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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 COMMISSION FILE NUMBER 1-8546
SYMS CORP
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(Exact name of registrant as specified in its charter)
NEW JERSEY No. 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)
Registrant's telephone number, including area code (201) 902-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange on
Title of each class which registered
---------------------------- ------------------------
Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock of the registrant held by
non-affiliates on April 28, 1998 was $127,138,955 based upon the closing price
of such stock on that date.
As of April 28, 1998 17,869,090 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the 1998 annual meeting of
stockholders to be filed pursuant to Regulation 14A are incorporated in Part III
hereof by reference.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of forty-one "off-price" retail stores located
throughout the Northeastern and middle Atlantic regions and in the Midwest,
Southeast and Southwest. Each Syms store offers a broad range of first quality,
in-season merchandise bearing nationally recognized designer or brand-name
labels at prices substantially lower than those generally found in department
and specialty stores. Syms directs its merchandising efforts at predominantly
middle-income, fashion-minded and price conscious customers.
Since the first Syms store opened in New York City in 1959, the Company has
expanded to forty-one stores and the aggregate amount of selling space in the
Syms stores increased from approximately 2,000 square feet to approximately
1,584,000 square feet. In March 1987, the Company relocated to an approximately
277,000 square foot distribution center and executive headquarters. Syms Corp
was incorporated in New Jersey in 1983. On July 25, 1983, a reorganization was
effected pursuant to which Syms Inc. and a newly formed corporation, Syms
Advertising, Inc., became wholly owned subsidiaries of Syms Corp. Syms
Advertising Agency, a sole proprietorship owned by Sy Syms, was transferred to
Syms Advertising Inc. On December 31, 1985, Syms Inc. was merged into Syms Corp.
Syms Inc. was the principal retailing subsidiary of Syms Corp and the operations
previously conducted by Syms Inc. are now being conducted by Syms Corp.
The Company maintains its executive offices at Syms Way, Secaucus, New
Jersey 07094, telephone (201) 902-9600. Unless otherwise noted, references to
the "Company" or to "Syms" relate to Syms Corp, its subsidiaries and their
predecessors.
DESCRIPTION OF BUSINESS
The Syms chain of forty-one apparel stores offers a broad range of
"off-price" first quality, in-season merchandise consisting primarily of men's
tailored clothing and haberdashery, women's dresses, suits and separates,
children's apparel and men's, women's and children's shoes. Syms stores
emphasize better quality, nationally recognized designer and brand name
merchandise at prices substantially below those generally charged by department
and specialty stores. Syms carries a wide selection of sizes and styles of
men's, women's and children's wear.
Syms operates in a single industry segment and has no foreign operations.
No material part of the Company's consolidated revenues is received from a
single customer or group of customers.
MERCHANDISE
For the year ended February 28, 1998 net sales were generated by the
following categories:
Men's tailored clothes and haberdashery............................... 54%
Women's dresses, suits, separates and accessories..................... 31%
Shoes................................................................. 8%
Children's wear....................................................... 5%
Luggage, domestics and fragrances..................................... 2%
---
100%
===
Most of the items sold by the Company consist of nationally recognized
fashion name merchandise. Merchandise is displayed by type and size on
conveniently arranged racks or counters. No emphasis is placed on any particular
"label". The stores generally offer minor alterations for an additional charge.
PURCHASING
The Company purchases first-quality, in-season, brand-name merchandise
directly from manufacturers on terms more favorable than those generally
obtained by department and specialty stores. Syms estimates that approximately
200 brand-name manufacturers of apparel are represented in its stores. The
Company does not maintain large out-of-season inventories. However, Syms
occasionally buys certain basic clothing which does not change in style from
year to year at attractive prices for storage until the following season.
Purchasing is performed by a buying staff in conjunction with their General
Merchandise Managers and several other key divisional merchandise managers.
1
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DISTRIBUTION
The Company owns a distribution center, located at Syms Way, Secaucus, New
Jersey. The facility contains approximately 277,000 square feet of warehouse and
distribution space, 34,000 square feet of office space and 29,000 square feet of
store space. The facility is located on an 18.6 acre parcel of land for which
the Company holds a ground lease for a remaining term of 278 years. Most
merchandise is received from manufacturers at the distribution center where it
is inspected, ticketed and allocated to particular stores.
MARKETING
The Company's pricing policy is to affix a ticket to each item displaying
Syms' selling price as well as the price the Company regards as the traditional
full retail price of that item at department or specialty stores. All garments
are sold with the brand-name as affixed by the manufacturer. Because women's
dresses are vulnerable to considerable style fluctuation, Syms has long utilized
a ten-day automatic markdown pricing policy to promote movement of merchandise.
The date of placement on the selling floor of each women's dress is stamped on
the back of the price ticket. The front of each ticket contains what the Company
believes to be the nationally advertised price, the initial Syms price and three
reduced prices. Each reduced price becomes effective after the passage of ten
selling days. Women's dresses represent approximately 4.8% of net sales. The
Company also offers "dividend" prices consisting of additional price reductions
on various types of merchandise.
Syms has as its tag line "An Educated Consumer is Our Best Customer"(R),
one of the best known in retail advertising. The Company historically has
advertised principally on television and radio. In the Fall of 1994, the Company
revised its strategy and began to enhance its advertising by including print
media as well as direct mail to its Syms credit card customer base.
The Company sells its merchandise for cash, checks, national credit cards,
and its own Syms credit card. Syms sells its own credit card receivables on a
non-recourse basis to a third party for a fee. Merchandise purchased from the
Company may be returned within a reasonable amount of time, within season. The
Company does not offer cash refunds for purchases, but issues credits toward the
Syms charge card or store merchandise credits which may be used toward the
purchase of other merchandise.
TRADEMARKS
"Syms", "An Educated Consumer is Our Best Customer"(R), "Names You Must
Know"(R), and "The More You Know About Clothing, the Better it is for Syms"(R)
have been registered with the United States Patent and Trademark Office.
COMPETITION
The retail apparel business is highly competitive, and the Company accounts
for only a small fraction of the total market for men's, women's and children's
apparel. The Company's stores compete with discount stores, apparel specialty
stores, department stores, manufacturer-owned factory outlet stores and others.
Many of the stores with which the Company competes are units of large national
or regional chains that have substantially greater resources than the Company.
Retailers having substantially greater resources than the Company have indicated
their intention to enter the "off-price" apparel business, and the "off-price"
apparel business itself has become increasingly competitive, especially with
respect to the increased use by manufacturers of their own factory outlets. At
various times of the year, department store chains and specialty shops offer
brand-name merchandise at substantial markdowns.
OPERATIONS AND CONTROL SYSTEMS
The Company has implemented a merchandise control system which tracks
product from its purchase to its ultimate sale in the Company's stores. The
system tracks the product by store in approximately 750 categories. All the
information regarding the product is transmitted daily through telephone lines
to the Company's database at its executive headquarters. Each week the Company's
executives receive detail reports regarding sales and inventory levels in units
and retail dollars on a store by store basis.
Management of the Company visit stores on a regular basis to coordinate
with the store managers, among other things, in the training of employees in
loss prevention methods. Each store has on premises security personnel during
normal hours and a security system after hours.
2
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EMPLOYEES
At February 28, 1998, the Company had 2,300 employees of whom approximately
470 work part time. The Company has collective bargaining agreements with the
Retail, Wholesale and Department Store Union and the United Food and Commercial
Workers Union which expire in the year 2000 and cover 1,641 sales and tailor
employees. The Company believes its relationships with the Unions are good.
Approximately 30 to 100 persons, consisting mostly of sales personnel, are
employed at each Syms store.
ITEM 2. PROPERTIES
THE STORES
Location
At February 28, 1998 the Company had forty-one stores, nineteen of which
are located in leased facilities. The following table indicates the locations of
the stores and the approximate selling space of each location. In addition to
the selling space indicated, each store contains between approximately 2,000 to
12,000 square feet for inspection and ticketing of merchandise and
administrative functions.
<TABLE>
<CAPTION>
APPROXIMATE SELLING APPROXIMATE SELLING
OWNED STORES SPACE AT FEBRUARY 28, LEASED STORES SPACE AT FEBRUARY 28,
LOCATION 1998 (SQ. FT.) LOCATION 1998 (SQ. FT.)
