10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C 20549

FORM 10-Q

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

For the quarterly period ended July 30, 2005

OR

o 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 (State of Incorporation)	95-3759463 (I.R.S Employer Identification No.)
3450 East Miraloma Avenue Anaheim, California (Address of principal executive offices)	92806 (Zip code)

(714) 414-4000
(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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares outstanding of the registrant’s Common Stock, par value $.01 per share, at August 30, 2005, was 74,601,458.

PACIFIC SUNWEAR OF CALIFORNIA, INC.
FORM 10-Q
For the Quarter Ended July 30, 2005

Index

	Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of July 30, 2005 and January 29, 2005		3
Condensed Consolidated Statements of Income and Comprehensive Income for the second quarters and first halves ended July 30, 2005 and July 31, 2004 (as restated)		4
Condensed Consolidated Statements of Cash Flows for the first halves ended July 30, 2005 and July 31, 2004 (as restated)		5
Notes to Condensed Consolidated Financial Statements		6-11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12-24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		24-25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3. Defaults Upon Senior Securities		25
Item 4. Submission of Matters to a Vote of Security Holders		25-26
Item 5. Other Information		26
Item 6. Exhibits		26
SIGNATURE PAGE		27
EXHIBIT 3.1
EXHIBIT 10.1
EXHIBIT 31
EXHIBIT 32

2

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, all amounts in thousands except share amounts)

	July 30, 2005			January 29, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	92,227		$	64,308
Marketable securities		70,366			79,223
Merchandise inventories		242,631			175,081
Other current assets		37,146			34,206
Total current assets		442,370			352,818
PROPERTY AND EQUIPMENT, NET:
Gross property and equipment		551,039			503,745
Less accumulated depreciation and amortization		(223,165	)		(199,523	)
Total property and equipment, net		327,874			304,222
Other Assets		22,063			20,738
TOTAL ASSETS	$	792,307		$	677,778
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	106,695		$	38,753
Other current liabilities		56,534			56,557
Total current liabilities		163,229			95,310
LONG-TERM LIABILITIES:
Deferred lease incentives		75,873			67,683
Deferred rent		27,717			26,826
Deferred income taxes		16,132			16,132
Other long-term liabilities		14,946			13,793
Total long-term liabilities		134,668			124,434
Commitments and contingencies (Note 5)
SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued		—			—
Common stock, $.01 par value; 170,859,375 shares authorized; 75,041,904 and 74,916,773 shares issued and outstanding, respectively		750			749
Additional paid-in capital		58,966			61,310
Retained earnings		434,694			395,975
Total shareholders’ equity		494,410			458,034
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	792,307		$	677,778

See accompanying notes

3

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(unaudited, all amounts in thousands except share and per share amounts)

	For the Second Quarter Ended				For the First Half Ended
	July 30, 2005		July 31, 2004		July 30, 2005		July 31, 2004
			(as restated, see				(as restated, see
			Note 3)				Note 3)
Net sales	$	309,064	$	272,164	$	589,049	$	517,665
Cost of goods sold, including buying, distribution and occupancy costs		198,707		177,525		381,342		336,821
Gross margin		110,357		94,639		207,707		180,844
Selling, general and administrative expenses		77,592		66,865		147,714		129,457
Operating income		32,765		27,774		59,993		51,387
Interest income, net		1,180		316		2,265		773
Income before income tax expense		33,945		28,090		62,258		52,160
Income tax expense		12,833		10,623		23,539		19,724
Net income	$	21,112	$	17,467	$	38,719	$	32,436
Comprehensive income	$	21,112	$	17,467	$	38,719	$	32,436
Net income per share, basic	$	0.28	$	0.23	$	0.51	$	0.42
Net income per share, diluted	$	0.28	$	0.22	$	0.51	$	0.41
Weighted average shares outstanding, basic		75,125,782		76,322,161		75,209,185		77,239,966
Weighted average shares outstanding, diluted		76,118,501		77,911,595		76,338,599		79,035,717

See accompanying notes

4

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, all amounts in thousands)

	For the First Half Ended
				July 31, 2004
				(as restated,
	July 30, 2005			see Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	38,719		$	32,436
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		31,081			24,423
Tax benefits related to exercise of stock options		5,737			2,906
Loss on disposal of equipment		—			2,839
Change in operating assets and liabilities:
Merchandise inventories		(67,550	)		(66,082	)
Other current assets		(2,940	)		(5,204	)
Other assets		(1,325	)		(665	)
Accounts payable		67,942			37,274
Other current liabilities		(2,917	)		(15,350	)
Deferred lease incentives		7,809			5,727
Deferred rent		(658	)		(904	)
Other long-term liabilities		1,444			1,229
Net cash provided by operating activities		77,342			18,629
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(48,173	)		(39,950	)
Purchases of held-to-maturity marketable securities		(26,493	)		(19,829	)
Maturities of held-to-maturity marketable securities		20,625			2,640
Purchases of available-for-sale marketable securities		(442,350	)		(637,450	)
Sales of available-for-sale marketable securities		457,075			635,300
Net cash used in investing activities		(39,316	)		(59,289	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common stock		(19,978	)		(74,931	)
Proceeds from exercise of stock options		10,756			6,883
Principal payments under long-term debt and capital lease obligations		(885	)		(932	)
Net cash used in financing activities		(10,107	)		(68,980	)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		27,919			(109,640	)
CASH AND CASH EQUIVALENTS, beginning of period		64,308			109,640
CASH AND CASH EQUIVALENTS, end of period	$	92,227		$	0
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	32		$	81
Cash paid for income taxes		21,659			23,781
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Increase to additional paid-in capital related to the issuance of stock to satisfy certain deferred compensation liabilities (Note 6)	$	1,142		$	4,853
Increase in non-cash property and equipment accruals		6,179			5,200

See accompanying notes

5

PACIFIC SUNWEAR OF CALIFORNIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Quarterly Period Ended July 30, 2005
(unaudited, all amounts in thousands except share and per share amounts unless otherwise indicated)

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS

Basis of Presentation – The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rules 5-02 and 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated financial statements include the accounts of Pacific Sunwear of California, Inc. and its subsidiaries, Pacific Sunwear Stores Corp. and Miraloma Corp. (the “Company”). All intercompany transactions have been eliminated in consolidation.

In the opinion of management, all adjustments consisting only of normal recurring entries necessary for a fair presentation have been included. The preparation of consolidated financial statements in conformity with GAAP necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported revenues and expenses during the reporting period. Actual results could differ from these estimates. The results of operations for the second quarter and first half ended July 30, 2005 are not necessarily indicative of the results that may be expected for fiscal 2005. For further information, refer to the Company’s consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended January 29, 2005.

Nature of Business – Pacific Sunwear of California, Inc. and its subsidiaries (the “Company”) is a leading specialty retailer of everyday casual apparel, footwear and accessories designed to meet the needs of active teens and young adults. The Company operates three nationwide, primarily mall-based chains of retail stores, under the names “Pacific Sunwear” (as well as “PacSun”), “Pacific Sunwear (PacSun) Outlet” and “d.e.m.o.” Pacific Sunwear and Pacific Sunwear Outlet stores specialize in board-sport inspired casual apparel, footwear and related accessories catering to teens and young adults. d.e.m.o. specializes in hip-hop inspired casual apparel, footwear and related accessories catering to teens and young adults. In addition, the Company operates two websites (www.pacsun.com and www.demostores.com) which sell PacSun and d.e.m.o. merchandise online, respectively, provide content and community for its target customers, and provide information about the Company. Additionally, the Company has announced its plans to begin operating a new mall-based chain of specialty retail footwear stores under the name “One Thousand Steps” beginning in fiscal 2006.

The Company’s fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31. “Fiscal 2005” is the 52-week period ending January 28, 2006. “Fiscal 2004” was the 52-week period ended January 29, 2005. The second quarter and first half of fiscal 2005 were the 13-week and 26-week periods ended July 30, 2005, respectively. The second quarter and first half of fiscal 2004 were the 13-week and 26-week periods ended July 31, 2004, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Information regarding the Company’s significant accounting policies is contained in Note 1, “Summary of Significant Accounting Policies and Nature of Business,” to the consolidated financial statements in the Company’s annual report on Form 10-K for the fiscal year ended January 29, 2005. Presented below in this and the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” included in that report.

Marketable Securities – Marketable securities consists of auction rate securities of $36 million, classified as available for sale, and other short-term investments of $34 million, classified as held-to-maturity.

6

Auction rate securities have long-term stated contractual maturities, but have variable interest rates that reset at each auction period (typically 7 days, or as long as 28 or 35 days in some cases). These securities trade in a broad, highly liquid market and the Company has never had difficulty being able to liquidate any such investment at the end of a given auction period. The Company typically reinvests these securities multiple times during each reporting period at each new auction date. As a result of the resetting variable rates, the Company had no cumulative gross unrealized or realized gains or losses from these investments. All income from these investments was recorded as interest income for each period presented.

Marketable securities, other than auction rate securities, are classified as held-to-maturity and consist of marketable corporate and U.S. agency debt instruments with original maturities of three months to one year and are carried at amortized cost, less other than temporary impairments in value. At July 30, 2005, the fair value of the Company’s held-to-maturity portfolio was $34 million, consisting of corporate debentures of $23 million and U.S. treasury/agency debentures of $11 million. Cost is determined by specific identification, which approximates fair value at July 30, 2005 due to the relatively short maturity period of such investments.

Customer Loyalty Programs – The Company accounts for its customer loyalty programs in accordance with EITF 00-22, “Accounting for ‘Points’ and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future.” The Company’s primary customer loyalty programs are referred to as “PacBucks” for PacSun and PacSun Outlet stores and “d.e.m.o. Dollars” for d.e.m.o. stores. The Company also has a customer loyalty discount program related to its private label credit card. These programs offer customers dollar-for-dollar discounts on future merchandise purchases within stated redemption periods if they purchase specified levels of merchandise in a current transaction. The impact of these programs is recognized ratably as a direct reduction in net sales over the series of transactions required to both earn and redeem the customer discounts. Redemptions generally occur within 30 days of original issuance. See Note 3, “Restatement of Prior Period Financial Statements.”

Stock-Based Compensation – The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 and related interpretations. Accordingly, no compensation expense has been recognized related to employee stock options for the periods presented. The Company follows the disclosure provisions of Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” as amended by SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” The Company will expense stock options in accordance with SFAS 123(R) beginning January 29, 2006 (see “New Accounting Pronouncements”). The Company has provided the pro-forma disclosures required by SFAS 123 and SFAS 148 for the second quarter and first half of each of fiscal 2005 and fiscal 2004 below.

	For the Second Quarter Ended						For the First Half Ended
	July 30,			July 31,			July 30,			July 31,
	2005			2004			2005			2004
Net Income
As reported	$	21,112		$	17,467		$	38,719		$	32,436
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(2,170	)		(1,673	)		(3,991	)		(3,231	)
Pro forma	$	18,942		$	15,794		$	34,728		$	29,205
Earnings per Share
Basic, as reported	$	0.28		$	0.23		$	0.51		$	0.42
Basic, pro forma	$	0.25		$	0.21		$	0.46		$	0.38
Diluted, as reported	$	0.28		$	0.22		$	0.51		$	0.41
Diluted, pro forma	$	0.25		$	0.20		$	0.46		$	0.37

7

Pro-forma net income and earnings per share related to the fair value of the Company’s stock option awards were determined using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Fiscal Year
	2005			2004
Expected Option Life	5 years			5 years
Stock Volatility		56.7% - 62.8	%		37.0 – 37.8	%
Risk-free Interest Rates		3.9 – 4.1	%		3.6 – 3.7	%
Expected Dividends	None			None

New Accounting Pronouncements – In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123(R), “Share-Based Payment.” SFAS 123(R) requires that companies recognize compensation expense equal to the fair value of stock options or other share-based payments over the requisite service period. The standard is effective for the Company at the beginning of its next fiscal year, which starts on January 29, 2006. The Company’s net income will be reduced as a result of the recognition of the remaining amortization of the fair value of existing options (similar to what is disclosed as pro-forma expense above in this Note 2) as well as the recognition of the fair value of all newly issued stock options, which is contingent upon the number of future options granted and other variables. The adoption of this standard will have no impact on the Company’s cash flows.

Reclassifications – Certain prior year amounts have been reclassified related to e-commerce shipping and handling revenues and expenses (as disclosed in Note 3) to conform to the current year presentation.

3. RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

As disclosed in the Company’s Form 10-K for the fiscal year ended January 29, 2005, the Company restated its prior year financial statements to reflect the impact of certain lease accounting corrections and certain other reclassifications related to auction rate securities (“ARS”) and e-commerce shipping revenues and expenses. Additionally, as previously announced in the Company’s Form 8-K dated August 11, 2005, the Company has corrected its July 2004 accounting for PacBuck issuances. A summary of the impact of those corrections to the Company’s financial statements for the second quarter and first half of fiscal 2004 is as follows:

	Second Quarter Ended July 31, 2004
	As		Lease and E-
	Previously		Commerce			PacBucks			As
	Reported		Corrections			Corrections			Restated
Consolidated Income Statement
Net Sales	$	274,797	$	342		$	(2,975	)	$	272,164
Cost of Sales		179,977		(2,452	)		—			177,525
Gross Margin		94,820		2,794			(2,975	)		94,639
SG&A Expenses		64,061		2,804			—			66,865
Operating Income		30,759		(10	)		(2,975	)		27,774
Income Tax Provision		11,750		(2	)		(1,125	)		10,623
Net Income		19,325		(8	)		(1,850	)		17,467
Earnings Per Share, diluted		0.25		(0.00	)		(0.03	)		0.22

8

	First Half Ended July 31, 2004
	As		Lease and E-
	Previously		Commerce			PacBucks			As
	Reported		Corrections			Corrections			Restated
Consolidated Income Statement
Net Sales	$	519,928	$	712		$	(2,975	)	$	517,665
Cost of Sales		341,537		(4,716	)		—			336,821
Gross Margin		178,391		5,428			(2,975	)		180,844
SG&A Expenses		124,011		5,446			—			129,457
Operating Income		54,380		(18	)		(2,975	)		51,387
Income Tax Provision		20,854		(5	)		(1,125	)		19,724
Net Income		34,299		(13	)		(1,850	)		32,436
Earnings Per Share, diluted		0.43		(0.00	)		(0.02	)		0.41

	First Half Ended July 31, 2004
	As			Lease and
	Previously			ARS
	Reported			Corrections			As Restated
Consolidated Cash Flow Statement
Net Cash Provided by Operating Activities	$	7,256		$	11,373		$	18,629
Net Cash Used in Investing Activities		(46,572	)		(12,717	)		(59,289	)
Net Cash Used in Financing Activities		(68,980	)		—			(68,980	)
Net Decrease in Cash and Cash Equivalents		(108,296	)		(1,344	)		(109,640	)
Cash and Cash Equivalents, Beginning		142,840			(33,200	)		109,640
Cash and Cash Equivalents, Ending		34,544			(34,544	)		0

4. OTHER CURRENT LIABILITIES

As of the dates presented, other current liabilities consisted of the following:

	July 30,		January 29,
	2005		2005
Accrued capital expenditures	$	10,853	$	6,223
Accrued compensation and benefits		9,434		13,284
Sales taxes payable		6,650		6,647
Accrued gift cards		6,255		10,386
Income taxes payable		3,364		5,993
Other		19,978		14,024
	$	56,534	$	56,557

5. COMMITMENTS AND CONTINGENCIES

During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of California. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets other than as disclosed below in this Note 5.

9

Litigation – The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not likely have a material adverse effect upon the results of operations or financial condition of the Company and, from time to time, may make provisions for probable litigation losses. Depending on the actual outcome of pending litigation, charges in excess of any provisions could be recorded in the future, which may have a material adverse affect on the Company’s operating results.

Letters of Credit – The Company has issued guarantees in the form of commercial letters of credit, of which there were approximately $27 million outstanding at July 30, 2005, as security for merchandise shipments from overseas.

Accrued Sublease Loss Charges – The Company remains liable under an operating lease covering a former store location. The term of the lease ends December 31, 2012. The Company has subleased this location to third parties at rates that are less than the Company’s required lease payments. Accordingly, the Company had approximately $1.5 million recorded in other current liabilities to recognize its net remaining contractual lease obligation related to these premises at July 30, 2005. To the extent any sublessee defaults upon its sublease obligations, the Company may incur additional charges related to this lease in the future. The Company’s remaining contractual obligation under the original lease, exclusive of any sublease income, was approximately $6 million at July 30, 2005.

Lease Guarantee – The Company remains secondarily liable under a guarantee issued related to the assignment of an operating lease covering another former store location. The term of the lease ends December 31, 2014. The Company had approximately $0.4 million recorded in other current liabilities to recognize the remaining estimated fair value of this guarantee, assuming that another assignee would be found within one year should the original assignee default. The aggregate payments remaining on the master lease agreement at July 30, 2005, were approximately $5 million.

6. COMMON STOCK REPURCHASES

At the beginning of fiscal 2005, the maximum value of Company shares that could yet be repurchased under previously authorized and publicly announced share repurchase plans was approximately $15.5 million. On May 12, 2005, the Company announced that its Board of Directors had authorized the Company to repurchase up to an additional $100 million of the Company’s common stock in open market transactions. There is no expiration date specified for this plan. During fiscal 2005, the Company has made the following repurchases of shares subject to this plan:

									Maximum
					# of Shares				Value of
					Purchased				Shares that
			Average		as Part of				May Yet be
			Price		Publicly		Value of		Purchased
	# of Shares		Paid Per		Announced		Shares		Under the
Period	Purchased		Share		Plan		Purchased		Plan
									$	115,499
May 2005		490,000	$	21.26		490,000	$	10,415	$	105,084
July 2005		417,500	$	22.90		417,500	$	9,563	$	95,521
August 2005		528,100	$	23.28		528,100	$	12,296	$	83,225

10

7. NET INCOME PER SHARE, BASIC AND DILUTED

The following table summarizes the computation of earnings per share (“EPS”):

	Second Quarter Ended
	July 30, 2005							July 31, 2004
								Net
	Net Income		Shares		EPS			Income		Shares		EPS
Basic EPS:	$	21,112		75,125,782	$	0.28		$	17,467		76,322,161	$	0.23
Diluted EPS:
Effect of dilutive stock options		—		992,719		(0.00	)		—		1,589,434		(0.00	)
	$	21,112		76,118,501	$	0.28		$	17,467		77,911,595	$	0.22

	First Half Ended
	July 30, 2005							July 31, 2004
								Net
	Net Income		Shares		EPS			Income		Shares		EPS
Basic EPS:	$	38,719		75,209,185	$	0.51		$	32,436		77,239,966	$	0.42
Diluted EPS:
Effect of dilutive stock options		—		1,129,414		(0.00	)		—		1,795,751		(0.00	)
	$	38,719		76,338,599	$	0.51		$	32,436		79,035,717	$	0.41

Options to purchase 2,180,576 and 1,221,266 shares of common stock in the second quarter of fiscal 2005 and fiscal 2004, respectively, and 1,676,170 and 915,644 shares of common stock in the first half of fiscal 2005 and fiscal 2004, respectively, were not included in the computation of diluted earnings per common share because the option exercise price was greater than the average market price of the Company’s common stock.

11

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONSOLIDATED OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and notes thereto of the Company included elsewhere in this Form 10-Q. As discussed in Note 3 to the condensed consolidated financial statements included at Item 1, the fiscal 2004 financial statements have been restated. This MD&A gives effect to the restatements.

Cautionary Note Regarding Forward-Looking Statements

This report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. We are hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements of the Company herein. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance (often, but not always through the use of words or phrases such as “will result,” “expects to,” “will continue,” “anticipates,” “plans,” “intends,” “estimated,” “projects” and “outlook”) are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. All forward-looking statements included in this report, including forecasts of fiscal 2005 planned new store openings, capital expenditures and the Company’s plans to begin operating its new retail concept, One Thousand Steps, in fiscal 2006, are based on information available to us as of the date hereof, and we do not intend, or assume any obligation, to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. See “Risk Factors” within this section.

Executive Overview

We consider the following items to be key performance indicators in evaluating Company performance:

Comparable (or “same store”) sales – Stores are deemed comparable stores on the first day of the month following the one-year anniversary of their opening or expansion/relocation. We consider same store sales to be an important indicator of current Company performance. Same store sales results are important in achieving operating leverage of certain expenses such as store payroll, store occupancy, depreciation, general and administrative expenses, and other costs that are somewhat fixed. Positive same store sales results generate greater operating leverage of expenses while negative same store sales results negatively impact operating leverage. Same store sales results also have a direct impact on our total net sales, cash, and working capital.

Net merchandise margins – We analyze the components of net merchandise margins, specifically initial markup and markdowns as a percentage of net sales. Any inability to obtain acceptable levels of initial markups or any significant increase in our use of markdowns could have an adverse impact on our gross margin results and results of operations.

Operating margin – We view operating margin as a key indicator of our success. The key drivers of operating margins are comparable store net sales, net merchandise margins, and our ability to control operating expenses. Operating margin as a percentage of net sales for fiscal 2004, 2003 and 2002, was 13.8%, 12.3% and 9.6%, respectively. The 13.8% operating margin result for fiscal 2004 was our highest historical annual operating margin. Operating margin as a percentage of sales for each of the first halves of fiscal 2005 and 2004 was 10.2% and 9.9%, respectively. For a discussion of the changes in the components comprising operating margins, see “Results of Operations” in this section.

Store sales trends – We evaluate store sales trends in assessing the operational performance of our store expansion strategies. Important store sales trends include average net sales per store and average net sales

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per square foot. Average net sales per store for fiscal 2004, 2003 and 2002 were $1.3 million, $1.2 million and $1.1 million, respectively. Average net sales per square foot were $374, $363 and $330, respectively.

Cash flow and liquidity (working capital) – We evaluate cash flow from operations, liquidity and working capital to determine our short-term operational financing needs. Cash flows from operations for fiscal 2004, 2003 and 2002 were approximately $143 million, $161 million and $89 million, respectively. We expect cash flows from operations will be sufficient to finance operations without borrowing under our credit facility during fiscal 2005.

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America necessarily requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reported period. Actual results could differ from these estimates. The accounting policies that we believe are the most critical to aid in fully understanding and evaluating reported financial results include the following:

Revenue Recognition – Sales are recognized upon purchase by customers at our retail store locations or upon delivery to and acceptance by the customer for orders placed through our website. We accrue for estimated sales returns by customers based on historical sales return results. Actual return rates have historically been within our expectations and the reserves established. However, in the event that the actual rate of sales returns by customers increased significantly, our operational results could be adversely affected. We record the sale of gift cards as a current liability and recognize a sale when a customer redeems a gift card. The amount of the gift card liability is determined taking into account our estimate of the portion of gift cards that will not be redeemed or recovered.

Inventory Valuation – Merchandise inventories are stated at the lower of cost (first-in, first-out method) or market. Cost is determined using the retail inventory method. At any one time, inventories include items that have been marked down to management’s best estimate of their fair market value. We base the decision to mark down merchandise primarily upon its current rate of sale and the age of the item, among other factors. To the extent that our estimates differ from actual results, additional markdowns may have to be recorded, which could reduce our gross margins and operating results.

Store Operating Lease Accounting – Rent expense from store operating leases represents one of the largest expenses incurred in operating our stores. We account for store rent expense in accordance with SFAS 13, “Accounting for Leases,” and FASB Technical Bulletin 85-3, “Accounting for Operating Leases with Scheduled Rent Increases.” Accordingly, rent expense under our store operating leases is recognized on a straight-line basis over the original term of each store’s lease, inclusive of rent holiday periods during store construction and excluding any lease renewal options. We capitalize rent expense incurred during the build-out period of our stores as a component cost of construction and amortize this amount over the life of the related store’s lease term once construction has completed, generally upon the commencement of store operations. The Company accounts for landlord allowances received in connection with store operating leases in accordance with SFAS 13, “Accounting for Leases,” and FASB Technical Bulletin 88-1, “Issues Relating to Accounting for Leases.” Accordingly, all amounts received from landlords to fund tenant improvements are recorded as a deferred lease incentive liability, which is then amortized as a credit to rent expense over the related store’s lease term.

Evaluation of Long-Lived Assets – In the normal course of business, we acquire tangible and intangible assets. We periodically evaluate the recoverability of the carrying amount of our long-lived assets (including property, plant and equipment, and other intangible assets) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is assessed when the undiscounted expected future cash flows derived from an asset or asset group are less than its carrying amount. Impairments are recognized in operating earnings. We use our best judgment based on the most current facts and circumstances surrounding our business when applying these impairment rules to determine the timing of the impairment test, the undiscounted cash flows used to assess

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impairments, and the fair value of a potentially impaired asset. Changes in assumptions used could have a significant impact on our assessment of recoverability. Numerous factors, including changes in our business, industry segment, and the global economy, could significantly impact our decision to retain, dispose of, or idle certain of our long-lived assets.

