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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 MAY 29, 2004
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 July 1, 2004 the latest practicable date, there were 15,115,553 shares
outstanding of Common Stock, par value $0.05 per share.
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SYMS CORP AND SUBSIDIARIES
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INDEX
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
May 29, 2004, February 28, 2004 and May 31, 2003 1
Condensed Consolidated Statements of Operations for the
13 Weeks Ended May 29, 2004 and May 31, 2003 2
Condensed Consolidated Statements of Cash Flows for the
13 Weeks Ended May 29, 2004 and May 31, 2003 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 10
PART II. OTHER INFORMATION
11-12
Item 1. Legal Proceedings
Item 2. Changes In Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 13
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
MAY 29, FEBRUARY 28, MAY 31,
2004 2004 2003
------------ ------------- ------------
(Unaudited) (NOTE) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 32,370 $ 21,386 $ 30,434
Merchandise inventories 83,458 69,226 88,277
Deferred income taxes 3,627 3,627 4,143
Assets held for sale 4,451 4,495 -
Prepaid expenses and other current assets 7,607 6,173 5,133
---------- ---------- ----------
TOTAL CURRENT ASSETS 131,513 104,907 127,987
PROPERTY AND EQUIPMENT - Net 121,971 123,757 133,312
DEFERRED INCOME TAXES 11,094 11,094 9,397
OTHER ASSETS 14,845 13,980 11,637
---------- ---------- ----------
TOTAL ASSETS $ 279,423 $ 253,738 $ 282,333
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 40,140 $ 16,154 $ 35,647
Accrued expenses 9,798 7,714 11,219
Accrued insurance 933 1,264 1,835
Obligations to customers 3,516 3,570 3,317
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 54,387 28,702 52,018
OTHER LONG TERM LIABILITIES 1,852 1,862 1,886
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
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; 15,100 shares outstanding (net of 2,895 in treasury shares)
on May 29, 2004, 15,092 shares outstanding as of February 28, 2004
(net of 2,879 treasury shares) and 15,440 shares outstanding
(net of 2,513 treasury shares) on May 31, 2003 755 755 772
Additional paid-in capital 14,370 14,239 14,117
Treasury stock (24,118) (23,993) (21,572)
Retained earnings 232,177 232,173 235,112
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 223,184 223,174 228,429
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 279,423 $ 253,738 $ 282,333
========== ========== ==========
NOTE: The balance sheet at February 28, 2004 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See Notes to Condensed Consolidated Financial Statements
1
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13 WEEKS ENDED
--------------
MAY 29, MAY 31,
2004 2003
---- ----
(Unaudited)
Net sales $ 68,321 $ 63,534
Cost of goods sold 40,165 37,620
-------- --------
Gross profit 28,156 25,914
Expenses:
Selling, general and administrative 18,653 19,169
Advertising 2,744 2,380
Occupancy 4,219 4,164
Depreciation and amortization 2,609 2,623
Other income (22) (110)
-------- --------
Loss from operations (47) (2,312)
Interest income (54) (12)
-------- --------
Income/(loss) before income taxes 7 (2,300)
Provision (benefit) for income taxes 3 (551)
-------- --------
Net income/(loss) $ 4 $ (1,749)
======== ========
Net income/(loss) per share-basic $ - $ (0.11)
======== ========
Weighted average shares outstanding-basic 15,103 15,439
======== ========
Net income/(loss) per share-diluted $ - $ (0.11)
======== ========
Weighted average shares outstanding- diluted 15,103 15,439
======== ========
See Notes to Condensed Consolidated Financial Statements
2
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
13 WEEKS ENDED
--------------
MAY 29, MAY 31,
2004 2003
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4 $ (1,749)
-------- --------
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 2,609 2,621
Loss on disposal of assets 85 -
(Increase) decrease in operating assets: -
Merchandising inventories (14,232) (10,126)
Prepaid expenses and other current assets (1,434) 1,147
Other assets (865) (1,792)
Increase (decrease) in operating liabilities:
Accounts payable 23,986 23,008
Accrued expenses 1,699 (1,419)
Other long term liabilities (10) (5)
-------- --------
Net cash provided by operating activities 11,842 11,685
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Stanley Blacker Acquisition - -
Expenditures for property and equipment (864) (473)
-------- --------
Net cash used in investing activities (864) (473)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of options/Issuance of stock 132 25
-------- --------
Purchase of treasury shares (126) -
-------- --------
Net cash provided by financing activities 6 25
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,984 11,237
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,386 19,197
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,370 $ 30,434
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ - $ -
======== ========
Income taxes paid (refunds received) $ 10 $ -
======== ========
See Notes to Condensed Consolidated Financial Statements
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SYMS CORP AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13 WEEKS ENDED MAY 29, 2004 AND MAY 31, 2003
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 39 "off-price" retail clothing
stores located throughout the United States in the Northeastern and Middle
Atlantic regions and in the Midwest, Southeast and Southwest. Each Syms store
offers a broad range of first quality, in season merchandise bearing nationally
recognized designer or brand-name labels for men, women and children.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 13-week period ended May 29, 2004 is
not necessarily indicative of the results that may be expected for the entire
fiscal year ending February 26, 2005. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended February 28,
2004.
