<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended: January 31, 1999

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the transition period from_____________ to__________

                         Commission file number 0-21296

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                        <C>       
               California                                     95-3759463
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                        Identification No.)

5200 E. La Palma Avenue, Anaheim, California                     92807
 (Address of principal executive offices)                      (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (714) 693-8066

        Securities Registered Pursuant to Section 12(b) of the Act: NONE
           Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].

         The aggregate market value of Common Stock held by non-affiliates of
the registrant on March 19, 1999 was approximately $650 million. All outstanding
shares of voting stock, except for shares held by executive officers and members
of the Board of Directors and their affiliates, are deemed to be held by
non-affiliates.

         On March 19, 1999 the registrant had 20,463,242 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III incorporates information by reference from the definitive
Proxy Statement for the 1999 Annual Meeting of Shareholders, to be filed with
the Commission no later than 120 days after the end of the registrant's fiscal
year covered by this Form 10-K.

================================================================================



<PAGE>   2
                                     PART I

ITEM 1. BUSINESS

         Pacific Sunwear of California, Inc. and its wholly-owned subsidiaries
("the Company" or "the Registrant") is a leading specialty retailer of primarily
mall-based stores selling everyday casual apparel, accessories and footwear
designed to meet the lifestyle needs of active teens and young adults. The
Company's customers are primarily young men aged 12 to 24, as well as young
women of the same age, who generally prefer a casual look. The Company believes
its stores are differentiated by a carefully edited selection of popular and
emerging brands, which are offered together with the Company's own private
brands. The Company believes its merchandise selection enhances its image with
its customers as a key fashion resource for the casual teen wardrobe. As of the
year ended January 31, 1999 ("fiscal 1998"), Pacific Sunwear operated 342 stores
in 43 states nationwide in the following regions: 92 stores in the Northeast
(27% of the Company's stores), 79 stores in the Midwest (23% of the Company's
stores), 70 stores in the Southeast (20% of the Company's stores), 50 stores in
California (15% of the Company's stores) and 51 stores in the Western/Middle
region (15% of the Company's stores).

         The Company operates under the following store formats:

         Pacific Sunwear stores - The Company's original and primary store
format, also referred to as "PacSun," offers a complete selection of shirts,
shorts, pants, overshirts, sweatshirts, outerwear, footwear and accessories in
order to satisfy the casual wardrobe needs of its customers. Within each
merchandise classification, Pacific Sunwear stores offer a broad selection, with
the goal of being viewed by its customers as the dominant retailer in its niche.
At the end of fiscal 1998, the Company operated 318 Pacific Sunwear stores
primarily in enclosed regional shopping malls.

         Until 1995 Pacific Sunwear stores averaged approximately 2,000 square
feet. In late 1995, the Company increased its average new store size to
approximately 3,000 square feet. Beginning in the year ended February 2, 1997
("fiscal 1996"), the Company has also enlarged the size of certain existing
smaller Pacific Sunwear stores through expansion or relocation. The Company
expanded or relocated 15 Pacific Sunwear stores in fiscal 1998 and expanded or
relocated 15 Pacific Sunwear stores in the year ended February 1, 1998 ("fiscal
1997"). At the end of fiscal 1998, the Company operated 188 Pacific Sunwear
stores in its larger format and 129 in its smaller format. In addition, the
Company operates one larger format Pacific Sunwear store in a non-mall street
location in Manhattan, New York.

         Pacific Sunwear Outlet - These stores average approximately 4,000
square feet and are located in value-oriented outlet malls, both open-air and
enclosed. This format carries a selection similar to the Pacific Sunwear mall
stores, with an emphasis on value pricing. The merchandise offerings at Pacific
Sunwear Outlets consist primarily of off-price brand merchandise, private-brand
merchandise and a smaller selection of full-priced branded merchandise. At the
end of fiscal 1998, the Company operated nine Pacific Sunwear Outlet stores.

         d.e.m.o. - In fiscal 1998, the Company introduced a new store concept
named "d.e.m.o." The Company opened 15 d.e.m.o. stores during fiscal 1998, of
which five were new stores and ten were existing Pacific Sunwear stores
converted to the d.e.m.o. format. d.e.m.o. stores offer a broad assortment of
popular and emerging cross-cultural brands that primarily target young men aged
16 to 24, and, to a lesser extent, young women. There is no merchandise overlap
with Pacific Sunwear stores or Pacific Sunwear Outlet stores.

STRATEGY

         The Company's goal is to be the dominant nationwide specialty retailer
of everyday casual apparel, footwear and accessories catering primarily to the
teen market through multiple retail formats and channels. The Company's target
customers are young men and women between the ages of 12 and 24. The Company
believes its customers want to stay abreast of fashion trends and continually
seek newness in their everyday wear. The Company endeavors to satisfy such
demands by offering a complete wardrobe selection representing fashion trends
considered timely by the Company's target customers. The principal aspects of
the Company's strategy are as follows:

         Offer a Broad Assortment. Pacific Sunwear stores and Pacific Sunwear
Outlets offer a complete selection of shirts, shorts, pants, overshirts,
sweatshirts, outerwear, footwear and accessories in order to satisfy the casual
wardrobe needs of its customers. d.e.m.o. stores offer a complete selection of
cross-cultural brands in T-shirts, shirts, shorts, pants, overshirts,
sweatshirts, outerwear and accessories. Within each merchandise classification,
the Company's stores offer a broad selection, with the goal of being viewed by
its customers as the dominant retailer in its niche.



                                        2

<PAGE>   3
         Create a Pacific Sunwear Brand Image. The Company strives to make the
"Pacific Sunwear" and "PacSun" names synonymous with distinctive and
high-quality merchandise for the casual teen lifestyle. In recent years Pacific
Sunwear customers and employees have adopted the nickname "PacSun" and the
Company uses "PacSun" in some of its in-store signage and marketing. Pacific
Sunwear stores and Pacific Sunwear Outlets project a strong brand image by
offering a carefully edited selection of popular and "cutting-edge" brands,
together with the Company's own exclusive brands. Key brands in young men's
apparel offered by Pacific Sunwear stores and Pacific Sunwear Outlets include
Billabong, Quiksilver, O'Neill, Rusty and Redsand. Key brands in juniors include
Roxy (Quiksilver), O'Neill, Billabong, 26 Red Sugar and Mudd. Key brands in
footwear include Vans, Soaps, Etnies and DC shoes. Pacific Sunwear stores and
Pacific Sunwear Outlets also offer a wide selection of private brand merchandise
under various labels including "Bullhead," "Breakdown" and "Venus Girl Trap,"
which are targeted at specific customer segments. The Company believes that
offering high-quality private brands contributes to its status as a key fashion
resource for the casual teen lifestyle and differentiates Pacific Sunwear stores
and Pacific Sunwear Outlets from its competitors.

         To further strengthen the Pacific Sunwear brand image, the Company
initiated a national print advertising campaign for the year ending January 30,
2000 ("fiscal 1999"). The ads have appeared and will appear in major magazines
that target teens and young adults. The Company is also sponsoring lifestyle
events consistent with the Pacific Sunwear brand image, including the 1999 Vans
Warped Tour.

         Create a d.e.m.o. Brand Image. The Company strives to make the
"d.e.m.o." name synonymous with distinctive and high-quality cross-cultural
merchandise. The Company seeks to project a strong brand image among its
customers by offering a carefully edited selection of popular brands. Key brands
in d.e.m.o. include Fubu, Tommy Hilfiger, Mecca, Polo, Enyce and Wu Wear.
Initially, d.e.m.o. offers a limited selection of private brand merchandise but
the Company expects to increase the percentage of private brand sales in
d.e.m.o. stores.

         Actively Manage Merchandise Trends. The Company does not attempt to
dictate fashion, but instead devotes considerable effort to identifying emerging
fashion trends. By using focus groups, listening to its customers and store
employees, monitoring sell-through trends, testing small quantities of new
merchandise in a limited number of stores, and maintaining domestic and
international sourcing relationships, the Company enhances its ability to
identify and respond to emerging fashion trends and to develop new private brand
styles in order to maximize existing fashion trends. The Company believes its
proactive strategy helps minimize fashion risk and the potential need for
significant markdowns, while permitting a rapid response to changing fashions
and the timely roll out of new merchandise.

         Maintain Strong Vendor Relationships. The Company views its vendor
relationships as important to its success, and promotes frequent personal
interaction with its vendors. The Company believes many of its vendors view
Pacific Sunwear stores, Pacific Sunwear Outlets and d.e.m.o. stores as important
distribution channels, in many cases as one of their largest customers, which
enhance their own brand image in the eyes of the customer.

         Provide Attentive Customer Service. The Company is committed to
offering courteous, professional and nonintrusive customer service. The Company
strives to give its customers the same level of respect that is generally given
to adult customers at other retail stores, and to provide friendly and informed
customer service for parents. Responding to the expressed preferences of its
customers, the Company trains its employees to greet each customer, to give
prompt and courteous assistance when asked, and to thank customers after
purchases are made, but to refrain from giving extensive unsolicited advice to
its shoppers. Pacific Sunwear stores and Pacific Sunwear Outlets are designed to
give a sense of "controlled clutter," with extensive wall displays and a
background of popular music. Additionally, the stores provide a friendly and
social atmosphere for teens, while also providing a comfortable environment for
parents and other adults. d.e.m.o. offers a similar format, with attractive and
brand-focused merchandise displays and a background of hip-hop music. The
Company believes the combination of its attentive customer service and its
unique store environments is integral to its success.

         Store Growth Strategy. The Company intends to continue its store growth
through the opening of new stores under its three formats. During fiscal 1999,
the Company plans to open approximately 108 new stores of which 67 will be
Pacific Sunwear stores, 16 will be Pacific Sunwear Outlet stores and 25 will be
d.e.m.o. stores. The Company also plans to expand or relocate 15 existing
smaller Pacific Sunwear stores during fiscal 1999. See "--Expansion."

         Internet Strategy. The Company launched its website in June 1998 at
www.pacificsunwear.com. This website includes information about store locations,
branded vendors, promotions, store events, surveys, employment opportunities and
investor relations. The Company anticipates that it will begin selling
merchandise over the internet in the summer of 1999.



                                        3

<PAGE>   4
The Company intends to offer a limited selection of current season branded and
private brand merchandise on the site. All of Pacific Sunwear stores key brands
are expected to participate. The Company will also allow online customers to
return merchandise to Pacific Sunwear stores. Recently the Company acquired the
rights to the name "pacsun.com" and intends to primarily market its website
under this name. Pacsun.com will be initially marketed in Pacific Sunwear
stores. In the future the Company intends to expand its community and content
sections and also expects to launch additional marketing efforts.

MERCHANDISING

   Merchandise

         Pacific Sunwear stores and Pacific Sunwear Outlet stores offer a
complete selection of t-shirts, shirts, shorts, pants, overshirts, sweatshirts,
outerwear, footwear and accessories in order to satisfy the casual wardrobe
needs of their teen customers. d.e.m.o. stores pursue a similar merchandising
strategy with a completely separate group of brands. Within each merchandise
classification, the Company's stores offer a broad selection, with the goal of
being viewed by its customers as the dominant retailer in its niche.


         The following table sets forth the Company's merchandise assortment by
classification as a percentage of net sales for the periods shown:


<TABLE>
<CAPTION>
                                                               FISCAL YEAR ENDED
                                                           --------------------------
                                                           JAN. 31,  FEB. 1,   FEB. 2,
                                                            1999      1998      1997
                                                           -------   ------    ------
<S>                                                        <C>       <C>       <C> 
Young men's t-shirts, knit and woven tops                    25 %      27 %      34 %
Juniors                                                      22        16         8
Young men's pants                                            16        19        17
Accessories (hats, sunglasses and other)                     12        11        13
Young men's bermuda shorts, board shorts and swimwear         9        10        12
Young men's sweatshirts, outerwear and overshirts             8        10        12
Footwear                                                      8         7         4
                                                             --        --        --
Total                                                        100%     100%      100%
                                                             ===      ===       ===
</TABLE>

         Pacific Sunwear stores and Pacific Sunwear Outlet stores offer many of
the brands best known by their target customers, as well as other "cutting-edge"
brands that reflect fashion trends considered timely by their customers. Key
brands in young men's apparel include Billabong, Quiksilver, O'Neill, Rusty,
Redsand, HIC, Stussy and Kikwear. In the juniors category, many of the brands
offered are lines offered by existing young men's vendors, such as Roxy
(Quiksilver), Rusty, O'Neill and 26 Red Sugar. In addition, Pacific Sunwear
stores and Pacific Sunwear Outlets offer junior-focused vendors, such as Paris
Blues, Mudd and Dawls. The Company believes that offering merchandise designed
specifically for young women broadens its customer base. Prominent footwear
brands offered by Pacific Sunwear stores include Vans, Soaps, Etnies, DC shoes
and Skechers. Key brands in d.e.m.o. include Fubu, Tommy Hilfiger, Mecca, Polo,
Enyce and Wu Wear. In fiscal 1998 and fiscal 1997 approximately 64% and 62%,
respectively, of the Company's net sales consisted of brand name merchandise. No
vendor accounted for more than 9% of net sales during fiscal 1998.

         Pacific Sunwear stores and Pacific Sunwear Outlets also offer a wide
selection of private brand merchandise, most notably under the labels
"Bullhead," "Breakdown," "Trans 9," "Venus Girl Trap," "Tilt" and "Good Vibes,"
each of which is targeted at a specific customer segment. d.e.m.o. stores
currently offer a limited selection of private brand merchandise under the
labels "Proto 23" and "Factor". The Company expects to increase the percentage
of private brand sales in d.e.m.o. stores, which accounted for only 5% of
d.e.m.o. net sales in fiscal 1999. The Company believes that offering
high-quality private brands contributes to its status as a key fashion resource
for the casual lifestyle and differentiates the Company from its competitors.
First introduced in the late 1980s, the Company's most established private
brands are those designed for its young male customer. Beginning in late 1995,
Pacific Sunwear introduced private brand merchandise designed for juniors, which
corresponds by label and brand positioning to the young men's lines. In
addition, the Company introduced new private brands targeted specifically to the
junior customer. The Company believes that the development of its brand image
among its target customers is enhanced by its private brands. In addition, the
private brands provide an opportunity to broaden its customer base by providing
merchandise of comparable quality to brand name merchandise at lower prices, to
capitalize on



                                        4

<PAGE>   5
emerging fashion trends when branded merchandise is not available in sufficient
quantities, and to provide the Company with a greater degree of control over the
flow of its merchandise. The Company's private brand merchandise is designed and
sourced internally by an 18-person product development group in collaboration
with the Company's buying staff. The product development staff also oversees the
manufacture and delivery of the private brand merchandise, with manufacturing
done on a contract basis domestically, in Asia and in Mexico. Private brand
sales accounted for 36% and 38% of the Company's net sales for fiscal 1998 and
fiscal 1997, respectively.

