SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 2, 1996, Commission File No. 0-1500
Evans, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-1050870
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
36 South State Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 855-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.20 par value
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 and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
The aggregate market value of voting stock of the Registrant held
by nonaffiliates of the Registrant was approximately $5,103,000.
For purposes of this calculation, all directors and officers of the
Registrant have been considered to be affiliates.
As of May 22, 1996, 4,918,301 shares of the Registrant's common stock
were outstanding.
Portions of the Registrant's Proxy Statement for its Annual Meeting
of Stockholders to be held on July 30, 1996 are incorporated into
Parts I and III of this Form 10-K.
<PAGE>
PART I
Item 1. Business
Evans, Inc. (together with its subsidiaries, hereinafter "Evans" or
the "Company"), founded in 1929, was conducted by a predecessor and
affiliates until 1963 when the Company was incorporated under Delaware
law. Evans' executive offices are located at its main store at 36
South State Street, Chicago, Illinois 60603 and its telephone number
is (312) 855-2000.
Evans is a retailer of fur apparel, cloth coats and suits, dresses,
sportswear, and related items and services. Fur apparel is carried
in all Company-owned stores, excluding the two Evans Woman locations,
while women's ready-to-wear apparel is carried in the 10 Chicago area
Evans and Evans Woman stores. Company stores are located in Metropolitan
Chicago, Austin, Dallas, and Washington D.C. areas. The Company operated
leased departments in 54 locations in 8 major department store chains
located in major metropolitan areas throughout the eastern half of
the United States.
The Company's Black Diamond mink trademark is registered in the United
States Patent and Trademark Office and in the trademark offices of
18 other countries. Black Diamond mink is known as a luxurious fur
made from among the finest and darkest natural ranch mink. All Company
owned stores, as well as most of the leased fur salons, market Black
Diamond fashions. The Company has licensed the Black Diamond mink
trademark in Canada.
Evans intends to continue its business activities as described above
in the future.
Buying is conducted by buyers and merchandising personnel in the open
market under competitive conditions.
Compliance with federal, state and local regulations relating to the
protection of the environment had no material effect upon the capital
expenditures, earnings or competitive position of Evans. Fur apparel
sold by Evans does not include any so-called "endangered species" and
is primarily ranch bred for apparel purposes.
Evans employs regularly on a full or part-time basis approximately
825 employees whose number increases during the Christmas season to
a peak of approximately 1,050.
Evans' business is seasonal in nature and historically realizes a major
portion of its annual revenues in the second half and most of its earnings
in the fourth quarter of its fiscal year. This seasonality results
in an increase in short-term borrowings in the beginning of the third
quarter which continues well into the second half of the year due to
increased inventories and accounts receivable during such period.
<PAGE>
Item 1. Business, continued
During January, 1995, the Company, through an acquisition, opened four
leased locations in the Minneapolis metropolitan area at Dayton's and
eighteen locations within the Hudson's stores in Michigan, both of
which are divisions of the Dayton Hudson Corporation, as well as three
leased locations with Rich's in the Atlanta metropolitan area and two
locations with Goldsmith's in Memphis, both being divisions of Federated
Department Stores, Inc. Also, in September, 1995, the Company opened
an additional leased location in the new Marshall Fields store in Northbrook,
Illinois.
During fiscal 1996, the Company closed its Evans stores in Merrillville,
Indiana and Schaumburg, Illinois as well as its Koslow's stores in
San Antonio and Fort Worth, Texas. Also, in December, 1995, Federated
Department Stores, Inc. closed its downtown store in Pittsburgh, Pennsylvania
in which the Company operated a leased location.
During the first quarter of fiscal 1997, Strawbridge & Clothier announced
that it was being acquired by The May Department Stores Company. Strawbridge
& Clothier subsequently notified the Company of its desire to terminate
the Company's license agreement. As of June 15, 1996, the Company
will close its one leased location at Strawbridge & Clothier, but will
continue its fur service business in the Philadelphia area through
an agreement with a local service facility.
The Company offers retail customers a program of fur services, including
cleaning, storage, repair, restyling and insurance. The Company provides
storage for approximately 125,000 fur garments annually, primarily
at facilities in its retail locations. Repair and restyling services
are usually performed by Company personnel. Information regarding
the percentage composition of the total revenues of the Company during
the periods indicated is set forth below:
<TABLE>
For the Year Ended
---------------------------------------------------
<CAPTION>
Mar. 2, Feb. 25, Feb. 26, Feb. 27, Feb. 29,
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Retail Fur Operations:
Company-owned Stores 19.0% 22.8% 28.6% 27.7% 31.9%
Leased 40.1 30.5 27.7 31.0 25.6
Fur Service 14.4 13.4 10.6 11.4 12.8
Wholesale and
Catalog Sales 0.6 1.4 3.3
------ ------ ------ ------ ------
Subtotal 73.5 66.7 67.5 71.5 73.6
Women's Ready-To-Wear
and Accessories 26.5 33.3 32.5 28.5 26.4
------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
<PAGE>
Item 1. Business, continued
Evans believes that its continued operation of leased departments,
and its operation of additional leased departments, as these stores
may expand, depends in large part on the continuance of present satisfactory
relations with these department store chains.
The business in which Evans is engaged is highly competitive. In all
locations, Evans competes with numerous furriers, department stores
and specialty stores as well as mail order houses. Evans believes
its emphasis on design and quality, broad coverage of price and size
ranges and its advertising, promotional programs and competitive pricing
have resulted in a substantial degree of customer acceptance of merchandise
and services. Based on statistics compiled by the American Fur Industry,
Evans further believes that it is the nation's largest retail fur apparel
merchandiser.
The following table sets forth information concerning the number of
Company-owned stores and Leased locations operated during the last
five fiscal years:
<TABLE>
For the Year Ended
---------------------------------------------------
<CAPTION>
Mar. 2, Feb. 25, Feb. 26, Feb. 27, Feb. 29,
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Locations Opened
or Acquired:
Company-owned 2 1
Leased (1) 1 27 4 11
Locations Closed:
Company-owned 4 1 1 5
Leased (1) 1 5 49 58
End of Period:
Company-owned 15 19 19 18 19
Leased (1) 54 54 27 28 66
<FN>
(1) Includes seasonal leased locations (generally operated October
through January).
</FN>
</TABLE>
Financial Information about Industry Segments
The Company's operations are in a single industry, retailing furs and
apparel through the operation of stores and leased departments. All
operations are within the United States and no one customer accounts
for more than 10% of revenues.
<PAGE>
Item 2. Properties
All Company stores and distribution centers are operated in leased
premises deemed suitable for their activities, except the State Street
store in downtown Chicago, which is owned subject to a ground lease.
The leased premises, the sizes thereof and the lease expiration dates
are as follows:
<TABLE>
<CAPTION>
Expiration Square
Dates (a) Feet
------------ ---------
<S> <C> <C>
Store
Chicago Area:
(Evans)
36 South State Street 04/30/2000 125,943 (b)
(includes executive offices)
Shopping Centers:
(Evans)
River Oaks 02/28/2007 26,174
North Riverside Mall 02/28/2003 14,326
Yorktown 05/31/2006 15,718
Evergreen Plaza 04/30/2001 11,862
Ford City 02/28/2002 12,181
Orland Square 02/28/2002 12,000
Harlem Irving Plaza 01/31/1999 7,800
(Evans Woman)
Ford City 02/28/2002 3,034
Evergreen Plaza 04/30/2001 2,633
Washington, D.C. Area:
(Evans/Rosendorf)
1750 K. Street, N.W. 02/28/2005 9,718
Tyson's Corner Center 06/30/2006 2,664
Montgomery Mall 01/31/2002 3,342
Texas (Koslow's):
Caruth Plaza, Dallas 04/30/2000 14,363
The Arboretum, Austin 07/31/2005 6,000
Distribution Centers
Hillside, Illinois 06/30/1999 36,625
<FN>
(a) Includes options to renew.
<PAGE>
Item 2. Properties, continued
(b) 30,998 square feet in the 36 South State Street premises are leased
out as store and office space. Upon termination of the ground lease,
lessor is required to purchase the building at its then fair market
value.
</FN>
</TABLE>
Item 3. Legal Proceedings
Evans is involved in various claims and lawsuits incidental to its
business. In the opinion of management, the ultimate liability will
not have a material effect on the consolidated financial statements
of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the shareholders of the Company
for a vote during the fourth quarter of the fiscal year ended March
2, 1996.
<PAGE>
Item 4 A. Executive Officers of the Registrant
Served
as Titled
Since
----------
David B. Meltzer 67 Chairman of the Board 1988
Samuel B. Garber 61 Vice President, Secretary
and General Counsel 1981
William E. Koziel 38 Vice President and Chief
Financial Officer 1995
Vice President and Controller 1989
Robert K. Meltzer 42 Executive Vice President -
General Merchandise Manager 1990
Patrick J. Regan 46 President and Chief Executive
Officer 1995
Chief Operating Officer, Executive
Vice President - Finance,
Chief Financial Officer 1991
John Sarama 44 Vice President of Operations 1990
Dean Obrecht 51 Vice President of Human Resources 1996
No executive officer of the Company has a family relationship to any
other executive officer, except that Robert K. Meltzer is the son of
David B. Meltzer.
