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 September 30, 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.
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(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
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(Address of principal executive offices) (zip code)
212-575-3200
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(Registrant's telephone number, including area code)
------
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(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 November 13, 2000
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, SEPTEMBER 30, 2000
AND JANUARY 1, 2000 3
INCOME STATEMENTS
THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000
AND OCTOBER 2, 1999 4
THIRTEEN WEEKS ENDED SEPTEMBER 30, 2000
AND OCTOBER 2, 1999 5
STATEMENTS OF CASH FLOWS
THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000
AND OCTOBER 2, 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)
September 30, January 1,
2000 2000
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 957,000 $ 9,848,000
Receivables 2,293,000 2,747,000
Notes receivable from related parties 250,000 250,000
Inventories 29,438,000 24,399,000
Prepaid income taxes and other assets 1,732,000 396,000
Prepaid expenses 622,000 724,000
--------------- ---------------
Total current assets 35,292,000 38,364,000
Property and equipment, net 16,974,000 16,936,000
Other assets 879,000 938,000
Deferred income taxes 693,000 724,000
--------------- ---------------
$ 53,838,000 $ 56,962,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,929,000 $ 16,311,000
Accrued compensation 747,000 1,618,000
Accrued liabilities 4,769,000 5,558,000
--------------- ---------------
Total current liabilities 20,445,000 23,487,000
--------------- ---------------
Other liabilities 1,423,000 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 September 30, 2000 and January 1, 2000 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 12,315,000 12,250,000
--------------- ---------------
Total stockholders' equity 31,970,000 31,905,000
--------------- ---------------
$ 53,838,000 $ 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 THIRTY-NINE WEEKS ENDED
(Unaudited)
September 30, October 2,
2000 1999
--------------- --------------
Net sales $ 122,726,000 $ 110,790,000
--------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 81,436,000 72,464,000
Selling, general and administrative expenses 41,286,000 35,968,000
--------------- --------------
122,722,000 108,432,000
--------------- --------------
Income from operations 4,000 2,358,000
Other income (expense) :
Interest expense - related party --- (105,000)
Interest expense - other (27,000) ---
Interest income 126,000 262,000
Other --- (50,000)
--------------- --------------
Income before income taxes 103,000 2,465,000
Income tax provision 38,000 1,010,000
--------------- --------------
Net income $ 65,000 $ 1,455,000
=============== ==============
Basic and diluted earnings per share $0.01 $0.16
=============== ==============
Weighted average shares outstanding 9,136,000 9,321,000
=============== ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
4
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
September 30, October 2,
2000 1999
--------------- --------------
Net sales $ 37,988,000 $ 34,276,000
--------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 26,026,000 23,247,000
Selling, general and administrative expenses 13,924,000 12,293,000
--------------- --------------
39,950,000 35,540,000
--------------- --------------
Loss from operations (1,962,000) (1,264,000)
Other income (expense) :
Interest expense - related party --- (35,000)
Interest expense - other (5,000) ---
Interest income 21,000 66,000
Other --- (50,000)
--------------- --------------
Loss before income tax benefit (1,946,000) (1,283,000)
Income tax benefit (710,000) (527,000)
--------------- --------------
Net loss $ (1,236,000) $ (756,000)
=============== ==============
Basic loss per share ($0.14) ($0.08)
=============== ==============
Weighted average shares outstanding 9,091,000 9,091,000
=============== ==============
<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 THIRTY-NINE WEEKS ENDED
(Unaudited)
September 30, October 2,
2000 1999
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income $ 65,000 $ 1,455,000
provided by (used in) operating activities:
Depreciation and amortization 3,580,000 3,272,000
Reversal of future rent escalations (123,000) (72,000)
Change in assets and liabilities:
