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0000950137-07-001561.txt : 20070206 0000950137-07-001561.hdr.sgml : 20070206 20070206160527 ACCESSION NUMBER: 0000950137-07-001561 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070202 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Cost Associated with Exit or Disposal Activities ITEM INFORMATION: Material Impairments ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070206 DATE AS OF CHANGE: 20070206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC SUNWEAR OF CALIFORNIA INC CENTRAL INDEX KEY: 0000874841 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 953759463 STATE OF INCORPORATION: CA FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21296 FILM NUMBER: 07584574 BUSINESS ADDRESS: STREET 1: 3450 EAST MIRALOMA AVENUE CITY: ANAHEIM STATE: CA ZIP: 92806 BUSINESS PHONE: 714-414-4000 MAIL ADDRESS: STREET 1: 3450 EAST MIRALOMA AVENUE CITY: ANAHEIM STATE: CA ZIP: 92806 8-K 1 a27098e8vk.htm FORM 8-K e8vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934

Date of report (Date of earliest event reported):
February 2, 2007

Pacific Sunwear of California, Inc.

(Exact name of registrant as specified in its charter)


California	0-21296	95-3759463

(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

3450 East Miraloma Avenue, Anaheim, CA 92806-2101

(Address of principal executive offices) (Zip Code)

(714) 414-4000

(Registrant’s telephone number, including area code)

not applicable

(Former name or former address, if changed since last report)

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

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

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

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

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

TABLE OF CONTENTS


Item 1.01 Entry into a Material Definitive Agreement
Item 2.05 Costs Associated with Exit or Disposal Activities
Item 2.06 Material Impairments
Item 7.01 Regulation FD Disclosure
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.1
EXHIBIT 99.1

Item 1.01 Entry into a Material Definitive Agreement.

On February 2, 2007, Pacific Sunwear of California, Inc. (the “Company”) entered into Amendment No. 2 to its unsecured $200 million Credit Agreement, dated as of September 14, 2005, with JPMorgan Chase Bank, N.A., as Administrative Agent, and a syndicate of other lenders. The amendment reduces the “Minimum Fixed Charge Coverage Ratio,” as amended by Amendment No. 1 as of October 12, 2006 to the Credit Agreement, required to be maintained by the Company as of the end of the Company’s fiscal quarter ended February 3, 2007 (the end of “fiscal 2006”) and the fiscal quarter ending May 5, 2007 (the first quarter of “fiscal 2007,” ending February 2, 2008). As of the date hereof, the Company has no direct borrowings outstanding under the Credit Agreement.

The full text of Amendment No. 2 to the Credit Agreement is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 2.05 Costs Associated with Exit or Disposal Activities.

On February 2, 2007, the Board of Directors of Pacific Sunwear of California, Inc. (the “Company”) approved management’s recommendation to close 74 demo stores. The determination to take this action resulted from a comprehensive review and evaluation of the real estate portfolio and profit performance of the Company’s demo stores. The stores to be closed, which in total generated a pre-tax operating loss of approximately $9 million in fiscal 2006, are expected to close during the first half of fiscal 2007. The Company has retained Hilco Merchant Resources, LLC to assist it in connection with the orderly liquidation of the inventory in these stores and Hilco Real Estate, LLC to assist it in connection with the disposition of the Company’s real estate operating leases covering these stores.

As a result of the decision to close these stores, the Company estimates that it will recognize the following pre-tax charges:

Non-cash charges expected to be recognized during the fourth quarter of fiscal 2006:

	•		$24 million — $25 million in fixed asset impairments, to be included in selling, general and administrative expenses

	•		$1 million — $2 million in inventory liquidation losses, to be included in cost of goods sold

	•		Total pre-tax, non-cash charges of approximately $25 million to $27 million

Cash charges expected to be recognized during fiscal 2007:

	•		$8 million — $12 million in real estate operating lease termination payments to landlords, to be included as part of occupancy within cost of goods sold

	•		$1 million — $2 million in contingent fee payments to Hilco, to be included in selling, general and administrative expenses

	•		Less than $1 million in severance benefits and related store closing costs

	•		Total cash charges of approximately $10 million to $15 million

The actual amount of non-cash and cash charges incurred by the Company in connection with the closing of the 74 demo stores may be different than the estimated amounts set forth in this report. The Company cannot predict with certainty the actual costs of terminating the leases, the amounts to be realized from the inventory liquidation, or the contingent fees that will be payable to Hilco upon final resolution of the closure process.

Item 2.06 Material Impairments.

The response to Item 2.05 is incorporated herein by reference.

Item 7.01 Regulation FD Disclosure.

The full text of the Company’s press release announcing the planned closure of the 74 demo stores is furnished as Exhibit 99.1 to this Current Report.

Item 9.01 Financial Statements and Exhibits.


