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

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

  - Comparable sales up 1%
  - Gross margin up 180 basis percentage points over last year

ANAHEIM, Calif., March 20, 2013 (GLOBE NEWSWIRE) -- Pacific Sunwear of
California, Inc. (Nasdaq:PSUN) (the "Company"), announced today that net sales
from continuing operations for the fourth quarter of fiscal 2012 ended
February 2, 2013, were $228.0 million versus net sales from continuing
operations of $218.7 million for the fourth quarter of fiscal 2011 ended
January 28, 2012. Comparable store sales for the fourth quarter of 2012
increased 1%. The Company noted that fiscal 2012 had 53 weeks versus 52 weeks
in fiscal 2011. As a result, net sales for the fourth quarter of fiscal 2012
and fiscal year 2012 include the additional week, while comparable store sales
exclude the 53rd week. The Company ended fiscal 2012 with 644 stores, compared
to 733 as of the end of fiscal 2011. The Company closed 78 stores in the
fourth quarter of fiscal 2012.

Fourth Quarter Results

On a GAAP basis, the Company reported a loss from continuing operations of
$22.5 million, or $(0.33) per diluted share, for the fourth quarter of fiscal
2012, compared to a loss from continuing operations of $26.7 million, or
$(0.39) per diluted share, for the fourth quarter of fiscal 2011. The loss
from continuing operations for the Company's fourth quarter of fiscal 2012
included a non-cash loss of $3.7 million, or $0.05 per diluted share, related
to a derivative liability that resulted from the issuance of the Convertible
Series B Preferred Stock (the "Series B Preferred") in connection with the
term loan financing the Company completed in December 2011.

On a non-GAAP basis, excluding store closure related charges of $0.6 million
and the non-cash loss on the derivative liability of $3.7 million, and using a
normalized annual income tax rate of approximately 37%, the Company would have
incurred a loss from continuing operations for the fourth quarter of fiscal
2012 of $11.4 million, or $(0.17) per diluted share, as compared to a loss
from continuing operations of $13.0 million, or $(0.19) per diluted share, for
the same period a year ago.

Full Year Results

Total net sales from continuing operations for fiscal 2012 were $803.1 million
versus net sales from continuing operations of $777.3 million for fiscal 2011.
Comparable store sales increased 2% during fiscal 2012.

On a GAAP basis, the Company reported a loss from continuing operations of
$52.2 million, or $(0.77) per diluted share, for the 2012 fiscal year,
compared to a loss from continuing operations of $82.1 million, or $(1.23) per
diluted share, for the 2011 fiscal year.

On a non-GAAP basis, excluding store closure charges of $0.6 million, and
using a normalized annual income tax rate of approximately 37%, the Company
would have incurred a loss from continuing operations for fiscal 2012 of $32.4
million, or $(0.47) per diluted share, as compared to a loss from continuing
operations of $47.4 million, or $(0.71) per diluted share, for the same period
a year ago.

"2012 was a very solid year for PacSun with important progress in several key
facets of our business. We achieved positive sales comps with better margins
in every quarter for the first time since 2007, continued to leverage our cost
base, and equally important is my belief that we are beginning to re-establish
PacSun's unique identity tied to great brands, on trend merchandising and our
distinct connection to California Lifestyle," said Gary H. Schoenfeld,
President and Chief Executive Officer. "Looking ahead to this year our key
priorities remain working closely with our key brands, attracting new
customers and continuing to elevate both our in-store and on-line experience."

Financial Outlook for First Fiscal Quarter of 2013

The Company's guidance range for the first quarter of fiscal 2013 contemplates
a non-GAAP loss per share from continuing operations of between negative $0.17
and negative $0.24, compared to negative $0.20 in the first quarter of fiscal
2012.

The forecasted first quarter non-GAAP loss from continuing operations per
share guidance range is based on the following assumptions:

  *Comparable store sales of negative 3% to plus 1%;
  *Revenue from $160 million to $167 million;
  *Gross margin rate, including buying, distribution and occupancy, of 21% to
    24%;
  *SG&A expenses in the range of $54 million to $56 million;
  *A normalized annual income tax rate of approximately 37%; and
  *Ending the period with approximately 638 stores.

The Company's first 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 2011 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 first 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.

About Pacific Sunwear of California, Inc.

Pacific Sunwear of California, Inc. and its subsidiaries (collectively,
"PacSun" or the "Company") is a leading specialty retailer rooted in the
action sports, fashion and music influences of the California lifestyle. The
Company sells a combination of branded and proprietary casual apparel,
accessories and footwear designed to appeal to teens and young adults. As of
March 20, 2013, the Company operates 644 stores in all 50 states and Puerto
Rico. PacSun's website address is www.pacsun.com.

