FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended April 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............... to ...............
Commission File Number: 0-10345
CACHE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Florida 59-1588181
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1460 Broadway, New York, New York 10036
----------------------------------------------------
(Address of principal executive offices) (zip code)
212-575-3200
---------------------------------------------------
(Registrant's telephone number, including area code)
------
- ---------------------------------------------------------------
(Former name, address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
---- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 9,091,338
- -------------------------- --------------------------
Class of Stock Outstanding Outstanding at May 12, 2000
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, APRIL 1, 2000
AND JANUARY 1, 2000 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED APRIL 1, 2000
AND APRIL 3, 1999 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED APRIL 1, 2000
AND APRIL 3, 1999 5
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-10
OTHER INFORMATION:
EXHIBIT INDEX AND REPORTS ON FORM 8-K 11
SIGNATURES 12
2
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 1, January 1,
ASSETS 2000 2000
---------------- ----------------
Current assets:
Cash and equivalents $ 6,331,000 $ 9,848,000
Receivables 2,274,000 2,747,000
Notes receivable from related parties 250,000 250,000
Inventories 27,704,000 24,399,000
Deferred income taxes and other assets 328,000 396,000
Prepaid expenses 891,000 724,000
---------------- ----------------
Total current assets 37,778,000 38,364,000
Property and equipment, net 17,386,000 16,936,000
Other assets 871,000 938,000
Deferred income taxes 732,000 724,000
---------------- ----------------
$ 56,767,000 $ 56,962,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,579,000 $ 16,311,000
Accrued compensation 905,000 1,618,000
Accrued liabilities 4,531,000 5,558,000
---------------- ----------------
Total current liabilities 23,015,000 23,487,000
Other liabilities 1,520,000 1,570,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at April 1, 2000 and January 1, 2000 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 12,577,000 12,250,000
---------------- ----------------
Total stockholders' equity 32,232,000 31,905,000
---------------- ----------------
$ 56,767,000 $ 56,962,000
================ ================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
</FN>
3
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
April 1, April 3,
2000 1999
---------------- ----------------
Net sales $ 40,914,000 $ 36,486,000
---------------- ----------------
Costs and expenses
Cost of sales, including occupancy and buying costs 26,944,000 23,716,000
Selling, general and administrative expenses 13,495,000 11,549,000
---------------- ----------------
40,439,000 35,265,000
---------------- ----------------
Operating income 475,000 1,221,000
---------------- ----------------
Interest expense
Related party --- (35,000)
---------------- -----------------
--- (35,000)
---------------- -----------------
Interest income 40,000 89,000
---------------- -----------------
Income before income taxes 515,000 1,275,000
Income tax provision 188,000 523,000
---------------- -----------------
Net income $ 327,000 $ 752,000
================ =================
Basic and diluted earnings per share $0.04 $0.08
========= ==========
Weighted average shares outstanding 9,193,000 9,235,000
========= ==========
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
4
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
April 1, April 3,
2000 1999
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income $ 327,000 $ 752,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,172,000 1,032,000
Reversal of future rent escalations (32,000) (30,000)
Change in assets and liabilities:
Decrease (increase) in receivables 473,000 (529,000)
Decrease in deferred income taxes 60,000 65,000
Decrease in notes receivable from related parties --- 45,000
Increase in inventories (3,305,000) (2,762,000)
Increase in prepaid expenses (167,000) (22,000)
Increase in accounts payable 1,268,000 4,018,000
Decrease in income taxes payable --- (320,000)
Decrease in accrued liabilities and accrued compensation (1,446,000) (1,257,000)
----------------- ----------------
Total changes in assets and liabilities (3,117,000) (762,000)
----------------- ----------------
Net cash provided by (used in) operating activities (1,650,000) 992,000
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (1,922,000) (1,268,000)
----------------- -----------------
Net cash used in investing activities (1,922,000) (1,268,000)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Other, net 55,000 (18,000)
----------------- -----------------
Net cash provided by (used in) financing activities 55,000 (18,000)
----------------- -----------------
Net decrease in cash and equivalents (3,517,000) (294,000)
Cash and equivalents, at beginning of period 9,848,000 13,720,000
----------------- -----------------
Cash and equivalents, at end of period $ 6,331,000 $ 13,426,000
================= =================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
5
CACHE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
In the opinion of the Company, the accompanying consolidated
financial statements include all adjustments necessary, which are
considered normal and recurring to present fairly the financial
position of the Company at April 1, 2000 and January 1, 2000, and the
results of operations for the thirteen week periods ended April 1, 2000
and April 3, 1999 and consolidated statements of cash flows for the
thirteen weeks then ended.