Executive Officers
The executive officers are elected annually by the Board of Directors
at the first meeting following the annual meeting of shareholders.
Vacancies may be filled and additional officers elected at any meeting
of the Board of Directors. Any officer elected serves until the next
annual meeting of the Board of Directors and until a successor shall
have been elected and qualified or until his death, resignation or
removal by the Board.
These officers have held the positions set forth in the above tabulation
for the last five years or have served the Company in various executive
or administrative capacities for a least that length of time.
<PAGE>
<TABLE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
The Company's common stock is traded in the Over-the-Counter Market.
High and low bid quotations, as reported on NASDAQ for each quarterly
period during the past two fiscal years and cash dividends declared,
were as follows:
<CAPTION>
1996 1995
----------------------------- -----------------------------
BID BID BID BID
PRICE PRICE DIVIDENDS PRICE PRICE DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $1-7/8 $1 --- $3-3/4 $3-3/8 ---
2nd Quarter $1-5/8 $1-1/8 --- $3-1/2 $2 ---
3rd Quarter $1-3/4 $1 --- $3-1/2 $2 ---
4th Quarter $1-5/8 $1-1/4 --- $3-1/8 $1-3/8 ---
<FN>
As of March 2, 1996, there were approximately 750 holders of the
Company's common stock.
The Company is restricted, under the terms of a debt agreement,
from paying any dividends at March 2, 1996 (see Note 3 to the
consolidated financial statements).
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data
($ In Thousand's, Except Per Share Amounts)
<CAPTION>
1996 1995 1994 1993 1992
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Financial Position:
- -------------------
Total assets $46,011 $48,816 $53,943 $59,940 $59,386
Total liabilities 24,233 27,272 20,335 28,292 29,358
Shareholders' equity 21,778 21,544 33,608 31,648 30,028
Current assets 32,119 35,152 39,374 46,206 44,087
Current liabilities 22,334 26,078 20,266 27,546 28,527
(a) (a) (a) (a)
Current ratio 1.44 1.35 1.94 1.68 1.55
Long-term debt 1,888 1,178
Results from Operations:
- ------------------------
Total revenues $96,566 $86,817 $96,785 $107,072 $100,296
Restructuring 3,176 773
Net earnings (loss) 234 (12,064) 1,960 1,620 (2,551)
(b) (c) (d)
Common Share Data:
- ------------------
Net earnings (loss)
per share $.05 $(2.45) $.39 $.33 $(.52)
(b) (c) (d)
Weighted average
common and common
equivalent shares
outstanding 4,918,301 4,918,301 5,051,255 4,950,230 4,918,301
Book value per share $4.43 $4.38 $6.65 $6.39 $6.11
<FN>
(a) Certain long-term debt obligations have been reclassified to
current liabilities in conformance with Emerging Issues Task
Force Abstract Issue No. 95-22, "Balance Sheet Classification
of Borrowings Outstanding under Revolving Credit Agreements".
(b) Net loss includes a $1,333 or $.27 per share tax provision for
an increase of its valuation allowance with respect to future
tax benefits of the net operating loss reflected in deferred
operating loss reflected in deferred income taxes.
(c) Net earnings include $1,500 or $.30 per share for the cumulative
effect of an income tax accounting change from adopting
Statement of Financial Accounting Standards 109
Accounting for Income Taxes".
(d) Net earnings include $593 or $.12 per share from the utilization
of net operating loss carryforwards, which were recorded as an
extraordinary item.
</FN>
</TABLE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
During fiscal 1996, total revenues increased $9,749,000 (11.2%) in
comparison to fiscal 1995 due primarily to an increase of $10,728,000
(23.2%) in fur merchandise sales and an increase of $2,294,000 (19.7%)
in service revenues, partially offset by a decrease of $3,273,000 (11.3%)
in women's ready-to-wear sales. The increase in fur merchandise sales
was largely due to an increase of $12,454,000 in sales associated with
leased locations acquired during the fourth quarter of fiscal 1995
partially offset by a decrease of $1,681,000 in sales associated with
four Company-owned locations closed during fiscal 1996. Fur merchandise
sales at comparable locations were essentially flat with levels of
the prior year. During the fourth quarter, fur merchandise sales at
comparable locations increased $1,694,000 (8.1%) as compared to the
prior fiscal year. The Company believes that the return to normal
seasonal weather which began in the month of November and continued
through the end of fiscal 1996 favorably impacted the sales of fur
merchandise. The decrease in women's ready-to-wear sales was due primarily
to a $1,665,000 (6.4%) decrease in sales at comparable locations and
a $1,608,000 decrease in sales associated with the closing of the Company's
Southlake location in Merrillville, Indiana during the first quarter
and the Company's Woodfield location in Schaumburg, Illinois during
the fourth quarter. The increase in service revenues was primarily
the result of an increase of $3,397,000 in sales associated with leased
locations acquired during the fourth quarter of fiscal 1995 and an
increase of $139,000 (1.5%) in sales at comparable locations, partially
offset by a decrease of $1,242,000 in sales associated with four Company
owned locations closed during fiscal 1996.
During fiscal 1995, total revenues decreased $9,968,000 (10.3%) as
compared to fiscal 1994 due primarily to a decline of $8,692,000 (15.8%)
in fur merchandise sales and a $2,590,000 (8.2%) decrease in women's
ready-to-wear sales, partially offset by an increase of $1,314,000
(12.7%) in service revenues. The decline in fur merchandise sales
was largely the result of an $8,264,000 (17.4%) decrease in sales at
comparable locations and a $2,929,000 decrease in sales associated
with Company-owned and leased locations closed during the prior fiscal
year. In addition, a decrease of $1,289,000 in sales was associated
with a liquidation event conducted on behalf of another retailer during
the prior fiscal year. These decreases were partially offset by an
increase of $3,790,000 in sales associated with one Company-owned and
four leased locations opened during fiscal 1994 and 27 leased locations
acquired on January 1, 1995. The decrease in women's ready-to-wear
sales was due primarily to a $1,737,000 (6.1%) decrease in sales at
comparable locations and a decline of $1,444,000 associated with the
closing of the Company's Old Orchard location in Skokie, Illinois,
during the fourth quarter of fiscal 1994, partially offset by an increase
in sales of $591,000 associated with two Company-owned locations opened
during the second quarter of fiscal 1994. The Company believes that
the abnormal unseasonably mild weather that prevailed in all of the
Company's operating markets in the latter half of the year contributed
significantly to the decline in sales of fur merchandise and apparel
outerwear at continuing operations. The increase in service revenues
was largely the result of a $926,000 increase in sales associated
with one Company-owned and four leased locations opened during fiscal
1994 and 27 leased locations acquired on January 1, 1995, and an increase
of $640,000 (6.4%) in sales at comparable locations. These increases
were partially offset by a decrease
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
of $252,000 in sales associated with the closing of a Company-owned
location during the fourth quarter of fiscal 1994.
Costs of goods and services sold, buying and occupancy costs were 64.0%
of total revenues in fiscal 1996 as compared to 69.2% in fiscal 1995
and 65.8% in fiscal 1994. Cost of goods and services sold as a percentage
of total revenues decreased by 5.4% due primarily to improved margins
on sales of fur merchandise resulting from higher initial markup.
Buying costs as a percentage of total revenues decreased (1.9% versus
2.7%) largely due to the closing of the Company's fur inspection office
in New York during the first quarter of fiscal 1996. Occupancy costs
as a percentage of total revenues increased (12.1% versus 11.2%) primarily
as the result of higher average rental percentages as compared to the
prior year. Cost of goods and services sold as a percentage of total
revenues increased by approximately 2% in fiscal 1995 as compared to
the prior year due primarily to lower gross margins on fur merchandise
and apparel outerwear sales resulting from higher markdowns and lower
initial markup. Buying costs as a percentage of total revenues in
fiscal 1995 were comparable with prior year levels. Occupancy costs
as a percentage of total revenues increased by approximately 1% in
fiscal 1995 as compared to the prior year due primarily to higher average
rental percentages and certain fixed rental costs as measured against
decreased sales levels.
Selling and general expenses were 33.7% of total revenues in fiscal
1996 as compared to 37.5% in the prior year. Payroll and related fringe
benefits as a percentage of total revenues decreased (18.3% versus
20.5%) due primarily to the reduction of staff in various corporate
departments as well as an employee wage freeze which was initiated
at the end of fiscal 1995. Advertising expenses as a percentage of
total revenues decreased (9.0% versus 9.8%) as compared to the prior
year. Selling and general expenses were 37.5% of total revenues in
fiscal 1995 as compared to 32.3% in fiscal 1994. Payroll and related
fringe benefits as a percentage of total revenues increased over the
prior year (20.5% versus 18.5%) due primarily to the decline in sales
at comparable locations. Advertising expenses increased to 9.8% in
fiscal 1995 as compared to 7.9% in fiscal 1994 due in large part to
increased expenditures, primarily in the fourth quarter, for additional
promotional events in the fur and apparel outerwear categories in an
effort to stimulate consumer demand. In addition, service charges
on customer credit accounts, which are netted against selling and general
expenses, decreased $294,000 (11.5%) as compared to the prior year
as a result of lower average outstanding balances on customer credit
accounts.
