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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 26, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 COMMISSION FILE NUMBER 1-8546
SYMS CORP
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(Exact name of registrant as specified in its charter)
NEW JERSEY NO. 22-2465228
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 902-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class which registered
------------------------------ -------------------------
Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates on May 8, 2000 was $31,815,672 based upon the closing price of
such stock on that date.
As of May 8, 2000 15,959,790 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the 2000 annual meeting of
stockholders to be filed pursuant to Regulation 14A are incorporated in Part III
hereof by reference.
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PART I
ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of 48 "off-price" retail stores located
throughout 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 at prices substantially lower than those generally found in department
and specialty stores. Syms directs its merchandising efforts at predominantly
middle-income, fashion-minded and price conscious customers.
Since the first Syms store opened in New York City in 1959, the Company has
expanded to 48 stores and the aggregate amount of selling space in the Syms
stores increased from approximately 2,000 square feet to approximately 1,844,000
square feet. In March 1987, the Company relocated to an approximately 277,000
square foot distribution center and executive headquarters.
The Company maintains its executive offices at Syms Way, Secaucus, New
Jersey 07094, telephone (201) 902-9600. Unless otherwise noted, references to
the "Company" or to "Syms" relate to Syms Corp, its subsidiaries and their
predecessors.
DESCRIPTION OF BUSINESS
The Syms chain of 48 apparel stores offers a broad range of "off-price"
first quality, in-season merchandise consisting primarily of men's tailored
clothing and haberdashery, women's dresses, suits and separates, children's
apparel and men's, women's and children's shoes. Syms stores emphasize better
quality, nationally recognized designer and brand name merchandise at prices
substantially below those generally charged by department and specialty stores.
Syms carries a wide selection of sizes and styles of men's, women's and
children's wear.
Syms operates in a single industry segment and has no foreign operations.
No material part of the Company's consolidated revenues is received from a
single customer or group of customers.
MERCHANDISE
For the year ended February 26, 2000 net sales were generated by the
following categories:
Men's tailored clothes and haberdashery.................... 54%
Women's dresses, suits, separates and accessories.......... 30%
Shoes...................................................... 7%
Children's wear............................................ 7%
Luggage, domestics and fragrances.......................... 2%
---
100%
===
Most of the items sold by the Company consist of nationally recognized
fashion name merchandise. Merchandise is displayed by type and size on
conveniently arranged racks or counters. No emphasis is placed on any particular
"label". The stores generally offer minor alterations for an additional charge.
PURCHASING
The Company purchases first-quality, in-season, brand-name merchandise
directly from manufacturers on terms more favorable than those generally
obtained by department and specialty stores. Syms estimates that approximately
200 brand-name manufacturers of apparel are represented in its stores. The
Company does not maintain large out-of-season inventories. However, Syms
occasionally buys certain basic clothing which does not change in style from
year to year at attractive prices for storage until the following season.
Purchasing is performed by a buying staff in conjunction with their General
Merchandise Manager and several other key divisional merchandise managers.
DISTRIBUTION
The Company owns a distribution center, located at Syms Way, Secaucus, New
Jersey. The facility contains approximately 277,000 square feet of warehouse and
distribution space, 34,000 square feet of office space and 29,000 square feet of
store space. The facility is located on an 18.6 acre parcel of land for which
the Company holds a ground lease for a remaining term of 276 years. Most
merchandise is received from manufacturers at the distribution center where it
is inspected, ticketed and allocated to particular stores.
1
MARKETING
The Company's pricing policy is to affix a ticket to each item displaying
Syms' selling price as well as the price the Company regards as the traditional
full retail price of that item at department or specialty stores. All garments
are sold with the brand-name as affixed by the manufacturer. Because women's
dresses are vulnerable to considerable style fluctuation, Syms has long utilized
a ten-day automatic markdown pricing policy to promote movement of merchandise.
The date of placement on the selling floor of each women's dress is stamped on
the back of the price ticket. The front of each ticket contains what the Company
believes to be the nationally advertised price, the initial Syms price and three
reduced prices. Each reduced price becomes effective after the passage of ten
selling days. Women's dresses represent approximately 4.5% of net sales. The
Company also offers "dividend " prices consisting of additional price reductions
on various types of merchandise.
Syms has as its tag line "An Educated Consumer is Our Best Customer"(R),
one of the best known in retail advertising. The Company historically has
advertised principally on television and radio. In the Fall of 1994, the Company
revised its strategy and began to enhance its advertising by including print
media as well as direct mail to its Syms credit card customer base.
The Company sells its merchandise for cash, checks, national credit cards,
and its own Syms credit card. Syms sells its own credit card receivables on a
non-recourse basis to a third party for a fee. Merchandise purchased from the
Company may be returned within a reasonable amount of time, within season. The
Company does not offer cash refunds for purchases, but issues credits toward the
Syms charge card and other major credit cards or store merchandise credits which
may be used toward the purchase of other merchandise.
TRADEMARKS
"Syms", "An Educated Consumer is Our Best Customer "(R), "Names You Must
Know"(R), and "The More You Know About Clothing, the Better it is for Syms"(R)
have been registered with the United States Patent and Trademark Office.
COMPETITION
The retail apparel business is highly competitive, and the Company accounts
for only a small fraction of the total market for men's, women's and children's
apparel. The Company's stores compete with discount stores, apparel specialty
stores, department stores, manufacturer-owned factory outlet stores and others.
Many of the stores with which the Company competes are units of large national
or regional chains that have substantially greater resources than the Company.
Retailers having substantially greater resources than the Company have indicated
their intention to enter the "off-price" apparel business, and the "off-price"
apparel business itself has become increasingly competitive, especially with
respect to the increased use by manufacturers of their own factory outlets. At
various times of the year, department store chains and specialty shops offer
brand-name merchandise at substantial markdowns.
OPERATIONS AND CONTROL SYSTEMS
The Company has implemented a merchandise control system which tracks
product from its purchase to its ultimate sale in the Company's stores. The
system tracks the product by store in approximately 750 categories. All the
information regarding the product is transmitted daily through telephone lines
to the Company's database at its executive headquarters. Each week the Company's
executives receive detail reports regarding sales and inventory levels in units
and retail dollars on a store by store basis.
Management of the Company visit stores on a regular basis to coordinate
with the store managers, among other things, in the training of employees in
loss prevention methods. Each store has on premises security personnel during
normal hours and a security system after hours.
EMPLOYEES
At February 26, 2000, the Company had 2,565 employees of whom approximately
620 work part time. The Company has collective bargaining agreements with the
Retail, Wholesale and Department Store Union and the United Food and Commercial
Workers Union which expire in the year 2000 and cover 1,823 sales and tailor
employees. The Company believes its relationships with the Unions are good.
Approximately 30 to 100 persons, consisting mostly of sales personnel, are
employed at each Syms store.
2
ITEM 2. PROPERTIES
THE STORES
Location
At February 26, 2000 the Company had 48 stores, 25 of which are located in
leased facilities. The following table indicates the locations of the stores and
the approximate selling space of each location. In addition to the selling space
indicated, each store contains between approximately 2,000 to 12,000 square feet
for inspection and ticketing of merchandise and administrative functions.
