0001193125-12-490362.txt : 20121204 0001193125-12-490362.hdr.sgml : 20121204 20121204140225 ACCESSION NUMBER: 0001193125-12-490362 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20121027 FILED AS OF DATE: 20121204 DATE AS OF CHANGE: 20121204 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: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-21296 FILM NUMBER: 121240114 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 10-Q 1 d416440d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

October 27, 2012 For the quarterly period ended: October 27, 2012

OR

 

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

Commission file number 0-21296

 

 

PACIFIC SUNWEAR OF CALIFORNIA, INC.

(Exact name of registrant as specified in its charter)

 

 

 

California   95-3759463
(State of incorporation)  

(I.R.S. Employer

Identification No.)

3450 East Miraloma Avenue, Anaheim, CA 92806

(Address of principal executive offices and zip code)

(714) 414-4000

(Registrant’s telephone number)

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer   ¨    Accelerated Filer   x
Non-Accelerated Filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   ¨

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

On November 29, 2012, the registrant had 67,965,230 shares of Common Stock outstanding.

 

 

 


Table of Contents

PACIFIC SUNWEAR OF CALIFORNIA, INC.

FORM 10-Q

For the Quarter Ended October 27, 2012

Index

 

     Page  

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements (unaudited):

  

Condensed Consolidated Balance Sheets—October 27, 2012 and January 28, 2012

     3   

Condensed Consolidated Statements of Operations and Comprehensive Operations—Third quarter (13 weeks) and three quarters (39 weeks) ended October 27, 2012 and October 29, 2011, respectively

     4   

Condensed Consolidated Statements of Cash Flows—Three quarters (39 weeks) ended October  27, 2012 and October 29, 2011, respectively

     5   

Notes to Condensed Consolidated Financial Statements

     6   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     15   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     23   

Item 4. Controls and Procedures

     24   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     24   

Item 1A. Risk Factors

     24   

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

     24   

Item 3. Defaults Upon Senior Securities

     24   

Item 4. Mine Safety Disclosures

     24   

Item 5. Other Information

     24   

Item 6. Exhibits

     25   

SIGNATURE PAGE

     26   

EX-31.1

  

EX-32.1

  

EX-101 INSTANCE DOCUMENT

  

EX-101 SCHEMA DOCUMENT

  

EX-101 CALCULATION LINKBASE DOCUMENT

  

EX-101 LABELS LINKBASE DOCUMENT

  

EX-101 PRESENTATION LINKBASE DOCUMENT

  

 

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, All Amounts in Thousands Except Share and Per Share Amounts)

 

     October 27, 2012      January 28, 2012  
ASSETS      

CURRENT ASSETS:

     

Cash and cash equivalents

   $ 23,809       $ 50,306   

Restricted cash

     305         8,593   

Merchandise inventories

     137,347         88,740   

Prepaid expenses

     17,208         15,506   

Other current assets

     3,473         6,272   
  

 

 

    

 

 

 

Total current assets

     182,142         169,417   

Property and equipment, net

     131,217         149,716   

Deferred income taxes

     6,643         6,643   

Other assets

     27,982         29,355   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 347,984       $ 355,131   
  

 

 

    

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY      

CURRENT LIABILITIES:

     

Accounts payable

   $ 67,336       $ 38,914   

Other current liabilities

     65,097         68,369   
  

 

 

    

 

 

 

Total current liabilities

     132,433         107,283   

LONG-TERM LIABILITIES:

     

Deferred lease incentives

     15,427         17,681   

Deferred rent

     16,316         16,602   

Long-term debt

     74,645         73,910   

Other long-term liabilities

     25,832         26,558   
  

 

 

    

 

 

 

Total long-term liabilities

     132,220         134,751   

Commitments and contingencies (Note 10)

     

SHAREHOLDERS’ EQUITY:

     

Preferred stock, $0.01 par value; 5,000,000 shares authorized; 1,000 issued and outstanding

     —           —     

Common stock, $0.01 par value; 170,859,375 shares authorized; 67,957,891 and 67,511,468 shares issued and outstanding, respectively

     680         675   

Additional paid-in capital

     19,208         16,766   

Retained earnings

     63,443         95,656   
  

 

 

    

 

 

 

Total shareholders’ equity

     83,331         113,097   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 347,984       $ 355,131   
  

 

 

    

 

 

 

See accompanying footnotes

 

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PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE OPERATIONS

(Unaudited, All Amounts in Thousands Except Share and Per Share Amounts)

 

     For the Third Quarter Ended     For the Three Quarters Ended  
     October 27,
2012
    October 29,
2011
    October 27,
2012
    October 29,
2011
 

Net sales

   $ 228,434      $ 226,786      $ 612,563      $ 599,582   

Cost of goods sold, including buying, distribution and occupancy costs

     167,607        171,407        452,951        463,674   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     60,827        55,379        159,612        135,908   

Selling, general and administrative expenses

     62,082        68,414        184,855        193,211   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (1,255     (13,035     (25,243     (57,303

Gain on derivative liability

     (5,558     —          (3,672     —     

Other expense, net

     3,244        1,178        10,008        2,292   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     1,059        (14,213     (31,579     (59,595

Income tax expense (benefit)

     111        (200     634        526   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     948        (14,013     (32,213     (60,121

Loss from discontinued operations, net of income taxes

     —          (3,589     —          (8,209
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 948      $ (17,602   $ (32,213   $ (68,330
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 948      $ (17,602   $ (32,213   $ (68,330
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations per share:

        

Basic

   $ 0.01      $ (0.21   $ (0.48   $ (0.91
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.01      $ (0.21   $ (0.48   $ (0.91
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from discontinued operations per share:

        

Basic

   $ —        $ (0.05   $ —        $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ —        $ (0.05   $ —        $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

        

Basic

   $ 0.01      $ (0.26   $ (0.48   $ (1.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.01      $ (0.26   $ (0.48   $ (1.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding:

        

Basic

     67,913,832        66,855,443        67,745,718        66,467,688   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     71,359,957        66,855,443        67,745,718        66,467,688   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying footnotes

 

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PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, All Amounts in Thousands)

 

     For the Three Quarters Ended  
     October 27, 2012     October 29, 2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net loss

   $ (32,213   $ (68,330

Adjustments to reconcile net loss to net cash from operating activities:

    

Depreciation and amortization

     25,915        32,758   

Asset impairment

     4,073        12,829   

Loss on disposal of property and equipment

     225        161   

Gain on derivative liability

     (3,672     —     

Amortization of debt discount

     1,163        —     

Non-cash stock-based compensation

     2,114        2,524   

Change in operating assets and liabilities:

    

Merchandise inventories

     (48,607     (56,548

Other current assets

     788        (7,298

Other assets

     1,374        518   

Accounts payable

     28,422        48,544   

Other current liabilities

     1,764        (3,361

Deferred lease incentives

     (2,254     (6,070

Deferred rent

     (286     (1,163

Other long-term liabilities

     (427     174   
  

 

 

   

 

 

 

Net cash used in operating activities

     (21,621     (45,262

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Purchases of property and equipment

     (12,037     (10,165

Restricted cash

     8,288        —     

Proceeds from insurance settlement

     653        300   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,096     (9,865

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Payments for credit facility borrowings

     (1,254     —     

Principal payments under mortgage borrowings

     (401     (375

Principal payments under capital leases

     (511     (241

Proceeds from exercise of stock options

     386        313   
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,780     (303
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (26,497     (55,430

CASH AND CASH EQUIVALENTS, beginning of period

     50,306        63,710   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 23,809      $ 8,280   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    

Cash paid for interest

   $ 2,473      $ 1,745   

Cash paid for income taxes

   $ 488      $ 991   

SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:

    

Property and equipment purchases accrued at period end

   $ 89      $ 1,388   

Shares issued in connection with lease modifications

   $ —        $ 1,585   

Capital lease borrowings for property and equipment

   $ 111      $ 470  

See accompanying footnotes

 

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PACIFIC SUNWEAR OF CALIFORNIA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. NATURE OF BUSINESS

Pacific Sunwear of California, Inc. (together with its wholly-owned subsidiaries, the “Company” or “PacSun”) is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. It operates a nationwide, primarily mall-based chain of retail stores under the names “Pacific Sunwear” and “PacSun.” In addition, the Company operates an e-commerce website at www.pacsun.com which sells PacSun merchandise online, provides content and community for its target customers and provides information about the Company. The Company, a California corporation, was incorporated in August 1982. As of October 27, 2012, the Company leased and operated 722 stores in each of the 50 states and Puerto Rico.

2. BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2012 (“fiscal 2011”) filed with the SEC. The Condensed Consolidated Financial Statements include the accounts of Pacific Sunwear of California, Inc. and its wholly-owned subsidiaries (Pacific Sunwear Stores Corp., a California corporation (“PacSun Stores”) and Miraloma Borrower Corporation, a Delaware corporation (“Miraloma”)). 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 Condensed Consolidated Financial Statements in conformity with GAAP 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 Condensed 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 Company’s fiscal quarter ended October 27, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending February 2, 2013 (“fiscal 2012”).

The results of continuing operations for all periods presented in these Condensed Consolidated Financial Statements exclude the financial impact of discontinued operations. See Note 12, “Discontinued Operations” for further discussion related to discontinued operations presentation.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Information regarding significant accounting policies is contained in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal 2011. Presented below in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” included in that Report.

Income Taxes

The Company calculates its interim income tax provision in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, “Interim Reporting” (“ASC 270”) and ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

 

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4. IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets (or asset group) may not be recoverable. Based on management’s review of the historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of the Company’s stores, the Company determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover the Company’s investment in the respective stores. As a result, the Company recorded the following non-cash impairment charges related to its retail stores within the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations, to write-down the carrying value of its long-lived store assets to their estimated fair values.

 

     For the Third Quarter Ended      For the Three Quarters Ended  
     (In thousands)  
     October 27,
2012
     October 29,
2011
     October 27,
2012
     October 29,
2011
 

Impairment charges from continuing operations

   $ 533       $ 4,457       $ 3,164       $ 9,575   

Impairment charges from discontinued operations

     —           2,588         —           3,254   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impairment charges

   $ 533       $ 7,045       $ 3,164       $ 12,829   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     October 27, 2012      October 29, 2011  
     (In thousands)  

Carrying value of assets tested for impairment

   $ 6,726       $ 24,845   
  

 

 

    

 

 

 

Carrying value of assets with impairment

   $ 1,023       $ 8,939   
  

 

 

    

 

 

 

Fair value of assets impaired

   $ 490       $ 1,894   
  

 

 

    

 

 

 

Number of stores tested for impairment

     101         221   
  

 

 

    

 

 

 

Number of stores with impairment

     17         64   
  

 

 

    

 

 

 

The long-lived assets disclosed above that were written down to their respective fair values consisted primarily of leasehold improvements, furniture, fixtures and equipment. The Company recognized impairment charges of $0.5 million and $7.0 million, respectively, during the quarters ended October 27, 2012 and October 29, 2011 and $3.2 million and $12.8 million, respectively, during the first three quarters ended October 27, 2012 and October 29, 2011. The decrease in the number of stores tested for impairment year-over-year was primarily related to the Company’s recent closure of certain underperforming stores. Based on historical operating performance and the projected outlook for these stores, the Company believes that the remaining asset value of approximately $6 million, as of October 27, 2012, is recoverable. Additionally, the Company wrote off approximately $0.9 million of excess store fixtures in the first three quarters of fiscal 2012.

5. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

 

     October 27, 2012      January 28, 2012  
     (In thousands)  

Derivative liability

   $ 16,404       $ 20,076   

Accrued gift cards

     7,198         10,776   

Accrued compensation and benefits

     14,538         10,687   

Sales taxes payable

     3,279         3,983   

Deferred tax liability

     2,201         2,201   

Accrued capital expenditures

     1,192         1,281   

Other

     20,285         19,365   
  

 

 

    

 

 

 

Total other current liabilities

   $ 65,097       $ 68,369   
  

 

 

    

 

 

 

As disclosed in Note 8, the Company issued 1,000 shares of its Convertible Series B Preferred Stock (the “Series B Preferred”) in connection with the five-year, $60 million senior secured term loan (the “Term Loan”), funded by an affiliate of Golden Gate Capital. The fair value of the Series B Preferred at issuance was approximately $15.0 million which was recorded as a derivative liability. As of October 27, 2012, the fair value of the derivative liability was approximately $16.4 million. See Note 9, “Fair Value Measurements – Recurring Fair Value Measurements” for further discussion on the derivative liability.

 

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6. DEBT

Credit Facility

On December 7, 2011, the Company entered into a new five-year, $100 million revolving credit facility with Wells Fargo Bank, N.A (the “New Credit Facility”), which replaced the Company’s previous revolving credit facility with JPMorgan Chase (the “Former Credit Facility”). Borrowings under the New Credit Facility bear interest at a floating rate which, at the Company’s option, may be determined by reference to a LIBOR Rate or a Base Rate (as defined in the New Credit Facility, 4.0% as of October 27, 2012). Extensions of credit under the New Credit Facility are limited to a borrowing base consisting of specified percentages of eligible categories of assets. The New Credit Facility is available for direct borrowings and allows for the issuance of letters of credit, and up to $12.5 million is available for swing-line loans. The New Credit Facility is secured by liens and security interests with (a) a first priority security interest in the current and certain related assets of the Company including cash, cash equivalents, deposit accounts, securities accounts, credit card receivables and inventory, and (b) a second priority security interest in all assets and properties of the Company that are not secured by a first lien and security interest. The New Credit Facility also contains covenants that, subject to specified exceptions, restrict the Company’s ability to, among other things, incur additional indebtedness, incur liens, liquidate or dissolve, sell, transfer, lease or dispose of assets, or make loans, investments or guarantees. The New Credit Facility is scheduled to mature on December 7, 2016. Based on current forecasts, the Company believes that cash flows from operating activities, working capital, borrowing availability under the New Credit Facility, and cash on hand resulting from the closing of the Term Loan and the two mortgage transactions discussed below will be sufficient to meet its operating and capital expenditure needs for the next twelve months. However, if the Company were to experience same-store sales declines similar to those that occurred in fiscal 2010 and 2009, it may be required to access most, if not all, of the New Credit Facility and would potentially require other sources of financing to fund its operations, which sources might not be available. At October 27, 2012, the Company had no direct borrowings and $26 million in letters of credit outstanding under the New Credit Facility. The remaining availability under the New Credit Facility at October 27, 2012 was $48 million. The Company is not subject to any financial covenant restrictions under the New Credit Facility.

Term Loan

On December 7, 2011, the Company obtained the Term Loan funded by an affiliate of Golden Gate Capital. The Term Loan bears interest at a rate of 5.5% per annum to be paid in cash, due and payable quarterly in arrears, and 7.5% per annum, due and payable in kind (“PIK”) annually in arrears, with such PIK interest then due and payable being added to the outstanding principal balance of the Term Loan at the end of each fiscal year, and with adjustments to the cash and PIK portion of the interest rate in accordance with the Term Loan agreement, following principal prepayments. Annual cash interest for fiscal 2012 is expected to be approximately $3 million. The Term Loan is guaranteed by each of the Company’s subsidiaries and will be guaranteed by any future domestic subsidiaries of the Company. The Term Loan is secured by liens and security interests with (a) a first priority security interest in all long-term assets of the Company and PacSun Stores and all other assets not subject to a first lien and security interest pursuant to the New Credit Facility, (b) a first priority pledge of the equity interests of Miraloma and (c) a second priority security interest in all assets of the Company and PacSun Stores subject to a first lien and security interest pursuant to the New Credit Facility. The Term Loan also contains covenants substantially identical to those in the New Credit Facility. The principal balance and any unpaid interest related to the Term Loan is due on December 7, 2016. The Company is not subject to any financial covenant restrictions under the Term Loan.

Mortgage Debt

On August 20, 2010, the Company, through its wholly-owned subsidiaries, Miraloma and PacSun Stores, executed two promissory notes pursuant to which borrowings in an aggregate amount of $29.8 million from American National Insurance Company (“Anico”) were incurred. The note executed by Miraloma (the “Miraloma Note”) is in the amount of $16.8 million and bears interest at the rate of 6.50% per annum. Monthly principal and interest payments under the Miraloma Note commenced on October 1, 2010, and are $113,435. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the Miraloma Note, and any accrued but unpaid interest thereon (estimated to be $14.4 million), will be due in full on September 1, 2017. The Miraloma Note is secured by a deed of trust on the building and land comprising the Company’s principal executive offices in Anaheim, California and is non-recourse to the Company. The Miraloma Note does not contain any financial covenants. In connection with this transaction, the Company transferred the building and related land securing the Miraloma Note to Miraloma and entered into a lease for the building and land with Miraloma. Miraloma paid a prepayment fee to Anico equal to 1% of the principal amount of the Miraloma Note on the closing date of the transaction. As a result, Miraloma may prepay the Miraloma Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.

 

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The note executed by PacSun Stores (the “PacSun Stores Note”) is in the amount of $13.0 million and bears interest at the rate of 6.50% per annum. Monthly principal and interest payments under the PacSun Stores Note commenced on October 1, 2010, and are $87,777. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the PacSun Stores Note, and any accrued but unpaid interest thereon (estimated to be $11.2 million), will be due in full on September 1, 2017. The PacSun Stores Note is secured by a mortgage on the Company’s leasehold interest in the building and land comprising the Company’s distribution center in Olathe, Kansas, and is unconditionally guaranteed by the Company. The PacSun Stores Note does not contain any financial covenants. PacSun Stores paid a prepayment fee to Anico equal to 1% of the principal amount of the PacSun Stores Note on the closing date of the transaction. As a result, PacSun Stores may prepay the PacSun Stores Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.

The Company recorded interest expense of $3.2 million and $1.2 million during the third quarter of fiscal 2012 and 2011, respectively, and $10.0 million and $2.3 million during the first three quarters of fiscal 2012 and 2011, respectively.