Evaluation of Insurance Reserves – We are responsible for workers’ compensation insurance claims up to a specified aggregate stop loss amount. We maintain a reserve for estimated claims, both reported and incurred but not reported, based on historical claims experience and other estimated assumptions. Actual claims activity has historically been within our expectations and the reserves established. To the extent claims experience or our estimates change, additional charges may be recorded in the future up to the aggregate stop loss amount for each policy year.

Evaluation of Income Taxes – Current income tax expense is the amount of income taxes expected to be payable for the current reporting period. The combined federal and state income tax expense was calculated using estimated effective annual tax rates. A deferred income tax asset or liability is established for the expected future consequences of temporary differences in the financial reporting and tax bases of assets and liabilities. We consider future taxable income and ongoing prudent and feasible tax planning in assessing the value of our deferred tax assets. Evaluating the value of these assets is necessarily based on our judgment. If we determine that it is more likely than not that these assets will not be realized, we would reduce the value of these assets to their expected realizable value through a valuation allowance, thereby decreasing net income. If we subsequently determined that the deferred tax assets, which had been written down, would be realized in the future, the value of the deferred tax assets would be increased, thereby increasing net income in the period when that determination was made.

Evaluation of Litigation Matters – We are involved from time to time in litigation incidental to our business. We believe that the outcome of current litigation will not likely have a material adverse effect on our results of operations or financial condition and, from time to time, may make provisions for probable litigation losses. Depending on the actual outcome of pending litigation, charges in excess of any provisions could be recorded in the future, which may have an adverse effect on our operating results.

Results of Operations

The following tables set forth selected income statement data of the Company expressed as a percentage of net sales for the periods indicated as well as a summary of the Company’s number of stores and total square footage as of the dates presented. The discussion that follows should be read in conjunction with these tables:

	Second Quarter Ended						First Half Ended
	July 30,			July 31,			July 30,			July 31,
	2005			2004			2005			2004
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold, including buying, distribution and occupancy costs		64.3			65.2			64.7			65.1
Gross margin		35.7			34.8			35.3			34.9
Selling, general and administrative expenses		25.1			24.6			25.1			25.0
Operating income		10.6			10.2			10.2			9.9
Interest income, net		0.4			0.1			0.4			0.2
Income before income tax expense		11.0			10.3			10.6			10.1
Income tax expense		4.2			3.9			4.0			3.8
Net income		6.8	%		6.4	%		6.6	%		6.3	%

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	July 30, 2005		July 31, 2004
PacSun stores		780		717
Outlet stores		91		82
d.e.m.o. stores		183		148
Total stores		1,054		947
Square footage (in 000’s)		3,720		3,266

The second quarter (thirteen weeks) ended July 30, 2005 as compared to the second quarter (thirteen weeks) ended July 31, 2004

Net Sales

Net sales increased to $309 million for the second quarter of fiscal 2005 from $272 million for the second quarter of fiscal 2004, an increase of $37 million, or 14%. The components of this $37 million increase in net sales are as follows:

$millions	Attributable to
$16	Net sales from stores opened in fiscal 2004 not yet included in the comparable store base
12	73 new stores opened in fiscal 2005 not yet included in the comparable store base
8	3.2% increase in comparable store net sales in the second quarter of fiscal 2005 compared to the second quarter of fiscal 2004
3	Other non-comparable sales (net sales from expanded or relocated stores not yet included in the comparable store base and internet net sales)
(2)	9 closed stores in fiscal 2005 and 5 closed stores in fiscal 2004
$37	Total

Of the 3.2% increase in comparable store net sales in the second quarter of fiscal 2005, PacSun and PacSun Outlet comparable store net sales increased a combined 3.5% and d.e.m.o. comparable store net sales increased 0.4%. In percentage terms, the average sale transaction in a comparable store was up mid single digits, driven by a high single digit increase in average retail prices. The increases in average retail prices were primarily due to a lower markdown rate as well as changes in sales mix towards higher priced merchandise. Total transactions per comparable store were down mid single digits.

Within PacSun and PacSun Outlet, comparable store net sales of guys’ and girls’ merchandise increased 3.8% and 3.2%, respectively. Guys’ comparable store net sales results were characterized by strength in denim, board shorts, sneakers and tees, partially offset by weakness in fleece and wovens. Girls’ comparable store net sales results were characterized by strength in swimwear, skate tees, board shorts and skirts, partially offset by weakness in knits, sandals and casual pants.

Within d.e.m.o., comparable store net sales of girls’ merchandise increased 20.9%, while guys’ merchandise decreased 12.0%. Girls’ comparable store net sales results were characterized by strength in tops, capris and accessories. Guys’ comparable store net sales results were characterized by weakness in tees and accessories.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, increased to $110 million for the second quarter of fiscal 2005 from $95 million for the second quarter of fiscal 2004, an increase of $15 million, or 16%. As a percentage of net sales, gross margin was 35.7% for the second quarter of fiscal 2005 compared to 34.8% for the second quarter of fiscal 2004. The 0.9% increase in gross margin as a percentage of net sales was primarily attributable to a lower markdown rate associated with less promotional activity in the second quarter of fiscal 2005 as compared to the second quarter of fiscal 2004 as well as an improved initial markup rate.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $78 million for the second quarter of fiscal 2005, up from $67 million for the second quarter of fiscal 2004, an increase of $11 million, or 16%. These expenses increased to 25.1% as a percentage of net sales in the second quarter of fiscal 2005 from 24.6% in the second quarter of fiscal 2004. The components of this 0.5% net increase in selling, general and administrative expenses as a percentage of net sales were as follows:

%	Attributable to
0.5	Increase in general and administrative expenses as a percentage of net sales to 5.9% ($18 million) for the second quarter of fiscal 2005 from 5.4% ($15 million) for the second quarter of fiscal 2004, primarily due to design expenses attributable to the development of our new large store prototype and new third store concept (One Thousand Steps).
0.4	Increase in store closing expenses to $0.9 million for the second quarter of fiscal 2005 as compared to a credit of $0.2 million for the second quarter of fiscal 2004, primarily due to a credit recognized in the second quarter of fiscal 2004 due to the execution of a lease termination agreement related to our former corporate offices.
(0.4)	Decrease in direct store expenses as a percentage of net sales to 6.7% ($21 million) for the second quarter of fiscal 2005 from 7.1% ($19 million) for the second quarter of fiscal 2004 as a result of small improvements in several expense categories.
0.0	Store payroll expenses as a percentage of net sales were 12.2% in the second quarter of each of fiscal 2005 and fiscal 2004. In absolute dollars, store payroll expenses were $38 million for the second quarter of fiscal 2005 versus $33 million for the second quarter of fiscal 2004, primarily due to the addition of 43 net new stores during the second half of fiscal 2004 and 64 net new stores during the first half of fiscal 2005.
0.5	Total

Net Interest Income

Net interest income was $1.2 million in the second quarter of fiscal 2005 compared to $0.3 million in the second quarter of fiscal 2004, an increase of $0.9 million. This increase was primarily the result of higher average cash and short-term investment balances as well as higher interest rates in the second quarter of fiscal 2005 as compared to the second quarter of fiscal 2004.

Income Tax Expense

Income tax expense was $13 million for the second quarter of fiscal 2005 compared to $11 million for the second quarter of fiscal 2004. The effective income tax rate was 37.8% in the second quarter of each of fiscal 2005 and fiscal 2004. Our weighted effective state income tax rate will vary over time depending on a number of factors, such as differing average income tax rates and net incomes in the respective states.

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The first half (26 weeks) ended July 30, 2005 as compared to the first half (26 weeks) ended July 31, 2004

Net Sales

Net sales increased to $589 million for the first half of fiscal 2005 from $518 million for the first half of fiscal 2004, an increase of $71 million, or 14%. The components of this $71 million increase in net sales are as follows:

$millions	Attributable to
$39	Net sales from stores opened in fiscal 2004 not yet included in the comparable store base
15	3.1% increase in comparable store net sales in the first half of fiscal 2005 compared to the first half of fiscal 2004
14	Net sales from 73 new stores opened in fiscal 2005 not yet included in the comparable store base
6	Other non-comparable sales (net sales from expanded or relocated stores not yet included in the comparable store base and internet net sales)
(3)	9 closed stores in fiscal 2005 and 5 closed stores in fiscal 2004
$71	Total

Of the 3.1% increase in comparable store net sales in the first half of fiscal 2005, PacSun and PacSun Outlet comparable store net sales increased 3.3% and d.e.m.o. comparable store net sales increased 1.8%. In percentage terms, the average sale transaction in a comparable store was up mid single digits, driven by a high single digit increase in average retail prices. The increases in average retail prices were primarily due to changes in sales mix towards higher priced merchandise, primarily denim and swim, in relation to other merchandise. Total transactions per comparable store were down mid single digits.

Within PacSun and PacSun Outlet, comparable store net sales of guys’ and girls’ merchandise increased 3.9% and 2.6%, respectively. Guys’ comparable store net sales results were characterized by strength in denim, sneakers, tees and board shorts, partially offset by weakness in casual pants and fleece. Girls’ comparable store net sales results were characterized by strength in swimwear, denim , skirts and board shorts, partially offset by weakness in casual pants, capris and sandals.

Within d.e.m.o., comparable store net sales of girls’ merchandise increased 20.4% while guys’ merchandise decreased 10.6%. Girls’ comparable store net sales results were characterized by strength in denim, capris, tops and accessories. Guys’ comparable store net sales results were characterized by weakness in tees and accessories.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, increased to $208 million for the first half of fiscal 2005 from $181 million for the first half of fiscal 2004, an increase of $27 million, or 15%. As a percentage of net sales, gross margin was 35.3% for the first half of fiscal 2005 compared to 34.9% for the first half of fiscal 2004. The 0.4% increase in gross margin as a percentage of net sales was primarily attributable to a lower markdown rate associated with less promotional activity in the first half of fiscal 2005 as compared to the first half of fiscal 2004.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $148 million for the first half of fiscal 2005 from $129 million for the first half of fiscal 2004, an increase of $19 million, or 15%. These expenses increased to 25.1% as a percentage of net sales in the first half of fiscal 2005 from 25.0% in the first half of fiscal 2004. The components of this 0.1% net increase in selling, general and administrative expenses as a percentage of net sales were as follows:

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%	Attributable to
0.3	Increase in general and administrative expenses as a percentage of net sales to 5.8% ($34 million) for the first half of fiscal 2005 from 5.5% ($28 million) for the first half of fiscal 2004, primarily due to design expenses attributable to the development of our new large store prototype and new third store concept (One Thousand Steps).
(0.2)	Decrease in store payroll expenses as a percentage of net sales to 12.3% ($72 million) in the first half of fiscal 2005 from 12.5% ($65 million) for the first half of fiscal 2004, primarily due to leveraging these expenses over higher total sales and tight control of store payroll costs. The increase in absolute dollars was primarily attributable to the addition of 43 net new stores during the second half of fiscal 2004 and 64 net new stores during the first half of fiscal 2005.
0.1	Total

Net Interest Income

Net interest income was $2.3 million in the first half of fiscal 2005 compared to $0.8 million in the first half of fiscal 2004, an increase of $1.5 million. This increase was primarily the result of higher average cash and short-term investment balances as well as higher interest rates in the first half of fiscal 2005 as compared to the first half of fiscal 2004.

Income Tax Expense

Income tax expense was $24 million for the first half of fiscal 2005 compared to $20 million for the first half of fiscal 2004. The effective income tax rate was 37.8% in the first half of each of fiscal 2005 and fiscal 2004. Our weighted effective state income tax rate will vary over time depending on a number of factors, such as differing average income tax rates and net incomes in the respective states.

Liquidity and Capital Resources

We have historically financed our operations primarily from internally generated cash flow, with occasional short-term and long-term borrowings in past years. Our primary capital requirements have been for the construction of newly opened, remodeled, expanded or relocated stores, the financing of working capital increases and, in the past, construction of corporate facilities. We believe that our invested cash and cash equivalents, cash flows from operating activities and revolving credit facility will be sufficient to meet our operating and capital expenditure requirements for at least the next twelve months.

