SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): August 16, 2004
THE SPORTS CLUB COMPANY, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-13290 95-4479735
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(Commission File Number) (IRS Employer Identification Number)
11100 Santa Monica Boulevard, Suite 300, Los Angeles, California 90025
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(Address of Principal Executive Offices, Including Zip Code)
(310) 479-5200
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Index of Exhibits on Page 3
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
The Company has previously filed an 8-K stating that (i) on July 6,
2004, The Sports Club Company, Inc. (the "Company") notified KPMG LLP ("KPMG")
that the Company would not be renewing its engagement of KPMG as its principal
accountants for the audit of the Company's consolidated financial statements for
the year ending December 31, 2004, (ii) KPMG's dismissal will be effective upon
KPMG's completion of its review of the Company's unaudited condensed
consolidated interim financial statements included in the Company's Form 10-Q
for the quarter ended June 30, 2004, and (iii) the Company's Audit Committee of
the Board of Directors (the "Audit Committee") approved the termination of KPMG
as the Company's principal accountants.
The Company filed its Form 10-Q for the period ended June 30, 2004 on
August 16, 2004 and accordingly KPMG was dismissed effective August 16, 2004.
KPMG audited the Company's consolidated financial statements for the
two most recent fiscal years ended December 31, 2002 and December 31, 2003,
respectively. During KPMG's engagement by the Company and in the subsequent
interim period through August 16, 2004:
(1) KPMG's audit reports on the consolidated financial
statements of the Company and its subsidiaries as of and for the years ended
December 31, 2002 and December 31, 2003, respectively, did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles, except KPMG's report on
the consolidated financial statements of the Company and subsidiaries as of and
for the years ended December 31, 2003 and 2002, contained separate paragraphs
stating (a) "as discussed in Note 2 to the consolidated financial statements,
the Company restated its 2002 consolidated financial statements," (b) "as
discussed in Note 4 to the consolidated financial statements the Company adopted
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, effective January 1, 2002", and (c) "the Company has suffered
recurring net losses, has working capital deficiency and has negative cash flows
from operating activities that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty."
(2) The Company did not have any disagreements with KPMG on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedures, which disagreements, if not resolved to KPMG's
satisfaction, would have caused it to make a reference to the subject matter of
the disagreements in connection with its reports.
(3) In performing its audit of our consolidated financial
statements for the
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year ended December 31, 2003, KPMG noted a matter involving our internal
controls that it considered to be a reportable condition. A reportable
condition, which may or may not be determined to be a material weaknesses,
involves matters relating to significant deficiencies in the design or operation
of internal controls that, in KPMG's judgment, could adversely affect our
ability to record, process, summarize and report financial data consistent with
the assertions of management on the financial statement. The reportable
condition, which was considered to be a material weakness, noted that the
Company does not have adequate internal controls over the application of new
accounting principles or the application of existing accounting principles to
new transactions. Specifically, KPMG stated that during their quarterly review
for the quarter ended March 31, 2003, they noted the Company had not properly
accounted for private training revenues. In addition, during their 2003 audit,
KPMG noted we were not properly accounting for our management arrangement for
The Sports Club/LA - Miami, that we had not properly implemented Statement of
Financial Accounting Standard No. 142, relating to goodwill and not properly
accounted for the accretion of dividends on Series C Preferred Stock. KPMG
indicated that we enhance our financial and accounting personnel staffing levels
or take other actions (i.e. attend training seminars on new accounting
pronouncements) to ensure that the Company has appropriate resources to
implement new accounting standards and apply existing accounting standards to
new transactions.
A letter from KPMG is attached as Exhibit 16.1 to this Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Not Applicable
(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits
Exhibit 16.1 Letter from KPMG.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: August 23, 2004 THE SPORTS CLUB COMPANY, INC.
By: /s/ Timothy M. O'Brien
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Timothy M. O'Brien
Chief Financial Officer
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EXHIBIT 16.1
(KPMG LLP Letterhead)
August 20, 2004
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for The Sports Club Company, Inc. and,
under the date of May 24, 2004, we reported on the consolidated financial
statements of The Sports Club Company, Inc. as of and for the years ended
December 31, 2003 and 2002. On July 6, 2004, we were notified that the
auditor-client relationship with KPMG LLP will cease upon completion of the
review of The Sports Club Company, Inc.'s consolidated financial statements as
of and for the three-month and six-month periods ended June 30, 2004, and the
filing of the Company's Form 10-Q. On August 16, 2004, The Sports Club Company,
Inc. filed its Form 10-Q for the period ended June 30, 2004, and accordingly,
the auditor-client relationship ceased. We have read The Sports Club Company,
Inc.'s statements included under Item 4 of its Form 8-K dated August 16, 2004,
and we agree with such statements, except that we are not in a position to agree
or disagree with The Sports Club Company, Inc.'s statement that our termination
as the Company's principal accountants was approved by the Audit Committee of
the Board of Directors.
Very truly yours,
/s/ KPMG LLP
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