7. INCOME TAXES

The provisions codified within ASC 740 require companies to assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. In accordance with ASC 740, a full valuation allowance was established during the fourth quarter of fiscal 2009 and continues to be maintained on all federal and the majority of state deferred tax assets. Remaining net state deferred tax assets of approximately $5 million were not reserved as the Company concluded it is more likely than not that these net deferred tax assets would be utilized before expiration. The Company has discontinued recognizing federal and certain state income tax benefits until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets.

The Company continues to monitor whether an ownership change has occurred under Internal Revenue Code Section 382 (“Section 382”). Based on available information at the reporting date, the Company believes it has not experienced an ownership change through the quarter ended October 27, 2012. The determination of whether or not an ownership change under Section 382 has occurred requires the Company to evaluate certain acquisitions and dispositions of ownership interests over a rolling three-year period. As a result, future acquisitions and dispositions could result in an ownership change of the Company under Section 382. If an ownership change were to occur, the Company’s ability to utilize federal net operating loss carryforwards could be significantly limited.

8. SHAREHOLDERS’ EQUITY

Common Stock

In connection with certain lease modifications during fiscal 2011, the Company issued 900,000 shares of its common stock to one of its landlords. The fair value on the date of issuance was approximately $1.6 million, which is being amortized on a straight-line basis as a component of occupancy costs over the respective rent reduction period.

Preferred Stock

In conjunction with the Term Loan, the Company issued the Series B Preferred to an affiliate of Golden Gate Capital which, based on the initial conversion ratio, gives that affiliate the right to purchase up to 13.5 million shares of the Company’s common stock. The Series B Preferred shares have an exercise price initially equal to $1.75 per share of the Company’s underlying common stock. The initial holder of the Series B Preferred is entitled to customary registration rights with respect to the underlying common stock. See Note 9, “Fair Value Measurements – Recurring Fair Value Measurements” for further discussion on the accounting treatment of the Series B Preferred.

 

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Stock-Based Compensation

The Company maintains two stock-based incentive plans: (1) the 2005 Performance Incentive Plan (the “Performance Plan”) and (2) the amended and restated Employee Stock Purchase Plan (the “ESPP”). The types of awards that may be granted under the Performance Plan include stock options, stock appreciation rights, restricted stock, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock. Persons eligible to receive awards under the Performance Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the Performance Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and stock appreciation rights under the Performance Plan is ten years after the grant date of the award. As of October 27, 2012, the maximum number of shares of the Company’s common stock that was available for award grants under the Performance Plan was 2.3 million shares. Any shares subject to awards under prior stock plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will become available for other award grants under the Performance Plan. The Performance Plan will terminate on March 22, 2015, unless terminated earlier by the Company’s Board of Directors.

The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, “Stock Compensation” (“ASC 718”). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock options. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company’s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company’s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company’s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares issued under the ESPP.

Stock Options

The fair value of the Company’s stock-based compensation activity was determined using the following weighted- average assumptions:

 

     For the Three Quarters Ended
     October 27, 2012   October 29, 2011
     Stock Options   ESPP   Stock Options   ESPP

Expected life

   4 years   0.5 years   4 years   0.5 years

Expected volatility

   87% - 88%   71%   83% - 84%   54%

Risk-free interest rate

   0.53% - 0.92%   0.15%   0.67% - 1.61%   0.20%

Expected dividends

   $—     $—     $—     $—  

Under the Performance Plan, incentive and nonqualified stock options have been granted to employees and directors to purchase common stock at prices equal to the fair value of the Company’s shares at the respective grant dates. A summary of stock option (incentive and nonqualified) activity for the first three quarters of fiscal 2012 is presented below:

 

     Shares     Weighted-
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term (Yrs.)
     Aggregate
Intrinsic
Value
($000s)
 

Outstanding at January 28, 2012

     2,990,501      $ 6.61         

Granted

     20,500        1.71         

Exercised

     (143,900     1.64         

Forfeited or expired

     (370,549     12.33         
  

 

 

         

Outstanding at October 27, 2012

     2,496,552      $ 6.02         3.7       $ 20   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest at October 27, 2012

     2,369,495      $ 6.14         3.7       $ 18   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at October 27, 2012

     1,440,601      $ 7.58         3.2       $ 12   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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The weighted-average grant-date fair value per share of options granted during the first three quarters of fiscal 2012 and 2011 was $1.71 and $1.84, respectively. There were 143,900 and 70,825 stock options exercised during the first three quarters of fiscal 2012 and 2011, respectively. The total intrinsic value of options exercised during each of the first three quarters of fiscal 2012 and 2011 was $0.1 million.

Restricted Stock Awards

A summary of service-based restricted stock awards activity under the Performance Plan for the first three quarters of fiscal 2012 is presented in the following table. Except as described below, such restricted stock awards contain a service-based restriction as to vesting. These awards generally vest over four years with 25% of the grant vesting each year on the anniversary of the grant date.

 

     Shares     Weighted-
Average
Grant-Date
Fair Value
 

Outstanding at January 28, 2012

     765,523      $ 3.91   

Granted

     1,505,782        1.76   

Vested

     (185,570     4.38   

Forfeited or expired

     (267,511     3.06   
  

 

 

   

Outstanding at October 27, 2012

     1,818,224      $ 2.21   
  

 

 

   

 

 

 

The weighted-average grant-date fair value per share of service-based restricted stock awards granted during the first three quarters of 2012 and 2011 was $1.76 and $3.51, respectively. The total fair value of awards vested during the first three quarters of fiscal 2012 and 2011 was $0.5 million and $0.9 million, respectively.

During the first three quarters of fiscal 2012, the Company granted 675,000 performance-based restricted stock awards which only vest upon the achievement of certain financial targets. The weighted-average grant-date fair value per share of performance-based restricted stock awards granted during the first three quarters of fiscal 2012 was $1.77. There were no performance-based restricted stock awards granted during the first three quarters of fiscal 2011.

Restricted Stock Units

A summary of restricted stock units activity under the Performance Plan for the first three quarters of fiscal 2012 is presented below. Restricted stock units contain a service-based restriction as to vesting. These awards generally vest 100% on the first anniversary of the grant date.

 

     Shares     Weighted-
Average
Grant-Date
Fair Value
 

Outstanding at January 28, 2012

     150,000      $ 3.19   

Granted

     125,000        1.57  

Vested

     (125,000     3.19   

Forfeited or expired

     (25,000     3.19   
  

 

 

   

Outstanding at October 27, 2012

     125,000      $ 1.57   
  

 

 

   

 

 

 

Stock-based compensation expense recognized related to nonvested stock options, restricted stock awards and restricted stock units during each of the third quarters of fiscal 2012 and 2011 was $0.6 million and $0.8 million, respectively, and during the first three quarters of fiscal 2012 and 2011, was $2.1 million and $2.5 million, respectively.

At October 27, 2012, the Company had approximately $3.6 million of stock-based compensation cost related to nonvested stock options, service-based restricted stock awards and restricted stock units expected to be recognized over a weighted-average period of approximately 2.5 years, and $0.5 million of stock-based compensation cost related to certain performance-based restricted stock awards, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Employee Stock Purchase Plan (“ESPP”)

The Company’s ESPP provides a method for Company employees to voluntarily purchase Company common stock at a 10% discount from fair market value as of the beginning or the end of each six-month purchasing period, whichever is lower. The ESPP covers substantially all employees who have three months of service with the Company, excluding senior executives.

 

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The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.

During the first three quarters of fiscal 2012 and 2011, the Company issued 114,897 and 95,798 shares at an average price of $1.58 and $2.35, respectively, under the ESPP.

9. FAIR VALUE MEASUREMENTS

The Company measures its financial assets and liabilities at fair value on a recurring basis and measures its nonfinancial assets and liabilities at fair value as required or permitted.

Fair value is defined as the price that would be received pursuant to the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. In order to determine the fair value of certain assets and liabilities, the Company applies the three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. The hierarchy is as follows:

 

   

Level 1 — quoted prices for identical instruments in active markets.

 

   

Level 2 — inputs other than Level 1 inputs, which are observable either directly or indirectly.

 

   

Level 3 — unobservable inputs.

Level 3 assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may result in a significantly lower or higher fair value measurement.

Recurring Fair Value Measurements

Derivative Liability

The Series B Preferred shares are required to be measured at fair value each reporting period. The fair value of the Series B Preferred shares was estimated using an option pricing model that requires Level 3 inputs, which are highly subjective and determined using the following significant assumptions:

 

     October 27, 2012     July 28. 2012  

Conversion price

   $ 1.75      $ 1.75   

Expected volatility

     66     66

Expected term (in years)

     9.1        9.3   

Risk free interest rate

     1.86     1.58

Expected dividends

   $ —        $ —     

The following table presents the activity recorded for the derivative liability during the first three quarters ended:

 

     October 27, 2012  
     (In thousands)  

Beginning balance as of January 28, 2012

   $ 20,076   

Gain on change in fair value

     (6,333
  

 

 

 

Balance as of April 28, 2012

     13,743   

Loss on change in fair value

     8,219   
  

 

 

 

Balance as of July 28, 2012

   $ 21,962   

Gain on change in fair value

     (5,558
  

 

 

 

Ending balance as of October 27, 2012

   $ 16,404   
  

 

 

 

The derivative liability is included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet. Changes in the fair value of the derivative liability are included in (gain) loss on derivative liability in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Operations.

Money Market Funds

As of October 27, 2012, and January 28, 2012, the Company had approximately $10.0 million and $19.8 million held in money market funds, respectively. The fair value of money market funds is determined based on Level 1 inputs which consist of quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. Money market funds are included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheet.

 

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Non-Recurring Fair Value Measurements

On a non-recurring basis, using a discounted cash flow model, the Company measures certain of its long-lived assets at fair value based on Level 3 inputs including, but not limited to, moderate comparable store sales and margin growth, projected operating costs based primarily on historical trends, and an estimated weighted-average cost of capital rate. During the first three quarters of fiscal 2012 and 2011 the Company recorded $4.1 million and $12.8 million of impairment charges, respectively, in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations.

10. COMMITMENTS AND CONTINGENCIES

Litigation

Charles Pfeiffer, individually and on behalf of other aggrieved employees vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corp., Superior Court of California, County of Riverside, Case No. 1100527. On January 13, 2011, the plaintiff in this matter filed a lawsuit against the Company under California’s private attorney general act alleging violations of California’s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

Tamara Beeney, individually and on behalf of other members of the general public similarly situated vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corporation, Superior Court of California, County of Orange, Case No. 30-2011-00459346-CU-OE-CXC. On March 18, 2011, the plaintiff in this matter filed a putative class action lawsuit against the Company alleging violations of California’s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks class certification, the appointment of the plaintiff as class representative, and an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain, no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

The Company is also involved from time to time in other litigation incidental to its business. The Company believes that the outcome of current litigation will not likely have a material adverse effect on its results of operations or financial condition and, from time to time, the Company 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 effect on the Company’s operating results.

Indemnities, Commitments and Guarantees

During the normal course of business, the Company agreed to certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities, commitments and guarantees 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.

Letters of Credit

The Company has issued guarantees in the form of commercial letters of credit, of which there were approximately $26 million outstanding at October 27, 2012, as security for merchandise shipments from overseas. All in-transit merchandise covered by letters of credit is accrued for in accounts payable.

 

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11. SEGMENT REPORTING

The Company operates exclusively in the retail apparel industry. The Company designs, produces and distributes clothing and related products catering to teens and young adults through its primarily mall-based PacSun retail stores. The Company has identified three operating segments: PacSun stores, PacSun Outlet stores and pacsun.com. The three operating segments have been aggregated into one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers, and economic characteristics among the three operating segments.

12. DISCONTINUED OPERATIONS

In accordance with ASC Topic 205, “Presentation of Financial Statements- Discontinued Operations” (“ASC 205”), the Company has presented the results of operations of its closed stores as discontinued operations for all periods presented. The Company closed 6 and 1 underperforming stores in the third quarter of fiscal 2012 and 2011, respectively, and during the first three quarters of fiscal 2012 and 2011, the Company closed 14 and 32 underperforming stores, respectively. If the cash flow of the closed store was determined not to be significant to ongoing operations, and the cash inflows of nearby stores were not expected to increase significantly, the results of operations of the closed store are included in discontinued operations. The following table details the operating results included in discontinued operations for the periods presented:

 

     For the Third Quarter Ended
October 29, 2011
    For the Three Quarters Ended
October 29, 2011
 

Net sales

   $ 15,225      $ 43,081   

Cost of goods sold, including buying, distribution and occupancy costs

     11,970        35,386   
  

 

 

   

 

 

 

Gross margin

     3,255        7,695   

Selling, general and administrative expenses

     6,938        16,121   
  

 

 

   

 

 

 

Operating loss

     (3,683     (8,426

Income tax benefit

     94        217   
  

 

 

   

 

 

 

Loss from discontinued operations

   $ (3,589   $ (8,209
  

 

 

   

 

 

 

 

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

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Report.

Cautionary Note Regarding Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements be subject to the safe harbors created thereby. In Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended January 28, 2012 (our “Annual Report”), as amended by Amendment No. 1 to our Annual Report, filed April 10, 2012 (our Annual Report, as amended, our “2011 Annual Report”), we provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in the forward-looking statements contained herein. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance (often, but not always, identifiable by 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. Examples of forward-looking statements in this Report include, but are not limited to, the following categories of expectations about:

 

   

the sufficiency of operating cash flows, working capital and available credit to meet our operating and capital expenditure requirements;

 

   

our capital expenditure plans for fiscal 2012; and

 

   

potential recording of non-cash impairment charges for underperforming stores in future quarters.

All forward-looking statements included in this Report are based on information available to us as of the date hereof, and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. See Item 1A, Risk Factors, in our 2011 Annual Report, which are hereby incorporated by reference in this Report for a discussion of these risks and uncertainties. We assume no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made.

Executive Overview

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

Comparable (or “same-store”) sales

Stores are deemed comparable stores on the first day of the fiscal month following the one-year anniversary of their opening or expansion/relocation. We consider same-store sales to be an important indicator of the Company’s current 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 usually generate greater operating leverage of expenses while negative same-store sales results generally have a negative impact on operating leverage. Same-store sales results also have a direct impact on our net sales, cash and working capital.

Net merchandise margin

We analyze the components of net merchandise margins, specifically initial markups, discounts 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 discounts or 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. For a discussion of the changes in the components comprising operating margins, see “Results of Operations” in this section.

 

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Store sales trends

We evaluate store sales trends in assessing the operational performance of our stores. Important store sales trends include average net sales per store, average net sales per square foot and number of transactions.

Cash flow and liquidity (working capital)

We evaluate cash flow from operations, liquidity and working capital to determine our short-term operational financing needs. Based on current forecasts, we believe that cash flows from operating activities, working capital, borrowing availability under the New Credit Facility, and cash on hand resulting from the closing of the Term Loan will be sufficient to meet our operating and capital expenditure needs for the next twelve months. However, if we were to experience same-store sales declines similar to those which occurred in fiscal 2010 and 2009, we may have to access most, if not all, of the New Credit Facility and potentially require other sources of financing to fund our operations, which sources might not be available. For a discussion of the changes in our operating cash flows and working capital, see “Liquidity and Capital Resources” in this section.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2011 Annual Report.

Results of Operations

Continuing Operations

The following table sets forth selected income statement data from our continuing operations expressed as a percentage of net sales for the fiscal years indicated. The table excludes discontinued operations and the discussion that follows should be read in conjunction with the table:

 

     For the Third Quarter Ended     For the Three Quarters Ended  
     October 27, 2012     October 29, 2011     October 27, 2012     October 29, 2011  

Net sales

     100.0     100.0     100.0     100.0

Cost of goods sold, including buying, distribution and occupancy costs

     73.4        75.6        73.9        77.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     26.6        24.4        26.1        22.7   

Selling, general and administrative expenses

     27.2        30.2        30.2        32.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (0.5     (5.8     (4.1     (9.5

Gain on derivative liability

     (2.4     —          (0.6     —     

Other expense, net

     1.4        0.5        1.6        0.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     0.5        (6.3     (5.1     (9.9

Income tax expense (benefit)

     0.0        (0.1     0.1        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     0.4     (6.2 )%      (5.2 )%      (10.0 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

The third quarter (13 weeks) ended October 27, 2012 as compared to the third quarter (13 weeks) ended October 29, 2011

Net Sales

Net sales increased to $228.4 million for the third quarter of fiscal 2012 from $226.8 million for the third quarter of fiscal 2011. The components of this $1.6 million increase in net sales are as follows:

 

$ millions

    

Attributable to

$ 0.6      

A 1% increase in comparable store net sales in the third quarter of fiscal 2012 and a 3% increase in average sales transactions, partially offset by a decrease in total transactions of 2%.

  1.0      

Increase primarily in other non-comparable sales, including sales from expanded, relocated or new stores not yet included in the comparable store base.

 

 

    
$ 1.6      

Total

 

 

    

 

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For the third quarter of fiscal 2012, comparable store net sales of Men’s was flat and Women’s increased 2%, respectively. For Men’s, increased sales of tops and non-apparel were offset by decreases in sales of bottoms, compared to the third quarter of fiscal 2011. The increase in Women’s was primarily driven by higher sales of bottoms and non-apparel, partially offset by decreases in sales of tops, compared to the third quarter of fiscal 2011. Apparel represented 87% of total Women’s sales for the third quarter of fiscal 2012 versus 86% in the third quarter of fiscal 2011, while Men’s apparel represented 86% of total Men’s sales for the third quarter of fiscal 2012 versus 87% in the third quarter of fiscal 2011. Total non-apparel sales represented a combined 14% of total sales for the third quarter of both fiscal 2012 and fiscal 2011. In addition, same-store sales transactions decreased from 4.5 million in the third quarter of fiscal 2011 to 4.4 million in the third quarter of fiscal 2012.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, was $60.8 million for the third quarter of fiscal 2012 versus $55.4 million for the third quarter of fiscal 2011. As a percentage of net sales, gross margin was 26.6% for the third quarter of fiscal 2012 compared to 24.4% for the third quarter of fiscal 2011. The components of this 2.2% increase in gross margin as a percentage of net sales were as follows:

 

%

    

Attributable to

  1.8      

Increase in merchandise margin to 49.0% in the third quarter of fiscal 2012 from 47.2% in the third quarter of fiscal 2011, primarily due to an increase in initial markups and a decrease in promotions, partially offset by a one-time store closure charge of 80 basis points for markdown allowances.

