8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): March 11, 2010

PACIFIC SUNWEAR OF CALIFORNIA, INC.

(Exact Name of Registrant as Specified in Charter)

California	0-21296	95-3759463
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
3450 East Miraloma Avenue Anaheim, CA (Address of principal executive offices)		92806-2101 (Zip Code)

(714) 414-4000
Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99.1

Item 2.02 Results of Operations and Financial Condition

On March 11, 2010, Pacific Sunwear of California, Inc. (NASDAQ:PSUN) (the “Company”) announced financial results for the fourth quarter of fiscal 2009 ended January 30, 2010. The full text of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release issued by the Company on March 11, 2010

-2-

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 hereunto duly authorized.

Dated: March 11, 2010

PACIFIC SUNWEAR OF CALIFORNIA, INC.
 

/s/ MICHAEL L. HENRY  

Michael L. Henry 

Sr. Vice President, Chief Financial Officer 

-3-

EX-99.1

Exhibit 99.1

CONTACT:
Michael L. Henry
Chief Financial Officer
(714) 414-4003

FOR IMMEDIATE RELEASE

PACIFIC SUNWEAR ANNOUNCES FOURTH QUARTER
OPERATING RESULTS; ISSUES FIRST QUARTER GUIDANCE

ANAHEIM, CA/March 11, 2010 — Pacific Sunwear of California, Inc. (NASDAQ:PSUN) today announced that total sales for the fourth quarter of fiscal 2009 ended January 30, 2010, were $293 million, a decrease of 17 percent from total sales of $352 million for the fourth quarter of fiscal 2008 ended January 31, 2009. Total Company same-store sales decreased 19 percent during the fourth quarter of fiscal 2009.

For the fourth quarter of fiscal 2009, the Company reported a net loss of $36 million, or $(0.56) per share, compared to a net loss of $27 million, or $(0.42) per share, for the fourth quarter of fiscal 2008. During the fourth quarter of fiscal 2009, the Company recorded a non-cash charge of $19 million, or $0.29 per share, to provide a valuation allowance against certain of its deferred tax assets. Excluding this charge, the Company’s non-GAAP net loss for the quarter was $17 million, or $(0.26) per share.

The Company ended the year with total cash of $93 million and no borrowings under its credit facility. Year over year, inventory decreased by 16%, from $107 million at the end of fiscal 2008 to $90 million as of January 30, 2010.

“When I joined PacSun, given all that we needed to do I knew it would take time to turn things around. Eight months into the job, I’m encouraged by the changes we’re making and the prospects for PacSun to once again become a leader for teens in the mall,” stated Gary H. Schoenfeld, President and Chief Executive Officer. “We’ve still got a tough period ahead of us in our Juniors’ business, yet I believe our Young Mens’ categories can begin to lead the turnaround of our business as we look further ahead to Back to School and Holiday.”

Full Year Results

Total sales for fiscal 2009 ended January 30, 2010 were $1.03 billion, a decrease of 18 percent from total sales of $1.25 billion during fiscal 2008 ended January 31, 2009. Total Company same-store sales decreased 20 percent during fiscal 2009. For fiscal 2009, the Company reported a loss of $70 million, or $(1.07) per share, compared to a loss from continuing operations of $39 million, or $(0.59) per share, in fiscal 2008. Excluding the $19 million, or $0.29 per share, non-cash valuation allowance charge discussed above, the Company’s non-GAAP net loss for the year was $51 million, or ($0.78) per share.