Operating Cash Flows

Net cash provided by operating activities was $77 million for the first half of fiscal 2005 compared to $19 million for the first half of fiscal 2004. The $58 million increase in cash provided by operations in the first half of fiscal 2005 as compared to the first half of fiscal 2004 was attributable to the following:

$millions	Attributable to
$29	Increase in cash flows from accounts payable, net of inventory, due to timing of payments.
12	Increase in cash flows from other current liabilities, including $9 million from accrued liabilities and $3 million from accrued income taxes. Cash payments for payroll were lower in the first half of fiscal 2005 as compared to the first half of fiscal 2004, primarily due to the settlement of a litigation matter in the prior year, which resulted in a $4 million cash payment during the first half of fiscal 2004. Cash payments for income taxes were lower primarily due to the timing of fiscal 2005 estimated income tax payments in relation to the actual income tax liability as compared to the same items for fiscal 2004.
7	Increase in depreciation expense, primarily due to the addition of 43 net new stores during the second half of fiscal 2004 and 64 net new stores during the first half of fiscal 2005.
6	Increase in net income.
4	Other items netting to an increase in cash provided by operating activities.
$58	Total

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Working Capital

Working capital at July 30, 2005 was $279 million compared to $258 million at January 29, 2005, an increase of $21 million. The changes in working capital were as follows:

$millions	Description
$258	Working capital at January 29, 2005
19	Increase in cash and marketable securities, primarily due to cash provided by operations.
2	Increase in other current assets.
$279	Working capital at July 30, 2005

Investing Cash Flows

Net cash used in investing activities in the first half of fiscal 2005 was $39 million compared to $59 million for the first half of fiscal 2004, a decrease in cash used of $20 million. Of the $39 million in net cash used in investing activities for the first half of fiscal 2005, $48 million was attributable to capital expenditures, partially offset by $9 million in net maturities of marketable securities. Capital expenditures for the first half of fiscal 2005 were categorized as follows:

$millions	Attributable to
$36	Construction costs of new, expanded and relocated stores
7	Capital expenditure improvements on existing stores
5	Other capital expenditures, including computer hardware and software
$48	Total

Total capital expenditures for fiscal 2005 are expected to be approximately $90-95 million, with a significant majority of the spending directed towards opening new and relocated/expanded stores. Other planned uses include maintenance capital for existing stores and computer hardware and software.

We plan to purchase additional land and begin construction of a new, additional corporate office and a new, additional distribution center at any time before the end of fiscal 2007. We have initiated planning efforts to assess these future needs. Costs of this future construction are currently unknown. Costs to construct our current corporate offices and distribution center were approximately $52 million and were incurred during fiscal 2000 and fiscal 2001.

Financing Cash Flows

Net cash used in financing activities in the first half of fiscal 2005 was $10 million compared to $69 million for the first half of fiscal 2004. The components of the $10 million of net cash used in financing activities in the first half of fiscal 2005 were repurchases of common stock of $20 million, repayments made pursuant to capital lease and long-term debt obligations of $1 million, partially offset by $11 million in proceeds from employee exercises of stock options. Information regarding the Company’s common stock repurchase program is contained in Note 6 to the condensed consolidated financial statements, which note is incorporated herein by this reference.

Credit Facility

We have a credit facility with a bank, which expires April 1, 2007. The credit facility provides for a $45 million line of credit (the “Credit Line”) through March 31, 2005 to be used for cash advances, commercial letters of credit and shipside bonds. The Credit Line increases to $50 million from April 1, 2005 through March 31, 2006, and $60 million from April 1, 2006 through expiration on April 1, 2007. Interest on the Credit Line is payable monthly at the bank’s prime rate (6.25% at July 30, 2005) or at optional interest rates that are primarily dependent upon the London Inter-bank Offered Rates for the time period chosen. We did not borrow under the credit facility at any time during fiscal 2005 or 2004. We had approximately $27 million outstanding in letters of credit at July 30, 2005. The credit facility subjects us to various restrictive

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covenants, including maintenance of certain financial ratios, and prohibits payment of cash dividends on common stock. At July 30, 2005, we were in compliance with all of the credit facility covenants.

A significant decrease in our operating results could adversely affect our ability to maintain the required financial ratios under our credit facility. Required financial ratios include total liabilities to tangible net worth, limitations on capital expenditures and achievement of certain rolling four-quarter EBITDA (earnings before interest, taxes, depreciation and amortization) requirements. If these financial ratios are not maintained, the bank will have the option to require immediate repayment of all amounts outstanding under the credit facility, if any. The alternatives available to the Company if in default of its covenants are to renegotiate certain terms of the credit agreement, obtain a waiver from the bank, or obtain a new credit agreement with another bank, which may contain different terms. At July 30, 2005, we had no borrowings outstanding under our credit facility.

Contractual Obligations

We have minimum annual rental commitments under existing store leases and capital leases for computer equipment as of July 30, 2005. Our financial obligations under these arrangements are approximately $100 million in fiscal 2005 and similar amounts annually thereafter. We lease all of our retail store locations under operating leases. We lease equipment, from time to time, under capital leases. In addition, at any time, we are contingently liable for commercial letters of credit with foreign suppliers of merchandise. At July 30, 2005, our future financial commitments under these arrangements were as follows:

	Payments Due by Period
Contractual Obligations			Less than						More than
(in millions)	Total		1 year		1-3 years		3-5 years		5 years
Operating lease obligations	$	650	$	100	$	192	$	168	$	190
Capital lease obligations		1		1		—		—		—
Letters of credit		27		27		—		—		—
Total	$	678	$	128	$	192	$	168	$	190

The contractual obligations table above does not include common area maintenance (CAM) charges, which are also a required contractual obligation under our store operating leases. In many of our leases, CAM charges are not fixed and can fluctuate significantly from year to year for any particular store. Total store rental expenses, including CAM for fiscal 2004, 2003 and 2002 were $138 million, $120 million, and $109 million, respectively. We expect total CAM expenses to continue to increase as the number of stores increases from year to year.

Operating Leases – We lease our retail stores and certain equipment under operating lease agreements expiring at various dates through December 2018. Substantially all of our retail store leases require us to pay CAM charges, insurance, property taxes and percentage rent ranging from 5% to 7% based on sales volumes exceeding certain minimum sales levels. The initial terms of such leases are typically 8 to 10 years, many of which contain renewal options exercisable at our discretion. Most leases also contain rent escalation clauses that come into effect at various times throughout the lease term. Rent expense is recorded under the straight-line method over the initial term of the lease. Other rent escalation clauses can take effect based on changes in primary mall tenants throughout the term of a given lease. Most leases also contain cancellation or kick-out clauses in our favor that relieve us of any future obligation under a lease if specified sales levels are not achieved by a specified date. None of our retail store leases contain purchase options.

We review the operating performance of our stores on an ongoing basis to determine which stores, if any, to expand, relocate or close. We closed five stores in fiscal 2004 and anticipate closing approximately 15 stores in fiscal 2005.

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New Accounting Pronouncements

Information regarding new accounting pronouncements is contained in Note 2 to the condensed consolidated financial statements for the quarter ended July 30, 2005, which note is incorporated herein by this reference.

Inflation

We do not believe that inflation has had a material effect on the results of operations in the recent past. There can be no assurance that our business will not be affected by inflation in the future.

Seasonality and Quarterly Results

Our business is seasonal by nature, with the Christmas and back-to-school periods historically accounting for the largest percentage of annual net sales. Our first quarter historically accounts for the smallest percentage of annual net sales with each successive quarter contributing a greater percentage than the last. In each of fiscal 2004 and fiscal 2003, excluding sales generated by new and relocated/expanded stores, the Christmas and back-to-school periods together accounted for approximately 30% of our annual net sales and a higher percentage of our operating income. In fiscal 2004, excluding net sales generated by new and relocated/expanded stores, approximately 44% of our annual net sales occurred in the first half of the fiscal year and approximately 56% in the second half. These results are consistent with prior years. Our quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings; 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.

Risk Factors

The products we sell are subject to significant merchandising/fashion sensitivity. Our success is largely dependent upon our ability to gauge the fashion tastes of our customers and to provide merchandise at competitive prices and in adequate quantities that satisfies customer demand in a timely manner. Our failure to anticipate, identify or react appropriately in a timely manner to changes in fashion trends could have a material adverse effect on our same store sales results, operating margins, financial condition and results of operations. Misjudgments or unanticipated fashion changes could also have a material adverse effect on our image with our customers. Some of our vendors have limited resources, production capacities and operating histories and some have intentionally limited the distribution of their merchandise. The inability or unwillingness on the part of key vendors to expand their operations to keep pace with the anticipated growth of PacSun, PacSun Outlet and d.e.m.o. stores, or the loss of one or more key vendors or proprietary brand sources for any reason, could have a material adverse effect on our business.

We may not be able to manage our planned expansion effectively. Our continued growth depends to a significant degree on our ability to open and operate stores on a profitable basis and to manage our planned expansion. There can be no assurance that we will achieve our planned expansion, that such expansion will be profitable, or that we will be able to manage our growth effectively. Our planned expansion is dependent upon a number of factors, including our ability to locate and obtain favorable store sites, negotiate acceptable lease terms, obtain adequate supplies of merchandise and hire and train qualified management level and other employees. Factors beyond our control may also affect our ability to expand, including general economic and business conditions affecting consumer spending. Any failure to manage growth could have a material adverse effect on our business, financial condition and results of operations.

We plan to launch a new retail concept, One Thousand Steps, which could negatively affect existing operations. We have announced plans to launch a new retail store concept, named One Thousand Steps, which will commence operations during fiscal 2006. We are currently in the preliminary planning stage regarding store design, merchandise selection and site selection for this new concept. Our ability to make this new retail concept successful is subject to numerous risks, including, but not limited to, (i)

21

unanticipated operating problems, (ii) lack of customer acceptance, (iii) new vendor relationships, (iv) competition from existing and new retailers, and (v) lack of sufficient product differentiation. There can be no assurance that this new retail concept will achieve sales and profitability levels that justify the Company’s investment in it. Additionally, the expansion of this new retail concept involves other risks that could have a material adverse effect on the Company, including, but not limited to, (i) diversion of management’s attention from the Company’s core businesses, (ii) inability to attract, train and retain qualified personnel, including management and product designers, and (iii) difficulty in locating and obtaining favorable store sites and negotiating acceptable lease terms. Any inability to succeed in developing a profitable new retail concept could have a material adverse effect on our continued growth and results of operations.

Our customers may not accept our proprietary brand merchandise. Sales from proprietary brand merchandise accounted for approximately 30%, 32% and 33% of net sales in fiscal 2004, 2003 and 2002, respectively. We may increase the percentage of net sales in proprietary brand merchandise in the future, although there can be no assurance that we will be able to achieve increases in proprietary brand merchandise sales as a percentage of net sales. Because our proprietary brand merchandise generally carries higher merchandise margins than our other merchandise, our failure to anticipate, identify and react in a timely manner to fashion trends with our proprietary brand merchandise, particularly if the percentage of net sales derived from proprietary brand merchandise increases, may have a material adverse effect on our same store sales results, operating margins, financial condition and results of operations.

Our comparable store net sales results can fluctuate significantly. Our comparable store net sales results have fluctuated significantly on a monthly, quarterly, and annual basis, and are expected to continue to fluctuate in the future. A variety of factors affect our comparable store net sales results, including changes in fashion trends, changes in our merchandise mix, calendar shifts of holiday periods, actions by competitors, weather conditions and general economic conditions. Our comparable store net sales results for any particular future fiscal month, quarter or year may decrease. As a result of these or other factors, our future comparable store net sales results are likely to have a significant effect on the market price of our common stock.

We could lose key personnel at any time. Our continued success is dependent to a significant degree upon the services of our key personnel, particularly our executive officers. The loss of the services of any member of our senior management team could have a material adverse effect on our business, financial condition and results of operations. Our success in the future will also be dependent upon our ability to attract and retain qualified personnel. Our inability to attract and retain qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operations.

Our dependence on a single distribution facility exposes us to significant operational risks. Although we have begun planning efforts to locate a site for the construction of a second distribution center, all of our current distribution functions continue to reside within a single facility in Anaheim, California. Any significant interruption in the operation of the existing distribution facility due to natural disasters, accidents, system failures or other unforeseen causes would have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that our current distribution center will be adequate to support our future growth.