  0.1      

Leveraging of occupancy costs as a result of the 1% same-store sales increase for the third quarter of fiscal 2012 discussed above and a reduction in rent expense related to negotiations with our landlords.

  0.3      

Decrease in distribution costs as compared to the third quarter of fiscal 2011.

 

 

    
  2.2      

Total

 

 

    

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) was $62.1 million for the third quarter of fiscal 2012 compared to $68.4 million for the third quarter of fiscal 2011. These expenses decreased to 27.2% as a percentage of net sales in the third quarter of fiscal 2012 from 30.2% in the third quarter of fiscal 2011. The components of this 3.0% decrease in SG&A as a percentage of net sales were as follows:

 

%

   

Attributable to

  0.7     

Increase in payroll and payroll-related expenses as a percentage of net sales. Payroll expense increased $2 million to $39 million in the third quarter of fiscal 2012 from $37 million in the third quarter of fiscal 2011 due primarily to an increase in employee benefits.

  (0.8  

Decrease in depreciation expense to $8 million in the third quarter of fiscal 2012 from $9 million in the third quarter of fiscal 2011 due primarily to recent store closures.

  (1.8  

Decrease in non-cash asset impairment charges and store closure related charges to $1 million in the third quarter of fiscal 2012 from $5 million in the third quarter of fiscal 2011.

  (1.1  

Decrease in all other SG&A expenses as a percentage of sales. Other SG&A expenses decreased $2 million to $15 million in the third quarter of fiscal 2012 from $17 million in the third quarter of fiscal 2011, primarily due to the timing of advertising expenses and a decrease in consulting fees.

 

 

   
  (3.0)     

Total

 

 

   

 

17


Table of Contents

We assess long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets (or asset group) may not be recoverable. Based on management’s review of the historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of our stores, we determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover our investment in the respective stores. As a result, we recorded non-cash impairment charges from continuing operations of approximately $1 million during the third quarter of fiscal 2012 and approximately $4 million during the third quarter of fiscal 2011 to write-down the carrying value of certain long-lived store assets to their estimated fair values. During the third quarters of fiscal 2012 and 2011, we tested 101 and 221 stores, respectively, for impairment and recorded impairment charges related to 17 and 64 of these stores, respectively. The decrease in the number of stores tested for impairment year-over-year was primarily related to our recent closure of certain underperforming stores. In addition, based on historical operating performance and the projected outlook for these stores, we believe that the remaining asset value of approximately $6 million as of October 27, 2012, is recoverable.

Gain on Derivative Liability

We recorded a fair market adjustment of approximately $6 million related to the derivative liability in the third quarter of fiscal 2012. See Note 9 to the Condensed Consolidated Financial Statements “Fair Value Measurements – Recurring Fair Value Measurements-Derivative Liability” for further discussion on the derivative liability.

Other Expense, Net

Other expense, net, was approximately $3 million and $1 million for the third quarters of fiscal 2012 and 2011, respectively. The increase in other expense, net, from fiscal 2011 to fiscal 2012 is primarily related to interest expense associated with the Term Loan described in Note 6 to the Condensed Consolidated Financial Statements.

Income Taxes

We recognized income tax expense of $0.1 million and an income tax benefit of $0.2 million for the third quarter of fiscal 2012 and 2011, respectively. For fiscal 2012, we expect to continue to maintain a valuation allowance against deferred tax assets resulting in minimal income tax expense for the year. Information regarding the realizability of our deferred tax assets and our assessment of a need for a valuation allowance is contained in Note 7 to the Condensed Consolidated Financial Statements.

Income (loss) from Continuing Operations

Our income from continuing operations for the third quarter of fiscal 2012 was approximately $1 million, or $0.01 per diluted share, versus a loss from continuing operations of approximately $14 million, or $(0.21) per diluted share, for the third quarter of fiscal 2011. Income for the third quarter of fiscal 2012 included a gain on the derivative liability of approximately $6 million as discussed in Note 9 to the Condensed Consolidated Financial Statements.

The first three quarters (39 weeks) ended October 27, 2012 as compared to the first three quarters (39 weeks) ended October 29, 2011

Net Sales

Net sales increased to $612.6 million for the first three quarters of fiscal 2012 from $599.6 million for the first three quarters of fiscal 2011. The components of this $13.0 million increase in net sales are as follows:

 

$ millions

    

Attributable to

$ 10.2      

A 2% increase in comparable store net sales in the first three quarters of fiscal 2012 and an increase in average sales transactions of 5%, partially offset by a decrease in total transactions of 3%.

  2.8      

Increase primarily in other non-comparable sales, including sales from expanded, relocated or new stores not yet included in the comparable store base.

 

 

    
$ 13.0      

Total

 

 

    

 

18


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For the first three quarters of fiscal 2012, comparable store net sales of Men’s and Women’s increased 3% and 2%, respectively. The increase in Men’s was attributable to increases in sales of bottoms and non-apparel, compared to the first three quarters of fiscal 2011. The increase in Women’s was driven by increases in sales of bottoms and non-apparel, partially offset by decreases in sales of tops, compared to the first three quarters of fiscal 2011. Apparel represented 85% of total Men’s sales for the first three quarters of fiscal 2012 versus 86% in the first three quarters of fiscal 2011, while Women’s apparel was flat at 86% of total Women’s sales for the first three quarters of fiscal 2012 and fiscal 2011. Total non-apparel sales represented a combined 15% of total sales for the first three quarters of fiscal 2012 and 14% of total sales for the first three quarters of fiscal 2011. Same-store sales transactions decreased from 13.3 million in the first three quarters of fiscal 2011 to 12.9 million in the first three quarters of fiscal 2012.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, was $159.6 million for the first three quarters of fiscal 2012 versus $135.9 million for the first three quarters of fiscal 2011. As a percentage of net sales, gross margin was 26.1% for the first three quarters of fiscal 2012 compared to 22.7% for the first three quarters of fiscal 2011. The components of this 3.4% increase in gross margin as a percentage of net sales were as follows:

 

%

    

Attributable to

  2.0      

Increase in merchandise margin to 50.4% in the first three quarters of fiscal 2012 from 48.4% in the first three quarters of fiscal 2011, primarily due to an increase in initial markups and a decrease in promotions, partially offset by a one-time store closure charge of 30 basis points for markdown allowances.

  1.0      

Leveraging of occupancy costs as a result of the 2% same-store sales increase for the first three quarters of fiscal 2012 discussed above and a reduction in rent expense related to negotiations with our landlords.

  0.4      

Decrease in distribution costs as compared to the third quarter of fiscal 2011.

 

 

    
  3.4      

Total

 

 

    

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) decreased to $184.9 million for the first three quarters of fiscal 2012 from $193.2 million for the first three quarters of fiscal 2011, a decrease of $8.3 million, or 4.3%. These expenses decreased to 30.2% as a percentage of net sales in the first three quarters of fiscal 2012 from 32.2% in the first three quarters of fiscal 2011. The components of this 2.0% decrease in SG&A as a percentage of net sales were as follows:

 

%

   

Attributable to

  0.8     

Increase in payroll and payroll-related expenses as a percentage of net sales. Payroll expense increased $7 million to $115 million in the first three quarters of fiscal 2012 from $108 million in the first three quarters of fiscal 2011, primarily due to an increase in employee benefits.

  (0.8  

Decrease in depreciation expense to $25 million in the first three quarters of fiscal 2012 from $29 million in the first three quarters of fiscal 2011 due primarily to recent store closures.

  (1.0  

Decrease in non-cash asset impairment charges and store closure related charges to $4 million in the first three quarters of fiscal 2012 from $10 million in the first three quarters of fiscal 2011.

  (1.0  

Decrease in all other SG&A expenses as a percentage of sales. Other SG&A decreased $5 million to $42 million in the first three quarters of fiscal 2012 from $47 million in the first three quarters of fiscal 2011, primarily due to a decrease in consulting costs and credit card processing fees, as well as the timing of advertising expenses.

 

 

   
  (2.0  

Total

 

 

   

 

19


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We assess long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets (or asset group) may not be recoverable. Based on management’s review of the historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of our stores, we determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover our investment in the respective stores. As a result, we recorded non-cash impairment charges from continuing operations of approximately $3 million and $10 million during the first three quarters of fiscal 2012 and 2011, respectively, to write-down the carrying value of certain long-lived store assets to their estimated fair values. Additionally, the Company wrote off approximately $0.9 million of excess store fixtures in the first three quarters of fiscal 2012.

Loss on Derivative Liability

We recorded a fair market adjustment of approximately $4 million related to the derivative liability in the first three quarters of fiscal 2012. See Note 9 to the Condensed Consolidated Financial Statements “Fair Value Measurements – Recurring Fair Value Measurements-Derivative Liability” for further discussion on the derivative liability.

Other Expense, Net

Other expense, net, was approximately $10 million and $2 million for the first three quarters of fiscal 2012 and 2011, respectively. The increase in other expense, net, from fiscal 2011 to fiscal 2012 was primarily related to interest expense associated with the Term Loan described in Note 6 to the Condensed Consolidated Financial Statements.

Income Taxes

We recognized income tax expense of $0.6 million and $0.5 million for the first three quarters of fiscal 2012 and 2011, respectively. For fiscal 2012, we expect to continue to maintain a valuation allowance against deferred tax assets resulting in minimal income tax expense for the year. Information regarding the realizability of our deferred tax assets and our assessment of a need for a valuation allowance is contained in Note 7 to the Condensed Consolidated Financial Statements.

Loss from Continuing Operations

Our loss from continuing operations for the first three quarters of fiscal 2012 was approximately $32 million, or $(0.48) per diluted share, versus a loss from continuing operations of approximately $60 million, or $(0.91) per diluted share, for the first three quarters of fiscal 2011.

Liquidity and Capital Resources

We have historically financed our operations primarily from internally generated cash flow and with short-term and long-term borrowings. Our primary cash requirements have been for the financing of inventories and construction of newly opened, remodeled, expanded or relocated stores. Based on current forecasts, we believe that cash flows from operating activities, working capital, borrowing availability under the New Credit Facility, and cash on hand resulting from the closing of the Term Loan will be sufficient to meet our operating and capital expenditure needs for the next twelve months. However, if we were to experience same-store sales declines similar to those which occurred in fiscal 2010 and 2009, we may be required to access most, if not all, of the New Credit Facility and potentially require other sources of financing to fund our operations, which sources might not be available.

 

     For the Three Quarters Ended  
     October 27, 2012     October 29, 2011  
     (In thousands)  

Net cash used in operating activities

   $ (21,621   $ (45,262

Net cash used in investing activities

     (3,096     (9,865

Net cash used in financing activities

     (1,780     (303
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

   $ (26,497   $ (55,430
  

 

 

   

 

 

 

 

20


Table of Contents

Operating Cash Flows

Net cash used in operating activities in the first three quarters of fiscal 2012 was $21.6 million, compared to $45.3 million for the first three quarters of fiscal 2011. This decrease of $23.7 million was due primarily to higher sales and improved gross margins in the current fiscal year. Our primary use of cash in the first three quarters of fiscal 2012 and 2011 was to purchase merchandise inventories, and was partially offset by increases in accounts payable. Such increases resulted from the seasonal variation between the ramp up for the holiday season and the annual low point for inventories at the end of our fiscal year. Non-cash adjustments to reconcile our net loss to net cash used in operating activities was approximately $30 million in the first three quarters of fiscal 2012 and $48 million in fiscal 2011, respectively, and were primarily related to depreciation expense and asset impairment charges in both periods.

Working Capital

Working capital at October 27, 2012, was $50 million compared to $62 million at January 28, 2012, a decrease of $12 million. The changes in working capital were as follows:

 

$ millions

   

Description

$ 62     

Working capital at January 28, 2012.

  (26  

Decrease in cash and cash equivalents.

  20     

Increase in merchandise inventories, net of accounts payable, from fiscal year end due to planned receipt flows.

  (6  

Increase in other current liabilities, net of other current assets.

 

 

   
$ 50     

Working capital at October 27, 2012.

 

 

   

Investing Cash Flows

Net cash used in investing activities in the first three quarters of fiscal 2012 was $3.1 million compared to $9.9 million used in investing activities for the first three quarters of fiscal 2011, a decrease in cash outflow of $6.8 million. Investing cash outflows in the first three quarters of fiscal 2012 and 2011 were comprised primarily of capital expenditures for refreshing existing stores and information technology investments at the store level and associated with our new online platform. We expect total capital expenditures for fiscal 2012 to be approximately $15 million which is consistent with fiscal 2011. Investing cash inflows of $9 million in the first three quarters of fiscal 2012 were primarily related to the receipt of restricted cash that was used as collateral to fund letters of credit outstanding under the Former Credit Facility.

Financing Cash Flows

Net cash used in financing activities in the first three quarters of fiscal 2012 was $1.8 million compared to $0.3 million for the first three quarters of fiscal 2011. The primary source of financing cash outflows in the first three quarters of fiscal 2012 was principal payments under the New Credit Facility of $1.3 million. The primary driver of financing cash outflows in fiscal 2011 was payments for mortgage borrowing costs.

New Credit Facility

Information regarding the New Credit Facility is contained in Note 6 to the Condensed Consolidated Financial Statements and is incorporated herein by reference.

Term Loan

Information regarding the Term Loan is contained in Note 6 to the Condensed Consolidated Financial Statements and is incorporated herein by reference.

 

21


Table of Contents

Mortgage Transactions

Information regarding our mortgage debt is contained in Note 6 to the Condensed Consolidated Financial Statements and is incorporated herein by reference.

Contractual Obligations

We have minimum annual rental commitments under existing store leases as well as a minor amount of capital leases for computer equipment. We lease all of our retail store locations under operating leases. We lease equipment, from time to time, under both capital and operating leases. In addition, at any time, we are contingently liable for commercial letters of credit with foreign suppliers of merchandise. At October 27, 2012, our future financial commitments under all existing contractual obligations were as follows:

 

     Payments Due by Period  
     Total      Less
than 1
year
     1-3
years
     3-5
years
     More
than 5
years
 
     (In millions)  

Operating lease obligations

   $ 352       $ 75       $ 129       $ 82       $ 66   

Term loan

     103         3         8         92         —     

Mortgage debt

     29         1         1         1         26   

Letters of credit

     26         26         —           —           —     

Guaranteed minimum royalties

     4         2         2         —           —     

Capital lease obligations

     1         1         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 515       $ 108       $ 140       $ 175       $ 92   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating lease obligations consist primarily of future minimum lease commitments related to store operating leases. The contractual obligations table above does not include common area maintenance (“CAM”) charges, insurance, or tax obligations, which are also required contractual obligations 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 the first three quarters of fiscal 2012 and fiscal 2011 were approximately $105 million and $119 million, respectively. Total CAM expenses may continue to fluctuate significantly from year-to-year as long-term leases come up for renewal at current market rates in excess of original lease terms and as we continue to close stores. Additional information regarding operating leases can be found below under the caption “Operating Leases.”

Obligations under our Executive Deferred Compensation Plan are equal to approximately $2 million as of October 27, 2012 and have been excluded from the contractual obligations table above as we are unable to reasonably determine the amount or the timing of the future payments.

Operating Leases

We lease our retail stores and certain equipment under operating lease agreements expiring at various dates through January 2023. Many of our retail store leases require us to pay CAM charges, insurance and property taxes. In addition, many of our retail store leases require us to pay percentage rent ranging from 2% to 20% when sales volumes exceed certain minimum sales levels. The initial terms of such leases are typically 8 to 10 years, some 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 life of the lease. Other rent escalation clauses can take effect based on changes in primary mall tenants throughout the term of a given lease. Many leases also contain cancellation or kick-out clauses in our favor that relieve us of any future obligation under a lease if specified criteria are met. These cancellation provisions typically apply if annual store sales levels do not exceed $1 million or mall occupancy targets are not achieved within the first 36 months of the lease. Generally, we are not required to make payments to our landlords in order to exercise our cancellation rights under these provisions. We are planning to close approximately 75 stores in the fourth quarter of fiscal 2012. The New Credit Facility and Term Loan do not preclude the transfer or disposal of assets related to the closure of such stores. None of our retail store leases contain purchase options.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain of our officers that will

 

22


Table of Contents

require us to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers in certain circumstances.

It is not possible to determine our maximum potential liability under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is contained in Note 3 to the Condensed Consolidated Financial Statements and is incorporated herein by reference.

Inflation

We do not believe that inflation has had a material effect on our results of operations in the recent past, including the first three quarters of fiscal 2012.

Seasonality and Quarterly Results

Our business is seasonal by nature. 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 recent years, approximately 45% of our net sales have occurred in the first half of the fiscal year and 55% have occurred in the second half. The six to seven week selling periods for each of the back-to-school and holiday seasons together account for approximately 35% to 40% of our annual net sales and a higher percentage of our operating results on a combined basis. Our quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including changes in consumer buying patterns, fashion trends, the timing and level of markdowns, the timing of store closings, expansions and relocations, competitive factors and general economic conditions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to interest rate risk in connection with the New Credit Facility. Generally, direct borrowings under the New Credit Facility bear interest at a floating rate which, at the Company’s option, may be determined by reference to a LIBOR rate, plus 1.50% (1.71% at October 27, 2012). See Note 6 to the Condensed Consolidated Financial Statements.

