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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended NOVEMBER 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From_____________ to _____________
COMMISSION FILE NUMBER 1-8546
SYMS CORP
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2465228
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(201) 902-9600
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At January 12, 1998 the latest practicable date, there were 17,846,090 shares
outstanding of Common Stock, par value $0.05 per share.
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<TABLE>
<CAPTION>
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SYMS CORP AND SUBSIDIARIES
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INDEX
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
November 29, 1997, March 1, 1997 and November 30, 1996 1
Condensed Consolidated Statements of Income for the Thirteen Weeks
and Thirty-Nine Weeks Ended November 29, 1997 and November 30, 1996 2
Condensed Consolidated Statements of Cash Flows for the Thirty-Nine
Weeks Ended November 29, 1997 and November 30, 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5-6
PART II. OTHER INFORMATION 7
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 8
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 29, MARCH 1, NOVEMBER 30,
1997 1997 1996
--------------- ------------- ---------------
(UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,322 $ 3,344 $ 4,544
Merchandise inventories 151,316 122,540 143,074
Deferred income taxes 5,958 6,639 5,994
Prepaid expenses and other current assets 1,576 1,756 2,175
-------- -------- --------
TOTAL CURRENT ASSETS 163,172 134,279 155,787
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization 146,909 142,741 143,193
DEFERRED INCOME TAXES 418 197 784
OTHER ASSETS 6,706 6,801 6,386
-------- -------- --------
TOTAL ASSETS $317,205 $284,018 $306,150
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 49,224 $ 28,723 $ 56,396
Accrued expenses 11,466 11,055 10,894
Obligations to customers 4,189 5,085 4,623
Income taxes payable 3,514 5,833 8,267
Short term borrowings 2,600 4,950 2,350
Current portion of obligations under capital lease 460 405 387
-------- -------- --------
TOTAL CURRENT LIABILITIES 71,453 56,051 82,917
-------- -------- --------
OBLIGATIONS UNDER CAPITAL LEASE 547 900 1,008
DEFERRED INCOME TAXES -- -- 849
OTHER LONG TERM LIABILITIES 886 633 548
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; 17,846
shares outstanding as of November 29, 1997 and 17,694 shares as of
March 2, 1996 and November 30, 1996 892 885 885
Additional paid-in capital 13,070 11,709 11,709
Retained earnings 230,357 213,840 208,234
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 244,319 226,840 220,828
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $317,205 $284,018 $306,150
======== ======== ========
</TABLE>
NOTE: The balance sheet at March 1, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements
1
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SYMS CORP AND SUBSIDIARIES
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CONDENSED STATEMENTS OF INCOME
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------- ------------------------
NOVEMBER 29, NOVEMBER 30, NOVEMBER 29, NOVEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales $97,867 $96,225 $262,106 $254,730
Cost of goods sold 55,824 54,731 155,619 156,647
------- ------- -------- --------
Gross profit 42,043 41,494 106,487 98,083
Expenses:
Selling, general and administrative 17,729 17,913 53,105 52,536
Advertising 2,955 2,410 6,855 5,293
Occupancy 3,775 3,666 11,705 10,349
Depreciation and amortization 2,171 2,034 6,461 5,864
Provisioin for special charges -- -- -- --
------- ------- -------- --------
Income from operations 15,413 15,471 28,361 24,041
Interest expense - net 124 184 365 220
------- ------- -------- --------
Income before income taxes 15,289 15,287 27,996 23,821
Provision for income taxes 6,268 6,650 11,479 10,362
------- ------- -------- --------
Net income $ 9,021 $ 8,637 $ 16,517 $ 13,459
======= ======= ======== ========
Net income per share $ 0.51 $ 0.49 $ 0.93 $ 0.76
======= ======= ======== ========
Weighted average shares outstanding 17,848 17,694 17,775 17,694
======= ======= ======== ========
</TABLE>
See notes to condensed consolidated financial statements
2
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
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NOVEMBER 29, NOVEMBER 30,
1997 1996
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,517 $ 13,459
