Question-and-Answer Session
Operator
(Operator Instructions) Our first question is coming from the line of Edward Yruma with Keybanc.
Edward Yruma – Keybanc Capital Markets
Sorry if I missed this earlier but could you discuss the tax rate and how we should think about the tax rate going forward? I noticed it was a bit higher year over year and sequentially.
Adrian Kowalewski
Our effective tax rate is very volatile with where our pretax income is because we have such a large decline year over year, because we are deleveraging in our operating business so because we have so many permanent items as part of our tax provision, swings quarter to quarter in earnings will significantly move the tax rate around. So for the -- if you are looking at the third quarter, the effective tax rate was in the range of about 44%. That’s up from the prior quarters. The tax rate primarily differs from the statutory rate primarily due to changes in foreign, federal, and state tax estimates, you know, [permanent] differences between [inaudible] tax and we also remeasured some of our state deferred income tax assets.
Edward Yruma – Keybanc Capital Markets
Great, and then how should we also think about your ability to deleverage in the fourth quarter? And I know that your covenants, you are looking a little bit tight for the fourth quarter. What is your interest or ability to negotiate some type of consent for the fourth quarter or some type of less restrictive covenant?
Adrian Kowalewski
I think it would be beneficial for all parties to have more headroom on the covenants, so that’s definitely something that is of interest to the company but I think from the standpoint of shareholders, we’d have to weigh what the cost of that kind of relief would be versus what the benefit of the relief would be.
Edward Yruma – Keybanc Capital Markets
And what should we think about for the targeted level of debt at the end of the fourth quarter? I mean, what is your ability to delever in that quarter?
Adrian Kowalewski
Well, in fourth quarter you have a few of our -- some of our strongest retail months in October and in December, so even though wholesale starts to peter off a bit, I think with the way we have been running our capital expenditures and with our inventory, there is definitely room to drive more cash flow and to pay down debt in the fourth quarter.
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