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 28, 1998
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 01, 1998
<PAGE>
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, MARCH 28, 1998
AND DECEMBER 27, 1997 3
STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 28, 1998
AND MARCH 29, 1997 4
STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED MARCH 28, 1998
AND MARCH 29, 1997 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
<PAGE>
<TABLE>
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 28, December 27,
<S> 1998 1997
ASSETS -------------- --------------
<C> <C>
Current assets:
Cash and cash equivalents $ 3,074,000 $ 5,892,000
Receivables 1,741,000 1,573,000
Notes receivable from related parties 250,000 250,000
Inventories 20,779,000 18,219,000
Deferred income taxes and other assets 220,000 220,000
Prepaid expenses 509,000 528,000
-------------- --------------
Total current assets 26,573,000 26,682,000
Property and equipment, net 15,718,000 15,869,000
Other assets 260,000 211,000
Deferred income taxes 741,000 746,000
-------------- --------------
$ 43,292,000 $ 43,508,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,086,000 $ 10,737,000
Income taxes payable 36,000 359,000
Accrued compensation 1,256,000 742,000
Accrued liabilities 3,061,000 3,862,000
-------------- --------------
Total current liabilities 15,439,000 15,700,000
Subordinated indebtedness to related party 2,000,000 2,000,000
Other liabilities 1,835,000 1,847,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at March 28, 1998 and December 27, 1997 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 4,363,000 4,306,000
-------------- --------------
Total stockholders' equity 24,018,000 23,961,000
-------------- --------------
$ 43,292,000 $ 43,508,000
============== ==============
<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 OPERATIONS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
<CAPTION>
March 28, March 29,
1998 1997
-------------- --------------
<S> <C> <C>
Net sales $ 31,334,000 $ 30,306,000
-------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 20,779,000 20,050,000
Selling, general and administrative expenses 10,444,000 10,380,000
-------------- --------------
31,223,000 30,430,000
-------------- --------------
Operating income (loss) 111,000 (124,000)
-------------- --------------
Interest expense
Related party (35,000) (35,000)
Other (12,000) (35,000)
-------------- --------------
(47,000) (70,000)
-------------- --------------
Interest income 33,000 6,000
-------------- --------------
Income (loss) before income taxes 97,000 (188,000)
Income tax provision (benefit) 40,000 (77,000)
-------------- --------------
Net income (loss) $ 57,000 $ (111,000)
============== ==============
Basic and diluted earnings (loss) per share $0.01 ($0.01)
============== ==============
Weighted average number of shares and
share equivalents outstanding 9,105,000 9,091,000
============== ==============
<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 28, March 29,
1998 1997
<S> -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
<C> <C>
Net income (loss) $ 57,000 $ (111,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 969,000 921,000
Deferred income taxes (benefit) 5,000 (116,000)
Accrual (reversal) of future rent escalations 9,000 (14,000)
Change in assets and liabilities:
Increase in receivables (168,000) (463,000)
Increase in inventories (2,560,000) (1,883,000)
Decrease in prepaid expenses 19,000 18,000
Increase (decrease) in accounts payable 349,000 (1,493,000)
Increase (decrease) in income taxes payable (323,000) ---
Increase (decrease) in accrued liabilities
and accrued compensation (308,000) 9,000
-------------- --------------
Total changes in assets and liabilities (2,991,000) (3,812,000)
-------------- --------------
Net cash used in operating activities (1,951,000) (3,132,000)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Payments for property and equipment (817,000) (781,000)
-------------- --------------
Net cash used in investing activities (817,000) (781,000)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Proceeds from long-term bank debt 550,000 10,950,000
Repayment of long-term bank debt (550,000) (8,300,000)
Other, net (50,000) 5,000
-------------- --------------
Net cash provided by (used in) financing activities (50,000) 2,655,000
-------------- --------------
Net decrease in cash and cash equivalents (2,818,000) (1,258,000)
Cash and cash equivalents at beginning of period 5,892,000 2,160,000
-------------- --------------
Cash and cash equivalents at end of period $ 3,074,000 $ 902,000
============== ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statem
</FN>
</TABLE>
5
<PAGE>
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 28, 1998 and December 27, 1997, and
the results of operations for the thirteen week periods ended March 28,
1998 and March 29, 1997 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 27, 1997.
Certain amounts reflected in Fiscal 1997 financial statements have been
reclassified to conform with the presentation of similar items in
Fiscal 1998.
Net income (loss) 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 1998 or Fiscal 1997 results.
2. BASIC AND DILUTED EARNINGS(LOSS)
-------------------------------
Basic and diluted earnings(loss) per share has been computed based
on the weighted average number of shares of common stock outstanding
for the thirteen weeks ended March 28, 1998 and March 29, 1997.
The approximate number of shares used in the computations of basic
and diluted earnings (loss) per share were 9,105,000 and 9,091,000, for
the thirteen week periods ended March 28, 1998 and March 29, 1997,
respectively.
6
<PAGE>
3. PROPERTY AND EQUIPMENT
----------------------
March 28, December 27,
1998 1997
----------- -----------
Leasehold improvements $16,587,000 $16,242,000
Furniture, fixtures and
equipment 18,807,000 18,335,000
----------- -----------
35,394,000 34,577,000
Less: accumulated depreciation
and amortization 19,676,000 18,708,000
----------- -----------
$15,718,000 $15,869,000
=========== ===========
4. ACCRUED LIABILITIES
-------------------
March 28, December 27,
1998 1997
----------- -----------
Operating Expenses $ 793,000 $1,119,000
Taxes, other than income taxes 727,000 1,141,000
Leasehold additions 170,000 160,000
Other customer deposits 1,371,000 1,442,000
----------- -----------
$3,061,000 $3,862,000
=========== ===========
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.
There was no outstanding balance on the line of credit at March
29, 1997, and 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. The Company is currently in
compliance with all covenant requirements.
7
<PAGE>
NOTE 6. INDEBTEDNESS TO/FROM RELATED PARTIES
As of March 28, 1998 and December 27, 1997 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 a loan repayment on December 31, 1998,
subject to the Tangible Net Worth covenant contained in the Amended Revolving
Credit Facility.
7. INCOME TAXES
------------
The effective tax rates for Fiscal 1998 and 1997 are 41.0%. At March
28, 1998 and December 27, 1997, the Company's deferred tax assets were
$961,000 and $966,000, respectively, also, there was no deferred tax
liability. The major components of the Company's net deferred taxes at March
28, 1998 are as follows:
March 28, December 27,
1998 1997
----------- -------------
Net operating loss carryforwards ("NOL'S") and
alternative minimum
tax carryforwards.............................. $ 92,000 $ 92,000
Deferred rent................................... 856,000 853,000
Inventory cost capitalization................... 128,000 128,000
Other........................................... ( 115,000) ( 107,000)
----------- -------------
$ 961,000 $ 966,000
=========== =============
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
<PAGE>
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 28, 1998, the Company used cash ($2,818,000)
and cash flow from non-cash depreciation expenses ($969,000) to primarily
offset the cost of inventory purchases ($2,560,000), and to fund the
Company's new store expansion and remodeling program ($817,000).
The Company plans to open approximately five to ten new stores during
1998. The Company opened two new stores in March 1998. The remaining stores
are expected to be opened during the second half of 1998. After deducting
construction allowances paid to the Company by its landlords, the Company has
spent $817,000 through March 28, 1998 and expects to spend an additional
$2,500,000 in 1998 for both new store and existing store construction and
remodeling.
The Company is conducting a comprehensive review of its computer systems
to identify the systems that could be affected by the "Year 2000" issue and
is developing an implementation plan to resolve the issue. The Company
presently believes that, with modifications to existing software and
converting to new software, where necessary, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems as
so modified and converted.
Management believes that the Company's internally generated cash flows
will be sufficient to meet anticipated requirements for operations and
planned expansion during Fiscal 1998.
RESULTS OF OPERATIONS
- ---------------------
For the thirteen weeks ended March 28, 1998, the 1% increase in
comparative store sales and reductions in several operating expense
categories, was partially offset by slightly higher occupancy costs,
resulting in a net profit in Fiscal 1998 as compared to a net loss in Fiscal
1997. The increase in general and administrative expenses was offset by
reductions in net interest expense.
9
<PAGE>
Certain financial data concerning the Company's results of operations
for the thirteen week periods ended March 28, 1998 and March 29, 1997,
expressed as a percentage of net sales, are as follows:
Thirteen Weeks Ended
--------------------
March 28, March 29,
1998 1997
--------- ---------
Sales 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 66.3% 66.2%
Selling, general and
administrative expenses 33.3% 34.3%
Income (loss) before taxes .3% ( .6%)
Income tax provision (benefit) .1% ( .3%)
Net income (loss) .2% ( .4%)
Sales
- -----
Net sales increased $1,028,000 or 3.4% during the thirteen week period
ended March 28, 1998, versus the comparable period in 1997. The increase was
primarily due to the greater number of stores open during the 1998 period,
approximately 170 stores in operation in 1998 versus approximately 162 in
1997, as well as an increase in comparable store sales (sales for stores open
at least one year or more) which increased 1% during 1998, as compared to the
1997 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 28, 1998
and March 29, 1997 were as follows:
Thirteen Weeks Ended
--------------------
March 28, March 29,
1998 1997
----------- -----------
Sales $31,334,000 $30,306,000
Weighted Average Stores
Open During Period 169.2 161.8
Net Sales Per Weighted
Average Number of Stores $ 185,000 $ 187,000
Net Weighted Average Sales
per Square Foot $ 89.1 $ 90.4
Stores Open at End
of Period 170 164
10
<PAGE>
Costs and expenses
- ------------------
Cost of sales including occupancy and buying costs, increased $729,000
or 3.6% for the thirteen weeks ended March 28, 1998 versus the similar period
in 1997. The increase was primarily due to the increase in sales and the
related cost of merchandise for those sales, as well as a $218,000 increase
in occupancy expenses, primarily due to the additional stores in operation
during 1998 versus 1997. As a percentage of sales, cost of sales including
occupancy and buying expenses, increased .1%, (66.3% versus 66.2%) for the
thirteen weeks ended March 28, 1998 versus the comparable period in 1997.
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses increased $64,000 or .6%
during the thirteen weeks ended March 28, 1998 versus the comparable period
in 1997. The increase was primarily due to the greater number of stores open
in 1998 (approximately 8 more than fiscal 1997), and is reflected in greater
payroll and payroll taxes ($133,000), advertising expenses ($72,000), and
depreciation ($49,000), which were partially offset by reductions in freight
charges ($89,000), bad debt expense ($38,000), and insurance expense
($69,000), as well as savings in other expense categories. As a percentage
of sales, S,G & A expenses decreased to 33.3% in Fiscal 1998 from 34.3% in
Fiscal 1997.
Interest expense
- ----------------
Interest expense decreased $23,000 or (33%) for the thirteen week period
ended March 28, 1998, versus the comparable period in 1997, primarily due to
lower average borrowing levels in 1998.
Interest income
- ---------------
Interest income increased to $33,000 from $6,000 in Fiscal 1998 as
compared to the Fiscal 1997 quarter. Interest income will continue to grow
in Fiscal 1998 due to the strong cash flows the Company is currently
generating.
Income taxes
- ------------
The Company's effective tax rate is approximately 41%, for Fiscal 1998
and 1997, respectively.
11
<PAGE>
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>
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 01, 1998 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
<PAGE>
<TABLE>
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------------
March 28, March 29,
<S> 1998 1997
EARNINGS -------------- --------------
--------
Net Income (Loss) Applicable <C> <C>
to Common Stockholders $ 57,000 $ (111,000)
BASIC 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
============== ==============
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 476,000 ---
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (462,000) ---
-------------- --------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,105,000 9,091,000
============== ==============
Fully Diluted Earnings Per Share $0.01 ($0.01)
============== ==============
14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> MAR-28-1998
<CASH> 3,074,000
<SECURITIES> 0
<RECEIVABLES> 1,991,000
<ALLOWANCES> 0
<INVENTORY> 20,779,000
<CURRENT-ASSETS> 26,573,000
<PP&E> 35,394,000
<DEPRECIATION> 19,676,000
<TOTAL-ASSETS> 43,292,000
<CURRENT-LIABILITIES> 15,439,000
<BONDS> 0
<COMMON> 91,000
0
0
<OTHER-SE> 23,927,000
<TOTAL-LIABILITY-AND-EQUITY> 43,292,000
<SALES> 31,334,000
<TOTAL-REVENUES> 31,334,000
<CGS> 20,779,000
<TOTAL-COSTS> 20,779,000
<OTHER-EXPENSES> 10,444,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,000
<INCOME-PRETAX> 97,000
<INCOME-TAX> 40,000
<INCOME-CONTINUING> 57,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
