CHARLOTTE RUSSE HOLDING INC - 10-Q Quarterly Report

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 2003

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


	x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2003


	o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-27677

CHARLOTTE RUSSE HOLDING, INC.

(Exact Name of Registrant as Specified in Its Charter)


	DELAWARE		33-0724325
	(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

4645 MORENA BOULEVARD, SAN DIEGO, CA 92117
(Address, including Zip Code, of Registrant’s Principal Executive Offices)

(858) 587-1500
(Registrant’s Telephone Number, Including Area Code)

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 preceding 12 months (or for such shorter period that 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 o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


	COMMON STOCK, par value $0.01 per share, number of shares outstanding as of April 17, 2003: 21,236,695 shares.

TABLE OF CONTENTS


	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF OPERATIONS
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	Notes to Consolidated Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 10.28
EXHIBIT 99.1
EXHIBIT 99.2

CHARLOTTE RUSSE HOLDING, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION


		Page

ITEM 1	CONSOLIDATED FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 29, 2003
	(unaudited) and September 28, 2002		2
	Consolidated Statements of Operations (unaudited) for
	the three and six months ended March 29, 2003 and
	March 30, 2002		3
	Consolidated Statements of Cash Flows (unaudited) for
	the three and six months ended March 29, 2003 and
	March 30, 2002		4
	Notes to Consolidated Financial Statements (unaudited)		5
ITEM 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS		8
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		13
ITEM 4	CONTROLS AND PROCEDURES		14
	PART II. OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS		15
ITEM 2	CHANGES IN SECURITIES AND USE OF PROCEEDS		15
ITEM 3	DEFAULTS UPON SENIOR SECURITIES		15
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		15
ITEM 5	OTHER INFORMATION		15
ITEM 6	EXHIBITS AND REPORTS ON FORM 8-K		15

CHARLOTTE RUSSE HOLDING, INC.
CONSOLIDATED BALANCE SHEETS


			March 29,			September 28,
			2003			2002

			(unaudited)			(audited)

ASSETS
Current assets:
	Cash and cash equivalents		$	17,693,575		$	13,553,480
	Inventories			34,683,377			33,319,014
	Other current assets			8,043,762			2,502,201
	Deferred tax assets			4,600,000			4,300,000

		Total current assets		65,020,714			53,674,695
Fixed assets, net				95,279,658			95,632,346
Goodwill, net				28,790,000			28,790,000
Other assets				1,371,281			1,405,928

		Total assets	$	190,461,653		$	179,502,969


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable trade		$	26,583,438		$	24,928,743
	Accounts payable other			4,049,522			5,444,806
	Accrued payroll and related expense			2,319,539			2,372,134
	Income and sales taxes payable			1,579,560			1,259,525
	Other current liabilities			10,243,571			6,752,135

		Total current liabilities		44,775,630			40,757,343
Deferred rent				9,066,299			8,376,994
Other liabilities				282,777			208,883
Deferred tax liabilities				5,000,000			1,600,000

		Total liabilities		59,124,706			50,943,220

Commitments

Stockholders’ equity:
	Preferred Stock $0.01 par value, 3,000,000 shares authorized, none issued and outstanding			—			—
	Common Stock $0.01 par value, 100,000,000 shares authorized, issued and outstanding shares – 21,236,695 at March 29, 2003 and 21,210,707 at September 28, 2002			212,367			212,107
	Additional paid-in capital			43,978,905			43,793,497
	Deferred compensation			(117,000	)		(171,000	)
	Retained earnings			87,262,675			84,725,145

		Total stockholders’ equity		131,336,947			128,559,749

		Total liabilities and stockholders’ equity	$	190,461,653		$	179,502,969

See accompanying notes.

CHARLOTTE RUSSE HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


				Three Months Ended						Six Months Ended

				March 29,			March 30,			March 29,			March 30,
				2003			2002			2003			2002

Net sales				$	93,098,703		$	86,069,774		$	226,427,339		$	198,007,892
Cost of goods sold, including buying, distribution and occupancy costs					74,841,538			63,240,942			171,578,511			142,886,501

Gross profit					18,257,165			22,828,832			54,848,828			55,121,391
Selling, general and administrative expenses					20,762,893			17,198,466			45,095,200			37,216,115
Store closing costs					5,500,000			—			5,500,000			—

Operating income(loss)					(8,005,728	)		5,630,366			4,253,628			17,905,276
Other income(expense):
		Interest income, net			22,598			82,207			31,405			83,715
		Other charges, net			(62,649	)		(70,260	)		(125,148	)		(148,556	)

			Total other income(expense)		(40,051	)		11,947			(93,743	)		(64,841	)

Income(loss) before income taxes					(8,045,779	)		5,642,313			4,159,885			17,840,435
Income taxes(benefit)					(3,137,854	)		2,139,511			1,622,355			6,957,769

Net income(loss)				$	(4,907,925	)	$	3,502,802		$	2,537,530		$	10,882,666

Earnings(loss) per share:
	Basic			$	(0.23	)	$	0.17		$	0.12		$	0.52

	Diluted			$	(0.23	)	$	0.15		$	0.11		$	0.46

Weighted average shares outstanding:
	Basic				21,236,375			20,948,770			21,225,797			20,887,675

	Diluted				21,236,375			23,699,708			23,494,120			23,607,835

See accompanying notes.

