PACIFIC SUNWEAR OF CALIFORNIA INC - FORM 8-K - EX-99.1 - September 6, 2016

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Exhibit 99.1

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

 

In re Pacific Sunwear of California, Inc., et al    Case No. 16-10882
   Reporting Period: 7/3/2016 to 7/30/2016

MONTHLY OPERATING REPORT

Submit copy of report to any official committee appointed in the case.

 

  REQUIRED DOCUMENTS

 

  

Form No.

 

   

Document    
Attached     

 

   

Explanation    
Attached     

 

  

Affidavit/Supplement
Attached

 

  

Schedule of Cash Receipts and Disbursements

   MOR-1                 Yes             

Schedule of Bank Accounts with Book Balances

   MOR-1a    Yes             

Bank Reconciliation (or copies of debtor’s bank reconciliations)

   MOR-1b    No    Yes     MOR-1b Declaration                    

Schedule of Professional Fees Paid

   MOR-1c    Yes             

Copies of bank statements

        No    Yes     MOR-1b Declaration   

Cash disbursements journals

        No    Yes     MOR-1b Declaration   

Statement of Operations

   MOR-2    Yes             

Balance Sheet

   MOR-3    Yes             

Status of Post petition Taxes

   MOR-4    Yes             

Copies of IRS Form 6123 or payment receipt

        No    Yes     Available upon request   

Copies of tax returns filed during reporting period

        No    Yes     Available upon request   

Summary of Unpaid Post petition Debts

   MOR-4    Yes             

Listing of aged accounts payable

   MOR-4    Yes             

Debtor Questionnaire

   MOR-5    Yes             

Global Notes:

This Monthly Operating Report (“MOR”) has been prepared solely for the purpose of complying with the monthly reporting requirements applicable in these bankruptcy cases. The financial information contained herein is unaudited, limited in scope and as discussed below, not prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The results of operations contained herein are not necessarily indicative of the results which may be expected from any other period or for the full year and may not necessarily reflect the results of operations, financial position and schedule of receipts and disbursements in the future. The amounts in MOR 3 currently classified as liabilities subject to compromise may be subject to future change as the Debtors complete their analysis of pre and post-petition liabilities. The Debtors caution readers not to place undue reliance on the MOR. There can be no assurance that such information is complete and the MOR may be subject to revision.

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

 

/s/ Gary Schoenfeld

    

August 31, 2016

Signature of Debtor         Date

/s/ Gary Schoenfeld

    

August 31, 2016

Signature of Joint Debtor         Date

/s/ Gary Schoenfeld

    

August 31, 2016

Signature of Authorized Individual*         Date

Gary Schoenfeld

    

President & Chief Executive Officer

Printed Name of Authorized Individual         Title of Authorized Individual

*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.

 

1

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

MOR-1

 

($ in thousands)   

Pacific Sunwear of
California, Inc.

 

     

Pacific Sunwear
Stores Corp

 

    

Miraloma Borrower
Corporation [1]

 

     

Consolidated

 

  

Cash Receipts

      $ 2,144        $ 58,369      $ -           $             60,513    

Cash Disbursements

           

Merchandise Vendor Payments

      $             (30,367)       $ (1 )    $ -           $ (30,368)    

Payroll, Payroll Taxes, and Benefits

      (3,066)         (7,817 )      -             (10,883)    

Rent & Occupancy

      -               (14,411 )      -             (14,411)    

Sales Tax Remittance

      -               (3,592 )      -             (3,592)    

Other Disbursements

      (7,272)         (4,668 )      -             (11,940)    
  

 

 

  

      Operating Disbursements

 

      $

 

 (40,705)

 

   

 

    $

 

 (30,490

 

 ) 

 

   $

 

                     -     

 

   

 

    $

 

 (71,195) 

 

   

 

  

 

 

  

Net Operating Cash Flow

      $ (38,561)       $             27,879      $ -           $ (10,682)    

Beginning Balance

      $ 7,803        $ (5,806 )    $ -           $ 1,997     

Cash Receipts

      2,144          58,369        -             60,513     

Operating Disbursements [A]

      (40,705)         (30,490 )      -             (71,195)    

Borrowings

      29,317          -              -             29,317     

Line of Credit Paydowns [A]

      (20,521)         -              -             (20,521)    

Intercompany Receipts/Adjustments

      29,492            -             29,492     

Intercompany Disbursements/Adjustments [A]

         (28,865 )         (28,865)    
  

 

 

  

Ending Balance

      $ 7,531        $ (6,792 )    $ -           $ 739     

Disbursements for calculating US Trustee Quarterly Fees:

           

Total Disbursements - Sum of [A]

      $ 61,227        $ 59,354      $ -           $ 120,581    

[1] Miraloma Borrower Corporation does not maintain bank accounts and therefore, does not have disbursements to report during the period.

