ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of 48 "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 48 stores and the aggregate amount of selling space in the Syms stores increased from approximately 2,000 square feet to approximately 1,844,000 square feet. In March 1987, the Company relocated to an approximately 277,000 square foot distribution center and executive headquarters.
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 48 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 26, 2000 net sales were generated by the following categories:
Men's tailored clothes and haberdashery.................... 54% Women's dresses, suits, separates and accessories.......... 30% Shoes...................................................... 7% Children's wear............................................ 7% 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 Manager and several other key divisional merchandise managers.
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 276 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 4.5% 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 and other major credit cards 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.
EMPLOYEES
At February 26, 2000, the Company had 2,565 employees of whom approximately 620 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 1,823 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.
ITEM 2. PROPERTIES
THE STORES
Location
At February 26, 2000 the Company had 48 stores, 25 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.
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 two New York City stores and the one downtown Boston store. Syms stores are usually located near a major highway or thoroughfare in suburban areas populated by at least 1,000,000 people and are readily accessible to customers by automobile. In certain areas where the population is in excess of 2,000,000 people, Syms has opened more than one store in the same general vicinity.
Lease Terms
Twenty-four of the Company's 48 stores are currently leased from unrelated parties, and the Elmsford, New York store is leased from Sy Syms, the Chairman of Syms Corp. The following table summarizes lease expirations and any renewal options:
Number of Number of Calendar Leases Leases with Range in Years of Periods Expiring (1) Renewal Options Option Periods (2) - ------- ------------ --------------- ------------------- 2000 0 0 0 2001 3 0 0 2002 2 1 4 2003 0 0 0 2004 1 1 10 2005 and thereafter 18 12 2.5-5 -- -- ----- 24 14
- -------------
(1) Westchester - month to month basis.
(2) 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.
Store leases provide for a base rental of between approximately $4.30 and $37.66 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 $11,043,000 for the year ended February 26, 2000, of which $600,000 was paid to Sy Syms as fixed rent.
Store Openings/Closings
Three new stores opened this year. The Lawrenceville, NJ store opened April 29, 1999 (54,000 square feet of selling space), the Chicago, IL store opened August 26, 1999 (39,000 square feet of selling space), and the Towson, MD store opened September 16, 1999 (41,000 square feet of selling space).
ITEM 3.
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.
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 Annual Report.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY 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.
HIGH LOW ---- --- 1999 Quarter ended February 26, 2000 $6 - 3/16 $4 - 5/16 Quarter ended November 27, 1999 8 - 7/8 5 - 1/8 Quarter ended August 28, 1999 8 - 3/16 7 - 7/16 Quarter ended May 29, 1999 8 - 3/8 7 - 3/8
1998 Quarter ended February 27, 1999 $9 - 3/4 $7 - 1/2 Quarter ended November 28, 1998 13 - 11/16 9 - 3/8 Quarter ended August 29, 1998 14 - 13/16 12 - 1/4 Quarter ended May 30, 1998 15 - 7/8 13 - 5/8
HOLDERS
As of May 1, 2000 there were 148 record holders of the Company's Common Stock. The Company believes that there were in excess of 1,693 beneficial owners of the Company's Common Stock as of that date.
DIVIDENDS
The Board of Directors of the Company did not declare dividends, in the fiscal years ended February 26, 2000 and February 27, 1999. Payment of dividends is within the discretion of the Company's Board of Directors and depends 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 intends generally to retain earnings, if any, to fund development and growth of its business. The Company does not plan on paying dividends in the near term. The Company had announced that its Board of Directors had authorized the repurchase 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 repurchase program expired on February 26, 2000.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the Company's audited Consolidated Financial Statements for the fiscal years ended February 26, 2000, February 27, 1999, February 28, 1998, March 1, 1997 and March 2, 1996. The selected financial data presented below should be read in conjunction with such Financial Statements and notes thereto.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual 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 Annual 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, 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
The following discussion compares the fiscal years ended February 26, 2000, February 27, 1999 and February 28, 1998. The fiscal years ended February 26, 2000, February 27, 1999 and February 28, 1998 were each comprised of 52 weeks.
