Cherokee Board Declares Distribution to Shareholders; Company Expects to Earn $0.60 - $0.80 in Fiscal Year 1997.VAN NUYS, Calif.--(BUSINESS WIRE)--May 1, 1996--Cherokee 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) today announced that its Board of Directors has declared a tax-free return of capital (the "distribution") to its shareholders of record as of the close of business day May 15, 1996, which distribution will be made in accordance with section 316 of the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. on May 30, 1996. The amount of such distribution will be subject to final Board approval, cash availability on payment date, fourth quarter results and the completion of certain of Cherokee's strategic plans by such date. Currently, Cherokee anticipates that such distribution will be no less than $0.50 per share and no more than $1.35 per share. After consideration of Cherokee's achievements during the current fiscal year, the Board of Directors had amended Cherokee's Management Agreement with The Wilstar Group. During the year, Cherokee has effectively liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. substantially all of its inventory, eliminated all debt, negotiated and consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. the sale of its Uniform Division, favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. settled all debtor claims, retired 475,000 shares held by the Disbursing Agent for distribution to holders of trade claims, and entered into nine new licensing agreements, including a major licensing agreement with Target Stores which will provide substantial revenues to Cherokee through the year 2001. In connection with the foregoing, Cherokee has also reduced its overhead from an annual rate of approximately $24,250,000 to a current rate of $3,300,000. In light of these accomplishments and Cherokee's vastly improved financial condition, the Management Agreement was revised to accelerate the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of Wilstar's performance options so that Wilstar has been immediately vested in its right to purchase up to 20% of Cherokee's 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. Common Stock at $0.02 per share. In connection with the foregoing, Wilstar agreed to relinquish its rights to purchase up to an additional 2.5% of Cherokee's Diluted Common Stock pursuant to the performance options. Wilstar has exercised the performance options in full and purchased 1.675 million shares. Cherokee will be accounting for this transaction as a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to earnings. The Board determined that this revision would serve to both compensate Wilstar and to align the ongoing interests of Wilstar with Cherokee. As a result of the foregoing, including the retirement of the 475,000 shares, Cherokee currently has outstanding approximately 7,641,000 shares. Cherokee also announced that it has reached an agreement in principal for the sale of all of its trademark rights in Japan to Suzuya Co. Ltd. for $3,500,000. Currently, Cherokee has a licensing agreement with Suzuya terminating in November 1997, pursuant to which Suzuya has an exclusive right to license the Cherokee trademark in Japan and six other territories. In connection with the proposed agreement, Suzuya will terminate its rights in these territories. Robert Margolis, Chairman and 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. of Cherokee, stated that during the past year much effort was devoted to revitalizing re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. Cherokee's balance sheet, completing the settlement of all bankruptcy claims and liquidating the assets of the "old Cherokee." Margolis added that Cherokee's licensing strategy has met with tremendous initial success, which he believes will be the cornerstone for its ongoing growth. During fiscal 1997, he estimates that Cherokee's earnings from operations, on a diluted basis, will be approximately $0.60 to $0.80 per share. Margolis further noted, however, that any earnings in excess of $0.60 per share during fiscal 1997 would be based upon Cherokee's estimates of anticipated licensing revenues above the minimum guarantees set forth in existing contracts. To the extent Cherokee did not obtain such revenues or its overhead costs overhead costs see fixed costs. are greater than anticipated, actual results could vary materially from the estimated results set forth above. Cherokee Inc., based in Van Nuys, California is a marketer and licenser of the Cherokee brand products. The Company currently has 27 continuing licensing agreements worldwide. For more information on Cherokee Inc. via facsimile at no cost, simply call 1-800-PRO-INFO and dial client code 058. CONTACT: Cherokee Inc. Carol Gratzke, 818/908-9868 or Financial Relations Board Tom Ekman, 310/442-0599 (analysts) Daniel Saks/Fiona Ross, 310/442-0599 (gen. info) |
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