- ------------ --------------------- ------------- ---------------------
<S> <C> <C> <C>
Lower Manhattan, NYC, New York 40,000 Elmsford, New York 50,000
Westbury, Long Island 72,000 Woodbridge, New Jersey 32,000
Commack, Long Island 36,000 Berlin, Connecticut 31,000
Rockville, MD 61,000 N. Cranston, Rhode Island 27,000
Buffalo, New York 39,000 Norwood, Massachusetts 36,000
Rochester, New York 32,000 Peabody, Massachusetts 39,000
Paramus, New Jersey 56,000 Franklin Mills Mall, Pennsylvania 22,000
Secaucus, New Jersey 29,000 Falls Church, Virginia 28,000
Cherry Hill, New Jersey 40,000 Potomac Mills Mall, Virginia 33,000
Fairfield, Connecticut 32,000 Baltimore, Maryland 43,000
King of Prussia, Pennsylvania 41,000 West Palm Beach, Florida 36,000
Monroeville, Pennsylvania 31,000 Gurnee Mills Mall, Illinois 33,000
Fort Lauderdale, Florida 44,000 Niles, Illinois 32,000
Miami, Florida 45,000 St. Louis, Missouri 33,000
Tampa, Florida 38,000 Charlotte, North Carolina 30,000
Addison, Illinois 47,000 Sharonville, Ohio 31,000
Marietta, Georgia 39,000 Highland Heights, Ohio 36,000
Norcross, Georgia 51,000 Parkway Center Mall, Pittsburgh 40,000
Southfield, Michigan 46,000 Park Avenue, NYC, New York 39,000
Dallas, Texas 42,000
Hurst, Texas 38,000
Houston, Texas 34,000
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Total Owned Space 933,000 Total Leased Space 651,000
======= =======
</TABLE>
Syms stores are either "free standing" or located in shopping centers or
indoor malls, and all are surrounded by adequate parking areas, except for the
New York City stores. Syms stores are usually located near a major highway or
thoroughfare in suburban areas populated by at least one million people and are
readily accessible to customers by automobile. In certain areas where there is a
population in excess of two million people, Syms has opened more than one store
in the same general vicinity.
3
<PAGE>
Lease Terms
Eighteen of the Company's forty-one stores are currently leased from
unrelated parties, and the Elmsford, New York store is leased from Mr. Sy Syms,
the Chairman of Syms Corp. The following table summarizes lease expirations and
any renewal options:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF RANGE IN YEARS OF
CALENDAR LEASES LEASES WITH RENEWAL OPTION
PERIODS EXPIRING OPTIONS PERIODS (1)
- -------- -------- ------------------- ------------------
<S> <C> <C> <C>
1998 3 3 5
1999 3 1 5
2000 1 1 5
2001 0 0 0
2002 2 1 4
2003 and thereafter 14 10 3 - 5
-- --
(2) 23 16
</TABLE>
- ------------
(1) Depending on the applicable option, the minimum rent due during the renewal
option periods may be based upon a formula contained in the existing lease
or negotiations between the parties.
(2) Includes lease obligations for stores not yet opened.
Store leases provide for a base rental of between approximately $2.90 and $34.06
per square foot. In addition, under the "net" terms of all of the leases, the
Company must also pay maintenance expenses, real estate taxes and other charges.
Four of the Company's stores have a percentage of sales rental as well as a
fixed minimum rent. Rental payments for Syms' leased stores aggregated
$7,724,000 for the year ended February 28, 1998, of which $600,000 was paid to
Mr. Sy Syms as fixed rent.
STORE OPENINGS/CLOSINGS
On October 23, 1997 the Company moved its Rockville, MD store
(approximately 56,000 square feet of selling space) to a newly built location
(approximately 61,000 square feet of selling space). On November 20, 1997 the
Company opened a new store in Marietta, Georgia (approximately 39,000 square
feet of selling space).
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions and
claims outstanding against the Company, and after discussion with counsel, that
there are no legal proceedings that will have a material adverse effect on the
financial condition or results of operations of the Company. Some of the
lawsuits to which the Company is a party are covered by insurance and are being
defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The following table sets forth for the period indicated the high and low
sales prices for the Company's common stock as reported by the New York Stock
Exchange using the trading symbol SYM.
4
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<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C>
1998 First Quarter (through April 28, 1998) $14 9/16 $13 5/8
1997 Quarter ended February 28, 1998 $ 14 1/4 $11 5/8
Quarter ended November 29, 1997
Quarter ended August 30, 1997 14 15/16 11 1/4
Quarter ended June 1, 1997 14 9 3/8
10 1/8 9
1996 Quarter ended March 1, 1997 $ 10 1/4 $ 8 3/4
Quarter ended November 30, 1996 8 7/8 8 1/8
Quarter ended August 31, 1996 8 1/2 7 1/8
Quarter ended June 1, 1996 8 3/8 7 5/8
</TABLE>
HOLDERS
As of April 28, 1998 there were 187 record holders of the Company's Common
Stock. The Company believes that there were in excess of 1,700 beneficial owners
of the Company's Common Stock as of that date.
DIVIDENDS
The Board of Directors of the Company elected not to declare dividends, in
the fiscal years ended March 1, 1997 and February 28, 1998. Payment of dividends
is within the discretion of the Company's Board of Directors and will depend
upon various factors including the earnings, capital requirements and financial
condition of the Company (see Note 4 to notes to consolidated financial
statements regarding covenants in the Company's revolving credit agreement). The
Company has also announced that its Board of Directors has authorized the
repurchase of up to 15% of its outstanding shares of common stock at prevailing
market prices during the current and following fiscal years ended February 26,
2000.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information presented below has been derived from
the Company's audited Consolidated Financial Statements for the fiscal years
ended February 28, 1998, March 1, 1997, March 2, 1996, December 31, 1994,
January 1, 1994 and the two months ended February 25, 1995, except that the
balance sheets at February 25, 1995 to February 26, 1994 are unaudited. The
selected financial information presented below should be read in conjunction
with such financial statements and notes thereto.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2, DECEMBER 31, JANUARY 1,
1998 1997 1996 1994 1994
------------ -------- ------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income statement data:
Net sales ............................... $352,959 $346,792 $334,750 $326,651 $318,939
======== ======== ======== ======== ========
Net income .............................. $ 23,036 $ 19,065 $ 10,411 $ 8,491 $ 10,847
======== ======== ======== ======== ========
Net income per share - basic ............ $ 1.30 $ 1.08 $ 0.59 $ 0.48 $ 0.61
======== ======== ======== ======== ========
Net income per share - diluted .......... $ 1.29 $ 1.08 $ 0.59 $ 0.48 $ 0.61
======== ======== ======== ======== ========
Cash Dividends Per Share ................ $ -- $ -- $ -- $ 0.10 $ 0.05
======== ======== ======== ======== ========
Balance sheet data:
Working Capital ......................... $ 99,728 $ 78,228 $ 75,521 $ 59,918 $ 59,871
Total Assets ............................ $294,192 $284,018 $260,144 $245,385 $221,152
Long term debt and capitalized
leases (A) ............................. $ 419 $ 900 $ 1,304 $ 1,696 $ 1,974
Shareholders' equity .................... $250,870 $226,434 $207,369 $197,341 $190,605
</TABLE>
TWO MONTHS ENDED
---------------------------
FEBRUARY 25, FEBRUARY 26,
1995 1994
------------ ------------
Income statement data:
Net sales ................................... $ 46,632 $ 41,642
========= =========
Net income .................................. $ (383) $ 50
========= =========
Net income per share - basic ................ $ (0.02) $ --
========= =========
Net income per share - diluted .............. $ (0.02) $ --
========= =========
Cash Dividends Per Share .................... $ -- $ --
========= =========
Balance sheet data:
Working Capital ............................. $ 60,703 $ 52,539
Total Assets ................................ $ 255,612 $ 238,203
Long term debt and capitalized
leases (A) ................................ $ 1,645 $ 1,931
Shareholders' equity ........................ $ 196,958 $ 190,655
- ----------
(A) Excludes current maturities.
5
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements in this report
other than statements of historical fact, including, without limitation, certain
statements under the "Liquidity and Capital Resources," "Year 2000 Compliance"
and "Impact of Inflation and Changing Prices" sub-headings in this Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements. Although management believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that those expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
management's expectations ("Cautionary Factors") include, without limitation,
the changing nature of the apparel retailing industry, the Company's ability to
maintain favorable relationship with vendors, expansion in the number of the
Company's stores, competition which the Company faces and general economic
conditions. All written and oral forward-looking statements by or attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by these Cautionary Factors.
The following discussion compares the fiscal years ended February 28, 1998,
March 1, 1997 and March 2, 1996. The fiscal years ended February 28, 1998 and
March 1, 1997 were comprised of 52 weeks. The fiscal year ended March 2, 1996
was comprised of 53 weeks.
RESULTS OF OPERATIONS
Fiscal Year Ended February 28, 1998 Compared to March 1, 1997
For the year ended February 28, 1998, net sales were $352,959,000, an
increase of $6,167,000 or 1.8% as compared to net sales of $346,792,000 for the
fiscal year ended March 1, 1997. This increase is largely attributable to an
increase in the number of stores in year ended February 28, 1998. Comparable
store sales for the fiscal year ended February 28, 1998 declined 2.5%.
Gross Profit for the fiscal year ended February 28, 1998 was $142,338,000,
an increase of $8,659,000 (6.5%) as compared to $133,679,000 for the fiscal year
ended March 1, 1997. This increase is largely attributable to the increased net
sales of $6,167,000 and the Company's gross profits as a percent of total sales
increasing from 38.5% last year to 40.3% this year. The 1.8% improvement in
gross profit resulted primarily from increased levels of opportunistic and
in-season purchases which created better values for the Company's customers.
Selling, general and administrative (SG&A) expense was $71,020,000 (20.1%
as a percentage of net sales) for the fiscal year ended February 28, 1998 versus
$71,028,000 (20.5% as a percentage of net sales) for last year. The improvement
in SG&A expenses this fiscal year is due to a continued effort by management to
control store and corporate operational expenses particularly in general
liability and workmen's compensation insurance.
