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TheStreet Open House

Pacific Sunwear Announces Fourth Quarter Operating Results; Issues First Quarter Guidance

Stock quotes in this article: PSUN

About Pacific Sunwear of California, Inc.

Pacific Sunwear of California, Inc. and its subsidiaries (collectively, "PacSun" or the "Company") 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. As of March 20, 2013, the Company operates 644 stores in all 50 states and Puerto Rico. PacSun's website address is www.pacsun.com .

The Company will be hosting a conference call today at 4:30 p.m. Eastern time to review the results of its fourth fiscal quarter. A telephonic replay of the conference call will be available, beginning approximately two hours following the call, for one week and can be accessed in the United States and Canada at (855) 859-2056 or internationally at (404) 537-3406; passcode: 19468762. For those unable to listen to the live Web broadcast or utilize the call-in replay, an archived version will be available on the Company's investor relations website through midnight, May 28, 2013.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, please see the accompanying table titled "Reconciliation of Selected GAAP Measures to Non-GAAP Measures" and the section following such table titled "About Non-GAAP Financial Measures."

Pacific Sunwear Safe Harbor

This press release contains "forward-looking statements" including, without limitation, the statements made by Mr. Schoenfeld in the seventh paragraph and the statements made by the Company under the heading "Financial Outlook for First Fiscal Quarter of 2013." In each case, these statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that these forward-looking statements be subject to the safe harbors created thereby. These statements are not historical facts and involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Uncertainties that could adversely affect the Company's business and results include, among others, the following factors: increased sourcing and product costs; adverse changes in U.S. and world economic conditions generally; adverse changes in consumer spending; changes in consumer demands and preferences; adverse changes in same-store sales; higher than anticipated markdowns and/or higher than estimated selling, general and administrative costs; currency fluctuations; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion risk; lower than expected sales from private label merchandise; reliance on key personnel; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors as a result of natural disasters or terrorist acts, which could cause unexpected delays in store relocations, renovations or expansions; reliance on foreign sources of production; and other risks outlined in the Company's filings with the Securities and Exchange Commission ("SEC"), including but not limited to the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2012, and subsequent periodic reports filed with the SEC. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

 
 
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
 
  Fourth Quarter Ended Fiscal Year Ended
  February 2, 2013 ( 1) January 28, 2012 February 2, 2013 ( 1) January 28, 2012
         
Net sales $ 228,039 $ 218,668 $ 803,071 $ 777,337
Gross margin 48,215 42,156 200,980 170,181
SG&A expenses 63,411 61,284 238,999 241,826
Operating loss (15,196) (19,128) (38,019) (71,645)
Other expense, net 7,015 7,150 13,351 9,441
Loss from continuing operations before income taxes (22,211) (26,278) (51,370) (81,086)
Income tax expense 257 382 848 1,032
Loss from continuing operations (22,468) (26,660) (52,218) (82,118)
Income (loss) from discontinued operations, net of tax 2,607 (11,432) 144 (24,305)
Net loss $ (19,861) $ (38,092) $ (52,074) $ (106,423)
         
Loss from continuing operations per share:        
Basic and diluted $ (0.33) $ (0.39) $ (0.77) $ (1.23)
Income (loss) from discontinued operations per share:        
Basic and diluted $ 0.04 $ (0.17) $ — $ (0.37)
Net loss per share:        
Basic and diluted $ (0.29) $ (0.56) $ (0.77) $ (1.60)
         
Weighted-average shares outstanding:        
Basic and diluted 68,005 67,428 67,815 66,708
 
(1) Fiscal 2012 fourth quarter and full-year results include a 53 rd week.
 
 
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
     
     
  February 2, 2013 January 28, 2012
     
ASSETS
Current assets:    
Cash and cash equivalents $ 48,733 $ 50,306
Restricted cash 8,593
Inventories 90,681 88,740
Prepaid expenses 12,815 15,506
Other current assets 2,912 6,272
Total current assets 155,141 169,417
Property and equipment, net 124,793 149,716
Other long-term assets 33,878 35,998
Total assets $ 313,812 $ 355,131
     
     
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:    
Accounts payable $ 49,993 $ 38,914
Other current liabilities 63,641 68,369
 Total current liabilities 113,634 107,283
Deferred lease incentives 14,401 17,681
Deferred rent 16,133 16,602
Long-term debt 79,570 73,910
Other long-term liabilities 25,714 26,558
Total liabilities 249,452 242,034
Total shareholders' equity 64,360 113,097
Total liabilities and shareholders' equity $ 313,812 $ 355,131
 