A sensitivity analysis was performed with respect to the New Credit Facility to determine the impact of unfavorable changes in interest rates on our cash flows. The sensitivity analysis determined that the estimated potential cash flow impact would be less than $10,000 in additional interest expense (for each $1 million borrowed) if interest rates were to increase by 10% over a three-month period. Actual interest charges incurred may differ from those estimated because of changes or differences in market rates, differences in amounts borrowed, timing and other factors.

We are exposed to market risks related to fluctuations in the market price of our common stock. The derivative liability associated with the Series B Preferred is recorded at fair value using an options pricing model which is dependent on the market price of our common stock. Changes in the value of the derivative are included as a component of earnings in current operations. A sensitivity analysis was performed with respect to the Series B Preferred to determine the impact of fluctuations in the market price of our common stock. The sensitivity analysis determined that the impact of a market price fluctuation of 10% would change the fair value of the derivative liability by approximately $2 million. See Note 9 to the Condensed Consolidated Financial Statements for further discussion of our derivative liability and valuation thereof.

 

23


Table of Contents

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) and 15d-15(e) promulgated under the Exchange Act. These disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures are also designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of October 27, 2012.

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 10 to the Condensed Consolidated Financial Statements, which information is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We have included in Part I, Item 1A of our 2011 Annual Report descriptions of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). We believe there are no material changes from the disclosure provided in our 2011 Annual Report with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to the Company’s stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

 

24


Table of Contents

ITEM 6. EXHIBITS

 

         Incorporated by
Reference

Exhibit #

 

Exhibit Description

   Form    Filing Date
    3.1   Third Amended and Restated Articles of Incorporation of the Company    10-Q    8/31/04
    3.2   Certificate of Determination of Preferences of Series A Junior Participating Preferred Stock of the Company    8-K    12/24/98
    3.3   Fifth Amended and Restated Bylaws of the Company    8-K    4/3/09
    3.4   Certificate of Determination of Preferences of Convertible Series B Preferred Stock of the Company.    8-K    12/7/11
  31.1+   Certifications of Gary H. Schoenfeld and Michael W. Kaplan pursuant to section 302 of the Sarbanes-Oxley Act of 2002      
  32.1+   Certifications of Gary H. Schoenfeld and Michael W. Kaplan pursuant to section 906 of the Sarbanes-Oxley Act of 2002      
101.INS**   XBRL Instance Document      
101.SCH**   XBRL Taxonomy Extension Schema Document      
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document      
101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document      
101.LAB**   XBRL Taxonomy Extension Label Linkbase Document      
101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document      

 

+ Filed herewith
** These interactive files are deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and are otherwise not subject to liability under these sections.

 

25


Table of Contents

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: December 4, 2012   By:  

/s/ GARY H. SCHOENFELD

    Gary H. Schoenfeld
    President, Chief Executive Officer and Director
    (Principal Executive Officer)
Date: December 4, 2012   By:  

/s/ MICHAEL W. KAPLAN

    Michael W. Kaplan
    Sr. Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

26

EX-31.1 2 d416440dex311.htm 302 CERTIFICATIONS 302 Certifications

EXHIBIT 31.1

CERTIFICATIONS

I, Gary H. Schoenfeld, 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: December 4, 2012  

/s/ GARY H. SCHOENFELD

  Gary H. Schoenfeld
  President, Chief Executive Officer and Director


CERTIFICATIONS

I, Michael W. Kaplan, 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: December 4, 2012  

/s/ MICHAEL W. KAPLAN

  Michael W. Kaplan
  Sr. Vice President and Chief Financial Officer
EX-32.1 3 d416440dex321.htm 906 CERTIFICATION 906 Certification

EXHIBIT 32.1

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 October 27, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Gary H. Schoenfeld, the Chief Executive Officer of the Company, and Michael W. Kaplan, 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: December 4, 2012  

/s/ GARY H. SCHOENFELD

  Gary H. Schoenfeld
  President, Chief Executive Officer and Director
  Pacific Sunwear of California, Inc.
  (Principal Executive Officer)
Dated: December 4, 2012  

/s/ MICHAEL W. KAPLAN

  Michael W. Kaplan
  Sr. Vice President and Chief Financial Officer
  Pacific Sunwear of California, Inc.
  (Principal Financial and Accounting 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.

