{"id":31874,"date":"2012-08-22T15:01:28","date_gmt":"2012-08-22T22:01:28","guid":{"rendered":"http:\/\/www.boardistan.com\/?p=31874"},"modified":"2012-08-22T15:07:34","modified_gmt":"2012-08-22T22:07:34","slug":"pac-sun-loses-another-17-5-million","status":"publish","type":"post","link":"https:\/\/www.boardistan.com\/?p=31874","title":{"rendered":"Pac Sun Loses Another $17.5 Million"},"content":{"rendered":"

\"Pacsun<\/a>In the quarter ended July 28, 2012 Pacific Sunwear<\/a><\/strong> saw an increase in net sales of $10 million over the same period in 2011, however, their loss from continuing operations was $17.5 million. But they have an excuse:<\/p>\n

The loss from continuing operations for the Company’s second quarter of fiscal 2012 included a non-cash loss of $8.2 million, or $0.12 per 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.<\/p><\/blockquote>\n

In other words, if it wasn’t for that thing they had to do to try to save themselves from bankruptcy they wouldn’t have lost as much money. CEO Gary H. Schoenfeld<\/strong> sees this as a good sign.<\/p>\n

“Our 5% comparable store sales, 260 basis point increase in merchandise margins, and positive operating cash flow for the second quarter further demonstrate our belief that customers are beginning to rediscover PacSun, including our improved merchandising and brand mix, and our distinct Golden State of Mind brand identity,” said Schoenfeld. “Newer brands helped drive a 7% comp in our Men’s business, which represents our biggest increase in Men’s since 2004. Women’s continued to improve as well with a 2% comp and higher margins, and we also achieved a 15% increase in online sales.”<\/p><\/blockquote>\n

Nice to see a silver lining beginning to appear around the dark cloud that has been hanging over Pac Sun for years. If they stay at it they might even begin breaking even in five or 10 quarters. Follow the jump for the official info.Pacific Sunwear Announces Second Quarter Operating Results; Issues Third Quarter Guidance<\/p>\n

– Comparable Sales Up 5%<\/p>\n

ANAHEIM, Calif., Aug. 22, 2012 (GLOBE NEWSWIRE) — Pacific Sunwear of California, Inc. (Nasdaq:PSUN) (the “Company”), announced today that net sales for the second quarter of fiscal 2012 ended July 28, 2012, were $210.3 million versus net sales of $200.9 million for the second quarter of fiscal 2011 ended July 30, 2011.<\/p>\n

On a GAAP basis, the Company reported a loss from continuing operations of $17.5 million, or $(0.26) per share, for the second quarter of fiscal 2012, compared to a loss from continuing operations of $17.5 million, or $(0.26) per share, for the second quarter of fiscal 2011. The loss from continuing operations for the Company’s second quarter of fiscal 2012 included a non-cash loss of $8.2 million, or $0.12 per 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.<\/p>\n

On a non-GAAP basis, excluding the non-cash loss on derivative liability and using a normalized annual income tax rate of approximately 37%, the Company’s loss from continuing operations for the second quarter of fiscal 2012 would have been $5.8 million, or $(0.08) per share, as compared to a loss from continuing operations of $11.1 million, or $(0.17) per share, for the same period a year ago.<\/p>\n

“Our 5% comparable store sales, 260 basis point increase in merchandise margins, and positive operating cash flow for the second quarter further demonstrate our belief that customers are beginning to rediscover PacSun, including our improved merchandising and brand mix, and our distinct Golden State of Mind brand identity,” said Gary H. Schoenfeld, President and Chief Executive Officer. “Newer brands helped drive a 7% comp in our Men’s business, which represents our biggest increase in Men’s since 2004. Women’s continued to improve as well with a 2% comp and higher margins, and we also achieved a 15% increase in online sales.”<\/p>\n

Financial Outlook for Third Fiscal Quarter of 2012<\/p>\n

The Company’s guidance range for the third quarter of fiscal 2012 contemplates a non-GAAP net loss per share from continuing operations of between negative 8 cents and flat.<\/p>\n

The forecasted third quarter non-GAAP loss from continuing operations per share guidance range is based on the following assumptions:<\/p>\n

Same-store sales of negative 2% to plus 2%;
\nGross margin rate, including buying, distribution and occupancy, of 25% to 28%;
\nSG&A expenses in the range of $62 million to $64 million; and
\nA normalized annual income tax rate of approximately 37%.<\/p>\n

The Company’s third fiscal quarter of 2012 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.<\/p>\n

Discontinued Operations<\/p>\n

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.<\/p>\n

Derivative Liability<\/p>\n

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 third fiscal quarter of 2012 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.<\/p>\n

About Pacific Sunwear of California, Inc.<\/p>\n

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 August 22, 2012, the Company operates 727 stores in all 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com.<\/p>\n

The Company will be hosting a conference call today at 4:30 p.m. Eastern time to review the results of its second 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: 78167566. 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, November 28, 2012.<\/p>\n

About Non-GAAP Financial Measures<\/p>\n

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.”<\/p>\n

Pacific Sunwear Safe Harbor<\/p>\n

This press release contains “forward-looking statements” including, without limitation, the statements made by Mr. Schoenfeld in the fourth paragraph and the statements made under the heading “Financial Outlook for Third Fiscal Quarter of 2012.” 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 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.<\/p>\n

PACIFIC SUNWEAR OF CALIFORNIA, INC.
\nCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
\n(Unaudited, in thousands, except per share data)<\/p>\n

\tSecond Quarter Ended \tFirst Half Ended
\n\tJuly 28, 2012 \tJuly 30, 2011 \tJuly 28, 2012 \tJuly 30, 2011<\/p>\n

Net sales \t$210,305 \t$200,915 \t$384,129 \t$372,796
\nGross margin \t57,799 \t47,337 \t98,785 \t80,529
\nSG&A expenses \t63,508 \t63,842 \t122,774 \t124,798
\nOperating loss \t(5,709) \t(16,505) \t(23,989) \t(44,269)
\nOther expense, net \t11,673 \t571 \t8,649 \t1,113
\nLoss before income taxes \t(17,382) \t(17,076) \t(32,638) \t(45,382)
\nIncome taxes \t156 \t376 \t523 \t726
\nLoss from continuing operations \t(17,538) \t(17,452) \t(33,161) \t(46,108)
\nLoss from discontinued operations, net of tax \t\u2014 \t(1,807) \t\u2014 \t(4,621)
\nNet loss \t($17,538) \t($19,259) \t($33,161) \t($50,729)<\/p>\n

Loss from continuing operations per share:
\nBasic and Diluted \t($0.26) \t($0.26) \t($0.49) \t($0.70)
\nLoss from discontinued operations per share:
\nBasic and Diluted \t$ \u2014 \t($0.03) \t$ \u2014 \t($0.07)
\nNet loss per share:
\nBasic and Diluted \t($0.26) \t($0.29) \t($0.49) \t($0.77)<\/p>\n

Weighted-average shares outstanding:
\nBasic and Diluted \t67,738 \t66,344 \t67,662 \t66,274<\/p>\n

PACIFIC SUNWEAR OF CALIFORNIA, INC.
\nCONDENSED CONSOLIDATED BALANCE SHEETS
\n(Unaudited, in thousands)<\/p>\n

\tJuly 28, 2012 \tJanuary 28, 2012 \tJuly 30, 2011<\/p>\n

ASSETS
\nCurrent assets:
\nCash and cash equivalents \t$34,830 \t$50,306 \t$13,252
\nRestricted cash \t405 \t8,593 \t\u2014
\nInventories \t144,797 \t88,740 \t163,332
\nPrepaid expenses \t17,165 \t15,506 \t16,893
\nOther current assets \t6,366 \t6,272 \t5,667
\nTotal current assets \t203,563 \t169,417 \t199,154
\nProperty and equipment, net \t137,440 \t149,716 \t170,879
\nOther long-term assets \t35,130 \t35,998 \t32,119
\nTotal assets \t$376,133 \t$355,131 \t$402,152<\/p>\n

LIABILITIES AND SHAREHOLDERS’ EQUITY
\nCurrent liabilities:
\nAccounts payable \t$85,852 \t$38,914 \t$97,411
\nOther current liabilities \t74,891 \t68,369 \t40,714
\nTotal current liabilities \t160,743 \t107,283 \t138,125
\nDeferred lease incentives \t16,728 \t17,681 \t24,681
\nDeferred rent \t16,517 \t16,602 \t19,050
\nLong-term debt \t74,414 \t73,910 \t28,828
\nOther long-term liabilities \t26,201 \t26,558 \t25,859
\nTotal liabilities \t294,603 \t242,034 \t236,543
\nTotal shareholders’ equity \t81,530 \t113,097 \t165,609
\nTotal liabilities and shareholders’ equity \t$376,133 \t$355,131 \t$402,152<\/p>\n

PACIFIC SUNWEAR OF CALIFORNIA, INC.
\nCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
\n(Unaudited, in thousands)<\/p>\n

\tFirst Half Ended
\n\tJuly 28, 2012 \tJuly 30, 2011
\nCash flows from operating activities:
\nNet loss \t($33,161) \t($50,729)
\nDepreciation and amortization \t17,765 \t22,437
\nAsset impairment \t3,540 \t5,785
\nNon-cash stock-based compensation \t1,466 \t1,736
\nLoss on disposal of property and equipment \t118 \t63
\nAmortization of debt discount \t787 \t\u2014
\nLoss on derivative liability \t1,886 \t\u2014
\nChanges in operating assets and liabilities:
\nInventories \t(56,057) \t(67,631)
\nAccounts payable and other current liabilities \t52,500 \t55,810
\nOther assets and liabilities \t(2,393) \t(11,188)
\nNet cash used in operating activities \t(13,549) \t(43,717)<\/p>\n

