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 June 1, 1996
Commission File Number 0-1500
EVANS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-1050870
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
36 South State Street, Chicago, Illinois 60603
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-855-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: as of July 12,
1996 4,918,301 shares of common stock, $.20 par value, were outstanding.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information --------
Condensed Consolidated Balance Sheets -
June 1, 1996, May 27, 1995 and March 2, 1996 2
Condensed Consolidated Statements of Operations -
Thirteen weeks ended June 1, 1996 and May 27, 1995 3
Condensed Consolidated Statements of Cash Flows -
Thirteen weeks ended June 1, 1996 and May 27, 1995 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 7
Part II. Other Information 8
Signatures 9
Index to Exhibits 10
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
June 1, 1996 May 27, 1995 March 2, 1996
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $248,000 $273,000 $220,000
Accounts receivable (net) 13,687,000 14,807,000 15,984,000
Merchandise inventories 13,671,000 14,081,000 14,761,000
Prepaid expenses and other assets 885,000 268,000 1,154,000
Deferred income taxes 573,000
------------ ------------ -------------
Total current assets 29,064,000 29,429,000 32,119,000
------------ ------------ -------------
Property and equipment 20,783,000 22,697,000 20,716,000
Accumulated depreciation and
amortization (10,576,000) (12,243,000) (10,293,000)
------------ ------------ -------------
Net property and equipment 10,207,000 10,454,000 10,423,000
Other assets 3,424,000 2,710,000 3,469,000
------------ ------------ -------------
$42,695,000 $42,593,000 $46,011,000
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $11,241,000 $9,965,000 $9,219,000
Current portion of long-term debt 1,015,000 362,000 1,043,000
Accounts payable 1,895,000 4,604,000 6,611,000
Accrued liabilities 5,713,000 6,766,000 5,461,000
------------ ------------ -------------
Total current liabilities 19,864,000 21,697,000 22,334,000
------------ ------------ -------------
Long-term debt 1,833,000 1,088,000 1,888,000
------------ ------------ -------------
Other liabilities 11,000 11,000 11,000
------------ ------------ -------------
Shareholders' equity:
Preferred stock, 3,000,000 shares
authorized, none issued
Common stock, 6,333,433 shares
issued 1,267,000 1,267,000 1,267,000
Capital in excess of par value 15,660,000 15,660,000 15,660,000
Retained earnings 8,658,000 7,468,000 9,449,000
------------ ------------ -------------
25,585,000 24,395,000 26,376,000
------------ ------------ -------------
Treasury stock (1,415,134 shares
at cost) (4,598,000) (4,598,000) (4,598,000)
------------ ------------ -------------
Total shareholders' equity 20,987,000 19,797,000 21,778,000
------------ ------------ -------------
$42,695,000 $42,593,000 $46,011,000
============ ============ =============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
- 2 -
<PAGE>
<TABLE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Thirteen weeks ended
------------------------------
June 1, 1996 May 27, 1995
------------ ------------
<S> <C> <C>
Net sales $8,839,000 $12,300,000
Service revenues 4,664,000 4,981,000
------------ ------------
13,503,000 17,281,000
Costs and expenses: ------------ ------------
Cost of goods and services sold,
buying and occupancy costs 8,491,000 11,978,000
Selling and general expenses 5,930,000 6,625,000
Provision for doubtful accounts 113,000 148,000
Interest expense 333,000 280,000
Other income, net (3,000)
------------ ------------
14,867,000 19,028,000
------------ ------------
Loss before credit for income taxes (1,364,000) (1,747,000)
Credit for income taxes 573,000 --
------------ ------------
Net loss ($791,000) ($1,747,000)
============ ============
Net loss per common share ($0.16) ($0.36)
============ ============
Cash dividends per common share -- --
Weighted average number of common
shares outstanding 4,918,301 4,918,301
============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
- 3 -
<PAGE>
<TABLE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen weeks ended
------------------------------
June 1, 1996 May 27, 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ($791,000) ($1,747,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 341,000 342,000
Provision for doubtful accounts 113,000 148,000
Change in assets and liabilities:
Accounts receivable 2,184,000 2,150,000
Merchandise inventories 1,090,000 2,320,000
Prepaid expenses and other current assets 269,000 244,000
Deferred income taxes (573,000) 0
Other assets (13,000) 305,000
Accounts payable (4,716,000) (4,307,000)
Accrued liabilities 252,000 (164,000)
Other liabilities 0 (5,000)
------------ ------------
Net cash used in operating activities (1,844,000) (714,000)
Cash Flows from Investing Activities:
Proceeds from the sale of property
and equipment 10,000
Additions to property and equipment (67,000) (157,000)
------------ ------------
Net cash used in investing activities (67,000) (147,000)
Cash Flows from Financing Activities:
Net cash provided by financing activities 1,939,000 0
------------ ------------
Net increase (decrease) in cash and
cash equivalents 28,000 (861,000)
Cash and cash equivalents at beginning
of period 220,000 1,134,000
------------ ------------
Cash and cash equivalents at end of period $248,000 $273,000
============ ============
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Cash paid during the period for:
Interest $336,000 $211,000
Income taxes 4,000 4,000
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
- 4 -
<PAGE>
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 1996 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 1996
Form 10-K Annual Report.
