-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, APLMt4YbkghFME2RkUD2gvaDkRI5yWPPxCCb25XNJIjuXWDUQzlNeZDoFxs+giUe dZdk8oGOqxglNQNVQxqjGQ== 0000892569-97-001539.txt : 19970602 0000892569-97-001539.hdr.sgml : 19970602 ACCESSION NUMBER: 0000892569-97-001539 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970504 FILED AS OF DATE: 19970530 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC SUNWEAR OF CALIFORNIA INC CENTRAL INDEX KEY: 0000874841 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 953759463 STATE OF INCORPORATION: CA FISCAL YEAR END: 0202 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21296 FILM NUMBER: 97616434 BUSINESS ADDRESS: STREET 1: 5037 E HUNTER AVE CITY: ANAHEIM STATE: CA ZIP: 92807 BUSINESS PHONE: 7146938066 MAIL ADDRESS: STREET 1: 5037 E HUNTER AVENUE CITY: ANAHEIM STATE: CA ZIP: 92807 10-Q 1 FORM 10-Q FOR PERIOD ENDED MAY 4, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 4, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-21296 PACIFIC SUNWEAR OF CALIFORNIA, INC. CALIFORNIA 95-3759463 (State of Incorporation) (I.R.S Employer Identification No.) 5037 EAST HUNTER AVENUE ANAHEIM, CALIFORNIA 92807 (Address of principal executive offices) (Zip code) (714) 693-8066 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The number of shares outstanding of the registrant's Common Stock, par value $.01 per share, at May 23, 1997 was 8,155,140. 2 PACIFIC SUNWEAR OF CALIFORNIA, INC. FORM 10-Q FOR THE QUARTER ENDED MAY 4, 1997 INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Balance Sheets as of May 4, 1997 (unaudited) and February 2, 1997................ 3 Statements of Operations (unaudited) for the thirteen weeks ended May 4, 1997 and May 5, 1996.............................................. 4 Statements of Cash Flows (unaudited) for the thirteen weeks ended May 4, 1997 and May 5, 1996.............................................. 5 Notes to Financial Statements.................................................... 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................ 7-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................................. 10 Item 2. Changes in Securities.............................................................. 10 Item 3. Defaults Upon Senior Securities.................................................... 10 Item 4. Submission of Matters to a Vote of Security Holders................................ 10 Item 5. Other Information.................................................................. 10 Item 6. Exhibits and Reports on Form 8-K................................................... 10 SIGNATURE PAGE..................................................................... 11
2 3 PACIFIC SUNWEAR OF CALIFORNIA, INC. BALANCE SHEETS ASSETS
MAY 4, FEBRUARY 2, 1997 1997 ------------ ------------ (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 7,196,956 $ 9,962,626 Accounts receivable 803,367 583,811 Prepaid income taxes 304,540 -- Merchandise inventories 22,461,924 19,760,412 Prepaid expenses, includes $1,948,487 and $1,910,681 of prepaid rent, respectively 3,036,047 3,216,160 Deferred taxes 1,358,733 1,358,733 ------------ ------------ Total current assets 35,161,567 34,881,742 PROPERTY AND EQUIPMENT: Leasehold improvements 27,210,834 25,210,439 Furniture, fixtures and equipment 21,901,491 20,244,954 ------------ ------------ 49,112,325 45,455,393 Less accumulated depreciation and amortization (17,419,688) (15,952,174) ------------ ------------ Net property and equipment 31,692,637 29,503,219 OTHER ASSETS: Goodwill, net of accumulated amortization of $298,886 and $292,165, respectively 789,857 796,578 Deposits and other assets 694,358 523,018 ------------ ------------ Total other assets 1,484,215 1,319,596 ------------ ------------ Total assets $ 68,338,419 $ 65,704,557 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 8,502,095 $ 6,686,561 Accrued liabilities (Note 4) 5,245,289 6,035,689 Income taxes payable -- 469,258 ------------ ------------ Total current liabilities 13,747,384 13,191,508 DEFERRED COMPENSATION 654,997 371,057 DEFERRED RENT 3,254,754 3,139,487 DEFERRED TAXES 1,456,463 1,456,463 SHAREHOLDERS' EQUITY: Preferred Stock, par value $.01; authorized, 5,000,000 shares; none issued and outstanding Common Stock, par value $.01; authorized, 22,500,000 shares; issued and outstanding, 8,135,134 and 8,092,107 shares, respectively 81,352 80,921 Additional paid-in capital 31,291,852 30,737,782 Retained earnings 17,851,617 16,727,339 ------------ ------------ Total shareholders' equity 49,224,821 47,546,042 ------------ ------------ Total liabilities and shareholders' equity $ 68,338,419 $ 65,704,557 ============ ============
