<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended May 1, 1999.
[ ] 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 0-18640
-------
CHEROKEE INC.
-------------
(Exact name of registrant as specified in its charter)
------------------------------------------------------
Delaware 95-4182437
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (IRS employer identification number)
Incorporation or organization)
6835 Valjean Avenue, Van Nuys, CA 91406
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (818) 908-9868
--------------
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
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by
the court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 1, 1999
- -------------------------------------- ---------------------------
Common Stock, $.02 par value per share 8,705,428
<PAGE>
CHEROKEE INC.
-------------
INDEX
<TABLE>
<S> <C>
PART 1. FINANCIAL INFORMATION
ITEM I. Consolidated Financial Statements
Consolidated Balance Sheets
May 1, 1999 and January 30, 1999 2
Consolidated Statements of Operations 3
Three Months ended May 1, 1999 and
May 2, 1998
Consolidated Statements of Cash Flow 4
Three Months ended May 1, 1999 and
May 2, 1998
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosure
about Market Risk 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on 8-K 12
</TABLE>
1
<PAGE>
Part 1. Financial Information
-----------------------------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CHEROKEE INC.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
Unaudited
May 1, 1999 January 30, 1999
----------- ----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,516,000 $ 2,847,000
Restricted cash 2,809,000 4,500,000
Receivables, net 6,389,000 3,232,000
Prepaid expenses and other current assets 7,000 29,000
Deferred tax asset - 861,000
------------ ------------
Total current assets 11,721,000 11,469,000
Deferred tax asset 2,890,000 3,527,000
Securitization fees, net of accumulated amortization of $274,000
and $223,000, respectively 967,000 1,018,000
Property and equipment, net of accumulated depreciation of
$110,000 and $95,000, respectively 247,000 233,000
Trademarks, net of accumulated amortization of
$300,000 and $243,000, respectively 3,425,000 3,176,000
Other assets 15,000 106,000
------------ ------------
Total assets $ 19,265,000 $ 19,529,000
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 594,000 $ 280,000
Dividends payable 2,176,000 2,176,000
Other accrued liabilities 2,241,000 1,755,000
Notes payable 9,000,000 9,000,000
------------ ------------
Total current liabilities 14,011,000 13,211,000
Other liabilities 500,000 500,000
Notes payable - long term 34,197,000 35,697,000
------------ ------------
Total liabilities 48,708,000 49,408,000
------------ ------------
Stockholders' Deficit:
Common stock, $.02 par value,20,000,000 shares authorized,
8,705,428 shares issued and outstanding at
May 1, 1999 and at January 30, 1999 174,000 174,000
Note receivable from stockholder (2,165,000) (2,134,000)
Accumulated deficit (27,452,000) (27,919,000)
------------ ------------
Stockholders' deficit (29,443,000) (29,879,000)
------------ ------------
Total liabilities and stockholders' deficit $ 19,265,000 $ 19,529,000
============ ============
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
2
<PAGE>
CHEROKEE INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
<TABLE>
<CAPTION>
Three months ended
------------------
May 1, 1999 May 2, 1998
-----------------------------------------------
<S> <C> <C>
Royalty revenues $ 6,917,000 $ 5,296,000
Selling, general and administrative expenses 1,845,000 1,240,000
------------ ------------
Operating income 5,072,000 4,056,000
Other income (expenses) :
Interest expense (750,000) (863,000)
Investment and Interest income 84,000 186,000
------------ ------------
Total other income (expenses), net (666,000) (677,000)
Income before income taxes 4,406,000 3,379,000
Income tax provision 1,763,000 1,352,000
------------ ------------
Net income...... $ 2,643,000 $ 2,027,000
============ ============
Basic earnings per share $ 0.30 $ 0.23
------------ ------------
Diluted earnings per share $ 0.30 $ 0.23
------------ ------------
Weighted average shares outstanding
Basic.......... 8,705,428 8,626,452
============ ============
Diluted........ 8,705,428 8,657,353
============ ============
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
3
<PAGE>
CHEROKEE INC.
