UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 26, 2004
OR
[ ] 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: 0-10345
CACHE, INC.
(Exact name of registrant as specified in its Charter)
Florida 59-1588181
------------------------------ ------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1440 Broadway, New York, New York 10018
--------------------------------- -----
(Address of principal executive offices) (zip code)
212-575-3200
----------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
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 preceeding 12 months (or for such shorter period than 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 [ ]
As of June 26, 2004, the aggregate market value of the voting stock held by
non-affiliated of the registrant (based on the closing price in NASDAQ National
Market) was approximately $182 million.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act 12b-2).
YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date.
Common Stock, $.01 15,634,000
-------------------------- ----------------------------
Class of Stock Outstanding Outstanding at July 31, 2004
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS,
JUNE 26, 2004, DECEMBER 27, 2003 AND JUNE 28, 2003 3
STATEMENTS OF INCOME TWENTY-SIX WEEKS ENDED
JUNE 26, 2004 AND JUNE 28, 2003 4
STATEMENTS OF INCOME THIRTEEN WEEKS ENDED
JUNE 26, 2004 AND JUNE 28, 2003 5
STATEMENTS OF CASH FLOWS TWENTY-SIX WEEKS ENDED
JUNE 26, 2004 AND JUNE 28, 2003 6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-12
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 12
CONTROLS AND PROCEDURES 13
OTHER INFORMATION:
EXHIBIT INDEX AND REPORTS ON FORM 8-K 13-15
CERTIFICATIONS 16-18
2
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 26, December 27, June 28,
ASSETS 2004 2003 2003
------------- -------------- --------------
Current assets:
Cash and equivalents $ 21,446,000 $ 16,887,000 $ 16,015,000
Marketable securities 19,187,000 19,746,000 4,878,000
Receivables, net 4,895,000 4,614,000 2,675,000
Notes receivable from related parties --- --- 321,000
Inventories 27,491,000 26,724,000 24,724,000
Deferred income taxes 750,000 936,000 791,000
Prepaid expenses and other current assets 776,000 1,239,000 721,000
-------------- ------------- --------------
Total current assets 74,545,000 70,146,000 50,125,000
Equipment and leasehold improvements, net 29,310,000 25,010,000 20,922,000
Other assets 832,000 873,000 827,000
Deferred income taxes, net --- --- 249,000
-------------- ------------- --------------
Total assets $ 104,687,000 $ 96,029,000 $ 72,123,000
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,588,000 $ 14,362,000 $ 10,038,000
Income taxes payable 199,000 --- 442,000
Accrued compensation 2,865,000 4,675,000 2,180,000
Accrued liabilities 9,073,000 10,075,000 7,685,000
-------------- -------------- -------------
Total current liabilities 23,725,000 29,112,000 20,345,000
Other liabilities 1,163,000 1,088,000 1,074,000
Deferred income taxes, net 973,000 687,000 ---
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000 shares;
issued and outstanding 15,634,100 shares 156,000 100,000 91,000
Additional paid-in capital 34,379,000 28,361,000 19,839,000
Retained earnings 44,291,000 36,681,000 30,774,000
--------------- --------------- ---------------
Total stockholders' equity 78,826,000 65,142,000 50,704,000
--------------- --------------- ---------------
Total liabilities and stockholders' equity $ 104,687,000 $ 96,029,000 $ 72,123,000
=============== ============== ===============
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
3
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
June 26, June 28,
2004 2003
--------------- ---------------
Net sales $ 119,281,000 $ 104,291,000
Cost of sales, including occupancy and buying costs 64,444,000 59,341,000
--------------- ---------------
Gross profit 54,837,000 44,950,000
--------------- ---------------
Expenses
Store operating expenses 35,337,000 30,500,000
General and administrative expenses 7,247,000 6,202,000
--------------- ---------------
Total expenses 42,584,000 36,702,000
--------------- ---------------
Operating income 12,253,000 8,248,000
Other income:
Interest income 202,000 130,000
Other income, net 20,000 14,000
--------------- --------------
Income before income taxes 12,475,000 8,392,000
Income tax provision 4,865,000 3,210,000
