Back to GetFilings.com
================================================================================
UNITED STATES
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 NOVEMBER 29, 2003
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
(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
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(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
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
At December 31, 2003, the latest practicable date, there were
15,127,278 shares outstanding of Common Stock, par value $0.05 per share.
================================================================================
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
November 29, 2003, March 1, 2003 and November 30, 2002 1
Condensed Consolidated Statements of Operations for
the 13 Weeks and 39 Weeks Ended November 29, 2003 and
November 30, 2002 2
Condensed Consolidated Statements of Cash Flows for the
39 Weeks Ended November 29, 2003 and November 30, 2002 3
Notes to Condensed Consolidated Financial Statements 4-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Controls and Procedures 12-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes In Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
November 29, March 1, November 30,
2003 2003 (1) 2002
----------- --------- ------------
(Unaudited) (See Note) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 25,633 $ 19,197 $ 18,178
Merchandise inventories 97,002 78,151 111,430
Deferred income taxes 4,143 4,143 6,514
Prepaid expenses and other current assets 7,529 6,280 5,238
--------- --------- ---------
TOTAL CURRENT ASSETS 134,307 107,771 141,360
PROPERTY AND EQUIPMENT - Net 128,848 135,460 137,551
DEFERRED INCOME TAXES 9,397 9,397 4,392
OTHER ASSETS 13,282 9,845 9,835
--------- --------- ---------
TOTAL ASSETS 285,834 $ 262,473 $ 293,138
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43,809 $ 12,639 $ 41,799
Accrued expenses 14,038 14,438 10,317
Obligations to customers 3,417 3,352 3,234
--------- --------- ---------
TOTAL CURRENT LIABILITIES 61,264 30,429 55,350
OTHER LONG TERM LIABILITIES 1,872 1,891 1,891
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;
15,127 shares (net of 2,829 treasury shares) outstanding on November 29,
2003, 15,435 shares outstanding (net of 2,513 treasury shares) as of
March 1, 2003 and 15,632 shares outstanding (net of 2,313 treasury shares)
outstanding as of November 30, 2002 756 772 793
Additional paid-in capital 14,135 14,092 14,056
Treasury stock (23,646) (21,572) (20,140)
Retained earnings 231,453 236,861 241,188
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 222,698 230,153 235,897
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 285,834 $ 262,473 $ 293,138
========= ========= =========
- ----------------
(1) The balance sheet at March 1, 2003 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements.
See Notes to Condensed Consolidated Financial Statements
1
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13 Weeks Ended 39 Weeks Ended
----------------------------------- ----------------------------------
November 29, November 30, November 29, November 30,
2003 2002 2003 2002
------------ ------------- ------------ ------------
(Unaudited) (Unaudited)
Net sales $ 74,345 $ 73,271 $ 199,981 $ 206,279
Cost of goods sold 42,960 43,122 120,576 124,054
--------- --------- --------- ---------
Gross profit 31,385 30,149 79,405 82,225
Expenses:
Selling, general and administrative 18,592 18,741 57,467 56,559
Advertising 3,810 3,439 7,611 7,728
Occupancy 4,390 4,302 13,010 13,453
Depreciation and amortization 2,782 2,698 8,189 8,270
Special charge - - - 4,000
--------- --------- --------- ---------
Income (loss) from operations 1,811 969 (6,872) (7,785)
Income from insurance recovery (81) (379) (259) (1,188)
Interest expense - net 64 (76) 21 (175)
--------- --------- --------- ---------
Income (loss) before income taxes 1,828 1,424 (6,634) (6,422)
Provision (benefit) for income taxes 804 671 (1,226) (1,713)
--------- --------- --------- ---------
Net income (loss) $ 1,024 $ 753 $ (5,408) $ (4,709)
========= ========= ========= =========
Net income (loss) per share - basic $ 0.07 $ 0.05 $ (0.35) $ (0.30)
========= ========= ========= =========
Weighted average shares
outstanding - basic 15,201 15,688 15,285 15,688
========= ========= ========= =========
Net income (loss) per share - diluted $ 0.06 $ 0.05 $ (0.35) $ (0.30)
========= ========= ========= =========
Weighted average shares
outstanding - diluted 15,795 16,189 15,285 15,688
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements
2
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
39 WEEKS ENDED
--------------
NOVEMBER 29, NOVEMBER 30,
2003 2002
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (5,408) $ (4,709)
---------- ----------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,189 8,270
(Gain) on sale of property and equipment - (44)
Writeoff and impairment of property and equipment 457 4,000
(Increase) decrease in operating assets:
Merchandising inventories (18,851) (24,620)
Prepaid expenses and other current assets (1,249) 833
Other assets (3,437) (1,612)
Increase (decrease) in operating liabilities:
Accounts payable 31,170 23,900
Accrued expenses (400) (1,672)
Obligations to customers 65 171
Other long term liabilities (19) (226)
---------- ----------
Net cash provided by operating activities 10,517 4,291
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Stanley Blacker, Inc. - (1,906)
Expenditures for property and equipment (2,034) (2,591)
---------- ----------
Net cash used in investing activities (2,034) (4,497)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 27 59
Stock repurchase (2,074) (1,160)
---------- ----------
Net cash used in financing activities (2,047) (1,101)
---------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 6,436 (1,307)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,197 19,485
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,633 $ 18,178
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Stanley Blacker, Inc. acquisition financed through
stock issuance $ - $ 250
========== ==========
See Notes to Condensed Consolidated Financial Statements
3
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13 AND 39 WEEKS ENDED NOVEMBER 29, 2003 AND NOVEMBER 30, 2002
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 40 "off-price" retail clothing
stores located throughout the Northeastern and Middle Atlantic regions and in
the Midwest, Southeast and Southwest. Each store offers a broad range of first
quality, in season merchandise bearing nationally recognized designer or
brand-name labels for men, women and children.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 13 and 39 week periods ended November
29, 2003 are not necessarily indicative of the results that may be expected for
the entire fiscal year ending February 28, 2004. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended March 1, 2003.
NOTE 3 - ACCOUNTING PERIOD
The Company's fiscal year ends the Saturday nearest to the end of February. The
fiscal year ending February 28, 2004 will be comprised of 52 weeks. The fiscal
year ended March 1, 2003 was 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
On November 5, 2003, the Company entered into a new unsecured revolving credit
agreement with a bank for a line of credit not to exceed $20,000,000 through
April 30, 2005. This new unsecured revolving credit agreement replaced the
Company's prior unsecured revolving credit agreement which expired on October
29, 2003. Interest on individual advances under the new revolving credit
agreement is payable quarterly at the bank's base prime rate, except that at the
time of advance, the Company has the option to select an interest rate based
upon one other alternative calculation, with such rate to be fixed for a period
not to exceed 90 days. The average daily unused portion under the new revolving
credit agreement is subject to a commitment fee of .5% per annum. As of November
29, 2003, the Company had no outstanding borrowings under the new revolving
credit agreement, and as of March 1, 2003 and November 30, 2002, the Company had
no outstanding borrowings under its prior revolving credit agreement.
The new revolving credit agreement contains financial covenants with respect to
consolidated tangible net worth, as defined therein, working capital and maximum
capital expenditures, including dividends (defined to include cash repurchases
of capital stock) as well as other financial ratios. The Company was in
compliance with all such covenants as of November 29, 2003.
In addition, the Company has a separate $10,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of foreign
merchandise. This agreement may be cancelled at any time by either party. At
November 29, 2003, March 1, 2003 and November 30, 2002, the Company had
$2,869,760, $2,754,872 and $3,866,000, respectively, in outstanding letters of
credit.
4
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
NOTE 6 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income or loss per share has been
computed based upon the weighted average of the common shares outstanding.