Advertising expense for the fiscal year ended February 28, 1998 was
$8,097,000 compared to $6,626,000 for the fiscal year ended March 1, 1997. This
increase of $1,471,000 resulted from a continued effort to expand the Company's
advertising effort through radio and direct mail advertising. In addition, the
Company advertised its semi-annual sale event ("Bash") in the newspaper and
radio for the first time.
Occupancy costs were $15,300,000 (4.3% as a percentage of net sales) for
the fiscal year ended February 28, 1998 compared to $14,215,000 (4.1% as a
percentage of net sales) last year. This increase is largely attributable to the
addition of the Park Avenue store in New York City.
Depreciation and amortization amounted to $8,627,000 (2.4% as a percentage
of net sales) for this year compared to $7,971,000 (2.3% as a percentage of net
sales) for the year ended March 1, 1997. This increase resulted principally from
the addition of the Park Avenue store in New York City.
Income before income taxes was $39,046,000 (an increase of $5,304,000 or
15.7%) for the fiscal year ended February 28, 1998, compared to $33,742,000 for
last year. This increase for the most part is the result of improved gross
profit margins.
For the fiscal year ended February 28, 1998 the effective income tax rate
was 41.0% compared to 43.5% last year. Last year's effective tax rate was
adversely affected by the addition of tax reserves pertaining to certain states.
6
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FISCAL YEAR ENDED MARCH 1, 1997 COMPARED TO MARCH 2, 1996
Net sales of $346,792,000 for the fiscal year ended March 1, 1997 increased
$12,042,000 (3.6%) as compared to net sales of $334,750,000 for the fiscal year
ended March 2, 1996. The increase was, for the most part, the result of an
increase in the number of stores in the year ended March 1, 1997. Comparable
store sales decreased by $736,000 (0.2%), caused mainly by fiscal 1995 being
comprised of 53 weeks vs. 52 weeks in fiscal 1996. The Company estimates that
the extra week added approximately $5,100,000 in net sales to the 1995 fiscal
year.
Gross profit for the fiscal year ended March 1, 1997 was $133,679,000, an
increase of $16,490,000 (14.1%) as compared to $117,189,000 for the fiscal year
ended March 2, 1996. This increase resulted mainly from increased net sales of
$12,042,000 and the Company's gross margin increasing to 38.5% from 35.0%. The
3.5% improvement in gross margin resulted primarily from increased levels of
opportunistic and in-season purchases which created better values for the
Company's customers.
Selling, general and administrative (SG&A) expense was $71,028,000 (20.5%
as a percentage of net sales) for the period ended March 1, 1997 as compared to
$70,579,000 (21.1% as a percentage of net sales) for the fiscal year ended March
2, 1996. The increase of $449,000 resulted from three additional stores in
fiscal 1996. As a percent of sales, SG&A expense decreased in fiscal 1997, due
to a continued effort by management to control store and corporate operational
expenses.
Advertising expense for fiscal 1996 increased to $6,626,000, as compared
to $5,905,000 in the year ended March 2, 1996, resulting from a continued
commitment to expand the Company's advertising effort.
Occupancy costs were $14,215,000 (4.1% as a percentage of net sales) for
the year ended March 1, 1997, up from $12,330,000 (3.7% as a percentage of net
sales) for the year ended March 2, 1996. This increase was the result of three
additional leased locations in fiscal 1996.
Depreciation and amortization amounted to $7,971,000, an increase of
$220,000, as compared to $7,751,000 for the fiscal year ended March 2, 1996,
resulting from the new stores which opened in fiscal 1996, and a 40,000 square
foot addition to the Secaucus, NJ distribution center.
The provision for contractor advance and special charges for the fiscal
year ended March 2, 1996 include a $2,200,000 provision made in the fourth
quarter in recognition of then current information that a contractor advance
might not be fully recoverable, a charge in the first quarter of $1,200,000 for
costs associated with closing the store in Sterling Heights, Michigan, offset by
a $714,000 adjustment to the $2,935,000 special charges taken in the two month
period ended February 25, 1995, part of which relates to the write-off of costs
associated with a lease in Cincinnati, Ohio in which the Company had initially
decided to not open a store. The $714,000 adjustment arose when the Company,
based on subsequent experience with the real estate market in Cincinnati, Ohio,
concluded in November 1995 that the property would not be subleased in a
reasonable time frame and at an acceptable rate. The Company then decided to
open the store in February, 1996, operating with a reduced expense structure.
Income before income taxes of $33,742,000 increased $16,097,000 (91.2%), as
compared to $17,645,000 for the fiscal year ended March 2, 1996. This increase
for the most part reflects higher gross profit and no special charge in the
current period, offset by increased selling, general and administrative expense,
advertising, and occupancy expense.
For the fiscal year ended March 1, 1997 the effective income tax rate was
43.5% as compared to 41.0% last year. The increase was the result of additional
tax provisions provided for certain states.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 28, 1998 was $99,728,000, an increase of
$21,500,000 from March 1, 1997, and the ratio of current assets to current
liabilities increased to 3.40 to 1 as compared to 2.40 to 1 at March 1, 1997.
Working capital at March 1, 1997 was $78,228,000, an increase of $2,707,000
from March 2, 1996, and the ratio of current assets to current liabilities
decreased to 2.40 to 1 as compared to 2.48 to 1 at March 2, 1996.
Net cash provided by operating activities totaled $16,661,000 for the
fiscal year ended February 28, 1998 and increased by $1,088,000 compared to
$15,573,000 for the fiscal year ended March 1, 1997. The major reasons for the
increase in cash provided by operating activities was attributed to the increase
in the Company's net income of $3,971,000 and increases in deferred income taxes
and depreciation and amortization. These changes were offset by increases in
merchandise inventories and reductions in operating liabilities predominantly in
accounts payable and income taxes.
Net cash provided by operating activities totaled $15,573,000 in fiscal
year ended March 1, 1997 compared to $11,136,000 for the fiscal year ended March
2, 1996. Net Income in this period was $19,065,000 compared to $10,411,000 the
previous year, an increase of
7
<PAGE>
$8,654,000. In the fiscal year ended March 1, 1997, merchandise inventories
increased $9,586,000 and accounts payable decreased $2,177,000.
Net cash used in investing activities was $12,210,000 for the fiscal year
ended February 28, 1998 compared to $21,644,000 for the fiscal year ended March
1, 1997 and $4,452,000 for the fiscal year ended March 2, 1996. Purchases of
property and equipment totaled $12,273,000, $21,709,000 and $4,777,000 for the
fiscal years ended February 28, 1998, March 1, 1997 and March 2, 1996,
respectively.
Net cash used in financing activities was $3,955,000 for the fiscal year
ended February 28, 1998. For the fiscal year ended March 1, 1997 net cash
provided by financing activities was $4,611,000. In the fiscal year ended March
2, 1996, net cash used in financing activities was $2,337,000.
The Company has a revolving credit agreement with a bank for a line of
credit not to exceed $40,000,000 through December 1, 2000. At December 1, 2000
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,
2004. Except for funds provided from this credit agreement, the Company has
satisfied its operating and capital expenditure requirements, including those
for operating and expansion of stores, from internally generated funds. For the
fiscal year ended February 28, 1998, under the revolving credit agreement, the
borrowings peaked at $22,500,000 and the average amount of borrowings was
$4,982,000 with a weighted average interest rate of 6.22 %. For the fiscal year
ended March 1, 1997, under the revolving agreement the average amount of
borrowings was $4,122,000 with a weighted average interest rate of 5.97%. For
the fiscal year ended March 2, 1996, under the revolving credit agreement, the
average amount of borrowings was $3,500,000 with a weighted average interest
rate of 7.3%.
The Company has planned capital expenditures of approximately $13,411,000
for the fiscal year ending February 27, 1999, which includes plans to open four
new stores. The Company has also announced that its Board of Directors has
authorized the repurchase of up to 15% of its outstanding shares of common stock
at prevailing market prices during the current and following fiscal years ended
February 26, 2000.
Management believes that existing cash, internally generated funds, trade
credit and funds available from the revolving credit agreement will be
sufficient for working capital, capital expenditure and stock repurchase program
requirements for the fiscal year ending February 27, 1999.
YEAR 2000 COMPLIANCE
The Company has identified all significant applications that will require
modification to ensure Year 2000 Compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 Compliance. The
modification process of all significant applications is substantially complete.
The Company plans on completing the testing process of all significant
applications by December 31, 1998.
In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the date on which the
Company plans to complete the Year 2000 modification and testing processes are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ from those plans.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this report. See index to Consolidated Financial Statements in Item 14.
8
<PAGE>
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 directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Sy Syms (1) (2)............................. 72 Chairman of the Board and
Director of the Company
Marcy Syms (1) (2)........................... 47 Chief Executive Officer/President
and Director of the Company
Stephen A. Merns (2)........................ 45 Vice President, Secretary, Merchandise Manager -
Men's Tailored Clothing and Director of the Company
Antone F. Moreira ......................... 61 Vice President, Treasurer and Chief Financial Officer and
Director of the Company
Harvey A. Weinberg (3) (4) ................. 60 Director of the Company
Wilbur L. Ross, Jr. (3) (4) ................ 60 Director of the Company
David Messer (3) (4)........................ 36 Director of the Company
Philip Barach (4)........................... 68 Director of the Company
Ronald Zindman.............................. 48 Executive Vice President - General Merchandise
Manager
Allen Brailsford............................ 53 Vice President - Operations
Douglas C. Meyer............................ 45 Vice President - Marketing, Advertising and Sales Promotion
Isabel Regan .............................. 43 Vice President - Divisional Merchandise Manager Ladies
Robert Syms ................................ 43 Vice President - Real Estate
</TABLE>
- ----------
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms and Stephen A. Merns.
