##### Table of Contents





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: February 2, 2008
    or[  ] Transition Report Pursuant to
    Section 13 or 15(d) of the Securities Exchange Act of
    1934
    For the transition period from
     to     PACIFIC SUNWEAR OF CALIFORNIA,
    INC.
   California

95-3759463(State of incorporation)

(I.R.S. Employer Identification No.)3450 E. Miraloma Ave., Anaheim, CA

92806(Address of principal executive offices)

(Zip Code)    (714) 414-4000
    Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $0.01 per share

The NASDAQ Stock Market LLC (Nasdaq Global Select Market)Preferred Stock Purchase Rights

The NASDAQ Stock Market LLC (Nasdaq Global Select Market)      
    Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act. Yes [X] No [ ]
    Indicate by check mark if the registrant is not required to file
    reports pursuant to Section 13 or 15(d) of the Act.
    Yes [ ] No [X]
    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.
    [ ]
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See definition of
    large accelerated filer, accelerated
    filer, and smaller reporting company in
    Rule 12b-2
    of the Exchange Act. (Check one):  Large Accelerated
    Filer [X]
    Accelerated
    Filer [ ]
    Non-Accelerated
    Filer [ ]
    Smaller Reporting
    Company [ ] (Do not check if a smaller
 reporting company)
  
    Indicate by check mark whether the registrant is a shell company
    (as defined in
    Rule 12b-2
    of the Exchange Act). Yes [ ] No [X]        Form 10-K.




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESPERFORMANCE GRAPHITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT 10.26EXHIBIT 21EXHIBIT 23.1EXHIBIT 31EXHIBIT 32    Table of Contents  PART I
 
 ITEM 1. BUSINESS
     February 2, 2008

March 28, 2008# of Stores

Square Footage

# of Stores

Square FootagePacSun

834

3,172,987

823

3,137,846Outlet

120

485,372

121

489,715Total

954

3,658,359

944

3,627,561       (714) 414-4000; www.pacsun.com Form 10-K, Form 10-Q, Form 8-K,
    Fiscal Year

Year-End Date

# of Weeks2008

January 31, 2009

522007

February 2, 2008

522006

February 3, 2007

532005

January 28, 2006

522004

January 29, 2005

522003

January 31, 2004

52   Our Mission and
    Strategies
   Strong Focus on Apparel.
   2     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Drive Improved Store Productivity.
  Deliver a Compelling Customer Shopping
    Experience. 50-75
     Pacific
    Sunwear of California, Inc. Form 10-K
    2007     3




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##### Table of Contents



Merchandising
 Merchandise.
  PacSun and Outlet2007

2006

2005Young Mens Apparel

38%

37%

35%Juniors Apparel

33%

29%

29%Accessories

17%

20%

20%Footwear

12%

14%

16%Total

100%

100%

100%   up-and-coming
    60-65% (70-75%).
  Vendor and Contract Manufacturer Relationships.
       4     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Buying, Planning, Allocation and Distribution.
    Web-Based Merchandising. www.pacsun.com. e-mail
  Stores
 Locations.
  Real Estate Strategy. 35-40 15-20 15-20 50-75 35-40
     Pacific
    Sunwear of California, Inc. Form 10-K
    2007     5




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##### Table of Contents



Store Operations.
  Competition
   Trademarks and
    Service Marks
   Information
    Technology
 open-to-buy,
  point-of-sale look-up,
   6     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Seasonality
   Working Capital
    Concentration
   Employees
   Executive Officers.
  Executive Officer

Age

TitleSally Frame Kasaks


63


Chief Executive Officer, Chairman of the BoardThomas M. Kennedy


46


Division President of PacSunMichael L. Henry


37


Sr. Vice President, Chief Financial Officer and Secretary
        
  ITEM 1A.
    RISK FACTORS
  Cautionary Note
    Regarding Forward-Looking Statements
 Form 10-K
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     7




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##### Table of Contents




    forecasts of future store openings, expansion/relocations,
    refreshes and closures
    estimates of remaining lease termination charges associated with
    the closure of demo and One Thousand Steps stores
    the sufficiency of working capital and operating cash flows to
    meet our operating and capital expenditure requirements without
    borrowing significantly under our credit facility
    the outcome of litigation matters
    expectations regarding future increases in CAM expenses
    expectations regarding our future operating and other financial
    results
    capital expenditure plans    Our comparable store net sales results will fluctuate
    significantly, which can cause volatility in our operating
    performance and stock price.
  Our failure to identify and respond appropriately to changing
    consumer preferences and fashion trends in a timely manner could
    have a material adverse impact on our profitability.
  We have stated our intention to place a greater emphasis on
    apparel, juniors merchandise, and the proprietary brand
    penetration within the juniors category in our merchandising
    assortments than we have in the past, which
   8     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



may not be successful in improving our store productivity or
    profitability.
  We continue to reinvest in our existing store fleet, which
    may not result in improved operating performance.
  Our continued growth depends, in part, on our ability to
    develop new store concepts
    and/or open
    new stores that achieve acceptable levels of profitability. Any
    failure to do so may negatively impact our stock price and
    operational performance.
  We are in the process of closing our demo stores. This
    process could divert significant attention from our more
    successful PacSun and PacSun Outlet operations and we are likely
    to incur significant cash charges for lease terminations, the
    amount of which is not currently known. and/or
  Any deterioration in consumer spending due to macro-economic
    issues that are beyond our control can have a material adverse
    impact on our results of operations, liquidity and stock
    price.
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     9




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We face significant competition from both
    vertically-integrated and brand-based competitors that are
    growing rapidly, which could have a material adverse effect on
    our business.
  Our customers may not prefer our proprietary brand
    merchandise, which may negatively impact our profitability.
  Our current or prospective vendors may be unable or unwilling
    to supply us with adequate quantities of their merchandise in a
    timely manner or at acceptable prices, which could have a
    material adverse impact on our business.
  Our foreign sources of production may not always be reliable,
    which may result in a disruption in the flow of new merchandise
    to our stores.
  The loss of key personnel could have a material adverse
    effect on our business at any time.
   10     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Our information systems may not be adequate to support future
    growth, which could disrupt business operations. and/or and/or
  Adverse outcomes of litigation matters could significantly
    affect our operational results.
  Any disruption of our distribution activities could have a
    material adverse impact on our business.
  Our stock price can fluctuate significantly due to a variety
    of factors, which can negatively impact our total market
    value.
  Selling merchandise over the internet carries particular
    risks that can have a negative impact on our
    business.
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     11




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##### Table of Contents



and/or
  Any failure by us to maintain credit facility financial
    covenants could have a material adverse impact on our
    business.
  The effects of terrorism or war could significantly impact
    consumer spending and our operational performance.
     