Diluted net income per share gives effect to outstanding stock options.
Net income/(loss) per share has been computed as follows:
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ -----------------------------
NOV. 29, 2003 NOV. 30, 2002 NOV. 29, 2003 NOV. 30, 2002
------------- -------------- ------------- -------------
BASIC NET INCOME PER SHARE:
Net income (loss) ................. $ 1,024 $ 753 $ (5,408) $(4,709)
Average shares outstanding ........ 15,201 15,688 15,285 15,688
Basic net income (loss) per share . $ 0.07 $ 0.05 $ (0.35) $ (0.30)
DILUTED NET INCOME PER SHARE:
Net income (loss) ................. $ 1,024 $ 753 $ (5,408) $(4,709)
Average shares outstanding ........ 15,201 15,688 15,285 15,688
Stock options ..................... 594 501 0 0
Total average equivalent shares .. 15,795 16,189 15,285 15,688
Diluted net income (loss) per share $ 0.06 $ 0.05 $ (0.35) $ (0.30)
In periods with losses, options were excluded from the computation of diluted
net income per share because the effect would be anti-dilutive.
Options to purchase 911,525 and 999,850 shares of common stock at prices ranging
from $5.63 to $10.69 per share were outstanding as of November 29, 2003 and
November 30, 2002, respectively. For the 13 and 39 weeks ended November 29,
2003, 317,600 shares were not included in the computation of diluted net income
per share because the exercise price of the option exceeded our market price and
would have been anti-dilutive. For the 13 and 39 weeks ended November 30, 2002,
317,600 shares were not included in the computation of diluted net income per
share because the exercise price of the option exceeded our market price and
would have been anti-dilutive.
Comprehensive income is equivalent to the Company's net income or loss for the
13 and 39 weeks ended November 29, 2003 and November 30, 2002, respectively.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "BUSINESS COMBINATIONS" ("SFAS 141") AND STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS" ("SFAS
142"). SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001 and modifies the application
of the purchase accounting method effective for transactions that are completed
after June 30, 2001. SFAS 142 eliminates the requirement to amortize goodwill
and intangible assets having indefinite useful lives but requires that they be
assessed at least annually for impairment. Intangible assets that have finite
lives will continue to be amortized over their useful lives. The adoption of
SFAS 141 and 142 did not have a material effect on the Company's financial
position or operations.
In October 2001, the FASB issued Statement of Financial Accounting
Standards 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS"
("SFAS 144"). SFAS No. 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets. The statement provides a single
accounting model for long-lived assets to be disposed of. New criteria must be
met to classify the asset as an asset held-for-sale. This statement also focuses
on reporting the effects of a disposal of a segment of business. This statement
is effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS 144 as of March 3, 2002, and the adoption did not have a material
impact on the Company's financial position or results of operations.
5
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
In April 2002, Statement of Financial Accounting Standards, No. 145,
"RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO.
13, AND TECHNICAL CORRECTIONS" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4
and 64, which required gains and losses from extinguishment of debt to be
classified as extraordinary items. SFAS also rescinds SFAS 44 since the
provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends
SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The
provisions of SFAS 145 are effective for fiscal years beginning after May 15,
2002. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented shall be reclassified to interest
expense. The adoption of SFAS 145 did not have a material effect on the
Company's financial position or results of operations.
Statement of Financial Accounting Standards, No. 146, "ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES" ("SFAS 146"), was issued in July
2002. SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 supercedes EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." SFAS
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. This pronouncement did not have a material effect on
the Company's financial position or results of operations.
On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "ACCOUNTING FOR STOCK-BASED COMPENSATION -TRANSITION AND
DISCLOSURE" ("SFAS 148"). This standard amends SFAS No. 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require more frequent and
prominent disclosures in financial statements of the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for fiscal years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The Company
has adopted the disclosure provisions of SFAS 148 as of March 1, 2003, as
required.