Exhibit
Number		Description
10.1		Amendment No. 2 to Credit Agreement, dated as of February 2, 2007, with JPMorgan Chase Bank, N.A., as Administrative Agent, and a syndicate of other lenders

99.1		Press Release, dated February 6, 2007, announcing the planned closure of 74 demo stores

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	PACIFIC SUNWEAR OF CALIFORNIA, INC.
Date: February 6, 2007	By:	/s/ GERALD M. CHANEY
		Gerald M. Chaney
		Senior Vice President, Chief Financial Officer and Secretary

EXHIBIT INDEX


Exhibit
Number		Description
10.1		Amendment No. 2 to Credit Agreement, dated as of February 2, 2007, with JPMorgan Chase Bank, N.A., as Administrative Agent, and a syndicate of other lenders

99.1		Press Release, dated February 6, 2007, announcing the planned closure of 74 demo stores

EX-10.1 2 a27098exv10w1.htm EXHIBIT 10.1 exv10w1

EXHIBIT 10.1

AMENDMENT NO. 2

Dated as of February 2, 2007

CREDIT AGREEMENT

Dated as of September 14, 2005

THIS AMENDMENT NO. 2 (“Amendment”) is made as of February 2, 2007 (the “Effective Date”) by and among Pacific Sunwear of California, Inc., a California corporation (the “Borrower”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, National Association, as Administrative Agent (the “Administrative Agent”), under that certain Credit Agreement dated as of September 14, 2005 by and among the Borrower, the Lenders and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrower has requested that certain modifications be made to the Credit Agreement;

WHEREAS, the Borrower, the Lenders party hereto and the Administrative Agent have agreed to amend the Credit Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders party hereto and the Administrative Agent hereby agree to the following amendments to the Credit Agreement.

1. Amendments to Credit Agreement. Effective as of the Effective Date but subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows:

(a) Section 6.08(a) of the Credit Agreement is hereby amended to restate the proviso appearing at the end thereof to read as follows:

; provided that, (1) solely with respect to the fiscal quarter of the Borrower ending on October 28, 2006, the Borrower will not permit such ratio to be less than 1.25 to 1.0, (2) solely with respect to the fiscal quarters of the Borrower ending on or about February 3, 2007 and May 5, 2007, the Borrower will not permit such ratio to be less than 1.00 to 1.0 and (3) solely with respect to the fiscal quarters of the Borrower ending on or about August 4, 2007 and November 3, 2007, the Borrower will not permit such ratio to be less than 1.25 to 1.0. Notwithstanding the foregoing, it is understood and agreed that, to the extent made or incurred

during any period, beginning with the fiscal quarter ending February 3, 2007 and thereafter, (A) any Capital Expenditures in an aggregate cumulative amount not in excess of $46,000,000, as further described in that certain disclosure letter from the Borrower, dated as of February 1, 2007, delivered to the Administrative Agent for the benefit of the Lenders, and solely and explicitly relating to the Borrower’s (i) purchase of land and construction of one new distribution center in Oletha, Kansas and (ii) purchase of land in Anaheim, California to be used as the site of a new corporate headquarters and (B) those certain charges, not to exceed $10,000,000 in respect of inventory write-downs and $15,000,000 in respect of lease expenses and as further described in that certain disclosure letter from the Borrower, dated as of February 1, 2007, delivered to the Administrative Agent for the benefit of the Lenders, in connection with the Borrower’s closing of up to 81 stores in its “demo” chain shall, in each case, be excluded from the calculation of the fixed charge coverage ratio with respect to this Section 6.08(a) for such period. The Borrower hereby covenants and agrees that it shall include an analysis and description of such charges (all in form and detail reasonably satisfactory to the Administrative Agent and in the same form as such disclosure letter) as part of the detailed calculations accompanying each certificate of a Financial Officer required to be delivered pursuant to Section 5.01(c) with respect to any such period.

(b) The Credit Agreement is hereby amended to add a new Schedule 6.08(a) thereto in the form of Exhibit A hereto.

2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received (i) counterparts of this Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent, (ii) counterparts of the Consent and Reaffirmation attached hereto duly executed by the Subsidiary Guarantors and (iii) for the account of each Lender which delivers its executed signature page hereto by such time as is requested by the Administrative Agent, an amendment fee equal to 0.05% of such Lender’s Commitment under the Credit Agreement.

3. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:

(a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b) As of the date hereof and giving effect to the terms of this Amendment, (i) no Default shall have occurred and be continuing and (ii) the representations and warranties of the Borrower set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects as of the date hereof (other than such representations and warranties as are made of a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date).

4. Reference to and Effect on the Credit Agreement.

(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.

6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature Pages Follow]

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.


		PACIFIC SUNWEAR OF CALIFORNIA, INC.,
		as the Borrower

		By:
		Name:
		Title:

		By:
		Name:
		Title: