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 29, 1997
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)
212-575-3200
----------------------------------------------------
(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 May 9, 1997
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, MARCH 29, 1997
AND DECEMBER 28, 1996 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 29, 1997
AND MARCH 30, 1996 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED MARCH 29, 1997
AND MARCH 30, 1996 5
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-11
OTHER INFORMATION:
EXHIBIT INDEX AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 29, December 28,
ASSETS 1997 1996
------------- -------------
Current assets:
Cash and equivalents $ 902,000 $ 2,160,000
Receivables 1,755,000 1,292,000
Notes receivable from related parties 250,000 250,000
Inventories 19,893,000 18,010,000
Deferred income taxes and other assets 902,000 770,000
Prepaid expenses 524,000 542,000
------------- -------------
Total current assets 24,226,000 23,024,000
Property and equipment, net 16,246,000 16,385,000
Other assets 208,000 198,000
Deferred income taxes 901,000 917,000
------------- -------------
$ 41,581,000 $ 40,524,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,382,000 $ 10,875,000
Accrued compensation 1,199,000 721,000
Accrued liabilities 2,755,000 3,224,000
------------- -------------
Total current liabilities 13,336,000 14,820,000
Long-term bank debt 2,650,000 ---
Subordinated indebtedness to related party 2,000,000 2,000,000
Other liabilities 2,110,000 2,108,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at March 29, 1997 and December 28, 1996 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 1,830,000 1,941,000
------------- -------------
Total stockholders' equity 21,485,000 21,596,000
------------- -------------
$ 41,581,000 $ 40,524,000
============= =============
<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 29, March 30,
1997 1996
------------- -------------
Net sales $ 30,306,000 $ 28,307,000
------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 20,044,000 18,539,000
Selling, general and administrative expenses 10,380,000 9,538,000
------------- -------------
30,424,000 28,077,000
------------- -------------
Operating income (loss) (118,000) 230,000
Interest expense
Related party 35,000 35,000
Other 35,000 62,000
------------- -------------
70,000 97,000
------------- -------------
Income (loss) before income taxes (188,000) 133,000
Income tax provision (benefit) (77,000) 50,000
------------- -------------
Net income (loss) $ (111,000) $ 83,000
============= =============
Net income (loss) per share ($0.01) $0.01
============= =============
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 29, March 30,
1997 1996
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income (loss) $ (111,000) $ 83,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 921,000 876,000
Deferred income taxes (benefit) (116,000) 35,000
Accrual (reversal) of future rent escalations (14,000) 36,000
Change in assets and liabilities:
(Increase) decrease in receivables (463,000) (260,000)
(Increase) decrease in inventories (1,883,000) (1,704,000)
(Increase) decrease in prepaid expenses 18,000 (192,000)
Increase (decrease) in accounts payable (1,493,000) 79,000
Increase (decrease) in accrued liabilities
and accrued compensation 9,000 330,000
------------- -------------
Total changes in assets and liabilities (3,812,000) (1,747,000)
------------- -------------
Net cash used in operating activities (3,132,000) (717,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
------------------------------------
Payments for property and equipment (781,000) (954,000)
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Net cash used in investing activities (781,000) (954,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
------------------------------------
Proceeds from long-term bank debt 10,950,000 13,450,000
Repayment of long-term bank debt (8,300,000) (12,050,000)
Other, net 5,000 (82,000)
------------- -------------
Net cash provided by financing activities 2,655,000 1,318,000
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Net decrease in cash (1,258,000) (353,000)
Cash at beginning of period 2,160,000 1,025,000
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Cash at end of period $ 902,000 $ 672,000
============= =============
<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 29, 1997 and December 28, 1996, and
the results of operations for the thirteen week periods ended March 29,
1997 and March 30, 1996 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 28, 1996.
Certain amounts reflected in Fiscal 1996 financial statements have been
reclassified to conform with the presentation of similar items in
Fiscal 1997.
