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 July 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 August 14, 2000
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, JULY 1, 2000
AND JANUARY 1, 2000 3
INCOME STATEMENTS
TWENTY-SIX WEEKS ENDED JULY 1, 2000
AND JULY 3, 1999 4
THIRTEEN WEEKS ENDED JULY 1, 2000
AND JULY 3, 1999 5
STATEMENTS OF CASH FLOWS
TWENTY-SIX WEEKS ENDED JULY 1, 2000
AND JULY 3, 1999 6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-12
OTHER INFORMATION:
EXHIBIT AND REPORTS ON FORM 8-K 12
SIGNATURE 13
EXHIBIT 11.1 - CALCULATION OF BASIC AND DILUTED
EARNINGS PER SHARE 14
2
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 1, January 1,
ASSETS 2000 2000
------------ ------------
Current assets:
Cash and cash equivalents $ 3,715,000 $ 9,848,000
Receivables 1,641,000 2,747,000
Notes receivable from related parties 250,000 250,000
Inventories 25,549,000 24,399,000
Deferred income taxes and other assets 777,000 396,000
Prepaid expenses 976,000 724,000
------------ ------------
Total current assets 32,908,000 38,364,000
Property and equipment, net 17,069,000 16,936,000
Other assets 856,000 938,000
Deferred income taxes 800,000 724,000
------------ ------------
$ 51,633,000 $ 56,962,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,135,000 $ 16,311,000
Accrued compensation 1,467,000 1,618,000
Accrued liabilities 4,360,000 5,558,000
------------ ------------
Total current liabilities 16,962,000 23,487,000
Other liabilities 1,465,000 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 July 1, 2000 and January 1, 2000 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 13,551,000 12,250,000
------------- -------------
Total stockholders' equity 33,206,000 31,905,000
------------- -------------
$ 51,633,000 $ 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 INCOME STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
July 1, July 3,
2000 1999
------------- --------------
Net sales $ 84,738,000 $ 76,514,000
------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 55,410,000 49,217,000
Selling, general and administrative expenses 27,362,000 23,675,000
------------- --------------
82,772,000 72,892,000
------------- --------------
Operating income 1,966,000 3,622,000
------------- --------------
Interest expense
Related party --- (70,000)
Other interest (22,000) ---
------------- --------------
(22,000) (70,000)
------------- --------------
Interest income 105,000 196,000
------------- --------------
Income before income taxes 2,049,000 3,748,000
Income tax provision 748,000 1,537,000
------------- --------------
Net income $ 1,301,000 $ 2,211,000
============= ==============
Basic and diluted earnings per share $0.14 $0.24
============= ==============
Weighted average shares outstanding 9,154,000 9,258,000
============= ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
4
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
July 1, July 3,
2000 1999
------------- -------------
Net sales $ 43,824,000 $ 40,028,000
------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 28,466,000 25,501,000
Selling, general and administrative expenses 13,867,000 12,126,000
------------- -------------
42,333,000 37,627,000
------------- -------------
Operating income 1,491,000 2,401,000
------------- --------------
Interest expense
Related party --- (35,000)
Other interest (22,000) ---
------------- --------------
(22,000) (35,000)
------------- --------------
Interest income 65,000 107,000
------------- --------------
Income before income taxes 1,534,000 2,473,000
Income tax provision 560,000 1,014,000
------------- --------------
Net income $ 974,000 $ 1,459,000
============= ==============
Basic and diluted earnings per share $0.11 $0.16
============= ==============
Weighted average shares outstanding 9,150,000 9,266,000
============= ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
5
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
July 1, July 3,
2000 1999
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income $ 1,301,000 $ 2,211,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,393,000 2,139,000
Reversal of future rent escalations (87,000) (52,000)
Change in assets and liabilities:
Decrease in receivables 1,106,000 267,000
Decrease in notes receivable from related parties --- 45,000
Increase in deferred income taxes (457,000) (26,000)
Increase in inventories (1,150,000) (1,767,000)
Decrease (increase) in prepaid expenses (252,000) 36,000
Decrease in accounts payable (5,176,000) (3,026,000)
Decrease in income taxes payable --- (303,000)
Decrease in accrued liabilities and accrued compensation (1,037,000) (471,000)
------------ -----------
Total changes in assets and liabilities (6,966,000) (5,245,000)
------------ -----------
Net cash used in operating activities (3,359,000) (947,000)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (2,830,000) (2,940,000)
------------ -----------
Net cash used in investing activities (2,830,000) (2,940,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Other, net 56,000 (102,000)
------------ -----------
Net cash used in financing activities 56,000 (102,000)
------------ -----------
Net decrease in cash and cash equivalents (6,133,000) (3,989,000)
Cash and cash equivalents, at beginning of period 9,848,000 13,720,000
------------ ------------
Cash and cash equivalents, at end of period $ 3,715,000 $ 9,731,000
============ ============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
6
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 July 1, 2000(Fiscal 2000)and January 1, 2000
(Fiscal 1999), and the results of operations for the twenty-six and
thirteen week periods ended July 1, 2000 and the consolidated
statements of cash flows for the twenty-six 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 twenty-six and thirteen weeks ended July 1, 2000 and July 3, 1999.
