ANAHEIM, Calif., Aug. 10, 2006 (PRIMEZONE) -- Pacific Sunwear of California, Inc. (Nasdaq:PSUN) today announced that total sales for the second quarter ended July 29, 2006 were $313.7 million, an increase of 1.5 percent over total sales of $309.1 million for the second quarter ended July 30, 2005. Second quarter net earnings were $0.14 per diluted share, including $0.02 related to stock compensation and pre-opening rent expenses. On a comparable non-GAAP basis, earnings per diluted share were $0.24 in the second quarter of 2005. Net income for the second quarter of fiscal 2006 was $9.7 million compared to a non-GAAP $18.5 million for the second quarter of fiscal 2005. Same-store sales decreased 5.5 percent for the comparable second quarter period.
"I am obviously very disappointed with our second quarter results," commented Seth Johnson, chief executive officer. "Although it is still too early to make a judgment regarding the strength of our back to school assortment, we must be cautious in our planning and expectations for the third quarter."
Total sales for the first half (twenty-six weeks) of fiscal 2006 were $613.6 million, an increase of 4.2 percent over total sales of $589.0 million for the first half of fiscal 2005. Net income for the first half of fiscal 2006 decreased 36 percent to $21.6 million, compared to a non-GAAP $33.8 million for the first half of fiscal 2005. Earnings per diluted share decreased 32 percent to $0.30 compared to a non-GAAP $0.44 per diluted share for the first half of fiscal 2005. Same-store sales decreased 3.7 percent for the comparable twenty-six week period ended July 29, 2006.
A reconciliation of second quarter and year-to-date fiscal 2005 reported GAAP earnings to the non-GAAP measures contained in this press release is set forth below.
Reconciliation of Fiscal 2005 Q2 Earnings to Non-GAAP Disclosure
----------------------------------------------------------------
GAAP EPS as originally reported for Q2 2005 $0.28
Less impact of stock compensation and
pre-opening rent expenses (0.04)
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Adjusted non-GAAP EPS for Q2 2005 $0.24
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GAAP net income as reported for Q2 2005, in $000's $21,112
Less stock compensation expenses, tax-effected (2,170)
Less pre-opening rent, tax-effected (418)
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Adjusted non-GAAP net income for Q2 2005 $18,524
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Reconciliation of Fiscal 2005 Year-to-Date Earnings
to Non-GAAP Disclosure
---------------------------------------------------
GAAP EPS as originally reported for Q2 2005 $0.51
Less impact of stock compensation and
pre-opening rent expenses (0.07)
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Adjusted non-GAAP EPS for Q2 2005 $0.44
=======
GAAP net income as reported for Q2 2005, in $000's $38,719
Less stock compensation expenses, tax-effected (3,991)
Less pre-opening rent, tax-effected (951)
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Adjusted non-GAAP net income for Q2 2005 $33,777
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Stock Repurchase Program
During the second quarter of fiscal 2006, the Company repurchased a total of 3.2 million shares of its common stock at an average price of $19.02. These repurchases occurred under the $100.0 million share repurchase authorization approved by the Company's board of directors on May 18, 2006. At the end of the second quarter, $50.5 million remained available for future repurchases
Financial Outlook
At this point, the Company believes it is too early in the back to school selling period to accurately predict third quarter volume. However, assuming a continuation of the negative mid-single digit second quarter comp trend, the Company is comfortable with third quarter earnings estimates in the range of $0.22 to $0.30 per diluted share. At this time, the Company is not providing fourth quarter or full year earnings guidance.
About Pacific Sunwear of California, Inc.
Pacific Sunwear, operating under three distinct retail concepts, is a leading specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. As of July 29, 2006, the Company operated 826 PacSun stores, 102 PacSun Outlet stores, 201 d.e.m.o. stores and 6 One Thousand Steps stores for a total of 1,135 stores in 50 states and Puerto Rico. PacSun's website address is www.pacsun.com, merchandise carried at d.e.m.o. stores can be found at www.demostores.com and information about One Thousand Steps can be found at www.onethousandsteps.com.
The Pacific Sunwear of California logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2087
The Company will be hosting a conference call today at 1:30 pm Pacific Time. A telephonic replay of the conference call will be available beginning approximately two hours following the call for one week and can be accessed in the United States/Canada at (800) 642-1687 or internationally at (706) 645-9291; pass code: 3804009 For those unable to listen to the live Web broadcast on the Company's investor relations website www.pacsun.com, or utilize the call-in replay, an archived version will be available on the Company's investor relations Web site through midnight, August 10, 2007.