EX-101.INS 4 psun-20121027.xml XBRL INSTANCE DOCUMENT 63710000 0.055 0.075 100000000 2201000 170859375 6272000 10687000 20076000 5000000 107283000 73910000 6643000 95656000 355131000 50306000 6.61 88740000 2990501 29355000 8593000 15506000 355131000 67511468 765523 675000 16602000 1000 17681000 68369000 134751000 19365000 3.91 0.01 1000 149716000 67511468 3983000 169417000 10776000 0.01 16766000 113097000 26558000 38914000 1281000 19800000 20076000 150000 3.19 29800000 16800000 0.065 13000000 0.065 14400000 0.01 11200000 0.01 8280000 13743000 1.75 21962000 20000 2201000 7.58 170859375 3473000 14538000 16404000 5000000 2369495 26000000 132433000 74645000 6643000 63443000 347984000 48000000 18000 23809000 6.02 137347000 2496552 27982000 305000 17208000 347984000 0 67957891 1818224 680000 16316000 1000 15427000 65097000 1440601 132220000 20285000 5000000 1.75 2.21 0.01 722 1000 131217000 50 67957891 3279000 16400000 182142000 7198000 0.01 6.14 19208000 83331000 12000 25832000 67336000 2 1192000 6000000 2300000 3600000 10000000 3000000 16404000 0.0004 P5Y 12500000 0 60000000 1000 1.75 15000000 26000000 125000 1.57 67965230 0.66 P9Y3M18D 0.0158 2300000 12829000 70825 32758000 991000 3254000 313000 -0.12 -161000 1585000 -9865000 95798 66467688000 -0.12 -8209000 -59595000 7695 1745000 100000 -60121000 2524000 -55430000 35386 -57303000 -1.03 300000 56548000 463674000 241000 -68330000 -2292000 -1.03 66467688000 -303000 -518000 135908000 -68330000 43081 7298000 193211000 526000 16121 10165000 599582000 9575000 -0.91 1388000 -3361000 470000 375000 1.84 48544000 174000 -45262000 -217 -0.91 -8426 -8209 -1163000 -6070000 8939000 12829000 221 64 24845000 1894000 32 2.35 2500000 0 3.51 12800000 0.0067 0.83 0.0161 0.84 P6M 0.0020 0.54 P4Y 900000 Q3 2012 10-Q 2012-10-27 0000874841 --01-31 PSUN PACIFIC SUNWEAR OF CALIFORNIA INC false Accelerated Filer P3Y8M12D 4073000 3672000 143900 25915000 488000 <div> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>4. IMPAIRMENT OF LONG-LIVED ASSETS</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company assesses long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets (or asset group) may not be recoverable. Based on management&#x2019;s review of the historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of the Company&#x2019;s stores, the Company determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover the Company&#x2019;s investment in the respective stores. As a result, the Company recorded the following non-cash impairment charges related to its retail stores within the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations, to write-down the carrying value of its long-lived store assets to their estimated fair values.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="56%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Third&#xA0;Quarter&#xA0;Ended</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Three&#xA0;Quarters&#xA0;Ended</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="14" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,<br /> 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,<br /> 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,<br /> 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,<br /> 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; 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MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="67%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,&#xA0;2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Carrying value of assets tested for impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,726</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">24,845</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Carrying value of assets with impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,023</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">8,939</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Fair value of assets impaired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">490</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,894</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Number of stores tested for impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">101</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">221</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Number of stores with impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">17</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">64</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The long-lived assets disclosed above that were written down to their respective fair values consisted primarily of leasehold improvements, furniture, fixtures and equipment. The Company recognized impairment charges of $0.5 million and $7.0 million, respectively, during the quarters ended October&#xA0;27, 2012 and October&#xA0;29, 2011 and $3.2 million and $12.8 million, respectively, during the first three quarters ended October&#xA0;27, 2012 and October&#xA0;29, 2011. The decrease in the number of stores tested for impairment year-over-year was primarily related to the Company&#x2019;s recent closure of certain underperforming stores. Based on historical operating performance and the projected outlook for these stores, the Company believes that the remaining asset value of approximately $6 million, as of October&#xA0;27, 2012, is recoverable. Additionally, the Company wrote off approximately $0.9 million of excess store fixtures in the first three quarters of fiscal 2012.</font></p> </div> 386000 <div> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table details the operating results included in discontinued operations for the periods presented:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="60%"></td> <td valign="bottom" width="15%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="15%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Third&#xA0;Quarter&#xA0;Ended</b></font><br /> <font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Three&#xA0;Quarters&#xA0;Ended</b></font><br /> <font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net sales</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">15,225</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">43,081</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Cost of goods sold, including buying, distribution and occupancy costs</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">11,970</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">35,386</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gross margin</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,255</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,695</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Selling, general and administrative expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,938</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">16,121</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Operating loss</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,683</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(8,426</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Income tax benefit</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">94</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">217</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Loss from discontinued operations</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,589</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(8209</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -225000 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>5. OTHER CURRENT LIABILITIES</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Other current liabilities consisted of the following:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="68%"></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>January&#xA0;28,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Derivative liability</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">16,404</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,076</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued gift cards</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,198</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">10,776</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued compensation and benefits</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">14,538</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">10,687</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Sales taxes payable</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,279</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,983</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred tax liability</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,201</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,201</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued capital expenditures</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,192</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,281</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Other</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,285</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">19,365</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Total other current liabilities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">65,097</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">68,369</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">As disclosed in Note 8, the Company issued 1,000 shares of its Convertible Series B Preferred Stock (the &#x201C;Series B Preferred&#x201D;) in connection with the five-year, $60 million senior secured term loan (the &#x201C;Term Loan&#x201D;), funded by an affiliate of Golden Gate Capital. The fair value of the Series B Preferred at issuance was approximately $15.0 million which was recorded as a derivative liability. As of October&#xA0;27, 2012, the fair value of the derivative liability was approximately $16.4 million. See Note 9, &#x201C;Fair Value Measurements &#x2013; Recurring Fair Value Measurements&#x201D; for further discussion on the derivative liability.</font></p> </div> -3096000 114897 1.64 20500 1.76 67745718000 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>7. INCOME TAXES</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The provisions codified within ASC 740 require companies to assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a &#x201C;more likely than not&#x201D; standard. In accordance with ASC 740, a full valuation allowance was established during the fourth quarter of fiscal 2009 and continues to be maintained on all federal and the majority of state deferred tax assets. Remaining net state deferred tax assets of approximately $5 million were not reserved as the Company concluded it is more likely than not that these net deferred tax assets would be utilized before expiration. The Company has discontinued recognizing federal and certain state income tax benefits until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company continues to monitor whether an ownership change has occurred under Internal Revenue Code Section&#xA0;382 (&#x201C;Section 382&#x201D;). Based on available information at the reporting date, the Company believes it has not experienced an ownership change through the quarter ended October&#xA0;27, 2012. The determination of whether or not an ownership change under Section&#xA0;382 has occurred requires the Company to evaluate certain acquisitions and dispositions of ownership interests over a rolling three-year period.&#xA0;As a result, future acquisitions and dispositions could result in an ownership change of the Company under Section&#xA0;382. If an ownership change were to occur, the Company&#x2019;s ability to utilize federal net operating loss carryforwards could be significantly limited.</font></p> </div> -370549 P3Y2M12D <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>9.&#xA0;FAIR VALUE MEASUREMENTS</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company measures its financial assets and liabilities at fair value on a recurring basis and measures its nonfinancial assets and liabilities at fair value as required or permitted.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Fair value is defined as the price that would be received pursuant to the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. In order to determine the fair value of certain assets and liabilities, the Company applies the three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company&#x2019;s assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. The hierarchy is as follows:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="5%"><font size="1">&#xA0;</font></td> <td valign="top" width="2%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2022;</font></td> <td valign="top" width="1%"><font size="1">&#xA0;</font></td> <td valign="top" align="left"> <p align="left"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Level&#xA0;1</i> &#x2014;&#xA0;quoted prices for identical instruments in active markets.</font></p> </td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="5%"><font size="1">&#xA0;</font></td> <td valign="top" width="2%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2022;</font></td> <td valign="top" width="1%"><font size="1">&#xA0;</font></td> <td valign="top" align="left"> <p align="left"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Level&#xA0;2</i> &#x2014;&#xA0;inputs other than Level&#xA0;1 inputs, which are observable either directly or indirectly.</font></p> </td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="5%"><font size="1">&#xA0;</font></td> <td valign="top" width="2%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2022;</font></td> <td valign="top" width="1%"><font size="1">&#xA0;</font></td> <td valign="top" align="left"> <p align="left"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Level&#xA0;3</i> &#x2014;&#xA0;unobservable inputs.</font></p> </td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Level 3 assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may result in a significantly lower or higher fair value measurement.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Recurring Fair Value Measurements</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Derivative Liability</i></font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Series B Preferred shares are required to be measured at fair value each reporting period. The fair value of the Series B Preferred shares was estimated using an option pricing model that requires Level 3 inputs, which are highly subjective and determined using the following significant assumptions:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="70%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>July&#xA0;28.&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Conversion price</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.75</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.75</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">66</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">66</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected term (in years)</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9.1</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9.3</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Risk free interest rate</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.86</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.58</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected dividends</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table presents the activity recorded for the derivative liability during the first three quarters ended:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr> <td width="81%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Beginning balance as of January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,076</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gain on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(6,333</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Balance as of April&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">13,743</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Loss on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">8,219</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Balance as of July&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">21,962</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gain on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(5,558</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Ending balance as of October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">16,404</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The derivative liability is included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet. Changes in the fair value of the derivative liability are included in (gain) loss on derivative liability in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Operations.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Money Market Funds</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">As of October&#xA0;27, 2012, and January&#xA0;28, 2012, the Company had approximately $10.0&#xA0;million and $19.8&#xA0;million held in money market funds, respectively. The fair value of money market funds is determined based on Level&#xA0;1 inputs which consist of quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. Money market funds are included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheet.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Non-Recurring Fair Value Measurements</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">On a non-recurring basis, using a discounted cash flow model, the Company measures certain of its long-lived assets at fair value based on Level 3 inputs including, but not limited to, moderate comparable store sales and margin growth, projected operating costs based primarily on historical trends, and an estimated weighted-average cost of capital rate. During the first three quarters of fiscal 2012 and 2011 the Company recorded $4.1 million and $12.8 million of impairment charges, respectively, in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations.</font></p> </div> 4.38 -31579000 2473000 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>8. SHAREHOLDERS&#x2019; EQUITY</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Common Stock</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In connection with certain lease modifications during fiscal 2011, the Company issued 900,000 shares of its common stock to one of its landlords. The fair value on the date of issuance was approximately $1.6 million, which is being amortized on a straight-line basis as a component of occupancy costs over the respective rent reduction period.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Preferred Stock</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In conjunction with the Term Loan, the Company issued the Series B Preferred to an affiliate of Golden Gate Capital which, based on the initial conversion ratio, gives that affiliate the right to purchase up to 13.5&#xA0;million shares of the Company&#x2019;s common stock. The Series B Preferred shares have an exercise price initially equal to $1.75 per share of the Company&#x2019;s underlying common stock. The initial holder of the Series B Preferred is entitled to customary registration rights with respect to the underlying common stock. See Note 9, &#x201C;Fair Value Measurements &#x2013; Recurring Fair Value Measurements&#x201D; for further discussion on the accounting treatment of the Series B Preferred.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Stock-Based Compensation</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company maintains two stock-based incentive plans: (1)&#xA0;the 2005 Performance Incentive Plan (the &#x201C;Performance Plan&#x201D;) and (2)&#xA0;the amended and restated Employee Stock Purchase Plan (the &#x201C;ESPP&#x201D;). The types of awards that may be granted under the Performance Plan include stock options, stock appreciation rights, restricted stock, and other forms of awards granted or denominated in the Company&#x2019;s common stock or units of the Company&#x2019;s common stock. Persons eligible to receive awards under the Performance Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the Performance Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and stock appreciation rights under the Performance Plan is ten years after the grant date of the award. As of October&#xA0;27, 2012, the maximum number of shares of the Company&#x2019;s common stock that was available for award grants under the Performance Plan was 2.3&#xA0;million shares. Any shares subject to awards under prior stock plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will become available for other award grants under the Performance Plan. The Performance Plan will terminate on March&#xA0;22, 2015, unless terminated earlier by the Company&#x2019;s Board of Directors.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, &#x201C;Stock Compensation&#x201D; (&#x201C;ASC 718&#x201D;). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock options. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company&#x2019;s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company&#x2019;s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company&#x2019;s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares issued under the ESPP.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Stock Options</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The fair value of the Company&#x2019;s stock-based compensation activity was determined using the following weighted- average assumptions:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="60%"></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="7" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For the Three Quarters Ended</b></font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27, 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Stock&#xA0;Options</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>ESPP</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Stock&#xA0;Options</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>ESPP</b></font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected life</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">4&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.5&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">4&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.5&#xA0;years</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">87%&#xA0;-&#xA0;88%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">71%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">83%&#xA0;-&#xA0;84%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">54%</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Risk-free interest rate</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.53%&#xA0;-&#xA0;0.92%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.15%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.67%&#xA0;-&#xA0;1.61%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.20%</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected dividends</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Under the Performance Plan, incentive and nonqualified stock options have been granted to employees and directors to purchase common stock at prices equal to the fair value of the Company&#x2019;s shares at the respective grant dates. A summary of stock option (incentive and nonqualified) activity for the first three quarters of fiscal 2012 is presented below:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="62%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Shares</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Exercise<br /> Price</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Remaining<br /> Contractual<br /> Term (Yrs.)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Aggregate<br /> Intrinsic<br /> Value<br /> ($000s)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,990,501</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.61</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.71</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercised</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(143,900</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.64</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(370,549</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">12.33</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,496,552</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.02</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.7</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested and expected to vest at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,369,495</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.14</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.7</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">18</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercisable at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,440,601</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7.58</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.2</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">12</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The weighted-average grant-date fair value per share of options granted during the first three quarters of fiscal 2012 and 2011 was $1.71 and $1.84, respectively. There were 143,900 and 70,825 stock options exercised during the first three quarters of fiscal 2012 and 2011, respectively. The total intrinsic value of options exercised during each of the first three quarters of fiscal 2012 and 2011 was $0.1 million.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Restricted Stock Awards</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">A summary of service-based restricted stock awards activity under the Performance Plan for the first three quarters of fiscal 2012 is presented in the following table. Except as described below, such restricted stock awards contain a service-based restriction as to vesting. These awards generally vest over four years with 25% of the grant vesting each year on the anniversary of the grant date.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="76%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Shares</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Grant-Date<br /> Fair Value</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">765,523</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.91</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,505,782</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.76</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(185,570</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4.38</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(267,511</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.06</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,818,224</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2.21</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The weighted-average grant-date fair value per share of service-based restricted stock awards granted during the first three quarters of 2012 and 2011 was $1.76 and $3.51, respectively. The total fair value of awards vested during the first three quarters of fiscal 2012 and 2011 was $0.5 million and $0.9 million, respectively.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">During the first three quarters of fiscal 2012, the Company granted 675,000 performance-based restricted stock awards which only vest upon the achievement of certain financial targets. The weighted-average grant-date fair value per share of performance-based restricted stock awards granted during the first three quarters of fiscal 2012 was $1.77. There were no performance-based restricted stock awards granted during the first three quarters of fiscal 2011.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Restricted Stock Units</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">A summary of restricted stock units activity under the Performance Plan for the first three quarters of fiscal 2012 is presented below. Restricted stock units contain a service-based restriction as to vesting. These awards generally vest 100% on the first anniversary of the grant date.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="77%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Shares</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Grant-Date<br /> Fair Value</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">150,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.57</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(25,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.57</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Stock-based compensation expense recognized related to nonvested stock options, restricted stock awards and restricted stock units during each of the third quarters of fiscal 2012 and 2011 was $0.6 million and $0.8 million, respectively, and during the first three quarters of fiscal 2012 and 2011, was $2.1 million and $2.5 million, respectively.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">At October&#xA0;27, 2012, the Company had approximately $3.6 million of stock-based compensation cost related to nonvested stock options, service-based restricted stock awards and restricted stock units expected to be recognized over a weighted-average period of approximately 2.5 years, and $0.5 million of stock-based compensation cost related to certain performance-based restricted stock awards, which is expected to be recognized over a weighted-average period of approximately 2.8 years.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Employee Stock Purchase Plan (&#x201C;ESPP&#x201D;)</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company&#x2019;s ESPP provides a method for Company employees to voluntarily purchase Company common stock at a 10% discount from fair market value as of the beginning or the end of each six-month purchasing period, whichever is lower. The ESPP covers substantially all employees who have three months of service with the Company, excluding senior executives.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The ESPP is intended to constitute an &#x201C;employee stock purchase plan&#x201D; within the meaning of Section&#xA0;423 of the Internal Revenue Code of 1986, as amended.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">During the first three quarters of fiscal 2012 and 2011, the Company issued 114,897, and 95,798 shares at an average price of $1.58 and $2.35, respectively, under the ESPP.</font></p> </div> 100000 -32213000 2114000 1.71 -26497000 -25243000 -0.48 <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1. NATURE OF BUSINESS</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Pacific Sunwear of California, Inc. (together with its wholly-owned subsidiaries, the &#x201C;Company&#x201D; or &#x201C;PacSun&#x201D;) is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. It operates a nationwide, primarily mall-based chain of retail stores under the names &#x201C;Pacific Sunwear&#x201D; and &#x201C;PacSun.&#x201D; In addition, the Company operates an e-commerce website at www.pacsun.com which sells PacSun merchandise online, provides content and community for its target customers and provides information about the Company. The Company, a California corporation, was incorporated in August 1982. As of October&#xA0;27, 2012, the Company leased and operated 722 stores in each of the 50 states and Puerto Rico.</font></p> </div> 10000000 653000 48607000 P3Y8M12D 452951000 511000 -32213000 -10008000 -0.48 0.66 67745718000 <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">A summary of stock option (incentive and nonqualified) activity for the first three quarters of fiscal 2012 is presented below:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="62%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Shares</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Exercise<br /> Price</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Remaining<br /> Contractual<br /> Term (Yrs.)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Aggregate<br /> Intrinsic<br /> Value<br /> ($000s)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,990,501</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.61</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.71</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercised</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(143,900</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.64</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(370,549</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">12.33</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,496,552</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.02</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.7</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested and expected to vest at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,369,495</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.14</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.7</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">18</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercisable at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,440,601</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7.58</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.2</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">12</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -1780000 -1374000 159612000 -32213000 1254000 <div> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">As a result, the Company recorded the following non-cash impairment charges related to its retail stores within the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations, to write-down the carrying value of its long-lived store assets to their estimated fair values.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="56%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Third&#xA0;Quarter&#xA0;Ended</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Three&#xA0;Quarters&#xA0;Ended</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="14" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,<br /> 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,<br /> 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,<br /> 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,<br /> 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Impairment charges from continuing operations</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">533</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4,457</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,164</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9,575</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Impairment charges from discontinued operations</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,588</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,254</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total impairment charges</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">533</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,045</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,164</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">12,829</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 185570 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>12.&#xA0;DISCONTINUED OPERATIONS</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In accordance with ASC Topic 205, &#x201C;Presentation of Financial Statements- Discontinued Operations&#x201D; (&#x201C;ASC 205&#x201D;), the Company has presented the results of operations of its closed stores as discontinued operations for all periods presented. The Company closed 6 and 1 underperforming stores in the third quarter of fiscal 2012 and 2011, respectively, and during the first three quarters of fiscal 2012 and 2011, the Company closed 14 and 32 underperforming stores, respectively. If the cash flow of the closed store was determined not to be significant to ongoing operations, and the cash inflows of nearby stores were not expected to increase significantly, the results of operations of the closed store are included in discontinued operations. The following table details the operating results included in discontinued operations for the periods presented:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="60%"></td> <td valign="bottom" width="15%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="15%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Third&#xA0;Quarter&#xA0;Ended</b></font><br /> <font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For&#xA0;the&#xA0;Three&#xA0;Quarters&#xA0;Ended</b></font><br /> <font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net sales</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">15,225</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">43,081</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Cost of goods sold, including buying, distribution and occupancy costs</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">11,970</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">35,386</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gross margin</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,255</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,695</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Selling, general and administrative expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,938</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">16,121</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Operating loss</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,683</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(8,426</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Income tax benefit</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">94</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">217</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Loss from discontinued operations</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,589</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(8,209</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -788000 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Income Taxes</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company calculates its interim income tax provision in accordance with Financial Accounting Standards Board (&#x201C;FASB&#x201D;) Accounting Standards Codification (&#x201C;ASC&#x201D;) Topic 270, &#x201C;Interim Reporting&#x201D; (&#x201C;ASC 270&#x201D;) and ASC Topic 740, &#x201C;Accounting for Income Taxes&#x201D; (&#x201C;ASC 740&#x201D;). At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. 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MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">765,523</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.91</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,505,782</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.76</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(185,570</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4.38</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(267,511</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.06</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,818,224</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2.21</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="77%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Shares</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p>&#xA0;</p> <p><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br /> Average<br /> Grant-Date<br /> Fair Value</b></font></p> </td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">150,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Granted</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.57</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Forfeited or expired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(25,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.19</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at October&#xA0;27, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">125,000</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.57</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 1505782 -8288000 3 12037000 612563000 P9Y1M6D 3164000 <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, &#x201C;Stock Compensation&#x201D; (&#x201C;ASC 718&#x201D;). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock options. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company&#x2019;s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company&#x2019;s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company&#x2019;s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares issued under the ESPP.</font></p> </div> <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>10. COMMITMENTS AND CONTINGENCIES</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Litigation</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Charles Pfeiffer, individually and on behalf of other aggrieved employees vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corp., Superior Court of California, County of Riverside, Case No.&#xA0;1100527.</i> On January&#xA0;13, 2011, the plaintiff in this matter filed a lawsuit against the Company under California&#x2019;s private attorney general act alleging violations of California&#x2019;s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff&#x2019;s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company&#x2019;s operating results.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Tamara Beeney, individually and on behalf of other members of the general public similarly situated vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corporation, Superior Court of California, County of Orange, Case No.&#xA0;30-2011-00459346-CU-OE-CXC.</i> On March&#xA0;18, 2011, the plaintiff in this matter filed a putative class action lawsuit against the Company alleging violations of California&#x2019;s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks class certification, the appointment of the plaintiff as class representative, and an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff&#x2019;s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain, no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company&#x2019;s operating results.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company is also involved from time to time in other litigation incidental to its business. The Company believes that the outcome of current litigation will not likely have a material adverse effect on its results of operations or financial condition and, from time to time, the Company 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 effect on the Company&#x2019;s operating results.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Indemnities, Commitments and Guarantees</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">During the normal course of business, the Company agreed to certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities, commitments and guarantees 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.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Letters of Credit</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company has issued guarantees in the form of commercial letters of credit, of which there were approximately $26&#xA0;million outstanding at October&#xA0;27, 2012, as security for merchandise shipments from overseas. All in-transit merchandise covered by letters of credit is accrued for in accounts payable.</font></p> </div> <div> <p style="margin-top:0px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>11. SEGMENT REPORTING</b></font></p> <p style="margin-top:6px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">The Company operates exclusively in the retail apparel industry. The Company designs, produces and distributes clothing and related products catering to teens and young adults through its primarily mall-based PacSun retail stores. The Company has identified three operating segments: PacSun stores, PacSun Outlet stores and pacsun.com. The three operating segments have been aggregated into one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers, and economic characteristics among the three operating segments.</font></p> </div> <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Information regarding significant accounting policies is contained in Note 1, &#x201C;Nature of Business and Summary of Significant Accounting Policies,&#x201D; of the Consolidated Financial Statements in the Company&#x2019;s Annual Report on Form 10-K for fiscal 2011. Presented below in the following notes is supplemental information that should be read in conjunction with &#x201C;Notes to Consolidated Financial Statements&#x201D; included in that Report.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Income Taxes</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company calculates its interim income tax provision in accordance with Financial Accounting Standards Board (&#x201C;FASB&#x201D;) Accounting Standards Codification (&#x201C;ASC&#x201D;) Topic 270, &#x201C;Interim Reporting&#x201D; (&#x201C;ASC 270&#x201D;) and ASC Topic 740, &#x201C;Accounting for Income Taxes&#x201D; (&#x201C;ASC 740&#x201D;). At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.</font></p> </div> -0.48 89000 12.33 <div> <p style="margin-top:18px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>2. BASIS OF PRESENTATION</b></font></p> <p style="margin-top:6px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">The accompanying Condensed Consolidated Financial Statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (&#x201C;SEC&#x201D;). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (&#x201C;GAAP&#x201D;) have been condensed or omitted.</font></p> <p style="margin-top:12px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company&#x2019;s Annual Report on Form 10-K for the fiscal year ended January&#xA0;28, 2012 (&#x201C;fiscal 2011&#x201D;) filed with the SEC. The Condensed Consolidated Financial Statements include the accounts of Pacific Sunwear of California, Inc. and its wholly-owned subsidiaries (Pacific Sunwear Stores Corp., a California corporation (&#x201C;PacSun Stores&#x201D;) and Miraloma Borrower Corporation, a Delaware corporation (&#x201C;Miraloma&#x201D;)). All intercompany transactions have been eliminated in consolidation.</font></p> <p style="margin-top:12px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">In the opinion of management, all adjustments consisting only of normal recurring entries necessary for a fair presentation have been included. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP 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 Condensed 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 Company&#x2019;s fiscal quarter ended October&#xA0;27, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending February&#xA0;2, 2013 (&#x201C;fiscal 2012&#x201D;).</font></p> <p style="margin-top:12px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">The results of continuing operations for all periods presented in these Condensed Consolidated Financial Statements exclude the financial impact of discontinued operations. See Note 12, &#x201C;Discontinued Operations&#x201D; for further discussion related to discontinued operations presentation.</font></p> </div> 1764000 <div> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The fair value of the Company&#x2019;s stock-based compensation activity was determined using the following weighted- average assumptions:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="60%"></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="7" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For the Three Quarters Ended</b></font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27, 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29, 2011</b></font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Stock&#xA0;Options</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>ESPP</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Stock&#xA0;Options</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>ESPP</b></font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected life</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">4&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.5&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">4&#xA0;years</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.5&#xA0;years</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">87%&#xA0;-&#xA0;88%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">71%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">83%&#xA0;-&#xA0;84%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">54%</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Risk-free interest rate</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.53%&#xA0;-&#xA0;0.92%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.15%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.67%&#xA0;-&#xA0;1.61%</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">0.20%</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected dividends</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="2">$&#x2014;&#xA0;&#xA0;</font></td> </tr> </table> </div> 111000 <div> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>6. DEBT</b></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Credit Facility</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">On December&#xA0;7, 2011, the Company entered into a new five-year, $100 million revolving credit facility with Wells Fargo Bank, N.A (the &#x201C;New Credit Facility&#x201D;), which replaced the Company&#x2019;s previous revolving credit facility with JPMorgan Chase (the &#x201C;Former Credit Facility&#x201D;). Borrowings under the New Credit Facility bear interest at a floating rate which, at the Company&#x2019;s option, may be determined by reference to a LIBOR Rate or a Base Rate (as defined in the New Credit Facility, 4.0% as of October&#xA0;27, 2012). Extensions of credit under the New Credit Facility are limited to a borrowing base consisting of specified percentages of eligible categories of assets. The New Credit Facility is available for direct borrowings and allows for the issuance of letters of credit, and up to $12.5 million is available for swing-line loans. The New Credit Facility is secured by liens and security interests with (a)&#xA0;a first priority security interest in the current and certain related assets of the Company including cash, cash equivalents, deposit accounts, securities accounts, credit card receivables and inventory, and (b)&#xA0;a second priority security interest in all assets and properties of the Company that are not secured by a first lien and security interest. The New Credit Facility also contains covenants that, subject to specified exceptions, restrict the Company&#x2019;s ability to, among other things, incur additional indebtedness, incur liens, liquidate or dissolve, sell, transfer, lease or dispose of assets, or make loans, investments or guarantees. The New Credit Facility is scheduled to mature on December&#xA0;7, 2016. Based on current forecasts, the Company believes that cash flows from operating activities, working capital, borrowing availability under the New Credit Facility, and cash on hand resulting from the closing of the Term Loan and the two mortgage transactions discussed below will be sufficient to meet its operating and capital expenditure needs for the next twelve months. However, if the Company were to experience same-store sales declines similar to those that occurred in fiscal 2010 and 2009, it may be required to access most, if not all, of the New Credit Facility and would potentially require other sources of financing to fund its operations, which sources might not be available. At October&#xA0;27, 2012, the Company had no direct borrowings and $26&#xA0;million in letters of credit outstanding under the New Credit Facility. The remaining availability under the New Credit Facility at October&#xA0;27, 2012 was $48&#xA0;million. The Company is not subject to any financial covenant restrictions under the New Credit Facility.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Term Loan</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">On December&#xA0;7, 2011, the Company obtained the Term Loan funded by an affiliate of Golden Gate Capital. The Term Loan bears interest at a rate of 5.5%&#xA0;per annum to be paid in cash, due and payable quarterly in arrears, and 7.5%&#xA0;per annum, due and payable in kind (&#x201C;PIK&#x201D;) annually in arrears, with such PIK interest then due and payable being added to the outstanding principal balance of the Term Loan at the end of each fiscal year, and with adjustments to the cash and PIK portion of the interest rate in accordance with the Term Loan agreement, following principal prepayments. Annual cash interest for fiscal 2012 is expected to be approximately $3 million. The Term Loan is guaranteed by each of the Company&#x2019;s subsidiaries and will be guaranteed by any future domestic subsidiaries of the Company. The Term Loan is secured by liens and security interests with (a)&#xA0;a first priority security interest in all long-term assets of the Company and PacSun Stores and all other assets not subject to a first lien and security interest pursuant to the New Credit Facility, (b)&#xA0;a first priority pledge of the equity interests of Miraloma and (c)&#xA0;a second priority security interest in all assets of the Company and PacSun Stores subject to a first lien and security interest pursuant to the New Credit Facility. The Term Loan also contains covenants substantially identical to those in the New Credit Facility. The principal balance and any unpaid interest related to the Term Loan is due on December&#xA0;7, 2016. The Company is not subject to any financial covenant restrictions under the Term Loan.</font></p> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><i>Mortgage Debt</i></font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">On August&#xA0;20, 2010, the Company, through its wholly-owned subsidiaries, Miraloma and PacSun Stores, executed two promissory notes pursuant to which borrowings in an aggregate amount of $29.8 million from American National Insurance Company (&#x201C;Anico&#x201D;) were incurred. The note executed by Miraloma (the &#x201C;Miraloma Note&#x201D;) is in the amount of $16.8 million and bears interest at the rate of 6.50%&#xA0;per annum. Monthly principal and interest payments under the Miraloma Note commenced on October&#xA0;1, 2010, and are $113,435. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the Miraloma Note, and any accrued but unpaid interest thereon (estimated to be $14.4 million), will be due in full on September&#xA0;1, 2017. The Miraloma Note is secured by a deed of trust on the building and land comprising the Company&#x2019;s principal executive offices in Anaheim, California and is non-recourse to the Company. The Miraloma Note does not contain any financial covenants. In connection with this transaction, the Company transferred the building and related land securing the Miraloma Note to Miraloma and entered into a lease for the building and land with Miraloma. Miraloma paid a prepayment fee to Anico equal to 1% of the principal amount of the Miraloma Note on the closing date of the transaction. As a result, Miraloma may prepay the Miraloma Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The note executed by PacSun Stores (the &#x201C;PacSun Stores Note&#x201D;) is in the amount of $13.0 million and bears interest at the rate of 6.50%&#xA0;per annum. Monthly principal and interest payments under the PacSun Stores Note commenced on October&#xA0;1, 2010, and are $87,777. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the PacSun Stores Note, and any accrued but unpaid interest thereon (estimated to be $11.2 million), will be due in full on September&#xA0;1, 2017. The PacSun Stores Note is secured by a mortgage on the Company&#x2019;s leasehold interest in the building and land comprising the Company&#x2019;s distribution center in Olathe, Kansas, and is unconditionally guaranteed by the Company. The PacSun Stores Note does not contain any financial covenants. PacSun Stores paid a prepayment fee to Anico equal to 1% of the principal amount of the PacSun Stores Note on the closing date of the transaction. As a result, PacSun Stores may prepay the PacSun Stores Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company recorded interest expense of $3.2 million and $1.2 million during the third quarter of fiscal 2012 and 2011, respectively, and $10.0 million and $2.3 million during the first three quarters of fiscal 2012 and 2011, respectively.</font></p> </div> 401000 1.71 28422000 0.0186 -427000 -21621000 -0.48 <div> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Other current liabilities consisted of the following:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="68%"></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>January&#xA0;28,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Derivative liability</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">16,404</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,076</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued gift cards</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,198</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">10,776</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued compensation and benefits</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">14,538</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">10,687</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Sales taxes payable</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,279</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,983</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred tax liability</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,201</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,201</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued capital expenditures</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,192</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,281</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Other</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,285</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">19,365</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Total other current liabilities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">65,097</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">68,369</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -286000 <div> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="67%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;29,&#xA0;2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Carrying value of assets tested for impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,726</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">24,845</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Carrying value of assets with impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,023</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">8,939</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Fair value of assets impaired</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">490</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,894</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Number of stores tested for impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">101</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">221</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Number of stores with impairment</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">17</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">64</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> P6M 0.10 -2254000 <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The fair value of the Series B Preferred shares was estimated using an option pricing model that requires Level 3 inputs, which are highly subjective and determined using the following significant assumptions:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="70%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>July&#xA0;28.&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Conversion price</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.75</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.75</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">66</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">66</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected term (in years)</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9.1</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9.3</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Risk free interest rate</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.86</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.58</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">%&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected dividends</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> </table> </div> 1023000 3164000 101 17 6726000 490000 0.00 14 <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table presents the activity recorded for the derivative liability during the first three quarters ended:</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr> <td width="81%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>October&#xA0;27,&#xA0;2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>(In thousands)</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Beginning balance as of January&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">20,076</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gain on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(6,333</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Balance as of April&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">13,743</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Loss on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">8,219</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Balance as of July&#xA0;28, 2012</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">21,962</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Gain on change in fair value</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(5,558</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td 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Oct. 29, 2011
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Oct. 29, 2011
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IMPAIRMENT OF LONG-LIVED ASSETS
9 Months Ended
Oct. 27, 2012
IMPAIRMENT OF LONG-LIVED ASSETS

4. IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets (or asset group) may not be recoverable. Based on management’s review of the historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of the Company’s stores, the Company determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover the Company’s investment in the respective stores. As a result, the Company recorded the following non-cash impairment charges related to its retail stores within the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations, to write-down the carrying value of its long-lived store assets to their estimated fair values.

 

     For the Third Quarter Ended      For the Three Quarters Ended  
     (In thousands)  
     October 27,
2012
     October 29,
2011
     October 27,
2012
     October 29,
2011
 

Impairment charges from continuing operations

   $ 533       $ 4,457       $ 3,164       $ 9,575   

Impairment charges from discontinued operations

     —           2,588         —           3,254   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impairment charges

   $ 533       $ 7,045       $ 3,164       $ 12,829   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     October 27, 2012      October 29, 2011  
     (In thousands)  

Carrying value of assets tested for impairment

   $ 6,726       $ 24,845   
  

 

 

    

 

 

 

Carrying value of assets with impairment

   $ 1,023       $ 8,939   
  

 

 

    

 

 

 

Fair value of assets impaired

   $ 490       $ 1,894   
  

 

 

    

 

 

 

Number of stores tested for impairment

     101         221   
  

 

 

    

 

 

 

Number of stores with impairment

     17         64   
  

 

 

    

 

 

 

The long-lived assets disclosed above that were written down to their respective fair values consisted primarily of leasehold improvements, furniture, fixtures and equipment. The Company recognized impairment charges of $0.5 million and $7.0 million, respectively, during the quarters ended October 27, 2012 and October 29, 2011 and $3.2 million and $12.8 million, respectively, during the first three quarters ended October 27, 2012 and October 29, 2011. The decrease in the number of stores tested for impairment year-over-year was primarily related to the Company’s recent closure of certain underperforming stores. Based on historical operating performance and the projected outlook for these stores, the Company believes that the remaining asset value of approximately $6 million, as of October 27, 2012, is recoverable. Additionally, the Company wrote off approximately $0.9 million of excess store fixtures in the first three quarters of fiscal 2012.

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OTHER CURRENT LIABILITIES - Additional Information (Detail) (USD $)
9 Months Ended
Oct. 27, 2012
Jan. 28, 2012
Oct. 27, 2012
Series B Preferred Stock [Member]
Schedule Of Other Current Liabilities [Line Items]      
Convertible Series B Preferred Stock issued 1,000 1,000 1,000
Period of term loan     5 years
Senior secured term loan $ 74,645,000 $ 73,910,000 $ 60,000,000
Fair value of Series B Preferred Stock     15,000,000
Derivative fair value liability $ 16,400,000    

XML 19 R28.htm IDEA: XBRL DOCUMENT v2.4.0.6
Other Current Liabilities - Schedule of Other Current Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Oct. 27, 2012
Jan. 28, 2012
Schedule Of Other Current Liabilities [Line Items]    
Derivative liability $ 16,404 $ 20,076
Accrued gift cards 7,198 10,776
Accrued compensation and benefits 14,538 10,687
Sales taxes payable 3,279 3,983
Deferred tax liability 2,201 2,201
Accrued capital expenditures 1,192 1,281
Other 20,285 19,365
Total other current liabilities $ 65,097 $ 68,369
XML 20 R30.htm IDEA: XBRL DOCUMENT v2.4.0.6
DEBT - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
Oct. 27, 2012
Note
Oct. 27, 2011
Oct. 27, 2012
Note
Oct. 27, 2011
Oct. 27, 2012
Miraloma [Member]
Aug. 20, 2010
Miraloma [Member]
Oct. 27, 2012
Pacsun Stores [Member]
Aug. 20, 2010
Pacsun Stores [Member]
Aug. 20, 2010
Notes payable, other payables [Member]
Oct. 27, 2012
Notes payable, other payables [Member]
Miraloma [Member]
Aug. 20, 2010
Notes payable, other payables [Member]
Miraloma [Member]
Oct. 27, 2012
Notes payable, other payables [Member]
Pacsun Stores [Member]
Aug. 20, 2010
Notes payable, other payables [Member]
Pacsun Stores [Member]
Oct. 27, 2012
Cash [Member]
Term Loan [Member]
Dec. 07, 2011
Cash [Member]
Term Loan [Member]
Dec. 07, 2011
Paid in kind [Member]
Term Loan [Member]
Oct. 27, 2012
Revolving credit facility [Member]
Dec. 07, 2011
Revolving credit facility [Member]
Oct. 27, 2012
Swing- line loans [Member]
Line of Credit Facility [Line Items]                                      
Revolving credit facility term                                 5 years    
Maximum borrowing capacity                 $ 29,800,000   $ 16,800,000   $ 13,000,000         $ 100,000,000 $ 12,500,000
Revolving credit facility interest rate description                                 Borrowings under the New Credit Facility bear interest at a floating rate which, at the Company's option, may be determined by reference to a LIBOR Rate or a Base Rate (as defined in the New Credit Facility, 4.0% as of October 27, 2012).    
Revolving credit facility reference to floating interest rate                                 0.04%    
New credit facility Maturity Date                                     Dec. 07, 2016
Direct borrowing outstanding                                     0
Letter of credit outstanding 26,000,000   26,000,000                                
Remaining availability under new credit facility 48,000,000   48,000,000                                
Interest rate                     6.50%   6.50%   5.50% 7.50%      
Interest payable                           3,000,000          
Number of promissory note 2   2                                
Periodic payment                   113,435   87,777              
Notes payable outstanding principal and unpaid interest.           14,400,000   11,200,000                      
Notes payable amortization schedule period.         25 years   25 years                        
Portion of prepayment fees equals to principal amount of notes.           1.00%   1.00%                      
Maturity date                   Sep. 01, 2017   Sep. 01, 2017              
Period for prepayment of note without penalty         30 days   30 days                        
Interest expense $ 3,200,000 $ 1,200,000 $ 10,000,000 $ 2,300,000                              
XML 21 R31.htm IDEA: XBRL DOCUMENT v2.4.0.6
INCOME TAXES - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 27, 2012
Income Taxes [Line Items]  
Net state deferred tax assets $ 5
Ownership change monitor description Full valuation allowance was established during the fourth quarter of fiscal 2009 and continues to be maintained on all federal and the majority of state deferred tax assets.
Ownership change under Internal Revenue Code 0.00%
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Oct. 27, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Information regarding significant accounting policies is contained in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal 2011. Presented below in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” included in that Report.

Income Taxes

The Company calculates its interim income tax provision in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, “Interim Reporting” (“ASC 270”) and ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

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SHAREHOLDERS' EQUITY - Additional Information (Detail) (USD $)
9 Months Ended 12 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
Oct. 27, 2012
Oct. 27, 2012
Minimum [Member]
Oct. 27, 2012
Maximum [Member]
Oct. 27, 2012
Restricted Stock [Member]
Oct. 29, 2011
Restricted Stock [Member]
Oct. 27, 2012
Restricted Stock Units [Member]
Oct. 27, 2012
Stock Options [Member]
Oct. 27, 2012
Performance Plan [Member]
Oct. 27, 2012
Performance Plan [Member]
Restricted Stock [Member]
Oct. 29, 2011
Performance Plan [Member]
Restricted Stock [Member]
Oct. 27, 2012
Performance Plan [Member]
Restricted Stock Units [Member]
Oct. 29, 2011
Performance Plan [Member]
Restricted Stock Units [Member]
Oct. 27, 2012
Performance Plan [Member]
Restricted Stock Units [Member]
Oct. 29, 2011
Performance Plan [Member]
Restricted Stock Units [Member]
Oct. 27, 2012
Performance Plan [Member]
Performance shares [Member]
Oct. 27, 2012
Series B Preferred Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                    
Common Stock issued to landlords     900,000                              
Common Stock issued to landlords, fair value     $ 1,600,000                              
Right to purchase common stock 13,500,000                                  
Exercise price of series B preferred shares                                   1.75
Maximum number of shares of the Company's common stock that was available for award grants under the Performance Plan                   2,300,000                
Termination date of the Performance Plan                   Mar. 22, 2015                
Vesting period of restricted stock       3 years 4 years           4 years              
Period in which stock option expires under condition one       7 years 10 years                          
Period in which stock option expires under condition 3 months                                  
Stock option expiration conditions                 Expire in seven to ten years or three months after termination of employment with the Company                  
Stock-based awards vesting period 1 year                                  
Weighted-average grant-date fair value per share of options granted $ 1.71 $ 1.84                                
Stock options exercised 143,900 70,825                                
Intrinsic value of stock options exercised 100,000 100,000                                
Time-based restriction as to vesting                     Four years with 25% of the grant vesting each year on the anniversary of the grant date.       Awards generally vest 100% on the first anniversary of the grant date.      
Restricted stock award vesting percentage per year                     25.00%       100.00%      
Weighted-average grant-date fair value granted $ 1.76             $ 1.57     $ 1.76 $ 3.51            
Fair value of awards vested           500,000 900,000               1,770,000 0    
Shares which only vest upon the achievement of certain performance-based financial targets 1,505,782             125,000                 675,000  
Stock-based compensation expense 2,114,000 2,524,000       500,000             600,000 800,000 2,100,000 2,500,000    
Compensation cost related to nonvested stock options, restricted stock awards and restricted stock units not yet recognized                         $ 3,600,000   $ 3,600,000      
Stock-based compensation expense is expected to be recognized over a weighted-average period           2 years 9 months 18 days                 2 years 6 months      
Percentage of discount in purchasing common stock from fair market value under ESPP 10.00%                                  
Purchasing period of stock under ESPP 6 months                                  
Shares issued under ESPP 114,897 95,798                                
Average price at which shares issued under ESPP $ 1.58 $ 2.35                                
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SEGMENT REPORTING - Additional Information (Detail)
9 Months Ended
Oct. 27, 2012
Segment
Operating Statistics [Line Items]  
Number of operating segments 3
XML 25 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Oct. 27, 2012
Jan. 28, 2012
CURRENT ASSETS:    
Cash and cash equivalents $ 23,809 $ 50,306
Restricted cash 305 8,593
Merchandise inventories 137,347 88,740
Prepaid expenses 17,208 15,506
Other current assets 3,473 6,272
Total current assets 182,142 169,417
Property and equipment, net 131,217 149,716
Deferred income taxes 6,643 6,643
Other assets 27,982 29,355
TOTAL ASSETS 347,984 355,131
CURRENT LIABILITIES:    
Accounts payable 67,336 38,914
Other current liabilities 65,097 68,369
Total current liabilities 132,433 107,283
LONG-TERM LIABILITIES:    
Deferred lease incentives 15,427 17,681
Deferred rent 16,316 16,602
Long-term debt 74,645 73,910
Other long-term liabilities 25,832 26,558
Total long-term liabilities 132,220 134,751
Commitments and contingencies (Note 10)      
SHAREHOLDERS' EQUITY:    
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 1,000 issued and outstanding      
Common stock, $0.01 par value; 170,859,375 shares authorized; 67,957,891 and 67,511,468 shares issued and outstanding, respectively 680 675
Additional paid-in capital 19,208 16,766
Retained earnings 63,443 95,656
Total shareholders' equity 83,331 113,097
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 347,984 $ 355,131
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NATURE OF BUSINESS
9 Months Ended
Oct. 27, 2012
NATURE OF BUSINESS

1. NATURE OF BUSINESS

Pacific Sunwear of California, Inc. (together with its wholly-owned subsidiaries, the “Company” or “PacSun”) is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. It operates a nationwide, primarily mall-based chain of retail stores under the names “Pacific Sunwear” and “PacSun.” In addition, the Company operates an e-commerce website at www.pacsun.com which sells PacSun merchandise online, provides content and community for its target customers and provides information about the Company. The Company, a California corporation, was incorporated in August 1982. As of October 27, 2012, the Company leased and operated 722 stores in each of the 50 states and Puerto Rico.

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Shareholder's Equity - Summary of Service-Based Restricted Stock Awards and Units Activity (Detail) (USD $)
9 Months Ended
Oct. 27, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares Outstanding at January 28, 2012 765,523
Granted shares 1,505,782
Vested Shares (185,570)
Forfeited or expired shares (267,511)
Shares Outstanding at October 27, 2012 1,818,224
Weighted-Average Grant-Date Fair Value Outstanding at January 28, 2012 $ 3.91
Weighted-average grant-date fair value granted $ 1.76
Weighted-Average Grant-Date Fair Value Vested $ 4.38
Weighted-Average Grant-Date Fair Value Forfeited or expired $ 3.06
Weighted-Average Grant-Date Fair Value Outstanding at October 27, 2012 $ 2.21
Restricted Stock Units [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares Outstanding at January 28, 2012 150,000
Granted shares 125,000
Vested Shares (125,000)
Forfeited or expired shares (25,000)
Shares Outstanding at October 27, 2012 125,000
Weighted-Average Grant-Date Fair Value Outstanding at January 28, 2012 $ 3.19
Weighted-average grant-date fair value granted $ 1.57
Weighted-Average Grant-Date Fair Value Vested $ 3.19
Weighted-Average Grant-Date Fair Value Forfeited or expired $ 3.19
Weighted-Average Grant-Date Fair Value Outstanding at October 27, 2012 $ 1.57
XML 28 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Oct. 27, 2012
Summary of Fair Value Assumptions for Derivative Liabilities

The fair value of the Series B Preferred shares was estimated using an option pricing model that requires Level 3 inputs, which are highly subjective and determined using the following significant assumptions:

 

     October 27, 2012     July 28. 2012  

Conversion price

   $ 1.75      $ 1.75   

Expected volatility

     66     66

Expected term (in years)

     9.1        9.3   

Risk free interest rate

     1.86     1.58

Expected dividends

   $ —        $ —     
Summary of Derivative Liability Activity

The following table presents the activity recorded for the derivative liability during the first three quarters ended:

 

     October 27, 2012  
     (In thousands)  

Beginning balance as of January 28, 2012

   $ 20,076   

Gain on change in fair value

     (6,333
  

 

 

 

Balance as of April 28, 2012

     13,743   

Loss on change in fair value

     8,219   
  

 

 

 

Balance as of July 28, 2012

   $ 21,962   

Gain on change in fair value

     (5,558
  

 

 

 

Ending balance as of October 27, 2012

   $ 16,404   
  

 

 

 
XML 29 R36.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements - Summary of Fair Value Assumptions for Derivative Liabilities (Detail) (USD $)
6 Months Ended 9 Months Ended
Jul. 28, 2012
Oct. 27, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Conversion price $ 1.75 $ 1.75
Expected volatility 66.00% 66.00%
Expected term (in years) 9 years 3 months 18 days 9 years 1 month 6 days
Risk free interest rate 1.58% 1.86%
Expected dividends      
XML 30 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
NATURE OF BUSINESS - Additional Information (Detail)
Oct. 27, 2012
State
Store
Nature Of Operations And Summary Of Significant Accounting Policies [Line Items]  
Number of stores leased and operated in each state 722
Number of states 50
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M``!02P$"'@,4````"`!:<(1!DM%,-+@R```B:00`%0`8```````!````I('A M/`$`<'-U;BTR,#$R,3`R-U]P&UL550%``/;2+Y0=7@+``$$)0X```0Y M`0``4$L!`AX#%`````@`6G"$0>S:+6AK$```0JT``!$`&````````0```*2! MZ&\!`'!S=6XM,C`Q,C$P,C'-D550%``/;2+Y0=7@+``$$)0X```0Y`0`` 64$L%!@`````&``8`&@(``)Z``0`````` ` end XML 33 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
BASIS OF PRESENTATION
9 Months Ended
Oct. 27, 2012
BASIS OF PRESENTATION

2. BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2012 (“fiscal 2011”) filed with the SEC. The Condensed Consolidated Financial Statements include the accounts of Pacific Sunwear of California, Inc. and its wholly-owned subsidiaries (Pacific Sunwear Stores Corp., a California corporation (“PacSun Stores”) and Miraloma Borrower Corporation, a Delaware corporation (“Miraloma”)). 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 Condensed Consolidated Financial Statements in conformity with GAAP 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 Condensed 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 Company’s fiscal quarter ended October 27, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending February 2, 2013 (“fiscal 2012”).

