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 May 31, 1997
Commission File Number 0-1500
EVANS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-1050870
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
36 South State Street, Chicago, Illinois 60603
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-855-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: as of July 11, 1997
4,985,771 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 -
May 31, 1997, June 1, 1996
and March 1, 1997 2
Condensed Consolidated Statements of Operations -
Thirteen weeks ended May 31, 1997
and June 1, 1996 3
Condensed Consolidated Statements of Cash Flows -
Thirteen weeks ended May 31, 1997
and June 1, 1996 4
Notes to Condensed Consolidated Financial Statements 5 - 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II. Other Information 9
Signatures 10
Index to Exhibits 11
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
May 31, 1997 June 1, 1996 March 1, 1997
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 118,000 $ 248,000 $ 153,000
Accounts receivable (net) 13,238,000 13,687,000 12,665,000
Merchandise inventories 15,847,000 13,671,000 17,130,000
Prepaid expenses and other assets 1,027,000 885,000 899,000
Assets held for sale 4,750,000 4,750,000
Deferred income taxes 573,000
------------ ------------ -------------
Total current assets 34,980,000 29,064,000 35,597,000
------------ ------------ -------------
Property and equipment 11,340,000 20,783,000 11,316,000
Accumulated depreciation and
amortization (7,584,000) (10,576,000) (7,398,000)
------------ ------------ -------------
Net property and equipment 3,756,000 10,207,000 3,918,000
------------ ------------ -------------
Other assets 3,055,000 3,424,000 3,107,000
------------ ------------ -------------
$41,791,000 $42,695,000 $42,622,000
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $13,112,000 $11,241,000 $ 9,308,000
Current portion of long-term debt 692,000 1,015,000 692,000
Accounts payable 4,847,000 1,895,000 9,318,000
Accrued liabilities 6,039,000 5,713,000 4,983,000
------------ ------------ -------------
Total current liabilities 24,690,000 19,864,000 24,301,000
------------ ------------ -------------
Long-term debt 1,141,000 1,833,000 1,224,000
------------ ------------ -------------
Other liabilities 36,000 11,000 43,000
------------ ------------ -------------
Shareholders' equity:
Preferred stock, 3,000,000 shares
authorized, none issued
Common stock, 6,333,435 shares
issued 1,267,000 1,267,000 1,267,000
Capital in excess of par value 15,535,000 15,660,000 15,660,000
Retained earnings 3,501,000 8,658,000 4,725,000
------------ ------------ -------------
20,303,000 25,585,000 21,652,000
------------ ------------ -------------
Treasury stock (1,347,664 shares
at cost) (4,379,000) (4,598,000) (4,598,000)
------------ ------------ -------------
Total shareholders' equity 15,924,000 20,987,000 17,054,000
------------ ------------ -------------
$41,791,000 $42,695,000 $42,622,000
============ ============ =============
<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
------------------------------
May 31, 1997 June 1, 1996
------------ ------------
<S> <C> <C>
Net sales $ 9,050,000 $8,839,000
Service revenues 4,767,000 4,664,000
------------ ------------
13,817,000 13,503,000
Costs and expenses: ------------ ------------
Cost of goods and services sold,
buying and occupancy costs 8,966,000 8,491,000
Selling and general expenses 5,555,000 5,930,000
Provision for doubtful accounts 123,000 113,000
Interest expense 399,000 333,000
Other income, net (2,000)
------------ ------------
15,041,000 14,867,000
------------ ------------
Loss before credit for income taxes (1,224,000) (1,364,000)
Credit for income taxes 573,000
------------ ------------
Net loss $(1,224,000) $ (791,000)
============ ============
Net loss per common share $(0.25) $(0.16)
============ ============
Cash dividends per common share -- --
Weighted average number of common
shares outstanding 4,927,198 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
------------------------------
May 31, 1997 June 1, 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,224,000) $(791,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 254,000 341,000
Provision for doubtful accounts 123,000 113,000
Non-cash compensation expense 24,000
Change in assets and liabilities:
Accounts receivable (696,000) 2,184,000
Merchandise inventories 1,283,000 1,090,000
Prepaid expenses and other current assets (58,000) 269,000
Deferred income taxes (573,000)
Other assets (1,000) (13,000)
Accounts payable (4,471,000) (4,716,000)
Accrued liabilities 1,056,000 252,000
Other liabilities (7,000)
------------ ------------
Net cash used in operating activities (3,717,000) (1,844,000)
Cash Flows from Investing Activities:
Proceeds from the sale of property
and equipment 1,000
Additions to property and equipment (40,000) (67,000)
------------ ------------
Net cash used in investing activities (39,000) (67,000)
Cash Flows from Financing Activities:
Proceeds from short-term borrowing 3,804,000 1,939,000
Principal payments on long-term debt (83,000)
------------ ------------
Net cash provided by financing activities 3,721,000 1,939,000
------------ ------------
Net (decrease) increase in cash and
cash equivalents (35,000) 28,000
Cash and cash equivalents at beginning
of period 153,000 220,000
------------ ------------
Cash and cash equivalents at end of period $ 118,000 $ 248,000
============ ============
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Cash paid during the period for:
Interest $246,000 $336,000
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 1997 Form 10-K Annual Report
filed with the Securities and Exchange Commission. The accompanying financial
data should be read in conjunction with the notes to consolidated financial
statements contained in the 1997 Form 10-K Annual Report.