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR
GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS ("FIN 45").
FIN 45 requires the recognition of a liability for certain guarantee obligations
issued or modified after December 31, 2002. It also clarifies disclosure
requirements to be made by a guarantor for certain guarantees. The disclosure
provisions of FIN 45 are effective for fiscal years ending after December 15,
2002. FIN 45 did not have a material impact on the Company's results of
operations, financial position or cash flows, and the Company has adopted the
disclosure provisions of FIN 45 as of March 1, 2003.
On January 17, 2003, the FASB issued Interpretation No. 46, "CONSOLIDATION
OF VARIABLE INTEREST ENTITIES" ("FIN 46"). FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The adoption of FIN 46 did not have an impact on the Company's results of
operations, financial position or cash flows.
In February 2003, the Emerging Issues Task Force ("EITF") addressed EITF
Statement No. 02-16 ("EITF 02-16"), "ACCOUNTING BY A RESELLER FOR CASH
CONSIDERATION RECEIVED FROM A VENDOR." EITF 02-16 provides accounting guidance
on how a reseller should characterize consideration given by a vendor and when
to recognize and how to measure that consideration in its income statement. EITF
02-16 is effective for all agreements entered into after December 31, 2002. The
Company has evaluated the provisions of EITF 02-16 and determined that this
statement did not have a material effect on the Company `s financial condition
or results of operations.
6
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
In April 2003, the FASB issued SFAS 149, "AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 149"). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. The new guidance amends SFAS 133 for decisions made: (a) as part of the
Derivatives Implementation Group process that effectively required amendments to
SFAS 133, (b) in connection with other Board projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. The amendments set forth in SFAS 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. SFAS 149 is generally effective for contracts entered
into or modified after June 30, 2003 (with a few exceptions) and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. The adoption of SFAS 149 did not have a material impact on the
Company's financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY"
("SFAS 150"). SFAS 150 improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. The Company does not expect the provisions of
SFAS 150 to have a material impact on the Company's financial position or
results of operations.
NOTE 8 - ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company complies with Statement of Financial Accounting Standards No.
123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS No. 123"). This statement
defines a fair value based method whereby compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. Under SFAS No. 123,
companies are encouraged, but are not required, to adopt the fair value method
of accounting for employee stock-based transactions. The Company accounts for
such transactions under Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, but discloses pro forma net loss as if the
Company had applied the SFAS No. 123 method of accounting.
Pro forma information, assuming the Company had accounted for its
employee stock options granted under the fair value method prescribed by SFAS
No. 123, as amended by Financial Accounting Standards Board Statement No. 148,
"Accounting for Stock Based Compensation - Transition and Disclosure, an
Amendment of FASB Statement No. 123," is presented below. The fair value of each
option grant is estimated on the date of each grant using the Black-Scholes
option-pricing model. There were no stock options granted in the thirty nine
weeks ended November 29, 2003 and November 30, 2002, respectively. 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.
13 WEEKS ENDED 39 WEEKS ENDED
-------------- --------------
11/29/03 11/30/02 11/29/03 11/30/02
-------- -------- -------- --------
Net income/(loss): $1,024 $753 ($5,408) ($4,709)
Total stock-based employee compensation expense
determined under fair value based
method for all awards, net of related tax effects ($13) ($21) ($16) ($36)
----- ----- ----- -----
Pro forma net income/(loss) $1,011 $732 ($5,424) ($4,745)
====== ==== ======== ========
Earnings (loss) per share:
Basic, as reported $.07 $.05 ($0.35) ($0.30)
Basic, pro forma $.07 $.05 ($0.35) ($0.30)
Diluted, as reported $.06 $.05 ($0.35) ($0.30)
Diluted, pro forma $.06 $.05 ($0.35) ($0.30)
7
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
This pro forma information may not be representative of the amounts
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 fiscal 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report (including but not limited to factors discussed below, in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as those discussed elsewhere in this Quarterly Report on
Form 10-Q) 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, 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 and elsewhere described
in this Quarterly Report and other reports filed with the Securities and
Exchange Commission.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require us
to make estimates and assumptions about future events and their impact on
amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual results
will inevitably differ from our estimates. Such differences could be material to
the consolidated financial statements.