Fiscal Year Ended February 26, 2000 Compared to Fiscal Year Ended February 27, 1999
Net sales for the fiscal year ended February 26, 2000, were $341,570,000 a decrease of $2,288,000 (or .7%) as compared to net sales of $343,858,000 for the fiscal year ended February 27, 1999. Comparable store sales for the fiscal year ended February 26, 2000 declined 5.9%. This sales decline continues to be impacted by increased price competition and increased promotional activity from other retailers.
Gross profit for the fiscal year ended February 26, 2000 was $128,725,000, a decrease of $7,175,000 (37.7 % as a percentage of net sales) as compared to $135,900,000 (39.5% as a percentage of net sales) for the fiscal year ended February 27, 1999. This decrease is largely due to the decline in sales and higher markdowns which was partially offset by an improved shrinkage performance.
Selling, general and administrative (SG&A) expense was $83,592,000 (24.5% as a percentage of net sales) for the fiscal year ended February 26, 2000 as compared to $73,886,000 (21.5% as a percentage of net sales) for the fiscal year ended February 27, 1999. This increase in SG&A expenses of approximately $9,706,000 is largely attributable to the opening of new stores. The SG&A expenses of these new stores amounted to $6,303,000 for the fiscal year ended February 26, 2000.
Advertising expense for the fiscal year ended February 26, 2000 was $10,210,000 (3.0% as a percentage of net sales) as compared to $7,581,000 (2.2% as a percentage of net sales) for the fiscal year ended February 27, 1999. The increase of $2,629,000 resulted from increased TV advertising in the first half of this year and increased number of direct mail customers in fiscal 1999 as compared to fiscal 1998 resulting from a management decision to spend more advertising dollars in an effort to improve sales performance.
Occupancy costs were $20,688,000 (6.1% as a percentage of net sales) for the fiscal year ended February 26, 2000 as compared to $16,717,000 (4.9% as a percentage of net sales) for the fiscal year ended February 27, 1999. This increase is largely attributable to the expense of new stores for the fiscal year ended February 26, 2000.
Depreciation and amortization amounted to $10,580,000 (3.1% as a percentage of net sales) for the fiscal year ended February 26, 2000 as compared to $8,541,000 (2.5% as a percentage of net sales) for the fiscal year ended February 27, 1999. This increase is attributable to the addition of new stores and the acquisition of new MIS systems and equipment.
Income before income taxes was $3,645,000 (a decrease of $25,437,000, or 87.5%) for the fiscal year ended February 26, 2000, as compared to $29,082,000 for the fiscal year ended February 27, 1999. This decrease resulted mostly from the decline in sales, gross margin and higher SG&A expenses largely attributable to the opening of three new stores.
For the fiscal year ended February 26, 2000 the effective income tax rate was 39.0% as compared to 40.0% for the fiscal year ended February 27, 1999. In the fiscal year ended February 27, 1999, the effective tax rate was affected by the addition of tax reserves pertaining to certain states.
Fiscal Year Ended February 27, 1999 Compared to February 28, 1998
Net sales for the fiscal year ended February 27, 1999, were $343,858,000, a decrease of $9,101,000 (or 2.6%) as compared to net sales of $352,959,000 for the fiscal year ended February 28, 1998. Comparable store sales for the fiscal year ended February 27, 1999 declined 6.3%. This sales decline can be largely attributable to increased promotional activity and price competition from other retailers.
Gross profit for the fiscal year ended February 27, 1999 was $135,900,000, a decrease of $6,438,000 (39.5% as a percentage of net sales) as compared to $142,338,000 (40.3% as a percentage of net sales) for the fiscal year ended February 28, 1998. This decrease is largely due to the decline in sales and higher markdowns which was partially offset by an improved shrinkage performance.
Selling, general and administrative (SG&A) expense was $73,886,000 (21.5% as a percentage of net sales) for the fiscal year ended February 27, 1999 as compared to $71,020,000 (20.1% as a percentage of net sales) for the fiscal year ended February 28, 1998. This increase in SG&A expenses of approximately $2,866,000 resulted from the opening of three new stores (Kendall, FL, Troy, MI and Boston, MA). The SG&A expenses of these new stores amounted to $4,012,000 for the fiscal year ended February 27, 1999.