Cash flows from investing activities:
\nCapital expenditures \t(9,068) \t(6,938)
\nRestricted cash \t8,188 \t \u2014
\nProceeds from insurance settlements \t653 \t300
\nNet cash used in investing activities \t(227) \t(6,638)<\/p>\n

Cash flows from financing activities:
\nPayments under credit facility borrowings \t(1,254) \t\u2014
\nProceeds from exercise of stock options \t181 \t314
\nPrincipal payments under capital lease obligations \t(362) \t(169)
\nPrincipal payments under mortgage borrowings \t(265) \t(248)
\nNet cash used by financing activities \t(1,700) \t(103)<\/p>\n

Net decrease in cash and cash equivalents \t(15,476) \t(50,458)
\nCash and cash equivalents, beginning of period \t50,306 \t63,710
\nCash and cash equivalents, end of period \t$34,830 \t$13,252<\/p>\n

PACIFIC SUNWEAR OF CALIFORNIA, INC.
\nSELECTED STORE OPERATING DATA<\/p>\n

\tJuly 28, 2012 \tJuly 30, 2011
\nStores open at beginning of year \t733 \t852
\nStores opened during the period \t2 \t\u2014
\nStores closed during the period \t(8) \t(31)
\nStores open at end of period \t727 \t821<\/p>\n

\tJuly 28, 2012 \tJuly 30, 2011
\n\t \tSquare Footage \t \tSquare Footage
\n\t# of Stores \t(000s) \t# of Stores \t(000s)
\nPacSun Core stores \t607 \t2,351 \t700 \t2,712
\nPacSun Outlet stores \t120 \t486 \t121 \t489
\nTotal stores \t727 \t2,837 \t821 \t3,201<\/p>\n

PACIFIC SUNWEAR OF CALIFORNIA, INC.
\nRECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
\n(Unaudited, in thousands, except per share data)<\/p>\n

\tSecond Quarter Ended \tFirst Half Ended
\n\tJuly 28, 2012 \tJuly 30, 2011 \tJuly 28, 2012 \tJuly 30, 2011<\/p>\n

GAAP SG&A expenses \t$63,508 \t$63,842 \t$122,774 \t$124,798
\nStore closure charges:
\n– Asset impairments \t(133) \t\u2014 \t(162) \t\u2014
\n– Lease terminations \t(44) \t\u2014 \t(138) \t\u2014
\nNon-GAAP SG&A expenses \t$63,331 \t$63,842 \t$122,474 \t$124,798<\/p>\n

GAAP loss from continuing operations \t($17,538) \t($17,452) \t($33,161) \t($46,108)
\nStore closure charges, net of tax:
\n– Asset impairment \t84 \t\u2014 \t102 \t\u2014
\n– Lease terminations \t28 \t\u2014 \t87 \t\u2014
\nDerivative liability \t8,219 \t\u2014 \t1,886 \t\u2014
\nValuation allowance \t3,457 \t6,356 \t11,620 \t16,958
\nNon-GAAP loss from continuing operations \t($5,750) \t($11,096) \t($19,466) \t($29,150)<\/p>\n

GAAP loss from continuing operations per share \t($0.26) \t($0.26) \t($0.49) \t($0.70)
\nStore closure charges, net of tax:
\n– Asset impairment \t\u2014 \t\u2014 \t\u2014 \t\u2014
\n– Lease terminations \t\u2014 \t\u2014 \t\u2014 \t\u2014
\nDerivative liability \t0.12 \t\u2014 \t0.03 \t\u2014
\nValuation allowance \t0.05 \t0.09 \t0.17 \t0.26
\nNon-GAAP loss from continuing operations per share \t($0.08) \t($0.17) \t($0.29) \t($0.44)<\/p>\n

Shares used in calculation \t67,738 \t66,344 \t67,662 \t66,274<\/p>\n

ABOUT NON-GAAP FINANCIAL MEASURES<\/p>\n

The accompanying press release dated August 22, 2012, contains non-GAAP financial measures. These non-GAAP financial measures include non-GAAP SG&A expenses, non-GAAP loss from continuing operations and non-GAAP loss from continuing operations per share for the second quarters and first half of fiscal 2012 and 2011 and non-GAAP loss from continuing operations per share guidance for the third quarter of fiscal 2012. 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:<\/p>\n

Store closure charges
\nDerivative liability
\nValuation allowance<\/p>\n

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.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the quarter ended July 28, 2012 Pacific Sunwear saw an increase in net sales of $10 million over the same period in 2011, however, their loss from continuing operations was $17.5 million. But they have an excuse: The loss from continuing operations for the Company’s second quarter of fiscal 2012 included a non-cash loss […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[10,12],"tags":[],"_links":{"self":[{"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/posts\/31874"}],"collection":[{"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31874"}],"version-history":[{"count":3,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/posts\/31874\/revisions"}],"predecessor-version":[{"id":31877,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=\/wp\/v2\/posts\/31874\/revisions\/31877"}],"wp:attachment":[{"href":"https:\/\/www.boardistan.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31874"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31874"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.boardistan.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31874"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}