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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 AUGUST 28, 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 October 1, 2004, the latest practicable date, there were 15,177,403 shares
outstanding of Common Stock, par value $0.05 per share.
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SYMS CORP AND SUBSIDIARIES
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INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
August 28, 2004, February 28, 2004 and August 30, 2003 1
Condensed Consolidated Statements of Operations for the
13 Weeks and 26 Weeks Ended August 28, 2004 and August 30, 2003 2
Condensed Consolidated Statements of Cash Flows for the
26 Weeks Ended August 28, 2004 and August 30, 2003 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition 7-10
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Disclosure Controls and Procedures 10-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11-12
Item 5. Other Information 12
Item 6. Exhibits 12
SIGNATURES 13
----------------------------
SYMS CORP AND SUBSIDIARIES
----------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
AUGUST 28, FEBRUARY 28, AUGUST 30,
2004 2004 2003
------------- ------------- -------------
(UNAUDITED) (NOTE) (UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents $ 21,451 $ 21,386 $ 19,828
Merchandise inventories 80,153 69,226 87,061
Deferred income taxes 3,627 3,627 4,143
Assets held for sale 2,376 4,495 --
Prepaid expenses and other current assets 6,607 6,173 6,588
--------- --------- ---------
TOTAL CURRENT ASSETS 114,214 104,907 117,620
--------- --------- ---------
PROPERTY AND EQUIPMENT - Net 120,831 123,757 131,056
DEFERRED INCOME TAXES 11,094 11,094 9,397
OTHER ASSETS 14,867 13,980 12,977
--------- --------- ---------
TOTAL ASSETS $ 261,006 $ 253,738 $ 271,050
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 28,676 $ 16,154 $ 31,506
Accrued expenses 6,232 7,714 9,877
Accrued insurance 840 1,264 1,708
Obligations to customers 3,540 3,570 3,250
--------- --------- ---------
TOTAL CURRENT LIABILITIES 39,288 28,702 46,341
--------- --------- ---------
OTHER LONG TERM LIABILITIES 1,838 1,862 1,881
--------- --------- ---------
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; 15,177 shares outstanding (net of 2,895 treasury shares)
on August 28, 2004; 15,092 shares outstanding as of February 28,
2004 (net of 2,879 treasury shares) and 15,034 shares outstanding
(net of 2,650 treasury shares) on August 30, 2003 759 755 765
Additional paid-in capital 14,794 14,239 14,121
Treasury stock (24,118) (23,993) (22,487)
Retained earnings 228,445 232,173 230,429
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 219,880 223,174 222,828
--------- --------- ---------
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 26 WEEKS ENDED
-------------- --------------
AUGUST 28, AUGUST 30, AUGUST 28, AUGUST 30,
2004 2003 2004 2003
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales $ 61,254 $ 62,102 $ 129,575 $ 125,636
Cost of goods sold 37,985 39,996 78,150 77,616
--------- --------- --------- ---------
Gross profit 23,269 22,106 51,425 48,020
Expenses:
Selling, general and administrative 19,306 19,706 37,959 38,875
Advertising 898 1,421 3,642 3,801
Occupancy 4,611 4,456 8,830 8,620
Depreciation and amortization 2,416 2,784 5,025 5,407
Loss on sale of building 1,271 -- 1,271 --
--------- --------- --------- ---------
Loss from operations (5,233) (6,261) (5,302) (8,683)
Other income (7) (68) (29) (178)
Interest income (76) (31) (130) (43)
--------- --------- --------- ---------
Loss before income taxes (5,150) (6,162) (5,143) (8,462)
Provision benefit for income taxes (1,418) (1,479) (1,415) (2,030)
--------- --------- --------- ---------
Net loss $ (3,732) $ (4,683) $ (3,728) $ (6,432)
========= ========= ========= =========
Net loss per share-basic $ (0.25) $ (0.30) $ (0.25) $ (0.42)
========= ========= ========= =========
Weighted average shares outstanding-basic 15,124 15,412 15,124 15,412
========= ========= ========= =========
Net loss per share-diluted $ (0.25) $ (0.30) $ (0.25) $ (0.42)
========= ========= ========= =========
Weighted average shares outstanding-diluted 15,124 15,412 15,124 15,412
========= ========= ========= =========
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)
26 WEEKS ENDED
--------------
AUGUST 28, AUGUST 30,
2004 2003
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,728) $ (6,432)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 5,025 5,407
Loss on sale of building 1,271 440
Loss on disposal of assets 126 --
(Increase) decrease in operating assets:
Merchandise inventories (10,927) (8,910)