3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

Financial Outlook

First Fiscal Quarter of 2010

The Company expects to report a GAAP net loss per share of $(0.50) to $(0.60) for the first quarter of fiscal 2010 which will reflect the continuing impact of maintaining a valuation allowance against deferred tax assets as discussed above and thus a very low effective tax rate. On a non-GAAP basis, using a normalized 37% effective income tax rate, the Company would expect to show a net loss of $(0.32) to $(0.38) per share for the first quarter of fiscal 2010. The forecasted first quarter GAAP earnings range is based on the following major assumptions:

• Same-store sales decline of 13% to 18%;

• Gross margin rate, including buying, distribution and occupancy, of 19% to 21% versus last year’s 27% due to a combination of merchandise margin declines and occupancy deleverage;

• SG&A dollars in the range of $71 million to $74 million versus last year’s $77 million. This range includes estimated non-cash store asset impairment charges of approximately $3 million to $5 million compared to $2 million in last year’s first quarter;

• As the Company will no longer be recording income tax benefits against its operating losses, tax expense will be approximately $500,000 due to taxable income projected to be generated in certain state and local tax jurisdictions.

Full Year Fiscal 2010

While it is difficult to predict full year results for fiscal 2010, the Company is currently planning for sequential improvement in its same-store sales results as the year progresses with the goal of getting back to positive same-store sales results by the fourth quarter. As a percentage of sales, gross margin, including buying, distribution and occupancy, is targeted to improve by approximately 50 to 100 basis points based upon anticipated improvements in merchandise margins which would offset further deleveraging of occupancy expenses. SG&A expenses are estimated to be in the range of $310 million to $320 million versus $340 million in fiscal 2009. Total capital expenditures for the year are expected to be in the range of $20 million to $30 million with depreciation and amortization expenses in the range of $55 million to $60 million.

About Pacific Sunwear of California, Inc.

Pacific Sunwear is a leading specialty retailer rooted in the California lifestyle. The Company sells casual apparel with a limited selection of accessories and footwear designed to meet the needs of teens and young adults. As of January 30, 2010, the Company operated 776 PacSun stores and 118 PacSun Outlet stores for a total of 894 stores in 50 states and Puerto Rico. PacSun’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

3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

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: 59365693. 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 web site through midnight, May 19, 2010.

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 section of the accompanying tables 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 fourth paragraph and all statements under the heading “Financial Outlook” regarding the Company’s earnings projections and financial outlook for the first quarter and full year of fiscal 2010. 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 anticipated markdowns and/or higher than estimated selling, general and administrative costs; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; 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 Annual Report on Form 10-K for the year ended January 31, 2009 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.
SUMMARY STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)

	Fourth Quarter Ended						Fiscal Year Ended
	01/30/10			01/31/09			01/30/10			01/31/09
Net sales	$	292,562		$	351,681		$	1,027,101		$	1,254,886
Gross margin		66,180			56,608			258,603			320,107
Selling, G&A expenses		94,251			99,845			339,728			381,008
Operating loss from continuing operations		(28,071	)		(43,237	)		(81,125	)		(60,901	)
Other expense/(income), net		96			(2,830	)		276			(2,369	)
Loss from continuing operations before income taxes		(28,167	)		(40,407	)		(81,401	)		(58,532	)
Income tax provision/(benefit)		8,332			(12,943	)		(11,099	)		(19,287	)
Loss from continuing operations		(36,499	)		(27,464	)		(70,302	)		(39,245	)
Discontinued operations, net of tax		—			422			—			(24,577	)
Net loss	$	(36,499	)	$	(27,042	)	$	(70,302	)	$	(63,822	)
Loss from continuing operations per share:
Basic	$	(0.56	)	$	(0.42	)	$	(1.07	)	$	(0.59	)
Diluted	$	(0.56	)	$	(0.42	)	$	(1.07	)	$	(0.59	)
Net loss per share:
Basic	$	(0.56	)	$	(0.42	)	$	(1.07	)	$	(0.96	)
Diluted	$	(0.56	)	$	(0.42	)	$	(1.07	)	$	(0.96	)
Weighted average shares outstanding:
Basic		65,629,371			65,059,597			65,442,887			66,652,088
Diluted		65,629,371			65,059,597			65,442,887			66,652,088

3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

	01/30/10		01/31/09
ASSETS
Current assets:
Cash & cash equivalents	$	93,091	$	24,776
Inventories		89,665		107,205
Other current assets		16,166		58,943
Total current assets		198,922		190,924
Property and equipment, net		249,000		327,026
Other long-term assets		29,296		51,559
Total assets	$	477,218	$	569,509

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	38,481	$	45,263
Other current liabilities		43,742		47,564
Total current liabilities		82,223		92,827
Deferred lease incentives		39,207		52,313
Deferred rent		21,396		23,008
Other long-term liabilities		27,714		29,374
Total liabilities		170,540		197,522
Total shareholders’ equity		306,678		371,987
Total liabilities and shareholders’ equity	$	477,218	$	569,509

3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)

	FISCAL YEAR ENDED
	01/30/10			1/31/09
Cash flows from operating activities:
Net loss	$	(70,302	)	$	(63,822	)
Depreciation and amortization		70,367			76,433
Loss on disposal/impairment of property and equipment		27,980			29,248
Non-cash stock based compensation		6,370			5,167
Tax benefit deficiencies related to stock-based compensation		(2,044	)		(1,596	)
Excess tax benefits related to stock-based compensation		—			(5	)
Changes in operating assets and liabilities:
Inventories		17,540			62,977
Accounts payable and other current liabilities		(10,970	)		(34,973	)
Other assets and liabilities		48,510			(39,514	)
Net cash provided by operating activities		87,451			33,915
Cash flows from investing activities:
Capital expenditures		(23,498	)		(80,934	)
Proceeds from the sale of property and equipment		3,739			25,275
Net cash used in investing activities		(19,759	)		(55,659	)
Cash flows from financing activities:
Proceeds from exercise of stock options		727			1,850
Principal payments under capital lease obligations		(104	)		(11	)
Repurchases of common stock		—			(52,911	)
Excess tax benefits related to stock-based compensation		—			5
Net cash provided by/(used in) financing activities		623			(51,067	)
Net increase/(decrease) in cash and cash equivalents		68,315			(72,811	)
Cash and cash equivalents, beginning of period		24,776			97,587
Cash and cash equivalents, end of period	$	93,091		$	24,776

PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA

	Fiscal 2009			Fiscal 2008
Stores open at beginning of fiscal year		932			954
Stores opened during the fiscal year		2			16
Stores closed during the fiscal year		(40	)		(38	)
Stores open at end of period		894			932

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)

	Fourth Quarter Ended						Fiscal Year Ended
		01/30/10	2		01/31/09	1		01/30/10			01/31/09	1
GAAP net loss	$	(36,499	)	$	(27,464	)	$	(70,302	)	$	(39,245	)
Valuation allowance		19,119			—			19,119			—
Non-GAAP net loss	$	(17,380	)	$	(27,464	)	$	(51,183	)	$	(39,245	)
GAAP net loss per share	$	(0.56	)	$	(0.42	)	$	(1.07	)	$	(0.59	)
Valuation allowance		0.29			—			0.29			—
Non-GAAP net loss per share	$	(0.26	)	$	(0.42	)	$	(0.78	)	$	(0.59	)
Shares used in calculation		65,629,371			65,059,597			65,442,887			66,652,088

1	Fiscal 2008 amounts reflect GAAP-based results from continuing operations only.
2	Per share amounts reflected in the table above may not reconcile due to rounding.

Forward-Looking Earnings GAAP to Non-GAAP Reconciliation:

	Guidance for the
	first quarter of
	fiscal 2010
GAAP net loss per share guidance	$	(0.50) - $(0.60	)
Income tax benefit, excluding valuation allowance1	$	0.18 - $0.22
Non-GAAP net loss per share guidance	$	(0.32) - $(0.38	)

¹ The Company assumed a 37% effective income tax rate 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 March 11, 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 fourth quarter and full year of fiscal 2009 and non-GAAP net loss per share guidance for the first 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