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 was comprised of 52 weeks. The fiscal year
ended February 26, 2005 will be 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 an unsecured revolving credit
agreement with a bank for a line of credit not to exceed $20,000,000 through
April 30, 2005. The unsecured revolving credit agreement replaced the Company's
prior unsecured revolving credit agreement which expired by its terms. Under the
new credit agreement, interest on individual advances is payable quarterly at
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 other alternative calculation,
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 .5 of 1% per annum. As of May
29, 2004 and February 28, 2004, there were no outstanding borrowings under this
new agreement and as of May 31, 2003, there were no outstanding borrowings under
the prior credit agreement. At May 29, 2004 and February 28, 2004, the Company
had $3,902,000 and $2,597,000 respectively, in outstanding letters of credit
under this new agreement. The prior credit agreement did not provide for the
issuance of letters of credit.
The 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 covenants
as of May 29, 2004.
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SYMS CORP AND SUBSIDIARIES
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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 canceled at any time by either party. At May
29, 2004, February 28, 2004 and May 31, 2003, the Company had $0, $0 and
$4,462,000, respectively, in outstanding letters of credit. The Company is not
currently utilizing this facility.
NOTE 6 - NET INCOME/(LOSS) PER SHARE
In accordance with SFAS 128, basic net income/(loss) per share has been
computed based upon the weighted average of the common shares outstanding.
Diluted net income/(loss) per share gives effect to outstanding stock options.
Net income (loss) per share has been computed as follows:
13 WEEKS ENDED
--------------
MAY 29, MAY 31,
2004 2003
---- ----
Basic net income/(loss) per
share:
Net income/(loss) $ 4 $ (1,749)
Average shares 15,103 15,439
outstanding
Basic net income (loss) per share $ - $ (0.11)
Diluted net income per share:
Net income/(loss) $ 4 $ (1,749)
Average shares 15,103 15,439
outstanding
Stock - --
options
Total average equivalent 15,103 15,439
shares
Diluted net income/(loss) per share $ - $ (0.11)
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 859,000 and 977,000 shares of common stock at prices
ranging from $5.63 to $10.69 per share were outstanding as of May 29, 2004 and
May 31, 2003, respectively, but were not included in the computation of diluted
net income per share because they would have been antidilutive.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46").
The objective of this interpretation is to provide guidance on how to identify a
variable interest entity ("VIE") and determine when the assets, liabilities,
non-controlling interests, and results of operations of a VIE need to be
included in a company's consolidated financial statements. A company that holds
variable interests in an entity will need to consolidate the entity if the
company's interest in the VIE is such that the company will absorb a majority of
the VIE's expected losses and/or receive a majority of the entity's expected
residual returns, if they occur. FIN 46 also requires additional disclosures by
primary beneficiaries and other significant variable interest holders. In
December 2003, the FASB completed deliberations of proposed modifications
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SYMS CORP AND SUBSIDIARIES
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to FIN 46 ("Revised Interpretations") resulting in multiple effective dates
based on the nature as well as the creation date of the VIE. VIE's created after
January 31, 2003, but prior to January 1, 2004, may be accounted for either
based on the original interpretation or the Revised Interpretations. However,
the Revised Interpretations must be applied no later than the Company's first
quarter of fiscal 2004. VIE's created after January 1, 2004 must be accounted
for under the Revised Interpretations. Special Purpose Entities ("SPE's")
created prior to February 1, 2003 may be accounted for under the original or
revised interpretation's provisions no later than the Company's first quarter of
fiscal 2004. Non-SPE's created prior to February 1, 2003, should be accounted
for under the revised interpretation's provisions no later than the Company's
first quarter of fiscal 2004. The Company has not entered into any material
arrangements with VIE's created after January 31, 2003. The Company has
determined that the adoption of FIN 46 did not have a material effect on its
results of operations and financial condition.
