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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended MAY 30, 1998
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 Identification No.)
incorporation or organization)
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 June 30, 1998 the latest practicable date, there were 17,725,490 shares
outstanding of Common Stock, par value $0.05 per share.
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<PAGE>
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SYMS CORP AND SUBSIDIARIES
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INDEX
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
May 30, 1998, February 28, 1998 and May 31, 1997 1
Condensed Consolidated Statements of Income for the
Thirteen Weeks Ended May 30, 1998 and May 31, 1997 2
Condensed Consolidated Statements of Cash Flows for the
Thirteen Weeks Ended May 30, 1998 and May 31, 1997 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5-7
PART II. OTHER INFORMATION 8
Item 1. Legal Proceedings
Item 2. Changes In Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
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>
MAY 30, FEB. 28, MAY 31,
1998 1998 1997
---------- ---------- ----------
(UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 14,151 $ 3,840 $ 6,757
Merchandise inventories 156,601 127,028 137,288
Deferred income taxes 6,203 5,614 8,163
Prepaid expenses and other current assets 2,555 4,621 3,321
-------- -------- --------
TOTAL CURRENT ASSETS 179,510 141,103 155,529
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization 145,791 146,378 141,852
DEFERRED INCOME TAXES -- -- 313
OTHER ASSETS 6,924 6,711 5,606
-------- -------- --------
TOTAL ASSETS $332,225 $294,192 $303,300
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 57,005 $ 21,986 $ 48,184
Accrued expenses 10,481 11,725 9,845
Obligations to customers 4,179 4,508 5,076
Income taxes payable 4,133 2,675 7,160
Current portion of obligations
under capital lease 502 481 422
-------- -------- --------
TOTAL CURRENT LIABILITIES 76,300 41,375 70,687
-------- -------- --------
OBLIGATIONS UNDER CAPITAL LEASE 285 419 787
-------- -------- --------
DEFERRED INCOME TAXES 568 564 --
-------- -------- --------
OTHER LONG TERM LIABILITIES 1,043 964 717
-------- -------- --------
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; 17,723
outstanding (net of 162 treasury shares)
as of May 30, 1998, 17,849 outstanding
as of Feb 28, 1998 and 17,694
outstanding as of May 31, 1997 886 892 885
Additional paid-in capital 10,958 13,102 11,709
Retained earnings 242,185 236,876 218,515
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 254,029 250,870 231,109
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 332,225 $ 294,192 $ 303,300
========= ========= =========
</TABLE>
NOTE: The balance sheet at February 28, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements
1
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THIRTEEN WEEKS ENDED
---------------------
MAY 30, MAY 31,
1998 1997
------- -------
(Unaudited)
Net sales $ 83,612 $ 85,650
Cost of goods sold 49,892 51,477
-------- --------
Gross profit 33,720 34,173
Expenses:
Selling, general and administrative 17,015 17,392
Advertising 2,151 2,835
Occupancy 3,722 3,796
Depreciation and amortization 2,073 2,150
-------- --------
Income from operations 8,759 8,000
Interest (income) expense - net (89) 75
-------- --------
Income before income taxes 8,848 7,925
Provision for income taxes 3,539 3,250
-------- --------
Net income $ 5,309 $ 4,675
======== ========
Net income per share-basic $ 0.30 $ 0.26
======== ========
Weighted average shares outstanding-basic 17,835 17,694
======== ========
Net income per share-diluted $ 0.30 $ 0.26
======== ========
Weighted Average shares outstanding-diluted 17,944 17,727
======== ========
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
2
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
THIRTEEN WEEKS ENDED
----------------------
MAY 30, MAY 31,
1998 1997
-------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,309 $ 4,675
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,073 2,150
Deferred income taxes (585) (1,640)
Gain on sale of property and equipment (600) (4)
(Increase) decrease in operating assets:
Merchandising inventories (29,573) (14,748)
Prepaid expenses and other current assets 2,066 (1,565)
Other assets (224) 1,186
Increase (decrease) in operating liabilities:
Accounts payable 35,019 19,461
Accrued expenses (1,244) (1,210)
Obligations to customers (329) (9)
Other long term liabilities 79 84
Income taxes 1,458 1,327
-------- --------
Net cash provided by operating
activities 13,449 9,707
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (1,761) (1,255)
Proceeds from sale of property and equipment 886 7
-------- --------
Net cash used in investing activities (875) (1,248)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (113) (96)
Revolving line of credit borrowings - net -- (4,950)
Exercise of Options / Stock Repurchase (2,150) --
-------- --------
Net cash used in financing activities (2,263) (5,046)
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,311 3,413
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,840 3,344
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,151 $ 6,757
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 13 $ 59
======== ========
Income taxes paid (refunds received) - net $ 358 $ 3,563
======== ========
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 WEEKS ENDED MAY 30, 1998 AND MAY 31, 1997
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (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.