--------------- --------------
Net income $ 7,610,000 $ 5,182,000
=============== ===============
Basic earnings per share $0.49 $0.38
=============== ===============
Diluted earnings per share $0.48 $0.36
=============== ===============
Basic weighted average shares outstanding 15,536,000 13,688,000
=============== ===============
Diluted weighted average shares outstanding 15,986,000 14,442,000
=============== ===============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
June 26, June 28,
2004 2003
--------------- ---------------
Net sales $ 62,087,000 $ 56,193,000
Cost of sales, including occupancy and buying costs 32,938,000 31,280,000
--------------- ---------------
Gross profit 29,149,000 24,913,000
--------------- ---------------
Expenses
Store operating expenses 18,448,000 15,896,000
General and administrative expenses 3,599,000 3,352,000
--------------- ---------------
Total expenses 22,047,000 19,248,000
--------------- ---------------
Operating income 7,102,000 5,665,000
Other income:
Interest income 107,000 56,000
Other income, net 20,000 14,000
--------------- ---------------
Income before income taxes 7,229,000 5,735,000
Income tax provision 2,868,000 2,194,000
--------------- ---------------
Net income $ 4,361,000 $ 3,541,000
=============== ===============
Basic earnings per share $0.28 $0.26
=============== ===============
Diluted earnings per share $0.27 $0.25
=============== ===============
Basic weighted average shares outstanding 15,634,000 13,697,000
=============== ===============
Diluted weighted average shares outstanding 16,100,000 14,451,000
=============== ===============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
June 26, June 28,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
--------------------------------------
Net income $ 7,610,000 $ 5,182,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,096,000 2,535,000
Income tax benefit from stock option exercises 1,345,000 ---
Increase (decrease) in deferred income taxes 472,000 (420,000)
Accrual (reversal) of future rent escalations 37,000 (20,000)
Change in assets and liabilities:
Decrease (increase) in receivables (281,000) 2,000
Increase in inventories (767,000) (2,659,000)
Decrease in prepaid expenses and other current assets 463,000 299,000
Decrease in accounts payable (2,774,000) (1,950,000)
Increase in income taxes payable 199,000 442,000
Decrease in accrued liabilities and compensation (3,524,000) (2,446,000)
---------------- ----------------
Total changes in assets and liabilities
Net cash provided by operating activities 5,876,000 965,000
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
---------------------------------------
Maturities of marketable securities, net 559,000 9,514,000
Additions to equipment and leasehold improvements (6,646,000) (4,971,000)
---------------- ----------------
Net cash provided by (used in) investing activities (6,087,000) 4,543,000
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
---------------------------------------
Proceeds from issuance of common stock 4,729,000 230,000
Other, net 41,000 (10,000)
---------------- ----------------
Net cash provided by financing activities 4,770,000 220,000
---------------- ----------------
Net increase in cash and equivalents 4,559,000 5,728,000
Cash and equivalents, at beginning of period 16,887,000 10,287,000
---------------- ----------------
Cash and equivalents, at end of period $ 21,446,000 $ 16,015,000
================ ================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
CACHE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying consolidated financial
statements include all adjustments necessary, which are considered normal and
recurring, to present fairly the financial position of the Company at June 26,
2004 (fiscal 2004), June 28, 2003 (fiscal 2003), and December 27, 2003 (fiscal
2003), and the results of operations for the twenty-six and thirteen week
periods ended June 26, 2004 and June 28, 2003 and consolidated cash flows for
the twenty-six weeks then ended.
Certain financial information, which is normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, but which is not required for interim reporting
purposes, has been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's latest annual report on Form 10-K for the
fiscal year ended December 27, 2003.
Net income includes all sources of comprehensive income. There were no
adjustments for foreign currency translation, unrealized gains (losses) on
investments or deferred compensation expense incurred in fiscal 2003 or fiscal
2004 results.
Certain items previously reported in specific captions in the accompanying
financial statements and notes have been reclassified to conform with the
current year's classification.
2. BASIC AND DILUTED EARNINGS
Basic earnings per share (EPS) is computed as net earnings divided by the
weighted average number of shares of common stock outstanding for the
twenty-six and thirteen week periods ended June 26, 2004 and June 28, 2003.
Diluted EPS reflects the potential dilution that could occur from common shares
issued through the exercise of outstanding dilutive stock options.
On June 18, 2004, the Company completed a three-for-two stock split for holders
of record on May 21, 2004. All share amounts have been restated to reflect the
stock split.
The approximate number of shares used in the computations of diluted earnings
per share were 15,986,000 and 14,442,000, respectively, for the 26 week
comparable period and 16,100,000 and 14,451,000 respectively, for the 13 week
comparable period ended June 26, 2004 and June 28, 2003.
The approximate number of shares used in the computations of basic earnings per
share were 15,536,000 and 13,688,000, respectively, for the 26 week comparable
period, and 15,634,000 and 13,697,000, respectively, for the 13 week comparable
period ended June 26, 2004 and June 28, 2003.
The Company accounts for options granted under the 1994, 2000 and 2003 Stock
Option Plans in accordance with the intrinsic value method allowed under SFAS
No. 123, "Accounting for Stock-Based Compensation", under which no compensation
cost has been recognized for stock option awards granted at fair market value.
Had compensation expense for the Plans been determined based on the fair value
at the grant dates for awards under the Plans, the Company's net earnings, basic
EPS and diluted EPS would have been reduced to the pro forma amounts listed
below:
7
26 Weeks Ended 13 Weeks Ended
------------------------ ------------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
------ ------ ------ ------
Net Income - as reported $7,610,000 $5,182,000 $4,361,000 $3,541,000
- pro-forma $7,397,000 $4,683,000 $4,255,000 $3,292,000
Basic EPS - as reported $ 0.49 $ 0.38 $ 0.28 $ 0.26
- pro-forma $ 0.48 $ 0.34 $ 0.27 $ 0.24
Diluted EPS - as reported $ 0.48 $ 0.36 $ 0.27 $ 0.25
- pro-forma $ 0.46 $ 0.32 $ 0.26 $ 0.23
3. RECENTLY ISSUED EXPOSURE DRAFT
On March 31, 2004, the Financial Accounting Standards Board (FASB) issued a
proposed Statement, "Share-Based Payment." This proposed Statement, addresses
the accounting for share-based awards to employees, including employee-stock
purchase-plans (ESPPs). The FASB formally proposed to require companies to
recognize the fair value of stock options and other stock-based compensation to
employees. The proposed Statement would eliminate the ability to account for
share based compensation transactions using the inherent method and generally
would require instead, that such transactions, be accounted for using a
fair-value-based method. The proposed requirements in the exposure draft would
be effective for public companies as of the beginning of the first fiscal year
beginning after December 15, 2004. The Company is currently assessing the
impact on the Company's financial statements of the adoption of this proposed
Statement, if issued in final form by the FASB.
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
June 26, December 27, June 28,
2004 2003 2003
------ ------ ------
Lease improvements $27,201,000 $24,020,000 $23,810,000
Furniture, fixtures and equipme 40,404,000 36,644,000 32,077,000
------------ ------------ ------------
67,605,000 60,664,000 55,887,000
Less: accumulated depreciation
and amortization 38,295,000 35,654,000 34,965,000
------------ ------------ ------------
$29,310,000 $25,010,000 $20,922,000
------------ ------------ ------------
5. ACCRUED LIABILITIES
June 26, December 27, June 28,
2004 2003 2003
------ ------ -------
Operating expenses $2,357,000 $2,631,000 $2,448,000
Taxes, other than income taxes 1,652,000 2,426,000 1,270,000
Group insurance 513,000 696,000 748,000
Sales return reserve 435,000 812,000 542,000
Leasehold additions 1,129,000 379,000 232,000
Other customer deposits 2,987,000 3,131,000 2,445,000
----------- ----------- -----------
$9,073,000 $10,075,000 $7,685,000
----------- ----------- ------------
8
6. BANK DEBT
During May 2004, the Company reached an agreement with its bank to increase the
amount available under the Amended Revolving Credit Facility to $17,500,000.
