SPOR » Topics » Inventories

This excerpt taken from the SPOR 10-Q filed May 15, 2009.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories were not prone to impairment, because we usually ordered branded apparel in quantities per specific customer orders.

 

We believe that the recent significant downturn in the United States economy negatively impacted the value of our excess fashion apparel inventories, and we adjusted the carrying value of our excess fashion apparel inventories, accordingly. We adjusted our reserve for inventory obsolescence and recorded impairments of $254,000 and $585,000 with regard to fashion apparel inventories for the three-month and nine-month periods ended March 31, 2009. Comparatively, we adjusted our reserve for inventory obsolescence and recorded impairments of $5,000 and $179,000 with regard to fashion apparel inventories for the three-month and nine-month periods ended March 31, 2008. The balances of our reserves for inventory obsolescence totaled $695,000, $168,000 and $178,000 at March 31, 2009, June 30, 2008, and March 31, 2008, respectively. While we believe that our processes produce fair valuations of our excess inventories, if actual future market conditions are less favorable than those projected by management, additional allowances may be required.

 

This excerpt taken from the SPOR 10-Q filed Feb 19, 2009.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories were not prone to impairment, because we usually ordered branded apparel in quantities per specific customer orders.

 

We believe that the recent significant downturn in the United States economy negatively impacted the value of our excess fashion apparel inventories, and we adjusted the carrying value of our excess fashion apparel inventories, accordingly. We adjusted our reserve for inventory obsolescence and recorded impairments of $53,000 and $331,000 with regard to fashion apparel inventories for the three-month and six-month periods ended December 31, 2008. Comparatively, we adjusted our reserve for inventory obsolescence and recorded impairments of $20,000 and $174,000 with regard to fashion apparel inventories for the three-month and six-month periods ended December 31, 2007, as corrected. The balances of our reserves for inventory obsolescence totaled $469,000, 168,000 and $173,000 at December 31, 2008, June 30, 2008, and December 31, 2007, respectively. While we believe that our processes produce fair valuations of our excess inventories, if actual future market conditions are less favorable than those projected by management, additional allowances may be required.

 

This excerpt taken from the SPOR 10-Q filed Nov 19, 2008.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

 

We believe that the recent significant downturn in the United States economy negatively impacted the value of our excess fashion apparel inventories, and we reduced the carrying value of our excess fashion apparel inventories at September 30, 2008, accordingly. We adjusted our reserve for inventory obsolescence and recorded impairments of $278,000 and $154,000 with regard to fashion apparel inventories for the three-month periods ended September 30, 2008 and 2007, respectively. The balances of our reserves for inventory obsolescence totaled $446,000 and $390,000 at September 30, 2008 and 2007, respectively. While we believe that our processes produce fair valuations of our excess inventories, if actual future market conditions are less favorable than those projected by management, additional allowances may be required.

 

These excerpts taken from the SPOR 10-K filed Oct 14, 2008.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

 

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During fiscal 2008, we recorded fashion apparel inventory write-downs of $210,000, including a write-down of $51,000 during the fourth fiscal quarter. We recorded write-downs of $20,000 with regard to branded apparel during fiscal 2008. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required.

 

Inventories



 



Our inventories, predominately comprised of
finished goods, are generally valued at the lower of cost (weighted average) or
market. Costs include amounts paid to suppliers for packaged apparel and/or
materials and labor, import costs, such as customs duties, freight-in and other
miscellaneous costs, and allocated overhead. Excess fashion apparel
inventories, consisting of discontinued or aging merchandise, are a natural component
of a seasonal apparel business. While certain fashion apparel items will sell
out in any particular selling season, quantities of other fashion apparel items
will remain at the end of each selling season. We market excess fashion apparel
finished goods inventories at reduced wholesale prices to our customers in the
normal course of business. Remaining excess inventories are liquidated through
other markets. In the ordinary course of business, we maintain reserves for
inventory write-downs due to the obsolescence of excess inventories. We perform
analyses on a quarterly basis to identify unsold excess inventories and adjust
our reserves for inventory obsolescence to reduce the carrying value of excess
inventories to their estimated net realizable value, which is estimated based
on management’s disposition plans and historical experiences. Generally,
branded apparel inventories are not prone to impairment, because we usually
order branded apparel in quantities per specific customer orders.