 

2

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

MOR-1a - Schedule of Bank Accounts with Book Balances

 

Bank Account

 

  

Pacific Sunwear of
California, Inc.

 

    

Pacific Sunwear
Stores Corp

 

    

Miraloma Borrower
Corporation

 

    

Consolidated  

 

  

104000 CASH ON HAND

     $ 2,046      $ 416,040        $ -          $ 418,085   

100000 CASH - HELD CHECK ACCRUAL

     -             -              -            -        

100002 CC DEP - AMEX

     -             450,304          -            450,304   

100003 CC DEP - VISA/MC

     -             7,262,667          -            7,262,667   

100004 CC DEP - DISCOVER

     -             175,958          -            175,958   

100005 CC DEP - PSUN CC

     -             189,927          -            189,927   

100006 CC DEP - AMEX - E4X

     -             22,751          -            22,751   

100052 GENERAL CASH ACCT - B OF A

     2,826        -              -            2,826   

100053 PAYROLL - PARENT B OF A

     0        -              -            0   

100054 PAYROLL - STORES B OF A

     -             1,790          -            1,790   

100056 FUNDING - CITI NON-CA CIGNA

     -             -              -            -        

100057 PAYROLL - 401K B OF A

     7,596,361        (7,596,361)         -            -        

100070 DISBURSE - STORES - WELLS FARG

     -             (12,267,243)         -            (12,267,243 ) 

100071 DISBURSE - PARENT - WELLS FARG

     (624,030 )      -              -            (624,030 ) 

100072 GENERAL CASH ACCT - WELLS FARG

     553,418        -              -            553,418   

100075 UTILITY DEPOSIT - WELLS FARGO

     -             441,372          -            441,372   

101000 DEP - AMAZON TENDER

     -             -              -            -        

101000 DEP - AMERICAN SAVINGS BANK

     -             69,058          -            69,058   

101000 DEP - BANCO POPULAR 2

     -             90,320          -            90,320   

101000 DEP - BANK OF HAWAII

     -             15          -            15   

101000 DEP - CITIZENS BANK

     -             121,440          -            121,440   

101000 DEP - ECOM B OF A

     -             (10,218)         -            (10,218 ) 

101000 DEP - ECOM B OF A (PAYPAL)

     -             53,070          -            53,070   

101000 DEP - JP MORGAN CHASE

     -             342,002          -            342,002   

101000 DEP - KEY BANK OF NEW YORK

     -             82,087          -            82,087   

101000 DEP - M&T BANK

     -             30,948          -            30,948   

101000 DEP - PNC BANK

     -             207,661          -            207,661   

101000 DEP - PNC RCC

     -             3,313          -            3,313   

101000 DEP - QUEENSTOWN BANK

     -             -              -            -        

101000 DEP - REGIONS

     -             191,514          -            191,514   

101000 DEP - US BANK

     -             199,958          -            199,958   

101000 DEP - WELLS FARGO BANK - CC

     -             93,326          -            93,326   

101000 DEP - WELLS FARGO BANK - STORE

     -             1,601,171          -            1,601,171   

101000 DEPOSITORY CLEARING

     -             2,963          -            2,963   

101001 ACH PAYMENTS - UTILITIES

     -             1,002,918          -            1,002,918   

101400 CC CLEARING - PLCC

     -             -              -            -        

101401 CC CLEARING - AMEX

     -             177          -            177   

101402 CC CLEARING - VISA/MC

     -             7,069          -            7,069   

101403 CC CLEARING - DISCOVER

     -             85          -            85   

101404 CC CLEARING - PAYPAL

     -             -              -            -        

101405 CC CLEARING - AMEX - E4X

     -             -              -            -        

103000 CD - MANUFACTURERS BANK UTIL

     -             11,799          -            11,799   

103001 CD - WELLS FARGO NEV TAX

     -             10,019          -            10,019   
 

 

 

  
    $         7,530,621      $           (6,792,098)       $                 -          $             738,523   

 

3

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

MOR-1b - Declaration Regarding the Status of Bank Reconciliations of the Debtors

Gary Schoenfeld hereby declares under penalty of perjury:

 

  1   I am the President and Chief Executive Officer for Pacific Sunwear of California, Inc. et al., the above-captioned debtors and debtors in possession (collectively, the “Debtors”). I am familiar with the debtors day-to-day operations, business affairs and books and records.

