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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 NOVEMBER 27, 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 December 30 , 2004 the latest practicable date, there were
15,151,003 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
November 27, 2004, February 28, 2004 and November 29, 2003 1
Condensed Consolidated Statements of Operations for the
13 Weeks and 39 Weeks Ended November 27, 2004 and
November 29, 2003 2
Condensed Consolidated Statements of Cash Flows for the
39 Weeks Ended November 27, 2004 and November 29, 2003 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Unregistered Sales 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
Item 5. Other Information 11
Item 6. Exhibits 11-12
SIGNATURES 13
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
NOVEMBER 27, FEBRUARY 28, NOVEMBER 29,
2004 2004 (1) 2003
----------- ----------- -----------
(UNAUDITED) (SEE NOTE) (UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,311 $ 21,386 $ 25,633
Merchandise inventories 89,883 69,226 97,002
Deferred income taxes 3,627 3,627 4,143
Assets held for sale -- 4,495 --
Prepaid expenses and other current assets 9,788 6,173 7,529
--------- --------- ---------
TOTAL CURRENT ASSETS 136,609 104,907 134,307
--------- --------- ---------
PROPERTY AND EQUIPMENT - Net 119,172 123,757 128,848
DEFERRED INCOME TAXES 11,094 11,094 9,397
OTHER ASSETS 15,373 13,980 13,282
--------- --------- ---------
TOTAL ASSETS $ 282,248 $ 253,738 $ 285,834
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43,064 $ 16,154 $ 43,809
Accrued expenses 11,410 7,714 12,532
Accrued insurance 707 1,264 1,506
Obligations to customers 3,745 3,570 3,417
--------- --------- ---------
TOTAL CURRENT LIABILITIES 58,926 28,702 61,264
--------- --------- ---------
OTHER LONG TERM LIABILITIES 1,712 1,862 1,872
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;
15,176 shares (net of 2,954 treasury shares) outstanding on
November 27, 2004, 15,092 shares outstanding (net of 2,879 treasury
shares) as of February 28, 2004 and 15,127 shares outstanding
(net of 2,829 treasury shares outstanding as of November 29, 2003 763 755 756
Additional paid-in capital 15,128 14,239 14,135
Treasury stock (24,744) (23,993) (23,646)
Retained earnings 230,463 232,173 231,453
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 221,610 223,174 222,698
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 282,248 $ 253,738 $ 285,834
========= ========= =========
(1) 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 accounting principles generally
accepted in the United States of America 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 39 WEEKS ENDED
-------------------------- --------------------------
NOVEMBER 27, NOVEMBER 29, NOVEMBER 27, NOVEMBER 29,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales $ 75,980 $ 74,345 $ 205,555 $ 199,981
Cost of goods sold 45,906 42,960 124,056 120,576
--------- --------- --------- ---------
Gross profit 30,074 31,385 81,499 79,405
Expenses:
Selling, general and administrative 18,367 18,592 56,326 57,467
Advertising 3,269 3,810 6,911 7,611
Occupancy 4,165 4,390 12,995 13,010
Depreciation and amortization 2,291 2,782 7,316 8,189
(Gain) loss on sale of assets (721) -- 550 --
--------- --------- --------- ---------
Income (loss) from operations 2,703 1,811 (2,599) (6,872)
Other income (17) (81) (46) (259)
Interest (income) expense - net (98) 64 (228) 21
--------- --------- --------- ---------
Income (loss) before income taxes 2,818 1,828 (2,325) (6,634)
Provision (benefit) for income taxes 800 804 (615) (1,226)
--------- --------- --------- ---------
Net income (loss) $ 2,018 $ 1,024 $ (1,710) $ (5,408)
========= ========= ========= =========
Net income (loss) per share - basic $ 0.13 $ 0.07 $ (0.11) $ (0.35)
========= ========= ========= =========
Weighted average shares outstanding - basic 15,175 15,201 15,141 15,285
========= ========= ========= =========
Net income (loss) per share - diluted $ 0.13 $ 0.06 $ (0.11) $ (0.35)
========= ========= ========= =========
Weighted average shares outstanding - diluted 15,898 15,795 15,141 15,285
========= ========= ========= =========
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)
39 WEEKS ENDED
---------------------------
NOVEMBER 27, NOVEMBER 29,
2004 2003
----------- -----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,710) $ (5,408)
-------- --------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 7,316 8,189
(Gain) loss on sale of assets 703 --
Writeoff and impairment of property and equipment -- 457
(Increase) decrease in operating assets:
Merchandising inventories (20,657) (18,851)
Prepaid expenses and other current assets (3,615) (1,249)
Other assets (1,393) (3,437)
Increase (decrease) in operating liabilities:
Accounts payable 26,910 31,170
Accrued expenses 3,139 (400)
