SECURES $100 MILLION OF FINANCING FROM WELLS
FARGO
Pacific Sunwear of California, Inc. (NASDAQ:PSUN) announced today
that it and all of its subsidiaries (collectively, "PacSun" or the
"Company") have entered into a restructuring support agreement (the
"RSA") with affiliates of Golden Gate Capital ("Golden Gate
Capital"), the holder of its secured term loan provider under the
Company's financing facilities. In conjunction with the RSA, a Plan
of Reorganization (the "Plan") was approved by the Company's Board
of Directors, which provides a comprehensive roadmap for the
Company to continue to execute its strategy and position the
Company for long-term success as a privately owned entity by Golden
Gate Capital.
The parties intend to implement the Plan through a Chapter 11
process. To that end, today PacSun filed voluntary petitions to
restructure under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). Under the Plan,
PacSun will continue to operate its business without interruption
to customers, vendors, partners and employees.
Pursuant to the Plan, Golden Gate Capital will be converting
more than 65% of its term loan debt into the equity of the
reorganized company and providing a minimum of $20 million in
additional capital to the reorganized Company upon its emergence
from Chapter 11 to support its long-term growth objectives. The
Company also announced that it has received a commitment for a
flexible draw $100 million in debtor-in-possession ("DIP")
financing from Wells Fargo Bank, National Association ("Wells
Fargo"), the Company's revolver lender, which will allow the
Company to draw capital as needed to manage seasonal swings in cash
flow. Wells Fargo has also committed to provide a five-year $100
million revolving line of credit effective upon the Company's
emergence from Chapter 11 and subject to certain conditions.
Gary H. Schoenfeld, President and Chief Executive Officer,
stated: "The plan negotiated with Golden Gate Capital and approved
by our Board of Directors places PacSun in a very promising
position as we continue the brand and merchandising transformation
that our team has worked relentlessly to achieve. Golden Gate
Capital is a private equity investment firm with over $15 billion
of capital under management and a tremendous track record of
success. Their deep familiarity with our business, retail
expertise, financial strength and industry experience make them an
exceptional equity partner for us going forward. Importantly, great
brand partnerships will remain paramount to PacSun's success and
the Plan provides for all key suppliers to be paid in full
following the effective date of the Plan."
Mr. Schoenfeld continued, “We have been making significant
strides over the past several years to improve performance. Due to
our team's hard work and unique brand partnerships, PacSun is the
only one of our direct retail competitors to achieve compounded
positive same-store-sales over the past four years. Through this
restructuring, however, we plan to solve the two structural issues
that operationally we could not fix on our own. First is a very
high occupancy cost of approximately $140 million per year, and
second is nearly $90 million of long-term debt coming due later
this year. The bankruptcy process gives us the ability both to fix
our balance sheet by reducing our long-term debt by more than 65%,
and reduce our annual occupancy costs, either through landlord
negotiations or lease rejections, appropriately adjusting the fixed
costs of operating our stores to better match the shifting retail
landscape.”
Josh Olshansky, Managing Director at Golden Gate Capital, said:
“PacSun has successfully transitioned beyond its historical base of
action sports brands to what we believe is the most relevant and
coveted mix of brands celebrating the California lifestyle. We
believe in the future of the Company, as reflected by our
significant injection of new capital into the business. While there
is still work to be done, we are supportive of the steps the
Company and its management team have taken to position PacSun for
success and growth long after emergence. Notably, the Company has
delivered positive comparable store sales in 13 of the past 16
quarters. We look forward to working closely with Gary and the
PacSun team to build a stronger future while continuing to deliver
the compelling product assortment and great shopping experience
that has long defined PacSun to customers.”
The DIP from Wells Fargo provides for a $100 million revolving
credit facility that will allow the Company to draw capital as
needed to manage seasonal swings in cash flow, subject to certain
limitations and conditions. This DIP financing, in conjunction with
the Company’s cash on hand, is expected to fund the Company's
operations during the Chapter 11 process, including its obligations
to vendors, employees, and other purveyors of goods and services.
The DIP is subject to Bankruptcy Court approval and the
satisfaction of specified closing conditions.
PacSun intends to operate its business as usual throughout the
Chapter 11 restructuring process. All PacSun stores nationwide will
remain open on normal schedules and are continuing to operate in
the ordinary course. The Chapter 11 filing should have no immediate
impact on PacSun’s employees and customers.