Interest expense in fiscal 1996 increased $253,000 (22.4%) as compared
to fiscal 1995 due primarily to higher average short-term borrowings
and higher average interest rates as compared to the prior year. Interest
expense in fiscal 1995 was consistent with levels of the prior year.
The Company recorded net other income of $5,000, $43,000 and $809,000
during fiscals 1996, 1995 and 1994, respectively. The net other income for
fiscal 1994 was primarily the result of a $750,000 settlement ($435,000 net
of taxes) the Company received during the first quarter of fiscal 1994,
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
relating to the mutually satisfactory termination of its leased fur
operations with The May Department Stores Company. The remainder of
the other net income in fiscals 1996, 1995 and 1994 was primarily interest
income from temporary cash investments.
During the fourth quarter of fiscal 1995, the Company recorded a pre
tax restructuring charge of $3,176,000. Approximately 40% of the charge
was related to costs associated with the closing of several Company
owned retail locations, the closing of the Company's fur inspection
office in New York and the reduction of staff in various corporate
departments. Approximately 39% of the charge was related to costs
associated with the migration of the Company's data processing and
information systems structure to a lower cost alternative. Approximately
8% of the charge was related to employee termination benefits. The
remaining charges were due primarily to the refinancing of the Company's
revolving credit facility and senior secured long-term note payable
obligations as well as other administrative costs.
The effective tax rate in fiscal 1996 was 19.6% as compared to 12.6%
and 47% in fiscal 1995 and 1994, respectively.
During fiscal 1996, the Company utilized a portion of its net operating
loss carryforward to fully offset the federal tax provision. In addition,
the Company will continue to evaluate the valuation allowance recorded
with respect to the future tax benefits of the remaining net operating
loss reflected in deferred income taxes. During the fourth quarter
of fiscal 1995, the Company recorded a $1,333,000 tax provision due
to an increase of its valuation allowance with respect to the future
tax benefits of the net operating loss reflected in deferred income
taxes as a result of the uncertainty of their ultimate realization.
Fiscal 1996 resulted in net earnings of $234,000 as compared to a net
loss of $12,064,000 in fiscal 1995 and net earnings of $1,960,000 in
fiscal 1994. The net earnings for fiscal 1996 were largely due to
the increase in total revenues and improved gross margins as well as
the cost reductions achieved as part of the Company's restructuring
initiated at the end of fiscal 1995, partially offset by the increase
in occupancy costs and interest expense.
The net loss for fiscal 1995 was due in large part to the decline in
total sales and related gross margins at continuing operations during
the latter half of the fiscal year. The results reflected the impact
of the abnormally warm fall and winter weather experienced in all of
the Company's operating markets during the third and fourth quarters
of fiscal 1995. The unusual climatic situation began in September
and carried on through the end of the fiscal year. In addition, the
Company recorded a charge of $3,176,000 during the fourth quarter for
reorganization, severance and refinancing costs related to the Company's
plan to exit certain underperforming locations, the refinancing of
its senior secured debt and the migration of its data processing systems
to a lower operating cost alternative.
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
The net earnings for fiscal 1994 were largely due to the $750,000 settlement
($435,000 net of taxes) the Company received relating to the mutually
satisfactory termination of its leased fur operations with The May
Department Stores Company, as well as the net effect of adopting SFAS
No. 109, Accounting for Income Taxes, during fiscal 1994. The Company's
pre-tax earnings as compared to fiscal 1993 were adversely impacted
by the closing of Company-owned and leased locations during and subsequent
to fiscal 1993, the effects of which were partially mitigated by a
$651,000 decline in interest expense and an overall increase in total
revenues and related gross margins at comparable retail locations.
All indications are that the price of fur merchandise, primarily mink,
will increase in fiscal 1997 due to an increase in world-wide demand
for fur garments coupled with a static supply of fur product at the
wholesale level. The Company has made commitments to secure fur garments
at advantageous prices and, given the positive trend of fur sales this
past season, does not believe its overall gross margins will be adversely
affected.
Liquidity and Capital Resources
Cash and cash equivalents at March 2, 1996 were $220,000, a decrease
of $914,000 as compared to February 25, 1995. The decrease was due
primarily to cash used in operating activities of $816,000 and cash
used in investing activities of $833,000, partially offset by cash
provided by financing activities of $735,000.
The cash used in operating activities of $816,000 was due primarily
to a decrease in accounts payable of $2,300,000 and a decrease in accrued
liabilities of $1,469,000, partially offset by a decrease in merchandise
inventories of $1,640,000 and net earnings of $234,000.
The cash used in investing activities of $833,000 was due primarily
to additions to property and equipment of $836,000.
The cash provided by financing activities was primarily the result
of the refinancing of the Company's revolving credit facility and its
senior secured long-term debt obligations with a new lender on May
31, 1995.
On May 31, 1995, the Company finalized an agreement to refinance its
revolving credit facility and its senior secured long-term debt obligations
with a new lender. The new agreement provides for a three year $23,500,000
credit facility which includes two term loans totaling $2,000,000.
The agreement provides for interest at 1.5% and 2% over the base rate
(prime) for the revolving facility and the term loans, respectively.
The agreement provides for monthly principal payments of $27,500
in which payments began May, 1995 with the remaining unamortized balance
due May, 1998 on a term loan of $1,650,000, whereas the other term
loan of $350,000 is due in full November, 1996.
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources, continued
The Company has offered for sale its Fort Worth, Texas real estate
and its 36 S. State building in Chicago, Illinois and although management
cannot determine if the properties will be sold, proceeds generated
from a sale, up to a maximum of $350,000 and $1,403,000, respectively,
will be used to pay down the long-term note payable obligation which
it collateralized.
The Company's anticipated capital expenditures for fiscal 1997 are
approximately $1,000,000. The Company plans to relocate its Rosendorf/Evans
store within the mall at Tysons Corner Center in McLean, Virginia at
an expected capital cost of $300,000. The remaining expenditures are
for improvements to existing locations.
The revolving credit facility which expires May 31, 1998 is considered
adequate to finance seasonal inventory requirements as well as commitments
for capital expenditures through fiscal 1997.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." This pronouncement requires that long-lived assets
and certain identifiable intangible assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss is to
be recognized when the sum of undiscounted cash flows is less than
the carrying amount of the asset. Measurement of the loss for assets
that the entity expects to hold and use are to be based on the fair
value of the asset. SFAS No. 121 was adopted in the fourth quarter
of fiscal 1996. This pronouncement did not have an impact on the Company's
financial condition or results of operations at adoption.
As described in Note 4 to the consolidated financial statements, in
October 1995, the FASB issued SFAS No. 123, Accounting for Stock Based
Compensation. As permitted, the Company expects to continue its accounting
in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", when SFAS No. 123 is adopted in fiscal
1997.
As of March 2, 1996, the Company was required to adopt new guidance
issued by the Financial Accounting Standards Board Emerging Task Force
in Abstract 95-22. This Abstract requires classification of the outstanding
borrowings under the Company's current Credit Agreement as a current
liability. Accordingly, borrowings under the Credit Agreement are
included in current liabilities in the balance sheet as of March 2,
1996. Prior year's outstanding borrowings have been reclassified to
current liabilities for consistent presentation.
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors
Evans, Inc.