Pursuant to the newly Amended Revolving Credit Facility, $17,500,000 is
available until expiration at November 30, 2005. The amounts outstanding
thereunder bear interest at a maximum per annum rate equal to the bank's prime
rate. The agreement contains selected financial and other covenants. Effective
upon the occurrence of an Event of Default under the Revolving Credit Facility,
the Company grants to the bank a security interest in the Company's inventory
and certain receivables. The Company has, at all times, been in compliance with
all loan covenants.
There have been no borrowings against the line of credit during fiscal 2004 and
fiscal 2003. There were outstanding letters of credit of $739,000, $2,116,000
and $612,000, pursuant to the Revolving Credit Facility, at June 26, 2004,
December 27, 2003 and June 28, 2003, respectively.
7. INCOME TAXES
The estimated annual effective tax rate for fiscal 2004 and fiscal 2003 were
39.0% and 38.2%, respectively, including state and local income taxes.
8. CONTINGENCIES
The Company is exposed to a number of asserted and unasserted potential claims.
Management does not believe it is reasonably possible that resolution of these
matters will result in a material loss.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------------------------------------------------------------------------------
OF OPERATIONS
--------------
Except for the historical information and current statements contained in this
Form 10-Q, certain matters discussed herein, including, without limitation,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward looking statements that involve risks and uncertainties,
including, without limitation, the effect of economic and market conditions and
competition, the ability to open new stores and expand into new markets, and
risks relating to foreign importing operations, which would cause actual results
to differ materially.
RESULTS OF OPERATIONS
------------------------
The following table sets forth our results of operations for the 13 and 26 week
periods ended June 26, 2004 and June 28, 2003, expressed as a percentage of net
sales.
26 Weeks Ended 13 Weeks Ended
---------------- -----------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
------ ------ ------ -------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 54.0% 56.9% 53.1% 55.7%
Gross profit 46.0% 43.1% 46.9% 44.3%
Store operating expenses 29.6% 29.2% 29.7% 28.3%
General and administrative expenses 6.1% 5.9% 5.8% 6.0%
Operating income 10.3% 7.9% 11.4% 10.1%
Other income 0.2% 0.1% 0.2% 0.1%
Income before taxes 10.5% 8.0% 11.6% 10.2%
Income tax provision 4.1% 3.1% 4.6% 3.9%
Net income 6.4% 5.0% 7.0% 6.3%
Net sales
-----------
Net sales increased to $119.3 million from $104.3 million, an increase of $15.0
million, or 14.4%, over the same 26 week period last year. This reflects $7.4
million of additional net sales as a result of a 7% increase in comparable store
sales. Net sales increased $7.6 million as a result of additional net sales
from non-comparable stores.
Net sales increased to $62.1 million from $56.2 million, an increase of $5.9
million, or 10.5%, over the same 13 week period last year. This reflects $1.4
million of additional net sales as a result of a 3% increase in comparable store
sales. Net sales increased $4.5 million as a result of additional net sales
from non-comparable stores.
Gross profit
--------------
Gross profit increased to $54.8 million from $45.0 million, an increase of $9.8
million or 22.0%, over the same 26 week period last year. This increase was
the combined result of higher net sales and increased gross profit margins. As
a percentage of net sales, gross profit increased to 46.0% from 43.1%. This
increase in percentage of net sales was primarily due to higher initial markups
on inventory purchases. We expect the improvement created by higher initial
markups to continue to benefit results in the remainder of fiscal 2004.