LEASED/ SELLING LEASED/ SELLING
STATE LOCATION OWNED SPACE STATE LOCATION OWNED SPACE
----- -------- ----- ----- ----- -------- ----- -----
CONNECTICUT NEW YORK/NEW JERSEY
Fairfield Owned 32,000 Park Avenue Leased 45,000
Hartford Leased 31,000 Trinity Owned 40,000
Westbury Owned 72,000
Commack Owned 36,000
FLORIDA Westchester Leased 50,000
Fort Lauderdale Owned 44,000 Rochester Owned 32,000
Miami Owned 45,000 Buffalo Owned 39,000
West Palm Beach Leased 36,000 Paramus Owned 56,000
Tampa Owned 38,000 Woodbridge Leased 32,000
Kendall Leased 32,000 Secaucus (2) Owned 29,000
GEORGIA Cherry Hill Owned 40,000
Norcross Owned 51,000 Lawrenceville Leased 54,000
Marietta Owned 39,000 NORTH CAROLINA
ILLINOIS Charlotte Leased 30,000
Addison Owned 47,000
Niles Leased 32,000 OHIO
Gurnee Mills Mall Leased 33,000 Highland Heights Leased 36,000
Chicago Leased 39,000 Sharonville Leased 31,000
MARYLAND
Baltimore Leased 43,000 PENNSYLVANIA
Rockville Owned 61,000 King of Prussia Owned 41,000
Towson Leased 41,000 Franklin Mills Mall Leased 22,000
MASSACHUSETTS Monroeville Owned 31,000
Norwood Leased 36,000 Pittsburgh Leased 40,000
Peabody Leased 39,000
Boston Leased 40,000 RHODE ISLAND
N. Cranston Leased 27,000
MICHIGAN
Southfield Owned 46,000 TEXAS
Troy Leased 37,000 Dallas Owned 42,000
MISSOURI Houston Owned 34,000
St. Louis Leased 33,000 Hurst Owned 38,000
VIRGINIA
Falls Church Leased 39,000
Potomac Mills Mall Leased 33,000
3
Syms stores are either "free standing" or located in shopping centers or
indoor malls, and all are surrounded by adequate parking areas, except for the
two New York City stores and the one downtown Boston store. Syms stores are
usually located near a major highway or thoroughfare in suburban areas populated
by at least 1,000,000 people and are readily accessible to customers by
automobile. In certain areas where the population is in excess of 2,000,000
people, Syms has opened more than one store in the same general vicinity.
Lease Terms
Twenty-four of the Company's 48 stores are currently leased from unrelated
parties, and the Elmsford, New York store is leased from Sy Syms, the Chairman
of Syms Corp. The following table summarizes lease expirations and any renewal
options:
Number of Number of
Calendar Leases Leases with Range in Years of
Periods Expiring (1) Renewal Options Option Periods (2)
- ------- ------------ --------------- -------------------
2000 0 0 0
2001 3 0 0
2002 2 1 4
2003 0 0 0
2004 1 1 10
2005 and thereafter 18 12 2.5-5
-- -- -----
24 14
- -------------
(1) Westchester - month to month basis.
(2) Depending on the applicable option, the minimum rent due during the renewal
option periods may be based upon a formula contained in the existing lease
or negotiations between the parties.
Store leases provide for a base rental of between approximately $4.30 and $37.66
per square foot. In addition, under the "net" terms of all of the leases, the
Company must also pay maintenance expenses, real estate taxes and other charges.
Four of the Company's stores have a percentage of sales rental as well as a
fixed minimum rent. Rental payments for Syms' leased stores aggregated
$11,043,000 for the year ended February 26, 2000, of which $600,000 was paid to
Sy Syms as fixed rent.
Store Openings/Closings
Three new stores opened this year. The Lawrenceville, NJ store opened April
29, 1999 (54,000 square feet of selling space), the Chicago, IL store opened
August 26, 1999 (39,000 square feet of selling space), and the Towson, MD store
opened September 16, 1999 (41,000 square feet of selling space).
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions and
claims outstanding against the Company, and after discussion with counsel, that
there are no legal proceedings that will have a material adverse effect on the
financial condition or results of operations of the Company. Some of the
lawsuits to which the Company is a party are covered by insurance and are being
defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report.
4
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The following table sets forth for the period indicated the high and low
sales prices for the Company's common stock as reported by the New York Stock
Exchange using the trading symbol SYM.
HIGH LOW
---- ---
1999 Quarter ended February 26, 2000 $6 - 3/16 $4 - 5/16
Quarter ended November 27, 1999 8 - 7/8 5 - 1/8
Quarter ended August 28, 1999 8 - 3/16 7 - 7/16
Quarter ended May 29, 1999 8 - 3/8 7 - 3/8
1998 Quarter ended February 27, 1999 $9 - 3/4 $7 - 1/2
Quarter ended November 28, 1998 13 - 11/16 9 - 3/8
Quarter ended August 29, 1998 14 - 13/16 12 - 1/4
Quarter ended May 30, 1998 15 - 7/8 13 - 5/8
HOLDERS
As of May 1, 2000 there were 148 record holders of the Company's Common
Stock. The Company believes that there were in excess of 1,693 beneficial owners
of the Company's Common Stock as of that date.
DIVIDENDS
The Board of Directors of the Company did not declare dividends, in the
fiscal years ended February 26, 2000 and February 27, 1999. Payment of dividends
is within the discretion of the Company's Board of Directors and depends upon
various factors including the earnings, capital requirements and financial
condition of the Company (see Note 4 to notes to consolidated financial
statements regarding covenants in the Company's revolving credit agreement). The
Company intends generally to retain earnings, if any, to fund development and
growth of its business. The Company does not plan on paying dividends in the
near term. The Company had announced that its Board of Directors had authorized
the repurchase of up to 15% of its outstanding shares of Common Stock at
prevailing market prices during the current fiscal year ended February 26, 2000.
This repurchase program expired on February 26, 2000.
5
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
Company's audited Consolidated Financial Statements for the fiscal years ended
February 26, 2000, February 27, 1999, February 28, 1998, March 1, 1997 and March
2, 1996. The selected financial data presented below should be read in
conjunction with such Financial Statements and notes thereto.
FISCAL YEAR ENDED
-----------------------------------------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 28, MARCH 1, MARCH 2,
2000 1999 1998 1997 1996
------------ ------------ ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Net sales................. $ 341,570 $343,858 $ 352,959 $346,792 $334,750
========= ======== ========= ======== ========
Net income ............... $ 2,224 $ 17,449 $ 23,036 $ 19,065 $ 10,411
========= ======== ========= ======== ========
Net income per share -
basic .................. $ 0.14 $ 1.00 $ 1.30 $ 1.08 $ 0.59
========= ======== ========= ======== ========
Net income per share -
diluted ................ $ 0.14 $ 1.00 $ 1.29 $ 1.08 $ 0.59
========= ======== ========= ======== ========
Cash dividends per share . $ -- $ -- $ -- $ -- $ --
========= ======== ========= ======== ========
BALANCE SHEET DATA:
Working capital............ $ 87,812 $101,592 $ 99,728 $ 78,228 $ 75,521
Total assets............... 300,314 298,742 294,192 284,018 260,144
Capitalized leases......... -- -- 419 900 1,304
Other long term
liabilities.............. 2,436 1,567 964 633 237
Shareholders' equity....... $ 253,428 $258,760 $ 250,870 $226,434 $207,369
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report includes forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) and information
relating to the Company that are based on the beliefs of the management of the
Company as well as assumptions made by and information currently available to
the management of the Company. When used in this Annual 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, increased or unanticipated costs or
effects associated with year 2000 compliance by the Company or its service or
supply providers, possible work stoppages, or increases in labor costs, effects
of competition, possible disruptions or delays in the opening of new stores or
inability to obtain suitable sites for new stores, higher than anticipated store
closings or relocation costs, higher interest rates, unanticipated increases in
merchandise or occupancy costs and other factors which may be outside the
Company's control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described therein as anticipated,
believed, estimated, expected, intended or planned. Subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements in
this paragraph.