-------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
<TABLE>
<CAPTION>
Three months ended
------------------
May 1, 1999 May 2, 1998
-----------------------------------------------
<S> <C> <C>
Operating activities
- --------------------
Net income $ 2,643,000 $ 2,027,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,000 8,000
Amortization of goodwill and trademarks 58,000 69,000
Amortization of securitization fees 52,000 52,000
Amortization of debt discount 750,000 863,000
Decrease in deferred taxes 1,498,000 1,352,000
Interest income on note receivable from stockholder (31,000) (30,000)
Changes in current assets and liabilities:
Increase in accounts receivable (3,157,000) (2,249,000)
Decrease in other current assets 22,000 24,000
Increase (decrease) in accounts payable and accrued liabilities 800,000 (614,000)
------------ ------------
Net cash provided by operating activities 2,650,000 1,502,000
------------ ------------
Investing activities
- --------------------
Purchase of trademarks (307,000) (96,000)
Purchase of property and equipment (30,000) -
Decrease in other assets 91,000 -
------------ ------------
Net cash used in investing activities (246,000) (96,000)
------------ ------------
Financing activities
- --------------------
Cash distributions (2,176,000) (4,348,000)
Decrease in restricted cash 1,691,000 -
Proceeds from exercise of stock options and warrants - 563,000
Payment on notes (2,250,000) -
------------ ------------
Net cash used in financing activities (2,735,000) (3,785,000)
------------ ------------
Decrease in cash and cash equivalents (331,000) (2,379,000)
Cash and cash equivalents at beginning of period 2,847,000 10,275,000
------------ ------------
Cash and cash equivalents at end of period $ 2,516,000 $ 7,896,000
============ ============
Total paid during period:
- -------------------------
Income taxes $ 240,000 $ -
Interest $ 172,000 $ -
Non-cash transactions:
- ----------------------
Declaration of dividend $ 2,176,000 $ -
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
4
<PAGE>
CHEROKEE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 1, 1999 and January 30, 1999
(1) Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements as of May 1, 1999
and for the three months ended May 1, 1999 and May 2, 1998 have been prepared in
accordance with generally accepted accounting principles ("GAAP"). These
consolidated financial statements have not been audited by independent public
accountants but include all adjustments, consisting of normal recurring
accruals, and certain reclassifications from prior year quarter ending May 2,
1998 , which in the opinion of management of Cherokee Inc. ("Cherokee" or the
"Company") are necessary for a fair presentation of the financial position and
the results of operations for the periods presented. The accompanying
consolidated balance sheet as of January 30, 1999 has been derived from audited
consolidated financial statements, but does not include all disclosures required
by GAAP. The results of operations for the three months ended May 1, 1999 are
not necessarily indicative of the results to be expected for the fiscal year
ended January 29, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended January 30, 1999 (the "Form 10-
K").
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of sales and
expenses during the reporting period. Actual results could differ from those
estimates.
(2) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, SPELL C. LLC, a Delaware limited liability
corporation ("Spell C"). All significant intercompany accounts and transactions
have been eliminated in consolidation.
Company Year End
On December 19, 1997, the Company decided to change its fiscal year to a 52 or
53 week fiscal year ending on the Saturday nearest to January 31 in order to
better align the Company with its licensees who also generally operate and plan
using a fiscal year ending on the Saturday nearest to January 31. Prior to this
change, the Company's fiscal year was a 52 or 53 week fiscal year ending on the
Saturday nearest to May 31.
Earnings per Share Computation
The following table provides a reconciliation of the numerator and denominator
of the basic and diluted per-share computations for the three months ended May
1, 1999 and May 2, 1998:
5
<PAGE>
<TABLE>
<CAPTION>
1999 1998
3 Months 3 Months
---------- ----------
<S> <C> <C>
Numerator:
Net income-numerator for
net income per common share
and net income per common
share assuming dilution $2,643,000 $2,027,000
========== ==========
Denominator:
Denominator for net income
Per common share-weighted
average shares 8,705,428 8,626,452
Effect of dilutive securities:
Stock options - 30,901
---------- ----------
Denominator for net income
per common share, assuming
dilution: Adjusted weighted
average shares and assumed
exercises 8,705,428 8,657,353
========== ==========
</TABLE>
Common shares issuable upon exercise of stock options that are antidilutive
amounted to 561,060 and 240,042 for the three months ended May 1, 1999 and May
2, 1998, respectively.
Reclassifications
Certain previously reported financial information has been reclassified to
conform to current
year presentation.
(3) Long Term Debt
--------------
On December 23, 1997, the Company completed the recapitalization described below
and publicly announced that it would declare a special dividend of $5.50 per
share, which was subsequently paid on January 15, 1998.
As part of the recapitalization, the Company, in exchange for the proceeds from
the Secured Notes (as defined below), sold to its wholly-owned subsidiary, Spell
C, all its rights to the Cherokee brand and related trademarks in the United
States and assigned to Spell C all of its rights in an amended licensing
agreement (the "Amended Target Agreement") with Target Stores, a division of
Dayton Hudson Corporation ("Target"). Spell C issued for gross proceeds of
$47.9 million, privately placed Zero Coupon Secured Notes (the "Secured Notes"),
yielding 7.0% interest per annum and maturing on February 20, 2004. The Secured
Notes amortize quarterly from May 20, 1998 through February 20, 2004. The
Secured Notes are secured by the Amended Target Agreement and the United States
Cherokee brand name and trademarks. The Secured Notes indenture requires that
any proceeds due to Spell C under the Amended Target Agreement must be deposited
directly into a collection account controlled by the trustee under the
indenture. The trustee will distribute from the collection account the amount
of principal due
6
<PAGE>
and payable on the Secured Notes to the holders thereof on quarterly note
payment dates. Excess amounts on deposit in the collection account may only be
distributed to Spell C if the amount on deposit in the collection account
exceeds the aggregate amount of principal due and payable on the next quarterly
note payment date. Such excess amounts, if any, may then be distributed by Spell
C to the Company. The minimum guaranteed royalty under the Amended Target
Agreement is $9.0 million per year for each of the two fiscal years ending
January 29, 1999 and 2000 and $10.5 million per year for each of the four fiscal
years ending January 31, 2001 through 2004. The aggregate scheduled amortization
under the Secured Notes is $60.0 million and equals the aggregate minimum
guaranteed royalty payable under the Amended Target Agreement which is also
$60.0 million. Of the $5.3 million in royalty revenues received from Target
pursuant to the Amended Target Agreement during the three months ended May 1,
1999, $2.25 million was paid to the holders of the Secured Notes and $2.25
million remains in a collection account for the benefit of the holders of
Secured Notes. Excess amounts totaling $3.6 million were distributed to Spell C.
Spell C distributed $2.2 million of such excess amounts to the Company on May
17, 1999.
The maturity schedule of Secured Notes is as follows:
<TABLE>
<CAPTION>
As of: Face Value
<S> <C>
May 1, 1999 $ 9,000,000
May 1, 2000 9,375,000
May 1, 2001 10,500,000
May 1, 2002 10,500,000
May 1, 2003 10,500,000
Thereafter 1,125,000
-----------
Total 51,000,000
Less unamortized Note Discount 7,803,000
-----------
43,197,000
Less current portion of long term debt 9,000,000
-----------
Long term obligation $34,197,000
===========
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Cherokee Inc. (the "Company" or "Cherokee") is in the business of marketing and
licensing the Cherokee and Sideout brands and related trademarks and other
brands it owns. The Company is one of the leading licensors of brand names and
trademarks for apparel, footwear and accessories in the United States. The
Company and its wholly owned subsidiary, SPELL C. LLC ("Spell C"), hold several
trademarks including Cherokee, Sideout, Sideout Sport, King of the Beach and
others. The Cherokee brand, which began as a footwear brand in 1973, has been
positioned to connote quality, comfort, fit and a "Casual American" lifestyle
with traditional wholesome values. The Sideout brand and related trademarks,
which represent a beach-oriented, active, "Ca1ifornia" lifestyle, were acquired
by the Company in November 1997.
The Company's operating strategy emphasizes retail direct, wholesale and
international licensing whereby the Company grants retailers and wholesalers the
license to use the trademarks held by the Company on certain categories of
merchandise, and the licensees are responsible for designing and manufacturing
the merchandise. The Company's license agreements generally provide the Company
with final approval of pre-agreed upon quality standards, packaging and
marketing of licensed products and the Company has the right to conduct periodic
quality control inspections to ensure that the image and quality of licensed
products remain consistent. As of June 1, 1999, the Company had 30 continuing
license agreements for the Company's various trademarks, covering both domestic
and international markets. The Company will continue to solicit new licensees
and may, from time to time, retain the services of outside consultants to assist
the Company in this regard. In November 1997 the Company reaffirmed its
relationship with Target Stores, a division of Dayton Hudson Corporation
("Target"), by entering into an amended licensing agreement (the "Amended Target
Agreement") which grants Target the exclusive right in the United States to use
the Cherokee trademarks on certain specified categories of merchandise. Under
the Amended Target Agreement, Target is obligated to pay a royalty based upon a
percentage of its net sales of Cherokee brand products, with a minimum
guaranteed royalty of $60.0 million over the six-year initial term of the
agreement.
During the three months ended May 1, 1999 (the "First Quarter"), the Company's
six Sideout retail licensing partners, Mervyn's California, Sportmart, Gart
Sport, Upton's, Bob's Stores and The Forzani Group, Ltd. began selling several
categories of merchandise bearing the Sideout brand and achieved stronger than
anticipated results. In particular, Mervyn's began selling young men's, juniors
and children's apparel and accessories bearing the Sideout brand and achieved
sales of approximately $10.0 million during the First Quarter.
During First Quarter, sales of merchandise bearing the Cherokee brand continued
to escalate, with total retail sales exceeding $297.0 million versus $218.0
million in total retail sales for the year-ago period. Zellers launched
additional categories of merchandise bearing the Cherokee brand including
accessories, socks, belts, jewelry, watches, sunglasses and footwear. Zellers
also announced plans to open stand-alone Cherokee stores in locations that do
not have a Zellers outlet nearby and anticipates opening the first store in fall
1999.
8
<PAGE>
As previously discussed in footnote 3 to the Notes to Consolidated Financial
Statements included in this Form 10-Q, in December 1997 the Company completed a
series of transactions whereby it sold its rights to the Cherokee brand and
related trademarks in the United States to Spell C, its wholly-owned subsidiary,
and also assigned to Spell C its rights in the Amended Target Agreement. In
return the Company received the gross proceeds resulting from the sale by Spell
C, for an aggregate of $47.9 million, of privately placed Zero Coupon Secured
Notes (the "Secured Notes"), which yield 7.0% interest per annum, amortize
quarterly from May 20, 1998 through February 20, 2004 and are secured by the
Amended Target Agreement and by the United States Cherokee trademarks. The
aggregate scheduled amortization under the Secured Notes which is $60.0 million
equals the aggregate minimum guaranteed royalty payable under the Amended Target
Agreement which is also $60.0 million.
Results of Operations
Net revenues for the First Quarter were $6.9 million in comparison to net
revenues for the three months ended May 2, 1998 of $5.3 million. For the First
Quarter and for the three months ended May 2, 1998, royalty revenues of
$5.3 million and $4.4 million were recognized from Target, which accounted for
77% and 84% of total revenues, respectively. The increase in revenues is mainly
due to the continued expansion by Target of the Cherokee trademark over a
broader range of categories, the continued success of Zellers' launch of the
Cherokee brand in Canada and the initial launch of the Sideout brand at
Mervyn's.
Selling, general, and administrative expenses for the First Quarter were
$1.8million or 27% of net revenues. In comparison, selling, general and
administrative expenses were $1.2 million or 23% of net revenues during the
three months ended May 2, 1998. In the First Quarter, selling, general and
administrative expenses increased mainly due to expenses of approximately
$200,000 in marketing the Company's trademarks and $485,000 in management bonus
accrual.
During the First Quarter, the Company's interest expense was $750,000 compared
to $863,000 in interest expense for the three months ended May 2, 1998. For the
First Quarter, the Company's investment and interest income was $84,000 in
comparison to $186,000 for the three months ended May 2, 1998. The interest
expense is attributable to the Secured Notes.
During the First Quarter, the Company's net income was $2.6 million or $0.30
earnings per share whereas for the three months ended May 2, 1998, net income
was $2.0 million or $0.23 earnings per share. For the First Quarter, the
Company incurred a charge for income taxes of $1.8 million in comparison to $1.4
million for the three months ended May 2, 1998, which amounts were offset
against the Company's deferred tax asset account.
Liquidity and Capital Resources
On May 1, 1999, the Company had approximately $5.3 million in cash and cash
equivalents, including amounts held in the collection account for distribution
to the Secured Note holders. Cash flow needs over the next 12 months are
expected to be met through the operating cash flows generated from licensing
revenues, and the Company's cash and cash equivalents.
9
<PAGE>
During the First Quarter, net cash provided by operations was $2.6 million. Net
cash used in investing activities was $246,000 relating to the purchase of
trademarks and equipment. Net cash used in financing activities was $2.7
million which is comprised of the quarterly payment on the Secured Notes of
$2.25 million, cash dividends of $2.2 million and reduction in restricted cash
of $1.7 million.
Inflation and Changing Prices
Inflation did not have a significant effect on the Company's operations during
the First Quarter or the prior year period.
Year 2000 Compliance
The Year 2000 issue is a result of computer programs being written using two
digits, e.g. "98", to define a year. Date-sensitive software may recognize the
year "00" as the year 1900 rather than the year 2000. This would result in
errors and miscalculations or even system failure causing disruptions in
everyday business activities and transactions. Software is termed "Year 2000
compliant" when it is capable of performing transactions correctly in the year
2000.
Because the Company's primary business is marketing and licensing its
trademarks, the Company has only modest information technology requirements and
resources, none of which is critical to the Company's day-to-day operations.
