Friday, July 15, 2011

Syms New 10Q

Here, we see that Syms actually made money last quarter! Horray! While the NY Post stated that it was largely caused by cost cutting, it should be noted that the company made over $6 million on the sale of real estate. If you take that out, the company lost money, but, not a company killing amount.

Some notes:

The company repurchased shares at a very opportunistic price:
On March 9, 2010, the Company purchased 150,196 shares of the Company’s Common Stock from the Sy Syms Revocable Living Trust at a price of $8.04 per share. The purchase was approved by a committee of the Board consisting solely of the independent members of the Board. The price approved by the committee, after consultation with a financial consultant and counsel, represented a 5% discount to a thirty day volume weighted average price.
While I don't know if they did this for reasons of capital allocation (and frankly, I kind of doubt it) this worked out really well for shareholders. Even though there are some options that may erase this repurchase, it will reduce the overall dilution. To put this in perspective, if the company sold the shares on the open market at today's price, they would net well over half a million dollars in gains... Additionally, I believe that they raised the intrinsic value of the company by even more.

Based on the income statement, it looks like they netted a gain of just under $6.5 million on the sale of the Rockville property and a small parcel in Georgia that was condemned for road construction. I would imagine that this road construction will ultimately be good for the store and was a good, if not lucky way to monetize some un-utilized real estate. Additionally, income was helped out by cost cutting efforts (largely, staffing), which, I have previously highlighted the potential effects of. I think that there will be more to come in the way of cost cutting.

In other Syms related news, the company's Senior VP/CFO/CAO resigned. He is being replaced with a guy named Gary Binkoski, as interim CFO, and an insider is being moved up to the CAO position. While the reason that we have for Seth Udasin is stated as "personal reasons" it seems that we are getting a heck of a replacement with Binkoski; the guy was a higher-up at "Limited Too," has M&A experience, and specializes in turnarounds and restructurings- not a bad thing for Syms to have on board! It seems that they may be serious about doing things correctly.

It should be noted that if Marcy Syms makes an effort to take the company private (as, the new hire may indicate), she can do it in a way that is very desirable; she already owns more than have of the company. She really only needs to get the cash to buy ~45% of the shares. Additionally, if she does this, she can sell off some of the real estate and her new company will have no debt... Just another way to think about this play. While results for the last quarter were not great I still have high hopes for the company. Syms stores grew sales ~11% whereas Filene's seemed to cause the majority of the fall in revenue, indicating a problem with Filene's, which may be left over from the bankruptcy.

Finally, the company re-scheduled it's annual meeting to Friday, July 29th. This seems to be an admittion to one of the points that Esopus Creek brought up in their suit against the company. I can't imagine that this would bode well for them in court- especially since the SEC requires company's to give a 30 day notice (which wasn't done). Maybe the judge will like that they are making effort to turn things around, and right the things that they messed up... who knows?

I recently emailed Marcy Syms, asking her to forego the court case, in favor of simply turning the books over to Esopus Creek. While I have yet to hear back, it is my hope that the company can save itself not only the legal fees, but also the negative press that this is sure to generate. I also believe that the guys at Esopus can offer a fresh perspective on the matters that face the company.

The court case is set to be at 1:30 on August 1st, and will be heard by Judge Olivieri.

Disclosure: Long Syms. This is not advice of any kind. Always do a ton of your own research in regards to anything that I say, do, write, or so much as even think about.

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