---------------------------------
Decrease (increase) in receivables 454,000 (505,000)
Decrease in notes receivable from related parties --- 45,000
Increase in inventories (5,039,000) (6,120,000)
Increase in prepaid income taxes and other assets (1,305,000) (662,000)
Decrease (increase) in prepaid expenses 102,000 (67,000)
Decrease in income taxes payable --- (943,000)
Increase (decrease) in accounts payable (1,382,000) 2,264,000
Decrease in accrued liabilities and accrued compensation (1,360,000) (1,097,000)
--------------- --------------
Total changes in assets and liabilities (8,530,000) (7,085,000)
--------------- --------------
Net cash used in operating activities (5,008,000) (2,430,000)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (3,903,000) (4,796,000)
Disposal of property and equipment --- 54,000
--------------- --------------
Net cash used in investing activities (3,903,000) (4,742,000)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Long-term bank debt additional borrowings 4,100,000 ---
Long-term bank debt principal repayments (4,100,000) ---
Other, net 20,000 (100,000)
--------------- --------------
Net cash provided by (used in) financing activities 20,000 (100,000)
--------------- --------------
Net decrease in cash and cash equivalents (8,891,000) (7,272,000)
Cash and cash equivalents, at beginning of period 9,848,000 13,720,000
--------------- --------------
Cash and cash equivalents, at end of period $ 957,000 $ 6,448,000
=============== ==============
<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
September 30, 2000(Fiscal 2000) and January 1, 2000 (Fiscal 1999), and the
results of operations for the thirty-nine and thirteen week periods ended
September 30, 2000 and the consolidated statements of cash flows for the
thirty-nine 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
thirty-nine and thirteen weeks ended September 30, 2000 and October 2,
1999.
The approximate number of shares used in the computations of basic and
diluted earnings per share were 9,136,000 and 9,321,000, for the thirty-nine
week periods and 9,091,000 and 9,091,000 for the thirteen week periods ended
September 30, 2000 and October 2, 1999, respectively.
7
3. PROPERTY AND EQUIPMENT
----------------------
September 30, January 1,
2000 2000
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Leasehold improvements $19,394,000 $18,347,000
Furniture, fixtures and
equipment 23,837,000 21,407,000
------------ -----------
43,231,000 39,754,000
Less: accumulated depreciation
and amortization 26,257,000 22,818,000
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$16,974,000 $16,936,000
============ ===========
4. ACCRUED LIABILITIES
-------------------
September 30, January 1,
2000 2000
------------- -----------
Operating Expenses $1,943,000 $1,694,000
Taxes, other than income taxes 1,109,000 1,614,000
Leasehold additions 123,000 447,000
Other customer deposits 1,594,000 1,803,000
------------ ----------
$4,769,000 $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 September
30, 2000, and January 1, 2000. The Company is currently in compliance with
all loan covenants.
8
6. INCOME TAXES
------------
The effective tax rates for Fiscal 2000 and 1999 are 36.5% and 41%,
respectively. At September 30, 2000 and January 1, 2000, the Company's deferred
tax assets were $962,000 and $960,000, respectively, also, there was no
deferred tax liability. The major components of the Company's net deferred
taxes at September 30, 2000 and January 1, 2000 are as follows:
September 30, January 1,
2000 2000
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Net operating loss carryforwards ("NOL'S)..... $ 54,000 $ 46,000
Deferred rent ................................ 750,000 801,000
Other......................................... 158,000 113,000
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$ 962,000 $ 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
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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 thirty-nine weeks ended September 30, 2000, the
Company used cash ($8,891,000), a reduction in receivables ($454,000), and cash
flow from non-cash depreciation expenses ($3,580,000) to repay accounts payable
($1,382,000), to fund inventory purchases ($5,039,000), to fund the Company's
store expansion and remodeling program ($3,903,000), as well as to pay accrued
liabilities ($1,360,000) and pay income tax payments ($1,305,000).
9
The Company plans to open approximately sixteen new stores during 2000.
