Pacific Sunwear Cuts Losses, Excluding Charges

On a GAAP basis, it reported a loss from continuing operations of $17.5 million, or 26 cents per share, for the second quarter, which was even with a loss from continuing operations of $17.5 million, or 26 cents, for the second quarter of fiscal 2011. The loss from continuing operations for the latest period included a non-cash loss of $8.2 million, or 12 cents per share, related to a derivative liability that resulted from the issuance of the Convertible Series B Preferred Stock  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 percent, the Company's loss from continuing operations for the second quarter of fiscal 2012 would have been $5.8 million, or 8 cents per share, as compared to a loss from continuing operations of $11.1 million, or 17 cents per share, for the same period a year ago.

“Our 5 percent 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 CEO. “Newer brands helped drive a 7 percent 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 percent comp and higher margins, and we also achieved a 15 percent 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 percent to plus 2 percent;
• Gross margin rate, including buying, distribution and occupancy, of 25 percent to 28 percent;
• SG&A expenses in the range of $62 million to $64 million; and
• A normalized annual income tax rate of approximately 37 percent.

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.