We have audited the accompanying consolidated balance sheets of Evans,
Inc. and Subsidiaries as of March 2, 1996 and February 25, 1995, and
the related consolidated statements of operations, shareholders' equity,
and cash flows for the years ended March 2, 1996, February 25, 1995
and February 26, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Evans, Inc. and Subsidiaries at March 2, 1996 and February 25, 1995,
and the consolidated results of their operations and their cash flows
for the years ended March 2, 1996, February 25, 1995 and February 26,
1994 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 30, 1996
<PAGE>
<TABLE>
EVANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 2, 1996 and February 25, 1995
($ In Thousands)
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
- -------
Current assets:
Cash and cash equivalents $220 $1,134
Accounts receivable, less allowance for
doubtful accounts of $864 and $794 15,984 17,105
Merchandise inventories 14,761 16,401
Prepaid expenses and other current assets 1,154 512
-------- --------
Total current assets 31,899 34,018
-------- --------
Property and equipment:
Buildings 4,861 4,861
Furniture and equipment 6,080 10,993
Leasehold improvements 9,775 10,635
-------- --------
20,716 26,489
Accumulated depreciation and amortization (10,293) (15,885)
-------- --------
10,423 10,604
-------- --------
Long-lived assets, principally intangible assets
(net of accumulated amortization of $1,896 and
and $1,632) 3,469 3,060
-------- --------
$45,791 $47,682
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------- 1996 1995
-------- --------
Current liabilities:
Notes payable $9,219 $9,965
Current portion of long-term debt 1,043 272
Accounts payable 6,611 8,911
Accrued liabilities:
Payroll 680 575
Taxes, other than on income 1,446 1,590
Rent 1,153 1,150
Vacations 774 987
Restructuring 215 1,401
Other 1,187 1,221
Income taxes 6 6
-------- --------
Total current liabilities 22,334 26,078
-------- --------
Long-term debt 1,888 1,178
-------- --------
Other liabilities 11 16
-------- --------
Shareholders' equity:
Preferred stock, $1.00 par value, 3,000,000 shares
authorized, none issued
Common stock, $.20 par value, 8,000,000 shares
authorized, 6,333,435 shares issued 1,267 1,267
Capital in excess of par value 15,660 15,660
Retained earnings 9,449 9,215
Treasury stock, 1,415,134 shares at cost (4,598) (4,598)
-------- --------
Total shareholders' equity 21,778 21,544
-------- --------
$46,011 $48,816
======== ========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
EVANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended March 2, 1996, February 25, 1995
and February 26, 1994
($ In Thousands Except Per Share Amounts)
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $82,650 $75,195 $86,477
Service revenues 13,916 11,622 10,308
---------- ---------- ----------
Total revenues 96,566 86,817 96,785
---------- ---------- ----------
Cost of goods and services sold,
occupancy and buying costs 61,787 60,085 63,655
Selling and general expenses 32,510 32,575 31,235
Provision for doubtful accounts 600 609 692
Interest expense 1,383 1,130 1,141
Other income, net (5) (43) (809)
Restructuring 3,176
---------- ---------- ----------
96,275 97,532 95,914
---------- ---------- ----------
Earnings (loss) before provision
for income taxes and cumulative
effect of accounting change 291 (10,715) 871
Provision for income taxes 57 1,349 411
---------- ---------- ----------
Earnings (loss) before cumulative
effect of accounting change 234 (12,064) 460
Cumulative effect of income tax
accounting change 1,500
---------- ---------- ----------
Net earnings (loss) $234 ($12,064) $1,960
========== ========== ==========
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of accounting change $.05 $(2.45) $.09
Cumulative effect of income tax
accounting change .30
---------- ---------- ----------
Net earnings (loss) per share $.05 $(2.45) $.39
========== ========== ==========
Weighted average common and common
equivalent shares 4,918,301 4,918,301 5,051,255
========== ========== ==========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
EVANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
for the years ended March 2, 1996, February 25, 1995
and February 26, 1994
($ In Thousands)
<CAPTION>
Capital in
Common Excess of Retained Treasury
Stock Par Value Earnings Stock Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, February 27,
1993 $1,267 $15,660 $19,319 ($4,598) $31,648
Net earnings 1,960 1,960
---------- ---------- ---------- ---------- ----------
Balance, February 26,
1994 1,267 15,660 21,279 (4,598) 33,608
Net loss (12,064) (12,064)
---------- ---------- ---------- ---------- ----------
Balance, February 25,
1995 1,267 15,660 9,215 (4,598) 21,544
Net earnings 234 234
---------- ---------- ---------- ---------- ----------
Balance, March 2,
1996 $1,267 $15,660 $9,449 ($4,598) $21,778
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
EVANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended March 2, 1996, February 25, 1995
and February 26, 1994
($ In Thousands)
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
- -------------------------------------
Net earnings (loss) $234 ($12,064) $1,960
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization 1,435 1,652 1,489
Cumulative effect of income tax
accounting change (1,500)
Net (gain ) loss from the disposition of
property and equipment (3) 12
Net (gain) loss from write-down of
property and equipment related to
planned store closings (154) 1,423
Provision for doubtful accounts 600 609 692
Change in assets and liabilities:
Accounts receivable 521 2,487 2,827
Merchandise inventories 1,640 2,175 (292)
Prepaid expenses and other current assets (642) 480 (107)
Long-lived assets (673) 410 102
Accounts payable (2,300) (3,049) (828)
Accrued liabilities (1,469) 851 (105)
Other liabilities (5) (53) (677)
Income taxes payable (115) 34
Deferred income taxes 1,300 200
--------- --------- ---------
Net cash (used in) provided by
operating activities (816) (3,894) 3,807
Cash Flows from Investing Activities:
- -------------------------------------
Proceeds from the sale of property
and equipment 3
Additions to property and equipment (836) (1,552) (1,138)
Acquisition less cash acquired (750)
--------- --------- ---------
Net cash used in investing activities (833) (2,302) (1,138)
Cash Flows from Financing Activities:
- -------------------------------------
Proceeds from short-term borrowing 1,400
Principal payments on short-term borrowing (746)
Additional long-term debt 2,000
Principal payments on long-term debt (519) (6,381)
--------- --------- ---------
Net cash provided by (used in)
financing activities 735 1,400 (6,381)
--------- --------- ---------
Net decrease in cash and cash equivalents (914) (4,796) (3,712)
Cash and cash equivalents at
beginning of period 1,134 5,930 9,642
--------- --------- ---------
Cash and cash equivalents at end of period $220 $1,134 $5,930
========= ========= =========
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Cash paid during the period for:
Interest $1,393 $1,164 $1,086
Income taxes 57 128 73
<FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
The following is a summary of the significant accounting policies
followed in the preparation of the financial statements:
A. Principles of Consolidation
The consolidated financial statements include the accounts of Evans,
Inc. and its subsidiaries, all of which are wholly-owned.
B. Recognition of Revenues
All revenues, including installment and revolving credit sales, are
included in the financial statements on the accrual method.
C. Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
D. Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market
with cost determined on the basis of specific identification for furs
(approximately 85% and 87% of total inventory in fiscal 1996 and 1995,
respectively) and on the retail method on a first-in, first-out basis
for other inventories. The Company includes in inventory certain purchasing
and handling costs. The Company believes this method provides for
matching the full cost of obtaining merchandise and preparing it for
sale with related revenues.
E. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
on the straight-line method in the financial statements and on accelerated
methods for income tax purposes over the estimated useful lives of
the related assets (periods ranging from 2 to 31.5 years). Depreciation
is not recognized for financial reporting purposes on the 36 S. State
Street building having a cost of $4,448,000 since the Company believes
the fair market value of the building approximates its
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. Significant Accounting Policies, continued
E. Property and Equipment, continued
carrying cost as of March 2, 1996. In addition, there is a commitment
by the lessor, under a related land lease, that requires the lessor
to purchase the building in the year 2000 at its then fair market
value. The Company currently has the building offered for sale. Leasehold
improvements are amortized on the straight-line method generally over
the shorter of the life of the related asset or the remaining term
of the lease.
Upon disposal of property and equipment, the cost of the asset retired
and the related accumulated depreciation or amortization are eliminated
from the accounts and the resulting gain or loss is reflected in the
consolidated statement of operations.
Expenditures for maintenance and repairs are charged against earnings
and expenditures for betterments and major renewals are capitalized.
The Company evaluates the recoverability of asset carrying values
using estimates of future cash flows over remaining asset lives. When
impairment is indicated, any impairment loss is measured by the excess
of carrying values over full values.
F. Long-Lived Assets
Intangibles, contracts and other deferred charges are included in
other assets at cost less amortization provided on a straight-line
basis over periods ranging from 2 to 40 years. The Company assesses
the recoverability of intangible assets by determining whether the
amortization of the asset balance over its remaining life can be recovered
through undiscounted future operating cash flows. The amount of impairment,
if any, would be measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost
of funds.
G. Preopening Costs
Costs incurred in connection with the opening of new locations are
expensed as incurred.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. Significant Accounting Policies, continued
H. Fiscal Year
The Company's fiscal year ends on the Saturday nearest the end of
February. Fiscal 1996 ended March 2, 1996 and was comprised of 53
weeks. Fiscal 1995 and 1994 ended February 25, 1995 and February 26,
1994, respectively, and were comprised of 52 weeks each.
I. Industry Segment Information
The Company's operations are in a single industry, retailing furs,
apparel and related items and services through the operation of stores
and leased departments. All operations are within the United States
and no one customer accounts for more than 10% of revenues.
J. Income Taxes
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109), as of the beginning
of fiscal 1994. The cumulative effect of this change in accounting
for income taxes increased net earnings by $1,500,000 and is reflected
as a cumulative change in accounting principle in the consolidated
statements of operations for the year ended February 26, 1994.
Under SFAS 109, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end based on enacted tax laws and statutory tax rates applicable
to the period in which the differences are expected to affect taxable
earnings. Valuation allowances are established when necessary to reduce
deferred tax assets due to the uncertainty of their ultimate realization.
Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
K. Reclassifications
Certain reclassifications have been made to the Consolidated Balance
Sheet for fiscal 1995 to conform to the presentation for fiscal 1996.
Such reclassifications did not effect the previously reported operating
results.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. Significant Accounting Policies, continued
L. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2. Cash and Cash Equivalents Concentration
A significant portion of the Company's cash and cash equivalents are
maintained with one financial institution.
3. Debt Obligations
At March 2, 1996 and February 25, 1995, long-term debt consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable, floating prime
rate plus 1% (Maximum rate of 11%).
