EX-99.1 2 a33272exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
 

Exhibit 99.1
(PacSun Logo)
CONTACT:
Gar Jackson
Director of Investor Relations
(714) 414-4049
FOR IMMEDIATE RELEASE
PACIFIC SUNWEAR ANNOUNCES SECOND QUARTER EARNINGS RESULTS
ANAHEIM, CA/August 23, 2007 — Pacific Sunwear of California, Inc. (NASDAQ:PSUN) today announced that total sales for the second quarter (13 weeks) of fiscal 2007 ended August 4, 2007, were $344.2 million, an increase of 9.7 percent over total sales of $313.7 million for the second quarter (13 weeks) of fiscal 2006 ended July 29, 2006.
Total Company same-store sales increased 1.8 percent during the second quarter of fiscal 2007. By concept, PacSun same-store sales increased 3.0 percent and demo same-store sales decreased 10.7 percent. Due to the 53rd week in fiscal year 2006, same-store sales for the second quarter of fiscal 2007 are compared to the thirteen-week period ended August 5, 2006.
For the second quarter of fiscal 2007, the Company recorded a net loss of $10.5 million, or $(0.15) per diluted share, compared to net income of $9.7 million, or $0.14 per diluted share, for the second quarter of fiscal 2006. Lease termination and other liquidation charges associated with the previously announced 74 demo stores closed accounted for $0.14 per diluted share of the loss. The previously announced store impairment charges related to One Thousand Steps accounted for $0.08 per diluted share of the loss. Excluding the demo lease termination and inventory liquidation charges and the One Thousand Steps store impairment charges, the Company had net income of $4.8 million, or $0.07 per diluted share, for the second quarter of fiscal 2007. A reconciliation of GAAP earnings to the non-GAAP disclosure above is contained at the end of this press release.
“Our second quarter results underscore that while elements of our efforts to improve the PacSun stores are showing progress, we still have a lot of work to do,” commented Sally Frame Kasaks, Chief Executive Officer. “July ended much weaker than we projected, which we believe was in part due to the impact of the late back to school starts in Florida and Texas, two of our most significant markets. On a positive note, strength in our PacSun juniors’ business is an indicator that we have identified the right fashion trends for back to school.”
Total sales for the first half (26 weeks) ended August 4, 2007 were $664.8 million, an increase of 8.4 percent over total sales of $613.6 million during the first half (26 weeks) ended July 29, 2006.
Total Company same-store sales increased 0.4 percent during the first half. By concept, PacSun same-store sales increased 1.9 percent and demo same-store sales decreased 11.5 percent. Due to the 53rd week in fiscal year 2006, same-store sales for the first half of fiscal 2007 are compared to the 26-week period ended August 5, 2006.
 
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

For the first half of fiscal 2007, the Company recorded a net loss of $15.6 million, or $(0.22) per diluted share, compared to net income of $21.6 million, or $0.30 per diluted share, in the first half of fiscal 2006 ended July 29, 2006. Lease termination and other liquidation charges associated with the previously announced 74 demo stores closed accounted for $0.17 per diluted share of the loss. The previously announced store impairment charges related to One Thousand Steps accounted for $0.08 per diluted share of the loss. Excluding the demo lease termination and inventory liquidation charges and the One Thousand Steps store impairment charges, the Company had net income of $1.9 million, or $0.03 per diluted share, for the first half of fiscal 2007. A reconciliation of GAAP earnings to the non-GAAP disclosure above is contained at the end of this press release.
Financial Outlook
Assuming flat to low single digit increases in total Company same-store sales, comprised of positive low single digits for PacSun and negative mid-teens for demo, the Company is comfortable with third quarter GAAP earnings in the range of $0.10 to $0.13 per diluted share. This estimate assumes approximately 300-350 basis points in gross margin improvement, offset by a similar increase in selling, general and administrative expenses primarily attributable to planned home office headcount additions, strategic consulting expenses and store payroll and depreciation deleverage.
About Pacific Sunwear of California, Inc.
Pacific Sunwear, operating under three distinct retail concepts, is a leading specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. As of August 4, 2007, the Company operated 840 PacSun stores, 117 PacSun Outlet stores, 152 demo stores and 9 One Thousand Steps stores for a total of 1,118 stores in 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com, merchandise carried at demo stores can be found at www.demostores.com and information about One Thousand Steps can be found at www.onethousandsteps.com.
The Company will be hosting a conference call today at 1:45 pm Pacific Time. A telephonic replay of the conference call will be available beginning approximately two hours following the call for one week and can be accessed in the United States/Canada at (800) 642-1687 or internationally at (706) 645-9291; pass code: 12722231. For those unable to listen to the live Web broadcast on the Company’s investor relations website www.pacsun.com, or utilize the call-in replay, an archived version will be available on the Company’s investor relations Web site through midnight, August 23, 2008.
Pacific Sunwear Safe Harbor
This press release contains “forward-looking statements” including, without limitation, statements regarding the Company’s earnings projections, its assumption of flat to low single digit same-store sales results and gross margin improvement for the third quarter of fiscal 2007. In each case, these statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that these forward-looking statements be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those projected in such forward-looking statements. The statements regarding fiscal 2007 earnings estimates, same-store sales projections
 