6
RESULTS OF OPERATIONS
The following discussion compares the fiscal years ended February 26, 2000,
February 27, 1999 and February 28, 1998. The fiscal years ended February 26,
2000, February 27, 1999 and February 28, 1998 were each comprised of 52 weeks.
Fiscal Year Ended February 26, 2000 Compared to Fiscal Year Ended February
27, 1999
Net sales for the fiscal year ended February 26, 2000, were $341,570,000 a
decrease of $2,288,000 (or .7%) as compared to net sales of $343,858,000 for the
fiscal year ended February 27, 1999. Comparable store sales for the fiscal year
ended February 26, 2000 declined 5.9%. This sales decline continues to be
impacted by increased price competition and increased promotional activity from
other retailers.
Gross profit for the fiscal year ended February 26, 2000 was $128,725,000,
a decrease of $7,175,000 (37.7 % as a percentage of net sales) as compared to
$135,900,000 (39.5% as a percentage of net sales) for the fiscal year ended
February 27, 1999. This decrease is largely due to the decline in sales and
higher markdowns which was partially offset by an improved shrinkage
performance.
Selling, general and administrative (SG&A) expense was $83,592,000 (24.5%
as a percentage of net sales) for the fiscal year ended February 26, 2000 as
compared to $73,886,000 (21.5% as a percentage of net sales) for the fiscal year
ended February 27, 1999. This increase in SG&A expenses of approximately
$9,706,000 is largely attributable to the opening of new stores. The SG&A
expenses of these new stores amounted to $6,303,000 for the fiscal year ended
February 26, 2000.
Advertising expense for the fiscal year ended February 26, 2000 was
$10,210,000 (3.0% as a percentage of net sales) as compared to $7,581,000 (2.2%
as a percentage of net sales) for the fiscal year ended February 27, 1999. The
increase of $2,629,000 resulted from increased TV advertising in the first half
of this year and increased number of direct mail customers in fiscal 1999 as
compared to fiscal 1998 resulting from a management decision to spend more
advertising dollars in an effort to improve sales performance.
Occupancy costs were $20,688,000 (6.1% as a percentage of net sales) for
the fiscal year ended February 26, 2000 as compared to $16,717,000 (4.9% as a
percentage of net sales) for the fiscal year ended February 27, 1999. This
increase is largely attributable to the expense of new stores for the fiscal
year ended February 26, 2000.
Depreciation and amortization amounted to $10,580,000 (3.1% as a percentage
of net sales) for the fiscal year ended February 26, 2000 as compared to
$8,541,000 (2.5% as a percentage of net sales) for the fiscal year ended
February 27, 1999. This increase is attributable to the addition of new stores
and the acquisition of new MIS systems and equipment.
Income before income taxes was $3,645,000 (a decrease of $25,437,000, or
87.5%) for the fiscal year ended February 26, 2000, as compared to $29,082,000
for the fiscal year ended February 27, 1999. This decrease resulted mostly from
the decline in sales, gross margin and higher SG&A expenses largely attributable
to the opening of three new stores.
For the fiscal year ended February 26, 2000 the effective income tax rate
was 39.0% as compared to 40.0% for the fiscal year ended February 27, 1999. In
the fiscal year ended February 27, 1999, the effective tax rate was affected by
the addition of tax reserves pertaining to certain states.
Fiscal Year Ended February 27, 1999 Compared to February 28, 1998
Net sales for the fiscal year ended February 27, 1999, were $343,858,000, a
decrease of $9,101,000 (or 2.6%) as compared to net sales of $352,959,000 for
the fiscal year ended February 28, 1998. Comparable store sales for the fiscal
year ended February 27, 1999 declined 6.3%. This sales decline can be largely
attributable to increased promotional activity and price competition from other
retailers.
Gross profit for the fiscal year ended February 27, 1999 was $135,900,000,
a decrease of $6,438,000 (39.5% as a percentage of net sales) as compared to
$142,338,000 (40.3% as a percentage of net sales) for the fiscal year ended
February 28, 1998. This decrease is largely due to the decline in sales and
higher markdowns which was partially offset by an improved shrinkage
performance.
Selling, general and administrative (SG&A) expense was $73,886,000 (21.5%
as a percentage of net sales) for the fiscal year ended February 27, 1999 as
compared to $71,020,000 (20.1% as a percentage of net sales) for the fiscal year
ended February 28, 1998. This increase in SG&A expenses of approximately
$2,866,000 resulted from the opening of three new stores (Kendall, FL, Troy, MI
and Boston, MA). The SG&A expenses of these new stores amounted to $4,012,000
for the fiscal year ended February 27, 1999.
7
Advertising expense for the fiscal year ended February 27, 1999 was
$7,581,000 (2.2% as a percentage of net sales) as compared to $8,097,000 (2.3%
as a percentage of net sales) for the fiscal year ended February 28, 1998. This
decrease of $516,000 in advertising expense resulted from expense savings
achieved through opportunistic media buying as well as other cost controls.
Occupancy costs were $16,717,000 (4.9% as a percentage of net sales) for
the fiscal year ended February 27,1999 as compared to $15,300,000 (4.3% as a
percentage of net sales) for the fiscal year ended February 28, 1998. This
increase is largely attributable to the addition of three new stores for the
fiscal year ended February 27, 1999.
Depreciation and amortization amounted to $8,541,000 (2.5% as a percentage
of net sales) for the fiscal year ended February 27, 1999 as compared to
$8,627,000 (2.4% as a percentage of net sales) for the fiscal year ended
February 28, 1998. This decrease resulted mainly from certain assets becoming
fully depreciated and was somewhat offset by the addition of three new stores.
Income before income taxes was $29,082,000 (a decrease of $9,964,000, or
25.5%) for the fiscal year ended February 27, 1999, as compared to $39,046,000
for the fiscal year ended February 28, 1998. This decrease resulted mostly from
the decline in sales and higher SG&A expenses attributable to the opening of
three new stores.
For the fiscal year ended February 27, 1999 the effective income tax rate
was 40.0% as compared to 41.0% for the fiscal year ended February 28, 1998. In
the fiscal year ended February 28, 1998, the effective tax rate was affected by
the addition of tax reserves pertaining to certain states.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 26, 2000 was $87,812,000, a decrease of
$13,780,000 from February 27, 1999 and the ratio of current assets to current
liabilities decreased to 2.98 to 1 as compared to 3.67 to 1 at February 27,
1999.
Net cash provided by operating activities totaled $36,132,000 for the
fiscal year ended February 26, 2000 and increased by $14,170,000 as compared to
$21,962,000 for the fiscal year ended February 27, 1999. The major reasons for
the increase in cash provided by operating activities was attributed to lower
inventory level versus last year and an increase in operating liabilities.