   Vendor and Contract Manufacturer Relationships

         The Company views its vendor relationships as important to its success
and promotes frequent personal interaction with its vendors. The Company
believes many of its vendors view Pacific Sunwear stores, Pacific Sunwear
Outlets and d.e.m.o. stores as important distribution channels, in many cases as
one of their largest customers, which enhance their own brand image in the eyes
of the customer. The Company's vendor base currently includes more than 250
vendors. The Company maintains strong and interactive relationships with its
vendors, many of whose philosophies of controlled distribution and merchandise
development are consistent with the Company's strategy. The Company generally
purchases merchandise from vendors who prefer distributing through specialty
retailers, small boutiques and, in some cases, better department stores, rather
than distributing their merchandise through mass market channels.

         To encourage the design and development of new merchandise, the Company
frequently shares ideas regarding fashion trends and merchandise sell-through
information with its vendors. The Company also suggests merchandise design and
fabrication with certain vendors. The Company encourages the development of new
vendor relationships by attending trade shows and through its weekly "Open-house
Wednesday" program, during which new vendors are encouraged to make
presentations of their merchandise to the Company's buying and product
development staffs. A number of the Company's key vendors have been introduced
to the Company through this program.

         The Company has cultivated its private brand sources with a view
towards high-quality merchandise, production reliability and consistency of fit.
The Company sources its private brand merchandise both domestically and
internationally in order to benefit from the lower costs associated with foreign
manufacturing and the shorter lead times associated with domestic manufacturing.

         The Company's business is dependant upon its ability to offer current
season, brand name apparel at competitive prices and in adequate quantities.
Some of the Company's vendors have limited resources, production capacities and
operating histories and some have intentionally limited the distribution of
their merchandise. The inability or unwillingness on the part of key vendors to
expand their operations to keep pace with the anticipated growth of Pacific
Sunwear stores, Pacific Sunwear Outlets and d.e.m.o. stores, or the loss of one
or more key vendors or private brand sources for any reason, could have a
material adverse effect on the Company's business.

   Purchasing, Allocation and Distribution

         The Company's merchandising department oversees the purchasing and
allocation of the Company's merchandise. The Company's buyers are responsible
for reviewing branded merchandise lines from new and existing vendors, selecting
branded and private brand merchandise styles in quantities, colors and sizes to
meet inventory levels established by management, and identifying emerging
fashion trends. The Company's planning and allocation department is responsible
for management of inventory levels by store and by class, allocation of
merchandise to stores and inventory replenishment based upon information
generated by the Company's merchandise management information systems. These
systems provide the planning department with current inventory levels at each
store and for the Company as a whole, as well as current selling history within
each store by merchandise classification and by style. See "--Information
Systems."

         The Company's corporate offices and distribution center are located in
Anaheim, California. The Company relocated its distribution center and corporate
offices in close proximity to the previous location in fiscal 1998. The Company
believes its new distribution center is capable of servicing at least 700
stores. All merchandise is delivered by its vendors to the main facility, where
it is inspected, received into the Company's computer system, allocated to
stores, ticketed when necessary, and boxed for distribution to the Company's
stores. Each store is typically shipped merchandise three to five times a week,
providing it with a steady flow of new merchandise. The Company uses a national
and a regional small package carrier to ship merchandise to its stores and
occasionally uses air freight during peak selling periods.



                                        5

<PAGE>   6
STORES

   Locations

         The Company has expanded from 11 stores in California at the end of
fiscal 1986 to 342 stores in 43 states at the end of fiscal 1998. The regional
breakdown of the Company's stores is as follows: 92 stores in the Northeast (27%
of the Company's stores), 79 stores in the Midwest (23% of the Company's
stores), 70 stores in the Southeast (20% of the Company's stores), 50 stores in
California (15% of the Company's stores) and 51 stores in the Western/Middle
region (15% of the Company's stores).

         The table below sets forth the number of stores located in each state
as of the end of fiscal 1998:

         TABLE OF STORES BY STATE:

<TABLE>
<CAPTION>
         State                   No. of Stores      State                   No of Stores
         -----                   -------------      -----                   ------------
<S>                                 <C>             
         Alabama                      1             Montana                       1
         Arizona                      8             Nebraska                      2
         California                  50             North Carolina                4
         Colorado                     5             New Hampshire                 3
         Connecticut                  8             New Jersey                   18
         Delaware                     2             New Mexico                    1
         Florida                     43             Nevada                        3
         Georgia                      7             New York                     20
         Idaho                        1             Ohio                         16
         Iowa                         3             Oklahoma                      2
         Illinois                    15             Oregon                        2
         Indiana                      7             Pennsylvania                 18
         Kansas                       3             South Carolina                1
         Kentucky                     2             South Dakota                  1
         Louisiana                    4             Tennessee                     4
         Massachusetts               11             Texas                        17
         Maryland                     9             Utah                          2
         Maine                        2             Virginia                      9
         Michigan                    14             Vermont                       1
         Minnesota                    7             Washington                    5
         Missouri                     5             Wisconsin                     4
                                                    West Virginia                 1
</TABLE>


   Store Expansion

     During fiscal 1999, the Company plans to increase its current store base by
opening approximately 108 new stores, of which 67 will be Pacific Sunwear
stores, 16 will be Pacific Sunwear Outlet stores and 25 will be d.e.m.o. stores.
The Company also plans to expand or relocate 15 existing smaller Pacific Sunwear
stores. The Company has identified regional malls in major metropolitan areas
for potential new store expansion, subject to financial return and site
selection criteria. The Company also intends to open two Pacific Sunwear stores
in non-mall street locations in fiscal 1999. Of the approximately 108 stores the
Company expects to open in fiscal 1999, leases have been executed for 67 stores.

     In fiscal 1998, the Company opened 64 new Pacific Sunwear stores in the
following states: California (1), Colorado (4), Delaware (1), Florida (7), Iowa
(2), Idaho (1), Illinois (2), Indiana (1), Kansas (2), Louisiana (1),
Massachusetts (2), Maryland (3), Maine (2), Minnesota (2), Missouri (5), Montana
(1), North Carolina (1), New Jersey (2), New York (4), Ohio (1), Oklahoma (1),
Oregon (1), Pennsylvania (2), Tennessee (1), Texas (6), Utah (2), Virginia (4),
Vermont (1) and Wisconsin (1). The Company opened five Pacific Sunwear Outlet
stores in fiscal 1998 in the following states: Illinois (1), Michigan (1), New
York (2) and Virginia (1) bringing the total to nine Pacific Sunwear Outlet
stores at the end of fiscal 1998. The Company opened 15 d.e.m.o. stores in
fiscal 1998, of which five were new stores and ten were existing Pacific Sunwear
stores converted to the d.e.m.o. format, in the following states: California
(2), Florida (7), Illinois (1), Louisiana (1), Michigan (1), New Jersey (2) and
New York (1).



                                        6

<PAGE>   7
     The Company's site selection strategy is to locate its stores primarily in
regional malls serving markets which meet its demographic criteria, including
average household income and population density. The Company also considers mall
sales per square foot, the performance of other retail tenants serving teens and
young adult customers, anchor tenants and occupancy costs. The Company currently
seeks Pacific Sunwear store locations of approximately 3,000-3,500 square feet
primarily in high-traffic locations within a mall. The Company currently seeks
d.e.m.o. store locations of approximately 2,000 square feet primarily in
high-traffic locations within regional malls with similar selection and
demographic criteria. The Company currently seeks Pacific Sunwear Outlet store
locations of approximately 4,000 square feet primarily in high- traffic
value-oriented outlet malls, both open-air and enclosed.

      The Company's average cost per store across all formats, including
leasehold improvements, furniture and fixtures and landlord allowances, was
approximately $222,000 and $241,000 in fiscal 1998 and fiscal 1997,
respectively. The average cost of expanding or relocating a store was
approximately $309,000 and $280,000 in fiscal 1998 and fiscal 1997,
respectively. The average total cost to build new stores and relocate or expand
stores will vary in the future, depending on various factors, including square
footage, changes in store design, local construction costs and landlord
allowances. The Company's average initial inventory for new stores opened in
fiscal 1998 was as follows: approximately $126,000 for Pacific Sunwear stores,
approximately $220,000 for Pacific Sunwear Outlet stores and approximately
$96,000 for d.e.m.o. stores. The Company's initial inventory for new stores will
vary in the future depending on various factors, including store concept and
square footage.

     The Company's continued growth depends on its ability to open and operate
stores on a profitable basis. The Company's ability to expand successfully will
be dependent upon a number of factors, including sufficient demand for the
Company's merchandise in its existing and new markets, customer acceptance of
its new store formats, and the ability of the Company to locate and obtain
favorable store sites, negotiate acceptable lease terms, obtain adequate
merchandise supply and hire and train qualified management-level and other
employees.

   Store Operations

     Store operations are managed by a Vice President of Stores, five regional
managers and 37 district managers, each of whom typically manages from eight to
10 stores. These managers and individual store managers participate in a bonus
program based on achieving predetermined levels of sales and inventory
shrinkage. Each store also has a co-manager, an assistant manager and
approximately four to 10 sales associates. Company stores are open during mall
shopping hours. The Company has well-established store operating policies and
procedures and an extensive four week in-store training program for new store
managers and co-managers. The Company places great emphasis on its loss
prevention program in order to control inventory shrinkage. This program
includes the installation of electronic article surveillance systems in all
stores, education of store personnel on loss prevention, and monitoring of
returns, voids and employee sales. Since fiscal 1991, the Company has achieved
an inventory shrinkage rate of less than 1.0% of net sales in each fiscal year,
which the Company believes is among the lowest shrinkage rates among national
specialty apparel retailers.

INFORMATION SYSTEMS

     The Company's merchandise, financial and store computer systems are fully
integrated and operate using IBM equipment. The systems have been in operation
since 1986, and the software, which is primarily provided by one of the largest
vendors to the retail trade, is regularly upgraded or modified as needs arise or
change. See-- "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Year 2000 Readiness." The Company's information systems
provide management, buyers and planners comprehensive data which helps them
identify emerging trends and manage inventories. The systems include purchase
order management, open order reporting, open-to-buy, receiving, distribution,
merchandise allocation, basic stock replenishment, inter-store transfers,
inventory and price management. Weekly best/worst item sales reports are used by
management to enhance the timeliness and effectiveness of purchasing and
markdown decisions. Merchandise purchases are based on planned sales and
inventories and are frequently revised to reflect changes in demand for a
particular item or classification.

     All of the Company's stores have a point-of-sale system operating on IBM
in-store computer hardware. The system features bar-coded ticket scanning,
automatic price look-up, dial-out check and credit authorization and automatic
nightly transmittal of data between the store and the Company's corporate
offices. Each of the regional and district managers use a laptop computer and
can instantly access Company-wide information, including actual and budgeted
sales by store, district and region; transaction information; and payroll data.
The Company believes its management information systems are adequate to support
its planned expansion at least through fiscal 2000.



                                        7

<PAGE>   8
COMPETITION

     The retail apparel, footwear and accessory business is highly competitive.
Pacific Sunwear stores, Pacific Sunwear Outlets and d.e.m.o. stores compete on a
national level with certain leading department stores and national chains that
offer the same or similar brands and styles of merchandise. The Company's stores
also compete with a wide variety of regional and local specialty stores, such as
Abercrombie and Fitch, American Eagle Outfitters, The Buckle, Gadzooks, The Gap
and Wet Seal. Many of the Company's competitors are larger and have
significantly greater resources than the Company. The Company believes the
principal competitive factors in its industry are fashion, merchandise
assortment, quality, price, store location, environment and customer service.



TRADEMARKS AND SERVICE MARKS

     Pacific Sunwear is the owner in the United States of the service marks
"Pacific Sunwear of California," "Good Vibrations," "Betty's Space," and the
trademarks "Pacific Sunwear," "Pac Sun," "Good Vibrations," "Good Vibes,"
"Bullhead," "Breakdown," "Diversion," "Trans 9," "Proto 23," "Factor," "Island
Force," "Hoax," "Violation," "Rare Brew," "d.e.m.o.," "Betty's Space," "Lulu,"
"Venus Girl Trap," "Distortion" and "Tilt." The Company has also registered many
of its marks outside of the United States. The Company believes its rights in
its marks are important to its business and the Company intends to maintain its
marks and the related registrations.

EMPLOYEES

     At January 31, 1999, Pacific Sunwear had approximately 4,058 employees of
whom 130 were employed in general and administrative functions at the Company's
corporate headquarters, 60 were employed in distribution center functions, 46
were employed as regional or district managers and approximately 3,822 were
store employees, of whom approximately 2,700 were part-time. A significant
number of seasonal employees are hired during peak selling periods. None of the
Company's employees is represented by a labor union, and the Company believes
that its relationships with its employees are good.



                                        8

<PAGE>   9
                      EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below are the names, ages, titles, present and past positions of
persons serving as executive officers or key employees of the Company as of
March 18, 1999.

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS:               AGE            POSITION
-------------------               ---            --------
<S>                               <C>            <C>
Greg H. Weaver                     45            Chairman of the Board and Chief Executive Officer
Timothy M. Harmon                  47            President and Chief Merchandising Officer
Carl W. Womack                     47            Senior Vice President, Chief Financial Officer and
                                                 Secretary
KEY EMPLOYEES:
Gary C.W. Hunt                     48            Vice President of Product Development
Robert G. Entersz                  53            Vice President of Merchandising, Juniors, Footwear
                                                    and Accessories
Robert M. Sayre                    43            Vice President of Merchandising, Young Men's
                                                    and Outlets
Larry J. Fesler                    48            Vice President of Stores
Shelley Smith                      40            Vice President of Real Estate
Ronald L. Ehlers                   47            Vice President of Information Systems
Frank J. Schools                   41            Vice President of Finance
Mark A. Kibler                     40            Vice President of Distribution
</TABLE>

         Greg H. Weaver has served as Chairman of the Board and Chief Executive
Officer since November 1997. He served as President and Chief Executive Officer
from October 1996 to November 1997 and as a director since February 1996. Mr.
Weaver served as President and Chief Operating Officer from February 1996 to
October 1996 and as Chief Operating Officer and Executive Vice President from
October 1994 to February 1996. He served as Executive Vice President of Store
Operations and Real Estate from September 1993 to October 1994. Mr. Weaver
served as Senior Vice President of Store Operations and Real Estate from
November 1990 to September 1993 and as Vice President of Stores from July 1987
to October 1990. Prior to joining the Company, he was employed for 13 years by
Jaeger Sportswear Ltd. in both operational and merchandising capacities for the
U.S. and Canadian stores.

