SPCH Sport Chalet (MM)

Sport Chalet Reports Best Ever Quarterly Results Third Quarter Net Income Up 23.2% on 20.3% Sales Increase LOS ANGELES, Feb. 8 /PRNewswire-FirstCall/ -- Sport Chalet, Inc. (NASDAQ:SPCH) announced the results for its third quarter ended December 31, 2004. Sales increased 20.3%, from $79.7 million for the quarter ended December 31, 2003 to $95.9 million for the same quarter this year. The increase is the result of opening eight new stores, as well as a same store sales increase of 6.8%. Gross profit margin decreased slightly from 32.6% for the quarter ended December 31, 2003 to 32.5% for the same quarter this year. Selling, general and administrative expenses, as a percentage of sales, decreased from 26.1% for the three months ended December 31, 2003 to 25.7% for the same period this year, as a result of the efficiencies created by the increase in same store sales and reduced workers' compensation expense partially offset by the costs associated with new stores. Net income increased $714,000, or 23.2%, from $3.1 million, or $0.44 per diluted share, in the third quarter last year to $3.8 million, or $0.53 per diluted share, for the same quarter this year. For the nine months ended December 31, 2004, sales increased 18.0%, from $194.8 million last year to $229.9 million for the same period this year. The increase is the result of opening eight new stores as well as a same store sales increase of 6.1%. Gross profit margin increased from 30.4% for the nine months ended December 31, 2003, to 31.0% for the same period this year due to reduced costs from more efficient inbound logistics as well as continued improvements in inventory procurement. Selling, general and administrative expenses, as a percentage of sales, remain unchanged at 26.7% for the nine months ended December 31, 2003 and the same period this year, as a result of the efficiencies created by the increase in same store sales and reduced workers' compensation expense offset by the costs associated with new stores. Net income increased $1.6 million, or 38.6%, from $4.2 million, or $0.61 per diluted share, for the nine months ended December 31, 2003, to $5.8 million, or $0.81 per diluted share, for the same period this year. Sport Chalet's expansion in Northern California continued in the third quarter of this year with the opening of its Elk Grove store. The Company also opened its first Central California location with a store in the city of Visalia and strengthened its primary Southern California market by adding a store location in Arcadia. "I am proud of our entire team who rose to the challenge of opening new stores during a successful holiday season, while achieving the most profitable quarter in the Company's history," said Craig Levra, Sport Chalet's Chairman and Chief Executive Officer. "We believe that the investment in opening new stores will be returned in improved company profitability as the stores mature. In addition, we expect to continue to execute our expansion plan by focusing on Arizona this year with three stores located in Phoenix, Chandler and Scottsdale." Sport Chalet, founded in 1959 by Norbert Olberz, is a leading operator of full service specialty sporting goods superstores in California and Southern Nevada. The Company offers over 40 services for the serious sports enthusiast, including backpacking, canyoneering, and kayaking instruction, custom golf club fitting and repair, ski rental and repair, SCUBA training and certification, SCUBA boat charters, team sales, racquet stringing, and bicycle tune up and repair throughout its current 36 locations. The address for Sport Chalet's web site is http://www.sportchalet.com/. Accounting for Lease Incentives On February 7, 2005, the Office of the Chief Accountant of the SEC (the "OCA") issued a letter regarding lease accounting. The Company has historically treated construction allowances from landlords as a reduction of fixed assets on its balance sheet and a reduction of depreciation expense on its statement of cash flows. In the opinion of the OCA, Statement of Accounting Standards No. 13 and FASB Technical Bulletin No. 88-1 require such landlord reimbursements to be presented on the balance sheet as a deferred credit and the amortization to be a reduction of rent expense. The Company and its independent registered public accounting firm have not yet determined the effect of the OCA's position on the Company's financial statements. However, because the amortization period for the related leasehold improvements approximates the rental period of the leases, the Company does not believe that the OCA's position would have a material effect on the Company's income from operations. Disclosure Regarding Forward-Looking Statements Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the competitive environment in the sporting goods industry in general and in the Company's specific market areas, inflation, the challenge of implementing the Company's expansion plans and maintaining its competitive position, changes in costs of goods and services, the weather and economic conditions in general and in specific market areas. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission. SPORT CHALET, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three months ended Nine months ended December 31, December 31, 2004 2003 2004 2003 Net sales $95,913,947 $79,704,678 $229,917,247 $194,832,656 Cost of goods sold, buying and occupancy 64,743,377 53,743,477 158,572,017 135,585,117 Gross profit 31,170,570 25,961,201 71,345,230 59,247,539 Selling, general and administrative expenses 24,697,260 20,807,415 61,353,517 52,109,629 Income from operations 6,473,310 5,153,786 9,991,713 7,137,910 Interest expense 145,842 72,314 236,749 162,070 Income before taxes 6,327,468 5,081,472 9,754,964 6,975,840 Income tax provision 2,529,000 1,997,000 3,908,000 2,757,000 Net income $3,798,468 $3,084,472 $5,846,964 $4,218,840 Earnings per share: Basic $0.57 $0.46 $0.88 $0.64 Diluted $0.53 $0.44 $0.81 $0.61 Weighted average number of common shares outstanding: Basic 6,675,534 6,650,801 6,679,631 6,635,730 Diluted 7,226,357 7,028,838 7,212,034 6,960,235 SPORT CHALET, INC. CONDENSED CONSOLIDATED BALANCE SHEETS December 31, March 31, 2004 2004 (Unaudited) Assets Current assets: Cash $6,894,585 $3,071,648 Accounts receivable, less allowance of $300,000 at December 31, 2004 and $30,000 at March 31, 2004 4,595,010 1,158,934 Merchandise inventories 75,407,922 54,172,055 Prepaid expenses and other current assets 3,180,961 2,202,036 Deferred income taxes 2,294,721 2,443,945 Total current assets 92,373,199 63,048,618 Furniture, equipment and leasehold improvements -- net 35,183,824 29,467,976 Deferred income taxes 193,961 83,704 Other assets 81,780 101,036 Total assets $127,832,764 $92,701,334 Liabilities and stockholders' equity Current liabilities: Accounts payable $33,642,637 $11,131,473 Salaries and wages payable 3,856,777 3,354,368 Income taxes payable 1,837,090 35,631 Other accrued expenses 11,917,418 7,830,961 Total current liabilities 51,253,922 22,352,433 Deferred rent 6,082,486 5,818,026 Stockholders' equity Preferred stock, $.01 par value: Authorized shares -- 2,000,000 Issued and outstanding shares -- none -- -- Common stock, $.01 par value: Authorized shares -- 15,000,000 Issued and outstanding shares -- 6,682,701 at December 31, 2004 and 6,673,534 at March 31, 2004 66,827 66,735 Additional paid-in capital 22,949,331 22,830,906 Retained earnings 47,480,198 41,633,234 Total stockholders' equity 70,496,356 64,530,875 Total liabilities and stockholders' equity $127,832,764 $92,701,334 SPORT CHALET, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine months ended December 31, 2004 2003 Operating activities Net income $5,846,964 $4,218,840 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,535,987 4,498,396 Loss on disposal of furniture, equipment and leasehold improvements 205,094 301,648 Deferred income taxes 38,967 (546,250) Tax benefit on employee stock options 69,244 29,951 Changes in operating assets and liabilities: Accounts receivable (3,436,076) (361,162) Merchandise inventories (21,235,867) (20,012,117) Prepaid expenses and other current assets (978,925) (561,007) Refundable income taxes -- 58,990 Accounts payable 22,511,164 13,263,385 Salaries and wages payable 502,409 2,202,365 Income taxes payable 1,801,459 2,334,309 Other accrued expenses 4,086,457 7,057,016 Deferred rent 264,460 413,807 Net cash provided by operating activities 15,211,337 12,898,171 Investing activities Purchase of furniture, equipment and leasehold improvements (11,456,929) (6,657,452) Other assets 19,256 7,106 Net cash used in investing activities (11,437,673) (6,650,346) Financing activities Proceeds from exercise of stock options 49,273 166,197 Net cash provided by financing activities 49,273 166,197 Increase in cash and cash equivalents 3,822,937 6,414,022 Cash and cash equivalents at beginning of period 3,071,648 4,230,003 Cash and cash equivalents at end of period $6,894,585 $10,644,025 Supplemental Disclosure of Cash Flow Information Cash paid during the period for: Income taxes $1,998,000 $880,000 Interest 101,512 64,288 DATASOURCE: Sports Chalet, Inc. CONTACT: Howard Kaminsky, Exec. VP-CFO of Sports Chalet, Inc., +1-818-949-5386 Web site: http://www.sportchalet.com/

Copyright