 



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During fiscal 2008, we recorded fashion
apparel inventory write-downs of $210,000, including a write-down of $51,000
during the fourth fiscal quarter. We recorded write-downs of $20,000 with
regard to branded apparel during fiscal 2008. While management believes that
our processes produce fair valuations of obsolete inventories, if actual market
conditions are less favorable than those projected by management, additional
allowances may be required.



 



This excerpt taken from the SPOR 10-Q filed May 15, 2008.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Because branded apparel is generally produced in quantities to fulfill specific customer orders, branded apparel inventories are generally not prone to impairment unless a customer cancels an order after production has begun and an alternative customer cannot be located to purchase the merchandise at a price in excess of its cost.

 

We recorded impairments of $5,000 and $159,000 with regard to fashion apparel inventories for the three-month and nine-month periods ended March 31, 2008, respectively. Comparatively, we recorded impairments of $4,000 and $126,000 with regard to fashion apparel inventories for the three-month and nine-month periods ended March 31, 2007, respectively. We recorded impairments of $0 and $20,000 with regard to branded apparel for the three months and nine months ended March 31, 2008, respectively, due to a customer’s cancellation of a replenishment order. Comparatively, we did not record an impairment with regard to branded apparel inventories during the three months or nine months ended March 31, 2007.

 

This excerpt taken from the SPOR 10-Q filed Feb 11, 2008.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

 

We recorded impairments of $0 and $174,000 with regard to fashion apparel inventories for the three-month and six-month periods ended December 31, 2007, respectively. Comparatively, we recorded impairments of $73,000 and $122,000 with regard to fashion apparel inventories for the three-month and six-month periods ended December 31, 2006, respectively. We recorded impairments of $20,000 and $20,000 with regard to branded apparel for the three months and six months ended December 31, 2007, respectively, due to a customer’s cancellation of a replenishment order. Comparatively, we did not record an impairment with regard to branded apparel inventories during the three months or six months ended December 31, 2006.

 

This excerpt taken from the SPOR 10-Q filed Nov 14, 2007.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

 

We recorded impairments of $154,000 and $49,000 with regard to fashion apparel inventories for the three-month periods ended September 30, 2007 and 2006, respectively.

 

This excerpt taken from the SPOR 10-K filed Sep 28, 2007.

Inventories

 

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write-downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

 

During fiscal 2007, we recorded fashion apparel inventories write-downs of $312,000, including a write-down of $186,000 during the fourth fiscal quarter. We did not record any write-downs with regard to branded apparel during fiscal 2007. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required.

 

This excerpt taken from the SPOR 10-Q filed May 14, 2007.

Inventories

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

During the three months and nine months ended March 31, 2007, we recorded fashion apparel inventory write-downs of $4,000 and $126,000, respectively. We did not record a write-down with regard to branded apparel inventories during the three months or nine months ended March 31, 2007.

This excerpt taken from the SPOR 10-Q filed Feb 12, 2007.

Inventories

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value, which is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

During the quarter and six months ended December 31, 2006, we recorded fashion apparel inventory write-downs of $73,000 and $122,000, respectively. We did not record a write-down with regard to branded apparel inventories during the three months or six months ended December 31, 2006.

This excerpt taken from the SPOR 10-Q filed Nov 14, 2006.

Inventories

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Excess fashion apparel inventories, consisting of discontinued or aging merchandise, are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market excess fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of excess inventories. We perform analyses on a quarterly basis to identify unsold excess inventories and adjust our reserves for inventory obsolescence to reduce the carrying value of excess inventories to their estimated net realizable value. The net realizable value of excess inventories is estimated based on management’s disposition plans and historical experiences. Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in quantities per specific customer orders.

