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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 quarterly period ended May 29, 1999
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 the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At July 6, 1999 the latest practicable date, there were 16,463,390 shares
outstanding of Common Stock, par value $0.05 per share.
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SYMS CORP AND
SUBSIDIARIES
-------------------------
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 29, 1999, February 27, 1999 and May 30, 1998 1
Condensed Consolidated Statements of Income for the
13 Weeks Ended May 29, 1999 and May 30, 1998 2
Condensed Consolidated Statements of Cash Flows for the
13 Weeks Ended May 29, 1999 and May 30, 1998 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5-8
Item 3. Quantitative and Qualitative Disclosure about Market Risk n/a
PART II. OTHER INFORMATION
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 9
SIGNATURES 9
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SYMS CORP AND
SUBSIDIARIES
-------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 29, FEBRUARY 27, MAY 30,
1999 1999 1998
-------------- -------------- --------------
(UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 14,697 $ 2,926 $ 14,151
Merchandise inventories 136,932 129,438 156,601
Deferred income taxes 2,947 3,462 6,203
Prepaid expenses and other current assets 2,792 3,753 2,555
--------- --------- ---------
TOTAL CURRENT ASSETS 157,368 139,579 179,510
PROPERTY AND EQUIPMENT - Net of accumulated 157,835 153,810 145,791
depreciation and amortization
DEFERRED INCOME TAXES 36 - -
OTHER ASSETS 5,582 5,353 6,924
--------- --------- ---------
TOTAL ASSETS $ 320,821 $ 298,742 $ 332,225
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short Term Borrowings $ - $ 2,350 $ -
Accounts payable 48,321 19,268 57,005
Accrued expenses & taxes 8,066 7,719 6,063
Accrued insurance 1,844 2,550 4,418
Obligations to customers 3,237 3,451 4,179
Income taxes payable 2,256 2,230 4,133
Current portion of obligations under capital lease 285 419 502
--------- --------- ---------
TOTAL CURRENT LIABILITIES 64,009 37,987 76,300
--------- --------- ---------
OBLIGATIONS UNDER CAPITAL LEASE - - 285
--------- --------- ---------
DEFERRED INCOME TAXES - 428 568
--------- --------- ---------
OTHER LONG TERM LIABILITIES 1,728 1,567 1,043
--------- --------- ---------
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; 16,463 shares outstanding (net of 1,424 in treasury
stock) on May 29, 1999, 17,024 shares outstanding (net of
864 treasury shares) on February 27, 1999 and 17,723 shares
outstanding (net of 162 treasury shares) on May 30, 1998 823 851 886
Additional paid-in capital 13,752 13,752 13,486
Treasury Stock (14,650) (10,168) (2,528)
Retained earnings 255,159 254,325 242,185
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 255,084 258,760 254,029
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,821 $ 298,742 $ 332,225
========= ========= =========
</TABLE>
NOTE: The balance sheet at February 27, 1999 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.
1
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SYMS CORP AND
SUBSIDIARIES
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See notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13 WEEKS ENDED
-------------------------------
MAY 29, MAY 30,
1999 1998
---- ----
(Unaudited)
Net sales $ 79,771 $ 83,612
Cost of goods sold 47,925 49,892
-------- --------
Gross profit 31,846 33,720
Expenses:
Selling, general and administrative 19,821 17,015
Advertising 3,620 2,151
Occupancy 4,671 3,722
Depreciation and amortization 2,388 2,073
-------- --------
Income from operations 1,346 8,759
Interest income (21) (89)
-------- --------
Income before income taxes 1,367 8,848
Provision for income taxes 533 3,539
-------- --------
Net income $ 834 $ 5,309
======== ========
Net income per share-basic $ 0.05 $ 0.30
======== ========
Weighted average shares outstanding-basic 16,722 17,835
======== ========
Net income per share-diluted $ 0.05 $ 0.30
======== ========
Weighted Average shares outstanding-diluted 16,723 17,944
======== ========
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
2
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SYMS CORP AND
SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------
MAY 29, MAY 30,
1999 1998
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 834 $ 5,309
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,388 2,073
Deferred income taxes 51 (585)
Gain on sale of property and equipment (143) (600)
Loss of disposal of assets 16 -
(Increase) decrease in operating assets:
Merchandising inventories (7,494) (29,573)
Prepaid expenses and other current assets 961 2,066
Other assets (236) (224)
Increase (decrease) in operating liabilities:
Accounts payable 29,053 35,019
Accrued expenses (359) (1,244)
Obligations to customers (214) (329)
Other long term liabilities 161 79
Income taxes 26 1,458
-------- --------
Net cash provided by operating activities 25,044 13,449
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (6,422) (1,761)
Proceeds from sale of property and equipment 143 886
-------- --------
Net cash (used in) investing activities (6,279) (875)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (134) (113)
Revolving line of credit (repayments) borrowings - net (2,350) -
Exercise of options - 378
Stock repurchase (4,510) (2,528)
-------- --------
Net cash used in financing activities (6,994) (2,263)
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,771 10,311
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,926 3,840
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,697 $ 14,151
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 53 $ 13
======== ========
Income taxes paid (refunds received) $ 464 $ 358
======== ========
</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
13 WEEKS ENDED MAY 29, 1999 AND MAY 30, 1998
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 45 "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 13 week period ended May 29, 1999 is
not necessarily indicative of the results that may be expected for the entire
fiscal year ending February 26, 2000. 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 27,
1999.