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 week period ended May 30, 1998
is not necessarily indicative of the results that may be expected for the entire
fiscal year ending February 27, 1999. 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 February 28,
1998.
NOTE 3 - ACCOUNTING PERIOD
The Company's fiscal year ends the Saturday nearest to the end of February. The
fiscal year ending February 27, 1999 will be comprised of 52 weeks. The fiscal
year ended February 28, 1998 was also 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 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. As of May
30, 1998 and May 31, 1997 there were no outstanding borrowings under this
agreement. At February 28, 1998 there were also no outstanding borrowings.
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 other borrowing needs. This agreement may be canceled at any
time by either party. At May 30, 1998, February 28, 1998 and May 31, 1997 the
Company had $7,337,000, $6,023,000 and $6,299,000, respectively, in outstanding
letters of credit.
NOTE 6 - 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.
4
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SYMS CORP AND SUBSIDIARIES
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Net income per share has been computed as follows:
MAY 30, MAY 31,
BASIC NET INCOME PER SHARE 1998 1997
---- ----
Net Income $ 5,309 $ 4,675
Average shares outstanding 17,835 17,694
Basic net income per share $ 0.30 $ 0.26
DILUTED NET INCOME PER SHARE:
Net Income $ 5,309 $ 4,675
Average shares outstanding 17,835 17,694
Stock options 109 33
Total average equivalent shares 17,944 17,727
Diluted net income per share $ 0.30 $ 0.26
Options to purchase 0 and 462,000 shares of common stock at prices ranging from
$7.125 to $12.25 per share were outstanding as of May 30, 1998 and May 31, 1997
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Special Note Regarding forward-looking statement
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 the 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-heading in this
term Item-"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 relationships 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.
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 30, 1998 Compared to Thirteen Weeks Ended May 31, 1997
Net sales of $83,612,000 for the thirteen weeks ended May 30, 1998 decreased
$2,038,000 (2.4%) as compared to net sales of $85,650,000 for the thirteen weeks
ended May 31, 1997. One new store was included in the first quarter ended May
30, 1998. Comparable store sales decreased 3.2% from the 1997 period.
5
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SYMS CORP AND SUBSIDIARIES
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Gross profit for the thirteen weeks ended May 30, 1998 was $33,720,000 (40.3%),
a decrease of $453,000 as compared to $34,173,000 (39.9%) for the fiscal period
ended May 31, 1997. This decrease resulted mainly from decreased net sales of
$2,038,000, and was partially offset by improved markon performance.
Selling, general and administrative expense decreased $377,000 to $17,015,000
for the thirteen weeks ended May 30, 1998 as compared to $17,392,000 for the
thirteen weeks ended May 31, 1997. This decrease is mainly attributable to a
gain of approximately $580,000 recorded in this quarter for the sale of land in
Miami, FL.
Advertising expense for the thirteen weeks ended May 30, 1998 decreased to
$2,151,000, as compared to $2,835,000 in the thirteen weeks ended May 31, 1997.
This decrease reflects a reallocation of advertising dollars spent this year
versus last year. Last year's advertising dollars were allocated primarily to
the 1st and 3rd quarter while this year's advertising dollars are allocated to
all four quarters. This may result in increased advertising expense in
subsequent quarters this year.
Occupancy costs were $3,722,000 for the thirteen week period ended May 30, 1998,
compared to $3,796,000 for the period ended May 31, 1997. The decrease was due
to the company's purchase of the Rockville, MD location as compared to payment
of the rent in the comparable quarter last year.
Depreciation and amortization amounted to $2,073,000, a decrease of $77,000 as
compared to $2,150,000 for the thirteen weeks ended May 31,1997. This decrease
is largely attributable to the write-off of fully depreciated assets.
Income before income taxes for the thirteen weeks ended May 30, 1998 was
$8,848,000, an increase of $923,000 (12%) compared to $7,925,000 for the
thirteen weeks ended May 31, 1997. As discussed above, the increase in income
before income taxes reflects improved advertising expense efficiencies, and the
gain on sale of land, which offsets the decline in gross margin and sales.