10
Gross profit increased to $29.1 million from $24.9 million, an increase of $4.2
million, or 17.0%, over the same 13 week period last year. This increase was
the combined result of higher net sales and increased gross margins. As a
percentage of net sales, gross profit increased to 46.9% from 44.3%. The
improvement in gross profit for the 13 week period reflects the same positive
conditions as stated above for the 26 week period.
Store operating expenses
--------------------------
Store operating expenses increased to $35.3 million from $30.5 million, an
increase of $4.8 million or 15.9%, over the same 26 week period last year. This
increase was primarily attributable to the increase in the number of stores
opened during the past 12 months. As a percentage of net sales, store
operating expenses increased to 29.6% from 29.2%, primarily due to a higher
percentage of payroll expense and depreciation incurred by the new stores opened
in the last year.
Store operating expenses increased to $18.4 million from $15.9 million, an
increase of $2.5 million, or 16.1%, over the same period last year. This
increase was primarily attributable to the increase in the number of stores
opened during the past 12 months. As a percentage of net sales, store operating
expenses increased from 28.3% to 29.7%, primarily due to a higher percentage of
payroll expense and depreciation incurred by the new stores opened in the last
year.
General and administrative expenses
-------------------------------------
General and administrative expenses increased to $7.2 million from $6.2 million,
an increase of $1.0 million or 16.8%, above the same 26 week period last year.
As a percentage of net sales, general and administrative expenses increased to
6.1% from 5.9%, primarily due to higher corporate-level payroll and
employee-related costs.
General and administrative expenses increased to $3.6 million from $3.4 million,
an increase of $247,000 or 7.4%, above the same 13 week period last year. As a
percentage of net sales, general and administrative expenses decreased to 5.8%
from 6.0%, for the 13 week period.
Interest income
-----------------
Interest income increased to $202,000 from $130,000 in the same 26 week period
last year, primarily attributable to higher average cash balances and higher
interest rates in 2004.
Interest income increased to $107,000 from $56,000 in the same 13 week period
last year.
Income taxes
--------------
Income taxes increased to $4.9 million from $3.2 million, an increase of $1.7
million over the same 26 week period last year. The increase was primarily
attributable to higher taxable income in fiscal 2004. Our effective tax rate
for fiscal 2004 and 2003 were 39.0% and 38.3% respectively, including state and
local income taxes.
Income taxes increased to $2.9 million from $2.2 million, an increase of
$674,000 over the same 13 week period last year.
Net income
------------
As a result of the factors discussed above, net income increased to $7.6 million
from $5.2 million, an increase of $2.4 million over the same 26 week period last
year. Net income increased to $4.4 million from $3.5 million, an increase of
$820,000 over the same 13 week period last year.
11
LIQUIDITY AND CAPITAL RESOURCES
---------------------------------
Our cash requirements are primarily for the construction of new stores and
inventory for these stores, as well as the remodeling of existing stores. We
have historically satisfied our cash requirements principally through cash flow
from operations. As of June 26, 2004, we had working capital of $50.8 million,
which included cash and marketable securities totaling $40.6 million.
During the twenty-six weeks ended June 26, 2004, net cash provided by operations
was $5.9 million, generated by net income, depreciation of $3.1 million, an
income tax benefit from stock option exercises of $1.3 million, a decrease in
prepaid expenses of $463,000, an increase in deferred income taxes payable of
$472,000 offset in part by a decrease in accounts payable of $2.8 million, an
increase in inventories of $767,000 and a decrease in accrued expenses of $3.5
million.
Cash used in investing activities was $6.1 million for the 26 week period ended
June 26, 2004. Matured investments generated $559,000 of cash flows. Funds
used for equipment and leasehold improvements in new and remodeled stores
totaled $6.6 million. Our capital requirements depend primarily on the number
of new stores we open, the number of stores we remodel and the timing of these
expenditures. Projected capital expenditures for fiscal 2004 to fund new store
openings and remodeling are approximately $15-16 million.
