Third Quarter Highlights versus Fiscal 2018 Third
Quarter:
Cherokee Global Brands (NASDAQ: CHKE), a global brand marketing
platform that manages a growing portfolio of fashion and lifestyle
brands, today reported financial results for its third fiscal
quarter ended November 3, 2018.
Revenues decreased for the third quarter as the Company
continues to transition from its DTR licenses to new wholesale
licensing partners in the United States. This was partially offset
by revenues from the Company’s new product development and design
agreement. The Company has worked to restructure and
rightsize its business operations, resulting in a $3.0 million, or
48% reduction in selling, general and administrative expenses
for the quarter. Revenue generated from the Company’s Hi-Tec
brand portfolio grew $1.6 million to $8.6 milllion for the
nine-month period, an increase of 22% compared to the first nine
months of the prior year.
“This has been a very productive year for the company.
Although it’s early, our licensees and retail partners are seeing a
significant revenue opportunity for the Hi-Tec portfolio of brands
as they introduce new categories into new distribution channels on
a global scale,” said Henry Stupp, chief executive officer.
“Further, our more efficient structure is focused on
maximizing the value we can deliver on brands we own, brands we
create and brands we develop for new partners, which taps into the
capabilities of our product design and development platform.”
Mr. Stupp added, “Looking to the remainder of fiscal 2019 and
beyond, we intend to expand the reach of our brand portfolio
through category growth, new territories, new design partnerships
and new licensees. The scalability, relevance and strategic
plans that have been established for our brands are leading us to
be a more profitable and responsive global brand management
company.”
Revenues Revenues were $5.8 million in the
third quarter, a decrease of $2.0 million, or 25%, from $7.8
million in the prior year. The year-over-year decline largely
reflects the transition of the Company’s Tony Hawk, Cherokee,
and the Liz Lange brands in the U.S. from a direct-to-retail
(“DTR”) model to new wholesale licensing partners. Revenues
in the prior year quarter includes $2.4 million from non-renewed
licenses and Flip Flop Shops, which was divested in June
2018. These declines were partially offset by revenues from
the Company’s new multi-year product development and design
agreement in China. Revenues from relationships that existed
in the third quarter of fiscal 2018 increased $0.4 million, or 8%,
year over year.
Revenues for the first nine months of fiscal 2019 were $18.3
million, compared to $22.5 million in the prior year, a decrease of
$4.2 million, or 19%. Non-renewed licenses and Flip Flop
Shops represented $8.0 million of revenues in the first
nine months of the prior year. These declines were partially
offset by revenue increases for the Cherokee and Hi-Tec portfolio
of brands along with revenues from the new product development and
design agreement. Revenues from relationships that existed in
the first nine months of the year increased $3.8 million, or
26%.
Operating and Nonoperating ExpensesSelling,
general and administrative expenses, which comprise the Company’s
normal operating expenses, were $3.2 million, compared
to $6.2 million in the third quarter of the prior year.
The $3.0 million, or 48% year-over-year decrease, reflects reduced
spending for payroll, professional fees, general operating costs
and the elimination of temporary employees following the completion
of the Hi-Tec integration. Selling, general and
administrative expenses for the first nine months of fiscal 2019
decreased $6.9 million, or 37%, to $11.6 million from $18.5 million
in the prior year.
During the second quarter of this fiscal year, the Company
incurred several one-time charges that affected its results for the
first nine months of fiscal 2019. Restructuring charges and
business acquisition and integration costs totaled $5.9 million,
and the refinancing of the Company’s previous credit facility
resulted in $4.0 of non-cash and cash charges. These costs
were partially offset by a $0.5 million gain on the sale of
assets.
Profitability MeasuresOperating income for the
third quarter was $2.1 million, compared to an operating loss of
$1.5 million in the third quarter of the prior year. The operating
loss during the nine months of fiscal 2019 was $0.5 million,
compared to a loss of $5.0 million in the first nine months of the
prior year.