         Timothy M. Harmon, who joined the Company in September 1991, has served
as President and Chief Merchandising Officer from November 1997. He served as
Executive Vice President of Merchandising from December 1996 to November 1997
and as Senior Vice President of Merchandising from October 1994 to November
1996. He served as Vice President of Merchandising from September 1991 to
September 1994. Prior to joining the Company, he served as Vice President and
General Manager of Wideworld/MTV Sportswear, a domestic apparel manufacturer,
from May 1990 until May 1991. From March 1986 until March 1990, Mr. Harmon
served as Vice President and General Manager, Women's Division, of Chauvin
International, an apparel manufacturer. Prior to that, he served as Divisional
Merchandise Manager for Millers Outpost, a young men's apparel retailer, where
he was employed for six years.

         Carl W. Womack, who joined the Company in May 1986, has served as
Senior Vice President and Chief Financial Officer since October 1994. He served
as Vice President of Finance and Chief Financial Officer from May 1986 to
September 1994. He has served as Secretary of the Company since November 1992.
Prior to joining the Company, Mr. Womack served in several positions in public
and private accounting. Mr. Womack is a certified public accountant.

         Gary C.W. Hunt joined the Company as Vice President of Product
Development in October 1993. Prior to joining the Company, he served as Vice
President of Merchandising with Pepe Clothing (USA), a jeanswear collection
company, from November 1990 to September 1993 and as Vice President of
Merchandising with Filippo Enterprises, Inc., a national jeanswear manufacturer,
from September 1988 to August 1990. Previously, he served as Vice President of
Merchandising for Jordache and for Zena Enterprises, Inc., each of which is a
jeanswear manufacturer.

         Robert G. Entersz joined the Company in November 1995 as Vice President
of Merchandising and currently oversees Juniors, Footwear and Accessories. Prior
to joining the Company, he was President of Journey's, a specialty shoe
retailer, from May 1993 to February 1995. Previously he was Executive Vice
President at Broadway Southwest, a department store, from January 1991 to April
1993. Prior to that, he was Senior Vice President and General Merchandise
Manager at Rich's, a division of Federated Department Stores.



                                        9

<PAGE>   10
         Robert M. Sayre joined the Company in February of 1997 as Vice
President of Merchandising and currently oversees Young Men's and Outlets. Prior
to joining the Company, he was General Merchandising Manager at J. Rigging's, a
division of Edison Brothers Stores, Inc., where he was employed from March 1991
to December 1996. Previously, he was Vice President of Menswear at Harold's &
Old School Clothing Company, a regional apparel retailer, from May 1990 to
October 1990. Prior to that, he was employed at Britches of Georgetown, a
regional apparel retailer, from May 1979 to April 1990.

         Larry J. Fesler has served as Vice President of Stores since joining
the Company in August 1993. Previously, he served for 11 years as Regional Sales
Manager with The Limited for its southwest store operations, where he was
employed for 15 years.

         Shelley Smith joined the Company in October 1994 as Vice President of
Real Estate. Previously, she was Director of Real Estate for Gymboree
Corporation, a children's apparel retailer, from October 1993 to September 1994.
From March 1989 to September 1993, she served as Director of Real Estate for
Natural Wonders, Inc., a nature and science gift retailer. Prior to that, she
was a Real Estate Representative for WNS, Inc., a specialty retailer with
several chains, where she was employed from August 1985 to February 1989.

         Ronald L. Ehlers joined the Company in June 1994 as Vice President of
Information Systems. Previously, he was Director of Management Information
Systems for Woman's World Shops, Inc., a women's specialty apparel retailer,
where he was employed for 16 years.

         Frank J. Schools, who joined the Company in July 1994, has served as
Vice President of Finance since November 1997. He served as the Company's
Controller from July 1994 to October 1997. Previously he was Assistant
Controller at Mac Frugal's Bargains. Close-outs, Inc., a general merchandise
close-out retailer, from October 1991 to July 1994. Prior to that, he served in
various accounting management positions at HomeClub, a warehouse home
improvement chain, from July 1986 to October 1991.

         Mark A. Kibler joined the Company in August 1998 as Vice President of
Distribution. Previously, he was Vice President of Distribution for L.A. Gear
Inc., a footwear and apparel wholesaler, from March 1988 to July 1998. Prior to
that, he served as Division Distribution Manager for Mervyns, a department
store, from February 1980 to March 1988.

ITEM 2. PROPERTIES

         The Company's corporate offices and distribution center are located in
Anaheim, California. The Company relocated its distribution center and corporate
offices in close proximity to the previous location in fiscal 1998. The
Company's new corporate offices and distribution facility occupy an aggregate of
approximately 197,000 square feet of a larger building, under a lease expiring
in February 2008. In addition, the Company has leased the remaining portion of
the same building (approximately 70,000 square feet) under a lease expiring in
February 2008. The Company has subleased this portion of the building with an
option to terminate the sublease at the Company's discretion after five years.

         The majority of the Company's stores are leased with initial lease
terms ranging from approximately eight to ten years. Substantially all leases
for the Company's stores provide for percentage rent, in excess of specified
minimums, based upon net sales.

ITEM 3. LEGAL PROCEEDINGS

         The Company is involved from time to time in litigation incidental to
its business. Management believes that the outcome of current litigation will
not have a material adverse effect upon the results of operations or financial
condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year covered by this report.



                                       10

<PAGE>   11
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The common stock trades on the Nasdaq National Market under the symbol
"PSUN". The following table sets forth for the quarterly periods indicated the
high and low bid prices per share of the common stock, adjusted to give
retroactive effect to the three-for-two stock splits effected in June 1998 and
October 1997, as reported by Nasdaq:

<TABLE>
<CAPTION>
FISCAL 1998       HIGH             LOW           FISCAL 1997           HIGH           LOW
-----------       ----             ---           -----------           ----           ---
<S>              <C>              <C>            <C>                  <C>           <C>   
1st Quarter      $30.67           $18.17         1st Quarter          $16.11        $11.45
2nd Quarter       39.38            28.00         2nd Quarter           17.53         11.45
3rd Quarter       34.56            17.50         3rd Quarter           20.33         12.89
4th Quarter       26.06            12.00         4th Quarter           23.00         16.00
</TABLE>

         As of March 19, 1999, the number of holders of record of common stock
of the Company was approximately 250 and the number of beneficial holders of the
common stock is in excess of 3,000.

         The Company has never declared or paid any dividends on its common
stock and does not intend to pay any dividends on its common stock in the
foreseeable future. In addition, the Company's current line of credit
arrangements prohibit the payment of cash dividends on its capital stock.

ITEM 6. SELECTED FINANCIAL DATA

         The balance sheet and income statement data as of January 31, 1999 and
February 1, 1998 and for each of the three fiscal years in the period ended
January 31, 1999 are derived from audited consolidated financial statements of
the Company included herein and should be read in conjunction with such
financial statements. Such data and the selected operating data below also
should be read in conjunction with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this report. The
balance sheet and income statement data as of February 2, 1997, February 4,
1996, and January 29, 1995 and for each of the two fiscal years in the period
ended February 4, 1996 are derived from audited consolidated financial
statements of the Company, which are not included herein.



                                       11

<PAGE>   12
<TABLE>
<CAPTION>
                                                                                 FISCAL YEAR ENDED (1)
                                                    ---------------------------------------------------------------------------
                                                     JAN. 31,        FEB. 1,          FEB. 2,         FEB. 4,          JAN 29,
                                                       1999            1998            1997            1996             1995
                                                    ----------      ----------      ----------      ----------       ----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<S>                                                 <C>             <C>             <C>             <C>              <C>       
CONSOLIDATED INCOME STATEMENT DATA:
Net sales                                           $  321,125      $  227,130      $  155,261      $  112,921       $   85,316
Cost of goods sold (including buying,
distribution and occupancy costs)                      212,859         150,219         106,126          80,788           59,481
                                                    ----------      ----------      ----------      ----------       ----------
Gross margin                                           108,266          76,911          49,135          32,133           25,835
Selling, general and administrative expenses            70,369          51,093          37,126          27,996           20,033
                                                    ----------      ----------      ----------      ----------       ----------
Operating income                                        37,897          25,818          12,009           4,137            5,802
Net interest income                                        977           1,248             237              63              307
                                                    ----------      ----------      ----------      ----------       ----------
Income before income tax expense                        38,874          27,066          12,246           4,200            6,109
Income tax expense                                      15,369          10,707           4,834           1,576            2,258
                                                    ----------      ----------      ----------      ----------       ----------
Net income                                          $   23,505      $   16,359      $    7,412      $    2,624       $    3,851
                                                    ==========      ==========      ==========      ==========       ==========
Net income per share, diluted (2)                   $     1.09      $     0.80      $     0.40      $     0.15       $     0.21
                                                    ==========      ==========      ==========      ==========       ==========
Weighted average shares outstanding,
  diluted (2)                                           21,489          20,430          18,682          18,053           17,949
                                                    ==========      ==========      ==========      ==========       ==========
SELECTED CONSOLIDATED OPERATING DATA:
Stores open at end of period                               342             272             209             182              128
Stores opened during period                                 74              52              30              55               46
Stores acquired during period                               --              15              --              --               --
Stores closed during period                                  4               4               3               1                1
Capital expenditures (000's)                        $   31,603      $   21,020      $    8,126      $    9,761       $   11,474
Average net sales per gross square foot (3) (4)     $      403      $      408      $      377      $      340       $      378

Average net sales per store (3) (4)                 $1,034,000      $  959,000      $  792,000      $  684,000       $  761,000
Square footage of gross store space at end of
  period                                               888,507         679,357         455,607         364,069          251,537

Comparable store net sales increase
 (decrease) (4) (5)                                        8.6%           15.1%           15.7%           (2.2)%            2.3%
CONSOLIDATED BALANCE SHEET DATA:
Working capital                                     $   47,545      $   48,119      $   21,690      $   14,800       $   16,436
Total assets                                           147,775         121,666          65,705          51,471           45,295
Long-term debt                                              --              --              --             406              781
Shareholders' equity                                $  116,697      $   96,563      $   47,546      $   38,309       $   35,420
</TABLE>

----------
(1)      Except for the fiscal year ended February 4, 1996, which included 53
         weeks, all fiscal years presented included 52 weeks.

(2)      Adjusted to give effect to the three-for-two stock splits effected as
         of June 8, 1998, October 9, 1997 and October 9, 1996.

(3)      For purposes of calculating these amounts, the number of stores and the
         amount of square footage reflect the number of months during the period
         that new stores and closed stores were open.

(4)      These amounts have been adjusted to exclude the fifty-third week in the
         fiscal year ended February 4, 1996.

(5)      Stores are deemed comparable stores on the first day of the first month
         following the one year anniversary of their opening. Commencing in
         fiscal 1996, in conjunction with the expansion or relocation of certain
         stores to the larger format, the Company excluded each such store's net
         sales results from the first day of the month of its expansion or
         relocation. Each of these stores is deemed a comparable store on the
         first day of the first month following the one-year anniversary of its
         expansion or relocation. Commencing in fiscal 1998, in conjunction with
         the conversion of certain stores to the d.e.m.o. format, the Company
         excluded each such store's net sales results from the first day of the
         month of its conversion. Each of these stores is deemed a comparable
         store on the first day of the first month following the one-year
         anniversary of its conversion to the d.e.m.o. format.



                                       12

<PAGE>   13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
Financial Statements and Notes thereto of the Company included elsewhere in this
Form 10-K. Commencing in fiscal 1996, in conjunction with the expansion or
relocation of certain stores to the larger format, the Company excluded each
such store's net sales results from the first day of the month of its expansion
or relocation. Each of these stores is deemed a comparable store on the first
day of the first month following the one-year anniversary of its expansion or
relocation. Commencing in fiscal 1998, in conjunction with the conversion of
certain stores to the d.e.m.o. format, the Company excluded each such store's
net sales results from the first day of the month of its conversion. Each of
these stores is deemed a comparable store on the first day of the first month
following the one-year anniversary of its conversion to the d.e.m.o. format. The
following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Cautionary Note Regarding
Forward-Looking Statements and Risk Factors" in this section.

RESULTS OF OPERATIONS

         The following table sets forth selected income statement data of the
Company expressed as a percentage of net sales for the fiscal years indicated:


<TABLE>
<CAPTION>
                                                        AS A PERCENTAGE OF NET SALES,
                                                        FISCAL YEAR ENDED YEAR ENDED
                                                        ----------------------------
                                                         JAN.31,   FEB. 1,  FEB. 2,
                                                          1999      1998     1997
                                                         -----     -----     -----
<S>                                                      <C>       <C>      <C>
Net sales                                                100.0%    100.0%    100.0%
Cost of goods sold (including buying, distribution
 and occupancy costs)                                     66.3      66.1      68.4
                                                         -----     -----     ----- 
Gross margin                                              33.7      33.9      31.6
Selling, general and administrative expenses              21.9      22.5      23.9
                                                         -----     -----     ----- 
Operating income                                          11.8      11.4       7.7
Interest income, net                                       0.3       0.5       0.2
                                                         -----     -----     ----- 
Income before income tax expense                          12.1      11.9       7.9
Income tax expense                                         4.8       4.7       3.1
                                                         -----     -----     ----- 
Net income                                                 7.3%      7.2%      4.8%
                                                         =====     =====     =====

Number of stores open at end of period                     342       272       209
</TABLE>



                                       13

<PAGE>   14
FISCAL 1998 COMPARED TO FISCAL 1997

Net Sales

         Net sales increased to $321.1 million in fiscal 1998 from $227.1
million in fiscal 1997, an increase of $94.0 million, or 41.4%. Of this $94.0
million increase, $36.8 million was attributable to net sales generated by 74
new stores opened in fiscal 1998 and not yet included in the comparable store
base, $33.3 million was attributable to net sales generated by new stores opened
or acquired in fiscal 1997, as well as Pacific Sunwear stores converted to the
d.e.m.o. format, and not yet included in the comparable store base, $17.0
million was attributable to an 8.6% increase in comparable store net sales in
fiscal 1998 compared to fiscal 1997 and $7.9 million was attributable to 30
stores that have been expanded or relocated to the larger format and not yet
included in the comparable store base. Partially offsetting this increase was a
$1.0 million decrease in net sales attributable to the closing of eight stores,
four of which were closed during fiscal 1997 and four of which were closed
during fiscal 1998. The increase in comparable store net sales was primarily
attributable to increases in comparable store net sales of juniors, shoes,
accessory merchandise and, to a lesser extent, increases in comparable store net
sales of young men's merchandise. Net sales of junior female apparel represented
approximately 22% of total net sales in fiscal 1998 compared to 16% of net sales
in fiscal 1997. Retail prices of the Company's merchandise remained relatively
unchanged in fiscal 1998 compared to fiscal 1997 and had no significant impact
on the net sales increase for fiscal 1998.