During the quarter ended September 30, 2006, we recorded fashion apparel inventories write-downs of $49,000. We did not record a write-down with regard to branded apparel inventories during the quarter ended September 30, 2006.

This excerpt taken from the SPOR 10-K filed Oct 13, 2006.

Inventories

Our inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. Since

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we implemented our operations software in January 2004, programming and human errors discovered within the system caused us to report a material weakness in our internal controls over financial reporting with respect to inventory valuation. This weakness in our internal controls prevented us from relying upon the system-recorded transactions with respect to inventory valuations during 2005 and 2004. We used a standard cost method to value our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005. Had we been able to rely upon the system to properly compute the cost of our finished goods inventories using the weighted average method, we believe that the weighted average method would not have yielded a materially different computation of the value than the standard cost method that we applied.

Based upon extensive tests that we performed near the end of fiscal 2006, we believe that the material weakness in our internal controls has been eradicated. We believe that the computer software has now been properly programmed, and employees have been adequately trained to utilize the system procedures, to rely upon the software to accurately compute our finished goods inventory valuations using a weighted average cost assumption. We also believe that the system has been configured and employees are sufficiently monitored to ensure that all errors, sufficient to cause a material weakness with regard to the costing of our finished goods inventories, are unlikely to recur.

Excess fashion apparel finished goods inventories are a natural component of a seasonal apparel business. While certain fashion apparel items will sell out in any particular selling season, quantities of other fashion apparel items will remain at the end of each selling season. We market previous seasons’ fashion apparel finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of discontinued or aging merchandise. We perform analyses on a quarterly basis to identify unsold discontinued or aging merchandise and adjust our reserves for inventory obsolescence to reduce the carrying value of discontinued or aging merchandise to its estimated net realizable value. The net realizable value of the discontinued or aging merchandise is estimated based on management’s disposition plans and historical experiences.

Generally, branded apparel inventories are not prone to impairment, because we usually order branded apparel in exact quantities to sufficiently satisfy specific customer orders. However, branded apparel inventories remained on hand at June 30, 2006, because we shipped the Father’s Day order in June, five weeks later than requested by Wal-Mart. Due to the tardiness of that shipment Wal-Mart canceled the follow-up order, the apparel inventories for which we had already received, and we wrote the corresponding inventories down to the value that we expected to recover from selling the goods to another market.

During fiscal 2006, we recorded fashion apparel inventories write-downs of $313,000, including a write-down of $28,000 during the fourth fiscal quarter, and we recorded branded apparel write-downs of $95,000 during the fourth fiscal quarter. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required.

This excerpt taken from the SPOR 10-Q filed May 22, 2006.

Inventories

 

Inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. After we implemented our operations software in January 2004, we discovered certain programming and human errors within the new system that adversely affected the software’s ability to accurately compute the valuation of our finished goods inventories using a weighted average method. In prior periods we considered the programming and human errors, which caused us to use a standard cost method in the prior periods, to be a material weakness in our internal controls over financial reporting with respect to inventory valuation. This weakness in our controls prevented us from relying upon the system-recorded transactions with respect to inventory valuations during fiscal 2005. During the 2005 fiscal year, we concluded with reasonable assurance that recomputing the value of our finished goods inventories using a standard cost method yielded a fair estimation of the value of our finished goods inventories. We used the standard cost method to value our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005. Had we

 

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been able to rely upon the system to properly compute the cost of our finished goods inventories using the weighted average method, we believe that the weighted average method would not have yielded a materially different computation of the value than the standard cost method that we applied. For periods subsequent to March 31, 2005, we determined that differences between the system-calculated values (average cost) of our finished goods inventories versus the values of our finished goods inventories using a standard cost method were immaterial. At March 31, 2006, inventories of approximately $102,000 remained on hand that had been valued in prior periods using the standard cost method.