The Company is seeking customary authority from the Bankruptcy
Court to continue to make wage and salary payments, continue
various benefits for employees and honor certain customer programs,
such as benefits earned under its myGSOM REWARDS loyalty program,
gift cards and returns on merchandise purchased prior to the
bankruptcy filing. Bankruptcy Court approval for those requests is
expected within the next few days. As a result, the Company’s
salaried and hourly employees should continue to be paid on the
normal schedule, and there are expected to be no changes to various
employee benefit programs. In addition, customers should not
experience any changes in their relationship with PacSun as there
are expected to be no changes to the customer loyalty program,
warranty programs, return policies or gift card balances.
Guggenheim Securities is acting as investment banker for the
Company, Klee, Tuchin, Bogdanoff & Stern LLP is the Company’s
legal counsel in connection with the debt restructuring, and RCS
Real Estate Advisors is the Company's real estate advisor. FTI
Consulting serves as its restructuring advisor. Perella Weinberg
Partners is acting as financial advisor for Golden Gate Capital,
and Kirkland & Ellis is Golden Gate Capital’s legal counsel.
Choate Hall & Stewart LLP is Wells Fargo's legal counsel.
Information regarding the Company’s Chapter 11 filings,
including access to court documents, can be found at pacsun.com,
http://casesprimeclerk.com/PSUN (the court-appointed claims
agent site), or www.deb.uscourts.gov, the official Bankruptcy
Court website.
Fourth Quarter Financial Information
The Company also announced today that net sales for the fourth
quarter of fiscal 2015 ended January 30, 2016, were $232.9
million versus net sales of $231.6 million for the fourth quarter
of fiscal 2014 ended January 31, 2015. Comparable store sales
for the fourth quarter of fiscal 2015 were slightly positive at
0.2%. The Company ended the fourth quarter of fiscal 2015 with 601
stores versus 605 stores a year ago.
On a GAAP basis, the Company reported a net loss of $10.0
million, or $(0.14) per diluted share, for the fourth quarter of
fiscal 2015, compared to a net loss of $26.0 million, or $(0.38)
per diluted share, for the fourth quarter of fiscal 2015. The net
loss for the Company's fourth quarter of fiscal 2015 included a
non-cash gain of $0.2 million, or $0.00 per diluted share, compared
to a non-cash loss of $14.3 million, or $(0.21) per diluted share,
for the fourth quarter of fiscal 2014, related to the derivative
liability that resulted from the issuance of Convertible Series B
Preferred Stock (the “Series B Preferred”) in connection with the
term loan financing the Company completed in December 2011 with an
affiliate of Golden Gate Capital.
On a non-GAAP basis, excluding the non-cash loss on the
derivative liability, other one-time charges, and assuming a tax
benefit of $2.5 million, the Company would have incurred a net loss
for the fourth quarter of fiscal 2015 of $6.4 million, or $(0.09)
per diluted share, as compared to net loss of $7.1 million, or
$(0.10) per diluted share, for the same period a year ago.
"Our slightly positive comp store sales performance was at the
better end of what many retailers experienced over the Holiday
season, which continues to validate our core strategies as we
re-establish the new PacSun," said Mr. Schoenfeld.
Full Year Financial Information
Net sales for fiscal 2015 were $800.9 million versus net sales
of $826.8 million for fiscal 2014. Comparable store sales decreased
2.6% during fiscal 2015.
On a GAAP basis, the Company reported a net loss of $8.5
million, or $(0.12) per diluted share, for the 2015 fiscal year,
compared to a net loss of $29.4 million, or $(0.42) per diluted
share for the 2014 fiscal year. The net loss for the 2015 fiscal
year included a non-cash gain of $27.7 million, or $0.40 per
diluted share, compared to a non-cash gain of $2.3 million, or
$0.03 per diluted share for the 2014 fiscal year, related to the
derivative liability.
On a non-GAAP basis, excluding the non-cash gain on derivative
liability, other one-time charges, and assuming a tax benefit of
approximately $11.0 million, the Company would have incurred a net
loss for the 2015 fiscal year of $22.6 million, or $(0.32) per
diluted share, as compared to a net loss of $18.5 million, or
$(0.27) per diluted share, for the 2014 fiscal year.
Derivative LiabilityIn 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 represented 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 delivering Best
Brands, Great StyleTM through its unique 34 year heritage at the
center of 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 April 7,
2016, the Company operates 593 stores in all 50 states and Puerto
Rico. PacSun's website address is www.pacsun.com.
