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TheStreet Open House

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

Financial Outlook for Second Fiscal Quarter of 2013

The Company's guidance range for the second quarter of fiscal 2013 contemplates a non-GAAP (loss) income per diluted share from continuing operations of between $(0.05) and $0.02, compared to $(0.09) in the second quarter of fiscal 2012.

The forecasted second quarter non-GAAP (loss) income from continuing operations per diluted share guidance range is based on the following assumptions:

  • Comparable store sales from flat to 5%;
  • Revenue from $209 million to $219 million;
  • Gross margin rate, including buying, distribution and occupancy, of 28% to 30%;
  • SG&A expenses in the range of $59 million to $61 million;
  • A normalized annual income tax rate of approximately 37%; and
  • An estimated $10 million shift in revenue from the third quarter to the second quarter and a corresponding shift of $0.05 per diluted share as a result of the 53 rd week calendar shift.

The Company's second fiscal quarter of 2013 guidance range excludes the quarterly impact of the change in the fair value of the derivative liability due to the inherently variable nature of this financial instrument.

Discontinued Operations

In accordance with applicable accounting literature and consistent with the Company's financial statement presentation in its fiscal 2012 annual report, the Company has reclassified the results of operations of its closed stores as discontinued operations for all periods presented, as applicable.

Derivative Liability

In fiscal 2011, as a result of the issuance of the Series B Preferred in connection with the Company's $60 million senior secured term loan financing with an affiliate of Golden Gate Capital, the Company recorded a derivative liability equal to approximately $15.0 million, which represents the fair value of the Series B Preferred upon issuance. In accordance with applicable U.S. GAAP, the Company has marked this derivative liability to fair value through earnings and will continue to do so on a quarterly basis until the shares of Series B Preferred are either converted into shares of the Company's common stock or until the conversion rights expire (December 2021). The Company's second fiscal quarter of 2013 earnings guidance excludes the quarterly impact of the change in the fair value of the derivative liability due to the inherently variable nature of this financial instrument.

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