The Company has opened seven new Lillie Rubin stores in Fiscal 2000, and
expects to open one additional store during the fourth quarter of 2000. The
Company also opened five new Cache stores in Fiscal 2000, and expects to open
approximately three additional Cache stores during the fourth quarter of Fiscal
2000. After deducting construction allowances paid to the Company by its
landlords, the Company has spent approximately $3,903,000 through September 30,
2000 and expects to spend approximately $1,500,000 additional dollars during
the fourth quarter 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 thirty-nine and thirteen week periods ended September 30, 2000 and October
2, 1999, expressed as a percentage of net sales, are as follows:
Thirty-Nine Weeks Ended Thirteen Weeks Ended
----------------------- ---------------------
Sept. 30, Oct. 2, Sept. 30, Oct. 2,
2000 1999 2000 1999
---------- -------- ---------- -------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 66.4% 65.4% 68.5% 67.8%
Selling, general and
administrative expenses 33.6% 32.5% 36.7% 35.9%
Income (loss) before taxes 0.1% 2.2% (5.1%) (3.7%)
Income tax provision (benefit) 0.0% 0.9% (1.9%) (1.5%)
Net income (loss) 0.1% 1.3% (3.2%) (2.2%)
Sales
- -----
Net sales increased $11,936,000 or 10.8% and $3,712,000 or 10.8%
respectively, during the thirty-nine and thirteen week periods ended September
30, 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 2.9% and 4.7%, respectively, for the
thirty-nine 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 $8,972,000
or 12.4% for the thirty-nine weeks ended September 30, 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 $1,807,000
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 1.0%, (66.4% versus
65.4%) for the thirty-nine week period ended September 30, 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 $2,779,000
or 12.0% for the thirteen weeks ended September 30, 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 $541,000 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 0.7% (68.5% versus 67.8%) for the thirteen weeks
ended September 30, 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 $5,318,000
or 14.8% during the thirty-nine week period ended September 30, 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 primarily due to greater payroll and payroll
taxes ($3,107,000), insurance ($441,000), credit card fees ($277,000),
depreciation ($307,000), licenses and taxes ($252,000), and advertising
expense ($308,000). As a percentage of sales, these expenses increased 1.1%
(33.6% versus 32.5%) for the thirty-nine weeks ended September 30, 2000 versus
the similar Fiscal 1999 period. The increase was primarily due to the effect of
higher payroll and payroll taxes, which were primarily driven by the greater
number of stores open during the Fiscal 2000 period.
Selling, general and administrative expenses increased $1,631,000 or 13.3%
during the thirteen weeks ended September 30, 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
($941,000),insurance ($143,000), licenses and taxes($72,000) and depreciation
($55,000). As a percentage of sales, these expenses increased 0.8% (36.7% versus
35.9%) for the thirteen weeks ended September 30, 2000 versus the similar Fiscal
1999 period. The increase was due primarily to the effect of higher payroll and
payroll taxes, as stated above.
11
Interest expense
- ----------------
Interest expense decreased $78,000 and $30,000, respectively, for the
thirty-nine and thirteen week periods ended September 30, 2000, due to the
repayment of the related party notes.
Interest income
- ---------------
Interest income decreased from $262,000 to $126,000 for the thirty-nine
week period, as well as decreasing from $66,000 to $21,000 for the thirteen
week period. The decreases were primarily due to lower average cash balances
after the repayment of 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
Signatures
----------
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)
November 13, 2000 BY: /s/ Thomas E. Reinckens
-----------------------
Thomas E. Reinckens
President and Chief
Operating Officer
(Principal Financial
Officer)
November 13, 2000 BY: /s/ Victor J. Coster
--------------------
Victor J. Coster
Controller
(Principal Accounting
Officer)
13
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
THIRTY- NINE THIRTEEN
WEEKS ENDED WEEKS ENDED
----------------------------- ------------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
----------------------------- ------------------------------
EARNINGS
--------
Net Income (Loss) Applicable
to Common Stockholders $ 65,000 $ 1,455,000 $ (1,236,000) $ (756,000)
============================= ==============================
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 $0.01 $0.16 ($0.14) ($0.08)
============================= ==============================
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 --- ---
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (505,000) (370,000) --- ---
----------------------------- -----------------------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,136,000 9,321,000 9,091,000 9,091,000
============================= =============================
Diluted Earnings Per Share $0.01 $0.16 ($0.14) ($0.08)
============================= =============================
14