$91,000 principal amount due July, 1995;
subsequent principal due in semi-annual
amounts of $181,000 beginning January,
1996, through January, 1999;
$91,000 due July, 1999. $1,178,000 $1,450,000
Note payable, floating prime
rate plus 2%. Principal due in monthly
installments of $27,500 beginning
July, 1995 through April, 1998;
$715,000 due May, 1998. 1,403,000
Note payable, floating prime
rate plus 2%. Principal due
November, 1996. 350,000
--------- ---------
2,931,000 1,450,000
Less amounts due in one year 1,043,000 272,000
--------- ---------
$1,888,000 $1,178,000
========= =========
</TABLE>
At March 2, the Company had an available line of credit of $21,500,000
($13,753,000 of which was used in support of letters of credit, bankers
acceptances and direct borrowings).
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. Debt Obligations, continued
On May 31, 1995, the Company finalized an agreement with a new lender
to refinance the existing senior secured debt and provide for the Company's
working capital needs. The agreement provides for a three year $23,500,000
credit facility which includes two term loans totalling $2,000,000.
The agreement provides for interest at 1.5% and 2% over the base rate
(prime) for the revolving facility and the term loans, respectively.
The agreement contains provisions which, among other things, require
the maintenance of certain financial covenants, the most restrictive
of which are the tangible net worth and the minimum debt service coverage
ratio. The agreement prohibits the payment of cash dividends and requires
a commitment fee of one-third of one percent per annum on the unused
portion of the revolving loan. Also, all assets, rights, interest
and properties of the Company are pledged as collateral for the revolving
and term loan obligations.
As of March 2, 1996, the Company was required to adopt new guidance
issued by the Financial Accounting Standards Board Emerging Issues
Task Force in Abstract 95-22. This Abstract requires classification
of the outstanding borrowings under the Company's current Credit Agreement
as a current liability. Accordingly, borrowings under the Credit Agreement
are included in current liabilities in the balance sheet as of March
2, 1996. Prior year's outstanding borrowings have been reclassified
to current liabilities for consistent presentation. The Company believes
that the stated amount of their debt obligations approximates fair
value.
The Company has offered for sale its Fort Worth, Texas real estate
and its 36 S. State building in Chicago, Illinois and although management
cannot determine if the properties will be sold, proceeds generated
from a sale, up to a maximum of $350,000 and $1,403,000, respectively,
will be used to pay down the long-term note payable obligation which
it collateralized.
Scheduled payments on long term debt, including the new term loans,
for the fiscal years 1997, 1998, 1999 and 2000 are $1,403,000, $665,000,
$1,133,000 and $90,000, respectively.
The weighted average interest rate on short-term borrowings was 11.24%,
9.69% and 7.53% for fiscal years 1996, 1995 and 1994, respectively.
4. Common Stock
During fiscal 1991, the Company granted options for 295,000 shares
of the Company's common stock to five officers at a price of $1.65
per share being 100% of the average market value for the ten trading
days preceding the date of grant. Options granted on 20,000 and 50,000
shares expired during fiscal 1995 and fiscal 1992, respectively. During
fiscal 1996, the remaining 225,000 options were cancelled and reissued
at a price of $1.50 per share being 100% of the market price at the
date of reissue.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. Common Stock, continued
Also, during fiscal 1996, the Company granted key employees and members
of the Board of Directors options for 166,000 and 10,000 shares at
prices of $1.50 and $1.375, respectively, the prices being 100% of
market value at the dates of grant.
As of March 2, 1996, 401,000 options were exercisable and 99,000 were
available for grant under the Company's stock option plan.
In October, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123). SFAS 123 establishes financial
accounting and reporting standards for stock-based employee compensation
plans and transactions in which goods or services are the consideration
received for the issuance of equity instruments. This statement requires
that an employer's financial statements include certain disclosures
about stock-based employee compensation regardless of the method used
to account for them. The Company will adopt SFAS 123 beginning in
fiscal 1997. The Company expects to continue its accounting in accordance
with Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees.
5. Service Charges
Service charges on customer credit accounts are netted against selling
and general expenses. Service charges amounted to $2,142,000, $2,268,000
and $2,562,000 in the years ended March 2, 1996, February 25, 1995
and February 26, 1994 respectively.
6. Income Taxes
The components of the net deferred tax asset as of March 2, 1996 and
February 25, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 9,115,000 $ 8,825,000
Sales taxes 380,000 377,000
Vacations 257,000 328,000
Store Closings 90,000 1,086,000
Other 976,000 1,001,000
Valuation allowance (9,660,000) (9,733,000)
----------- -----------
Total deferred tax assets 1,158,000 1,884,000
</TABLE>
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Income Taxes, continued
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment (1,001,000) (1,548,000)
Accounts receivable (157,000) (336,000)
----------- -----------
Total deferred tax liabilities (1,158,000) (1,884,000)
----------- -----------
Net deferred tax balance $ - 0 - $ - 0 -
=========== ===========
</TABLE>
The Company has recorded a valuation allowance with respect to the
future tax benefits of the net operating loss reflected in deferred
income taxes as a result of the uncertainty of their ultimate realization.
The Company has net operating loss carryforwards of approximately
$21,703,000 which are available to offset future taxable income. These
carryforwards expire in the years 2005 through 2011.
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ---------- --------
<S> <C> <C> <C>
Current
Federal $ 33,000
State $57,000 16,000 $170,000
Deferred ------ --------- -------
Federal 1,300,000 241,000
State ------ --------- -------
Total $57,000 $1,349,000 $411,000
====== ========= =======
</TABLE>
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Income Taxes, continued
The income tax provision differed from a provision computed at the
U.S. statutory rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Statutory federal tax rate 34.0% (34.0)% 34.0%
Losses with no current tax
benefit 33.8
Increase (decrease) in
valuation allowance (25.1) 12.1
State taxes on income, net
of federal tax benefit 12.9 0.1 11.0
Other (2.2) 0.6 2.0
----- ----- -----
19.6% 12.6% 47.0%
===== ===== =====
7. Profit-Sharing Plan
The Company maintains a profit-sharing plan covering substantially
all employees. The Company funds all amounts as accrued which totaled
$27,000,$44,000 and $13,000 for the years ended March 2, 1996, February
25, 1995 and February 26, 1994 respectively.
8. Leases
The Company operates primarily in leased facilities under long-term
leases. Noncancelable lease terms generally range from 2 to 12 years.
The principal leases are for sales facilities with options to renew
for additional periods and provide for minimum annual rentals plus
additional rentals based on a percentage of sales, and payment of taxes,
insurance and maintenance costs.
Future minimum lease payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one
year are as follows:
Fiscal Year Ended:
1997 $ 2,168,000
1998 2,413,000
1999 2,425,000
2000 2,188,000
2001 2,026,000
Total thereafter 6,563,000
----------
Total minimum payments required $17,783,000
==========
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. Leases, continued
The following schedule shows the composition of total rental expenses
for all operating leases:
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Minimum rentals $2,578,000 $2,714,000 $2,378,000
Contingent rentals 7,010,000 4,567,000 4,607,000
---------- ---------- ----------
$9,588,000 $7,281,000 $6,985,000
========== ========== ==========
</TABLE>
9. Earnings per Share
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, representing 401,000 shares, were not included in
the computation of earnings per share for fiscal 1996 because the market
price of the common stock obtainable was not in excess of the exercise
price for substantially all of the fourth quarter. Common share equivalents
were not included in the computation of earnings per share for fiscal
1995 because the period resulted in a net loss and the effect would
be antidilutive.
10. Restructuring
During the fourth quarter of fiscal 1995, the Company recorded a pre
tax restructuring charge of $3,176,000. Approximately 40% of the charge
was related to costs associated with the closing of several Company
owned retail locations, the closing of the Company's fur inspection
office in New York and the reduction of staff in various corporate
departments. Approximately 39% of the charge was related to costs
associated with the migration of the Company's data processing and
information systems structure to a lower cost alternative. Approximately
8% of the charge was related to employee termination benefits. The
remaining charges were due primarily to the refinancing of the Company's
revolving credit facility and senior secured long-term note payable
obligations as well as other administrative costs. During fiscal 1996,
Company reversed approximately 5% of the previously recorded restructuring
charge associated with store closings. Approximately 7% of the original
restructuring charge recorded remained outstanding at the end of fiscal
1996, but was expected to be fully utilized by the end of the first
quarter of fiscal 1997.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
11. Acquisition
On January 13, 1995 the Company finalized its agreement to acquire
the assets and assume certain liabilities of Gilson, Inc., a retailer
of fur apparel which operates leased departments in four major department
store chains. The total purchase price was $3,500,000, which included
$300,000 related to a covenant not to compete agreement, and warrants
to purchase 100,000 shares of Evans common stock, $.20 par value.per
share, with an exercise price of $2.50 per share and an expiry on the
warrants of December 31, 1999.
A down payment of $1,750,000 was made on January 17, 1995 and a payment
of $300,000 related to the covenant not to compete was made on July
15, 1995. The remaining $1,450,000 is due as follows; $91,000 due
July, 1995, installments of $181,000 commencing January, 1996, with
subsequent payments every July and January through January, 1999 and
$91,000 due July, 1999.
