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, 1996
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)
212-840-4242
---------------------------------------------------
(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 May 10, 1996
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, MARCH 30, 1996
AND DECEMBER 30, 1995 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 30, 1996
AND APRIL 1, 1995 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED MARCH 30, 1996
AND APRIL 1, 1995 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 30, December 30,
ASSETS 1996 1995
------------- -------------
Current assets:
Cash and equivalents $ 672,000 $ 1,025,000
Receivables 1,591,000 1,331,000
Notes receivable from related parties 250,000 250,000
Inventories 17,507,000 15,803,000
Deferred income taxes 1,399,000 1,383,000
Prpaid expenses 781,000 589,000
------------- -------------
Total current assets 22,200,000 20,381,000
Property and equipment, net 16,656,000 16,577,000
Other assets 207,000 188,000
Deferred income taxes 850,000 901,000
------------- -------------
$ 39,913,000 $ 38,047,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,455,000 $ 9,376,000
Accrued compensation 1,054,000 749,000
Accrued liabilities 2,914,000 2,889,000
------------- -------------
Total current liabilities 13,423,000 13,014,000
Long-term bank debt 2,700,000 1,300,000
Subordinated indebtedness to related party 2,000,000 2,000,000
Other liabilities 2,077,000 2,103,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at March 30, 1996 and December 30, 1995 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings (deficit) 58,000 (25,000)
------------- -------------
Total stockholders' equity 19,713,000 19,630,000
------------- -------------
$ 39,913,000 $ 38,047,000
============= =============
<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 30, April 1,
1996 1995
------------- -------------
Net sales $ 28,307,000 $ 26,010,000
------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 18,539,000 16,878,000
Selling, general and administrative expenses 9,538,000 8,246,000
------------- -------------
28,077,000 25,124,000
------------- -------------
Operating income 230,000 886,000
Interest expense
Related party 35,000 35,000
Other 62,000 89,000
------------- -------------
97,000 124,000
------------- -------------
Income before income taxes 133,000 762,000
Income tax provision 50,000 281,000
------------- -------------
Net income $ 83,000 $ 481,000
============= =============
Net income per share $ .01 $ .05
============= =============
Weighted average number of shares and
share equivalents outstanding 9,091,000 9,091,000
============= =============
<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 30, April 1,
1996 1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ----------------------------------------------
Net income $ 83,000 $ 481,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 876,000 676,000
Deferred income taxes 35,000 268,000
Accrual of future rent escalations 36,000 72,000
Change in assets and liabilities:
(Increase) decrease in receivables (260,000) (347,000)
(Increase) decrease in inventories (1,704,000) (2,113,000)
(Increase) decrease in prepaid expenses (192,000) (82,000)
Increase (decrease) in accounts payable 79,000 161,000
Increase (decrease) in accrued liabilities
and accrued compensation 330,000 (325,000)
------------- -------------
Total changes in assets and liabilities (1,747,000) (2,706,000)
------------- -------------
Net cash used in operating activities (717,000) (1,209,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -----------------------------------------------
Payments for property and equipment (954,000) (1,710,000)
------------- -------------
Net cash used in investing activities (954,000) (1,710,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -----------------------------------------------
Proceeds from long-term bank debt 13,450,000 12,900,000
Repayment of long-term bank debt (12,050,000) (10,100,000)
Other, net (82,000) (7,000)
------------- -------------
Net cash provided by financing activities 1,318,000 2,793,000
------------- -------------
Net decrease in cash (353,000) (126,000)
Cash at beginning of period 1,025,000 814,000
------------- -------------
Cash at end of period $ 672,000 $ 688,000
============= =============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
5
CACHE, INC.
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, 1996 and December 30, 1995, and
the results of operations for the thirteen week periods ended March 30,
1996 and April 1, 1995 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, 1995.
Certain amounts reflected in Fiscal 1995 financial statements have been
reclassified to conform with the presentation of similar items in
fiscal 1996.
2. NET INCOME OR LOSS PER SHARE
----------------------------
Net income or loss per share has been computed based on the
weighted average number of shares of common stock outstanding for the
thirteen weeks ended March 30, 1996 and April 1, 1995.
The approximate number of shares used in the computations of
income per common share were 9,091,000, for the thirteen week periods
ended March 30, 1996 and April 1, 1995, respectively.