Obligations to customers 175 65
Other long term liabilities (150) (19)
-------- --------
Net cash provided by operating activities 10,718 10,517
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of land 3,098 --
Expenditures for property and equipment (2,133) (2,034)
Proceeds from sale of building 96 --
-------- --------
Net cash (used in) provided by
investing activities 1,061 (2,034)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 897 27
Stock repurchase (751) (2,074)
-------- --------
Net cash (used in) provided by
financing activities 146 (2,047)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,925 6,436
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,386 19,197
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 33,311 $ 25,633
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 40 $ 270
======== ========
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 39 WEEKS ENDED NOVEMBER 27, 2004 AND NOVEMBER 29, 2003
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 37 "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 and 39 week periods ended November
27, 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 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. Under the new agreement, interest on individual advances 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 27,
2004 and November 29, 2003, the Company had no outstanding borrowings under the
new revolving credit agreement. At November 27, 2004 and February 28, 2004, the
Company had $622,000 and $2,597,000, respectively, in outstanding letters of
credit under this agreement.
This 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 27, 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 cancelled at any time by either party. At
November 27, 2004, February 28, 2004 and November 29, 2003, the Company had $0,
$0 and $2,869,760, respectively, in outstanding letters of credit.
4
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SYMS CORP AND SUBSIDIARIES
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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. 27, NOV. 29, NOV. 27, NOV. 29,
2004 2003 2004 2003
-------- -------- -------- --------
BASIC NET INCOME PER SHARE:
Net income (loss) ..................... $ 2,018 $ 1,024 $(1,710) $(5,408)
Average shares outstanding ............ 15,175 15,201 15,141 15,285
Basic net income (loss) per share ..... $ 0.13 $ 0.07 $ (0.11) $ (0.35)
DILUTED NET INCOME PER SHARE:
Net income (loss) ..................... $ 2,018 $ 1,024 $(1,710) $(5,408)
Average shares outstanding ............ 15,175 15,201 15,141 15,285
Stock options ......................... 723 594 0 0
Total average equivalent shares ...... 15,898 15,795 15,141 15,285
Diluted net income (loss) per share ... $ 0.13 $ 0.06 $ (0.11) $ (0.35)
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 723,450 and 911,525 shares of common stock at prices ranging
from $5.63 to $10.69 per share were outstanding as of November 27, 2004 and
November 29, 2003, respectively. For the 13 and 39 weeks ended November 27,
2004, all shares were included in the computation of diluted net income per
share. 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.
Comprehensive income is equivalent to the Company's net income or loss for the
13 and 39 weeks ended November 27, 2004 and November 29, 2003, respectively.
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 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.
5
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SYMS CORP AND SUBSIDIARIES
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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 27, 2004 and November 29, 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 39 WEEKS ENDED
------------------- --------------------
11/27/04 11/29/03 11/27/04 11/29/03
-------- -------- -------- --------
Net income/(loss): $ 2,018 $ 1,024 ($ 1,710) ($ 5,408)
Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of related
tax effects ($ 0 ) ( $13) ($ 0 ) ( $16)
-------- -------- -------- --------
Pro forma net income/(loss) $ 2,018 $ 1,011 ($ 1,710) ($ 5,424)
======== ======== ======== ========
Earnings (loss) per share:
Basic, as reported $ 0.13 $ .07 ($ 0.11) ($ 0.35)
Basic, pro forma $ .013 $ .07 ($ 0.11) ($ 0.35)
Diluted, as reported $ .013 $ .06 ($ 0.11) ($ 0.35)
Diluted, pro forma $ .013 $ .06 ($ 0.11) ($ 0.35)
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
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
6
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SYMS CORP AND SUBSIDIARIES
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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, 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 not likely 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 the Company's 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.
