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 June 30, 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.
- -----------------------------------------------------------------------
(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
----------------------------------------------------
(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, 2001
<page>
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, JUNE 30, 2001
AND DECEMBER 30, 2000 3
INCOME STATEMENTS
TWENTY-SIX WEEKS ENDED JUNE 30, 2001
AND JULY, 1 2000 4
THIRTEEN WEEKS ENDED JUNE 30, 2001 5
AND JULY 1, 2000
STATEMENTS OF CASH FLOWS
TWENTY-SIX WEEKS ENDED JUNE 30, 2001
AND JULY 1, 2000 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
SIGNATURES 13
EXHIBIT 11.1 - CALCULATION OF BASIC AND DILUTED
EARNINGS PER SHARE 14
2
<page>
<table>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<caption>
June 30, December 30,
ASSETS 2001 2000
------------- -------------
<s> <c> <c>
Current assets:
Cash and equivalents $ 8,336,000 $ 6,748,000
Receivables 2,459,000 3,258,000
Notes receivable from related parties 371,000 721,000
Inventories 22,281,000 24,123,000
Deferred income taxes and other tax assets 657,000 1,072,000
Prepaid expenses 1,075,000 906,000
------------- -------------
Total current assets 35,179,000 36,828,000
Property and equipment, net 15,702,000 16,597,000
Other assets 864,000 869,000
Deferred income taxes 778,000 757,000
------------- -------------
$ 52,523,000 $ 55,051,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,082,000 $ 12,316,000
Accrued compensation 1,897,000 1,979,000
Accrued liabilities 5,389,000 6,368,000
------------- -------------
Total current liabilities 16,368,000 20,663,000
Other liabilities 1,320,000 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 June 30, 2001 and December 30, 2000 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 15,180,000 13,353,000
------------- -------------
Total stockholders' equity 34,835,000 33,008,000
------------- -------------
$ 52,523,000 $ 55,051,000
============= =============
<fn>
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
</fn>
</table>
3
<page>
<table>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
<caption>
June 30, July 1,
2001 2000
------------- -------------
<s> <c> <c>
Net sales $ 89,804,000 $ 84,738,000
------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 58,485,000 55,410,000
Selling, general and administrative expenses 30,176,000 27,362,000
------------- -------------
88,661,000 82,772,000
------------- -------------
Operating income 1,143,000 1,966,000
------------- -------------
Other income:
Interest income (net) 157,000 83,000
Miscellaneous income (net) 58,000 ---
Litigation settlement (net) 1,518,000 ---
------------- -------------
1,733,000 83,000
------------- -------------
Income before income taxes 2,876,000 2,049,000
Income tax provision 1,049,000 748,000
------------- -------------
Net income $ 1,827,000 $ 1,301,000
============= =============
Basic earnings per share $0.20 $0.14
============= =============
Diluted earnings per share $0.20 $0.14
============= =============
Basic weighted average shares outstanding 9,091,000 9,091,000
============= =============
Diluted weighted average shares outstanding 9,276,000 9,154,000
============= =============
<fn>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</fn>
</table>
4
<page>
<table>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
<caption>
June 30, July 1,
2001 2000
------------- -------------
<s> <c> <c>
Net sales $ 45,613,000 $ 43,824,000
------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 29,529,000 28,466,000
Selling, general and administrative expenses 15,249,000 13,867,000
------------- -------------
44,778,000 42,333,000
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Operating income 835,000 1,491,000
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Other income:
Interest income (net) 96,000 43,000
Miscellaneous income (net) 58,000 ---
------------- -------------
154,000 43,000
------------- -------------
Income before income taxes 989,000 1,534,000
Income tax provision 360,000 560,000
------------- -------------
Net income $ 629,000 $ 974,000
============= =============
Basic earnings per share $0.07 $0.11
============= =============
Diluted earnings per share $0.07 $0.11
============= =============
Basic weighted average shares outstanding 9,091,000 9,091,000
============= =============
Diluted weighted average shares outstanding 9,276,000 9,150,000
============= =============
<fn>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</fn>
</table>
5
<page>
<table>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
<caption>
June 30, July 1,
2001 2000
------------- -------------
<s>
CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------- <c> <c>
Net income $ 1,827,000 $ 1,301,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,345,000 2,393,000
Reversal of future rent escalations (104,000) (87,000)
Gain on litigation settlement (1,518,000) ---
Change in assets and liabilities:
Decrease in receivables 2,899,000 1,106,000
Decrease in notes receivable from related parties 350,000 ---
Decrease (increase) in prepaid income taxes and other tax assets 394,000 (457,000)
Decrease (increase) in inventories 1,842,000 (1,150,000)
Increase in prepaid expenses (169,000) (252,000)
Decrease in accounts payable (3,234,000) (5,176,000)
Decrease in accrued liabilities and accrued compensation (1,493,000) (1,037,000)
------------- -------------
Total changes in assets and liabilities 589,000 (6,966,000)
------------- -------------
Net cash provided by (used in) operating activities 3,139,000 (3,359,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Proceeds from property and equipment disposals 83,000 ---
Payments for property and equipment (1,627,000) (2,830,000)
------------- -------------
Net cash used in investing activities (1,544,000) (2,830,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Other, net (7,000) 56,000
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Net cash (used in) provided by financing activities (7,000) 56,000
------------- -------------
Net increase (decrease) in cash and equivalents 1,588,000 (6,133,000)
Cash and equivalents, at beginning of period 6,748,000 9,848,000
------------- -------------
Cash and equivalents, at end of period $ 8,336,000 $ 3,715,000
============= =============
<fn>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</fn>
</table>
6
<page>
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
June 30, 2001 (Fiscal 2001) and December 30, 2000 (Fiscal 2000), and the
results of operations for the twenty-six and thirteen week periods ended
June 30, 2001 and 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 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
twenty-six and thirteen weeks ended June 30, 2001 and July 1, 2000.
