Cherokee Announces Second Quarter Earnings Per Share Increase 14.7% to $0.39.Business Editors VAN NUYS, Calif.--(BUSINESS WIRE)--Sept. 6, 2001 Cherokee Cherokee, Native American language Cherokee, language belonging to the Iroquoian branch of the Hokan-Siouan linguistic family. See Native American languages. Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CHKE) Highlights: - Second quarter revenue and EPS increased 8.6% and 14.7%, respectively - Six month to date revenue and EPS increased 9.0% and 11.0%, respectively Cherokee Inc. (NASDAQ: CHKE), a leading licensor of consumer brand for apparel, footwear Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). and accessories, today reported results for the three months ("Second Quarter") and six months ended August 4, 2001 ("Six Months"). Cherokee reported second quarter revenue increased 8.6% to $8.3 million from $7.7 million in the prior year. Net income increased 14.6% during the quarter to $3.3 million from $2.8 million last year. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 14.7% to $0.39 versus $0.34 in the comparable period last year. The revenue growth was attributable to expanded retail sales of Cherokee and Sideout branded merchandise by the Company's nineteen worldwide licensees. Retail sales of Cherokee branded merchandise increased 21.8% during the second quarter to $489.3 million and retail sales of Sideout branded merchandise at Mervyn's increased 19.4% to $25.8 million. Revenue generated from the royalty sharing agreement with Mossimo Mossimo is a mid-range American apparel company, founded in 1986. Mossimo specializes in youth, teenage, and adult male clothing. It draws from street, urban and sport styles. , Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : MGXO.OB) also contributed to second quarter revenue growth. "We are pleased with our second quarter financial results," stated Howard Howard, English noble family. Landowners in Norfolk from the 13th cent., the Howards obtained the duchy of Norfolk through the marriage of Sir Robert Howard to Margaret Mowbray, daughter of Thomas Mowbray, 1st duke of Norfolk. Siegel Siegel, a surname, is associated with two ethnic groups. As a Jewish surname Siegel (סג"ל) it could be an acronym of Segan Levi (סגן לוי), meaning "Assistant Levite". , President. "Our strategy of expanding distribution of our existing brands while adding new brands and relationships is clearly working. Our brand equity continues growing as retail sales of Cherokee branded products increased 21.8% during the second quarter. Additionally, our operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. resulted in 14.7% earnings growth on an 8.6% sales increase as operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 69.4%." For the Six Months, the Company reported revenue increased 9.0% to $18.9 million compared to $17.3 million a year ago. Net income increased 12.2% to $7.9 million or $0.95 earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income of $7.0 or $0.83 earnings per diluted share last year. For the Six Months, retail sales of Cherokee branded merchandise increased 19.8% to $951.6 million and retail sales of Sideout branded merchandise at Mervyn's increased 12.5% to $45.1 million. "We remain enthusiastic about our future," continue Mr. Siegel. "In addition to the continued retail sales growth of our brands with existing retailer partners, we expect additional growth from Carrefour's launch of the Cherokee brand in select international markets in spring 2002. We continue expanding the number of brands and product categories we represent ranging from apparel to health and wellness products. Most recently, we signed an agreement to represent the Mrs. Fields Mrs. Fields Cookies is a chain of bakeries, located mostly in the United States, founded by Debbi Fields (b. 1956, Park City, Utah). Mrs. Fields and her husband started their business in the late 1970s, opening the first of many retail bakeries in Palo Alto, California, selling brand worldwide for categories including foods, bakery goods, bakeware and kitchen accessories and textiles. We look forward to our future continued growth as we continue building a global network of licensing partners." Since August 1, 1999, pursuant to the Company's Board of Directors directive to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. its outstanding common stock, the Company has repurchased and retired 532,000 shares of its outstanding common stock, of which 50,000 shares were repurchased and retired during Second Quarter at an average price of $8.90. Continued repurchases of the Company's stock, if any, will be made from time to time in the open market at prevailing market prices or privately negotiated transactions. Cherokee Inc., based in Van Nuys, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , a marketer, licensor and manager of a variety of brands it owns or represents and is continuing its negotiations for domestic and international licensing contracts covering multiple categories of merchandise. Cherokee currently has licensing agreements in many categories, including family apparel, fashion accessories Fashion accessories are items apart from the garment itself, which complement the whole outfit. Fashion accessories include jewelry, gloves, handbags, hats, or scarves. , as well as luggage LUGGAGE. Such things as are carried by a traveller, generally for his personal accommodation; baggage. In England this