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 March 31, 2001
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 May 15, 2001
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, MARCH 31, 2001
AND DECEMBER 30, 2000 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 31, 2001
AND APRIL 1, 2000 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED MARCH 31, 2001
AND APRIL 1, 2000 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)
March 31, December 30,
ASSETS 2001 2000
---------------- --------------
Current assets:
Cash and equivalents $ 7,588,000 $ 6,748,000
Receivables 4,414,000 3,258,000
Notes receivable from related parties 371,000 721,000
Inventories 26,990,000 24,123,000
Prepaid income taxes and other tax assets 354,000 1,072,000
Prepaid expenses 1,268,000 906,000
---------------- --------------
Total current assets 40,985,000 36,828,000
Property and equipment, net 16,148,000 16,597,000
Other assets 866,000 869,000
Deferred income taxes 773,000 757,000
---------------- --------------
$ 58,772,000 $ 55,051,000
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,375,000 $ 12,316,000
Accrued compensation 1,071,000 1,979,000
Accrued liabilities 5,771,000 6,368,000
---------------- --------------
Total current liabilities 23,217,000 20,663,000
Other liabilities 1,349,000 1,380,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at March 31, 2001 and December 30, 2000 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 14,551,000 13,353,000
---------------- --------------
Total stockholders' equity 34,206,000 33,008,000
---------------- --------------
$ 58,772,000 $ 55,051,000
================ ==============
<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)
March 31, April 1,
2001 2000
---------------- --------------
Net sales $ 44,191,000 $ 40,914,000
---------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 28,956,000 26,944,000
Selling, general and administrative expenses 14,927,000 13,495,000
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43,883,000 40,439,000
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Operating income 308,000 475,000
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Other income:
Interest income 61,000 40,000
Litigation settlement (net) 1,518,000 ---
---------------- --------------
1,579,000 40,000
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Income before income taxes 1,887,000 515,000
Income tax provision 689,000 188,000
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Net income $ 1,198,000 $ 327,000
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Basic earnings per share $0.13 $0.04
========= =========
Diluted earnings per share $0.13 $0.04
========= =========
Basic weighted average shares outstanding 9,091,000 9,091,000
========= =========
Diluted weighted average shares outstanding 9,260,000 9,193,000
========= =========
<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)
March 31, April 1,
2001 2000
---------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income $ 1,198,000 $ 327,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,230,000 1,172,000
Reversal of future rent escalations (52,000) (32,000)
Gain on litigation settlement (1,518,000) ---
Change in assets and liabilities:
Decrease in receivables 944,000 473,000
Decrease in prepaid income taxes and other tax assets 702,000 60,000
Decrease in notes receivable from related parties 350,000 ---
Increase in inventories (2,867,000) (3,305,000)
Increase in prepaid expenses (362,000) (167,000)
Increase in accounts payable 4,059,000 1,268,000
Decrease in accrued liabilities and accrued compensation (1,980,000) (1,446,000)
---------------- --------------
Total changes in assets and liabilities 846,000 (3,117,000)
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Net cash provided by (used in) operating activities 1,704,000 (1,650,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (861,000) (1,922,000)
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Net cash used in investing activities (861,000) (1,922,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Other, net (3,000) 55,000
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Net cash provided by (used in) financing activities (3,000) 55,000
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Net increase (decrease) in cash and equivalents 840,000 (3,517,000)
Cash and equivalents, at beginning of period 6,748,000 9,848,000
--------------- --------------
Cash and equivalents, at end of period $ 7,588,000 $ 6,331,000
=============== ==============
<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 March 31,
2001 and December 30, 2000, and the results of operations for the thirteen week
periods ended March 31, 2001 and April 1, 2000 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
December 30, 2000. Certain amounts reflected in Fiscal 2000 financial statements
have been reclassified to conform with the presentation of similar items in
Fiscal 2001.
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 2001 or Fiscal
2000 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 March 31, 2001 and April 1, 2000.
The approximate number of shares used in the computations of basic and
diluted earnings per share were 9,091,000 and 9,260,000, respectively, for the
thirteen week period ended March 31, 2001 and 9,091,000 and 9,193,000,
respectively, for the thirteen week period ended April 1, 2000.
6
3. PROPERTY AND EQUIPMENT
----------------------
March 31, December 30,
2001 2000
----------- -----------
Leasehold improvements $19,403,000 $19,053,000
Furniture, fixtures and
equipment 23,313,000 22,888,000
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42,716,000 41,941,000
Less: accumulated depreciation
and amortization 26,568,000 25,344,000
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$16,148,000 $16,597,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
March 31, December 30,
2001 2000
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Operating Expenses $ 2,481,000 $ 2,581,000
Taxes, other than income taxes 1,295,000 1,628,000
Leasehold additions 45,000 131,000
Other customer deposits 1,950,000 2,028,000
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$ 5,771,000 $ 6,368,000
=========== ===========
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 March 31, 2001,
and December 30, 2000. There were no borrowings in the Fiscal period ended March
31, 2001.
