The remainder of such charges is expected to be incurred during the first quarter of fiscal 2008 ending May 3, 2008, by which time the Company currently expects that all 154 demo stores will be closed.
Upon the completion of the inventory liquidation and lease termination negotiations, together with anticipated income tax benefits expected to be realized, the Company expects the net cash outflow of the demo store closings to be in the range of near neutral to approximately $10 million.
The Company intends to engage the Gordon Brothers Group, LLP and its subsidiary, DJM Realty, LLP, to assist in the demo store closing effort.
Separately, the Company also announced that, following a review of its supply chain operations, it will relocate all of its distribution activities to its distribution center in Olathe, Kansas, and close its distribution center in Anaheim, California.
Ms. Kasaks added, "In analyzing our operations, it became clear that we can better leverage our existing capacity at our Olathe distribution center to improve the efficiency of our supply chain, better service our stores and reduce certain costs.
We regret the impact on our associates of both of these decisions, but recognize these actions are necessary in order to improve our financial performance and best position the Company for future growth."
The relocation of the Anaheim distribution operations is expected to result in pre-tax charges ofapproximately $3 million, of which approximately $1 million is expected to be incurred during the fourth quarter of fiscal 2007 and approximately $2 million is expected to be incurred during the first quarter of fiscal 2008.
These charges were not reflected in the Company's previously given GAAP earnings guidance for the fourth quarter of fiscal 2007.
The Company plans to gradually phase down its operations in the Anaheim distribution center and expects the facility to close by the end of April 2008.
The Company is currently evaluating sale or lease alternatives for the Anaheim distribution center, which are expected to generate cash flow in excess of the current net book value of those assets.
Pacific Sunwear of California Inc
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