Restoration Hardware, Inc. Announces Correction in Lease Accounting
08 Marzo 2005 - 1:09PM
PR Newswire (US)
Restoration Hardware, Inc. Announces Correction in Lease Accounting
CORTE MADERA, Calif., March 8 /PRNewswire-FirstCall/ -- Restoration
Hardware, Inc. (NASDAQ:RSTO) today announced it is revising its
method of accounting for leases as a result of recent views
expressed by the Office of the Chief Accountant of the Securities
and Exchange Commission (SEC). As a result, the Company will
restate certain prior period financial statements to correct the
way it accounts for rent holidays in its leases. The correction in
lease accounting and resulting non-cash adjustments will not have
any effect on the Company's historical cash flows or the timing of
payments under the related leases. Based on the Company's
preliminary review, the correction of the lease accounting is
expected to have a positive effect on pretax results in amounts of
approximately $500,000 for fiscal 2004, $700,000 for fiscal 2003
and $1.2 million for fiscal 2002, and is expected to increase
deferred rent by approximately $5 million on the balance sheet as
of January 29, 2005. These estimates are still preliminary, and may
change pending a final review by management, which the Company
anticipates completing in conjunction with the filing of the
Company's 10-K for the period ended January 29, 2005. Historically,
and consistent with industry practice, the Company had recognized
the straight line rent expense for leases beginning on the earlier
of the store opening date or the lease commencement date, which had
the effect of excluding the construction period of its stores from
the calculation of the period over which it expensed rent. On
February 7, 2005, the SEC issued a letter to the American Institute
of Certified Public Accountants clarifying the staff's
interpretation of certain accounting issues relating to operating
leases. After evaluation of the views expressed in the letter and
consultation with its independent auditors, the Company determined
it should restate certain prior period operating results to include
the construction period in its calculation of straight line rent in
accordance with Financial Accounting Standards Board Technical
Bulletin No. 85-3, "Accounting for Operating Leases with Scheduled
Rent Increases" and will correct its straight line rent accrual and
deferred rent credits accordingly. The Company will release its
fourth quarter fiscal 2004 results on Thursday, March 31, 2005
after market close. About Restoration Hardware, Inc. Restoration
Hardware, Inc. is a specialty retailer of home furnishings, bath
fixtures and bath ware, functional and decorative hardware and
related merchandise that reflects the Company's classic and
authentic American point of view. Restoration Hardware, Inc. sells
its merchandise offering through its retail stores, catalog
(800-762-1005) and on-line at http://www.restorationhardware.com/.
As of March 8, 2005 the Company operated 102 retail stores and 2
outlet stores in 30 states, the District of Columbia and Canada.
Safe Harbor Under the Private Securities Litigation Reform Act of
1995 This release contains certain "forward-looking statements"
that are made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements include, without limitation, statements
relating to the expected outcome of the Company's on- going and
final accounting review, statements regarding the anticipated
timing, nature, scope, impact and effect of the Company's
accounting review, corrections and restatement of its financial
statements, and other statements containing words such as "expects"
or "estimates" and words of similar import or statements of
management's opinion. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause the actual results, including financial results, market
performance or achievements to differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause such
differences include, but are not limited to, the actual results of
the on-going and final review of the accounting corrections, the
actual timing of the Company's restatement of financial statements
and the need for any follow-on actions in connection with the
Company's accounting practices and the impact or effect of the
Company's anticipated restatement and the reaction to it from the
Company's stockholders and customers, as well as changes in
economic, business, competitive, technological and/or regulatory
factors and trends, and other factors detailed in the Company's
filings with the Securities and Exchange Commission, including its
recent filings on Forms 10- K, 10-Q and 8-K, including, but not
limited to, those described in the Company's Form 10-Q for the
quarter ended October 30, 2004 in Part I, Item 2 thereof
("Management's Discussion and Analysis of Financial Condition and
Results of Operations") under the captions "Expenses," "Liquidity
and Capital Resources" and "Factors that May Affect our Future
Operating Results." The Company undertakes no obligation to update
or revise any forward-looking statement in order to reflect events
or circumstances that may arise after the date of this release.
DATASOURCE: Restoration Hardware, Inc. CONTACT: Patricia McKay,
Executive Vice President and Chief Financial Officer of Restoration
Hardware, Inc., +1-415-924-1005 Web site:
http://www.restorationhardware.com/
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