Net income from continuing operations was $0.1 million, or zero
cents per diluted share in the third quarter of the current
year, as compared to a net loss of $2.4 million, or $0.17 per
diluted share in the prior year. The net loss from continuing
operations for the first nine months of fiscal 2019 was $11.7
million, or $0.83 per diluted share, compared to net loss of
$10.7 million, or $0.81 per diluted share in the prior
year.
Adjusted EBITDA increased $1.1 million, or 68% to $2.6 million
for the third quarter, compared to $1.6 million in the prior
year. This improvement was due to the year-over-year decline
in selling, general and administrative expenses. Adjusted
EBITDA during the first nine months of fiscal 2019 increased $2.8
million, or 69% to $6.7 million, compared to $4.0 million in the
first nine months of the prior year.
Balance SheetAt November 3, 2018, the Company
had cash and cash equivalents of $2.0 million, compared to $3.2
million at February 3, 2018. Outstanding borrowings under the
Company’s term loan and subordinated promissory notes totaled $50.0
at November 3, 2018, net of debt issuance costs, with $0.8 million
reflected as a current obligation. At February 3, 2018, all
of the Company’s long-term debt of $46.1 million was classified as
a current obligation.
Fiscal 2019 Outlook The Company is narrowing
its guidance for the fiscal year ending February 2, 2019 as
follows:
- Revenues are anticipated to be in the range of $25.0 to $26.0
million
- Adjusted EBITDA is expected to be in the range of $9.0 to $10.0
million
- SG&A is expected to approximate $16.0 million
Conference CallThe 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). The earnings call will also be broadcast
over the Internet and can be accessed on the Investor Relations
section of the Company’s website at
http://www.cherokeeglobalbrands.com. For those unable to
participate during the live broadcast, a replay will be available
through Thursday, December 27, 2018, at 8:59 p.m. PT / 11:59 p.m.
ET. To access the replay, dial (844) 512-2921 (U.S.) or (412)
317-6671 (international) and use conference ID: 13685469.
About Cherokee Inc. Cherokee is a global
brand marketing platform that manages a growing portfolio of
fashion and lifestyle brands including Cherokee®, Carole Little®,
Tony Hawk® Signature Apparel and Hawk Brands®, Liz Lange®, Everyday
California®, Sideout®, Hi-Tec®, Magnum®, 50 Peaks® and
Interceptor®, across multiple consumer product categories and
retail tiers around the world. The Company currently maintains
license agreements with leading retailers and manufacturers that
span approximately 80 countries, with distribution across 20,000+
retail locations and multiple ecommerce platforms.
Safe Harbor Statement This news release may
contain forward-looking statements regarding future events and the
future performance of Cherokee Global Brands. Forward-looking
statements in this press release include, without limitation,
express or implied statements regarding: the Company’s forecasted
operating results for fiscal year 2019; the Company’s expectations
regarding its new and existing license agreements and the
performance of its licensees thereunder; the Company’s ability to
sustain necessary liquidity and grow its business; and anticipated
market developments and opportunities. A forward-looking statement
is neither a prediction nor a guarantee of future events or
circumstances and is based on currently available market,
operating, financial and competitive information and assumptions.
Forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those expected
or projected, including, among others, risks that: the Company and
its partners will not achieve the results anticipated in the
statements made in this release; global economic conditions and the
financial condition of the apparel and retail industry and/or
adverse changes in licensee or consumer acceptance of products
bearing the Company’s brands may lead to reduced royalties; the
ability and/or commitment of the Company’s licensees to design,
manufacture and market Cherokee®, Hi-Tec®, Magnum®, 50 Peaks®,
Interceptor®, Carole Little®, Tony Hawk® and Hawk Brands®, Liz
Lange®, Everyday California® and Sideout® branded products could
cause our results to differ from our anticipations; the Company’s
dependence on a select group of licensees for most of the Company’s
revenues makes us susceptible to changes in those organizations;
and the Company’s dependence on its key management personnel could
leave us exposed to disruption on any termination of service. A
more detailed discussion of such risks and uncertainties are
described in the Company’s annual report on Form 10-K filed on
April 19, 2018, its periodic reports on Forms 10-Q and 8-K, and
subsequent filings with the SEC the Company makes from time to
time. Except as required by law, the Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
The Company’s guidance is based on current plans and
expectations and is subject to a number of known and unknown
uncertainties and risks, including those set forth under the
Company’s safe harbor statement. This forecast is made as of the
date of this release, and Company undertakes no obligation to
update or amend this guidance whether as a result of new
information, future events or otherwise.
