EX-99.1 2 a57922exv99w1.htm EX-99.1 exv99w1
         
Exhibit 99.1
(PACIFIC SUNWEAR LOGO)
CONTACT:
Michael L. Henry
Chief Financial Officer
(714) 414-4003
FOR IMMEDIATE RELEASE
PACIFIC SUNWEAR ANNOUNCES
THIRD QUARTER EARNINGS RESULTS; ISSUES FOURTH
QUARTER EARNINGS GUIDANCE
- Reports GAAP net loss of $(0.11) per share for Q3
- Comparable non-GAAP net loss of $(0.07) per share vs. prior year GAAP net loss of $(0.17) per share
ANAHEIM, CA/November 22, 2010 — Pacific Sunwear of California, Inc. (NASDAQ:PSUN) (the “Company”) today announced that net sales for the third quarter of fiscal 2010 ended October 30, 2010, were $258 million versus net sales of $268 million for the third quarter of fiscal 2009 ended October 31, 2009. Total Company same-store sales decreased 3% during the period.
For the third quarter of fiscal 2010, the Company reported a net loss of $7 million, or $(0.11) per share, compared to a net loss of $11 million, or $(0.17) per share, for the third quarter of fiscal 2009. Results for the third quarter of fiscal 2010 reflect the continuing impact of a valuation allowance against the Company’s deferred tax assets. On a comparable non-GAAP basis, using a normalized 39% income tax rate, the Company’s net loss for the third quarter was $4 million, or $(0.07) per share.
“Our third quarter results were led by positive comps in our Men’s business and significant improvement in the sales trending of our Women’s business,” said Gary H. Schoenfeld, President and Chief Executive Officer. “We are eagerly anticipating Black Friday and the kickoff of the holiday season and the prospects for further strengthening of both our Men’s and Women’s businesses.”
Financial Outlook for the Fourth Quarter
The Company’s guidance range for the fourth quarter of fiscal 2010 contemplates a GAAP net loss per share of $(0.10) to $(0.29) for the fourth quarter of fiscal 2010 which reflects the continuing impact of maintaining a valuation allowance against deferred tax assets and a very low effective tax rate. On a non-GAAP basis, using a normalized income tax rate of approximately 37%, the Company’s guidance range translates to a net loss of $(0.07) to $(0.18) per share for the fourth quarter of fiscal 2010. The forecasted fourth quarter GAAP earnings range is based on the following significant assumptions:
  •   Same-store sales in the range of flat to -5%;
 
  •   Gross margin rate improvement of 100 to 400 basis points versus last year’s 22.6%;
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

  •   SG&A expenses in the range of $82 million to $84 million;
 
  •   Income tax expense is expected to be minimal for the quarter because the Company no longer records income tax benefits against its operating losses.
About Pacific Sunwear of California, Inc.
Pacific Sunwear of California, Inc. and its subsidiaries (collectively, the “Company”) is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. As of October 30, 2010, the Company operates 877 stores in 50 states and Puerto Rico. The Company’s website address is www.pacsun.com.
The Company will be hosting a conference call today at 4:30 pm Eastern time to review the results. A telephonic replay of the conference call will be available, beginning approximately two hours following the call, for one week and can be accessed in the United States/Canada at (800) 642-1687 or internationally at (706) 645-9291; passcode: 23412284. For those unable to listen to the live Web broadcast or utilize the call-in replay, an archived version will be available on the Company’s investor relations website through midnight, March 9, 2011.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, please see the accompanying table titled “Reconciliation of Selected GAAP Measures to Non-GAAP Measures” and the section following such table titled “About Non-GAAP Financial Measures.”
Pacific Sunwear Safe Harbor
This press release contains “forward-looking statements” including, without limitation, the statements by Mr. Schoenfeld in the third paragraph and all statements under the heading “Financial Outlook for the Fourth Quarter.” In each case, these statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that these forward-looking statements be subject to the safe harbors created thereby. These statements are not historical facts and involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Uncertainties that could adversely affect the Company’s business and results include, among others, the following factors: adverse changes in economic conditions generally; adverse changes in consumer spending; changes in consumer demands and preferences; higher than expected same-store sales declines; higher than anticipated markdowns and/or higher than estimated selling, general and administrative costs; increased sourcing and product costs; currency fluctuations; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; lower than expected sales from private label merchandise; reliance on key personnel; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors as a result of natural disasters or terrorist acts, which could cause unexpected delays in store relocations, renovations or expansions; reliance on foreign sources of production; and other risks outlined in the Company’s filings with the Securities and Exchange Commission (“SEC”), including but not limited to the Company’s Annual Report on Form 10-K for the year ended January 30, 2010 and subsequent periodic reports filed with the SEC. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
                                 
    Third Quarter Ended     Three Quarters Ended  
    10/30/10     10/31/09     10/30/10     10/31/09  
Net sales
   $ 257,904     $ 268,280     $ 666,548     $ 734,539  
Gross margin
     64,377       73,441       157,601       192,423  
SG&A expenses
     71,093       89,365       218,192       245,477  
 
                        
Operating loss
     (6,716 )     (15,924 )     (60,591 )     (53,054 )
Other expense, net
     420       17       497       180  
 
                        
Loss before income taxes
     (7,136 )     (15,941 )     (61,088 )     (53,234 )
Income tax (benefit)/expense
     (173 )     (5,036 )     367       (19,431 )
 
                        
Net loss
   $ (6,963 )   $ (10,905 )   $ (61,455 )   $ (33,803 )
 
                        
 
                                
Net loss per share:
                                
Basic
   $ (0.11 )   $ (0.17 )   $ (0.93 )   $ (0.52 )
 
                        
Diluted
   $ (0.11 )   $ (0.17 )   $ (0.93 )   $ (0.52 )
 
                        
 
                                
Weighted average shares outstanding:
                                
Basic
     66,056,822       65,563,721       65,948,679       65,380,726  
 
                        
Diluted
     66,056,822       65,563,721       65,948,679       65,380,726  
 
                        
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                         
    10/30/10     01/31/10     10/31/09  
ASSETS
                        
Current assets:
                        
Cash & cash equivalents
   $ 43,975     $ 93,091     $ 15,564  
Inventories
     166,300       89,665       168,417  
Prepaid expenses
     11,712       10,801       11,662  
Other current assets
     4,575       5,365       4,112  
 
                  
Total current assets
     226,562       198,922       199,755  
Property and equipment, net
     212,120       249,000       272,596  
Other long-term assets
     29,951       29,296       64,944  
 
                  
Total assets
   $ 468,633     $ 477,218     $ 537,295  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Current liabilities:
                        
Accounts payable
   $ 77,237     $ 38,481     $ 63,298  
Other current liabilities
     34,826       43,742       40,159  
 
                  
Total current liabilities
     112,063       82,223       103,457  
Deferred lease incentives
     31,551       39,207       42,229  
Deferred rent
     20,230       21,396       21,872  
Mortgage debt
     29,223       —       —  
Other long-term liabilities
     27,156       27,714       27,863  
 
                  
Total liabilities
     220,223       170,540       195,421  
Total shareholders’ equity
     248,410       306,678       341,874  
 
                  
Total liabilities and shareholders’ equity
   $ 468,633     $ 477,218     $ 537,295  
 
                  
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
                 
    Three Quarters Ended  
    10/30/10     10/31/09  
Cash flows from operating activities:
                
Net loss
   $ (61,455 )   $ (33,803 )
Depreciation and amortization
     41,910       53,326  
Asset impairment
     8,209       16,538  
Non-cash stock based compensation
     3,082       5,030  
Tax deficiencies related to exercise of stock options
     —       (1,702 )
Loss on disposal of property and equipment
     710       555  
Changes in operating assets and liabilities:
                
Inventories
     (76,869 )     (61,212 )
Accounts payable and other current liabilities
     30,290       9,986  
Other assets and liabilities
     (8,076 )     17,510  
 