 

  2   All statements in the Declaration are based on my personal knowledge, my review of the relevant documents, my discussions with other employees of the Debtors, or my opinion based upon my experience and knowledge of the Debtors’ operations and financial condition. If I were called upon to testify, I could and would testify to each of these facts set forth herein based on such personal knowledge, review of documents or opinion. I am authorized to submit this Declaration on behalf of the Debtors.

 

  3   To the best of my knowledge, all of the Debtors’ bank balances as of July 30, 2016 have been reconciled in an accurate and timely manner.

 

             Dated:  August 31, 2016       Respectfully submitted

 

    /s/ Gary Schoenfeld                            
   By: Gary Schoenfeld
   Title: President & Chief Executive Officer

 

4

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

MOR - 1c

SCHEDULE OF PROFESSIONAL FEES AND EXPENSES PAID

This schedule is to include all retained professional payments from case inception to current month

 

               Check   Amount Paid     Year-To-Date

Payee

 

  

Period Covered

 

  

Payor

 

  

Number

 

   

Date

 

  

Fees

 

    

Expenses

 

    

Fees

 

    

Expenses

 

Choate, Hall & Stewart   Apr 4 - 30, 2016   Pacific Sunwear of California, Inc.   N/A [1]    24-May       215,567        7,125        215,567      7,125
Choate, Hall & Stewart   May 2016   Pacific Sunwear of California, Inc.   N/A [1]    12-Jul       104,207        3,576        319,774      10,702
                                              
FTI Consulting   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   911050    24-Jun       364,312        32,569        364,312      32,569
                                              
Guggenheim Securities   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   4637806106     10-Jun       120,000        4,955        120,000      4,955
                                              
Kirkland & Ellis   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   910836    1-Jun       348,355        4,603        348,355      4,603
Kirkland & Ellis   May 2016   Pacific Sunwear of California, Inc.   911274    19-Jul       190,834        4,003        539,189      8,606
                                              
Klee, Tuchin, Bogdanoff & Stern   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   910929    10-Jun       215,991        3,364        215,991      3,364
Klee, Tuchin, Bogdanoff & Stern   May 2016   Pacific Sunwear of California, Inc.   911229    15-Jul       380,348        12,804        596,339      16,168
                                              
Prime Clerk   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   910950    10-Jun       72,991        285,015        72,991      285,015
Prime Clerk   May 1 - 31, 2016   Pacific Sunwear of California, Inc.   910975    16-Jun       99,029        224,683        172,019      509,697
Prime Clerk   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   911051    24-Jun       8,817        -            180,836      509,697
                                              
Richards Layton & Finger   Mar 23 -Apr 30, 2016   Pacific Sunwear of California, Inc.   N/A [1]    25-May       41,980        2,242        41,980      2,242
                                              
Sullivan & Cromwell   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   910926    10-Jun       22,457        -            22,457      -    
Sullivan & Cromwell   May 2016   Pacific Sunwear of California, Inc.   911253    19-Jul       12,344        -            34,801      -    
                                              
Young Conaway Stargatt & Taylor   Apr 7 - 30, 2016   Pacific Sunwear of California, Inc.   911117    1-Jul       119,785        13,966        119,785      13,966
Young Conaway Stargatt & Taylor   May 2016   Pacific Sunwear of California, Inc.   911275    19-Jul       64,179        4,817        183,964      18,783

[1] DIP Lender Counsel was paid by direct debit from the ABL facility at the direction of Wells Fargo.

 

5

Pacific Sunwear of California, Inc. et al
Consolidating Statement of Operations [1]

Reporting Period: 7/3/2016 to 7/30/2016

MOR-2

    Case No. 16-10882

 

 

$ in thousands

 

  

  Pacific Sunwear of  
California, Inc.