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

and gross margin improvement are not historical facts and involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in such forward-looking statements. Such uncertainties which could adversely affect our business and results include, among others, the following factors: our assumption of comparable same store sales during the third quarter of fiscal 2007 may be wrong and actual comparable same store sales may be higher or lower; changes in consumer demands and preferences may adversely affect our performance; higher than anticipated markdowns and/or higher than estimated selling, general and administrative costs; higher than anticipated lease termination costs associated with the 74 demo store closures; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; sales from private label merchandise, expansion and management of growth; reliance on key personnel; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors, as a result of natural disasters or terrorist acts, could cause unexpected delays in new store openings, relocations or expansions; our new concept (One Thousand Steps) is untested and may not achieve profitability or be successful; reliance on foreign sources of production; credit facility financial covenants and other risks outlined in the company’s SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended February 3, 2007 and subsequent periodic reports filed with the Securities and Exchange Commission. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
***MORE***
 
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
                                 
    Second Quarter Ended     First Half Ended  
    AUG. 4,     JUL. 29,     AUG. 4,     JUL. 29,  
    2007     2006     2007     2006  
Net sales
   $ 344,218     $ 313,682     $ 664,803     $ 613,570  
Gross margin
     91,020       97,425       173,889       194,708  
Selling, G&A expenses
     109,606       82,855       201,641       162,794  
 
                        
Operating (loss)/income
     (18,586 )     14,570       (27,752 )     31,914  
Interest income, net
     541       1,090       1,511       2,885  
 
                        
(Loss)/Income before taxes
     (18,045 )     15,660       (26,243 )     34,799  
Income tax (benefit)/expense
     (7,543 )     5,950       (10,683 )     13,223  
 
                        
Net (loss)/income
   $ (10,502 )   $ 9,710     $ (15,560 )   $ 21,576  
 
                        
Net (loss)/income per share, basic
   $ (0.15 )   $ 0.14     $ (0.22 )   $ 0.30  
 
                        
Net (loss)/income per share, diluted
   $ (0.15 )   $ 0.14     $ (0.22 )   $ 0.30  
 
                        
Wtd avg shares outstanding, basic
     69,692,827       71,335,467       69,635,543       72,239,872  
 
                        
Wtd avg shares outstanding, diluted
     70,064,804       71,866,482       69,986,773       72,783,954  
 
                        
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                         
    AUG. 4,     FEB. 3,     JUL. 29,  
    2007     2007     2006  
ASSETS
                        
Current assets:
                        
Cash & cash equivalents
   $ 26,264     $ 52,267     $ 11,783  
Short-term investments
     16,000       31,500       —  
Inventories
     256,084       205,213       286,666  
Other current assets
     56,954       46,255       43,870  
 
                  
Total current assets
     355,302       335,235       342,319  
Property and equipment, net
     434,600       420,886       392,769  
Other long-term assets
     43,418       17,122       24,579  
 
                  
Total assets
   $ 833,320     $ 773,243     $ 759,667  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Current liabilities:
                        
Accounts payable
   $ 114,120     $ 66,581     $ 81,633  
Other current liabilities
     80,470       73,952       61,412  
 
                  
Total current liabilities
     194,590       140,533       143,045  
Deferred lease incentives
     81,283       89,371       84,291  
Deferred rent
     29,158       30,619       30,341  
Other long-term liabilities
     35,831       9,367       22,465  
 
                  
Total liabilities
     340,862       269,890       280,142  
Total shareholder’s equity
     492,458       503,353       479,525  
 
                  
Total liabilities and shareholders’ equity
   $ 833,320     $ 773,243     $ 759,667  
 
                  
 
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
                 
    FOR THE FIRST HALF ENDED  
    AUG. 4, 2007     JUL. 29, 2006  
Cash flows from operating activities:
                
Net (loss)/income
   $ (15,560 )   $ 21,576  
Depreciation & amortization
     38,027       34,385  
Non-cash stock based compensation
     3,023       3,573  
Tax benefits related to exercise of stock options
     369       1,479  
Excess tax benefits related to stock-based compensation
     (344 )     —  
Loss on disposal of property and equipment
     12,197       158  
Changes in operating assets and liabilities:
                