Net cash provided by operating activities totaled $21,962,000 for the
fiscal year ended February 27, 1999 and increased by $5,301,000 as compared to
$16,661,000 for the fiscal year ended February 28, 1998. The major reasons for
the increase in cash provided by operating activities was attributed to lower
decreases in operating liabilities versus last year and lower increases in
inventory levels compared to a year ago offset by lower net income.
Net cash used in investing activities was $19,051,000 for the fiscal year
ended February 26, 2000 as compared to $15,186,000 for the fiscal year ended
February 27, 1999 and $12,210,000 for the fiscal year ended February 28, 1998.
Purchases of property and equipment totaled $19,203,000, $16,250,000 and
$12,273,000 for the fiscal years ended February 26, 2000, February 27, 1999 and
February 28, 1998, respectively.
Net cash used in financing activities was $10,325,000 for the fiscal year
ended February 26, 2000 as compared to $7,690,000 for the fiscal year ended
February 27, 1999 and $3,955,000 for the fiscal year ended February 28, 1998.
The Company has a revolving credit agreement with a bank for a line of
credit not to exceed $40,000,000 through December 1, 2000. At December 1, 2000,
the Company, has the option to reduce this commitment to zero or convert the
revolving credit agreement to a term loan with a maturity date of December 1,
2004. Except for funds provided from this revolving credit agreement, the
Company has satisfied its operating and capital expenditure requirements,
including those for the operation and expansion of stores, from internally
generated funds. For the fiscal year ended February 26, 2000, under the
revolving credit agreement, the borrowings peaked at $7,450,000 and the average
amount of borrowings was $887,775 with a weighted average interest rate of
6.33%. For the fiscal year ended February 27, 1999, the average amount of
borrowings under the revolving credit agreement was $6,768,000 with a weighted
average interest rate of 6.10%. For the fiscal year ended February 28, 1998, the
average amount of borrowing under the revolving credit agreement was $4,982,000
with a weighted average interest rate of 6.22%.
In addition, the Company has a separate $20,000,000 credit facility with
another bank available for the issuance of letters of credit for the purchase of
merchandise and short-term borrowings. This agreement may be canceled at any
time by either party. At February 26, 2000 and at February 27, 1999, the Company
had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit.
There were no borrowings for the fiscal year ended February 26, 2000 compared to
$2,350,000 for the fiscal year ended February 27, 1999.
8
The Company has planned capital expenditures of approximately $5,000,000
for the fiscal year ending March 3, 2001. The Company's Board of Directors had
authorized the repurchase of up to 15% of its outstanding shares of common stock
at prevailing market prices through the fiscal year ended February 26, 2000. As
of February 26, 2000, the Company has purchased 1,927,900 shares which
represented 10.8% of its outstanding shares at a total cost of $17,670,624. This
Repurchase Program expired on February 26, 2000.
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 March 3, 2001.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this Annual Report. See index to Consolidated Financial Statements in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows :
NAME AGE TITLE
- ---- --- -----
Sy Syms (1) (2)................... 74 Chairman of the Board and
Director of the Company
Marcy Syms (1) (2)................ 49 Chief Executive Officer/President
and Director of the Company
Antone F. Moreira ............... 63 Vice President, Treasurer and Chief
Financial Officer and Director of
the Company
Harvey A. Weinberg (3) (4) ....... 62 Director of the Company
David A. Messer (3) (4).......... 38 Director of the Company
Ronald Zindman.................... 50 Executive Vice President - General
Merchandise Manager
Allen Brailsford.................. 56 Vice President - Operations
Myra Butensky..................... 41 Vice President - Divisional
Merchandise Manager Men's
Tailored Clothing
Douglas C. Meyer.................. 47 Vice President - Marketing,
Advertising and Sales
Promotion
Isabelle Regan.................... 45 Vice President - Divisional
Merchandise Manager Women's
John Tyzbir....................... 46 Vice President - Human Resources
- -----------
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms.
(3) Member of the Stock Option - Compensation Committee of the Company.
(4) Member of the Audit Committee of the Company.
The members of the Company's Board of Directors hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Executive officers are elected annually by the Board of Directors of
the Company and serve at the pleasure of the Board. Marcy Syms is the daughter
of Sy Syms. There are no other family relationships between any directors or
executive officers of the Company. None of the organizations with which these
persons were previously associated is a parent, subsidiary or other affiliate of
the Company except as otherwise set forth.
10
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company and/or its predecessors since 1959. Mr. Syms was Chief
Operating Officer of the Company from 1983 to 1984. Mr. Syms has been a Director
of Israel Discount Bank of New York since December 1991. On January 22, 1998, Sy
Syms relinquished his position as Chief Executive Officer to Marcy Syms. Since
that date Mr. Syms has been Chairman of the Board.
MARCY SYMS has been President and a Director of the Company since 1983 and
Chief Operating Officer of the Company since 1984. On January 22, 1998, Marcy
Syms was named Chief Executive Officer / President.
ANTONE F. MOREIRA has been Vice President, Chief Financial Officer and
Treasurer of Syms Corp since May 1997. From 1996 to May 1997, Mr. Moreira was a
financial consultant with Equitable Assurance Society, a financial services
organization. From 1990 to 1995, Mr. Moreira was Executive Vice President and
Chief Financial Officer of Stuarts Department Stores, Inc., a regional discount
department store chain operating in New England. Mr. Moreira has been a Director
of the Company since May 1997.
HARVEY A. WEINBERG has been a consultant since April 1994. From April 1992
to April 1994, he was President and Chief Executive Officer of HSSI, Inc., a
retailer of men's and women's apparel. From 1987 to September 1990, he was Chief
Executive Officer and Vice Chairman of the Board of Directors of Hartmarx
Corporation and from 1990 to September 1992, he served as Chairman of the Board
of Hartmarx Corporation. He is a trustee of Glimcher Realty Trust, a real estate
investment trust. He has been a Director of the Company since December 1992.
DAVID A. MESSER has been President of Sempra Energy Trading, a subsidiary
of American International Group, Inc. (NYSE: AIG), since January 1994. Prior to
January 1994, Mr. Messer was a Senior Vice President of AIG Trading Corporation,
(now known as Sempra Energy Trading), where he has been employed since March
1990. He has been a Director of the Company since July 1996.
RONALD ZINDMAN has been Executive Vice President - General Merchandise
Manager since March 1997. He was Vice President, General Merchandise Manager,
Ladies, Mens and Haberdashery from July 1994 to March 1997. Previously, Mr.
Zindman was Vice President - General Merchandise Manager Ladies from March 1993
to July 1994 and a buyer of men's and women's merchandise from March 1990 to
March 1993.
ALLEN BRAILSFORD has been Vice President - Operations since January 1993.
From March 1992 to January 1993, Mr. Brailsford was Director of Operations, and
from March 1985 to March 1992, he was Director of Distribution.
MYRA BUTENSKY has been Vice President - Divisional Merchandise Manager,
Men's Tailored Clothing since January 1999. From May 1998 to January 1999, Ms.
Butensky was Divisional Merchandise Manager, Ladies. Prior to joining the
Company in 1991, Ms. Butensky was a buyer with Popular Trading Club, Inc, and
also spent 10 years with Macy's in a number of buying positions.