 

    

Pacific Sunwear
Stores Corp

 

    

Miraloma Borrower
Corporation

 

    

Eliminations

 

    

Consolidated

 

  

Net Sales

     $                 51,238      $                 57,114      $ -          $         (51,238)      $           57,114     

Cost of Goods Sold

     (46,660 )      (37,696 )      -            49,950         (34,406)    
 

 

 

  

Gross Margin

     $ 4,578      $ 19,418      $ -          $ (1,288)      $ 22,708     

Expenses:

          

Operating Expenses [2]

     $ 6,286      $ 29,514      $ (96 )    $ -           $ 35,705     

Derivative Liab (Gain) Loss

     (131 )      -            -            -             (131)    

Net Interest (Income) Expense

     1,428        548        82        -             2,058     

Income Tax Provision (Benefit)

     -            328        -            -             328     
 

 

 

  

Total Expenses

     $ 7,583      $ 30,391      $ (14 )    $ -           $ 37,960     
 

 

 

  

Net Income Prior to Reorganization Items

     $ (3,005 )    $ (10,973 )    $ 14      $ (1,288)      $ (15,252)    

Reorganization Items

     (2,344 )      -            -            -             (2,344)    
 

 

 

  

Net Income After Reorganization Items

     $ (5,349 )    $ (10,973 )    $                 14      $ (1,288)      $ (17,596)    
 

 

 

  

Notes:

[1] The unaudited financial statements have been derived from the books and records of the Debtors. The information furnished in this report includes primarily normal recurring adjustments, but may not include all of the adjustments that would typically be made for the quarterly and annual financial statements in accordance with US GAAP. Furthermore, the monthly financial information contained herein has not been subjected to the same level of accounting review and testing that the Debtors apply in the preparation of their quarterly and annual financial information in accordance with US GAAP. Accordingly, upon the application of such procedures, the financial information may be subject to change and that these changes could be material.

[2] Operating expenses include direct store expenses and selling, general, and administrative expenses.

 

6

Pacific Sunwear of California, Inc. et al
Consolidating Balance Sheet (External Account Format)

Reporting Period: 7/3/2016 to 7/30/2016

MOR-3

    Case No. 16-10882

 

 

$ in thousands  

 

  Pacific Sunwear of  
California, Inc.

 

    

 

Pacific Sunwear
Stores Corp

 

    

 

Miraloma Borrower
Corporation

 

    

Eliminations

 

    

Consolidated

 

  

Assets

          

Cash and cash equivalents

     $ 7,531      $ (6,792)      $ -          $ -           $ 739     

Other current assets

     638        5,404        -            -             6,042     

Intercompany Inventory

     (189,049)        172,038        -            17,011        -         

Inventories

     201,153        (48,550)        -            (27,183)        125,420     

Prepaid expenses

     10,159        16,835        210        -             27,204     

Property and equipment, net

     2,621        62,570        18,876        -             84,067     

Intangible assets, net

     9,580        831        -            -             10,411     

Other assets

     56,642        23,824        153        (56,539)        24,080     

Deferred income taxes

     3,344        -            -            -             3,344     

Intercompany Asset

     (63,307)        78,616        (3,407)        (11,902)        -         
 

 

 

  

Total Assets

     $ 39,312      $ 304,777      $ 15,831      $ (78,613)      $ 281,307     
 

 

 

  

Liabilities

          

Not Subject to Compromise

          

Accounts payable (post-petition)

     $ 44,817      $ 3,412      $ -          $ -           $ 48,229     

Other current liabilities [1]

     21,635        27,988        -            -             49,623     

Current portion of long-term debt

     -            255        330        -             585     

Line of credit

     28,447        -            -            -             28,447     

Other liabilities

     -            23,372        -            -             23,372     

Long-term debt

     -            11,575        14,946        -             26,521     

Intercompany Liability

     (175,734)        186,569        1,068        (11,902)        -         

Subject to Compromise

          

Accounts payable (prepetition)

     28,940        19,923        -            -             48,863     

Other current liabilities

     452        1,167        -            -             1,619     

Current portion of long-term debt

     80,644        -            -            -             80,644     

Other liabilities

     2,143        -            -            -             2,143     

Deferred rent

     -            13,994        -            -             13,994     

Deferred lease incentives

     -            12,548        -            -             12,548     
 

 

 

  

Total Liabilities

     $ 31,345      $ 300,803      $ 16,343      $ (11,902)      $ 336,589     

Equity

          

Common stock

     $ 704      $ 0      $ -          $ (0)      $ 704     

Preferred stock

     -            -            -            -             -         

Additional paid-in capital

     27,747        56,539        -            (56,539)        27,747     

Current year Net Income

     (37,392)        (20,464)        80        17,011         (40,765)    

Retained Earnings

     16,908        (32,100)        (592)        (27,183)        (42,968)    
 

 

 

  

Total Equity

     $ 7,967      $ 3,974      $ (512)      $ (66,711)      $ (55,282)    
 

 

 

  

Total Liabilities and Equity

     $               39,312      $               304,777      $                 15,831      $         (78,613)      $         281,307     
 

 

 

  

[1] Other current liabilities not subject to compromise may include prepetition accruals for which invoices have not been received.