The results of continuing operations for all periods presented in these Condensed Consolidated Financial Statements exclude the financial impact of discontinued operations. See Note 12, “Discontinued Operations” for further discussion related to discontinued operations presentation.

XML 34 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Oct. 27, 2012
Jan. 28, 2012
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 1,000 1,000
Preferred stock, shares outstanding 1,000 1,000
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 170,859,375 170,859,375
Common stock, shares issued 67,957,891 67,511,468
Common stock, shares outstanding 67,957,891 67,511,468
XML 35 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
DISCONTINUED OPERATIONS
9 Months Ended
Oct. 27, 2012
DISCONTINUED OPERATIONS

12. DISCONTINUED OPERATIONS

In accordance with ASC Topic 205, “Presentation of Financial Statements- Discontinued Operations” (“ASC 205”), the Company has presented the results of operations of its closed stores as discontinued operations for all periods presented. The Company closed 6 and 1 underperforming stores in the third quarter of fiscal 2012 and 2011, respectively, and during the first three quarters of fiscal 2012 and 2011, the Company closed 14 and 32 underperforming stores, respectively. If the cash flow of the closed store was determined not to be significant to ongoing operations, and the cash inflows of nearby stores were not expected to increase significantly, the results of operations of the closed store are included in discontinued operations. The following table details the operating results included in discontinued operations for the periods presented:

 

     For the Third Quarter Ended
October 29, 2011
    For the Three Quarters Ended
October 29, 2011
 

Net sales

   $ 15,225      $ 43,081   

Cost of goods sold, including buying, distribution and occupancy costs

     11,970        35,386   
  

 

 

   

 

 

 

Gross margin

     3,255        7,695   

Selling, general and administrative expenses

     6,938        16,121   
  

 

 

   

 

 

 

Operating loss

     (3,683     (8,426

Income tax benefit

     94        217   
  

 

 

   

 

 

 

Loss from discontinued operations

   $ (3,589   $ (8,209
  

 

 

   

 

 

 
XML 36 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information
9 Months Ended
Oct. 27, 2012
Nov. 29, 2012
Entity Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Oct. 27, 2012  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q3  
Trading Symbol PSUN  
Entity Registrant Name PACIFIC SUNWEAR OF CALIFORNIA INC  
Entity Central Index Key 0000874841  
Current Fiscal Year End Date --01-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   67,965,230
XML 37 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Oct. 27, 2012
Income Taxes

Income Taxes

The Company calculates its interim income tax provision in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, “Interim Reporting” (“ASC 270”) and ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

Stock Compensation

The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, “Stock Compensation” (“ASC 718”). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock options. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company’s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company’s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company’s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares issued under the ESPP.

XML 38 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
Oct. 27, 2012
Oct. 29, 2011
Net sales $ 228,434 $ 226,786 $ 612,563 $ 599,582
Cost of goods sold, including buying, distribution and occupancy costs 167,607 171,407 452,951 463,674
Gross margin 60,827 55,379 159,612 135,908
Selling, general and administrative expenses 62,082 68,414 184,855 193,211
Operating loss (1,255) (13,035) (25,243) (57,303)
Gain on derivative liability (5,558)   (3,672)  
Other expense, net 3,244 1,178 10,008 2,292
Income (loss) from continuing operations before income taxes 1,059 (14,213) (31,579) (59,595)
Income tax expense (benefit) 111 (200) 634 526
Income (loss) from continuing operations 948 (14,013) (32,213) (60,121)
Loss from discontinued operations, net of income taxes   (3,589)   (8,209)
Net income (loss) 948 (17,602) (32,213) (68,330)
Comprehensive income (loss) $ 948 $ (17,602) $ (32,213) $ (68,330)
Income (loss) from continuing operations per share:        
Basic $ 0.01 $ (0.21) $ (0.48) $ (0.91)
Diluted $ 0.01 $ (0.21) $ (0.48) $ (0.91)
Loss from discontinued operations per share:        
Basic   $ (0.05)   $ (0.12)
Diluted   $ (0.05)   $ (0.12)
Net income (loss) per share:        
Basic $ 0.01 $ (0.26) $ (0.48) $ (1.03)
Diluted $ 0.01 $ (0.26) $ (0.48) $ (1.03)
Weighted-average shares outstanding:        
Basic 67,913,832 66,855,443 67,745,718 66,467,688
Diluted 71,359,957 66,855,443 67,745,718 66,467,688
XML 39 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
INCOME TAXES
9 Months Ended
Oct. 27, 2012
INCOME TAXES

7. INCOME TAXES

The provisions codified within ASC 740 require companies to assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. In accordance with ASC 740, a full valuation allowance was established during the fourth quarter of fiscal 2009 and continues to be maintained on all federal and the majority of state deferred tax assets. Remaining net state deferred tax assets of approximately $5 million were not reserved as the Company concluded it is more likely than not that these net deferred tax assets would be utilized before expiration. The Company has discontinued recognizing federal and certain state income tax benefits until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets.

The Company continues to monitor whether an ownership change has occurred under Internal Revenue Code Section 382 (“Section 382”). Based on available information at the reporting date, the Company believes it has not experienced an ownership change through the quarter ended October 27, 2012. The determination of whether or not an ownership change under Section 382 has occurred requires the Company to evaluate certain acquisitions and dispositions of ownership interests over a rolling three-year period. As a result, future acquisitions and dispositions could result in an ownership change of the Company under Section 382. If an ownership change were to occur, the Company’s ability to utilize federal net operating loss carryforwards could be significantly limited.

XML 40 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
DEBT
9 Months Ended
Oct. 27, 2012
DEBT

6. DEBT

Credit Facility

On December 7, 2011, the Company entered into a new five-year, $100 million revolving credit facility with Wells Fargo Bank, N.A (the “New Credit Facility”), which replaced the Company’s previous revolving credit facility with JPMorgan Chase (the “Former Credit Facility”). Borrowings under the New Credit Facility bear interest at a floating rate which, at the Company’s option, may be determined by reference to a LIBOR Rate or a Base Rate (as defined in the New Credit Facility, 4.0% as of October 27, 2012). Extensions of credit under the New Credit Facility are limited to a borrowing base consisting of specified percentages of eligible categories of assets. The New Credit Facility is available for direct borrowings and allows for the issuance of letters of credit, and up to $12.5 million is available for swing-line loans. The New Credit Facility is secured by liens and security interests with (a) a first priority security interest in the current and certain related assets of the Company including cash, cash equivalents, deposit accounts, securities accounts, credit card receivables and inventory, and (b) a second priority security interest in all assets and properties of the Company that are not secured by a first lien and security interest. The New Credit Facility also contains covenants that, subject to specified exceptions, restrict the Company’s ability to, among other things, incur additional indebtedness, incur liens, liquidate or dissolve, sell, transfer, lease or dispose of assets, or make loans, investments or guarantees. The New Credit Facility is scheduled to mature on December 7, 2016. Based on current forecasts, the Company believes that cash flows from operating activities, working capital, borrowing availability under the New Credit Facility, and cash on hand resulting from the closing of the Term Loan and the two mortgage transactions discussed below will be sufficient to meet its operating and capital expenditure needs for the next twelve months. However, if the Company were to experience same-store sales declines similar to those that occurred in fiscal 2010 and 2009, it may be required to access most, if not all, of the New Credit Facility and would potentially require other sources of financing to fund its operations, which sources might not be available. At October 27, 2012, the Company had no direct borrowings and $26 million in letters of credit outstanding under the New Credit Facility. The remaining availability under the New Credit Facility at October 27, 2012 was $48 million. The Company is not subject to any financial covenant restrictions under the New Credit Facility.

Term Loan

On December 7, 2011, the Company obtained the Term Loan funded by an affiliate of Golden Gate Capital. The Term Loan bears interest at a rate of 5.5% per annum to be paid in cash, due and payable quarterly in arrears, and 7.5% per annum, due and payable in kind (“PIK”) annually in arrears, with such PIK interest then due and payable being added to the outstanding principal balance of the Term Loan at the end of each fiscal year, and with adjustments to the cash and PIK portion of the interest rate in accordance with the Term Loan agreement, following principal prepayments. Annual cash interest for fiscal 2012 is expected to be approximately $3 million. The Term Loan is guaranteed by each of the Company’s subsidiaries and will be guaranteed by any future domestic subsidiaries of the Company. The Term Loan is secured by liens and security interests with (a) a first priority security interest in all long-term assets of the Company and PacSun Stores and all other assets not subject to a first lien and security interest pursuant to the New Credit Facility, (b) a first priority pledge of the equity interests of Miraloma and (c) a second priority security interest in all assets of the Company and PacSun Stores subject to a first lien and security interest pursuant to the New Credit Facility. The Term Loan also contains covenants substantially identical to those in the New Credit Facility. The principal balance and any unpaid interest related to the Term Loan is due on December 7, 2016. The Company is not subject to any financial covenant restrictions under the Term Loan.

Mortgage Debt

On August 20, 2010, the Company, through its wholly-owned subsidiaries, Miraloma and PacSun Stores, executed two promissory notes pursuant to which borrowings in an aggregate amount of $29.8 million from American National Insurance Company (“Anico”) were incurred. The note executed by Miraloma (the “Miraloma Note”) is in the amount of $16.8 million and bears interest at the rate of 6.50% per annum. Monthly principal and interest payments under the Miraloma Note commenced on October 1, 2010, and are $113,435. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the Miraloma Note, and any accrued but unpaid interest thereon (estimated to be $14.4 million), will be due in full on September 1, 2017. The Miraloma Note is secured by a deed of trust on the building and land comprising the Company’s principal executive offices in Anaheim, California and is non-recourse to the Company. The Miraloma Note does not contain any financial covenants. In connection with this transaction, the Company transferred the building and related land securing the Miraloma Note to Miraloma and entered into a lease for the building and land with Miraloma. Miraloma paid a prepayment fee to Anico equal to 1% of the principal amount of the Miraloma Note on the closing date of the transaction. As a result, Miraloma may prepay the Miraloma Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.

 

The note executed by PacSun Stores (the “PacSun Stores Note”) is in the amount of $13.0 million and bears interest at the rate of 6.50% per annum. Monthly principal and interest payments under the PacSun Stores Note commenced on October 1, 2010, and are $87,777. The principal and interest payments are based on a 25-year amortization schedule. The remaining principal balance of the PacSun Stores Note, and any accrued but unpaid interest thereon (estimated to be $11.2 million), will be due in full on September 1, 2017. The PacSun Stores Note is secured by a mortgage on the Company’s leasehold interest in the building and land comprising the Company’s distribution center in Olathe, Kansas, and is unconditionally guaranteed by the Company. The PacSun Stores Note does not contain any financial covenants. PacSun Stores paid a prepayment fee to Anico equal to 1% of the principal amount of the PacSun Stores Note on the closing date of the transaction. As a result, PacSun Stores may prepay the PacSun Stores Note, in whole, but not in part, at any time without penalty upon 30 days prior written notice to Anico.

The Company recorded interest expense of $3.2 million and $1.2 million during the third quarter of fiscal 2012 and 2011, respectively, and $10.0 million and $2.3 million during the first three quarters of fiscal 2012 and 2011, respectively.

XML 41 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
DISCONTINUED OPERATIONS (Tables)
9 Months Ended
Oct. 27, 2012
Details of Operating Results Included in Discontinued Operations

The following table details the operating results included in discontinued operations for the periods presented:

 

     For the Third Quarter Ended
October 29, 2011
    For the Three Quarters Ended
October 29, 2011
 

Net sales

   $ 15,225      $ 43,081   

Cost of goods sold, including buying, distribution and occupancy costs

     11,970        35,386   
  

 

 

   

 

 

 

Gross margin

     3,255        7,695   

Selling, general and administrative expenses

     6,938        16,121   
  

 

 

   

 

 

 

Operating loss

     (3,683     (8,426

Income tax benefit

     94        217   
  

 

 

   

 

 

 

Loss from discontinued operations

   $ (3,589   $ (8209
  

 

 

   

 

 

 
XML 42 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
IMPAIRMENT OF LONG-LIVED ASSETS (Tables)
9 Months Ended
Oct. 27, 2012
Long Lived Assets Tested for Impairment

As a result, the Company recorded the following non-cash impairment charges related to its retail stores within the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations, to write-down the carrying value of its long-lived store assets to their estimated fair values.

 

     For the Third Quarter Ended      For the Three Quarters Ended  
     (In thousands)  
     October 27,
2012
     October 29,
2011
     October 27,
2012
     October 29,
2011
 

Impairment charges from continuing operations

   $ 533       $ 4,457       $ 3,164       $ 9,575   

Impairment charges from discontinued operations

     —           2,588         —           3,254   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impairment charges

   $ 533       $ 7,045       $ 3,164       $ 12,829   
  

 

 

    

 

 

    

 

 

    

 

 

 
Details of Long Lived Assets Tested and Impaired
     October 27, 2012      October 29, 2011  
     (In thousands)  

Carrying value of assets tested for impairment

   $ 6,726       $ 24,845   
  

 

 

    

 

 

 

Carrying value of assets with impairment

   $ 1,023       $ 8,939   
  

 

 

    

 

 

 

Fair value of assets impaired

   $ 490       $ 1,894   
  

 

 

    

 

 

 

Number of stores tested for impairment

     101         221   
  

 

 

    

 

 

 

Number of stores with impairment

     17         64   
  

 

 

    

 

 

 
XML 43 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
COMMITMENTS AND CONTINGENCIES
9 Months Ended
Oct. 27, 2012
COMMITMENTS AND CONTINGENCIES

10. COMMITMENTS AND CONTINGENCIES

Litigation

Charles Pfeiffer, individually and on behalf of other aggrieved employees vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corp., Superior Court of California, County of Riverside, Case No. 1100527. On January 13, 2011, the plaintiff in this matter filed a lawsuit against the Company under California’s private attorney general act alleging violations of California’s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

Tamara Beeney, individually and on behalf of other members of the general public similarly situated vs. Pacific Sunwear of California, Inc. and Pacific Sunwear Stores Corporation, Superior Court of California, County of Orange, Case No. 30-2011-00459346-CU-OE-CXC. On March 18, 2011, the plaintiff in this matter filed a putative class action lawsuit against the Company alleging violations of California’s wage and hour, overtime, meal break and rest break rules and regulations, among other things. The complaint seeks class certification, the appointment of the plaintiff as class representative, and an unspecified amount of damages and penalties. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. The Company is currently in the discovery phase of this case. As the ultimate outcome of this matter is uncertain, no amounts have been accrued by the Company as of the date of this report. Depending on the actual outcome of this case, provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

The Company is also involved from time to time in other litigation incidental to its business. The Company believes that the outcome of current litigation will not likely have a material adverse effect on its results of operations or financial condition and, from time to time, the Company 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 effect on the Company’s operating results.

Indemnities, Commitments and Guarantees

During the normal course of business, the Company agreed to certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities, commitments and guarantees 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.

Letters of Credit

The Company has issued guarantees in the form of commercial letters of credit, of which there were approximately $26 million outstanding at October 27, 2012, as security for merchandise shipments from overseas. All in-transit merchandise covered by letters of credit is accrued for in accounts payable.

XML 44 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
SHAREHOLDERS' EQUITY
9 Months Ended
Oct. 27, 2012
SHAREHOLDERS' EQUITY

8. SHAREHOLDERS’ EQUITY

Common Stock

In connection with certain lease modifications during fiscal 2011, the Company issued 900,000 shares of its common stock to one of its landlords. The fair value on the date of issuance was approximately $1.6 million, which is being amortized on a straight-line basis as a component of occupancy costs over the respective rent reduction period.

Preferred Stock

In conjunction with the Term Loan, the Company issued the Series B Preferred to an affiliate of Golden Gate Capital which, based on the initial conversion ratio, gives that affiliate the right to purchase up to 13.5 million shares of the Company’s common stock. The Series B Preferred shares have an exercise price initially equal to $1.75 per share of the Company’s underlying common stock. The initial holder of the Series B Preferred is entitled to customary registration rights with respect to the underlying common stock. See Note 9, “Fair Value Measurements – Recurring Fair Value Measurements” for further discussion on the accounting treatment of the Series B Preferred.