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,461 5,864
Deferred income taxes 460 (463)
(Gain) on sale of property and equipment (28) (38)
Loss on disposal of assets 50 244
(Increase) decrease in operating assets:
Merchandise inventories (28,776) (30,120)
Other current assets 180 1,346
Other assets 59 (1,977)
Increase (decrease) in operating liabilities:
Accounts payable 20,501 25,496
Accrued expenses 411 976
Obligations to customers (896) 133
Other long term liabilities 253 311
Income taxes (2,319) (2,436)
-------- --------
Net cash provided by operating activities 12,873 17,667
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (10,644) (20,078)
Proceeds from sale of property and equipment 29 50
-------- --------
Net cash (used in) investing activities (10,615) (20,028)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (298) (249)
Revolving line of credit borrowings - net (2,350) 2,350
Exercise of stock options 1,368 --
-------- --------
Net cash (used in) provided by financing activities (1,280) 2,101
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 978 (260)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,344 4,804
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,322 $ 4,544
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 419 $ 261
======== ========
Income taxes paid - net $ 13,329 $ 5,891
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
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SYMS CORP AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND THIRTY-NINE WEEKS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 -- THE COMPANY
Syms Corp (the "Company") operates a chain of forty-one "off-price" retail
clothing stores located throughout the Northeastern and Middle Atlantic regions
and in the Midwest, Southeast and Southwest. Each store offers a broad range of
first quality, in season merchandise bearing nationally recognized designer or
brand-name labels for men, women and children.
NOTE 2 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and thirty-nine week periods
ended November 29, 1997 are not necessarily indicative of the results that may
be expected for the entire fiscal year ending February 28, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the fiscal year
ended March 1, 1997.
NOTE 3 -- ACCOUNTING PERIOD
The Company maintains its records on the basis of a 52-53 week fiscal year
ending the Saturday closest to the end of February. The fiscal year ending
February 28, 1998 and March 1, 1997 are both comprised of 52 weeks.
NOTE 4 -- MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (first in, first out) or
market, as determined by the retail inventory method.
NOTE 5 -- BANK CREDIT FACILITIES
The Company has an unsecured revolving credit agreement with a bank for a line
of credit not to exceed $40,000,000. By an amendment dated November 25, 1997,
this facility was extended for an additional three years, 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 interest rate on short term borrowings was 6.2% at November 29, 1997.
The average daily unused portion is subject to a commitment fee of 1/8% of 1%
per annum. The Company had outstanding borrowings of $2,600,000, $4,950,000 and
$2,350,000 as of November 29, 1997, March 1, 1997 and November 30, 1996,
respectively.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends, as well as other financial ratios.
In addition, the Company has a separate $20,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise and short term borrowing. This agreement may be canceled at any time
by either party. At November 29, 1997, March 1, 1997 and November 30, 1996 the
Company had $3,706,000, $6,094,000 and $4,202,000, respectively, in outstanding
letters of credit.
4
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SYMS CORP AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen and Thirty-Nine Weeks Ended November 29, 1997 Compared to Thirteen and
Thirty-Nine Weeks Ended November 30, 1996
Net sales of $97,867,000 for the thirteen weeks ended November 29, 1997
increased $1,164,200 (1.7%) as compared to net sales of $96,225,000 for the
thirteen weeks ended November 30, 1996. For the thirty-nine weeks ended November
29, 1997 net sales increased $7,376,000 (2.9%) to $262,106,000 as compared to
net sales of $254,730,000 for the thirty-nine weeks ended November 30, 1996.
Comparable store net sales decreased 3.3% for the thirteen weeks and decreased
2.6% for the thirty-nine weeks ended November 29, 1997 from the 1996 periods.
The 2.9% increase in net sales was, for the most part, the result of an increase
in the number of stores as compared to last year.
