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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended AUGUST 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From_____________ to _____________
COMMISSION FILE NUMBER 1-8546
SYMS CORP
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2465228
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
(Address of principal executive offices) (Zip Code)
(201) 902-9600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether 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 periods 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 [ ]
At September 30, 1996, the latest practicable date, there were 17,694,015 shares
outstanding of Common Stock, par value $0.05 per share.
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SYMS CORP AND SUBSIDIARIES
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INDEX
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<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
August 31, 1996, March 2, 1996 and August 26, 1995 1
Condensed Consolidated Statements of Income for the Thirteen Weeks
and Twenty-Six Weeks Ended August 31, 1996 and August 26, 1995 2
Condensed Consolidated Statements of Cash Flows for the Twenty-Six
Weeks Ended August 31, 1996 and August 26, 1995 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5-7
PART II. OTHER INFORMATION 8
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 9
</TABLE>
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, MARCH 2, AUGUST 26,
1996 1996 1995
-------- -------- --------
(UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,744 $ 4,804 $ 319
Merchandise inventories 128,867 112,954 125,961
Deferred income taxes 5,977 5,221 1,316
Prepaid expenses and other current assets 3,501 3,521 4,633
-------- -------- --------
TOTAL CURRENT ASSETS 145,089 126,500 132,229
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization 137,870 129,235 129,856
DEFERRED INCOME TAXES 686 - 111
OTHER ASSETS 5,457 4,409 4,150
-------- -------- --------
TOTAL ASSETS $289,102 $260,144 $266,346
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 49,748 $ 30,900 $ 42,941
Accrued expenses 9,734 9,918 10,214
Obligations to customers 4,313 4,490 3,965
Income taxes payable 3,598 5,331 1,048
Short term borrowings 6,900 - 7,650
Current portion of obligations under capital lease 371 340 312
-------- -------- --------
TOTAL CURRENT LIABILITIES 74,664 50,979 66,130
-------- -------- --------
OBLIGATIONS UNDER CAPITAL LEASE 1,111 1,304 1,482
-------- -------- --------
DEFERRED INCOME TAXES 667 255 -
-------- -------- --------
OTHER LONG TERM LIABILITIES 469 237 -
-------- -------- --------
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock, par value; $0.05 per share. Authorized 30,000 shares; 17,694
outstanding as of August 31, 1996, March 2, 1996
and August 26, 1995 885 885 885
Preferred stock, par value; $100 per share. Authorized 1,000 shares;
none outstanding - - -
Additional paid-in capital 11,709 11,709 11,709
Retained earnings 199,597 194,775 186,140
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 212,191 207,369 198,734
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $289,102 $260,144 $266,346
======== ======== ========
</TABLE>
NOTE: The balance sheet at March 2, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements
1
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
AUGUST 31, AUGUST 26, AUGUST 31, AUGUST 26,
1996 1995 1996 1995
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales $ 75,128 $ 72,814 $158,505 $152,066
Cost of goods sold 48,995 48,279 101,916 100,358
-------- -------- -------- --------
Gross profit 26,133 24,535 56,589 51,708
Expenses:
Selling, general and administrative 17,599 17,191 34,623 34,490
Advertising 474 814 2,883 2,584
Occupancy 3,508 3,244 6,683 6,326
Depreciation and amortization 1,949 1,926 3,830 3,866
Provision for special charges - - - 1,200
-------- -------- -------- --------
Income from operations 2,603 1,360 8,570 3,242
Interest expense - net 53 105 36 231
-------- -------- -------- --------
Income before income taxes 2,550 1,255 8,534 3,011
Provision for income taxes 1,109 515 3,712 1,234
-------- -------- -------- --------
Net income $ 1,441 $ 740 $ 4,822 $ 1,777
======== ======== ======== ========
Net income per share $ 0.08 $ - $ 0.27 $ 0.10
======== ======== ======== ========
Weighted average shares outstanding 17,694 17,694 17,694 17,694
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements
2
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
AUGUST 31, AUGUST 26,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,822 $ 1,777
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,830 3,866
Deferred income taxes (710) -
(Gain) on sale of property and equipment (37) (51)
Loss on disposal of assets 244 1,087
Changes in operating assets and liabilities:
