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Hart Stores to improve controls over inventory valuation process

Apr '08
Hart Stores Inc announced that it has undertaken a special review of inventory for fiscal 2008 and prior years while in the process of assessing the implementation of the new CICA Section 3031-Inventories.

Based on the findings of the review, the management has concluded that inventory was overstated in fiscal 2007 and prior years.

The impact is that fiscal 2007 year end inventory is overstated by $2.7 million. The impact for fiscal 2007 on net income is an overstatement of $0.3 million.

The restatement to fiscal 2007 and prior years will generate a tax recovery of approximately $0.9 million and an overstatement of retained earnings of $1.8 million at the end of fiscal 2007.

It will not have any impact on the cash balances. Prior to the restatement, fiscal 2007 closing inventory was $45.0 million and net earnings were $4.4 million.

These restatements are required as a result of the findings of the Company's valuation process regarding inventory, more precisely the accounting application of certain consideration received from vendors.

The management is reviewing the circumstances which resulted in the inventory overstatement and is taking steps to improve controls over inventory valuation process.

Hart Stores' Board of Directors, on the recommendation of management, has concluded that it is necessary to restate the Company's audited consolidated financial statements for each of the prior years affected.

The Company is currently working to finalize and file its restated financial statements for fiscal 2007 and they will be available when it releases its 2008 financial statements later in the up coming weeks.

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