Prepaid expenses and other current assets (434) (308)
Other assets (894) (3,132)
Increase (decrease) of operating liabilities:
Accounts payable 12,522 18,867
Accrued expenses (1,906) (2,853)
Obligations to customers (30) (102)
Other long term liabilities (24) (10)
-------- --------
Net cash provided by operating activities 1,001 2,967
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (1,466) (1,443)
Proceeds from sale of building 96 --
-------- --------
Net cash used in investing activities (1,370) (1,443)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of options 560 22
Stock repurchase (126) (915)
-------- --------
Net cash provided by (used in) financing activities 434 (893)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 65 631
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,386 19,197
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,451 $ 19,828
======== ========
See Notes to Condensed Consolidated Financial Statements
3
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SYMS CORP AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13 AND 26 WEEKS ENDED AUGUST 28, 2004 AND AUGUST 30, 2003
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 38 "off-price" retail clothing
stores located throughout the United States in 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 and 26 week periods ended
August 28, 2004 are 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 26, 2005 will be comprised of 52 weeks. The fiscal
year ended February 28, 2004 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 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 0.5 of 1% per annum. As of
August 28, 2004 and February 28, 2004, there were no outstanding borrowings
under this new agreement and as of August 30, 2003, there were no outstanding
borrowings under the prior credit agreement. At August 28, 2004 and February 28,
2004, the Company had $1,676,000 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 August 28, 2004.
4
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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
August 28, 2004, February 28, 2004 and August 30, 2003, the Company had $0, $0
and $3,321,000, 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 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 26 WEEKS ENDED
----------------------------------- ----------------------------------
AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 28, 2004 AUGUST 30, 2003
--------------- --------------- --------------- ---------------
BASIC NET LOSS PER SHARE:
Net loss ...................... $ (3,732) $ (4,683) $ (3,728) $ (6,432)
Average shares outstanding .... 15,124 15,412 15,124 15,412
Basic net loss per share ...... $ (0.25) $ (0.30) $ (0.25) $ (0.42)
DILUTED NET LOSS PER SHARE:
Net loss ...................... $ (3,732) $ (4,683) $ (3,728) $ (6,432)
Average shares outstanding .... 15,124 15,412 15,124 15,412
Stock options ................. -- -- -- --
Total average equivalent
shares ........................ 15,124 15,412 15,124 15,412
Diluted net loss per share .... $ (0.25) $ (0.30) $ (0.25) $ (0.42)
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 781,850 and 920,875 shares of common stock at prices ranging
from $5.63 to $10.69 per share were outstanding as of August 28, 2004 and August
30, 2003, respectively, but were not included in the computation of diluted net
income per share because the exercise price of the options exceed the average
market price and would have been anti-dilutive.
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 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
5
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SYMS CORP AND SUBSIDIARIES
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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 FASB 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 twenty six weeks ended August 28, 2004 and August 30, 2003,
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 26 WEEKS ENDED
-------------- --------------
8/28/04 8/30/03 8/28/04 8/30/03
------- ------- ------- -------
Net income/(loss): ($3,732) ($4,683) ($3,728) ($6,432)
Total stock-based employee compensation expense
determined under fair value based
method for all awards, net of related tax effects $ -- ($7) $ -- ($14)
---- ---- ---- -----
Pro forma net income/(loss) ($3,732) ($4,690) ($3,728) ($6,446)
======== ======== ======== ========
Earnings (loss) per share:
Basic, as reported ($.25) ($.30) ($.25) ($0.42)
Basic, pro forma ($.25) ($.30) ($.25) ($0.42)
Diluted, as reported ($.25) ($.30) ($.25) ($0.42)
Diluted, pro forma ($.25) ($.30) ($.25) ($0.42)
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.