Selling merchandise over the internet carries particular risks that can distract attention from our core businesses. Our internet operations are subject to numerous risks that could have a material adverse effect on our operational results, including unanticipated operating problems, reliance on third party computer hardware and software providers, system failures and the need to invest in additional computer systems. Specific risks include: (i) diversion of sales from our stores; (ii) rapid technological change; (iii) liability for online content; and (iv) risks related to the failure of the computer systems that operate the website and its related support systems, including computer viruses, telecommunication failures and electronic break-ins and similar disruptions. In addition, internet operations involve risks which are beyond our control that could have a material adverse effect on our operational results, including: (i) price competition involving the items we intend to sell; (ii) the entry of our vendors into the internet business, in direct competition with us; (iii) the level of merchandise returns experienced by us; (iv) governmental

22

regulation; (v) online security breaches involving unauthorized access to Company and/or customer information; (vi) credit card fraud; and (vii) competition and general economic conditions specific to the internet, online commerce and the apparel industry.

Any terrorist attacks or war/threat of war could significantly affect consumer spending. The majority of our stores are located in regional shopping malls. Any threat of terrorist attacks or actual terrorist events, particularly in public areas, could lead to lower customer traffic in regional shopping malls. In addition, local authorities or mall management could close regional shopping malls in response to any immediate security concern. Mall closures, as well as lower customer traffic due to security concerns, could result in decreased sales. Additionally, war or the threat of war could significantly diminish consumer spending, resulting in decreased sales for the Company. Decreased sales would have a material adverse effect on our business, financial condition and results of operations.

Our foreign sources of production may not always be reliable. We purchase merchandise directly in foreign markets for our proprietary brands. In addition, we purchase merchandise from domestic vendors, some of which is manufactured overseas. We do not have any long-term merchandise supply contracts and our imports are subject to existing or potential duties, tariffs and quotas. We face competition from other companies for production facilities and import quota capacity. We also face a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as: (i) political instability; (ii) enhanced security measures at United States ports, which could delay delivery of imports; (iii) imposition of new legislation relating to import quotas that may limit the quantity of goods which may be imported into the United States from countries in a region within which we do business; (iv) imposition of duties, taxes, and other charges on imports; (v) delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with applicable import regulations; (vi) delayed receipt or non-delivery of goods due to organized labor strikes or unexpected or significant port congestion at United States ports; and (vii) local business practice and political issues, including issues relating to compliance with domestic or international labor standards which may result in adverse publicity. New initiatives may be proposed that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions that, if enacted, would increase the cost of products purchased from suppliers in countries that we do business with. Any inability on our part to rely on our foreign sources of production due to any of the factors listed above could have a material adverse effect on our business, financial condition and results of operations.

Any failure by us to maintain credit facility financial covenants could have a material adverse impact on our business. A significant decrease in our operating results could adversely affect our ability to maintain required financial ratios under our credit facility. Required financial ratios include a rolling four-quarter EBITDA requirement, total liabilities to tangible net worth ratio, and limitations on capital expenditures. If these financial ratios are not maintained, the bank will have the option to require immediate repayment of all amounts outstanding under the credit facility, if any. The most likely result would require us to renegotiate certain terms of the credit agreement, obtain a waiver from the bank, or obtain a new credit agreement with another bank, which may contain different terms.

The expensing of stock options will reduce our future reported earnings. The FASB has issued a new accounting standard requiring companies to begin recording compensation expense related to all unvested and newly granted stock options. This standard will go into effect for us in fiscal 2006. Currently, we include such expenses on a pro forma basis in the notes to the Company’s quarterly and annual financial statements in accordance with accounting principles generally accepted in the United States of America and do not include compensation expense related to stock options in our reported earnings in the financial statements. Our reported earnings will be lower under the new standard in fiscal 2006 and our stock price could decline as a result.

Adverse outcomes of litigation matters could significantly affect our operational results. We are involved from time to time in litigation incidental to our business. We believe that the outcome of current litigation will not have a material adverse effect upon our results of operations or financial condition. However, our assessment of current litigation could change in light of the discovery of facts with respect to legal actions pending against us not presently known to us or determinations by judges, juries or other

23

finders of fact which do not accord with our evaluation of the possible liability or outcome of such litigation.

Our stock price can fluctuate significantly. The market price of our common stock has fluctuated substantially in the past and there can be no assurance that the market price of the common stock will not continue to fluctuate significantly. Future announcements or management discussions concerning the Company or its competitors, net sales and profitability results, quarterly variations in operating results or comparable store net sales, changes in earnings estimates by analysts or changes in accounting policies, among other factors, could cause the market price of the common stock to fluctuate substantially. In addition, stock markets have experienced extreme price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons frequently unrelated to the operating performance of the specific companies.

*************

We caution that the risk factors described above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on behalf of the Company. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are susceptible to market value fluctuations with regard to our short-term investments. However, due to the relatively short maturity period of those investments and our intention and ability to hold those investments until maturity, the risk of material market value fluctuations is not expected to be significant.

To the extent we borrow under our credit facility, we are exposed to market risk related to changes in interest rates. At July 30, 2005, there were no borrowings outstanding under our credit facility and we did not borrow under the credit facility at any time during fiscal 2005 or 2004. Based on the interest rate of 6.25% on our credit facility at July 30, 2005, if interest rates on the credit facility were to increase by 10%, and to the extent borrowings were outstanding, for every $1 million outstanding on our credit facility, net income would be reduced by approximately $4 thousand per year. We are not a party with respect to derivative financial instruments.

ITEM 4 – CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). These disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in its periodic reports filed with the Commission is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of July 30, 2005.

In the quarterly period ended July 31, 2004, our Company’s then principal executive and financial officers (collectively, the “certifying officers”) evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in our periodic reports filed with the Commission is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms, and that the information is communicated to the certifying officers on a timely basis. The certifying officers concluded, based on their evaluation, that our disclosure controls and procedures were effective as of July 31, 2004.

24

As a result of the need to restate the financial statements for the second quarter and first half of fiscal 2004 due to lease accounting issues and the impact of our PacBucks promotional program, our certifying officers and management have considered again whether our disclosure controls and procedures were effective on those dates. Based on the corrections required to be made, our certifying officers and management have concluded that a control deficiency existed with respect to lease accounting and PacBucks at July 31, 2004. Our certifying officers and management have concluded that this represents a control deficiency and that our disclosure controls and procedures as of October 30, 2004 and November 1, 2003 were not effective. While assessing its internal control over financial reporting for Sarbanes-Oxley purposes for fiscal 2004, the Company effectively remediated these issues.

No change in our internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

For information on legal proceedings, see “Litigation” within Note 5 of Notes to Condensed Consolidated Financial Statements, which is incorporated by reference in response to this Item 1.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

For information on repurchases made during fiscal 2005, see Note 6 of Notes to Condensed Consolidated Financial Statements, which is incorporated by reference in response to this Item 2.

Item 3 – Defaults Upon Senior Securities - None

Item 4 – Submission of Matters to a Vote of Security Holders

a) The 2005 Annual Meeting of Shareholders of the Company was held on May 18, 2005.

b) At the 2005 Annual Meeting, Greg H. Weaver, Julius Jensen III, Pearson C. Cummin III and Michael Goldstein were elected as Class II Directors of the Company for a two-year term ending in 2007. Additionally, Seth R. Johnson was elected as a Class I Director of the Company for a one-year term ending in 2006. Sally Frame Kasaks, Thomas M. Murnane and Peter Starrett continued in office after the meeting.

c) In addition, the shareholders voted on and approved the Pacific Sunwear of California, Inc. 2005 Performance Incentive Plan.

The shareholders also voted on and ratified the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2006.

Voting at the 2005 Annual Meeting for the election of directors is set forth below. Each of the nominees identified below was elected a director.

	VOTES		VOTES
DIRECTOR NAME	CAST FOR		WITHHELD
Class II:
Greg H. Weaver		71,387,172		603,503
Julius Jensen III		70,633,921		1,356,754
Pearson C. Cummin III		71,426,250		564,425
Michael Goldstein		71,379,386		611,289
Class I:
Seth R. Johnson		71,424,112		566,563

25

With respect to the approval of the Pacific Sunwear of California, Inc. 2005 Performance Incentive Plan, 51,945,963 votes were cast for approval, 7,812,803 votes were cast against approval, 24,929 votes abstained and there were 12,206,980 broker non-votes.

With respect to the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending January 28, 2006, 71,041,891 votes were cast for approval, 937,903 votes were cast against approval, 10,881 votes abstained and there were no broker non-votes.

Item 5 – Other Information - None

Item 6 – Exhibits

Exhibit 3.1	Third Amended and Restated Bylaws of the Company, as amended
Exhibit 10.1	Summary of Compensation for Timothy M. Harmon
Exhibit 31	Written statements of Seth R. Johnson and Gerald M. Chaney pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Written statement of Seth R. Johnson and Gerald M. Chaney pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

26

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: August 31, 2005	/s/ SETH R. JOHNSON
	Seth R. Johnson
	Director and Chief Executive Officer
	(Principal Executive Officer)
Date: August 31, 2005	/s/ GERALD M. CHANEY
	Gerald M. Chaney
	Senior Vice President, Chief Financial Officer
	(Principal Financial and Accounting Officer)

27

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 3.1	Third Amended and Restated Bylaws of the Company, as amended
Exhibit 10.1	Summary of Compensation for Timothy M. Harmon
Exhibit 31	Written statements of Seth R. Johnson and Gerald M. Chaney pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Written statement of Seth R. Johnson and Gerald M. Chaney pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

EX-3.1

                                                                     EXHIBIT 3.1

          THIRD AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT
                     AS OTHERWISE PROVIDED BY STATUTE OR ITS
                          ARTICLES OF INCORPORATION, OF
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.
                            A CALIFORNIA CORPORATION

                                    ARTICLE I

                                     OFFICES

            SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The corporation's principal
executive office shall be fixed and located at such place as the Board of
Directors shall determine. The Board of Directors is granted full power and
authority to change the principal executive office from one location to another.

            SECTION 2. OTHER OFFICES. Other business offices may at any time be
established by the Board of Directors at any place or places where the
corporation is qualified to do business.

                                   ARTICLE II

                            MEETINGS OF SHAREHOLDERS

            SECTION 1. PLACE OF MEETINGS. All annual or other meetings of
shareholders shall be held at the principal executive office of the corporation,
or at any other place within or without the State of California which may be
designated by the Board of Directors or by the written consent of all persons
entitled to vote thereat and not present at the meeting, given either before or
after the meeting and filed with the secretary of the corporation.

            SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders
shall be held on such dates and at such times as shall be designated by the
Board of Directors and stated in the notice of the meeting given to each
shareholder as provided below. At such meetings, directors shall be elected,
reports of the affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers of the shareholders.
Written notice of each annual meeting shall be given to each shareholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at its address
appearing on the books of the corporation or given to the corporation for the
purpose of notice. If any notice or report addressed to the shareholder at the
address of such shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the shareholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the shareholder upon written demand of the shareholder at
the principal executive office of the corporation for a period of one year from
the date of the giving of the notice or report to all other shareholders. If a
shareholder gives no address, notice shall be deemed to have been given if sent
by mail or other means of written communication addressed to the place where the
principal executive office of the corporation is situated, or if published at
least once in some newspaper of general circulation in the county in which the
principal executive office is located.



            All such notices shall be given to each shareholder entitled thereto
not less than ten (10) days nor more than sixty (60) days before each annual
meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation, shall be prima facie evidence of the giving
of the notice.

            Such notices shall specify:

                  (a) the place, the date, and the hour of such meeting;

                  (b) those matters which the Board, at the time of the mailing
      of the notice, intends to present for action by the shareholders at the
      meeting;

                  (c) if directors are to be elected, the names of nominees
      intended at the time of the notice to be presented by management for
      election;

                  (d) the general nature of a proposal, if any, to take action
      with respect to approval of (i) a contract or other transaction with an
      interested director, (ii) amendment of the Articles of Incorporation,
      (iii) a reorganization of the corporation as defined in Section 181 of the
      California General Corporation Law (the "CGCL"), (iv) voluntary
      dissolution of the corporation, or (v) a distribution in dissolution other
      than in accordance with the rights of outstanding preferred shares, if
      any; and

                  (e) such other matters, if any, as may be expressly required
      by statute.

            SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
for the purpose of taking any action permitted by the shareholders under the
CGCL and the Articles of Incorporation of this corporation, may be called at any
time by the chairman of the Board or the chief executive officer (if there shall
be such an officer or officers) or the president, or by any two directors, or by
holders of shares entitled to cast not less than ten percent (10%) of the votes
at the meeting. Upon request in writing that a special meeting of shareholders
be called for any proper purpose, directed to the chairman of the Board,
president, vice president or secretary by any person (other than the Board)
entitled to call a special meeting of shareholders, the officer forthwith shall
cause notice to be given to shareholders entitled to vote that a meeting will be
held at a time requested by the person or persons calling the meeting, not less
than thirty-five (35) nor more than sixty (60) days after receipt of the
request. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for the annual meeting of shareholders. In addition to the matters required by
items (a) and, if applicable, (c) of the preceding Section, notice of any
special meeting shall specify the general nature of the business to be
transacted, and no other business may be transacted at such meeting.

            SECTION 4. QUORUM. The presence in person or by proxy of the persons
entitled to vote a majority of the shares at any meeting shall constitute a
quorum for the transaction of business at that meeting. The shareholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the

                                       2


withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.

            SECTION 5. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or by proxy thereat, but in the absence of a quorum
no other business may be transacted at such meeting, except as provided in
Section 4 above. When any shareholders' meeting, either annual or special, is
adjourned for forty-five days or more, or if after adjournment a new record date
is fixed for the adjourned meeting, notice of the adjourned meeting shall be
given as in the case of an original meeting. Except as provided above, it shall
not be necessary to give any notice of the time and place of the adjourned
meeting or of the business to be transacted thereat, other than by announcement
of the time and place of the adjourned meeting at the meeting at which the
adjournment is taken.

            SECTION 6. VOTING. Unless a record date for voting purposes be fixed
as provided in Section 1 of Article V of these Bylaws, then, subject to the
provisions of Sections 702 and 704, inclusive, of the CGCL (relating to voting
of shares held by a fiduciary, in the name of a corporation, or in joint
ownership) only persons in whose names shares entitled to vote stand on the
stock records of the corporation at the close of business on the business day
next preceding the day on which notice of the meeting is given or if such notice
is waived, at the close of business on the business day next preceding the day
on which the meeting of shareholders is held, shall be entitled to vote at such
meeting, and such day shall be the record date for such meeting. Such vote may
be viva voce or by ballot; provided, however, that all elections for directors
must be by ballot upon demand made by a shareholder at any election and before
the voting begins. If a quorum is present, except with respect to election of
directors, the affirmative vote of the majority of the shares represented at the
meeting and voting on the matter shall be the act of the shareholders, unless
the vote of a greater number or voting by classes is required by the CGCL or the
Articles of Incorporation. Subject to the requirements of the next sentence and
any provision contained in the Articles of Incorporation, every shareholder
entitled to vote at any election for directors shall have the right to cumulate
its votes and give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which its shares
are entitled, or to distribute its votes on the same principle among as many
candidates as such shareholder shall think fit. No shareholder shall be entitled
to cumulate votes unless the name of the candidate or candidates for whom such
votes would be cast has been placed in nomination prior to the meeting, and any
shareholder has given notice at the meeting prior to the voting of such
shareholder's intention to cumulate its votes. The candidates receiving the
highest number of votes of shares entitled to be voted for them, up to the
number of directors to be elected, shall be elected.

            SECTION 7. VALIDATION OF DEFECTIVE CALLED OR NOTICED MEETINGS. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, whether before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, or who, though present, has, at the
beginning of the meeting, properly objected to the transaction of any business
thereat because the meeting was not lawfully called or convened, or to
particular matters of business legally required

                                       3


to be included in the notice, but not so included, signs a written waiver of
notice, or a consent to the holding of such meeting, or an approval of the
minutes thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.

            SECTION 8. ACTION WITHOUT A MEETING. Subject to any provision
contained in the Articles of Incorporation, directors may be elected without a
meeting by consent in writing, setting forth the action so taken, signed by all
of the persons who would be entitled to vote for the election of directors,
provided that, without notice except as hereinafter set forth, a director may be
elected at any time to fill a vacancy on the Board of Directors not filled by
the directors by the written consent of persons holding a majority of the
outstanding shares entitled to vote for the election of directors.

            Subject to any provision contained in the Articles of Incorporation,
any other action which, under any provision of the CGCL, may be taken at a
meeting of the shareholders, may be taken without a meeting, and without notice
except as hereinafter set forth, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Unless the consents of all shareholders entitled to vote have
been solicited in writing,

            (a) Notice of any proposed shareholder approval of a (i) contract or
            other transaction with an interested director, (ii) indemnification
            of an agent of the corporation as authorized by Section 15 of
            Article III of these Bylaws, (iii) a reorganization of the
            corporation as defined in Section 181 of the CGCL, or (iv) a
            distribution in dissolution other than in accordance with the rights
            of outstanding preferred shares, if any, without a meeting shall be
            given a least ten (10) days before consummation of the action
            authorized by such approval; and

            (b) Prompt notice shall be given of the taking of any other
            corporate action approved by the shareholders without a meeting by
            less than unanimous written consent to those shareholders entitled
            to vote who have not consented in writing. Such notices shall be
            given in the manner and shall be deemed to have been given as
            provided in Section 2 of Article II of these Bylaws.

            Unless, as provided in Section 1 of Article V of these Bylaws, the
Board of Directors has fixed a record date for the determination of shareholders
entitled to notice of and to give such written consent, the record date for such
determination shall be the day on which the first written consent is given. All
such written consents shall be filed with the secretary of the corporation.

            Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.

                                       4


            SECTION 9. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so whether in person or by one or more
agents authorized by a written proxy executed by such person or such person's
duly authorized agent and filed with the secretary of the corporation. Any proxy
duly executed is not revoked and continues in full force and effect until (i) an
instrument revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation prior to the vote pursuant thereto, (ii)
the person executing the proxy attends the meeting and votes in person, or (iii)
written notice of the death or incapacity of the maker of the proxy is received
by the corporation before the vote pursuant thereto is counted; provided that no
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the person executing it specifies therein the length of
time for which such proxy is to continue in force.

            SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. If inspectors of election be not so appointed, the chairman of any such
meeting may, and on the request of any shareholder or its proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one or three inspectors are to be appointed. In
case any person appointed as inspector fails to appear or fails or refuses to
act, the vacancy may, and on the request of any shareholder or a shareholder's
proxy shall, be filled by appointment by the Board of Directors in advance of
the meeting, or at the meeting by the chairman of the meeting.

            The duties of such inspectors shall be as prescribed by Section 707
of the CGCL and shall include determining the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the right to vote; counting and tabulating all
votes or consents; determining when the polls close; determining the result; and
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. In the determination of the validity and effect of proxies, the
dates contained on the forms of proxy shall presumptively determine the order of
execution of the proxies, regardless of the postmark dates on the envelopes in
which they are mailed.

            The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as expeditiously as is
practical. If there be three inspectors of election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of election
is prima facie evidence of the facts stated therein.

                                   ARTICLE III

                                    DIRECTORS

            SECTION 1. POWERS. Subject to limitations of the Articles of
Incorporation and the CGCL as to action to be authorized or approved by the
shareholders, and subject to the duties of

                                       5


directors as prescribed by these Bylaws, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be controlled by, the Board of Directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to wit:

            First - To select and remove all the officers, agents and employees
of the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or these Bylaws, fix
their compensation and require from them security for faithful service.

            Second - To conduct, manage and control the affairs and business of
the corporation, and to make such rules and regulations therefor not
inconsistent with law, or with the Articles of Incorporation or these Bylaws, as
they may deem best.

            Third - To adopt, make and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law.

            Fourth - To authorize the issue of shares of stock of the
corporation from time to time, upon such terms as may be lawful.

            Fifth - To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.

            Sixth - By resolution adopted by a majority of the authorized number
of directors, to designate an executive and other committees, each consisting of
two or more directors, to serve at the pleasure of the Board, and to prescribe
the manner in which proceedings of such committees shall be conducted. Unless
the Board of Directors shall otherwise prescribe the manner of proceedings of
any such committee, meetings of such committee may be regularly scheduled in
advance and may be called at any time by any two members thereof; otherwise, the
provisions of these Bylaws with respect to notice and conduct of meetings of the
Board shall govern. Any such committee, to the extent provided in a resolution
of the Board, shall have all of the authority of the Board, except with respect
to:

            (i) the approval of any action for which the CGCL or the Articles of
            Incorporation also require shareholder approval;

            (ii) the filling of vacancies on the Board or in any committee;

            (iii) the fixing of compensation of the directors for serving on the
            Board or on any committee;

            (iv) the adoption, amendment or repeal of bylaws;

                                       6


            (v) the amendment or repeal of any resolution of the Board which by
            its express terms is not so amendable or repealable;

            (vi) any distribution to the shareholders, except at a rate or in a
            periodic amount or within a price range determined by the Board;

            (vii) the appointment of other committees of the Board or the
            members thereof.

            SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be not less than five nor more than nine until changed
by Amendment of the Articles of Incorporation or by a bylaw duly adopted by
approval of the outstanding shares. The exact number of directors shall be
fixed, within the limits specified, by amendment of the next sentence duly
adopted either by the Board of Directors or the shareholders. The exact number
of directors shall be nine until changed as provided in this Section 2.

            SECTION 3. ELECTION AND TERM OF OFFICE. This section shall become
effective only when this corporation becomes a listed corporation within the
meaning of Section 301.5 of the CGCL.

            In the event that the authorized number of directors shall be fixed
with at least six (6) but less than nine (9) directors, the Board of Directors
shall be divided into two classes, designated Class I and Class II, effective as
of the first annual meeting following the effective date of this Bylaw (the
"Initial Annual Meeting"). Each class shall consist of one-half of the directors
or as close an approximation as possible. The initial term of office of the
directors of Class I shall expire at the annual meeting to be held during the
fiscal year following the Initial Annual Meeting, and the initial term of office
of the directors of Class II shall expire at the annual meeting to be held
during the second fiscal year following the Initial Annual Meeting. At each
annual meeting, commencing with the first annual meeting following the Initial
Annual Meeting, each of the successors to the directors of the class whose term
shall have expired at such annual meeting shall be elected for a term running
until the second annual meeting next succeeding his or her election and until
his or her successor shall have been duly elected and qualified.

            In the event that the authorized number of directors shall be fixed
at nine (9) or more, the Board of Directors shall be divided into three classes,
designated Class I, Class II and Class III, effective as of the first annual
meeting coinciding with or following the division into three classes (the
"Effective Date"). Each class shall consist of one-third of the directors or as
close an approximation as possible. The initial term of office of the directors
of Class I shall expire at the annual meeting to be held during the first fiscal
year following the Effective Date, the initial term of office of the directors
of Class II shall expire at the annual meeting to be held during second fiscal
year following the Effective Date and the initial term of office of the
directors of Class III shall expire at the annual meeting to be held during the
third fiscal year following the Effective Date. At each annual meeting,
commencing with the first annual meeting following the Effective Date, each of
the successors to the directors of the class whose term shall have expired at
such annual meeting shall be elected for a term running until the third annual
meeting next succeeding his or her election and until his or her successor shall
have been duly elected qualified.

                                       7


            Notwithstanding the rule that the classes shall be as nearly equal
in number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he or she is a member
until the expiration of his or her current term, or his or her prior death,
resignation or removal.

            At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall designate one or more directorships
whose term then expires as directorships of another class in order more nearly
to achieve equality of number of directors among the classes.

            This section only may be amended or repealed by the approval of the
Board of Directors and the outstanding shares (as defined in Section 152 of the
CGCL) voting as a single class, notwithstanding Section 903 of the CGCL.

            SECTION 4. VACANCIES. A vacancy in the Board of Directors shall be
deemed to exist in the case of the death, resignation or removal of any
director, if a director has been declared of unsound mind by order of court or
convicted of a felony, if the authorized number of directors be increased, or if
the shareholders fail, at any annual or special meeting of shareholders at which
any director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting. No reduction of the authorized number
of directors shall have the effect of removing any director prior to the
expiration of his or her term of office.

            Subject to any provision contained in the Articles of Incorporation,
vacancies in the Board of Directors, except for a vacancy created by the removal
of a director, may be filled by a majority of the remaining directors, though
less than a quorum, or by a sole remaining director; and each director so
elected shall hold office until his or her successor is elected at an annual or
special meeting of the shareholders. Subject to any provision contained in the
Articles of Incorporation, a vacancy in the Board of Directors created by the
removal of a director may only be filled by the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or, subject to any provision contained in the Articles of
Incorporation, by the written consent of the holders of a majority of the
outstanding shares.

