SPCH Sport Chalet (MM)

Sport Chalet Reports Fourth Quarter and Year End Results LOS ANGELES, June 28 /PRNewswire-FirstCall/ -- Sport Chalet, Inc. (NASDAQ:SPCH) today announced the results for its fiscal year ended March 31, 2005. Sales increased 17.0%, from $264.2 million last year to $309.1 million this year. The increase is the result of opening five new stores this year and three last year, as well as a same store sales increase of 5.7%. The same store sales increase is due to better inventory assortments compared to the same period last year and increased customer traffic from the appeal of winter related merchandise. Sales of winter related merchandise were driven by record winter weather conditions at the resorts frequented by our customers. Same store sales excluding winter related products increased 4.7%. Gross profit margin increased from 30.3% last year to 30.9% this year primarily due to a strong winter season, which reduced the need for markdowns as well as reduced costs from more efficient inbound logistics. Selling, general and administrative expenses ("SG&A"), as a percentage of sales, increased slightly from 27.4% last year to 27.5% this year primarily from approximately $1.5 million in: (i) increased litigation reserves and (ii) professional fees primarily associated with the recapitalization plan announced today in a separate release. This increase was partially offset by a decrease in workers' compensation expense due to a significant reduction in claim activity resulting from the implementation of a new safety program. Net income increased $1.5 million, or 32.9%, from $4.6 million, or $0.66 per diluted share last year, to $6.2 million, or $0.88 per diluted share this year. For the fourth quarter ended March 31, 2005, sales increased 14.1%, from $69.4 million last year to $79.2 million this year. The increase is the result of opening five new stores in fiscal 2005, as well as a same store sales increase of 4.4%. Comparable store sales excluding winter related products increased 4.1%. Gross profit margin increased from 29.5% to 30.8% due to increased sales of higher margin apparel combined with a reduction in end-of-season markdowns as record winter weather conditions increased customer demand for winter related products. SG&A, as a percentage of sales, increased from 28.8% to 29.3% primarily from approximately $1.2 million in: (i) increased litigation reserves and (ii) professional fees primarily associated with the recapitalization plan. This increase was partially offset by a decrease in workers' compensation expense due to a significant reduction in claim activity resulting from the implementation of a new safety program. Net income increased $392,000, or 118.8%, from $330,000, or $0.05 per diluted share, for the quarter ended March 31, 2004, to $722,000, or $0.10 per diluted share, for the same quarter this year. Commenting on the results, Craig Levra, Chairman and CEO said, "Our outstanding results for the quarter and the fiscal year reflect the consistent and effective execution of our strategic plan. The entire Sport Chalet team contributed to a very successful year during which we made strides in both enhancing our operational performance and implementing our growth plans. As we expand into Arizona in the new fiscal year, we believe we are well positioned for continued strong performance. "As we announced in a separate release today, the Company's board of directors has proposed a recapitalization plan that is designed to facilitate the orderly transition of control from Norbert Olberz, the principal stockholder, to the Company's management and increase financial flexibility for the Company and its stockholders. The proposed recapitalization plan retains current stockholders' existing voting interests and allows management to maintain our strong culture and continue to focus on our growth strategy. Overall, we are pleased with our results for fiscal 2005 and encouraged about the direction of our business. We remain committed to our strategy to generate long-term top and bottom line growth and increase stockholder value." The Company's Form 10-K with full financial statements will be available before June 30, 2005. Proposed Recapitalization Plan Sport Chalet also announced today in a separate release that its board of directors has proposed a recapitalization plan designed to facilitate the orderly transition of control from Norbert Olberz, the principal stockholder, to the Company's management and increase financial flexibility for the Company and its stockholders. The recapitalization plan includes transferring a portion of founder Norbert Olberz's Sport Chalet ownership to Craig Levra, Chairman and Chief Executive Officer, and Howard Kaminsky, Chief Financial Officer, and allows current stockholders to retain existing ownership and voting interests. Teleconference and Webcast Information Sport Chalet will host a conference call and webcast today at 2:00 p.m. Pacific Daylight Time/5:00 p.m. Eastern Daylight Time to discuss the proposed recapitalization plan. To access the call, please dial 800-821-1449 (domestic) or 973-409-9262 (international), using conference ID Sport Chalet. A replay of the conference call will be available for 14 days through July 12, 2005 and can be accessed by dialing 877-519-4471 (domestic) or 973-341-3080 (international), using pin number 6220516. The conference call will also be simultaneously webcast at the following address: http://phx.corporate-ir.net/playerlink.zhtml?c=119568&s=wm&e=1090729. An archive of the webcast will be accessible at the same address for 14 days through July 12, 2005. About Sport Chalet, Inc. Sport Chalet, founded in 1959 by Norbert Olberz, is a leading operator of full service specialty sporting goods stores 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/. 