DOUGLAS C. MEYER has been Vice President - Marketing, Advertising and Sales
Promotion since July 1994. Mr. Meyer was Vice President, Marketing and Creative
Services for Loehmann's, Inc. from 1987 to 1994.
ISABELLE REGAN has been Vice President - Divisional Merchandise Manager,
Ladies since March 1993. She has held various positions at the Company since
1972, including buyer of women's apparel.
JOHN TYZBIR has been Vice President - Human Resources since April 1999.
From January 1995 to October 1997, Mr. Tyzbir was Director of Human Resources of
Zallie Supermarkets Corp. From June 1991 to January 1995, Mr. Tyzbir was
Director of Human Resources and Planning of Carson Pirie Scott Inc.
11
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 26, 2000, the end of
the fiscal year covered by this Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 12 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 26, 2000, the end of
the fiscal year covered by this Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of the General Instructions to Form
10-K, the information called for by Item 13 is omitted from this Annual Report
and is incorporated by reference to the definitive Proxy Statement to be filed
by the Company pursuant to Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, which the Company will
file not later than 120 days after February 26, 2000, the end of the fiscal year
covered by this Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE
NUMBER
------
(a) (1) Financial Statements:
Report of Independent Public Accountants............. F-1
Consolidated Balance Sheets ......................... F-2
Consolidated Statements of Income ................... F-3
Consolidated Statements of Shareholders' Equity ..... F-4
Consolidated Statements of Cash Flow ................ F-5
Notes to Consolidated Financial Statements .......... F-6 - F-17
All schedules are omitted because they are not applicable, or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
(a) (3) List of Exhibits:
The following exhibits which are marked with an asterisk are filed as part
of this Annual Report and the other exhibits set forth below are incorporated by
reference (utilizing the same exhibit numbers, except as stated otherwise below)
from (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and declared
effective September 23, 1983 or (ii) where indicated, the Company's reports on
Form 8-K, Form 10-Q or Form 10-K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
4.3 $5,600,000 New Jersey Economic Development Authority Revenue Bond Agreement
dated December 1, 1981
12
4.4 Amendments to the New Jersey Economic Development Authority Revenue Bond
Agreement
4.4a First Amendment dated April 14, 1982
4.4b Second Amendment dated May 17, 1982
4.4c Third Amendment dated June 27, 1983
4.4d Fourth Amendment dated July 14, 1983
4.5 Mortgage & Note dated December 11, 1981 between Syms Inc. and New Jersey
Economic Development Authority
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No. 1, July 29, 1969
10.3f Parking Area Sublease No.1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.4 Ground Lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey Assignment and Assumption of Ground Lease, dated May 8, 1986,
to Registrant (exhibit 28.1 to 8-K Report dated May 1986)
10.21+ Syms Corp 1983 Incentive Stock Option and Appreciation Plan as Amended
and Restated (Exhibit A to Company's Proxy Statement for the 1993 Annual
Meeting of Shareholders)
10.29 Credit Card Program Agreement dated as of March 12, 1987 and as amended
as of March 16, 1987 between General Electric Credit Card Corporation and
Registrant (10-K Report for fiscal year ended December 31, 1987)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms Corp
and Summit Bank (successor to United Jersey Bank) (8-K Report dated
December 7, 1993)
10.33 Form of Indemnification Agreement between Registrant and Directors and
Executive Officers of the Registrant (10-K Report for fiscal year ended
March 2, 1996)
10.34 Credit Plan Agreement dated December 11, 1995 between Citicorp Retail
Services, Inc. and Registrant (10-K Report for fiscal year ended March 2,
1996)
10.35+ Employment Agreement dated November 1, 1996 between Syms Corp and Ronald
Zindman (10-K Report for fiscal year ended March 1, 1997)
10.36+ Stock Option Certificate for Ronald Zindman (10-K Report for fiscal year
ended March 1, 1997)
10.37 Promissory note and mortgage from Syms Corp to Marcy Syms (10-K Report
for fiscal year ended March 1, 1997)
10.38 First Amendment to Revolving Credit Agreement, dated as of November 24,
1997, between Syms Corp and Summit Bank. (10K report for fiscal year
ended February 28, 1998)
10.39* Credit Program Agreement, dated January 27, 2000 between Syms Corp and
Conseco Finance Corp.
21* List of Subsidiaries of the Company
23* Consent of Deloitte & Touche LLP
27* Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended February 26, 2000 no reports on Form 8-K were
filed.
13
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By _______________________________
Marcy Syms
Chief Executive Officer / President
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
___________________________ Chairman of the Board May , 2000
Sy Syms and Director
___________________________ Chief Executive Officer/ May , 2000
Marcy Syms President and Director
(Principal executive officer)
___________________________ Vice President, Treasurer and May , 2000
Antone F. Moreira Chief Financial Officer and
Director (Principal financial
and accounting officer)
___________________________ Director May , 2000
Harvey A. Weinberg
___________________________ Director May , 2000
David A. Messer
14
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Syms Corp.
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
subsidiaries as of February 26, 2000 and February 27, 1999, and the related
consolidated statement of income, shareholders' equity, and cash flows for each
of the three years ended February 26, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Syms Corp and subsidiaries as of
February 26, 2000, and February 27, 1999 and the results of their operations and
their cash flows for each of the three years in the period ended February 26,
2000, in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 10, 2000
F-1
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FEBRUARY 26, FEBRUARY 27,
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,682 $ 2,926
Merchandise inventories 116,357 129,438
Deferred income taxes 3,221 3,462
Prepaid expenses and other current assets 3,002 3,753
--------- ---------
Total current assets 132,262 139,579
PROPERTY AND EQUIPMENT - NET 162,447 153,810
Deferred Income Taxes 916 --
--------- ---------
OTHER ASSETS 4,689 5,353
--------- ---------
TOTAL ASSETS $ 300,314 $ 298,742
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 27,374 $ 19,268
Accrued expenses 7,500 7,719
Accrued insurance 2,774 2,550
Obligations to customers 2,733 3,451
Income taxes payable 4,069 2,230
Short term borrowings -- 2,350
Current portion of obligations
under capital lease -- 419
--------- ---------
Total current liabilities 44,450 37,987
DEFERRED INCOME TAXES -- 428
OTHER LONG TERM LIABILITIES 2,436 1,567
COMMITMENTS (Note 7) -- --
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; 15,960 shares outstanding as of February 26, 2000
(net of 1,928 treasury shares) and 17,024 shares outstanding
as of February 27, 1999 (net of 864 treasury shares) 798 851
Additional paid-in capital 13,752 13,752
Treasury Stock (17,671) (10,168)
Retained earnings 256,549 254,325
--------- ---------
Total shareholders' equity 253,428 258,760
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 300,314 $ 298,742
========= =========
See notes to consolidated financial statements
F-2
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED
-----------------------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 28,
2000 1999 1998
------------ ------------ ------------
NET SALES $341,570 $343,858 $352,959
Cost of goods sold 212,845 207,958 210,621
-------- -------- --------
Gross profit 128,725 135,900 142,338
EXPENSES
Selling, general and administrative 83,592 73,886 71,020
Advertising 10,210 7,581 8,097
