-----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, IjS/NTMzhiFDIInfUh6qrRKlsFQke5wTkTWIjFJ40/YZCZBdN/HNkLlJUNx5RpDK ElgZHfG0YEKSNy1+mcMDww== 0000033780-98-000001.txt : 19980114 0000033780-98-000001.hdr.sgml : 19980114 ACCESSION NUMBER: 0000033780-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971129 FILED AS OF DATE: 19980113 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: 98505469 BUSINESS ADDRESS: STREET 1: 36 S STATE ST CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3128552000 10-Q 1 EVANS,INC. 10-Q FOR THE 3RD QUARTER ENDED 11/29/97 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 November 29, 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 January 12, 1998, 4,992,947 shares of common stock, $.20 par value, were outstanding. EVANS, INC. AND SUBSIDIARIES INDEX Page No. Part I. Financial Information Condensed Consolidated Balance Sheets - November 29, 1997, November 30, 1996 and March 1, 1997 2 Condensed Consolidated Statements of Operations - Thirteen and Thirty-nine weeks ended November 29, 1997 and November 30, 1996 3 Condensed Consolidated Statements of Cash Flows - Thirty-nine weeks ended November 29, 1997 and November 30, 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 November 29, 1997 November 30, 1996 March 1, 1997 ----------------- ----------------- ------------- (unaudited) (unaudited) ASSETS Current assets: Cash and cash equivalents $ 384,000 $ 2,768,000 $ 153,000 Accounts receivable (net) 15,125,000 14,753,000 12,665,000 Merchandise inventories 39,640,000 31,311,000 17,130,000 Prepaid expenses and other assets 1,306,000 598,000 899,000 Assets held for sale 4,750,000 - 4,750,000 Deferred income taxes - 2,074,000 - ----------------- ----------------- ------------- Total current assets 61,205,000 51,504,000 35,597,000 ----------------- ----------------- ------------- Property and equipment 11,566,000 20,612,000 11,316,000 Accumulated depreciation and amortization (7,948,000) (10,681,000) (7,398,000) ----------------- ----------------- ------------- Net property and equipment 3,618,000 9,931,000 3,918,000 ----------------- ----------------- ------------- Other assets 5,344,000 3,279,000 3,107,000 ----------------- ----------------- ------------- $ 70,167,000 $ 64,714,000 $ 42,622,000 ================= ================= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 16,857,000 $ 13,588,000 $ 9,308,000 Current portion of long- term debt 1,959,000 1,043,000 692,000 Accounts payable 26,220,000 22,958,000 9,318,000 Accrued liabilities 7,294,000 6,678,000 4,983,000 ----------------- ----------------- ------------- Total current liabilities 52,330,000 44,267,000 24,301,000 ----------------- ----------------- ------------- Long-term debt 3,918,000 1,486,000 1,224,000 ----------------- ----------------- ------------- Other liabilities 12,000 47,000 43,000 ----------------- ----------------- ------------- Shareholders' equity: Preferred stock, 3,000,000 shares authorized, none issued Common stock, 6,333,435 shares 1,267,000 1,267,000 1,267,000 Capital in excess of par value 15,503,000 15,660,000 15,660,000 Retained earnings 1,503,000 6,585,000 4,725,000 ----------------- ----------------- ------------- 18,273,000 23,512,000 21,652,000 Treasury stock (1,343,664 shares) (4,366,000) (4,598,000) (4,598,000) ----------------- ----------------- ------------- 13,907,000 18,914,000 17,054,000 ----------------- ----------------- ------------- $ 70,167,000 $ 64,714,000 $ 42,622,000 ================= ================= ============= See accompanying notes to condensed consolidated financial statements. Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Thirteen weeks ended Thirty-nine weeks ended --------------------------- ---------------------------- November 29, November 30, November 29, November 30, 1997 1996 1997 1996 ------------- ------------ ------------- ------------- Net sales $ 24,619,000 $ 19,765,000 $ 40,935,000 $ 35,358,000 Service revenues 1,887,000 1,866,000 10,660,000 10,750,000 ------------- ------------ ------------- ------------- 26,506,000 21,631,000 51,595,000 46,108,000 ------------- ------------ ------------- ------------- Costs and expenses: Cost of goods and services sold, buying and occupancy 16,310,000 13,677,000 32,869,000 29,874,000 Selling and general expenses 9,454,000 8,557,000 20,230,000 19,726,000 Provision for doubtful accounts 218,000 158,000 475,000 357,000 Interest expense 446,000 407,000 1,246,000 1,094,000 Other income, net (1,000) - (3,000) (5,000) ------------- ------------ ------------- ------------- 26,427,000 22,799,000 54,817,000 51,046,000 ------------- ------------ ------------- ------------- Income (loss) before credit for income taxes 79,000 (1,168,000) (3,222,000) (4,938,000) Credit for income taxes -- 491,000 -- 2,074,000 ------------- ------------ ------------- ------------- Net income (loss) $ 79,000 $ (677,000) $ (3,222,000) $ (2,864,000) ============= ============ ============= ============= Net income (loss) per common share $0.02 $ (0.14) $ (0.65) $ (0.58) ============= ============ ============= ============= Cash dividends per common share -- -- -- -- ============= ============ ============= ============= Weighted average number of common shares outstanding 5,174,635 4,918,301 4,966,935 4,918,301 ============= ============ ============= ============= See accompanying notes to condensed consolidated financial statements. Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Thirty-nine weeks ended --------------------------------------- November 29, 1997 November 30, 1996 ----------------- ----------------- Cash Flows from Operating Activities: Net loss $ (3,222,000) $ (2,864,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 802,000 1,047,000 Provision for doubtful accounts 438,000 357,000 Non-cash compensation expense 22,000 - Change in assets and liabilities: Accounts receivable (2,898,000) 874,000 Merchandise inventories (21,445,000) (16,550,000) Prepaid expenses and other current assets (354,000) 556,000 Deferred income taxes - (2,074,000) Other assets (1,922,000) 28,000 Accounts payable 16,902,000 15,189,000 Accrued liabilities 2,311,000 1,217,000 Other liabilities (31,000) 36,000 ----------------- ----------------- Net cash used in operating activities (9,397,000) (2,184,000) Cash Flows from Investing Activities: Acquisition of business (1,573,000) - Additions to property and equipment (309,000) (393,000) ----------------- ----------------- Net cash used in investing activities (1,882,000) (393,000) Cash Flows from Financing Activities: Proceeds from short-term borrowing 7,549,000 4,369,000 Proceeds/(payments) on long-term debt 3,961,000 (402,000) ----------------- ----------------- Net cash provided by financing activities 11,510,000 3,967,000 ----------------- ----------------- Net increase in cash and cash equivalents 231,000 1,390,000 Cash and cash equivalents at beginning of period 153,000 1,378,000 ----------------- ----------------- Cash and cash equivalents at end of period $ 384,000 $ 2,768,000 ================= ================= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 1,107,000 $ 967,000 Income taxes 13,000 79,000 See accompanying notes to condensed consolidated financial statements. 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 thirty-nine 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. Net earnings (loss) per share is computed on the basis of the weighted average number of common shares outstanding and common share equivalents resulting from the assumed exercise of common stock options. Common share equivalents were not included in the computation of earnings per share for the thirty-nine weeks ended November 29, 1997 and for the thirteen and thirty-nine weeks ended November 30, 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(R) 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(R). A down payment of $1,573,000 was made on August 7, 1997 and the first installment of $524,000 was paid on November 4, 1997. The second installment of $524,000 is due on February 4, 1998, and quarterly installments of $262,000 are due from May 4, 1998 through November 4, 1999, with a final installment of $932,000 due on December 30, 1999. EVANS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 closed on December 17, 1997. As part of the agreement the Company executed 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 agreement also required a $500,000 deposit to secure the lease obligations. The proceeds of $4,100,000 generated from the sale were used first to pay down the unamortized senior secured long-term payable obligation and then the secured revolving loan obligation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash and cash equivalents at November 29, 1997 were $384,000 as compared to $153,000 at March 1, 1997. The increase was due to cash provided by financing activities of $11,510,000 offset by cash used in operating activities of $9,397,000 and cash used in investing activities of $1,882,000. The cash used in operating activities was due primarily to the increase in inventories of $21,445,000 due to the seasonal increase of inventory for the fall season along with the increase related to the acquisition of Maximilian(R) inventory. Accounts payable increased $16,902,000 related to the inventory requirements. Also contributing to the operating activities increase was an increase of other assets of $1,922,000 due primarily to the acquisition of the Maximilian(R) trademark. The cash used in investing activities was due to the acquisition of Maximilian(R) of $1,573,000 and additions to property and equipment of $309,000, of which $145,000 related to the Maximilian(R) purchase with the additional amount being due to the purchase of computer-related equipment. The cash provided by financing activities was due to proceeds from short-term borrowings of $7,549,000 and long-term debt. 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 $4,825,000 of additional debt was offset by principal payments on long-term debt obligations of $864,000. Working capital at November 29, 1997 was $8,875,000 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 transaction closed on December 19, 1997. The proceeds generated from the sale of $4,100,000 were used first to pay down the unamortized senior secured long-term payable obligation and then the secured revolving loan obligation. The building has been classified as an asset held for sale within the current asset section of the balance sheet as of November 29, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Total revenues for the third quarter ended November 29, 1997 increased $4,875,000 (22.5%) as compared to the same period last year. Fur merchandise sales increased $4,406,000 (31.2%) primarily due to locations acquired during the second quarter of fiscal 1998 offset by a decrease in sales associated with a store closing event at Marshall Field's in Texas in the third quarter of the prior year. Sales at comparable locations increased $588,000 (4.4%) due to products being available at affordable price points and the trend toward fur fashion awareness. Women's ready-to-wear sales increased $447,000 (7.9%) due to an increase in sales at comparable locations. The Company believes that wom en'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 remained consistent with the prior year due primarily to a decrease of sales at comparable locations offset by service revenue from locations acquired during the second quarter of fiscal 1998. Total revenues for the first nine months increased $5,487,000 (11.9%) as compared to the same period last year. Fur merchandise sales increased $4,275,000 (20.6%) due primarily to a decrease of $467,000 (2.4%) in sales at comparable locations and a decrease of $447,000 in sales associated with a leased location closed during the second quarter of fiscal 1997. These decreases were offset by sales of $5,166,000 from locations acquired during the second quarter of fiscal 1998. The decrease in fur merchandise sales at comparable locations was largely due to a significant 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 $1,302,000 (8.9%). The Company believes that women's ready-to-wear sales were favorably impacted by the refocusing of its efforts on providing product in line with the tastes of its target consumers. Service revenues decreased $90,000 (0.8%) due primarily to a decrease of $265,000 in sales associated with a leased location closed in the second quarter of fiscal 1997 and a decrease of $222,000 in sales at comparable locations offset by an increase of $396,000 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 decreased for both the third quarter (61.5% versus 63.2%) and the first nine months ended November 29, 1997 (63.7% versus 64.8%) compared to the same periods in the previous year. Cost of goods and services sold as a percentage of revenues were relatively flat for the third quarter and for the nine month period. Buying costs as a percentage of total revenues decreased slightly for the quarter (1.9% versus 2.3%). Buying costs for the nine months period ended November 29, 1997 were comparable with prior year levels. Occupancy costs as a percentage of total revenues decreased for both the quarter (10.8% versus 11.9%) and the nine months ended November 29, 1997 (12.6% versus 13.8%) in comparison with the prior periods. The decrease was due primarily to the impact of fixed rental costs as measured against the overall increase in sales. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of operations, (continued) Total selling and general expenses increased $897,000 (10.5%) for the third quarter and increased $504,000 (2.6%) for the first nine months as compared to the prior year. Payroll and related fringe benefits increased $812,000 (17.8%) and $308,000 (2.5%) for the quarter and year to date, respectively. The increases are due primarily to the payroll and benefits related to the acquisition and the operation of the Maximilian(R) Fur Salons at Bloomingdale's Stores. Advertising expense increased $212,000 (9.0%) and $45,000 (1.2%) for the third quarter and first nine months, respectively. This increase is due primarily to advertising costs related to the operation of the Maximilian(R) Fur Salons at Bloomingdale's Stores acquired during the second quarter of 1998. These increases were offset by decreases in depreciation related to the sale of the State Street building ($78,000 for the third quarter and $243,000 for the nine month period ended November 29, 1997). Interest expense for the third quarter and the first nine months increased $39,000 (9.6%) and $152,000 (13.9%) 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 third 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. Other 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. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" effective for fiscal years beginning after December 15, 1997. The Company does not anticipate that adoption will have any impact on reporting of financial results. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" effective for financial statements for periods beginning after December 15, 1997. The company has not yet determined how the adoption will effect the reporting of the business. 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 None. Items other than those listed are omitted because they are not required. 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: January 12, 1998 ROBERT K. MELTZER ----------------- ROBERT K. MELTZER President and Chief Executive Officer DATE: January 12, 1998 WILLIAM E. KOZIEL ----------------- WILLIAM E. KOZIEL Vice President and Chief Financial Officer EVANS, INC. AND SUBSIDIARIES Exhibit Page Nos. 11 13 EXHIBIT 11 EVANS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Thirteen weeks ended Thirty-nine weeks ended ------------------------- -------------------------- November 29, November 30, November 29, November 30, 1997 1996 1997 1996 ----------- ------------ ------------ ------------ Primary: Weighted average shares outstanding 4,987,837 4,918,301 4,966,935 4,918,301 Incremental shares for exercise of stock options 186,798 118,419 67,216 63,390 ----------- ------------ ------------ ------------ Adjusted number of common shares outstanding 5,174,635 5,036,720 5,034,151 4,981,691 =========== ============ ============ ============ Net income (loss) $79,000 $(677,000) $(3,222,000) $(2,864,000) =========== ============ ============ ============ Net income (loss) per share $ 0.02 $ (0.13) $ (0.64) $ (0.57) =========== ============ ============ ============ Fully diluted: Weighted average shares outstanding 4,987,837 4,918,301 4,966,935 4,918,301 Incremental shares for exercise of stock options 186,798 118,419 133,556 72,567 ----------- ------------ ------------ ------------ Adjusted number of common shares outstanding 5,174,635 5,036,720 5,100,491 4,990,868 =========== ============ ============ ============ Net income (loss) $79,000 $(677,000) $(3,222,000) $(2,864,000) =========== ============ ============ ============ Net income (loss) per share $ 0.02 $ (0.13) $ (0.63) $ (0.57) =========== ============ ============ ============ EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3RD QTR 10-Q
5 9-MOS Feb-28-1998 Nov-29-1997 384,000 0 15,125,000 0 39,640,000 61,205,000 11,566,000 7,948,000 70,167,000 52,330,000 0 0 0 1,267,000 17,006,000 70,167,000 40,935,000 51,595,000 24,927,000 32,869,000 472,000 0 1,246,000 (3,222,000) 0 (3,222,000) 0 0 0 (3,222,000) .65 .65
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