The information furnished herein, other than the Condensed Consolidated
Balance Sheet as of March 2, 1996, is unaudited and includes all adjustments
and accruals consisting only of normal recurring adjustments which
are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The Condensed Consolidated Balance
Sheet as of March 2, 1996 has been derived from, and does not include
all the disclosures contained in the audited financial statements as
of and for the year ended March 2, 1996.
2. Because of the seasonal nature of the Company's business, operating
results for the first thirteen 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. Common share equivalents were not included in the computation of
earnings per share for the thirteen weeks ended June 1, 1996 and May
27, 1995, because the periods resulted in net losses and the effect
would be antidilutive.
4. Certain reclassifications have been made to the Condensed Consolidated
Balance Sheet for May 27, 1995 to conform to the presentation for March
2, 1996 and June 1, 1996. Such reclassifications did not effect the
previously reported operating results.
5. On July 5, 1996, the Company amended its revolving credit agreement
to reflect its current operating condition.
- 5 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash and cash equivalents at June 1, 1996 were $248,000 as compared
to $220,000 at March 2, 1996. The increase was due to cash provided
by financing activities of $1,939,000 partially offset by cash used
in operating activities of $1,844,000 and cash used in investing activities
of $67,000.
The cash provided by financing activities was due primarily to an increase
in notes payable of $2,022,000.
The cash used in operating activities was due primarily to the net
loss of $791,000 and a decrease in accounts payable of $4,716,000,
partially offset by a decrease in accounts receivable of $2,184,000
and a decrease in merchandise inventories of $1,090,000.
The cash used in investing activities was the result of additions to
property and equipment of $67,000.
Working capital at June 1, 1996 was $9,200,000 as compared to $9,785,000
at March 2, 1996.
The revolving line of credit which expires May 31, 1998 is considered
adequate to finance seasonal inventory requirements as well as commitments
for capital expenditures during fiscal 1997.
Results of Operations
Total revenues for the first quarter ended June 1, 1996 decreased $3,778,000
(21.9%) as compared to the same period last year. Fur merchandise
sales decreased $1,566,000 (30.0%) due primarily to a decrease of $889,000
(20.1%) in sales at comparable locations and a decrease of $580,000
in sales associated with four Company-owned locations closed during
and subsequent to the first quarter of the prior year. In addition,
a decrease of $97,000 in sales was associated with the announced termination
of the Company's license agreement with Strawbridge & Clothier. The
decrease in fur merchandise sales at comparable locations as compared
to the prior year period was due largely to the elimination of certain
highly promotional fur events which produced marginal results last
year. Women's ready-to-wear sales decreased $1,895,000 (26.8%) due
primarily to a decrease of $1,379,000 (21.0%) in sales at comparable
locations and a decrease of $516,000 in sales associated with two Company
owned locations closed during and subsequent to the first quarter of
the prior year. The decrease in women's ready-to-wear sales at comparable
locations was indicative of industry trends as well as the impact of
the unseasonably cold spring weather in the midwest during the Mother's
Day and Easter promotional periods. Service revenues decreased $317,000
(6.4%) due primarily to a decrease of $179,000 in sales associated
with four Company-owned locations closed during and subsequent to the first
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
quarter of the prior year and a decrease of $299,000 in sales associated with
the announced termination of the Company's license agreement with Strawbridge
& Clothier, partially offset by an increase of $161,000 (3.6%) in sales
at comparable locations.
Cost of goods and services sold, buying and occupancy costs as a percentage
of total revenues for the first quarter were 62.9% as compared to 69.3%
for the same period last year. Cost of goods and services sold as
a percentage of total revenues decreased (45.2% versus 54.4%) due primarily
to the Company's continuing plan to focus on achieving higher gross
margins on lower planned sales. Buying costs as a percentage of total
revenues were comparable with prior year levels. Occupancy costs as
a percentage of total revenues increased (14.1% versus 12.2%) due primarily
to the impact of fixed rental costs as measured against the overall
decrease in sales.
Total selling and general expenses decreased $695,000 (10.5%) as compared
to the prior year due primarily to a decrease of $457,000 (10.5%) in
payroll and related fringe benefits and a decrease of $235,000 (20.2%)
in advertising expense.
Interest expense for the first quarter increased $58,000 (21.2%) due
primarily to higher average short-term borrowings as compared to the
prior year.
The pre-tax loss for the first quarter of $1,364,000 as compared to
$1,747,000 for the same period last year was due largely to the increase
in gross margin percentages and the decrease in selling and general
expenses.
The credit for income taxes in the prior year 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.