Occupancy 20,688 16,717 15,300
Depreciation and amortization 10,580 8,541 8,627
-------- -------- --------
Income from operations 3,655 29,175 39,294
Interest expense (income) - net 10 93 248
-------- -------- --------
Income before income taxes 3,645 29,082 39,046
Provision for income taxes 1,421 11,633 16,010
-------- -------- --------
NET INCOME $ 2,224 $ 17,449 $ 23,036
======== ======== ========
Net Income Per Share - basic $ 0.14 $ 1.00 $ 1.30
======== ======== ========
Weighted Average Shares Outstanding - basic 16,351 17,474 17,770
======== ======== ========
Net Income Per Share - diluted $ 0.14 $ 1.00 $ 1.29
======== ======== ========
Weighted Average Shares Outstanding - diluted 16,362 17,536 17,841
======== ======== ========
See notes to consolidated financial statements
F-3
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
(In thousands, except per share amounts)
Preferred Stock, Common Stock,
1,000 Shares; 30,000 Shares;
$100 Par Value $0.05 Par Value Additional
----------------- ----------------- Paid-in Treasury Retained
Shares Amount Shares Amount Capital Stock Earnings Total
------ ------ -------- ------ ----------- --------- --------- ---------
BALANCE AS OF MARCH 1, 1997 -- $ -- $ 17,694 $ 885 $ 11,709 $ -- $ 213,840 $ 226,434
Exercise of stock options -- -- 155 7 1,393 -- -- 1,400
Net income -- -- -- -- -- -- 23,036 23,036
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 28, 1998 -- -- 17,849 892 13,102 -- 236,876 250,870
Exercise of stock options -- -- 39 2 650 -- -- 652
Stock buyback -- -- (864) (43) -- (10,168) -- (10,211)
Net Income -- -- -- -- -- -- 17,449 17,449
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 27, 1999 -- -- 17,024 851 13,752 (10,168) 254,325 258,760
Stock buyback -- -- (1,064) (53) -- (7,503) -- (7,556)
Net Income -- -- -- -- -- -- 2,224 2,224
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 26, 2000 -- $ -- $ 15,960 $ 798 $ 13,752 $ (17,671) $ 256,549 $ 253,428
===== ====== ======== ===== ======== ========= ========= =========
See notes to consolidated financial statements
F-4
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Year Ended
--------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,224 $ 17,449 $ 23,036
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,580 8,541 8,627
Deferred income taxes (1,103) 2,016 1,786
Gain on sale of property and equipment (152) (748) (58)
Loss on disposal of assets 13 -- 50
(Increase) decrease in operating assets:
Merchandising inventories 13,081 (2,410) (4,488)
Prepaid expenses and other current assets 751 868 (2,865)
Other assets 637 1,319 44
Increase (decrease) in operating liabilities:
Accounts payable 8,106 (2,718) (6,737)
Accrued expenses 5 (1,456) 670
Obligations to customers (718) (1,057) (577)
Other long term liabilities 869 603 331
Income taxes 1,839 (445) (3,158)
-------- -------- --------
Net cash provided by operating activities 36,132 21,962 16,661
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (19,203) (16,250) (12,273)
Proceeds from sale of property and equipment 152 1,064 63
-------- -------- --------
Net cash used in investing activities (19,051) (15,186) (12,210)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (419) (481) (405)
Revolving line of credit (repayments) borrowings (2,350) 2,350 (4,950)
Purchase of treasury shares (7,556) (10,168) --
Exercise of options -- 609 1,400
-------- -------- --------
Net cash used in financing activities (10,325) (7,690) (3,955)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,756 (914) 496
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,926 3,840 3,344
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,682 $ 2,926 $ 3,840
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 191 $ 389 $ 397
======== ======== ========
Income taxes paid (refunds received) - net $ 694 $ 7,507 $ 19,364
======== ======== ========
See notes to consolidated financial statements
F-5
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 26, 2000, FEBRUARY 27, 1999 AND FEBRUARY 28, 1998
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business - Syms Corp and subsidiaries (the "Company") operates a
chain of 48 "off-price" retail stores located throughout 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.
b. Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
c. Accounting Period - The fiscal years ended February 26, 2000, February 27,
1999 and February 28, 1998 were comprised of 52 weeks.
d. Cash and Cash Equivalents- Syms Corp considers credit card receivables and
all short-term investments with an original maturity of three months or
less as cash equivalents.
e. Merchandise Inventories - Merchandise inventories are stated at the lower
of cost or market on a first-in first-out (FIFO) basis, as determined by
the retail inventory method.
f. Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are principally determined by the
straight-line method over the following estimated useful lives:
Buildings and improvements 15 - 39 years
Machinery and equipment 4 - 7 years
Furniture and fixtures 7 - 10 years
Leasehold improvements Lesser of life of the
asset or life of lease
Facilities' leases (Note 7) having the substance of financing transactions
have been capitalized. The related lease obligations have been included as
obligations under capital lease. The leased assets are being amortized as
described above.
g. Income Taxes - Deferred income taxes reflect the future tax consequences of
differences between the tax basis of assets and liabilities and their
financial reporting amounts at year end.
h. Obligation to Customers - Obligations to customers represent credits issued
for returned merchandise as well as gift certificates.
i. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
j. Reclassification - Certain items in prior years in specific captions of the
accompanying consolidated financial statements and notes to consolidated
financial statements have been reclassified for comparative purposes.
F-6
k. Revenue Recognition - The Company recognizes revenue at the "point of
sale". Allowance for sales returned is recorded as a component of net sales
in the period in which the related sales are recorded.
l. Comprehensive Income - In March 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS No. 130). "Reporting
Comprehensive," which is required for years beginning December 15, 1997.
Comprehensive income is equivalent to the Company's net income for fiscal
years 1999, 1998 and 1997.
m. Employee Benefit Plans - SFAS No. 132, "Employers' Disclosures about
Pensions and other Postretirement Benefits," which is an amendment of SFAS
No. 87, No. 88 and No. 106. SFAS No. 132 that revises employers'
disclosures related to pension and other postretirement plans by requiring,
among other things, standardization of disclosures among such plans as well
as additional information on the changes in benefit obligations and fair
values of plan assets. It also eliminates certain other disclosures no
longer deemed useful.
n. Segment Reporting - SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" establishes standards for reporting
information about a company's operating segments. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. The Company operates in a single operating
segment - the operation of retail off-price stores. Revenues from external
customers are derived from merchandise sales. The Company's merchandise
sales mix by product category for the last three fiscal years was as
follows:
Fiscal Year
-------------------------
1999 1998 1997
---- ---- ----
Men's tailored clothes and haberdashery 54% 53% 54%
Women's dresses, suits, separates and accessories 30% 31% 31%
Shoes 7% 8% 8%
Children's wear 7% 6% 5%
Luggage, domestics and fragrances 2% 2% 2%
--- --- ---
100% 100% 100%
The Company does not rely on any major customers as a source of revenue.
o. Computer Software Costs - In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires capitalization of costs of software
developed or purchased for internal use. The Company adoption of the SOP
for 1999 which resulted in the capitalization of software development costs
of approximately $4,428,000. The after tax effect on net income in 1999 was
approximately $2,399,000 or $.15 per diluted share.