3. PROPERTY AND EQUIPMENT
----------------------
March 30, December 30,
1996 1995
------------ -------------
Leasehold improvements $15,780,000 $15,661,000
Furniture, fixtures and
equipment 14,005,000 13,170,000
------------ -------------
29,785,000 28,831,000
Less: accumulated depreciation
and amortization 13,129,000 12,254,000
------------ -------------
$16,656,000 $16,577,000
============ ============
4. ACCRUED LIABILITIES
-------------------
March 30, December 30,
1996 1995
----------- -----------
Operating Expenses $ 792,000 $ 889,000
Taxes, other than income taxes 694,000 1,022,000
Leasehold additions 520,000 52,000
Other 908,000 926,000
----------- -----------
$2,914,000 $2,889,000
=========== ===========
6
5. BANK DEBT
---------
During 1996, the Company reached an agreement with its bank to
extend the maturity of the existing Revolving Credit Facility until
July 4, 1997. Pursuant to the Revolving Credit Facility, $8,500,000 is
available until expiration of the agreement. The amounts outstanding
thereunder bear interest at a maximum per annum rate up to 1.00% above
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 and total equity ratio, a maximum
capital expenditure covenant, a minimum earnings to bank interest
coverage ratio and certain restrictions on the repayment of principal
amounts due to related parties. The agreement prohibits the payment of
any 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.
The outstanding balances on the line of credit at March 30, 1996
and December 30, 1995 were $2,700,000 and $1,300,000, respectively.
The related party debt is subordinated to the bank debt and therefore
will not be paid prior to expiration of the bank line of credit.
6. INDEBTEDNESS TO RELATED PARTY
-----------------------------
As of March 30, 1996 and December 30, 1995 the Company had
outstanding, (i) a $250,000 long-term loan from a major stockholder
bearing interest payable quarterly with principal due upon demand at
any time after January 31, 1997; and (ii) a $1,750,000 loan made by the
same stockholder bearing interest payable quarterly with principal due
upon demand at any time after January 31, 1997. Interest on both notes
accrue at 7% per year through January 31, 1997.
In December 1994, the Company loaned a total of $913,000 to
several executive officers of the Company. The loans are evidenced by
secured promissory notes, which bear interest at the rate of 9% per
annum. In September 1995, two officers repaid a total of $663,000 to
the Company, while $250,000 remains outstanding at December 30, 1995
and March 30, 1996.
7. INCOME TAXES
------------
At December 30, 1995 and March 30, 1996, the Company had net
operating loss carryforwards of $1,333,000 and $1,213,000,
respectively, for federal income tax reporting purposes. The net
operating loss carryforwards expire at various dates through 2008. In
April 1995, the Company realized for financial reporting purposes
$318,000 of income tax benefits from stock option exercises. This
benefit was recorded as an increase in paid-in capital. The Company
had available at December 30, 1995 approximately $295,000 of
alternative minimum tax carryforwards for tax reporting purposes. At
December 30, 1995 and March 30, 1996, the Company's deferred tax assets
7
were $2,135,000 and $2,084,000, respectively, also, there was no deferred tax
liability. The major components of the Company's net deferred taxes at March
30, 1996 and December 30, 1995 are as follows:
March 30, December 30,
1996 1995
----------- ------------
Net operating loss carryforwards ("NOL'S") and
alternative minimum tax carryforwards.......... $ 508,000 $ 508,000
NOL'S resulting from stock option exercises..... 444,000 378,000
Deferred rent................................... 708,000 695,000
Inventory cost capitalization................... 282,000 348,000
Other........................................... 142,000 206,000
----------- -----------
$2,084,000 $2,135,000
=========== ===========
8. 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
- ---------------------
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 30, 1996, the Company increased bank
borrowings ($1,400,000) to partially offset the cost of inventory purchases
($1,704,000), and the Company's new store expansion and remodeling program.
Cash used by operations decreased to $717,000 in 1996 from $1,209,000 in
1995.
The Company plans to open a total of approximately twelve new stores
during 1996. The Company opened four stores in March, one store in April and
one store in May 1996. The remaining stores are expected to be opened during
the second half of 1996. After deducting construction allowances paid to the
Company by its landlords, the Company has spent $954,000 through March 30,
1996 and expects to spend an additional $3,000,000 in 1996 for both new store
and existing store construction and remodeling. The Company anticipates that
it will finance new store construction and remodeling in 1996 primarily by
cash flow from operations and its existing credit facilities. The Company
closed three stores in January 1996, the store closures had no material
effect on net income for the thirteen week period.