Advertising expense for the fiscal year ended February 27, 1999 was $7,581,000 (2.2% as a percentage of net sales) as compared to $8,097,000 (2.3% as a percentage of net sales) for the fiscal year ended February 28, 1998. This decrease of $516,000 in advertising expense resulted from expense savings achieved through opportunistic media buying as well as other cost controls.
Occupancy costs were $16,717,000 (4.9% as a percentage of net sales) for the fiscal year ended February 27,1999 as compared to $15,300,000 (4.3% as a percentage of net sales) for the fiscal year ended February 28, 1998. This increase is largely attributable to the addition of three new stores for the fiscal year ended February 27, 1999.
Depreciation and amortization amounted to $8,541,000 (2.5% as a percentage of net sales) for the fiscal year ended February 27, 1999 as compared to $8,627,000 (2.4% as a percentage of net sales) for the fiscal year ended February 28, 1998. This decrease resulted mainly from certain assets becoming fully depreciated and was somewhat offset by the addition of three new stores.
Income before income taxes was $29,082,000 (a decrease of $9,964,000, or 25.5%) for the fiscal year ended February 27, 1999, as compared to $39,046,000 for the fiscal year ended February 28, 1998. This decrease resulted mostly from the decline in sales and higher SG&A expenses attributable to the opening of three new stores.
For the fiscal year ended February 27, 1999 the effective income tax rate was 40.0% as compared to 41.0% for the fiscal year ended February 28, 1998. In the fiscal year ended February 28, 1998, the effective tax rate was affected by the addition of tax reserves pertaining to certain states.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 26, 2000 was $87,812,000, a decrease of $13,780,000 from February 27, 1999 and the ratio of current assets to current liabilities decreased to 2.98 to 1 as compared to 3.67 to 1 at February 27, 1999.
Net cash provided by operating activities totaled $36,132,000 for the fiscal year ended February 26, 2000 and increased by $14,170,000 as compared to $21,962,000 for the fiscal year ended February 27, 1999. The major reasons for the increase in cash provided by operating activities was attributed to lower inventory level versus last year and an increase in operating liabilities.
Net cash provided by operating activities totaled $21,962,000 for the fiscal year ended February 27, 1999 and increased by $5,301,000 as compared to $16,661,000 for the fiscal year ended February 28, 1998. The major reasons for the increase in cash provided by operating activities was attributed to lower decreases in operating liabilities versus last year and lower increases in inventory levels compared to a year ago offset by lower net income.
Net cash used in investing activities was $19,051,000 for the fiscal year ended February 26, 2000 as compared to $15,186,000 for the fiscal year ended February 27, 1999 and $12,210,000 for the fiscal year ended February 28, 1998. Purchases of property and equipment totaled $19,203,000, $16,250,000 and $12,273,000 for the fiscal years ended February 26, 2000, February 27, 1999 and February 28, 1998, respectively.
Net cash used in financing activities was $10,325,000 for the fiscal year ended February 26, 2000 as compared to $7,690,000 for the fiscal year ended February 27, 1999 and $3,955,000 for the fiscal year ended February 28, 1998.
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 revolving credit agreement, the Company has satisfied its operating and capital expenditure requirements, including those for the operation and expansion of stores, from internally generated funds. For the fiscal year ended February 26, 2000, under the revolving credit agreement, the borrowings peaked at $7,450,000 and the average amount of borrowings was $887,775 with a weighted average interest rate of 6.33%. For the fiscal year ended February 27, 1999, the average amount of borrowings under the revolving credit agreement was $6,768,000 with a weighted average interest rate of 6.10%. For the fiscal year ended February 28, 1998, the average amount of borrowing under the revolving credit agreement was $4,982,000 with a weighted average interest rate of 6.22%.
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 February 26, 2000 and at February 27, 1999, the Company had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit. There were no borrowings for the fiscal year ended February 26, 2000 compared to $2,350,000 for the fiscal year ended February 27, 1999.