(3) Member of the Stock Option - Compensation Committee of the Company.
(4) Member of the Audit Committee of the Company.
The members of the Company's Board of Directors hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Executive officers are elected annually by the Board of Directors of
the Company and serve at the pleasure of the Board. Marcy Syms, Stephen A. Merns
and Robert Syms are the children of Sy Syms. There are no other family
relationships between any directors or executive officers of the Company. None
of the organizations with which these persons were previously associated is a
parent, subsidiary or other affiliate of the Company except as otherwise set
forth.
9
<PAGE>
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company and/or its predecessors since 1959. Mr. Syms was Chief
Operating Officer of the Company from 1983 to 1984. Mr. Syms has been a Director
of Israel Discount Bank of New York since December 1991. On January 22, 1998 Mr.
Syms relinquished his position as Chief Executive Officer to Marcy Syms. As of
that date Mr. Syms will remain as Chairman of the Board.
MARCY SYMS has been President and a Director of the Company since 1983 and
Chief Operating Officer of the Company since 1984. On January 22, 1998 Marcy
Syms was named Chief Executive Officer/President.
WILBUR L. ROSS, JR. has been a Managing Director of Rothschild Inc. since
1976. He is a member of the Board of Directors of Mego Corp. He has been a
director of the Company since 1983.
HARVEY A. WEINBERG has been a consultant since April 1994. From April 1992
to April 1994 he was President and Chief Executive Officer of HSSI, Inc., a
retailer of men's and women's apparel. From 1987 to September, 1990 he was Chief
Executive Officer and Vice Chairman of the Board of Directors of Hartmarx
Corporation and from 1990 to September 1992 served as Chairman of the Board of
Hartmarx Corporation. He is a trustee of Glimcher Realty Trust (a real estate
investment trust). He has been a Director of the Company since December 1992.
PHILIP G. BARACH has been a consultant since March 1993. From 1968 to March
1993 he was Chairman of the Board or Chairman of the Board, President and Chief
Executive Officer of the United States Shoe Corp. (manufacturer and retailer of
footwear, apparel and eyewear). He is a member of the Board of Directors of
Bernard Chaus, Inc. (manufacturer of women's apparel), Glimcher Realty Trust (a
real estate investment trust), R.G. Barry Corp. (manufacturer of foldable
slippers and heat/cold preservation products) and Union Central Insurance Co.
(life insurance). He has been a Director of the Company since July 1996.
DAVID A. MESSER has been President of AIG Trading Corporation, a subsidiary
of American International Group, Inc. (NYSE: AIG), since January 1994. Prior to
January 1994, Mr. Messer was a Senior Vice President of AIG Trading Corporation,
where he has been employed since March 1990. He has been a Director of the
Company since July 1996. In January 1998 AIG Trading Corporation's name was
changed to Sempra Energy Trading in connection with the sale of the Company to
Enova Corporation (NYSE:ENA) and Pacific Enterprises (PET).
STEPHEN A. MERNS has been Vice President, Secretary and Merchandise Manager
Men's Tailored Clothing of the Company since January 1, 1986. He was Vice
President and a buyer of men's haberdashery of Syms Inc. from 1980 through 1985
and Secretary of Syms Inc. from 1983 through 1985. He has been a Director of the
Company since July 1996.
ANTONE F. MOREIRA has been Vice President, Chief Financial Officer and
Treasurer of Syms Corp. since May 1997. From 1996 to May 1997 Mr. Moreira was a
financial consultant with Equitable, a financial services organization. From
1990 to 1995, Mr. Moreira was Executive Vice President, Chief Financial Officer
of Stuarts Department Stores, Inc., a regional discount department store chain
operating in New England.
RONALD ZINDMAN has been Executive Vice President - General Merchandise
Manager since March, 1997. He was Vice President, General Merchandise Manager,
Ladies, Mens and Haberdashery from July 1994 to March 1997. Previously, Mr.
Zindman was Vice President - General Merchandise Manager Ladies from March 1993
to July 1994 and a buyer of men's and women's merchandise from March 1990 to
March 1993.
ALLEN BRAILSFORD has been Vice President - Operations since January 1993.
Previously Mr. Brailsford was Director of Operations from March 1992 to January
1993 and Director of Distribution from March 1985 to March 1992.
ISABEL REGAN has been Vice President - Divisional Merchandise Manager,
Ladies since March 1993. She has held various positions at Syms since 1972,
including buyer of women's apparel.
DOUGLAS C. MEYER has been Vice President - Marketing, Advertising and Sales
Promotion since July 1994. Mr. Meyer was Vice President, Marketing and Creative
Services for Loehmann's from 1987 to 1994.
ROBERT G. SYMS has been Vice President - Real Estate since January, 1998.
He was Merchandise Manager - Men's Clothing from October, 1984 to October, 1991.
He first joined Syms Corp. in 1976.
During 1994 HSSI, Inc., of which Mr. Weinberg was President, Chief
Executive Officer and a Director, filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Report and
is incorporated by reference to the definitive Proxy Statement to be filed by
the Company pursuant to Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, which the Company will file not later
than 120 days after February 28, 1998, the end of the fiscal year covered by
this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Report and
is incorporated by reference to the definitive Proxy Statement to be filed by
the Company pursuant to Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, which the Company will file not later
than 120 days after February 28, 1998, the end of the fiscal year covered by
this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of the General Instructions to Form
10-K, the information called for by Item 11 is omitted from this Report and is
incorporated by reference to the definitive Proxy Statement to be filed by the
Company pursuant to Regulation 14A of the General Rules and Regulations under
the Securities Exchange Act of 1934, which the Company will file not later than
120 days after February 28, 1998, the end of the fiscal year covered by this
Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements: PAGE NUMBER
Report of Independent Public Accountants........................ F-1
Consolidated Balance Sheets .................................... F-2
Consolidated Statements of Income .............................. F-3
Consolidated Statements of Shareholders' Equity ................ F-4
Consolidated Statements of Cash Flow ........................... F-5
Notes to Consolidated Financial Statements ..................... F-6 - F-17
All schedules are omitted because they are not applicable, or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
(a) (3) List of Exhibits:
The following exhibits which are marked with an asterisk are filed as part
of this Report and the other exhibits set forth below are incorporated by
reference (utilizing the same exhibit numbers, except as stated otherwise below)
from (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and declared
effective September 23, 1983 or (ii) where indicated, the Company's reports on
Form 8-K, Form 10-Q or Form 10-K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
4.3 $5,600,000 New Jersey Economic Development Authority Revenue Bond Agreement
dated December 1, 1981
11
<PAGE>
4.4 Amendments to the New Jersey Economic Development Authority Revenue Bond
Agreement
4.4a First Amendment dated April 14, 1982
4.4b Second Amendment dated May 17, 1982
4.4c Third Amendment dated June 27, 1983
4.4d Fourth Amendment dated July 14, 1983
4.5 Mortgage & Note dated December 11, 1981 between Syms Inc. and New
Jersey Economic Development Authority
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No. 1, July 29, 1969
10.3f Parking Area Sublease No. 1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.4 Ground Lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey Assignment and Assumption of Ground Lease, dated May 8, 1986,
to Registrant (exhibit 28.1 to 8-K Report dated May 1986)
+10.21 Syms Corp 1983 Incentive Stock Option and Appreciation Plan as
Amended and Restated (Exhibit A to Company's Proxy Statement for the 1993
Annual Meeting of Shareholders)
10.29 Credit Card Program Agreement dated as of March 12, 1987 and as amended
as of March 16, 1987 between General Electric Credit Card Corporation and
Registrant (10-K Report for fiscal year ended December 31, 1987)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms Corp
and Summit Bank (successor to United Jersey Bank) (8-K Report dated
December 7, 1993)
10.33 Form of Indemnification Agreement between Registrant and Directors and
Executive Officers of the Registrant (10-K Report for fiscal year ended
March 2, 1996)
10.34 Credit Plan Agreement dated December 11, 1995 between Citicorp Retail
Services, Inc. and Registrant (10-K Report for fiscal year ended March 2,
1996)
+10.35 Employment Agreement dated November 1, 1996 between Syms Corp and Ronald
Zindman (10-K Report for fiscal year ended March 1, 1997)
+10.36 Stock Option Certificate for Ronald Zindman (10-K Report for fiscal year
ended March 1, 1997)
10.37 Promissory note and mortgage from Syms Corp to Marcy Syms (10-K Report
for fiscal year ended March 1, 1997)
*10.38 First Amendment to Revolving Credit Agreement, dated as of November 24,
1997, between Syms Corp and Summit Bank.
21 List of Subsidiaries of the Company
*23 Consent of Deloitte & Touche LLP
*27 Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended February 28, 1998 no reports on Form 8-K were
filed.
12
<PAGE>
SIGNATURE
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 by the undersigned, thereunto duly authorized.
