ANAHEIM, Calif., Nov. 20, 2007 (PRIME NEWSWIRE) -- Pacific Sunwear of California, Inc. (Nasdaq:PSUN) today announced that total sales for the third quarter (13 weeks) of fiscal 2007 ended November 3, 2007, were $373.1 million, a decrease of 0.6 percent from total sales of $375.4 million for the third quarter (13 weeks) of fiscal 2006 ended October 28, 2006.
Total Company same-store sales increased 5.0 percent during the third quarter of fiscal 2007. By concept, PacSun same-store sales increased 7.7 percent and demo same-store sales decreased 18.3 percent. Due to the 53rd week in fiscal 2006, same-store sales for the third quarter of fiscal 2007 are compared to the thirteen-week period ended November 4, 2006.
For the third quarter of fiscal 2007, the Company recorded a GAAP net loss of $20.0 million, or $(0.29) per diluted share, compared to GAAP net income of $9.0 million, or $0.13 per diluted share, for the third quarter of fiscal 2006. Store asset impairments and inventory reserves associated with the Company's demo stores accounted for approximately $31 million in after-tax charges, or $(0.45) per diluted share. Excluding these charges and their related tax rate implications, the Company generated non-GAAP net income of $11.1 million, or $0.16 per diluted share, for the third quarter of fiscal 2007. A reconciliation of the GAAP to non-GAAP financial measures above is contained at the end of this press release.
"I am very pleased by the progress shown by our core PacSun business during the third quarter," commented Sally Frame Kasaks, Chief Executive Officer. "We completed a strong back-to-school season, driven by continued progress in improving our juniors' business and steady performance from our guys' business."
Total sales for the first three quarters (39 weeks) ended November 3, 2007 were $1,038.0 million, an increase of 4.9 percent over total sales of $989.0 million during the first three quarters (39 weeks) ended October 28, 2006.
Total Company same-store sales increased 2.0 percent during the first three quarters. By concept, PacSun same-store sales increased 4.0 percent and demo same-store sales decreased 13.7 percent. Due to the 53rd week in fiscal 2006, same-store sales for the first three quarters of fiscal 2007 are compared to the 39-week period ended November 4, 2006.
For the first three quarters of fiscal 2007, the Company recorded a GAAP net loss of $35.6 million, or $(0.51) per diluted share, compared to GAAP net income of $30.6 million, or $0.43 per diluted share, in the first three quarters of fiscal 2006 ended October 28, 2006. Store asset impairments, lease termination charges, inventory reserves and other liquidation charges associated with the Company's demo and One Thousand Steps stores accounted for approximately $48 million in after-tax charges, or $0.69 per diluted share. Excluding these charges and their related tax rate implications, the Company generated non-GAAP net income of $12.8 million, or $0.18 per diluted share, for the first three quarters of fiscal 2007. A reconciliation of the GAAP to non-GAAP financial measures above is contained at the end of this press release.
Financial Outlook
Assuming a flat to low-single digit increase in total Company same-store sales for the fourth quarter, the Company expects fourth quarter earnings in the range of $0.26 to $0.29 per diluted share. This earnings range does not include any potential lease termination or other disposition-related charges that may occur associated with the demo or One Thousand Steps businesses at any time in the future.
As a result of the Company's previously announced plans to explore strategic alternatives for its demo stores and to close its One Thousand Steps stores, and the uncertainty regarding the financial impact those plans may produce, the Company is also providing non-GAAP earnings guidance associated with its core PacSun business on a stand-alone basis. Accordingly, assuming a low-single digit increase in PacSun same-store sales for the fourth quarter, the Company is comfortable with fourth quarter non-GAAP earnings, excluding demo and One Thousand Steps and any associated potential lease termination or other disposition-related charges that may occur at any time in the future, in the range of $0.32 to $0.35 per diluted share.
About Pacific Sunwear of California, Inc.
Pacific Sunwear 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 November 3, 2007, the Company operated 838 PacSun stores, 119 PacSun Outlet stores, 154 demo stores and 9 One Thousand Steps stores for a total of 1,120 stores in 50 states and Puerto Rico. PacSun's website address is www.pacsun.com, merchandise carried at demo stores can be found at www.demostores.com and information about One Thousand Steps can be found at www.onethousandsteps.com. On October 24, 2007, the Company announced that it would be seeking strategic alternatives for its demo division and would be closing its One Thousand Steps division as soon as is practical.
The Company will be hosting a conference call today at 2:00 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: 24025382. 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, November 20, 2008.