The Company has planned capital expenditures of approximately $5,000,000 for the fiscal year ending March 3, 2001. The Company's Board of Directors had authorized the repurchase of up to 15% of its outstanding shares of common stock at prevailing market prices through the fiscal year ended February 26, 2000. As of February 26, 2000, the Company has purchased 1,927,900 shares which represented 10.8% of its outstanding shares at a total cost of $17,670,624. This Repurchase Program expired on 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 and capital expenditure requirements for the fiscal year ending March 3, 2001.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with this Annual Report. See index to Consolidated Financial Statements in Item 14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows :
NAME AGE TITLE - ---- --- ----- Sy Syms (1) (2)................... 74 Chairman of the Board and Director of the Company
Marcy Syms (1) (2)................ 49 Chief Executive Officer/President and Director of the Company
Antone F. Moreira ............... 63 Vice President, Treasurer and Chief Financial Officer and Director of the Company
Harvey A. Weinberg (3) (4) ....... 62 Director of the Company
David A. Messer (3) (4).......... 38 Director of the Company
Ronald Zindman.................... 50 Executive Vice President - General Merchandise Manager
Allen Brailsford.................. 56 Vice President - Operations
Myra Butensky..................... 41 Vice President - Divisional Merchandise Manager Men's Tailored Clothing
Douglas C. Meyer.................. 47 Vice President - Marketing, Advertising and Sales Promotion
Isabelle Regan.................... 45 Vice President - Divisional Merchandise Manager Women's
John Tyzbir....................... 46 Vice President - Human Resources
- -----------
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms.
(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 is the daughter 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.
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, Sy Syms relinquished his position as Chief Executive Officer to Marcy Syms. Since that date Mr. Syms has been 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.
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 Assurance Society, a financial services organization. From 1990 to 1995, Mr. Moreira was Executive Vice President and Chief Financial Officer of Stuarts Department Stores, Inc., a regional discount department store chain operating in New England. Mr. Moreira has been a Director of the Company since May 1997.
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, he 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.
DAVID A. MESSER has been President of Sempra Energy Trading, 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, (now known as Sempra Energy Trading), where he has been employed since March 1990. He has been a Director of the Company since July 1996.
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. From March 1992 to January 1993, Mr. Brailsford was Director of Operations, and from March 1985 to March 1992, he was Director of Distribution.
MYRA BUTENSKY has been Vice President - Divisional Merchandise Manager, Men's Tailored Clothing since January 1999. From May 1998 to January 1999, Ms. Butensky was Divisional Merchandise Manager, Ladies. Prior to joining the Company in 1991, Ms. Butensky was a buyer with Popular Trading Club, Inc, and also spent 10 years with Macy's in a number of buying positions.
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, Inc. from 1987 to 1994.
ISABELLE REGAN has been Vice President - Divisional Merchandise Manager, Ladies since March 1993. She has held various positions at the Company since 1972, including buyer of women's apparel.
JOHN TYZBIR has been Vice President - Human Resources since April 1999. From January 1995 to October 1997, Mr. Tyzbir was Director of Human Resources of Zallie Supermarkets Corp. From June 1991 to January 1995, Mr. Tyzbir was Director of Human Resources and Planning of Carson Pirie Scott Inc.
ITEM 11.
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 Annual 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, as amended, which the Company will file not later than 120 days after February 26, 2000, the end of the fiscal year covered by this Annual Report.
ITEM 12.
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 12 is omitted from this Annual 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, as amended, which the Company will file not later than 120 days after February 26, 2000, the end of the fiscal year covered by this Annual Report.
ITEM 13.
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 13 is omitted from this Annual 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, as amended, which the Company will file not later than 120 days after February 26, 2000, the end of the fiscal year covered by this Annual Report.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE NUMBER ------ (a) (1) Financial Statements:
Report of Independent Public Accountants............. Consolidated Balance Sheets ......................... Consolidated Statements of Income ................... Consolidated Statements of Shareholders' Equity ..... Consolidated Statements of Cash Flow ................ Notes to Consolidated Financial Statements .......... -
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 Annual 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
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. (10K report for fiscal year ended February 28, 1998)
10.39* Credit Program Agreement, dated January 27, 2000 between Syms Corp and Conseco Finance Corp.
