Press Release:
ANAHEIM, Calif., March 13, 2012 (GLOBE NEWSWIRE) — Pacific Sunwear of California, Inc. (Nasdaq:PSUN – News) (the “Company”), announced today that net sales from continuing operations for the fourth quarter of fiscal 2011 ended January 28, 2012, were $234.2 million versus net sales of $237.6 million for the fourth quarter of fiscal 2010 ended January 29, 2011. Total Company same-store sales were flat during the period. The Company ended fiscal 2011 with 733 stores, as compared to 852 as of the end of fiscal 2010. The Company closed 87 stores in the fourth quarter of fiscal 2011.
Fourth Quarter Results
On a GAAP basis, the Company reported a net loss of $38.1 million, or $(0.56) per share, for the fourth quarter of fiscal 2011, compared to a net loss of $35.2 million, or $(0.53) per share, for the fourth quarter of fiscal 2010. The net loss for the Company’s fourth quarter of fiscal 2011 also included a non-cash loss of $5.0 million, or $0.08 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 which was not reflected in its prior guidance.
On a non-GAAP basis, excluding store closure charges of $7.2 million and the non-cash loss on derivative liability of $5.0 million (net of tax effects), and using a normalized annual income tax rate of approximately 37%, the Company’s net loss for the fourth quarter of fiscal 2011 would have been $13.1 million, or $(0.19) per share, as compared to a net loss of $20.6 million, or $(0.31) per share, for the same period a year ago.
“Our sales trends improved as we moved further into the Holiday Season resulting in flat comparable store sales for the quarter and an improvement in merchandise margins, compared to the fourth quarter last year,” said Gary H. Schoenfeld, President and Chief Executive Officer. “We similarly finished the fiscal year with nearly flat same-store sales and remain focused on the key merchandising, in-store and digital initiatives that we believe are critical to successfully rebuilding the PacSun brand and our position in the marketplace.”
Full Year Results
Total net sales from continuing operations for fiscal 2011 were $833.8 million versus net sales of $837.1 million for fiscal 2010. Total Company same-store sales declined 1% during fiscal 2011.
On a GAAP basis, the Company reported a net loss of $106.4 million, or $(1.60) per share, for the 2011 fiscal year, compared to a net loss of $96.6 million, or $(1.46) per share, for the 2010 fiscal year.
On a non-GAAP basis, excluding store closure charges of $12.0 million and the non-cash loss on derivative liability of $5.0 million (net of tax effects), and using a normalized annual income tax rate of approximately 37%, the Company’s net loss for fiscal 2011 would have been $51.3 million, or $(0.77) per share, as compared to a net loss of $58.3 million, or $(0.88) per share, for the same period a year ago.
Financial Outlook for First Fiscal Quarter of 2012
The Company’s guidance range for the first quarter of fiscal 2012 contemplates a non-GAAP net loss from continuing operations of between $(0.26) and $(0.34) per share.
The forecasted first quarter non-GAAP net loss per share guidance range is based on the following assumptions:
Same-store sales of negative 4% to plus 1%;
Gross margin rate, including buying, distribution and occupancy, of 17% to 20%;
SG&A expenses in the range of $59 million to $61 million; and
A normalized annual income tax rate of approximately 37%.
The Company’s first 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
As required under applicable accounting rules, the results of operations of all stores that meet the related accounting criteria have been reclassified as discontinued operations for all periods presented herein. For fiscal 2011 and 2010, all of the Company’s store closures met the criteria for discontinued operations presentation.
Derivative Liability
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 market 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 PacSun common stock or until the conversion rights expire (December 2021).
The Company’s first 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 March 13, 2012, the Company operates 733 stores in all 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com.