SYMS CORP
By /s/ MARCY SYMS
-----------------------------------
Marcy Syms
Chief Executive Officer/President
Date: May 13, 1998
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ SY SYMS
- -------------------------- Chairman of the Board May 13, 1998
Sy Syms and Director
/s/ MARCY SYMS
- -------------------------- Chief Executive Officer/President May 13, 1998
Marcy Syms and Director
(Principal executive officer)
/s/ ANTONE F. MOREIRA
- -------------------------- Vice President, Treasurer and May 13, 1998
Antone F. Moreira Chief Financial Officer and Director
(Principal financial and accounting
officer)
/s/ WILBUR L. ROSS, JR
- -------------------------- Director May 13, 1998
Wilbur L. Ross, Jr
/s/ HARVEY WEINBERG
- -------------------------- Director May 13, 1998
Harvey Weinberg
/s/ DAVID MESSER
- -------------------------- Director May 13, 1998
David Messer
/s/ PHILIP BARACH
- -------------------------- Director May 13, 1998
Philip Barach
/s/ STEPHEN A. MERNS
- -------------------------- Director May 13, 1998
Stephen A. Merns
</TABLE>
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
its subsidiaries as of February 28, 1998 and March 1, 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years ended February 28, 1998, March 1, 1997, and March 2,
1996. 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 consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Syms Corp and subsidiaries as of
February 28, 1998, March 1, 1997 and March 2, 1996 and the results of their
operations and their cash flows for each of the three fiscal years ended
February 28, 1998, March 1, 1997, and March 2, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
April 13, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------
(IN THOUSANDS)
FEBRUARY 28, MARCH 1,
1998 1997
------------ ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 3,840 $ 3,344
Merchandise inventories 127,028 122,540
Deferred income taxes 5,614 6,639
Prepaid expenses and other current assets 4,621 1,756
-------- --------
Total current assets 141,103 134,279
PROPERTY AND EQUIPMENT - Net 146,378 142,741
DEFERRED INCOME TAXES -- 197
OTHER ASSETS 6,711 6,801
-------- --------
TOTAL ASSETS $294,192 $284,018
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,986 $ 28,723
Accrued expenses 11,725 11,055
Obligations to customers 4,508 5,085
Income taxes payable 2,675 5,833
Current portion of obligations
under capital lease 481 405
Short term borrowings -- 4,950
-------- --------
Total current liabilities 41,375 56,051
OBLIGATIONS UNDER CAPITAL LEASE 419 900
DEFERRED INCOME TAXES 564 --
OTHER LONG TERM LIABILITIES 964 633
COMMITMENTS -- --
SHAREHOLDERS' EQUITY:
Preferred stock, par value $100 per share - authorized 1,000
shares; none outstanding -- --
Common stock, par value $0.05 per share - authorized 30,000
shares; 17,849 shares outstanding as of February 28,
1998 and 17,694 shares outstanding as of March 1, 1997 892 885
Additional paid-in capital 13,102 11,709
Retained earnings 236,876 213,840
-------- --------
Total shareholders' equity 250,870 226,434
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $294,192 $284,018
======== ========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED
---------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
----------- -------- --------
NET SALES $352,959 $346,792 $334,750
Cost of goods sold 210,621 213,113 217,561
-------- -------- --------
Gross profit 142,338 133,679 117,189
EXPENSES
Selling, general and administrative 71,020 71,028 70,579
Advertising 8,097 6,626 5,905
Occupancy 15,300 14,215 12,330
Depreciation and amortization 8,627 7,971 7,751
Provision for contractor advance
and special charges -- -- 2,686
-------- -------- --------
Income from operations 39,294 33,839 17,938
Interest expense - net 248 97 293
-------- -------- --------
Income before income taxes 39,046 33,742 17,645
Provision for income taxes 16,010 14,677 7,234
-------- -------- --------
NET INCOME $ 23,036 $ 19,065 $ 10,411
======== ======== ========
Net Income Per Share - basic $ 1.30 $ 1.08 $ 0.59
======== ======== ========
Weighted Average Shares Outstanding - basic 17,770 17,694 17,694
======== ======== ========
Net Income Per Share - diluted $ 1.29 $ 1.08 $ 0.59
======== ======== ========
Weighted Average Shares Outstanding - diluted 17,841 17,705 17,695
======== ======== ========
See notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PREFERRED STOCK, COMMON STOCK,
1,000 SHARES; 30,000 SHARES;
$100 PAR VALUE $0.05 PAR VALUE ADDITIONAL
------------------ -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF MARCH 2, 1996 -- $ -- 17,694 $885 $11,709 $194,775 $207,369
Net income -- -- -- -- -- 19,065 19,065
------ ----- ------ ---- ------- -------- --------
BALANCE AS OF MARCH 1, 1997 -- -- 17,694 885 11,709 213,840 226,434
Exercise of stock options -- -- 155 7 1,393 -- 1,400
Net income -- -- -- -- -- 23,036 23,036
------ ----- ------ ---- ------- -------- --------
BALANCE AS OF
FEBRUARY 28, 1998 -- $ -- 17,849 $892 $13,102 $236,876 $250,870
====== ===== ====== ==== ======= ======== ========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
----------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
----------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $23,036 $ 19,065 $10,411
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,627 7,971 7,751
Deferred income taxes 1,786 (1,870) (3,539)
(Gain) loss on sale of property and equipment (58) (52) 10
Loss on disposal of assets 50 244 1,142
(Increase) decrease in operating assets:
Merchandising inventories (4,488) (9,586) (2,694)
Prepaid expenses and other current assets (2,865) 1,765 2,158
Other assets 44 (2,417) (306)
Increase (decrease) in operating liabilities:
Accounts payable (6,737) (2,177) (4,721)
Accrued expenses 670 1,137 1,203
Obligations to customers (577) 595 (271)
Other long term liabilities 331 396 237
Income taxes (3,158) 502 (245)
------- -------- -------
Net cash provided by operating activities 16,661 15,573 11,136
------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (12,273) (21,709) (4,777)
Proceeds from sale of property and equipment 63 65 325
------- -------- -------
Net cash used in investing activities (12,210) (21,644) (4,452)
------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (405) (339) (287)
Revolving line of credit (repayments) borrowings (4,950) 4,950 (2,050)
Proceeds from shares issued 1,400 -- --
------- -------- -------
Net cash (used in) provided by financing activities (3,955) 4,611 (2,337)
------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 496 (1,460) 4,347
CASH AND CASH EQUIVALENTS. BEGINNING OF PERIOD 3,344 4,804 457
------- -------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,840 $ 3,344 $ 4,804
======= ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) 397 291 399
======= ======== =======
Income taxes paid (refunds received) - net $19,364 $ 16,041 $11,026
======= ======== =======
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 28, 1998, MARCH 1, 1997, AND MARCH 2, 1996
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business - Syms Corp and subsidiaries (the "Company") operates a
chain of forty-one "off-price" retail stores located throughout the
Northeastern and middle Atlantic regions and in the Midwest, Southeast and
Southwest. Each Syms store offers a broad range of first quality, in season
merchandise bearing nationally recognized designer or brand-name labels for
men, women and children.
b. Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
c. Accounting Period - The fiscal years ended February 28, 1998 and March 1,
1997 were comprised of 52 weeks. The fiscal year ended March 2, 1996 was
comprised of 53 weeks.
d. Merchandise Inventories - Merchandise inventories are stated at the lower
of cost or market on a first-in first-out (FIFO) basis, as determined by
the retail inventory method.
e. Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are principally by the straight-line method
over the following estimated useful lives:
Buildings and improvements 15 - 39 years
Machinery and equipment 4 - 7 years
Furniture and fixtures 10 years
Leasehold improvements Lesser of life of the asset or life of lease
Facilities' leases (Note 7) having the substance of financing transactions
have been capitalized. The related lease obligations have been included as
obligations under capital lease. The leased assets are being amortized as
described above.
f. Income Taxes - Deferred income taxes reflect the future tax consequences of
differences between the tax basis of assets and liabilities and their
financial reporting amounts at year end.
g. Net Income Per Share - During the fourth quarter of fiscal 1998, the
Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per share," as required. It was not
necessary to restate previously recorded net income per share for any
periods presented.
h. Cash and Cash Equivalents - Syms Corp considers credit card receivables and
all short-term investments with a maturity of three months or less as cash
equivalents.
i. Pre-opening Costs - Store pre-opening costs are deferred until the store's
opening, at which time they are expensed over the first 12 months of store
operation.
j. Obligation to Customers - Obligations to customers represent credits issued
for returned merchandise as well as gift certificates. The Company's policy
is to allow customers to exchange credits issued for other merchandise or
credit to the Syms charge card.
F-6
<PAGE>
k. Use of 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 and disclosure of contingent 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.
l. Reclassification - Certain items in prior years in specific captions of the
accompanying consolidated financial statements and notes to consolidated
financial statements have been reclassified for comparative purposes.
