News

Cherokee Seeks Extension for 10K Filing and Reports Preliminary Results

April 05, 2006 by Jeff Shepard

Cherokee International Corp. announced that it will file a 15-day automatic extension notification with the Securities and Exchange Commission relating to its Annual Report on Form 10-K for the fiscal year ended January 1, 2006. The company needs additional time to finalize its financial statements for the year ended January 1,

2006 and will not meet the prescribed filing date of April 3, 2006.

Late last month, the company was made aware that employees of its Indian subsidiary manufacturing operations had made certain unauthorized payments. Cherokee's Audit Committee has commenced an immediate investigation and has engaged the services of independent counsel to oversee it. The reason for the delay is to provide additional time for the company's Audit Committee to obtain sufficient information to enable Cherokee to finalize its financial statements.

The company noted that the investigation is in its early stages, and no determination has been made as to whether it will result in any impact on the company's financial statements. The amounts of the known payments are not material. The facility in India is for the sole purpose of manufacturing product for other Cherokee locations and as such does not generate or bill revenue to external customers. The India production facility manufactures approximately 6% of total company products.

The company also reported its preliminary, unaudited financial results. Net sales for the fourth quarter of 2005 were $32.7 million, down 11% compared to $36.7 million for the fourth quarter in 2004, and up 24% compared to $26.4 million for the third quarter of 2005. Cherokee's fourth quarter revenue exceeded the latest guidance of mid-to-high teen growth over the third quarter of 2005.

Operating income for the fourth quarter of 2005 was $321,000, down from $3.6 million for the fourth quarter in 2004, and up from the $1.6 million operating loss in the third quarter of 2005.

Net income for the fourth quarter of 2005 was $78,000, or $0.00 per diluted share, compared to a net income of $2.2 million, or $0.11 per diluted share, for the fourth quarter of 2004, and a net loss of $2.2 million, or $0.11 per diluted share for the third quarter of 2005.

Net sales decreased 18% or $26.4 million to $122.1 million for the fiscal year 2005 from $148.5 million for fiscal year 2004. Cherokee recorded a net loss of $3.2 million for fiscal year 2005, or $(0.17) per diluted share, compared to net income of $10.4 million during fiscal year 2004, or $0.62 per diluted share.