are hearing about it, Jeff. And as we continue to -- those leases come due every three years on existing doors. So, we believe there is an opportunity moving forward as our leases become renewable that we might be able to get reduced rates based on -- in a new world economy. Having said all that, our comps in Asia have been pretty good so far. So on a local currency basis, we are holding, we are standing tall.

Your next question comes from the line of Chi Lee with Morgan Stanley.

Hey, guys, good morning. Larry, do you mind breaking out the $0.30 FX and tax impact? Can you just break out what your view of the two different buckets are?

Sure. Just in broad strokes. The fourth quarter we are being impacted by currency to a tune of about $0.20 per share. The -- in terms of the tax rate, that is the effect on the full-year results going from 29% to 31.5%, which cost us about $0.10.

31.5%. Okay, great. And then, the October comp growth that you talked about, Joe, plus 3%. Is that on a local currency basis? And if so, can you just talk about regionally where you are seeing greater rates of deceleration?

Constant dollars.

Yes, that is in constant dollars. And I think we are seeing a slowdown in Western Europe. When we looked at it, Spain has slowed down fairly dramatically at this point. The Italian market is struggling a bit right now. We are still holding on our own in the UK. So, some of the areas where we had good strength in Western Europe, we are feeling a bit of the pain. In terms of our businesses in Asia -- for the month of October, they were still pretty powerful. I think we do have a number for October -- Asia was plus 20 comp, so -- I am sorry -- plus 2 comp, so we are holding our own there.

Okay. Thank you.

The next question comes from the line of Eric Beder with Brean Murray. Eric Beder - Brean Murray, Carret & Co.: Good morning.

Good morning. Eric Beder - Brean Murray, Carret & Co.: Could you talk a little bit about the domestic policy? Are you seeing any push-backs in orders, canceling orders from the domestic area here?

To date what we have seen is that there has been a bit of a falloff in replenishment. So, in the businesses where we sell one, we ship one, that has slowed down a bit. But in terms of basic ordering moving forward, currently and moving forward, we still look pretty strong. Eric Beder - Brean Murray, Carret & Co.: Okay. You talked about that you were at the high end -- you were trending towards the high end of your guidance for Q4. When does the vast majority of your shipping for the holiday season pretty much end? So how close are we -- how much more are you in the cycle here?

Well, remember that we are a wholesaler and a retailer. So we have got a couple of components here. During the quarter, we have a significant amount of retail business to be done, and the fourth quarter is the largest -- it's probably the largest percentage-wise portion of retail that we do. So the mix is probably $100 million of retail, and the balance would be wholesale. We are in a fairly good shape. I think we are probably 80%, 85% booked and ready for the balance, which would be replenishment. So, if the replenishment holds, we are in great shape. Eric Beder - Brean Murray, Carret & Co.: Okay. Any thoughts on potentially doing share repurchases at these levels?

I think we continue to evaluate the utilization of our cash, and right now, we think it's prudent to be in a strong cash position. But, certainly we will look at both share repurchases and the reduction of our long-term debt. Eric Beder - Brean Murray, Carret & Co.: Okay. Thank you.

Your next question comes from the line of Carla Casella with JP Morgan.

Hi. I am wondering if you can talk a bit about on your receivables side, are you concerned about any of your customers? Have you changed any of your terms with them or have you seen any difference in the dating of your receivables?

Carla, in terms of our receivables, obviously in this environment we are seeing some slower collecting. We are putting all efforts to monitor and manage that collection tightly. We are holding our vendors to the terms we have agreed to. And, but in terms of risk, one thing I want to point out is that we did take a credit insurance policy against many of our retailers a year ago, so we were protected from some of the announcements we saw in the third quarter. For most of our retailers, we were able to renew a credit -- bad-debt reserve -- insurance continuing for the next year.

Carla, we do have that globally, as well. So we are insured against receivables in Europe and parts of Asia, not just domestically. And the other thing that we are doing is that Larry is being very vigilant, and as someone becomes a little past due on their bills, we evaluate the shipping at that moment in time. So typically that gets everyone's attention, and it has kept us fairly current.