The approximate number of shares used in the computations of diluted
earnings per share were 9,276,000 and 9,154,000, respectively, for the
twenty-six week periods and 9,276,000 and 9,150,000, respectively, for the
thirteen week periods ended June 30, 2001 and July 1, 2000. The approximate
number of shares used in the computations of basic earnings per share were
9,091,000 for each of the twenty-six and thirteen week periods ended June
30, 2001 and July 1, 2000.
7
<page>
3. PROPERTY AND EQUIPMENT
----------------------
June 30, December 30,
2001 2000
----------- -----------
Leasehold improvements $19,520,000 $19,053,000
Furniture, fixtures and
equipment 23,809,000 22,888,000
----------- -----------
43,329,000 41,941,000
Less: accumulated depreciation
and amortization 27,627,000 25,344,000
----------- -----------
$15,702,000 $16,597,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
June 30, December 30,
2001 2000
---------- -----------
Operating Expenses $2,467,000 $2,581,000
Taxes, other than income taxes 1,012,000 1,628,000
Leasehold additions 25,000 131,000
Other customer deposits 1,885,000 2,028,000
---------- ----------
$5,389,000 $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 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. 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 June 30, 2001,
and December 30, 2000. There were no borrowings in the Fiscal period ended
June 30, 2001 and July 1, 2000. In addition, there was approximately $200,000
in outstanding letters of credit, pursuant to the Revolving Credit Facility
at June 30, 2001.
8
<page>
6. INCOME TAXES
------------
The effective tax rate for Fiscal 2001 and 2000 is 36.5%. At June 30, 2001
and December 30, 2000, the Company's deferred tax assets were $1,060,000 and
$1,030,000, respectively, also, there was no deferred tax liability. The major
components of the Company's net deferred taxes at June 30, 2001 and December 30,
2000 were as follows:
June 30, December 30,
2001 2000
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Net operating loss carryforwards ("NOL'S)....... $ 56,000 $ 56,000
Deferred rent................................... 690,000 733,000
Other........................................... 314,000 241,000
---------- ----------
$1,060,000 $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
- ------------------------------------------------------------------------
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 June 30, 2001, the Company
generated cash totaling $3,139,000. The primary sources and uses of cash during
the period were; a reduction in receivables ($2,899,000),reduction of inventory
($1,842,000) and cash flow from non-cash depreciation expenses ($2,345,000),
which were used for the payment of accounts payable ($3,234,000), for the
payment of accrued liabilities and compensation ($1,493,000) and to fund the
Company's store expansion and remodeling program ($1,627,000). The Company had
no bank borrowings during Fiscal 2001 and Fiscal 2000.
9
<page>
The Company plans to open approximately ten new stores during 2001. All
new stores are expected to be opened during the summer and fall of 2001. The
Company renovated four existing stores during the first half of Fiscal 2001.
After deducting construction allowances paid to the Company by its landlords,
the Company has spent approximately $1,627,000 through June 30, 2001 and expects
to spend between two and three million additional dollars during the second
half of Fiscal 2001, for both new stores and existing store construction and
remodeling. The Company closed two stores in the first half of Fiscal 2001, 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 2001.
RESULTS OF OPERATIONS
- ---------------------
Certain financial data concerning the Company's results of operations for
the thirteen week periods ended June 30, 2001 and July 1, 2000 expressed as a
percentage of net sales, are as follows:
Twenty-six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
--------- --------- ---------- -------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.1% 65.4% 64.7% 65.0%
Selling, general and
administrative expenses 33.6% 32.3% 33.4% 31.6%
Other income 1.9% - 0.3% -
Income before taxes 3.2% 2.4% 2.2% 3.5%
Income tax provision 1.2% 0.9% 0.8% 1.3%
Net income 2.0% 1.5% 1.4% 2.2%
Sales
- -----
Net sales increased $5,066,000 or 6.0% and $1,789,000 or 4.1%,
respectively, during the twenty-six and thirteen week periods ended June 30,
2001, versus the comparable periods in Fiscal 2000. The increases were primarily
due to the greater number of stores open during the Fiscal 2001 periods.
