Big 5 to Restate Results for Fiscal Years 2001-03

Big 5 Sporting Goods Corp. said Wednesday that it would restate its financial results for fiscal years 2001-03 to correct accounting errors, sparking a late sell-off of the company’s shares.

As part of a year-end financial review, Big 5 executives found that some of the company’s accounting personnel “failed to understand” how to manage invoices on a timely basis, the El Segundo-based retailer said in a statement. That resulted “in an understatement of accounts payable and an overstatement of net income.”

The company said the overstatement was $1.2 million in 2001, when Big 5 reported a profit of $14.9 million; $2.1 million in 2002, when it reported $19 million; and $1.4 million in 2003, when it reported $26.3 million.

The invoices were for inventory received at Big 5’s distribution center. Big 5 and its auditor, KPMG, are continuing to review financial statements and the results could be changed further, the statement said.

“We have corrected our internal controls associated with these accounting adjustments,” Charles Kirk, Big 5’s chief financial officer, was quoted as saying in the statement.

Calls to the company weren’t returned.

The statement was released after the markets closed. Big 5’s stock slid more than 7% to $25.12 in after-hours trading. It lost $1.27 to $27.18 in regular Nasdaq trading.

Because of the accounting problems, Big 5 reported its fiscal fourth-quarter earnings Wednesday on a preliminary basis. The company reported net income of $11.6 million, or 51 cents a share, for the quarter that ended Jan. 2, compared with $8.6 million, or 37 cents, for the fourth quarter of 2003, which was one week shorter. Sales increased 13.4% to $217.6 million.

The results fell short of Wall Street forecasts.

For fiscal year 2004, the company said net income increased to $34.2 million from $24.9 million in 2003. Sales for 2004 increased 9.8% to $778.9 million.

Big 5 operates 309 sporting goods stores, mostly on the West Coast.