- Ninth straight quarter of comparable
store sales growth
- Comparable store sales up
3%
- Gross margin up 100 basis
points
Pacific Sunwear of California, Inc. (Nasdaq:PSUN) (the "Company"),
announced today that net sales from continuing operations for the
first quarter of fiscal 2014 ended May 3, 2014, were $171.1 million
versus net sales from continuing operations of $166.4 million for
the first quarter of fiscal 2013 ended May 4, 2013. Comparable
store sales for the first quarter of fiscal 2014 increased 3%. The
Company ended the first quarter of fiscal 2014 with 618 stores
versus 638 stores a year ago.
On a GAAP basis, the Company reported a loss from continuing
operations of $10.4 million, or $(0.15) per diluted share, for the
first quarter of fiscal 2014, compared to a loss from continuing
operations of $24.1 million, or $(0.35) per diluted share, for the
first quarter of fiscal 2013. The loss from continuing operations
for the Company's first quarter of fiscal 2014 included a non-cash
gain of $1.2 million, or $0.02 per diluted share, compared to a
non-cash loss of $9.3 million, or $(0.13) per diluted share, for
the first quarter of fiscal 2013 related to the 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 gain (loss) on the
derivative liability, and assuming a tax benefit of approximately
$3.8 million, the Company would have incurred a loss from
continuing operations for the first quarter of fiscal 2014 of $7.4
million, or $(0.11) per diluted share, as compared to a loss from
continuing operations of $9.5 million, or $(0.14) per diluted
share, for the same period a year ago.
"I believe that in a tough marketplace we are continuing to
attract new customers and great brands to PacSun, which has been
key to achieving our ninth straight quarter of positive comparable
store sales," said Gary H. Schoenfeld, President and Chief
Executive Officer. "While we anticipate continued growth in our
Men's business, the promotional environment that we are seeing in
the mall coupled with underperformance in a couple of categories in
Women's is resulting in a more cautious outlook for the second
quarter."
Financial Outlook for Second Fiscal Quarter of
2014
The Company's guidance range for the second quarter of fiscal
2014 contemplates a non-GAAP loss per diluted share from continuing
operations of between $(0.08) and $(0.02), compared to $0.02 in the
second quarter of fiscal 2013.
The forecasted second quarter non-GAAP loss from continuing
operations per diluted share guidance range is based on the
following assumptions:
- Comparable store sales from -5% to flat;
- Revenue from $200 million to $210 million;
- Gross margin rate, including buying, distribution and
occupancy, of 26% to 29%;
- SG&A expenses in the range of $56 million to $58 million;
and
- Applicable non-GAAP adjustments are tax effected using a
normalized annual income tax rate.
The Company's second fiscal quarter of 2014 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 2013 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 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).
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 May 29, 2014,
the Company operates 619 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 first 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: 47110638.
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, August 27,
2014.
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 fourth paragraph and the statements made by the
Company under the heading "Financial Outlook for Second Fiscal
Quarter of 2014." 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 February 1, 2014, 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) |
|
|
|
|
For the First
Quarter Ended |
|
May 3, 2014 |
May 4, 2013 |
|
|
|
Net sales |
$ 171,143 |
$ 166,352 |
Gross margin |
44,663 |
41,781 |
SG&A expenses |
52,026 |
52,766 |
Operating loss |
(7,363) |
(10,985) |
(Gain) loss on derivative liability |
(1,225) |
9,290 |
Interest expense, net |
3,877 |
3,547 |
Loss from continuing operations before income
taxes |
(10,015) |
(23,822) |
Income taxes |
382 |
232 |
Loss from continuing operations |
(10,397) |
(24,054) |
Loss from discontinued operations, net of tax
effects |
— |
(127) |
Net loss |
$ (10,397) |
$ (24,181) |
|
|
|
Loss from continuing operations per
share: |
|
|
Basic and diluted |
$ (0.15) |
$ (0.35) |
Loss from discontinued operations per
share: |
|
|
Basic and diluted |
$ — |
$ — |
Net loss per share: |
|
|
Basic and diluted |
$ (0.15) |
$ (0.35) |
Weighted-average shares outstanding: |
|
|
Basic and diluted |
68,750 |
68,242 |
|
|
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited, in
thousands) |
|
|
|
|
|
|
|
|
|
May 3, 2014 |
February 1,
2014 |
May 4, 2013 |
|
|
|
|
ASSETS |
Current assets: |
|
|
|
Cash and cash equivalents |
$ 19,953 |
$ 27,769 |
$ 17,658 |
Inventories |
95,862 |
83,073 |
103,671 |
Prepaid expenses |
15,584 |
13,404 |
14,863 |
Other current assets |
4,395 |
6,089 |
3,016 |
Total current assets |
135,794 |
130,335 |
139,208 |
Property and equipment, net |
94,420 |
96,797 |
105,005 |
Other assets |
44,457 |
45,507 |
46,903 |
Total assets |
$ 274,671 |
$ 272,639 |
$ 291,116 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
Current liabilities: |
|
|
|
Accounts payable |
$ 56,168 |
$ 46,034 |
$ 47,321 |
Derivative liability |
29,495 |
30,720 |
29,372 |
Other current liabilities |
41,032 |
37,286 |
38,645 |
Total current
liabilities |
126,695 |
114,040 |
115,338 |
Deferred lease incentives |
12,181 |
12,889 |
13,342 |
Deferred rent |
15,232 |
15,440 |
15,937 |
Long-term debt |
86,639 |
86,075 |
79,937 |
Other liabilities |
25,862 |
26,046 |
25,715 |
Total liabilities |
266,609 |
254,490 |
250,269 |
Total shareholders' equity |
8,062 |
18,149 |
40,847 |
Total liabilities and shareholders'
equity |
$ 274,671 |
$ 272,639 |
$ 291,116 |
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited, in
thousands) |
|
|
|
|
For the First
Quarter Ended |
|
May 3, 2014 |
May 4, 2013 |
Cash flows from operating activities: |
|
|
Net loss |
$ (10,397) |
$ (24,181) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation and amortization |
5,696 |
6,808 |
Asset impairment |
783 |
861 |
Loss on disposal of property and
equipment |
16 |
26 |
(Gain) loss on derivative liability |
(1,225) |
9,290 |
Amortization of debt discount |
724 |
517 |
Non-cash stock-based compensation |
495 |
994 |
Changes in assets and liabilities: |
|
|
Inventories |
(12,789) |
(12,990) |
Other current assets |
(486) |
(2,151) |
Other assets |
330 |
412 |
Accounts payable |
10,134 |
(2,672) |
Other current
liabilities |
2,932 |
(5,461) |
Deferred lease
incentives |
(708) |
(1,059) |
Deferred rent |
(208) |
(196) |
Other long-term
liabilities |
(34) |
98 |
Net cash used in
operating activities |
(4,737) |
(29,704) |
Cash flows used for investing
activities: |
|
|
Purchases of property,
equipment and intangible assets |
(2,862) |
(1,114) |
Cash flows from financing activities: |
|
|
Principal payments under
mortgage borrowings |
(150) |
(140) |
Principal payments under
capital lease obligations |
(67) |
(125) |
Proceeds from exercise of
stock options |
— |
8 |
Net cash used in
financing activities |
(217) |
(257) |
Net decrease in cash and cash
equivalents |
(7,816) |
(31,075) |
Cash and cash equivalents, beginning of
period |
27,769 |
48,733 |
Cash and cash equivalents, end of period |
$ 19,953 |
$ 17,658 |
|
|
|
|
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
SELECTED STORE
OPERATING DATA |
|
|
|
|
|
|
May 3,
2014 |
May 4,
2013 |
Stores open at beginning of year |
618 |
644 |
Stores opened during the period |
1 |
1 |
Stores closed during the period |
(1) |
(7) |
Stores open at end of period |
618 |
638 |
|
|
|
|
|
|
May 3,
2014 |
May 4,
2013 |
|
# of Stores |
Square Footage
(000s) |
# of Stores |
Square Footage
(000s) |
PacSun Core stores |
501 |
1,963 |
522 |
2,036 |
PacSun Outlet stores |
117 |
472 |
116 |
471 |
Total stores |
618 |
2,435 |
638 |
2,507 |
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
RECONCILIATION OF
SELECTED GAAP MEASURES TO NON-GAAP MEASURES |
(Unaudited, in
thousands, except per share data) |
|
|
|
|
For the First
Quarter Ended |
|
May 3, 2014 |
May 4, 2013 |
|
|
|
GAAP loss from continuing operations |
$ (10,397) |
$ (24,054) |
Derivative liability |
(1,225) |
9,290 |
Deferred tax valuation allowance |
4,198 |
5,306 |
Non-GAAP loss from continuing operations |
$ (7,424) |
$ (9,458) |
|
|
|
GAAP loss from continuing operations per
share |
$ (0.15) |
$ (0.35) |
Derivative liability |
(0.02) |
0.13 |
Deferred tax valuation allowance |
0.06 |
0.08 |
Non-GAAP loss from continuing operations per
share |
$ (0.11) |
$ (0.14) |
Shares used in calculation |
68,750 |
68,242 |
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated May 29, 2014, contains
non-GAAP financial measures. These non-GAAP financial measures
include non-GAAP loss from continuing operations and non-GAAP loss
from continuing operations per share for the first quarters of
fiscal 2014 and 2013, respectively, and non-GAAP income (loss) from
continuing operations per share guidance for the second quarter of
fiscal 2014. 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:
|
- Derivative liability -
Deferred tax 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