EX-99.1 2 a22991exv99w1.htm EXHIBIT 99.1 exv99w1
 

EXHIBIT 99.1
(PACSUN LOGO)
CONTACT:
Gar Jackson
Director of Investor Relations
(714) 414-4049
FOR IMMEDIATE RELEASE
PACIFIC SUNWEAR ANNOUNCES SECOND QUARTER EARNINGS RESULTS
     ANAHEIM, CA/August 10, 2006 -— Pacific Sunwear of California, Inc. (NASDAQ:PSUN) today announced that total sales for the second quarter ended July 29, 2006 were $313.7 million, an increase of 1.5 percent over total sales of $309.1 million for the second quarter ended July 30, 2005. Second quarter net earnings were $0.14 per diluted share, including $0.02 related to stock compensation and pre-opening rent expenses. On a comparable non-GAAP basis, earnings per diluted share were $0.24 in the second quarter of 2005. Net income for the second quarter of fiscal 2006 was $9.7 million compared to a non-GAAP $18.5 million for the second quarter of fiscal 2005. Same-store sales decreased 5.5 percent for the comparable second quarter period.
     “I am obviously very disappointed with our second quarter results,” commented Seth Johnson, chief executive officer. “Although it is still too early to make a judgment regarding the strength of our back to school assortment, we must be cautious in our planning and expectations for the third quarter.”
     Total sales for the first half (twenty-six weeks) of fiscal 2006 were $613.6 million, an increase of 4.2 percent over total sales of $589.0 million for the first half of fiscal 2005. Net income for the first half of fiscal 2006 decreased 36 percent to $21.6 million, compared to a non-GAAP $33.8 million for the first half of fiscal 2005. Earnings per diluted share decreased 32 percent to $0.30 compared to a non-GAAP $0.44 per diluted share for the first half of fiscal 2005. Same-store sales decreased 3.7 percent for the comparable twenty-six week period ended July 29, 2006.
     A reconciliation of second quarter and year-to-date fiscal 2005 reported GAAP earnings to the non-GAAP measures contained in this press release is set forth below.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

Reconciliation of Fiscal 2005 Q2 Earnings to Non-GAAP Disclosure
         
GAAP EPS as originally reported for Q2 2005
   $ 0.28  
Less impact of stock compensation and pre-opening rent expenses
     (0.04 )
 
      
Adjusted non-GAAP EPS for Q2 2005
   $ 0.24  
 
      
 
        
GAAP net income as reported for Q2 2005, in $000’s
   $ 21,112  
Less stock compensation expenses, tax-effected
     (2,170 )
Less pre-opening rent, tax-effected
     (418 )
 
      
Adjusted non-GAAP net income for Q2 2005
   $ 18,524  
 
      
Reconciliation of Fiscal 2005 Year-to-Date Earnings to Non-GAAP Disclosure
         
GAAP EPS as originally reported for Q2 2005
   $ 0.51  
Less impact of stock compensation and pre-opening rent expenses
     (0.07 )
 
      
Adjusted non-GAAP EPS for Q2 2005
   $ 0.44  
 
      
 
        
GAAP net income as reported for Q2 2005, in $000’s
   $ 38,719  
Less stock compensation expenses, tax-effected
     (3,991 )
Less pre-opening rent, tax-effected
     (951 )
 
      
Adjusted non-GAAP net income for Q2 2005
   $ 33,777  
 
      
Stock Repurchase Program
During the second quarter of fiscal 2006, the Company repurchased a total of 3.2 million shares of its common stock at an average price of $19.02. These repurchases occurred under the $100.0 million share repurchase authorization approved by the Company’s board of directors on May 18, 2006. At the end of the second quarter, $50.5 million remained available for future repurchases
Financial Outlook
At this point, the Company believes it is too early in the back to school selling period to accurately predict third quarter volume. However, assuming a continuation of the negative mid-single digit second quarter comp trend, the Company is comfortable with third quarter earnings estimates in the range of $0.22 to $0.30 per diluted share. At this time, the Company is not providing fourth quarter or full year earnings guidance.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

About Pacific Sunwear of California, Inc.
Pacific Sunwear, operating under three distinct retail concepts, is a leading specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. As of July 29, 2006, the Company operated 826 PacSun stores, 102 PacSun Outlet stores, 201 d.e.m.o. stores and 6 One Thousand Steps stores for a total of 1,135 stores in 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com, merchandise carried at d.e.m.o. stores can be found at www.demostores.com and information about One Thousand Steps can be found at www.onethousandsteps.com.
     The Company will be hosting a conference call today at 1:30 pm Pacific Time. 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; pass code: 3804009 For those unable to listen to the live Web broadcast on the Company’s investor relations website www.pacsun.com, or utilize the call-in replay, an archived version will be available on the Company’s investor relations Web site through midnight, August 10, 2007.
Pacific Sunwear Safe Harbor
This press release contains “forward-looking statements” regarding the Company’s third quarter earnings expectations (any prior earnings guidance, including full fiscal year guidance, is superseded by the guidance contained in this release) made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that this forward-looking statement be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those projected in such forward-looking statements. This statement is not a historical fact and involves estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in such forward-looking statements. Such uncertainties include, among others, the following factors: our new concept is untested and may not be profitable or successful; changes in consumer demands and preferences, higher than estimated costs of goods sold or selling, general and administrative costs, competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; sales from private label merchandise; fluctuations in comparable store net sales results; expansion and management of growth; reliance on key personnel; dependence on single distribution facility; 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, could cause unexpected delays in new store openings, relocations or expansions; reliance on foreign sources of production; credit facility financial covenants and other risks outlined in the company’s SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended January 28, 2006 and subsequent periodic reports filed with the Securities and Exchange Commission. 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.
—MORE—
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
                                 