See accompanying notes 3 4 PACIFIC SUNWEAR OF CALIFORNIA, INC STATEMENTS OF OPERATIONS (UNAUDITED)
THIRTEEN WEEKS ENDED ----------------------------- MAY 4, 1997 MAY 5, 1996 ------------ ------------ Net sales $ 38,932,736 $ 27,640,975 Cost of goods sold, including buying, distribution, and occupancy costs 27,225,628 20,362,870 ------------ ------------ Gross margin 11,707,108 7,278,105 Selling, general and administrative expenses 9,942,532 7,576,340 ------------ ------------ Operating income (loss) 1,764,576 (298,235) Interest income 95,702 29,659 ------------ ------------ Income (loss) before income tax expense (benefit) 1,860,278 (268,576) Income tax expense(benefit) 736,000 (99,000) ------------ ------------ Net income (loss) $ 1,124,278 $ (169,576) ============ ============ Net income (loss) per common and common equivalent share $ 0.13 $ (0.02) ------------ ------------ Weighted average common and common equivalent shares outstanding 8,442,791 7,892,310 ============ ============
See accompanying notes 4 5 PACIFIC SUNWEAR OF CALIFORNIA, INC STATEMENTS OF CASH FLOWS (UNAUDITED)
THIRTEEN WEEKS ENDED ---------------------------- MAY 4, 1997 MAY 5, 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income(loss) $ 1,124,278 $ (169,576) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,474,235 1,234,916 Change in: Accounts receivable (219,556) (316,597) Merchandise inventories (2,701,512) (2,707,960) Prepaid expenses 180,113 57,426 Deposits and other assets (171,340) (29,919) Accounts payable 1,815,534 4,264,612 Accrued liabilities (790,400) 642,704 Income taxes and deferred income taxes (324,350) (557,150) Deferred rent 115,267 131,760 Deferred compensation 283,940 56,786 ----------- ----------- Net cash provided by operating activities 786,209 2,607,002 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in property and equipment (3,656,932) (1,521,251) ----------- ----------- Net cash used in investing activities (3,656,932) (1,521,251) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under loan agreement -- (781,250) Proceeds from exercise of stock options 105,053 488,276 ----------- ----------- Net cash provided by (used in) financing activities 105,053 (292,974) ----------- ----------- NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (2,765,670) 792,777 CASH AND CASH EQUIVALENTS, beginning of period 9,962,626 4,315,842 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 7,196,956 $ 5,108,619 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 478 $ 10,685 Income taxes $ 1,060,350 $ 458,150 - --------------------------------------------------------------------------------------------------
Non-cash transaction: During the thirteen weeks ended May 4, 1997, the Company recorded an increase to additional paid-in capital of $449,448 related to tax benefits associated with the exercise of non-qualified stock options. See accompanying notes 5 6 PACIFIC SUNWEAR OF CALIFORNIA, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements are unaudited except for the February 2, 1997 balance sheet. These statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Company's fiscal year is the 52- or 53-week period which ends on the Sunday closest to the end of January. "Fiscal 1997" is a 52-week period which ends February 1, 1998. In the opinion of management, all adjustments consisting only of normal recurring entries necessary for a fair presentation have been included. The preparation of financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported expenses during the reported period. Actual results could differ from these estimates. The results of operations for the thirteen weeks ended May 4, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending February 1, 1998. For further information, refer to the financial statements and notes thereto as of and for the years ended February 2, 1997, February 4, 1996 and January 29, 1995. NOTE 2 - NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Net income (loss) per common and common equivalent share is based on the weighted average number of common and common equivalent shares outstanding during the relevant periods. For the thirteen weeks ended May 5, 1996, no effect has been given to options outstanding under the Company's Stock Option Plan as they were not dilutive. Stock Split - On October 9, 1996, the Company effected a three-for-two stock split. Earnings per share and share outstanding amounts have been given retroactive effect in these financial statements. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") which is effective for financial statements issued for periods ending after December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per share. For the thirteen weeks ended May 4, 1997, the amount reported as net income per common and common equivalent share is not materially different from that which would have been reported for basic and diluted earnings per share in accordance with SFAS No. 128. NOTE 3 - FEDERAL AND STATE INCOME TAX EXPENSE (BENEFIT) The combined federal and state income tax expense (benefit) were calculated using estimated effective annual tax rates. NOTE 4 - ACCRUED LIABILITIES Accrued liabilities consist of the following:
MAY 4, FEBRUARY 2, 1997 1997 ----------- ---------- Accrued compensation and benefits $1,932,561 $2,939,217 Reserve for expansion/relocation and closing costs 1,669,156 1,424,315 Other accrued liabilities 1,643,572 1,672,157 ---------- ---------- $5,245,289 $6,035,689 ========== ==========
6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The thirteen weeks ended May 4, 1997 as compared to the thirteen weeks ended May 5, 1996 Net Sales Net sales increased to $38.9 million for the first thirteen weeks of fiscal 1997 from $27.6 million for the first thirteen weeks of fiscal 1996, an increase of $11.3 million, or 40.9%. Of this $11.3 million increase, $5.8 million was attributable to net sales generated by new stores opened in fiscal 1996 and not yet included in the comparable store base, $4.5 million was attributable to a 17.5% increase in comparable store net sales in the first thirteen weeks of fiscal 1997, $.7 million was attributable to nine stores that have been expanded or relocated to the larger format and not yet included in the comparable store base, and $.6 million was attributable to net sales generated by 11 new stores opened in fiscal 1997 and not yet included in the comparable store base. Offsetting these increases was a $.3 million decrease attributable to the closing of four stores. The increase in comparable store net sales was primarily attributable to the addition of footwear and juniors to certain of the Company's stores and, to a lesser extent, to increases in sales of young men's merchandise. Net sales of footwear and juniors represented approximately 19% of total net sales for the first thirteen weeks of fiscal 1997 compared to 6% for the first thirteen weeks of fiscal 1996. The average retail price per unit sold increased approximately 11% in the first thirteen weeks of fiscal 1997 compared to the first thirteen weeks of fiscal 1996, primarily attributable to a change in the mix of products sold, including the addition of footwear, an increase in sales of pants as a percentage of net sales and a decrease in T-shirt sales as a percentage of net sales. Gross Margin Gross margin, after buying, distribution and occupancy costs, increased to $11.7 million for the first thirteen weeks of fiscal 1997 from $7.3 million for the first thirteen weeks of fiscal 1996, an increase of $4.4 million, or 60.3%. As a percentage of net sales, gross margin increased to 30.1% from 26.4%. Of this 3.7% increase, 2.5% was due to a decrease in occupancy costs as a percentage of net sales which was related primarily to higher comparable store net sales. In addition, net merchandise margins increased 1.0% as a percentage of net sales for the first thirteen weeks of fiscal 1997 compared to the first thirteen weeks of fiscal 1996 due primarily to an increase in initial markup and a decrease in markdowns as a percentage of net sales. Furthermore, buying and distribution costs decreased by .2% as a percentage of net sales. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $9.9 million for the first thirteen weeks of fiscal 1997 from $7.6 million for the first thirteen weeks of fiscal 1996, an increase of $2.3 million, or 30.3%. As a percentage of net sales, these expenses decreased to 25.5% from 27.5%. Of this 2.0% decrease as a percentage of net sales, 1.9% was attributable to a decrease in store selling expenses as a percentage of net sales primarily as a result of an increase in comparable store net sales and higher total net sales and .6% was due to a decrease in general and administrative expenses as a percentage of net sales as a result of leveraging these expenses over higher total net sales. Partially offsetting this decrease was an increase of .5% due to increased expansion and relocation expenses and closing expenses as a percentage of net sales compared to the first thirteen weeks of fiscal 1996. Income Tax Expense (Benefit) Income tax expense was $.7 million in the first thirteen weeks of fiscal 1997 compared to an income tax benefit of $.1 million for the first thirteen weeks of fiscal 1996. The effective income tax rate for the first thirteen weeks of fiscal 1997 was 39.6 % compared to a benefit of 36.9% for the first thirteen weeks of fiscal 1996. 7 8 LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations from internally generated cash flow, short-term borrowings and equity financing. The Company's primary capital requirements have been for the construction of new stores, remodeling, expansion, or relocation of selected stores and financing of inventories. Net cash provided by operating activities for the first thirteen weeks of fiscal 1997 was $.8 million compared to $2.6 million for the first thirteen weeks of fiscal 1996. The $1.8 million decrease was primarily attributable to a decrease in accounts payable of $2.4 million and a decrease in accrued liabilities of $1.4 million, offset by a $1.3 million increase in net income and net increases in other items of $.7 million. Working capital at May 4, 1997 was $21.4 million compared to $21.7 million at February 2, 1997, a decrease of $.3 million. Inventories at May 4, 1997 were $22.5 million compared to $19.8 million at February 2, 1997, an increase of $2.7 million. This increase was primarily related to opening 11 new stores, relocating two stores with 50% larger average square footage than existing stores and the addition of juniors to certain of the Company's existing stores. The increase in accounts payable of $1.8 million at May 4, 1997 compared to February 2, 1997 was primarily attributable to the increase in inventories at May 4, 1997. Net cash used in investing activities was $3.7 million for the first thirteen weeks of fiscal 1997 compared to $1.5 million for the first thirteen weeks of fiscal 1996. This increase was primarily due to net cash invested in property and equipment for the first thirteen weeks of fiscal 1997 of $3.7 million compared to $1.5 million for the first thirteen weeks of fiscal 1996, due to an increase in the number of new stores opened and, to a lesser extent, an increase in the number of stores expanded/relocated in the first thirteen weeks of fiscal 1997 compared to the first thirteen weeks of fiscal 1996. Net cash provided by (used in) financing activities for the first thirteen weeks of fiscal 1997 was $.1 million compared to $(.3) million for the first thirteen weeks of fiscal 1996. In the first thirteen weeks of fiscal 1997, the Company made no borrowings or repayments under its loan agreement, compared to the repayment of a term loan of $.8 million in the first thirteen weeks of fiscal 1996. In the first thirteen weeks of fiscal 1997, the Company received proceeds of $.1 million from the exercise of stock options compared to $.5 million in the first thirteen weeks of fiscal 1996. At May 4, 1997, the Company had $3.1 million in letters of credit outstanding. The Company plans to open approximately 39 stores, and expand or relocate approximately 13 existing stores during the remainder of fiscal 1997. The Company estimates that capital expenditures during the remainder of fiscal 1997 will be approximately $12.0 million. The Company reviews the operating performance of its stores on an ongoing basis to determine which stores, if any, to close and records closing costs as stores are closed or identified to be closed. The Company closed one store in the first quarter of fiscal 1997 and anticipates closing two stores in the second quarter of fiscal 1997. Management believes that the Company's working capital, bank line of credit and cash flows from operating activities will be sufficient to meet the Company's operating and capital expenditure requirements through the end of fiscal 1997. INFLATION The Company does not believe that inflation has had a material effect on the results of operations during the past three years. There can be no assurance that the Company's business will not be affected by inflation in the future. NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") which is effective for financial statements issued for periods ending after December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per share. For the thirteen weeks ended May 4, 1997, the amount reported as net income per common and common equivalent share is not materially different from that which would have been reported for basic and diluted earnings per share in accordance with SFAS No. 128. 