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 30, 2002
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 9,100,150
- -------------------------- ----------------------------
Class of Stock Outstanding Outstanding at May 9, 2002
<page>
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, MARCH 30, 2002, DECEMBER 29, 2001
AND MARCH 31, 2001 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 30, 2002
AND MARCH 31, 2001 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED MARCH 30, 2002
AND MARCH 31, 2001 5
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-11
OTHER INFORMATION:
EXHIBIT INDEX AND REPORTS ON FORM 8-K 11
SIGNATURES 12
EXHIBIT 11.1 - CALCULATION OF BASIC AND DILUTED
EARNINGS PER SHARE 13
2
<page>
<table>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<caption>
March 30, December 29, March 31,
ASSETS 2002 2001 2001
------------- ------------- -------------
<s>
Current assets: <c> <c> <c>
Cash and equivalents $ 17,198,000 $ 12,101,000 $ 7,588,000
Receivables, net 3,108,000 4,318,000 4,414,000
Notes receivable from related parties 321,000 371,000 371,000
Inventories 26,340,000 21,761,000 26,990,000
Prepaid income taxes and other tax assets 395,000 599,000 354,000
Prepaid expenses 619,000 712,000 1,268,000
------------- ------------- -------------
Total current assets 47,981,000 39,862,000 40,985,000
Equipment and leasehold improvements, net 15,819,000 15,906,000 16,148,000
Other assets 829,000 825,000 866,000
Deferred income taxes, net 536,000 542,000 773,000
------------- ------------- -------------
Total assets $ 65,165,000 $ 57,135,000 $ 58,772,000
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,014,000 $ 11,089,000 $ 16,375,000
Income taxes payable 846,000 --- ---
Accrued compensation 1,381,000 2,135,000 1,071,000
Accrued liabilities 6,625,000 6,441,000 5,771,000
------------- ------------ ------------
Total current liabilities 25,866,000 19,665,000 23,217,000
Other liabilities 1,114,000 1,164,000 1,349,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares at
December 29, 2001 and 9,100,150 shares at March 30, 2002 91,000 91,000 91,000
Additional paid-in capital 19,587,000 19,564,000 19,564,000
Retained earnings 18,507,000 16,651,000 14,551,000
------------- ------------- ------------
Total stockholders' equity 38,185,000 36,306,000 34,206,000
------------- ------------- -------------
Total liabilities and stockholders' equity $ 65,165,000 $ 57,135,000 $ 58,772,000
============= ============= =============
<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 STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
<caption>
March 30, March 31,
2002 2001
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<s> <c> <c>
Net sales $ 47,643,000 $ 44,191,000
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Costs and expenses
Cost of sales, including occupancy and buying costs 28,066,000 28,956,000
Selling, general and administrative expenses 16,705,000 14,927,000
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44,771,000 43,883,000
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Operating income 2,872,000 308,000
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Other income:
Interest income 51,000 61,000
Litigation settlement (net) --- 1,518,000
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51,000 1,579,000
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Income before income tax provision 2,923,000 1,887,000
Income tax provision 1,067,000 689,000
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Net income $ 1,856,000 $ 1,198,000
============= =============
Basic earnings per share $0.20 $0.13
============= =============
Diluted earnings per share $0.20 $0.13
============= =============
Basic weighted average shares outstanding 9,100,000 9,091,000
============= =============
Diluted weighted average shares outstanding 9,474,000 9,260,000
============= =============
<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 STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
<caption>
March 30, March 31,
2002 2001
<s> ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES: <c> <c>
-------------------------------------
Net income $ 1,856,000 $ 1,198,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,202,000 1,230,000
Reversal of future rent escalations (36,000) (52,000)
Gain on litigation settlement --- (1,518,000)
Change in assets and liabilities:
Decrease in receivables 1,210,000 944,000
Decrease in prepaid income taxes and other tax assets 210,000 702,000
Decrease in notes receivable from related parties 50,000 350,000
Increase in inventories (4,579,000) (2,867,000)
Decrease (increase) in prepaid expenses 93,000 (362,000)
Increase in accounts payable 5,925,000 4,059,000
Increase in income taxes payable 846,000 ---
Decrease in accrued liabilities and accrued compensation (965,000) (1,980,000)
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Total changes in assets and liabilities 2,790,000 846,000
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Net cash provided by operating activities 5,812,000 1,704,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (728,000) (861,000)
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Net cash used in investing activities (728,000) (861,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Proceeds from the issuance of common stock 23,000 ---
Other, net (10,000) (3,000)
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Net cash provided by (used in) financing activities 13,000 (3,000)
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Net increase in cash and equivalents 5,097,000 840,000
Cash and equivalents, at beginning of period 12,101,000 6,748,000
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Cash and equivalents, at end of period $ 17,198,000 $ 7,588,000
============= =============
<fn>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</fn>
</table>
5
<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 March 30, 2002, March 31, 2001 and December
29, 2001, and the results of operations for the thirteen week periods
ended March 30, 2002 and March 31, 2001 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 29, 2001.
