Exhibit 99.1
| | | |
CONTACT:
Gar Jackson
Vice President, Investor Relations
(714) 414-4049 | |  |
FOR IMMEDIATE RELEASE
PACIFIC SUNWEAR ANNOUNCES THIRD QUARTER
EARNINGS RESULTS
ANAHEIM, CA/November 18, 2008-— Pacific Sunwear of California, Inc. (NASDAQ:PSUN, the “Company”), today announced that total sales for the third quarter (13 weeks) of fiscal 2008 ended November 1, 2008, were $323.6 million, a 5% decrease from total sales of $341.9 million for the third quarter (13 weeks) of fiscal 2007 ended November 3, 2007. Total Company same-store sales decreased 7% during the third quarter of fiscal 2008.
The Company recorded a loss from continuing operations of $3.5 million, or $(0.05) per diluted share, for the third quarter of fiscal 2008 compared to income from continuing operations of $17.1 million, or $0.25 per diluted share, for the third quarter of fiscal 2007. Third quarter results for each period exclude the income statement impact of demo and One Thousand Steps due to the designation of these operations as discontinued operations during the first quarter of fiscal 2008 and the fourth quarter of fiscal 2007, respectively. Results for the third quarter of fiscal 2008 include an after-tax, non-cash goodwill impairment charge of approximately $4.2 million, of $0.06 per diluted share.
“It’s been well reported that consumer spending decelerated significantly in the September/October period, and we certainly saw this in our own results for the quarter. To strengthen our financial position in this economic downturn, we are focused on reducing our inventory, capital expenditures and other expenses,” commented Sally Frame Kasaks, Chief Executive Officer. “We remain encouraged by our e-commerce business, which continues to experience strong growth supported, in part, by enhancements to our website and supply chain.”
Total sales for the first three quarters (39 weeks) ended November 1, 2008 were $903.2 million, a 2% decrease from total sales of $921.7 million during the first three quarters (39 weeks) ended November 3, 2007. Same-store sales decreased 3% during the same period. For the first three quarters of fiscal 2008, the Company recorded a loss from continuing operations of $11.8 million, or $(0.18) per diluted share, compared to income from continuing operations of $26.1 million, or $0.37 per diluted share, in the first three quarters of fiscal 2007. Earnings results for the first three quarters include the asset impairment charge of $0.07 per diluted share incurred in the first quarter related to the materials handling equipment in the Company’s closed Anaheim distribution center and the non-cash goodwill impairment charge of $0.06 per diluted share incurred in the third quarter.
Financial Outlook
Given the significant downturn in the economic climate in recent months, the Company is updating its fiscal 2008 fourth quarter earnings forecast. As a result of additional promotional activity, and assuming a same-store sales decrease in the negative high-single digit range for the fourth quarter of fiscal 2008, the Company currently expects to report a
3450 East Miraloma Avenue• Anaheim, CA 92806• (714) 414-4000
fourth quarter loss of $(0.03) to $(0.08) per diluted share, including an estimated gain of approximately $0.11 per diluted share from the previously-announced sale of its Anaheim distribution Center.
About Pacific Sunwear of California, Inc.
Pacific Sunwear is a leading lifestyle specialty retailer rooted in the youth culture and fashion vibe of Southern California. The Company sells casual apparel with a limited selection of accessories and footwear designed to meet the needs of teens and young adults. As of November 1, 2008, the Company operated 815 PacSun stores and 125 PacSun Outlet stores for a total of 940 stores in 50 states and Puerto Rico. PacSun’s website address iswww.pacsun.com.
The Company will be hosting a conference call today at 4:30 pm Eastern 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: 72074140. For those unable to listen to the live Web broadcast on the Company’s investor relations websitewww.pacsun.com, or utilize the call-in replay, an archived version will be available on the Company’s investor relations website through midnight, March 11, 2009.