Based on a recent assessment of the Company's computer hardware and software, it
has been determined that more than 95% of the Company's hardware and software
systems are either currently Year 2000 compliant or have an existing upgrade
available from the software vendor that is Year 2000 compliant. All systems
that are not currently Year 2000 compliant will either be upgraded to be Year
2000 compliant or replaced with alternative systems that are Year 2000 compliant
over the next four months. The Company expects the costs to upgrade or replace
such systems will not exceed approximately $5,000.
The Company does not expect that the achievement of Year 2000 compliance by the
Company will have a material impact on its financial condition or results of
operations. However, the Company's financial condition or results of operations
could be materially adversely effected if its significant licensees fail to
adequately address and correct Year 2000 problems and such failures result in
the interruption of royalty payments or lower royalty payments. The Company has
no control over its licensees' Year 2000 compliance and as a result the Company
cannot develop a contingency plan to address their noncompliance, if any. The
Company has contacted its most significant licensees in an effort to determine
the status of their Year 2000 compliance efforts. The Company has received
information that these licensees have evaluated the impact, assessed the
potential problems of Year 2000 and they are currently taking steps to be in
compliance in a timely manner. Notwithstanding, there can be no assurance that
the Company's significant licensees will be Year 2000 compliant in a timely
manner, and as discussed above, their failure to do so could materially
adversely effect the Company.
10
<PAGE>
Special Note Regarding Forward-Looking Statements
- -------------------------------------------------
This Form 10-Q contains certain forward-looking statements, including without
limitation, statements containing the words, "believes," "anticipates,"
"estimates," "expects," and words of similar import. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The Company is subject
to certain risk factors, which include, but are not limited to, restrictions on
distributions by Spell C, uncertainty regarding the Sideout brand, competition,
dependence on a single licensee, dependence on intellectual property rights,
Year 2000 readiness, and other factors referenced in this Form 10-Q and/or
discussed further in the Company's Form 10-K. The forward-looking information
provided by the Company pursuant to the safe harbor established under the
Private Securities Litigation Reform Act of 1995 should be evaluated in
conjunction with the risk factors listed in the Company's Form 10-K under "Risk
Factors." Given the known and unknown risks and uncertainties, undue reliance
should not be placed on the forward-looking statements contained herein. In
addition, the Company disclaims any intent or obligation to update any of the
forward-looking statements contained herein to reflect future events and
developments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Market risk generally represents the risk that losses may occur in the values
of financial instruments as a result of movements in interest rates, foreign
currency exchange rates and commodity prices. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
Interest: From time to time the Company invests its excess cash in interest-
bearing temporary investments of high-quality issuers. Due to the short time
the investments are outstanding and their general liquidity, these instruments
are classified as cash equivalents in the consolidated balance sheet of the
Company and do not represent a material interest rate risk to the Company. The
Company's only long-term debt obligations are the Secured Notes, which are zero-
coupon secured notes yielding interest of 7.0% per annum. This long-term debt
obligation does not represent a material interest rate risk to the Company.
Foreign Currency: The Company conducts business in various parts of the
world. The Company is exposed to fluctuations in exchange rates to the extent
that the foreign currency exchange rate fluctuates in countries where the
Company's licensees do business. For First Quarter, a hypothetical 10%
strengthening of the US dollar relative to the foreign currencies of countries
where the Company operates was not material.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, the Company from time to time becomes
involved in legal claims and litigation. In the opinion of management, based
upon consultations with legal counsel, the disposition of litigation currently
pending against the Company is unlikely to have, individually or in the
aggregate, a materially adverse effect on its consolidated business financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON 8-K
The Company filed no reports on Form 8-K during the First Quarter.
List of Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
27.1 Article 5 of Regulation S-X - Financial Data Schedule
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.
Dated: June 7, 1999
CHEROKEE INC.
By: /s/ Robert Margolis
-------------------
Robert Margolis
Chief Executive Officer
By: /s/ Carol Gratzke
------------------
Carol Gratzke
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 5,325
<SECURITIES> 0
<RECEIVABLES> 6,389
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,721
<PP&E> 357
<DEPRECIATION> 110
<TOTAL-ASSETS> 19,265
<CURRENT-LIABILITIES> 14,011
<BONDS> 0
0
0
<COMMON> 174
<OTHER-SE> (29,617)
<TOTAL-LIABILITY-AND-EQUITY> 19,265
<SALES> 6,917
<TOTAL-REVENUES> 6,917
<CGS> 0
<TOTAL-COSTS> 1,845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 750
<INCOME-PRETAX> 4,406
<INCOME-TAX> 1,763
<INCOME-CONTINUING> 2,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,643
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
</TABLE>
