Eddie Bauer Withdraws SEC Registration

Accounting problems deepen.
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Eddie Bauer

said it would withdraw its registration with the

Securities and Exchange Commission

as its accounting problems deepened.

The Seattle-based apparel chain, which filed in December to register its shares with U.S. regulators so it could get its stock traded on the

Nasdaq

, said it found more problems with the registration statement it filed with the SEC.

On Jan. 12, the company announced in a press release that it had discovered errors in the financial statements included in the registration statement. That announcement indicated that the company did not expect the errors to impact net earnings for any fiscal period presented.

But Eddie Bauer said it has now determined through its ongoing review that the lease accounting revisions were incorrectly described in the press release and will likely impact net earnings for the quarter ended Oct. 1, 2005, and future periods.

The company expects that the correction to the balance sheets as of July 2, 2005, and Oct. 1, 2005, will impact fixed assets and goodwill and, as a result, depreciation expense for the quarter ended Oct. 1, 2005, will increase. Based on information currently available, for the third quarter ended Oct. 1, 2005, the company estimates the impact on reported depreciation expense to be an increase of less than $2 million and the impact on net earnings to be a reduction of less than $1 million. In addition, the company intends to restate the unaudited pro forma consolidated financial information for the nine months ended Oct. 1, 2005, and for fiscal 2004, to correct these misstatements relating to depreciation expense for the pro forma periods.

The company has also discovered that its balance sheets as of July 2, 2005, and Oct. 1, 2005, contained an understatement of noncurrent liabilities (pension and other post-retirement liabilities) arising from an incorrect application of fresh start accounting principles. The company is in the process of refining its estimate of the impact on assets and noncurrent liabilities, but expects such impact to be less than $3 million.

The shares Eddie Bauer is trying to register via Form 10 have already been distributed to creditors of the company's now-defunct parent, Spiegel, the

Seattle Post-Intelligencer

reported. The creditors include Commerzbank AG of Germany, Dresdner Kleinwort Wasserstein and DZ Bank AG. About 580 shareholders of record held 30 million shares as of Dec. 12, the paper said.

Eddie Bauer shares have been trading on the over-the-counter market since June, when the company emerged from bankruptcy with the help of $450 million in loans from JPMorgan Chase, GE Commercial, Bank of America and others, the

Post-Intelligencer

said.

Eddie Bauer said it would try to restart the registration process when the problems are fixed.