The information furnished herein, other than the Condensed Consolidated
Balance Sheet as of March 1, 1997, is unaudited and includes all adjustments
and accruals consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair statement of results for the
interim periods. The Condensed Consolidated Balance Sheet as of March 1, 1997
has been derived from, and does not include all the disclosures contained in
the audited financial statements as of and for the year ended March 1, 1997.
2. Because of the seasonal nature of the Company's business, operating results
for the first 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 May 31, 1997 and June 1, 1996, because the
periods resulted in net losses and the effect would be antidilutive.
4. On June 16, 1997, 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 $27,000,000
credit facility which includes a term loan of $2,000,000. The agreement
provides for interest at 0.25% over the base rate (prime) for direct
borrowings under the revolving facility and the term loan. The agreement
contains provisions which, among other things, require the maintenance of
certain financial covenants, the most restrictive of which is the maintenance
of a certain level of earnings before interest, taxes, depreciation and
amortization (EBITDA). The agreement prohibits the payment of cash dividends
and requires a commitment fee of three-tenths 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.
- 5 -
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
5. On June 19, 1997, the Company entered into a contract for the sale and
leaseback of its flagship store and corporate office headquarters building
located at 36 S. State Street in Chicago, Illinois with a purchase price of
$5,000,000. The transaction is expected to close on or before August 2, 1997.
As part of the agreement, the Company will execute 15-year and 10-year lease
agreements covering 61,775 square feet for the existing retail premises and
36,020 square feet for the corporate operation space, respectively. The
leases provide for a rental rate of $12.50 per square foot gross with an
escalation of 2.5% per annum. The agreement also requires a $500,000 deposit
to secure the lease obligations. The net proceeds from the transaction will
be used first to retire the senior secured long-term payable obligation and
then to pay down the secured revolving credit facility obligation.
6. On June 25, 1997, the Company signed a Letter of Intent for Evans to purchase
the assets of Triomphe Fourrures Incorporated which are used in connection
with the operation of the Maximilian Fur Salons in Bloomingdale's Stores. The
purchase would allow Evans to expand its Leased Fur Salon Division into
several markets where it does not operate, primarily the New York,
Philadelphia and southern California markets. For the year ended December 31,
1996, the Maximilian operation generated revenues in excess of $19 million.
The transaction is expected to close in July, 1997, and is subject to the
execution of a definitive agreement, due diligence and other contingencies.
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash and cash equivalents at May 31, 1997 were $118,000 as compared to
$153,000 at March 1, 1997. The decrease was due to cash used in operating
activities of $3,717,000 and cash used in investing activities of $39,000,
partially offset by cash provided by financing activities of $3,721,000.
The cash used in operating activities was due primarily to the net loss of
$1,224,000 and a decrease in accounts payable of $4,471,000, partially offset
by a decrease in merchandise inventories of $1,283,000.
The cash used in investing activities was largely the result of additions to
property and equipment of $40,000.
The cash provided by financing activities was due primarily to proceeds from
short-term borrowings of $3,804,000 partially offset by principal payments on
long-term debt obligations of $83,000.
Working capital at May 31, 1997 was $10,290,000 as compared to $11,296,000 at
March 1, 1997.
On June 16, 1997, 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 new agreement provides for a three year
$27,000,000 credit facility which includes a term loan of $2,000,000. The
agreement provides for interest at 0.25% over the base rate (prime) for the
revolving facility and the term loan. The agreement provides for monthly
principal payments of $23,810 beginning October 1, 1997 with the remaining
unamortized balance due June 15, 2000.
On June 19, 1997, the Company entered into a contract for the sale of its 36
S. State building in Chicago, Illinois. The proceeds generated from the sale
will be used first to pay down the unamortized senior secured long-term
payable obligation and then the secured revolving loan obligation. The
building, as such, has been classified as an asset held for sale within the
current asset section of the balance sheet as of May 31, 1997.
The credit facility which expires June 15, 2000 is considered adequate to
finance seasonal inventory requirements as well as commitments for capital
expenditures during fiscal 1998.