The Company will be hosting a conference call today at 4:30 p.m. Eastern time
to review the results of its fourth fiscal quarter. 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 and Canada at
(855) 859-2056 or internationally at (404) 537-3406; passcode: 19468762. For
those unable to listen to the live Web broadcast or utilize the call-in
replay, an archived version will be available on the Company's investor
relations website through midnight, May 28, 2013.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial
measures. For a description of these non-GAAP financial measures and
reconciliations of these non-GAAP financial measures to the most directly
comparable financial measures prepared in accordance with Generally Accepted
Accounting Principles, please see the accompanying table titled
"Reconciliation of Selected GAAP Measures to Non-GAAP Measures" and the
section following such table titled "About Non-GAAP Financial Measures."

Pacific Sunwear Safe Harbor

This press release contains "forward-looking statements" including, without
limitation, the statements made by Mr. Schoenfeld in the seventh paragraph and
the statements made by the Company under the heading "Financial Outlook for
First Fiscal Quarter of 2013." 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. Uncertainties that could adversely affect the
Company's business and results include, among others, the following factors:
increased sourcing and product costs; adverse changes in U.S. and world
economic conditions generally; adverse changes in consumer spending; changes
in consumer demands and preferences; adverse changes in same-store sales;
higher than anticipated markdowns and/or higher than estimated selling,
general and administrative costs; currency fluctuations; competition from
other retailers and uncertainties generally associated with apparel retailing;
merchandising/fashion risk; lower than expected 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, which could
cause unexpected delays in store relocations, renovations or expansions;
reliance on foreign sources of production; and other risks outlined in the
Company's filings with the Securities and Exchange Commission ("SEC"),
including but not limited to the Company's Annual Report on Form 10-K for the
fiscal year ended January 28, 2012, and subsequent periodic reports filed with
the SEC. 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

                           Fourth Quarter Ended      Fiscal Year Ended
                           February 2,  January 28,  February 2,  January 28,
                            2013^(^1)    2012         2013^(^1)    2012
                                                               
Net sales                   $228,039    $218,668    $803,071    $777,337
Gross margin                48,215       42,156       200,980      170,181
SG&A expenses               63,411       61,284       238,999      241,826
Operating loss              (15,196)     (19,128)     (38,019)     (71,645)
Other expense, net          7,015        7,150        13,351       9,441
Loss from continuing
operations before income    (22,211)     (26,278)     (51,370)     (81,086)
taxes
Income tax expense          257          382          848          1,032
Loss from continuing        (22,468)     (26,660)     (52,218)     (82,118)
operations
Income (loss) from
discontinued operations,    2,607        (11,432)     144          (24,305)
net of tax
Net loss                    $(19,861)   $(38,092)   $(52,074)   $(106,423)
                                                               
Loss from continuing                                            
operations per share:
Basic and diluted           $(0.33)     $(0.39)     $ (0.77)     $(1.23)
Income (loss) from
discontinued operations per                                     
share:
Basic and diluted           $0.04       $ (0.17)     $—          $(0.37)
Net loss per share:                                             
Basic and diluted           $(0.29)     $ (0.56)     $(0.77)     $(1.60)
^                          ^           ^           ^           ^
Weighted-average shares                                         
outstanding:
Basic and diluted           68,005       67,428       67,815       66,708

(1) Fiscal 2012 fourth quarter and full-year results include a 53^rd week.



PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
                                                          
                                                          
                                          February 2, 2013 January 28, 2012
                                                          
ASSETS
Current assets:                                            
Cash and cash equivalents                  $ 48,733         $ 50,306
Restricted cash                            —                8,593
Inventories                                90,681           88,740
Prepaid expenses                           12,815           15,506
Other current assets                       2,912            6,272
Total current assets                       155,141          169,417
Property and equipment, net                124,793          149,716
Other long-term assets                     33,878           35,998
Total assets                               $ 313,812        $ 355,131
                                                          
                                                          
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:                                       
Accounts payable                           $ 49,993         $ 38,914
Other current liabilities                  63,641           68,369
Total current liabilities                 113,634          107,283
Deferred lease incentives                  14,401           17,681
Deferred rent                              16,133           16,602
Long-term debt                             79,570           73,910
Other long-term liabilities                25,714           26,558
Total liabilities                          249,452          242,034
Total shareholders' equity                 64,360           113,097
Total liabilities and shareholders' equity $ 313,812        $ 355,131



PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

                                            Fiscal Year Ended
                                            February 2, 2013 January 28, 2012
Cash flows from operating activities:                        
Net loss                                     $(52,074)       $(106,423)
Depreciation and amortization                33,637           42,505
Asset impairment                             5,341            14,787
Non-cash stock-based compensation            2,836            3,176
Amortization of debt discount                1,548            —
Loss on disposal of property and equipment   268              242
Loss on derivative liability                 6                5,039
(Gain) loss on lease terminations            (268)            9,336
Changes in operating assets and liabilities:                 
Inventories                                  (1,941)          6,961
Accounts payable and other current           8,732            (12,886)
liabilities
Other assets and liabilities                 8,359            (10,141)
Net cash provided by (used in) operating     6,444           (47,404)
activities
                                                            
Cash flows from investing activities:                        
Capital expenditures                         (15,393)         (13,235)
Restricted cash                              8,593            (8,593)
Proceeds from insurance settlements          653              300
Net cash used in investing activities        (6,147)          (21,528)
                                                            
Cash flows from financing activities:                        
Proceeds from credit facility borrowings     —                21,254
Payments under credit facility borrowings    (1,254)          (20,000)
Proceeds from senior secured term loan       —                60,000
Payments for debt issuance costs             —                (5,300)
Principal payments under mortgage borrowings (540)            (505)
Principal payments under capital lease       (636)            (398)
obligations
Proceeds from exercise of stock options      560              477
Net cash (used in) provided by financing     (1,870)          55,528
activities
                                                            
Net decrease in cash and cash equivalents    (1,573)          (13,404)
Cash and cash equivalents, beginning of      50,306           63,710
period
Cash and cash equivalents, end of period     $48,733         $50,306



PACIFIC SUNWEAR OF CALIFORNIA, INC.
SELECTED STORE OPERATING DATA
                                                      
                                February 2, 2013 January 28, 2012
Stores open at beginning of year 733              852
Stores opened during the period  3                —
Stores closed during the period  (92)             (119)
Stores open at end of period     644              733
                                                      
                                                      
                                February 2, 2013 January 28, 2012
                                 # of    Square   # of    Square
                                Stores  Footage  Stores  Footage
                                         (000s)           (000s)
PacSun Core stores               528     2,066    614     2,380
PacSun Outlet stores             116     471      119     482
Total stores                     644     2,537    733     2,862



PACIFIC SUNWEAR OF CALIFORNIA, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited, in thousands, except per share data)

                         Fourth Quarter Ended       Fiscal Year Ended
                         February 2,   January 28,  February 2,  January 28,
                          2013^(^1)     2012         2013^(^1)    2012
                                                              
GAAP SG&A expenses        $63,411      $61,284     $238,999    $241,826
Store closure charges                                          
(gains):
- Asset impairments       576           174          626          1,035
- Lease terminations      (5)           26           (30)         59
Non-GAAP SG&A expenses    $62,840      $61,084     $238,403    $240,732
                                                              
GAAP loss from continuing $(22,468)    $(26,660)   $(52,218)   $(82,118)
operations 
Store closure charges                                          
(gains), net of tax:
- Asset impairment        363           110          395          652
- Lease terminations      (3)           17           (19)         37
Derivative liability      3,678         5,039        6            5,039
Valuation allowance       7,015        8,522       19,415      28,958
Non-GAAP loss from        $(11,415)    $(12,972)   $(32,421)   $(47,432)
continuing operations
                                                              
GAAP loss from continuing $(0.33)      $(0.39)     $(0.77)     $(1.23)
operations per share
Store closure charges                                          
(gains), net of tax:
- Asset impairment        0.01          —            0.01         0.01
- Lease terminations      —             —            —            —
Derivative liability      0.05          0.07         —            0.08
Valuation allowance       0.10         0.13        0.29        0.43
Non-GAAP loss from
continuing operations per $(0.17)      $(0.19)     $(0.47)     $(0.71)
share
                                                              
Shares used in            68,005       67,428       67,815      66,708
calculation

(1) Fiscal 2012 fourth quarter and full-year results include a 53^rd week.

ABOUT NON-GAAP FINANCIAL MEASURES

The accompanying press release dated March 20, 2013, contains non-GAAP
financial measures. These non-GAAP financial measures include non-GAAP gross
margin, non-GAAP SG&A expenses, non-GAAP loss from continuing operations and
non-GAAP loss from continuing operations per share for the fourth quarter and
the four quarters of fiscal 2012 and 2011, respectively, and non-GAAP loss
from continuing operations per share guidance for the first quarter of fiscal
2013. Non-GAAP financial measures should not be considered as a substitute
for, or superior to, measures of financial performance prepared in accordance
with GAAP. These non-GAAP financial measures do not reflect a comprehensive
system of accounting, differ from GAAP measures with the same names and may
differ from non-GAAP financial measures with the same or similar names that
are used by other companies. The Company computes non-GAAP financial measures
using the same consistent method from quarter to quarter and year to year. The
Company may consider whether other significant items that arise in the future
should be excluded from the non-GAAP financial measures. The Company has
excluded the following items from all of its non-GAAP financial measures:

  *Store closure charges (gains)
  *Derivative liability
  *Valuation allowance

The Company believes that these non-GAAP financial measures provide meaningful
supplemental information regarding the Company's operating results primarily
because they exclude amounts that are not considered part of ongoing operating
results when planning and forecasting and when assessing the performance of
the organization, individual operating segments or its senior management. In
addition, the Company believes that non-GAAP financial information is used by
analysts and others in the investment community to analyze the Company's
historical results and in providing estimates of future performance and that
failure to report these non-GAAP measures, could result in confusion among
analysts and others and create a misplaced perception that the Company's
results have underperformed or exceeded expectations.

CONTACT: Michael W. Kaplan
         Chief Financial Officer
         (714) 414-4003
 
Press spacebar to pause and continue. Press esc to stop.