SPCH Sport Chalet (MM)

Sport Chalet Reports First Quarter Results LOS ANGELES, July 28 /PRNewswire-FirstCall/ -- Sport Chalet, Inc. (NASDAQ:SPCH) announced the results for its first quarter ended June 30, 2004. Sales increased 15.4%, from $53.3 million for the quarter ended June 30, 2003 to $61.5 million for the same quarter this year. The increase is the result of opening three new stores in late Fall 2003, as well as a same store sales increase of 6.1%. Gross profit margin increased from 27.7% for the quarter ended June 30, 2003 to 28.8% for the same quarter 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, decreased primarily due to the increase in same store sales, as well as labor savings and lower advertising expenses, partially offset by an increase in workers' compensation expense. As a result, net income increased $0.12 per diluted share from a loss of $593,000, or $0.09 per diluted share, in the first quarter last year to income of $245,000, or $0.03 per diluted share, for the same quarter this year. Commenting on the results, Craig Levra, Chairman and CEO said, "We are pleased to begin the fiscal year with a strong first quarter and a significant improvement over last year. We again managed inventory effectively while achieving a same store sales increase of 6.1%, increasing our gross profit margin 110 basis points and reducing our average inventory per store by 2.1%." Mr. Levra concluded, "During July, we helped solidify our team sales business and strengthened our operating platform by acquiring Bassco Sporting Goods, a Southern California based team dealer with nearly 20 years of team sales expertise." The Company will hold its annual stockholder's meeting at the Sport Chalet Corporate Offices at One Sport Chalet Drive, La Canada, California on Monday, August 2, 2004 at 9:00 a.m. 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 31 locations. The address for Sport Chalet's web site is http://www.sportchalet.com/. 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 Company's specific market areas, inflation, the challenge of implementing the Company's expansion plans in Northern California, 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 OPERATIONS (UNAUDITED) Three months ended June 30, 2004 2003 Net sales $61,538,119 $53,309,276 Cost of goods sold, buying and occupancy 43,839,441 38,536,263 Gross profit 17,698,678 14,773,013 Selling, general and administrative expenses 17,236,355 15,721,469 Income (loss) from operations 462,323 (948,456) Interest expense (43,291) (34,010) Income (loss) before taxes 419,032 (982,466) Income tax provision (benefit) 174,000 (389,000) Net income (loss) $245,032 $(593,466) Earnings (loss) per share: Basic $0.04 $(0.09) Diluted $0.03 $(0.09) Weighted average number of common shares outstanding: Basic 6,673,534 6,629,667 Diluted 7,190,852 6,629,667 SPORT CHALET, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, March 31, 2004 2004 (Unaudited) Assets Current assets: Cash $1,530,938 $3,071,648 Accounts receivable, less allowance of $30,000 1,015,778 1,158,934 Merchandise inventories 64,521,890 54,172,055 Prepaid expenses and other current assets 2,478,926 2,202,036 Deferred income taxes 2,412,173 2,443,945 Total current assets 71,959,705 63,048,618 Furniture, equipment and leasehold improvements-net 29,706,263 29,467,976 Deferred income taxes 614,101 83,704 Other assets 93,019 101,036 Total assets $102,373,088 $92,701,334 Liabilities and stockholders' equity Current liabilities: Accounts payable 19,466,625 11,131,473 Salaries and wages payable 3,347,569 3,354,368 Income taxes payable 366,328 35,631 Other accrued expenses 8,449,941 7,830,961 Total current liabilities 31,630,463 22,352,433 Deferred rent 5,924,790 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 -- 6,673,534 at June 30, 2004 and March 31, 2004 66,735 66,735 Additional paid-in capital 22,872,834 22,830,906 Retained earnings 41,878,266 41,633,234 Total stockholders' equity 64,817,835 64,530,875 Total liabilities and stockholders' equity $102,373,088 $92,701,334 SPORT CHALET, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended June 30, 2004 2003 Operating activities Net income (loss) $245,032 $(593,466) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,840,892 1,452,000 Loss on disposal of furniture, equipment and leasehold improvements -- 244,821 Deferred income taxes (498,625) (227,352) Tax benefit on employee stock options 41,928 2,257 Changes in operating assets and liabilities: Accounts receivable 143,156 314,006 Merchandise inventories (10,349,835) (8,614,079) Prepaid expenses and other current assets (276,890) (234,191) Refundable income taxes -- (263,906) Bank overdraft -- 1,190,640 Accounts payable 8,335,152 9,594,563 Salaries and wages payable (6,799) 599,409 Income taxes payable 330,697 -- Other accrued expenses 618,980 830,089 Deferred rent 106,764 166,741 Net cash provided by operating activities 530,452 4,461,532 Investing activities Purchase of furniture, equipment and leasehold improvements (2,079,179) (2,192,387) Other assets 8,017 6,275 Net cash used in investing activities (2,071,162) (2,186,112) Financing activities Proceeds from exercise of stock options -- 8,875 Net cash provided by financing activities -- 8,875 Increase (decrease) in cash and cash equivalents (1,540,710) 2,284,295 Cash and cash equivalents at beginning of period 3,071,648 4,230,003 Cash and cash equivalents at end of period $1,530,938 $6,514,298 Supplemental Disclosure of Cash Flow Information Cash paid during the period for: Income taxes $300,000 $100,000 Interest -- -- DATASOURCE: Sport Chalet, Inc. CONTACT: Howard Kaminsky, Exec. VP-CFO of Sport Chalet, Inc., +1-818-949-5386 Web site: http://www.sportchalet.com/

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