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 FRESNO, Calif., April 30 /PRNewswire/ -- Gottschalks Inc. (NYSE: GOT) today announced results for the fiscal year ended Jan. 30, 1993. For the year, the company reported a net after-tax loss from operations of $2.3 million. Included in the loss was a significant increase in LIFO. The loss also included the write-off of transaction costs related to an unconsummated acquisition and related financing, and costs associated with establishing provisions, including healthcare, general liability and other one-time items. Excluding these costs and one time items, the company essentially operated at a breakeven level compared to last year's restated profit of $4.1 million.
 In addition to the loss from operations, the company recorded an after-tax one-time and unusual charge to income of $5.7 million. The charge includes previously paid costs associated with the company's July 1992 settlement with the U.S. Attorney's office. The company announced that it has made significant progress in resolving the previously reported potential federal civil tax assessment arising from the government's investigation. A provision for this anticipated settlement is included in the unusual charge. The company has also included a provision for pending litigation arising out of the company's attempted acquisition of the former Frederick & Nelson Northtown store in Spokane, Wash. The company intends to vigorously pursue its defense in this litigation.
 Joe Levy, chairman and chief executive officer, commented, "Over the last several months, the company has significantly strengthened its financial organization, management controls and the oversight role of the audit committee and the board of directors. In addition to hiring a new and experienced financial management team, the company also retained a new independent accounting and audit firm, Deloitte & Touche."
 James Clifford, chief financial officer, reported, "In connection with these changes and in consultation with its independent auditors, the company undertook a complete review of prior-period financial statements. As a result of this review, the company has determined that its prior financial statements should fully recognize costs in the period in which they were incurred and should fully reflect the company's potential liability for California workers compensation expense. In order to address these items, the company intends to restate its financial statements for 1989, 1990, and 1991. The aggregate impact of these changes will reduce net income for 1991, from $4.3 million to $4.1 million, for 1990 from $6.4 million to $5.6 million; and for 1989 from $3.4 million to $2.6 million."
 Clifford stressed, "The cumulative impact of the restatements is less than 2.5 percent of stockholders equity and, therefore, has no material effect on the financial condition of the company. For the most part, the adjustments to the prior years relate to the timing of recognition of certain liabilities.
 The company also announced that Wells Fargo Bank has indicated its intent to renew the company's existing line of credit, which expires May 31, 1993. The company is negotiating with Wells Fargo and other lenders to further expand the funds available to the company for working capital and expects to successfully consummate those negotiations in the company's second quarter.
 Levy commented, "Operationally, 1992 was a difficult year for retailing in California. Comparable store sales flattened, creating downward pressure on earnings. The company opened new stores over the last several years as its markets were generally unaffected by the national recession. While costs associated with this expansion have pressured earnings, management believes that the company should benefit significantly from a recovery in California. Earlier this year, the company opened a new store in the growing community of Hanford, Calif.
 Levy concluded, "The company has worked diligently to put recent problems behind it, and better position the company to deal with the current retail environment."
 Gottschalks is a regional department store chain, currently operating 26 department stores and 23 specialty apparel stores in California, Tacoma, Wash., and Klamath Falls, Ore. Gottschalks offers moderate to upper moderately priced brand-name fashion merchandise.
 Annual Operating Results ($000)
 Jan. 30, 1993 Feb. 1, 1992 Feb. 1, 1992
 (as restated) (as originally
 Net sales $331,133 $314,633 $314,633
 Service charge & other
 income 9,458 10,830 10,723
 Total 340,591 325,463 325,356
 Cost of sales 227,672 210,698 212,028
 Selling, general & admin.
 expenses 103,728 95,881 93,948
 & amortization 6,432 5,503 5,558
 Interest expense 6,904 6,793 6,793
 Total 344,736 318,875 318,327
 Income (loss) before
 taxes & unusual items (4,145) 6,588 7,029
 Provision for government
 settlement, assessments
 & provision for lawsuit 7,852 0 0
 Income (loss) before
 income taxes (11,997) 6,588 7,029
 Income taxes (4,006) 2,528 2,705
 Net income (loss) $ (7,991) $ 4,060 $ 4,324
 Earnings (loss) per
 common share $ (0.77) $ 0.41 $ 0.44
 Weighted average number of
 common shares
 outstanding 10,410 9,797 9,797
 Analysis of Operating Results (After Tax)
 Reported Loss (7,991)
 Unusual Items (after tax):
 -- Government Settlement and Associated Fees
 -- IRS Settlement
 -- Frederick & Nelson Northtown Provisions
 Total Unusual Items 5,719
 Loss from Operations Before Unusual Items
 Above (2,272)
 LIFO Adjustment 995
 Provisions and Write-Offs 1,804
 Adjusted Operating Profit 527
 -0- 4/30/93
 /James Clifford, executive vice president and chief financial officer of Gottschalks, 209-434-8000/

CO: Gottschalks Inc. ST: California IN: REA SU: ERN

LH-GT -- SF012 -- 3495 04/30/93 19:59 EDT
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Publication:PR Newswire
Date:Apr 30, 1993

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