            Subject to any provision contained in the Articles of Incorporation,
the shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election by written
consent shall require the consent of holders of a majority of the outstanding
shares entitled to vote.

            Any director may resign effective upon giving written notice to the
chairman of the Board, the president, the secretary of the Board or the Board of
Directors of the corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future time, the Board
or, subject to any provision contained in the Articles of Incorporation, the
shareholders shall have the power to elect a successor to take office when the
resignation is to become effective.

                                       8


            SECTION 5. PLACE OF MEETING. Regular meetings of the Board of
Directors shall be held at any place within or without the State of California
which has been designated from time to time by resolution of the Board or by
written consent of all members of the Board. In the absence of such designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the Board may be held either at a place so
designated or at the principal executive office of the corporation.

            SECTION 6. ORGANIZATION MEETING. Immediately following each annual
meeting of shareholders, the Board of Directors shall hold a regular meeting at
the place of said annual meeting or at such other place as shall be fixed by the
Board, for the purpose of organization of the newly elected Board, election of
officers, and the transaction of other business. Call and notice of such
meetings are hereby dispensed with.

            SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the
Board of Directors shall be held without call as provided in a resolution
adopted by the Board from time to time; provided, however, should said day fall
upon a legal holiday, then said meeting shall be held at the same time on the
next day thereafter ensuing which is a full business day. Notice of all such
regular meetings of the Board of Directors is hereby dispensed with.

            SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the chairman
of the Board or the chief executive officer (if there shall be such an officer
or officers), the president, any vice president or the secretary, or by any two
directors.

            Written notice of the time and place of special meetings shall be
delivered personally to each director or communicated to each director by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, telegraph, facsimile, electronic
mail or other electronic means, or by mail, charges prepaid, addressed to him or
her at his or her address as it is shown upon the records of the corporation or,
if it is not so shown on such records or is not readily ascertainable, at the
place at which meetings of the directors are regularly held. In case such notice
is mailed or telegraphed, it shall be deposited in the United States mail or
delivered to the telegraph company in the place in which the principal executive
office of the corporation is located at least forty-eight (48) hours prior to
the time of the holding of the meeting. In case such notice is delivered,
personally or by telephone, facsimile or other electronic means, as above
provided, it shall be so delivered at least twenty-four (24) hours prior to the
time of the holding of the meeting. Such mailing or delivery, as above provided,
shall be due, legal and personal notice to each such director.

            SECTION 9. ACTION WITHOUT A MEETING. Any action by the Board of
Directors may be taken without a meeting if all members of the Board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board and shall have the same force and effect as a unanimous vote of such
directors at a meeting duly called and held.

            SECTION 10. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE. Presence
of a majority of the authorized number of directors at a meeting of the Board of
Directors constitutes a quorum for the transaction of business, except as
hereinafter provided. Members of the Board

                                        9


may participate in a meeting through use of conference telephone, electronic
video screen communication, or similar communications equipment, so long as all
members participating in such meeting can hear one another. Participation in a
meeting through the use of a conference telephone constitutes presence in person
at such meeting. Participation in a meeting through the use of electronic video
screen communication or other communications equipment, other than conference
telephone, constitutes presence in person at that meeting if all of the
following apply:

              (a) Each member participating in the meeting can communicate with
            all of the other members concurrently.

              (b) Each member is provided the means of participating in all
            matters before the board, including, without limitation, the
            capacity to propose, or to interpose an objection to, a specific
            action to be taken by the corporation.

              (c) The corporation adopts and implements some means of
            verifying both of the following:

              (i)   A person participating in the meeting is a director or other
                    person entitled to participate in the board meeting.

              (ii)  All actions of, or votes by, the board are taken or cast
                    only by the directors and not by persons who are not
                    directors.

            Subject to the provisions of the CGCL, every act or decision done or
made by a majority of the directors at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a greater
number, or the same number after disqualifying one or more directors from
voting, is required by law, by the Articles of Incorporation, or by these
Bylaws. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action taken is approved by at least a majority of the required quorum for such
meeting.

            SECTION 11. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS.
The transactions of any meeting of the Board of Directors, however called or
noticed or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present and if, either before or
after the meeting, each of the directors not present or who, though present,
has, prior to the meeting or at its commencement, protested the lack of proper
notice, signs a written waiver of notice or a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.

            SECTION 12. ADJOURNMENT. A quorum of the directors may adjourn any
directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.

            SECTION 13. NOTICE OF ADJOURNMENT. If the meeting is adjourned for
more than twenty-four (24) hours, notice of any adjournment to another time or
place shall be given prior to

                                       10


the time of the adjourned meeting to the directors who were not present at the
time of adjournment. Otherwise, notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.

            SECTION 14. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board of Directors.

            SECTION 15. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS.

                  (a) Indemnification of Directors and Officers. Each person who
            was or is a party or is threatened to be made a party to or is
            involved in any threatened, pending or completed action, suit or
            proceeding, formal or informal, whether brought in the name of the
            corporation or otherwise and whether of a civil, criminal,
            administrative or investigative nature (hereinafter a "proceeding"),
            by reason of the fact that he or she, or a person of whom he or she
            is the legal representative, is or was a director or officer of the
            corporation or is or was serving at the request of the corporation
            as a director, officer, employee or agent of another corporation or
            of a partnership, joint venture, trust or other enterprise,
            including service with respect to employee benefit plans, whether
            the basis of such proceeding is an alleged action or inaction in an
            official capacity or in any other capacity while serving as a
            director or officer, shall, subject to the terms of any agreement
            between the corporation and such person, be indemnified and held
            harmless by the corporation to the fullest extent permissible under
            California law and the corporation's Articles of Incorporation,
            against all costs, charges, expenses, liabilities and losses
            (including attorneys' fees, judgments, fines, ERISA excise taxes or
            penalties and amounts paid or to be paid in settlement) reasonably
            incurred or suffered by such person in connection therewith, and
            such indemnification shall continue as to a person who has ceased to
            be a director or officer and shall inure to the benefit of his or
            her heirs, executors and administrators; provided, however, that (a)
            the corporation shall indemnify any such person seeking
            indemnification in connection with a proceeding (or part thereof)
            initiated by such person only if such proceeding (or part thereof)
            was authorized by the Board of the corporation, (b) the corporation
            shall indemnify any such person seeking indemnification in
            connection with a proceeding (or part thereof) other than a
            proceeding by or in the name of the corporation to procure a
            judgment in its favor only if any settlement of such a proceeding is
            approved in writing by the corporation, (c) no such person shall be
            indemnified (i) except to the extent that the aggregate of losses to
            be indemnified exceeds the amount of such losses for which the
            director or officer is paid pursuant to any directors' and officers'
            liability insurance policy maintained by the corporation; (ii) on
            account of any suit in which judgment is rendered against such
            person for an accounting of profits made from the purchase or sale
            by such person of securities of the corporation pursuant to the
            provisions of Section 16(b) of the Securities Exchange Act of 1934
            and amendments thereto or similar provisions of any federal state or
            local statutory law; (iii) if a court of competent jurisdiction
            finally determines that

                                       11


            any indemnification hereunder is unlawful; and (iv) as to
            circumstances in which indemnity is expressly prohibited by the
            CGCL, and (d) no such person shall be indemnified with regard to any
            action brought by or in the right of the corporation for breach of
            duty to the corporation and its shareholders (i) for acts or
            omissions involving intentional misconduct or knowing and culpable
            violation of law; (ii) for acts or omissions that the director or
            officer believes to be contrary to the best interests of the
            corporation or its shareholders or that involve the absence of good
            faith on the part of the director or officer; (iii) for any
            transaction from which the director or officer derived an improper
            personal benefit; (iv) for acts or omissions that show a reckless
            disregard for the director's or officer's duty to the corporation or
            its shareholders in circumstances in which the director or officer
            was aware, or should have been aware, in the ordinary course of
            performing his or her duties, of a risk of serious injury to the
            corporation or its shareholders; (v) for acts or omissions that
            constitute an unexcused pattern of inattention that amounts to an
            abdication of the director's or officer's duties to the corporation
            or its shareholders; and (vi) for costs, charges, expenses,
            liabilities and losses arising under Section 310 or 316 of the CGCL.
            The right to indemnification conferred in this Section 15 shall be a
            contract right and shall include the right to be paid by the
            corporation expenses incurred in defending any proceeding in advance
            of its final disposition; provided, however, that if the CGCL
            permits the payment of such expenses incurred by a director or
            officer in his or her capacity as a director or officer (and not in
            any other capacity in which service was or is rendered by such
            person while a director or officer, including, without limitation,
            service to an employee benefit plan) in advance of the final
            disposition of a proceeding, such advances shall be made only upon
            delivery to the corporation of an undertaking, by or on behalf of
            such director or officer, to repay all amounts to the corporation if
            it shall be ultimately determined that such person is not entitled
            to be indemnified.

                  (b) Indemnification of Employees and Agents. A person who was
            or is a party or is threatened to be made a party to or is involved
            in any proceeding by reason of the fact that he or she is or was an
            employee or agent of the corporation or is or was serving at the
            request of the corporation as an employee or agent of another
            enterprise, including service with respect to employee benefit
            plans, whether the basis of such action is an alleged action or
            inaction in an official capacity or in any other capacity while
            serving as an employee or agent, may, subject to the terms of any
            agreement between the corporation and such person, be indemnified
            and held harmless by the corporation to the fullest extent permitted
            by California law and the corporation's Articles of Incorporation,
            against all costs, charges, expenses, liabilities and losses
            (including attorneys' fees, judgments, fines, ERISA excise taxes or
            penalties and amounts paid or to be paid in settlement) reasonably
            incurred or suffered by such person in connection therewith. The
            immediately preceding sentence is not intended to be and shall not
            be considered to confer a contract right on any employee or agent
            (other than directors and officers) of the corporation.

                                       12


                  (c) Right of Directors and Officers to Bring Suit. If a claim
            under Paragraph (a) of this Section 15 is not paid in full by the
            corporation within 30 days after a written claim has been received
            by the corporation, the claimant may at any time thereafter bring
            suit against the corporation to recover the unpaid amount of the
            claim and, if successful in whole or in part, the claimant shall
            also be entitled to be paid the expense of prosecuting such claim.
            Neither the failure of the corporation (including its Board of
            Directors, independent legal counsel, or its shareholders) to have
            made a determination prior to the commencement of such action that
            indemnification of the claimant is permissible in the circumstances
            because he or she has met the applicable standard of conduct, if
            any, nor an actual determination by the corporation (including its
            Board of Directors, independent legal counsel, or its shareholders)
            that the claimant has not met the applicable standard of conduct,
            shall be a defense to the action or create a presumption for the
            purpose of an action that the claimant has not met the applicable
            standard of conduct.

                  (d) Successful Defense. Notwithstanding any other provision of
            this Section 15, to the extent that a director or officer has been
            successful on the merits or otherwise (including the dismissal of an
            action without prejudice or the settlement of a proceeding or action
            without admission of liability) in defense of any proceeding
            referred to in paragraph (a) of this Section 15 or in defense of any
            claim, issue or matter therein, he or she shall be indemnified
            against expenses (including attorneys' fees) actually and reasonably
            incurred in connection therewith.

                  (e) Non-Exclusivity of Rights. The right to indemnification
            provided by this Section 15 shall not be exclusive of any other
            right which any person may have or hereafter acquire under any
            statute, bylaw, agreement, vote of shareholders or disinterested
            directors or otherwise.

                  (f) Insurance. The corporation may maintain insurance, at its
            expense, to protect itself and any director, officer, employee or
            agent of the corporation or another corporation, partnership, joint
            venture, trust or other enterprise against any expense, liability or
            loss, whether or not the corporation would have the power to
            indemnify such person against such expense, liability or loss under
            the CGCL.

                  (g) Expenses as a Witness. To the extent that any director or
            officer or former director or former officer of the corporation is
            by reason of such position or former position, or a position with
            another entity at the request of the corporation, a witness in any
            action, suit or proceeding, he or she shall be indemnified against
            all costs and expenses actually and reasonably incurred by him or
            her on his or her behalf in connection therewith.

                  (h) Indemnity Agreements. The corporation may enter into
            agreements with any director, officer, employee or agent of the
            corporation

                                       13


            providing for indemnification to the fullest extent permissible
            under the CGCL and the corporation's Articles of Incorporation.