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 Section
27A of the Securities Act of 1933 and Section 21E of the Securities and 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 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 application of FIFO provides an inventory valuation which
reasonably approximates cost using a first-in,
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SYMS CORP AND SUBSIDIARIES
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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 AND 26 WEEKS ENDED AUGUST 28, 2004 COMPARED TO 13 AND 26 WEEKS ENDED
AUGUST 30, 2003
Net sales for the 13 weeks ended August 28, 2004 were $61,254,000, a decrease of
$848,000 (1.4%) as compared to net sales of $62,102,000 for the 13 weeks ended
August 30, 2003. For the 26 weeks ended August 28, 2004, net sales increased
$3,939,000 (3.1%) to $129,575,000 as compared to net sales of $125,636,000 for
the 26 weeks ended August 30, 2003. Comparable store sales increased 0.2% for
the 13 weeks ended August 28, 2004 and 3.7% for the 26 weeks ended August 28,
2004, as compared to the comparable periods in the prior fiscal year. Our "Bash"
sales promotion, which took place in August 2004, had seven less selling days in
this fiscal quarter than during the promotion in the same period last fiscal
year. Sales during such promotion were $3,500,000 less than sales during the
promotion in the same period last fiscal year, contributing to the decrease in
net sales for the 13 weeks ended August 28, 2004.
Gross profit for the 13 weeks ended August 28, 2004 was $23,269,000 (38.0% as a
percentage of net sales), an increase of $1,163,000 as compared to $22,106,000
(35.6% as a percentage of net sales) for the 13 weeks ended August 30, 2003.
Gross profit for the 26 weeks ended August 28, 2004 was $51,425,000 (39.7% as a
percentage of net sales), an increase of $3,405,000 as compared to $48,020,000
(38.2% as a percentage of net sales) for the 26 weeks ended August 30, 2003. The
increase in gross profit in the 13 and 26 week periods is largely due to fewer
markdowns on merchandise sold as compared to the same periods in the prior
fiscal year.
Selling, general and administrative expense decreased $438,000 to $19,268,000
(31.5% as a percentage of net sales) for the 13 weeks ended August 28, 2004 as
compared to $19,706,000 (31.7% as a percentage of net sales) for the 13 weeks
ended August 30, 2003. Selling, general and administrative expense decreased
$954,000 to $37,921,000 (29.3% as a percentage of net sales) for the 26 weeks
ended August 28, 2004 as compared to $38,875,000 (30.9% as a percentage of net
sales) for the 26 weeks ended August 30, 2003. The reduced expenditures in
existing locations and the closing of the Baltimore and Charlotte stores
contributed to the reduction in selling, general and administrative expenses in
the 13 and 26 weeks ended August 28, 2004.
8
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SYMS CORP AND SUBSIDIARIES
----------------------------
Advertising expense for the 13 weeks ended August 28, 2004 was $898,000 (1.5% as
a percentage of net sales) as compared to $1,421,000 (2.3% as a percentage of
net sales) for the 13 week period ended August 30, 2003. Advertising expense for
the 26 weeks ended August 28, 2004 was $3,642,000 (2.8% as a percentage of net
sales as compared to $3,801,000 (3.0% as a percentage of net sales) in the 26
weeks ended August 30, 2003.
Occupancy costs were $4,611,000 (7.5% as a percentage of net sales) for the 13
weeks ended August 28, 2004 as compared to $4,456,000 (7.2% as a percentage of
net sales) for the 13 weeks ended August 30, 2003. Occupancy costs were
$8,830,000 (6.8% as a percentage of net sales) for the 26 weeks ended August 28,
2004 compared to $8,620,000 (6.9% as a percentage of net sales) for the 26 week
period ended August 30, 2003. The increased expenditures of utilities and real
estate taxes in existing stores accounts for this increase in both the 13 and 26
week periods as compared to the comparable periods a year ago.
Depreciation and amortization was $2,416,000 (3.9% as a percentage of net sales)
for the 13 weeks ended August 28, 2004 as compared to $2,784,000 (4.5% as a
percentage of net sales) for the 13 weeks ended August 30, 2003. Depreciation
and amortization for the 26 weeks ended August 28, 2004 was $5,025,000 (3.9% as
a percentage of net sales) as compared to $5,407,000 (4.3% as a percentage of
net sales) for the 26 weeks ended August 30, 2003.
The results for the 13 weeks ended August 28, 2004 reflect a $1,271,000 charge
resulting from the exercise by the Company of its option to purchase the
Lawrenceville store and the simultaneous sale of the Lawrenceville store. Such
store will be closed on October 16, 2004. This action was taken by the Company
as part of its continuing efforts to improve profitability.