The approximate number of shares used in the computations of basic
and diluted earnings per share were 9,154,000 and 9,258,000, for the
twenty-six week periods and 9,150,000 and 9,266,000 for the thirteen
week periods ended July 1, 2000 and July 3, 1999, respectively.
7
3. PROPERTY AND EQUIPMENT
----------------------
July 1, January 1,
2000 2000
----------- -----------
Leasehold improvements $19,104,000 $18,347,000
Furniture, fixtures and
equipment 23,048,000 21,407,000
----------- -----------
42,152,000 39,754,000
Less: accumulated depreciation
and amortization 25,083,000 22,818,000
----------- -----------
$17,069,000 $16,936,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
July 1, January 1,
2000 2000
---------- -----------
Operating Expenses $1,647,000 $1,694,000
Taxes, other than income taxes 940,000 1,614,000
Leasehold additions 117,000 447,000
Other customer deposits 1,656,000 1,803,000
---------- -----------
$4,360,000 $5,558,000
========== ===========
5. BANK DEBT
---------
During July 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 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 up 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. The
amended agreement now permits the payment of dividends on the Company's
common stock. 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 July 1,
2000, and January 1, 2000. There were no borrowings in the Fiscal
period ended July 1, 2000.
8
6. INCOME TAXES
------------
The effective tax rates for Fiscal 2000 and 1999 are 36.5% and 41%,
respectively. At July 1, 2000 and January 1, 2000, the Company's deferred
tax assets were $982,000 and $960,000, respectively, also, there was no
deferred tax liability. The major components of the Company's net deferred
taxes at July 1, 2000 and January 1, 2000 are as follows:
July 1, January 1,
2000 2000
--------- -----------
Net operating loss carryforwards ("NOL'S)..... $ 46,000 $ 46,000
Deferred rent.................................. 765,000 801,000
Other.......................................... 171,000 113,000
--------- -----------
$ 982,000 $ 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
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
- ----------------------------------------------
Except for the historical information and current statements contained in
this Form 10-Q, certain matters discussed herein, including, without
limitation, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" are forward looking statements that involve risks and
uncertainties, including, without limitation, the effect of economic and
market conditions and competition, the ability to open new stores and expand
into new markets, and risks relating to foreign importing operations, which
would cause actual results to differ materially.
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 and the
renovation of existing stores. During the twenty-six weeks ended July 1, 2000,
the Company used cash ($6,133,000),a reduction in receivables ($1,106,000),
and cash flow from non-cash depreciation expenses ($2,393,000) to repay
accounts payable ($5,176,000),to fund inventory purchases ($1,150,000)and to
fund the Company's store expansion and remodeling program ($2,830,000). The
Company had no bank borrowings during Fiscal 2000 and Fiscal 1999.
9
The Company plans to open approximately fifteen new stores during 2000.
The Company has opened seven new Lillie Rubin stores in the first half of
Fiscal 2000, and expects to open one additional store during the second half
of 2000. The Company also opened two new Cache stores in the first half of
Fiscal 2000, and expects to open approximately six or seven additional Cache
stores during the second half of Fiscal 2000. After deducting construction
allowances paid to the Company by its landlords, the Company has spent
approximately $2,830,000 through July 1, 2000 and expects to spend between one
and two million additional dollars during the second half of Fiscal 2000, for
both new store and existing store construction and remodeling. The Company
closed two stores in the first half of Fiscal 2000, the closures had no
material impact on earnings.
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
- ---------------------
Certain financial data concerning the Company's results of operations for
the twenty-six and thirteen week periods ended July 1, 2000 and July 3, 1999,
expressed as a percentage of net sales, are as follows:
Twenty-six Weeks Ended Thirteen Weeks Ended
----------------------- ---------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------- ------- ------- -------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.4% 64.3% 65.0% 63.7%
Selling, general and
administrative expenses 32.3% 30.9% 31.6% 30.3%
Income before taxes 2.4% 4.9% 3.5% 6.2%
Income tax provision 0.9% 2.0% 1.3% 2.5%
Net income 1.5% 2.9% 2.2% 3.6%
Sales
- -----
Net sales increased $8,224,000 or 10.8% and $3,796,000 or 9.5%,
respectively, during the twenty-six and thirteen week periods ended July 1,
2000, versus the comparable periods in Fiscal 1999. The increases were primarily
due to the greater number of stores open during the Fiscal 2000 period, as well
as an increase in comparable store sales during the Fiscal 2000 periods.