Okay. Great. And then on the pension side, can -- how much are you contributing into the pension in '08? And do you have any early estimate of how much that could potentially increase in '09 just given the under-funded position?

Well, Carla, as you know, in the terms of the pension, we true it up in the fourth quarter. Obviously in this environment I think as most people, the pension assets have been under performing. So, we anticipate that we will be funding a little more. We've been typically funding $10 million to $20 million a year, and that was what was -- and we are close. And if the pension would have performed as expected this year, we would've been close to being fully funded. So, we will evaluate them in the fourth quarter. Also, please look forward to the Q. We do disclose where the assets are at the end of third quarter as an estimate.

Okay. Great. And then one last question on the wholesale side, do you still have, I mean, during fourth quarter will -- are you still adding any new doors or adding space in existing doors? Or are we looking at -- should we be looking at this as a sell-through of existing doors?

Let's put the scale of the business in perspective. Our department store business currently represents about 15% pf total Warnaco. In Q4, it's probably a little less than that based on the fact that our own retail sales are heightened. And we do have around 10% in the -- with the chain stores. So, that's the magnitude of what the situation is. And yes, we do have expansion of fixtures in certain doors and particularly in the Intimate Apparel area. So, there is additional space, additional doors, and additional fixturing.

Okay. And that would be both domestic and international?

That's primarily domestic that we are talking about. And I think if you look at the Chaps brand as well, in the mid-tier, we have expansion of doors there also based on certain -- some of our clients having added doors.

Okay. Great. Thanks.

(Operator Instructions) Your next question comes from the line of David Glick with Buckingham.

Joe, as we have thought about your company coming into this year in terms of revenue growth, we generally thought of kind of the US as flattish and international 20% plus. Obviously, you've outperformed that through the third quarter and then clearly the world economy has changed. So now we are going from high-teens -- constant currency growth down to 3% to 5% in the fourth quarter, which sounds like you are trending towards the high end. Can you help us think about how the dynamics have changed, US versus Europe and Asia, in the context of that revenue guidance? And then, the growth rate of Calvin Klein versus your other businesses as well? So, we can kind of recalibrate on how we think about the revenue growth going forward.

David, I think the domestic business has been a pleasant surprise, and that's purely based on the ability of our teams to execute. We have had very strong performances in the core Intimate Apparel business. We have had very strong business to date with our Chaps brand. So they are really the drivers of the growth here. Remember, going into the year we said that this would be a profit story, not a revenue story. And in fact, we are seeing both. So that was a very pleasant surprise. I think moving forward, you think about the Calvin Klein business. Last year, we grew by 4%, year-to-date we are up 20%. That was well above the projections that we had given to you, which was in the 12% to 15% range. So, we clearly have over achieved in that area, and a lot of that is based on the fact that we are growing our retail footprint. We will continue to grow that retail footprint, and we think we will continue to gain market share globally. We see the opportunity in Asia specifically, where we will grow more rapidly. I think if anything, we will drag our feet a bit in Europe, where we have had good success with factory outlet stores, but we are starting to run out of room to open those up.

Okay. So, and again, in the context of 3% to 5%, how would you position Calvin versus that overall growth rate for the fourth quarter?

I think the Calvin would continue to excel and be in the high end.

High end or above?

It will outperform the balance.

Okay. And then -- so in the US you think you can still run positively?

I think the US, based on some timing of shipments, I think we actually over delivered a bit, and I think as you saw in Larry's announcement, I think we were like a -- $11 million or $13 million over-delivered in the third quarter. So I think we will feel some of that pain in the fourth quarter.

Okay.

David, just to put it in perspective, the year-to-date growth of 20% overall for the Company in terms of revenue growth for the nine months, we delivered over 5% -- 5.4% in the US; Europe was 33%; Asia was 37%; and then Canada, 19%; with Mexico/Latin America at 70%.

Right. So that's what I am trying to recalibrate, Larry. So, is it fair to think of the US as kind of flattish, Asia with the highest growth rate, and maybe Europe around the average?

That's probably in the range, yes.