    Second Quarter Ended     First Half Ended  
    JUL. 29, 2006     JUL. 30, 2005     JUL. 29, 2006     JUL. 30, 2005  
Net sales
   $ 313,682     $ 309,064     $ 613,570     $ 589,049  
Gross margin
     97,425       110,357       194,708       207,707  
Selling, G&A expenses
     82,855       77,592       162,794       147,714  
 
                        
Operating income
     14,570       32,765       31,914       59,993  
Interest income, net
     1,090       1,180       2,885       2,265  
 
                        
Income before taxes
     15,660       33,945       34,799       62,258  
Income tax expense
     5,950       12,833       13,223       23,539  
 
                        
Net income
   $ 9,710     $ 21,112     $ 21,576     $ 38,719  
 
                        
Net income per share, basic
   $ 0.14     $ 0.28     $ 0.30     $ 0.51  
 
                        
Net income per share, diluted
   $ 0.14     $ 0.28     $ 0.30     $ 0.51  
 
                        
Wtd avg shares outstanding, basic
     71,335,467       75,125,782       72,239,872       75,209,185  
 
                        
Wtd avg shares outstanding, diluted
     71,866,482       76,118,501       72,783,954       76,338,599  
 
                        
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                         
    JUL. 29, 2006     JAN. 28, 2006     JUL. 30, 2005  
ASSETS
                        
Current assets:
                        
Cash & cash equivalents
   $ 11,783     $ 95,185     $ 92,227  
Short-term investments
     —       74,911       70,366  
Inventories
     286,666       215,140       242,631  
Other current assets
     43,870       41,485       37,146  
 
                  
Total current assets
     342,319       426,721       442,370  
Property and equipment, net
     392,769       355,822       327,874  
Other long-term assets
     24,579       25,018       22,063  
 
                  
Total assets
   $ 759,667     $ 807,561     $ 792,307  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Current liabilities:
                        
Accounts payable
   $ 81,633     $ 47,550     $ 106,695  
Other current liabilities
     61,412       74,921       56,534  
 
                  
Total current liabilities
     143,045       122,471       163,229  
Deferred lease incentives
     84,291       81,440       75,873  
Deferred rent
     30,341       28,748       27,717  
Other long-term liabilities
     22,466       28,112       31,078  
 
                  
Total liabilities
     280,143       260,771       297,897  
Total shareholder’s equity
     479,524       546,790       494,410  
 
                  
Total liabilities and shareholders’ equity
   $ 759,667     $ 807,561     $ 792,307  
 
                  
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
                 
    FOR THE FIRST HALF ENDED  
    JUL. 29, 2006     JUL. 30, 2005  
Cash flows from operating activities:
                
Net income
   $ 21,576     $ 38,719  
Depreciation & amortization
     34,385       31,081  
Non-cash stock based compensation
     3,573       —  
Tax benefits related to exercise of stock options
     1,479       5,737  
Loss on disposal of property and equipment
     158       —  
Changes in operating assets and liabilities:
                
Inventories
     (71,526 )     (67,550 )
Accounts payable and other current liabilities
     10,769       65,025  
Other assets and liabilities
     (1,869 )     4,330  
 
            
Net cash (used in)/provided by operating activities
     (1,455 )     77,342  
Cash flows from investing activities:
                
Purchases of short-term investments
     (201,900 )     (468,843 )
Maturities of short-term investments
     276,811       477,700  
Capital expenditures
     (62,675 )     (48,173 )
 
            
Net cash provided by/(used in) investing activities
     12,236       (39,316 )
Cash flows from financing activities:
                
Repurchases of common stock
     (99,347 )     (19,978 )
Proceeds from exercise of stock options
     5,454       10,756  
Repayments under long-term debt and capital leases
     (290 )     (885 )
Net cash used in financing activities
     (94,183 )     (10,107 )
 
            
Net (decrease) increase in cash and cash equivalents
     (83,402 )     27,919  
Cash and cash equivalents, beginning of period
     95,185       64,308  
 
            
Cash and cash equivalents, end of period
   $ 11,783     $ 92,227  
 
            
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
                 
    JUL. 29, 2006     JUL. 30, 2005  
Stores open at beginning of fiscal year
     1,105       990  
Stores opened during the fiscal year
     33       73  
Stores closed during the fiscal year
     (3 )     (9 )
 
            
Stores open at end of period
     1,135       1,054  
PacSun stores
     826       780  
Outlet stores
     102       91  
d.e.m.o. stores
     201       183  
One Thousand Steps stores
     6       —  
 
            
Total stores
     1,135       1,054  
Total square footage at end of period (in 000’s)
     4,077       3,720  
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000