F-7
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
FEBRUARY 28, MARCH 1,
1998 1997
------------ --------
(IN THOUSANDS)
Land $ 40,961 $ 40,061
Buildings and building improvements 114,178 105,511
Leasehold and leasehold improvements 31,743 32,142
Machinery and equipment 17,327 16,747
Furniture and fixtures 15,972 15,661
Capital lease 3,763 3,763
Construction in progress 1,135 692
-------- --------
225,079 214,577
Less accumulated depreciation and amortization 78,701 71,836
-------- --------
$146,378 $142,741
======== ========
NOTE 3 - INCOME TAXES
The provision for income taxes is as follows:
FISCAL YEAR ENDED
------------------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
------------- -------- --------
(In thousands)
Current:
Federal $ 12,343 $ 13,799 $ 9,109
State 1,881 2,748 1,664
-------- -------- --------
14,224 16,547 10,773
-------- -------- --------
Deferred:
Federal 1,490 (1,560) (2,622)
State 296 (310) (917)
-------- -------- --------
1,786 (1,870) (3,539)
-------- -------- --------
$ 16,010 $ 14,677 $ 7,234
======== ======== ========
F-8
<PAGE>
The following is a reconciliation of income taxes computed at the U.S. Federal
statutory rate to the provision for income taxes:
FISCAL YEAR ENDED
---------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
------------ -------- --------
Statutory Federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of Federal income
tax benefits 5.8 8.4 5.3
Officers' life insurance 0.2 0.1 0.7
----- ---- ----
Effective income tax rate 41.0% 43.5% 41.0%
==== ==== ====
The composition of the Company's deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
FEBRUARY 28, MARCH 1,
1998 1997
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capitalization of inventory costs $ 3,274 $ 4,085
Accounts receivable 106 1,143
Other 3,514 3,049
------- -------
Total deferred tax assets 6,894 8,277
Deferred tax liability:
Depreciation method and different estimated lives (1,371) (425)
Other (473) (1,016)
------- -------
Total deferred tax liabilities (1,844) (1,441)
======= =======
Net $ 5,050 $ 6,836
======= =======
Classified in balance sheet as follows:
Current deferred tax asset $ 5,614 $ 6,639
Long term deferred tax liability (net of non-current deferred tax asset) (564) --
Long term deferred tax asset (net of noncurrent deferred tax liability) -- 197
------- -------
Net $ 5,050 6,836
======= =======
</TABLE>
F-9
<PAGE>
NOTE 4 - 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, 2000. 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 average daily
unused portion is subject to a commitment fee of 1/8 of 1% per annum. At
February 28, 1998 there were no outstanding borrowings compared to $4,950,000 in
outstanding borrowings at March 1, 1997.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends, (defined to include cash repurchases of
capital stock), as well as other financial ratios.
Total interest charges incurred for the years ended February 28, 1998, March 1,
1997 and March 2, 1996, including amounts related to capital leases, were
$617,000, $586,000, and $623,000, respectively, of which $160,000, $152,000, and
$105,000 were capitalized in fiscal 1997, 1996 and 1995, respectively, in
connection with the purchase and construction of new facilities.
In addition, the Company has a separate $20,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise and other borrowings. This agreement may be cancelled at any time by
either party. At February 28, 1998 and at March 1, 1997, the Company had
$6,023,000 and $6,094,000, respectively, in outstanding letters of credit.
NOTE 5 - FAIR VALUE DISCLOSURES
The estimated fair values of financial instruments which are presented herein
have been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of amounts the Company
could realize in a current market exchange.
The fair value of the Company's cash and cash equivalents, accounts receivable
and short-term borrowings approximates their carrying values at February 28,
1998 and March 1, 1997 due to the short-term maturities of these instruments.
F-10
<PAGE>
NOTE 6 - PENSION AND PROFIT SHARING PLANS
a. PENSION PLAN - The Company has a defined benefit pension plan for all
employees other than those covered under collective bargaining agreements.
The benefits are based on years of service and the employee's highest
average pay during any five consecutive years within the ten-year period
prior to retirement. Pension plan costs are funded annually. Contributions
are intended to provide not only for benefits attributed to service to
date, but also for those expected to be earned in the future.
The following table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
FEBRUARY 28, MARCH 1,
1998 1997
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation: Accumulated
benefit obligation, including vested benefits of $3,324 at
February 28, 1998 and $3,128 at March 1, 1997 $ 3,770 $ 3,254
======= =======
Projected benefit obligation $ 4,890 $ 4,180
Plan assets at fair value, primarily mutual
funds and United States Treasury bills 4,654 3,869
------- -------
Plan assets less than projected benefit obligation (236) (311)
Unrecognized net Loss 165 147
Unamortized net asset at transition (101) (127)
------- -------
Accrued pension cost (included in accrued expenses) $ (172) $ (291)
======= =======
</TABLE>
F-11
<PAGE>
Pension expense includes the following components:
FISCAL YEAR ENDED
----------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
------------ ------- --------
(IN THOUSANDS)
Service cost-benefits earned
during the period $ 384 $ 326 $ 330
Interest cost on the projected
benefit obligation 303 282 242
Actual return on plan assets (207) (159) (191)
Net amortization and deferral (166) (155) (80)
----- ----- -----
Net periodic pension cost $ 314 $ 294 $ 301
===== ===== =====
The weighted average discount rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation was 7.0% during the year ended February 28, 1998, and
7.75% for the fiscal years ended March 1, 1997, and March 2, 1996. The
expected long-term rate of return on plan assets was 8.5% during each of
the years ended February 28, 1998, March 1, 1997 and March 2, 1996.
b. PROFIT-SHARING AND 401(K) PLAN - The Company has a profit-sharing plan and
401(k) plan for all employees other than those covered under collective
bargaining agreements. In 1995, the Company established a defined
contribution savings plan 401(k) for substantially all of its eligible
employees. Employees may contribute a percentage of their salary to the
plan subject to statutory limits. The Company has not made any matching
contributions to this plan, however, profit-sharing contributions were made
in the amounts of $222,000 for year ended February 28, 1998, $200,000 for
the year ended March 1, 1997, and $130,000 for the year ended March 2,
1996.
F-12
<PAGE>
NOTE 7 - COMMITMENTS
a. LEASES - The Company has various operating leases and one capital lease for
its retail stores, with terms expiring between 1998 and 2019. Under most
lease agreements, the Company pays real estate taxes, maintenance and other
operating expenses. Certain store leases also provide for additional
contingent rentals based upon a percentage of sales in excess of certain
minimum amounts.
Future minimum lease payments at February 28, 1998 are as follows:
CAPITAL LEASE OPERATING
REAL ESTATE LEASES
------------- ----------
(IN THOUSANDS)
1998 $ 600 $ 7,342
1999 450 8,341
2000 -- 7,981
2001 -- 7,980
2002 -- 7,700
2003 and thereafter -- 67,354
------ ---------
Total minimum payments 1,050 $ 106,698
=========
Less amount representing interest 150
Present value of net minimum lease payments 900
------
Less current maturities 481
------
$ 419
=======
Payments under the real estate capital lease, which expires in 1999, are payable
to the Company's principal shareholder. Rental payments were $600,000 during
each of the years ended February 28, 1998, March 1, 1997 and March 2, 1996.
Rent expense for operating leases are as follows:
FISCAL YEAR ENDED
---------------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
------------ -------- --------
(IN THOUSANDS)
Minimum rentals $ 7,011 $ 5,832 $ 4,308
Escalation rentals 331 413 24
Contingent rentals 32 36 40
Sublease rentals (867) (743) (386)
------- ------- -------
$ 6,507 $ 5,538 $ 3,986
======= ======= =======
b. EMPLOYMENT AGREEMENT - At March 1, 1997 the Company had an employment
agreement with its General Merchandising Manager, expiring 2009, pursuant
to which annual compensation of approximately $300,000 is required. In
addition, that employee is entitled to additional compensation upon
occurrence of certain events.
F-13
<PAGE>
c. LEGAL PROCEEDINGS - The Company is a party to routine litigation incident
to its business. Management of the Company believes, based upon its
assessment of the actions and claims outstanding against the Company, and
after discussion with counsel, that there are no legal proceedings that
will have a material adverse effect on the financial condition or results
of operations of the Company. Some of the lawsuits to which the Company is
a party are covered by insurance and are being defended by the Company's
insurance carriers.
d. LETTER OF CREDIT - The Company has guaranteed a letter of credit on behalf
of the licensee totaling approximately $150,000, which expires on July 5,
1998.
NOTE 8 - PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of preferred stock, in
one or more series of preferred stock. The Board of Directors is authorized to
establish the number of shares to be included in each such series, and to fix
the designation, relative rights, preferences, qualifications and limitations of
the shares of each such series.
NOTE 9 - STOCK OPTION PLAN
The Company's Stock Option Plan allows for the granting of incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1986 (as
amended), non-qualified stock options or stock appreciation rights. The plan
requires that incentive stock options be granted at an exercise price not less
than the fair market value of the common shares on the date the option is
granted. The exercise price of the option for holders of more than 10% of the
voting rights of the Company must be not less than 110% of the fair market value
of the common shares on the date of grant. Non-qualified options and stock
appreciation rights may be granted at any exercise price. The Company has
reserved 1,000,000 shares of common stock for issuance thereunder.
No option or stock appreciation rights may be granted under the stock option
plan after July 2003. The maximum exercise period for any option or stock
appreciation right under the plan is ten years from the date the option is
granted (five years for any optionee who holds more than 10% of the voting
rights of the Company).
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), was effective for the Company for fiscal 1996.