Gross Margin

         Gross margin, after buying, distribution and occupancy costs, increased
to $108.3 million in fiscal 1998 from $76.9 million in fiscal 1997, an increase
of $31.4 million, or 40.8%. As a percentage of net sales, gross margin decreased
to 33.7% from 33.9%. Of this .2% decrease, .4% was due to higher distribution
costs as a percentage of net sales for fiscal 1998 compared to fiscal 1997,
which was related to startup costs and higher occupancy costs of the Company's
new distribution center facility and .1% was due to an increase in occupancy
costs as a percentage of net sales. The increase in occupancy costs was
primarily due to opening 74 new stores with lower sales volumes than mature
stores and therefore higher occupancy costs as a percentage of net sales. These
increases were offset by an increase in net merchandise margins of .3% as a
percentage of net sales for fiscal 1998 compared to fiscal 1997 due to an
increase in initial markup.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased to $70.4 million
in fiscal 1998 from $51.1 million in fiscal 1997, an increase of $19.3 million,
or 37.8%. As a percentage of net sales, these expenses decreased to 21.9% from
22.5%. Of this .6% decrease as a percentage of net sales, .5% was due to a
decrease in store expansion/relocation and closing expenses as a percentage of
net sales and .3% was due to a decrease in general and administrative expenses
as a percentage of net sales. These decreases as a percentage of net sales were
primarily a result of leveraging these expenses over higher total net sales.
Offsetting these decreases was an increase in store selling expenses as a
percentage of net sales of .2% due to higher store selling expenses as a
percentage of net sales associated with 74 new stores. Sales volumes in new
stores generally increase during the first four years of operation, while store
selling expenses are generally fixed.

Net Interest Income

         Net interest income was $1.0 million in fiscal 1998 compared to $1.2
million in fiscal 1997, a decrease of $.2 million. This decrease was a result of
lower average cash balances during fiscal 1998 as compared to fiscal 1997.

Income Tax Expense

         Income tax expense was $15.4 million in fiscal 1998 compared to $10.7
million in fiscal 1997. The effective income tax rate in fiscal 1998 was 39.5%
compared to 39.6% in fiscal 1997.



                                       14

<PAGE>   15
FISCAL 1997 COMPARED TO FISCAL 1996

Net Sales

         Net sales increased to $227.1 million in fiscal 1997 from $155.3
million in fiscal 1996, an increase of $71.8 million, or 46.2%. Of this $71.8
million increase, $21.0 million was attributable to a 15.1% increase in
comparable store net sales in fiscal 1997 compared to fiscal 1996, $25.7 million
was attributable to net sales generated by 52 new stores opened in fiscal 1997,
$15.5 million was attributable to net sales generated by stores opened prior to
fiscal 1997 and not yet included in the comparable store base, $6.2 million was
attributable to the expansion or relocation of 15 existing stores not yet
included in the comparable store base and $5.4 million was attributable to the
15 Good Vibrations stores acquired in fiscal 1997. Partially offsetting this
increase was a $2.0 million decrease in net sales attributable to the closing of
seven stores, three of which were closed in the fourth quarter of fiscal 1996
and four of which were closed during fiscal 1997. The increase in comparable
store net sales was primarily attributable to the addition of footwear and
juniors to certain of the Company's stores and, to a lesser extent, increases in
sales of young men's merchandise. In fiscal 1997, the Company significantly
expanded the number of stores offering footwear and juniors. Sales of this
merchandise represented approximately 23% of net sales in fiscal 1997 as
compared to approximately 12% of net sales in fiscal 1996. As a result of a
change in the mix of products sold, including the addition of footwear, an
increase in the sales of pants as a percentage of net sales and a decrease in
T-shirt sales as a percentage of net sales, the average retail price per unit
sold increased approximately 5% in fiscal 1997 compared to fiscal 1996.

Gross Margin

         Gross margin, after buying, distribution and occupancy costs, increased
to $76.9 million in fiscal 1997 from $49.1 million in fiscal 1996, an increase
of $27.8 million, or 56.6%. As a percentage of net sales, gross margin increased
to 33.9% from 31.6%. Of this 2.3% increase in gross margin as a percentage of
net sales, 1.4% was due to a decrease in occupancy costs as a percentage of net
sales which was primarily related to an increase in comparable store net sales.
In addition, merchandise margins increased .9% as a percentage of net sales in
fiscal 1997 compared to fiscal 1996, primarily due to an increase in initial
markup in both branded and private brand merchandise.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased to $51.1 million
in fiscal 1997 from $37.1 million in fiscal 1996, an increase of $14.0 million,
or 37.7%. As a percentage of net sales, these expenses decreased to 22.5% from
23.9%. Of this 1.4% decrease as a percentage of net sales, .8% was attributable
to a decrease in store selling expenses as a percentage of net sales primarily
as a result of an increase in comparable store net sales, .5% was due to a
decrease in general and administrative expenses as a percentage of net sales as
a result of leveraging these expenses over higher net sales and .1% was due to a
reduction in store expansion/relocation and closing expenses as a percentage of
net sales.

Net Interest Income

         Net interest income was $1.2 million in fiscal 1997 compared to $.2
million in fiscal 1996, an increase of $1.0 million. This was a result of higher
cash, cash equivalents and short-term investments in fiscal 1997 compared to
fiscal 1996, primarily as a result of the net proceeds received from the
issuance of common stock in fiscal 1997.

Income Tax Expense

         Income tax expense was $10.7 million in fiscal 1997 compared to $4.8
million in fiscal 1996. The effective income tax rate in fiscal 1997 was 39.6%
compared to 39.5% in fiscal 1996.



                                       15

<PAGE>   16
LIQUIDITY AND CAPITAL RESOURCES

         The Company has financed its operations from internally generated cash
flow, short-term borrowings and equity financing. The Company's primary capital
requirements have been for the construction of new stores, remodeling,
relocation or expansion of selected existing stores and financing of
inventories. In fiscal 1998, the Company used funds for the relocation of and
capital improvements to its new corporate offices and distribution facility.

         Net cash provided by operating activities for fiscal 1998, fiscal 1997
and fiscal 1996 was $30.3 million, $18.2 million and $13.5 million,
respectively. Working capital at the end of fiscal 1998, fiscal 1997 and fiscal
1996 was $47.5 million, $48.1 million and $21.7 million, respectively.
Inventories at January 31, 1999 were $42.5 million compared to $32.1 million at
February 1, 1998, an increase of $10.4 million or 32.4%. The Company's average
store inventories vary throughout the year and increase in advance of the peak
selling periods of spring break, back-to-school and Christmas. The increase in
inventories at January 31, 1999 was primarily related to opening 74 new stores
and expanding/relocating 15 stores with in excess of 50% larger average square
footage than their previous locations. The increase in accounts payable of $5.0
million at January 31, 1999 compared to February 1, 1998 was primarily
attributable to the increase in inventories at January 31, 1999.

         Net cash used in investing activities in fiscal 1998, fiscal 1997 and
fiscal 1996 was $27.7 million, $44.2 million and $8.1 million, respectively. Net
cash used for investment in property and equipment in fiscal 1998, fiscal 1997
and fiscal 1996 was $31.6 million, $21.0 million and $8.1 million, respectively.
Of the $31.6 million of net cash used for investment in property and equipment
in fiscal 1998, $16.1 million was used for 74 new stores opened, $5.4 million
was used for material handling equipment for the Company's new distribution
center, $2.0 million was used for leasehold improvements, furniture and fixtures
for the Company's new corporate offices as well as computer hardware and
software, $4.0 million was used for the relocation and expansion of 15 existing
stores and $3.0 million was used for the initial construction costs of 65 of the
108 stores to be opened in fiscal 1999. In addition, $1.0 million was used for:
remodeling costs, store expansions/relocations planned for fiscal 1999 and costs
of converting eleven Pacific Sunwear stores to d.e.m.o. stores. In fiscal 1998,
$12.7 million of net cash was provided by short-term investment maturities. In a
series of open market transactions during the fourth quarter of fiscal 1998, the
Company purchased and retired 667,500 shares of its common stock at an average
cost of $13.31 per share for a total cost of $8.9 million. These purchases were
made pursuant to a resolution adopted by the Board of Directors in December 1998
which authorized the Company to purchase up to 1.0 million shares of its common
stock.

         Net cash provided by financing activities in fiscal 1998, fiscal 1997
and fiscal 1996 was $1.7 million, $30.8 million and $.3 million, respectively.
In fiscal 1998 and fiscal 1997, the Company received proceeds of $1.7 million
and $.7 million, respectively, from the exercise of stock options. In fiscal
1997 the Company received net proceeds of $30.1 million from the issuance of
common stock.

         The Company has a credit facility with a bank, which expires in August
2000. The credit facility provides for a $25.0 million line of credit, which can
be used for cash advances, commercial letters of credit and shipside bonds.
Interest on cash advances under the line of credit facility is payable monthly
at the bank's prime rate (7.75 % at January 31, 1999). At January 31, 1999, the
Company had $3.0 million in letters of credit outstanding and no cash advances
outstanding. The loan agreement subjects the Company to various restrictive
covenants, including maintenance of certain financial ratios and prohibits
payment of cash dividends on common stock. At January 31, 1999, the Company was
in compliance with all of the covenants.

         The Company has minimum annual rental commitments under existing store
leases and the lease for its corporate offices and distribution center of
approximately $30.0 million in fiscal 1999 and $31.1 million in fiscal 2000 and
similar amounts thereafter.

         In fiscal 1998, the Company's average cost to build a new store across
all formats, including leasehold improvements, furniture and fixtures and
landlord allowances, was approximately $222,000. In fiscal 1998, the average
cost of expanding or relocating stores was approximately $309,000. The average
total cost to build new stores and relocate or expand stores will vary in the
future, depending on various factors, including square footage, changes in store
design, local construction costs and landlord allowances. The Company's average
initial inventory for new stores opened in fiscal 1998 was as follows:
approximately $126,000 for Pacific Sunwear stores, approximately $220,000 for
Pacific Sunwear Outlet stores and approximately $96,000 for d.e.m.o. stores. The
Company's initial inventory for new stores will vary in the future depending on
various factors, including store concept, square footage and timing of store
openings.

         During fiscal 1999, the Company plans to open approximately 108 new
stores, of which 67 will be Pacific Sunwear



                                       16

<PAGE>   17
stores, 16 will be Pacific Sunwear Outlet stores and 25 will be d.e.m.o. stores.
The Company also plans to expand or relocate 15 existing smaller Pacific Sunwear
stores. The Company estimates that capital expenditures in fiscal 1999 will
total approximately $34 million.

         The Company reviews the operating performance of its stores on an
ongoing basis to determine which stores, if any, to expand, relocate or close.
The Company closed four stores in fiscal 1998 and anticipates closing three to
five stores in fiscal 1999.

         Management believes that the Company's working capital, bank loan
agreement and cash flow from operating activities will be sufficient to meet the
Company's operating and capital expenditure requirements through the end of
fiscal 1999.

RECENT DEVELOPMENT

         In March 1999, the Company announced an agreement with Vans, Inc.
("Vans"), whereby a new limited liability company named Van Pac, LLC (the "LLC")
was created in order to produce and distribute Vans apparel. The apparel line
created by the LLC will initially be for sale in Pacific Sunwear and Vans stores
only. The Company will provide product development, design, sourcing, quality
control and inventory planning services to the LLC, while Vans will contribute
design services and license the VANS and TRIPLE CROWN trademarks and logos to
the LLC. Vans will own 51% of the LLC and the Company will own 49%. The Company
anticipates launching the new line in the summer of 1999.

NEW ACCOUNTING PRONOUNCEMENTS

         Accounting for Derivatives and Hedging Activities -- In June 1998, the
FASB issued SFAS No. 133, "Accounting for Derivatives and Hedging Activities"
(SFAS 133). SFAS 133 must be implemented by the Company in fiscal 2000. SFAS 133
is not expected to have a significant impact on the Company's consolidated
financial statements.

INFLATION

         The Company does not believe that inflation has had a material effect
on the results of operations in the recent past. There can be no assurance that
the Company's business will not be affected by inflation in the future.

SEASONALITY AND QUARTERLY RESULTS

         The Company's business is seasonal by nature, with the Christmas and
back-to-school periods historically accounting for the largest percentage of
annual net sales. The Company's first quarter historically accounts for the
smallest percentage of annual net sales. In fiscal 1998 and fiscal 1997,
excluding sales generated by new and relocated/expanded stores, the Christmas
and back-to-school periods together accounted for approximately 34% and 35%,
respectively, of the Company's annual net sales and a higher percentage of the
Company's operating income. In fiscal 1998, excluding net sales generated by new
and relocated/expanded stores, approximately 45% of the Company's annual net
sales occurred in the first half of the fiscal year and 55% in the second half.
The Company's quarterly results of operations may also fluctuate significantly
as a result of a variety of factors, including the timing of store openings; the
amount of revenue contributed by new stores; the timing and level of markdowns;
the timing of store closings, expansions and relocations; competitive factors;
and general economic conditions.

YEAR 2000 READINESS

         The Company has completed a year 2000 review of its information
technology and non-information technology systems in preparation for the year
2000.

         The Company's material merchandise, financial and store computer
software systems are provided by third-party vendors and are used with minor
modifications by the Company. The software vendors have provided updated
software versions as part of the normal periodic software upgrade process that
address the year 2000 issue. This upgrade process has been substantially
completed as of the end of fiscal 1998 and did not cost the Company additional
amounts beyond normal recurring annual software maintenance fees paid by the
Company. While the Company will incur internal staff costs as well as certain
outside consulting and other expenditures related to its year 2000 readiness
efforts, the total incremental expenses are not expected to have a material
impact on the Company's financial condition or results of operations. As of
January 31, 1999,



                                       17

<PAGE>   18
the Company had incurred less than $150,000 in expenses relating to its year
2000 readiness efforts. The source of funds for these expenses has been the
Company's working capital, and the Company anticipates that it will fund its
additional year 2000 expenses from its working capital.