Note Regarding Use of Non-GAAP Financial
Measures Certain of the information set forth herein,
including Adjusted EBITDA, may be considered non-GAAP financial
measures. Cherokee believes this information is useful to investors
as a measure of profitability, because it helps us compare our
performance on a consistent basis by removing from our operating
results the impact of our capital structure, the effect of
operating in different tax jurisdictions, the impact of our asset
base, which can differ depending on the book value of assets and
the accounting methods used to compute depreciation and
amortization, and the cost of acquiring or disposing of businesses
and restructuring our operations. In addition, the company’s
management uses these non-GAAP financial measures along with the
most directly comparable GAAP financial measures in evaluating the
company’s operating performance and cash flow. Non-GAAP financial
measures should not be considered in isolation from, or as a
substitute for, financial information presented in compliance with
GAAP, and non-GAAP financial measures as reported by the company
may not be comparable to similarly titled amounts reported by other
companies. A reconciliation of net loss from continuing operations
as reported in our consolidated statements of operations is
reconciled to Adjusted EBITDA in tabular form later in this release
under the heading “Reconciliation of GAAP to Non-GAAP Financial
Data“.
Investor Contact:Cherokee Global BrandsSteve Brink,
CFO818-908-9868
Addo Investor RelationsLaura Bainbridge/Patricia
Nir310-829-5400
CHEROKEE
INC.CONSOLIDATED BALANCE
SHEETS(UNAUDITED)(In thousands,
except share and per share amounts)
|
|
November 3, |
|
|
February 3, |
|
|
|
2018 |
|
|
2018 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
2,045 |
|
|
$ |
3,174 |
|
Accounts
receivable, net |
|
|
6,233 |
|
|
|
9,805 |
|
Other
receivables |
|
|
406 |
|
|
|
472 |
|
Prepaid
expenses and other current assets |
|
|
940 |
|
|
|
1,258 |
|
Current
assets of discontinued operations |
|
|
— |
|
|
|
1,868 |
|
Total current
assets |
|
|
9,624 |
|
|
|
16,577 |
|
Property and equipment,
net |
|
|
690 |
|
|
|
1,090 |
|
Intangible assets,
net |
|
|
64,869 |
|
|
|
69,548 |
|
Goodwill |
|
|
16,252 |
|
|
|
16,352 |
|
Accrued revenue and
other assets |
|
|
1,360 |
|
|
|
30 |
|
Total assets |
|
$ |
92,794 |
|
|
$ |
103,597 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
6,421 |
|
|
$ |
7,205 |
|
Other
current liabilities |
|
|
5,618 |
|
|
|
7,370 |
|
Current
portion of long term debt |
|
|
800 |
|
|
|
46,105 |
|
Deferred
revenue—current |
|
|
2,004 |
|
|
|
2,229 |
|
Current
liabilities of discontinued operations |
|
|
— |
|
|
|
1,103 |
|
Total
current liabilities |
|
|
14,843 |
|
|
|
64,012 |
|
Long term
liabilities: |
|
|
|
|
|
|
|
|
Long-term
debt |
|
|
49,163 |
|
|
|
— |
|
Deferred
income taxes |
|
|
11,630 |
|
|
|
10,466 |
|
Other
liabilities |
|
|
2,990 |
|
|
|
5,004 |
|
Total liabilities |
|
|
78,626 |
|
|
|
79,482 |
|
Commitments and
Contingencies (Note 9) |
|
|
|
|
|
|
|
|
Stockholders’
Equity: |
|
|
|
|
|
|
|
|
Preferred
stock, $.02 par value, 1,000,000 shares authorized, none
