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The Sports Club Co. Delays Financial Reporting

LOS ANGELES--The Sports Club Co. Inc. has delayed reporting of its first quarter 2005 results. The delay stems from issues relating to the recording of leasehold improvements. Most of the work required to prepare the company’s consolidated financial statements has been completed. However, the complexities associated with accounting for and reporting of landlord incentives under operating leases and assets held for sale have held up completion of the final financial statements. As a result, the company has not filed its required financial reports with the Securities and Exchange Commission. The company had recorded its leasehold improvements differently than required, which will result in several reclassifications of the company's reported results for the first quarter of 2004.

A new methodology will be applied to both the 2004 and 2005 financial statements and will require the company to increase its depreciation expense and reduce rent expense. Since the amount of these adjustments will be the same, there will be no change to the company's income (loss) from operations.

In February, the company announced that it had entered into a letter of intent to sell six of its nine sports and fitness complexes for $65 million. In accordance with regulations, these assets will be classified as held for sale and the 2004 and 2005 operating statements will include the results of these clubs as discontinued operations.

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