(Increase) in merchandising inventories (15,913) (15,701)
Decrease in prepaid expenses and other current assets 20 1,046
(Increase) in other assets (1,048) (15)
Increase in accounts payable 18,848 7,320
(Decrease) increase in accrued expenses (184) 1,499
(Decrease) in obligations to customers (177) (796)
Increase in other long term liabilities 232 -
(Decrease) in income taxes (2,053) (4,528)
-------- --------
Net cash provided by (used in) operating activities 7,874 (4,496)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (12,716) (1,180)
Proceeds from sale of property and equipment 44 75
-------- --------
Net cash (used in) investing activities (12,672) (1,105)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (162) (137)
Revolving line of credit borrowings - net 6,900 5,600
-------- --------
Net cash provided by financing activities 6,738 5,463
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,940 (138)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,804 457
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,744 $ 319
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 57 $ 183
======== ========
Income taxes paid - net $ 3,977 $ 5,820
======== ========
</TABLE>
See notes to condensed consolidated financial statements
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SYMS CORP AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of forty "off-price" retail stores
(thirty-eight at March 2, 1996) located throughout the Northeastern and Middle
Atlantic regions and in the Midwest, Southeast and Southwest. Each store offers
a broad range of first quality, in season merchandise bearing nationally
recognized designer or brand-name labels for men, women and children.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and twenty-six week periods
ended August 31, 1996 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending March 1, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the fiscal year
ended March 2, 1996.
NOTE 3 - ACCOUNTING PERIOD
The Company changed its fiscal year end to the Saturday nearest to the end of
February. This change was reported on March 17, 1995. The fiscal year ending
March 1, 1997 will be comprised of 52 weeks. The fiscal year ended March 2, 1996
was comprised of 53 weeks.
NOTE 4 - MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (first in, first out) or
market, as determined by the retail inventory method.
NOTE 5 - BANK CREDIT FACILITIES
The Company has an unsecured revolving credit agreement with a bank for a line
of credit not to exceed $40,000,000 through December 1, 1997. Interest on
individual advances is payable quarterly at 1 1/2% per annum below the bank's
base rate, except that at the time of advance, the Company has the option to
select an interest rate based upon one of two other alternative calculations,
with such rate to be fixed for a period not to exceed 90 days. The interest rate
on short term borrowings was 6.75% at August 31, 1996. The average daily unused
portion is subject to a commitment fee of 1/8 of 1% per annum. The Company had
outstanding borrowings of $6,900,000, $0, and $7,650,000 as of August 31, 1996,
March 2, 1996 and August 26, 1995, respectively.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends, as well as other financial ratios.
In addition, the Company has a separate $10,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise. This agreement may be cancelled at any time by either party. At
August 31, 1996, March 2, 1996 and August 26, 1995 the Company had $7,896,000,
$3,786,000 and $6,953,000, respectively, in outstanding letters of credit.
NOTE 6 - PROVISION FOR SPECIAL CHARGES
The provision for special charges for the twenty-six week period ended August
26, 1995 in the amount of $1,200,000 was for costs associated with closing the
store in Sterling Heights, Michigan.
4
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SYMS CORP AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen and Twenty-Six Weeks Ended August 31, 1996 Compared to Thirteen and
Twenty-Six Weeks Ended August 26, 1995
Net sales of $75,128,000 for the thirteen weeks ended August 31, 1996 increased
$2,314,000 (3.2%) as compared to net sales of $72,814,000 for the thirteen weeks
ended August 26, 1995. For the twenty-six weeks ended August 31, 1996 sales
increased $6,439,000 (4.2%) to $158,505,000 as compared to net sales of
$152,066,000 for the twenty-six weeks ended August 26, 1995. Three new stores
(Sharonville, Pittsburgh and an additional Secaucus store) were included in the
twenty-six weeks ended August 31, 1996. Comparable store sales increased 1.3%
for the thirteen weeks and 2.8% for the twenty-six weeks ended August 31, 1996
from the 1995 period. The 4.2% increase was, for the most part, the result of an
increase in average unit selling prices and an increase in the number of stores
as compared to last year.
