-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdETUzw1NxOVjmSmXlQFJZiP/91tAOYI/34UDxGWjpxZR+viUTNJZcYwKSM0foQ7 6u3nGVhxFO92S+pmXYLR+g== 0000033780-97-000017.txt : 19971015 0000033780-97-000017.hdr.sgml : 19971015 ACCESSION NUMBER: 0000033780-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970830 FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVANS INC CENTRAL INDEX KEY: 0000033780 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 361050870 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01500 FILM NUMBER: 97694829 BUSINESS ADDRESS: STREET 1: 36 S STATE ST CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3128552000 10-Q 1 EVANS, INC. 10-Q REPORT FOR SECOND QUARTER ENDED 08/30/97 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended August 30, 1997 Commission File Number 0-1500 EVANS, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-1050870 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification Number) 36 South State Street, Chicago, Illinois 60603 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 312-855-2000 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: as of October 13, 1997, 4,985,771 shares of common stock, $.20 par value, were outstanding. EVANS, INC. AND SUBSIDIARIES INDEX Page No. Part I. Financial Information Condensed Consolidated Balance Sheets - August 30, 1997, August 31, 1996 and March 1, 1997 2 Condensed Consolidated Statements of Operations - Thirteen and Twenty-six weeks ended August 30, 1997 and August 31, 1996 3 Condensed Consolidated Statements of Cash Flows - Twenty-six weeks ended August 30, 1997 and August 31, 1996 4 Notes to Condensed Consolidated Financial Statements 5 - 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 9 Part II. Other Information 10 Signatures 11 Index to Exhibits 12 PART I. FINANCIAL INFORMATION Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
August 30, August 31, March 1, 1997 1996 1997 ------------ ------------ ------------ ASSETS - ------ Current assets: Cash and cash equivalents $ 194,000 $ 764,000 $ 153,000 Accounts receivable (net) 12,019,000 12,577,000 12,665,000 Merchandise inventories 22,048,000 17,445,000 17,130,000 Prepaid expenses and other assets 1,399,000 1,244,000 899,000 Assets held for sale 4,750,000 -- 4,750,000 Deferred income taxes -- 1,583,000 -- ------------ ------------ ------------ Total current assets 40,410,000 33,613,000 35,597,000 ------------ ------------ ------------ Property and equipment 11,505,000 20,931,000 11,316,000 Accumulated depreciation and amortization (7,752,000) (10,831,000) (7,398,000) ------------ ------------ ------------ Net property and equipment 3,753,000 10,100,000 3,918,000 ------------ ------------ ------------ Other assets 5,411,000 3,353,000 3,107,000 ------------ ------------ ------------ $49,574,000 $47,066,000 $42,622,000 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Notes payable $15,441,000 $11,707,000 $ 9,308,000 Current portion of long-term debt 2,197,000 1,043,000 692,000 Accounts payable 7,772,000 7,361,000 9,318,000 Accrued liabilities 6,073,000 5,784,000 4,983,000 ------------ ------------ ------------ Total current liabilities 31,483,000 25,895,000 24,301,000 ------------ ------------ ------------ Long-term debt 4,252,000 1,569,000 1,224,000 ------------ ------------ ------------ Other liabilities 17,000 11,000 43,000 ------------ ------------ ------------ Shareholders' equity: Preferred stock, 3,000,000 shares authorized, none issued Common stock, 6,333,435 shares issued 1,267,000 1,267,000 1,267,000 Capital in excess of par value 15,510,000 15,660,000 15,660,000 Retained earnings 1,424,000 7,262,000 4,725,000 ------------ ------------ ------------ 18,201,000 24,189,000 21,652,000 ------------ ------------ ------------ Treasury stock (1,347,664 shares at cost) (4,379,000) (4,598,000) (4,598,000) ------------ ------------ ------------ Total shareholders' equity 13,822,000 19,591,000 17,054,000 ------------ ------------ ------------ $49,574,000 $47,066,000 $42,622,000 ============ ============ ============ See accompanying notes to condensed consolidated financial statements.