  ITEM 1B.
    UNRESOLVED STAFF
    COMMENTS   
  ITEM 2.
    PROPERTIES  Form 10-K.
     12     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



State

Pac

Out

TotalAlabama


13


2


15Alaska


3





3Arizona


17


5


22Arkansas


5





5California


99


18


117Colorado


19


3


22Connecticut


9


1


10Delaware


3


1


4Florida


59


9


68Georgia


19


3


22Hawaii


9





9Idaho


6





6Illinois


27


2


29Indiana


16


2


18Iowa


10


1


11Kansas


7





7Kentucky


9





9Louisiana


12





12Maine


3


2


5Maryland


15


4


19Massachusetts


21


2


23Michigan


25


3


28Minnesota


14


2


16Mississippi


6


1


7Missouri


15


3


18Montana


4





4Nebraska


4





4Nevada


7


3


10New Hampshire


5


2


7New Jersey


22


3


25New Mexico


7





7New York


33


6


39North Carolina


23


3


26North Dakota


4





4Ohio


36


2


38Oklahoma


9





9Oregon


11


2


13Pennsylvania


45


6


51Rhode Island


2





2South Carolina


11


3


14South Dakota


2





2Tennessee


14


3


17Texas


59


10


69Utah


10


1


11Vermont


3


1


4Virginia


24


2


26Washington


22


3


25West Virginia


8





8Wisconsin


14


4


18Wyoming


2





2Puerto Rico


12


2


14Total


834


120


954


ITEM 3.
    LEGAL
    PROCEEDINGS  Form 10-K
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     13




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##### Table of Contents



ITEM 4.
    SUBMISSION OF
    MATTERS TO A VOTE OF SECURITY HOLDERS    
 PART II
  
 ITEM 5.
    MARKET FOR
    REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES    Fiscal 2007

Fiscal 2006High

Low

High

Low1st Quarter

$
23.11

$
16.94

$
25.19

$
21.322nd Quarter

$
23.06

$
15.62

$
25.26

$
16.673rd Quarter

$
18.60

$
13.00

$
17.77

$
13.124th Quarter

$
16.99

$
8.87

$
21.68

$
16.42        14     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



PERFORMANCE
    GRAPH
    Comparison of
    Cumulative Total Return from January 31, 2003 through
    February 2,
    2008(1)
  
  Calculated
    Returns(1)

01/31/03

01/31/04

01/29/05

01/28/06

02/03/07

02/02/08Pacific Sunwear

100

190

199

200

165

98Nasdaq Market Index

100

156

154

175

189

181Retail Index

100

147

176

190

209

184     Common Stock Repurchase and Retirement Form 10-K,
   
  ITEM 6.
    SELECTED
    FINANCIAL DATA     Pacific
    Sunwear of California, Inc. Form 10-K
    2007     15




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##### Table of Contents



Form 10-K).
  Fiscal Year2007


2006


2005


2004


2003Consolidated Income Statement Data:Net sales

$
1,454


$
1,442


$
1,391


$
1,230


$
1,041Gross margin (after buying, distribution and occupancy
    costs)(1)


407



448



506



448



373Operating (loss)/income from continuing
    operations(1)


(36
)


67



197



170



128(Loss)/Income from continuing
    operations(1)


(19
)


44



126



107



80(Loss)/Income from continuing operations per share, diluted

$
(0.27
)

$
0.62


$
1.67


$
1.38


$
1.02Consolidated Operating Data:Comparable store net sales
    +/(−)(2)


0.7
%


(4.7
)%


3.2
%


7.3
%


13.1
%Average net sales($)/square
    foot(3)


343



346



371



374



363Average net sales($)/store
    (000s)(3)


1,256



1,242



1,309



1,290



1,229Stores open at end of period


1,107



1,190



1,105



990



877Capital expenditures ($ million)


106



158



109



82



50Consolidated Balance Sheet Data:Working capital

$
187


$
195


$
304


$
258


$
243Total assets


752



773



808



678



644Long-term debt


















Shareholders
    Equity(4)


483



503



547



458



429   Form 10-K).
       
  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K. Form 10-K).
  Executive
    Overview
   Comparable (or same store) sales
   16     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Net merchandise margins
  Operating margin and/or
  Store sales trends
  Cash flow and liquidity (working capital)
  Critical
    Accounting Policies
    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     17




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##### Table of Contents



Recognition of Revenue
  Valuation of Inventories
  Determination of Stock-Based Compensation
    Expense
  Form 10-K
  Store Operating Lease Accounting Bulletin 85-3, 13-1, Bulletin 88-1,
   18     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Evaluation of Long-Lived Assets
    Evaluation of Insurance Reserves
  Evaluation of Income Taxes
  Evaluation of Litigation Matters
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     19




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##### Table of Contents



Results of
    Operations
   Fiscal Year2007


2006


2005Net sales


100.0
%


100.0
%


100.0
%Cost of goods sold (including buying, distribution and occupancy
    costs)


72.0



68.9



63.6Gross margin


28.0



31.1



36.4Selling, general and administrative expenses


30.5



26.5



22.2Operating (loss)/income from continuing operations


(2.5
)


4.6



14.2Interest income, net


0.2



0.3



0.4(Loss)/Income from continuing operations before income tax
    expense


(2.3
)


4.9



14.6Income tax (benefit)/expense


(1.0
)


1.9



5.5(Loss)/Income from continuing operations


(1.3
)%


3.0
%


9.1
%Number of stores open at end of period


1,107



1,190



1,105     February 2,

February 3,2008

2007PacSun stores


834


849Outlet stores


120


116demo stores


153


225Total stores


1,107


1,190Total square footage (in 000s)


4,097


4,300     Fiscal 2007
    Compared to Fiscal 2006
  Net
    Sales
   Amount($million)


Attributable to$
29


Net sales from stores opened in fiscal 2006 while not yet
    included in the comparable store base in 2007.10


Net sales from expanded or relocated stores not yet included in
    the comparable store base.10


0.7% increase in comparable store net sales in fiscal 2007
    compared to fiscal 2006.10


Increase in net sales attributable to e-commerce.8


18 new stores opened in fiscal 2007 not yet included in the
    comparable store base.(55
)