Cash decreased $353,000 and bank debt rose by $1,400,000, as the Company
paid for inventory and fixed asset additions. Inventories increased
$1,704,000, principally due to increased average store inventory levels at
March 30, 1996, as compared to fiscal year-end post-holiday inventory levels,
as well as due to the addition of five new stores in 1996. Property and
equipment increased $954,000, primarily due to the above mentioned new store
8
expansion and store remodeling. Accrued liabilities increased $330,000,
primarily due to higher accrued payrolls at March 30, 1996. The Company
believes that given the sources of credit discussed above, its financial
resources will be sufficient to meet anticipated requirements.
RESULTS OF OPERATIONS
- ---------------------
For the thirteen weeks ended March 30, 1996, the 2% decrease in
comparative store sales, combined with the addition of new stores opened in
1995 and 1996, caused a reduction in net income for the thirteen week period
in 1996 as compared to 1995.
Certain financial data concerning the Company's results of operations
for the thirteen week periods ended March 30, 1996 and April 1, 1995,
expressed as a percentage of net sales, are as follows:
Thirteen Weeks Ended
--------------------
March 30, April 1,
1996 1995
-------- --------
Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.5% 64.9%
Selling, general and
administrative expenses 33.7% 31.7%
Operating income .8% 3.4%
Interest expense .3% .5%
Income tax provision .2% 1.1%
Net income .3% 1.8%
Sales
- -----
Net sales increased $2,297,000 or 8.8% during the thirteen week period
ended March 30, 1996, versus the comparable period in 1995. The increase was
primarily due to the greater number of stores open during the 1996 period,
approximately 153 stores in operation in 1996 versus 134 in 1995, and was
partially offset by a reduction in comparable store sales (sales for stores
open at least one year or more) which decreased 2% during 1996, as compared
to the 1995 period.
Historically, sales at new stores do not achieve the same levels as
existing, established stores. New stores generally begin to perform as well
as existing stores during their second and third year of operation. Sales on
a weighted average basis for the thirteen week periods ended March 30, 1996
and April 1, 1995 were as follows:
9
Thirteen Weeks Ended
--------------------
March 30, April 1,
1996 1995
------------ ------------
Sales $28,307,000 $26,010,000
Weighted Average Stores
Open During Period 149.3 130.2
Net Sales Per Weighted
Average Number of Stores $ 190,000 $ 200,000
Net Weighted Average Sales
per Square Foot $ 91.3 $ 96.3
Stores Open at End
of Period 153 134
Costs and expenses
- ------------------
Cost of sales including occupancy and buying costs, increased
$1,661,000 or 9.8% for the thirteen weeks ended March 30, 1996
versus the similar period in 1995. The increase was primarily due
to the increase in sales and the related cost of merchandise for
those sales, as well as a $448,000 increase in occupancy expenses,
primarily due to the additional stores in operation during 1996
versus 1995. As a percentage of sales, cost of sales including
occupancy and buying expenses, increased .6%, (65.5% versus 64.9%)
for the thirteen weeks ended March 30, 1996 versus the comparable
period in 1995. The increase was primarily due to the additional
occupancy expenses incurred by new stores.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses increased
$1,292,000 or 15.7% during the thirteen weeks ended March 30, 1996
versus the comparable period in 1995. The increase was primarily
due to the greater number of stores open in 1996 (19 more than
fiscal 1995), and is reflected in greater payroll and payroll taxes
($712,000) and depreciation ($201,000). As a percentage of sales,
these expenses increased to 33.7% in fiscal 1996 from 31.7% in
fiscal 1995.
Interest expense
- ----------------
Interest expense decreased $27,000 or (21.8%) for the thirteen
week period ended March 30, 1996, versus the comparable period in
1995, primarily due to lower average borrowing levels in 1996, as
well as due to lower average borrowing rates in 1996, as compared
to 1995.
Income taxes
- ------------
The Company's effective tax rate is approximately 37%, for
fiscal 1996 and 1995.
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
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)
May 10, 1996 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)
12
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
THIRTEEN WEEKS ENDED
--------------------
March 30, April 1,
1996 1995
------------- -------------
EARNINGS
- --------
Net Income Applicable
to Common Stockholders $ 83,000 $ 481,000
PRIMARY SHARES
- --------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options
and Stock Warrants --- ---
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method --- ---
------------- -------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,091,000 9,091,000
============= =============
Primary Earnings Per Share $0.01 $0.05
============= =============
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options
and Stock Warrants --- ---
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method --- ---
------------- -------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,091,000 9,091,000
============= =============
Fully Diluted Earnings Per Share $0.01 $0.05
============= =============
13