The Company believes application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, the Company has found the
application of accounting policies to be appropriate, and actual results have
not differed materially from those determined using necessary estimates.
The Company's accounting policies are more fully described in Note 1 to the
Consolidated Financial Statements, located in the Annual Report on Form 10-K for
the year ended March 1, 2003. The Company has identified certain critical
accounting policies that are described below.
MERCHANDISE INVENTORY - Inventories are valued at lower of cost or market
using the retail first-in, first-out ("FIFO") inventory method. Under the retail
inventory method ("RIM"), the valuation of inventories at cost and the resulting
gross margins are calculated by applying a calculated cost to retail ratio to
the retail value of inventories. RIM is an averaging method that has been widely
used in the retail industry due to its practicality. Additionally, it is
recognized that the use of RIM will result in valuing inventories at the lower
of cost or market if markdowns are currently taken as a reduction of the retail
value of inventories. Inherent in the RIM calculation are certain significant
management judgments and estimates including, among others, merchandise markon,
markups, and markdowns, which significantly impact the ending inventory
valuation at cost as well as resulting gross margins. Management believes that
the Company's RIM and application of FIFO provides an inventory valuation which
8
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
reasonably approximates cost using a first-in, first-out assumption and results
in carrying value at the lower of cost or market. If actual market conditions
are less favorable than those projected by management, additional markdowns may
be required.
LONG-LIVED ASSETS - In evaluation of the fair value and future benefits of
long-lived assets, the Company performs analyses of the anticipated undiscounted
future net cash flows of the related long-lived assets. If the carrying value of
the related asset exceeds the undiscounted cash flows, the Company reduces the
carrying value to its fair value, which is generally calculated using discounted
cash flows. Various factors including future sales growth and profit margins are
included in this analysis. To the extent these future projections or our
strategies change, the conclusion regarding impairment may differ from the
Company's current estimates.
DEFERRED TAX VALUATION ALLOWANCE - The Company records a valuation
allowance to reduce its deferred tax assets to the amount that is more likely
than not to be realized. The Company has considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, if the Company were to determine that it would be able
to realize its deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Likewise, should the Company determine that
it would not be able to realize all or part of our net deferred tax asset in the
future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made.
RESULTS OF OPERATIONS
13 AND 39 WEEKS ENDED NOVEMBER 29, 2003 COMPARED TO 13 AND 39 WEEKS ENDED
NOVEMBER 30, 2002
Net sales for the 13 weeks ended November 29, 2003 were $74,345,000, an increase
of $1,074,000 (1.5%), as compared to net sales of $73,271,000 for the 13 weeks
ended November 30, 2002. For the 39 weeks ended November 29, 2003, net sales
decreased $6,298,000 (3.1%) to $199,981,000 as compared to net sales of
$206,279,000 for the 39 weeks ended November 30, 2002. Comparable store net
sales increased 1.9% for the 13 weeks ended November 29, 2003 and decreased 1.1%
for the 39 weeks ended November 29, 2003, as compared to the comparable periods
in the prior fiscal year. The sales decrease in the 39 week period is largely
attributable to the closing of the Pittsburgh, PA, and Chicago, IL stores (sales
of closed stores amounted to $4,342,000 for the 39 weeks ended during the same
period in the prior fiscal year).