7
6. INCOME TAXES
------------
The effective tax rate for Fiscal 2001 and 2000 is 36.5%. At March 31,
2001 and December 30, 2000, the Company's deferred tax assets were $1,050,000
and $1,030,000, respectively, also, there was no deferred tax liability. The
major components of the Company's net deferred taxes at March 31, 2001 and
December 30,2000 are as follows:
March 31, December 30,
2000 2000
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Net operating loss carryforwards ("NOL's")... $ 56,000 $ 56,000
Deferred rent................................ 712,000 733,000
Other........................................ 282,000 241,000
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$1,050,000 $1,030,000
========== ==========
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 LIQUIDITY AND CAPITAL RESOURCES
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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 March 31, 2001, the Company generated cash totaling $840,000. The
primary sources and uses of cash during the period were; cash flow from non-cash
depreciation expenses ($1,230,000), a decrease in receivables ($944,000), a
decrease in prepaid income taxes ($702,000), as well as an increase in accounts
payable ($4,059,000) used to offset the cost of inventory purchases
($2,867,000), payment of accrued liabilities and compensation ($1,980,000), and
to fund the Company's new store expansion and remodeling program ($ 861,000).
8
The Company plans to open approximately ten to fifteen new stores during
2001. All new stores are expected to be opened during the summer and fall of
2001. The Company renovated one existing store in the first quarter. After
deducting a construction allowance paid to the Company by its landlords, the
Company has spent $861,000 through March 31, 2001 and expects to spend an
additional three to four million dollars in 2001, 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 2001.
RESULTS OF OPERATIONS
- ---------------------
For the thirteen weeks ended March 31, 2001, the benefit of higher net
sales, including a 4% increase in comparative store sales and improved gross
margins, was more than offset by increased selling, general and administrative
expenses, resulting in a decrease in operating income in Fiscal 2001, as
compared to Fiscal 2000. Net income also includes an after-tax gain of
approximately $964,000 or $.10 per share for the settlement of a trademark
litigation claim.
Certain financial data concerning the Company's results of operations for
the thirteen week periods ended March 31, 2001 and April 1, 2000, expressed as
a percentage of net sales, are as follows:
Thirteen Weeks Ended
--------------------
March 31, April 1,
2001 2000
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Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.5% 65.9%
Selling, general and
administrative expenses 33.8% 33.0%
Other income 3.6% 0.1%
Income before taxes 4.3% 1.2%
Income tax provision 1.6% 0.4%
Net income 2.7% 0.8%
Sales
- -----
Net sales increased $3,277,000 or 8.0% during the thirteen week period
ended March 31, 2001, as compared to the 2000 Fiscal period. The increase was
primarily due to the greater number of stores open during the 2001 period, as
well as an increase in comparable store sales (sales for stores open at least
one year or more) which increased 4% during 2001, as compared to the 2000 Fiscal
period.
9
Costs and expenses
- ------------------
Cost of sales, which includes occupancy and buying costs, increased
$2,012,000 or 7.5% for the thirteen weeks ended March 31, 2001 as compared to
the similar 2000 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 $366,000 increase in occupancy expenses,
as a result of the additional stores in operation during Fiscal 2001 as compared
to Fiscal 2000. As a percentage of sales, cost of sales including occupancy and
buying expenses, decreased 0.4%, (65.5% as compared to 65.9%) for the thirteen
weeks ended March 31, 2001 as compared to the 2000 Fiscal period, the decrease
was primarily due to the increase in initial mark-up and was partially offset
by higher occupancy and buying expenses, as well as an increase in markdowns,
as compared to the prior period.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A") increased $1,432,000
or 10.6% during the thirteen weeks ended March 31, 2001 as compared to the 2000
Fiscal period. The increase was primarily due to the greater number of stores
open in 2001 (approximately 7 more than fiscal 2000), and is reflected in
greater payroll and payroll taxes ($1,133,000), travel expenses ($124,000), and
insurance expenses ($84,000). As a percentage of sales, S,G & A expenses
increased to 33.8% in Fiscal 2001 as compared to 33.0% in Fiscal 2000.
Other income
- ------------
During the period ended March 31, 2001, the Company settled a trademark
litigation claim undertaken against a third party. The Company will receive
payments totaling $2,100,000 in Fiscal 2001 and will incur costs in Fiscal 2001
of approximately $582,000 in professional fees related to the lawsuit.
Interest income increased to $61,000 in Fiscal 2000 from $40,000 in Fiscal
2000, due to an increase in average cash on hand.
Income taxes
- ------------
The Company's effective tax rate is approximately 36.5%, for Fiscal 2001
and Fiscal 2000.
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
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)
May 15, 2001 BY: /s/ Brian P. Woolf
------------------
Brian P. Woolf
On behalf of Cache, Inc.
and in his capacity as
Chairman and Chief
Executive Officer
(Principal Executive
Officer)
BY: /s/ Victor J. Coster
--------------------
Victor J. Coster
On behalf of Cache, Inc.
and in his capacity as
Controller (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
--------------------------------------
March 31, April 1,
2001 2000
---------------- ---------------
EARNINGS PER SHARE
------------------
Net Income Applicable to Common Stockholders $ 1,198,000 $ 327,000
================ ===============
BASIC EARNINGS PER SHARE
------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
================ ===============
Basic Earnings Per Share $0.13 $0.04
================ ===============
DILUTED EARNINGS PER SHARE
--------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options 900,000 550,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (731,000) (448,000)
---------------- ---------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,260,000 9,193,000
================ ===============
Diluted Earnings Per Share $0.13 $0.04
================ ===============
13