For the thirteen week period ended May 30, 1998 the effective income tax rate
was 40% as compared to 41% last year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at May 30, 1998 was $103,210,000, an increase of $18,368,000
compared to $84,842,000 as of May 31, 1997. The ratio of current assets to
current liabilities improved to 2.35 to 1 versus 2.20 to 1 at May 31, 1997.
Net cash provided by operating activities totaled $13,449,000 for the thirteen
weeks ended May 30, 1998, an increase of $3,742,000 compared to $9,707,000 for
the thirteen weeks ended May 31, 1997. Net income for the first quarter of 1998
amounted to $5,309,000 compared to $4,675,000 in 1997, an increase of $634,000.
In the thirteen week period ended May 30, 1998, cash provided by operating
activities was mainly used to increase inventory by $29,573,000, offset by an
increase in accounts payable of $35,019,000.
Net cash used in investing activities was $875,000 for the thirteen weeks ended
May 30, 1998, and $1,248,000 in 1997. Expenditures for property and equipment
totaled $1,761,000 and $1,255,000 for the thirteen weeks ended May 30, 1998 and
May 31, 1997, respectively.
Net cash used in financing activities was $2,263,000 for the thirteen weeks
ended May 30, 1998 and $5,046,000 for the thirteen weeks ended May 31, 1997. The
$2,263,000 was primarily used to fund the Company's stock repurchase program.
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
6
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SYMS CORP AND SUBSIDIARIES
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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 the opening and expansion of stores, from internally
generated funds. As of May 30, 1998 and May 31, 1997 and there were no
outstanding borrowings under the revolving credit agreement.
The Company has planned capital expenditures of approximately $13,400,000 for
the fiscal year ending February 27, 1999, which includes opening three new
stores. Through the thirteen week period ended May 30, 1998 the Company has
incurred $1,761,000 of capital expenditures relating to the new store expansion.
The Company has also announced that its Board of Directors has authorized the
repurchase of an aggregate 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. This program will be subjected to market and general
economic conditions and may be suspended from time to time without further
notice.
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 the stock repurchase program
requirements for the fiscal year ending February 27, 1999.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of inflation
on its operations, it does not believe inflation has had a material effect on
sales or results of operations.
7
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SYMS CORP AND SUBSIDIARIES
--------------------------
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS - None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None
Item 3. DEFAULTS UPON SENIOR SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
Item 5. OTHER INFORMATION - None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11-statement re computations of per share earnings.
(b) Exhibit 27 - Financial Data Schedule
(c) On May 5, 1998 a report on Form 8K was filed, (and thereafter amended
on May 22, 1998) disclosing, under Item 5, the Company's stock buy
back program.
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: JULY 7, 1998 BY /s/ MARCY SYMS
-----------------------------------
Marcy Syms
Chief Executive Officer
BY /s/ ANTONE F. MOREIRA
-----------------------------------
Antone F. Moreira
Vice President, Chief Financial
Officer And Treasurer
(Principal Financial and
Accounting Officer)
8
STATEMENT RE COMPUTATION
OF PER SHARE EARNINGS
EXHIBIT 11
THIRTEEN WEEKS ENDED
-----------------------
MAY 30, MAY 31,
1998 1997
(in thousands)
Average shares outstanding 17,835 17,694
Net effect of dilutive stock
options based on the
treasury stock method using
average market price 109 33
Total 17,944 17,727
======= =======
Net income available to
common shares $ 5,309 $ 4,675
======= =======
Earnings per share $ 0.30 $ 0.26
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-30-1998
<CASH> 14,151
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 156,601
<CURRENT-ASSETS> 179,510
<PP&E> 226,539
<DEPRECIATION> 80,748
<TOTAL-ASSETS> 332,225
<CURRENT-LIABILITIES> 76,300
<BONDS> 285
0
0
<COMMON> 886
<OTHER-SE> 253,143
<TOTAL-LIABILITY-AND-EQUITY> 332,225
<SALES> 83,612
<TOTAL-REVENUES> 83,612
<CGS> 49,892
<TOTAL-COSTS> 49,892
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89)
<INCOME-PRETAX> 8,848
<INCOME-TAX> 3,539
<INCOME-CONTINUING> 5,309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,309
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
