Sport Chalet, Inc. announced that, as a result of a clarification issued by the Securities and Exchange Commission (“SEC”) on February 7, 2005 affecting many retail companies, the company has reviewed and corrected its lease accounting practices to (a) treat construction allowances from landlords as deferred rent liabilities instead of a reduction in fixed assets and capital expenditures, (b) revise the amortization period for leasehold improvements in certain situations, and (c) commence expensing of rent at the date the company occupies the leased premises (generally for the build-out period) rather than the date of the store opening. Based on this review, the company expects to restate its previously filed annual and quarterly financial statements as applicable.
The effect on the company's previously released Consolidated Statements of Income will be an increase in net income of $97,000 for the fiscal year ended March 31, 2004, and a reduction of net income of $117,000 and $353,000 for the fiscal years ended March 31, 2003 and March 31, 2002, respectively. The impact on previously released earnings per share is expected to be an increase of $0.01 for the fiscal year ended March 31, 2004, and a reduction in earnings per share of $0.02 and $0.05 for the fiscal years ended March 31, 2003 and March 31, 2002, respectively. The restatement of previously issued consolidated financial statements will not have an impact on total net cash flows during any of the periods amended.
The company's previously issued consolidated financial statements, including those in the company's Annual Report on Form 10-K for the year ended March 31, 2004 and in the company's Quarterly Reports on Forms 10-Q for the quarters ended June 30, 2004, September 30, 2004 and December 31, 2004, should no longer be relied upon. For additional information, refer to Form 8-K filed concurrently with this press release.