Comparable store sales increased 3.1% and 2.1%, respectively, for the twenty-six
and thirteen week periods in Fiscal 2001, as compared to the comparable periods
in Fiscal 2000.
10
<page>
Costs and expenses
- ------------------
Cost of sales, including occupancy and buying costs, increased $3,075,000
or 5.6% for the thirteen weeks ended June 30, 2001, versus the similar Fiscal
2000 period. The increase was primarily due to the increase in sales and the
related cost of merchandise for those sales, as well as a $713,000 increase in
occupancy expenses, primarily due to the additional stores in operation during
the Fiscal 2001 versus Fiscal 2000. As a percentage of sales, cost of sales,
including the occupancy expenses, decreased 0.3%, (65.1% versus 65.4%) for the
twenty-six week period ended June 30, 2001, versus the comparable period in
Fiscal 2000. The decrease was primarily due to higher initial markups and was
partially offset by higher occupancy and buying expenses, as well as an increase
in markdowns taken in Fiscal 2001, as compared to Fiscal 2000.
Cost of sales, including occupancy and buying costs, increased $1,062,000
or 3.7% for the thirteen weeks ended June 30, 2001, versus the similar Fiscal
2000 period. The increase was primarily due to the increase in sales and the
related cost of the merchandise for those sales, and a $347,000 increase in
occupancy, due to the additional stores in operation during Fiscal 2001 versus
Fiscal 2000. As a percentage of sales, cost of sales, including occupancy and
buying expenses, decreased 0.3% (64.7% versus 65.0%) for the thirteen weeks
ended June 30, 2001, versus the comparable period in Fiscal 2000. The increase
in initial markups in Fiscal 2001 was partially offset by higher occupancy and
buying expenses, as well as an increase in markdowns in dollars, and as a
percent of sales, as compared to the Fiscal 2000 period.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A") increased $2,814,000
or 10.3% during the twenty-six week period ended June 30, 2001 versus the
comparable period in Fiscal 2000. The increase was primarily due to the greater
number of stores open in Fiscal 2001 as compared to Fiscal 2000. The increase
in S,G&A expenses was due to greater payroll and payroll taxes ($2,259,000),
travel expense ($143,000), insurance ($138,000), and advertising expense
($439,000) and was partially offset by savings in several other categories. As
a percentage of sales, these expenses increased 1.3% (33.6% versus 32.3%) for
the twenty-six weeks ended June 30, 2001 versus the similar Fiscal 2000 period.
Selling, general and administrative expenses increased $1,382,000 or 10.0%
during the thirteen weeks ended June 30, 2001, versus the comparable period in
Fiscal 2000. The increase was primarily due to the greater number of stores open
in Fiscal 2001, as compared to Fiscal 2000. The increase in S,G&A expenses was
primarily due to greater payroll and payroll taxes ($1,126,000), credit card
fees ($79,000) and advertising expense ($355,000) and was partially offset by
reductions in depreciation expense ($103,000) and freight expense ($85,000).
11
<page>
Other Income
- ------------
During the first quarter of Fiscal 2001, the Company recorded the
settlement of a trademark litigation claim undertaken against a third party for
$1,518,000, net of professional fees related to the lawsuit.
Interest income increased $74,000 and $53,000, respectively, for the
twenty-six and thirteen week periods ended June 30, 2001, 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.
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
<page>
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)
August 14, 2001 BY: /s/ Brian Woolf
-------------------------
Brian Woolf
On behalf of Cache, Inc.
and in his capacity as Chairman
and Chief Executive Officer
(Principal Executive Officer)
August 14, 2001 BY: /s/ Victor J. Coster
-------------------------
Victor J. Coster
On behalf of Cache, Inc.
and in his capacity as Controller
(Principal Accounting Officer)
13
<page>
<table>
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE
(In thousands except per share data)
<caption>
TWENTY-SIX THIRTEEN
WEEKS ENDED WEEKS ENDED
---------------------------- ---------------------------
<c> <c> <c> <c>
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
---------------------------- ---------------------------
<s>
EARNINGS
--------
Net Income Applicable
to Common Stockholders $ 1,827,000 $ 1,301,000 $ 629,000 $ 974,000
============================ ===========================
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 $0.20 $0.14 $0.07 $0.11
============================ ===========================
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 900,000 550,000 900,000 550,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (715,000) (487,000) (715,000) (491,000)
---------------------------- ---------------------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,276,000 9,154,000 9,276,000 9,150,000
============================ ===========================
Diluted Earnings Per Share $0.20 $0.14 $0.07 $0.11
============================ ===========================
</table>
14
<page>