 

Stock-Based Compensation

The Company maintains two stock-based incentive plans: (1) the 2005 Performance Incentive Plan (the “Performance Plan”) and (2) the amended and restated Employee Stock Purchase Plan (the “ESPP”). The types of awards that may be granted under the Performance Plan include stock options, stock appreciation rights, restricted stock, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock. Persons eligible to receive awards under the Performance Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the Performance Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and stock appreciation rights under the Performance Plan is ten years after the grant date of the award. As of October 27, 2012, the maximum number of shares of the Company’s common stock that was available for award grants under the Performance Plan was 2.3 million shares. Any shares subject to awards under prior stock plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will become available for other award grants under the Performance Plan. The Performance Plan will terminate on March 22, 2015, unless terminated earlier by the Company’s Board of Directors.

The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, “Stock Compensation” (“ASC 718”). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock options. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company’s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company’s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company’s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares issued under the ESPP.

Stock Options

The fair value of the Company’s stock-based compensation activity was determined using the following weighted- average assumptions:

 

     For the Three Quarters Ended
     October 27, 2012   October 29, 2011
     Stock Options   ESPP   Stock Options   ESPP

Expected life

   4 years   0.5 years   4 years   0.5 years

Expected volatility

   87% - 88%   71%   83% - 84%   54%

Risk-free interest rate

   0.53% - 0.92%   0.15%   0.67% - 1.61%   0.20%

Expected dividends

   $—     $—     $—     $—  

Under the Performance Plan, incentive and nonqualified stock options have been granted to employees and directors to purchase common stock at prices equal to the fair value of the Company’s shares at the respective grant dates. A summary of stock option (incentive and nonqualified) activity for the first three quarters of fiscal 2012 is presented below:

 

     Shares     Weighted-
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term (Yrs.)
     Aggregate
Intrinsic
Value
($000s)
 

Outstanding at January 28, 2012

     2,990,501      $ 6.61         

Granted

     20,500        1.71         

Exercised

     (143,900     1.64         

Forfeited or expired

     (370,549     12.33         
  

 

 

         

Outstanding at October 27, 2012

     2,496,552      $ 6.02         3.7       $ 20   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest at October 27, 2012

     2,369,495      $ 6.14         3.7       $ 18   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at October 27, 2012

     1,440,601      $ 7.58         3.2       $ 12   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

The weighted-average grant-date fair value per share of options granted during the first three quarters of fiscal 2012 and 2011 was $1.71 and $1.84, respectively. There were 143,900 and 70,825 stock options exercised during the first three quarters of fiscal 2012 and 2011, respectively. The total intrinsic value of options exercised during each of the first three quarters of fiscal 2012 and 2011 was $0.1 million.

Restricted Stock Awards

A summary of service-based restricted stock awards activity under the Performance Plan for the first three quarters of fiscal 2012 is presented in the following table. Except as described below, such restricted stock awards contain a service-based restriction as to vesting. These awards generally vest over four years with 25% of the grant vesting each year on the anniversary of the grant date.

 

     Shares     Weighted-
Average
Grant-Date
Fair Value
 

Outstanding at January 28, 2012

     765,523      $ 3.91   

Granted

     1,505,782        1.76   

Vested

     (185,570     4.38   

Forfeited or expired

     (267,511     3.06   
  

 

 

   

Outstanding at October 27, 2012

     1,818,224      $ 2.21   
  

 

 

   

 

 

 

The weighted-average grant-date fair value per share of service-based restricted stock awards granted during the first three quarters of 2012 and 2011 was $1.76 and $3.51, respectively. The total fair value of awards vested during the first three quarters of fiscal 2012 and 2011 was $0.5 million and $0.9 million, respectively.

During the first three quarters of fiscal 2012, the Company granted 675,000 performance-based restricted stock awards which only vest upon the achievement of certain financial targets. The weighted-average grant-date fair value per share of performance-based restricted stock awards granted during the first three quarters of fiscal 2012 was $1.77. There were no performance-based restricted stock awards granted during the first three quarters of fiscal 2011.

Restricted Stock Units

A summary of restricted stock units activity under the Performance Plan for the first three quarters of fiscal 2012 is presented below. Restricted stock units contain a service-based restriction as to vesting. These awards generally vest 100% on the first anniversary of the grant date.

 

     Shares     Weighted-
Average
Grant-Date
Fair Value
 

Outstanding at January 28, 2012

     150,000      $ 3.19   

Granted

     125,000        1.57  

Vested

     (125,000     3.19   

Forfeited or expired

     (25,000     3.19   
  

 

 

   

Outstanding at October 27, 2012

     125,000      $ 1.57   
  

 

 

   

 

 

 

Stock-based compensation expense recognized related to nonvested stock options, restricted stock awards and restricted stock units during each of the third quarters of fiscal 2012 and 2011 was $0.6 million and $0.8 million, respectively, and during the first three quarters of fiscal 2012 and 2011, was $2.1 million and $2.5 million, respectively.

At October 27, 2012, the Company had approximately $3.6 million of stock-based compensation cost related to nonvested stock options, service-based restricted stock awards and restricted stock units expected to be recognized over a weighted-average period of approximately 2.5 years, and $0.5 million of stock-based compensation cost related to certain performance-based restricted stock awards, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Employee Stock Purchase Plan (“ESPP”)

The Company’s ESPP provides a method for Company employees to voluntarily purchase Company common stock at a 10% discount from fair market value as of the beginning or the end of each six-month purchasing period, whichever is lower. The ESPP covers substantially all employees who have three months of service with the Company, excluding senior executives.

 

The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.

During the first three quarters of fiscal 2012 and 2011, the Company issued 114,897, and 95,798 shares at an average price of $1.58 and $2.35, respectively, under the ESPP.

XML 45 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
FAIR VALUE MEASUREMENTS
9 Months Ended
Oct. 27, 2012
FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

The Company measures its financial assets and liabilities at fair value on a recurring basis and measures its nonfinancial assets and liabilities at fair value as required or permitted.

Fair value is defined as the price that would be received pursuant to the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. In order to determine the fair value of certain assets and liabilities, the Company applies the three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. The hierarchy is as follows:

 

   

Level 1 — quoted prices for identical instruments in active markets.

 

   

Level 2 — inputs other than Level 1 inputs, which are observable either directly or indirectly.

 

   

Level 3 — unobservable inputs.

Level 3 assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may result in a significantly lower or higher fair value measurement.

Recurring Fair Value Measurements

Derivative Liability

The Series B Preferred shares are required to be measured at fair value each reporting period. The fair value of the Series B Preferred shares was estimated using an option pricing model that requires Level 3 inputs, which are highly subjective and determined using the following significant assumptions:

 

     October 27, 2012     July 28. 2012  

Conversion price

   $ 1.75      $ 1.75   

Expected volatility

     66     66

Expected term (in years)

     9.1        9.3   

Risk free interest rate

     1.86     1.58

Expected dividends

   $ —        $ —     

The following table presents the activity recorded for the derivative liability during the first three quarters ended:

 

     October 27, 2012  
     (In thousands)  

Beginning balance as of January 28, 2012

   $ 20,076   

Gain on change in fair value

     (6,333
  

 

 

 

Balance as of April 28, 2012

     13,743   

Loss on change in fair value

     8,219   
  

 

 

 

Balance as of July 28, 2012

   $ 21,962   

Gain on change in fair value

     (5,558
  

 

 

 

Ending balance as of October 27, 2012

   $ 16,404   
  

 

 

 

The derivative liability is included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet. Changes in the fair value of the derivative liability are included in (gain) loss on derivative liability in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Operations.

Money Market Funds

As of October 27, 2012, and January 28, 2012, the Company had approximately $10.0 million and $19.8 million held in money market funds, respectively. The fair value of money market funds is determined based on Level 1 inputs which consist of quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. Money market funds are included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheet.

 

Non-Recurring Fair Value Measurements

On a non-recurring basis, using a discounted cash flow model, the Company measures certain of its long-lived assets at fair value based on Level 3 inputs including, but not limited to, moderate comparable store sales and margin growth, projected operating costs based primarily on historical trends, and an estimated weighted-average cost of capital rate. During the first three quarters of fiscal 2012 and 2011 the Company recorded $4.1 million and $12.8 million of impairment charges, respectively, in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Operations.

XML 46 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
SEGMENT REPORTING
9 Months Ended
Oct. 27, 2012
SEGMENT REPORTING

11. SEGMENT REPORTING

The Company operates exclusively in the retail apparel industry. The Company designs, produces and distributes clothing and related products catering to teens and young adults through its primarily mall-based PacSun retail stores. The Company has identified three operating segments: PacSun stores, PacSun Outlet stores and pacsun.com. The three operating segments have been aggregated into one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers, and economic characteristics among the three operating segments.

XML 47 R34.htm IDEA: XBRL DOCUMENT v2.4.0.6
Shareholder's Equity - Stock Option (Incentive and Nonqualified) Activity (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Shares Outstanding at January 28, 2012 2,990,501  
Granted Shares 20,500  
Exercised Shares (143,900) (70,825)
Forfeited or expired Shares (370,549)  
Share Outstanding at October 27, 2012 2,496,552  
Share, Vested and expected to vest at October 27, 2012 2,369,495  
Share Exercisable at October 27, 2012 1,440,601  
Weighted-Average Exercise Price Outstanding at January 28, 2012 $ 6.61  
Granted Weighted-Average Exercise Price $ 1.71  
Exercised Weighted-Average Exercise Price $ 1.64  
Forfeited or Expired Share Weighted-Average Exercise Price $ 12.33  
Weighted-Average Exercise Price Outstanding at October 27, 2012 $ 6.02  
Vested and expected to vest at October 27, 2012 Weighted-Average Exercise Price $ 6.14  
Exercisable at October 27, 2012 Weighted-Average Exercise Price $ 7.58  
Outstanding at October 27, 2012 Weighted-Average Remaining Contractual Term 3 years 8 months 12 days  
Vested and expected to vest at October 27, 2012 Weighted-Average Remaining Contractual Term 3 years 8 months 12 days  
Exercisable at October 27, 2012 Weighted-Average Remaining Contractual Term 3 years 2 months 12 days  
Outstanding at October 27, 2012Aggregate Intrinsic Value $ 20  
Vested and expected to vest at October 27, 2012Aggregate Intrinsic Value 18  
Exercisable at October 27, 2012Aggregate Intrinsic Value $ 12  
XML 48 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
SHAREHOLDERS' EQUITY (Tables)
9 Months Ended
Oct. 27, 2012
Weighted- Average Assumptions for Determining Fair Value

The fair value of the Company’s stock-based compensation activity was determined using the following weighted- average assumptions:

 

     For the Three Quarters Ended
     October 27, 2012   October 29, 2011
     Stock Options   ESPP   Stock Options   ESPP

Expected life

   4 years   0.5 years   4 years   0.5 years

Expected volatility

   87% - 88%   71%   83% - 84%   54%

Risk-free interest rate

   0.53% - 0.92%   0.15%   0.67% - 1.61%   0.20%

Expected dividends

   $—     $—     $—     $—  
Stock Option (Incentive and Nonqualified) Activity

A summary of stock option (incentive and nonqualified) activity for the first three quarters of fiscal 2012 is presented below:

 

     Shares     Weighted-
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term (Yrs.)
     Aggregate
Intrinsic
Value
($000s)
 

Outstanding at January 28, 2012

     2,990,501      $ 6.61         

Granted

     20,500        1.71         

Exercised

     (143,900     1.64         

Forfeited or expired

     (370,549     12.33         
  

 

 

         

Outstanding at October 27, 2012

     2,496,552      $ 6.02         3.7       $ 20   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest at October 27, 2012

     2,369,495      $ 6.14         3.7       $ 18   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at October 27, 2012

     1,440,601      $ 7.58         3.2       $ 12   
  

 

 

   

 

 

    

 

 

    

 

 

 
Summary of Service-Based Restricted Stock Awards and Units Activity
     Shares     Weighted-
Average
Grant-Date
Fair Value
 

Outstanding at January 28, 2012

     765,523      $ 3.91   

Granted

     1,505,782        1.76   

Vested

     (185,570     4.38   

Forfeited or expired

     (267,511     3.06   
  

 

 

   

Outstanding at October 27, 2012

     1,818,224      $ 2.21   
  

 

 

   

 

 

 
     Shares    

 

Weighted-
Average
Grant-Date
Fair Value

 

Outstanding at January 28, 2012

     150,000      $ 3.19   

Granted

     125,000        1.57  

Vested

     (125,000     3.19   

Forfeited or expired

     (25,000     3.19   
  

 

 

   

Outstanding at October 27, 2012

     125,000      $ 1.57   
  

 

 

   

 

 

 
XML 49 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
Impairment of Long-Lived Assets - Details of Long Lived Assets Tested and Impaired (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 27, 2012
Store
Oct. 29, 2011
Store
Impaired Long-Lived Assets Held and Used [Line Items]    
Carrying value of assets tested for impairment $ 6,726 $ 24,845
Carrying value of assets with impairment 1,023 8,939
Aggregate fair value of all long-lived assets tested $ 490 $ 1,894
Number of stores tested for impairment 101 221
Number of stores with impairment 17 64
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DISCONTINUED OPERATIONS - Additional Information (Detail)
3 Months Ended 9 Months Ended
Oct. 27, 2012
Store
Oct. 29, 2011
Store
Oct. 27, 2012
Store
Oct. 29, 2011
Store
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Underperforming stores 6 1 14 32
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (32,213) $ (68,330)
Adjustments to reconcile net loss to net cash from operating activities:    
Depreciation and amortization 25,915 32,758
Asset impairment 4,073 12,829
Loss on disposal of property and equipment 225 161
Gain on derivative liability (3,672)  
Amortization of debt discount 1,163  
Non-cash stock-based compensation 2,114 2,524
Change in operating assets and liabilities:    
Merchandise inventories (48,607) (56,548)
Other current assets 788 (7,298)
Other assets 1,374 518
Accounts payable 28,422 48,544
Other current liabilities 1,764 (3,361)
Deferred lease incentives (2,254) (6,070)
Deferred rent (286) (1,163)
Other long-term liabilities (427) 174
Net cash used in operating activities (21,621) (45,262)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment (12,037) (10,165)
Restricted cash 8,288  
Proceeds from insurance settlement 653 300
Net cash used in investing activities (3,096) (9,865)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments for credit facility borrowings (1,254)  
Principal payments under mortgage borrowings (401) (375)
Principal payments under capital leases (511) (241)
Proceeds from exercise of stock options 386 313
Net cash used in financing activities (1,780) (303)
NET DECREASE IN CASH AND CASH EQUIVALENTS (26,497) (55,430)
CASH AND CASH EQUIVALENTS, beginning of period 50,306 63,710
CASH AND CASH EQUIVALENTS, end of period 23,809 8,280
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Cash paid for interest 2,473 1,745
Cash paid for income taxes 488 991
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:    
Property and equipment purchases accrued at period end 89 1,388
Shares issued in connection with lease modifications   1,585
Capital lease borrowings for property and equipment $ 111 $ 470
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OTHER CURRENT LIABILITIES
9 Months Ended
Oct. 27, 2012
OTHER CURRENT LIABILITIES

5. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

 

     October 27, 2012      January 28, 2012  
     (In thousands)  

Derivative liability

   $ 16,404       $ 20,076   

Accrued gift cards

     7,198         10,776   

Accrued compensation and benefits

     14,538         10,687   

Sales taxes payable

     3,279         3,983   

Deferred tax liability

     2,201         2,201   

Accrued capital expenditures

     1,192         1,281   

Other

     20,285         19,365   
  

 

 

    

 

 

 

Total other current liabilities

   $ 65,097       $ 68,369   
  

 

 

    

 

 

 

As disclosed in Note 8, the Company issued 1,000 shares of its Convertible Series B Preferred Stock (the “Series B Preferred”) in connection with the five-year, $60 million senior secured term loan (the “Term Loan”), funded by an affiliate of Golden Gate Capital. The fair value of the Series B Preferred at issuance was approximately $15.0 million which was recorded as a derivative liability. As of October 27, 2012, the fair value of the derivative liability was approximately $16.4 million. See Note 9, “Fair Value Measurements – Recurring Fair Value Measurements” for further discussion on the derivative liability.

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IMPAIRMENT OF LONG-LIVED ASSETS - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
Oct. 27, 2012
Oct. 29, 2011
Asset Impairment Charges [Line Items]        
Impairment charged $ 533,000 $ 7,045,000 $ 3,164,000 $ 12,829,000
Excess store fixtures 900,000      
Under performing stores,remaining assets fair value $ 6,000,000   $ 6,000,000  
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FAIR VALUE MEASUREMENTS - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Oct. 27, 2012
Oct. 29, 2011
Oct. 27, 2012
Oct. 29, 2011
Oct. 27, 2012
Fair value, Level 3 inputs [Member]
Oct. 29, 2011
Fair value, Level 3 inputs [Member]
Oct. 27, 2012
Fair value, Level 1 inputs [Member]
Cash and cash equivalents [Member]
Jan. 28, 2012
Fair value, Level 1 inputs [Member]
Cash and cash equivalents [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]                
Money market funds, carrying value             $ 10,000,000 $ 19,800,000
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OTHER CURRENT LIABILITIES (Tables)
9 Months Ended
Oct. 27, 2012
Schedule of Other Current Liabilities

Other current liabilities consisted of the following:

 

     October 27, 2012      January 28, 2012  
     (In thousands)  

Derivative liability

   $ 16,404       $ 20,076   

Accrued gift cards

     7,198         10,776   

Accrued compensation and benefits

     14,538         10,687   

Sales taxes payable

     3,279         3,983   

Deferred tax liability

     2,201         2,201   

Accrued capital expenditures

     1,192         1,281   

Other

     20,285         19,365   
  

 

 

    

 

 

 

Total other current liabilities

   $ 65,097       $ 68,369