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PSUN - Pacific Sunwear Announces Second Quarter Operating Results; Issues Third Quarter Guidance

- Comparable Sales Up 5%
GlobeNewswirePress Release: Pacific Sunwear of California, Inc. – 38 minutes ago

ANAHEIM, Calif., Aug. 22, 2012 (GLOBE NEWSWIRE) -- Pacific Sunwear of California, Inc. (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.

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.

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.

"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."

Financial Outlook for Third Fiscal Quarter of 2012

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.

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

Same-store sales of negative 2% to plus 2%;
Gross margin rate, including buying, distribution and occupancy, of 25% to 28%;
SG&A expenses in the range of $62 million to $64 million; and
A normalized annual income tax rate of approximately 37%.

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.

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 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.

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 August 22, 2012, the Company operates 727 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 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 [phone] or internationally at [phone]; 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.

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."

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