Gross profit for the thirteen weeks ended August 31, 1996 was $26,133,000, an
increase of $1,598,000 (6.5%) as compared to $24,535,000 for the fiscal period
ended August 26, 1995. Gross profit for the twenty-six weeks ended August 31,
1996 was $56,589,000, an increase of $4,881,000 (9.4%) as compared to
$51,708,000 for the fiscal period ended August 26, 1995. This increase resulted
mainly from increased net sales of $6,439,000 and the Company's gross margin
increasing to 35.7% from 34.0%. The 1.7% improvement in gross margin resulted
primarily from increased levels of opportunistic and in-season purchases which
created better values for the Company's customers and lower markdowns.
Selling, general and administrative expense increased $408,000 to $17,599,000
(23.4% as a percentage of net sales) for the thirteen weeks ended August 31,
1996 as compared to $17,191,000 (23.6% as a percentage of net sales) for the
thirteen weeks ended August 26, 1995. Selling, general and administrative
expense increased $133,000 to $34,623,000 (21.8% as a percentage of net sales)
for the twenty-six weeks ended August 31, 1996 as compared to $34,490,000 (22.7%
as a percentage of net sales) for the twenty-six weeks ended August 26, 1995.
Advertising expense for the thirteen weeks ended August 31, 1996 decreased to
$474,000, as compared to $814,000 in the thirteen week period ended August 26,
1995. Advertising expense for the twenty-six weeks ended August 31, 1996
increased to $2,883,000, as compared to $2,584,000 in the twenty-six week period
ended August 26, 1995, resulting from a return to TV, a commitment to expand the
Company's advertising effort and an increase of TV in single store markets
during the first thirteen weeks of this fiscal period.
Occupancy costs were $3,508,000 (4.7% as a percentage of net sales) for the
thirteen week period ended August 31, 1996, up from $3,244,000 (4.5% as a
percentage of net sales) for the thirteen week period ended August 26, 1995.
Occupancy costs were $6,683,000 (4.2% as a percentage of net sales) for the
twenty-six week period ended August 31, 1996, up from $6,326,000 (4.2% as a
percentage of net sales) for the period ended August 26, 1995.
Depreciation and amortization amounted to $1,949,000, an increase of $23,000 as
compared to $1,926,000 for the thirteen weeks ended August 26, 1995.
Depreciation and amortization amounted to $3,830,000, a decrease of $36,000 as
compared to $3,866,000 for the twenty-six weeks ended August 26, 1995.
The provision for special charges for the twenty-six week period ended August
26, 1995 in the amount of $1,200,000 was for costs associated with closing the
store in Sterling Heights, Michigan.
5
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SYMS CORP AND SUBSIDIARIES
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Income before income taxes for the thirteen weeks ended August 31, 1996 of
$2,550,000 increased $1,295,000 as compared to $1,255,000 for the thirteen weeks
ended August 26, 1995. Income before income taxes for the twenty-six weeks ended
August 31, 1996 of $8,534,000 materially increased $5,523,000 as compared to
$3,011,000 for the twenty-six weeks ended August 26, 1995. As discussed above
the increase in income before income taxes reflects for the most part higher
gross profit, offset somewhat by increased selling, general and administrative,
advertising and occupancy expense, and no special charges in the current period.
For the thirteen and twenty-six week periods ended August 31, 1996 the effective
income tax rate was 43.5% as compared to 41.0% last year. Last year's rate was
favorably impacted by the recognition of certain tax reserves provided for
previous years that were no longer deemed necessary.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at August 31, 1996 was $70,425,000, an increase of $4,326,000
from $66,099,000 as of August 26, 1995, and the ratio of current assets to
current liabilities improved to 1.94 to 1 as compared to 2.00 to 1 at August 26,
1995.
Net cash provided by operating activities totaled $7,874,000 for the twenty-six
weeks ended August 31, 1996 an increase of $12,370,000 as compared to $4,496,000
used in operating activities for the twenty-six weeks ended August 26, 1995. Net
income for 1996 amounted to $4,822,000 compared to $1,777,000 in 1995, an
increase of $3,045,000. In the twenty-six week period ended August 31, 1996,
cash provided from operating activities was mainly used to increase inventory by
$15,913,000, offset by an increase in accounts payable of $18,848,000.
