EXHIBIT 99.1
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CONTACT:
Gar Jackson
Director of Investor Relations
(714) 414-4049
Gar Jackson
Director of Investor Relations
(714) 414-4049
FOR IMMEDIATE RELEASE
PACIFIC SUNWEAR ANNOUNCES SECOND QUARTER EARNINGS RESULTS
ANAHEIM, CA/August 10, 2006-— 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.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000
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 | ) | ||
Adjusted non-GAAP EPS for Q2 2005 | $ | 0.24 | ||
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 | ) | ||
Adjusted non-GAAP net income for Q2 2005 | $ | 18,524 | ||
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 | ) | ||
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 | ) | ||
Adjusted non-GAAP net income for Q2 2005 | $ | 33,777 | ||
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.
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000
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 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.
—MORE—
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
Second Quarter Ended | First Half Ended | |||||||||||||||
JUL. 29, 2006 | JUL. 30, 2005 | JUL. 29, 2006 | JUL. 30, 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)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
JUL. 29, 2006 | JAN. 28, 2006 | JUL. 30, 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 | ||||||
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
FOR THE FIRST HALF ENDED | ||||||||
JUL. 29, 2006 | JUL. 30, 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 | ||||
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
SELECTED STORE OPERATING DATA
JUL. 29, 2006 | JUL. 30, 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 |
3450 East Miraloma Avenue • Anaheim, CA 92806 • (714) 414-4000