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 26, 2000 no reports on Form 8-K were filed.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By _______________________________ Marcy Syms Chief Executive Officer / President
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ----
___________________________ Chairman of the Board May , 2000 Sy Syms and Director
___________________________ Chief Executive Officer/ May , 2000 Marcy Syms President and Director (Principal executive officer)
___________________________ Vice President, Treasurer and May , 2000 Antone F. Moreira Chief Financial Officer and Director (Principal financial and accounting officer)
___________________________ Director May , 2000 Harvey A. Weinberg
___________________________ Director May , 2000 David A. Messer
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders Syms Corp. Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and subsidiaries as of February 26, 2000 and February 27, 1999, and the related consolidated statement of income, shareholders' equity, and cash flows for each of the three years ended February 26, 2000. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 26, 2000, and February 27, 1999 and the results of their operations and their cash flows for each of the three years in the period ended February 26, 2000, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey April 10, 2000
SYMS CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See notes to consolidated financial statements
SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See notes to consolidated financial statements
SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------- (In thousands, except per share amounts)
See notes to consolidated financial statements
SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
See notes to consolidated financial statements
SYMS CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 26, 2000, FEBRUARY 27, 1999 AND FEBRUARY 28, 1998 - -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business - Syms Corp and subsidiaries (the "Company") operates a chain of 48 "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 26, 2000, February 27, 1999 and February 28, 1998 were comprised of 52 weeks.
d. Cash and Cash Equivalents- Syms Corp considers credit card receivables and all short-term investments with an original maturity of three months or less as cash equivalents.
e. 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.
f. Property and Equipment - Property and equipment are stated at cost. Depreciation and amortization are principally determined 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 7 - 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.
g. 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.
h. Obligation to Customers - Obligations to customers represent credits issued for returned merchandise as well as gift certificates.
i. 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.
j. 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.
k. Revenue Recognition - The Company recognizes revenue at the "point of sale". Allowance for sales returned is recorded as a component of net sales in the period in which the related sales are recorded.
l. Comprehensive Income - In March 1998, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS No. 130). "Reporting Comprehensive," which is required for years beginning December 15, 1997. Comprehensive income is equivalent to the Company's net income for fiscal years 1999, 1998 and 1997.
m. Employee Benefit Plans - SFAS No. 132, "Employers' Disclosures about Pensions and other Postretirement Benefits," which is an amendment of SFAS No. 87, No. 88 and No. 106. SFAS No. 132 that revises employers' disclosures related to pension and other postretirement plans by requiring, among other things, standardization of disclosures among such plans as well as additional information on the changes in benefit obligations and fair values of plan assets. It also eliminates certain other disclosures no longer deemed useful.
n. Segment Reporting - SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" establishes standards for reporting information about a company's operating segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company operates in a single operating segment - the operation of retail off-price stores. Revenues from external customers are derived from merchandise sales. The Company's merchandise sales mix by product category for the last three fiscal years was as follows:
The Company does not rely on any major customers as a source of revenue.
o. Computer Software Costs - In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires capitalization of costs of software developed or purchased for internal use. The Company adoption of the SOP for 1999 which resulted in the capitalization of software development costs of approximately $4,428,000. The after tax effect on net income in 1999 was approximately $2,399,000 or $.15 per diluted share.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
February 26, February 27, 2000 1999 ------------ ------------ (In thousands)
Land $ 40,628 $ 40,628 Buildings and building improvements 115,205 114,668 Leasehold and leasehold improvements 51,318 40,782 Machinery and equipment 28,193 20,793 Furniture and fixtures 20,487 17,560 Capital lease 3,763 3,763 Construction in progress 392 2,747 -------- -------- 259,986 240,941 Less accumulated depreciation and amortization 97,539 87,131 -------- -------- $162,447 $153,810 ======== ========
NOTE 3 - INCOME TAXES
The provision for income taxes is as follows:
Fiscal Year Ended ------------------------------------------ February 26, February 27, February 28, 2000 1999 1998 ------------ ------------ ------------ Current: Federal $ 2,366 $ 8,009 $ 12,343 State 158 1,608 1,881 ------- -------- -------- 2,524 9,617 14,224 ------- -------- --------
Deferred: Federal (190) 1,622 1,490 State (913) 394 296 ------- -------- -------- 1,103 2,016 1,786 ------- -------- -------- $ 1,421 $ 11,633 $ 16,010 ======= ======== ========
The following is a reconciliation of income taxes computed at the U.S. Federal statutory rate to the provision for income taxes:
The composition of the Company's deferred tax assets and liabilities is as follows:
At February 26, 2000 the Company had net operating losses of approximately $840,000 for state income tax purposes which expire beginning in 2007 through 2020.