                  (i) Separability. Each and every paragraph, sentence, term and
            provision of this Section 15 is separate and distinct so that if any
            paragraph, sentence, term or provision hereof shall be held to be
            invalid or unenforceable for any reason, such invalidity or
            unenforceability shall not affect the validity or enforceability of
            any other paragraph, sentence, term or provision hereof. To the
            extent required, any paragraph, sentence, term or provision of this
            Section 15 may be modified by a court of competent jurisdiction to
            preserve its validity and to provide the claimant with, subject to
            the limitations set forth in this Section 15 and any agreement
            between the corporation and claimant, the broadest possible
            indemnification permitted under applicable law.

                  (j) Effect of Repeal or Modification. Any repeal or
            modification of this Section 15 shall not adversely affect any right
            of indemnification of a director or officer existing at the time of
            such repeal or modification with respect to any action or omission
            occurring prior to such repeal or modification.

                                   ARTICLE IV

                                    OFFICERS

            SECTION 1. OFFICERS. The officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, a chairman of the Board, a
chief executive officer, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article. One
person may hold two or more offices, except that the offices of president and
secretary shall not be held by the same person.

            SECTION 2. ELECTION. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by the Board of Directors,
and each shall hold office until he or she shall resign or shall be removed or
otherwise disqualified to serve, or his or her successor shall be elected and
qualified.

            SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office, for
such period, have such authority and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.

            SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by the Board of Directors, at any regular or
special meeting thereof, or, except in case of an officer chosen by the Board of
Directors, by any officer upon whom such power of

                                       14


removal may be conferred by the Board of Directors (subject, in each case, to
the rights, if any, of an officer under any contract of employment).

            Any officer may resign at any time by giving written notice to the
Board of Directors or the president, or to the secretary of the corporation,
without prejudice, however, to the rights, if any, of the corporation under any
contract to which the officer is a party. Any such resignation shall take effect
at the date of receipt of such notice or at any time specified therein. Unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective.

            SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.

            SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors and exercise and perform such other powers and duties as
may be from time to time assigned by the Board of Directors or prescribed by
these Bylaws.

            SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the chairman of the Board or the chief
executive officer, if there shall be such an officer or officers, the president
shall be the chief executive officer of the corporation and shall, subject to
the control of the Board of Directors, have general supervision, direction and
control of the business and affairs of the corporation. The president shall
preside at all meetings of the shareholders and, in the absence of the chairman
of the Board, or if there be none, at all meetings of the Board of Directors.
The president shall be ex officio a member of all the standing committees,
including the executive committee, if any, and shall have the general powers and
duties of management usually vested in the office of president of a corporation,
and shall have such other powers and duties as may be prescribed by these Bylaws
or the Board of Directors.

            SECTION 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the vice president designated by the Board of
Directors, shall perform all the duties of the president, and when so acting
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors or these
Bylaws.

            SECTION 9. SECRETARY. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
and such other place as the Board of Directors may order, a book of minutes of
actions taken at all meetings of directors and shareholders, with the time and
place of holding, whether regular or special, and, if special, how authorized,
the notice given thereof, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings thereof.

            The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held

                                       15


by each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.

            The secretary shall give, or cause to be given, notice of all
meetings of shareholders and of the Board of Directors required by these Bylaws
or by law to be given, and shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or these Bylaws.

            SECTION 10. CHIEF FINANCIAL OFFICER. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. Any surplus, including earned surplus,
paid-in surplus, and surplus arising from a reduction of stated capital, shall
be classified according to source and shown in a separate account. The books of
account shall at all reasonable times be open to inspection by any director.

            The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. The chief financial
officer shall disburse the funds of the corporation as may be ordered by the
Board of Directors, shall render to the president and directors, whenever they
request it, an account of all his or her transactions as chief financial officer
and of the financial condition of the corporation, and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors or these Bylaws.

                                    ARTICLE V

                                  MISCELLANEOUS

            SECTION 1. RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of and to vote at any meeting of shareholders or, subject to any
provision of the Articles of Incorporation, entitled to give consent to
corporate action in writing without a meeting, to receive any report, to receive
any dividend or distribution, or any allotment of rights, or to exercise rights
in respect to any change, conversion or exchange of shares. The record date so
fixed shall be not more than sixty (60) days nor less than ten (10) days prior
to the date of any meeting, nor more than sixty (60) days prior to any other
event for the purposes of which it is fixed. When a record date is so fixed,
only shareholders of record on that date are entitled to notice of and to vote
at any such meeting, to give consent without a meeting, to receive any report,
to receive a dividend, distribution or allotment of rights, or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise may be
provided in the Articles of Incorporation or these Bylaws.

            SECTION 2. INSPECTION OF CORPORATE RECORDS. The accounting books and
records and minutes of proceedings of the shareholders and of the Board of
Directors and committees of the Board of this corporation and any subsidiary of
this corporation shall be open to inspection upon the written demand on the
corporation of any shareholder or the holder of a voting trust certificate at
any reasonable time during regular business hours, for a purpose

                                       16


reasonably related to such holder's interests as a shareholder or as the holder
of such voting trust certificate. Such inspection by a shareholder or holder of
a voting trust certificate may be made in person or by agent or attorney, and
the right of inspection includes the right to copy and make extracts.

            A shareholder or shareholders holding at least five percent (5%) in
the aggregate of the outstanding voting shares of the corporation or who hold at
least one percent (1%) of such voting shares and have filed a Schedule 14B with
the United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have (in person, or by agent or attorney) the
right to inspect and copy the record of shareholders' names and addresses and
shareholdings during usual business hours upon five (5) business days' prior
written demand upon the corporation, and to obtain from the transfer agent for
the corporation, if there be one, upon written demand and upon the tender of its
usual charges, a list of the shareholders' names and addresses who are entitled
to vote for the election of directors, and their shareholdings, as of the most
recent record date for which it has been compiled or as of a date subsequent to
the date of demand specified by the shareholder therein. The list shall be made
available on or before the later of five (5) business days after receipt of the
demand or the date specified therein as of which the list is to be compiled.

            Every director shall have the absolute right at any reasonable time
to inspect and copy all books, records and documents of every kind and to
inspect the physical properties of the corporation. Such inspection by a
director may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.

            SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to this corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board of Directors.

            SECTION 4. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the CGCL is expressly waived, but
nothing herein shall be interpreted as prohibiting the Board from issuing annual
or other periodic reports to the shareholders.

            A shareholder of shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation may make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty (30) days prior to the date of the request and a balance
sheet of the corporation as of the end of any such period, and, in addition, if
no annual report for the last fiscal year containing an income statement and
balance sheet for and as of the end of such fiscal year has been sent to
shareholders, such an income statement and balance sheet for the prior fiscal
year. The corporation shall use its best efforts to deliver the statement or
statements requested to the person making such request within thirty days after
the receipt thereof. A copy of any such statements shall be kept on file in the
principal executive office of the corporation for twelve (12) months, and they
shall be exhibited at all reasonable times to any shareholder demanding an
examination of them or a copy thereof shall be mailed to such shareholder.

                                       17


            The corporation shall, upon the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared, together with a balance sheet as of the
end of the same period. The financial statements referred to in this Section
shall be accompanied by the report thereon, if there be any, of any independent
accountants engaged by the corporation in respect thereof or, if there be no
such report, the certificate of an authorized officer of the corporation that
such financial statements were prepared without audit from the books and records
of the corporation.

            SECTION 5. CERTIFICATES FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman or vice chairman of the Board or the president or
any vice president and by the chief financial officer or an assistant treasurer
or the secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any of the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be an officer, transfer agent or registrar
before such certificate is issued, it may nevertheless be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue. Any such certificate shall also contain
such legend or other statement as may be required by Section 418 of the CGCL,
the Corporate Securities Law of 1968, the federal securities laws, these Bylaws,
and any agreement between the corporation and the issuee thereof.

            Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the Board of Directors or these
Bylaws may provide; provided, however, that any such certificate so issued prior
to full payment shall state on the face thereof the amount remaining unpaid and
the terms of payment thereof.

            No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same time;
provided, however, that a new certificate will be issued without surrender and
cancellation of the old certificate if (1) the old certificate is lost,
apparently destroyed or wrongfully taken; (2) the request for issuance of a new
certificate is made within a reasonable time after the owner of the old
certificate has notice of its loss, destruction or theft; (3) the request for
issuance of a new certificate is made prior to the receipt of notice by the
corporation that the old certificate has been acquired by a bona fide purchaser;
(4) the owner of the old certificate files a sufficient indemnity bond with or
provides other adequate security to the corporation; and (5) the owner satisfies
any other reasonable requirements imposed by the corporation. In the event of
the issuance of a new certificate, the rights and liabilities of the
corporation, and of the holders of the old and new certificates, shall be
governed by the provisions of Sections 8104 and 8405 of the California Uniform
Commercial Code.

            SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
president or any vice president and the secretary or any assistant secretary of
this corporation are authorized to vote, represent and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority granted to said officers to vote or represent on behalf of this
corporation any and all shares held by this corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.

                                       18


            SECTION 7. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office in California, or, if its principal executive office
is not in California, then at its principal business office in California (or
otherwise provide upon written request of any shareholder) the original or a
copy of these Bylaws as amended or otherwise altered to date, certified by the
secretary of the corporation, which shall be open to inspection by the
shareholders at all reasonable times during office hours.

            SECTION 8. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the CGCL shall govern the construction of these Bylaws.
Without limiting the generality of the foregoing, the masculine gender includes
the feminine and neuter, the singular includes the plural and the plural number
includes the singular, and the term "person" includes a corporation or other
entity as well as a natural person.

                                   ARTICLE VI

                                   AMENDMENTS

            SECTION 1. POWER OF SHAREHOLDERS. New bylaws may be adopted or these
Bylaws may be amended or repealed by the affirmative vote of a majority of the
outstanding shares entitled to vote, or by the written consent of shareholders
entitled to vote such shares, except as otherwise provided by law or by the
Articles of Incorporation.

            SECTION 2. POWER OF DIRECTORS. Subject to the right of the
shareholders as provided in Section 1 of this Article VI to adopt, amend or
repeal bylaws, bylaws, other than a bylaw or amendment thereof increasing or
decreasing the range of the authorized number of directors or changing Article
III, Section 3, may, except as otherwise provided by law or the Articles of
Incorporation, be adopted, amended or repealed by the Board of Directors.

                                       19

EX-10.1

                                                                    EXHIBIT 10.1

                  SUMMARY OF COMPENSATION FOR TIMOTHY M. HARMON

Mr. Harmon retired as the Company's President and Chief Merchandising Officer
effective July 1, 2005. Mr. Harmon's annual base salary at the time of his
retirement was $750,000 per year. Mr. Harmon has a performance-based bonus award
agreement as described in more detail in our Current Report on Form 8-K filed on
March 25, 2005. A prorated portion of this bonus for the period prior to his
retirement, and excluding any portion related to his individual performance,
will be paid to Mr. Harmon at the time that bonuses under this program are paid
to the Company's executive officers. A severance agreement with Mr. Harmon was
filed as an exhibit to our Annual Report on Form 10-K filed on April 9, 1998. No
payment was made under this agreement in connection with Mr. Harmon's
retirement. The Company has agreed to extend the standard employee discount
privilege to Mr. Harmon and his spouse for his and her lifetimes, provided that
Mr. Harmon does not at any time have an affiliation (as employee, consultant,
board member, advisor or otherwise) with any entity that could be considered a
competitor of the Company.

EX-31

EXHIBIT 31

CERTIFICATIONS

I, Seth R. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pacific Sunwear of California, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2005	/s/ SETH R. JOHNSON
	Seth R. Johnson
	Chief Executive Officer

I, Gerald M. Chaney, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pacific Sunwear of California, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2005	/s/ GERALD M. CHANEY
	Gerald M. Chaney
	Senior Vice President, Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Pacific Sunwear of California, Inc. (the “Company”) on Form 10-Q for the quarter ended July 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Seth R. Johnson, the Chief Executive Officer of the Company, and Gerald M. Chaney, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i)	the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 31, 2005	/s/ SETH R. JOHNSON
	Seth R. Johnson
	Chief Executive Officer Pacific Sunwear of California, Inc. (Principal Executive Officer)

Dated: August 31, 2005	/s/ GERALD M. CHANEY
	Gerald M. Chaney
	Senior Vice President and Chief Financial Officer Pacific Sunwear of California, Inc. (Principal Financial Officer)

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Pacific Sunwear of California, Inc. and will be retained by Pacific Sunwear of California, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.