Net cash used in investing activities was $12,672,000 and $1,105,000 for the
twenty-six weeks ended August 31, 1996 and August 26, 1995, respectively.
Net cash provided by financing activities was $6,738,000 for the twenty-six
weeks ended August 31, 1996, compared to $5,463,000 in 1995. Both increases
resulted from an increase in revolving line of credit borrowings amounting to
$6,900,000 in 1996 and 5,600,000 in 1995. As of August 31, 1996 and August 26,
1995, the Company had net borrowings of $6,900,000 and $7,650,000, respectively,
under its revolving credit agreement.
The Company has a revolving credit agreement with a bank for a line of credit
not to exceed $40,000,000 through December 1, 1997. At December 1, 1997 the
Company has the option to reduce this commitment to zero or convert the
revolving credit agreement to a term loan with a maturity date of December 1,
2000. Except for funds provided from this credit agreement, the Company has
satisfied its operating and capital expenditure requirements, including those
for the opening and expansion of stores, from internally generated funds. For
the twenty-six weeks ended August 31, 1996 borrowings under the revolving credit
agreement were $1,214,000 with a weighted average interest rate of 6.40%. For
the twenty-six weeks ended August 26, 1995 borrowings under the revolving credit
agreement were $2,791,000 with a weighted average interest rate of 7.50%.
The Company has planned capital expenditures of approximately $16,500,000 for
the fiscal year ending March 1, 1997, which includes plans to open two new
stores, to expand the Secaucus distribution center and to relocate one store
from a leased location to a Company built store. Through the twenty-six week
period ended August 31, 1996 the Company has incurred $12,716,000 of capital
expenditures relating to the $16,500,000.
Management believes that existing cash, internally generated funds, trade credit
and funds available from the revolving credit agreement will be sufficient for
working capital and capital expenditure requirements for the fiscal year ending
March 1, 1997.
6
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SYMS CORP AND SUBSIDIARIES
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IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of inflation
on its operations, it does not believe inflation has had a material effect on
sales or results of operations.
7
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SYMS CORP AND SUBSIDIARIES
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PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1996 Annual Meeting of Stockholders of the Company was held
on July 10, 1996.
(b) The following eight persons were elected as directors at the
meeting pursuant to the following vote:
For Withhold
--- --------
Sy Syms 14,670,201 83,171
Marcy Syms 14,668,201 85,171
John K. Kabay 14,669,901 83,471
Wilbur L. Ross, Jr. 14,667,901 85,471
Harvey Weinberg 14,667,901 85,471
Philip G. Barach 14,669,701 83,671
David A. Messer 14,669,801 83,571
Stephen A. Merns 14,668,201 85,171
Effective August 7, 1996 John K. Kabay resigned as a member of
the board of directors.
In the approval of the appointment of Deloitte & Touche LLP as the
independent accountants of the Company, the vote was as follows:
For: 14,742,682
Against: 8,515
Abstain: 2,175
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - During the quarter ended August 31, 1996 no
reports on Form 8-K were filed.
8
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SYMS CORP AND SUBSIDIARIES
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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 by the
undersigned thereunto duly authorized.
SYMS CORP
Date: October 2, 1996 By /s/ Marcy Syms Merns
------------------------------
MARCY SYMS MERNS
PRESIDENT
By /s/ Kirk R. Oney
------------------------------
KIRK R. ONEY
ACCOUNTING MANAGER
(Acting Principal Financial and
Accounting Officer)
<PAGE> 12
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-END> AUG-31-1996
<CASH> 6,744
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 128,867
<CURRENT-ASSETS> 145,089
<PP&E> 205,702
<DEPRECIATION> 67,832
<TOTAL-ASSETS> 289,102
<CURRENT-LIABILITIES> 74,664
<BONDS> 1,111
0
0
<COMMON> 885
<OTHER-SE> 211,306
<TOTAL-LIABILITY-AND-EQUITY> 289,102
<SALES> 158,505
<TOTAL-REVENUES> 158,505
<CGS> 101,916
<TOTAL-COSTS> 101,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 8,534
<INCOME-TAX> 3,712
<INCOME-CONTINUING> 4,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,822
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