Inventories
     (50,871 )     (71,526 )
Accounts payable and other current liabilities
     53,337       12,329  
Other assets and liabilities
     (20,705 )     (3,429 )
 
            
Net cash provided by/(used in) operating activities
     19,473       (1,455 )
Cash flows from investing activities:
                
Purchases of short-term investments
     (122,400 )     (201,900 )
Maturities of short-term investments
     137,900       276,811  
Purchases of long-term investments
     (23,300 )     —  
Capital expenditures
     (63,178 )     (62,675 )
 
            
Net cash (used in)/provided by investing activities
     (70,978 )     12,236  
Cash flows from financing activities:
                
Repurchases of common stock
     —       (99,347 )
Excess tax benefits related to stock-based compensation
     344       —  
Proceeds from exercise of stock options
     1,896       5,454  
Net borrowings under capital leases
     23,262       (290 )
Net cash provided by/(used in) financing activities
     25,502       (94,183 )
 
            
Net (decrease) in cash and cash equivalents
     (26,003 )     (83,402 )
Cash and cash equivalents, beginning of period
     52,267       95,185  
 
            
Cash and cash equivalents, end of period
   $ 26,264     $ 11,783  
 
            
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
                 
    AUG. 4,     JUL. 29,  
    2007     2006  
Stores open at beginning of fiscal year
     1,199       1,105  
Stores opened during the fiscal year
     6       33  
Stores closed during the fiscal year
     (87 )     (3 )
 
            
Stores open at end of period
     1,118       1,135  
 
                
PacSun stores
     840       826  
Outlet stores
     117       102  
d.e.m.o. stores
     152       201  
One Thousand Steps stores
     9       6  
 
            
Total stores
     1,118       1,135  
 
                
Total square footage at end of period (in 000’s)
     4,112       4,077  
 
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Reconciliation of GAAP earnings to non-GAAP disclosures
This earnings release for the second quarter ended August 4, 2007 contains certain non-GAAP disclosures. Provided in the tables below is a reconciliation of the relevant GAAP measure to the non-GAAP disclosure contained in this earnings release. Only line items affected by these non-GAAP adjustments are included in the tables below. All amounts are expressed in millions of dollars, except earnings per share. Non-GAAP earnings are derived by starting with the GAAP number on the left and subtracting the relevant non-GAAP adjustments while moving to the right by line item.
Reconciliation of fiscal 2007 second quarter GAAP earnings to non-GAAP earnings:
Non-GAAP earnings for the second quarter of fiscal 2007 exclude the income statement impact from the 74 demo store closures and the One Thousand Steps store asset impairment charges.
                                 
                    Non-GAAP        
                    Adjustments        
            Non-GAAP     Attributable to        
            Adjustments     One Thousand        
            Attributable to     Steps Store Asset        
    GAAP     74 demo     Impairment     Non-GAAP  
    Amounts     Store Closures     Charges     Amounts  
Net Sales
   $ 344.2     $ 2.1       —     $ 342.1  
Gross Margin/(Loss)
     91.0       (14.9 )     —       105.9  
SG&A
     109.6       1.4       9.9       98.3  
Operating (Loss)/Income
     (18.6 )     (16.3 )     (9.9 )     7.6  
Income Tax (Benefit)/Expense
     (7.5 )     (6.8 )     (4.1 )     3.4  
Net (Loss)/Income
   $ (10.5 )     (9.5 )     (5.8 )     4.8  
(Loss)/Earnings Per Share
   $ (0.15 )   $ (0.14 )   $ (0.08 )   $ 0.07  
 
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Reconciliation of fiscal 2007 first half GAAP earnings to non-GAAP earnings:
Non-GAAP earnings for the first half of fiscal 2007 exclude the income statement impact from the 74 demo store closures and the One Thousand Steps store asset impairment charges.
                                 
                    Non-GAAP        
                    Adjustments        
            Non-GAAP     Attributable to        
            Adjustments     One Thousand        
            Attributable to     Steps Store Asset        
    GAAP     74 demo     Impairment     Non-GAAP  
    Amounts     Store Closures     Charges     Amounts  
Net Sales
   $ 664.8     $ 13.3       —     $ 651.5  
Gross Margin/(Loss)
     173.9       (15.3 )     —       189.2  
SG&A
     201.6       4.3       9.9       187.4  
Operating (Loss)/Income
     (27.8 )     (19.6 )     (9.9 )     1.7  
Income Tax (Benefit)/Expense
     (10.7 )     (8.0 )     (4.0 )     1.3  
Net (Loss)/Income
   $ (15.6 )     (11.6 )     (5.9 )     1.9  
(Loss)/Earnings Per Share
   $ (0.22 )   $ (0.17 )   $ (0.08 )   $ 0.03  
 
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000