Cherokee Inc. Reports Record First Quarter Fiscal 2006 Results; 8.0% Growth in Total Revenues; 9.9% Growth in Net Income.VAN NUYS, Calif. -- 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), a leading global licensor and brand management company, today reported its highest ever revenue and earnings for its first quarter ended April 30, 2005. Net revenues for the three months ended April 30, 2005 rose 8.0% or $1.0 million to $13.2 million, compared to revenues of $12.2 million in the comparable period last year. Selling, general and administrative expenses for the three months ended April 30, 2005 were $3.1 million, up slightly from $3.0 million in the comparable period last year. Net earnings for the three months ended April 30, 2005 increased by 9.9% to $6.1 million or $0.69 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 $5.5 million or $0.64 per diluted share in the year ago period. The Company ended the quarter with cash and equivalents of $8.9 million, trade receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed of $12.8 million and no debt. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. 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. , said, "Our first quarter growth in revenues and net income represents our 18th consecutive quarter of revenue and net income growth as compared to the comparable quarter in the prior year. We are very excited about the team we have in place, and the many growth opportunities available to us. We look forward to continuing to execute strategies to increase value for our shareholders." Howard Siegel, President of Cherokee, stated, "We are pleased to report another record quarter of results as we continue to successfully expand and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. the business worldwide. Royalty revenues in the U.S. increased 3.2% primarily due to the continued strength of our Cherokee brand and the growth of our Carole Little brands. In fact, our Carole Little brands at TJX produced their largest quarter to date, and we're encouraged by their progress. Internationally, royalty revenues grew 24.8% due to our continued growth in the U.K. and Ireland, and in Canada this quarter as well as from our recent launch in Mexico. Continued growth internationally is expected through the growth of our Cherokee brand in the U.K., Ireland and Mexico as well as through launches in several new territories with Tesco over the next 24 months. In addition, we expect some of our previously announced initiatives such as Latina at Sears, and HouseBeautiful at May Company department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. to begin generating royalty revenues for us in our third quarter. We continue to be very excited by the growth opportunities for the brands we own and represent as we seek worldwide licensing agreements." Russell J. Riopelle, Chief Financial Officer, added, "Our record operating results during the first quarter validates the strength of our retail direct business model. We finished the quarter with $8.9 million of cash, $12.8 million of net receivables Net Receivables A company's accounts receivable (money owed to the company) minus bad debts. Notes: If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable. and no debt. In addition to the $0.50 per share dividend just paid to shareholders in March, we will pay another dividend of $0.50 per share on June 15th, evidencing continued execution of our goal of returning profits to shareholders." About Cherokee Inc. Cherokee Inc., based in Van Nuys, is a marketer, licensor and manager of a variety of brands it owns (Cherokee, Sideout, Carole Little and others) and represents. Currently, Cherokee has licensing agreements in a number of 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. and 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). , as well as home furnishings furnishings the extra type or quantity of hair on the head, tail, ears or legs, specified for a particular breed. For example, the feathers in setters, the beard in Bearded collies, the eyebrows in Schnauzers. and recreational products. Premier clients for the Cherokee brand around the world include Target Stores (U.S.), Tesco (U.K., Ireland and certain other European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. and Asian countries Noun 1. Asian country - any one of the nations occupying the Asian continent Asian nation country, land, state - the territory occupied by a nation; "he returned to the land of his birth"; "he visited several European countries" ), Zellers (Canada), Carrefour (selected countries in Europe and South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. ) and Grupo Aviara (Mexico). Premier clients for Cherokee's Sideout brand include Mervyn's (U.S.) and Shanghai Shanghai (shăng`hī`, shäng`hī`), city (1994 est. pop. 12,980,000), in, but independent of, Jiangsu prov., E China, on the Huangpu (Whangpoo) River where it flows into the Chang (Yangtze) estuary. Bolderway (China), and for Cherokee's Carole Little brands include TJX Companies The TJX Companies, Incorporated (NYSE: TJX), is the largest international apparel and home fashions off-price department store chain, based in Framingham, Massachusetts, in the United States. (U.S., Canada and Europe). Other key clients of Cherokee include Hearst Publications and Solera A solera is a series of barrels or other containers used for aging liquids such as Sherry, Madeira, Marsala, Mavrodafni (a dark-red fortified dessert wine from Greece), Muscat, Muscadelle, Balsamic and Sherry Vinegars. Capital (U.S.). 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 "anticipates", "believes", "expects", "may", "should" and similar expressions are intended to identify such forward-looking statements. 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 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 adverse determinations of claims, liabilities or litigations and the effect of a breach or termination by the Company of the management agreement with the Company's CEO. A further list and description of these risks, uncertainties and other matters can be found in the Company's Annual Report on Forms 10-K for Fiscal Year 2005, 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
----------------------------------
April 30, 2005 May 1, 2004
--------------- -----------------
Royalty revenues $13,213,000 $12,231,000
Selling, general and administrative
expenses 3,080,000 2,969,000
--------------- -----------------
Operating income 10,133,000 9,262,000
Other income (expenses):
Interest expense (6,000) (4,000)
Investment and Interest income 58,000 178,000
--------------- -----------------
Total other income (expenses), net 52,000 174,000
Income before income taxes 10,185,000 9,436,000
Income tax provision 4,091,000 3,893,000
--------------- -----------------
Net income $6,094,000 $5,543,000
--------------- -----------------
Basic earnings per share $0.70 $0.64
--------------- -----------------
Diluted earnings per share $0.69 $0.64
--------------- -----------------
Weighted average shares outstanding
Basic 8,701,273 8,603,936
--------------- -----------------
Diluted 8,800,597 8,667,188
--------------- -----------------
CHEROKEE INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
April 30, January 29,
2005 2005
Assets
Current assets:
Cash and cash equivalents $ 8,899,000 $ 10,960,000
Receivables 12,768,000 7,567,000
Prepaid expenses and other
current assets 175,000 1,081,000
Deferred tax asset 557,000 1,004,000
Total current assets 22,399,000 20,612,000
Deferred tax asset 1,047,000 1,320,000
Property and equipment, net of
accumulated depreciation of
$410,000 and $391,000,
respectively 135,000 149,000
Trademarks, net of accumulated
amortization of $4,397,000 and
$4,115,000, respectively 8,825,000 9,077,000
Other assets 29,000 35,000
Total assets $32,435,000 $ 31,193,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 517,000 526,000
Other accrued liabilities 2,705,000 4,310,000
Accrued dividends payable -- 4,334,000
Total current liabilities 3,222,000 9,170,000
Stockholders' Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized,
None issued and outstanding -- --
Common stock, $.02 par value,
20,000,000 shares authorized,
8,724,765 and 8,670,072 shares
issued and outstanding at
April 30, 2005 and at
January 29, 2005, respectively 174,000 173,000
Additional paid-in capital 8,509,000 7,403,000
Retained earnings 20,530,000 14,447,000
Stockholders' equity 29,213,000 22,023,000
Total liabilities and stockholders'
equity $32,435,000 $ 31,193,000
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