F-7
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
Land $ 40,628 $ 40,628
Buildings and building improvements 115,205 114,668
Leasehold and leasehold improvements 51,318 40,782
Machinery and equipment 28,193 20,793
Furniture and fixtures 20,487 17,560
Capital lease 3,763 3,763
Construction in progress 392 2,747
-------- --------
259,986 240,941
Less accumulated depreciation and amortization 97,539 87,131
-------- --------
$162,447 $153,810
======== ========
NOTE 3 - INCOME TAXES
The provision for income taxes is as follows:
Fiscal Year Ended
------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
Current:
Federal $ 2,366 $ 8,009 $ 12,343
State 158 1,608 1,881
------- -------- --------
2,524 9,617 14,224
------- -------- --------
Deferred:
Federal (190) 1,622 1,490
State (913) 394 296
------- -------- --------
1,103 2,016 1,786
------- -------- --------
$ 1,421 $ 11,633 $ 16,010
======= ======== ========
F-8
The following is a reconciliation of income taxes computed at the U.S. Federal
statutory rate to the provision for income taxes:
Fiscal Year Ended
--------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
Statutory Federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of Federal income
tax benefits (10.3) 4.4 5.8
Officers' life insurance 14.3 0.6 0.2
----- ---- ----
Effective income tax rate 39.0% 40.0% 41.0%
===== ==== ====
The composition of the Company's deferred tax assets and liabilities is as
follows:
Fiscal Year Ended
------------------------------
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
Deferred tax assets:
Capitalization of inventory costs $ 1,414 $ 1,629
Accounts receivable 81 87
Net operating losses 583
Other 3,041 2,822
------- -------
Total deferred tax assets 5,119 4,538
Deferred tax liability:
Depreciation method and different estimated lives (915) (1,446)
Other (67) (58)
------- -------
Total deferred tax liabilities (982) (1,504)
------- -------
Net $ 4,137 $ 3,034
======= =======
Classified in balance sheet as follows:
Current deferred tax asset $ 3,221 $ 3,462
Long term deferred tax asset (net of non-current
deferred tax liability) 916 --
Long term deferred tax liabiltiy (net of non-current
deferred tax asset) -- (428)
------- -------
Net $ 4,137 $ 3,034
======= =======
At February 26, 2000 the Company had net operating losses of approximately
$840,000 for state income tax purposes which expire beginning in 2007 through
2020.
F-9
NOTE 4 - BANK CREDIT FACILITIES
The Company has an unsecured revolving credit agreement with a bank for a line
of credit not to exceed $40,000,000 through December 1, 2000. Interest on
individual advances is payable quarterly at 1 1/2% per annum below 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 of two other alternative calculations,
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 1/8 of 1% per annum. There were
no outstanding borrowings against this agreement for the fiscal years ended
February 26, 2000 and February 27, 1999.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends (defined to include cash repurchases of
capital stock), as well as other financial ratios.
Total interest charges incurred for the years ended February 26, 2000, February
27, 1999 and February 28, 1998, including amounts related to capital leases,
were $577,000, $607,000, and $617,000, respectively, of which $40,000, $147,000,
and $160,000 were capitalized in fiscal 1999, 1998 and 1997, respectively, in
connection with the construction of new facilities.
In addition, the Company has a separate $20,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise and short-term borrowings. This agreement may be canceled at any
time by either party. At February 26, 2000 and at February 27, 1999, the Company
had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit.
There were no borrowings for the fiscal year ended February 26, 2000 compared to
$2,350,000 for the fiscal year ended February 27, 1999.
NOTE 5 - FAIR VALUE DISCLOSURES
The estimated fair values of financial instruments which are presented herein
have been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of amounts the Company
could realize in a current market exchange.
The fair value of the Company's cash and cash equivalents, accounts receivable
and short-term borrowings approximates their carrying values at February 26,
2000 and February 27, 1999 due to the short-term maturities of these
instruments.
F-10
NOTE 6 - PENSION AND PROFIT SHARING PLANS
a. Pension Plan - The Company has a defined benefit pension plan for all
employees other than those covered under collective bargaining agreements.
The benefits are based on years of service and the employee's highest
average pay during any five consecutive years within the ten-year period
prior to retirement. Pension plan costs are funded annually. Contributions
are intended to provide not only for benefits attributed to service to
date, but also for those expected to be earned in the future.
The following information on the Company's pension plan is provided:
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 5,586 $ 4,890
Service cost 437 477
Interest cost 356 334
Actuarial (gain) loss (879) 162
Gross benefits paid (305) (277)
------- -------
Net benefit obligation at end of year $ 5,195 $ 5,586
======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 5,137 $ 4,655
Employer contributions 249 203
Gross benefits paid (305) (277)
Actual return on plan assets 603 556
------- -------
Fair value of plan assets at end of year $ 5,684 $ 5,137
======= =======
Funded status at end of year $ 489 $ (449)
Unrecognized net actuarial (gain) loss (860) 170
Unrecognized transition amount (51) (76)
------- -------
Accrued benefit costs $ (422) $ (355)
======= =======
F-11
Pension expenses includes the following components:
Fiscal Year Ended
---------------------------
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
COMPONENTS OF NET
PERIODIC BENEFIT COST:
Service cost $ 437 $ 477
Interest cost 356 334
Return on Assets (603) (556)
Amortization of actuarial loss 125 132
----- -----
Net periodic benefit cost $ 315 $ 387
===== =====
WEIGHTED-AVERAGE
ASSUMPTIONS USED:
Discount rate 7.75% 6.75%
Rate of compensation increase 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% during each
of the years ended February 26, 2000 and February 27, 1999.
b. Profit-Sharing and 401(k) Plan - The Company has a profit-sharing plan and
401(k) plan for all employees other than those covered under collective
bargaining agreements. In 1995, the Company established a defined
contribution savings plan 401(k) for substantially all of its eligible
employees. Employees may contribute a percentage of their salary to the
plan subject to statutory limits. The Company has not made any matching
contributions to this plan, however, profit-sharing contributions were made
in the amounts of $18,900 for year ended February 26, 2000, $180,000 for
the year ended February 27, 1999 and $222,000 for the year ended February
28, 1998.
F-12
NOTE 7 - COMMITMENTS
a. Leases - The Company has various operating leases for its retail stores,
with terms expiring between 2001 and 2018. Under most lease agreements, the
Company pays real estate taxes, maintenance and other operating expenses.
Certain store leases also provide for additional contingent rentals based
upon a percentage of sales in excess of certain minimum amounts.
Future minimum lease payments at February 26, 2000 are as follows:
Operating
Leases
-----------
2000 11,035
2001 10,453
2002 10,235
2003 10,043
2004 9,970
2005 and thereafter 63,575
---------
Total minimum payments $ 115,311
=========
Payments were made under the real estate capital lease, which expired in
November 1999, to the Company's principal shareholders. Rental payments
were $600,000 during each of the years ended February 26, 2000, February
27, 1999, and February 28, 1998. The $600,000 paid for the year ended
February 26, 2000 included $450,000 in capital lease payments.
