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 30, 1998
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Commission File Number 0-1500
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EVANS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-1050870
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
36 South State Street, Chicago, Illinois 60603
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(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 10, 1998 5,194,245
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 30, 1998, May 31, 1997
and February 28, 1998 2
Condensed Consolidated Statements of Operations -
Thirteen weeks ended May 30, 1998
and May 31, 1997 3
Condensed Consolidated Statements of Cash Flows -
Thirteen weeks ended May 30, 1998
and May 31, 1997 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>
PART I. FINANCIAL INFORMATION
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 30, 1998 May 31, 1997 February 28, 1998
----------- ----------- -----------------
(Unaudited) (Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 723,000 $ 118,000 $ 650,000
Accounts receivable (net) 12,960,000 13,238,000 12,639,000
Merchandise inventories 23,417,000 15,847,000 25,495,000
Prepaid expenses and other
asset 921,000 1,027,000 923,000
Assets held for sale - 4,750,000 -
----------- ----------- -----------
Total current assets 38,021,000 34,980,000 39,707,000
----------- ----------- -----------
Property and equipment 11,663,000 11,340,000 11,642,000
Accumulated depreciation and
amortization (8,397,000) (7,584,000) (8,203,000)
----------- ----------- -----------
Net property and equipment 3,266,000 3,756,000 3,439,000
----------- ----------- -----------
Other assets 5,166,000 3,055,000 5,254,000
----------- ----------- -----------
$ 46,453,000 $ 41,791,000 $ 48,400,000
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 14,911,000 $ 13,112,000 $ 13,021,000
Current portion of
long-term debt 1,673,000 692,000 1,411,000
Accounts payable 6,954,000 4,847,000 11,165,000
Accrued liabilities 6,366,000 6,039,000 4,694,000
----------- ----------- -----------
Total current liabilities 29,904,000 24,690,000 30,291,000
----------- ----------- -----------
Long-term debt 1,546,000 1,141,000 1,808,000
----------- ----------- -----------
Other liabilities - 36,000 -
----------- ----------- -----------
Shareholders' equity:
Preferred stock, 3,000,000
shares authorized, none
issued
Common stock, 8,000,000
authorized, 6,333,435
shares issued 1,267,000 1,267,000 1,267,000
Capital in excess of par
value 15,023,000 15,535,000 15,495,000
Unearned compensation (105,000) - -
Retained earnings 2,520,000 3,501,000 3,890,000
----------- ----------- -----------
18,705,000 20,303,000 20,652,000
Treasury stock (1,139,190,
1,347,664 and 1,339,190
shares at cost,
respectively (3,702,000) (4,379,000) (4,351,000)
----------- ----------- -----------
15,003,000 15,924,000 16,301,000
----------- ----------- -----------
$ 46,453,000 $ 41,791,000 $ 48,400,000
============ ============ ============
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen weeks ended
-----------------------------
May 30, 1998 May 31, 1997
------------ ------------
Net sales $ 10,705,000 $ 9,050,000
Service revenues 6,460,000 4,767,000
---------- ----------
17,165,000 13,817,000
---------- ----------
Costs and expenses:
Cost of goods and services sold,
buying and occupancy costs 11,190,000 8,966,000
Selling and general expenses 6,874,000 5,555,000
Provision for doubtful accounts 143,000 123,000
Interest expense 332,000 399,000
Other income, net (4,000) (2,000)
---------- ----------
18,535,000 15,041,000
---------- ----------
Net loss $ (1,370,000) $ (1,224,000)
========== ==========
Net loss per common share
Basic $ (0.26) $ (0.25)
========= =========
Diluted $ (0.26) $ (0.25)
========= =========
Cash dividends per common share -- --
========= =========
Weighted average number of common
shares outstanding
Basic 5,194,245 4,927,198
========= =========
Diluted 5,194,245 4,927,198
========= =========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen weeks ended
------------------------------
May 30, 1998 May 31, 1997
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (1,370,000) $ (1,224,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 281,000 254,000
Provision for doubtful accounts 143,000 123,000
Non-cash compensation expense 20,000 24,000
Change in assets and liabilities:
Accounts receivable (464,000) (696,000)
Merchandise inventories 2,078,000 1,283,000
Prepaid expenses and other current assets 55,000 (58,000)
Other assets - (1,000)
Accounts payable (4,211,000) (4,471,000)
Accrued liabilities 1,672,000 1,056,000
Other liabilities - (7,000)
------------ ------------
Net cash used in operating activities (1,796,000) (3,717,000)
Cash Flows from Investing Activities:
Proceeds from the sale of property and
equipment - 1,000
Additions to property and equipment (21,000) (40,000)
------------ ------------
Net cash used in investing activities (21,000) (39,000)
Cash Flows from Financing Activities:
Proceeds from short-term borrowing 1,890,000 3,804,000
Principal payments on long-term debt - (83,000)
------------ ------------
Net cash provided by financing activities 1,890,000 3,721,000
------------ ------------
Net (decrease) increase in cash and cash
equivalents 73,000 (35,000)
Cash and cash equivalents at beginning of
period 650,000 153,000
------------ ------------
Cash and cash equivalents at end of period $ 723,000 $ 118,000
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 310,000 $ 246,000
Income taxes 45,000 4,000
See accompanying notes to condensed consolidated financial statements.