 

7

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

STATUS OF POSTPETITION TAXES

MOR - 4

The beginning tax liability should be the ending liability from the prior month or, if this is the first report, the amount should be zero.

 

$ in thousands   

Beginning

Tax

Liability

 

     

Amount
Withheld or
Accrued

 

     

Amount
Paid

 

     

Ending

Tax

Liability

 

  
   

   Federal

            

Withholding

      $0         $1,519         $1,519         $0   

FICA-Employee

      0         1,029         1,029         0   

FICA-Employer

      0         1,026         1,026         0   

Unemployment

      0         25         25         0   

Income

      0         125         125         0   

Total Federal Taxes

      $0         $3,724         $3,724         $0   

   State and Local

                                    

Withholding - State

      $0         $460         $460         $0   

Withholding - Local

      0         16         16         0   

Sales

      3,529         3,625         3,286         3,867   

Unemployment

      0         46         46         0   

Real Property [1]

                                    

Personal Property

      0         31         31         0   

Gross Receipts Taxes/Business Licenses

      0         21         21         0   

Total State and Local

      $3,529         $4,198         $3,860         $3,867   

Total Taxes

              $3,529                 $7,922                 $7,583                 $3,867   

[1] Real property taxes are paid through mortgage payments, and as such, are not included on this schedule.

SUMMARY OF UNPAID POSTPETITION DEBTS [2]

 

$ in thousands    Number of Days Past Due  
      Current      0-30      31-60     Total  

Accounts Payable [3]

      $48,229                          $48,229   

Taxes Payable

      3,867                          3,867   

Total Post petition Debts

              $52,096                          $0                          $0                $52,096   

[2] The Debtor is in the process of actively reviewing accounts payable and liabilities; therefore, these figures may be subject to change.

[3] Accounts Payable excludes other accrued liabilities which include accruals for wages, benefits, royalties, freight, taxes, capital leases, insurance and other expenses that may not be payable as of the filing of this report. Other accrued liabilities may also include prepetition accruals for which invoices have not been received.

Explain how and when the Debtor intends to pay any past-due post petition debts.

       N/A

 

8

In re Pacific Sunwear of California, Inc., et al   

Case No. 16-10882

Reporting Period: 7/3/2016 to 7/30/2016

 

ACCOUNTS RECEIVABLE RECONCILIATION AND AGING [1]

 

Accounts Receivable Reconciliation

 

   

Amount

 

Total Accounts Receivable at the beginning of the reporting period

    N/A

+ Amounts billed during the period

    N/A

- Amounts collected during the period

    N/A

Total Accounts Receivable at the end of the reporting period

    N/A
      

Accounts Receivable Aging

 

   

Amount

 

0 - 30 days old

    N/A

31 - 60 days old

    N/A

61 - 90 days old

    N/A

91+ days old

    N/A

Total Accounts Receivable

    N/A

Amount considered uncollectible (Bad Debt)

    N/A

Accounts Receivable (Net)

    N/A

[1] Debtors’ customer sales are collected at the time of transaction in the form of cash or credit card payments; therefore the Debtors do not carry significant accounts receivable balances. Certain other accounts receivable for rebates, holdbacks, vendor overpayments and credits, excess merchandise sold to third party resellers, and other non-trade receivables are included in the other current assets line item on the balance sheet.

DEBTOR QUESTIONNAIRE

 

  Must be completed each month

 

  

Yes

 

  

No

 

1. Have any assets been sold or transferred outside the normal course of business

    this reporting period? If yes, provide an explanation below.

 

            X

2. Have any funds been disbursed from any account other than a debtor in possession

    account this reporting period? If yes, provide an explanation below.

 

            X

3. Have all post petition tax returns been timely filed? If no, provide an

    explanation below.

 

  

X

 

    

4. Are workers compensation, general liability and other necessary insurance

    coverages in effect? If no, provide an explanation below.

 

   X    

5. Has any bank account been opened during the reporting period? If yes, provide

    documentation identifying the opened account(s). If an investment account has been opened

    provide the required documentation pursuant to the Delaware Local Rule 4001-3.

 

            X

 

9

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PACIFIC SUNWEAR OF CALIFORNIA INC Reports