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 2008. 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. In particular, current unfavorable economic conditions and reduced consumer spending make it very difficult to forecast sales, and therefore our assumption of same-store sales during the fourth quarter of fiscal 2008 may be wrong, with actual same-store sales being lower than we have assumed for purposes of our earnings projection. In addition, completion of the sale of our Anaheim distribution center remains subject to the satisfaction by the buyer of its undertaking to obtain financing for the property acquisition. Other uncertainties that could adversely affect our business and results include, among others, the following factors: additional adverse changes in economic conditions generally; additional adverse changes in consumer spending, changes in consumer demands and preferences; higher than anticipated markdowns and/or higher than estimated selling, general and administrative costs; competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; 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, could cause unexpected delays in new store openings, relocations, renovations or expansions; reliance on foreign sources of production 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 2, 2008 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
| | | | | | | | | | | | | | | | | |
| | | Third Quarter Ended | | | First Three Quarters Ended | |
| | | Nov. 1, | | | Nov. 3, | | | Nov. 1, | | | Nov. 3, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Net sales | | $ | 323,612 | | | $ | 341,874 | | | $ | 903,204 | | | $ | 921,754 | |
Gross margin | | | 92,776 | | | | 114,726 | | | | 263,499 | | | | 291,770 | |
| Selling, G&A expenses | | | 95,308 | | | | 88,325 | | | | 281,163 | | | | 251,963 | |
| | | | | | | | | | | | | |
Operating (loss) income from continuing operations | | | (2,532 | ) | | | 26,401 | | | | (17,664 | ) | | | 39,807 | |
| Other expense (income), net | | | 1,100 | | | | (652 | ) | | | 461 | | | | (2,162 | ) |
| | | | | | | | | | | | | |
| Income (loss) from continuing operations before income taxes | | | (3,632 | ) | | | 27,053 | | | | (18,125 | ) | | | 41,969 | |
| Income tax (benefit) expense | | | (112 | ) | | | 9,910 | | | | (6,344 | ) | | | 15,906 | |
| | | | | | | | | | | | | |
Income (loss) from continuing operations | | | (3,520 | ) | | | 17,143 | | | | (11,781 | ) | | | 26,063 | |
| Discontinued operations, net of tax | | | 1,046 | | | | (37,180 | ) | | | (24,999 | ) | | | (61,660 | ) |
| | | | | | | | | | | | | |
Net loss | | $ | (2,474 | ) | | $ | (20,037 | ) | | $ | (36,780 | ) | | $ | (35,597 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.05 | ) | | $ | 0.25 | | | $ | (0.18 | ) | | $ | 0.37 | |
| | | | | | | | | | | | | |
| Diluted | | $ | (0.05 | ) | | $ | 0.25 | | | $ | (0.18 | ) | | $ | 0.37 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net loss per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.04 | ) | | $ | (0.29 | ) | | $ | (0.55 | ) | | $ | (0.51 | ) |
| | | | | | | | | | | | | |
| Diluted | | $ | (0.04 | ) | | $ | (0.29 | ) | | $ | (0.55 | ) | | $ | (0.51 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 64,968,707 | | | | 69,765,113 | | | | 67,182,918 | | | | 69,635,543 | |
| | | | | | | | | | | | | |
| Diluted | | | 64,968,707 | | | | 69,949,070 | | | | 67,182,918 | | | | 69,986,773 | |
| | | | | | | | | | | | | |
Note: All periods presented above exclude the income statement impact to continuing operations of demo and One Thousand Steps, which were designated as discontinued operations during the first quarter of fiscal 2008 and the fourth quarter of fiscal 2007, respectively. Continuing operations, as presented above, include the operations of the Company’s PacSun and PacSun Outlet stores only.
3450 East Miraloma Avenue• Anaheim, CA 92806• (714) 414-4000
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
| | | | | | | | | | | | | |
| | | Nov. 1, | | | Feb. 2, | | | Nov. 3, | |
| | | 2008 | | | 2008 | | | 2007 | |
ASSETS | | | | | | | | | | | | |
| |
Current assets: | | | | | | | | | | | | |
| Cash & cash equivalents | | $ | 4,817 | | | $ | 97,587 | | | $ | 37,179 | |
| Marketable securities | | | — | | | | — | | | | — | |
| Inventories | | | 233,814 | | | | 170,182 | | | | 242,210 | |
| Other current assets | | | 73,635 | | | | 52,818 | | | | 71,604 | |
| | | | | | | | | | |
Total current assets | | | 312,266 | | | | 320,587 | | | | 350,993 | |
| Property and equipment, net | | | 369,571 | | | | 376,243 | | | | 394,785 | |
| Other long-term assets | | | 31,423 | | | | 55,313 | | | | 43,515 | |