issued |
|
|
— |
|
|
|
— |
|
Common
stock, $.02 par value, 20,000,000 shares authorized, shares
issued 14,223,037 (November 3, 2018) and 13,997,200 (February
3, 2018) |
|
|
284 |
|
|
|
280 |
|
Additional paid-in capital |
|
|
75,882 |
|
|
|
74,377 |
|
Accumulated deficit |
|
|
(61,998 |
) |
|
|
(50,542 |
) |
Total stockholders’
equity |
|
|
14,168 |
|
|
|
24,115 |
|
Total liabilities and
stockholders’ equity |
|
$ |
92,794 |
|
|
$ |
103,597 |
|
CHEROKEE
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)(In
thousands, except per share amounts)
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
November 3, |
|
|
October 28, |
|
|
November 3, |
|
|
October 28, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenues |
$ |
5,842 |
|
|
$ |
7,796 |
|
|
$ |
18,317 |
|
|
$ |
22,481 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
3,234 |
|
|
|
6,245 |
|
|
|
11,577 |
|
|
|
18,496 |
|
Stock-based compensation |
|
241 |
|
|
|
1,250 |
|
|
|
666 |
|
|
|
2,344 |
|
Business
acquisition and integration costs |
|
— |
|
|
|
1,503 |
|
|
|
307 |
|
|
|
5,325 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
5,615 |
|
|
|
128 |
|
Gain on
sale of assets |
|
25 |
|
|
|
— |
|
|
|
(546 |
) |
|
|
— |
|
Depreciation and amortization |
|
292 |
|
|
|
347 |
|
|
|
1,223 |
|
|
|
1,138 |
|
Total operating
expenses |
|
3,792 |
|
|
|
9,345 |
|
|
|
18,842 |
|
|
|
27,431 |
|
Operating
income (loss) |
|
2,050 |
|
|
|
(1,549 |
) |
|
|
(525 |
) |
|
|
(4,950 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
(1,910 |
) |
|
|
(1,706 |
) |
|
|
(6,007 |
) |
|
|
(4,829 |
) |
Other
income (expense), net |
|
14 |
|
|
|
(24 |
) |
|
|
(3,219 |
) |
|
|
(256 |
) |
Total
other expense, net |
|
(1,896 |
) |
|
|
(1,730 |
) |
|
|
(9,226 |
) |
|
|
(5,085 |
) |
Income (loss) from
continuing operations before income taxes |
|
154 |
|
|
|
(3,279 |
) |
|
|
(9,751 |
) |
|
|
(10,035 |
) |
Provision (benefit) for
income taxes |
|
91 |
|
|
|
(889 |
) |
|
|
1,980 |
|
|
|
665 |
|
Net income (loss) from
continuing operations |
|
63 |
|
|
|
(2,390 |
) |
|
|
(11,731 |
) |
|
|
(10,700 |
) |
Income from
discontinued operations, net of income taxes |
|
— |
|
|
|
(130 |
) |
|
|
- |
|
|
|
296 |
|
Net income (loss) |
$ |
63 |
|
|
$ |
(2,520 |
) |
|
$ |
(11,731 |
) |
|
$ |
(10,404 |
) |
Net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
loss per share from continuing operations |
$ |
0.00 |
|
|
$ |
(0.17 |
) |
|
$ |
(0.83 |
) |
|
$ |
(0.81 |
) |
Diluted
loss per share from continuing operations |
$ |
0.00 |
|
|
$ |
(0.17 |
) |
|
$ |
(0.83 |
) |
|
$ |
(0.81 |
) |
Basic
(loss) earnings from discontinued operations per share |
$ |
— |
|
|
$ |
(0.01 |
) |
|
$ |
- |
|
|
$ |
0.02 |
|
Diluted
(loss) earnings from discontinued operations per share |
$ |
— |
|
|
$ |
(0.01 |
) |
|
$ |
- |
|
|
$ |
0.02 |
|
Basic
loss per share |
$ |
0.00 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.83 |
) |
|
$ |
(0.79 |
) |
Diluted
loss per share |
$ |
0.00 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.83 |
) |
|
$ |
(0.79 |
) |
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
14,150 |
|
|
|
13,792 |
|