Gross profit for the 13 weeks ended November 29, 2003 was $31,385,000, an
increase of $1,236,000 (42.2% as a percentage of total net sales) as compared to
$30,149,000 (41.1% as a percentage of net sales) for the 13 weeks ended November
30, 2002. Gross profit for the 39 weeks ended November 29, 2003 was $79,405,000,
a decrease of $2,820,000 (39.7% as a percentage of total net sales) as compared
to $82,225,000 (39.9% as a percentage of total net sales) for the 39 weeks ended
November 30, 2002. The increase in gross profit in the 13 week period ended
November 29, 2003 is largely attributable to fewer markdowns on merchandise sold
compared to the same period in the prior fiscal year.
Selling, general and administrative expense was $18,592,000 (25.0% as a
percentage of total net sales) for the 13 weeks ended November 29, 2003, as
compared to $18,741,000 (25.6% as a percentage of total net sales) for the 13
weeks ended November 30, 2002. Selling, general and administrative expense
increased $908,000 to $57,467,000 (28.7% as a percentage of total net sales) for
the 39 weeks ended November 29, 2003, as compared to $56,559,000 (27.4% as a
percentage of total net sales) for the 39 weeks ended November 30, 2002. This
increase for the 39 week period is largely due to higher medical insurance
costs, pension costs and maintenance and repair costs as compared to the same
period in the prior fiscal year.
Advertising expense for the 13 weeks ended November 29, 2003 was $3,810,000
(5.1% as a percentage of total net sales), as compared to $3,439,000 (4.7% as a
percentage of total net sales) in the 13 week period ended November 30, 2002.
Advertising expense for the 39 weeks ended November 29, 2003 was $7,611,000
(3.8% as a percentage of total net sales), as compared to $7,728,000 (3.7% as a
percentage of total net sales) in the 39 week period ended November 30, 2002.
9
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
Occupancy costs were $4,390,000 (5.9% as a percentage of total net sales) for
the 13 week period ended November 29, 2003, as compared to $4,302,000 (5.9% as a
percentage of total net sales) for the 13 week period ended November 30, 2002.
Occupancy costs were $13,010,000 (6.5% as a percentage of total net sales) for
the 39 week period ended November 29, 2003 as compared to $13,453,000 (6.5% as a
percentage of total net sales) for the 39 week period ended November 30, 2002.
The reduced expenses for the 39 week period is largely attributable to the
closing of the Pittsburgh, PA and Chicago, IL stores.
Depreciation and amortization was $2,782,000 (3.7% as a percentage of total net
sales) for the 13 week period ended November 29, 2003, as compared to $2,698,000
(3.7% as a percentage of total net sales) for the 13 weeks ended November 30,
2002. Depreciation and amortization for the 39 week period ended November 29,
2003 was $8,189,000 (4.1% as a percentage of total net sales), as compared to
$8,270,000 (4.0% as a percentage of total net sales) for the 39 weeks ended
November 30, 2002.
The net profit before income taxes for the 13 weeks ended November 29, 2003 was
$1,828,000, an increase of $404,000 as compared to a net profit of $1,424,000
for the 13 weeks ended November 30, 2002. The loss before income taxes for the
39 weeks ended November 29, 2003 was $6,634,000, as compared to a loss before
taxes of $6,422,000 for the 39 weeks ended November 30, 2002. This increased
loss in the 39 week period ended November 29, 2003 versus the comparable period
a year ago resulted principally from lower sales and gross profit dollars. The
loss for the 39 week period ended November 30, 2002 reflects a charge for store
closing costs.
For the 39 week period ended November 29, 2003, the effective income tax rate
was 18.5%, as compared to 26.7% for the comparable period a year ago. The
reduced income tax rate is due to the non-deductibility of officer's life
insurance premiums.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of November 29, 2003 was $73,043,000, a decrease of
$12,967,000 as compared to $86,010,000 as of November 30, 2002. A decline in
merchandise inventory is largely attributable to the decrease in working capital
for the period ended November 29, 2003. The ratio of current assets to current
liabilities was 2.19 to 1 as of November 29, 2003 as compared to 2.55 to 1 as of
November 30, 2002.