Okay. And then CK, obviously maybe in the high single-digit range; is that fair?

Outperforming the 5%.

Okay. Very good. Thank you very much.

Your next question comes from the line of Susan Sansbury with Miller Tabak.

Okay. Hi. Thanks. Just pursuing David's line of questioning a little bit, and then reference to your comments about what was going on in Europe in the third quarter with Spain and Italy, I think you said -- was Spain was challenging and Italy had slowed down a lot.

Susan, I would say that, that’s more fourth quarter -- October than third quarter, candidly.

Oh. Well, and -- again, okay. With respect to David's line of questioning, though, is anything down in -- by country in Europe and/or by category?

Typically we are not down, because we have expanded square footage. So we still run positive. But on a comp basis, I think we have seen some deterioration in certain markets.

Okay. But generally it should be positive?

That's correct.

Okay. And Larry, can you be a little bit more specific about the fourth-quarter increment-to-pension expense at this point?

At this point, like I said, the biggest thing is that we're getting impacted unfavorably to EPS by approximately $0.20 per share just because of what's happened with currencies. And as I called out, the other $0.10 is the annual effect of a tax rate -- oh, pension. I am sorry.

Pension. The question related to what the hit is actually going to be on pension.

Sure. Based upon the assets' performance and where we expected them to be, there is about a $20 million or $23 million -- $24 million under-performance from where they were. What we will do, Susan, is in the fourth quarter we go through the actuaries and actually true up that discount rates and several other variables, and we do that every year and mark-to-market that through our P&L, as you know.

I am sorry. Start again. Year-to-date you under funded by $20 million to $24 million, so you have to true that up in the fourth quarter?

No, we don't. To be clear, the performance of our assets would result in terms of the assets performance, would be down approximately $24 million. You don't have to fund that immediately, and so that's just the reality of what overall funds have performed in 2008.

Okay. So the answer is, there is no answer at this point. Okay. Can you -- with respect to the US business, 2009, have you completed your Springs bookings? And if so, can you give us an idea of the magnitude of change, and differentiate between Calvin Klein and all other businesses?

Okay. We are in market as we speak, and to date, again, we are feeling confident. There is a mix implication of the customers that we are selling. The department stores are at one place, and some of the secondary channels are picking up some of the steam. So, at this point (inaudible) we are fairly comfortable with our forward bookings. If you want to hear more by brand, the group presidents can you take you through their businesses, if you would like.

Sure.

Okay. This is Frank. How are you?

Thank you, Frank.

In our Calvin Klein business -- now here again, channel shipments are important in how we are flowing product. In the department store segment, we are looking for the quarter somewhat flattish, up a little bit; but enormous increases as it relates to our spring, flat-to-up; and we are looking at significant increase in our value channels of distribution. In the Chaps business we are (inaudible) we have very strong bookings coming into the (inaudible) short span on a comparable basis.

So Susan, to answer your question, Sportswear bookings are up for the spring season.

On Calvin Klein underwear, we are up substantially for the spring season, up 30%, the bulk of that being in the off-price channel, where we have secured ongoing programs there. On the new and fashion front in terms of what we would call our introduction volume, we are flat, but just keep in mind the bulk of our business in department store is replenishment. On the core Warner's and Olga business, Warner's is up 5% and Olga is down slightly. And again, nearly 80% of the business in spring is replenishment, so the bookings that we have secured, we are pleased with. We have had good reaction in market. We have had good appointments this week with our retailers, who are actually looking to increase some of the items that we have right now that are really performing. So, we are in good shape going into spring.

Susan, I think that also Helen mentioned that Speedo is up 3%, I believe in forward booking. So all in all, I think we are in pretty good shape.

Okay. Just two more questions. Helen, specifically, I know you sold in Seductive Comfort well. Any commentary about sell-through or reaction on the floor?

Select Comfort -- right now, we are satisfied with the results, and the retailers are satisfied with the results. So we are selling through, depending on the retailer, anywhere from 3% a week to 8% a week. So the response has been good. It's certainly going into a market that's not particularly robust right now, but I think it helps drive some overall department sales in the month of October. So, so far everyone is satisfied with the results.