            
Net cash (used in)/provided by operating activities
     (62,199 )     6,228  
 
                
Cash flows from investing activities:
                
Capital expenditures
     (15,544 )     (19,540 )
Proceeds from sale of property and equipment
     —       28  
Proceeds from sale of land
     —       3,705  
 
            
Net cash used in investing activities
     (15,544 )     (15,807 )
 
                
Cash flows from financing activities:
                
Proceeds from mortgage borrowings
     29,800       —  
Payments for mortgage borrowings costs
     (1,154 )     —  
Proceeds from exercise of stock options
     298       373  
Principal payments under mortgage borrowings
     (80 )     —  
Principal payments under capital leases
     (237 )     (6 )
 
            
Net cash provided by financing activities
     28,627       367  
 
            
 
                
Net decrease in cash and cash equivalents
     (49,116 )     (9,212 )
Cash and cash equivalents, beginning of period
     93,091       24,776  
 
            
Cash and cash equivalents, end of period
   $ 43,975     $ 15,564  
 
            
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
                 
    10/30/10     10/31/09  
Stores open at beginning of fiscal year
     894       932  
Stores opened during the period
     2       2  
Stores closed during the period
     (19 )     (30 )
 
            
Stores open at end of period
     877       904  
                                 
    10/30/10     10/31/09  
            Square Footage             Square Footage  
    # of Stores     (000s)     # of Stores     (000s)  
PacSun stores
     752       2,895       777       2,982  
PacSun Outlet stores
     125       505       127       512  
                         
Total stores
     877       3,400       904       3,494  
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(unaudited, in thousands except share and per share data)
                                 
    Third Quarter Ended     Three Quarters Ended  
    10/30/10     10/31/09     10/30/10     10/31/09  
GAAP net loss
   $ (6,963 )   $ (10,905 )   $ (61,455 )   $ (33,803 )
Valuation allowance
     2,622       —       22,909       —  
 
                        
Non-GAAP net loss
   $ (4,341 )   $ (10,905 )   $ (38,546 )   $ (33,803 )
 
                        
 
                                
GAAP net loss per share
   $ (0.11 )   $ (0.17 )   $ (0.93 )   $ (0.52 )
Valuation allowance per share
     0.04       —       0.35       —  
 
                        
Non-GAAP net loss per share
   $ (0.07 )   $ (0.17 )   $ (0.58 )   $ (0.52 )
 
                        
 
                                
Shares used in calculation
     66,056,822       65,563,721       65,948,679       65,380,726  
 
                        
Forward-Looking Earnings GAAP to Non-GAAP Reconciliation:
         
    Guidance for the  
    fourth quarter of  
    fiscal 2010  
GAAP net loss per share guidance
   $ (0.10) - $(0.29 )
Income tax benefit, excluding valuation allowance1
   $ 0.03   - $ 0.11  
 
      
Non-GAAP net loss per share guidance
   $ (0.07) - $(0.18 )
 
      
 
1   The Company assumed a normalized effective income tax rate of approximately 37% against pre-tax operating losses which represents the expected effective tax rate for fiscal 2010 exclusive of any impact from valuation allowances.
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated November 22, 2010 contains non-GAAP financial measures. These non-GAAP financial measures include non-GAAP net loss and non-GAAP net loss per share for the third quarter and first three quarters of fiscal 2010 and non-GAAP net loss per share guidance for the fourth quarter of fiscal 2010. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. The Company computes non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. The Company may consider whether other significant items that arise in the future should be excluded from the non-GAAP financial measures. The Company has excluded the following item from all of its non-GAAP financial measures:
  •   Deferred tax asset valuation allowance charges
The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s operating results primarily because they exclude amounts that are not considered part of ongoing operating results when planning and forecasting and when assessing the performance of the organization, individual operating segments or its senior management. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company’s historical results and in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and a misplaced perception that the Company’s results have underperformed or exceeded expectations.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000