Gross profit for the thirteen weeks ended November 29, 1997 was $42,043,000, an
increase of $549,000 (1.3%) as compared to $41,494,000 for the fiscal period
ended November 30, 1996. Gross profit for the current year's third quarter
increased principally from higher net sales. Gross profit for the thirty-nine
weeks ended November 29, 1997 was $106,487,000, an increase of $8,404,000 (8.6%)
as compared to $98,083,000 for the fiscal period ended November 30, 1996. Gross
profit for the thirty-nine weeks ended November 29, 1997 increased mainly from
higher net sales in the current thirty-nine week period as well as an improved
initial mark up on goods and fewer markdowns, resulting from increased levels of
opportunistic and in-season purchases which created better values for the
Company's customers.
Selling, general and administrative expense decreased $184,000 to $17,729,000
(18.1% as a percentage of net sales) for the thirteen weeks ended November 29,
1997 as compared to $17,913,000 (18.6% as a percentage of net sales) for the
thirteen weeks ended November 30, 1996. Selling, general and administrative
expense increased $569,000 to $53,105,000 (20.3%) for the thirty-nine weeks
ended November 29, 1997 as compared to $52,536,000 (20.6%) for the thirty-nine
weeks ended November 30, 1996.
Advertising expense for the thirteen weeks ended November 29, 1997 increased to
$2,955,000, as compared to $2,410,000 in the thirteen week period ended November
30, 1996. Advertising expense for the thirty-nine weeks ended November 29, 1997
increased to $6,855,000, as compared to $5,293,000 in the thirty-nine week
period ended November 30, 1996. These increases were due to an increase in
television and radio advertising in certain single store markets as well as two
promotional events not advertised in previous years.
Occupancy costs were $3,775,000 (3.9% as a percentage of net sales) for the
thirteen week period ended November 29, 1997, up from $3,666,000 (3.8% as a
percentage of net sales) for the thirteen week period ended November 30, 1996.
Occupancy costs were $11,705,000 (4.5%) for the thirty-nine week period ended
November 29, 1997, up from $10,349,000 (4.1%) for the thirty-nine week period
ended November 30, 1996. The increases in both the thirteen and thirty-nine week
periods resulted mainly from the addition of the Park Avenue store open since
November of 1996.
Depreciation and amortization amounted to $2,171,000 for the thirteen week
period ended November 29, 1997, an increase of $137,000, as compared to
$2,034,000 for the thirteen weeks ended November 30, 1996. Depreciation and
amortization for the thirty-nine week period ended November 29, 1997 amounted to
$6,461,000, an increase of $597,000, as compared to $5,864,000 for the
thirty-nine weeks ended November 30, 1996. This increase resulted from the
addition of the Park Avenue store, an addition to the Secaucus, NJ Distribution
Center, the addition of an owned location in Marietta, GA and the completion of
a company built store in Rockville, MD to replace a leased location.
5
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SYMS CORP AND SUBSIDIARIES
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Income before income taxes for the thirteen weeks ended November 29, 1997 of
$15,289,000 increased $2,000 as compared to $15,287,000 for the thirteen weeks
ended November 30, 1996. Income before income taxes for the thirty-nine weeks
ended November 29, 1997 of $27,996,000 increased $4,175,000 as compared to
$23,821,000 for the thirty-nine weeks ended November 30, 1996. As discussed
above, the increase in income before income taxes, for the current year's
thirty-nine week period, reflects, for the most part, higher gross profit,
offset somewhat by increased selling, general and administrative expenses and
increased advertising expenses, as well as higher occupancy costs and
depreciation and amortization.
For the thirteen and thirty-nine week periods ended November 29, 1997 the
effective income tax rate was 41.0% as compared to 43.5% last year. Last year's
rate was adversely affected by additional tax provisions for certain states.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at November 29, 1997 was $91,719,000, an increase of $18,849,000
from $72,870,000 as of November 30, 1996, and the ratio of current assets to
current liabilities at November 29, 1997 was 2.28 to 1 as compared to 1.88 to 1
at and November 30, 1996.