The Pacific Sunwear of California logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=2087
Pacific Sunwear Safe Harbor
This press release contains "forward-looking statements" including, without limitation, statements regarding the Company's earnings projections for the fourth quarter of fiscal 2007, its assumptions of a flat to low-single digit increase in total Company same-store sales and a low-single digit same-store sales increase for its PacSun business in the fourth quarter, the Company's plans to explore strategic alternatives for its demo stores and to close its One Thousand Steps stores, and the Company's continued progress in improving its juniors' business. 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 which could cause actual results to differ materially from those expressed in such forward-looking statements. Such uncertainties which could adversely affect our business and results include, among others, the following factors: our assumption of comparable same store sales during the fourth quarter of fiscal 2007 may be wrong and actual comparable same store sales may be higher or lower; changes in consumer demands and preferences may adversely affect our performance; higher than anticipated markdowns and/or higher than estimated selling, general and administrative costs; higher than anticipated lease termination costs or inventory liquidation charges associated with the Company's demo and One Thousand Steps stores; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; sales from private label merchandise, expansion and management of growth; reliance on key personnel; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors, as a result of natural disasters or terrorist acts, could cause unexpected delays in new store openings, relocations or expansions; reliance on foreign sources of production; credit facility financial covenants and other risks outlined in the company's SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended February 3, 2007 and subsequent periodic reports filed with the Securities and Exchange Commission. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
PACIFIC SUNWEAR OF CALIFORNIA, INC. SUMMARY STATEMENTS OF INCOME (unaudited, in thousands except share and per share data) Third Quarter Ended First Three Quarters Ended ------------------------ ------------------------ NOV. 3, OCT. 28, NOV. 3, OCT. 28, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Net sales $ 373,148 $ 375,427 $ 1,037,951 $ 988,996 Gross margin 111,099 106,342 284,988 301,049 Selling, G&A expenses 148,849 92,562 350,491 255,355 ----------- ----------- ----------- ----------- Operating (loss)/ income (37,750) 13,780 (65,503) 45,694 Interest income, net 652 709 2,162 3,594 ----------- ----------- ----------- ----------- (Loss)/Income before taxes (37,098) 14,489 (63,341) 49,288 Income tax (benefit)/expense (17,061) 5,506 (27,744) 18,729 ----------- ----------- ----------- ----------- Net (loss)/income $ (20,037) $ 8,983 $ (35,597) $ 30,559 =========== =========== =========== =========== Net (loss)/income per share, basic $ (0.29) $ 0.13 $ (0.51) $ 0.43 =========== =========== =========== =========== Net (loss)/income per share, diluted $ (0.29) $ 0.13 $ (0.51) $ 0.43 =========== =========== =========== =========== Wtd avg shares outstanding, basic 69,765,113 69,344,402 69,678,733 71,274,716 =========== =========== =========== =========== Wtd avg shares outstanding, diluted 69,765,113 69,561,420 69,678,733 71,657,385 =========== =========== =========== =========== PACIFIC SUNWEAR OF CALIFORNIA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) NOV. 3, FEB. 3, OCT. 28, 2007 2007 2006 -------- -------- -------- ASSETS Current assets: Cash & cash equivalents $ 37,179 $ 52,267 $ 55,453 Short-term investments -- 31,500 -- Inventories 242,210 205,213 252,680 Other current assets 71,604 46,255 32,120 -------- -------- -------- Total current assets 350,993 335,235 340,253 Property and equipment, net 394,785 420,886 419,396 Other long-term assets 43,515 17,122 16,350 -------- -------- -------- Total assets $789,293 $773,243 $775,999 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $106,352 $ 66,581 $ 77,911 Other current liabilities 66,113 73,952 67,807 -------- -------- -------- Total current liabilities 172,465 140,533 145,718 Deferred lease incentives 78,201 89,371 86,377 Deferred rent 28,408 30,619 31,039 Other long-term liabilities 35,411 9,367 21,383 -------- -------- -------- Total liabilities 314,485 269,890 284,517 Total shareholder's equity 474,808 503,353 491,482 -------- -------- -------- Total liabilities and shareholders' equity $789,293 $773,243 $775,999 ======== ======== ======== PACIFIC SUNWEAR OF CALIFORNIA, INC. CONDENSED CONSOLIDATED CASH FLOWS (unaudited, in thousands) THREE QUARTERS ENDED NOV. 3, OCT. 28, 2007 2006 --------- --------- Cash flows from operating activities: Net (loss)/income $ (35,597) $ 30,559 Depreciation & amortization 58,295 52,632 Non-cash stock based compensation 5,119 5,392 Tax benefits related to exercise of stock options 320 1,556 Excess tax benefits related to stock-based compensation (292) (963) Loss on disposal of property and equipment 63,001 373 Changes in operating assets and liabilities: Inventories (36,997) (37,540) Accounts payable and other current liabilities 31,724 11,482 Other assets and liabilities (39,709) 21,124 --------- --------- Net cash provided by operating activities 45,864 84,615 Cash flows from investing activities: Purchases of short-term investments (171,400) (226,503) Maturities of short-term investments 202,900 301,414 Purchases of long-term investments (23,300) -- Capital expenditures (94,939) (107,087) --------- --------- Net cash used in investing activities (86,739) (32,176) Cash flows from financing activities: Repurchases of common stock -- (99,347) Excess tax benefits related to stock-based compensation 292 963 Proceeds from exercise of stock options 2,237 6,532 Net borrowings under long-term leases 23,258 (319) --------- --------- Net cash provided by/(used in) financing activities 25,787 (92,171) --------- --------- Net (decrease) in cash and cash equivalents (15,088) (39,732) Cash and cash equivalents, beginning of period 52,267 95,185 --------- --------- Cash and cash equivalents, end of period $ 37,179 $ 55,453 ========= ========= PACIFIC SUNWEAR OF CALIFORNIA, INC. SELECTED STORE OPERATING DATA NOV. 3, 2007 OCT. 28, 2006 ------------ ------------- Stores open at beginning of fiscal year 1,199 1,105 Stores opened during the fiscal year 14 67 Stores closed during the fiscal year (93) (3) ------------ ------------- Stores open at end of period 1,120 1,169 NOV. 3, 2007 OCT. 28, 2006 ---------------- ---------------- Square Square # of Footage # of Footage Stores (000's) Stores (000's) ---------------- ---------------- PacSun stores 838 3,186 835 3,136 Outlet stores 119 481 110 446 d.e.m.o. stores 154 439 215 603 One Thousand Steps stores 9 24 9 24 ---------------- ---------------- Total stores 1,120 4,130 1,169 4,209 Reconciliation of GAAP to non-GAAP financial measures ----------------------------------------------------- This earnings release for the third quarter ended November 3, 2007 contains certain non-GAAP financial measures. Provided in the tables below is a reconciliation of the relevant GAAP measure to the non-GAAP measure contained in this earnings release. Only line items affected by these non-GAAP adjustments are included in the tables below. All amounts are expressed in millions of dollars, except earnings per share. Non-GAAP earnings are derived by starting with the GAAP number on the left and subtracting the relevant non-GAAP adjustments while moving to the right by line item. The Company believes that the non-GAAP measures presented in the earnings release and below in the reconciliation tables are useful to investors, as they provide an alternative method for measuring the Company's operating performance and comparing it against prior periods' performance without reference to the income statement impact of store asset impairment charges associated with demo stores and inventory reserve charges associated with both demo and One Thousand Steps stores. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. As used herein, "GAAP" refers to accounting principles generally accepted in the United States. Reconciliation of fiscal 2007 third quarter GAAP earnings to non-GAAP earnings: Non-GAAP earnings for the third quarter of fiscal 2007 exclude the income statement impact of store asset impairment charges associated with demo stores and inventory reserve charges associated with both demo and One Thousand Steps. Non-GAAP Adjustments Attributable to demo and One GAAP Amounts Thousand Steps Non-GAAP Amounts Gross Margin/(Loss) $111.1 $(4.5) $115.6 SG&A 148.8 49.5 99.3 Operating (Loss) Income (37.8) (54.1) 16.3 Income Tax (Benefit)/ Expense (17.1) (22.9) 5.8 Net (Loss)/Income (20.0) (31.1) 11.1 (Loss)/Earnings Per Share $(0.29) $(0.45) $0.16 Reconciliation of fiscal 2007 first three quarters' GAAP earnings to non-GAAP earnings: Non-GAAP earnings for the first three quarters of fiscal 2007 exclude the income statement impact from the liquidation of 74 demo store closures and store asset impairment and inventory reserve charges associated with both demo and One Thousand Steps stores. Non-GAAP Non-GAAP Adjustments Adjustments Attributable to Attributable to demo and GAAP 74 demo Store One Thousand Non-GAAP Amounts Closures Steps Amounts Net Sales $1,038.0 $13.3 $-- $1,024.6 Gross Margin/ (Loss) 285.0 (15.2) (4.5) 304.7 SG&A 350.5 4.6 59.2 286.7 Operating (Loss)/Income (65.5) (19.8) (63.7) 18.0 Income Tax (Benefit)/ Expense (27.7) (7.9) (27.2) 7.4 Net (Loss)/ Income (35.6) (11.9) (36.5) 12.8 (Loss)/Earnings Per Share $(0.51) $(0.17) $(0.52) $0.18