Net cash provided by operating activities totaled $10,517,000 for the 39 weeks
ended November 29, 2003, as compared to $4,291,000 for the 39 weeks ended
November 30, 2002.
Net cash used in investing activities was $2,034,000 for the 39 weeks ended
November 29, 2003 as compared to $4,497,000 for the 39 weeks ended November 30,
2002. Expenditures for property and equipment were $2,034,000 and $2,591,000 for
the 39 weeks ended November 29, 2003 and November 30, 2002, respectively.
Net cash used in financing activities was $2,047,000 for the 39 weeks ended
November 29, 2003, as compared to $1,101,000 for the 39 weeks ended November 30,
2002. This increase is attributable to stock repurchases equal to $2,074,000,
compared to $1,160,000 a year ago.
On November 5, 2003, the Company entered into a new unsecured revolving credit
agreement with a bank for a line of credit not to exceed $20,000,000 through
April 30, 2005. This new unsecured revolving credit agreement replaced the
Company's prior unsecured revolving credit agreement which expired on October
29, 2003. Except for funds provided from this credit agreement, the Company has
satisfied its operating and capital expenditure requirements from internally
generated funds. As of November 29, 2003, there were no outstanding borrowings
under the new revolving credit agreement, and as of November 30, 2002, there
were no outstanding borrowings under the prior revolving credit agreement.
In addition, the Company has a separate $10,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of foreign
merchandise. This agreement may be cancelled at any time by either party. At
November 29, 2003, March 1, 2003 and November 30, 2002, the Company had
$2,869,760, $2,754,872 and $3,866,000, respectively, in outstanding letters of
credit.
10
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
The Company has planned capital expenditures of approximately $5,000,000 for the
fiscal year ended February 28, 2004. Through the 39 week period ended November
29, 2003, the Company has incurred $2,034,000 of capital expenditures.
On June 7, 2002, the Company's Board of Directors' authorized the repurchase of
up to 20% of its outstanding shares of common stock (not to exceed 3,200,000
shares) at prevailing market prices through June 7, 2004. During the 39 week
period ended November 29, 2003, the Company purchased 316,300 shares of common
stock, which represented 2.0% of its outstanding shares, at a total cost of
$2,089,260.
Management believes that existing cash, internally generated funds, trade credit
and funds available from the revolving credit agreement will be sufficient for
working capital and capital expenditure requirements for the fiscal year ending
February 28, 2004.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "BUSINESS COMBINATIONS" ("SFAS 141") AND STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS" ("SFAS
142"). SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001 and modifies the application
of the purchase accounting method effective for transactions that are completed
after June 30, 2001. SFAS 142 eliminates the requirement to amortize goodwill
and intangible assets having indefinite useful lives but requires that they be
assessed at least annually for impairment. Intangible assets that have finite
lives will continue to be amortized over their useful lives. The adoption of
SFAS 141 and 142 did not have a material effect on the Company's financial
position or operations.
In October 2001, the FASB issued Statement of Financial Accounting
Standards 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS"
("SFAS 144"). SFAS No. 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets. The statement provides a single
accounting model for long-lived assets to be disposed of. New criteria must be
met to classify the asset as an asset held-for-sale. This statement also focuses
on reporting the effects of a disposal of a segment of business. This statement
is effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS 144 as of March 3, 2002, and the adoption did not have a material
impact on the Company's financial position or results of operations.
In April 2002, Statement of Financial Accounting Standards, No. 145,
"RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO.
13, AND TECHNICAL CORRECTIONS" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4
and 64, which required gains and losses from extinguishment of debt to be
classified as extraordinary items. SFAS also rescinds SFAS 44 since the
provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends
SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The
provisions of SFAS 145 are effective for fiscal years beginning after May 15,
2002. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented shall be reclassified to interest
expense. The adoption of SFAS 145 did not have a material effect on the
Company's financial position or results of operations.