Net cash provided by operating activities totaled $12,873,000 for the
thirty-nine weeks ended November 29, 1997, a decrease of $4,794,000 as compared
to $17,667,000 for the thirty-nine weeks ended November 30, 1996. This decrease
resulted primarily from a smaller increase this year in accounts payable as well
as a reduction this year vs. an increase last year in accrued income taxes, both
offset by a higher net income this year. Net income for 1997 amounted to
$16,517,000 compared to $13,459,000 in 1996, an increase of $3,058,000.
Net cash used in investing activities was $10,615,000 and $20,028,000 for the
thirty-nine weeks ended November 29, 1997 and November 30, 1996, respectively.
Net cash used in financing activities was $1,280,000 for the thirty-nine weeks
ended November 29, 1997, compared to $2,101,000 provided by financing activities
in the thirty-nine weeks ended November 30, 1996. As of November 29, 1997 and
November 30, 1996, the Company had net borrowings of $2,600,000 and $2,350,000,
respectively, under its revolving credit agreement.
The Company has a revolving credit agreement with a bank for a line of credit
not to exceed $40,000,000 through December 1, 2000. Except for funds provided
from this credit agreement, the Company has satisfied its operating and capital
expenditure requirements, including those for the opening and expansion of
stores, from internally generated funds. For the thirty-nine weeks ended
November 29, 1997 average borrowings under the revolving credit agreement were
$6,469,000 with a weighted average interest rate of 6.2%. For the thirty-nine
weeks ended November 30, 1996 average borrowings under the revolving credit
agreement were $4,687,000 with a weighted average interest rate of 6. 0%.
The Company has planned capital expenditures for the fiscal year ending February
28, 1998 of $12,000,000, which includes the opening of one new store, and the
relocation of one store from a leased location to a Company built store. Through
the thirty-nine week period ended November 29, 1997 the Company has incurred
$10,644,000 of capital expenditures relating to the $12,000,000.
Management believes that existing cash, internally generated funds, trade credit
and funds available from the revolving credit agreement will be sufficient for
working capital and capital expenditure requirements for the fiscal year ending
February 28, 1998.
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.
6
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SYMS CORP AND SUBSIDIARIES
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PART II. OTHER INFORMATION
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Statement re: Computation of Per Share Earnings
(b) Exhibit 27 - Financial Data Schedule
(c) Reports on Form 8-K -- During the quarter ended November 29, 1997 no
reports on Form 8-K were filed.
7
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SYMS CORP AND SUBSIDIARIES
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYMS CORP
DATE: January 13, 1998 BY ____________________________________
SY SYMS
CHIEF EXECUTIVE OFFICER
BY ____________________________________
ANTONE F. MOREIRA
VICE PRESIDENT &
CHIEF FINANCIAL OFFICER
(Principal Financial Officer &
Chief Accounting Officer)
8
STATEMENT RE COMPUTATION
OF PER SHARE EARNINGS
EXHIBIT 11
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------- -----------------------
NOV. 29, NOV. 30, NOV. 29, NOV. 30,
1997 1996 1997 1996
(in thousands)
Average shares outstanding 17,813 17,694 17,744 17,694
Net effect of dilutive stock
options based on the
treasury stock method using
average market price 35 -- 31 --
Total 17,848 17,694 17,775 17,694
======= ======= ======= =======
Net income available to
common shares $ 9,021 $ 8,637 $16,517 $13,459
======= ======= ======= =======
Earnings per share $ 0.51 $ 0.49 $ 0.93 $ 0.76
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-29-1997
<CASH> 4,322
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 151,316
<CURRENT-ASSETS> 163,172
<PP&E> 223,557
<DEPRECIATION> 76,648
<TOTAL-ASSETS> 317,205
<CURRENT-LIABILITIES> 71,453
<BONDS> 547
0
0
<COMMON> 892
<OTHER-SE> 243,427
<TOTAL-LIABILITY-AND-EQUITY> 317,205
<SALES> 262,106
<TOTAL-REVENUES> 262,106
<CGS> 155,619
<TOTAL-COSTS> 155,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 365
<INCOME-PRETAX> 27,996
<INCOME-TAX> 11,479
<INCOME-CONTINUING> 16,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,517
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
</TABLE>
