TBC will restate financial results
TBC Corp. officials have announced that the company's financial statements from 2000 to 2004 and the first quarter of 2005 "can no longer be relied upon."
As a result, TBC will restate its Dec. 31, 2002, through March 31, 2005, financial statements.
All adjustments will be non-cash and will not have any impact on previously reported cash flows, cash balances, sales or comparable sales; timing or amount of any actual lease payment or tax liability; compliance with any financial covenant under its revolving credit facility or other debt instruments; the current economic value of TBC's leaseholds or the underlying value of its real estate assets.
The adjustments "will primarily affect the company's balance sheet accounts for goodwill and non-current liabilities, as well as rent expense in prior periods.
"While the company does not consider the impact of correcting the previously issued financial statements to be material with respect to any one period, the cumulative effect of the changes would be material if recorded in the second quarter of 2005. Therefore, the company believes that a restatement of prior period financial statements is appropriate."
As part of the restatement, TBC will adjust its computation of straight-line rent expense and related deferred rent liability on acquired leases.
"Historically, when accounting for acquired leases, the company evaluated the lease term in order to determine the period over which to record straight-line rents.
"After performing this assessment, the company recorded a deferred rent liability at the date of acquisition. Management has determined that the company should have eliminated the deferral rent liability on its acquired leases upon acquisition."
As a result, TBC's straight-line rent expense was understated.
TBC expects to report a 4.1% increase in same-store sales for the second quarter of 2005 and also expects to report earnings "in line with its previously announced guidance of $.49 to $.53 per diluted share," according to TBC officials.
TBC has not disclosed when the restatements will take place.