NOTE 3 - ACCOUNTING PERIOD
The Company's fiscal year ends the Saturday nearest to the end of February. The
fiscal year ending February 26, 2000 will be comprised of 52 weeks. The fiscal
year ended February 27, 1999 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
29, 1999 and May 30, 1998 there were no outstanding borrowings under this
agreement. At February 27, 1999, the outstanding borrowings amounted to
$2,350,000.
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 borrowings. This agreement may be canceled at any
time by either party. At May 29, 1999, February 27, 1999 and May 30, 1998 the
Company had $ 5,842,000, $3,352,000 and $7,337,000, respectively, in outstanding
letters of credit.
4
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SYMS CORP AND
SUBSIDIARIES
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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.
Net income per share has been computed as follows:
MAY 29, MAY 30,
BASIC NET INCOME PER SHARE 1999 1998
---- ----
Net Income $ 834 $ 5,309
Average shares outstanding 16,722 17,835
Basic net income per share $ 0.05 $ 0.30
DILUTED NET INCOME PER SHARE:
Net Income $ 834 $ 5,309
Average shares outstanding 16,722 17,835
Stock options 1 109
Total average equivalent shares 16,723 17,944
DILUTED NET INCOME PER SHARE $ 0.05 $ 0.30
Options to purchase 386,000 and 0 shares of common stock at prices ranging from
$8.50 to $12.25 per share were outstanding as of May 29,1999 and May 30, 1998,
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 STATEMENTS
The Quarterly Report includes forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) and information
relating to the Company that are based on the beliefs of the management of the
Company as well as assumptions made by and information currently available to
the management of the Company. When used in this Quarterly Report, the words
"anticipate," "believe," "estimate," "expect," "intend," "plan," and similar
expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events, the outcome of which is subject to
certain risks, including among others general economic and market conditions,
decreased consumer demand for the Company's products, possible disruptions in
the Company's computer or telephone systems, increased or unanticipated costs or
effects associated with year 2000 compliance by the Company or its service or
supply providers, possible work stoppages, or increases in labor costs, effects
of competition, possible disruptions or delays in the opening of new stores or
inability to obtain suitable sites for new stores, higher than anticipated store
closings or relocation costs, higher interest rates, unanticipated increases in
merchandise or occupancy costs and other factors which may be outside the
Company's control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described therein as anticipated,
believed, estimated,
5
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SYMS CORP AND
SUBSIDIARIES
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expected, intended or planned. Subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements in this
paragraph.
RESULTS OF OPERATIONS
13 Weeks Ended May 29, 1999 Compared to 13 Weeks Ended May 30, 1998
Net sales of $79,771,000 for the 13 weeks ended May 29, 1999 decreased
$3,841,000 (4.6%) as compared to net sales of $83,612,000 for the 13 weeks ended
May 30, 1998. Comparable store sales decreased 10.6% from the 1998 period. The
sales decline in this quarter continues to be impacted by increased promotional
activity and price competition from other retailers.
Gross profit for the 13 weeks ended May 29, 1999 was $31,846,000 (39.9% as a
percentage of net sales), a decrease of $1,874,000 as compared to $33,720,000
(40.3% as a percentage of net sales) for the fiscal period ended May 30, 1998.
This decrease resulted mainly from decreased net sales and higher markdowns
which was partially offset by improved markon performance.
Selling, general and administrative expense increased $2,806,000 to $19,821,000
for the 13 weeks ended May 29, 1999 as compared to $17,015,000 for the 13 weeks
ended May 30, 1998. Approximately $2,439,000 of this increase can be attributed
to the opening of four new stores in Kendall, FL, Boston, MA, Troy, MI and
Lawrenceville, NJ.
Advertising expense for the 13 weeks ended May 29, 1999 increased to $3,620,000,
as compared to $2,151,000 in the 13 weeks ended May 30, 1998. Advertising
expenses were higher than last year as a result of a 30% increase in the direct
mail customer base, and the more frequent use of TV commercials compared to the
same period last year.
Occupancy costs were $4,671,000 (5.9% as a percentage of net sales) for the 13
week period ended May 29,1999, compared to $3,722,000 (4.5% as a percentage of
net sales) for the period ended May 30, 1998. The occupancy expenses of the four
new stores which amounted to approximately $852,000 accounts for the major
portion of this increase.
Depreciation and amortization amounted to $2,388,000, an increase of $315,000 as
compared to $2,073,000 for the 13 weeks ended May 30, 1998. This increase is
largely attributable to the addition of four new stores, and the acquisition of
new MIS systems.
