Total domestic royalty revenues decline at Cherokee
Cherokee Inc. a leading global licensor and brand management company, reported financial results for its third quarter ended October 31, 2009 (the "Third Quarter"). Net revenues for the Third Quarter totaled $8.04 million, $5,000 greater than revenues in the comparable period last year. Operating income for the Third Quarter was $4.71 million, or $40,000 greater than the $4.67 million of operating income in the comparable period last year.
Pre-tax profits for the Third Quarter totaled $4.72 million, as compared to $4.71 million in the comparable period last year. Net earnings for the Third Quarter totaled $2.77 million, or $0.31 per diluted share, as compared to $3.25 million, or $0.37 per diluted share, in the comparable period last year, due to a lower tax provision in the comparable period last year resulting from certain favorable tax-related adjustments. The Company ended the quarter with cash and equivalents of $9.26 million, net receivables of $7.45 million and no debt.
Selling, general and administrative expenses for the Third Quarter were $3.33 million, which was slightly lower than the $3.37 million in the comparable period last year. Interest and other income for the Third Quarter totaled $6,000 versus the $46,000 reported last year, due to a combination of lower cash balances and lower (prevailing) interest rates. The income tax expense for the Third Quarter was $1.95 million, as compared to $1.46 million in the third quarter of last year. As a consequence, the effective tax rate for the Third Quarter was 41.3%, as compared to 31.0% in the third quarter of last year, as last year's tax rate was lower due to certain favorable tax-related adjustments.
Russell J. Riopelle, Chief Financial Officer, stated, "Our $0.31 of earnings per diluted share in the Third Quarter was lower this year due to a higher tax provision, as our pre-tax income was actually slightly higher in the Third Quarter. As previously announced, we will pay a $0.50 per share dividend on December 16th as we continue to return profits and excess cash to our stockholders."
Howard Siegel, President, added, "Our total domestic royalty revenues declined by 1.4% in the Third Quarter, and our domestic retail sales decline was greater than that, as compared to the third quarter of last year. Our international royalties increased by 1.5%, primarily due to the growth in Canada and in our South American territories, although we did experience some unfavorable exchange rate comparisons with several of our larger international licensees in the Third Quarter, relative to the comparable period last year, and consequently the retail sales in dollars were lower for these licensees. During the Third Quarter we signed up two new licensees for our Sideout brand, and in November we announced our new licensing agreement for the Cherokee brand in China. We look forward to additional revenue streams from our new licensees over time, while we continue to pursue new licensing opportunities with premier clients around the world."