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 first quarter
of fiscal 2004 or of fiscal 2003. 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
--------------
5/29/04 5/31/03
------- -------
Net income/(loss): 4 ($1,749)
Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects - ($7)
------- ----
Pro forma net income/(loss) 4 ($1,756)
======= =======
Earnings (loss) per share:
Basic, as reported - ($0.11)
Basic, pro forma - ($0.11)
Diluted, as reported - ($0.11)
Diluted, pro forma - ($0.11)
This pro forma information may not be representative of the amounts to
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.
6
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SYMS CORP AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The 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 (within the meaning of Sections
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934) 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 herein 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 ESTIMATE
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 fiscal year ended February 28, 2004. 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
7
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SYMS CORP AND SUBSIDIARIES
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application of FIFO provides an inventory valuation which reasonably
approximates cost using a first-in, first-out assumption and results in a
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.
SELF-INSURANCE ACCRUALS - The Company had been self-insured for workers'
compensation liability claims. The Company is responsible for the payment of
claims from prior years. In estimating the obligation associated with incurred
losses, the Company utilizes loss development factors. These development factors
utilize historical data to project incurred losses. Loss estimates are adjusted
based upon actual claims settlements and reported claims.
RESULTS OF OPERATIONS
13 WEEKS ENDED MAY 29, 2004 COMPARED TO 13 WEEKS ENDED MAY 31, 2003
Net sales for the 13 weeks ended May 29, 2004 were $68,321,000, an increase of
$4,787,000 (7.5%) as compared to net sales of $63,534,000 for the 13 weeks ended
May 31, 2003. The increases were primarily due to sales increases in
haberdashery, women's apparel, shoes and tailored clothing.
Gross profit for the 13 weeks ended May 29, 2004 was $28,156,000 (41.2% as a
percentage of net sales), an increase of $2,242,000 as compared to gross profit
of $25,914,000 (40.8% as a percentage of net sales) for the fiscal period ended
May 31, 2003. This increase in gross profit during this period is largely
attributable to higher sales and lower markdowns compared to the comparable
period a year ago.
Selling, general and administrative expense decreased $516,000 to $18,653,000
(27.3% as a percentage of net sales) for the 13 weeks ended May 29, 2004, as
compared to $19,169,000 (30.2% as a percentage of net sales) for the 13 weeks
ended May 31, 2003. The decrease in expenses in existing stores is largely due
to lower payrolls which was partially offset by higher pension expense.
Advertising expense for the 13 weeks ended May 29, 2004 was $2,744,000 (4.0% as
a percentage of net sales) for the 13 weeks ended May 29, 2004 as compared to
$2,380,000 (3.8% as a percentage of net sales) for the 13 weeks ended May 31,
2003.
Occupancy costs were $4,219,000 (6.2% as a percentage of net sales) for the
13-week period ended May 29, 2004 as compared to $4,164,000 (6.6% as a
percentage of net sales) for the 13 weeks ended May 31, 2003.
8
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SYMS CORP AND SUBSIDIARIES
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Depreciation and amortization amounted to $2,609,000 (3.8% as a percentage of
net sales) for the 13 weeks ended May 29, 2004 as compared to $2,623,000 (4.1%
as a percentage of net sales) for the 13 weeks ended May 31, 2003.
Net income before taxes for the 13 weeks ended May 29, 2004 was $7,000 as
compared to a net loss before income taxes of $2,300,000 for the 13 weeks ended
May 31, 2003. The net profit for this period resulted principally from higher
sales, improved gross profit margins and lower expenses as compared to the same
period last year.
For the 13-week period ended May 29, 2004, the effective income tax rate was 43%
compared to 24% for the period ended May 31, 2003. The fluctuation on the
effective income tax rate is due to the non-deductibility of officer's life
insurance premiums.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of May 29, 2004 was $77,126,000, an increase of $1,157,000,
as compared to $75,969,000 as of May 31, 2003. The ratio of current assets to
current liabilities was 2.42 to 1 as compared to 2.46 to 1 as of May 31, 2003.
Net cash provided by operating activities totaled $11,842,000 for the 13 weeks
ended May 29, 2004, an increase of $157,000 as compared to $11,685,000 for the
13 weeks ended May 31, 2003. Net cash used in investing activities was $864,000
for the 13 weeks ended May 29, 2004, as compared to $473,000 for the 13 weeks
ended May 31, 2003. Expenditures for property and equipment totaled $864,000 and
$473,000 for the 13 weeks ended May 29, 2004 and May 31, 2003, respectively.
Net cash provided by financing activities was $6,000 for the 13 weeks ended May
29, 2004, as compared to $25,000 for the 13 weeks ended May 31, 2003.