<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 1998 Form 10-K Annual
Report filed with the Securities and Exchange Commission. The accompanying
financial data should be read in conjunction with the notes to
consolidated financial statements contained in the 1998 Form 10-K Annual
Report.
The information furnished herein, other than the Condensed Consolidated
Balance Sheet as of February 28, 1998, is unaudited and includes all
adjustments and accruals consisting only of normal recurring adjustments
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The Condensed Consolidated Balance Sheet
as of February 28, 1998 has been derived from, and does not include all
the disclosures contained in the audited financial statements as of and
for the year ended February 28, 1998.
2. Because of the seasonal nature of the Company's business, operating
results for the first 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. The following table sets forth the computation of basic and diluted
earnings per share:
Weighted
Avg.
Net loss Shares Per Share
(Numerator) (Denominator) Amounts
----------- ------------- ----------
Thirteen weeks ended May
30, 1998
Basic EPS:
Loss available to common
shareholder $(1,370,000) 5,194,245 $(0.26)
=========== ========= =======
Effect of dilutive options 0
---------
Dilutive EPS:
Loss available to common
shareholder plus assumed
conversions $(1,370,000) 5,194,245 $(0.26)
=========== ========= =======
Thirteen weeks ended May
31, 1997
Basic EPS:
Loss available to common
shareholder $(1,224,000) 4,927,198 $(0.25)
=========== ========= =======
Effect of dilutive options 0
---------
Dilutive EPS:
Loss available to common
shareholder plus assumed
conversions $(1,224,000) 4,927,198 $(0.25)
=========== ========= =======
<PAGE>
4. On May 28, 1998, the Company amended its agreement with its lender to
establish and modify certain financial covenants to reflect the Company's
current operating results and financial needs.
5. On June 3, 1998, the Company amended its agreement and promissory note
related to the acquisition of the assets in connection with the
operation of Maximilian(R)Fur Salons. The amendments provide for a
revised payment plan for the quarterly installments due May 4, 1998 and
August 4, 1998. The payments are as follows: $100,000 due and paid
with interest on June 30, 1998; $84,850 is due monthly from August 31,
1998 through November 30, 1998 with the final installment due December
15, 1998. The payments will be paid with interest at a rate of 10% per
annum. The remaining debt schedule will remain intact without interest.
6. On April 27, 1998, the Company entered into a consulting agreement with an
outside director for a three year period ending December 31, 2000. Among
other things, the agreement provides for a fee of 144,000 shares of the
Company's common stock. The unearned compensation related to this
agreement is included in the Shareholder's Equity section of the balance
sheet and is being amortized over the term of the agreement.
<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 30, 1998 were $723,000 as compared to $650,000
at February 28, 1998. The increase was due to cash provided by financing
activities of $1,890,000, offset by cash used in operating and investing
activities of $1,796,000 and $21,000, respectively.
The cash used in operating activities was due primarily to the net loss of
$1,370,000 and a decrease in accounts payable of $4,211,000, partially offset by
a decrease in merchandise inventories of $2,078,000. The decrease in accounts
payable and merchandise inventories is due a decrease in purchases related to
the seasonal nature of the business.
The cash used in investing activities was the result of additions to property
and equipment of $21,000.
The cash provided by financing activities was due to proceeds from short-term
borrowings of $1,890,000.
Working capital at May 30, 1998 was $8,117,000 as compared to $9,416,000 at
February 28, 1998.
On May 28, 1998, the Company amended its agreement with its lender to establish
and modify certain financial covenants to reflect the Company's current
operating results and financial needs.