About Golden Gate CapitalGolden Gate Capital is a San
Francisco-based private equity investment firm with over $15
billion of capital under management. The principals of Golden Gate
Capital have a long and successful history of investing across a
wide range of industries and transaction types, including
going-privates, corporate divestitures, and recapitalizations, as
well as debt and public equity investments. In addition to PacSun,
retail investments sponsored by Golden Gate Capital include
California Pizza Kitchen, Eddie Bauer, Express, Payless Shoes, Red
Lobster and Zales. For more information, visit
www.goldengatecap.com.
About Non-GAAP Financial MeasuresThis 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 HarborThis press release contains
"forward-looking statements" including, without limitation, the
statements made by Mr. Schoenfeld and Mr. Olshansky in the fourth,
fifth, sixth and fifteenth paragraphs. 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 31, 2015, and subsequent periodic reports filed
with the SEC. In addition, risks and uncertainties relating to the
bankruptcy filing by the Company could also adversely affect the
Company’s business and results, including but not limited to, (i)
the Company’s ability to obtain Bankruptcy Court approval with
respect to motions in the Company’s bankruptcy case, (ii) the
ability of the Company to consummate the transactions contemplated
by the RSA with respect to the bankruptcy, (iii) the effects of the
Company’s bankruptcy filing on the Company and on the interests of
various constituents, (iv) Bankruptcy Court rulings in the
bankruptcy cases and the outcome of the cases in general, (v) the
length of time the Company will operate under its bankruptcy cases,
(vi) risks associated with third party motions in the bankruptcy
cases, which may interfere with the Company’s ability to consummate
the transactions contemplated by the RSA, (vii) the potential
adverse effects of the bankruptcy cases on the Company’s liquidity
or results of operations, (viii) the ability to operate the
Company’s business and consummate the transactions contemplated by
the RSA, (ix) the transactions contemplated by the DIP financing
agreement, and the RSA being subject to closing conditions, which
conditions may not be satisfied for various reasons, including for
reasons outside of the Company’s control; (x) increased legal costs
to execute the Company’s reorganization, and other risks and
uncertainties, (xi) the Company’s ability to maintain contracts,
trade credit and other customer and/or vendor relationships that
are essential to the Company’s operations, and (xii) the Company’s
ability to retain key executives and employees. 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.
Contacts
Media:Sard Verbinnen & CoDenise DesChenes/Nathaniel
Garnick/Jenny Gore(212) 687-8080
Investors:Craig E. GosselinSenior Vice President and General
Counsel(714) 414-4667
| |
| PACIFIC SUNWEAR OF CALIFORNIA,
INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
| (Unaudited, in thousands, except per share
data) |
|
|
| |
For the Fourth Quarter Ended |
|
For the Fiscal Year Ended |
| |
January 30, 2016 |
|
January 31, 2015 |
|
January 30, 2016 |
|
January 31, 2015 |
| |
|
|
|
|
|
|
|
| Net sales |
$ |
232,873 |
|
|
$ |
231,593 |
|
|
$ |
800,919 |
|
|
$ |
826,777 |
|
| Gross margin |
56,634 |
|
|
60,348 |
|
|
203,544 |
|
|
223,233 |
|
| SG&A expenses |
62,124 |
|
|
67,766 |
|
|
221,552 |
|
|
238,374 |
|
| Operating loss |
(5,490 |
) |
|
(7,418 |
) |
|
(18,008 |
) |
|
(15,141 |
) |
| (Gain) loss on
derivative liability |