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. There were no outstanding borrowings against this agreement for the fiscal years ended February 26, 2000 and February 27, 1999.
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 26, 2000, February 27, 1999 and February 28, 1998, including amounts related to capital leases, were $577,000, $607,000, and $617,000, respectively, of which $40,000, $147,000, and $160,000 were capitalized in fiscal 1999, 1998 and 1997, respectively, in connection with the 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 short-term borrowings. This agreement may be canceled at any time by either party. At February 26, 2000 and at February 27, 1999, the Company had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit. There were no borrowings for the fiscal year ended February 26, 2000 compared to $2,350,000 for the fiscal year ended February 27, 1999.
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 26, 2000 and February 27, 1999 due to the short-term maturities of these instruments.
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 information on the Company's pension plan is provided:
Pension expenses includes the following components:
Fiscal Year Ended --------------------------- February 26, February 27, 2000 1999 ------------ ------------ (In thousands) COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost $ 437 $ 477 Interest cost 356 334 Return on Assets (603) (556) Amortization of actuarial loss 125 132 ----- ----- Net periodic benefit cost $ 315 $ 387 ===== =====
WEIGHTED-AVERAGE ASSUMPTIONS USED: Discount rate 7.75% 6.75% Rate of compensation increase 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% during each of the years ended February 26, 2000 and February 27, 1999.
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 $18,900 for year ended February 26, 2000, $180,000 for the year ended February 27, 1999 and $222,000 for the year ended February 28, 1998.
NOTE 7 - COMMITMENTS
a. Leases - The Company has various operating leases for its retail stores, with terms expiring between 2001 and 2018. 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 26, 2000 are as follows:
Operating Leases ----------- 2000 11,035 2001 10,453 2002 10,235 2003 10,043 2004 9,970 2005 and thereafter 63,575 --------- Total minimum payments $ 115,311 =========
Payments were made under the real estate capital lease, which expired in November 1999, to the Company's principal shareholders. Rental payments were $600,000 during each of the years ended February 26, 2000, February 27, 1999, and February 28, 1998. The $600,000 paid for the year ended February 26, 2000 included $450,000 in capital lease payments.
Rent expense for operating leases are as follows:
b. Employment Agreement - 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.
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.
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).
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:
1999 1998 1997 ------- -------- -------- Net Income (in thousands) $ 1,893 $ 17,320 $ 22,971 Net Income per share - basic $ 0.12 $ 1.00 $ 1.29 Net Income per share - diluted $ 0.12 $ 1.00 $ 1.29
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.
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 1999 and 1998: risk-free interest rate of 6.47% and 4.75%, expected life 5 and 10 years, expected volatility of 35.38% and 31.33%, 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:
(1) Such options were granted subject to shareholder approval of an amendment to the Company's Stock Option Plan to increase the number of shares of common stock for which options may be granted under the Plan.
The following table summarizes information about stock options outstanding at February 26, 2000:
(1) 724,000 of such options were granted in fiscal year 1999 subject to shareholder approval of an amendment to the Company's Stock Option Plan to increase the number of shares of common stock for which options may be granted under the Plan.
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.
Net income per share have been computed as follows:
Options to purchase 367,000, 396,000 and 0 shares of common stock at prices ranging from $7.125 to $12.250 per share were outstanding in 1999, 1998 and 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. Options to purchase 724,000 shares of common stock issued in 1999 were granted subject to shareholder approval of an amendment to the Company's Stock Option Plan to increase the number of shares of common stock for which options may be granted under the Plan.
NOTE 11 - Related Party Transactions
Included in the Statements of Income are the following expenses relating to a Capital Lease with an Officer (this lease expired November 30, 1999). This agreement expired November 30, 1999.
February 26, February 27, February 28, 2000 1999 1998 ------------ ------------ ------------ (in thousands) Depreciation $ 100 $ 161 $ 156 Interest 31 119 195
The balance sheet includes the following items relating to this agreement:
February 26, 2000 February 27, 1999 ----------------- ----------------- (In thousands) Assets under Capital Lease $ 3,763 $ 3,763 Accumulated Depreciation (3,756) (3,656) Capital Lease Obligation -- 419
NOTE 12 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA