-----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, QRlW990pB8JB6RtYyZqBy9lpDZSd+McbLFGPociF/79lOagCN0QvjZ0Dzef8c52x K/y81KJf61IGpz9TQHXaaw== 0000033780-98-000011.txt : 19981014 0000033780-98-000011.hdr.sgml : 19981014 ACCESSION NUMBER: 0000033780-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980829 FILED AS OF DATE: 19981013 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: 98724282 BUSINESS ADDRESS: STREET 1: 36 S STATE ST CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3128552000 10-Q 1 EVANS, INC. 10Q FOR THE SECOND QUARTER 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 29, 1998 - ------------------------------------------------------------------------------ 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 Identification Incorporation or organization) 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 12, 1998, 5,199,845 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 29, 1998, August 30, 1997 and February 28, 1998 2 Condensed Consolidated Statements of Operations - Thirteen and Twenty-six weeks ended August 29, 1998 and August 30, 1997 3 Condensed Consolidated Statements of Cash Flows - Twenty-six weeks ended August 29, 1998 and August 30, 1997 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 29, August 30, February 28, 1998 1998 1997 ---------- ----------- ----------- ASSETS (Audited) Current assets: Cash and cash equivalents $ 700,000 $ 194,000 $ 650,000 Accounts receivable (net) 11,775,000 12,019,000 12,639,000 Merchandise inventories 25,846,000 22,048,000 25,495,000 Prepaid expenses and other assets 175,000 1,399,000 923,000 Assets held for sale - 4,750,000 - ---------- ---------- ---------- Total current assets 38,496,000 40,410,000 39,707,000 ---------- ---------- ---------- Property and equipment 11,789,000 11,505,000 11,642,000 Accumulated depreciation and amortization (8,582,000) (7,752,000) (8,203,000) ---------- ---------- ---------- Net property and equipment 3,207,000 3,753,000 3,439,000 ---------- ---------- ---------- Other assets 5,094,000 5,411,000 5,254,000 ---------- ---------- ---------- $46,797,000 $49,574,000 $48,400,000 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $16,809,000 $15,441,000 $13,021,000 Current portion of long-term debt 1,745,000 2,197,000 1,411,000 Accounts payable 9,392,000 7,772,000 11,165,000 Accrued liabilities 5,617,000 6,073,000 4,694,000 ---------- ---------- ---------- Total current liabilities 33,563,000 31,483,000 30,291,000 ---------- ---------- ---------- Long-term debt 1,193,000 4,252,000 1,808,000 ---------- ---------- ---------- Other liabilities - 17,000 - ---------- ---------- ---------- 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 15,023,000 15,510,000 15,495,000 Unearned compensation (96,000) - - (Accumulated deficit)retained earnings (451,000) 1,424,000 3,890,000 ---------- ---------- ---------- 15,743,000 18,201,000 20,652,000 Treasury stock (1,347,664 shares at cost) (3,702,000) (4,379,000) (4,351,000) ---------- ---------- ---------- 12,041,000 13,822,000 16,301,000 ---------- ---------- ---------- $46,797,000 $49,574,000 $48,400,000 ========== ========== =========== See accompanying notes to condensed consolidated financial statements. Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Thirteen weeks ended Twenty-six weeks ended ---------------------- ----------------------- August 29, August 30, August 29, August 30, 1998 1997 1998 1997 ------------ ----------- ------------ ------------ Net sales $ 8,201,000 $ 7,266,000 $ 18,906,000 $ 16,316,000 Service revenues 4,218,000 4,006,000 10,678,000 8,773,000 ----------- ---------- ---------- ----------- 12,419,000 11,272,000 29,584,000 25,089,000 ----------- ---------- ---------- ----------- Costs and expenses: Cost of goods and services sold, buying and occupancy 8,957,000 7,593,000 20,147,000 16,559,000 Selling and general expenses 5,953,000 5,221,000 12,827,000 10,776,000 Provision for doubtful accounts 113,000 134,000 256,000 257,000 Interest expense 370,000 401,000 702,000 800,000 Other income, net (3,000) - (7,000) (2,000) ------------ ---------- ---------- ----------- 15,390,000 13,349,000 33,925,000 28,390,000 ------------ ---------- ---------- ----------- Net loss (2,971,000) (2,077,000) (4,341,000) (3,301,000) ============ ============ ========== ============ Net loss per common share $ (0.57) $ (0.42) $ (0.84) $ (0.67) ============ ============ ========== ============ Weighted average number of common shares outstanding 5,194,245 4,985,771 5,194,245 4,956,485 ============ ============ ========== ============ See accompanying notes to condensed consolidated financial statements. Evans, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Twenty-six weeks ended --------------------------------- August 29, 1998 August 30, 1997 -------------- ------------- Cash Flows from Operating Activities: Net loss $ (4,341,000) $ (3,301,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 548,000 513,000 Provision for doubtful accounts 256,000 257,000 Non-cash compensation expense 47,000 16,000 Change in assets and liabilities: Accounts receivable 608,000 389,000 Merchandise inventories (351,000) (1,914,000) Prepaid expenses and other current assets 782,000 (447,000) Other assets - (177,000) Accounts payable (1,773,000) (1,546,000) Accrued liabilities 923,000 1,090,000 Other liabilities - (26,000) -------------- ------------- Net cash used in operating activities (3,301,000) (5,146,000) Cash Flows from Investing Activities: Acquisition of business - (5,387,000) Additions to property and equipment (156,000) (92,000) -------------- ------------- Net cash used in investing activities (156,000) (5,479,000) Cash Flows from Financing Activities: Proceeds from short-term borrowing 3,788,000 6,133,000 Note payable related to acquisition - 3,815,000 Proceeds from long-term debt - 1,009,000 Payments on acquisition debt (100,000) - Payments on long-term debt (181,000) (291,000) -------------- ------------- Net cash provided by financing activities 3,507,000 10,666,000 -------------- ------------- Net increase in cash and cash equivalents 50,000 41,000 Cash and cash equivalents at beginning of period 650,000 153,000 -------------- ------------- Cash and cash equivalents at end of period $ 700,000 $ 194,000 ============== ============= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 673,000 $ 673,000 Income taxes 45,000 4,000 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 1998 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 1998 Form 10-K Annual Report. The information furnished herein, other than the Condensed Consolidated Balance Sheet as of February 28, 1998 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 February 28, 1998 has been derived from, and does not include all the disclosures contained in the audited financial statements as of and for the year ended February 28, 1998. 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. The following table sets forth the computation of basic and diluted earnings per share: Weighted Avg. Net loss Shares Per Share (Numerator) (Denominator) Amounts Twenty-six weeks ended August 29, 1998 Basic EPS: Loss available to common shareholder $(4,341,000) 5,194,245 $(0.84) ============ ========= ======= Effect of dilutive options 0 --------- Dilutive EPS: Loss available to common shareholder plus assumed conversions $(4,341,000) 5,194,245 $(0.84) ============ ========= ======= Twenty-six weeks ended August 30, 1997 Basic EPS: Loss available to common shareholder $(3,301,000) 4,956,485 $(0.67) ============ ========= ======= Effect of dilutive options 0 --------- Dilutive EPS: Loss available to common shareholder plus assumed conversions $(3,301,000) 4,956,485 $(0.67) ============ ========= ======= EVANS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Evans recognizes the potential impact that the Year 2000 issue may have relative to its computer systems and has implemented an action plan to ensure that all systems will be fully Year 2000 compliant. The action plan includes a combination of internal and external resources to be utilized for modifications. These modifications will include hardware and software upgrades or replacement of non-compliant systems. Modifications for all systems are in various stages of completion. Some modifications have been fully implemented and satisfactorily tested, while others are in lesser stages of completion. The Company is confident that all systems will be appropriately modified in a timely manner to handle the turn of the century computer issues. The related costs of compliance are currently being evaluated. Preliminary estimates range from $500,000 to $750,000. The Company has completed its assessment with regard to non-financial software and chip embedded technology. Modifications will include upgrades or replacement of systems. The cost of making those adaptations are not expected to be material and will be expensed in the period incurred. The Company has contacted its critical suppliers, service providers and partners to determine the extent to which the Company is vulnerable to those third parties' failure to remedy their own Year 2000 issues. The Company has received indications from a majority of its suppliers, service providers and partners that they are in the process of working on Year 2000 compliance. In the event that any of the Company's significant suppliers, service providers or partners do not successfully and timely achieve Year 2000 compliance, the Company's business or operations could be adversely affected. The costs of the project and the date on which the Company plans to complete its Year 2000 assessment and remediation are based on management's estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ significantly from those plans. The Company is developing contingency plans for the above areas addressing any material failure to deal with Year 2000 issues. EVANS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash and cash equivalents at August 29, 1998 were $700,000 as compared to $650,000 at February 28, 1998. The increase was due to cash provided by financing activities of $3,507,000 offset by cash used in operating activities of $3,301,000 and cash used in investing activities of $156,000. The cash used in operating activities was due primarily to the increase in inventories and accounts payable of $351,000 and $1,773,000 respectively, due to the purchase of fur merchandise for the acquired locations coupled with the seasonal increase of inventory for the fall season. The cash used in investing activities was due to additions to property and equipment of $156,000. The cash provided by financing activities was due to proceeds from short-term borrowings of $3,788,000 offset by payments on acquisition debt and other long-term debt totaling $281,000. Working capital at August 29, 1998 was $4,933,000 as compared to $9,416,000 at February 28, 1998. The decrease in working capital is due to the general funding of operations in the first and second quarters. The $35,000,000 credit facility, which expires June 15, 2000 is considered adequate to finance seasonal inventory requirements as well as commitments for capital expenditures during fiscal 1999. Results of Operations Total revenues for the second quarter ended August 29, 1998 increased $1,147,000 (10.2%) as compared to the same period last year. Fur merchandise sales increased $677,000 (21.1%) due primarily to locations acquired during the last month of the second quarter of fiscal 1998. The current quarter includes all three months of revenues. Sales at comparable locations were flat for the quarter. Women's ready-to-wear sales increased $258,000 (6.4%). The Company believes that women's ready-to-wear sales were favorably impacted by the increase in the demand for casual wear by consumers. The Company continues to focus its efforts to provide product in line with the tastes of its target consumers. Service revenues increased $212,000 (5.3%) due primarily to an increase of $625,000 in sales from locations acquired during the last month of the second quarter of fiscal 1998 offset by a comparable sales decrease of $413,000. The comparable sales decrease is a result of the impact of the unseasonably warm winter as customer's needs for services on their fur coats decreased due to decreased use of the garments. EVANS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenues for the first six months increased $4,495,000 (17.9%) as compared to the same period last year. Fur merchandise sales increased $2,269,000 (34.6%) due primarily to sales of $2,799,000 from locations acquired during the last month of the second quarter of fiscal 1998 and an increase of comparable sales of $325,000. The Company believes that the comparable sales increase is due to the continued resurgence of fur as fashion. These increases were offset by sales of $855,000 associated with store closing events in the Macy's store in Texas in the second quarter of 1998. Women's ready-to-wear sales increased $321,000 (3.3%). The Company believes that women's ready-to-wear sales were favorably impacted by the increase in the demand for casual wear by consumers. The Company continues to focus its efforts to provide product in line with the tastes of its target consumers. Service revenues increased $1,905,000 (21.7%) due an increase of $2,382,000 from locations acquired during the last month of the second quarter of fiscal 1998 offset by a comparable sales decrease of $477,000. The comparable sales decrease is a result of the impact of the unseasonably warm winter as customer's needs for services on their fur coats decreased due to decreased use of the garments. Cost of goods and services sold, buying and occupancy costs as a percentage of total revenues for the second quarter and for the first six months increased (72.1% versus 67.4% and 68.1% versus 66.0% respectively). Cost of goods and services sold as a percentage of revenues increased from 47.3% to 50.5% for the second quarter and increased from 47.8% to 48.8% for the six month period. The increase in the quarter and year to date is due to increased costs associated with running the service business at locations acquired during the last month of the second quarter of fiscal 1998. 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 (17.6% versus 15.9%) and first six months (15.9% versus 14.6%) increased in comparison with the prior periods. These increases were due primarily to higher average rental costs related to the rentals included on locations acquired during the second quarter of 1998. Total selling and general expenses increased $733,000 (14.0%) and $2,052,000 (19.0%) for the second quarter and for the first six months respectively as compared to the prior year. Payroll and related fringe benefits increased $888,000 (24.5%) and $2,049,000 (28.5%) 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. For the second quarter, the increase was offset by settlements received totaling approximately $81,000 in the second quarter of the previous year. Interest expense for the second quarter and first six months decreased $31,000 (7.7%) and $98,000 (12.3%) respectively due primarily to higher average short-term borrowings at a lower weighted average interest rate as compared to the same period last year. EVANS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995 Certain statements included in these financial statements that are not historical facts may include forward-looking statements. The Company cautions readers that these forward-looking statements are subject to a variety of risks and uncertainties that could cause Evans' actual results to differ materially from those expressed in forward-looking statements. These risks and uncertainties include, without limitation, general economic and business conditions affecting the customers in existing and new geographical markets, competition from national, regional and local retailers, the availability of sufficient capital, and the ability to obtain and identify the right product mix and to maintain sufficient inventory to meet customer demand. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the twenty-six weeks ended August 29, 1998. 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: October 12, 1998 ROBERT K. MELTZER ------------------------ ROBERT K. MELTZER President and Chief Executive Officer DATE: October 12, 1998 WILLIAM E. KOZIEL ------------------------ WILLIAM E. KOZIEL Vice President and Chief Financial Officer EVANS, INC. AND SUBSIDIARIES Exhibit Page No. 27 12 EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QUARTER 10Q
5 6-MOS Feb-27-1999 Aug-29-1998 700,000 0 11,775,000 0 25,846,000 38,496,000 11,789,000 8,582,000 46,797,000 33,563,000 0 0 0 1,267,000 10,774,000 46,797,000 18,906,000 29,854,000 14,451,000 32,974,000 110,000 0 702,000 (4,341,000) 0 (4,341,000) 0 0 0 (4,341,000) .84 .84
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