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 29, 1997 and March 30, 1996.
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 29, 1997 and March 30, 1996, respectively.
3. PROPERTY AND EQUIPMENT
----------------------
March 29, December 28,
1997 1996
----------- -----------
Leasehold improvements $16,413,000 $16,271,000
Furniture, fixtures and
equipment 16,345,000 15,706,000
----------- -----------
32,758,000 31,977,000
Less: accumulated depreciation
and amortization 16,512,000 15,592,000
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$16,246,000 $16,385,000
=========== ===========
6
4. ACCRUED LIABILITIES
-------------------
March 29, December 28,
1997 1996
----------- -----------
Operating Expenses $ 789,000 $ 803,000
Taxes, other than income taxes 697,000 1,121,000
Leasehold additions 85,000 107,000
Other customer deposits 1,184,000 1,193,000
----------- -----------
$2,755,000 $3,224,000
=========== ===========
5. BANK DEBT
---------
During August 1996, the Company reached an agreement with its
bank to extend the maturity of the Amended Revolving Credit Facility
until January 31, 2000. Pursuant to the Amended Revolving Credit
Facility $12,000,000 is available until expiration at January 31,
2000. The amounts outstanding thereunder bear interest at a maximum
per annum rate up to .50% 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 balance on the line of credit at March 29, 1997
was $2,650,000 and there was no outstanding balance on the line of
credit at December 28, 1996. The related party debt is subordinated to
the bank debt and repayment is subject to terms of the Amended
Revolving Credit Facility.
NOTE 6. INDEBTEDNESS TO/FROM RELATED PARTIES
As of March 29, 1997 and December 28, 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, 2000; 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, 2000. Interest on both notes
accrue at 7% per year through January 31, 2000. The Company may make
loan repayments of $1,000,000 each on December 31, 1997 and December
31, 1998, subject to the Tangible Net Worth covenant contained in the
Amended Revolving Credit Facility.
7
7. INCOME TAXES
------------
The effective tax rates for Fiscal 1997 and 1996 are 41.0% and 37.5%,
respectively. The Company had available at December 28, 1996 approximately
$281,000 of alternative minimum tax carryforwards for tax reporting purposes,
as an investment tax credit carryforward of approximately $117,000. At March
29, 1997 and December 28, 1996, the Company's deferred tax assets were
$1,770,000 and $1,679,000, respectively, also, there was no deferred tax
liability. The major components of the Company's net deferred taxes at March
29, 1997 are as follows:
March 29, December 28,
1997 1996
----------- -------------
Net operating loss carryforwards ("NOL'S") and
investment tax credit and alternative minimum
tax carryforwards.............................. $ 628,000 $ 529,000
Deferred rent................................... 846,000 852,000
Inventory cost capitalization................... 241,000 233,000
Other........................................... 55,000 65,000
----------- -------------
$1,770,000 $1,679,000
=========== =============
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.
8
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 29, 1997, the Company increased bank
borrowings ($2,650,000) and used cash ($1,258,000) to primarily offset the
cost of inventory purchases ($1,883,000), repay accounts payable ($1,493,000)
and fund the Company's new store expansion and remodeling program.
The Company plans to open approximately seven to ten new stores during
1997. The Company opened three stores in March and one in April. The
remaining stores are expected to be opened during the second half of 1997.
After deducting construction allowances paid to the Company by its landlords,
the Company has spent $781,000 through March 29, 1997 and expects to spend an
additional $3,000,000 in 1997 for both new store and existing store
construction and remodeling. The Company anticipates that it will finance
new store construction and remodeling in 1997 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 in 1996.