|
|
14,059 |
|
|
|
13,244 |
|
Diluted |
|
14,150 |
|
|
|
13,792 |
|
|
|
14,059 |
|
|
|
13,244 |
|
CHEROKEE INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL DATA
(In thousands)
We define Adjusted EBITDA as net income before (i)
interest expense, (ii) Other (income) expense, net, (iii) provision
for income taxes, (iv) depreciation and amortization, (v) gain on
sale of assets, (vi) intangible asset impairment loss, (vii)
restructuring charges, (viii) business acquisition and integration
costs and (ix) stock-based compensation and stock warrant
charges. Adjusted EBITDA is not defined under generally
accepted accounting principles (“GAAP”) and it may not be
comparable to similarly titled measures reported by other
companies. We use Adjusted EBITDA, along with GAAP measures,
as a measure of profitability, because Adjusted EBITDA helps us
compare our performance on a consistent basis by removing from our
operating results the impact of our capital structure, the effect
of operating in different tax jurisdictions, the impact of our
asset base, which can differ depending on the book value of assets
and the accounting methods used to compute depreciation and
amortization, and the cost of acquiring or disposing of businesses
and restructuring our operations. We believe it is useful to
investors for the same reasons. Adjusted EBITDA has
limitations as a profitability measure in that it does not include
the interest expense on our long-term debt, non-operating income or
expense items, our provision for income taxes, the effect of our
expenditures for capital assets and certain intangible assets, or
the costs of acquiring or disposing of businesses and restructuring
our operations, or our non-cash charges for stock-based
compensation and stock warrants. A reconciliation from net
loss from continuing operations as reported in our condensed
consolidated statement of operations to Adjusted EBITDA is as
follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
(In
thousands) |
|
November 3, 2018 |
|
|
October 28, 2017 |
|
|
November 3, 2018 |
|
|
October 28, 2017 |
|
Net loss from continuing
operations |
|
$ |
63 |
|
|
$ |
(2,390 |
) |
|
$ |
(11,731 |
) |
|
$ |
(10,700 |
) |
Provision (benefit) for
income taxes |
|
|
91 |
|
|
|
(889 |
) |
|
|
1,980 |
|
|
|
665 |
|
Interest expense |
|
|
1,910 |
|
|
|
1,706 |
|
|
|
6,007 |
|
|
|
4,829 |
|
Other (income) expense,
net |
|
|
(14 |
) |
|
|
24 |
|
|
|
3,219 |
|
|
|
256 |
|
Depreciation and
amortization |
|
|
292 |
|
|
|
347 |
|
|
|
1,223 |
|
|
|
1,138 |
|
Gain on sale of
assets |
|
|
25 |
|
|
|
— |
|
|
|
(546 |
) |
|
|
— |
|
Restructuring
charges |
|
|
— |
|
|
|
— |
|
|
|
5,615 |
|
|
|
128 |
|
Business acquisition
and integration costs |
|
|
— |
|
|
|
1,503 |
|
|
|
307 |
|
|
|
5,325 |
|
Stock-based
compensation and stock warrant charges |
|
|
241 |
|
|
|
1,250 |
|
|
|
666 |
|
|
|
2,344 |
|
Adjusted EBITDA |
|
$ |
2,608 |
|
|
$ |
1,551 |
|
|
$ |
6,740 |
|
|
$ |
3,985 |
|
Cherokee Inc. (MM) (NASDAQ:CHKE)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Cherokee Inc. (MM) (NASDAQ:CHKE)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024