 

During the quarter ended December 31, 2005, we revised employee guidelines and procedures for recording inventory-related transactions within our software system, and shortly after December 31, 2005, we prepared a detailed analysis of the weighted average cost calculations recorded within our software for several of our finished goods inventory items. Our guidelines and procedures are designed to ensure that only qualified personnel may record inventory-related transactions. During the quarter ended December 31, 2005, those persons received additional training in how to properly record finished goods inventory transactions within the system. Our detailed analysis concluded with reasonable assurance that the software system has been properly configured within a level of accuracy that provides us with reasonable assurance to now rely upon the system to properly compute the weighted average unit costs of our finished goods inventories. Therefore, we now believe, with reasonable assurance, that the programming errors related to our operations software no longer cause a material weakness in our internal controls over financial reporting with respect to inventory valuation. However, human errors have continued to cause a material weakness in our internal controls over financial reporting with respect to inventory valuation. Our detailed analysis revealed that certain variances in the unit costs of our finished goods inventories have occurred, because procedures were not properly followed in all instances. Ongoing training and management supervision are inherent requirements within any software system and all errors cannot be prevented in all instances. In order to achieve reasonable assurance that human errors no longer cause a material weakness, we will continue to educate and supervise our personnel responsible for recording inventory-related transactions, and we will also continue to refine our periodic testing model used to determine the accuracy of inventory-related transactions which have been recorded within the system.

 

The material weakness in our internal controls over financial reporting with respect to inventory valuation also impaired our ability to rely upon information created by our computer system to fairly present, in all material respects, our financial condition, results of operations and cash flows in the periods covered by this report. The inability of our computer system to properly calculate the valuation of our finished goods inventories using a weighted average cost assumption also affected the system-recorded amounts within our cost of goods sold in certain periods covered by this report. Because (1) we concluded with reasonable assurance that our using a standard cost assumption yielded a fair estimation of our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005, (2) we determined that differences between the system-calculated values (average cost) of our finished goods inventories versus the values of our finished goods inventories using a standard cost method subsequent to March 31, 2005, were immaterial and (3) we consistently recorded adjustments to inventories as components of cost of goods sold, we believe with reasonable assurance that our cost of goods sold are fairly stated for the periods covered by this report. Therefore, we believe that the procedures we applied to value our finished goods inventories for the periods covered by this report provide us with reasonable assurance that our condensed consolidated financial statements and the notes thereto fairly state, in all material respects, our financial condition, the results of our operations and our cash flows.

 

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Excess finished goods inventories are a natural component of a seasonal apparel business. While certain finished goods items will sell out in any particular selling season, quantities of other finished goods items will remain at the end of each selling season. We market previous seasons’ finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of discontinued or aging merchandise. We perform analyses on a quarterly basis to identify unsold discontinued or aging merchandise and adjust our reserves for inventory obsolescence to reduce the carrying value of discontinued or aging merchandise to its estimated net realizable value. The net realizable value of the discontinued or aging merchandise is estimated based on management’s disposition plans and historical experiences. During the quarter ended March 31, 2006, we recorded finished goods inventories write-downs of $91,000. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required or we may recognize losses on the disposition of obsolete inventories.

 

This excerpt taken from the SPOR 10-Q filed Feb 28, 2006.

Inventories

 

Inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. After we implemented our operations software in January 2004, we discovered certain programming and human errors within the new system that adversely affected the software’s ability to accurately compute the valuation of our finished goods inventories using a weighted average method. We consider the programming and human errors, which caused us to use a standard cost method in prior periods, to be a material weakness in our internal controls over financial reporting with respect to inventory valuation. This weakness in our controls prevented us from relying upon the system-recorded transactions with respect to inventory valuations during fiscal 2005. During the 2005 fiscal year, we concluded with reasonable assurance that recomputing the value of our finished goods inventories using a standard cost method yielded a fair estimation of the value of our finished goods inventories. We used the standard cost method to value our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005. Had we been able to rely upon the system to properly compute the cost of our finished goods inventories using the weighted average method, we believe that the weighted average method would not have yielded a materially different computation of the value than the standard cost method that we applied.