word is generally used in the same sense that baggage is used in the United States. See Baggage. , cosmetics cosmetics, preparations externally applied to change or enhance the beauty of skin, hair, nails, lips, and eyes. The use of body paint for ornamental and religious purposes has been common among primitive peoples from prehistoric times (see body-marking). and footwear. Statements included within this news release that are not historical in nature constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. for the purposes of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provided by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. When used, the words "believe", "expects" and similar expressions are intended to identify such forward-looking statements. In particular, the forward-looking statements in this news release include statements regarding the Company's goals for future growth in revenues and earnings, the prospects of existing and new licensees such as Carrefour, and the Company's pursuit of additional brands to acquire or represent. Forward-looking statements involve known and unknown risks and uncertainties that 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. Such risks and uncertainties, include, but are not limited to, the effect of national and regional economic conditions, the financial condition of the apparel industry and the retail industry, the overall level of consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. , the effect of intense competition in the industry in which the Company operates, adverse changes in licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. or consumer acceptance of products bearing the Company's brands as a result of fashion trends or otherwise, the ability and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. commitment of the Company's licensees to design, manufacture and market Cherokee and Sideout branded products, the Company's dependence on a single licensee for most of the Company's revenues, the Company's dependence on its key management personnel and the effect of a breach or termination by the Company of the management agreement with the Company's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . A further list and description of these risks, uncertainties and other matters can be found in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for Fiscal 2001, and in its periodic reports on Forms 10-Q and 8-K (if any). Undue reliance should not be placed on the forward-looking statements contained herein because some or all of them may turn out to be wrong. The Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments.
CHEROKEE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three months ended Six months ended
----------------------- ------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
----------- ---------- ----------- -----------
Royalty revenues $8,348,000 $7,686,000 $18,852,000 $17,289,000
Selling, general
and administrative
expenses 2,551,000 2,476,000 4,963,000 4,616,000
---------- ---------- ---------- ---------
Operating income 5,797,000 5,210,000 13,889,000 12,673,000
Other income
(expenses):
Interest expense (462,000) (606,000) (962,000) (1,238,000)
Investment and
Interest income 84,000 124,000 165,000 223,000
------- -------- -------- -------
Total other income
(expenses), net (378,000) (482,000) (797,000) (1,015,000)
Income before
income taxes 5,419,000 4,728,000 13,092,000 11,658,000
Income tax provision 2,168,000 1,891,000 5,242,000 4,664,000
--------- --------- ---------- ----------
Net income $3,251,000 $2,837,000 $7,850,000 $6,994,000
Basic earnings
per share $0.40 $0.34 $0.95 $0.83
Diluted earnings
per share $0.39 $0.34 $0.95 $0.83
Weighted average
shares outstanding
Basic 8,223,372 8,397,705 8,227,538 8,437,136
Diluted 8,246,835 8,402,400 8,266,389 8,439,787
CHEROKEE INC.
CONSOLIDATED BALANCE SHEET
August 4, 2001 Feb. 3, 2001
-------------- ------------
Unaudited
Assets
Current assets:
Cash and cash equivalents $3,195,000 $2,598,000
Restricted cash 2,653,000 2,724,000
Receivables, net 8,122,000 5,893,000
Prepaid expenses and
other current assets 74,000 37,000
Deferred tax asset 713,000 713,000
---------- ----------
Total current assets 14,757,000 11,965,000
Deferred tax asset 493,000 493,000
Securitization fees, net
of accumulated amortization 504,000 606,000
Property and equipment, net
of accumulated depreciation 188,000 219,000
Trademarks, net of
accumulated amortization 6,624,000 6,115,000
Other assets 15,000 15,000
----------- -----------
Total assets $22,581,000 $19,413,000
----------- -----------
Liabilities and
Stockholders' Deficit
Current liabilities:
Accounts payable $330,000 $302,000
Other accrued liabilities 3,199,000 3,176,000
Notes payable 10,500,000 10,500,000
---------- ----------
Total current liabilities 14,029,000 13,978,000
Other liabilities 250,000 250,000
Notes payable - long term 15,967,000 20,255,000
---------- ----------
Total liabilities 30,246,000 34,483,000
---------- ----------
Stockholders' Deficit:
Common stock, $.02 par value,
20,000,000 shares authorized,
8,231,705 shares issued
and outstanding at May 5, 2001
and at February 3, 2001 164,000 165,000
Accumulated deficit (7,829,000) (15,235,000)
---------- -----------
Stockholders' deficit (7,665,000) (15,070,000)
---------- -----------
Total liabilities and
stockholders' deficit $22,581,000 $19,413,000
----------- -----------
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