Results of Operations
Total revenues for the first quarter ended May 31, 1997 increased $314,000
(2.3%) as compared to the same period last year. Fur merchandise sales
decreased $315,000 (8.6%) due primarily to a decrease of $1,058,000 (29.9%) in
sales at comparable locations and a decrease of $112,000 in sales associated
with a leased location closed subsequent to the first quarter of fiscal 1997.
These decreases were partially offset by sales of $855,000 associated with
store closing events in the Macy's stores in Texas. The decrease in fur
merchandise sales at comparable locations during the first quarter was largely
due to a decrease of $1,021,000 during the month of March,
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
which the Company believes was the result of the continued lack of
availability of finished goods at certain affordable retail price levels.
Women's ready-to-wear sales increased $526,000 (10.1%) due primarily to an
increase in sales at comparable locations. The Company believes that women's
ready-to-wear sales at comparable locations were favorably impacted by the
refocusing of its efforts on providing product in line with the tastes of its
target consumers. Service revenues increased $103,000 (2.2%) due primarily to
an increase of $168,000 (3.7%) in sales at comparable locations partially
offset by a decrease of $65,000 in sales associated with a leased location
closed subsequent to the first quarter of fiscal 1997.
Cost of goods and services sold, buying and occupancy costs as a percentage of
total revenues for the first quarter were 64.9% as compared to 62.9% for the
same period last year. Cost of goods and services sold as a percentage of
total revenues increased (48.2% versus 45.2%) due primarily to lower overall
margins during the month of March as the Company attempted to stimulate demand
at certain lower retail price points. Buying costs as a percentage of total
revenues were comparable with prior year levels. Occupancy costs as a
percentage of total revenues decreased (13.5% versus 14.1%).
Total selling and general expenses decreased $375,000 (6.3%) as compared to
the prior year due primarily to a decrease of $350,000 (9.0%) in payroll and
related fringe benefits and a decrease of $50,000 (5.4%) in advertising
expense. The decrease in payroll and related fringe benefits was largely the
result of additional staff reductions in various corporate departments which
the Company initiated during the fourth quarter of fiscal 1997.
Interest expense for the first quarter increased $66,000 (19.8%) due primarily
to higher average short-term borrowings as well as higher weighted average
interest rates as compared to the same period last year.
The pre-tax loss for the first quarter of $1,224,000 as compared to $1,364,000
for the prior year period was primarily the result of the increase in total
revenues and the decrease in selling and general expenses.
The credit for income taxes for the first quarter 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.
- 8 -
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Part I. Exhibit 11
Computation of earnings per share.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
during the thirteen weeks ended May 31, 1997
Items other than those listed are omitted because they are not required.
- 9 -
<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 11, 1997 PATRICK J. REGAN
PATRICK J. REGAN
President and
Chief Executive Officer
DATE: July 11, 1997 WILLIAM E. KOZIEL
WILLIAM E. KOZIEL
Vice President and
Chief Financial Officer
- 10 -
<PAGE>
EVANS, INC. AND SUBSIDIARIES
Exhibit Page Nos.
11 12
- 11 -
<PAGE>
<TABLE>
EXHIBIT 11
EVANS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Thirteen weeks ended
------------------------------
May 31, 1997 June 1, 1996
------------ ------------
<S> <C> <C>
Primary:
- --------
Weighted average shares outstanding 4,927,198 4,918,301
Incremental shares for
exercise of stock options -- --
------------ ------------
Adjusted number of common
shares outstanding 4,927,198 4,918,301
============ ============
Net loss $(1,224,000) $ (791,000)
============ ============
Net loss per share $(0.25) $(0.16)
============ ============
Fully diluted:
Weighted average shares outstanding 4,927,198 4,918,301
Incremental shares for
exercise of stock options -- --
------------ ------------
Adjusted number of common
shares outstanding 4,927,198 4,918,301
============ ============
Net loss $(1,224,000) $ (791,000)
============ ============
Net loss per share $(0.25) $(0.16)
============ ============
</TABLE>
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-START> Mar-02-1997
<PERIOD-END> May-31-1997
<CASH> 118,000
<SECURITIES> 0
<RECEIVABLES> 13,238,000
<ALLOWANCES> 0
<INVENTORY> 15,847,000
<CURRENT-ASSETS> 34,980,000
<PP&E> 11,340,000
<DEPRECIATION> 7,584,000
<TOTAL-ASSETS> 41,791,000
<CURRENT-LIABILITIES> 24,690,000
<BONDS> 0
<COMMON> 1,267,000
0
0
<OTHER-SE> 14,657,000
<TOTAL-LIABILITY-AND-EQUITY> 41,791,000
<SALES> 9,050,000
<TOTAL-REVENUES> 13,817,000
<CGS> 6,656,000
<TOTAL-COSTS> 8,966,000
<OTHER-EXPENSES> (2,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 399,000
<INCOME-PRETAX> (1,224,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,224,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,224,000)
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