Rent expense for operating leases are as follows:
Fiscal Year Ended
--------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
(In thousands)
Minimum rentals due $ 10,477 $ 7,608 $ 7,011
Escalation rentals accrued 868 584 331
Contingent rentals 16 26 32
Sublease rentals (512) (875) (867)
-------- ------- -------
$ 10,849 $ 7,343 $ 6,507
======== ======= =======
b. Employment Agreement - The Company had an employment agreement with its
General Merchandising Manager, expiring 2009, pursuant to which annual
compensation of approximately $300,000 is required. In addition, that
employee is entitled to additional compensation upon occurrence of certain
events.
c. Legal Proceedings - The Company is a party to routine litigation incident
to its business. Management of the Company believes, based upon its
assessment of the actions and claims outstanding against the Company, and
after discussion with counsel, that there are no legal proceedings that
will have a material adverse effect on the financial condition or results
of operations of the Company. Some of the lawsuits to which the Company is
a party are covered by insurance and are being defended by the Company's
insurance carriers.
F-13
NOTE 8 - PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of preferred stock, in
one or more series of preferred stock. The Board of Directors is authorized to
establish the number of shares to be included in each such series, and to fix
the designation, relative rights, preferences, qualifications and limitations of
the shares of each such series.
NOTE 9 - STOCK OPTION PLAN
The Company's Stock Option Plan allows for the granting of incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1986 (as
amended), non-qualified stock options or stock appreciation rights. The plan
requires that incentive stock options be granted at an exercise price not less
than the fair market value of the common shares on the date the option is
granted. The exercise price of the option for holders of more than 10% of the
voting rights of the Company must be not less than 110% of the fair market value
of the common shares on the date of grant. Non-qualified options and stock
appreciation rights may be granted at any exercise price. The Company has
reserved 1,000,000 shares of common stock for issuance thereunder.
No option or stock appreciation rights may be granted under the stock option
plan after July 2003. The maximum exercise period for any option or stock
appreciation right under the plan is ten years from the date the option is
granted (five years for any optionee who holds more than 10% of the voting
rights of the Company).
SFAS No. 123 encourages (but does not require) compensation expense to be
measured based on the fair value of the equity instrument awarded. In accordance
with APB No. 25, no compensation cost has been recognized in the Consolidated
Statements of Income for the Company's stock option plans. If compensation cost
for the Company's stock option plans had been determined in accordance with the
fair value method prescribed by SFAS No. 123, the Company's pro forma net income
and earnings per share would be as follows:
1999 1998 1997
------- -------- --------
Net Income (in thousands) $ 1,893 $ 17,320 $ 22,971
Net Income per share - basic $ 0.12 $ 1.00 $ 1.29
Net Income per share - diluted $ 0.12 $ 1.00 $ 1.29
This pro forma information may not be representative of the amounts to be
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 1996.
The fair value of each option grant is estimated on the date of each grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999 and 1998: risk-free interest rate of 6.47%
and 4.75%, expected life 5 and 10 years, expected volatility of 35.38% and
31.33%, and dividend yield 0%. 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.
F-14
Stock option transactions are summarized below:
Weighted Weighted Weighted
Fiscal Average Fiscal Average Fiscal Average
1999 Exercise 1998 Exercise 1997 Exercise
Shares Price Shares Price Shares Price
---------- -------- -------- --------- -------- ---------
FIXED OPTIONS
Outstanding
beginning of year 493 $ 10.01 347 $ 9.75 490 $ 9.52
Granted 724 (1) 5.63 200 10.69 25 9.88
Exercised -- -- (38) 10.70 (155) 9.03
Cancelled (33) 9.98 (16) 11.07 (13) 9.96
Outstanding, end of period 1,184 $ 7.33 493 $ 10.01 347 $ 9.75
----- ------- --- ------- --- -------
Options exerciseable at year end 550 $ 9.02 430 $ 10.30 282 $ 10.15
----- ------- --- ------- --- -------
Weighted-average fair value of
options granted during the year $ 2.36 $ 3.74 $ 3.84
(1) Such options were granted subject to shareholder approval of an amendment
to the Company's Stock Option Plan to increase the number of shares of
common stock for which options may be granted under the Plan.
The following table summarizes information about stock options outstanding at
February 26, 2000:
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------ ---------------------------------------
Weighted-Average
Number Remaining Weighted- Number Weighted-
Range of Outstanding At Contractural Average Exercisable At Average
Exercise Prices February 26, 2000 Life (years) Exercise Price February 26, 2000 Exercise Price
- ------------------------------------------------------------------------ ---------------------------------------
$5.625-$12.00 1,184,075(1) 8.2 $7.33 550,075 $9.02
(1) 724,000 of such options were granted in fiscal year 1999 subject to
shareholder approval of an amendment to the Company's Stock Option Plan to
increase the number of shares of common stock for which options may be
granted under the Plan.
NOTE 10 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income per share has been computed based
upon the weighted average common shares outstanding. Diluted net income per
share gives effect to outstanding stock options.
Net income per share have been computed as follows:
Fiscal 1999 Fiscal 1998 Fiscal 1997
----------- ----------- -----------
Basic net income per share:
Net Income $ 2,224 $ 17,449 $ 23,036
Average shares outstanding 16,351 17,474 17,770
Basic net income per share $ .14 $ 1.00 $ 1.30
Diluted net income per share:
Net Income $ 2,224 $ 17,449 $ 23,036
Average shares outstanding 16,351 17,474 17,770
Stock options 11 62 71
Total average equivalent shares 16,362 17,536 17,841
Diluted net income per share $ .14 $ 1.00 $ 1.29
F-15
Options to purchase 367,000, 396,000 and 0 shares of common stock at prices
ranging from $7.125 to $12.250 per share were outstanding in 1999, 1998 and
1997, 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 antidilutive. Options to purchase 724,000
shares of common stock issued in 1999 were granted subject to shareholder
approval of an amendment to the Company's Stock Option Plan to increase the
number of shares of common stock for which options may be granted under the
Plan.
NOTE 11 - Related Party Transactions
Included in the Statements of Income are the following expenses relating to a
Capital Lease with an Officer (this lease expired November 30, 1999). This
agreement expired November 30, 1999.
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
(in thousands)
Depreciation $ 100 $ 161 $ 156
Interest 31 119 195
The balance sheet includes the following items relating to this agreement:
February 26, 2000 February 27, 1999
----------------- -----------------
(In thousands)
Assets under Capital Lease $ 3,763 $ 3,763
Accumulated Depreciation (3,756) (3,656)
Capital Lease Obligation -- 419
F-16
NOTE 12 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
Quarter
------------------------------------------------
First Second Third Fourth
--------- -------- -------- --------
(In thousands, except per share amounts)
YEAR ENDED FEBRUARY 26, 2000
Net sales $ 79,771 $ 72,794 $ 95,628 $ 93,377
Gross profit $ 31,846 $ 23,926 $ 36,776 $ 36,177
Net income $ 834 $ (3,525) $ 2,796 $ 2,119
Net income per share - basic $ 0.05 $ (0.21) $ 0.17 $ 0.13
Net income per share - diluted $ 0.05 $ (0.21) $ 0.17 $ 0.13
Quarter
------------------------------------------------
First Second Third Fourth
--------- -------- -------- --------
(In thousands, except per share amounts)
YEAR ENDED FEBRUARY 27, 1999
Net sales $ 83,612 $ 73,649 $ 95,533 $ 91,064
Gross profit $ 33,720 $ 27,870 $ 38,852 $ 35,458
Net income $ 5,309 $ 1,175 $ 6,323 $ 4,642
Net income per share - basic $ 0.30 $ 0.07 $ 0.36 $ 0.27
Net income per share - diluted $ 0.30 $ 0.07 $ 0.36 $ 0.27
F-17