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TheStreet Open House

Cherokee Inc. Reports Third Quarter 2013 Financial Results

Mr. Stupp concluded, “We are privileged to work with the best retail partners in over 40 countries and appreciate the dedication they have shown to the Cherokee Group as we strive to enhance and improve our 360 degree approach to serving them. We expect the remainder of Fiscal 2013 to show positive results for the Company while we continue to refine our operating model. In addition we will continue to seek new, successful brands to build our portfolio. We remain confident in our strategic plan and will continue to monitor our investments in our infrastructure to ensure that we maintain a strong financial position as well as deliver solid returns for our shareholders.”

At October 27, 2012, the Company had cash and cash equivalents of approximately $2.0 million, down from $7.4 million at January 28, 2012 due to pre-payment of all outstanding principal and interest on the Company’s loan with U.S. Bank on June 5, 2012.

Conference Call

The Company will host a conference call today at 1:30 p.m. PT / 4:30 p.m. ET. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time and use conference ID: 403817. The earnings call and accompanying slides will also be broadcast live over the Internet and can be accessed on the Investor Relations section of the Company’s Web site at http://www.thecherokeegroup.com. To listen to the live webcast, please visit the site prior to the start of the call in order to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available beginning December 6, 2012 at 4:30 p.m. PT / 7:30 p.m. ET, through December 20, 2012, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (877) 870-5176 (U.S.) or (858) 384-5517 (International) and use conference ID: 403817.

About Cherokee Inc.

Cherokee Inc. is a global marketer and manager of a portfolio of Fashion and Lifestyle brands including Cherokee ®, Carole Little ®, Liz Lange ® and Sideout ®, in multiple consumer product categories and sectors around the world. The Company has license agreements with premier retailers and manufacturers covering over 40 countries around the world including Target Stores (U.S.), Tesco (U.K., Ireland and certain Central European countries), Zellers (Canada), RT-Mart (Peoples Republic of China), Pick ‘n Pay (South Africa), Falabella (Chile, Peru and Colombia), Arvind Mills (India and certain Middle Eastern countries), Shufersal LTD. (Israel), Comercial Mexicana (Mexico), Eroski (Spain), Nishimatsuya (Japan), Magnit (Russia), Landmark Group’s Max Stores (certain Middle East and North Africa countries), and the TJX Companies (U.S., Canada and Europe).

Statements included within this news release may contain forward-looking statements for purposes of the safe harbor provided by the Private Securities Litigation Reform Act 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 included in this press release (including, without limitation, express or implied statements regarding anticipated financial performance) involve known and unknown risk 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 global economic conditions, the financial condition of the apparel and retail industry, adverse changes in licensee or consumer acceptance of products bearing the Company’s brands, the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee, Sideout , Carole Little, Liz Lange, and Completely Me branded products, the Company’s dependence on Target for most of the Company’s revenues and the Company’s dependence on its key management personnel. The risks included here are not exhaustive. 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 for Fiscal Year 2012, and in its periodic reports on Forms 10-Q and 8-K. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. 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 BALANCE SHEETS
Unaudited
 
    October 27, 2012     January 28, 2012
Assets
Current assets:
Cash and cash equivalents $ 1,505,000 $ 7,421,000
Restricted cash 502,000
Receivables 6,576,000 5,320,000
Income taxes receivable 397,000 672,000
Prepaid expenses and other current assets 244,000 152,000
Deferred tax asset   101,000     100,000  
Total current assets 9,325,000 13,665,000
Deferred tax asset 1,600,000 1,230,000
Property and equipment, net 924,000 733,000
Trademarks, net 17,861,000 5,596,000
Other assets   421,000      
Total assets $ 30,131,000   $ 21,224,000  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 1,810,000 $ 850,000
Deferred revenue – current 104,000 320,000
Accrued compensation payable 49,000 268,000
Income taxes payable 1,137,000
Accrued dividends 840,000 1,677,000
Deferred tax liability – current 38,000 38,000
Short term portion of long term debt   2,600,000     500,000  
Total current liabilities   6,578,000     3,653,000  
Long term liabilities:
Deferred tax liability – non current
Deferred revenue – non-current 125,000 382,000
Long term debt   10,400,000       6,438,000  
Total liabilities   17,103,000       10,473,000  
Commitments and Contingencies
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, 8,400,167 issued and outstanding at October 27, 2012 and 8,387,167 issued and outstanding at January 28, 2012 167,000 167,000
Additional paid-in capital 19,985,000 19,271,000
Retained earnings (deficit)   (7,124,000 )   (8,687,000 )
Total stockholders’ equity   13,028,000     10,751,000  
Total liabilities and stockholders’ equity $ 30,131,000   $ 21,224,000  
 

CHEROKEE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

 
     

Three months ended

       

Nine months ended

October 27, 2012

     

October 29, 2011

October 27, 2012

       

October 29, 2011

 

Royalty revenues $ 6,730,000 $ 6,015,000 $ 20,551,000 $ 19,615,000
Selling, general and administrative expenses   3,404,000       4,195,000      

11,203,000

      11,451,000  
 
Operating income 3,326,000 1,820,000 9,348,000 8,164,000
 
Other income:
Interest expense (65,000 ) (64,000 ) (138,000 ) (198,000 )
Investment and interest income   3,000       2,000       15,000       24,000  
 
Total other income (62,000 ) (62,000 ) (123,000 ) (174,000 )
 
Income before income taxes 3,264,000 1,758,000 9,225,000 7,990,000
Income tax provision   1,187,000       709,000       3,469,000       2,018,000  
 
Net income $ 2,077,000     $ 1,049,000     $ 5,756,000     $ 5,972,000  
 
 
Basic earnings per share $ 0.25     $ 0.12     $ 0.69     $ 0.70  
 
Diluted earnings per share $ 0.25     $ 0.12     $ 0.68     $ 0.70  
 
Weighted average shares outstanding
Basic   8,397,416       8,419,473       8,391,666       8,476,469  
 
Diluted   8,435,589       8,421,385       8,404,662       8,479,838  




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