 
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
  Fiscal Year Ended
  February 2, 2013 January 28, 2012
Cash flows from operating activities:    
Net loss $ (52,074) $ (106,423)
Depreciation and amortization 33,637  42,505
Asset impairment 5,341 14,787
Non-cash stock-based compensation 2,836  3,176
Amortization of debt discount 1,548
Loss on disposal of property and equipment 268 242
Loss on derivative liability 6 5,039
(Gain) loss on lease terminations (268) 9,336
Changes in operating assets and liabilities:    
Inventories (1,941)  6,961
Accounts payable and other current liabilities 8,732  (12,886)
Other assets and liabilities 8,359 (10,141)
Net cash provided by (used in) operating activities  6,444  (47,404)
     
Cash flows from investing activities:    
Capital expenditures (15,393)  (13,235)
Restricted cash 8,593  (8,593)
Proceeds from insurance settlements 653  300
Net cash used in investing activities (6,147)   (21,528)
     
Cash flows from financing activities:    
Proceeds from credit facility borrowings 21,254
Payments under credit facility borrowings (1,254) (20,000)
Proceeds from senior secured term loan 60,000
Payments for debt issuance costs (5,300)
Principal payments under mortgage borrowings (540)  (505)
Principal payments under capital lease obligations (636)  (398)
Proceeds from exercise of stock options 560  477
Net cash (used in) provided by financing activities (1,870)  55,528
     
Net decrease in cash and cash equivalents (1,573)  (13,404)
Cash and cash equivalents, beginning of period 50,306  63,710
Cash and cash equivalents, end of period $ 48,733 $ 50,306
 
 
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
         
  February 2, 2013 January 28, 2012
Stores open at beginning of year 733 852
Stores opened during the period 3
Stores closed during the period (92) (119)
Stores open at end of period 644 733
         
         
  February 2, 2013 January 28, 2012
  # of Stores Square Footage (000s) # of Stores Square Footage (000s)
PacSun Core stores 528 2,066 614 2,380
PacSun Outlet stores 116 471 119 482
Total stores 644 2,537 733 2,862
 
 
PACIFIC SUNWEAR OF CALIFORNIA, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited, in thousands, except per share data)
 
  Fourth Quarter Ended Fiscal Year Ended
  February 2, 2013 ( 1) January 28, 2012 February 2, 2013 ( 1) January 28, 2012
         
GAAP SG&A expenses $ 63,411 $ 61,284 $ 238,999 $ 241,826
Store closure charges (gains):        
- Asset impairments 576 174 626 1,035
- Lease terminations (5) 26 (30) 59
Non-GAAP SG&A expenses $ 62,840 $ 61,084 $ 238,403 $ 240,732
         
GAAP loss from continuing operations   $ (22,468) $ (26,660) $ (52,218) $ (82,118)
Store closure charges (gains), net of tax:        
- Asset impairment 363 110 395 652
- Lease terminations (3) 17 (19) 37
Derivative liability 3,678 5,039 6 5,039
Valuation allowance  7,015  8,522  19,415  28,958
Non-GAAP loss from continuing operations $ (11,415) $ (12,972) $ (32,421) $ (47,432)
         
GAAP loss from continuing operations per share $ (0.33) $ (0.39) $ (0.77) $ (1.23)
Store closure charges (gains), net of tax:        
- Asset impairment 0.01 0.01 0.01
- Lease terminations
Derivative liability 0.05 0.07 0.08
Valuation allowance  0.10  0.13  0.29  0.43
Non-GAAP loss from continuing operations per share $ (0.17) $ (0.19) $ (0.47) $ (0.71)
         
Shares used in calculation  68,005 67,428  67,815 66,708
 
(1) Fiscal 2012 fourth quarter and full-year results include a 53 rd week.

ABOUT NON-GAAP FINANCIAL MEASURES

The accompanying press release dated March 20, 2013, contains non-GAAP financial measures. These non-GAAP financial measures include non-GAAP gross margin, non-GAAP SG&A expenses, non-GAAP loss from continuing operations and non-GAAP loss from continuing operations per share for the fourth quarter and the four quarters of fiscal 2012 and 2011, respectively, and non-GAAP loss from continuing operations per share guidance for the first quarter of fiscal 2013. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. The Company computes non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. The Company may consider whether other significant items that arise in the future should be excluded from the non-GAAP financial measures. The Company has excluded the following items from all of its non-GAAP financial measures:

  • Store closure charges (gains)
  • Derivative liability
  • Valuation allowance

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's operating results primarily because they exclude amounts that are not considered part of ongoing operating results when planning and forecasting and when assessing the performance of the organization, individual operating segments or its senior management. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and in providing estimates of future performance and that failure to report these non-GAAP measures, could result in confusion among analysts and others and create a misplaced perception that the Company's results have underperformed or exceeded expectations.

CONTACT: Michael W. Kaplan
         Chief Financial Officer
         (714) 414-4003

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