- 2 - Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirteen weeks ended Twenty-six weeks ended -------------------------- -------------------------- Aug. 30, Aug. 31, Aug. 30, Aug. 31, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $ 7,266,000 $ 6,754,000 $16,316,000 $15,593,000 Service revenues 4,006,000 4,220,000 8,773,000 8,884,000 ------------ ------------ ------------ ------------ 11,272,000 10,974,000 25,089,000 24,477,000 ------------ ------------ ------------ ------------ Costs and expenses: Cost of goods and services sold, buying and occupancy costs 7,593,000 7,706,000 16,559,000 16,197,000 Selling and general expenses 5,221,000 5,239,000 10,776,000 11,169,000 Provision for doubtful accounts 134,000 86,000 257,000 199,000 Interest expense 401,000 354,000 800,000 687,000 Other income, net -- (5,000) (2,000) (5,000) ------------ ------------ ------------ ------------ 13,349,000 13,380,000 28,390,000 28,247,000 ------------ ------------ ------------ ------------ Loss before credit for income taxes (2,077,000) (2,406,000) (3,301,000) (3,770,000) Credit for income taxes -- 1,010,000 -- 1,583,000 ------------ ------------ ------------ ------------ Net loss $(2,077,000) $(1,396,000) $(3,301,000) $(2,187,000) ============ ============ ============ ============ Net loss per common share $(0.42) $(0.28) $(0.67) $(0.44) ------------ ------------ ------------ ------------ Cash dividends per common share -- -- -- -- Weighted average number of common shares outstanding 4,985,771 4,918,301 4,956,485 4,918,301 ============ ============ ============ ============ See accompanying notes to condensed consolidated financial statements.
- 3 - Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Twenty-six weeks ended ------------------------------- Aug. 30, 1997 Aug. 31, 1996 ------------- ------------- Cash Flows from Operating Activities: - ------------------------------------- Net loss $(3,301,000) $(2,187,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 513,000 681,000 Provision for doubtful accounts 257,000 199,000 Non-cash compensation expense 16,000 Change in assets and liabilities: Accounts receivable 389,000 3,208,000 Merchandise inventories (4,918,000) (2,684,000) Prepaid expenses and other current assets (447,000) (90,000) Deferred income taxes - (1,583,000) Other assets (2,415,000) 13,000 Accounts payable (1,546,000) (408,000) Accrued liabilities 1,090,000 323,000 Other liabilities (26,000) - ------------ ------------ Net cash used in operating activities (10,388,000) (2,528,000) Cash Flows from Investing Activities: - ------------------------------------- Additions to property and equipment (237,000) (255,000) ------------ ------------ Net cash used in investing activities (237,000) (255,000) Cash Flows from Financing Activities: - ------------------------------------- Proceeds from short-term borrowing 6,133,000 2,488,000 Proceeds from long-term debt 4,533,000 (319,000) ------------ ------------ Net cash provided by financing activities 10,666,000 2,169,000 ------------ ------------ Net increase (decrease) in cash and cash equivalents 41,000 (614,000) Cash and cash equivalents at beginning of period 153,000 1,378,000 ------------ ------------ Cash and cash equivalents at end of period $ 194,000 $ 764,000 ============ ============ Supplemental Disclosures of Cash Flow Information: - -------------------------------------------------- Cash paid during the period for: Interest $ 673,000 $ 583,000 Income taxes 4,000 75,000 See accompanying notes to condensed consolidated financial statements.
- 4 - EVANS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The financial information included herein was prepared in conformity with generally accepted accounting principles and such principles were applied on a basis consistent with those reflected in the 1997 Form 10-K Annual Report filed with the Securities and Exchange Commission. The accompanying financial data should be read in conjunction with the notes to consolidated financial statements contained in the 1997 Form 10-K Annual Report. The information furnished herein, other than the Condensed Consolidated Balance Sheet as of March 1, 1997, is unaudited and includes all adjustments and accruals consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The Condensed Consolidated Balance Sheet as of March 1, 1997 has been derived from, and does not include all the disclosures contained in the audited financial statements as of and for the year ended March 1, 1997. 2. Because of the seasonal nature of the Company's business, operating results for the first twenty-six weeks are not considered to be indicative of the results that may be expected for the full year. Historically, the Company realizes a major portion of its annual revenues and most of its earnings in the fourth quarter of its fiscal year. 3. Certain reclassifications have been made to the consolidated financial statements. The reclassifications did not effect operating results. 4. Common share equivalents were not included in the computation of earnings per share for the twenty-six weeks ended August 30, 1997 and August 31, 1996, because the periods resulted in net losses and the effect would be antidilutive. 5. On August 4, 1997, the Company entered into a purchase agreement with Triomphe Fourrures Incorporated which was used in connection with the operation of the Maximilian Fur Salons at Bloomingdale's Stores, a division of Federated Department Stores, Inc. The total purchase price was $5,387,000, which included inventory and operating assets as well as the world- wide fur trademark of Maximilian. A down payment of $1,573,000 was made on August 7, 1997 with installments of $524,000 due on November 4, 1997 and February 4, 1998, and quarterly installments of $262,000 due from May 4, 1998 through November 4, 1999, with a final installment of $932,000 due on December 30, 1999. - 5 - EVANS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) The acquisition, which was effective August 2, 1997, was accounted for by the purchase method of accounting and, accordingly, the net assets and results of operations were included in the Company's condensed consolidated financial statements commencing on August 3, 1997. The Maximillian trademark was allocated $1,738,000 of the purchase price with the remaining price exceeding the fair market value of the net assets acquired by $500,000 which was recorded as goodwill. The trademark and the goodwill will be amortized over a forty and twenty year period, respectively, on a straight line basis. On August 7, 1997, the Company entered into an agreement with its lender for an amendment to its loan and security agreement. The amendment, among other things, increased the credit facility to $35,000,000 from $27,000,000. Additionally, the revolving loan commitment which provides for direct borrowing was increased to $33,000,000 from $25,000,000. The financial covenants were adjusted to reflect the acquisition of the assets of Triomphe Fourrures Incorporated, as well as the Company's current financial operating condition. 6. On June 19, 1997, the Company entered into a contract for the sale and leaseback of its flagship store and corporate office headquarters building located at 36 S. State Street in Chicago, Illinois with a purchase price of $5,000,000. The transaction is expected to close on or before October 15, 1997. The Company holds $200,000 in escrow pending performance of the contract. As part of the agreement the Company will execute 15-year and 10-year lease agreements covering 61,775 square feet for the existing retail premises and 36,020 square feet for the corporate operation space, respectively. The leases provide for a rental rate of $12.50 per square foot gross with an escalation of 2.5% per annum. The agreement also requires a $500,000 deposit to secure the lease obligations. The net proceeds from the transaction will be used first to retire the senior secured long-term payable obligation and then to pay down the secured revolving credit facility obligation. - 6 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash and cash equivalents at August 30, 1997 were $194,000 as compared to $153,000 at March 1, 1997. The increase was due to cash used in operating activities of $10,388,000 and cash used in investing activities of $237,000, partially offset by cash provided by financing activities of $10,666,000. The cash used in operating activities was due primarily to the increase in inventories of $4,918,000 and other assets of $2,415,000 due to the acquisition of the Maximilian inventory and trademark. The remaining inventory increase and the accounts payable increase of $1,546,000 is due to the seasonal increase of inventory for the fall season. The cash used in investing activities was due to additions to property and equipment of $237,000, a majority of which related to the Maximilian acquisition. The cash provided by financing activities was due to proceeds from short-term borrowings of $6,133,000 and long- term debt increases. The financing arrangement entered into on June 16, 1997 provided for additional long-term borrowings and the acquisition involved future long-term debt obligations. The $4,824,000 of additional debt was offset by principal payments on long-term debt obligations of $291,000. Working capital at August 30, 1997 was $8,927,000 as compared to $11,296,000 at March 1, 1997. On August 7, 1997, the Company entered into an agreement with its lender for an amendment to its loan and security agreement. The amendment, among other things, increased the credit facility to $35,000,000 from $27,000,000. Additionally, the revolving loan commitment which provides for direct borrowing was increased to $33,000,000 from $25,000,000. The financial covenants were adjusted to reflect the acquisition of the assets of Triomphe Fourrures Incorporated, as well as the Company's current financial operating condition. The credit facility which expires June 15, 2000 is considered adequate to finance seasonal inventory requirements as well as commitments for capital expenditures during fiscal 1998. On June 19, 1997, the Company entered into a contract for the sale of its 36 S. State building in Chicago, Illinois. The proceeds generated from the sale will be used first to pay down the unamortized senior secured long-term payable obligation and then the secured revolving loan obligation. The building, as such, has been classified as an asset held for sale within the current asset section of the balance sheet as of August 30, 1997. - 7 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Total revenues for the second quarter ended August 30, 1997 increased $298,000 (2.7%) as compared to the same period last year. Fur merchandise sales increased $184,000 (6.1%) due primarily from locations acquired during the second quarter of fiscal 1998 offset by a decrease in sales associated with a leased location closed subsequent to the second quarter of 1997. Sales at comparable locations were flat for the quarter. Women's ready-to-wear sales increased $328,000 (8.8%) due to an increase in sales at comparable locations. The Company believes that women's ready-to-wear sales at comparable locations were favorably impacted by the refocusing of its efforts on providing product in line with the tastes of its target consumers. Service revenues decreased $214,000 (5.1%) due primarily to a decrease of $122,000 in sales at comparable locations and the loss of $155,000 in sales associated with a leased location closed subsequent to the second quarter of fiscal 1997 offset by service revenue of $63,000 from locations acquired during the second quarter of fiscal 1998. Total revenues for the first six months increased $612,000 (2.5%) as compared to the same period last year. Fur merchandise sales decreased $130,000 (2.0%) due primarily to a decrease of $1,053,000 (16.9%) in sales at comparable locations and a decrease of $447,000 in sales associated with a leased location closed subsequent to the second quarter of fiscal 1997. These decreases were offset by sales of $855,000 associated with store closing events in the Macy's store in Texas and sales of $515,000 from locations acquired during the second quarter of fiscal 1998. The decrease in fur merchandise sales at comparable locations was largely due to a decrease of $1,021,000 during the month of March which was the result of the lack of availability of finished goods at certain affordable retail price levels. Women's ready-to-wear sales increased $853,000 (9.6%) due to an increase in sales at comparable locations. The Company believes that women's ready-to-war sales at comparable locations were favorably impacted by the refocusing of its efforts on providing product in line with the tastes of its target consumers. Service revenues decreased $111,000 (1.3%) due primarily to a decrease of $220,000 in sales associated with a leased location closed subsequent to the second quarter of fiscal 1997 offset slightly by an increase of $46,000 (0.5%) in sales at comparable locations and an increase of $63,000 from locations acquired during the second quarter of fiscal 1998. Cost of goods and services sold, buying and occupancy costs as a percentage of total revenues for the second quarter decreased (67.4% versus 70.2%) for the same period last year while for the first six months the results were comparable with prior years results. Cost of goods and services sold as a percentage of revenues decreased from 49.4% to 47.3% for the second quarter and remained flat for the six month period. The decrease in the quarter is due to the Company's continuing efforts to achieve higher gross margins on merchandise sales. Buying costs as a percentage of total revenues, for both the quarter and for the six months