- Fiscal 2017 Consolidated revenues of $40.6 million
- Fiscal 2017 Consolidated net loss of $7.9 million; non-GAAP net income of $7.4 million
- Fiscal 2017 GAAP EPS of ($0.84); non-GAAP EPS of $0.78
- Fiscal 2017 Adjusted EBITDA of $13.4 million
- Q4 2017 Consolidated revenues of $15.0 million
- Q4 2017 Consolidated net loss of $11.2 million; non-GAAP net income of $1.8 million
- Q4 2017 GAAP EPS of ($0.97); non-GAAP EPS of $0.15
- Q4 2017 Adjusted EBITDA of $2.9 million
SHERMAN OAKS, Calif., May 18, 2017 (GLOBE NEWSWIRE) -- Cherokee Global Brands (NASDAQ: CHKE ), a global brand marketing platform that manages a growing portfolio of fashion and lifestyle brands, today provided final financial results for the fourth quarter and fiscal year ended January 28, 2017. The company filed its Annual Report on Form 10-K for the year ended January 28, 2017 today, including audited financial statements for all required periods. The audited results differed from the results released on May 11, 2017 due to approximately $570,000 of additional expenses recorded in the Other Expense portion of the statement of operations for the year and quarter ended January 28, 2017. The financial information in this release supersedes the information contained in the May 11, 2017 press release, which should no longer be relied upon.
Non-GAAP Amounts stated to be on a non-GAAP basis exclude the items that are described below under the heading “Note Regarding Use of Non-GAAP Financial Measures”. Reconciliations of amounts on a GAAP basis to amounts on a non-GAAP basis are presented in tabular form later in this release under the heading “GAAP to Non-GAAP Financial Metrics.”
2017 Fourth Quarter & Fiscal Year Financial Results Consolidated revenues for the quarter, including the contribution from Hi-Tec, were $15.0 million. On a year-over-year comparable basis, Cherokee Global Brand revenues, excluding Hi-Tec, were $7.2 million, a decrease of 8.8% from $7.8 million in the prior year period. The year-over-year decline is largely due to the decrease in North America revenues related to the Cherokee brand as the Company continues to transition to new wholesale licensees. During the quarter, some of the decrease was offset by global revenue increases, particularly in South America, Europe, Japan and South Africa as the demand for Cherokee-branded products continues to grow.
Hi-Tec revenues totaled $7.8 million in the fourth quarter of fiscal 2017 and included $6.6 million in indirect product sales related to distribution and government contracts, as well as $1.2 million in licensing revenues stemming from new and existing licensing deals for the Hi-Tec portfolio of brands. Gross profit from Hi-Tec indirect product sales was $1.5 million, and is inclusive of $5.1 million in cost of goods sold.
Consolidated revenues for the year, including the contribution from Hi-Tec, were $40.6 million. On a year-over-year comparable basis, Cherokee Global Brand revenues, excluding Hi-Tec, were $32.8 million, compared with $34.7 million in the prior year. Cherokee-brand royalties earned by Target in fiscal 2017 were $10.5 million, a decrease of $4.4 million over the prior year.
GAAP selling, general and administrative expenses were $18.9 million in the fourth fiscal quarter of 2017, compared to $5.9 million in the prior-year period. SG&A expenses for fiscal 2017 totaled $38.9 million, compared with $21.3 million in the prior year. The increase in SG&A for the fourth quarter and fiscal 2017 was primarily related to an increase in professional fees from legal and due diligence expenses associated with the Hi-Tec acquisition of $11.5 million and $15.3 million, respectively, and which includes restructuring and integration costs associated with the acquisition of Hi-Tec.
Non-GAAP SG&A for the fourth quarter of fiscal 2017 was $7.4 million, compared with $5.5 million, in the prior year period. Non-GAAP SG&A for fiscal 2017 was $23.7 million, compared with $20.1 million, in the prior year period.
GAAP operating loss for the fourth quarter of fiscal 2017 totaled $9.0 million, compared with GAAP operating income of $1.9 million in the prior-year period. GAAP operating loss for fiscal 2017 totaled $3.4 million, compared with GAAP operating income of $13.3 million in the prior year.
Non-GAAP operating income for the fourth quarter of fiscal 2017 was $2.5 million, or 16.5% of revenues, compared with $2.3 million, or 29.9% of revenues, in the prior year period.
Adjusted EBITDA for the fourth quarter of fiscal 2017 was $2.9 million, compared to $2.7 million in the prior year period. Adjusted EBITDA for fiscal 2017 was $13.4 million, compared to $15.9 million in the in the prior year.
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®, Interceptor® and Flip Flop Shops®, a leading franchise retail chain, across multiple consumer product categories and retail tiers around the world. The Company currently maintains license and franchise agreements with leading retailers and manufacturers that span over 110 countries in 12,000 retail locations and digital commerce.
Safe Harbor Statement This news release contains forward-looking statements regarding future events and the future performance of Cherokee. 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 anticipated benefits of the Hi-Tec acquisition will not be achieved; 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. The risks included here are not exhaustive. Other risks and uncertainties are described in our annual report on Form 10-K filed on April 14, 2016, its periodic reports on Forms 10-Q and 8-K, and subsequent filings with the SEC we make from time to time, including the preliminary prospectus supplement that we filed in connection with the offering described herein. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, 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 non-GAAP SG&A, non-GAAP operating income, EBITDA and non-GAAP net income, may be considered non-GAAP financial measures. Cherokee believes this information is useful to investors because it provides a basis for measuring the company’s available capital resources, the operating performance of its business and its cash flow, excluding expenses relating to professional fees from legal and due diligence for actual and potential acquisitions and business development related to the identification and establishment of new brand licensees that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). 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, capital resources 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-financial measures as reported by the company may not be comparable to similarly titled amounts reported by other companies. The non-GAAP measures are described above and are reconciled to the corresponding GAAP measure in the condensed consolidated financial statements portion of this release under the headings “GAAP to Non-GAAP Financial Metrics“.
| CHEROKEE INC. | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| (amounts in thousands, except share and per share amounts) | ||||||
| January 28, | January 30, | |||||
| 2017 | 2016 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 8,378 | $ | 6,534 | ||
| Receivables | 21,873 | 7,365 | ||||
| Other receivables | 3,292 | — | ||||
| Income taxes receivable | 1,020 | 707 | ||||
| Inventory, net | 1,567 | — | ||||
| Prepaid expenses and other current assets | 5,010 | 425 | ||||
| Total current assets | 41,140 | 15,031 | ||||
| Intangible assets, net | 106,193 | 53,095 | ||||
| Goodwill | 15,794 | 100 | ||||
| Deferred tax asset | — | 1,136 | ||||
| Property and equipment, net | 1,311 | 1,151 | ||||
| Other assets | 1,578 | 35 | ||||
| Total assets | $ | 166,016 | $ | 70,548 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and other accrued payables | $ | 26,736 | $ | 2,195 | ||
| Current portion of long term debt | 1,241 | 8,456 | ||||
| Related party Ravich loan | 3,896 | — | ||||
| Deferred revenue—current | 7,015 | 479 | ||||
| Accrued compensation payable | 935 | 891 | ||||
| Income taxes payable—current | 347 | — | ||||
| Total current liabilities | 40,170 | 12,021 | ||||
| Long term liabilities: | ||||||
| Deferred tax liability | 7,718 | — | ||||
| Income taxes payable—non-current | 3,041 | — | ||||
| Long term debt | 41,595 | 15,068 | ||||
| Other non-current | 1,174 | 1,388 | ||||
| Total liabilities | 93,698 | 28,477 | ||||
| Commitments and Contingen | ||||||
| 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, 12,951,284 shares issued and outstanding at January 28, 2017 and 8,720,012 issued and outstanding at January 30, 2016 | 259 | 174 | ||||
| Additional paid-in capital | 66,612 | 27,822 | ||||
| Retained earnings | 5,414 | 14,075 | ||||
| Accumulated other comprehensive income | 33 | — | ||||
| Total stockholders’ equity | 72,318 | 42,071 | ||||
| Total liabilities and stockholders’ equity | $ | 166,016 | $ | 70,548 | ||
| CHEROKEE INC. | ||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
| (amounts in thousands, except per share amounts) | ||||||||||||
| Year Ended | ||||||||||||
| January 28, | January 30, | January 31, | ||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Royalty revenues | $ | 34,022 | $ | 34,654 | $ | 34,968 | ||||||
| Indirect product sales | 6,599 | — | — | |||||||||
| Total revenues | 40,621 | 34,654 | 34,968 | |||||||||
| Cost of goods sold | 5,083 | — | — | |||||||||
| Gross profit | 35,538 | 34,654 | 34,968 | |||||||||
| Selling, general and administrative expenses | 34,243 | 20,456 | 18,648 | |||||||||
| Amortization of intangible assets | 912 | 882 | 932 | |||||||||