- 7 -
<PAGE>
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Part I. Exhibit 4.52
Amendment No. 5 to Loan and Security Agreement between
Registrant and Transamerica Business Credit Corporation.
Exhibit 11
Computation of earnings per share.
(b) Reports on Form 8-K -- There were no reports on Form 8-K
filed during the thirteen weeks ended June 1, 1996.
Items other than those listed are omitted because they are not required.
- 8 -
<PAGE>
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: July 12, 1996 PATRICK J. REGAN
PATRICK J. REGAN
President and
Chief Executive Officer
DATE: July 12, 1996 WILLIAM E. KOZIEL
WILLIAM E. KOZIEL
Vice President and
Chief Financial Officer
- 9 -
<PAGE>
EVANS, INC. AND SUBSIDIARIES
Exhibit Page Nos.
4.52 11 - 12
11 13
- 10 -
<PAGE>
AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 5, dated as of July 5, 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, by Amendment No. 3 to Loan and Security Agreement dated as
of January 5, 1996, and by Amendment No. 4 to Loan and Security Agreement
dated as of May 30, 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. Amendment. Effective as of June 1, 1996, Section 7.3(G) of the
Loan and Security Agreement is amended and restated as follows:
"(G) (i) at the end of each Fiscal Quarter subsequent to the date
hereof, Average Accounts Receivable Days of not more than 211 with respect
to Owned Store Sales Accounts, and not more than 45 with respect to
Licensed Department Sales Accounts, (ii) at the end of each of the
third Fiscal Quarters subsequent to the date hereof, Average Accounts
Receivable Days of not more than 115 with respect to Owned Store Service
Accounts, and not more than 220 with respect to Licensed Department
Service Accounts, and (iii) at the end of each of the first, second
and fourth Fiscal Quarters subsequent to the date hereof, Average Accounts
Receivable Days of not more than 75 with respect to Owned Store Service
Accounts, and not more than 85 with respect to Licensed Department
Service Accounts."
3. 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 this Amendment No. 5 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 or 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.
- 11 -
<PAGE>
4. Miscellaneous. Except as herein provided, the Loan and Security
Agreement shall remain unchanged and in full force and effect. This
Amendment No. 5 may be executed in any number of separate counterparts,
each of which shall, collectively and separately, constitute one agreement.
This Amendment No. 5 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 principles thereof regarding conflict
of laws, and any applicable laws of the United States of America.
IN WITNESS WHEREOF, this Amendment No. 5 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: PATRICK J. REGAN
Name: MATTHEW N. MCALPINE Name: PATRICK J. REGAN
Title: Senior Account Executive Title: President and
Chief Executive Officer
KOSLOW'S, INC.
By: PATRICK J. REGAN
Name: PATRICK J. REGAN
Title: President and
Chief Executive Officer
EVANS - ROSENDORF OF
MARYLAND, INC.
By: PATRICK J. REGAN
Name: PATRICK J. REGAN
Title: President and
Chief Executive Officer
- 12 -
<PAGE>
<TABLE>
EXHIBIT 11
EVANS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Thirteen weeks ended
------------------------------
June 1, 1996 May 27, 1995
------------ ------------
<S> <C> <C>
Primary:
- --------
Weighted average shares outstanding 4,918,301 4,918,301
Incremental shares for
exercise of stock options -- --
------------ ------------
Adjusted number of common
shares outstanding 4,918,301 4,918,301
============ ============
Net loss ($791,000) ($1,747,000)
============ ============
Net loss per share ($0.16) ($0.36)
============ ============
Fully diluted:
Weighted average shares outstanding 4,918,301 4,918,301
Incremental shares for
exercise of stock options -- --
------------ ------------
Adjusted number of common
shares outstanding 4,918,301 4,918,301
============ ============
Net loss ($791,000) ($1,747,000)
============ ============
Net loss per share ($0.16) ($0.36)
============ ============
- 13 -
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-01-1997
<PERIOD-START> Mar-03-1996
<PERIOD-END> Jun-01-1996
<CASH> 248,000
<SECURITIES> 0
<RECEIVABLES> 13,687,000
<ALLOWANCES> 0
<INVENTORY> 13,671,000
<CURRENT-ASSETS> 29,064,000
<PP&E> 20,783,000
<DEPRECIATION> 10,576,000
<TOTAL-ASSETS> 42,695,000
<CURRENT-LIABILITIES> 19,864,000
<BONDS> 0
0
0
<COMMON> 1,267,000
<OTHER-SE> 19,720,000
<TOTAL-LIABILITY-AND-EQUITY> 42,695,000
<SALES> 8,839,000
<TOTAL-REVENUES> 13,503,000
<CGS> 6,110,000
<TOTAL-COSTS> 8,491,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 333,000
<INCOME-PRETAX> (1,364,000)
<INCOME-TAX> 573,000
<INCOME-CONTINUING> (791,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (791,000)
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