SFAS No. 123 encourages (but does not require) compensation expense to be
measured based on the fair value of the equity instrument awarded. In accordance
with APB No. 25, no compensation cost has been recognized in the Consolidated
Statements of Income for the Company's stock option plans. If compensation cost
for the Company's stock option plans had been determined in accordance with the
fair value method prescribed by SFAS No. 123, the Company's pro forma net income
and earnings per share would be as follows:
1997 1996 1995
---- ---- ----
Net Income (in thousands) $ 22,971 $19,042 $10,411
Net Income per share - basic 1.29 1.08 .59
Net Income per share - diluted 1.29 1.08 .59
This pro forma information may not be representative of the amounts to be
expected in future years as the fair value method of accounting prescribed by
SFAS No. 123 has not been applied to options granted prior to 1996.
F-14
<PAGE>
The fair value of each option grant is estimated on the date of each grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997 and 1996: risk-free interest rate 5.5% and
6.83%, expected life 5 and 10 years, expected volatility of 33.25% and 33.29%,
and dividend yield 0%. The fair value generated by the Black-Scholes model may
not be indicative of the future benefit, if any, that may be received by the
option holder.
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------------------
FEBRUARY 28, 1998 MARCH 1, 1997 MARCH 2, 1996
----------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
beginning of year 490 $ 9.52 426 $ 9.94 464 $ 9.90
Granted 25 9.88 100 8.00 -- --
Exercised (155) 9.03 -- -- -- --
Cancelled (13) 9.96 (36) 10.27 (38) 9.53
- -----------------------------------------------------------------------------------------------------------------------
Outstanding, end of period 347 $ 9.75 490 $ 9.52 426 $ 9.94
=======================================================================================================================
Options exerciseable at year end 282 $10.15 360 $ 9.83 320 $10.02
Weighted-average fair value of
options granted during the year $ 3.84 $ 4.99 N/A
</TABLE>
The following table summarizes information about stock options outstanding at
February 28, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------- ----------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AT CONTRACTURAL AVERAGE EXERCISABLE AT AVERAGE
EXERCISE PRICES FEBRUARY 28, 1998 LIFE (YEARS) EXERCISE PRICE FEBRUARY 28, 1998 EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.125 - $12.250 347,450 5.2 $9.75 282,050 $10.15
</TABLE>
NOTE 10 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income per share has been computed based
upon the weighted average common shares outstanding. Diluted net income per
share gives effect to outstanding stock options.
F-15
<PAGE>
Net income per share have been computed as follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
<S> <C> <C> <C>
BASIC NET INCOME PER SHARE:
Net income $ 23,036 $ 19,065 $ 10,411
Average shares outstanding 17,770 17,694 17,694
Basic net income per share $ 1.30 $ 1.08 $ .59
DILUTED NET INCOME PER SHARE:
Net Income $ 23,036 $ 19,065 $ 10,411
Average shares outstanding 17,770 17,694 17,694
Stock options 71 11 1
Total average equivalent shares 17,841 17,705 17,695
Diluted net income per share $ 1.29 $ 1.08 $ .59
</TABLE>
Options to purchase 0, 236,000 and 412,000 shares of common stock at prices
ranging from $7.125 to $12.250 per share were outstanding in 1997, 1996 and
1995, respectively, but were not included in the computation of diluted net
income per share because the exercise price of the options exceed the average
market price and would have been antidilutive.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company has entered into a capital lease with an officer. Included in the
Statement of Income are the following expense relating to this agreement:
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996
------------- --------- --------
(IN THOUSANDS)
Depreciation $ 156 $ 238 $ 238
Interest 195 261 313
The balance sheet includes the following items relating to this agreement:
FEBRUARY 28, 1998 MARCH 1, 1997
----------------- -------------
(IN THOUSANDS)
Assets under Capital Lease $ 3,763 $ 3,763
Accumulated Depreciation (3,495) (3,339)
Capital Lease Obligation 900 1,305
On November 22, 1996 the Company loaned the Marcy Syms Revocable Trust $500,000
toward the purchase of a house for Ms. Syms in Westchester County, New York. The
loan is evidenced by the Trust's note, which is guaranteed by Ms. Syms, and is
secured by a first priority mortgage on the real estate purchased. The note
bears interest at the rate of 6.6% per annum (the then
F-16
<PAGE>
Federal Mid-Term Rate) payable annually, and the principal of the note is due
November 22, 2001. The principal balance on this loan as of February 28, 1998
was reduced by prepayment to $200,000.
NOTE 12 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED FEBRUARY 28, 1998
Net sales $ 85,650 $ 78,589 $ 97,867 $ 90,853
Gross profit $ 34,173 $ 30,271 $ 42,043 $ 35,851
Net income $ 4,675 $ 2,821 $ 9,021 $ 6,519
Net income per share - basic $ 0.26 $ 0.16 $ 0.51 $ 0.37
Net income per share - diluted $ 0.26 $ 0.16 $ 0.51 $ 0.36
YEAR ENDED MARCH 1, 1997
Net sales $ 83,377 $ 75,128 $ 96,225 $ 92,062
Gross profit $ 30,456 $ 26,133 $ 41,494 $ 35,596
Net income $ 3,381 $ 1,441 $ 8,637 $ 5,606
Net income per share - basic $ 0.19 $ 0.08 $ 0.49 $ 0.32
Net income per share - diluted $ 0.19 $ 0.08 $ 0.49 $ 0.32
</TABLE>
F-17
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT is dated as of the 24th day of November, 1997 and is by and
between SUMMIT BANK (as successor to United Jersey Bank) having an office at 750
Walnut Avenue, Cranford, New Jersey 07016 (the "Bank"), and SYMS CORP., a New
Jersey corporation having an address at One Syms Way, Secaucus, New Jersey 07094
(the "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank have entered into a Revolving
Credit Agreement dated as of December 1, 1993, (the "Credit Agreement"); and
WHEREAS, the Borrower and the Bank have agreed to amend certain
terms of the Credit Agreement as more fully described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Definitions. Except as otherwise defined herein, terms defined
in the Credit Agreement shall have the same meaning when used herein.
2. Amendment of Credit Agreement. The Credit Agreement is
hereby amended as follows (all Section references are to the corresponding
Sections of the Credit Agreement)
2.1 The definition of "Conversion Date" which appears in Section
1.1 is amended to read as follows:
"Conversion Date" shall mean December 1, 2000, or, if earlier, the
date upon which the Borrower shall, in accordance with the terms
hereof, reduce the Commitment to zero.
2.2 The definition of "Maturity Date" which appears in Section 1.1
is amended to read as follows:
"Maturity Date" shall mean the date which is the fourth
anniversary of the Conversion Date.
2.3 Section 6.12 is amended to read as follows:
"Capital Expenditures. The Borrower shall not permit the sum of
Capital Expenditures plus Dividends to exceed (a) $35,000,000 for
the fiscal year ending February 28, 1998 and each of the three
fiscal years thereafter and (b) $40,000,000 for the fiscal year
ending March 2, 2002 and each fiscal year thereafter; provided,
however, that (1) the foregoing shall be increased in each fiscal
year by an amount equal to the net cash proceeds received by the
Borrower from the sale of capital assets (as determined in
accordance with GAAP) during such fiscal year and (2) to
<PAGE>
the extent that the amount of Capital Expenditures made by the
Borrower and its subsidiaries during any fiscal year ending on or
after February 28, 1998 is less than the amount permitted for such
fiscal year pursuant to the foregoing, such amount (the "Rollover
Amount") may be carried forward and utilized to make Capital
Expenditures in excess of the amount permitted by the foregoing in
the succeeding fiscal years."
2.4 Section 6.17 is amended by deleting the reference to "October 2,
1993" which appears in paragraph (b) therein and inserting "August 30, 1997" in
its place.
3. Substitute Note. Concurrently herewith, the Borrower shall
execute and deliver to the Bank a substitute revolving credit note (the
"Substitute Note") which shall supersede, and be in substitution for, the
revolving credit note (the "Prior Note") executed and delivered pursuant to the
provisions of Section 2.3 of the Credit Agreement and shall be the "Note" as
defined and described in the Credit Agreement for all purposes. It is expressly
agreed that the execution and delivery of such Substitute Note shall not
evidence or represent a refinancing, repayment, accord and satisfaction or
novation of the indebtedness evidenced by the Prior Note. As soon as practicable
following its receipt of the Substitute Note, the Bank will return the Prior
Note to the Borrower.
4. Representations and Warranties. In order to induce the Bank to
enter into this Agreement and amend the Credit Agreement as provided herein, the
Borrower hereby represents and warrants to the Bank that:
(a) Except as otherwise disclosed in writing to the Bank, all of the
representations and warranties of the Borrower set forth in the Credit Agreement
are true, complete and correct in all material respects on and as of the date
hereof with the same force and effect as if made on and as of the date hereof
and as if set forth at length herein (except that representations and warranties
which are expressly stated to be as of a certain date are true, complete and
correct in all material respects as of such certain date)
(b) No Default or Event of Default presently exists and is
continuing on and as of the date hereof.