We plan to open approximately 45 new stores during fiscal 2004. We opened 3 new
stores in the first quarter in March 2004, and we opened 15 new stores in the
second quarter. We anticipate opening the remaining new stores during the fall
of 2004. After deducting construction allowances paid to the Company by its
landlords, we spent $6.6 million through June 26, 2004 and expect to spend an
additional eight to nine million dollars in 2004, for both new store and
existing store construction and remodeling.
We believe that cash flows from operations, our current available cash and
funds available under our $17.5 million revolving credit facility, will be
sufficient to meet our working capital needs and contemplated new store
expansion for at least the next 12 months. If our cash flow from operations
should decline significantly or if we should accelerate our store expansion or
remodeling program, it may be necessary for us to seek additional sources of
capital.
Seasonality
-------------
The Company experiences seasonal and quarterly fluctuations in net sales and
operating income. Quarterly results of operations may fluctuate significantly as
a result of a variety of factors, including the timing of new store openings,
fashion trends and shifts in timing of certain holidays. The Company's business
is subject to seasonal influences, characterized by highest sales during the
fourth quarter (October, November and December) and lowest sales during the
third quarter (July, August and September).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to the following types of market risk-fluctuations in the
purchase price of merchandise, as well as other goods and services; the value of
foreign currencies in relation to the U.S. dollar, and changes in interest
rates. Due to the Company's inventory turn rate and its historical ability to
pass through the impact of any generalized changes in its cost of goods sold to
its customers through pricing adjustments, commodity and other product risks
are not expected to be material. The Company purchases substantially all its
merchandise in U.S. dollars.
The Company's exposure to market risk for changes in interest rates relates to
its cash, cash equivalents and marketable securities. As of June 26, 2004, the
Company's cash, cash equivalents and marketable securities consisted primarily
of funds invested in money market accounts, which bear interest at a variable
rate, U.S. treasury instruments and tax exempt municipal bonds rated AA or
better, which bear interest at a fixed rate. Due to the average maturity and the
12
conservative nature of the Company's investment portfolio, we believe a sudden
change in interest rates would not have a material effect on the value of our
investment portfolio. As the interest rates on a material portion of our cash,
cash equivalents and marketable securities are variable, a change in interest
rates earned on our investment portfolio would impact interest income along with
cash flows, but would not materially impact the fair market value of the related
underlying instruments.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed by the Company in its Exchange Act reports
is recorded, processed, summarized and reported on a timely basis and that such
information is accumulated and communicated to the Company's management,
including the Chief Executive Officer and the Acting Chief Financial Officer,
as appropriate, to allow timely decisions regarding the required disclosure. As
of the end of the period covered by this Form 10-Q, an evaluation was performed
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and the Acting Chief Financial Officer, of
the effectiveness of the design and operation of these disclosure controls and
procedures. Based on that evaluation, the Chief Executive Officer and the Acting
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective. There have been no changes in the internal controls
over financial reporting during the period ended June 26, 2004 that have been
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11.1 Calculation of Basic and Diluted Earnings per Common Share.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Reports on Form 8-K
1. Form 8-K, filed July 22, 2004 - reporting pursuant to Item 5 of such
Form, the operating results for the twenty-six and thirteen week
periods ended June 26, 2004.
13
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, thereto duly authorized.
CACHE, INC.