7
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SYMS CORP AND SUBSIDIARIES
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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 AND 39 WEEKS ENDED NOVEMBER 27, 2004 COMPARED TO 13 AND
39 WEEKS ENDED NOVEMBER 29, 2003
Net sales for the 13 weeks ended November 27, 2004 were $75,980,000, an increase
of $1,635,000 (2.2%), as compared to net sales of $74,345,000 for the 13 weeks
ended November 29, 2003. For the 39 weeks ended November 27, 2004, net sales
increased $5,574,000 (2.8%) to $205,555,000 as compared to net sales of
$199,981,000 for the 39 weeks ended November 29, 2003. Comparable store net
sales increased 5.1% for the 13 weeks ended November 27, 2004 and increased 4.2%
for the 39 weeks ended November 27, 2004, as compared to the comparable periods
in the prior fiscal year.
Gross profit for the 13 weeks ended November 27, 2004 was $30,074,000, a
decrease of $1,311,000 (39.6% as a percentage of total net sales) as compared to
$31,385,000 (42.2% as a percentage of total net sales) for the 13 weeks ended
November 29, 2003. Gross profit for the 39 weeks ended November 27, 2004 was
$81,499,000, an increase of $2,094,000 (39.7% as a percentage of total net
sales) as compared to $79,405,000 (39.7% as a percentage of total net sales) for
the 39 weeks ended November 29, 2003. The results for the third quarter were
impacted by additional markdowns on goods sold of approximately $2,000,000 in an
effort to clear out aged merchandise which was partially offset by a reduction
in the markdown reserve.
Selling, general and administrative expense was $18,367,000 (24.2% as a
percentage of total net sales) for the 13 weeks ended November 27, 2004, as
compared to $18,592,000 (25.0% as a percentage of total net sales) for the 13
weeks ended November 29, 2003. Selling, general and administrative expense
decreased $1,141,000 to $56,326,000 (27.4% as a percentage of total net sales)
for the 39 weeks ended November 27, 2004, as compared to $57,467,000 (28.7% as a
percentage of total net sales) for the 39 weeks ended November 29, 2003. The
reduced expenditures in existing locations and the closing of the Baltimore,
Charlotte and Lawrenceville stores contributed to the reduction in selling,
general and administrative expenses in the 13 and 39 weeks ended November 27,
2004.
Advertising expense for the 13 weeks ended November 27, 2004 was $3,269,000
(4.3% as a percentage of total net sales), as compared to $3,810,000 (5.1% as a
percentage of total net sales) in the 13 week period ended November 29, 2003.
Advertising expense for the 39 weeks ended November 27, 2004 was $6,911,000
(3.4% as a percentage of total net sales), as compared to $7,611,000 (3.8% as a
percentage of total net sales) in the 39 week period ended November 29, 2003.
Advertising expense decreased $541,000 for the 13 weeks ended November 27, 2004.
This decline is attributable to a decision to reduce the amount of radio and
television advertising in the third quarter of this year.
Occupancy costs were $4,165,000 (5.5% as a percentage of total net sales) for
the 13 week period ended November 27, 2004, as compared to $4,390,000 (5.9% as a
percentage of total net sales) for the 13 week period ended November 29, 2003.
Occupancy costs were $12,995,000 (6.3% as a percentage of total net sales) for
the 39 week period ended November 27, 2004 as compared to $13,010,000 (6.5% as a
percentage of total net sales) for the 39 week period ended November 29, 2003.
The decline in occupancy costs in the 13 and 39 week periods ending November 27,
2004 is largely attributable to the closing of, the Baltimore, Charlotte and
Lawrenceville stores which was partially offset by increased occupancy costs in
existing stores.
Depreciation and amortization was $2,291,000 (3.0% as a percentage of total net
sales) for the 13 week period ended November 27, 2004, as compared to $2,782,000
(3.7% as a percentage of total net sales) for the 13 weeks ended November 29,
2003. Depreciation and amortization for the 39 week period ended November 27,
2004 was $7,316,000 (3.6% as a percentage of total net sales), as compared to
$8,189,000 (4.1% as a percentage of total net sales) for the 39 weeks ended
November 29, 2003. The reduced expense for the 13 and 39 week periods is largely
attributable to the closing of three stores in fiscal 2004 and fully depreciated
assets.
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SYMS CORP AND SUBSIDIARIES
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In the 13 weeks ended November 27, 2004, the Company recorded a gain of $721,000
from the sale of land in Roseland, New Jersey. In the 39 weeks ended November
27, 2004, this third quarter gain was offset by a charge of $1,271,000 resulting
from the exercise by the company of its' option to purchase the Lawrenceville
store and the simultaneous sale of the Lawrenceville store (which was recorded
in the second quarter ended August 28, 2004), resulting in a net loss on the
sales of assets of $550,000. The Lawrenceville store was closed on October 16,
2004. This action was taken by the Company as part of its continued efforts to
improve profitability.