         The Company's most significant software system includes purchase order
management, open order reporting, open-to- buy, receiving, distribution, basic
stock replenishment, inter-store transfers, inventory and price management,
general ledger and accounts payable functions. This system has been upgraded and
has been certified by the software vendor as year 2000 compliant. In addition,
the Company uses a recently installed materials handling system at its new
distribution center and the vendor of this system has advised the Company that
the system is year 2000 compliant.

         With regard to the Company's vendors, the Company has contacted its
significant merchandise vendors regarding their state of year 2000 readiness and
these vendors have advised the Company that they expect to be ready for the year
2000. None of these vendors accounted for more than 9% of the Company's net
sales in fiscal 1998. The Company also uses numerous third-party vendors to
provide other goods and services, as well as office, distribution center and
other supplies to the Company and its stores. The Company has contacted its
significant goods and services vendors regarding their state of year 2000
readiness and these vendors have advised the Company that they expect to be
ready for the year 2000. There is no assurance that the systems of the vendors
from whom the Company receives merchandise, goods and services will be year 2000
ready or that any failure on their part to be year 2000 ready would not have an
adverse impact on the Company if a number of such vendors fail to be year 2000
ready on a timely basis.

         The year 2000 issue presents a number of risks and uncertainties that
could impact the Company, from the failure of one or several of the Company's
significant vendors to timely fill the Company's merchandise orders to public
utility failures affecting the company's retail stores. The Company is currently
analyzing these risks and uncertainties and has begun to develop contingency
plans to address material risks related to the year 2000 issues. These
contingency plans include the following:

           January 1, 2000 falls on a Saturday, when the Company's distribution
center and corporate offices are normally closed. The contingency plans include
operating the distribution center and corporate office systems on January 1 in
order to quickly address any year 2000 issues that may arise.

         The Company's shipment of merchandise to its stores is traditionally at
a low point during the time frame surrounding the immediate beginning of the new
year due to the fact that the stores are primarily engaged in the promotional
selldown of inventories after the holiday season. The Company plans to monitor
merchandise shipments from vendors during the weeks immediately following
January 1, 2000, and survey its vendors to determine if they are encountering
year 2000 issues that may prevent them from delivering future shipments of
merchandise on a timely basis. Contingency plans include processing substitute
orders with vendors who do not have year 2000 issues.

         The Company's stores will be open for business on January 1, 2000.
Contingency plans for the Company's stores include: (i) all stores will report
to the corporate office during the morning of January 1, 2000 whether they are
open and operating normally, or if they have encountered problems, (ii) a
procedure to rank year 2000 issues reported by stores in order of importance,
using the ability of the store to conduct business and process sales as the
primary criteria, (iii) the Company's staff of information systems personnel
will be on hand and available to work on any year 2000 issues on January 1, 2000
and (iv) the use of existing manual sales processing procedures in any affected
stores until such time as any year 2000 issues are fixed.

         While the Company continues to believe the year 2000 issues described
above will not materially affect its financial position or results of
operations, it remains uncertain as to what extent, if any, the Company may be
impacted.



                                       18

<PAGE>   19
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

         This report on Form 10-K contains "forward-looking statements" within
the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. The
Company is hereby providing cautionary statements identifying important factors
that could cause the Company's actual results to differ materially from those
projected in forward-looking statements of the Company herein. Any statements
that express, or involve discussions as to expectations, beliefs, plans,
objectives, assumptions, future events or performance (often, but not always
through the use of words or phrases such as "will result" "expects to" "will
continue" "anticipates" "plans" "intends" "estimated" "projects" and "outlook")
are not historical facts and may be forward-looking and, accordingly, such
statements involve estimates, assumptions and uncertainties which could cause
actual results to differ materially from those expressed in the forward-looking
statements. Such uncertainties include, among others, the following factors:

         FLUCTUATIONS IN COMPARABLE STORE NET SALES RESULTS. The Company's
comparable store net sales results have fluctuated significantly in the past, on
a monthly, quarterly and annual basis, and are expected to continue to fluctuate
in the future. A variety of factors affect the Company's comparable store net
sales results, including changes in fashion trends, changes in the Company's
merchandise mix, calendar shifts of holiday periods, actions by competitors,
weather conditions and general economic conditions. The Company's comparable
store net sales results for any particular fiscal month, fiscal quarter or
fiscal year in the future may decrease. As a result of these or other factors
the Company's future comparable store net sales results are likely to have a
significant effect on the market price of the Company's common stock.

         RISKS OF NEW SPECIALTY STORE CONCEPT NAMED "d.e.m.o.". The Company's
ability to expand into new concepts has not been fully tested. The Company
opened the first d.e.m.o. store in April of fiscal 1998, and at the end of
fiscal 1998 operated 15 d.e.m.o. stores. Accordingly, the operation of its
d.e.m.o. stores is subject to numerous risks, including unanticipated operating
problems, lack of experience, lack of customer acceptance, new vendor
relationships and competition from existing and new retailers. There can be no
assurance that the Company's d.e.m.o. stores will achieve sales and
profitability levels that justify the Company's investment in this new retail
format. Expansion of the d.e.m.o. format also involves other risks that could
have a material adverse effect on the Company, including (i) the diversion of
management's attention from the Company's core business, (ii) difficulties with
the hiring, retention and training of key personnel for the d.e.m.o. stores,
(iii) risks associated with new vendors and (iv) difficulties with locating and
obtaining favorable store sites and negotiating acceptable lease terms.

         INTERNET SALES. The Company intends to begin selling merchandise over
the internet in the summer of 1999. The internet operations involve, among other
things, internet web site design activities, investment in new systems,
distribution center enhancements, training of personnel and hiring of additional
personnel to handle new functions. The Company's internet operations will be
subject to numerous risks, including unanticipated operating problems, reliance
on third party computer hardware and software providers, higher than expected
volumes of traffic on the web site that could lead to system failures and the
need to invest in additional computer systems to support the traffic, lack of
experience in managing the new internet business, lack of customer acceptance
and lack of experience in the fulfillment and shipping of individual orders to
customers. There can be no assurance that the internet operations will achieve
sales and profitability levels that justify the Company's investment therein.
The internet operations also involve other risks that could have a material
adverse effect on the Company, including (i) the diversion of management's
attention from the Company's core business, (ii) the failure to reach
profitability within the foreseeable future, (iii) difficulties with hiring,
retention and training of key personnel to conduct the Company's internet
operations, (iv) diversion of sales from Pacific Sunwear stores, (v) rapid
technological change, (vi) liability for online content and (vii) risks related
to the failure of the computer systems that operate the web site and its related
support systems, including computer viruses, telecommunication failures and
electronic break-ins and similar disruptions. In addition, the internet
operations involves risks which are beyond the Company's control that could have
a material adverse effect on the Company, including (i) price competition
involving the items the Company intends to sell, (ii) the entry of the Company's
vendors into the internet business, in direct competition with the Company,
(iii) the level of merchandise returns experienced by the Company, (iv)
governmental regulation, (v) online security breaches, (vi) credit card fraud,
(vii) general economic conditions and economic conditions specific to the
internet, online commerce and the apparel industry and (viii) competition from
other internet web sites that may have significantly more capital resources and
experience in internet sales than the Company.

         EXPANSION AND MANAGEMENT OF GROWTH. Pacific Sunwear's continued growth
depends to a significant degree on its ability to open and operate stores on a
profitable basis and on management's ability to manage the Company's planned



                                       19

<PAGE>   20
expansion. During fiscal 1999, the Company plans to open approximately 108 new
stores, of which 67 will be Pacific Sunwear stores, 16 will be Pacific Sunwear
Outlet stores and 25 will be d.e.m.o. stores. The Company's planned expansion is
dependant upon a number of factors, including the ability of the Company to
locate and obtain favorable store sites, negotiate acceptable lease terms,
obtain adequate merchandise supply and hire and train qualified management level
and other employees. Factors beyond the Company's control may also affect the
Company's ability to expand, including general economic and business conditions
affecting consumer spending. There can be no assurance that the Company will
achieve its planned expansion or that such expansion will be profitable. As the
Company's operations continue to grow, there could be increasing strain on the
Company's resources, and the Company could experience difficulties relating to a
variety of operational matters, including hiring, training and managing an
increasing number of employees, having sufficient working capital, bank line of
credit and cash flow from operating activities for the Company's future
operating and capital requirements, obtaining sufficient quantities of
merchandise from its preferred vendors, obtaining sufficient materials and
contract manufacturers to produce its private brand products and enhancing its
distribution, financial and operating systems. There can be no assurance that
the Company will be able to manage its growth effectively. Any failure to manage
growth could have a material adverse effect on the Company's business, financial
condition and results of operations.

         MERCHANDISING/FASHION SENSITIVITY. The Company's success is largely
dependent upon its ability to gauge the fashion tastes of its customers and to
provide merchandise that satisfies customer demand in a timely manner. The
Company's failure to anticipate, identify or react appropriately in a timely
manner to changes in fashion trends could have a material adverse effect on the
Company's business, financial condition and results of operations. Misjudgements
or unanticipated fashion misjudgements could have a material adverse effect on
the Company's image with its customers. See Item 1. "Business - Merchandising."

         PRIVATE BRAND MERCHANDISE. Sales from private brand merchandise
accounted for approximately 36% and 38% of net sales in fiscal 1998 and fiscal
1997, respectively. The Company intends to increase the percentage of net sales
in private brands in the future, although there can be no assurance that the
Company will be able to achieve increases in private brand sales as a percentage
of net sales. Because the Company's private brand merchandise generally carries
higher merchandise margins than its other merchandise, the Company's failure to
anticipate, identify and react in a timely manner to fashion trends with its
private brand merchandise, particularly if the percentage of net sales derived
from private brand merchandise increases, may have a material adverse affect on
the Company's business, financial condition and results of operations. See Item
1. "Business - Merchandising."

         RELIANCE ON KEY PERSONNEL. The continued success of the Company is
dependant to a significant degree upon the services of its key personnel,
particularly its executive officers. The loss of the services of any member of
senior management could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's success
in the future will also be dependent upon the Company's ability to attract and
retain qualified personnel. The Company's inability to attract and retain
qualified personnel in the future could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Executive Officers of the Registrant."

         DEPENDENCE ON SINGLE DISTRIBUTION FACILITY. The Company's distribution
functions for all of its stores are handled from a single facility in Anaheim,
California. In addition, the Company intends initially to process shipments
related to sales of merchandise over the internet from the same facility. Any
significant interruption in the operation of the distribution facility due to
natural disasters, accidents, system failures arising from the year 2000 issue
or otherwise, would have a material adverse effect on the Company's business,
financial condition and results of operations.

         YEAR 2000 READINESS AND CONTINGENCY PLAN. There can be no assurance
that a failure in the Company's information and non-information technology
systems due to the year 2000 will not occur. Any significant failure due to the
year 2000 could have a material adverse effect on the Company's business,
financial condition and results of operations. Examples of failures due to the
year 2000 include, among others: (i) failures of one or several of the Company's
significant vendors to timely fill the Company's merchandise orders, (ii) public
utility failures that prevent some of the Company's stores from opening for
normal business hours, the Company's distribution center from handling
distribution functions, and/or the Company's corporate office from conducting
normal business, (iii) failures in the banking system, including the processing
of charge card, check and debit card transactions and (iv) other unforeseen
failures in the national infrastructure that the Company depends upon to conduct
its business.

         VOLATILITY OF STOCK PRICE. The market price of the Company's Common
Stock has fluctuated substantially in the past and there can be no assurance
that the market price of the Common Stock will not continue to fluctuate
significantly. Future



                                       20

<PAGE>   21
announcements or management discussions concerning the Company or its
competitors, internet sales results, d.e.m.o. sales and profitability results,
quarterly variations in operating results or comparable store net sales, changes
in earnings estimates by analysts or changes in accounting policies, among other
factors, could cause the market price of the common stock to fluctuate
substantially. For example, in December 1998 the Company's stock price decreased
dramatically after a decrease in the Company's comparable store net sales for
the month of November 1998 was reported. In addition, stock markets have
experienced extreme price and volume volatility in recent years. This volatility
has had a substantial effect on the market prices of securities of many small
public companies for reason frequently unrelated to the operating performance of
the specific companies. See Item 5. "Market for Registrant's Common Equity and
Related Stockholder Matters."


                                  *************

         The Company cautions that the risk factors described above could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Further, management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.

         ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risk related to changes in interest
rates. A discussion of the Company's accounting policies for financial
instruments and further disclosures relating to financial instruments is
included in the Summary of Significant Accounting Policies and Nature of
Business in the Notes to Consolidated Financial Statements. The Company monitors
the risks associated with interest rates and financial instrument positions.

         ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information with respect to this item is set forth in "Index to
Financial Statements."

         ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                 FINANCIAL DISCLOSURE.

                  None.



                                       21

<PAGE>   22
                                    PART III

         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

                  Information with respect to this item is incorporated by
reference from the Registrant's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the end of the registrant's fiscal
year.

         ITEM 11. EXECUTIVE COMPENSATION.

                  Information with respect to this item is incorporated by
reference from the Registrant's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the end of the registrant's fiscal
year.

         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

                  Information with respect to this item is incorporated by
reference from the Registrant's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the end of the Registrant's fiscal
year.

         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  Information with respect to this item is incorporated by
reference from the Registrant's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the end of the Registrant's fiscal
year.

                                     PART IV

         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON 
                  FORM 8-K.

         (a)      1.   The financial statements listed in the "Index to
                       Financial Statements" at page F-1 are filed as a part
                       of this report.

                  2.   Financial statement schedules are omitted because
                       they are not applicable or the required information
                       is shown in the financial statements or notes
                       thereto.

                  3.   Exhibits included or incorporated herein: See Index
                       to Exhibits.

         (b)           Reports on Form 8-K.
                  1.   On December 24, 1998, the Company filed a Form 8-K
                       with the Securities and Exchange Commission reporting
                       that the Company adopted a Shareholders' Rights Plan.



                                       22

<PAGE>   23
                                   SIGNATURES

                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on April 8, 1999 on its behalf by the undersigned, thereunto duly
authorized.

                                       PACIFIC SUNWEAR OF CALIFORNIA, INC.


                                       By: /s/ GREG H. WEAVER
                                           -------------------------------------
                                           Greg H. Weaver
                                           Chairman of the Board and
                                           Chief Executive Officer

                  Each person whose signature appears below hereby authorizes
Greg H. Weaver and Carl W. Womack or either of them, as attorneys-in-fact to
sign on his behalf, individually, and in each capacity stated below and to file
all amendments and/or supplements to the Annual Report on Form 10-K.

                  Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
               SIGNATURE                                TITLE                                        DATE
               ---------                                -----                                        ----
<S>                                         <C>                                             <C>
          /s/ GREG H. WEAVER                Chairman of the Board                           April 8, 1999
--------------------------------------      and Chief Executive Officer
              Greg H. Weaver                                           

         /s/ CARL W. WOMACK                 Sr. Vice President and Chief Financial          April 8, 1999
--------------------------------------      Officer (Principal Financial and Accounting
             Carl W. Womack                 Officer)                                   
                                            

         /s/ JULIUS JENSEN III              Director                                        April 8, 1999
--------------------------------------
             Julius Jensen III

        /s/ PEARSON C. CUMMIN III           Director                                        April 8, 1999
--------------------------------------
            Pearson C. Cummin III

        /s/ PETER L. HARRIS                 Director                                        April 8, 1999
--------------------------------------
            Peter L. Harris

        /s/ SALLY FRAME KASAKS              Director                                        April 8, 1999
--------------------------------------
            Sally Frame Kasaks

        /s/ RICHARD LYONS                   Director                                        April 8, 1999
---------------------------------------
            Richard Lyons
</TABLE>



                                       23

<PAGE>   24
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998 AND FEBRUARY 2, 1997:

CONSOLIDATED FINANCIAL STATEMENTS:


<TABLE>
<S>                                                                                   <C>
  Independent auditors' report                                                        F-2

  Consolidated Balance sheets as of January 31, 1999 and February 1, 1998             F-3

  Consolidated Statements of income and Comprehensive income for each of the
     three fiscal years in the period ended January 31, 1999                          F-4

  Consolidated Statements of shareholders' equity for each of three fiscal years
     in the period ended January 31, 1999                                             F-5

  Consolidated Statements of cash flows for each of the three fiscal years
     in the period ended January 31, 1999                                             F-6

  Notes to consolidated financial statements                                          F-7
</TABLE>



                                       F-1

<PAGE>   25
                          INDEPENDENT AUDITORS' REPORT




The Board of Directors and Shareholders
Pacific Sunwear of California, Inc.
Anaheim, California

We have audited the accompanying consolidated balance sheets of Pacific Sunwear
of California, Inc. and its wholly owned subsidiaries as of January 31, 1999 and
February 1, 1998, and the related statements of income and comprehensive income,
shareholders' equity, and cash flows for each of the three fiscal years in the
period ended January 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pacific Sunwear of California, Inc. as of
January 31, 1999 and February 1, 1998, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended January 31,
1999, in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Costa Mesa, California
March 12, 1999



                                       F-2

<PAGE>   26
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                                JANUARY 31,          FEBRUARY 1,
                                                                                    1999                 1998
                                                                               -------------        -------------
<S>                                                                            <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents (Note 1)                                           $  19,031,738        $  14,781,566
  Short-term investments (Note 1)                                                         --           12,742,666
  Accounts receivable                                                                899,179            1,009,839
  Merchandise inventories                                                         42,469,829           32,122,341
  Prepaid expenses, includes $3,620,435 and $2,832,739 of prepaid
    rent, respectively                                                             5,044,941            4,364,537
  Prepaid income tax (Note 4)                                                        713,402                   --
  Deferred taxes (Note 4)                                                          1,944,275            1,916,935
                                                                               -------------        -------------
     Total current assets                                                         70,103,364           66,937,884
PROPERTY AND EQUIPMENT (NOTE 1):
  Leasehold improvements                                                          47,877,157           36,327,054
  Furniture, fixtures and equipment                                               45,819,759           29,416,189
                                                                               -------------        -------------
                                                                                  93,696,916           65,743,243
  Less accumulated depreciation and amortization                                 (26,773,496)         (20,342,749)
                                                                               -------------        -------------
     Net property and equipment                                                   66,923,420           45,400,494
OTHER ASSETS:
  Goodwill, net of accumulated amortization of $758,180 and $440,297,
     respectively (Note 1)                                                         7,605,563            7,923,446
  Deferred compensation and other assets (Notes 6 and 8)                           3,142,504            1,404,234
                                                                               -------------        -------------
     Total other assets                                                           10,748,067            9,327,680
                                                                               -------------        -------------
              Total assets                                                     $ 147,774,851        $ 121,666,058
                                                                               =============        =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                             $  13,867,906        $   8,916,915
  Accrued liabilities (Note 7)                                                     8,690,783            8,834,161
  Income taxes payable (Note 4)                                                           --            1,068,276
                                                                               -------------        -------------
     Total current liabilities                                                    22,558,689           18,819,352
DEFERRED COMPENSATION (Note 6)                                                     2,826,531            1,114,374
OTHER LONG-TERM LIABILITIES                                                           28,316                   --
DEFERRED RENT                                                                      4,689,772            3,746,246
DEFERRED TAXES (Note 4)                                                              974,522            1,423,029
COMMITMENTS AND CONTINGENCIES (Note 5)


SHAREHOLDERS' EQUITY (Notes 3 and 6):
 Preferred stock, par value $.01; authorized, 5,000,000; none issued and
   outstanding 
 Common stock, par value $.01; authorized 50,625,000 shares;
   issued and outstanding, 20,433,852 and 20,617,337 shares,
   respectively (Note 1)                                                             204,339              206,174
 Additional paid-in capital                                                       59,902,375           63,271,085
 Retained earnings                                                                56,590,307           33,085,798
                                                                               -------------        -------------
     Total shareholders' equity                                                  116,697,021           96,563,057
                                                                               -------------        -------------
                   Total liabilities and shareholders' equity                  $ 147,774,851        $ 121,666,058
                                                                               =============        =============
</TABLE>



                 See notes to consolidated financial statements



                                       F-3

<PAGE>   27
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


<TABLE>
<CAPTION>
                                                                          FISCAL YEAR ENDED
                                                            --------------------------------------------------
                                                             JANUARY 31,        FEBRUARY 1,        FEBRUARY 2,
                                                                1999               1998               1997
                                                            ------------       ------------       ------------
<S>                                                         <C>                <C>                <C>         
Net sales                                                   $321,125,009       $227,129,848       $155,261,558
Cost of goods sold, including buying, distribution
  and occupancy costs                                        212,859,474        150,219,301        106,126,306
                                                            ------------       ------------       ------------
Gross margin                                                 108,265,535         76,910,547         49,135,252
Selling, general and administrative expenses                  70,369,424         51,093,091         37,126,318
                                                            ------------       ------------       ------------
Operating income                                              37,896,111         25,817,456         12,008,934
Interest income                                                  977,398          1,248,003            236,889
                                                            ------------       ------------       ------------
Income before income tax expense                              38,873,509         27,065,459         12,245,823
Income tax expense (Note 4)                                   15,369,000         10,707,000          4,834,000
                                                            ------------       ------------       ------------
Net income                                                  $ 23,504,509       $ 16,358,459       $  7,411,823
                                                            ============       ============       ============
Comprehensive income (Note 1)                               $ 23,504,509       $ 16,358,459       $  7,411,823
                                                            ============       ============       ============
Net income per share, basic (Note 1)                        $       1.13       $       0.83       $       0.41
                                                            ============       ============       ============
Net income per share, diluted (Note 1)                      $       1.09       $       0.80       $       0.40
                                                            ============       ============       ============
Weighted average shares outstanding, basic (Note 1)           20,775,610         19,699,602         18,002,672
                                                            ============       ============       ============
Weighted average shares outstanding, diluted (Note 1)         21,488,659         20,429,589         18,681,926
                                                            ============       ============       ============
</TABLE>



                 See notes to consolidated financial statements



                                       F-4

<PAGE>   28
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                       COMMON        COMMON        ADDITIONAL
                                                       STOCK         STOCK          PAID-IN          RETAINED
                                                       SHARES        AMOUNT         CAPITAL          EARNINGS         TOTAL
                                                     -----------    ---------     ------------     -----------    -------------
<S>                                                  <C>            <C>           <C>              <C>            <C>
BALANCE, FEBRUARY 4, 1996                            17,888,079     $ 178,881     $ 28,814,990     $ 9,315,516    $  38,309,387
  Exercise of stock options and restricted stock
    grant (Note 6)                                      586,475         5,865        1,072,220              --        1,078,085
  Cancellation of restricted stock
    surrendered (Note 6)                               (267,204)       (2,672)           1,484              --           (1,188)
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                           (108)           (1)          (1,692)             --           (1,693)
  Tax benefits related to exercise of stock
    options (Note 6)                                         --            --          749,628              --          749,628
  Net income                                                 --            --               --       7,411,823        7,411,823
                                                    -----------     ---------     ------------     -----------    -------------
BALANCE, FEBRUARY 2, 1997                            18,207,242       182,073       30,636,630      16,727,339       47,546,042
  Net proceeds from issuance of common
    stock                                             1,960,875        19,609       30,065,464              --       30,085,073
  Exercise of stock options and restricted stock
    grant (Note 6)                                      449,300         4,493          683,989              --          688,482
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                            (80)           (1)          (2,186)             --           (2,187)
  Tax benefits related to exercise of stock
    options (Note 6)                                         --            --        1,887,188              --        1,887,188
  Net income                                                 --            --               --      16,358,459       16,358,459
                                                    -----------     ---------     ------------     -----------    -------------
BALANCE, FEBRUARY 1, 1998                            20,617,337       206,174       63,271,085      33,085,798       96,563,057
  Exercise of stock options and shares sold
    under employee stock purchase plan
    (Note 6)                                            484,968         4,850        1,729,354              --        1,734,204
  Cancellation of fractional shares due to
    3-for-2 stock split (Note 1)                           (953)          (10)         (28,918)             --          (28,928)
  Repurchase and retirement of common stock
    (Note 3)                                           (667,500)       (6,675)      (8,877,743)             --       (8,884,418)
  Tax benefits related to exercise of stock
    options (Note 6)                                         --            --        3,808,597              --        3,808,597
  Net income                                                 --            --               --      23,504,509       23,504,509
                                                    -----------     ---------     ------------     -----------    -------------
BALANCE, JANUARY 31, 1999                            20,433,852     $ 204,339     $ 59,902,375     $56,590,307    $ 116,697,021
                                                    ===========     =========     ============     ===========    =============
</TABLE>



                 See notes to consolidated financial statements



                                       F-5

<PAGE>   29
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                  FISCAL YEAR ENDED
                                                                  ------------------------------------------------
                                                                   JANUARY 31,       FEBRUARY 1,      FEBRUARY 2,
                                                                      1999              1998              1997
                                                                  ------------      ------------      ------------
<S>                                                               <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                      $ 23,504,509      $ 16,358,459      $  7,411,823
  Adjustments to reconcile net income to net cash provided by
    operating activities:
    Depreciation and amortization                                   10,448,317         6,891,981         5,273,060
    Change in operating assets and liabilities, net of effect
      of acquisition:
     Accounts receivable                                               110,660          (426,028)         (260,512)
     Merchandise inventories                                       (10,347,488)      (11,087,295)       (4,351,568)
     Prepaid expenses                                                 (680,404)       (1,133,377)         (764,990)
     Deferred compensation and other assets                         (1,788,273)         (652,050)         (158,279)
     Accounts payable                                                4,950,991         2,230,354         1,418,065
     Accrued liabilities                                              (143,378)        2,798,472         3,288,275
     Income taxes and deferred taxes                                 1,551,072         1,894,569         1,022,326
     Other liabilities                                                  28,316                --                --
     Deferred rent                                                     943,526           606,759           415,106
     Deferred compensation                                           1,712,157           743,317           185,709
                                                                  ------------      ------------      ------------
       Net cash provided by operating activities                    30,290,005        18,225,161        13,479,015

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments                                       --       (27,590,049)               --
  Short-term investment maturities                                  12,742,666        14,847,383                --
  Acquisition, net of cash acquired                                         --       (10,414,634)               --
  Repurchase and retirement of common stock                         (8,884,418)               --                --
  Investment in property and equipment                             (31,603,357)      (21,020,289)       (8,126,185)
                                                                  ------------      ------------      ------------
       Net cash used in investing activities                       (27,745,109)      (44,177,589)       (8,126,185)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments under loan agreement and capital lease
     obligations                                                            --                --          (781,250)
  Cash paid in lieu of fractional shares due to 3-for-2
     stock split                                                       (28,928)           (2,187)           (1,693)
  Proceeds from exercise of stock options                            1,734,204           688,482         1,076,897
  Net proceeds from issuance of common stock                                --        30,085,073                --
                                                                  ------------      ------------      ------------
        Net cash provided by financing activities                    1,705,276        30,771,368           293,954
NET INCREASE IN CASH AND CASH EQUIVALENTS:                           4,250,172         4,818,940         5,646,784
CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR                 14,781,566         9,962,626         4,315,842
                                                                  ------------      ------------      ------------
CASH AND CASH EQUIVALENTS, end of fiscal year                     $ 19,031,738      $ 14,781,566      $  9,962,626
                                                                  ============      ============      ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                                      $         --      $      2,381      $     11,752
    Income taxes                                                  $ 13,817,928      $  8,812,430      $  3,811,674
------------------------------------------------------------------------------------------------------------------
</TABLE>


Noncash transaction: During the fiscal years ended January 31, 1999, February 1,
1998 and February 2, 1997, the Company recorded an increase to additional
paid-in capital of $3,808,597, $1,887,188 and $749,628, respectively, related to
tax benefits associated with the exercise of nonqualified stock options.



                 See notes to consolidated financial statements



                                       F-6

<PAGE>   30
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         FOR THE FISCAL YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998
                              AND FEBRUARY 2, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS

     Nature of Business -- Pacific Sunwear of California, Inc. and its
wholly-owned subsidiaries (the "Company") operate a nationwide, primarily
mall-based, chain of retail stores specializing in casual apparel, footwear and
related accessories catering to teenagers and young adults.

     The Company's fiscal year is a 52- or 53-week period ending near January
31. Fiscal 1998 was a 52-week period ended January 31, 1999. Fiscal 1997 was a
52-week period ended February 1, 1998. Fiscal 1996 was a 52-week period ended
February 2, 1997.

     Principles of Consolidation -- The consolidated financial statements 
include the accounts of Pacific Sunwear of California, Inc. and Pacific Sunwear
Stores Corp., its wholly-owned subsidiary. All significant intercompany
transactions have been eliminated in consolidation.

     Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported expenses during the reported period.
Actual results could differ from these estimates.

     Fair Value of Financial Instruments -- Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments," requires management to disclose the estimated fair value of
certain assets and liabilities defined by SFAS No. 107 as financial instruments.
Financial instruments are generally defined by SFAS No. 107 as cash, evidence of
ownership interest in an entity, or a contractual obligation that both conveys
to one entity a right to receive cash or other financial instruments from
another entity and imposes on the other entity the obligation to deliver cash or
other financial instruments to the first entity. At January 31, 1999, management
believes that the carrying amounts of cash, receivables and payables approximate
fair value because of the short maturity of these financial instruments.