 

At September 30, 2005, a relatively small percentage our inventory items remained on hand that had been valued in prior periods using the standard cost method. Based upon tests we performed during the quarter ended September 30, 2005, we believe that the computer software has been properly programmed, and employees have been adequately trained to utilize the proscribed system procedures, so that prospectively we may rely upon the computer system to accurately compute our finished goods inventory valuations using a weighted average cost assumption. During the quarter ending December 31, 2005, we plan to design and implement additional controls to periodically test the accuracy of the system-generated valuation entries that comprise the weighted average cost components of our finished goods inventories.

 

The material weakness in our internal controls over financial reporting with respect to inventory valuation also impaired our ability to rely upon information created by our computer system to fairly present, in all material respects, our financial condition, results of operations and cash flows in periods during the periods covered by this report. The inability of our computer system to properly calculate the valuation of our finished goods inventories using a weighted average cost assumption also affected the system-recorded amounts within our cost of goods sold in periods in the periods covered by this report. Because we concluded with reasonable assurance that our using a standard cost assumption yielded a fair estimation of our finished goods inventories, and because we consistently recorded adjustments to inventories as components of cost of goods sold, we believe with reasonable assurance that our cost of goods sold are fairly stated for the periods covered by this report. Therefore, we believe that the procedures we applied to value our finished goods inventories for the periods covered by this report provide us with reasonable assurance that our condensed financial statements and the notes thereto fairly state, in all material respects, our financial condition, the results of our operations and our cash flows.

 

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Excess finished goods inventories are a natural component of a seasonal apparel business. While certain finished goods items will sell out in any particular selling season, quantities of other finished goods items will remain at the end of each selling season. We market previous seasons’ finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of discontinued or aging merchandise. We perform analyses on a quarterly basis to identify unsold discontinued or aging merchandise and adjust our reserves for inventory obsolescence to reduce the carrying value of discontinued or aging merchandise to its estimated net realizable value. The net realizable value of the discontinued or aging merchandise is estimated based on management’s disposition plans and historical experiences. During the quarter ended September 30, 2005, we recorded finished goods inventories write-downs of $65,000. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required.

 

This excerpt taken from the SPOR 10-Q filed Feb 21, 2006.

Inventories

 

Inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. After we implemented our operations software in January 2004, we discovered certain programming and human errors within the new system that adversely affected the software’s ability to accurately compute the valuation of our finished goods inventories using a weighted average method. In prior periods we considered the programming and human errors, which caused us to use a standard cost method in the prior periods, to be a material weakness in our internal controls over financial reporting with respect to inventory valuation. This weakness in our controls prevented us from relying upon the system-recorded transactions with respect to inventory valuations during fiscal 2005. During the 2005 fiscal year, we concluded with reasonable assurance that recomputing the value of our finished goods inventories using a standard cost method yielded a fair estimation of the value of our finished goods inventories. We used the standard cost method to value our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005. Had we

 

14



 

been able to rely upon the system to properly compute the cost of our finished goods inventories using the weighted average method, we believe that the weighted average method would not have yielded a materially different computation of the value than the standard cost method that we applied. For periods subsequent to March 31, 2005, we determined that differences between the system-calculated values (average cost) of our finished goods inventories versus the values of our finished goods inventories using a standard cost method were immaterial. At December 31, 2005, a relatively small percentage our inventory items remained on hand that had been valued in prior periods using the standard cost method.