Cash decreased $1,258,000 and bank debt rose by $2,650,000, as the
Company paid for inventory and fixed asset additions. Inventories increased
$1,883,000, principally due to increased average store inventory levels at
March 29, 1997, as compared to fiscal year-end post-holiday inventory levels,
as well as due to the addition of four new stores in 1997. Property and
equipment increased $781,000, primarily due to the above mentioned new store
expansion and store remodeling. 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 29, 1997, the 1% increase in
comparative store sales, was more than offset by slightly lower gross margins
and higher store operating expenses, resulting in a net loss in Fiscal 1997
as compared to Fiscal 1996. The increase in store operating expenses is
primarily due to the addition of fourteen new stores in Fiscal 1996 and the
four new stores added in Fiscal 1997.
9
Certain financial data concerning the Company's results of operations
for the thirteen week periods ended March 29, 1997 and March 30, 1996,
expressed as a percentage of net sales, are as follows:
Thirteen Weeks Ended
--------------------
March 29, March 30,
1997 1996
--------- --------
Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 66.1% 65.5%
Selling, general and
administrative expenses 34.3% 33.7%
Operating income (loss) ( .4%) .8%
Interest expense .2% .3%
Income tax provision (benefit) ( .3%) .2%
Net income (loss) ( .4%) .3%
Sales
- -----
Net sales increased $1,999,000 or 7.1% during the thirteen week period
ended March 29, 1997, versus the comparable period in 1996. The increase was
primarily due to the greater number of stores open during the 1997 period,
approximately 164 stores in operation in 1997 versus 153 in 1996, as well as
an increase in comparable store sales (sales for stores open at least one
year or more) which increased 1% during 1997, as compared to the 1996 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 29, 1997
and March 30, 1996 were as follows:
Thirteen Weeks Ended
--------------------
March 29, March 30,
1997 1996
----------- -----------
Sales $30,306,000 $28,307,000
Weighted Average Stores
Open During Period 161.8 149.3
Net Sales Per Weighted
Average Number of Stores $ 187,000 $ 190,000
Net Weighted Average Sales
per Square Foot $ 90.8 $ 91.3
Stores Open at End
of Period 164 153
10
Costs and expenses
- ------------------
Cost of sales including occupancy and buying costs, increased
$1,505,000 or 8.1% for the thirteen weeks ended March 29, 1997
versus the similar period in 1996. The increase was primarily due
to the increase in sales and the related cost of merchandise for
those sales, as well as a $321,000 increase in occupancy expenses,
primarily due to the additional stores in operation during 1997
versus 1996. As a percentage of sales, cost of sales including
occupancy and buying expenses, increased .6%, (66.1% versus 65.5%)
for the thirteen weeks ended March 29, 1997 versus the comparable
period in 1996. The increase was primarily due to higher
merchandise costs.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses increased
$842,000 or 8.8% during the thirteen weeks ended March 29, 1997
versus the comparable period in 1996. The increase was primarily
due to the greater number of stores open in 1997 (approximately 12
more than fiscal 1996), and is reflected in greater payroll and
payroll taxes ($549,000), credit card fees ($68,000), freight
charges ($71,000), licenses and taxes ($66,000) and depreciation
($43,000). As a percentage of sales, S,G & A expenses increased to
34.6% in Fiscal 1997 from 33.7% in Fiscal 1996.
Interest expense
- ----------------
Interest expense decreased $27,000 or (27.8%) for the thirteen
week period ended March 29, 1997, versus the comparable period in
1996, primarily due to lower average borrowing levels in 1997.
Income taxes
- ------------
The Company's effective tax rate is approximately 41% and
37.5%, for Fiscal 1997 and 1996, respectively. The higher rate in
Fiscal 1997 reflects higher state and local income taxes, as well
as a reduction in temporary differences which previously were more
significant.
11
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
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 9, 1997 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)
13
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
THIRTEEN WEEKS ENDED
-------------------------------
March 29, March 30,
1997 1996
------------- -------------
EARNINGS
--------
Net Income (Loss) Applicable
to Common Stockholders $ (111,000) $ 83,000
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) $0.01
============= =============
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) $0.01
============= =============
14