110 closed stores in fiscal 2007 and 6 closed stores in fiscal
    2006.$
12


Total    20     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



12-16%
    Gross
    Margin
   %

Attributable to(1.6)

Increase in occupancy charges as a percentage of net sales to
    15.6% ($227 million) in fiscal 2007 from 14.0% ($202 million) in
    fiscal 2006, including lease termination charges of
    approximately $16 million related to the closure of 74
    underperforming demo stores during fiscal 2007.  Excluding the
    lease termination charges, occupancy expenses increased pursuant
    to store operating lease terms at a higher rate of sales than
    the 0.7% same-store sales result for fiscal 2007.(0.7)

Decrease in merchandise gross margins, primarily due to higher
    markdowns at cost ($217 million) in fiscal 2007 compared to
    fiscal 2006 ($200 million), partially offset by higher initial
    markups. Markdowns were higher in fiscal 2007, both in absolute
    dollars and as a percentage of net sales, primarily due to the
    0.7% same-store sales result for fiscal 2007 and the poor
    performance of the demo business and the footwear and accessory
    categories within PacSun.(0.5)

Increase in buying expenses as a percentage of net sales to 2.1%
    ($30 million) in fiscal 2007 from 1.5% ($22 million) in fiscal
    2006, primarily due to increased headcount in the Companys
    design and allocation departments and $3 million in severance
    and retention charges associated with the pending closure of the
    demo business.(0.3)

Increase in distribution expenses as a percentage of net sales
    to 2.6% ($37 million) in fiscal 2007 from 2.3% ($33 million) in
    fiscal 2006, primarily due to operating two distribution centers
    in fiscal 2007 versus one in fiscal 2006.  We opened our second
    distribution facility in Olathe, Kansas in May 2007.  As
    previously noted, we are in the process of consolidating our
    distribution activities to this Olathe facility and expect to
    complete this transition during April 2008.  As a result, we
    expect to be able to reduce distribution expenses as a
    percentage of net sales in fiscal 2008.(3.1)

Total    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     21




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##### Table of Contents



Selling, General
    and Administrative Expenses
   %

Attributable to2.0

Increase in asset impairment and loss on disposal charges to
    $54 million in fiscal 2007 compared to $25 million in
    fiscal 2006 (see Asset Impairments discussion below).0.6

Increase in direct store expenses as a percentage of net sales
    to 7.5% ($109 million) in fiscal 2007 from 6.9%
    ($100 million) in fiscal 2006, primarily due to increased
    depreciation expenses associated with the Companys store
    refresh program and new store openings as well as increased
    credit authorization charges due to higher penetration of credit
    card sales in fiscal 2007.0.4

Increase in general and administrative payroll expenses as a
    percentage of net sales to 3.4% ($49 million) in fiscal
    2007 from 3.0% ($44 million) in fiscal 2006 due to planned
    headcount additions.0.3

Increase in store payroll expenses as a percentage of net sales
    to 12.4% ($181 million) in fiscal 2007 from 12.1%
    ($175 million) for fiscal 2006. In absolute dollars, these
    expenses were up primarily due to the addition of 18 new stores
    during fiscal 2007 and 91 new stores during fiscal 2006,
    partially offset by the closure of 74 underperforming demo
    stores early in fiscal 2007. As a percentage of net sales, these
    expenses were up primarily due to deleveraging them against the
    0.7% same-store sales results in fiscal 2007.0.3

Increase in consulting expenses as a percentage of net sales to
    0.4% ($5.6 million) in fiscal 2007 from 0.1%
    ($1.5 million) in fiscal 2006. The consulting expenses for
    fiscal 2007 were targeted primarily at the Companys
    strategic positioning, supply chain and real estate portfolio
    assessment.0.4

Increase in all other general and administrative expenses as a
    percentage of net sales to 3.1% ($45 million) in fiscal
    2007 from 2.6% ($36 million) for fiscal 2006, primarily due
    to planned increases in e-commerce and system support expenses
    designed at improving operating efficiencies.4.0

Total   Asset
    Impairments
   Net Interest
    Income
   Income Tax
    (Benefit)/Expense
    22     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Fiscal 2006
    Compared to Fiscal 2005
  Net
    Sales
   Amount($million)


Attributable to$
53


Net sales from stores opened in fiscal 2005 while not included
    in the comparable store base in 2006.38


91 new stores opened in fiscal 2006 not yet included in the
    comparable store base.7


Other non-comparable sales (net sales from expanded or relocated
    stores not yet included in the comparable store base and
    internet net sales).(5
)

6 closed stores in fiscal 2006 and 11 closed stores in
    fiscal 2005.(42
)

(4.7)% decrease in comparable store net sales in fiscal 2006
    compared to fiscal 2005.$
51


Total         Gross
    Margin
    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     23




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##### Table of Contents



Selling, General
    and Administrative Expenses
   %


Attributable to1.7


Increased asset impairment and loss on disposal charges of $25
    million in fiscal 2006 (see Asset Impairments
    discussion below).1.0


Increase in store payroll expenses as a percentage of net sales
    to 12.1% ($175 million) in fiscal 2006 from 11.1% ($154 million)
    for fiscal 2005.  In absolute dollars, these expenses were up
    primarily due to the addition of 85 net new stores during
    fiscal 2006 and 115 net new stores during fiscal 2005.  As
    a percentage of net sales, these expenses were up primarily due
    to deleveraging them against the negative same-store sales
    results in fiscal 2006.0.9


Increase in direct store expenses as a percentage of net sales
    to 6.9% ($100 million) for fiscal 2006 from 6.0% ($84 million)
    for fiscal 2005, primarily due to increased depreciation
    expenses associated with new store openings and deleveraging
    these expenses over the negative same-store sales results in
    fiscal 2006.0.4


Expenses incurred during fiscal 2006 that are non-comparable to
    fiscal 2005 include stock compensation expenses of $4 million
    (see Note 10, Stock Compensation Plans, in the notes
    to the consolidated financial statements), and a charge of $1
    million related to the resignation of our former CEO.0.3


Increase in all other general and administrative expenses as a
    percentage of net sales to 5.3% ($78 million) for fiscal 2006
    from 5.0% ($69 million) for fiscal 2005.4.3


Total   Asset
    Impairments
     Net Interest
    Income
   Income Tax
    Expense
 Form 10-K).
   24     Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Liquidity and
    Capital Resources
   Operating Cash
    Flows
   $millions


Attributable to(70
)

Decrease in net income, largely due to asset impairment and
    lease termination charges associated with demo and One Thousand
    Steps stores.(23
)