| | | | | | | | | | |
Total assets | | $ | 713,260 | | | $ | 752,143 | | | $ | 789,293 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
| Accounts payable | | $ | 113,799 | | | $ | 62,349 | | | $ | 106,352 | |
| Credit facility | | | 43,100 | | | | — | | | | — | |
| Other current liabilities | | | 47,365 | | | | 71,107 | | | | 66,113 | |
| | | | | | | | | | |
Total current liabilities | | | 204,264 | | | | 133,456 | | | | 172,465 | |
| | | | | | | | | | | | | |
| Deferred lease incentives | | | 55,054 | | | | 74,012 | | | | 78,201 | |
| Deferred rent | | | 23,471 | | | | 27,669 | | | | 28,408 | |
| Other long-term liabilities | | | 32,213 | | | | 33,661 | | | | 35,411 | |
| | | | | | | | | | |
Total liabilities | | | 315,002 | | | | 268,798 | | | | 314,485 | |
| Total shareholders’ equity | | | 398,258 | | | | 483,345 | | | | 474,808 | |
| | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 713,260 | | | $ | 752,143 | | | $ | 789,293 | |
| | | | | | | | | | |
3450 East Miraloma Avenue• Anaheim, CA 92806• (714) 414-4000
PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
| | | | | | | | | |
| | | THREE QUARTERS ENDED | |
| | | Nov. 1, 2008 | | | Nov. 3, 2007 | |
Cash flows from operating activities: | | | | | | | | |
| Net loss | | $ | (36,780 | ) | | $ | (35,597 | ) |
| Depreciation & amortization | | | 58,743 | | | | 58,295 | |
| Asset impairment | | | 21,313 | | | | 59,756 | |
| Non-cash stock based compensation | | | 4,442 | | | | 5,119 | |
| Tax (deficiencies) benefits from exercise of stock options | | | (1,408 | ) | | | 320 | |
| Excess tax benefits related to stock-based compensation | | | — | | | | (292 | ) |
| Loss on disposal of property and equipment | | | 2,368 | | | | 3,245 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Inventories | | | (63,632 | ) | | | (36,997 | ) |
| Accounts payable and other current liabilities | | | 26,649 | | | | 31,724 | |
| Other assets and liabilities | | | (28,030 | ) | | | (39,709 | ) |
| | | | | | | |
Net cash (used in)/provided by operating activities | | | (16,335 | ) | | | 45,864 | |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
| Capital expenditures | | | (68,503 | ) | | | (94,939 | ) |
| Proceeds from sale of property and equipment | | | 275 | | | | — | |
| Purchases of short-term investments | | | — | | | | (171,400 | ) |
| Maturities of short-term investments | | | — | | | | 202,900 | |
| Purchases of long-term investments | | | — | | | | (23,300 | ) |
| | | | | | | |
Net cash used in investing activities | | | (68,228 | ) | | | (86,739 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| Borrowings under credit facility | | | 168,739 | | | | — | |
| Principal payments under credit facility | | | (125,639 | ) | | | — | |
| Repurchases of common stock | | | (52,911 | ) | | | — | |
| Proceeds from exercise of stock options | | | 1,613 | | | | 2,237 | |
| Principal payments under capital lease obligations | | | (9 | ) | | | (42 | ) |
| Excess tax benefits related to stock-based compensation | | | — | | | | 292 | |
| Borrowings under long-term debt obligations | | | — | | | | 23,300 | |
| | | | | | | |
Net cash (used in) /provided by financing activities | | | (8,207 | ) | | | 25,787 | |
| | | | | | | |
Net decrease in cash and cash equivalents | | | (92,770 | ) | | | (15,088 | ) |
| Cash and cash equivalents, beginning of period | | | 97,587 | | | | 52,267 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | 4,817 | | | $ | 37,179 | |
| | | | | | | |
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
| | | | | | | | | |
| | | Fiscal 2008 | | Fiscal 2007 |
| Stores open at beginning of fiscal year | | | 1,107 | | | | 1,199 | |
| Stores opened during the period | | | 13 | | | | 14 | |
| Stores closed during the period | | | (180 | ) | | | (93 | ) |
| | | | | | | | | |
Stores open at end of period | | | 940 | | | | 1,120 | |
Note: Fiscal 2008 store closures include 153 demo stores. demo became a discontinued operation during the first quarter of fiscal 2008.
| | | | | | | | | | | | | | | | | |
| | | Nov. 1, 2008 | | Nov. 3, 2007 |
| | | # of | | Square Footage | | # of | | Square Footage |
| | | Stores | | (000s) | | Stores | | (000s) |
| | | | | |
| PacSun stores | | | 815 | | | | 3,103 | | | | 838 | | | | 3,186 | |
| Outlet stores | | | 125 | | | | 505 | | | | 119 | | | | 481 | |
| demo stores | | | — | | | | — | | | | 154 | | | | 439 | |
| One Thousand Steps stores | | | — | | | | — | | | | 9 | | | | 24 | |
| | | | | |
Total stores | | | 940 | | | | 3,608 | | | | 1,120 | | | | 4,130 | |
3450 East Miraloma Avenue• Anaheim, CA 92806• (714) 414-4000