 

During the quarter ended December 31, 2005, we revised employee guidelines and procedures for recording inventory-related transactions within our software system, and shortly after December 31, 2005, we prepared a detailed analysis of the weighted average cost calculations recorded within our software for several of our finished goods inventory items. Our guidelines and procedures are designed to ensure that only qualified personnel may record inventory-related transactions. During the quarter ended December 31, 2005, those persons received additional training in how to properly record finished goods inventory transactions within the system. Our detailed analysis concluded with reasonable assurance that the software system has been properly configured within a level of accuracy that provides us with reasonable assurance to now rely upon the system to properly compute the weighted average unit costs of our finished goods inventories. Therefore, we now believe, with reasonable assurance, that the programming errors related to our operations software no longer cause a material weakness in our internal controls over financial reporting with respect to inventory valuation. However, human errors have continued to cause a material weakness in our internal controls over financial reporting with respect to inventory valuation. Our detailed analysis revealed that certain variances in the unit costs of our finished goods inventories have occurred, because procedures were not properly followed in all instances. Ongoing training and management supervision are inherent requirements within any software system and all errors cannot be prevented in all instances. In order to achieve reasonable assurance that human errors no longer cause a material weakness, we will continue to educate and supervise our personnel responsible for recording inventory-related transactions, and we will also refine our periodic testing model used to determine the accuracy of inventory-related transactions which have been recorded within the system.

 

The material weakness in our internal controls over financial reporting with respect to inventory valuation also impaired our ability to rely upon information created by our computer system to fairly present, in all material respects, our financial condition, results of operations and cash flows in the periods covered by this report. The inability of our computer system to properly calculate the valuation of our finished goods inventories using a weighted average cost assumption also affected the system-recorded amounts within our cost of goods sold in certain periods covered by this report. Because (1) we concluded with reasonable assurance that our using a standard cost assumption yielded a fair estimation of our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005, (2) we determined that differences between the system-calculated values (average cost) of our finished goods inventories versus the values of our finished goods inventories using a standard cost method subsequent to March 31, 2005, were immaterial and (3) we consistently recorded adjustments to inventories as components of cost of goods sold, we believe with reasonable assurance that our cost of goods sold are fairly stated for the periods covered by this report. Therefore, we believe that the procedures we applied to value our finished goods inventories for the periods covered by this report provide us with reasonable assurance that our condensed consolidated financial statements and the notes thereto fairly state, in all material respects, our financial condition, the results of our operations and our cash flows.

 

15



 

Excess finished goods inventories are a natural component of a seasonal apparel business. While certain finished goods items will sell out in any particular selling season, quantities of other finished goods items will remain at the end of each selling season. We market previous seasons’ finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of discontinued or aging merchandise. We perform analyses on a quarterly basis to identify unsold discontinued or aging merchandise and adjust our reserves for inventory obsolescence to reduce the carrying value of discontinued or aging merchandise to its estimated net realizable value. The net realizable value of the discontinued or aging merchandise is estimated based on management’s disposition plans and historical experiences. During the quarter ended December 31, 2005, we recorded finished goods inventories write-downs of $129,000. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required or we may recognize losses on the disposition of obsolete inventories.

 

This excerpt taken from the SPOR 10-Q filed Nov 21, 2005.

Inventories

 

Inventories, predominately comprised of finished goods, are generally valued at the lower of cost (weighted average) or market. Costs include amounts paid to suppliers for packaged apparel and/or materials and labor, import costs, such as customs duties, freight-in and other miscellaneous costs, and allocated overhead. After we implemented our operations software in January 2004, we discovered certain programming and human errors within the new system that adversely affected the software’s ability to accurately compute the valuation of our finished goods inventories using a weighted average method. We consider the programming and human errors, which caused us to use a standard cost method in prior periods, to be a material weakness in our internal controls over financial reporting with respect to inventory valuation. This weakness in our controls prevented us from relying upon the system-recorded transactions with respect to inventory valuations during fiscal 2005. During the 2005 fiscal year, we concluded with reasonable assurance that recomputing the value of our finished goods inventories using a standard cost method yielded a fair estimation of the value of our finished goods inventories. We used the standard cost method to value our finished goods inventories from the fiscal quarter ended March 31, 2004, through the fiscal quarter ended March 31, 2005. Had we been able to rely upon the system to properly compute the cost of our finished goods inventories using the weighted average method, we believe that the weighted average method would not have yielded a materially different computation of the value than the standard cost method that we applied.