Certain amounts reflected in Fiscal 2001 financial statements have been
reclassified to conform with the presentation of similar items in
Fiscal 2002.
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 2002 or Fiscal 2001 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 30, 2002 and March 31, 2001.
The approximate number of shares used in the computations of basic
and diluted earnings per share were 9,100,000 and 9,474,000,
respectively, for the thirteen week period ended March 30, 2002 and
9,091,000 and 9,260,000, respectively, for the thirteen week period
ended March 31, 2001.
6
<page>
3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
------------------------------------
March 30, December 29,
2002 2001
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Leasehold improvements $20,527,000 $19,954,000
Furniture, fixtures and
equipment 26,057,000 25,521,000
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46,584,000 45,475,000
Less: accumulated depreciation
and amortization 30,765,000 29,569,000
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$15,819,000 $15,906,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
March 30, December 29,
2002 2001
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Operating Expenses $2,573,000 $2,465,000
Taxes, other than income taxes 1,538,000 1,719,000
Leasehold additions 412,000 31,000
Other customer deposits 2,102,000 2,226,000
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$6,625,000 $6,441,000
========== ===========
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
30, 2002, and December 29, 2001. In addition, there was $750,000 in
outstanding letters of credit, pursuant to the Revolving Credit
Facility, at March 30, 2002.
7
<page>
6. INCOME TAXES
------------
The effective tax rate for Fiscal 2002 and 2001 is 36.5%. At March 30,
2002 and December 29, 2001, the Company's deferred tax assets were $931,000
and $934,000, respectively, also, there was no deferred tax liability. The
major components of the Company's net deferred taxes at March 30, 2002 and
December 29,2001 are as follows:
March 30, December 29,
2002 2001
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Net operating loss carryforwards ("NOL's")... $ 183,000 $ 183,000
Deferred rent................................ 534,000 547,000
Other (principally inventory capitalization). 214,000 204,000
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$ 931,000 $ 934,000
========== ===========
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
- ---------------------
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
- -------------------------------
As of March 30, 2002, the Company had cash and equivalents totaling
$17,198,000, as compared to $7,588,000 at March 31, 2001. The Company
primarily invests in short-term investments and money market funds, with the
majority having maturities of less than one year. The Company does not invest
in stock options or other derivative instruments. In addition, the Company
has a $15,000,000 revolving line of credit. As of March 30, 2002, there was
no borrowing under the line of credit and outstanding letters of credit
totaled approximately $750,000.
8
<page>
The Company has funded through internally generated cash flows the
payment of new store merchandise inventories, as well the construction costs
of new stores. During the thirteen weeks ended March 30, 2002, the Company
generated net cash from operations totaling $5,812,000. The primary sources
and uses of cash during the period were; cash flow from non-cash depreciation
expense ($1,202,000), a decrease in receivables ($1,210,000), an increase in
income taxes payable ($846,000), as well as an increase in accounts payable
($5,925,000) used to offset the cost of inventory purchases ($4,579,000),
payment of accrued liabilities and compensation ($965,000), and funding for
the Company's new store expansion and remodeling program ($ 728,000).
Management believes that the Company's internally generated cash flows
will be sufficient to meet anticipated requirements for operations and
planned expansion during Fiscal 2002.
The Company plans to open between 15 and 20 new stores during 2002. Two
new stores were opened in March 2002. The remaining new stores are expected
to be opened during the summer and fall of 2002. The Company renovated three
existing stores in the first quarter. After deducting a construction
allowance paid to the Company by its landlords, the Company has spent
$728,000 through March 30, 2002 and expects to spend an additional four to
five million dollars in 2002, for both new store and existing store
construction and remodeling.
RESULTS OF OPERATIONS
- ---------------------
Operating results for the thirteen weeks ended March 30, 2002, were
favorably impacted by the merchandising strategies initially instituted in
Fiscal 2001. These included key item and base fabric strategies, as well as
reducing the number of suppliers, while working to improve merchandise
quality and fit standards. These initiatives had a significant positive
impact on gross margins during the Fiscal 2002 period. The Company
anticipates these improvements will continue to have a positive impact on
future results.