The loss before income taxes for the 13 weeks ended August 28, 2004 was
$5,150,000, a decrease of $1,012,000 as compared to a loss of $6,162,000 for the
13 weeks ended August 30, 2003. The loss before income taxes for the 26 weeks
ended August 28, 2004 was $5,143,000 as compared to a loss before income taxes
of $8,462,000 for the 26 weeks ended August 30, 2003. This reduction in loss
before income taxes for the 13 and 26 week periods as compared to the previous
fiscal year resulted principally from improved gross profit margins and lower
expenses.
For the 26 week period ended August 28, 2004, the effective income tax rate was
27.5% as compared to 24.0% for the comparable period a year ago. Included in the
13 weeks ended August 28, 2004 was a tax refund from the State of Maryland for
approximately $1,400,000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of August 28, 2004 was $74,926,000, an increase of $3,647,000
as compared to $71,279,000 as of August 30, 2003. The ratio of current assets to
current liabilities was 2.91 to 1 as of August 28, 2004 as compared to 2.54 to 1
as of August 30, 2003.
Net cash provided by operating activities totaled $1,001,000 for the 26 weeks
ended August 28, 2004, as compared to $2,967,000 for the 26 weeks ended August
30, 2003.
Net cash used in investing activities was $1,370,000 for the 26 weeks ended
August 28, 2004, as compared to $1,443,000 for the 26 weeks ended August 30,
2003. Expenditures for property and equipment were $1,466,000 and $1,443,000 for
the 26 weeks ended August 28, 2004 and August 30, 2003, respectively.
Net cash provided by financing activities was $434,000 for the 26 weeks ended
August 28, 2004, as compared to net cash used in financing activities of
$893,000 for the 26 weeks ended August 30, 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. 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
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SYMS CORP AND SUBSIDIARIES
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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 0.5
of 1% per annum. As of August 28, 2004 and February 28, 2004, there were no
outstanding borrowings under this new agreement and as of August 30, 2003, there
were no outstanding borrowings under the prior credit agreement. At August 28,
2004 and February 28, 2004, the Company had $1,676,000 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 August 28, 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
August 28, 2004, February 28, 2004 and August 30, 2003, the Company had $0, $0
and $3,321,000, respectively, in outstanding letters of credit. The Company is
not currently utilizing this facility.
The Company has planned capital expenditures of approximately $5,000,000 for the
fiscal year ending February 26, 2005. Through the 26 week period ended August
28, 2004, the Company has incurred $1,466,000 of capital expenditures.
On April 22, 2004, the Company's Board of Directors approved the repurchase of
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. The Company did not make any repurchases during the 13 week period
ended August 28, 2004 of shares of common stock.
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
(a) Evaluation of Disclosure Controls and Procedures
Based on the evaluation of the Company's disclosure controls and procedures as
of the end of the period
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SYMS CORP AND SUBSIDIARIES
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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, has 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 (the "Exchange Act"), 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.
(b) 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 recently completed fiscal quarter 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. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS -
None
Item 3. DEFAULTS UPON SENIOR SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on July 15, 2004, the Company's
shareholders holding a majority of the shares of the Common Stock outstanding as
of the close of business on June 11, 2004, voted to approve each of the two
proposals included in the Company's proxy statement as follows:
To elect six directors to hold office for one year or until their respective
successors are duly elected and qualified.
FOR WITHHELD
--- --------
Sy Syms 13,096,825 1,016,175
Marcy Syms 13,096,925 1,016,175
Antone F. Moreira 11,853,543 2,259,457
Harvey A. Weinberg 13,853,657 259,343
Wilbur L. Ross, Jr. 13,853,657 259,343
Amber A. Brookman 13,853,657 259,343
To ratify the appointment of BDO Seidman, LLP as independent accountants of the
Company for the fiscal year ending February 26, 2005:
For: 14,007,206
Against: 102,170
Abstain: 3,624
Item 5. OTHER INFORMATION - None
Item 6. EXHIBITS
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SYMS CORP AND SUBSIDIARIES
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(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
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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: OCTOBER 7, 2004 BY /s/ Marcy Syms
-----------------------------------
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: OCTOBER 7, 2004 BY /s/ Antone F. Moreira
-----------------------------------
ANTONE F. MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(Principal Financial and Accounting
Officer)
13