Statement of Financial Accounting Standards, No. 146, "ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES" ("SFAS 146"), was issued in July
2002. SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 supercedes EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." SFAS
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. This pronouncement did not have a material effect on
the Company's financial position or results of operations.
11
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "ACCOUNTING FOR STOCK-BASED COMPENSATION -TRANSITION AND
DISCLOSURE" ("SFAS 148"). This standard amends SFAS No. 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require more frequent and
prominent disclosures in financial statements of the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for fiscal years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The Company
has adopted the disclosure provisions of SFAS 148 as of March 1, 2003, as
required.
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR
GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS ("FIN 45").
FIN 45 requires the recognition of a liability for certain guarantee obligations
issued or modified after December 31, 2002. It also clarifies disclosure
requirements to be made by a guarantor for certain guarantees. The disclosure
provisions of FIN 45 are effective for fiscal years ending after December 15,
2002. FIN 45 did not have a material impact on the Company's results of
operations, financial position or cash flows, and the Company has adopted the
disclosure provisions of FIN 45 as of March 1, 2003.
On January 17, 2003, the FASB issued Interpretation No. 46, "CONSOLIDATION
OF VARIABLE INTEREST ENTITIES" ("FIN 46"). FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The adoption of FIN 46 did not have an impact on the Company's results of
operations, financial position or cash flows.
In February 2003, the Emerging Issues Task Force ("EITF") addressed EITF
Statement No. 02-16 ("EITF 02-16"), "ACCOUNTING BY A RESELLER FOR CASH
CONSIDERATION RECEIVED FROM A VENDOR." EITF 02-16 provides accounting guidance
on how a reseller should characterize consideration given by a vendor and when
to recognize and how to measure that consideration in its income statement. EITF
02-16 is effective for all agreements entered into after December 31, 2002. The
Company has evaluated the provisions of EITF 02-16 and determined that this
statement did not have a material effect the Company's financial condition or
results of operations.
In April 2003, the FASB issued SFAS 149, "AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 149"). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. The new guidance amends SFAS 133 for decisions made: (a) as part of the
Derivatives Implementation Group process that effectively required amendments to
SFAS 133, (b) in connection with other Board projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. The amendments set forth in SFAS 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. SFAS 149 is generally effective for contracts entered
into or modified after June 30, 2003 (with a few exceptions) and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. The adoption of SFAS 149 did not have a material impact on the
Company's financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY"
("SFAS 150"). SFAS 150 improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. The Company does not expect the provisions of
SFAS 150 to have a material impact on the Company's financial position or
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's operations are not currently subject to material market risks for
interest rates, foreign currency rates or other market price risks.
12
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
ITEM 4. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and procedures as
of the end of the period covered by this Quarterly Report, each of Marcy Syms,
the Chief Executive Officer of the Company, and Antone F. Moreira, the Chief
Financial Officer of the Company, have concluded that the Company's disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by the Company in the reports that it files or submits under the
Securities and Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time period specified by the Securities and
Exchange Commission's rules and forms. Notwithstanding the foregoing, a control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that it will detect or uncover failures within the
Company to disclose material information otherwise required to be set forth in
the Company's periodic reports.
Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect the Company's
internal control over financial reporting.
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) Exhibits filed with this Form 10-Q
10.50 Loan Agreement, dated as of November 5, 2003, between
Syms Corp and Israel Discount Bank of New York
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
13
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
(b) Reports on Form 8-K
On September 26, 2003, the Company furnished a Report on Form
8-K pursuant to Items 7 and 12 of such form regarding its
results of operations for the fiscal quarter ended August 30,
2003.
14
--------------------------
SYMS CORP AND SUBSIDIARIES
--------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYMS CORP
DATE: January 9, 2004 BY: /s/ Marcy Syms
--------------------------
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: January 9, 2004 BY: /s/ Antone F. Moreira
--------------------------
ANTONE F. MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
(Principal Financial and Accounting Officer)
15