The acquisition, which was effective as of December 31, 1994, was
accounted for by the purchase method of accounting and, accordingly,
the net assets and results of operations were included in the Company's
consolidated financial statements commencing on January 1, 1995. The
total acquisition cost exceeded the fair market value of the net assets
acquired by $2,157,000 which was recorded as goodwill and will be amortized
over a twenty year period on a straight line basis.
The following table summarizes the unaudited consolidated pro forma
results of operations, assuming the acquisition had occurred at the
beginning of each of the following periods:
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
(dollars in thousands, except per share amounts)
Sales of products and services $101,825 $117,176
Net earnings (11,263) 3,146
Primary earnings per common share (2.29) .62
</TABLE>
<PAGE>
12. Subsequent Event
On May 30, 1996, the Company amended its revolving credit agreement to
reflect its current operating condition. Among other things, the
amendment revised certain financial covenants as well as increasing the
maximum direct borrowings available under the agreement from $21,500,000
to $23,500,000 during the period of October 15, 1996 to January 3, 1997.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement no later than 120 days after the close of
its fiscal year ended March 2, 1996 (the "Proxy Statement"). The information
required by this Item and not given in Item 4A, Executive Officers
of the Registrant, is incorporated by reference from the Proxy Statement.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference
from the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference
from the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference
from the Proxy Statement.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
a. (1) Financial Statements Pages
Included in Part II of this report:
Report of Independent Accountants 15
Financial Statements:
Consolidated Balance Sheets,
March 2, 1996, and February 25, 1995 16
Consolidated Statements of Operations
for the years ended March 2, 1996,
February 25, 1995 and February 26, 1994 17
Consolidated Statements of Changes
in Shareholders' Equity for the years
ended March 2, 1996, February 25, 1995
and February 26,1994 18
Consolidated Statements of Cash Flows
for the years ended March, 2, 1996,
February 25, 1995 and February 26, 1994 19
Notes to Consolidated Financial Statements 20 - 30
a. (2) Financial Statement Schedules
Included in Part IV of this report:
Report of Independent Accountants 40
Schedules:
II. Valuation and Qualifying Accounts
and Reserves for the years ended
March 2, 1996, February 25, 1995
and February 26, 1994 41
Notes: Schedules other than those listed are omitted for the reason
that they are inapplicable, are not required, or equivalent information
has been included elsewhere herein.
<PAGE>
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K, continued
a. (3) Exhibits
3.1 The Certificate of Incorporation of the Company is incorporated
herein by reference to Exhibit 3 (a) to Form 2-1 under Registration
No. 2-21433 and the Certificate of Amendment of Certificate of Incorporation
effective July 15, 1968 is incorporated herein by reference to Exhibit
3(c) to Form S-1 under Registration No. 2-29193 and all amendments
thereto.
3.2 Bylaws as presently in effect are herein incorporated by reference
to the Form 10-K filed for the fiscal year ending February 28, 1981
(File No. 0-1500).
4.1 Loan agreement dated August 16, 1978, as amended, between Registrant
and The Prudential Insurance Company of America relating to 10.125%
promissory note due August 15, 1993 as modified by Credit Agreement
dated August 30, 1984 between Registrant and Prudential Interfunding
Corporation relating to a revolving loan agreement not exceeding
$21,000,000, terminating August 30, 1988 is herein incorporated by
reference to the Form 10-Q filed for the quarter ended September 1,
1984 (File No. 0-1500).
4.2 Loan agreement dated October 29, 1984 modifying credit agreement
dated August 30,1984 with Prudential Interfunding Corporation, whereby
Registrant reduced its revolving loan commitment from $21,000,000 to
$16,000,000 and converted $4,200,000 into a fixed rate term loan at
13.725% due October 1994, is herein incorporated by reference to the
10-Q filed for the quarter ended December 1, 1984 (File No. 0-1500).
4.3 Loan agreement dated October 15, 1985 effective as of September
30, 1985 with Prudential Interfunding Corp. whereby Prudential Interfunding
Corp. will make available to Registrant up to and including September
30, 1989 sums which shall not exceed $21,000,000 at interest rates
equal to 1.875% per annum plus the rate charged to Prudential Interfunding
Corp. by an affiliate on 30-day dealer-placed promissory notes is hereby
incorporated by reference to the Form 10-Q filed for the quarter ended
November 30, 1985.
4.4 Loan agreement (Promissory Note) dated August 6, 1986 with Prudential
Insurance Company of American (Prudential) whereby Prudential will
make available to Registrant $17,500,000 with interest at a rate of
9.375% on the unpaid balance. This agreement which replaces Registrant's
agreement with Prudential dated October 15, 1985 is herein incorporated
by reference to the Exhibit to the Form 10-Q filed for the quarter
ended August 30, 1986.
<PAGE>
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K, continued
a. (3) Exhibits, continued
4.5 Amendment dated July 6, 1990 which amends the Loan Agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986.
4.6 Amended and restated secured credit agreement dated August 9,
1990 between registrant and American National Bank and Trust Company
of Chicago, individually and as agent is herein incorporated by reference
to the Exhibit to the Form 10-Q filed for the quarter ended September
1, 1990 and the amendment thereto dated December 7, 1990 is incorporated
by reference to the Exhibit to Form 10-Q file for the quarter ended
December 1, 1990. In addition, letters of notification pursuant to
section 7.3(c) of the amended and restated secured credit agreement
are herein incorporated by reference to the exhibit to the Form 10
Q filed for the quarter ended December 1, 1990.
4.7 Amendment dated August 9, 1990 which amends the loan agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986 is herein incorporated by reference to the Exhibit
to the Form 10-Q filed for quarter ended September 1, 1990.
4.8 Amendment dated June 20, 1991 which amends the amended and restated
secured credit agreement dated August 9, 1990 between registrant and
American National Bank and Trust Company of Chicago, individually and
as agent and the amendment thereto dated December 7, 1990.
4.9 Amendment dated June 20, 1991 which amends the loan agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986 and the amendment thereto dated August 9, 1990.
4.10 Amended and Restated Revolving Note dated June 20, 1991 between
registrant and American National Bank, individually and as agent.
4.11 Amendment dated February 7, 1992 which amends the amended and
restated secured credit agreement dated August 9, 1990 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent and the amendments thereto dated December 7, 1990 and
June 20, 1991.
<PAGE>
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K, continued
a. (3) Exhibits, continued.
4.12 Amendment dated February 7, 1992 which amends the loan agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986 and the amendments thereto dated August 9, 1990
and June 20, 1991.
4.13 Second Amended and Restated Revolving Note dated February 7,
1992 between registrant and American National Bank, individually and
as agent.
4.14 Amendment dated May 29, 1992, which amends the amended and restated
secured credit agreement dated August 9, 1990 between registrant and
American National Bank and Trust Company of Chicago, individually and
as agent and the amendments thereto dated December 7, 1990, June 20,
1991 and February 7, 1992.
4.15 Amendment dated May 29, 1992 which amends the loan agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986 and the amendments thereto dated August 9, 1990,
June 20, 1991 and February 7, 1992.
4.16 Second Amended and restated secured credit agreement dated May
28, 1993, which amends and restates the amended and restated secured
credit agreement dated August 9, 1990 between registrant and American
National Bank and Trust Company of Chicago, individually and as agent
and the amendments thereto dated December 7, 1990, June 20, 1991 and
February 7, 1992 and May 29, 1992.
4.17 Amendment dated May 28, 1993, which amends the loan agreements
with Prudential Insurance Company of America dated August 16, 1978
and with Prudential Interfunding Corporation dated August 30, 1984
and August 6, 1986 and the amendments thereto dated August 9, 1990,
June 20, 1991 and February 7, 1992 and May 29, 1992.
4.18 Amendment dated May 10, 1994, which amends the second amended
and restated secured credit agreement dated May 28, 1993 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent.
<PAGE>
Item 14. Exhibits, Financing Statements
Schedules and Reports on Form 8-K, continued
a. (3) Exhibits, continued
4.19 Amendment dated May 10, 1994, which amends the loan agreement
with Prudential Interfunding Corporation dated August 6, 1986 and the
amendments thereto dated August 9, 1990, June 20, 1991, February 7,
1992, May 29, 1992 and May 28, 1993.
4.20 Amendment dated January 13, 1995, which amends the second amended
and restated secured credit agreement dated May 28, 1993 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent, and the amendment thereto dated May 10, 1994.
4.21 Amendment dated January 13, 1995, which amends the loan agreement
with Prudential Interfunding Corporation dated August 6, 1986 and the
amendments thereto dated August 9, 1990, June 20, 1991, February 7,
1992, May 28, 1993 and May 10, 1994.
4.22 Amendment dated February 17, 1995 which amends the second amended
and restated secured credit agreement dated May 28, 1993 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent and the amendments thereto dated May 10, 1994 and January
13, 1995.
4.23 Amendment dated February 17, 1995 which amends the loan agreements
with Prudential Interfunding Corporation dated August 9, 1990, June
20, 1991, February 7, 1992, May 28, 1993, May 10, 1994 and January
13, 1995.
4.24 Amendment dated March 31, 1995 which amends the second amended
and restated secured credit agreement dated May 28, 1993 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent and the amendments thereto dated May 10, 1994, January
13, 1995, February 17, 1995 and March 3, 1995.