 

At September 30, 2005, a relatively small percentage our inventory items remained on hand that had been valued in prior periods using the standard cost method. Based upon tests we performed during the quarter ended September 30, 2005, we believe that the computer software has been properly programmed, and employees have been adequately trained to utilize the proscribed system procedures, so that prospectively we may rely upon the computer system to accurately compute our finished goods inventory valuations using a weighted average cost assumption. During the quarter ending December 31, 2005, we plan to design and implement additional controls to periodically test the accuracy of the system-generated valuation entries that comprise the weighted average cost components of our finished goods inventories to conclude whether the material weakness has been mitigated.

 

The material weakness in our internal controls over financial reporting with respect to inventory valuation also impaired our ability to rely upon information created by our computer system to fairly present, in all material respects, our financial condition, results of operations and cash flows in periods during the periods covered by this report. The inability of our computer system to properly calculate the valuation of our finished goods inventories using a weighted average cost assumption also affected the system-recorded amounts within our cost of goods sold in periods in the periods covered by this report. Because we concluded with reasonable assurance that our using a standard cost assumption yielded a fair estimation of our finished goods inventories, and because we consistently recorded adjustments to inventories as components of cost of goods sold, we believe with reasonable assurance that our cost of goods sold are fairly stated for the periods covered by this report. Therefore, we believe that the procedures we applied to value our finished goods inventories for the periods covered by this report provide us with reasonable assurance that our condensed financial statements and the notes thereto fairly state, in all material respects, our financial condition, the results of our operations and our cash flows.

 

12



 

Excess finished goods inventories are a natural component of a seasonal apparel business. While certain finished goods items will sell out in any particular selling season, quantities of other finished goods items will remain at the end of each selling season. We market previous seasons’ finished goods inventories at reduced wholesale prices to our customers in the normal course of business. Remaining excess inventories are liquidated through other markets. In the ordinary course of business, we maintain reserves for inventory write downs due to the obsolescence of discontinued or aging merchandise. We perform analyses on a quarterly basis to identify unsold discontinued or aging merchandise and adjust our reserves for inventory obsolescence to reduce the carrying value of discontinued or aging merchandise to its estimated net realizable value. The net realizable value of the discontinued or aging merchandise is estimated based on management’s disposition plans and historical experiences. During the quarter ended September 30, 2005, we recorded finished goods inventories write-downs of $65,000. While management believes that our processes produce fair valuations of obsolete inventories, if actual market conditions are less favorable than those projected by management, additional allowances may be required.

 

This excerpt taken from the SPOR 8-K filed Nov 8, 2005.
Section 12.6 Inventories. Unless approved by the Management Committee, no on-hand inventories of the Top-FliteÔ Apparel and Other Branded Apparel subject to this Agreement shall be maintained at Sport-Haley’s warehouse. Rather, the Members intend that inventories will be purchased only after a sales contract for such apparel has been entered into by the Company and the customer. The inventory subject to such sales contracts shall be maintained at Sport-Haley’s warehouse for such time as necessary to repackage (if necessary) and ship the units to the customer.

 

               

This excerpt taken from the SPOR 10-Q filed May 20, 2005.

Inventories

 

Inventories, predominantly comprised of finished goods, are generally valued at the lower of cost or market. As discussed above in

This excerpt taken from the SPOR 10-Q filed Feb 25, 2005.

NOTE 2 INVENTORIES

 
  September 30,
2004

  June 30,
2004

Inventories consisted of the following:            
  Component   $ 315,000   $ 470,000
  Finished goods     8,512,000     8,338,000
   
 
    $ 8,827,000   $ 8,808,000
   
 
This excerpt taken from the SPOR 10-Q filed Feb 22, 2005.

Inventories

 

Inventories, predominantly comprised of finished goods, are generally valued at the lower of cost or market. As discussed above in

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