Decrease in cash flows from deferred lease incentives, primarily
    due to the closure of 110 stores during fiscal 2007 and fewer
    new store openings (18) than in past years.47


Increase in cash flows due to non-cash charges, including $39
    million in higher asset impairment and loss on asset disposal
    charges due to demo and One Thousand Steps stores in fiscal 2007
    than in fiscal 2006 and $8 million in increased depreciation
    expense primarily associated with the PacSun refresh program.$
(46
)

Total   Working
    Capital
   $millions


Description$
195


Working capital at February 3, 2007(35
)

Decrease in inventory, primarily due to the closure of 110
    stores and the reduction of inventory per square foot during
    fiscal 2007.(6
)

Decrease in working capital due to increased accruals for lease
    terminations and severance charges associated with demo.(3
)

Decrease in prepaid expenses, primarily due to the closure of
    110 stores during fiscal 2007.18


Increase in income taxes receivable and current deferred income
    tax assets ($17 million in current net income tax assets in
    fiscal 2007 versus current net income tax payable of $1 million
    in fiscal 2006) due to the net losses sustained within demo and
    One Thousand Steps during fiscal 2007.14


Increase in cash and marketable securities (see cash flow
    statement).4


Decrease in accounts payable due to timing of payments and
    reductions in inventory levels primarily as a result of closing
    110 stores during fiscal 2007.$
187


Working capital at February 2, 2008   Investing Cash
    Flows
    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     25




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##### Table of Contents



Form 10-K),
  Fiscal 2007 New
    Store Costs
   Fiscal 2008 Store
    Opening and Closing Plans
 50-75 15-20 15-20 35-40
    Amount($million)


Attributable to$
65


Store capital expenditures20


Investments in new information technology capabilities,
    particularly with regard to supply chain, store and financial
    systems5


Other corporate capital expenditures, including maintenance
    capital$
90


Total       Financing Cash
    Flows
 Form 10-K).
   26     Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Form 10-K,
  Credit
    Facility
     Contractual
    Obligations
   Payments Due by PeriodContractual Obligations



Less than

1-3

3-5

More than(In millions)

Total

1 year

years

years

5 yearsOperating lease obligations

556

127

171

125

133Capital lease obligations

<0.1

<0.1





FIN 48 obligations including interest and penalties

2



2



Letters of credit

17

17





Total

575

144

173

125

133      Pacific
    Sunwear of California, Inc. Form 10-K
    2007     27




---



##### Table of Contents



(50-100
    Operating Leases Form 10-K).
    185-195
  Indemnifications
     New Accounting
    Pronouncements
 Form 10-K,
   28     Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Inflation
   Seasonality and
    Quarterly Results
 back-to-school 30-34%
 
  ITEM 7A.
    QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK  and/or
  Form 10-K.
 
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   
  ITEM 9.
    CHANGES IN, AND
    DISAGREEMENTS WITH, ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE   
  ITEM 9A.
    CONTROLS AND
    PROCEDURES  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
 Rule 13a-15(e) 15d-15(e)
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     29




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
 Rules 13a-15(f) 15d-15(f). Internal
    Control  Integrated Framework Internal Control  Integrated Framework
  Form 10-K,
    Changes in
    Internal Control Over Financial Reporting
    30     Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control 
    Integrated Framework Managements Report on
    Internal Control over Financial Reporting
        Internal Control  Integrated Framework
  Share-Based Payment
  
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     31




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION    
 PART III
  
 ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE  Form 10-K.
 
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Form 10-K.
 
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K.
 
  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Form 10-K.
 
  ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Form 10-K.
  
 PART IV
  
 ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a) 1.
    The financial statements listed in the Index to
    Consolidated 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
    consolidated financial statements or notes thereto.3.
    Exhibits included or incorporated herein: See Index to
    Exhibits at end of consolidated financial statements.   32     Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Sally
    Frame Kasaks       Signature

Title

Date/s/  Sally
    Frame KasaksSally
    Frame Kasaks

Chief Executive Officer and Chairman of the Board (Principal
    Executive Officer)

March 28, 2008/s/  Michael
    L. HenryMichael
    L. Henry

Senior Vice President, Chief Financial Officer and Secretary
    (Principal Financial and Accounting Officer)

March 28, 2008/s/  Peter
    StarrettPeter
    Starrett

Non-Employee Lead Director

March 28, 2008/s/  Pearson
    C. Cummin IIIPearson
    C. Cummin III

Non-Employee Director

March 28, 2008/s/  Michael
    GoldsteinMichael
    Goldstein

Non-Employee Director

March 28, 2008/s/  Julius
    Jensen IIIJulius
    Jensen III

Non-Employee Director

March 28, 2008/s/  George
    R. MrkonicGeorge
    R. Mrkonic

Non-Employee Director

March 28, 2008/s/  Thomas
    M. MurnaneThomas
    M. Murnane

Non-Employee Director

March 28, 2008/s/  Grace
    NicholsGrace
    Nichols

Non-Employee Director

March 28, 2008    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     33




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL Years
    Ended:
      Report of Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets as of February 2, 2008 and
    February 3, 2007


F-3Consolidated Statements of Operations and Comprehensive
    Operations for each of the three fiscal years in the period
    ended February 2, 2008


F-4Consolidated Statements of Shareholders Equity for each of
    the three fiscal years in the period ended February 2, 2008


F-5Consolidated Statements of Cash Flows for each of the three
    fiscal years in the period ended February 2, 2008


F-6Notes to Consolidated Financial Statements


F-7    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Share-Based Payment
  Internal Control  Integrated Framework
  
   F-2Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
  CONSOLIDATED
    BALANCE SHEETS
  February 2,

February 3,(In thousands, except share amounts)

2008

2007ASSETSCURRENT ASSETS:Cash and cash equivalents

$
97,587

$
52,267Marketable securities





31,500Merchandise inventories


170,182


205,213Other current assets


52,818


46,255TOTAL CURRENT ASSETS


320,587


335,235PROPERTY AND EQUIPMENT,
    NET


376,243


420,886OTHER ASSETS


55,313


17,122TOTAL ASSETS

$
752,143

$
773,243LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
62,349

$
66,581Other current liabilities


71,107


73,952TOTAL CURRENT
    LIABILITIES


133,456


140,533LONG-TERM LIABILITIES:Deferred lease incentives


74,012


89,371Deferred rent


27,669


30,619Deferred income taxes





463Other long-term liabilities


33,661


8,904TOTAL LONG-TERM
    LIABILITIES


135,342


129,357Commitments and contingencies (Note 12)SHAREHOLDERS EQUITY:Preferred stock, $.01 par value; 5,000,000 shares
    authorized; none issued