Certain financial information which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes, has been condensed or omitted. The accompanying consolidated
financial statements should be read in conjunction with the Financial
Statements and notes thereto included in the Company's latest annual
report on Form 10-K for the fiscal year ended January 1, 2000. Certain
amounts reflected in Fiscal 1999 financial statements have been
reclassified to conform with the presentation of similar items in
Fiscal 2000.
Net income includes all sources of comprehensive income. There
were no adjustments for foreign currency translation, unrealized
gains(losses)on investments or deferred compensation expense incurred
in Fiscal 2000 or Fiscal 1999 results.
2. BASIC AND DILUTED EARNINGS
--------------------------
Basic and diluted earnings per share has been computed based on
the weighted average number of shares of common stock outstanding for
the thirteen weeks ended April 1, 2000 and April 3, 1999.
The approximate number of shares used in the computations of basic
and diluted earnings per share were 9,193,000 and 9,235,000, for the
thirteen week periods ended April 1, 2000 and April 3, 1999,
respectively.
6
3. PROPERTY AND EQUIPMENT
----------------------
April 1, January 1,
2000 2000
----------- -----------
Leasehold improvements $19,108,000 $18,347,000
Furniture, fixtures and
equipment 22,256,000 21,407,000
----------- -----------
41,364,000 39,754,000
Less: accumulated depreciation
and amortization 23,978,000 22,818,000
----------- -----------
$17,386,000 $16,936,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
April 1, January 1,
2000 2000
---------- -----------
Operating Expenses $1,353,000 $1,694,000
Taxes, other than income taxes 1,318,000 1,614,000
Leasehold additions 135,000 447,000
Other customer deposits 1,725,000 1,803,000
----------- -----------
$4,531,000 $5,558,000
=========== ===========
5. BANK DEBT
---------
During August 1999, the Company reached an agreement with its
bank to extend the maturity of the Amended Revolving Credit Facility
until January 31, 2003. Pursuant to the newly Amended Revolving Credit
Facility, $15,000,000 is available until expiration at January 31,
2003. The amounts outstanding thereunder bear interest at a maximum
per annum rate equal to the bank's prime rate. The agreement contains
selected financial and other covenants including covenants to maintain
a minimum current ratio, a maximum debt to equity ratio, a maximum
capital expenditure covenant and a minimum fixed charge coverage ratio.
Effective upon the occurrence of an Event of Default under the
Revolving Credit Facility, the Company grants to the bank a security
interest in the Company's inventory and certain receivables.
There was no outstanding balance on the line of credit at April 1,
2000, and January 1, 2000. There were no borrowings in the Fiscal
period ended April 1, 2000.
7
6. INCOME TAXES
------------
The effective tax rates for Fiscal 2000 and 1999 are 36.5% and 41%,
respectively. At April 1, 2000 and January 1, 2000, the Company's deferred
tax assets were $976,000 and $960,000, respectively, also, there was no
deferred tax liability. The major components of the Company's net deferred
taxes at April 1, 2000 and January 1,2000 are as follows:
April 1, January 1,
2000 2000
---------- -----------
Net operating loss carryforwards ("NOL'S)....... $ 46,000 $ 46,000
Deferred rent................................... 788,000 801,000
Other........................................... 142,000 113,000
----------- -----------
$ 976,000 $ 960,000
=========== ===========
7. CONTINGENCIES
-------------
The Company is exposed to a number of asserted and unasserted potential
claims. In the opinion of management, the resolution of these matters is not
presently expected to have a material adverse effect upon the Company's
financial position and results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
The Company's primary need for capital is to finance new store
merchandise inventories, as well as the construction of new stores. During
the thirteen weeks ended April 1, 2000, the Company used cash ($3,517,000),
cash flow from non-cash depreciation expenses ($1,172,000) a decrease in
receivables ($473,000), as well as increase in accounts payable ($1,268,000)
to offset the cost of inventory purchases ($3,305,000), payment of accrued
liabilities and compensation ($1,446,000), and to fund the Company's new
store expansion and remodeling program ($1,922,000).