| Restructure charges | 3,782 | — | — | |||||||||
| Operating (loss) income | (3,399 | ) | 13,316 | 15,388 | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (1,661 | ) | (711 | ) | (854 | ) | ||||||
| Interest income and other income, net | 391 | 186 | — | |||||||||
| Total other expense, net | (1,270 | ) | (525 | ) | (854 | ) | ||||||
| (Loss) Income before income taxes | (4,669 | ) | 12,791 | 14,534 | ||||||||
| Income tax provision | 3,258 | 4,358 | 4,714 | |||||||||
| Net (loss) income | $ | (7,927 | ) | $ | 8,433 | $ | 9,820 | |||||
| Net (loss) income per common share attributable to common stockholders: | ||||||||||||
| Basic (loss) earnings per share | $ | (0.84 | ) | $ | 0.97 | $ | 1.17 | |||||
| Diluted (loss) earnings per share | $ | (0.84 | ) | $ | 0.95 | $ | 1.15 | |||||
| Weighted average common shares outstanding attributable to common stockholders: | ||||||||||||
| Basic | 9,424 | 8,674 | 8,429 | |||||||||
| Diluted | 9,424 | 8,862 | 8,543 | |||||||||
| Dividends declared per common share | $ | 0.00 | $ | 0.00 | $ | 0.10 | ||||||
| CHEROKEE INC. | |||||||||||||||||
| GAAP TO NON-GAAP FINANCIAL METRICS | |||||||||||||||||
| Unaudited | |||||||||||||||||
| (amounts in thousands, except percentages and per share amounts) | |||||||||||||||||
| Three months ended | Twelve months ended | ||||||||||||||||
| January 28, | January 30, | January 28, | January 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Royalty revenues | $ | 8,376 | $ | 7,844 | $ | 34,022 | $ | 34,654 | |||||||||
| Indirect product sales | $ | 6,599 | $ | — | $ | 6,599 | $ | — | |||||||||
| Total Revenues | $ | 14,975 | $ | 7,844 | $ | 40,621 | $ | 34,654 | |||||||||
| Cost of goods sold | $ | (5,083 | ) | $ | — | $ | (5,083 | ) | $ | — | |||||||
| GAAP Gross profit | $ | 9,892 | $ | 7,844 | $ | 35,538 | $ | 34,654 | |||||||||
| Selling, general and administrative expenses: | |||||||||||||||||
| GAAP Selling, general and administrative expenses | 18,888 | 5,930 | 38,937 | 21,338 | |||||||||||||
| Professional fees | 11,466 | 433 | 15,280 | 1,234 | |||||||||||||
| Non-GAAP selling, general and administrative expenses | $ | 7,422 | $ | 5,497 | $ | 23,657 | $ | 20,104 | |||||||||
| GAAP selling, general and administrative expenses as a percentage of total revenues | 126 | % | 76 | % | 96 | % | 62 | % | |||||||||
| Non-GAAP selling, general and administrative expenses as a percentage of total revenues | 50 | % | 70 | % | 58 | % | 58 | % | |||||||||
| Operating income: | |||||||||||||||||
| GAAP Operating income (loss) | (8,996 | ) | 1,914 | (3,399 | ) | 13,316 | |||||||||||
| Professional fees | 11,466 | 433 | 15,280 | 1,234 | |||||||||||||
| Non-GAAP Operating income | $ | 2,470 | $ | 2,347 | $ | 11,881 | $ | 14,550 | |||||||||
| GAAP Operating income as a percentage of total revenues | −60 | % | 24 | % | −8 | % | 38 | % | |||||||||
| Non-GAAP Operating income as a percentage of total revenues | 16.5 | % | 29.9 | % | 29 | % | 42 | % | |||||||||
| Net income: | |||||||||||||||||
| GAAP Net income (loss) | (11,153 | ) | 1,384 | (7,927 | ) | 8,433 | |||||||||||
| GAAP Tax Provision | 1,323 | — | 3,258 | — | |||||||||||||
| Professional fees | 11,466 | 433 | 15,280 | 1,234 | |||||||||||||
| Other expense | 570 | — | 570 | — | |||||||||||||
| Tax | 115 | (109 | ) | (3,778 | ) | (421 | ) | ||||||||||
| Non-GAAP Net income | $ | 1,751 | $ | 1,708 | $ | 7,403 | $ | 9,246 | |||||||||
| GAAP Diluted earnings per share | $ | (0.97 | ) | $ | 0.16 | $ | (0.84 | ) | $ | 0.95 | |||||||
| Non-GAAP Diluted earnings per share | $ | 0.15 | $ | 0.19 | $ | 0.78 | $ | 1.04 | |||||||||
| Weighted average diluted shares outstanding: | 11,539 | 8,803 | 9,442 | 8,862 | |||||||||||||
| EBITDA: | |||||||||||||||||
| GAAP Net Income (loss) | (11,153 | ) | 1,384 | (7,927 | ) | 8,433 | |||||||||||
| Interest and other expense | 834 | 61 | 1,270 | 525 | |||||||||||||
| Tax Provision | 1,323 | 469 | 3,258 | 4,358 | |||||||||||||
| Depreciation and amortization | 407 | 375 | 1,483 | 1,329 | |||||||||||||
| EBITDA | (8,589 | ) | 2,289 | (1,916 | ) | 14,645 | |||||||||||
| Professional fees | 11,466 | 433 | 15,280 | 1,234 | |||||||||||||
| Non-GAAP EBITDA | $ | 2,877 | $ | 2,722 | $ | 13,364 | $ | 15,879 | |||||||||
| GAAP EBITDA as a percentage of total revenues | −57 | % | 29 | % | −5 | % | 42 | % | |||||||||
| Non-GAAP EBITDA as a percentage of total revenues | 19 | % | 35 | % | 33 | % | 46 | % | |||||||||
Investor Contact: Cherokee Global Brands Jason Boling, CFO 818-908-9868 Addo Investor Relations Laura Bainbridge/Patricia Nir 310-829-5400