(c) Except as otherwise disclosed in writing to the Bank, since
the date of the Borrower's most recent financial statements delivered to the
Bank, no material adverse change has occurred in the business, assets,
liabilities, financial condition or results of operations of the Borrower, and
no event has occurred or failed to occur which has had, or reasonably may be
expected to have, a material adverse effect on the business, assets,
liabilities, financial condition or results of operations of the Borrower.
(d) The Borrower has full power and authority to execute, deliver
and perform any action or step which may be necessary to carry out the terms of
this Agreement and all other agreements, documents and instruments executed and
delivered by the Borrower to the Bank concurrently herewith or in connection
herewith (collectively, the "Amendment Documents"); each Amendment Document to
which the Borrower is a party has been duly executed and delivered by the
Borrower and is the legal, valid and binding obligation of the Borrower
enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency, general equity principles or other similar laws affecting the
enforcement of creditor's rights generally.
<PAGE>
(e) The execution, delivery and performance of the Amendment
Documents will not (i) violate any provision of any existing law, statute, rule,
regulation or ordinance (ii) conflict with, result in a breach of or constitute
a default under (a) any order, judgment, award or decree of any court,
governmental authority, bureau or agency, or (b) any mortgage, indenture, lease,
contract or other agreement or undertaking to which the Borrower is a party or
by which the Borrower or any of its properties or assets may be bound, or (iii)
result in the creation or imposition of any lien or other encumbrance upon or
with respect to any property or asset now owned or hereafter acquired by the
Borrower.
(f) No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with
any person is required in connection with the execution, delivery, performance
or validity of the Amendment Documents or the transactions contemplated thereby.
(g) The Borrower agrees to reimburse the Bank for all reasonable
costs and expenses, including reasonable counsel fees and disbursements,
incurred by the Bank in connection with the Amendment Documents and the
transactions contemplated therein.
5. No Change. Except as expressly set forth herein, all of the terms
and provisions of the Credit Agreement shall continue in full force and effect
and are hereby ratified and confirmed in all respects.
6. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts and all such counterparts taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this
Amendment as of the date above written.
SUMMIT BANK
By: Bruce A. Gray
------------------
Vice President
SYMS CORP
Attest:
Antone F. Moreira
- ----------------- By: Sy Syms
------------------
<PAGE>
SUBSTITUTE REVOLVING CREDIT NOTE
November 24, l997
$40,000,000
FOR VALUE RECEIVED, the undersigned, SYMS CORP., a New Jersey
corporation (the "Borrower") hereby unconditionally promises to pay on or before
the Conversion Date (unless the indebtedness evidenced hereby shall be converted
into the Term Loan), to the order of SUMMIT BANK, a banking institution of the
State of New Jersey (the "Bank"), at the office of the Bank located at 210 Main
Street, Hackensack, New Jersey, or at such other location as the Bank shall
designate, in lawful money of the United States of America and in immediately
available fluids, the principal amount of the lesser of (i) $40,000,000 or (ii)
so much thereof as shall have been advanced (the "Advances") by the Bank to the
Borrower pursuant to that certain Revolving Credit Agreement between the
Borrower and the Bank dated December 1, 1993, as amended by the First Amendment
to Revolving Credit Agreement dated the date hereof (as amended, the "Credit
Agreement"). Terms defined in the Credit Agreement shall have the same meaning
when used herein. All of the terms and provisions of the Credit Agreement are
incorporated herein by reference as if set forth at length herein.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time as hereinafter
provided. Except as hereinafter provided, the unpaid principal amount hereof
shall bear interest commencing with the date hereof at a fluctuating rate per
annum equal to the Floating Rate.
The Borrower may elect to have all or any portion of the
outstanding principal balance of this Note, in an amount equal to or greater
than $500,000 (and, if greater, in additional increments of $100,000), bear
interest at the LIBOR Rate or at the Secondary CD Based Rate for any Interest
Period, to the extent and in the manner provided in the Credit Agreement.
Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed and, except for that portion of this Note
bearing interest at a Fixed Rate, shall be adjusted automatically as of the
opening of business on each day on which any change in the Base Rate or the
Federal Funds Rate shall be announced and be effective.
Except for that portion of this Note bearing interest at a Fixed
Rate, installments of accrued interest only shall be due and payable hereon
quarterly, in arrears, with the first such installment being due and payable on
the first Business Day of the first calendar quarter following the date hereof,
and the remainder of such quarterly installments of interest being due and
payable on the first Business Day of each and every calendar quarter thereafter
until this Note shall have been paid in full.
The Borrower shall pay (i) the outstanding principal amount of each Fixed Rate
Loan on each Fixed Rate Interest Payment Date applicable thereto and (ii) all
unpaid interest accrued on such Fixed Rate Loan on the first Business Day of
each calendar quarter following the making of such Fixed Rate Loan and on the
Fixed Rate Interest Payment Date; provided, however, that if any Fixed Rate
Interest Payment Date shall not be a Business Day, then such payment shall be
made on the next succeeding Business Day. unless, with respect to that portion
of this Note which
<PAGE>
bears interest at a LIBOR Rate, the next such succeeding Business Day falls in
the next calendar month, in which case such payment shall be made in the next
preceding Business Day.
All Advances made by the Bank to the Borrower hereunder may be
noted by the Bank on any schedule or other record annexed hereto or otherwise so
designated, and the Bank is authorized to make such notations, which shall be
Prima facia evidence of the principal amount outstanding hereunder at any time;
provided, however, that any failure to make such a notation (or any error in
notation) shall not limit or otherwise affect the obligation of the Borrower
hereunder which are and shall remain absolute and unconditional.
The Borrower agrees to pay to the Bank the commitment fee provided
for in the Credit Agreement.
The Borrower shall pay to the Bank a late charge of five percent
(5%) of any amount due hereunder or under the Credit Agreement if such amount is
not received by the Bank within ten calendar days after the date it is due;
provided, however, that such late charge shall not be less than $25 nor more
than $2,500. The acceptance by the Bank of payment of the late charge shall not
be considered an election of remedies or waiver by the Bank of any of its rights
or remedies.
The Bank may declare this Note to be immediately due and payable
if any of the following events shall have occurred and be continuing:
(1) Failure by the Borrower to (i) make any payment of principal
on this Note or under the Credit Agreement on any date when due or (ii) make any
payment of interest or commitment fee payable hereunder or under the Credit
Agreement within 15 days from any date when due; or
(2) An Event of Default shall have occurred under the Credit
agreement
Upon any nonpayment of any amount owing under this Note at its
stated or accelerated maturity, the Bank may, in addition to such other and
further rights and remedies as provided by law or under the Credit Agreement,
(i) collect interest on such overdue amount from the date of such maturity until
paid at a rate per annum equal to the Base Rate plus three (3%) percent, (ii)
setoff such amount against any deposit account maintained in the Bank by the
Borrower, and such right of setoff shall be deemed to have been exercised
immediately upon such stated or accelerated maturity even though such setoff is
not noted on the Bank's records until a later time and (iii) hold as security
any property heretofore or hereafter delivered into the custody, control or
possession of the Bank or any entity acting as agent for the Bank (other than
property contained in any safe deposit box maintained in the Bank) by any person
liable for the payment of this Note.
<PAGE>
This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
Should the indebtedness represented by this Note or any part
hereof be collected at law or in equity, or in bankruptcy, receivership, or any
other court proceeding, or should this Note be placed in the hands of attorneys
for collection upon default, the Borrower agrees to pay, in addition to the
principal and interest due and payable hereon, all reasonable costs of
collecting or attempting to collect this Note, including reasonable attorneys'
fees and expenses.
This Note shall be and remain in full force and effect and in no
way impaired until the actual payment thereof to the Bank, its successors or
assigns.
Anything herein to the contrary notwithstanding, the obligations
of the Borrower under this Note shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt of any such payment
by the Bank would be contrary to provisions of law applicable to the Bank
limiting the maximum rate of interest which may be charged or collected by the
Bank.
The Borrower and all endorsers and guarantors of this Note hereby
waive presentment, demand for payment, protest and notice of dishonor of this
Note.
This Note is binding upon the Borrower and its successors and
assigns and shall inure to the benefit of the Bank and its successors and
assigns.
This Note and the rights and obligations of the parties hereto
shall be subject to and governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the undersigned has caused this Revolving
Credit Note to be duly executed by its authorized officers, as of the day and
year above written.
ATTEST: SYMS CORP.
By: Antone F. Moreira By: Sy Syms
------------------------- ------------------
Title: Vice President Title: Chairman
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of our report dated April 13, 1998, appearing in this Annual Report on
Form 10-K of Syms Corp and subsidiaries for the fiscal year ended February 28,
1998.
Deloitte & Touche LLP
New York, New York
May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 3,840
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 127,028
<CURRENT-ASSETS> 141,103
<PP&E> 225,079
<DEPRECIATION> 78,701
<TOTAL-ASSETS> 294,192
<CURRENT-LIABILITIES> 41,375
<BONDS> 419
0
0
<COMMON> 892
<OTHER-SE> 249,978
<TOTAL-LIABILITY-AND-EQUITY> 294,192
<SALES> 352,959
<TOTAL-REVENUES> 352,959
<CGS> 210,621
<TOTAL-COSTS> 210,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248
<INCOME-PRETAX> 39,046
<INCOME-TAX> 16,010
<INCOME-CONTINUING> 23,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,036
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.29
</TABLE>