4.25 Amendment dated March 31, 1995 which amends the loan agreements
with Prudential Interfunding Corporation dated August 6, 1986 and the
amendments thereto dated August 9, 1990, June 20, 1991, February 7,
1992, May 28, 1993, May 10, 1994, January 13, 1995 and February 17,
1995.
4.26 Amendment dated March 3, 1995 which amends the second amended
and restated secured credit agreement dated May 28, 1993 between registrant
and American National Bank and Trust Company of Chicago, individually
and as agent and the amendments thereto dated May 10, 1994, January
13, 1995 and February 17, 1995.
<PAGE>
Item 14. Exhibits, Financing Statements
Schedules and Reports on Form 8-K, continued
a. (3) Exhibits, continued
4.27 Letter of termination dated May 31, 1995, which terminates the
second amended and restated secured credit agreement dated May 28,
1993 between registrant and American National Bank and Trust Company
of Chicago, individually and as agent and the amendments thereto dated
May 10, 1994, January 13, 1995, February 17, 1995 and March 3, 1995
and March 31, 1995.
4.28 Letter of termination dated May 31, 1995 which terminates the
loan agreements with Prudential Interfunding Corporation dated August
6, 1986 and the amendments thereto dated August 9, 1990, June 20, 1991,
February 7, 1992, May 28 1993, May 10, 1994, January 13, 1995, February
17, 1995 and March 31, 1995.
4.29 Loan and Security Agreement dated May 31, 1995 between registrant
and Transamerica Business Credit Corporation.
4.30 Amendment dated October 3, 1995 which amends the Loan and Security
Agreement dated May 31, 1995 with Transamerica Business Credit Corporation.
4.40 Amendment dated November 20, 1995 which amends the Loan and Security
Agreement dated May 31, 1995 with Transamerica Business Credit Corporation
and the amendment thereto dated October 3, 1995.
4.50 Amendment dated January 5, 1996 which amends the Loan and Security
Agreement dated May 31, 1995 with Transamerica Business Credit Corporation
and the amendments thereto dated October 3, 1995 and November 20, 1995.
4.51 Amendment dated May 30, 1996 which amends the Loan and
Security Agreement dated May 31, 1995 with Transamerica Business Credit
Corporation and the amendments thereto dated October 3, 1995, November
20, 1995 and January 5, 1996.
10.1 1971 Stock Option Plan of the Company is incorporated herein
by reference top Appendix A or the Company's definitive proxy statement
for its annual meeting held July 11, 1978 (File No. 0-1500).
10.2 Deferred Compensation Plan dated July 8, 1975 is incorporated
herein by reference to Exhibit 4 to the Form 10-K filed for the fiscal
year ended February 28, 1976 and the amendment thereto dated July 14,
1977 is incorporated herein by reference to the Exhibit to the Form
10-K filed for the fiscal year ended February 25, 1978 (File No. 0
1500).
<PAGE>
Item 14. Exhibits, Financing Statements
Schedules and Reports on Form 8-K, continued
a. (3) Exhibits, continued
10.4 Key Employees' Supplemental Medical Expense Benefit Plan is herein
incorporate by reference to the Form 10-K for the fiscal year ended
February 28, 1981 (File No. 0-1500).
10.5 Employment Agreement dated as of November 17, 1982 with David
B. Meltzer is incorporated by reference to the Exhibit to the Form
10-K filed for the fiscal year ended February 26, 1983 and the Amendment
thereto dated April 11, 1988 is incorporated by reference to the exhibit
to the Form 10-Q filed for the quarter ended May 28, 1988 (File No.
0-1500).
10.6 Stock purchase agreement dated December 17, 1984 is incorporated
by reference to the exhibit to the Form S-1 Registration statement
dated June 27, 1986.
10.7 Letter agreement dated January 4, 1982 and May 18, 1983 between
the Company and each of two officers is incorporated by reference to
the exhibit to the Form S-1 Registration statement dated June 27, 1986.
10.8 Credit and Security Agreement with American National Bank and
Trust Company of Chicago dated July 6, 1990.
10.9 Inter-Creditor Agreement dated July 6, 1990, between American
National Bank and Trust Company of Chicago and Prudential Insurance
Company of America.
10.10 Commitment Letter dated June 29, 1990 for the secured revolving
credit agreement with American National Bank and Trust Co. of Chicago.
10.11 Employment agreement dated July 5, 1990 with Leonard Levey is
incorporated by reference to the Exhibit to the form 10-Q filed for
the quarter ended June 2, 1990 and the Amendment thereto dated August
21, 1990 is incorporated by reference to the Exhibit to the form 10
Q filed for the quarter ended September 1, 1990.
10.12 Commitment letter dated January 20, 1992 for certain modifications
to the amended and restated secured credit agreement dated August 9,
1990 and as amended June 20, 1991, between registrant, American National
Bank and Trust Company of Chicago, individually and as agent, the Prudential
Insurance Company of America, and the Prudential Interfunding Corporation.
10.13 Purchase agreement dated as of January 13, 1995 by and between
registrant and Gilson, Incorporated, a Delaware Corporation.
<PAGE>
Item 14. Exhibits, Financing Statements
Schedules and Reports on Form 8-K, continued
a. (3) Exhibits, continued
10.14 Covenant not to compete agreement dated as of January 13, 1995
be and between registrant, Karl B. Gittelman and C. Richard Gittelman.
10.15 Warrant to purchase shares of registrant's common stock.
11.0 Computation of Earnings Per Share.
22.1 A list of the Registrant's subsidiaries is incorporated
by reference to the Form 10-K filed for the fiscal year
ended March 1, 1980 (File No. 0-1500).
b. Reports on Form 8-K
Items other than those listed are omitted because they are not required.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: William E. Koziel
-----------------
William E. Koziel
Vice President and Chief Financial Officer
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
----------- ------- ------
David B. Meltzer Chairman of the Board May 22, 1996
- ------------------
David B. Meltzer
Patrick J. Regan President and Chief May 22, 1996
- --------------------- Executive Officer
Patrick J. Regan
Robert K. Meltzer Executive Vice President May 22, 1996
- --------------------- General Merchandise Manager
Robert K. Meltzer
Samuel B. Garber Vice President, May 22, 1996
- --------------------- General Counsel and Secretary
Samuel B. Garber
Ernest R. Wish Director May 22, 1996
- ---------------------
Ernest R. Wish
Harold Sussman Director May 22, 1996
- ---------------------
Harold Sussman
Dennis Bookshester Director May 22, 1996
- ----------------------
Dennis Bookshester
Gwendolyn L. Stanback Director May 22, 1996
- ----------------------
Gwendolyn L. Stanback
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors
Evans, Inc.
Our report on the consolidated financial statements of Evans, Inc.
and Subsidiaries is included on page 15 of this Form 10-K. In connection
with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page
31 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 30, 1996
<PAGE>
<TABLE>
EVANS, INC. AND SUBSIDIAIRES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended March 2, 1996, February 25, 1995
and February 26, 1994
($ IN THOUSANDS)
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
--------------------
(1) (2)
Balance Charged Charged Balance
at to to at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deduction(a) Period
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
March 2, 1996
Allowance for doubtful
accounts $794 $600 $530 $864
Year ended
February 25, 1995
Allowance for doubtful
accounts $702 $609 $517 $794
Year ended
February 26, 1994
Allowance for doubtful
accounts $912 $692 $902 $702
<FN>
Note:
(a) Uncollectible accounts receivable and inventory charged off,
net of recoveries.
</FN>
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11
EVANS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
1996 1995 1994
----------- ------------- -----------
<S> <C> <C> <C>
Primary:
----------
Weighted average shares outstanding 4,918,301 4,918,301 4,918,301
Incremental shares for
exercise of stock options 132,954
----------- ------------- -----------
Adjusted number of common
shares outstanding 4,918,301 4,918,301 5,051,255
=========== ============= ===========
Earnings (loss) before cumulative
effect of accounting change $234,000 ($12,064,000) $460,000
Cumulative effect of income tax
accounting change 1,500,000
----------- ------------- -----------
Net earnings (loss) $234,000 ($12,064,000) $1,960,000
=========== ============= ===========
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of accounting change $.05 $(2.45) $.09
Cumulative effect of income tax
accounting change .30
----------- ------------- -----------
Net earnings (loss) per share $.05 $(2.45) $.39
=========== ============= ===========
Fully diluted:
----------------
Weighted average shares outstanding 4,918,301 4,918,301 4,918,301
Incremental shares for
exercise of stock options 113,917 132,954
----------- ------------- -----------
Adjusted number of common
shares outstanding 4,918,301 5,032,218 5,051,255
=========== ============= ===========
Earnings (loss) before cumulative
effect of accounting change $234,000 ($12,064,000) $460,000
Cumulative effect of income tax
accounting change 1,500,000
----------- ------------- -----------
Net earnings (loss) $234,000 ($12,064,000) $1,960,000
=========== ============= ===========
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of accounting change $.05 $(2.40) $.09
Cumulative effect of income tax
accounting change .30
----------- ------------- -----------
Net earnings (loss) per share $.05 $(2.40) $.39
=========== ============= ===========
</TABLE>
<PAGE>
EVANS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit Page Nos.
------- ---------
4.51 44 - 48
<PAGE>
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
AMENDMENT NO. 4, dated as of May 30, 1996, between TRANSAMERICA BUSINESS
CREDIT CORPORATION ("Lender"), and EVANS, INC. ("Borrower"), and Borrower's
wholly-owned Subsidiaries, KOSLOW'S, INC. ("Koslow") and EVANS - ROSENDORF
OF MARYLAND, INC. (Rosendorf") (Koslow and Rosendorf individually,
a "Borrowing Subsidiary", and collectively, "Borrowing Subsidiaries").
Lender and Borrower and Borrowing Subsidiaries are parties to a Loan
and Security Agreement dated as of May 31, 1995, as amended by Amendment
No. 1 to Loan and Security Agreement dated as of October 3, 1995, by
Amendment No. 2 to Loan and Security Agreement dated as of November
20, 1995, and by Amendment No. 3 to Loan and Security Agreement dated
as of January 5, 1996 (the "Loan and Security Agreement"). Lender,
Borrower and Borrowing Subsidiaries desire to amend the Loan and Security
Agreement in certain respects and, accordingly, the parties hereto
agree as follows:
1. Definitions. Except as otherwise provided herein, the terms defined
in the Loan and Security Agreement are used herein as defined therein.
2. Amendments. Subject to the satisfaction of the conditions precedent
set forth in Section 3 hereof, the Loan and Security Agreement is amended
as follows:
A. Effective as of May 30, 1996, the definitions of "Maximum Facility
Amount" and "Maximum Revolving Loan" in Section 1.1 are amended and
restated as follows:
Maximum Facility Amount: Twenty-Three Million, Five Hundred Thousand
Dollars ($23,500,000) during the period beginning on May 30, 1996,
and ending on October 14, 1996, Twenty-Five Million, Five Hundred Thousand
Dollars ($25,500,000) during the period beginning on October 15, 1996,
and ending on the earlier of January 3, 1997 or the date on which Borrower
sells its leasehold estate in the Real Property commonly described
as 36 South State Street, Chicago, Illinois, and Twenty-Three Million,
Five Hundred Thousand Dollars ($23,500,000) at all times thereafter.
Maximum Revolving Loan: Twenty-One Million, Five Hundred Thousand
Dollars ($21,500,000) during the period beginning on May 30, 1996,
and ending on October 14, 1996, Twenty-Three Million, Five Hundred
Thousand Dollars ($23,500,000) during the period beginning on October
15, 1996, and ending on the earlier of January 3, 1997, or the date
on which Borrower sells its leasehold estate in the Real Property commonly
described as 36 South State Street, Chicago, Illinois, and Twenty-One
Million, Five Hundred Thousand Dollars ($21,500,000) at all times thereafter.
<PAGE>
B. Effective as of May 30, 1996, the definition of "Borrowing Base"
in Section 3.1 is amended and restated as follows:
The "Borrowing Base" shall mean, at any particular time, an amount
equal to the lesser of the Maximum Revolving Loan, or the sum of the
following:
(i) Seventy-five percent (75%) (an "Advance Rate") of Eligible
Owned Store Sales Accounts; plus
(ii) Eighty percent (80%) (an "Advance Rate") of Eligible Licensed
Department Sales Accounts; plus
(iii) Fifty percent (50%) (an "Advance Rate") of Eligible Owned
Store Service Accounts and Eligible Licensed Department Service
Accounts; plus
(iv) The lesser of (x) Twelve Million Dollars ($12,000,000) during
the months of January, February, March and April, and Thirteen
Million Dollars ($13,000,000) during the months of May, June, July,
August, September, October, November and December, except Fifteen
Million Dollars ($15,000,000) during the period beginning on October
15, 1996, and ending on the earlier of January 3, 1997, or the
date on which Borrower sells its leasehold estate in the Real Property
commonly described as 36 South State Street, Chicago, Illinois,
or (y) the sum of the following:
(A) Thirty-five percent (35%) (an "Advance Rate") of Eligible
Apparel Inventory during the months of January, February, March and
April, and forty percent (40%) (an "Advance Rate") of Eligible Apparel
inventory during the months of May, June, July, August, September,
October, November and December; plus
(B) Fifty-five percent (55%) (an "Advance Rate") of Eligible Fur
Inventory during the months of January, February, March and April,
and sixty percent (60%) (an "Advance Rate") of Eligible Fur Inventory
during the months of May, June, July, August, September, October, November
and December.
C. Effective as of March 1, 1996, Section 7.3(D) is amended and restated
as follows:
(D) At the end of each Fiscal Year, Tangible Net Worth equal to or
greater than the amount set opposite such Fiscal Year in the following
schedule:
<PAGE>
Fiscal Year Tangible Net Worth
----------- ------------------
1996 $18,000,000
1997 $19,000,000
1998 $20,000,000
D. Effective as of May 30, 1996, Sections 7.3 (A), (E), (F), (H)
and (I) are amended and restated as follows:
(A) Operating Losses (i) for the first fiscal quarter of each of
the 1997 and 1998 fiscal years of not more than $925,000, and (ii)
for the first and second Fiscal Quarters of each of the 1997 and 1998
Fiscal Years of not more than $3,025,000.
(E) At the end of each Fiscal Quarter, Average Inventory Days of
not more than the number set opposite such Fiscal Quarter in the
following Schedule:
Fiscal Quarter Average Inventory Days
-------------- -----------------------
First 300
Second 375
Third 200
Fourth 125
(F) At the end of each Fiscal Year, Average Inventory Days of not
more than 200.
(H) At the end of each Fiscal Quarter Average Accounts Payable Days
of not more than the number set opposite such Fiscal quarter in the
following schedule:
Fiscal Quarter Average Accounts Payable Days
-------------- -----------------------------
First 90
Second 110
Third 120
Fourth 85
<PAGE>
(I) At the end of each Fiscal Year, Average Accounts Payable Days
of not more than 90.
3. Conditions Precedent. This Amendment No. 4 shall become effective
upon the satisfaction of the following conditions precedent:
3.1 Execution and Delivery of Amendment No. 4. This Amendment No.
4 or counterparts thereof shall have been duly executed and delivered
to Lender, Borrower and Borrowing Subsidiaries.
3.2 Replacement Revolving Credit Note. Borrower and Borrowing Subsidiaries
shall have executed and delivered to Lender a replacement Revolving
Credit Note in the form attached hereto as Exhibit A.
3.3 Amendment Fee. Borrower and Borrowing Subsidiaries shall have
paid to Lender solely as consideration for Lender agreeing to enter
into this Amendment No. 4 an amendment fee in the amount of $25,000.
Upon the satisfaction of the foregoing conditions precedent, Lender
shall mark the Replacement Revolving Credit Note date November 30,
1995, in the principal amount of $22,500,000, "replaced by Revolving
Credit Note date May 30, 1996", and shall deliver same to Borrower
and Borrowing Subsidiaries.
4. Representation and Warranty. Borrower and each Borrowing Subsidiary
represents and warrants to Lender that the execution and delivery by
Borrower and each Borrowing Subsidiary of the Amendment No. 4 are within
Borrower's and each Borrowing Subsidiary's corporate power, have been
duly authorized by all necessary or proper corporate action, are not
in contravention of any provision of Borrower's or either Borrowing
Subsidiary's Articles or Certificate of Incorporation or By-Laws,
will not violate any law or regulation, or any order to decree of any
court or governmental instrumentality, will not conflict with or result
in the breach or termination of, constitute a default under, or accelerate
any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Borrower or either Borrowing
Subsidiary is a party or by which Borrower or either Borrowing Subsidiary
or any of its property is bound and do not require the consent or approval
of any governmental body, agency, authority or any other person.
5. Miscellaneous. Except as herein provided, the Loan and Security
Agreement shall remain unchanged and in full force and effect. This
Amendment No. 4 may be executed in any number of separate counterparts,
each of which shall, collectively and separately, constitute one agreement.
This Amendment No. 4 and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws
of the State of Illinois applicable to contracts made and performed
in such state, without regard to the principals thereof regarding conflict
of laws, and any applicable laws of the United States of America.
<PAGE>
IN WITNESS WHEREOF, This Amendment No. 4 has been duly executed as
of the day and year specified at the beginning hereof.
TRANSAMERICA BUSINESS CREDIT EVANS, INC.
CORPORATION
By: Matthew N. McAlpine By: William E. Koziel
______________________________ ______________________________
Name: Matthew N. McAlpine Name: William E. Koziel
Title: Senior Account Executive Title: Vice President and
Chief Financial Officer
KOSLOW'S, INC.
By:______________________________
Name: William E. Koziel
Title: Vice President and
Chief Financial Officer
EVANS-ROSENDORF OF
MARYLAND, INC.
By:___________________________
Name: William E. Koziel
Title: Vice President and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-02-1996
<PERIOD-START> Feb-26-1995
<PERIOD-END> Mar-02-1996
<CASH> 220,000
<SECURITIES> 0
<RECEIVABLES> 15,984,000
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0
0
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</TABLE>