Pacific Sunwear Safe Harbor
This press release contains "forward-looking statements" regarding the Company's third quarter earnings expectations (any prior earnings guidance, including full fiscal year guidance, is superseded by the guidance contained in this release) made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that this forward-looking statement be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in such forward-looking statements. This statement is not a historical fact and involves estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in such forward-looking statements. Such uncertainties include, among others, the following factors: our new concept is untested and may not be profitable or successful; changes in consumer demands and preferences, higher than estimated costs of goods sold or selling, general and administrative costs, competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; sales from private label merchandise; fluctuations in comparable store net sales results; expansion and management of growth; reliance on key personnel; dependence on single distribution facility; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors, as a result of natural disasters or terrorist acts, could cause unexpected delays in new store openings, relocations or expansions; reliance on foreign sources of production; credit facility financial covenants and other risks outlined in the company's SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended January 28, 2006 and subsequent periodic reports filed with the Securities and Exchange Commission. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
Second Quarter Ended First Half Ended
----------------------- -----------------------
JUL. 29, JUL. 30, JUL. 29, JUL. 30,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $ 313,682 $ 309,064 $ 613,570 $ 589,049
Gross margin 97,425 110,357 194,708 207,707
Selling,
G&A expenses 82,855 77,592 162,794 147,714
---------- ---------- ---------- ----------
Operating income 14,570 32,765 31,914 59,993
Interest income,
net 1,090 1,180 2,885 2,265
---------- ---------- ---------- ----------
Income before
taxes 15,660 33,945 34,799 62,258
Income tax
expense 5,950 12,833 13,223 23,539
---------- ---------- ---------- ----------
Net income $ 9,710 $ 21,112 $ 21,576 $ 38,719
========== ========== ========== ==========
Net income per
share, basic $ 0.14 $ 0.28 $ 0.30 $ 0.51
========== ========== ========== ==========
Net income per
share, diluted $ 0.14 $ 0.28 $ 0.30 $ 0.51
========== ========== ========== ==========
Wtd avg shares
outstanding,
basic 71,335,467 75,125,782 72,239,872 75,209,185
========== ========== ========== ==========
Wtd avg shares
outstanding,
diluted 71,866,482 76,118,501 72,783,954 76,338,599
========== ========== ========== ==========
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
JUL. 29, JAN. 28, JUL. 30,
2006 2006 2005
-------- -------- --------
ASSETS
Current assets:
Cash & cash equivalents $ 11,783 $ 95,185 $ 92,227
Short-term investments -- 74,911 70,366
Inventories 286,666 215,140 242,631
Other current assets 43,870 41,485 37,146
-------- -------- --------
Total current assets 342,319 426,721 442,370
Property and equipment, net 392,769 355,822 327,874
Other long-term assets 24,579 25,018 22,063
-------- -------- --------
Total assets $759,667 $807,561 $792,307
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 81,633 $ 47,550 $106,695
Other current liabilities 61,412 74,921 56,534
-------- -------- --------
Total current liabilities 143,045 122,471 163,229
Deferred lease incentives 84,291 81,440 75,873
Deferred rent 30,341 28,748 27,717
Other long-term liabilities 22,466 28,112 31,078
-------- -------- --------
Total liabilities 280,143 260,771 297,897
Total shareholder's equity 479,524 546,790 494,410
-------- -------- --------
Total liabilities and
shareholders' equity $759,667 $807,561 $792,307
======== ======== ========
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
FOR THE FIRST HALF ENDED
JUL. 29, JUL. 30,
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $ 21,576 $ 38,719
Depreciation & amortization 34,385 31,081
Non-cash stock based compensation 3,573 --
Tax benefits related to exercise
of stock options 1,479 5,737
Loss on disposal of property
and equipment 158 --
Changes in operating assets
and liabilities:
Inventories (71,526) (67,550)
Accounts payable and other
current liabilities 10,769 65,025
Other assets and liabilities (1,869) 4,330
--------- ---------
Net cash (used in)/provided
by operating activities (1,455) 77,342
Cash flows from investing activities:
Purchases of short-term investments (201,900) (468,843)
Maturities of short-term investments 276,811 477,700
Capital expenditures (62,675) (48,173)
--------- ---------
Net cash provided by/(used in)
investing activities 12,236 (39,316)
Cash flows from financing activities:
Repurchases of common stock (99,347) (19,978)
Proceeds from exercise of
stock options 5,454 10,756
Repayments under long-term debt
and capital leases (290) (885)
--------- ---------
Net cash used in financing
activities (94,183) (10,107)
--------- ---------
Net (decrease) increase in cash
and cash equivalents (83,402) 27,919
Cash and cash equivalents,
beginning of period 95,185 64,308
--------- ---------
Cash and cash equivalents,
end of period $ 11,783 $ 92,227
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PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
JUL. 29, JUL. 30,
2006 2005
------ ------
Stores open at beginning of fiscal year 1,105 990
Stores opened during the fiscal year 33 73
Stores closed during the fiscal year (3) (9)
------ ------
Stores open at end of period 1,135 1,054
PacSun stores 826 780
Outlet stores 102 91
d.e.m.o. stores 201 183
One Thousand Steps stores 6 --
------ ------
Total stores 1,135 1,054
Total square footage at end
of period (in 000's) 4,077 3,720