8
The Company plans to open approximately ten to fifteen new stores during
2000. The Company opened two new Lillie Rubin stores in January and five new
Lillie Rubin stores in March 2000, and closed one Lillie Rubin store in
February 2000. The Company recently opened two new Cache Stores, one store
in February 2000 and one store in April 2000. The additional new stores are
expected to be opened during the summer and fall of 2000. After deducting
construction allowances paid to the Company by its landlords, the Company has
spent $1,922,000 through April 1, 2000 and expects to spend an additional two
to three million dollars in 2000 for both new store and existing store
construction and remodeling.
Management believes that the Company's internally generated cash flows
will be sufficient to meet anticipated requirements for operations and
planned expansion during Fiscal 2000.
RESULTS OF OPERATIONS
- ---------------------
For the thirteen weeks ended April 1, 2000, the benefit of higher net
sales, including a 3% increase in comparative store sales, was more than
offset by higher cost of sales due to higher occupancy costs, higher
markdowns and increased selling, general and administrative expenses,
resulting in a decrease in net income in Fiscal 2000, as compared to Fiscal
1999.
Certain financial data concerning the Company's results of operations
for the thirteen week periods ended April 1, 2000 and April 2, 2000,
expressed as a percentage of net sales, are as follows:
Thirteen Weeks Ended
---------------------
April 1, April 3,
2000 2000
--------- --------
Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.9% 65.0%
Selling, general and
administrative expenses 33.0% 31.7%
Income before taxes 1.3% 3.5%
Income tax provision 0.5% 1.4%
Net income 0.8% 2.1%
Sales
- ------
Net sales increased $4,428,000 or 12.1% during the thirteen week period
ended April 1, 2000, as compared to the 1999 Fiscal period. The increase was
primarily due to the greater number of stores open during the 1999 period, as
well as an increase in comparable store sales (sales for stores open at least
one year or more) which increased 3% during 2000, as compared to the 1999
Fiscal period.
9
Costs and expenses
- ------------------
Cost of sales, which includes occupancy and buying costs, increased
$3,228,000 or 13.6% for the thirteen weeks ended April 1, 2000 as compared to
the similar 1999 Fiscal period. The increase in cost of sales was primarily
due to the increase in sales and the related cost of merchandise for those
sales, higher markdowns, as well as a $645,000 increase in occupancy
expenses, as a result of the additional stores in operation during Fiscal
2000 as compared to Fiscal 1999. As a percentage of sales, cost of sales
including occupancy and buying expenses, increased 0.9%, (65.9% as compared
to 65.0%) for the thirteen weeks ended April 1, 2000 as compared to the 1999
Fiscal period, the increase was primarily due to the increase in occupancy
and buying expenses, as well as an increase in markdowns.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A")increased
$1,946,000 or 16.8% during the thirteen weeks ended April 1, 2000 as compared
to the 1999 Fiscal period. The increase was primarily due to the greater
number of stores open in 2000 (approximately 15 more than fiscal 1999), and
is reflected in greater payroll and payroll taxes ($1,319,000), credit card
fees ($115,000), and depreciation ($140,000). As a percentage of sales, S,G
& A expenses increased to 33.0% in Fiscal 2000 as compared to 31.7% in Fiscal
1999.
Interest expense
- ----------------
Interest expense decreased from $35,000 in Fiscal 1999 to $0 in
Fiscal 2000, due to the repayment of the related party notes.
Interest income
- ---------------
Interest income decreased from $89,000 in Fiscal 1999 to $40,000 in
Fiscal 2000, due to the reduction in available cash.
Income taxes
- ------------
The Company's effective tax rate is approximately 36.5%, for Fiscal 2000
as compared to 41.0% in Fiscal 1999.
10
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
NONE
(b) Reports on Form 8-K
NONE
11
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CACHE, INC.
(Registrant)
May 12, 2000 BY: /s/ Thomas E. Reinckens
----------------------------
Thomas E. Reinckens
On behalf of Cache, Inc.
and in his capacity as
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
12
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
THIRTEEN WEEKS ENDED
--------------------------------------
April 1, April 3,
2000 1999
--------------- -----------------
EARNINGS PER SHARE
Net Income Applicable to Common Stockholders $ 327,000 $ 752,000
=============== =================
BASIC EARNINGS PER SHARE
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
=============== =================
Basic Earnings Per Share $0.04 $0.08
=============== =================
DILUTED EARNINGS PER SHARE
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options 550,000 476,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (448,000) (332,000)
-------------- -----------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,193,000 9,235,000
============== =================
Diluted Earnings Per Share $0.04 $0.08
============== =================
13