The net income before income taxes for the 13 weeks ended November 27, 2004 was
$2,818,000, an increase of $990,000 as compared to a net income of $1,828,000
for the 13 weeks ended November 29, 2004. The loss before income taxes for the
39 weeks ended November 27, 2004 was $2,325,000, as compared to a loss before
taxes of $6,634,000 for the 39 weeks ended November 29, 2003. This improvement
in profit performance in the 13 weeks and loss reduction in the 39 weeks ended
November 27, 2004 results mainly from higher sales, gross profit dollars and
lower expenses when compared to comparable periods in the fiscal year last year.
For the 39 week period ended November 27, 2004, the effective income tax rate
was 26.5%, as compared to 18.5% for the comparable period a year ago. Included
in the 39 weeks ended November 27, 2004 was a tax refund from the State of
Maryland for approximately $1,400,000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of November 27, 2004 was $77,683,000, an increase of
$4,640,000 as compared to $73,043,000 as of November 29, 2003. The ratio of
current assets to current liabilities was 2.32 to 1 as of November 27, 2004 as
compared to 2.19 to 1 as of November 29, 2003.
Net cash provided by operating activities totaled $10,718,000 for the 39 weeks
ended November 27, 2004, as compared to $10,517,000 for the 39 weeks ended
November 29, 2003.
Net cash provided by investment activities was $1,061,000 for the 39 weeks ended
November 27, 2004 as compared to net cash used in investing activities of
$2,034,000 for the 39 weeks ended November 29, 2003. Expenditures for property
and equipment were $2,133,000 and $2,034,000 for the 39 weeks ended November 27,
2004 and November 29, 2003, respectively.
Net cash provided by financing activities was $146,000 for the 39 weeks ended
November 27, 2004, as compared to net cash used in financing activities of
$2,047,000 for the 39 weeks ended November 29, 2003.
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. Under the new agreement, interest on individual advances 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 27,
2004 and November 29, 2003, the Company had no outstanding borrowings under the
new revolving credit agreement. At November 27, 2004 and February 28, 2004, the
Company had $622,000 and $2,597,000, respectively, in outstanding letters of
credit under this agreement.
This 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 27, 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 cancelled at any time by either
9
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SYMS CORP AND SUBSIDIARIES
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party. At November 27, 2004, February 28, 2004 and November 29, 2003, the
Company had $0, $0 and $2,869,760, respectively, in outstanding letters of
credit.
The Company has planned capital expenditures of approximately $5,000,000 for the
fiscal year ended February 26, 2005. Through the 39 week period ended November
27, 2004, the Company has incurred $2,133,000 of capital expenditures.
On April 22, 2004, the Company's Board of Directors approved the repurchase by
the Company through June 7, 2005 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 under the current approved purchase plan, an additional 59,400
shares of common stock was repurchased at a total cost of $625,358 for the
period ended November 27, 2004.
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 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 (the "Exchange Act"), 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 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.
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PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS - None
Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
- --------------------------------------------------------------------------------
PERIOD TOTAL NUMBER AVERAGE PRICE TOTAL NUMBER MAXIMUM NUMBER
OF SHARES PAID PER SHARE OF SHARES OF SHARES THAT
PURCHASED PURCHASED AS MAY YET BE
PART OF PURCHASED
PUBLICLY UNDER THE
ANNOUNCED PLANS OR
PLANS OR PROGRAMS (1)
PROGRAMS
- --------------------------------------------------------------------------------
August 29, 2004 - 0 0 0 0
October 2, 2004
- --------------------------------------------------------------------------------
October 3, 2004 - 30,500 10.33 30,500 3,069,500
October 30, 2004
- --------------------------------------------------------------------------------
October 31, 2004 - 28,900 10.73 28,900 3,040,600
November 27, 2004
- --------------------------------------------------------------------------------
Total 59,400 10.53 59,400 3,040,600
- --------------------------------------------------------------------------------
(1) 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
Item 6. EXHIBITS
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
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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
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: January 6, 2005 BY: /s/ Marcy Syms
------------------------------
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: January 6, 2005 BY: /s/ Antone F. Moreira
------------------------------
ANTONE F. MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
(Principal Financial and Accounting Officer)