     Short-term Investments -- The Company accounts for investments pursuant to
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." At February 1, 1998, the Company's investments had been categorized
as "held to maturity" and, as a result, are stated at cost. Short-term
investments consisted principally of state and municipal obligations.
There were no short-term investments as of January 31, 1999.

     Merchandise Inventories -- Merchandise inventories are stated at the lower
of cost (first-in, first-out method) or market.

     Property and Equipment -- Leasehold improvements and furniture, fixtures
and equipment are stated at cost. Amortization of leasehold improvements is
computed on the straight-line method over the life of the lease (generally 10
years). Depreciation on furniture, fixtures and equipment is computed on the
straight-line method over five years.

     Intangible Assets -- The intangible assets consist of the excess of cost
over net assets acquired (goodwill), of $1.1 million, which arose from the
acquisition of four stores in 1986 and is being amortized on a straight-line
method over 40 years. In addition, in fiscal 1997 the Company acquired 15 retail
stores which resulted in the recording of $7.3 million of goodwill and $.3
million for non-competition agreements, which are being amortized over 25 years
and 5 years, respectively.

     The Company evaluates the recoverability of its goodwill at each balance
sheet date. The recoverability of goodwill is determined by comparing the
carrying value of the goodwill to the estimated operating income of the related
entity on an undiscounted cash flow basis. Any impairment is recorded at the
date of determination.

     Income Taxes -- The Company accounts for income taxes under the provisions
of SFAS No. 109, "Accounting for Income Taxes." Deferred taxes on income result
from temporary differences between the reporting of income for financial
statements and tax reporting purposes.

     Deferred Rent -- The Company's policy is to average any defined rental
escalations over the term of the related lease in order to provide level
recognition of rent expense.



                                       F-7

<PAGE>   31

     Statements of Cash Flows -- For purposes of the statements of cash flows,
the Company considers all highly-liquid debt instruments, if any, purchased with
a maturity of three months or less to be cash equivalents.

     Stock Split -- On June 8, 1998, the Company effected a three-for-two stock
split. Shareholders' equity has been restated to give retroactive recognition to
the stock split in prior periods by reclassifying the par value ($68,725) of the
additional shares arising from the split from additional paid-in capital to
common stock.

     Net Income per Share -- The Company adopted SFAS No. 128, "Earnings Per
Share," beginning with the Company's fourth quarter of fiscal 1997. All prior
period earnings per common share data have been restated to conform to the
provisions of this statement. Basic earnings per common share is computed using
the weighted average number of shares outstanding. Diluted earnings per common
share is computed using the weighted average number of shares outstanding
adjusted for the incremental shares attributed to outstanding options to
purchase common stock. Incremental shares of 713,049, 729,987 and 679,254 in
fiscal 1998, fiscal 1997 and fiscal 1996, respectively, were used in the
calculation of diluted earnings per common share. Options to purchase 87,046,
134,724 and 60,773 shares of common stock in fiscal 1998, fiscal 1997 and fiscal
1996, respectively, were not included in the computation of diluted earnings per
common share because the option exercise price was greater than the average
market price of the common stock.

     Stock-Based Compensation -- The Company accounts for stock-based 
compensation in accordance with Accounting Principles Board ("APB") Opinion No. 
25. See Note 6 for the pro-forma disclosure requirements of SFAS No. 123, 
"Accounting for Stock Based Compensation."

     Comprehensive Income -- The Company adopted SFAS No. 130, "Reporting
Comprehensive Income", in the first quarter 1998. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income. Components of
comprehensive income include net earnings (loss), foreign currency translation
adjustments and gains/losses associated with investments available for sale. The
adoption of SFAS No. 130 required no additional disclosure for the Company and
did not have any effect on the Company's financial position or results of
operations.

     Accounting for Derivatives and Hedging Activities -- In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities". SFAS No. 133 must be implemented by the
Company in fiscal 1999. SFAS No. 133 is not expected to have a significant
impact on the Company's consolidated financial statements.

     Segment Information -- The Company operates in one principal business
segment domestically.

     Merchandise Risk -- The Company's success is largely dependent upon its
ability to gauge the fashion tastes of its customers and provide merchandise
that satisfies customer demand. Any inability to provide appropriate merchandise
in sufficient quantities in a timely manner could have a material adverse effect
on the Company's business, operating results and financial condition.

2. CREDIT FACILITY

     The Company has a credit facility with a bank, which expires in August
2000. The credit facility provides for a $25.0 million line of credit, which can
be used for cash advances, commercial letters of credit and shipside bonds.
Interest on cash advances under the line of credit facility is payable monthly
at the bank's prime rate (7.75 % at January 31, 1999). At January 31, 1999, the
Company had $3.0 million in letters of credit outstanding and no cash advances
outstanding. The loan agreement subjects the Company to various restrictive
covenants, including maintenance of certain financial ratios and prohibits
payment of cash dividends on common stock. At January 31, 1999, the Company was
in compliance with all of its covenants.



                                       F-8

<PAGE>   32
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

          FOR THE FISCAL YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998
                              AND FEBRUARY 2, 1997

3. COMMON STOCK

     Common Stock Purchase and Retirement -- In a series of open market
transactions during the fourth quarter of fiscal 1998, the Company repurchased
667,500 shares of its common stock at an average cost of $13.31 per share. These
purchases, aggregating $8,884,418, were made pursuant to a resolution adopted by
the Board of Directors in December 1998 which authorized the Company to purchase
up to 1.0 million shares of common stock.

     Stock Splits -- During each of the fiscal years ended February 2, 1997,
February 1, 1998 and January 31, 1999 the Company effected a three-for-two stock
split. Shareholders' equity has been restated to give retroactive recognition to
the stock splits in prior periods by reclassifying the par value of the
additional shares arising from the split from additional paid-in capital to
common stock. Additionally, all share and per share amounts have been restated
to give effect to the stock splits.

     Sale of Common Stock -- During fiscal 1997 the Company issued an aggregate
of 1,960,875 shares of its common stock in a follow-on stock offering. The sale
of shares yielded net proceeds to the Company, after deducting expenses
associated with the offering, of $30.1 million.

     Shareholder Rights Plan -- In December 1998, the Board of Directors 
approved the adoption of a Shareholder Rights Plan ("the Rights Plan.") The 
Rights Plan provides for the distribution to the Company's shareholders of one 
preferred stock purchase "Right" for each outstanding share of the Company's 
common stock. The Rights have an exercise price of $75 per Right, subject to 
subsequent adjustment. Initially, the Rights will trade with the Company's 
common stock, and will not be exercisable until the occurrence of certain 
takeover-related events, as defined. The Rights Plan provides that if a person 
or group acquires more than 15% of the Company's stock without prior approval 
of the Board of Directors, holders of the Rights will be entitled to purchase 
the Company's stock at half of market value. The Rights Plan also provides that 
if the Company is acquired in a merger or other business combination after a 
person or group acquires more than 15% of the Company's stock without prior 
approval of the Board of Directors, holders of the Rights will be entitled to 
purchase the acquirer's stock at half of market value. The Rights were 
distributed to holders of the Company's common stock of record on December 29, 
1998, as a dividend, and will expire, unless earlier redeemed, on December 29, 
2008.

4. INCOME TAXES

     The components of the income tax expense are as follows:


<TABLE>
<CAPTION>
                                           FISCAL YEAR ENDED
                           -----------------------------------------------
                            JANUARY 31,        FEBRUARY 1,      FEBRUARY 2,
                              1999               1998              1997
                           ------------      ------------      -----------
<S>                        <C>               <C>               <C>
Current income taxes:
Federal                    $ 13,485,816      $  9,082,864      $ 3,602,278
State                         2,359,031         2,215,772          959,621
                           ------------      ------------      -----------
                             15,844,847        11,298,636        4,561,899
Deferred income taxes:
Federal                        (453,831)         (586,544)         272,196
State                           (22,016)           (5,092)             (95)
                           ------------      ------------      -----------
                               (475,847)         (591,636)         272,101
                           ------------      ------------      -----------
                           $ 15,369,000      $ 10,707,000      $ 4,834,000
                           ============      ============      ===========
</TABLE>

                 See notes to consolidated financial statements


                                       F-9

<PAGE>   33
     A reconciliation of the income tax expense to the amount of income tax
     expense that would result from applying the federal statutory rate to
     income before income taxes is as follows:

<TABLE>
<CAPTION>
                                                               FISCAL YEAR ENDED
                                                 ---------------------------------------------
                                                  JANUARY 31,     FEBRUARY 1,      February 2,
                                                    1999             1998             1997
                                                 -----------     ------------      -----------
<S>                                              <C>             <C>               <C>        
Provision for income taxes at statutory rate     $13,606,000     $  9,473,000      $ 4,286,000
State income taxes, net of federal income
  tax benefit                                      1,519,000        1,437,000          624,000
Other                                                244,000         (203,000)         (76,000)
                                                 -----------     ------------      -----------
                                                 $15,369,000     $ 10,707,000      $ 4,834,000
                                                 ===========     ============      ===========
</TABLE>

     At January 31, 1999 and February 1, 1998, the Company's current net
deferred tax asset was $1,944,275 and $1,916,935, respectively, and long-term
net deferred tax liability was $974,522 and $1,423,029, respectively. The major
components of the Company's net deferred tax asset of $969,753 and $493,906 at
January 31, 1999 and February 1, 1998, respectively, are as follows:


<TABLE>
<CAPTION>
                                                              JANUARY 31,      FEBRUARY 1,
                                                                 1999            1998
                                                             -----------      -----------
<S>                                                          <C>              <C>
Depreciation                                                 $(4,015,178)     $(3,623,347)
Alternative minimum tax carryforwards                                 --           49,615
Deferred rent                                                  1,922,807        1,616,131
Reserve for store expansion/relocation and closing costs         556,757          931,834
State income taxes                                               115,541          196,813
Inventory cost capitalization                                  1,024,097          589,329
Deferred compensation                                          1,158,878          480,741
Other                                                            206,851          252,790
                                                             -----------      -----------
                                                             $   969,753      $   493,906
                                                             ===========      ===========
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

     Operating Leases -- The Company leases its retail stores, corporate offices
and distribution facilities and certain equipment under operating lease
agreements expiring at various dates through 2014. Substantially all of the
leases require the Company to pay maintenance, insurance, property taxes and
percentage rent ranging from 5% to 7% based on sales volumes over certain
minimum sales levels.

   Minimum future annual rental commitments under noncancellable leases are as
follows:

 Fiscal year ending:

<TABLE>
<S>                                                        <C>         
         January 30, 2000                                  $ 30,002,910
         January 28, 2001                                    31,147,155
         February 3, 2002                                    30,841,337
         February 2, 2003                                    30,666,106
         February 1, 2004                                    29,878,628
         Thereafter                                         123,136,631
                                                           ------------
                                                           $275,672,767
                                                           ============
</TABLE>

     Rental expense, including common area maintenance, was $39,094,115,
$27,533,077 and $20,783,388 of which $759,224, $377,895 and $280,002 was paid as
percentage rent based on sales volume for the fiscal years ended January 31,
1999, February 1, 1998 and February 2, 1997, respectively.



                                      F-10

<PAGE>   34
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

          FOR THE FISCAL YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998
                              AND FEBRUARY 2, 1997

     Letters of Credit - The Company was contingently liable for $3.0 million in
open letters of credit with foreign suppliers at January 31, 1999.

     Litigation - The Company is involved from time to time in litigation
incidental to its business. Management believes that the outcome of current
litigation will not have a material adverse effect upon the results of
operations or financial condition of the Company.

6. STOCK OPTION AND RETIREMENT PLANS

     Under the Company's stock option plans, incentive and nonqualified options
have been granted to employees, directors and consultants to purchase common
stock at prices equal to the fair value of the Company's shares at the grant
dates.

     At January 31, 1999, outstanding incentive and nonqualified options had
exercise prices ranging from $.17 to $37.88 per share, with an average exercise
price of $13.44, and generally begin vesting one year after the grant date. On
the initial vesting date, 25% of the options vest and, thereafter, options
generally continue to vest at 2.08% each calendar month. The options generally
expire ten years from the date of grant or 90 days after employment or services
are terminated.

     At January 31, 1999, incentive and nonqualified options to purchase
2,132,074 shares were outstanding. At January 31, 1999, 299,578 shares were
available for future grant under the Company's stock option plans. During the
years ended January 31, 1999 and February 1, 1998, the Company recognized tax
benefits of $3,808,597 and $1,887,188, respectively, resulting from the exercise
of certain nonqualified stock options. Stock option (incentive and nonqualified)
activity for the three years ended January 31, 1999 was as follows:


<TABLE>
<CAPTION>
                                                                              STOCK OPTIONS
                                                              ---------------------------------------------
                                                              NUMBER OF SHARES        PRICE RANGE PER SHARE
                                                              ----------------        ---------------------
<S>                                                           <C>                      <C>
Balance at February 4, 1996                                      1,508,961             $0.17 to $ 5.15
  Options granted (weighted average fair
       value of $3.75)                                           1,103,625              2.26 to  10.39
  Options canceled                                                (197,112)             0.54 to   4.45
  Options exercised                                               (586,475)             0.17 to   4.97
                                                                 ---------
Balance at February 2, 1997                                      1,828,999              0.17 to  10.39
  Options granted (weighted average fair
       value of $9.65)                                             717,747             11.67 to  21.71
  Options canceled                                                 (98,646)             1.93 to  20.28
  Options exercised                                               (322,749)             0.17 to   9.28
                                                                 ---------
Balance at February 1, 1998                                      2,125,351              0.17 to  21.71
  Options granted (weighted average fair
       value of $17.61)                                            543,750             13.69 to  37.88
  Options canceled                                                 (69,652)             2.24 to  32.13
  Options exercised                                               (467,375)             0.17 to  18.71
                                                                 ---------
Balance at January 31, 1999                                       2,132,074            $0.17 to $37.88
                                                                 ==========

</TABLE>

     The following is a summary of the weighted average exercise prices for
activity during the year ended January 31, 1999:



                                      F-11

<PAGE>   35
<TABLE>
<CAPTION>
                                                                  Weighted
                                                                  Average
                                                    Shares      Exercise Price
                                                  ---------      ----------
<S>                                               <C>            <C>
         Beginning Outstanding                    2,125,351      $     8.56
            Options granted                         543,750           24.01
            Options exercised                      (467,375)           3.11
            Options canceled                        (69,652)          16.29
                                                  ---------
         Ending Outstanding                       2,132,074      $    13.44
                                                  =========
         Exercisable as of January 31, 1999         801,483      $     8.17
</TABLE>

     Additional information regarding options outstanding as of January 31, 1999
is as follows:


<TABLE>
<CAPTION>
                                        Options Outstanding                                  Options Exercisable
                       ---------------------------------------------------------       --------------------------------
                          Number            Weighted                                     Number
   Range of            Outstanding           Average                Weighted           Exercisable           Weighted
   Exercise               as of              Remaining               Average              as of              Average
    Prices             Jan 31, 1999      Contractual Life         Exercise Price       Jan 31, 1999      Exercise Price
-------------          ------------      -----------------        --------------       ------------      --------------
<S>                    <C>               <C>                      <C>                  <C>               <C>  
$0.17 - $2.59            445,480               6.62                   $ 2.48              288,257             $2.43
2.67 - 9.28              449,600               7.34                     7.57              263,036              7.22
9.44 - 15.78             233,932               8.22                    13.14               98,899             12.88
15.89 - 17.58            453,375               8.73                    17.55              142,731             17.55
18.25 - 37.88            549,687               9.50                    23.86                8,560             20.13
                       ---------                                                          -------
$0.17 - $37.88         2,132,074               8.14                   $13.44              801,483             $8.17
</TABLE>

     During the year ended February 1, 1998, the Company granted a restricted
stock award of 126,562 shares with a purchase price of $.01 per share to its
Chief Executive Officer. The 126,562 share award begins vesting on March 31,
1999, with 25% of the shares vested at such time, and thereafter will vest at
25% on each of March 31, 2000, 2001 and 2002, if, in each instance, at the time
of the vesting date, certain cumulative earnings per share growth targets have
been satisfied. The Company's Compensation Committee has determined that the
cumulative earnings per share growth targets for the first vesting period have
been satisfied, and, accordingly 25% of the shares will vest on March 31, 1999.
During the year ended January 31, 1999, the Company recorded $240,440 of
deferred compensation expense associated with this award.

