SPCH Sport Chalet (MM)

Sport Chalet Reports Fourth Quarter, Year End Results and Continued Expansion LOS ANGELES, May 25 /PRNewswire-FirstCall/ -- Sport Chalet, Inc. announced the results for its fiscal year ended March 31, 2004. Sales increased 11.0% from $238.0 million last year to $264.2 million this year. The increase is the result of opening three stores this year and two last year, in addition to a comparable store sales increase of 3.7%. The comparable store sales increase reflects an improved economic climate and more seasonable winter weather conditions at the resorts frequented by the Company's customers. Net income increased 9.3% from $4.2 million, or $0.60 per diluted share last year, to $4.5 million, or $0.65 per diluted share this year, primarily due to increased sales and improved gross profit as a percent of sales, partially offset by increased workers' compensation expense and the effect of a stock award directly from the Company's founder to certain executives of the Company. This stock award, which resulted in additional compensation expense of approximately $800,000 or $0.07 per diluted share, had no significant effect on the Company's cash flow. For the fourth quarter ended March 31, 2004, sales increased 19.2% from $58.2 million to $69.4 million. The increase resulted from the opening of three stores in fiscal 2004, in addition to a comparable store sales increase of 10.5%. For the quarter ended March 31, 2004, net income increased 516.0% from $53,000, or $0.01 per diluted share, to $328,000, or $0.05 per diluted share, primarily due to increased sales and improved gross profit as a percent of sales, partially offset by increased workers' compensation expense and the effect of the stock award. Commenting on the results, Craig Levra, Chairman and CEO said, "Coming off a very tough first quarter, I am proud our team worked so hard to improve the results of the subsequent three quarters. The retail climate is improving, and we are capitalizing on this by continuing our expansion. We plan to open five new stores and remodel four stores during this fiscal year. The continued expansion into Northern California includes Pleasanton in the East Bay area, along with Roseville and Elk Grove in the Sacramento area. Our first store in Central California will be in the city of Visalia. We also plan to open a store in the Santa Anita mall in the city of Arcadia within our Southern California market. The Company will remodel four mature stores to complement the look and feel of the newer stores. Although accelerated depreciation on fixtures and equipment for stores to be remodeled will dampen profitability in the short term, our overall advancing growth should leverage our ongoing investment in infrastructure, ultimately reducing overhead expenses as a percent of sales. With the scheduled openings and remodels, 44% of our store base will be three years old or less." The Company's annual report with full financial statements will be available in late June. Sport Chalet, founded in 1959 by Norbert Olberz, is a leading operator of full-service specialty sporting goods superstores in California and 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 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, the challenge of implementing the Company's expansion plans in Northern California, inflation, 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 2004 2003 2004 2003 Net sales $69,404,267 $58,229,885 $264,236,923 $238,033,375 Cost of goods sold, buying and occupancy costs 48,993,917 42,147,271 184,579,034 168,739,502 Gross profit 20,410,350 16,082,614 79,657,889 69,293,873 Selling, general and administrative expenses 19,878,346 15,934,981 71,987,975 62,167,771 Income from operations 532,004 147,633 7,669,914 7,126,102 Interest expense 27,854 34,370 189,924 306,755 Income before taxes 504,150 113,263 7,479,990 6,819,347 Income tax provision 176,000 60,000 2,933,000 2,659,000 Net income $328,150 $53,263 $4,546,990 $4,160,347 Earnings per share: Basic $0.05 $0.01 $0.68 $0.63 Diluted $0.05 $0.01 $0.65 $0.60 Weighted average number of common shares outstanding: Basic 6,668,534 6,621,667 6,645,667 6,614,544 Diluted 7,171,439 6,914,369 7,008,380 6,947,343 SPORT CHALET, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31 March 31 2004 2003 Assets Current assets: Cash $3,071,648 $4,230,003 Accounts receivable, less allowance of $30,000 in 2004 and $25,000 in 2003 1,158,934 1,090,519 Merchandise inventories 54,172,055 50,886,630 Prepaid expenses and other current assets 2,202,036 2,038,588 Prepaid income taxes -- 58,990 Deferred income taxes 2,443,945 1,325,249 Total current assets 63,048,618 59,629,979 Furniture, equipment and leasehold improvements-net 29,467,976 27,095,314 Deferred income taxes 83,704 66,281 Other assets 101,036 109,905 Total assets $92,701,334 $86,901,479 Liabilities and stockholders' equity Current liabilities: Bank overdraft $-- $5,764,355 Accounts payable 11,131,473 9,353,444 Salaries and wages payable 3,354,368 2,191,335 Income taxes payable 35,631 -- Other accrued expenses 7,830,961 5,041,753 Total current liabilities 22,352,433 22,350,887 Deferred rent 5,818,026 5,276,696 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 March 31, 2004 and 6,628,334 at March 31, 2003 66,735 66,283 Additional paid-in capital 22,830,906 22,121,369 Retained earnings 41,633,234 37,086,244 Total stockholders' equity 64,530,875 59,273,896 Total liabilities and stockholders' equity $92,701,334 $86,901,479 SPORT CHALET, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Year ended March 31 2004 2003 Operating activities Net income $4,546,990 $4,160,347 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,074,104 5,479,628 Loss on disposal of equipment 354,608 31,730 Stock compensation 448,918 -- Tax benefit on employee stock options 34,498 53,473 Deferred income taxes (1,136,119) 51,756 Changes in operating assets and liabilities: Accounts receivable (68,415) (411,810) Merchandise inventories (3,285,425) (2,970,077) Prepaid expenses and other current assets (163,448) (281,581) Refundable income taxes 58,990 389,770 Bank overdraft (5,764,355) (1,427,903) Accounts payable 1,778,029 (1,461,797) Salaries and wages payable 1,163,033 6,826 Other accrued expenses 2,789,208 1,033,545 Income taxes payable 35,631 -- Deferred rent 541,330 1,091,071 Net cash provided by operating activities 7,407,577 5,744,978 Investing activities Purchases of furniture, equipment and leasehold improvements (8,801,374) (6,042,631) Other assets 8,869 105,564 Proceeds from sale of assets -- 13,000 Net cash used in investing activities (8,792,505) (5,924,067) Financing activities Proceeds from bank borrowings 10,225,000 57,563,424 Repayment of bank borrowings (10,225,000) (57,563,424) Proceeds from exercise of stock options 226,573 135,607 Net cash provided by financing activities 226,573 135,607 (Decrease) increase in cash and cash equivalents (1,158,355) (43,482) Cash and cash equivalents at beginning of year 4,230,003 4,273,485 Cash and cash equivalents at end of year $3,071,648 $4,230,003 Cash paid during the year for: Income taxes $3,940,000 $2,164,000 Interest $189,925 $323,304 DATASOURCE: Sport Chalet, Inc. CONTACT: Howard Kaminsky, Exec. VP-CFO of Sport Chalet, +1-818-949-5386 Web site: http://www.sportchalet.com/

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