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 effect of the recapitalization plan on the Company's stock price, 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 Three months ended Year ended March 31, March 31, 2005 2004 2005 2004 Net sales $79,172,304 $69,404,267 $309,089,551 $264,236,923 Cost of goods sold, buying and occupancy 54,822,746 48,898,721 213,428,269 184,046,770 Gross profit 24,349,558 20,505,546 95,661,282 80,190,153 Selling, general and administrative expenses 23,161,970 19,970,500 85,144,702 72,360,528 Income from operations 1,187,588 535,046 10,516,580 7,829,625 Interest expense 26,774 27,854 263,523 189,924 Income before taxes 1,160,814 507,192 10,253,057 7,639,701 Income tax provision 439,088 177,050 4,082,000 2,995,625 Net income $721,726 $330,142 $6,171,057 $4,644,076 Earnings per share: Basic $0.11 $0.05 $0.92 $0.70 Diluted $0.10 $0.05 $0.88 $0.66 Weighted average number of common shares outstanding: Basic 6,680,493 6,645,667 6,680,493 6,645,667 Diluted 7,003,686 7,008,380 7,003,686 7,008,380 SPORT CHALET, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2005 2004 Assets Current assets: Cash and cash equivalents $6,176,689 $3,071,648 Accounts receivable, less allowance of $182,000 in 2005 and $65,000 in 2004 1,462,042 1,208,934 Merchandise inventories 65,061,142 54,172,055 Prepaid expenses and other current assets 3,044,153 2,202,036 Deferred income taxes 3,915,079 2,443,945 Total current assets 79,659,105 63,098,618 Furniture, equipment and leasehold improvements: Furniture, fixtures and office equipment 31,175,598 27,503,694 Rental equipment 4,454,223 3,955,873 Vehicles 307,366 610,413 Leasehold improvements 33,583,082 26,186,004 69,520,269 58,255,984 Less allowance for depreciation and amortization 32,017,691 27,633,846 37,502,578 30,622,138 Deferred income tax 1,550,753 1,234,729 Other assets 76,960 101,036 Total assets $118,789,396 $95,056,521 Liabilities and stockholders' equity Current liabilities: Accounts payable $20,883,973 $11,131,473 Salaries and wages payable 5,080,320 3,354,368 Income taxes payable 825,059 35,631 Other accrued expenses 9,753,575 7,830,961 Total current liabilities 36,542,927 22,352,433 Deferred rent 13,136,303 9,893,581 Commitments and contingencies 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 - 6,686,368 in 2005 and 6,673,534 in 2004 66,864 66,735 Additional paid-in capital 22,959,379 22,830,906 Retained earnings 46,083,923 39,912,866 Total stockholders' equity 69,110,166 62,810,507 Total liabilities and stockholders' equity $118,789,396 $95,056,521 SPORT CHALET, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended March 31, 2005 2004 Operating activities Net income $6,171,057 $4,644,076 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,692,015 6,446,657 Loss on disposal of equipment 360,761 354,608 Stock compensation -- 448,918 Deferred income taxes (1,787,158) (1,073,494) Tax benefit on employee stock options 69,244 34,498 Changes in operating assets and liabilities: Accounts receivable (253,108) (68,415) Merchandise inventories (10,889,087) (3,285,425) Prepaid expenses and other current assets (842,117) (163,448) Refundable income taxes -- 58,990 Bank overdraft -- (5,764,355) Accounts payable 9,752,500 1,778,029 Salaries and wages payable 1,725,952 1,163,033 Other accrued expenses 1,922,614 2,789,208 Income taxes payable 789,428 35,631 Deferred rent 3,242,722 209,066 Net cash provided by operating activities 17,954,823 7,607,577 Investing activities Purchases of furniture, equipment and leasehold improvements (15,197,322) (9,001,374) Other assets 24,076 8,869 Proceeds from sales of assets 264,106 -- Net cash used in investing activities (14,909,140) (8,992,505) Financing activities Proceeds from bank borrowings 10,700,000 10,225,000 Repayment of bank borrowings (10,700,000) (10,225,000) Proceeds from exercise of stock options 59,358 226,573 Net cash provided by financing activities 59,358 226,573 Increase (decrease) in cash and cash equivalents 3,105,041 (1,158,355) Cash and cash equivalents at beginning of year 3,071,648 4,230,003 Cash and cash equivalents at end of year $6,176,689 $3,071,648 Cash paid during the year for: Income taxes $3,624,000 $3,940,000 Interest 101,512 189,925 DATASOURCE: Sport Chalet, Inc. CONTACT: Howard Kaminsky, Exec. VP-CFO of Sport Chalet, Inc., +1-818-949-5386; or Investors, Cara O'Brien, +1-212-850-5669, or Media, Melissa Merrill, +1-212-850-5651, both of Financial Dynamics, for Sport Chalet, Inc. Web site: http://www.sportchalet.com/

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