     The Company accounts for its stock-based awards using the intrinsic value
method in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements.

     SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1995. Under SFAS No.
123, the fair value of stock-based awards to employees is calculated through the
use of option-pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values. The Company's calculations were made using the Black-Scholes
option-pricing model with the following weighted average assumptions: expected
life, 5 years following vesting; stock volatility, 87.0% in fiscal 1998, 60.6%
in fiscal 1997 and 80.3% in fiscal 1996; risk-free interest rates, 4.7% in
fiscal 1998, 6.1% in fiscal 1997 and 6.6% in fiscal 1996; and no dividends
during the expected term. The Company's calculations are based on a
multiple-option valuation approach and forfeitures are recognized as they occur.
If the computed fair values of the fiscal 1998, fiscal 1997 and fiscal 1996
awards had been amortized to expense over the vesting period of the awards, pro
forma net income and earnings per share would have been reduced to the pro forma
amounts indicated below:


                                      F-12
<PAGE>   36
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

          FOR THE FISCAL YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998
                              AND FEBRUARY 2, 1997


<TABLE>
<CAPTION>
                                                              FISCAL           FISCAL              FISCAL
                                                               1998              1997               1996
                                                            -----------      -----------         -----------
<S>                                     <C>                 <C>              <C>                 <C>
     Net Income
                                        As reported         $23,504,509      $16,358,459         $7,411,823
                                        Pro forma           $21,289,248      $15,320,101         $7,056,742
     Net Income Per Share, Basic
                                        As reported            $1.13            $.83                $0.41
                                        Pro forma              $1.02            $.78                $0.39
     Net Income Per Share, Diluted
                                        As reported            $1.09            $.80                $0.40
                                        Pro forma              $1.01            $.76                $0.38
</TABLE>

     The impact of outstanding nonvested stock options granted prior to fiscal
1995 has been excluded from the pro forma calculation; accordingly, the fiscal
1996, fiscal 1997 and fiscal 1998 pro forma adjustments are not indicative of
future period pro forma adjustments, when the calculation will apply to all
stock options granted after fiscal 1994.

     In fiscal 1997, the Company established the Pacific Sunwear of California,
Inc. Employee Stock Purchase Plan (the "ESPP"), which provides a method for
employees of the Company whereby they may voluntarily purchase common stock at a
10% discount from fair market value as of the beginning or the end of each
purchasing period of six months, whichever is lower. The ESPP covers
substantially all employees, except officers, who have three months of service
with the Company. The ESPP is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended, and therefore the Company does not recognize compensation expense
related to the ESPP. In fiscal 1998, 17,593 shares were issued at an average
price of $15.89 under the ESPP.

     In fiscal 1995, the Company established the Pacific Sunwear of California,
Inc. Executive Deferred Compensation Plan (the "Executive Plan"). The Executive
Plan covers officers of the Company, and is funded by participant contributions
and periodic discretionary contributions from the Company (Note 8). For each of
the three fiscal years in the period ended January 31, 1999, the Company made
contributions of $82,236, $58,854 and $34,900, respectively, to the Executive
Plan.

     In fiscal 1992, the Company established the Pacific Sunwear of California,
Inc. Employee Savings Plan ("the 401(k) Plan"). The 401(k) Plan is a defined
contribution plan (401(k)) covering substantially all employees who have reached
age 21 and have one year of service with the Company. The 401(k) Plan is funded
by employee contributions and periodic discretionary contributions from the
Company, which are subject to approval by the Company's Board of Directors. For
each of the three fiscal years in the period ended January 31, 1999, the Company
made contributions, net of forfeitures, of $144,468, $64,400 and $66,750,
respectively, to the 401(k) Plan.



                                      F-13

<PAGE>   37
7. ACCRUED LIABILITIES

        Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                         JANUARY 31,       FEBRUARY 1,
                                                                            1999              1998
                                                                         ----------        ----------
<S>                                                                      <C>               <C>       
         Accrued compensation and benefits                               $4,546,415        $4,185,159
         Reserve for store expansion/relocation and closing costs         1,322,077           954,823
         Accrued costs related to corporate relocation                       35,866         1,205,202
         Sales tax payable                                                  738,910           568,931
         Gift certificates and store merchandise credits                    969,378           778,390
         Other                                                            1,078,137         1,141,656
                                                                         ----------        ----------
                                                                         $8,690,783        $8,834,161
                                                                         ==========        ==========
</TABLE>


8.  DEFERRED COMPENSATION AND OTHER ASSETS

     Deferred compensation and other assets consist of the following:


<TABLE>
<CAPTION>
                                         JANUARY 31,       FEBRUARY 1,
                                           1999              1998
                                        ----------        ----------
<S>                                     <C>               <C>       
         Deferred compensation          $2,807,694        $1,025,953
         Covenant not-to-compete           179,167           229,167
         Security deposits                 155,643           149,114
                                        ----------        ----------
                                        $3,142,504        $1,404,234
                                        ==========        ==========
</TABLE>



                                      F-14

<PAGE>   38
                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

          FOR THE FISCAL YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998
                              AND FEBRUARY 2, 1997

9.   QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                               FIRST            SECOND              THIRD               FOURTH
                                                              QUARTER          QUARTER             QUARTER             QUARTER
                                                              -------          -------             -------             -------
<S>                                                          <C>                <C>                <C>                <C>
Fiscal year ended January 31, 1999:
Net sales                                                    $61,162,000        $73,203,000        $91,779,000        $94,981,000
Gross margin                                                  19,607,000         24,576,000         32,636,000         31,447,000
Operating income                                               4,460,000          7,981,000         13,214,000         12,242,000
Net income                                                     2,887,000          4,967,000          8,138,000          7,513,000
                                                             -----------        -----------        -----------        -----------
Net income per share, basic                                  $       .14        $       .24        $       .39        $       .36
Net income per share, diluted                                $       .13        $       .23        $       .38        $       .36
Weighted average shares outstanding, basic (Note 1)           20,675,355         20,763,818         21,015,525         20,647,740
Weighted average shares outstanding, diluted (Note 1)         21,495,905         21,626,768         21,637,763         21,115,663

Fiscal year ended February 1, 1998:
Net sales                                                    $38,933,000        $48,326,000        $65,312,000        $74,559,000
Gross margin                                                  11,707,000         15,849,000         23,671,000         25,683,000
Operating income                                               1,765,000          4,470,000          9,134,000         10,449,000
Net income                                                     1,124,000          2,880,000          5,804,000          6,551,000
                                                             -----------        -----------        -----------        -----------
Net income per share, basic                                  $       .06        $       .15        $       .28        $       .32
Net income per share, diluted                                $       .06        $       .14        $       .27        $       .31
Weighted average shares outstanding, basic (Note 1)           18,266,063         19,458,122         20,489,984         20,583,797
Weighted average shares outstanding, diluted (Note 1)         18,996,281         20,161,268         21,234,479         21,339,669
</TABLE>


Earnings per basic and diluted shares outstanding are computed independently for
each of the quarters presented and therefore may not sum to the totals for the
year.

10.  SUBSEQUENT EVENTS

     In March 1999, the Company formed Pacific Sunwear.com Corp, a wholly-owned
subsidiary, in order to sell merchandise over the internet. The Company
anticipates that it will begin selling merchandise over the internet in the
summer of 1999.

     In March 1999, the Company announced an agreement with Vans, Inc. ("Vans"),
whereby a new limited liability company named Van Pac, LLC (the "LLC") was
created in order to produce and distribute Vans apparel. The apparel line
created by the LLC will initially be for sale in Pacific Sunwear and Vans stores
only. The Company will provide product development, design, sourcing, quality
control and inventory planning services to the LLC, while Vans will contribute
design services and license the VANS and TRIPLE CROWN trademarks and logos to
the LLC. Vans will own 51% of the LLC and the Company will own 49%. The LLC
anticipates launching the new line in the summer of 1999.



                                      F-15

<PAGE>   39
                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit Number                        Description of Exhibit
--------------                        ----------------------
<S>       <C>
 (1) 3.1  Third Amended and Restated Articles of Incorporation of the Company

 (5) 3.2  Certificate of Amendment of Third Amended and Restated Articles of
          Incorporation of the Company

 (9) 3.3  Certificate of Determination of Preferences of Series A Junior
          Participating Preferred Stock of the Company

 (1) 3.4  Second Amended and Restated Bylaws of the Company

 (10)3.5  Amendment, dated August 18, 1998, to the Second Amended and
          Restated Bylaws of the Company

 (1) 4.1  Specimen stock certificate

 (1)10.1  Form of Indemnity Agreement between the Company and each of its
          executive officers and directors

 (1)10.2  1986-87 Stock Option Plan dated as of December 11, 1986, as
          amended (the "Option Plan")

 (1)10.3  Form of Incentive Stock Option under the Option Plan

 (1)10.4  Form of Nonstatutory Stock Option under the Option Plan

 (3)10.5  Second Amended and Restated 1992 Stock Award Plan dated June 8,
          1994 (the "Award Plan")

 (2)10.6  Form of Nonqualified Stock Option Agreement under the Award Plan

 (2)10.7  Form of Incentive Stock Option Agreement under the Award Plan

 (2)10.8  Form of Restricted Stock Award Agreement under the Award Plan

 (1)10.9  Registration Rights Agreement dated November 25, 1986, as
          amended, by and among the Company and certain holders of the Preferred
          Stock of the Company

(11)10.11 Standard Industrial Lease - Net, dated September 30, 1997
          between the Company and Bank of America National Trust and Savings
          Association, as amended, and Standard Industrial Lease - Net, dated
          January 12, 1998 between the Company and The Realty Associates Fund
          IV, L.P., a Delaware limited partnership, as amended for the Company's
          corporate headquarters and distribution center located in Anaheim,
          California

 (4)10.12 Pacific Sunwear of California, Inc. Executive Deferred Compensation
          Plan and Trust Agreement
 
 (6)10.13 Pacific Sunwear of California, Inc. Employee Stock Purchase Plan
 
 (7)10.14 Employment Agreement, dated November 3, 1997, by and between
          Pacific Sunwear of California, Inc. and Greg H. Weaver

(11)10.15 Severance Agreements, dated October 27, 1997 and November 6,
          1996, by and between Pacific Sunwear of California, Inc. and Timothy
          M. Harmon and Carl W. Womack, respectively

(12)10.17 Rights Agreement, dated as of December 16, 1998, between the
          Company and U.S. Stock Transfer Corporation

 (8)10.16 Asset Purchase Agreement dated August 4,1997 by and among the
          Company, Good Vibrations Inc. and certain other parties
</TABLE>



                                      F-16

<PAGE>   40
<TABLE>
<S>       <C>
10.18     Amendment No.1 to Amended and Restated Employment Agreement, dated as
          of January 31, 1999, between the Company and Greg H. Weaver.

10.19     Standard Sublease - dated December 22, 1998 between the Company and
          Bekins Moving and Storage Company, LLC.

23.1      Consent of Deloitte & Touche LLP

27        Financial Data Schedule

----------

(1)         Incorporated by reference from the Company's Form S-1 Registration
            Statement (No. 33-57860) as filed with the Securities and Exchange
            Commission on February 4, 1993.

(2)         Incorporated by reference from the Company's Annual Report on Form
            10-K as filed with the Securities and Exchange Commission on April
            8, 1994.

(3)         Incorporated by reference from the Company's Form S-8 Registration
            Statement as filed with the Securities and Exchange Commission on
            September 28, 1995.

(4)         Incorporated by reference from the Company's Annual Report on Form
            10-K as filed with the Securities and Exchange Commission on March
            17, 1995.

(5)         Incorporated by reference from the Company's Annual Report on Form
            10-K as filed with the Securities and Exchange Commission on April
            4, 1997.

(6)         Incorporated by reference from the Company's Registration Statement
            on Form S-8 as filed with the Securities and Exchange Commission on
            November 20, 1997.

(7)         Incorporated by reference from the Company's Quarterly Report on
            Form 10-Q as filed with the Securities and Exchange Commission on
            December 16, 1997.

(8)         Incorporated by reference from the Company's Current Report on Form
            8-K as filed with the Securities and Exchange Commission on
            September 16, 1997.

(9)         Incorporated by reference from the Company's Current Report on Form
            8-K as filed with the Securities and Exchange Commission on December
            24, 1998.

(10)        Incorporated by reference from the Company's Quarterly Report on
            Form 10-Q as filed with the Securities and Exchange Commission on
            December 9, 1998.

(11)        Incorporated by reference from the Company's Annual Report on Form
            10-K as filed with the Securities and Exchange Commission on April
            9, 1998.

(12)        Incorporated by reference from the Company's Form 8-A Registration
            Statement as filed with the Securities and Exchange Commission on
            December 24, 1998.
</TABLE>


                                      F-17