Operating income in the Fiscal 2002 period rose significantly, as
compared to Fiscal 2001, primarily due the above mentioned improvement in
gross margins, and a 5% increase in comparative store sales which was
partially offset by increased selling, general and administrative expenses.
Net income in Fiscal 2001 included 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 30, 2002 and March 31, 2001,
expressed as a percentage of net sales, are as follows:
9
<page>
Thirteen Weeks Ended
---------------------
March 30, March 31,
2002 2001
--------- ---------
Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 58.9% 65.5%
Selling, general and
administrative expenses 35.1% 33.8%
Operating income 6.0% 0.7%
Other income 0.1% 3.6%
Income before taxes 6.1% 4.3%
Income tax provision 2.2% 1.6%
Net income 3.9% 2.7%
Sales
- -----
Net sales increased $3,452,000 or 7.8% during the thirteen week period
ended March 30, 2002, as compared to the 2001 Fiscal period. The increase
was primarily due to the greater number of stores open during the 2002
period, as well as an increase in comparable store sales (sales for stores
open at least one year or more) which increased 5% during Fiscal 2002, as
compared to the Fiscal 2001 period.
Costs and expenses
- ------------------
Cost of sales, which includes occupancy and buying costs, decreased
$890,000 or 3.1% for the thirteen weeks ended March 30, 2002 as compared to
the similar Fiscal 2001 period. The decrease in cost of sales was primarily
due to the decrease in the related cost of merchandise for those sales and
lower markdowns, and was partially offset by a $348,000 increase in occupancy
expenses, as a result of the additional stores in operation during Fiscal
2002. As a percentage of sales, cost of sales including occupancy and buying
expenses, decreased 6.6%, (58.9% as compared to 65.5%) for the period ended
March 30, 2002 as compared to the Fiscal 2001 period, the reduction in cost
of sales was primarily due to the merchandise strategy initiatives mentioned
above which led to improved gross margins. This positive gross margin impact
was partially offset by higher occupancy and buying expenses, as compared to
the prior period.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A") increased
$1,778,000 or 11.9% during the thirteen weeks ended March 30, 2002 as
compared to the 2001 Fiscal period. The increase was primarily due to the
greater number of stores open in 2002 (approximately 9 more than Fiscal
2001), and is reflected in greater payroll and payroll taxes ($853,000),
advertising ($479,000), and insurance expense ($242,000). As a percentage of
sales, S,G & A expenses increased to 35.1% in Fiscal 2002 as compared to
33.8% in Fiscal 2001.
10
<page>
Other income
- ------------
Interest income decreased to $51,000 in Fiscal 2002 from $61,000 in
Fiscal 2001, due to lower interest rates in Fiscal 2002 as compared to Fiscal
2001, although average cash on hand increased as compared to Fiscal 2001.
During the period ended March 31, 2001, the Company recorded the
settlement of trademark litigation claim undertaken against a third party
recorded the settlement of $1,518,000, net of professional fees related to
the lawsuit.
Income taxes
- ------------
The Company's effective tax rate is approximately 36.5%, for Fiscal 2002
and Fiscal 2001.
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
<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)
May 9, 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)
BY: /s/ Victor J. Coster
--------------------------
Victor J. Coster
On behalf of Cache, Inc.
and in his capacity as
Treasurer (Principal
Accounting Officer)
12
<page>
<table>
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
<caption>
THIRTEEN WEEKS ENDED
------------------------------
March 30, March 31,
2002 2001
------------ ------------
<s>
EARNINGS PER SHARE
------------------ <c> <c>
Net Income Applicable to Common Stockholders $ 1,856,000 $ 1,198,000
============ ============
BASIC EARNINGS PER SHARE
------------------------
Weighted Average Number of
Common Shares Outstanding 9,100,000 9,091,000
============ ============
Basic Earnings Per Share $0.20 $0.13
============ ============
DILUTED EARNINGS PER SHARE
--------------------------
Weighted Average Number of
Common Shares Outstanding 9,100,000 9,091,000
Assuming Conversion of
Outstanding Stock Options 1,014,000 900,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (640,000) (731,000)
------------ ------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,474,000 9,260,000
============ ============
Diluted Earnings Per Share $0.20 $0.13
============ ============
</table>
13
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