On June 3, 1998, the Company amended its agreement and promissory note related
to the acquisition of the assets in connection with the operation of
Maximilian(R) Fur Salons. The amendments provide for a revised payment plan for
the quarterly installments due May 4, 1998 and August 4, 1998. The payments are
as follows: $100,000 due and paid with interest on June 30, 1998; $84,850 is due
monthly from August 31, 1998 through November 30, 1998 with the final
installment due December 15, 1998. The payments will be paid with interest at a
rate of 10% per annum. The remaining debt schedule will remain intact without
interest.
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 1999.
Results of Operations
Total revenues for the first quarter ended May 30, 1998 increased $3,348,000
(24.2%) as compared to the same period last year. Fur merchandise sales
increased $1,591,000 (47.7%) due primarily to an increase of $2,106,000 in sales
associated with locations acquired during the second quarter of 1998 and an
increase of $340,000 (13.7%) in sales at comparable locations. These increases
were partially offset by sales of $855,000 associated with store closing events
in the Macy's stores in Texas in the first quarter of fiscal year 1998. Women's
ready-to-wear sales increased $63,000 (1.1%) over the prior year first quarter
reflecting the continuing recovery of the apparel business. Service revenues
increased $1,693,000 (35.5%) due almost entirely to an increase of sales
associated with locations acquired during the second quarter of 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, continued
Cost of goods and services sold, buying and occupancy costs as a percentage of
total revenues for the first quarter were 65.2% as compared to 64.9% for the
same period last year. Cost of goods and services sold as a percentage of total
revenues decreased (47.7% versus 48.2%) due primarily to the Company's attempt
in March of the prior year 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 increased
(14.7% versus 13.5%) primarily due to higher average rental costs related to the
locations acquired during the second quarter of 1998.
Total selling and general expenses increased $1,319,000 (23.7%) as compared to
the prior year due primarily to an increase of $1,242,000 (33.5%) in payroll,
related fringe benefits, and other general costs associated with locations
acquired during the second quarter of 1998.
Interest expense for the first quarter decreased $67,000 (16.8%) due primarily
to higher average short-term borrowings at a lower weighted average interest
rate as compared to the same period last year.
The net loss for the first quarter of $1,370,000 as compared to $1,224,000 for
the prior year period was primarily the result of funding the non-variable costs
and related benefit components of locations acquired during the second quarter
of 1998.
Other
In response to the Year 2000 issue, the Company has begun to identify,
evaluate and implement changes to its existing computerized business
systems. The Company is addressing the issue through a combination of
modifications to existing programs and conversions to Year 2000 compliant
software. In addition, the Company is in the process of communicating
with its vendors and other service providers to determine whether they are
actively involved in projects to ensure that their products and business
systems will be Year 2000 compliant. The Company does not anticipate any
material problems associated with using computer programs or retrieving
computerized information with respect to Year 2000. The Company is still
quantifying the impact of total costs associated with the required
modifications and conversions. These costs are being expensed as incurred.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
during the thirteen weeks ended May 30, 1998
Items other than those listed are omitted because they are
not required.
<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 13, 1998 ROBERT K. MELTZER
-----------------------
ROBERT K. MELTZER
President and
Chief Executive Officer
DATE: July 13, 1998 WILLIAM E. KOZIEL
-----------------------
WILLIAM E. KOZIEL
Vice President and
Chief Financial Officer
<PAGE>
EVANS, INC. AND SUBSIDIARIES
Exhibit Page Nos.
27 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Feb-27-1999
<PERIOD-END> May-30-1999
<CASH> 723,000
<SECURITIES> 0
<RECEIVABLES> 12,960,000
<ALLOWANCES> 0
<INVENTORY> 23,417,000
<CURRENT-ASSETS> 38,021,000
<PP&E> 11,663,000
<DEPRECIATION> 8,397,000
<TOTAL-ASSETS> 46,453,000
<CURRENT-LIABILITIES> 29,904,000
<BONDS> 0
0
0
<COMMON> 1,267,000
<OTHER-SE> 17,438,000
<TOTAL-LIABILITY-AND-EQUITY> 45,453,000
<SALES> 10,705,000
<TOTAL-REVENUES> 17,165,000
<CGS> 8,186,000
<TOTAL-COSTS> 11,190,000
<OTHER-EXPENSES> 139,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 332,000
<INCOME-PRETAX> (1,370,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,370,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,370,000)
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