Okay. What about international?

Selling has been very strong internationally, and we have increased our penetration in some of the larger cup sizes, which was a real key initiative for us, so it's been very good.

Stronger Asia than Europe? Is that the conclusion?

Definitely stronger in Europe. The large cup size initiative is not a key part of the Asian business.

Your next question comes from the line of Evren Kopelman with JP Morgan.

Good morning. Thanks. I just had a few questions on the foreign currency translation impact. So firstly, in the fourth quarter when you talk about the 8% to 10% negative impact, is that purely translation? There's no mark-to-market adjustments or anything like that in there?

The revenue adjustment is virtually all translation.

Okay. And then can you tell us which Asian currencies that you have the largest exposures to?

The largest exposure is that we happen to do over $200 million -- roughly $200 million of business in Korea. So, in Asia it would be the Korean won.

Okay. That helped. And then, looking at next year, if the currencies stay around current levels against the US dollars, should we expect a similar impact?

Well, the -- in terms of the mark-to-market, once you mark-to-market, you shouldn't expect that to continue to flow through. In terms of translation, next year we would anticipate some negative impact. But as you know, most currencies had improved against the dollar by year end, 2007. And so as that comparison falls off in a dramatic decline we have seen in currencies in the last 30 days, there will be some negative impact that we anticipate carrying through 2009.

Okay. That helped. And then the last question on the currency is, the impact -- is it typically larger on your top line than your bottom line? Or is it the other way around?

Typically, the impact of currencies are much larger to the top line, and it flows through.

Okay. That helped. And then finally, on the Intimates business, based on your experience in slowing economic periods, is Intimates usually a business that holds up better than the average apparel, or really there is -- you can't say that?

In general, Intimates -- I hate to use the expression recession-proof, but it tends to not have the peaks and valleys that Sportswear does. So, we don't enjoy as much on the upside, and we don't suffer as much on the downside. It's pretty consistent.

I think the important factor is what Helen indicated in terms of how she is outperforming the market at this moment. And the market's down, and she's up.

That makes senses. Great. Thank you, guys.

Thank you.

Your next question is a follow-up from Carla Casella with JP Morgan.

(inaudible) before, but in your new credit agreement, are you permitted to buy back bonds?

We are permitted to use -- there are covenants and restrictions in there. Primarily, in the new credit facility, if we were to trip a fixed-charge ratio, which is set at 1.1, well below where we currently are, there are restrictions. However, we are able to use pretty liberally and the credit facility for general purposes, including potentially to pay down debt.

Okay. Thank you.

Your next question comes from the line of Susan Sansbury with Miller Tabak.

Hi. Larry, another foreign exchange question. Can you share with us right now what your assumptions are in terms of your hedging operations for the Euro, and I guess for the Korean -- pardon me -- whatever it is?

The Korean Won.

Okay.

Yes. In terms of our hedging, as you know, in the third quarter we picked up over $3 million of benefit, but unfortunately [hedged] other income. Those are the FX forward contracts that we've taken. Traditionally we have taken those on approximately 50% of our anticipated Euro purchases. So, it's really been primarily protecting the European Euro-based gross margin. So -- and we have now extended that where we are looking for vendors to provide goods based in that local currency for the local markets that should help mitigate some of the gross margin transactional type fluctuations in the future.

Okay. And you said that once you mark the balance sheet to market, you don't expect -- I don't think you mean you don't expect further mark-to-market -- negative mark-to-market, or were you saying that it would just be smaller than what you have marked-to-market so far?

Susan, to be clear, once you mark it to market, if the rates hold, you wouldn't have to typically mark-to-market unless the volumes or levels change. So, unless there are significant swings in the volatility rate or further declines in those currencies against the dollar, it is as big of an impact.

Okay. All right. Just trying to -- the question was point of information. Alright. Great. Thanks ever so much.

Sure.

At this time, we have no further questions. Are there any closing remarks?

Thank you for joining us today. We look forward to updating you at year end with the full-year results. Have a great day.

Thank you. This concludes today's conference call. You may now disconnect.