(Registrant)
August 10, 2004 BY:/s/ Brian Woolf
-----------------------
Brian Woolf
Chairman and Chief
Executive Officer
(Principal Executive
Officer)
August 10, 2004 BY:/s/ Thomas Reinckens
-----------------------
Thomas E. Reinckens
President and Chief
Operating Officer
(Principal Financial
and Accounting
Officer)
14
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
(In thousands except per share data)
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED
------------------------ -------------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
-------- --------- -------- --------
EARNINGS PER SHARE
--------------------
Net Income Applicable to Common
Stockholders $ 7,610,000 $ 5,182,000 $ 4,361,000 $ 3,541,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE
--------------------------
Weighted Average Number of Common
Shares Outstanding 15,536,000 13,688,000 15,634,000 13,697,000
============ ============ ============= ===========
Basic Earnings Per Share $0.49 $0.38 $0.28 $0.26
============ ============ ============= ===========
DILUTED EARNINGS PER SHARE
----------------------------
Weighted Average Number of
Common Shares Outstanding 15,536,000 13,688,000 15,634,000 13,697,000
Assuming Conversion of
Outstanding Stock Options 1,765,000 1,660,000 1,765,000 1,660,000
Less: Assumed Repurchase
Of Common Stock Pursuant
To the Treasury Stock Method (1,315,000) (906,000) (1,299,000) (906,000)
------------- ------------ ------------- ------------
Weighted Average Number of
Common Shares Outstanding 15,986,000 14,442,000 16,100,000 14,451,000
============= ============ ============= ============
Diluted Earnings Per Share $0.48 $0.36 $0.27 $0.25
============= ============ ============= ============
15
EXHIBIT 31.1
CERTIFICATION
-----------------
I, Brian Woolf, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cache, Inc.
(Cache);
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Cache as of, and for, the periods presented in this
quarterly report;
4. Cache's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and to be designed under our supervision, to
ensure that material information relating to Cache, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period which this
quarterly report is being prepared;
b) evaluated the effectiveness of Cache's disclosure controls and
procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures as of the end of the period covered by this quarterly
report based on such evaluation; and
c) disclosed in this report any changes in Cache's internal control
over financial reporting that occurred during Cache's second
quarter that has materially affected, or is reasonably likely to
materially affect, Cache's internal control over financial
reporting;
5. Cache's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to Cache's auditors and the audit committee of Cache's Board of
Directors;
a) all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect Cache's ability
to record, process, summarize and report financial information;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Cache's internal
control over financial reporting.
August 10, 2004 By: /s/ Brian Woolf
-----------------------
Brian Woolf
Chairman and Chief
Executive Officer
(Principal Executive
Officer)
16
EXHIBIT 31.2
CERTIFICATION
-----------------
I, Thomas E. Reinckens, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cache, Inc.
(Cache);
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Cache as of, and for, the periods presented in this
quarterly report;
4. Cache's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to
Cache, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the
period which this quarterly report is being prepared;
b) evaluated the effectiveness of Cache's disclosure controls and
procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
as of the end of the period covered by this quarterly report
based on such evaluation; and
c) disclosed in this report any changes in Cache's internal control
over financial reporting that occurred during Cache's second
quarter that has materially affected, or is reasonably likely to
materially affect, Cache's internal control over financial
reporting;
5. Cache's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to Cache's auditors and the audit committee of Cache's Board of
Directors;
a) all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect Cache's ability
to record, process, summarize and report financial information;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Cache's internal
control over financial reporting.
August 10, 2004 By:/s/ Thomas E. Reinckens
----------------------
Thomas E. Reinckens
President and Chief
Operating Officer
(Principal Financial and
Accounting Officer)
17
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to and solely for the purposes of, 18 U.S.C. Section 1350 (Section 906
of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in
the capacity and on the date indicated below that:
1. The Quarterly Report of Cache, Inc. on Form 10-Q for the period
ending June 26, 2004 as filed with the Securities and Exchange
Commission on the date hereof (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of Cache, Inc.
August 10, 2004 BY:/s/ Brian Woolf
----------------------
Brian Woolf
Chairman and Chief
Executive Officer
(Principal Executive
Officer)
August 10, 2004 BY:/s/Thomas E. Reinckens
----------------------
Thomas E. Reinckens
President and Chief
Operating Officer
(Principal Financial
and Accounting
Officer)
18