ended, were comparable with prior year levels. Occupancy costs as a percentage of total revenues for the second quarter (17.0% versus 15.9%) and first six months (15.4% versus 14.6%) decreased in comparison with the prior periods. These decreases were due primarily to the impact of fixed rental costs as measured against the overall increase in sales. - 8 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, continued Total selling and general expenses were flat for the second quarter and decreased $393,000 (3.5%) for the first six months as compared to the prior year. Payroll and related fringe benefits decreased $154,000 (4.1%) and $504,000 (6.5%) for the quarter and year to date, respectively. The decreases are due primarily to the result of additional staff reductions in various corporate departments which the Company initiated during the fourth quarter of fiscal 1997. For the second quarter, the savings were offset by the payroll and benefits related to the acquisition and the operation of the Maximilian Fur Salons at Bloomingdale's Stores. Advertising expense decreased $117,000 (20.1%) and $167,000 (11.1%) for the second quarter and first six months, respectively. This decrease is due to the repositioning of advertising costs to gain maximum benefit. The decreases noted were offset by settlements in the quarter related to various legal disputes totaling $81,000. In addition, the prior year's second quarter results included a $175,000 settlement related to the early termination of a lease agreement. Interest expense for the second quarter and first six months increased $47,000 (13.3%) and $113,000 (16.4%) respectively due primarily to higher average short-term borrowings as well as higher weighted average interest rates as compared to the same period last year. The credit for income taxes for the second quarter and year to date was offset by an increase in the Company's valuation allowance with respect to the future tax benefits of the net operating loss as a result of the uncertainty of their ultimate realization. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" effective for years ending after December 15, 1997. The Company does not believe that adoption will have a material impact on historical earnings per share. - 9 - PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Part I. Exhibit 11 Computation of earnings per share. (b) Reports on Form 8-K A report on form 8-K dated August 4, 1997 was filed by the Company stating that the Company had finalized an agreement to acquire the assets of Triomphe Fourrures, Incorporated and that the Company had finalized an agreement with its lender for an amendment to its loan and security agreement. Relating to the acquisition, a Pro Forma Condensed Consolidated Balance Sheet as of May 31, 1997 was presented as well as Pro Forma Condensed Consolidated Statements of Earnings for the year ended March 1, 1997 and for the thirteen weeks ended May 31, 1997. Items other than those listed are omitted because they are not required. - 10 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. EVANS, INC. DATE: October 13, 1997 PATRICK J. REGAN PATRICK J. REGAN President and Chief Executive Officer DATE: October 13, 1997 WILLIAM E. KOZIEL WILLIAM E. KOZIEL Vice President and Chief Financial Officer - 11 - EVANS, INC. AND SUBSIDIARIES Exhibit Page Nos. 11 13 - 12 - EXHIBIT 11 EVANS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Thirteen weeks ended Twenty-six weeks ended -------------------------- -------------------------- August 30, August 31, August 30, August 31, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Primary: -------- Weighted average shares outstanding 4,985,771 4,918,301 4,956,485 4,918,301 Incremental shares for exercise of stock options -- 99,165 -- 42,487 ------------ ------------ ------------ ------------ Adjusted number of common shares outstanding 4,985,771 5,017,466 4,956,485 4,960,788 ============ ============ ============ ============ Net loss $(2,077,000) $(1,396,000) $(3,301,000) $(2,187,000) ============ ============ ============ ============ Net loss per share $(0.42) $(0.28) $(0.67) $(0.44) ======= ======= ======= ======= Fully diluted: -------------- Weighted average shares outstanding 4,985,771 4,918,301 4,956,485 4,918,301 Incremental shares for exercise of stock options -- 160,900 -- 160,900 ------------ ------------ ------------ ------------ Adjusted number of common shares outstanding 4,985,771 5,079,201 4,956,485 5,079,201 ============ ============ ============ ============ Net loss $(2,077,000) $(1,396,000) $(3,301,000) $(2,187,000) ============ ============ ============ ============ Net loss per share $(0.42) $(0.27) $(0.67) $(0.43) ======= ======= ======= ======= - 13 -
EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
5 1 6-MOS Feb-28-1998 Mar-02-1997 Aug-30-1997 194,000 0 12,019,000 0 22,048,000 40,410,000 11,505,000 7,752,000 49,574,000 31,483,000 0 1,267,000 0 0 12,555,000 49,574,000 16,316,000 25,089,000 11,990,000 16,559,000 (2,000) 0 800,000 (3,301,000) 0 (3,301,000) 0 0 0 (3,301,000) .67 .67
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