Income before income taxes for the 13 weeks ended May 29, 1999 was $1,367,000, a
decrease of $7,481,000 as compared to $8,848,000 for the 13 weeks ended May 30,
1998. This decrease in profit resulted from lower sales and increased expenses.
For the 13 week period ended May 29, 1999 the effective income tax rate was 39%
as compared to 40% last year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of May 29, 1999 was $93,359,000, a decrease of $9,851,000
compared to $103,210,000 as of May 30, 1998. The ratio of current assets to
current liabilities improved to 2.46 to 1 as compared to 2.35 to 1 as of May 30,
1998.
Net cash provided by operating activities totaled $25,044,000 for the 13 weeks
ended May 29, 1999, an increase of $11,595,000 as compared to $13,449,000 for
the 13 weeks ended May 30, 1998. In the 13 week period ended May 29, 1999, cash
provided by operating activities was largely impacted by the reduction in
merchandise inventories during this period compared to the comparable period a
year ago.
6
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SYMS CORP AND
SUBSIDIARIES
-------------------------
Net cash used in investing activities was $6,279,000 for the 13 weeks ended May
29, 1999, and $875,000 in 1998. Expenditures for property and equipment totaled
$6,422,000 and $1,761,000 for the 13 weeks ended May 29, 1999 and May 30, 1998,
respectively. This capital expenditure resulted from the opening of three new
stores and the implementing of new software and MIS systems.
Net cash used in financing activities was $6,994,000 for the 13 weeks ended May
29, 1999 and $2,263,000 for the 13 weeks ended May 30, 1998. The $6,994,000 was
primarily used to fund the Company's stock repurchase program of 560,200 shares
for an aggregate of $4,510,000 and to retire short term borrowings of
$2,350,000.
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 the opening and expansion of stores, from internally generated funds. As of
May 29, 1999 and May 30, 1998 there were no outstanding borrowings under the
revolving credit agreement.
The Company has planned capital expenditures of approximately $14,200,000 for
the fiscal year ending February 26, 2000, which includes opening three new
stores and the implementing of new software and MIS systems. Through the 13 week
period ended May 29, 1999 the Company has incurred $6,422,000 of capital
expenditures relating to the new store expansion and the upgrading of MIS
Systems.
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 fiscal year 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. As of
May 29, 1999 the Company has purchased 1,424,300 shares which represented 8.0%
of its outstanding shares at a total cost of $14,721,000.
Management believes that existing cash, internally generated funds, trade credit
and funds available from the revolving credit agreement will be sufficient for
working capital, capital expenditure and the stock repurchase program
requirements for the fiscal year ending February 26, 2000.
YEAR 2000 COMPLIANCE
The Company has commenced a comprehensive program consisting of identifying,
assessing and, if necessary, upgrading and/or replacing its systems and
equipment that may be vulnerable to year 2000 problems. This process is already
underway. The Company has developed a plan to test its entire system for year
2000 compliance. The Company believes that it will have completed all of its
necessary upgrades and/or replacements and the testing of its systems by October
1999.
The Company has begun the process of communicating with those Companies where
their systems interface with the Company's systems or may otherwise impact the
operations of the Company to determine if they have appropriate plans to remedy
year 2000 issues. There can be no assurance, however, that the systems of other
companies on which the Company's processes rely will be timely converted, or
that a failure to successfully convert by another company, or a conversion that
is incompatible with the Company's systems, would not have an impact on the
Company's operations.
Management currently estimates that the cost, in connection with bringing its
existing systems and equipment into compliance, was less than $50,000 for the 13
weeks ended May 29, 1999 and does not expect the additional cost to exceed
$600,000. Although the Company is not aware of any material operational issues
or costs associated with preparing its internal systems for the year 2000, there
can be no assurance that there will not be a delay in, or increased costs
associated with, the implementation of the necessary systems and changes to
address the year 2000.
7
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SYMS CORP AND
SUBSIDIARIES
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A potential source of risk includes, but is not limited to, the inability of
principal suppliers to be year 2000 compliant, which could result in delays in
product deliveries from such suppliers.
The Company currently does not have a contingency plan in place to cover any
unforeseen problems encountered that relate to the year 2000.
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.
8
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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 27 - Financial Data Schedule
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 8, 1999 BY___________________________
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: JULY 8, 1999 BY___________________________
ANTONE F. MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(Principal Financial and Accounting
Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> MAY-29-1999
<CASH> 14,697
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 136,932
<CURRENT-ASSETS> 157,368
<PP&E> 247,346
<DEPRECIATION> 89,511
<TOTAL-ASSETS> 320,821
<CURRENT-LIABILITIES> 64,009
<BONDS> 0
0
0
<COMMON> 823
<OTHER-SE> 254,261
<TOTAL-LIABILITY-AND-EQUITY> 320,821
<SALES> 79,771
<TOTAL-REVENUES> 79,771
<CGS> 47,925
<TOTAL-COSTS> 47,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21)
<INCOME-PRETAX> 1,367
<INCOME-TAX> 533
<INCOME-CONTINUING> 834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 834
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>