Comparable store sales increased 2.1% and 1.4%, respectively, for the twenty-six
and thirteen week periods in Fiscal 2000, as compared to the comparable periods
in Fiscal 1999.
10
Costs and expenses
- ------------------
Cost of sales, including occupancy and buying costs, increased $6,193,000
or 12.6% for the twenty-six weeks ended July 1, 2000, versus the similar period
in Fiscal 1999. The increase was primarily due to the increase in sales and the
related cost of merchandise for those sales, as well as a $1,266,000 increase in
occupancy expenses, primarily due to the additional stores in operation during
the Fiscal 2000 versus Fiscal 1999. As a percentage of sales, cost of sales,
including the occupancy expenses, increased 1.1%, (65.4% versus 64.3%) for the
twenty-six week period ended July 1, 2000, versus the comparable period
in Fiscal 1999. The increase was primarily due to higher markdowns taken in
Fiscal 2000, as compared to Fiscal 1999.
Cost of sales, including occupancy and buying costs, increased $2,965,000
or 11.6% for the thirteen weeks ended July 1, 2000, versus the similar Fiscal
1999 period. The increase was primarily due to the increase in sales and the
related cost of the merchandise for those sales, and a $621,000 increase in
occupancy, due to the additional stores in operation during Fiscal 2000 versus
Fiscal 1999. As a percentage of sales, cost of sales, including occupancy and
buying expenses, increased 1.3% (65.0% versus 63.7%) for the thirteen weeks
ended July 1, 2000, versus the comparable period in Fiscal 1999. The increase
was primarily due to higher markdowns in dollars, and as a percent of sales, as
compared to the Fiscal 1999 period.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A") increased $3,687,000
or 15.6% during the twenty-six week period ended July 1, 2000 versus the
comparable period in Fiscal 1999. The increase was primarily due to the greater
number of stores open in Fiscal 2000 as compared to Fiscal 1999. The increase
in several expense categories was due to greater payroll and payroll taxes
($2,166,000), credit card fees ($224,000), depreciation ($252,000) and licenses
and taxes ($180,000), and advertising expense($211,000). As a percentage of
sales, these expenses increased 1.3% (32.3% versus 30.9%) for the twenty-six
weeks ended July 1, 2000 versus the similar Fiscal 1999 period. The increase
was primarily driven by the greater number of stores open during the Fiscal 2000
period.
Selling, general and administrative expenses increased $1,741,000 or 14.4%
during the thirteen weeks ended July 1, 2000, versus the comparable period in
Fiscal 1999. The increase was primarily due to the greater number of stores open
in Fiscal 2000, as compared to Fiscal 1999. The increase in certain expense
categories was primarily due to greater payroll and payroll taxes ($917,000),
licenses and taxes($92,000) and depreciation ($113,000). As a percentage of
sales, these expenses increased 1.3% (31.6% versus 30.3%) for the thirteen weeks
ended July 1, 2000 versus the similar Fiscal 1999 period. The increase was due
primarily to the effect of higher payroll and payroll taxes, which was primarily
driven by the greater number of stores open during the Fiscal 2000 period.
11
Interest expense
- ----------------
Interest expense decreased $48,000 and $13,000, respectively, for the
twenty-six and thirteen week periods ended July 1, 2000, due to the repayment of
the related party notes.
Interest income
- ---------------
Interest and other income decreased from $196,000 to $105,000 for the
twenty-six week period, as well as decreasing from $107,000 to $65,000 for the
thirteen week period. The decreases were primarily due to lower average cash
balances after the repayment of the related party notes.
Income taxes
- ------------
The Company's effective tax rate is approximately 36.5% for Fiscal 2000, as
compared to 41% in Fiscal 1999.
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
12
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)
August 14, 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)
13
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE
(In thousands except per share data)
TWENTY-SIX THIRTEEN
WEEKS ENDED WEEKS ENDED
------------------------------ -----------------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------------------------------ -----------------------------
EARNINGS
--------
Net Income Applicable
to Common Stockholders $ 1,301,000 $ 2,211,000 $ 974,000 $ 1,459,000
============================== =============================
BASIC EARNINGS PER SHARE
-------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000 9,091,000 9,091,000
============================== =============================
Basic Earnings Per Share $0.14 $0.24 $0.11 $0.16
============================== =============================
DILUTED EARNINGS PER SHARE
--------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options 550,000 600,000 550,000 600,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (487,000) (433,000) (491,000) (425,000)
------------------------------ -----------------------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,154,000 9,258,000 9,150,000 9,266,000
============================== =============================
Diluted Earnings Per Share $0.14 $0.24 $0.11 $0.16
============================== =============================
14