CHARLOTTE RUSSE HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


			Three Months Ended						Six Months Ended

			March 29,			March 30,			March 29,			March 30,
			2003			2002			2003			2002

Operating Activities
Net income(loss)			$	(4,907,925	)	$	3,502,802		$	2,537,530		$	10,882,666
Adjustments to reconcile net income(loss) to net cash provided by (used in) operating activities:
	Depreciation and amortization			3,909,443			3,205,925			7,810,163			6,384,758
	Deferred rent			179,560			723,542			689,305			1,388,468
	Amortization of deferred compensation			27,000			27,000			54,000			54,000
	Loss on impairment and disposal of assets			3,072,136			—			3,235,796			23,745
	Deferred income taxes			3,100,000			(300,000	)		3,100,000			(400,000	)
	Changes in operating assets and liabilities:
		Inventories		(9,505,060	)		(9,064,914	)		(1,364,363	)		(1,650,715	)
		Other current assets		(3,683,531	)		1,021			(5,541,561	)		(361,656	)
		Accounts payable trade		6,702,297			9,317,888			1,654,695			3,572,528
		Accounts payable other		189,766			1,599,141			(1,395,284	)		(1,477,541	)
		Accrued payroll and related expense		(2,040,109	)		(1,152,840	)		(52,595	)		737,427
		Income and sales taxes payable		(5,874,529	)		(4,211,567	)		341,633			(1,411,051	)
		Other current liabilities		(324,832	)		(1,544,774	)		3,491,436			2,100,900
		Other liabilities		58,894			(105,586	)		73,894			(90,587	)

Net cash provided by (used in) operating activities				(9,096,890	)		1,997,638			14,634,649			19,752,942
Investing Activities
Purchases of fixed assets				(6,203,399	)		(11,793,473	)		(10,672,081	)		(19,061,523	)
Other assets				(45,781	)		10,026			13,457			(18,564	)

Net cash used in investing activities				(6,249,180	)		(11,783,447	)		(10,658,624	)		(19,080,087	)
Financing Activities
Payments on capital leases				—			(24,951	)		—			(45,017	)
Proceeds from notes payable to bank				—			—			—			11,000,000
Payments on notes payable to bank				—			—			—			(11,000,000	)
Proceeds from issuance of common stock				131,570			782,695			164,070			872,996

Net cash provided by financing activities				131,570			757,744			164,070			827,979

Net increase (decrease) in cash and cash equivalents				(15,214,500	)		(9,028,065	)		4,140,095			1,500,834
Cash and cash equivalents at beginning of the period				32,908,075			20,560,297			13,553,480			10,031,398

Cash and cash equivalents at end of the period			$	17,693,575		$	11,532,232		$	17,693,575		$	11,532,232

See accompanying notes.

CHARLOTTE RUSSE HOLDING, INC.
Notes to Consolidated Financial Statements
(Unaudited)

1. Interim Financial Statements

The accompanying unaudited consolidated financial statements of Charlotte Russe Holding, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited financial statements contain all material adjustments, consisting of normal recurring accruals, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated, and have been prepared in a manner consistent with the audited financial statements as of September 28, 2002.

Due to the seasonal nature of the Company’s business, the results of operations for the six month period ended March 29, 2003 are not necessarily indicative of the results of a full fiscal year.

These financial statements should be read in conjunction with the audited financial statements and the footnotes for the fiscal year ended September 28, 2002 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 13, 2002.

2. Net Income(Loss) Per Common Share

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share,” the following table reconciles income(loss) and share amounts utilized to calculate basic and diluted net income(loss) per common share.


		Three Months Ended						Six Months Ended

		March 29,			March 30,			March 29,			March 30,
		2003			2002			2003			2002

Net income(loss)		$	(4,907,925	)	$	3,502,802		$	2,537,530		$	10,882,666

Earnings(loss) per share:
	Basic	$	(0.23	)	$	0.17		$	0.12		$	0.52
	Effect of dilutive stock options		—			(0.01	)		0.00			(0.02	)
	Effect of dilutive warrants		—			(0.01	)		(0.01	)		(0.04	)

	Diluted	$	(0.23	)	$	0.15		$	0.11		$	0.46

Weighted average number of shares:
	Basic		21,236,375			20,948,770			21,225,797			20,887,675
	Effect of dilutive stock options		—			878,220			487,439			860,590
	Effect of dilutive warrants		—			1,872,718

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