8 9 SEASONALITY AND QUARTERLY RESULTS The Company's business is seasonal by nature, with the Christmas and back-to-school periods historically accounting for the largest percentage of annual net sales. The Company's first quarter historically accounts for the smallest percentage of annual net sales. In fiscal 1996 and fiscal 1995, excluding net sales generated by new and expanded/relocated stores, the Christmas and back-to-school periods together accounted for approximately 36% of the Company's annual net sales and a higher percentage of the Company's operating income. In fiscal 1996, excluding net sales generated by new and expanded/relocated stores, approximately 43% of the Company's annual net sales occurred in the first half of the fiscal year and 57% in the second half. The Company's quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings and the amount of revenue contributed by new stores, the timing and level of markdowns, the timing of store closings, expansions and relocations, competitive factors and general economic conditions. SAFE HARBOR STATEMENT The preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include the plans and objectives of management for future operations, including plans and objectives relating to the future economic performance of the Company. The forward-looking statements and associated risks set forth herein may include or relate to: (i) the planned opening of approximately 39 stores and expansion or relocation of 13 stores during the remainder of fiscal 1997; (ii) the anticipated closing of two stores in the second quarter of fiscal 1997 and; (iii) sufficiency of the Company's working capital, bank line of credit and cash flows from operating activities for the Company's future operating and capital requirements. The forward-looking statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following: (i) the ability of the Company to locate and obtain favorable store sites, negotiate acceptable lease terms, and hire and train employees; (ii) management's ability to manage the Company's planned expansion; (iii) the availability of merchandise from the Company's vendors and private brand sources; (iv) the effect of economic conditions; and (v) the effect of competitive pressures from other retailers, particularly including those in the recently introduced juniors and footwear categories. Results actually achieved thus may differ materially from expected results in these statements. 9 10 PART II-OTHER INFORMATION Item 1 - Legal Proceedings - Not Applicable Item 2 - Changes in Securities - Not Applicable Item 3 - Defaults Upon Senior Securities - Not Applicable Item 4 - Submission of Matters to a Vote of Security Holders - Not Applicable Item 5 - Other Information - Not Applicable Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: (27) Financial Data Schedule (b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter for which this report is filed. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Pacific Sunwear of California, Inc. (Registrant) Date: May 23, 1997 /s/ Greg H. Weaver ------------------------------- Greg H. Weaver Chief Executive Officer and Director Date: May 23, 1997 /s/ Carl W. Womack ------------------------------- Carl W. Womack Senior Vice President, Chief Financial Officer and Secretary 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFIC SUNWEAR OF CALIFORNIA, INC.'S FORM 10Q FOR THE QUARTERLY PERIOD ENDED MAY 4, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q. 1 3-MOS FEB-01-1998 FEB-03-1997 MAY-04-1997 7,196,956 0 803,367 0 22,461,924 35,161,567 49,112,325 (17,419,688) 68,338,419 13,747,384 0 0 0 81,352 49,143,469 68,338,419 38,932,736 38,932,736 27,225,628 9,942,532 0 0 (95,702) 1,860,278 736,000 1,124,278 0 0 0 1,124,278 0.13 0.13
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