Common stock, $.01 par value; 170,859,375 shares
    authorized; 70,026,510 and 69,560,077 shares issued and
    outstanding, respectively


700


696Additional paid-in capital


16,761


5,783Retained earnings


465,884


496,874TOTAL SHAREHOLDERS
    EQUITY


483,345


503,353TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
752,143

$
773,243      Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-3




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
  (In thousands, except share and per share amounts)

February 2,


February 3,


January 28,FISCAL YEAR ENDED

2008


2007


2006Net sales

$
1,454,163


$
1,441,973


$
1,391,473Cost of goods sold, including buying, distribution and occupancy
    costs


1,046,988



993,673



884,982Gross margin


407,175



448,300



506,491Selling, general and administrative expenses


443,577



381,644



309,218Operating (loss)/income from continuing operations


(36,402
)


66,656



197,273Interest income, net


3,012



4,620



5,673(Loss)/Income from continuing operations before income tax
    (benefit)/expense


(33,390
)


71,276



202,946Income tax (benefit)/expense


(14,820
)


27,404



76,734(Loss)/income from continuing operations


(18,570
)


43,872



126,212Loss from discontinued operations, net of tax effects


(11,797
)


(4,251
)


Net (loss)/income

$
(30,367
)

$
39,621


$
126,212Comprehensive (loss)/income

$
(30,367
)

$
39,621


$
126,212(Loss)/income from continuing operations per share, basic

$
(0.27
)

$
0.62


$
1.69(Loss)/income from continuing operations per share,
    diluted

$
(0.27
)

$
0.62


$
1.67Net (loss)/income per share, basic

$
(0.44
)

$
0.56


$
1.69Net (loss)/income per share, diluted

$
(0.44
)

$
0.56


$
1.67Weighted average shares outstanding, basic


69,749,536



70,800,912



74,758,874Weighted average shares outstanding, diluted


69,749,536



71,170,181



75,713,793   See notes to consolidated
    financial statements.
   F-4Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  Common





AdditionalStock


Common


Paid-in


Retained(In thousands, except share amounts)

Shares


Stock


Capital


Earnings


TotalBALANCE, January 29, 2005


74,916,773


$
749


$
61,310


$
395,975


$
458,034Exercise of stock options and shares issued under employee stock
    purchase plan


1,642,776



16



18,651







18,667Repurchase and retirement of common stock


(2,808,300
)


(28
)


(65,615
)






(65,643
)Restricted stock award, vesting of shares










1,142







1,142Tax benefits related to exercise of stock options










8,378







8,378Net income














126,212



126,212BALANCE, January 28, 2006


73,751,249



737



23,866



522,187



546,790Exercise of stock options and shares issued under employee stock
    purchase plan


724,828



8



8,562







8,570Repurchase and retirement of common stock


(4,916,000
)


(49
)


(99,297
)






(99,346
)Stock compensation










6,220







6,220Tax benefits related to exercise of stock options










1,498







1,498Reclassify negative additional paid-in capital to retained
    earnings (1)










64,934



(64,934
)


Net income














39,621



39,621BALANCE, February 3, 2007


69,560,077



696



5,783



496,874



503,353Exercise of stock options and shares issued under employee stock
    purchase plan


466,433



4



4,291







4,295Stock compensation










6,398







6,398Tax benefits related to exercise of stock options










289







289FIN 48 adoption adjustment (see Note 6)














(623
)


(623
)Net loss














(30,367
)


(30,367
)BALANCE, February 2, 2008


70,026,510


$
700


$
16,761


$
465,884


$
483,345     See notes to consolidated
    financial statements.
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-5




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (In thousands)

February 2,


February 3,


January 28,FISCAL YEAR ENDED

2008


2007


2006CASH FLOWS FROM OPERATING
    ACTIVITIES:Net (loss)/income

$
(30,367
)

$
39,621


$
126,212Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


80,323



72,529



63,161Stock compensation


6,398



6,220



Asset impairment


59,829



24,409



Loss on disposal of equipment


4,507



1,127



300Tax benefits related to stock-based compensation


289



1,498



8,378Excess tax benefits related to stock-based compensation


(292
)


(942
)


Change in operating assets and liabilities:Merchandise inventories


35,031



9,927



(40,380
)Other current assets


(6,563
)


(4,770
)


(6,608
)Other assets


(14,891
)


7,896



(4,280
)Accounts payable


(4,232
)


19,031



8,797Other current liabilities


3,552



(5,687
)


18,138Deferred lease incentives


(15,359
)


7,931



13,376Deferred rent


(2,950
)


1,553



(1,377
)Other long-term liabilities


366



(18,703
)


(1,452
)Net cash provided by operating activities


115,641



161,640



184,265CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases of property and equipment


(106,363
)


(157,788
)


(109,174
)Purchases of
    available-for-sale
    short-term investments


(171,400
)


(296,031
)


(792,550
)Maturities of
    available-for-sale
    short-term investments


202,900



324,831



774,700Purchases of
    held-to-maturity
    short-term investments (Note 11)


(23,300
)






(20,988
)Maturities of
    held-to-maturity
    short-term investments






14,611



43,150Net cash used in investing activities


(98,163
)


(114,377
)


(104,862
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Borrowings under long-term debt obligations (Note 11)


23,300







Repurchase and retirement of common stock






(99,346
)


(65,643
)Proceeds from exercise of stock options


4,295



8,570



18,667Excess tax benefits related to stock-based compensation


292



942



Principal payments under capital lease and long-term debt
    obligations


(45
)


(347
)


(1,550
)Net cash provided by/(used in) financing activities


27,842



(90,181
)


(48,526
)NET INCREASE/(DECREASE) IN CASH AND
    CASH EQUIVALENTS:


45,320



(42,918
)


30,877CASH AND CASH EQUIVALENTS, beginning of fiscal year


52,267



95,185



64,308CASH AND CASH EQUIVALENTS, end of fiscal year

$
97,587


$
52,267


$
95,185SUPPLEMENTAL DISCLOSURES OF CASH
    FLOW INFORMATION:Cash paid for interest

$
6


$
6


$
47Cash paid for income taxes

$
10,668


$
42,251


$
63,313SUPPLEMENTAL DISCLOSURES OF
    NON-CASH TRANSACTIONS:(Decrease)/Increase in accrued property and equipment