(192 |
) |
|
14,268 |
|
|
(27,708 |
) |
|
(2,272 |
) |
| Interest expense,
net |
4,510 |
|
|
3,939 |
|
|
17,263 |
|
|
15,759 |
|
| Loss before income
taxes |
(9,808 |
) |
|
(25,625 |
) |
|
(7,563 |
) |
|
(28,628 |
) |
| Income tax expense |
162 |
|
|
365 |
|
|
911 |
|
|
727 |
|
| Net loss |
$ |
(9,970 |
) |
|
$ |
(25,990 |
) |
|
$ |
(8,474 |
) |
|
$ |
(29,355 |
) |
| |
|
|
|
|
|
|
|
| Net loss per
share: |
|
|
|
|
|
|
|
| Basic and diluted |
$ |
(0.14 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.42 |
) |
| Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
| Basic and diluted |
70,115 |
|
|
69,261 |
|
|
69,862 |
|
|
69,079 |
|
| |
|
|
|
|
|
|
|
| PACIFIC SUNWEAR OF CALIFORNIA,
INC. |
| CONDENSED CONSOLIDATED BALANCE
SHEETS |
| (Unaudited, in thousands) |
| |
| |
|
January 30, 2016 |
|
January 31, 2015 |
| |
|
ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash
equivalents |
|
$ |
6,235 |
|
|
$ |
22,588 |
|
| Inventories |
|
96,523 |
|
|
81,658 |
|
| Prepaid expenses |
|
12,412 |
|
|
12,692 |
|
| Other current
assets |
|
4,967 |
|
|
3,992 |
|
| Total current assets |
|
120,137 |
|
|
120,930 |
|
| Property and equipment,
net |
|
85,274 |
|
|
88,751 |
|
| Other assets |
|
37,934 |
|
|
42,598 |
|
| Total assets |
|
$ |
243,345 |
|
|
$ |
252,279 |
|
| |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
EQUITY |
|
|
|
|
|
|
|
|
| Current
liabilities: |
| Accounts payable |
|
$ |
43,328 |
|
|
$ |
36,775 |
|
| Line of credit |
|
18,000 |
|
|
— |
|
| Current portion of
long-term debt |
|
77,373 |
|
|
541 |
|
| Derivative
liability |
|
740 |
|
|
28,448 |
|
| Other current
liabilities |
|
39,678 |
|
|
47,642 |
|
| Total current liabilities |
|
179,119 |
|
|
113,406 |
|
| Deferred lease
incentives |
|
13,330 |
|
|
10,804 |
|
| Deferred rent |
|
14,307 |
|
|
14,694 |
|
| Long-term debt |
|
26,817 |
|
|
94,424 |
|
| Other liabilities |
|
25,292 |
|
|
28,368 |
|
| Total liabilities |
|
258,865 |
|
|
261,696 |
|
| Total shareholders'
deficit |
|
(15,520 |
) |
|
(9,417 |
) |
| Total liabilities and
shareholders' deficit |
|
$ |
243,345 |
|
|
$ |
252,279 |
|
| |
|
|
|
|
| PACIFIC SUNWEAR OF CALIFORNIA,
INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
| (Unaudited, in thousands) |
| |
| |
For the Fiscal Year Ended |
| |
January 30, 2016 |
|
January 31, 2015 |
| Cash flows from
operating activities: |
|
|
|
| Net loss |
$ |
(8,474 |
) |
|
$ |
(29,355 |
) |
| Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: |
|
|
|
| Depreciation and
amortization |
20,721 |
|
|
24,013 |
|
| Asset impairment |
1,940 |
|
|
3,323 |
|
| Non-cash stock-based
compensation |
2,623 |
|
|
1,621 |
|
| Amortization of debt
discount |
4,031 |
|
|
2,997 |
|
| Gain on derivative
liability |
(27,708 |
) |
|
(2,272 |
) |
| Loss on disposal of
property and equipment |
93 |
|
|
278 |
|
| Gain on lease
terminations |
— |
|
|
(191 |
) |
| Changes in assets and
liabilities: |
|
|
|
| Inventories |
(14,865 |
) |
|
1,415 |
|
| Accounts payable and other current
liabilities |
(1,176 |
) |
|
1,503 |
|
| Other assets and liabilities |
7,682 |
|
|
7,400 |
|
| Net cash provided by (used in)
operating activities |
(15,133 |
) |
|
10,732 |
|
| Cash flows from
investing activities: |
|
|
|
| Purchases of property, equipment,
and intangible assets |
(17,575 |
) |
|
(15,595 |
) |
| Cash flows from
financing activities: |
|
|
|
| Proceeds from credit facility
borrowings |
85,000 |
|
|
15,000 |
|
| Payments under credit facility
borrowings |
(67,000 |
) |
|
(15,000 |
) |
| Proceeds from mortgage
borrowings |
— |
|
|
618 |
|
| Principal payments under mortgage
borrowings |
(541 |
) |