On November 5, 2003 the Company entered into an unsecured revolving credit
agreement with a bank for a line of credit not to exceed $20,000,000 through
April 30, 2005. This unsecured revolving credit agreement replaced the Company's
prior unsecured revolving credit agreement which expired by its terms. Under the
new agreement, interest on individual advances is payable quarterly at 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 other alternative calculation, 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 .5 of 1% per annum. As of May
29, 2004 and February 28, 2004, there were no outstanding borrowings under this
new agreement and as of May 31, 2003, there were no outstanding borrowings under
the prior agreement. At May 29, 2004 and February 28, 2004, the Company had
$3,902,000 and $2,597,000 respectively, in outstanding letters of credit under
this new agreement. The prior credit agreement did not provide for the issuance
of letters of credit.
The 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 covenants
as of May 29, 2004.
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 canceled at any time by either party. At May
29, 2004, February 28, 2004 and May 31, 2003, the Company had $0, $0 and
$4,462,000, respectively, in outstanding letters of credit. The Company is not
currently utilizing this facility.
9
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SYMS CORP AND SUBSIDIARIES
----------------------------
The Company has planned capital expenditures of approximately $5,000,000 for the
fiscal year ending February 26, 2005. Through the 13 week period ended May 29,
2004, the Company incurred $864,000 of capital expenditures.
On April 22, 2004, the Company's Board of Directors approved the repurchase by
the Company through June 7, 2006 of up to an additional 3,100,000 shares of
common stock at prevailing market prices. All shares repurchased will be held as
treasury stock. Under prior authorization, the Company repurchased during the 13
week period ended May 29, 2004, 16,100 shares of common stock at a total cost of
$126,002, and during the year ended February 28, 2004, 366,300 shares of common
stock representing 2.4% of its outstanding shares, at a total cost of
$2,438,000.
Management believes that existing cash, internally generated funds, trade credit
and funds available from the revolving credit agreement will be sufficient for
working capital and capital expenditure requirements for the fiscal year ending
February 26, 2005.
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
See Note 7 of the Consolidated Financial Statements for a full description of
the Recent Accounting Pronouncements including the respective dates of adoption
and the effects on Results of Operation and Financial Condition.
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.
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 Company's most recent completed fiscal quarter that
have materially affected, or are reasonably likely to materially affect the
Company's internal control over financial reporting.
10
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SYMS CORP AND SUBSIDIARIES
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - None
Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES
OF EQUITY SECURITIES
Issuer Purchases of Equity Securities
- ----------------------- --------------------- -------------------- --------------------- --------------------
PERIOD TOTAL NUMBER OF AVERAGE PRICE PAID TOTAL NUMBER OF MAXIMUM NUMBER OF
SHARES PURCHASED PER SHARE SHARES PURCHASED AS SHARES THAT MAY
PART OF PUBLICLY YET BE PURCHASED
ANNOUNCED PLANS OR UNDER THE PLANS OR
PROGRAMS PROGRAMS (1) (2)
- ----------------------- --------------------- -------------------- --------------------- --------------------
February 29, 2004 - 0 0 0 0
April 3, 2004
- ----------------------- --------------------- -------------------- --------------------- --------------------
April 3, 2004 - 3,100 7.90 3,100 2,469,600
May 1, 2004
- ----------------------- --------------------- -------------------- --------------------- --------------------
May 2, 2004 - 13,000 7.81 13,000 2,456,600
May 29, 2004
- ----------------------- --------------------- -------------------- --------------------- --------------------
Total 16,100 7.83 16,100 2,456,600
- ----------------------- --------------------- -------------------- --------------------- --------------------
(1) 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. The shares repurchased
pursuant to this authorization are represented in this chart.
(2) On April 22, 2004, the Company's Board of Directors approved the repurchase
of up to an additional 3,100,000 shares of common stock at prevailing market
prices through June 7, 2006. All shares repurchased will be held as treasury
stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
Item 5. OTHER INFORMATION - None
11
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SYMS CORP AND SUBSIDIARIES
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this Form 10-Q
31.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities and Exchange Act
of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities and Exchange Act
of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(b) under the Securities and Exchange Act
of 1934, and 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
Rule 13a-14(b) under the Securities and Exchange Act
of 1934, and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) Reports on Form 8-K
On April 23, 2004, 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 and year ended February
28, 2004.
12
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SYMS CORP AND SUBSIDIARIES
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYMS CORP
DATE: July 8, 2004 BY /s/ MARCY SYMS
--------------
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: July 8, 2004 BY /s/ ANTONE F. MOREIRA
---------------------
ANTONE F. MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(Principal Financial and Accounting Officer)
13