$
(6,358
)

$
5,023


$
5,856Purchases of property pursuant to capital lease obligations

$
11







Increase to additional paid-in capital related to the issuance
    of stock to satisfy certain deferred compensation liabilities









$
1,142      F-6Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



PACIFIC SUNWEAR
    OF CALIFORNIA, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For the Fiscal Years Ended February 2, 2008,
    February 3, 2007 and January 28, 2006
    (all amounts in thousands, except share and per share amounts,
    unless otherwise indicated)
  1.
    NATURE OF
    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES  Nature of Business e-commerce
      Fiscal Year

Year-End Date


# of Weeks2008


January 31, 2009



522007


February 2, 2008



522006


February 3, 2007



532005


January 28, 2006



52   Principles of Consolidation
  Basis of Presentation
  Use of Estimates
  Fair Value of Financial Instruments
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-7




---



##### Table of Contents



Cash and Cash Equivalents
  Merchandise Inventories (first-in,
  Property and Equipment
  Property Category

Depreciation TermBuildings

39 yearsBuilding improvements

Lesser of remaining estimated useful life of the building or
    estimated useful life of the improvementLeasehold improvements

Lesser of remaining lease term (at inception, generally
    10 years) or estimated useful life of the improvementFurniture, fixtures and equipment

Generally 5 years (ranging from 3 to 15 years),
    depending on the nature of the asset   Goodwill and Other Intangible Assets
  Other Long-Lived Assets
  Insurance Reserves
   F-8Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Income Taxes
    Litigation
  Deferred Lease Incentives 88-1,
  Revenue Recognition
  Fiscal 2007


Fiscal 2006


Fiscal 2005Beginning balance

$
971


$
875


$
763Provisions


29,911



30,264



26,980Usage


(30,093
)


(30,168
)


(26,868
)Ending balance

$
789


$
971


$
875   E-commerce
    Shipping and Handling Revenues and Expenses 00-10,
  Customer Loyalty Programs EITF 00-22, dollar-for-dollar
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-9




---



##### Table of Contents



Cost of Goods Sold, including Buying, Distribution and
    Occupancy Costs
  Vendor Allowances EITF 02-16,
  Straight-Line Rent FTB 85-3, (FSP) 13-1, FSP 13-1,
  Selling, General and Administrative Expenses
  Advertising Costs
  Stock-Based Compensation
     F-10Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Fiscal 2005Net income, as reported

$
126,212Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects


(7,141
)Pro forma net income

$
119,071Earnings Per ShareBasic, as reported

$
1.69Basic, pro forma

$
1.59Diluted, as reported

$
1.67Diluted, pro forma

$
1.58   Earnings per Share
  Fiscal Year2007

2006

2005Incremental shares





369,269


954,919Anti-dilutive options and non-vested shares


2,308,227


2,376,996


1,692,613     Comprehensive Operations
    Vendor and Merchandise Concentrations
  Merchandise Category

Fiscal 2007

Fiscal 2006

Fiscal 2005Young Mens Apparel


38%


37%


35%Juniors Apparel


33%


29%


29%Accessories


17%


20%


20%Footwear


12%


14%


16%Total


100%


100%


100%    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-11




---



##### Table of Contents



New Accounting Pronouncements
      EITF 95-3
    2.
    STORE CLOSURES
    AND IMPAIRMENT OF LONG-LIVED ASSETS  Form 8-K,
   F-12Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Fiscal 2007

Fiscal 2006PacSun

$
829

$
1,124demo


49,067


22,401Total

$
49,896

$
23,525   3.
    DISCONTINUED
    OPERATIONS  ONE THOUSAND STEPS  Form 8-K,
  4.
    SEGMENT
    REPORTING  E-commerce
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-13




---



##### Table of Contents



Fiscal 2007:

PacSun

demo

Corporate


TotalNet Sales

$
1,305,853

$
148,310


n/a


$
1,454,163% of Total Sales


90%


10%


n/a



100%Comparable Store Sales%


3.4%


(19.6)%


n/a



0.7%Income (Loss) from Continuing Operations before Income Taxes

$
218,618

$
(106,033)

$
(145,976
)

$
(33,390)Total Assets

$
428,012

$
17,816

$
306,315


$
752,143Number of Stores


954


153


n/a



1,107Square Footage (in 000s)


3,659


438


n/a



4,097   Fiscal 2006:

PacSun

demo

Corporate

TotalNet Sales

$
1,241,242

$
200,731


n/a

$
1,441,973% of Total Sales


86%


14%


n/a


100%Comparable Store Sales%


(4.2)%


(7.9)%


n/a


(4.7)%Income (Loss) from Continuing Operations before Income Taxes

$
226,398

$
(31,249)

$
(123,873)

$
71,276Total Assets

$
437,431

$
94,915

$
240,897

$
773,243Number of Stores


965


225


n/a


1,190Square Footage (in 000s)


3,664


636


n/a


4,300   Fiscal 2005:

PacSun

demo

Corporate

TotalNet Sales

$
1,205,937

$
185,536


n/a

$
1,391,473% of Total Sales


87%


13%


n/a


100%Comparable Store Sales%


3.5%


1.1%


n/a


3.2%Income (Loss) from Continuing Operations before Income Taxes

$
293,952

$
18,765

$
(109,771)

$
202,946Total Assets

$
413,863

$
96,515

$
297,183

$
807,561Number of Stores


907


198


n/a


1,105Square Footage (in 000s)


3,389


542


n/a


3,931   e-commerce. e-commerce.
    5.
    STOCK
    COMPENSATION    F-14Pacific
    Sunwear of California, Inc. Form 10-K 2007




---



##### Table of Contents



Fiscal Year2007

2006Stock Awards

ESPP

Stock Awards

ESPP

2005Expected Option Life

4 years

0.5 years

5 years

0.5 years

5 yearsStock Volatility

34.7% - 37.9%

31.9% - 45.4%

41.3% - 48.7%

31.9% - 35.4%

36.9% - 56.7%Risk-free Interest Rates

3.1% - 4.9%

3.2% - 5.0%

4.6% - 5.1%

4.5% - 5.2%

3.9% - 4.5%Expected Dividends

None

None

None

None

None            Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-15




---



##### Table of Contents



Weighted-Weighted-

Average

AggregateAverage

Remaining

IntrinsicExercise

Contractual

ValueStock Options

Shares


Price

Term (Yrs.)

($000s)Outstanding at February 3, 2007


2,931,920


$19.43Granted


792,000


19.62Exercised


(349,377
)

9.53Forfeited or expired


(552,749
)

23.28Outstanding at February 2, 2008


2,821,794


$19.96

4.77

$748Vested and expected to vest at February 2, 2008


2,364,398


$19.86

4.56

$748Exercisable at February 2, 2008


1,775,969


$19.39

4.21

$748       Options Outstanding

Options ExercisableWeighted

Weighted



WeightedAverage

Average



AverageNumber

Remaining

Exercise

Number

ExerciseRange of Exercise
    Prices

Outstanding

Contractual Life

Price

Exercisable

Price$ 6.49  $10.78

282,559

1.99

$
9.28

282,559

$
9.2810.83  14.21

301,199

4.22


13.14

251,553


12.9314.50  18.66

104,874

5.62


16.25

62,000


15.8218.67  19.10

302,196

6.30


19.10

89,364


19.0919.16  20.52

282,171

5.61


20.01

138,898


20.1920.63  20.86

283,537

6.15


20.86

6,208


20.7520.97  22.32

286,060

4.48


21.58

249,770


21.5222.44  23.60

283,999

5.00


22.77

146,499


22.8323.68  25.71

285,208

5.41


24.67

246,709


24.6826.46  28.90

409,991

3.80


26.89

302,409


26.88$ 6.49  $28.90

2,821,794

4.77

$
19.96

1,775,969

$
19.39     Weighted-AverageGrant-DateNon-vested Shares

Shares


Fair ValueOutstanding at February 3, 2007


327,387


$
19.85Granted


637,864



18.90Vested


(51,231
)


19.75Forfeited or expired


(144,945
)


20.16Outstanding at February 2, 2008


769,075


$
19.01      F-16Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Employee Stock Purchase Plan
    (ESPP)
  6.
    INCOME
    TAXES    Fiscal 2007


Fiscal 2006


Fiscal 2005Current income taxes:Federal

$
2,660


$
34,781


$
72,602State


1,233



5,374



7,9923,893



40,155



80,594Deferred income taxes:Federal


(13,087
)


(10,336
)


(4,117
)State


(5,626
)


(2,415
)


257(18,713
)


(12,751
)


(3,860
)Total income tax (benefit)/expense

$
(14,820
)

$
27,404


$
76,734       Fiscal 2007


Fiscal 2006

Fiscal 2005Provision for income taxes at statutory rate

$
(11,687
)

$
24,947

$
71,031State income taxes,net of federal income tax benefit


(3,337
)


1,923


5,362Life insurance proceeds


(1,215
)





Other


1,419



534


341Total income tax (benefit)/expense

$
(14,820
)

$
27,404

$
76,734    Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-17




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##### Table of Contents



February 2,


February 3,2008


2007Current net deferred tax asset

$
12,179


$
7,291Long-term net deferred tax asset/(liability)


15,231



(463
)Overall net deferred tax asset

$
27,410


$
6,828Components:Depreciation and amortization

$
(31,853
)

$
(50,509
)Deferred lease incentives


31,004



37,836State income taxes


(3,121
)


(143
)Inventory cost capitalization


2,610



3,075Sublease loss reserves


661



543Deferred rent


8,148



8,023Deferred and stock-based compensation


5,244



4,591Lease termination liabilities


1,658



Net operating loss and tax credit carry forward


4,664



Other


8,395



3,412$
27,410


$
6,828           Unrecognized tax benefits, Opening Balance

$
2,444Gross increases  tax positions in prior period


295Gross decreases  tax positions in prior period


(542
)Gross increases  tax positions in current period


1Settlements


Lapse of statute of limitations


(546
)Unrecognized tax benefits, Ending Balance

$
1,652      F-18Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



7.
    OTHER CURRENT
    ASSETS    February 2,

February 3,2008

2007Prepaid expenses

$
25,228

$
27,748Deferred income taxes


12,179


7,291Non-trade accounts receivable


10,211


11,216Income taxes receivable


5,200


Total other current assets

$
52,818

$
46,255   8.
    PROPERTY AND
    EQUIPMENT, NET    February 2,


February 3,2008


2007Leasehold improvements

$
310,654


$
346,084Furniture, fixtures and equipment


303,924



310,063Buildings and building improvements


47,768



27,292Land


25,895



25,335Total gross property and equipment


688,241



708,774Less accumulated depreciation


(311,998
)


(287,888
)Property and equipment, net

$
376,243


$
420,886   9.
    CREDIT
    FACILITY     Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-19




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##### Table of Contents



10.
    OTHER CURRENT
    LIABILITIES    February 2,

February 3,2008

2007Accrued compensation and benefits

$
21,619

$
15,529Accrued gift cards


15,493


14,007Accrued capital expenditures


7,444


13,802Accrued lease terminations


3,958


Sales taxes payable


3,024


4,771Income taxes payable





8,706Other current liabilities


19,569


17,137$
71,107

$
73,952   11.
    INDUSTRIAL
    REVENUE BOND TRANSACTION  OLATHE, KANSAS      10-year
  12.
    COMMITMENTS AND
    CONTINGENCIES  Operating Leases
   F-20Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



Fiscal year ending:January 31, 2009

$
126,732January 30, 2010


89,311January 29, 2011


81,924February 3, 2012


68,971February 2, 2013


56,005Thereafter


133,323Total future operating lease commitments

$
556,266       Litigation
  Indemnities, Commitments, and Guarantees
   Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-21




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##### Table of Contents



Letters of Credit
  Accrued Sublease Loss Charges
  Lease Guarantee
  13.
    COMMON
    STOCK  Common Stock Repurchase and Retirement
  Shareholder Rights Plan
  14.
    RETIREMENT
    PLANS     F-22Pacific
    Sunwear of California, Inc. Form 10-K 2007




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##### Table of Contents



15.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    First


Second


Third


FourthFISCAL YEAR ENDED FEBRUARY 2, 2008:

Quarter


Quarter


Quarter


QuarterNet sales

$
319,324


$
342,853


$
371,844


$
420,142Gross margin


83,229



92,746



111,971



119,230Operating (loss)/income


(7,862
)


(5,913
)


(36,203
)


13,576(Loss)/income


(4,268
)


(2,827
)


(19,101
)


7,625(Loss)/income per share, basic

$
(0.06
)

$
(0.04
)

$
(0.27
)

$
0.11(Loss)/income per share, diluted

$
(0.06
)

$
(0.04
)

$
(0.27
)

$
0.11Wtd. avg. shares outstanding, basic


69,578,259



69,692,827



69,765,113



69,961,943Wtd. avg. shares outstanding, diluted


69,578,259



69,692,827



69,765,113



70,069,528FISCAL YEAR ENDED FEBRUARY 3,
    2007:Net sales

$
299,713


$
312,659


$
373,821


$
455,780Gross margin


97,621



97,792



106,647



146,240Operating income


17,902



15,642



15,132



17,979Net income


12,201



10,355



9,797



11,518Net income per share, basic

$
0.17


$
0.15


$
0.14


$
0.17Net income per share, diluted

$
0.17


$
0.14


$
0.14


$
0.16Wtd. avg. shares outstanding, basic


73,144,277



71,335,467



69,344,402



69,481,032Wtd. avg. shares outstanding, diluted


73,711,710



71,866,482



69,561,420



69,815,699      Pacific
    Sunwear of California, Inc. Form 10-K
    2007     F-23




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##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibit #

Description of Exhibit3
.1

Third Amended and Restated Articles of Incorporation of the
    Company(7)3
.2

Certificate of Determination of Preferences of Series A
    Junior Participating Preferred Stock of the
    Company(3)3
.3

Third Amended and Restated Bylaws of the Company, as
    amended(30)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

Pacific Sunwear of California, Inc. Executive Deferred
    Compensation Plan and
    Trust Agreement(2)*10
.3

Amended and Restated 1992 Stock Award Plan dated June 8,
    1999(5)*10
.4

Amended and Restated Pacific Sunwear of California, Inc. 1999
    Stock Award Plan dated March 24,
    2004(6)*10
.5

Pacific Sunwear of California, Inc. 2005 Performance Incentive
    Plan(13)*10
.6

Amended and Restated Pacific Sunwear of California, Inc.
    Employee Stock Purchase Plan dated November 17,
    2004(10)*10
.7

Form of Performance-Based Bonus Award
    Agreement(10)*10
.8

Form of Notice of Director Stock Appreciation Right Award
    Agreement(17)*10
.9

Form of Notice of Employee Stock Appreciation Right Award
    Agreement(17)*10
.10

Form of Notice of Employee Restricted Stock Award
    Agreement(17)*10
.11

Pacific Sunwear of California, Inc. Executive Severance
    Plan(30)*10
.12

Severance Agreement, dated November 22, 2004, between the
    Company and Gerald M.
    Chaney(9)*10
.13

Resignation Agreement, dated November 26, 2007, between the
    Company and Gerald M.
    Chaney(29)*10
.14

Employment Agreement, dated April 1, 2005 between the
    Company and Thomas M.
    Kennedy(11)*10
.15

Amendment No. 1, dated December 14, 2006, to the
    Employment Agreement between the Company and Thomas M.
    Kennedy(20)*10
.16

Amendment No. 2, dated September 28, 2007, to the
    Employment Agreement between the Company and Thomas M.
    Kennedy(30)*10
.17

Severance Agreement, dated February 15, 2005, between the
    Company and Lou Ann
    Bett(12)*10
.18

Retention Bonus Agreement, dated October 29, 2007, between
    the Company and Lou Ann
    Bett(27)*10
.19

Offer of Employment, dated October 3, 2005, between the
    Company and Wendy E.
    Burden(15)*10
.20

Employee Separation and General Release Agreement, dated
    June 19, 2007, between the Company and Wendy E.
    Burden(24)*10
.21

Summary of Compensation Arrangements for Sally Frame Kasaks,
    Interim Chief Executive
    Officer(19)*10
.22

Employment Agreement, dated as of May 22, 2007, between the
    Company and Sally Frame
    Kasaks(22)*10
.23

Form of Stock Appreciation Rights Agreement between the Company
    and Sally Frame
    Kasaks(22)*10
.24

Form of Restricted Stock Unit Award Agreement between the
    Company and Sally Frame
    Kasaks(22)*10
.25

Summary of Board of Directors Compensation, May
    2007(23)*10
.26

Summary of Named Executive Officers Annual Compensation for
    fiscal 2008*+10
.27

Rights Agreement, dated as of December 16, 1998, between
    the Company and U.S. Stock Transfer
    Corporation(4)10
.28

Amendment No. 1 to Rights Agreement dated June 18,
    2004(7)10
.29

Credit Agreement, dated September 14, 2005, between the
    Company and the lenders
    thereto(14)10
.30

Amendment No. 1 to Credit Agreement, dated October 12,
    2006, between the Company and JPMorgan Chase Bank, N.A., as
    Administrative Agent, and a syndicate of other
    lenders(18)10
.31

Amendment No. 2 to Credit Agreement, dated February 2,
    2007, between the Company and JPMorgan Chase Bank, N.A., as
    Administrative Agent, and a syndicate of other
    lenders(21)10
.32

Amendment No. 3 to Credit Agreement, dated July 27,
    2007, between the Company and JPMorgan Chase Bank, N.A., as
    Administrative Agent, and a syndicate of other
    lenders(26)10
.33

Amendment No. 4 to Credit Agreement, dated October 31,
    2007, between the Company and JPMorgan Chase Bank, N.A., as
    Administrative Agent, and a syndicate of other
    lenders(28)10
.34

Amendment No. 5 to Credit Agreement, dated February 1,
    2008, between the Company and JPMorgan Chase Bank, N.A., as
    Administrative Agent, and a syndicate of other
    lenders(31)10
.35

Trust Indenture, dated as of July 17, 2007, between
    the City of Olathe, Kansas and U.S. Bank National Association,
    as
    Trustee(25)10
.36

Lease Agreement, dated as of July 17, 2007, between the
    City of Olathe, Kansas and Pacific Sunwear Stores
    Corp.(25)21


Subsidiaries of the Registrant




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##### Table of Contents



Exhibit #

Description of Exhibit23
.1

Consent of Independent Registered Public Accounting Firm31


Written statements of Sally Frame Kasaks and Michael L. Henry
    pursuant to section 302 of the Sarbanes-Oxley Act of 200232


Written statement of Sally Frame Kasaks and Michael L. Henry
    pursuant to section 906 of the Sarbanes-Oxley Act of 2002   Note
    References
  Form S-1 (No. 33-57860)
  Form 10-K
  Form 8-K
  Form 8-A
  Form 10-K
  Form 10-Q
  Form 10-Q
  Form 8-K
  Form 8-K
  Form 10-Q
  Form 10-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 10-Q
  Form 8-K
  Form 8-K
  Form 8-K
  Form 10-Q
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
  Form 10-Q
  Form 8-K