|
(554 |
) |
| Payments for debt issuance
costs |
— |
|
|
(116 |
) |
| Principal payments under capital
lease obligations |
(851 |
) |
|
(639 |
) |
| Proceeds from issuance of
stock-based compensation |
302 |
|
|
373 |
|
| Statutory withholding payments for
stock-based compensation |
(555 |
) |
|
— |
|
| Net cash provided by (used in)
financing activities |
16,355 |
|
|
(318 |
) |
| Net decrease in cash
and cash equivalents |
(16,353 |
) |
|
(5,181 |
) |
| Cash and cash
equivalents, beginning of period |
22,588 |
|
|
27,769 |
|
| Cash and cash
equivalents, end of period |
$ |
6,235 |
|
|
$ |
22,588 |
|
| |
|
|
|
| PACIFIC SUNWEAR OF CALIFORNIA,
INC. |
| SELECTED STORE OPERATING DATA |
|
|
| |
January 30, 2016 |
|
January 31, 2015 |
| Stores open at
beginning of year |
|
605 |
|
|
618 |
|
| Stores opened during
the period |
|
11 |
|
|
5 |
|
| Stores closed during
the period |
|
(15 |
) |
|
(18 |
) |
| Stores open at end of
period |
|
601 |
|
|
605 |
|
| |
|
|
|
| |
January 30, 2016 |
|
January 31, 2015 |
| |
# of Stores |
|
Square
Footage(000s) |
|
# of Stores |
|
Square
Footage(000s) |
| PacSun Core
stores |
475 |
|
1,874 |
|
485 |
|
1,907 |
| PacSun
Outlet stores |
126 |
|
507 |
|
120 |
|
485 |
| Total
stores |
601 |
|
2,381 |
|
605 |
|
2,392 |
| |
|
|
|
|
|
|
|
| PACIFIC SUNWEAR OF CALIFORNIA,
INC. |
| RECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES |
| (Unaudited, in thousands, except per share
data) |
|
|
| |
For the Fourth Quarter Ended |
|
For the Fiscal Year Ended |
| |
January 30, 2016 |
|
January 31, 2015 |
|
January 30, 2016 |
|
January 31, 2015 |
| |
|
|
|
|
|
|
|
| GAAP net loss |
$ |
(9,970 |
) |
|
$ |
(25,990 |
) |
|
$ |
(8,474 |
) |
|
$ |
(29,355 |
) |
| Store closure charge (markdown
allowance) |
(184 |
) |
|
(171 |
) |
|
— |
|
|
— |
|
| Software impairment |
— |
|
|
— |
|
|
— |
|
|
987 |
|
| Termination benefits |
399 |
|
|
442 |
|
|
875 |
|
|
442 |
|
| Change to California income tax
apportionment |
808 |
|
|
— |
|
|
808 |
|
|
— |
|
| Derivative liability |
(192 |
) |
|
14,268 |
|
|
(27,708 |
) |
|
(2,272 |
) |
| Deferred tax valuation
allowance |
2,707 |
|
|
4,369 |
|
|
11,886 |
|
|
11,670 |
|
| Non-GAAP net loss |
$ |
(6,432 |
) |
|
$ |
(7,082 |
) |
|
$ |
(22,613 |
) |
|
$ |
(18,528 |
) |
| |
|
|
|
|
|
|
|
| GAAP net loss per
share |
$ |
(0.14 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.42 |
) |
| Store closure charge (markdown
allowance) |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Software impairment |
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
| Termination benefits |
— |
|
|
0.01 |
|
|
0.01 |
|
|
— |
|
| Change to California income tax
apportionment |
0.01 |
|
|
— |
|
|
0.01 |
|
|
— |
|
| Derivative liability |
— |
|
|
0.21 |
|
|
(0.40 |
) |
|
(0.03 |
) |
| Deferred tax valuation
allowance |
0.04 |
|
|
0.06 |
|
|
0.18 |
|
|
0.17 |
|
| Non-GAAP net loss per
share |
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.27 |
) |
| Shares used in
calculation |
70,115 |
|
|
69,261 |
|
|
69,862 |
|
|
69,079 |
|
| |
|
|
|
|
|
|
|
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated April 7, 2016 contains
non-GAAP financial measures. These non-GAAP financial measures
include non-GAAP net loss and non-GAAP net loss per diluted share
for the fourth quarters and fiscal years 2015 and 2014,
respectively, and non-GAAP net loss per diluted share guidance for
the first quarter of fiscal 2016. 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
charge (markdown allowance) |
| - Software
impairment |
| - Termination
benefits |
| - 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.